Many importers are already drowning in heavy tariffs, and they see the First Sale rule as a lifeline. But it’s not a free pass, and it’s not for everyone!

CBP is watching closely, and if you get it wrong, it can cost you dearly!

In this email:

Tariffs slammed down like a hammer on importers, but savvy businesses have found a legal shield to soften the blow: the First Sale Rule. This decades-old provision lets importers calculate duties based on the original factory price rather than the marked-up intermediary price.

Here’s the simple math: If a Chinese factory sells a product for $5 to a Hong Kong distributor, who then sells it to a U.S. retailer for $10, under the First Sale Rule, tariffs are based on the $5 price, not the $10. This allows importers to save money on duties and protect their profit margins.

But this isn’t a free pass.

In fact, the U.S. Customs and Border Protection (CBP) recently rejected a First Sale claim in ruling H332358, and it’s a wake-up call. The First Sale rule isn’t for everyone. 

The importer was denied because they failed to provide complete financial data from the parent company, despite warnings. CBP wants a full paper trail (contracts, payment proofs, proof the middleman took title and risk), not just invoices and packing slips. Without that, the claim collapses.

Yes, First Sale can save you money, but only if everything checks out. If your arm’s-length analysis is sloppy or the paperwork is incomplete, CBP will deny the claim and slap you with full duties plus penalties.

Other duty savings like transfer pricing and reconciliation programs help, but again, only if you do them right.

CBP is tightening the screws and watching closely. Check your First Sale claims before they check you. Work with experts who know how to nail the details.

🚫 CBP Busts Over $400M in Duty Evasion. From January to August 2025, CBP uncovered more than $400 million in unpaid duties through 89 investigations under the Enforce and Protect Act (EAPA). The largest case involved 23 importers and Chinese shell companies funneling goods through South Korea, Indonesia, and Vietnam.

🤝 U.S. and EU Agree on New Trade Framework. Starting Sept. 1, the EU will drop tariffs on U.S. industrial goods and expand farm and seafood access. The U.S. will cap tariffs on EU imports at 15%, with some exemptions. The deal includes major EU investments in U.S. energy, tech, and industries through 2028.

📉 Canada to Drop Some of Its Retaliatory Tariffs on the U.S. Canada will drop retaliatory tariffs on U.S. goods covered by CUSMA starting Sept. 1, 2025. Tariffs on steel, aluminum, and autos will remain. The move follows talks between Prime Minister Carney and President Trump, aiming to ease trade tensions while consultations continue ahead of the 2026 CUSMA review.

🇻🇳 Walmart Expands Freight Services to Vietnam. Walmart now allows sellers to ship full-container loads directly from Ho Chi Minh City and Hai Phong to the U.S. This reduces costs and speeds shipping, with added benefits such as waived storage fees during busy seasons, helping sellers better prepare for peak demand.

Kelly Nelson, trade and customs expert, shares what importers need to watch out for in the latest CBP First Sale ruling. See more from Kelly Nelson on LinkedIn.