Since the Trump administration announced a sweeping list of new tariffs on goods entering the U.S. last April, importers, brands and retailers have strategized ways to mitigate the financial impact to their companies and customers. Those efforts have resulted in more interest in first sale, a legal mechanism that allows importers to pay duties on the price a middleman pays for the goods rather than the price the importer paid for them. For those that use it, it has brought some welcome relief, but not everyone is in favor of this practice. Just last week, U.S. Senators Bill Cassidy and Sheldon Whitehouse introduced the Last Sale Valuation Act, which would put an end to first sale.
In a statement from Cassidy’s office accompanying the bill, first sale is characterized as “a decades-old customs loophole that allows importers to underpay duties, undercut American manufacturers, and put U.S. workers at a competitive disadvantage.”
Whitehouse struck a similar tone in a separate press release, saying, “Closing the ‘first sale’ loophole will boost businesses that play by the rules, while helping law enforcement crack down on illicit trade.”
While organizations representing U.S.-based companies have applauded the bill, others like the American Apparel and Footwear Association are opposed.
Vincent Iacopella, chief strategy officer of customs and logistics broker Alba Wheels Up, explained why first sale is a benefit not a burden to the fashion industry, one that’s only gained importance since the “Liberation Day” tariff announcement.
“It is not a loophole. It’s a long-standing court supported valuation method, and in my view, it actually aligns duties with the true manufacturing cost,” he said. “Apparel has a lot of multi-tier supply chains, notoriously thin margins, and first sale can often be the difference between a product being financially viable or not.”
Offering an estimate, Iacopella said first sale can result in savings between 5 and 15% of the entered value, and even higher for tariff-sensitive items.
According to Cassidy, one key aspect of his proposed legislation is to “prevent importers that exploit complex overseas transaction chains from gaming the system.”
Nicole Bivens Collinson, managing partner, operating committee and international trade and government relations practice leader for law firm Sandler, Travis & Rosenberg, called that a mischaracterization. “Does a company exploit the system when it claims a tax deduction or credit? No, it uses the laws as defined by Congress, CBP and the Judicial branch to reduce taxes owed,” she said.
Both Iacopella and Collinson agree that if first sale were to go away, retail prices would rise as companies grapple with higher tariff bills. “In the current landscape with the costs elevated— tariffs, inflation, sourcing constraints—I think this would have a substantial impact to landed cost,” Iacopella said. “When you add costs, they eventually travel through the supply chain. No matter at what point they’re paid, they generally pass through to the consumer.”
Already, Collinson noted, a recent CBO study shows U.S. consumers are being hit with 70% of the import price increases due to tariffs.
She added that a move to eliminate first sale runs counter to other initiatives Washington is pursuing right now.
“As inflation continues, making goods affordable is essential,” she said. “It is surprising to me that Congress is getting in on the action to increase tariff bills for importers and consumers. When you look at the Senate and House both recently passing measures to cancel the emergency with respect to IEEPA tariffs on Canada for fentanyl, it seems odd that now Congress is thinking how they too can increase the tariff burden.”
Among the benefits of the Last Sale Valuation Act, according to Cassidy, is enhanced trade transparency. Here again, Collinson calls this into question.
“First sale provides greater security to incoming shipments because the importers have to go beyond tier one suppliers. [It’s] greater visibility for CBP into the supply chain; greater compliance as importers know they must have all their documentation ready at the request of CBP,” she said. “Last sale entries only require an invoice.”
The local benefits
The bill has garnered support from organizations that focus on U.S. businesses. Michael Woody, founding chair of the Rhode Island Textile Innovation Network, welcomed the potential end of first sale, calling it an example of how the government subsidizes overseas competitors.
The National Council of Textile Organizations applauded the bill, calling first sale “harmful.” In a statement, NCTO president and CEO Kim Glas said first sale “disadvantages U.S. textile manufacturers in favor of countries that often employ predatory trade practices and fail to provide reciprocal market access.”
Ultimately, she said the Last Sale Valuation Act would bolster the U.S. textile industry and result in more onshoring.
While Iacopella agreed this bill would probably prompt changes in the supply chain, he doesn’t believe those efforts would necessarily benefit U.S. producers.
“It would cause importers to maybe restructure supply chains and pricing compliance processes, maybe renegotiate contracts, maybe seek out countries with lower duties,” he said. “Would first sale facilitate onshoring? I’m not sure that happens, because onshoring is not driven primarily by duty valuation alone. You have labor, cost structures, infrastructure, regional capacity, other things going on. So, I think it’s big enough to cause substantial impact to the system, but not in itself, large enough to drive businesses back to the onshoring.”
