Businesses are finding a workaround for tariffs — and it’s entirely legal
May 26, 2025
Businesses are finding a workaround to minimize the most significant hit from tariffs, using a decades-old piece of legislation known as the “first sale rule.”
Within U.S. customs law, the first sale rule allows U.S. importers to use the price of the first sale in a number of transactions to calculate customs duties.
For instance, a Chinese manufacturer sells a T-shirt to a Hong Kong vendor for $5. That Hong Kong vendor then sells the T-shirt to a U.S. retailer for $10. That U.S. retailer then sells the T-shirt to consumers for $40.
Under the first sale rule, the U.S. retailer can pay the import duty on the initial $5 price of the good, rather than the vendor’s inflated $10, thus stripping out the cost associated with the middleman’s profit.
