The U.S. is moving toward the imposition of higher import tariffs on a wide range of goods from the European Union due to several ongoing trade disputes, raising concerns among EU exporters about their access to an important market. However, the first sale rule is a proven tool that can be used to not only mitigate the impact of any such tariffs but also lower costs well into the future.
Under the first sale rule, the dutiable value of a qualifying transaction may be based on the purchase price between the middleman/vendor and the manufacturer rather than the price paid by the importer to the middleman/vendor, resulting in a lower duty bill. Various criteria must be met to use this method, including ensuring that the first sale price reflects a sale clearly destined to the U.S. and conducted at arm’s length. This rule was established in litigation by Sandler, Travis & Rosenberg more than 30 years ago, and its legality and importance to the U.S. economy and trade community were reaffirmed by legislation first proposed by ST&R and enacted in 2008.
The first sale rule has long been useful to industries subject to high U.S. tariffs, such as apparel and footwear, which use it to save millions of dollars in import duties each year. Its utilization has increased dramatically over the past year as companies seek to lessen the impact of the Section 301 tariffs on imports from China as well as Section 201 and 232 tariffs on steel, aluminum, and other products.
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© 2019, Sandler, Travis & Rosenberg, P.A. Originally published in the [July 17, 2019] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.
- Posted by Joe DeSilvetri
- On July 19, 2019
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