This Week in Business How the First Sale Rule Helps Offset Tariff Costs
Jul 2, 2025
In this discussion, David Zaring, a Wharton Professor of Legal Studies and Business Ethics, delves into the First Sale Rule, revealing how it can help U.S. companies mitigate tariff costs. He explains the complexities of international transactions and the crucial documentation needed to leverage this rule effectively. Zaring also shares practical examples, notably how it impacts global supply chains, offering invaluable insights for businesses facing rising tariffs. The conversation highlights strategic approaches to navigating financial pressures in today's market.
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How First Sale Rule Cuts Tariffs
- The First Sale Rule lets companies pay tariffs only on the first sale in the supply chain, not at importation.
- This saves tariffs by valuing the item at initial sale price, not the final sale to the U.S. importer.
Document Supply Chain for Savings
- Maintain detailed, clear supply chain documentation to claim tariffs based on the first sale price.
- Require transparency among supply chain partners to take advantage of tariff savings under the rule.
Legal Foundation of First Sale Rule
- The First Sale Rule has been legal since the early 1980s following court approval.
- It is an interpretation of U.S. customs law allowing importers to pay tariffs based on the initial sale.