"To address Trump’s tariffs, U.S. importers already have 'mature tax reduction plans.'"

American companies are significantly lowering their tariff bills by leveraging a set of mature legal strategies, with the “first sale” rule at the core of effective judicial precedents. It’s estimated that in 2025, importers will pay about $45.7 billion less in tariffs using this rule and other methods. This practice has triggered a bipartisan push in Congress for legislation to seal off such loopholes.

The “first sale” rule is a valuation principle of U.S. Customs. Under this rule, when goods are resold multiple times through intermediaries to the U.S., the importer can calculate the tariff based on the price of the initial transaction between manufacturer and intermediary (instead of the final price at which the intermediary exports to the U.S.). This means importers can choose to declare at the lowest initial transaction value, legally lowering the tariff basis and reducing their tax burden.

The Wall Street Journal reports that Republican Senator Bill Cassidy of Louisiana and Democratic Senator Sheldon Whitehouse of Rhode Island jointly introduced a bill this February to end the application of the “first sale” rule. White House trade adviser Peter Navarro has publicly voiced support, noting that Washington law firms are exploiting this loophole to undermine the effectiveness of Trump’s tariff policies.

White House spokesperson Kush Desai warned:

“The Trump administration attaches great importance to the integrity of presidential tariff policies; foreign exporters should think twice before attempting to undermine the U.S. tariff system.”

From a market perspective, these avoidance tactics help explain why inflation didn’t surge as expected after steep tariff increases. Data shows that in 2025, imported durable goods prices rose only 1.3% for the entire year, far below most economists’ prior forecasts.

How the “First Sale” Rule Works

The “first sale” rule stems from a legal precedent established in the 1980s. Its core logic is to allow importers to use the earliest transaction price in the supply chain as the tariff basis, rather than the actual price paid to intermediaries.

Take a sofa as an example: If the manufacturer sells it to the trader for $200, and the trader resells it to a U.S. retailer for $300. With a 50% tariff rate, under the standard declaration method, the U.S. importer would owe $150 in tariffs. But by invoking the “first sale” rule and declaring $200 as the value, the tariff due is only $100, saving a third compared to the standard method.

International trade lawyer Dave Townsend, a partner at Dorsey & Whitney, commented:

“If duties can’t be avoided, the only way to lower the tax burden is to, to some extent, adjust the declared value.”

Another common practice is “unbundling,” i.e., stripping out insurance, transportation, and other costs not usually included in the tariff basis from the declared value, so only the manufacturing cost is taxed, further compressing the tax liability.

Significant Avoidance Effects, Inflation Pressure Below Expectations

These strategies have had observable macroeconomic impacts. The Penn Wharton Budget Model estimates that in 2025, importers saved about $45.7 billion in tariffs through pre-stocking, application of the “first sale” rule, and other measures.

Analysis from the Yale Budget Lab shows that from January to November 2025, import durable goods prices rose just 1.3% year-on-year, far less than economists’ general expectations. Overall inflation also slowed during the same period.

Previously, few businesses used the “first sale” rule due to its cumbersome paperwork when tariff rates were low. As tariffs climbed, related podcasts and webinars rapidly popularized the strategy; lawyers say this practice has become quite common in the industry.

Thresholds and Compliance Risks

Although the “first sale” rule is legal, it faces multiple obstacles in practice.

Customs officials remain highly vigilant about importers who suddenly reduce their declared values for fear of potential fraud. For small and medium businesses, the paperwork and legal costs required often prove prohibitive. Also, to qualify for the “first sale” price, it must be proven that when the initial transaction occurred, the goods were clearly intended for the U.S. market—a demanding burden of proof.

Meanwhile, intermediary traders from Asian factories are not always willing to disclose actual manufacturing costs. However, lawyers say that, as more U.S. buyers demand supply chain transparency, traders who refuse may risk losing orders, and their attitudes are gradually changing.

As the international trade law firm that pioneered this strategy in the 1980s, Sandler, Travis & Rosenberg specializes in hiring former customs officials to help review documents and identify risks. Partner Mark Segrist stated:

“Our goal is to establish a clear and complete document chain, not only defensible on paper but also in substance during scrutiny.”

Legislative Pressure from Congress, Pushback from Industry Associations

Legislative pressure continues to mount. The bill jointly proposed by Senators Cassidy and Whitehouse would directly block the “first sale” route for legal tax reduction. The bill has received public backing from White House trade adviser Peter Navarro.

In response, the U.S. Exporters and Importers Association opposes the bill, arguing that forcing importers to pay higher tariffs will ultimately pass the cost to consumers. The association stresses:

“The current first sale system has undergone rigorous scrutiny and has a well-developed structure and enforcement mechanism.”

Whether the bill moves forward will largely determine whether companies can continue to use this strategy to hedge tariff pressure—and will directly affect the effectiveness of Trump’s tariff policy.

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