In response to Trump's tariffs, U.S. importers already have a "mature tax reduction plan"

U.S. businesses are leveraging a set of sophisticated legal strategies to significantly reduce their tariff bills, with the judicial precedent centered on the “first sale” rule proving especially effective. It is estimated that in 2025, importers will pay about $45.7 billion less in tariffs through this rule and other means. This practice has prompted bipartisan efforts in Congress to push for legislation aimed at closing such loopholes.

The “first sale” rule is a U.S. Customs valuation principle. Under this rule, when goods change hands multiple times via intermediaries before reaching the U.S., importers can calculate tariffs based on the initial transaction price between the manufacturer and the intermediary, rather than the final price at which the intermediary sells to the U.S. This means importers can choose to declare the lowest initial transaction price, thereby legally lowering the tariff base and reducing their tax burden.

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

White House spokesperson Kush Desai warned:

“The Trump administration places high importance on the integrity of the President’s tariff policy, and foreign exporters should think twice before attempting to undermine the U.S. tariff system.”

From a market perspective, these circumvention tactics partially explain why inflation did not surge as expected after large tariff hikes. Data shows that in 2025, prices of imported durable goods rose by only 1.3% for the year, far below most economists’ earlier 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 basis for tariff calculation, rather than declaring the price actually paid to the intermediary.

Take a sofa as an example: if a manufacturer sells it to a trader for $200, and the trader then resells it to a U.S. retailer for $300. At a 50% tariff rate, under conventional declaration, the U.S. importer would pay $150 in tariffs; but by invoking the “first sale” rule and declaring $200 as the value, the tariff would only be $100, saving one third compared to the former approach.

International trade lawyer and Dorsey & Whitney partner Dave Townsend stated:

“If tariffs are unavoidable, the only way to reduce the tax burden is to adjust the declared value to some extent.”

Another common practice is “unbundling,” which entails stripping insurance, transportation, and other fees typically excluded from the tariff base out of the declared value, thus paying tariffs only on the manufacturing cost of the product and further compressing the tax burden.

Significant Circumvention Effects, Lower-than-Expected Inflationary Pressure

The actual effectiveness of these strategies is reflected in macroeconomic data. The Penn Wharton Budget Model at the University of Pennsylvania estimates that in 2025, importers avoided about $45.7 billion in tariffs through early stocking, application of the “first sale” rule, and other measures.

Analysis by the Yale Budget Lab shows that from January to November 2025, prices of imported durable goods rose by just 1.3% year-on-year, far below the general expectations among economists. Overall inflation also slowed during the same period.

Previously, the “first sale” rule was rarely used by companies when tariffs were low, due to the complexity of the required documentation. However, as tariff rates have surged, related podcasts and webinars have quickly popularized this strategy, and lawyers report that it has become quite common in the industry.

Operational Thresholds and Compliance Risks

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

Customs officials remain vigilant toward importers who suddenly and significantly reduce their declared values, fearing the potential for fraud. For small- and medium-sized enterprises, the required document preparation and associated legal fees are often prohibitive. Furthermore, to apply the “first sale” price, one must prove that the goods were clearly destined for the U.S. market at the time of the initial transaction—a strict burden of proof.

Meanwhile, intermediary traders from Asian factories are not always willing to disclose the actual manufacturing cost. However, lawyers note that as more U.S. buyers demand supply chain transparency, traders unwilling to cooperate 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 employs former customs officials to help review documents and identify risks. Partner Mark Segrist at the firm stated:

“Our goal is to build a clear and complete document trail that can stand up both on paper and in substantive content under scrutiny.”

Congressional Legislative Pressure and Industry Pushback

Legislative pressure is mounting. The bill jointly introduced by Senators Cassidy and Whitehouse, if passed, will directly close off the legal tax-saving pathway of the “first sale” rule. The bill has already received public endorsement from White House trade adviser Peter Navarro.

In response, the American Association of Exporters and Importers has voiced opposition, arguing that if importers are forced to pay higher tariffs, the costs will ultimately be passed on to consumers. The association emphasized:

“The current first sale regime has undergone rigorous scrutiny and has a well-structured and effective implementation mechanism.”

Whether the bill advances will largely determine whether companies can continue relying on this strategy to hedge tariff pressure, and will directly affect the actual enforcement of Trump’s tariff policies.