From CNBC. May 26:
- Businesses are finding a workaround to minimize the most significant hit from U.S. tariffs.
- The “first sale rule” is a concept in U.S. customs law that allows importers to use the lowest cost of a good to calculate duties.
- “It’s been around for a very long time but ... everybody’s beginning to explore it with more interest,” lawyer Brian Gleicher told CNBC.
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.
“What the rules allow you to do is use that initial sales price from the factory to the vendor to determine the final duty price,” Brian Gleicher, senior lawyer and member at Miller & Chevalier Chartered, told CNBC over the phone.
How it works....
....MUCH MORE
