Retailers Rely on This Tariff Mitigation Tactic. Congress Has Noticed.

Why It Matters

If enacted, the Last Sale Valuation Act could raise duty costs for retailers and shift supply‑chain strategies, while also signaling heightened regulatory risk for the broader trade ecosystem.

Key Takeaways

• First Sale lets importers declare earliest sale price for duties
• Target reports significant refunds using First Sale methodology
• Senate bill proposes mandatory last‑sale valuation
• Critics say First Sale harms domestic manufacturers
• Customs survey collecting data on First Sale usage

Pulse Analysis

The First Sale valuation, rooted in a 1988 court decision and reaffirmed in 1992, permits importers to base customs duties on the price paid in the earliest transaction of a multi‑tier supply chain. By declaring the manufacturer‑to‑middleman price—often far lower than the final sale price—retailers can shave millions off tariff bills. Target’s FY2025 filing illustrates the practice, noting that it files First Sale claims and receives refunds that may extend beyond a year. Apparel and footwear firms have long relied on the method to offset elevated duties.

Senators Sheldon Whitehouse and Bill Cassidy introduced the bipartisan Last Sale Valuation Act in February. The proposal would base duties on the final sale price before export, closing what lawmakers call a ‘customs loophole.’ The National Council of Textile Organizations says the rule favors retailers over U.S. manufacturers, while the National Retail Federation points to its legal footing and the transparency gained by tracking all supply‑chain costs. Adding a reporting flag could give customs clearer insight into First Sale applications.

Amid ongoing tariff volatility, the First Sale debate highlights the tension between cost‑saving tactics and domestic production policy. If the Last Sale Valuation Act passes, retailers may face higher duty bills, prompting a shift back to on‑shoring or renegotiating supplier contracts. For investors, the outcome signals how trade‑related regulatory risk will be priced into retail margins and supply‑chain strategies. Meanwhile, Customs and Border Protection’s new survey of importers suggests the agency is gathering data to inform future rulemaking, making transparency and compliance more critical than ever.