First Sale for Export
When goods pass through a trading company, declare the earlier factory price rather than the price you pay, so the middleman's markup is never dutiable.
Best for: Multi tier supply chains with a trading company in the middle
How it works
The order the work actually runs in.
- 1
Confirm the structure genuinely contains two sales: factory to middleman, then middleman to you.
- 2
Establish that the first sale was a bona fide sale destined for the United States at the time it happened.
- 3
Get documentary access to the factory invoice and proof of payment, which is where most programs stall.
- 4
Have the valuation position reviewed, and consider a ruling, before you rely on it.
- 5
Build the recordkeeping so every entry can still be supported years later.
A worked example
What the strategy looks like once you put numbers on it.
A 22% trading company markup taken out of the dutiable value
A home goods brand bought $6M a year through a Hong Kong trading company that marked factory prices up by about 22%.
Duty was assessed on the full $6M invoice from the trading company, so the brand was paying duty on a markup that had nothing to do with the goods themselves.
The factory-to-middleman sale was documented as a bona fide sale for export to the United States, with factory invoices and proof of payment made available under an agreement with the trading company. Entries then moved to the first sale value.
$1.08M of markup came out of the dutiable value. At a stacked 28.4% rate that is about $307k a year, with no change to the product, the supplier, or the price actually paid.
Figures are illustrative math on a representative volume, not a specific client engagement. Your own numbers depend on your product, your codes, and current policy.
Before you commit
What this needs from you, and where it goes wrong.
What it takes
- A genuine two-tier structure. A single sale through an agent does not qualify.
- Factory pricing transparency, which usually has to be negotiated with the middleman
- Documentation on every entry, retained for the full record retention period
- A valuation review before you rely on it, not after
Watch-outs
- Trading companies resist showing factory pricing because the markup is their business model. That is the real blocker, not the law.
- The first sale must be destined for the United States at the time of that sale. Goods diverted later do not qualify.
- Savings are proportional to the markup. A 4% markup rarely justifies the program's overhead.
Would this one work for your product?
Send us your HTS codes and volumes. We will tell you whether this strategy applies to you, what it is worth, and what it takes to put in place.