First sale for export: the test, the proof CBP asks for, and past entries filed on the last sale

What is the first sale for export?

Transaction value, the usual basis of customs value, is the price actually paid or payable for the goods "when sold for exportation to the United States", plus the statutory additions (19 U.S.C. 1401a(b)(1)). When goods pass through two sales before they reach the US, for example a factory in China selling to a trading company in Hong Kong, which then sells to the US importer, both sales can meet that description. The first sale rule says that when both prices are valid transaction values, the factory's price is the one used.

The rule is older than most compliance programs. The Federal Circuit applied it in Nissho Iwai American Corp. v. United States (982 F.2d 505, December 28, 1992), building on two earlier decisions it described as the "first sale" rule. CBP's position, published as General Notice T.D. 96-87 (Customs Bulletin vol. 30/31, No. 52/1, January 2, 1997), sets out the documents an importer needs to use it. The rule rests on the courts' reading of "sold for exportation to the United States" in 19 U.S.C. 1401a; CBP's notice describes how CBP applies it.

The middleman's markup is what falls out of the value. On a line that carries several ad valorem layers, every layer falls with it.

What test does the first sale have to pass?

Nissho Iwai states it in one sentence: the manufacturer's price is a viable transaction value when the goods are clearly destined for export to the United States and the manufacturer and middleman deal at arm's length, without non-market influences that affect the legitimacy of the price. The court also said the rule applies only where there is a real choice between two valid transaction values, and that each case turns on its facts.

CBP's Informed Compliance Publication on bona fide sales (August 2005) breaks that into three things the importer must show.

1. The first sale is a bona fide sale. The middleman took title and the risk of loss and paid for the goods. Possession helps but is not required. No single factor decides it; CBP looks at the whole relationship, including whether the middleman could give the factory instructions, set its own resale price, choose its own customers and buy for its own inventory. A middleman who cannot do those things looks like an agent, and an agent's purchase is not a sale.
2. The goods were clearly destined for the United States when the middleman bought them. At the time of the first sale, the United States was the only possible destination. Evidence that appears only at shipment, such as cartons addressed to a US consignee, is not enough on its own. Goods made to the US buyer's specifications, carrying its labels, stock numbers and US-specific certifications, and shipped straight from the factory to the US, show destination from the start.
3. The first sale was at arm's length. CBP treats a sale between unrelated parties as arm's length. Between related parties, the sale must pass the related-party test in 19 U.S.C. 1401a(b)(2)(B): the circumstances of the sale show the relationship did not influence the price, or the price closely approximates a test value.

The shipping terms can sink the first. When the goods ship straight from the factory to the US and the terms pass title and risk from factory to middleman and on to the importer at the same moment, CBP's guidance calls it a "simultaneous passage of title": the middleman holds title only momentarily, if ever, and on the shipping terms alone no sale to the middleman appears to have occurred. Other documents can overcome that, but only if they exist.

What proof does CBP expect, under T.D. 96-87?

CBP presumes that transaction value is based on the price the US importer paid, and the importer carries the burden of rebutting it. T.D. 96-87, as summarised in CBP's guidance, requires two things and three findings from them.

CBP's guidance adds two practical points. When the importer asks for a ruling, requests internal advice or files a protest on a first-sale value, this documentation goes with it. And declaring a value based on a sale the importer was not party to, without the documentation in hand, is not reasonable care and can lead to a penalty.

Is there a first-sale indicator on Form 7501?

Not today. For one year, a statute required one. Section 15422 of the Food, Conservation, and Energy Act of 2008 directed CBP to collect a declaration of first-sale use, and CBP's interim rule (73 FR 49939, August 25, 2008) required an "F" next to the declared value on each line, for goods entered from August 20, 2008 through August 19, 2009. CBP removed the first-sale requirements from the ACE entry summary specification in October 2012 (CSMS # 12-000425), and the current Form 7501 instructions (revision 02/26) have no first-sale field.

For an audit that matters in two ways. You cannot find first-sale lines by filtering the entry export; you have to compare the entered value with the importer's own purchase invoice. And a line whose entered value is lower than what the importer paid, with no first-sale file behind it, is a finding in itself.

What does the first sale save on a stacked line?

Take an illustrative line: travel bags with an outer surface of man-made fibers (not backpacks), HTS 4202.92.3131, made in China, entered October 6, 2026. The factory sold them to a Hong Kong trading company for $52,500; the trading company sold them to the US importer for $60,000. Assume no product exclusion applies. The stack for that date, from the 2026 HTS:

The first sale lowers the duty on this one line by $4,132.50, which is the 55.1 percent stack applied to the $7,500 markup. The forced-labor layer applies to goods entered from July 24, 2026 (USTR notice, 91 FR 47318), so the same bags entered earlier carried a different stack; recompute each entry at the rates for its own date. The merchandise processing fee, 0.3464 percent of the value under 19 CFR 24.23 on that entry date, falls with the value too, unless the entry already sits at the per-entry minimum or maximum.

Two other layers make the markup cost more on some lines:

• Section 232. For goods entered from April 6, 2026, Section 232 duties on aluminum, steel and copper articles and their derivatives apply to the full customs value regardless of metal content (Proclamation 11021). On a covered article the first sale lowers that layer too.
• IEEPA, entries before February 24, 2026. The IEEPA duties also ran on the entered value. They are now being refunded rather than corrected; see which IEEPA entries qualify for a refund.

You can check the stack for a code, an origin and an entry date with the duty calculator. How the layers combine is on why your entry shows the wrong duty stack.

How do you find first-sale candidates in past entries?

1. List every supplier that is not the manufacturer. Trading companies, sourcing agents that invoice in their own name, and related distributors are the candidates.
2. Ask each one whether it buys and resells, and on what terms. A middleman that buys for its own account, pays the factory and takes risk of loss in transit may pass. One that passes the factory's invoice through for a fee is probably an agent, and the agent's fee then raises separate commission questions.
3. Check destination at the time of the first sale. Products made to your specifications, under your brand, for the US market, ordered before production, are the strongest candidates.
4. Test the paper trail on three entries. Pull both invoices, both purchase orders, both payment records and the shipping documents. If prices, dates, quantities and parties do not line up, fix the process before claiming anything.
5. Value the claim. Multiply the markup by the line's full ad valorem stack for each entry date, and total it across the export.

What do you do about past entries filed on the last sale?

The first sale is not elected on the entry; it is the correct transaction value when the facts support it. Past entries can move to it through the usual routes, each with the T.D. 96-87 documentation.

The post-summary correction windows come from CBP's post-summary correction page. 19 U.S.C. 1514(a)(1) makes the appraised value of merchandise a protestable decision, and the protest must be filed within 180 days after liquidation for entries made on or after December 18, 2004 (19 CFR 174.12(e)). For how a protest is built from an audit finding, see how to file a customs protest; for the full set of recovery routes, see how to recover overpaid import duty.

The audit runs both ways. A line already entered at a first-sale value, without the paper trail to support it, carries an underpayment equal to the stack on the markup. The penalty exposure on such a line is often overstated: for a negligent violation, 19 U.S.C. 1592(c)(3) caps the penalty at the lesser of the domestic value or two times the duties lost; four times is the cap for gross negligence (1592(c)(2)). How CBP sizes it is on how CBP sizes a Section 1592 penalty. On unliquidated entries that is a post-summary correction; on liquidated entries or across a pattern, a prior disclosure under 19 CFR 162.74 is the route to consider. Confirm either with a licensed customs broker or trade counsel.

The value rules that apply to both sales alike, including assists, royalties, freight and related-party pricing, are on what counts in customs value.

How does TariffSense fit into a first-sale review?

TariffSense reads entered values from Form 7501s and broker entry exports, pairs them with the commercial invoices and payment records you provide, and flags lines where the entered value does not match the price the importer paid, in either direction. It recomputes each line's Chapter 99 stack for the entry date at both values, so the size of a first-sale claim, or of an unsupported one, is stated per line. Deciding whether a first sale qualifies, and filing any correction, stays with your team and your broker. The post-entry audit page describes what goes in and what comes back.

What should you do next on your own entries?

List your suppliers for the last twelve months and mark every one that did not manufacture the goods. For the largest by duty paid, ask for the factory invoice and the middleman's proof of payment for three recent shipments. If the paper trail holds and the goods were made for the US from the order onward, value the markup across every entry still unliquidated or liquidated within 180 days, and decide the route for each before the deadlines pass. The post-entry audit pillar covers the other checks to run on the same lines.