Transcription
tariff. This second strategy big brands use to slash their tariff bills is something called the first sale rule. And here's how it works. Tariffs are typically calculated based on the declared value of a product when it enters the United States. If you buy a product from a supplier for 10 bucks and resell it for 20 bucks, but declare 20 as the customs value, you're paying way more in tariffs than necessary. And a lot of brand new importers make this mistake. The first sale rule lets you legally pay tariffs based on the original manufacturer's price, not the marked-up price you paid your supplier.
So let's break this down with two quick examples. In scenario one, you are the importer of record. You pay tariffs on the price you paid your supplier. So for example, you buy product for 20 bucks and the tariff is 25%. You pay five bucks in tariffs.
Now in scenario two, your supplier is the importer of record and you pay for your order via DDP or delivery duty paid. And this is where the supplier acts as the importer and pays all the customs duties and fees on your behalf and you pay a lump sum to your factory. And in this case, tariffs are paid on the supplier's internal cost. In other words, what the factory charged them for the products that you are buying. For example, let's say the supplier paid 10 bucks to have your product made. The tariff is 25%. Now you're only paying $2.50 in tariffs and saving 50%. Pretty slick, right?
And this isn't some shady loophole. It is a legit method as long as it's documented properly. Your supplier must agree to quote a DDP price and act as the official importer of record. And if US Customs audits the shipment, they need to show a full paper trail of the transaction from the factory to the middleman to you. But when done right, this strategy can save you thousands because you're still paying the tariff just on a much lower declared value. Same product, same shipment, half the tariff bill. So, if you're not asking your supplier for a DDP quote and letting them be the importer of record, you're probably overpaying.