Table of Contents
What Is Happening?
On 11 February 2026, a U.S. Senate bill — the Last Sale Valuation Act of 2026 — was introduced to eliminate the long-standing First Sale Principle.
Under the First Sale rule (recognized in Nissho Iwai American Corp. v. United States), U.S. import duty could be calculated on the lower price paid by an intermediary to the manufacturer, instead of the higher price paid by the U.S. importer to that intermediary.
The proposed change would require duties to be assessed on the last sale before export to the U.S., effectively increasing the dutiable value in multi-tier supply chains.
Why It Matters Now
After the 2025 reciprocal tariff increases, many U.S. importers used First Sale structures to reduce duty exposure. However:
• U.S. Customs has recently been rejecting first-sale claims
• Compliance scrutiny has intensified
• India’s tariff rationalization (around 18% in many sectors) has already reduced overall arbitrage attractiveness
Conclusion:
The benefit of First Sale has already weakened — but formal elimination could still disrupt pricing models.
Who Is Most Impacted?
High Impact
• Indian exporters using offshore trading hubs (Singapore/HK/group traders) or local subsidiaries
• Structures designed to split margin between manufacturers and intermediaries
• Long-term contracts priced assuming first-sale valuation
Low Impact
• Direct India → U.S. importer sales
• Indian exporters with their own U.S. subsidiary acting as importer of record (single-tier sale)
• Structures already valuing on last-sale basis
Commercial Implications for Business
(A) Margin Pressure
If enacted:
• Higher U.S. duty → higher landed cost
• U.S. buyers may demand price reductions
• Gross margins may compress
(B) Supply Chain Simplification
Multi-layer trading models may lose economic rationale.
Direct export or U.S. subsidiary models may become more stable.
(C) Transfer Pricing Alignment
Customs and tax authorities globally are converging on substance-based pricing.
Artificially low manufacturer pricing will face greater scrutiny.
Business Bottom Line
• The shine of First Sale planning has already faded due to enforcement and tariff shifts (Reduction)
• May be an opportunity for Indian Exporter vis a vis other overseas exporter from the countries having higher tariff in USA like China
• Formal elimination could still disrupt margin structures where multi-tier trading exists
• Direct export and U.S. subsidiary models remain relatively insulated unless First Sale model is being used for duty reductions for local distributions
• This is the right time to simplify supply chains and align pricing with commercial substance