Target files First Sale claims on qualifying direct imports with processing cycles extending beyond one year, according to the retailer's fiscal year 2025 SEC filing—a timeline that exposes how deeply embedded this valuation methodology is in enterprise customs operations and why the proposed Last Sale Valuation Act poses a systemic data challenge for compliance teams.
The First Sale rule, established through a 1988 federal court case and reaffirmed in 1992, allows importers operating in multi-tiered supply chains to declare duties based on an earlier transaction value rather than the final price paid to a middleman. In practice, this means an importer can use a $20 manufacturer price for customs valuation instead of the $80 middleman price—a 75% reduction in the dutiable value before any rate is applied.
Proposed Change: Sens. Sheldon Whitehouse and Bill Cassidy introduced the Last Sale Valuation Act in February 2025, which would require transaction values to be determined based on "the last sale of the merchandise occurring before exportation to the United States."
For compliance engineering teams, the distinction between first sale and last sale valuation isn't just a policy debate—it's a fundamental change to how transaction value fields map to duty calculations. Systems that currently accept and validate first sale documentation would need to flag or reject those values entirely if the legislation passes. The National Council of Textile Organizations, which endorses the bill, argues that most other countries already use last sale methodology, meaning U.S. systems are outliers in how they handle multi-party transaction chains.
CBP attempted a similar shift in 2008, proposing to switch to last sale valuation administratively. Congress blocked the move, instead directing the United States International Trade Commission to report on First Sale usage. That report relied on CBP data collected through a new one-year methodology. The current legislative approach bypasses administrative rulemaking entirely.
Documentation Impact: First Sale claims require importers to identify and report all costs throughout the supply chain, creating visibility into each transaction tier. Systems built to capture this documentation structure would need significant rearchitecting under a last sale regime.
The apparel and footwear sectors have historically been the heaviest users of First Sale due to elevated tariff rates in those HTS chapters, according to a 2025 KPMG report. Any valuation methodology change would disproportionately affect duty calculations for codes in Chapters 61-64, where ad valorem rates frequently exceed 10% and compounding effects on transaction value are substantial.
Compliance systems that cache or pre-calculate estimated duties based on declared values will need logic updates to handle the valuation method switch—particularly for importers currently operating refund cycles that extend past 12 months, as Target disclosed. Open First Sale claims would face uncertain treatment during any transition period.
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