European Fashion Brands Eye 'First Sale' Rule to Counter Trump's Tariffs

European fashion and cosmetics companies are exploring the U.S. 'First Sale' rule to mitigate high tariffs imposed by President Trump. This approach allows companies to pay lower duties based on factory prices rather than retail, but involves complex compliance requirements and potential risks, including audits and penalties.

European fashion and cosmetics giants, including L'Oreal, are considering tactics to ease the strain of President Donald Trump's tariffs, utilizing an American customs clause known as the 'First Sale' rule. This strategy offers a financial reprieve by imposing tariffs on the factory price rather than the end retail cost.

L'Oreal, along with brand names like Moncler and Ferragamo, is assessing this potentially beneficial rule, despite its complexity and the intricate paperwork it entails. Analysts highlight its cost-effectiveness, particularly when tariffs are reaching staggering heights compared to average historical rates on EU imports.

This strategy's multi-layered nature requires precise documentation and thorough understanding of supply chains. Despite the ambiguity surrounding its adoption, industry consultancy experts note increased inquiries and interest, indicating a potential surge in its utilization as companies navigate the current tariff landscape.

(With inputs from agencies.)