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Articles Conditionally Free. Chapter 98 Of U.S. HTS for International Shipping

There are several ways in which international shipping merchandise arriving in the United States may be entered FREE or PARTIALLY FREE OF DUTY.

References are at:

• Code of Federal Regulations; Title 19CFR Customs Regulations; Part 10 (19CFR 10) "Articles conditionally free, subject to a reduced rate, etc."
  direct link http://www.access.gpo.gov/nara/cfr/waisidx_04/19cfrv1_04.html
• U.S. Harmonized Tariff Schedule; Chapter 98 "Special classification provisions"
  direct link http://hotdocs.usitc.gov/docs/tata/hts/bychapter/0500C98.pdf

SOME TOPICS FROM Chapter 98, "Special classification provisions" for EXPORTED AND RETURNED ITEMS:

1. American Goods Returned
2. Item Repeated or Altered Abroad
3. Assembly of U.S. Components Abroad
4. Articles Exported and Returned not advanced or Improved
5. Temporary Imported Under Bond
6. ATA Carnet
7. PERSONAL EXEMPTIONS (Extended to Residents or Non-residents (1); U.S. Personal (2); DISTINGUISHED VISITORS AND TO PERSONNEL OF FOREIGN GOVERNMENTS OR INTERNATIONAL ORGANIZATIONS (3); Other (4))
8. IMPORTATIONS OF THE UNITED STATES GOVERNMENT

9. IMPORTATIONS OF FOREIGN GOVERNMENTS AND INTERNATIONAL ORGANIZATIONS

10. SAMPLES FOR SOLICITING ORDERS

11. ETC... See the Chapter 98

Always read Chapter Notes and pay extreme attention to EVERY WORD in Chapter 98, "Special classification provisions." Otherwise, it cannot be used.

American Goods Returned (9801)

U.S. HTS. Chapter 98. SUBCHAPTER II.
2 (a) ...any imported article which has been assembled abroad in whole or in part of products of the United States, shall be treated for this Act as a foreign article, and, if subject to a duty which is wholly or partly ad valorem, shall be dutiable, except as otherwise prescribed in this part, on its total value determined by section 402 of the Tariff Act of 1930, as amended. If such product or article is dutiable at a rate dependent upon its value, the value for determining the rate shall be its total value under section 402.

In general:
ONLY THOSE ARTICLES OF U.S. ORIGIN WHICH HAVE NOT BEEN ADVANCED IN VALUE (1) or IMPROVED IN CONDITIONS (2) BY OTHER MEANS CAN BE ENTERED FREE OF DUTY.

Examples of U.S. international shipping goods sent abroad and returned:
a. Came back in worthy condition (rusted, broken, etc.), then it IS QUALIFIED.
b. Came back improved or repaired, then it IS NOT QUALIFIED.
Tomatoes went to Mexico and came back to the U.S.
a. Sorted - it IS QUALIFIED.
b. Wax removed - it IS NOT QUALIFIED.

GENERAL RULES FOR RETURNED ARTICLES:

While filing FOREIGN SHIPPER DECLARATION, it must be stated that international shipping articles were not imported abroad. This statement can be displayed in the invoice itself.

A. INFORMAL ENTRY AND NO BOND ARE REQUIRED IF:

1. CBP Form 3311 (Declaration for Free Entry of Returned American Products) DOES NOT be required if the value of the international shipping article is UNDER $250.

2. CBP Form 3311 (1) and Foreign Shipper Declaration (2) must be filed if the value of international shipping articles is:

• Less than $2,000;
• Less than $10,000 but imported for REPAIR and after that will be RE-EXPORTED;
• Less than $10,000 and had been REJECTED.

3. CBP Form 3311 (1) and Foreign Shipper Declaration (2) and Entree Summary CBP 7501 (3) if less than $10,000 and RETURNED FROM A TEMPORARY EXPORT.

B. ANYTHING ELSE WOULD REQUIRE FORMAL ENTRY AND BOND.

U.S. Customs has the right to request formal entry and bond for any entry, even though it is an exemption in HTS.

If FOREIGN SHIPPER DECLARATION is unavailable, then you can post a bond and have 120 days to produce that FOREIGN SHIPPER DECLARATION to get free of duty.

 

These specific conditions are outlined in 19 CFR. In section 10.1 of 19CFR.
direct link http://a257.g.akamaitech.net/7/257/2422/12feb20041500/edocket.access.gpo.gov/cfr_2004/aprqtr/19cfr10.1.htm

1. A declaration by the exporter or foreign shipper is required on all international shipments exceeding $2,000 in value that states that the exporter knows that articles) were exported from the USA on a given date (1), and these international shipping goods were NOT advanced or improved (2).
2. A completed CF 3311 serves as both a declaration and an entry for free entry. NOT as a certificate of exportation. See CBP Form 3311 - Declaration for Free Entry of Returned American Products(online)(print only)(wizard).

If the international shipping merchandise was exported from THE SAME PORT as it is imported, the export could be verified based on information on hand at those customhouses. It can be validated as an export declaration.

Otherwise, IF IT WAS ANOTHER PORT OF EXPORTATION, the appraising officer can send the CF 3311 for verification to the port of exportation.

EXCLUSION: Excluded from the free entry are international shipping items on which manufacturing drawbacks have been claimed upon exportation.

 

Articles are Imported, duty is paid, and then Exported again (19 CFR 10.8(a)):

Duty must be paid a second time.

There are two exemptions when you international shipping products for a second time and DO NOT PAY DUTY (HTS 9801).

1. 9801.0020 - International shipping articles are exported under a lease.
   Imported foreign goods had been leased abroad. The lease is over. It comes back.
2. 9801.0025 - Articles REJECTED or not conformed to specification.

Both of those must be:

1. Previously imported AND DUTY HAD BEEN PAID at the previous importation;
2. Must NOT BE ADVANCED IN VALUE abroad;
3. The original importer, exporter, and present importer MUST BE THE SAME PARTY;
4. Must be exported WITHIN 3 YEARS from the original importation date;

Documents require:

1. Copy of original entry with proof that duty was paid at the 1st time of importation;
2. Proof of export (Shipper's Export Declaration, Manifest, etc.);
3. Lease agreement IF LEASE or;
4. Rejection statement if REJECTED.

Several other categories under 9801:

3. 9801.0040 - import assigned for educational purposes;
4. Trade fairs - the original importer must also be the exporter;
5. 9801.0050 - circus or menagerie;
6. 9801.0060 - other miscellaneous.

 

International shipping item Repeated or Altered Abroad (9802)

U.S. HTS. Chapter 98. SUBCHAPTER II.
3. International shipping articles repaired, altered, processed, or otherwise changed in condition abroad...

In general:
Merchandise, whether of domestic or foreign origin, can be shipped abroad for repair or alternation and returned to the U.S. WITH ONLY THE REPAIR or ALTERATION COST BEING DUTIABLE. Meanwhile, the value of the goods themselves is entered duty-free. The cost of repair or alteration is dutiable AT THE ARTICLE RATE OF DUTY.
(19 CFR 10.8)
NOTE: In this instance, NO FREIGHT COSTS ARE DUTIABLE.

1. 9802.0040 - done for warranty work (IMPORTANT: Warranty work is dutiable anyway. New parts, labor, etc.);

2. 9802.0050 - non-warranty work or improvement;

Are those entrees formal or informal?
Example: If the machine costs $10,000 and the repair costs $1,000, then TOTAL VALUE IS $11,000 (above $10,000), then FORMAL ENTRY IS REQUIRE.

ALTERATION is - Physical improvement of a product that DOES NOT CHANGE THE IDENTICAL OF THAT PRODUCT. I.e., NO SUBSTANTIAL TRANSFORMATION HAD OCCURRED.

ELEMENTS OF VALUE OF REPAIR OR ALTERATION:

1. If it built an actual invoice value,

2. If it is free (warranty, for example), it is FAIR MARKET VALUE. That means that EVEN THOUGH IT has been DONE FOR FREE, YOU MUST PAY DUTY ANYWAY!; If the cost of free repair exceeds the cost of an article (let's say under warranty, and they sent you a new one), THE NEW ARTICLE IS FULLY DUTIABLE.

3. Assists do not count (mold, test equipment, etc.);

4. U.S. components (parts) ARE dutiable anyway.
Example: You send a machine for repair abroad.
- Machine costs - $50,000 - FREE
- Repair (labor) costs - $ 1,000 - Dutiable
- Test equipment you sent (assists) - $ 5,000 - FREE
- U.S. parts you sent - $ 2,000 - Dutiable
Then, $55,000 would be duty-free; $3,000 would be dutiable AT THE RATE OF IMPORT OF THE MACHINE (Let's say 5%).
I.e., for Customs purposes, that $3,000 IS the DUTIABLE VALUE OF THE IMPORTING MACHINE.

DOCUMENTS REQUIRE:

1. A FOREIGN REPAIR AFFIDAVIT.

• What was received;
• What was done to that;
• The value of the repair or alternation (even if it was given for free)
• No substitution was made.

2. COPY OF AIRBILL providing the export (1) or foreign customs entry (2) or CBP 4455 (Certificate of Registration) BEFORE IT EXPORTED, signed by U.S. Customs. Even if Customs had not inspected it before it was exported, it must be signed.

9802.0060 - U.S. Metal articles exported for processing and returned for further processing:

Applies to metal. It must have three processing parts:

1. It must be processed in the USA first before exporting;
2. Then processed abroad;
3. And then again processed in the USA.

The value is free. But the value of the processing is dutiable at the value of the item itself.

Documents require:

1. CBP 4455 was filed BEFORE the item was exported from the USA;
2. Foreign Processing Declaration:
   - what they did;
   - what the value was.
3. Endorsement by importer staying that further processing will be done.

Certain conditions apply:

1. a. A certificate of registration (THE TOP PORTION of CBP Form 4455 - Certificate of Registration (online) (print only) (wizard)) shall be filed by the exporter PRIOR TO THE DEPARTURE of the exporting carrier.
   b. On arrival at the port of Exportation, THE BOTTOM PORTION of CBP Form 4455 is completed.
2. When filing the entry, the CBP Form 4455 is presented with the entry TOGETHER WITH A STATEMENT BY THE IMPORTER, OWNER, or CONSIGNEE that the articles entered are, to the best of his knowledge,
   a. The article registered at the time of exportation;
   b. The value of repairs or alternations is the FULL COST OF THESE REPAIRS OR ALTERATIONS or that it represents the fair market value of repairs or alternations IF NO CHANGE IS MADE FOR THEM.
3. The importer or broker must keep this document for 5 YEARS after the entry date.
4. In addition to the CBP Form 4455, a declaration by the foreign processor must be submitted stating that the articles WERE EXPORTED FROM THE U.S. AND WERE RECEIVED. The total cost of the fair market and value after processing is correctly displayed.

Assembly of U.S. Components Abroad HTS 9802.00.80 (19CFR 10.11)

U.S. HTS. Chapter 98. SUBCHAPTER II.
4. Articles assembled abroad with components produced in the United States...

In general:
International shipping articles assembled abroad in whole or in part of fabricated components of U.S. origin, which were exported in CONDITIONS READY FOR ASSEMBLING, are subject to duty upon the total value of the imported article LESS THE COST OF THE ASSEMBLED ARTICLES OF U.S. ORIGIN.

Determining whether or not a U.S. part becomes dutiable is complicated and must be considered.
For example:
- If the assembling requires drilling a hole to fasten the piece to another, this whole CANNOT be drilled by the assembler. Otherwise, it will be disqualified as an exemption from payment of duty.
- However, if this whole was incidental to the assembly process for lifting by cranes, for example, then the part WOULD qualify for duty-free treatment.

CRITERIA: Must be U.S. components exported FULLY READY FOR ASSEMBLING.

What are the assembly conditions? It must fit or join together fabricated components by welding, sewing, soldering, screwing, etc., and must be solid to solid (i.e., mixing gas and water is not acceptable). IT CAN NOT BE IMPROVED. ASSEMBLED ONLY.

Exception: Operations that are considered as INCIDENTAL (??????????????) to the assembly, such as cleaning, taking off protection film, etc. (Polishing, painting, etc. are NOT incidental)

How do we value that? Cost of the Assembly (1) plus Cost of International Freight (2) from the USA to the place of assembly. (IMPORTANT: Domestic U.S. freight to a port of exportation AND Any cargo to return to the U.S. is NOT DUTIABLE). It classifies separately.
Example:
1. Cost of U.S. international shipping parts (under 9802.00.80) - FREE
2. Transport to the USA border (under 9802.00.80) - FREE
3. International freight from U.S. port to the assembly plant - 5% DUTIABLE
4. Assembly of the product international shipping abroad - 5% DUTIABLE
5. The merchandise itself - DUTIABLE at the rate of duty
6. All freight back to the USA - FREE

Documentation required: Free entry of U.S. assembled international shipping components will only be granted if submitted with the entry(1) or bond posted for submission later (2). The documentation consists of:

1. ASSEMBLER'S DECLARATION by the assembler abroad as outlined in Section 19CFR 10.24(a)
   http://a257.g.akamaitech.net/7/257/2422/12feb20041500/edocket.access.gpo.gov/cfr_2004/aprqtr/pdf/19cfr10.24.pdf
   The additional information required is:
   - Marks & Numbers;
   - Description of components;
   - Quantity;
   - Unit value at a time and place of export;
   - Port and date of export; and
   - Name and address of the manufacturer.
2. IMPORTER'S DECLARATION (Endorsement from the importer), showing endorsement and agreement with the statement of the ASSEMBLER'S DECLARATION as shown in 19CFR 10.24(a). The Port Director may revise the format of this dual declaration to adapt to the particular situation if warranted.
3. The documents referred to above MAY MAKE REFERENCE TO DOCUMENTS SUBMITTED TO U.S. CUSTOMS such as:
   - Assembly description;
   - A list of U.S. components; and
   - etc

The importer must keep detailed records available for examination by Customs.

9804.00.20 - Non-residential tool of the trade. I.e., a tool of the trade that foreign visitors bring to the USA.

9811.00.60 - Samples valued not over $1.00 marked "NOT FOR SALE."
Must indicate "NOT FOR SALE." Examples: Perfume with the "NOT FOR SALE" label or T-shirt marked clear "SAMPLE."

NAFTA classifications in 9800.

 

Articles Exported and Returned not advanced or Improved

Chapter 98 Subchapter 1 of the HTS provides duty-free treatment for U.S. products that HAVE BEEN EXPORTED and SUBSEQUENTLY RETURNED to the USA without improvement, as well as provisions for the RETURN of PREVIOUSLY IMPORTED merchandise TO BE RE-ENTERED FREE OF DUTY.
http://hotdocs.usitc.gov/docs/tata/hts/bychapter/0500C98.pdf

1. Imported by the same person who exported them;
2. The international shipping article was exported within 3 years from the date of original importation into the USA;
3. The international shipping article was NOT improved in condition by any process of manufacture or otherwise while abroad;
4. The international shipping article did not conform to the sample or specifications, and
5. The same person who originally imported and, within 3 years, exported the international shipping articles is the importer upon re-importation.
6. It also provides a duty-free return of foreign articles IMPORTED and DUTY-PAID, IF EXPORTED BY THE ORIGINAL IMPORTER UNDER A BONAFIDE LEASE AGREEMENT, and no advanced in value or by any means abroad.

A declaration from the importer and one from the exporter must be filed with the entry.
Port Director MAY WAIVE DUTY-FREE ENTRY if justified.

The phrase "ON WHICH DUTY HAS BEEN PAID" is instrumental in qualifying for the free exemption.

 

Temporary Imported Under Bond (TIB). 9800 HTS classification and 19CFR10.31 till 40

Important:
Entries TIB cannot be liquidated. It is canceled. It can be EXPORTED or DESTROYED only.

Exporting a TIB under Customs supervision will automatically cancel the bond given on importation. When international shipping merchandise is exported or destroyed under Customs supervision but not within the bond period, it is up to the Port Director to request payment of a reduced amount or to settle without collection of liquidated damages if the delay in exportation was in the best interest of the United States, or was caused by circumstances beyond the control of the parties involved and which could not have been foreseen by a reasonable and prudent party.

This bond is given to guarantee the exportation of the goods or their destruction under Customs supervision WITHIN ONE YEAR FROM THE DATE OF IMPORTATION (not an entry). The bond may be extended twice, for one additional year each, but cannot exceed three years after importation.
The statement "Not for sale in the USA" must be performed.

The exception is the importation of professional international shipping equipment and tools of the trade (1), as well as automobiles and parts or cutaways of the foregoing, and if entered for show purposes (2). The latter cases must be exported within six months from their date of importation, as stated in CR 10.31. (CROSS - Customs Ruling Online Search System at http://rulings.customs.gov)

In general:
The bond amount, in general, is 2 times DUTY (not the value) unless the exceptions are below.

Some samples and bond requirements are shown below:

1. International shipping articles imported for repairs, alteration, or processing - BOND is 200% of Duty.
2. Models of women wearing apparel - BOND is 200% of duty.
3. International shipping articles are imported as models by illustrators or photographers. If used in their establishment for catalogs or advertising, BOND is 200% of Duty.
4. Samples solely for use in taking orders - BOND is 110% of Duty.
5. Articles solely used for examination with a view to reproduction and motion picture advertising film -BOND is 110% of Duty.
6. International shipping professional equipment and tools of the trade - BOND is 110% of duty.
7. Theatrical effects for temporary use in the U.S. on exhibition - BOND is 200% of Duty.

Examples:
- TIB of machine value of $5,000 (say duty rate is 5%) is $250. THEN TIB BOND REQUIRE IS $500 (2 times of duty).
- For a sample jewelry trade, the value of $5,000 (say duty rate is 5%) is $250. THEN TIB BOND REQUIRE IS $275 (110% of duty).

Documents under TIB:

1. Proof of export CBP3495 or Airway bill (Bill of Lading) or Shipper's Export Declaration or;
2. Proof of Destroy CBP3499 - Permit to Manipulate.
   Important: Customs must sign the Permit to Manipulate BEFORE the destruction of articles. IT CAN BE PAID TO CUSTOMS TO STAND WHY YOU DESTROYED THE ARTICLES.

 

Entry of international shipping items under TIB, except for items covered by an ATA carnet, must be made on CF 3461 or CF 7533, followed by an entry summary (CF 7501) within the standard 10-day period from the entry date.
There is a special provision for handling Trade Fair Entries. They are not handled under a TIB. Trade Fair entries are discussed in CR 147.

In addition to the usual requirements on either CF 3461 or CF 7533 followed by the CF 7501, each TIB must show:

1. The HTS number on which entry is claimed;
2. A statement as to the use of the entered articles to allow the Port Director to decide as to their admissibility under a TIB provision; and
3. A declaration that the international shipping articles are not to be put to any other use and that they are not imported for sale or sale on approval.

Except for some international shipping articles entered by non-residents for fewer than 90 days, a bond or CF 7563 in an amount equal to double the standard estimated duty or a higher amount at the discretion of the Port Director must be given. The exceptions to this rule are:

1. Samples for soliciting orders;
2. Motion picture advertising film and
3. Tools of the trade.

These exceptions require a bond for 110% of duty rather than double the average duty rate.

A Continuous Bond (formerly called a General Term Bond) can be used in lieu of a CF 7563. If the bond amount is less than $25, surety or a cash deposit is not required, and the bond will be modified accordingly.

After Customs has accepted the entry and bond, the articles are released to the importer. The entry will not be liquidated since the transaction does not involve liquidated duties.

Articles internationally shipping under TIB may be exported from the port of entry or another port. Application on CF 3495 must be filed with the Port Director sufficiently before the exportation to permit examination and identification of the articles. If exported at another port, CF 3495 must be filed in triplicate, with a certified copy of the import entry or the invoice used in the entry. Once examined, shipments must move under bond (T&E).

LIQUIDATED DAMAGES FOR TIB are CHARGE AGAINST THE BOND, not a fine or penalty.

Failure to export or destroy under Customs supervision TIB merchandise will result in a demand by the Port Director in the amount of 2 TIMES the average duty rate (or 110% where this lower amount applies) for liquidated damages.

If there has been a default in respect to TIB merchandise and a petition for relief is filed on time, it will be forwarded to headquarters by the District unless the Port Director has allowed it in part or whole. In most cases, the international shipping merchandise entered under TIB is exported. Still, problems arise when the exporter fails to have the goods examined on export, and the TIB is not canceled. In this case, the Port Director will typically request a landing certificate from the port to which the international shipping merchandise was destined to prove exportation. The Port Director may request the payment of a lesser amount as liquidated damages or no cost if he feels this action is warranted.

Example (the exam question):
a. You bring to the USA 10 units under TIB and extend it 2 times up to 3 years.
Each unit costs $10,000, and the total value is $100,000 with a 10% duty rate on it. THEN YOUR BOND IS $20,000 (2 times the duty).

b. 2.5 years later, Customs checks out that entry under TIB and asks you for the Proofs of Export CBP3495 or Airway bill (Bill of Lading) or Shipper's Export Declaration (1) or Proofs of Destroy CBP3499 (2). You show it for 9 units but cannot prove the 10th one.

c. Then Customs goes against the FULL bond amount of $20,000 (2 times of duty for ALL 10 UNITS). BECAUSE THE BOND CONTRACT MEETS CERTAIN CONDITIONS. ONE OF THOSE CONDITIONS SAYS: "SAME 10 UNITS IN, 10 SAME UNITS OUT"

 

ANTIQUE Chapter 97 in HTS

The unique thing about antiques is that IT CAN BE ENTERED IN CERTAIN PORTS OF THE USA ONLY. Not all ports of the USA entries with antiques can be made.

To qualify as antique, it must have:

1. Proof that the international shipping item is 100 years old or older (exempt cars - 25 years old).
   There is no particular customs form. It must be something acceptable for Customs.
2. A statement that international shipping items are either for PERSONAL or COMMERCIAL use.
   a. If it is for personal, it is the average duty rate.
   b. If international shipping is COMMERCIAL (see chapter 97 in HTS), 6.6% is in column 1, and 25% of the additional duty is on top of the regular duty.

 

ATA Carnet

ATA stands for the combined French and English words "Admission Temporaire - Temporary Admission." An ATA carnet is an international customs document that may be used for temporary duty-free importation of certain global shipping goods into a country instead of the customs documentation required. The carnet is a guarantee against the payment of Customs duties, which may become due on international shipping goods that are temporarily imported and not re-exported. Quota compliance may be required on certain types of merchandise. ATA textile carnets are subject to quota and visa requirements.

A carnet is valid for one year. The traveler or businessman, however, may make as many trips as desired during the period the carnet is valid, provided he has sufficient pages on the carnet for each stop.

The United States currently allows ATA carnets to be used for temporary admission of professional international shipping equipment, international shipping commercial samples, and advertising material. Most other countries will enable the use of carnets for the temporary admission of these global shipping goods; in some cases, other uses of the ATA carnet are permitted. ATA carnets can also be used to transit international shipping goods (in-bond movement) in the United States.

As members of the international bureau of the Paris-based International Chamber of Commerce, local carnet associations issue carnets to their residents. These associations guarantee the payment of duties to local Customs authorities should the international shipping goods imported under cover of a foreign-issued carnet not be re-exported. In the United States, the U.S. Council of the International Chamber of Commerce, located at 1212 Avenue of the Americas, New York, N.Y. 10036, (212) 354-4480, has been designated by U.S. Customs as the United States issuing and guaranteeing organization. The council charges a fee for its service.

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