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 the 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 the purposes of 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 full value determined in accordance with section 402 of the Tariff Act of 1930, as amended. If such product or such article is dutiable at a rate dependent upon its value, the value for the purpose of determining the rate shall be its full value under the said 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 for U.S. international shipping goods sent abroad and returned:
a. Came back in worth 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 U.S.
a. Sorted - it IS QUALIFIED.
b. Wax removed - it IS NOT QUALIFIED.

GENERAL RULES FOR RETURNED ARTICLES:

While filing FOREIGN SHIPPER DECLARATION must be stated that international shipping articles had not been imported abroad. This statement can be stated in the invoice itself.

A. INFORMAL ENTRY AND NO BOND REQUIRE IF:

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

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

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

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

B. ANYTHING ELSE WOULD REQUIRE FORMAL ENTRY AND BOND.

U.S. Customs has rights ask for formal entry and bond for any entry, even though it is an exemption in HTS.

If FOREIGN SHIPPER DECLARATION is not available then you can post a bond and have 120 days to produce that FOREIGN SHIPPER DECLARATION to get free of duty.

This certain 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 require on all international shipments exceeding $2,000 in value that states that the exporter has knowledge 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, which serves as both a declaration and as 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, verification of the export can be made based on on information on hand at those Customhouse. It can be validated 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 free entree are international shipping items on which manufacturing drawback has been claimed upon exportation.

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

Duty must be paid 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 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 confirmed 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 bee also 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 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. While 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;

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

ALTERATION is - Physical improvement of product that DOES NOT CHANGE IDENTICAL OF THAT PRODUCT. I.e. NO SUBSTANTIAL TRANSFORMATION HAD BEEN 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 THOUGHT IT HAD BEEN DONE FOR FREE YOU MUST PAY DUTY ANYWAY!; If the cost of free repair would exceed the cost of article (let's say under warranty, and they sent to you an new one), THE NEW ARTICLE IS FULLY DUTIABLE.

3. Assists do not count (mould, 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 free duty free; $3,000 would be dutiable AT THE RATE OF IMPORT OF THE MACHINE (Let's say 5%).
I.e. for Customs purpose that $3,000 IS 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 it was given for free)
• No substitution was made.

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

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

Applies for metal. It must have 3 processing parts:

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

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

Documents require:

1. CBP 4455 filed BEFORE the item 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. This document must be kept by the importer or broker for 5 YEARS after the date of entry.
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 and the full cost of fair market and value after processing are correctly stated.

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 full value of the imported article LESS THE COST OF THE ASSEMBLED ARTICLES OF U.S. ORIGIN.

The determination whether or not a U.S. part becomes dutiable is complicated and must be considered.
For example:
- If the assembling require drilling a whole 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 THE ASSEMBLING.

What is the assembly conditions? It must fitting or joining together fabricated components by welding, sewing, soldering screwing etc and must be a solid to solid (i.e. mixing gas and water is not acceptable). IT CANNOT 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 to 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 freight to get it back to 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 at a later date (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 are:
   - 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 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 format of this dual declaration may be revised by the Port Director to adapt to special situation if warranted.
3. The documents referred 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 and keep them available for examination by Customs.

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

9811.00.60 - Samples valued not over $1.00 marked "NOT FOR SALE".
Must clear 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 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 WERE NOT improved in condition by any process of manufacture or otherwise while abroad;
4. The international shipping article did not conform to 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 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, as well as 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.

Exportation of 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 periods of one additional year each, but cannot exceed three years after importation.
Statement "Not for sale in the USA" must be preformed.

The exception is: importation of professional international shipping equipment and tools of 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:
Bond amount in general is 2 times OF DUTY (not the value) unless exceptions 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's wearing apparel - BOND is 200% of Duty.
3. International shipping articles imported as models by illustrators or photographers. If used in their own establishment for catalogs or advertising matter - 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, tools of 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 of trade of jewelry 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 normal 10 day time period from the date of entry.
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, so as to allow the Port Director to make a determination 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 a period of less than 90 days, a bond or CF 7563 in an amount equal to double the normal 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 trade.

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

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

After the entry and bond have been accepted by Customs, 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 from another port. Application on CF 3495 must be filed with the Port Director sufficiently in advance of the exportation to permit examination and identification of the articles. If exported at another port, CF 3495 must be filed in triplicate, together with a certified copy of the import entry or a certified copy of the invoice used in the entry. Once examined, shipments must move under bond (T&E).

LIQUIDATED DAMAGES FOR TIB is CHARGE AGAINST THE BOND but 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 normal 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 in a timely manner, it will be forwarded to Headquarter by the District unless the Port Director has allowed it in part or in whole. In most cases the international shipping merchandise entered under TIB is exported, but problems arise when the exporter fails to have the goods examined on export and the TIB does not get canceled. In this case the Port Director will normally request a landing certificate from the port to which the international shipping merchandise was destined in order to prove exportation. The Port Director may request the payment of a lesser amount as liquidated damages or no payment if he feels this action is warranted.

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

b. 2.5 years later Customs is 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 proof 10th one.

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

ANTIQUE Chapter 97 in HTS

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

To qualify as antique it must has:

1. A proof that the international shipping item is 100 years old or older (exemption cars - 25 years old).
   There is no special customs form. It must be something acceptable for Customs.
2. A statement that international shipping items either for PERSONAL or COMMERCIAL use.
   a. If it is for personal then it is normal duty rate.
   b. If international shipping COMMERCIAL (see the chapter 97 in HTS) then 6.6% if in column 1 and 25% of additional duty 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 which may be used for temporary duty-free importation of certain international shipping goods into a country in lieu of the usual customs documentation required. The carnet serves as a guarantee against the payment of Customs duties which may become due on international shipping goods 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 the temporary admission of professional international shipping equipment, international shipping commercial samples, and advertising material. Most other countries allow the use of carnets for the temporary admission of these international shipping goods and, in some cases, other uses of the ATA carnet are permitted. ATA carnets can also be used for transit of international shipping goods (in-bond movement) in the United States.

Local carnet associations, as members of the international bureau of the Paris-based International Chamber of Commerce, 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. A fee is charged by the council for its service.