Tariff Benefits

In traveling the country and dealing with industry import specialists, I’m too often struck by the lack of knowledge of the tariff benefits they can gain by classifying their qualifying products under Chapter 98 of the Harmonized Tariff Schedules. You ask, “What is Chapter 98 and what does it provide”?, a question that is prima facie evidence that you may be missing out on substantial cost savings for your importations.

Under the worldwide Harmonized Tariff system of classification, the 170+ signature countries (with very limited exceptions) agree to implement the same 97 HTS chapters (there is no Chapter 77) containing identically numbered four digit HTS headings and six-digit subheadings with the same product descriptions.  Participating countries may adopt their own numbered subheadings beyond the six-digit levels with individual product descriptions and their own tariff rates consistent with their bilateral and multilateral agreements and obligations (tariff rates are not harmonized under the HTS).  Countries adopting the HTS are also free to adopt their own Chapters 98 and 99 and incorporate special product subheadings and tariff regimes for “special” items classifiable within those chapters.

The US version of HTS Chapter 98 primarily covers duty-free or reduced duty items that meet certain criteria spelled out in its subheadings.  These include, among many others, samples solely for use in taking orders for merchandise (9813.00.20); race cars brought in temporarily for the Indy 500 or other contests (9813.00.35); professional equipment and tools of trade (9813.00.50); and, models of women’s apparel (9813.00.10).  But you can save paying full or partial duty, often in a much higher magnitude, on many other types of products.  If you bring in a prototype for testing before you purchase it, you may wish to utilize “Prototypes to be used exclusively for development, testing, product evaluation or quality control purposes” (9817.85.01).  Many US manufacturers find it very valuable to classify qualifying products as articles assembled abroad of fabricated components of U.S.-origin with operations incidental to the assembly process (HTS 9802.00.80), as you are able to subtract the cost or value of the U.S.-origin goods from the tariff calculation.  Those who deal in processed metal items may wish to consider classification as articles of metal exported for foreign processing and returned to the US for further processing with the tariff applicable only to the processing performed outside the United States (9802.00.60).  If you are bringing goods back to the United States, you may wish to investigate classification as American goods returned without having been advanced in value while abroad (9801.00.10) which are entitled to US duty-free status.

You must read the qualifying criteria (and any associated Chapter, Heading and subheading Notes) carefully.  In addition, many of the subheadings require you to post a Temporary Importation Bond (or an international carnet) to ensure against the goods either entering the US stream or commerce and/or not being reexported or destroyed within one year from the date of importation.  Finally, you (or the foreign supplier or shipper) may have to document the duty-free or reduced duty status of the goods as prescribed in the HTS and accompanying interpretive regulations of 19 CFR Chapter 10.