While imports of returned goods to the U.S. are common transactions, they are also a major source of risk.
Historically, there has been a duty free exemption for U.S. goods returned under provision 9801.00.10 in the Harmonized Tariff Schedule, but it did not apply to all goods being returned.
Under that provision, the returned article had to be a product of the United States, better explained as being “made in the U.S. “Foreign made articles remained dutiable, even if duty had been paid on them before.
HTS 9801.00.10 further required that the article not be advanced in value or improved in condition while outside the US. This means that the exported item cannot be physically changed in any way that improves it, increases its value, or makes it into a different product.
In February of this year, the President signed the Trade Facilitation & Trade Enforcement Act of 2015 into law. One of the provisions of this legislation is to change the language of 9801.00.10.
The following wording was added to the text of 9801.00.10: “or any other products when returned within 3 years after having been exported.” This addition allows the classification to apply to articles returned to the U.S. as well as to articles exported within the last 3 years, regardless of origin.
As an example, a U.S. importer receives a motor from Japan and pays import duties on that motor. The U.S. importer then sends this motor to France. France then returns the same motor to the U.S. Importer. In this case, the U.S. Importer does not have to pay duty on the import from France.
Under the new law, the importer is prevented from paying duty twice, as long as it is within 3 years of the original import date.
It is worth noting that the previous requirements of articles not being advanced in value or Improved in condition while outside the U.S. still applies.
This new provision went into effect on April 25, 2016.
Documents or data required to prove an export in the last three years may include export invoices, packing slips, export bills of lading, air waybills, and extracts of the Electronic Export Information.
While this is good news for importers, they will still need to file an entry and meet the strict chapter 98 record-keeping requirements, including the retention of records to demonstrate that the subject items had, in fact, been exported from the U.S. within the preceding three years.
This expanded provision will eliminate the need to pay duties on many non-US goods that are being returned to the U.S.