Articles Returned After Repair or Alteration Are Under U.S. Customs

By Christopher M. Kane

Unless subject to a special exception, all goods of foreign origin are subject to duty when they enter the United States. One exception covers goods repaired or altered in a foreign country.

Under the Harmonized Tariff of the United States (“HTSUS”), an importer who has returned previously imported articles to the foreign manufacturer for repair or alteration is required to pay duty only on the value of the repair upon re-importation of the repaired article when the pertinent HTSUS provision is invoked.

U.S. Customs & Border Protection (“CBP”) has recently increased its scrutiny of entries containing repair or alteration declarations and is looking more closely at the documentation that is available to substantiate the duty preference claim.

Duty is assessed only on the value of the repairs or alterations performed abroad under HTSUS Subheadings 9802.00.40 or 9802.00.50, provided that the costs can be documented. The language of HTSUS 9802 specifically provides that articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means for repairs or alterations will be assessed duty upon the value of the repairs or alterations. Such repairs or alterations may be made pursuant to a warranty or otherwise.

However, even if the repair or alteration is provided at no charge to the importer, the value of the servicing will be the basis of the assessment of duty.

Regulations governing the use of the provisions of 9802.00.40 and 9802.00.50 are found in the Code of Federal Regulations (“CFR”) at 19 CFR 10.8. The documentary requirements to support a claim for duty on previously imported articles returned to the United States after they have been exported for repairs or alterations are fairly simple. Unless the CBP Port Director is satisfied because of the nature of the goods, or production of other evidence is sufficient to support the assessment of duty on the repair or alteration, the following forms are required to substantiate the repair/alteration claim. Examples are included in various parts of the forms:

1) A declaration from the person who performed such repairs, in substantially the following form:

I, _________________________, declare that the articles herein specified are the articles which, in the condition in which they were exported from the United States, were received by me (us) on __________________ , 20____, from___________________ (name and address of owner or exporter in the U.S.); that they were received by me (us) for the sole purpose of being repaired or altered; that only the repairs or alterations described below were performed by me (us); that the full cost or (when no charge is made) value of such repairs or alterations are correctly stated below; and that no substitution whatever has been made to replace any of the articles originally received by me (us) from the owner or exporter thereof mentioned above.

Marks and style numbers
Description of articles and of repairs or alterations
Full cost or (when no charge is made) value of repairs or alterations (see subchapter II, chapter 98, HTSUS)
Total value of articles after repairs or alterations

SKU 1424 Diamond necklace — repaired gold clasp $15.00 $750.00
Style Oxford1424 Men’s Suit — repaired pants by replacing zipper $10.00 $300.00
SKU Eng1424 Lawn Mower — repaired engine by replacing grease cap $8.00 $375.00
Etc.

________________________________________________________________________

(Date)

________________________________________________________________________

(Address)

________________________________________________________________________

(Signature)

________________________________________________________________________

(Capacity)

2) A declaration by the owner, importer, consignee, or agent having knowledge of the pertinent facts, in substantially the following form:

I, ____________________, declare that the (above) (attached) declaration by the person who performed the repairs or alterations abroad is true and correct to the best of my knowledge and belief; that the articles were not manufactured or produced in the United States under subheading 9813.00.05, HTSUS; that such articles were exported from the United States for repairs or alterations and without benefit of drawback from _______________________(port) on ___________________, 20_____________; and that the articles entered in their repaired or altered condition are the same articles that were exported on the above date and that are identified in the (above) attached) declaration.

________________________________________________________________________

(Date)

________________________________________________________________________

(Address)

________________________________________________________________________

(Signature)

________________________________________________________________________

(Capacity)

In seeking to verify the validity of a claim for duty on the cost of repair or alteration on previously imported goods, CBP may require other evidence, such as records of the original importation, records detailing the nature of the repair, records of payments, and/or labor records, which together might create an “audit trail” allowing CBP to trace the transaction. In the audit trail would be documents identifying merchandise by SKU or style, as well as invoices, packing lists, and bills of lading or air waybills.

It is important that the repairs or alterations were actually performed. Replacement goods are not given special duty treatment. Replacement goods sent to the United States require payment of duty on the full value of the article.

Assertions of claims for duty solely on the value of repairs or alteration are required to be true and accurate. Given CBP’s increased attention in this area, claimant importers should be diligent in maintaining the records necessary to substantiate their repair/alteration claims. Penalties for false or misleading statements can be prosecuted civilly under the civil Customs fraud statute (19 USC 1592), or criminally under various provisions of the Criminal Code