By Shawna Karajic, Export Solutions Inc.
With the recent imposition of additional 25% tariffs on imports from Canada and Mexico, many companies are seeking ways to alleviate the financial burden of these extra duties. Some traditional duty-saving methods, such as duty drawback, are no longer viable due to these new tariffs. As a result, companies are exploring alternative strategies to maintain their cost efficiency.
Do you export US-origin components to Canada or Mexico for assembly, with no further manufacturing or fabrication, and plan to reimport them into the United States?
If so, we have great news!
By leveraging Chapter 98, specifically heading 9802.00.80, companies can potentially avoid paying the additional tariffs on the cost of US-origin items.
What Are the Requirements?
Heading 9802.00.80 covers articles assembled abroad, either wholly or partially, from US-manufactured components. To qualify for the exemption, the following criteria must be met:
- The components must be exported in a condition ready for assembly, without any further fabrication.
- The components must retain their physical identity, meaning they should not be altered in any significant way.
- The value or condition of the components must not be enhanced except by the assembly process itself or operations incidental to assembly.
Does this scenario apply to your products?
What Do Customs Regulations Say?
The Customs Regulations under 19 C.F.R § 10.14(a) outline the fabricated components eligible for this exemption, providing both a detailed description and examples. Additionally, the regulations define the concept of “assembly abroad,” clarify what operations are incidental to assembly, and list which components do not qualify for the exemption.
For further guidance, the regulations also include information on valuation and the necessary documentation to support a valid claim.
What About US Customs Rulings?
For those who wish to delve deeper, reviewing US Customs rulings can provide valuable insight. There are numerous rulings dating back to the 1980s that address assembled goods and the application of Chapter 98, specifically heading 9802.00.80. US Customs has maintained a consistent approach in these rulings, offering clarity on how to navigate this process.
By adhering to the Customs Regulations, you should be able to make a legitimate 9802 claim without issue.
Recent CBP Guidance on Additional Duties for Canada and Mexico
On March 3rd, US Customs released updated guidance on the additional duties imposed on imports from Canada and Mexico. According to these bulletins, the new duties will not apply to goods that are properly claimed under Chapter 98 provisions. For goods covered under heading 9802.00.80, the additional duties are calculated on the value of the article assembled abroad, excluding the value of the US-origin components.
While the additional tariffs on Canada and Mexico may seem overwhelming and could add significant costs to your bottom line, there are opportunities for savings. While this post focuses on heading 9802.00.80, other Chapter 98 provisions may also offer exemptions from these tariffs.
If you’re interested in exploring how Chapter 98 can help reduce your costs, we invite you to schedule a no-charge consultation with one of our experts today. We can guide you through the complexities of Chapter 98 and identify potential cost-saving strategies tailored to your business.
Shawna Karajic is a Senior Consultant for Export Solutions — a full-service consulting firm specializing in U.S. import and export regulations.