Proposed Rule Could Lower Duties

In an effort to promote domestic manufacturing, U.S. Customs and Border Protection has announced a proposal to exclude the value of U.S.-origin parts from the dutiable value of certain articles exported from the United States for repairs, alterations, or processing performed abroad and subsequently returned to the United States. If the proposed rule, scheduled for publication on March 13, 2009, is adopted, importers will be able to exclude the value of U.S.-origin parts used in the repairs, alterations, or processing from the dutiable value for articles exported from the United States and returned under subheading 9802.00.40, 9802.00.50, or 9802.00.60, of the Harmonized Tariff System of the United States (HTSUS).  

Subheadings 9802.00.40 and 9802.00.50, HTSUS, provide a partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by repairs or alterations. Subheading 9802.00.40 applies to articles repaired or altered abroad pursuant to a warranty, while subheading 9802.00.50 encompasses non-warranty items. Duties are assessed on these articles based only on the value of the repairs or alterations, not on the underlying value of the product.  

Subheading 9802.00.60, HTSUS, provides a similar duty exemption specifically for articles of metal that are manufactured in the United States, exported for additional processing, and subsequently returned to the United States for further processing. Duties are assessed on articles under this subheading based on the value of the processing performed abroad.  

The implementing regulations for these subheadings currently require that, in calculating the dutiable value of imported merchandise under these subheadings, the cost or value of repairs or alterations includes all domestic and foreign articles used in the processing. The proposed rule would instead require that the cost or value of repairs or alterations, for duty calculation purposes, include only the foreign articles used in the processing, thereby excluding the value of any U.S.- origin parts used in the foreign repairs, alterations, or processing. The effect of the proposed rule is to encourage the use of U.S.-origin parts in the foreign repairs, alterations, or processing of articles entered under subheadings 9802.00.40, 9802.00.50, or 9802.00.60, HTSUS.  

Customs is accepting comments for a period of 60 days, until May 12, 2009