Overview
FAR Subpart 25.9 outlines the policies and procedures for exempting imported supplies purchased under Government contracts from federal import duties. It establishes a requirement for agencies to pursue these exemptions whenever the cost savings to the government exceed the administrative burden of processing the necessary customs documentation.
Key Rules
- Mandatory Duty Exemptions: Agencies are required to obtain duty exemptions if the anticipated savings to appropriated funds outweigh the administrative costs of processing the paperwork.
- Standard Customs Requirements: All imported supplies remain subject to standard U.S. Customs Service entry and examination requirements unless a specific exemption is granted under 19 CFR.
- Harmonized Tariff Schedule (HTSUS): Exemptions are primarily governed by Subchapters VIII and X of Chapter 98 of the HTSUS.
- Vessels and Aircraft: Supplies (excluding equipment) for Government-operated vessels or aircraft can be withdrawn from bonded warehouses or foreign-trade zones free of duty and internal revenue tax.
- Regulatory Alignment: This subpart functions in tandem with the Department of the Treasury's Customs Regulations (19 CFR Chapter 1) and the Harmonized Tariff Schedule.
Responsibilities
- Contracting Agency: Must certify to the Commissioner of Customs that supplies are being imported for the specific purposes stated in the HTSUS.
- Contracting Officer/Activity:
- Responsible for determining if the administrative cost of processing an exemption is justified by the duty savings.
- Must cite the appropriate legal authorities (e.g., 19 U.S.C. 1309 or 1317) on customs forms when purchasing supplies for government vessels or aircraft.
- Commissioner of Customs: Oversees the verification of certifications and the processing of duty-free entries.
Practical Implications
- Cost-Benefit Analysis: Contracting Officers must perform a "common sense" economic check. If a small purchase has a negligible duty, the labor cost of filing the paperwork may exceed the savings, making the exemption unnecessary.
- Procurement Lead Times: Contractors and COs should account for the time required to process customs certifications and potential examinations, as these can impact delivery schedules for foreign-sourced goods.
- Documentation Rigor: Errors in customs documentation or failing to cite the correct HTSUS subchapter can lead to shipment delays or unexpected duty assessments that may lead to claims from the contractor.
- Strategic Sourcing: For large-scale international acquisitions (such as fuel for aircraft or maritime supplies), leveraging duty-free withdrawals from foreign-trade zones can result in significant budgetary savings.