Return Material Authorization (also known as Return Merchandise Authorization or Returned Goods Authorization), commonly referred to in industry as 'RMA,' is the process of returning a defective item to the source provider (or a designate) to receive a refund on the purchase, for replacement of the same or comparable item, or to have the item repaired and returned to the sender. Return of goods is commonplace in today's global markets. But when the return of goods includes items that originated in the United States, there are specific compliance requirements that must be met.

If the original sale of the item resulted in an export of a controlled item from the United States to a foreign country or foreign end user, and the item must return to the United States temporarily for repair or replacement and subsequent return export to the foreign country, the RMA process becomes a reverse logistics cycle. This type of transaction requires the U.S. recipient to pre-plan for receiving the item and actively manage the item's second lifecycle to ensure compliance with U.S. regulations pertaining to both the temporary import and return export of the goods.

Caution! This document only addresses a few key elements of the RMA process cycle. The RMA process for U.S. origin export-controlled items can be quite complex. Multiple U.S. regulatory regimes will have jurisdiction over the various stages of the process. Each RMA process must be specific to the U.S. receiving company and to the unique characteristics of each returned item. It is highly recommended that you seek the advice of skilled trade professionals and legal counsel to assist in designing a compliant RMA process or to review an active RMA process to avoid costly violations and penalties.

Importing returned goods

  • Previously exported items returned to the U.S. for repair or replacement must be properly declared at the time of temporary import for repair or replacement.
    • Failure to properly declare an RMA on import may result in a U.S. Customs violation. In most cases, the U.S. company receiving the returned item will be considered the Importer of Record (See 19 U.S.C. §1484(a)(1)) and therefore subject to U.S. Customs regulations.
  • Be sure to apply the correct U.S. Harmonized Tariff Schedule Code (HTSUS) to the import. The use of an incorrect HTSUS could lead to potential Customs penalties in addition to potential owed duties.
    • Chapter 98 of the HTSUS, and more specifically subheading 9801.11.10, allows duty free entry for goods returned to the U.S. within three years after having been exported, provided that the goods were not improved in any way while abroad.
    • Also, subheading 9801.00.10 includes all products exported from and returned to the United States, regardless of country of origin.
  • Provide written instructions to the foreign party on how to initiate the merchandise return, including what information to include in the shipping documents and customs invoice, such as the product description, correct HTSUS code, and Shipper's Declaration (see 19 CFR §10.1(a)(1)).
  • If the value of the returned goods is greater than $2,500, a Manufacturer's Affidavit is required per 19 CFR §10.1(a)(2).
  • For items previously exported under a U.S. export authorization such as a license or ITAR exemption, the applicable exemption must also be noted on the import documents to avoid a U.S. Customs violation. For example:
    • For items controlled for export by the U.S. Department of State, International Traffic in Arms Regulations (ITAR), the applicable ITAR exemption may be ITAR §123.4(a)(1) allowing temporary import for overhaul, service, or repair.
    • For items controlled for export by the U.S. Department of Commerce, Export Administration Regulations (EAR), no declarations are required for the import but exceptions may be available to authorize the second export from the U.S. after repair. For example, EAR License Exception RPL (§740.10) may be used for exports and reexports of one-for-one replacement of EAR-controlled items and associated parts, components, accessories, and attachments, subject to certain conditions.
  • Ensure that your internal RMA process includes steps for routing newly received RMAs to the business functional areas that will monitor receipt of the RMA shipment and place it into the necessary internal routing process.

Exporting repaired or replaced goods

  • Items previously exported under a U.S. export license, exemption, or exception will also require an export authorization for returning the repaired or replaced item to the foreign customer. If no applicable exemption or exception exists, an export license may be required for the return shipment.
  • It is important to determine the correct value of the items when returning to the foreign party. Following is a synopsis of the valuation rules under the Federal Trade Regulations (See 15 C.F.R. Part 30).
  • Repaired Items
  • FTR §30.29(a) directs how to determine value for goods temporarily imported for repair and subsequently returned to the foreign customer.
    • Goods NOT licensed by a U.S. Government agency and NOT subject to the ITAR – Value must include ONLY parts and labor costs.
      • Per FTR §30.6(a)(17) - The "value" of parts and the "value" of labor is the selling price (or the cost if the goods are not sold) in U.S. dollars, plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export. Cost of goods is the sum of expenses incurred in the USPPI's acquisition or production of the goods.
      • The value of the original product must NOT be included.
      • If the value of the parts and labor is over $2,500 per Schedule B number, then an Electronic Export Information (EEI) filing must be performed using the Automated Commercial Environment (ACE) filing tool for submitting EEI to the U.S. Customs Automated Export System (AES).
    • Goods LICENSED by a U.S. Government agency OR subject to the ITAR –
      • Report the value for ONLY parts and labor; and,
      • Report the value designated on the export license for the item(s) (per FTR §30.6(b)(15)).
    • EEI MUST be filed in ACE regardless of value.
  • Replacements Under Warranty
  • FTR §30.29(b) directs how to determine value for goods temporarily imported and subsequently replaced under warranty and returned to the foreign customer.
    • Goods NOT licensed by a U.S. Government agency and NOT subject to the ITAR – Report the value of ONLY the replacement parts in accordance with FOR §30.6(a)(17).
      • "In general, the value to be reported in the EEA shall be the value of the goods at the U.S. port of export in U.S. dollars. The value shall be the selling price (or the cost, if the goods are not sold), plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export. Cost of goods is the sum of expenses incurred in the Spa's acquisition or production of the goods."
      • The value of the original product must NOT be included.
      • If the value of the replacement parts is over $2,500 per Schedule B number, EEI must be filed in ACE.
    • Goods LICENSED by a U.S. Government agency OR subject to the ITAR –
      • Report the value for ONLY replacement parts in accordance with FTR §30.6(a)(17); and,
      • Report the value designated on the export license for the item(s), in accordance with FTR §30.6(b)(15).
    • EEI MUST be filed in ACE regardless of value.
  • Prepare a Customs Invoice for the return export. A Customs Invoice is essentially the same as a commercial invoice but is used for non-sale transactions, such as repairs or replacements under warranty. The Customs Invoice should, at a minimum, include:
    • A statement confirming that there is no charge because the shipment is a return of goods repaired or replaced under warranty and that value is for customs purposes only;
    • The appropriate export declaration statement and U.S. export authorization information; and,
    • Correct value of the goods returning.
  • Include the appropriate document notations in the shipping documents for the return export to the foreign customer. For example:
    • For repaired items, include a statement such as "This product was repaired under warranty" on the bill of lading, air waybill, customs invoice, and other shipment documents.
    • For items replaced under warranty or at no charge to the foreign customer, include the statement such as "Product replaced under warranty - value for Customs purposes only" on the bill of lading, air waybill, customs invoice, and other shipment documents.