In the past two years, importers have learned the hard way that tariffs are the new normal. Products that were once easily imported at a zero ad valorem are now generating costs that require far more adjustment than originally expected. As trade compliance professionals are increasingly pressured to find legal tariff mitigation strategies, you may be considering the benefits of Chapter 98 provisions and Temporary Importation Bond (TIB). TIB can be an excellent way to legally import goods on a temporary basis while avoiding high duties, but importers should beware of the many pitfalls associated with improper use of TIB and the risks of breaching the bond.
To properly utilize a TIB, you must understand the rules and conditions of the specific Chapter 98 provision you intend to use. For example, HTSUS 9813.00.20 can be used to temporarily import samples solely for the purpose of taking orders for merchandise. When the government says "solely for taking orders," it means exactly that. Goods imported under 9813.00.20 cannot be used for any other purpose and cannot be sold while in the United States. Doing so constitutes a breach of the bond and may result in duties, penalties, and other enforcement actions. Additionally, 9813.00.20 generally allows goods to remain in the country for only one year, after which the importer must either obtain an extension or export the goods and close the bond.
While some rules are clearly published and readily available through CBP's Informed Compliance Publications on CBP.gov, other restrictions can catch importers by surprise. For example, CBP currently requires approximately three months to process extension requests. If you wait until one month before your TIB expires to file an extension request, you've likely already missed the boat. It is also important to remember that while compliance professionals understand the applicable requirements, the sales team may not. While those items are being displayed to customers to generate future business, it can be difficult to know exactly how they are being used in the field. Education and communication across all relevant functions of the organization are critical to maintaining compliance.
Considering a TIB? Go for it, but proceed carefully. Make sure you understand the applicable rules before instructing your broker to start filing Chapter 98 entries. Proper planning and preparation can save you significant headaches, unexpected costs, and compliance issues down the road.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
