U.S. Customs: Key Issues for Import of Aviation Articles
Contact ARSA if your company is having issues importing aviation articles.
Resources for Establishing Duty-Free Rates
New ARSA Guidance Clarifies Duty-Free Aviation Parts Importation Rules
Background on Duty-Free Import Rules
Under the World Trade Organization (WTO) Agreement on Trade in Civil Aircraft (“the Civil Aircraft Agreement” or “CAA”), many civil aviation products and parts are exempt from import duties. Unfortunately, inconsistent application of Customs rules has resulted in the opposite effect.
In addition to having to pay duties, maintenance providers have devoted considerable resources for navigating Customs rules and dealing with conflicting views from exporters, importers and government agents. One major question has been whether the imported part must be airworthy to qualify for duty-free treatment.
(I) The Global Perspective
The CAA is part of the Tokyo Round of international trade negotiations; it entered into force on Jan. 1, 1980. The signatory countries (including the United States) agreed to eliminate customs duties on articles used in civil aircraft and aircraft manufacture, repair, maintenance, rebuilding, modification or conversion. The agreement also eliminated duties on civil aircraft maintenance activities.
As a “plurilateral” agreement, the CAA is binding only on the World Trade Organization (WTO) members that have signed it. The CAA does not create obligations or rights for WTO members that are not signatories. Fortunately, the United States allows duty-free entry of CAA-covered products and articles regardless of country of origin. So, for example, U.S. imports of Embraer aircraft or parts may be claimed duty-free under the CAA even though Brazil is not a signatory (and is not bound by the CAA to provide duty-free entry into Brazil of U.S. aircraft and aircraft parts).
The CAA covers only civil aviation products and articles. The term “civil aircraft” is defined in the agreement by negation, that is, to mean all aircraft other than military aircraft. In practical terms, aircraft operated by armed forces and national police forces are not covered by the agreement.
The CAA’s Annex provides a detailed list of the products and articles exempt from duties under the agreement. The annex specifies 248 items at the six-digit Harmonized System (HS) level. With the exception of a handful (such as helicopters and “ignition wiring sets and other wiring sets of a kind used in aircraft”), most of the listings on the CAA product coverage list are not aviation specific, e.g., pumps, oil filters, tires, generators, tubing, gaskets, hinges, etc. That fact has important implications for how exporters and importers must satisfy Customs Service entry requirements.
(II) U.S. Implementation of the CAA
The Harmonized Tariff Schedule of the United States (HTSUS) is maintained by the U.S. International Trade Commission (ITC). It is the primary resource for determining the proper tariff (customs duty) classification for imported goods. General Note 6 of the HTSUS prescribes what must be done to enter products duty-free under the CAA; it defines the term “civil aircraft” for purposes of the tariff schedule.
Chapter 88 deals with aircraft and aircraft parts, which fall under heading 8803. The general code for rotors, propellers and related items is 8803.10.00; the general code for undercarriages and related articles is 8803.20.00; the general code for other civil aviation articles is 8803.30.00. Civil aviation items may also be in other HTSUS chapters; according to the notes for HTSUS, articles exempt from duty under the CAA will have a “C” in the “Special” sub-column of the “Rates of Duty” column. ITC provides statistical data for imports in all the various civil aviation related categories. For more information, click here.
(III) What Qualifies for Duty-Free Treatment?
The primary section under Title 19 of the Code of Federal Regulations applicable to the importation of civil aircraft and related articles is 19 CFR § 10.183 (“Duty-free entry of civil aircraft, aircraft engines, ground flight simulators, parts, components, and subassemblies”).It explains, among other things, what qualifies for the exemption, how to claim duty-free treatment, and the required certifications and documentation that must be maintained.
The rule applies to aircraft, aircraft engines, and ground flight simulators, including related parts, components, and subassemblies, that qualify as civil aircraft under General Note 6(b) of the HTSUS. To qualify for duty-free treatment the item must be used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification or conversion of aircraft. The article must also be:
(1) Manufactured or operated pursuant to a certificate issued by the FAA under 49 U.S.C. 44704 or pursuant to the approval of the airworthiness authority in the country of exportation if that approval is recognized by the FAA as an acceptable substitute for the FAA certificate; or
(2) Covered by an application for such a certificate, submitted to and accepted by the FAA, filed by an existing type and production certificate holder pursuant to 49 U.S.C. 44702 and FAA regulations; or
(3) Covered by an application for such approval or certificate which will be submitted in the future by an existing type and production certificate holder, pending the completion of design or other technical requirements stipulated by the FAA (applicable only to the quantities of parts, components, and subassemblies as are required to meet the stipulation).
(IV) Does It Matter Whether the Imported Article is Airworthy?
There is no requirement in the regulation or HTSUS that the part be airworthy and Customs rulings support that position.
For example, in HQ 116505 (Sept. 21, 2005), Customs examined the tariff exemption for parts removed from a foreign aircraft sent to the United States for repair. The government concluded: “if the parts at issue are either FAA certified or approved for use on a civil aircraft and are imported for repair to be used in the same manner, then the importation of the parts would qualify for duty-free entry under the Civil Aircraft Agreement.” The Service ultimately held that, “[a] civil aircraft part, removed from a foreign aircraft…and imported for repair, is eligible for duty-free treatment under the Civil Aircraft Agreement if the part is either FAA certified or approved for use on a civil aircraft and will be used in the same manner subsequent to repair.”
In another case (HQ 224266 (March 3, 1993)), Customs found that aircraft parts imported for repair from Mexico were not exempt under the Air Transport Agreement between that country and the United States. However, Customs said that the subject parts could enter the United States duty-free under the CAA, HTSUS and related regulations which, “allow for the free of duty importation of civil aircraft parts, whether broken or unbroken, if they are certified by the importer for use in civil aircraft.”
(V) Documentation and Paperwork Issues
19 C.F.R. § 10.183 provides details on how to claim, certify, and document duty-free admissions under the CAA. Section 10.183(c) directs the importer to make a claim by identifying the item as qualifying merchandise based upon its status as an article for which the duty rate of “Free (C)” appears on the HTSUS and placing the special indicator “C” on the entry summary or Customs & Border Protection (CBP) Form 7501.
Under § 10.183(d) the importer is then deemed to have certified that the merchandise does in fact qualify under paragraphs (a) or (b) of the regulation. It is vital that the importer have a sound basis for making that certification. Customs ruled in HQ223604 (May 28, 1992) that an importer must be able to certify in good faith that: “the imported article has been imported for use in civil aircraft; it will be so used; and, the article has been approved for such use by the [FAA] or an airworthiness authority in the country of exportation, if such approval is recognized by the FAA as an acceptable substitute for FAA certification.”
Sec. 10.183(e) deals with documentation. It requires that each entry summary (CBP Form 7501) be supported by documentation that verifies the claim of duty-free admission. Documentation includes the written order or contract and other evidence that the merchandise qualifies under HTSUS General Note 6. According to the regulation, other documentation that serves as evidence that the merchandise qualifies includes, as appropriate:
- an FAA certification;
- an application for a certification submitted to and accepted by the FAA;
- a type and production certificate issued by the FAA;
- Evidence that a type and production certificate holder will submit an application for certification or approval in the future pending the completion of design or other technical requirements stipulated by the FAA and of estimates of quantities of parts, components, and subassemblies as are required to meet design and technical requirements stipulated by the FAA.
The list was not created by someone familiar with civil aviation safety regulations and is not exhaustive. Generally speaking, the goal of the documentation requirements is to provide evidence that the parts qualify under § 10.183(a).
The documentation does not need to be filed along with the entry summary, but it must be maintained in accordance with the HTSUS and Customs recordkeeping requirements (found at 19 C.F.R. part 163). Customs may request the documents at any time and failure to produce sufficient records will result in the denial of duty-free treatment.
Finally, § 10.183(f) allows an importer to file a claim for duty-free treatment after filing an entry that made no such claim. In other words, if you determine after the fact that you are not required to pay a duty on an imported article, you can file for the exemption and receive a refund of a tariff previously paid. However, the time for doing so is not unlimited. According to the regulation, to do so, you should file a written statement with Customs any time prior to liquidation of the entry or prior to the liquidation becoming final. Liquidation, defined at 19 C.F.R. § 159.1, effectively means the final acceptance by Customs of the duty calculation.
Recognizing the costs associated with inconsistent application of the rules, ARSA has developed these resources – including the recorded training session and Advisory 2017-01 linked above – in support of its members.