Tariff Change Removes Duties on USMCA Goods Returned After Assembly

A recent revision to the tariff schedule changes treatment of goods returned after assembly from Canada or Mexico under subheading 9802.00.80, allowing products of the U.S. assembled in Canada or Mexico to enter duty free under USMCA.

Prior to USMCA taking effect July 1, special program indicators (SPIs) “MX” and “CA” were listed in special rate of duty column 1 as subject to “a duty upon the full value of the imported article, less the cost or value of such products of the United States.” Now, after a revision issued days after USMCA took effect, SPI “S” for USMCA-eligible goods is listed in the special rate of duty column as “free.” SPIs “CA” and “MX” remain listed as they were previously. The new provision is effective as of July 1, per the International Trade Commission’s change record.

Subheading 9802.00.80 covers articles “assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.”

“This is a helpful change that may not impact many imports,” Lawrence Friedman, of Barnes Richardson, said by email. “Under NAFTA, there was no preferential rate of duty applicable to US goods. Under USMCA, the importer can make a claim for preferential treatment on US goods.”

“The new ‘free’ status in 9802.00.80 for USMCA means that as long as the item qualifies for USMCA, it can be imported free of duty even if it is a US product,” Friedman said.

“It is really the edge case where this will be a big benefit,” Friedman said. “Under NAFTA, if the finished good was originating in Mexico or Canada, a NAFTA claim could be made and there was no need to make a 9802.00.80 deduction for the US content. But, if the good qualified as originating under NAFTA without being a product of Mexico or Canada, then it would be a US product, no NAFTA claim could be made, and the duty would apply to the value of the product less the value of the US parts. This fixes that and allows for a duty free claim on the full value,” he said.

Upcoming regulations on USMCA should clarify the agreement’s new provisions on U.S. goods returned after assembly abroad, Friedman said. For now, the relevant section is one of many marked “reserved” following an interim rule that for the most part included the negotiated text of the USMCA rules of origin (see 2006300066). “I suspect there will be more to follow,” he said.