Understanding Customs Duty Regulations For Free Samples In The United States

Commercial samples play an essential role in business, particularly in product development, soliciting orders, and testing product quality before manufacturing. For businesses looking to import free samples into the United States, understanding customs duty regulations is crucial. The U.S. Customs and Border Protection (CBP) regulates the importation of commercial samples similarly to other commercial shipments, with specific provisions that allow for duty-free entry under certain conditions. This article explores the various options available for importing commercial samples duty-free, the requirements that must be met, and the consequences of non-compliance.

Options for Importing Commercial Samples Duty-Free

The U.S. Harmonized Tariff Code (HTS) provides specific provisions for commercial samples that can be imported duty-free. Importers have several options when bringing commercial samples into the United States, each with different requirements and limitations.

HTS 9811.00.60 Provision

The HTS number 9811.00.60 covers "any sample except samples covered in 9811.00.20 (alcohol samples) or 9811.00.40 (tobacco samples), valued not over $1 each, or marked, torn, perforated, or otherwise treated so that it is unsuitable for sale or for use other than as a sample." Under this provision, samples can be imported duty-free if they meet specific requirements:

• Merchandise must be marked permanently as a "sample," or cut or torn in such a manner that is visible. Additional marking and defacing requirements for textile products and footwear are also in place.
• Commercial documents must show a value for the samples, even if they are being provided to the importer at no cost or have no commercial value.
• The commercial document must include the statement "mutilated samples – 9811.00.60" to ensure duty-free treatment.
• Samples must typically be destroyed or donated to a charity or other non-commercial entities after use. Importers are not permitted to sell them or reconstitute them into articles that are suitable for sale.

Entry Type 86 for Low-Value Samples

If the commercial sample's value is less than $800, importers can take advantage of entry type 86, which allows for goods valued under $800 to be imported free of duties, taxes, and fees. The goods are eligible if they are not subject to antidumping, countervailing, quota, or do not require additional fees or IRS taxes to be paid. This option provides a straightforward way to import samples without the need for specific marking or defacing, as long as the value threshold is met.

Temporary Importation under Bond (TIB)

For importers bringing samples to solicit sales or exhibit at trade shows, Temporary Importation under Bond (TIB) may be an appropriate option. TIB temporarily permits the importation of goods into the United States free of duty when the importer posts a bond. TIBs can be used to temporarily import commercial samples for the exclusive purpose of soliciting orders of the merchandise.

Key requirements for TIB include: - Goods imported under a TIB must not be sold or offered for sale. - Goods must be exported or destroyed within one year from the date of importation. - Extensions can be requested for additional one-year periods, not exceeding three years total.

While TIB entries can be convenient, they carry additional risks. Failure to export or destroy the samples prior to the expiration date will result in liquidated damages equal to double the estimated duties for the samples.

Carnets for Temporary Imports

Carnets represent another option when temporarily importing commercial samples to solicit orders. A carnet is both a customs bond and customs entry documentation that is purchased in advance of shipping from the origin country. This simplifies the customs process, allows for planning customs clearance in advance, and enables use in several countries.

The United States accepts only two types of carnets: - Carnets are only valid for one year, so if it is anticipated that the carnet will be used to solicit orders longer than that timeframe, a TIB may be a better choice. - Goods imported under a carnet cannot be sold. However, if goods imported under a carnet are sold, the importer would be required to pay not only the duties, fees, and taxes on the goods but also a penalty equal to 10% of the duties and taxes owed for some or all of the sold goods.

Prototypes Under HTS 9817.85.01

Prototypes may be imported duty-free in limited non-commercial quantities under HTS 9817.85.01. Prototypes in varying production stages can be imported for development, testing, product evaluation, or quality control purposes under this provision. CBP may request proof of actual use within three years of importation.

Requirements for Duty-Free Sample Importation

Importing commercial samples duty-free requires adherence to specific requirements regarding marking, documentation, value limitations, and post-importation restrictions.

Marking and Defacing Requirements

For samples to qualify for duty-free treatment under HTS 9811.00.60, they must be marked permanently as "sample" or be visibly cut, torn, perforated, or otherwise treated in a manner that makes them unsuitable for sale. This requirement ensures that the samples cannot be readily sold in the marketplace after importation.

For textile products and footwear, additional marking and defacing requirements may apply, depending on the type of fabric, size, and other considerations. These additional requirements help prevent the diversion of samples into commercial channels.

Documentation Requirements

Proper documentation is essential for importing samples duty-free. Commercial documents must show a value for the samples, even if they are being provided to the importer at no cost or have no commercial value. The commercial document must include the specific statement "mutilated samples – 9811.00.60" to ensure duty-free treatment.

For carnets, the documentation must be purchased in advance of shipment from the origin country and presented to customs officials when the samples enter the United States. TIB entries require the posting of a bond and proper completion of customs entry documentation.

Value Limitations

Different provisions have different value limitations for duty-free treatment:

• HTS 9811.00.60 covers samples valued not over $1 each or samples that are marked, torn, perforated, or otherwise treated to be unsuitable for sale.
• Entry type 86 allows goods valued under $800 to be imported free of duties, taxes, and fees.
• Under the previous NAFTA agreement (now replaced by USMCA), commercial samples had to be of negligible value, not exceeding one U.S. dollar.

Post-Importation Restrictions

Once imported duty-free, samples are subject to specific restrictions on their use:

• Samples imported under HTS 9811.00.60 must typically be destroyed or donated to a charity or other non-commercial entities after use. Importers are not permitted to sell them or reconstitute them into articles that are suitable for sale.
• Goods imported under a TIB must not be sold or offered for sale and must be exported or destroyed within the specified timeframe.
• Goods imported under a carnet cannot be sold without incurring additional penalties.

Free Trade Agreements and Sample Importation

Free trade agreements can affect the importation of commercial samples by providing for duty-free treatment or reduced duty rates.

USMCA (Replacing NAFTA)

The North American Free Trade Agreement (NAFTA) terminated on June 30, 2020, and was replaced on July 1, 2020, by the United States-Mexico-Canada Agreement (USMCA). Under the previous NAFTA, commercial samples could be imported duty-free if they were of negligible value (not exceeding $1) or marked, torn, perforated, or otherwise unsuitable for sale except as commercial samples.

Only printed advertising materials classified in Chapter 49 of the Harmonized Tariff Schedule could be imported duty-free under this provision. The list includes brochures, pamphlets, leaflets, trade catalogues, and yearbooks.

While the specific provisions for commercial samples under USMCA are not detailed in the provided sources, it is reasonable to assume that similar provisions exist, though importers should consult the current USMCA guidelines for specific requirements.

Other Trade Agreements

Products from Israel, Jordan, Chile, and Singapore may also enter the United States either free of duty or at a reduced rate under the U.S. free trade agreements with those countries. Importers should check the specific provisions of each trade agreement to determine if their samples qualify for preferential treatment.

Consequences of Non-Compliance

Failure to comply with the requirements for importing commercial samples duty-free can result in significant consequences, including financial penalties and loss of duty-free privileges.

Liquidated Damages for TIB Failures

For samples imported under TIB, failure to export or destroy them prior to the expiration date will result in liquidated damages equal to double the estimated duties for the samples. This penalty applies regardless of whether the samples were actually sold or simply not removed from the United States within the required timeframe.

Penalties for Selling Restricted Samples

Selling samples imported under certain provisions can result in additional penalties:

• If goods imported under a carnet are sold, the importer would be required to pay not only the duties, fees, and taxes on the goods but also a penalty equal to 10% of the duties and taxes owed for some or all of the sold goods.
• Samples imported under HTS 9811.00.60 that are sold or reconstituted into articles suitable for sale may result in the loss of duty-free treatment and potential additional penalties.

Alternative: Importing Samples as Regular Customs Entry

Importers have the option to import samples as a regular customs entry rather than utilizing duty-free provisions. Under this approach, importers may have to pay duties and taxes depending on the HTS and duty rate and follow all the regulations and requirements for the customs entry. However, the goods would be able to remain in the United States indefinitely, and the importer would retain the right to sell the samples after use.

This option may be preferable for importers who anticipate wanting to sell or use the samples commercially after evaluation or for samples that do not meet the specific requirements for duty-free treatment.

Conclusion

Importing commercial samples into the United States can be accomplished through several methods, each with specific requirements and limitations. The HTS 9811.00.60 provision allows for duty-free importation of samples valued at not over $1 each or samples that are visibly marked or defaced to be unsuitable for sale. Entry type 86 provides another option for samples valued under $800. For temporary imports, TIB and carnets offer duty-free treatment for samples brought in to solicit orders, with specific time limitations and usage restrictions.

Proper documentation, including the statement "mutilated samples – 9811.00.60," is essential for duty-free treatment. Samples imported duty-free must typically be destroyed or donated after use and cannot be sold or reconstituted into commercial products. Non-compliance can result in significant penalties, including liquidated damages equal to double the estimated duties.

Importers should also consider the impact of free trade agreements such as USMCA and other bilateral agreements that may provide for preferential treatment of samples. For those who need more flexibility in using or selling their samples after importation, choosing to import as a regular customs entry may be the best option despite the payment of duties and taxes.

Understanding these customs duty regulations and requirements is essential for businesses that regularly import commercial samples, as proper compliance can result in significant cost savings while avoiding potential penalties and legal issues.

Sources

1. CH Robinson - Importing Commercial Samples
2. CBP - Customs Duty Information
3. CBP - NAFTA Guide for Commercial Samples