Exporting Repaired Goods
by Catherine J. Petersen | Format
Congratulations! You sold a piece of your equipment and machinery to a customer in the United Kingdom who also purchased an extended warranty and service agreement from your firm.
Before you shipped your equipment to this new customer, of course, you verified that the goods did not require an export license and that the customer was not listed as a restricted end-user by any U.S. government agency.
Now, some months later, the equipment that you sold to your British customer has broken down, and they wish to return the item for repair. They ask you for guidance on how to proceed. It is urgent. You want to be sure that the return process is as low cost as possible and without any delays in shipping, handling and repair.
Here are some steps that will help you make arrangements that will ease the flow of paperwork and goods between you and your customer.
Step 1: Sending an Item to the U.S. for Repair
Your British customer (or a customer in any country) should first check with his or her own customs authority. Every country's customs authority has a different procedure and documentation for repairs, which your customer must research and then follow.
Some countries require that the goods being returned be registered with the customs authority prior to sending it to the U.S. for repair. This proves that the goods have been legally imported and duty paid on the goods and that duty should not be assessed on the entire item when returned. The customs authority in the buyer’s country will likely assess duty on the declared value of the repair.
Step 2: Contact Your Customs House Broker
Contact your broker and discuss the steps you and your customer should take to import the goods for repair. This will also lay the groundwork for a smooth return to your customer.
It is important to establish a procedure with your customs house broker; they will be able to advise you whether it is beneficial to import the goods under a Temporary Importation under Bond (TIB), especially if advanced in value since exportation. If you use a TIB, then there are procedures and bonding requirements you will follow in order to comply with U.S. Customs requirements.
They may also have specific instructions for you and your customer to follow in preparing the documentation on the item being sent to you.
Step 3: Prepare the Commercial Documents for Import
If the goods have not been advanced in value or improved in condition while overseas, you or your customs house broker will likely be able to enter the goods into the U.S. duty free. If the goods have been advanced in value or improved in condition overseas, then you and the customs house broker may want to enter the goods under a TIB.
If the goods have not been advanced in value or improved in condition, then instruct the British customer to prepare a commercial invoice indicating “the goods are of U.S. origin, being returned for repair, have not been advanced in value or improved in condition,” and describe the goods with a general description:
Traffic Monitoring Equipment being returned for repair,
Made in the U.S., not advanced in value or improved in condition.
HTS Number of the U.S.: 9801.00.1012
The Harmonized Tariff Schedule number is a special number used when goods are returned for repair and can be found online.
Remember, when you are named on the international bill of lading as the importer or consignee—even for goods returned for repair—you become an importer subject to U.S. Customs rules, regulations and laws.
Step 4: The Goods Are Prepared, What’s Next?
You have completed the repair on the equipment, now its time to prepare the documentation that will move the shipment from your facility to the carrier or the forwarder’s consolidation facility. There are documents that you will typically prepare yourself, such as the commercial invoice, the packing list and the Shipper’s Export Declaration (SED). The SED is prepared as needed, either in hard copy or through the Automated Export System (AES), an electronic version of the SED. (Visit AES Direct for details.)
If you are using a forwarder, they may also complete the SED or AES record on your behalf. Your freight forwarder, in conjunction with the U.S. Customs Broker, will close the TIB if it was issued and issue the international bill of lading.
Commercial Invoice: The commercial invoice is an important document. First, the value of a repair should be listed on the commercial invoice. If the repair is a sale, then the invoice should reflect the transaction value. If it is not a sale, for example the repair is under warranty, then your company can list the value as its cost or wholesale value, fair market value, or the company's cost of production if it performed the repair.
Second, write the following sentence or a variation on the commercial invoice: "No charge: Warranty Repair Value for Customs purposes only.” (View the sample commercial invoice.)
Remember, customs in the buyer’s country may still be required to collect duty or taxes on the value of the repair even with this notation on the commercial invoice.
Shipper’s Export Declaration (SED): The Harmonized Tariff Schedule (HTS) and the Schedule B Code Book numbers reflect classifications important for duty and tax determinations and for trade statistics. When reported in the hard copy or electronic SED, it is being recorded for export from the US.
Products shipped under Headings 9801 and 9802 ensures that only the repair value will be reported in the trade statistics and will not double-count the item being shipped back to your customer. After you repair the item and you are ready to re-export, use Schedule B number 9801.10.0000 and not the corresponding number from Chapter 98 of the HTS.
When a good is returned by a foreign buyer to the U.S. manufacturer for repairs, fixed, and then re-exported, the U.S. firm must file a new SED for the repaired good if:
(a) the goods are subject to an export license, or
(b) the value is $2,500 or greater unless there is an exemption identified below.
No SED is required if the value of the repairs or alterations is $2,500 or less, or the merchandise is being shipped to Canada or to U.S. Territories other than Puerto Rico and the Virgin Islands.
When an SED is not required, the bill of lading, airway bill or other loading document used by the exporting carrier must include the following statement: "No SED required - value of repairs or alterations $2,500 or less.”
Complete the new SED or AES record with the required information. Pay close attention to two fields:
Field 22—Provide the Schedule B Number 9801.10.0000, which is for repairs and include below it the following text: “Merchandise being returned or otherwise exported after repair or alteration in the U.S.” The merchandise should be reported as “D” for domestic in Field 21.
Field 26—The value reported on the SED or AES record for such merchandise should reflect only the cost of the repairs or alterations (including parts and labor). If no charge is made for the repairs or alterations, such as repairs under warranty, report a value representing the cost of such repairs or alterations to the manufacturer.
Congratulations! You have succeeded in receiving, repairing and shipping the item back to your customer in record time. If there is one area that causes problems for sellers and buyers, it is properly clearing goods, which will be repaired and returning those goods in a timely manner to their customers.
For more information
- Trade Information Center's website or call 1 (800) USA-TRADE. Under FAQs – please see the article by Miller, Ashley, REPAIR AND WARRANTY RE-EXPORTS, Export America, April 2002; Updated September 2002, Brown, Patterson.
- To find your local U.S. Customs office and obtain information on import and export regulations, visit their website or call toll free at 877-287-8667.
- Schedule B Number questions, go to http://www.census.gov/foreign-trade/.
- Filling Out The SED questions either call the U.S. Bureau of the Census at 301-457-2238 or, for AES questions, visit the AES Direct website or call 877-715-4433.
- Harmonized Tariff Schedule Numbers are at http://dataweb.usitc.gov/SCRIPTS/tariff/toc.html.