The importation of commercial samples is a critical activity for many UK businesses, particularly those involved in product development, quality testing, and market solicitation. Understanding the customs valuation rules and import procedures is essential to ensure compliance with regulations, avoid penalties, and manage costs effectively. The process can vary significantly depending on whether samples are purchased, provided free of charge, or intended for temporary use. This article outlines the key considerations for UK-based importers, drawing exclusively on the provided source material.
Understanding Commercial Samples and Their Importation
Commercial samples are products used by businesses to demonstrate quality, test materials, or solicit orders from potential clients. They are distinct from goods intended for resale and are subject to specific customs regulations. In the United States, U.S. Customs and Border Protection (CBP) regulates the importation of commercial samples similarly to other commercial shipments, requiring adherence to trade policy compliance.
There are two primary options for permanently importing commercial samples into the United States: importing them as a regular customs entry or under a specific provision in the U.S. Harmonized Tariff Code (HTS). The HTS includes a provision (9811.00.60) for commercial samples valued at not over $1 each or samples that are marked, torn, perforated, or otherwise treated to make them unsuitable for sale or use other than as a sample. Samples falling under this provision may be imported duty-free if they are permanently marked as a "sample" or cut or torn in a visible manner.
Additional requirements may apply depending on the type of product. For instance, textile products and footwear have specific marking and defacing requirements. Other regulations may be enforced based on the fabric type, size, and other considerations. It is important to note that samples imported under the duty-free provision for mutilated samples must typically be destroyed or donated to a charity or other non-commercial entity after use. Importers are not permitted to sell them or reconstitute them into articles suitable for sale.
Alternatively, importers can choose to import samples as a regular customs entry. In this case, duties and taxes may be payable depending on the HTS classification and applicable duty rate. However, the goods can remain in the United States indefinitely, and the importer retains the right to sell the samples after use.
For samples valued at less than $800, importers may consider entry type 86, which allows for goods valued under $800 to be imported free of duties, taxes, and fees. This option can be advantageous for low-value shipments.
Valuation of Purchased Samples
When samples are purchased from a supplier, the customs value must reflect the price actually paid or payable for the goods. The purchase price must be declared to customs authorities, regardless of whether the samples are mutilated or intended for duty-free treatment. Mutilation for tariff purposes does not affect the value of purchased samples; appropriate tariff classifications are applied, many of which are independent of value.
Declaring an accurate value is crucial. Some suppliers may mistakenly believe that declaring reduced values for mutilated samples benefits the importer. However, understating the value can lead to penalties and re-assessments by customs authorities, both during audits and at the time of clearance. Therefore, importers must ensure that the declared value is truthful and supported by documentation, such as invoices and proof of payment.
Valuation of Samples Supplied Free of Charge
When samples are shipped to the U.S. by a vendor free of charge to the importer, a customs value must still be declared. The value should not be an arbitrary or nominal figure but must be based on a reasonable method. Two primary approaches are recommended:
Cost of Production: The value can be calculated as the cost of production, which includes:
- Material costs
- Fabrication charges (materials, cutting, sewing, and mutilation costs)
- Development and design costs (e.g., screen setup charges, embroidery setup charges)
- A reasonable markup for general expenses and profit
Price for Similar Goods: The value can be set at a price equal to that used for similar or identical goods from the same sample supplier.
The vendor should maintain documentation showing how the pro forma invoice price was calculated. The invoice must clearly state that the samples are being provided free of charge and that no payment will be made for the shipment.
It is important to note that for certain types of samples, such as mutilated samples originating from the United States, Mexico, Chile, or Costa Rica, they are duty-free regardless of value. Additionally, samples of negligible value, where the aggregate duty and tax per sample is $2 or less, are also duty-free.
Temporary Importation Options
For businesses importing samples to solicit sales or exhibit goods at a trade show, temporary importation may be a suitable option. Two common methods are Temporary Importation under Bond (TIB) and carnets.
Temporary Importation under Bond (TIB)
A TIB temporarily permits the importation of goods into the United States free of duty when the importer posts a bond. TIBs can be used exclusively for importing commercial samples to solicit orders for the merchandise. Goods imported under a TIB must not be sold or offered for sale and must be exported or destroyed within one year from the date of importation. Extensions can be requested for additional one-year periods, but the total period cannot exceed three years.
While convenient, TIB entries carry risks. Failure to export or destroy the samples before the expiration date will result in liquidated damages equal to double the estimated duties for the samples.
Carnets
A carnet is both a customs bond and customs entry documentation. It is purchased in advance of the shipment exporting the origin country. Carnets provide a streamlined process for temporarily importing goods into multiple countries, including the United States.
Customs Valuation Methods
The customs value of imported goods is determined using specific methods outlined in customs regulations. The process starts with the transaction value method and proceeds sequentially to alternative methods if the primary method is not applicable.
Transaction Value: The primary method is based on the price actually paid or payable for the goods when sold for export to the country of importation, adjusted for certain costs.
Alternative Methods: If the transaction value cannot be determined, other methods are used in sequence:
- Computed Value: Calculated from the production side, this method adds up the cost of materials, direct labour, overhead, packing, and a reasonable profit. It requires detailed cost data from the foreign manufacturer.
- Fallback Method: Used only when none of the other methods apply, the fallback method adapts elements from other methods to determine the customs value.
Inclusions and Exclusions in Customs Value
Regardless of the valuation method used, certain costs must be added to the customs value, while others must be excluded.
Inclusions: The customs value must include: * Packing costs * Selling commissions * Assists (materials, tools, parts, or designs supplied to the seller at no charge or at a reduced cost) * Royalties and license fees payable as a condition of sale * Freight, insurance, and related costs to bring the goods to the U.S. port of import * Proceeds from the resale of the goods payable to the seller
Exclusions: The customs value should exclude: * Duties and taxes * Domestic transportation, insurance, and handling after the goods arrive at a U.S. port
Compliance and Documentation
Compliance is paramount when importing commercial samples. For textile apparel products, including samples, the Federal Trade Commission (FTC) requires Country of Origin (COO), fibre content, and Manufacturer Identification/RN number information. This information can be on a hangtag attached to the garment rather than by sewn-in labels, but there are no exceptions to these legal requirements.
All commercial documents must show a value for the samples, even if they are provided at no cost or have no commercial value. For duty-free treatment under the mutilated samples provision (9811.00.60), the commercial document must include the statement “mutilated samples – 9811.00.60”. Vendors and importers should maintain proof of payment or documentation showing how the pro forma invoice price was calculated for free-of-charge samples.
Conclusion
Importing commercial samples into the United States requires careful attention to customs valuation rules and import procedures. UK businesses must decide between permanent importation (with or without duties) and temporary importation options like TIB or carnets, based on their specific needs. Accurate valuation is critical, whether samples are purchased or provided free of charge, and must be supported by appropriate documentation. Compliance with marking requirements, such as those for textiles, and adherence to customs regulations are essential to avoid penalties and ensure smooth clearance. By understanding these requirements, UK importers can effectively manage their sample programmes while maintaining regulatory compliance.