Are You Overpaying on Import Duties?

The Offshore Assembly Program (OAP), formerly known as the 806/807 Provision of the US Tariff Code, has been renamed the 9802 Provision of the Harmonized System Code. This program allows American firms to export component parts and have them assembled overseas. When the finished product is imported back into the US, duties are paid only on the foreign value added.

Shippers should estimate the production characteristics of the US OAP activity, and in particular, whether this activity is intensive in the use of non-production labor as compared to the overseas production. They should also examine the sensitivity of OAP imports to real exchange rate movements.

A breakdown of documents is required per shipment estimating the value of the US goods, the value of any foreign components that may have been added, and a breakdown of labor. If terms are listed on an invoice as Delivered Duty Unpaid (DDU), then freight needs to be shown as a separate line item. If you use a third-party logistics provider (3PL), they will need a listing of the freight rate so they will know how to handle the customs entry once the documents reach the US. Please note that you do not want to pay duty on freight either.

When handling imports of this nature, documents will need to be more itemized. By doing so, you will save money in duties, and make sure you are handling the shipment correctly and providing all the necessary information to US Customs and Border Protection.

If you have any questions about the "9802 Provision,” please contact Julia Church, International Specialist for M33 Integrated Solutions.