Written by Tom Gould, Chief Strategy & Compliance Officer, Gaia Dynamics
Chapter 98 of the Harmonized Tariff Schedule of the United States (HTSUS) provides duty and tariff reduction and duty and tariff-free provisions for goods entering the U.S., including those returning after export. Chapter 98 includes many provisions often overlooked by importers.
When importing under any of these provisions, it is important to understand the rules and limitations. Each Chapter 98 program comes with documentation, certification, and other requirements that importers must follow to qualify. Some programs allow for full duty and tariff-free import, some allow for partial duty and tariff reductions, and some only provide relief from most favored nations (MFN) duty rates.
But with opportunity comes risk: every provision carries strict eligibility rules, documentation requirements, and compliance pitfalls. Importers who misunderstand or misapply Chapter 98 can face unexpected duties, audits, or even penalties.
Heading 9801: U.S. Products Returned
Heading 9801.00.10 provides duty-free entry for U.S. origin products returned after export, provided they have not been advanced in value or improved in condition abroad. For example, U.S.-manufactured machinery exported temporarily for display at a trade show can typically reenter the country duty-free, so long as it has not undergone repair or modification outside the U.S.
Foreign-origin goods may also qualify under heading 9801 if they were previously imported, duty paid, and then exported. Foreign-origin items imported under 9801 must be returned within three years of their original export to be eligible for duty-free entry.
Right: U.S.-origin goods that are exported and later returned, without being advanced in value or improved abroad, can reenter duty-free.
Wrong: Assuming all returning goods qualify. Foreign-origin items can also use 9801, but only if they were exported and re-imported within three years of export. Miss the timeline, and eligibility is lost.
Heading 9802: U.S. Products Assembled, Processed, Repaired, or Altered Abroad
Heading 9802 includes multiple provisions that allow importers to limit duty and tariff payments to the value of the repairs, alterations, or processing abroad. These provisions allow companies to avoid paying duty, and sometimes tariffs, on the value of items exported to be advanced in value in another country and returned to the U.S.
One commonly used provision in 9802 allows companies to avoid paying duty and tariffs on the cost of U.S.-origin components exported to be assembled into a foreign-origin item and reimported.
Right: U.S. exporters can send parts abroad for assembly and avoid paying duty on the U.S. origin components when the finished product returns.
Wrong: Claiming 9802 without the required declarations or clear documentation of the value added. Without invoices and records showing the cost of repairs or processing, CBP may deny the claim and assess full duties.
Headings 9803 to 9817: Products Eligible for Duty Reduction or Elimination
Many provisions in Chapter 98, headings 9803 through 9817, provide for reduced duty and tariff rates, and many allow importers to avoid paying duty and tariffs on products as long as all of the requirements are met. Examples of some of the Chapter 98 provisions importers should consider include:
- U.S. items exported and reimported.
- Foreign items exported from the U.S. and returned within 3 years.
- Professional books, implements, instruments, and tools of trade.
- U.S.-origin components assembled into foreign items abroad.
- Items exported for repairs or alterations abroad and reimported.
- U.S.-made metal items exported for processing and returned for further processing.
- Instruments of international traffic (IIT), substantial containers and holders.
- U.S. and foreign government imports
- Importation of religious, educational, scientific, and other institutions
- Samples and prototypes
- Agricultural or horticultural machinery, equipment, implements, and their parts.
- Unwrought metal, including remelt scrap.
- Articles for the blind or handicapped persons (Nairobi protocol).
- Theatrical scenery, props, and apparel
- Ski racing apparel
- Footwear for supporting or holding the foot following an illness, operation, or injury
- Bicycle wheel building, wheel truing, rim punching, tire fitting, and similar machines
- Articles used in the home for specific religious or cultural ritual celebrations
- Some holiday items
Right: Review Chapter 98 provisions proactively—many apply to niche business cases.
Wrong: Waiting until after importation to identify opportunities. Missed classifications mean lost savings and some of these provisions cannot be claimed retroactive.
Burden of Proof: Documentation Requirements
Customs compliance hinges on documentation. Importers—not their customs brokers—bear the responsibility of proving eligibility under Chapter 98. Typical supporting records may include:
- Proof of prior importation and duty payment for foreign-origin goods.
- Shipping and customs documents demonstrating export and import.
- Declarations, affidavits, and certifications as outlined in the customs regulations.
- Purchase and shipping documents for raw material, ingredients and components.
- Production records showing production steps and transfers from raw materials through export to the U.S.
- Employee records for workers who produced the imported products.
Without sufficient documentation, goods may be subject to duties, tariffs, and penalties. Importers should implement internal controls and recordkeeping systems to support claims under any of the Chapter 98 provisions.
Right: Importers (not their brokers) must prove eligibility under Chapter 98.
Wrong: Filing without robust support. Insufficient documentation can lead to denied claims, retroactive duties, or penalties.
Artificial Intelligence (AI) Automation
Today’s AI tools can help with automated HTS classification, document review, predictive modeling, and some basic compliance checks. I have not seen any tools to help companies identify when a Chapter 98 claim might be available and walk them through the requirements. At Gaia Dynamics, we are working on capabilities to incorporate tariff and origin engineering, including Chapter 98 strategies, into our tools. We would love to hear from AAEI members who are looking to understand the opportunities and requirements of Chapter 98 and how you might use AI to identify opportunities and enhance compliance.
Conclusion
Chapter 98 of the HTS provides significant opportunities for importers to minimize duty and tariff exposure. By understanding the scope of duty-free entry, the distinctions between U.S. and foreign origin products, the applicable time limits, and the burden of proof, companies can better position themselves to take advantage of these provisions. Ultimately, proactive compliance and strong documentation practices are key to unlocking the benefits while avoiding costly missteps.
The “right” strategy: Treat Chapter 98 not as a loophole, but as a compliance discipline. Done correctly, it protects the bottom line while staying on the right side of CBP.
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