With the new tariffs being imposed by the United States, and also being imposed reciprocally by other countries on the products of the United States, “country-of-origin” has become an important topic.
FAA-PMA parts are manufactured in the United States. Thus, their country-of-origin is typically the United States. But what about their sub-components?
PMA manufacturers should be concerned about country-of-origin for two different types of US-import transactions. First, sub-components or raw materials that will be incorporated into the PMA assembly may be imported into the United States, which could result in a tariff impact on the import. Second, a PMA part that was previously exported may be subsequently imported into the United States: for example, in order to be maintained.
Sub-Components or Raw Materials Imported for Assembly in the PMA Part
Sub-components or raw materials that are imported for use in production are typically products of the country in which they were wholly produced. That means that the duty applied to goods of that country will apply to those goods when they are first imported into the United States. There are a variety of new tariffs that could apply to such an import.
In the past, aircraft sub-components often could be entered on a duty-free basis as aircraft parts. The new Chapter 99 tariffs are changing this because they supersede may of the duty-free provisions in Chapters 1-98 of the HTSUS.
If your sub-components are imported from Canada or Mexico, then there may be special country-of-origin rules that apply. If you enter the goods under the USMCA, you can identify them under the USMCA tariff subheadings: 9903.01.04 (Mexico) or 9903.01.14 (Canada). It is possible that these goods could be shifted to tariff sub-heading 9903.01.36 or 38 (Canada) and 9903.01.40 or 42 (Mexico) in the near future, so watch the HTSUS carefully (these codes are in the Executive Order Annex III but have not yet been made part of the HTSUS). In each case, the duty for these aircraft parts becomes zero instead of 25%. To do this, you must have a certificate of origin that matches the USMCA requirements. CBP has a sample certificate form that you can use. Make sure you include all nine of the required data elements described in Annex 5-A of the USMCA.
Some raw materials from Canada or Mexico may also be subject to the rules in the last paragraph.
Imports that will be processed into articles manufactured or produced in the United States (with the intent of subsequent export) can be entered on a duty-free basis under bond. A tariff subheading for this is 9813.00.0520. You would obtain a bond from a licensed surety. The entry must be properly declared as a temporary import under bond. Typically, the completed assembly must be exported within one year, but this can be extended to up to three years upon application. For purposes of this provision, an aircraft engine or propeller, or any part or accessory of either, imported under sub-heading 9813.00.05, which is
removed physically from the United States as part of an aircraft departing from the United States in international traffic is treated as exported and typically meets the end-requirements of the bond.
Unfortunately, not every foreign good can be protected from import tariffs. So it will be important to properly characterize your imported sub-components and raw materials and to assess what tariffs may apply to them upon entry.
If you are importing goods that may be subject to the aluminum, iron or steel tariffs, then you should carefully examine the impact that these may have on country-based tariffs. In many cases, the aluminum, iron or steel tariff takes precedence over the country-based tariff and is an exception to the country-based tariff. Raw materials are particularly likely to be subject to the aluminum, iron or steel tariffs. Details on these aluminum, iron and steel tariffs can be found in my earlier blog article on the subject.
Return of PMA Parts to the US
A PMA part may be exported and then subsequently imported back into the United States. There are a number of circumstances where this could happen, including a part that is being returned to the United States for maintenance. Here are a few useful rules to remember when assessing U.S. tariff applicability to such parts:
- FAA-PMA parts are typically products of the United States so if they were not “advanced in value” while abroad, they enter the United States duty-free under tariff heading 9801.00.1079 as long as they are subject to tariff heading 8807
- Not all PMA parts are coded under heading 8807. If the PMA part is subject to a different tariff heading then there will be be a different statistical code for the entry into the United States [instead of ’79’], but subheading 9801.00.10 should still apply.
- If the PMA part that was assembled in the United States reflected a transformative process for the sub-components, then the United States becomes the new country-of-origin for the sub-components.
- That means that a sub-component can be removed from the PMA part and sent back to the United States as a U.S. good, even though it was originally from somewhere else.
- The USMCA has its own transformation rules. One of them is that if the sub-component is described under any other subheading than the 8807 subheading that applies to the PMA part, then the sub-component becomes a U.S. good when it is assembled into the PMA article in the United States.
- For example, a foreign steel part under chapter 73 that is assembled into a PMA part (that is coded under heading 8807) in the United States will become a US good under the USMCA origin rules that apply to heading 8807 goods.
- When the sub-components become U.S goods, they retain this character when they are disassembled.