May 20, 2014
by Jason Dickstein
This is the first in a series of articles discussing import into the United States of aircraft parts. It is meant to lay the ground-work for the rest of the series by explaining some basic terms and notions that apply to U.S. import law.
Import law is important to both U.S. companies (who are importing into the U.S.) and non-U.S. companies. non-U.S. companies may be exporting to the U.S., but that doesn’t mean tat they can ignore the U.S. import laws. They need to cooperate with their U.S. importers to make sure that the importer can readily clear Customs with the goods without unnecessary delay.
U.S. import law applies to goods that enter the customs territory of the United States. The customs territory of the United States includes only the States, the District of Columbia and Puerto Rico. Other US possessions are not considered to be part of the customs territory of the United States.
Imports are regulated for a variety of reasons, but one of the most important historical reasons for regulating imports is to apply tariffs. The first US Congress passed the Tariff Act of 1789 in order to raise funds to be able to operate the government. Until the federal income tax began in the early 20th century, tariffs were the single most important source of revenue for the United States government.
Modern US policy no longer relies heavily on tariffs as a major source of US revenue – instead the US now uses tariffs to advance industrial, trade and foreign policy issues. For example, where the US believes that foreign goods are being subsidized, and that this subsidy is permitting them to be sold into the US market at a below-cost price, the US may apply heavy tariffs in order to make the imported goods more competitive relative to US-manufactured goods. Part of the reason for doing this is to protect the correlative US manufacturing industry because if the US correlative US manufacturing industry were to disappear in the face of the subsidized imports, then the prices for the imports could be increased to supra-competitive levels because there would be no domestic competition to offer competition that could prevent such price increases.
Many of the countries that have significant aviation industries are signatories to the Agreement on Trade in Civil Aircraft, which addresses import tariffs on aircraft parts. Most people in our industry know that aircraft parts are imported “duty-free” under the Agreement on Trade in Civil Aircraft.
But while duty-free treatment is the general rule, there are many exceptions.
Aviation industry personnel often do not realize that many aircraft parts are characterized as other things for import purposes. Some parts that appear to be aircraft parts are treated under other categories for import tariff purposes. This includes things like washers, certain rubber articles, certain bearings, brushes found in machines, and lamps and lighting fittings. These parts will all have special classifications, so learning how to identify the right classifications is important.
An important first step for importing goods is classification. The importer will be responsible for properly classifying the import goods, and this classification may drive the applicable tariffs.
Many nations have adopted the Harmonized Commodity Description and Coding System (HCDCS) which is a list that is published and maintained by the World Customs Organization (WCO). The HCDCS serves as the basis for the U.S. Harmonized Tariff Schedule, which is the list of goods used in the United States.
Classifications of goods are listed in the U.S. Harmonized Tariff Schedule, so you would find aircraft parts in this schedule; but you will also find exceptions. In part two of this series we will look more closely at the harmonized tariff codes applicable to aircraft parts and will discuss the full list of exceptions. In forthcoming articles, we will discuss topics like:
- USHTS classification numbers associated with aircraft parts; and
- Exceptions to the general rules including parts that are NOT duty-free.
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