Duty-Free Entry
Contractors must follow strict notification, documentation, and pricing procedures to ensure eligible foreign supplies receive duty-free entry under government contracts.
Overview
FAR 52.225-8, Duty-Free Entry, establishes the requirements and procedures for contractors to obtain duty-free entry for certain foreign supplies imported into the customs territory of the United States for government contracts. The clause defines key terms, outlines notification and documentation requirements, and specifies when contractors must reduce contract prices by the amount of duty saved. It also details the responsibilities for both contractors and the government in facilitating duty-free entry and sets forth procedures for subcontractors.
Key Rules
- No Duty in Contract Price for Duty-Free Items
- Contractors must not include duty costs in the contract price for supplies specifically identified as duty-free in the contract Schedule unless approved by the Contracting Officer.
- Notification for Non-Scheduled Foreign Supplies
- Contractors must notify the Contracting Officer at least 20 days before importing foreign supplies over $20,000 not listed as duty-free, providing details on the items, estimated duty, and country of origin.
- Government Determination and Price Adjustment
- The Contracting Officer decides within 10 days if such supplies should be duty-free; if not, contract price must be adjusted to exclude duty savings.
- Exceptions to Notification
- Notification is not required for commercial items where segregation for government use is not feasible.
- Duty-Free Entry Claims and Diversion
- Duty-free entry can only be claimed for supplies delivered to the government; duties must be paid if items are diverted to non-government use.
- Shipping and Documentation Requirements
- Specific shipping instructions, markings, and documentation are required for duty-free shipments.
- Subcontractor Flowdown
- The clause must be included in subcontracts involving duty-free imports over $20,000 or those listed in the Schedule.
Responsibilities
- Contracting Officers: Approve duty-free entry, determine eligibility, execute certificates, and assist with customs procedures.
- Contractors: Notify CO of qualifying imports, ensure proper documentation and shipping, claim duty-free entry only for eligible items, and flow down requirements to subcontractors.
- Agencies: Provide oversight, execute required certificates, and assist with customs clearance.
Practical Implications
This clause ensures that contractors do not charge the government for duties on eligible imports and that all necessary steps are taken to secure duty-free entry. It impacts contract pricing, import planning, and documentation processes. Common pitfalls include failing to notify the CO in time, improper documentation, or not flowing down the clause to subcontractors, which can result in denied duty-free entry or contract price adjustments.