52.225-8 Duty-Free Entry
Source: FAR 52.225-8 on acquisition.gov
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.
As prescribed in 25.1101(e), insert the following clause:
Duty-Free Entry (Oct 2025)
(a) Definition. "Customs territory of the United States" means the States, the District of Columbia, and Puerto Rico.
(b) Except as otherwise approved by the Contracting Officer, the Contractor shall not include in the contract price any amount for duties on supplies specifically identified in the Schedule to be accorded duty-free entry.
(c) Except as provided in paragraph (d) of this clause or elsewhere in this contract, the following procedures apply to supplies not identified in the Schedule to be accorded duty-free entry:
(1) The Contractor shall notify the Contracting Officer in writing of any purchase of foreign supplies (including, without limitation, raw materials, components, and intermediate assemblies) in excess of $20,000 that are to be imported into the customs territory of the United States for delivery to the Government under this contract, either as end products or for incorporation into end products. The Contractor shall furnish the notice to the Contracting Officer at least 20 calendar days before the importation. The notice shall identify the-
(i) Foreign supplies;
(ii) Estimated amount of duty; and
(iii) Country of origin.
(2) The Contracting Officer will determine whether any of these supplies should be accorded duty-free entry and will notify the Contractor within 10 calendar days after receipt of the Contractor’s notification.
(3) Except as otherwise approved by the Contracting Officer, the contract price shall be reduced by (or the allowable cost shall not include) the amount of duty that would be payable if the supplies were not entered duty-free.
(d) The Contractor is not required to provide the notification under paragraph (c) of this clause for purchases of foreign supplies if-
(1) The supplies are identical in nature to items purchased by the Contractor or any subcontractor in connection with its commercial business; and
(2) Segregation of these supplies to ensure use only on Government contracts containing duty-free entry provisions is not economical or feasible.
(e) The Contractor shall claim duty-free entry only for supplies to be delivered to the Government under this contract, either as end products or incorporated into end products, and shall pay duty on supplies, or any portion of them, other than scrap, salvage, or competitive sale authorized by the Contracting Officer, diverted to nongovernmental use.
(f) The Government will execute any required duty-free entry certificates for supplies to be accorded duty-free entry and will assist the Contractor in obtaining duty-free entry for these supplies.
(g) Shipping documents for supplies to be accorded duty-free entry shall consign the shipments to the contracting agency in care of the Contractor and shall include the-
(1) Delivery address of the Contractor (or contracting agency, if appropriate);
(2) Government prime contract number;
(3) Identification of carrier;
(4) Notation "UNITED STATES GOVERNMENT, _____ [agency] _____, Duty-free entry to be claimed pursuant to Item No(s) _____ [from Tariff Schedules] _____, Harmonized Tariff Schedules of the United States. Upon arrival of shipment at port of entry, District Director of Customs, please release shipment under 19 CFR Part 142 and notify [cognizant contract administration office] for execution of Customs Forms7501 and 7501-A and any required duty-free entry certificates.";
(5) Gross weight in pounds (if freight is based on space tonnage, state cubic feet in addition to gross shipping weight); and
(6) Estimated value in United States dollars.
(h) The Contractor shall instruct the foreign supplier to-
(1) Consign the shipment as specified in paragraph (g) of this clause;
(2) Mark all packages with the words "UNITED STATES GOVERNMENT" and the title of the contracting agency; and
(3) Include with the shipment at least two copies of the bill of lading (or other shipping document) for use by the District Director of Customs at the port of entry.
(i) The Contractor shall provide written notice to the cognizant contract administration office immediately after notification by the Contracting Officer that duty-free entry will be accorded foreign supplies or, for duty-free supplies identified in the Schedule, upon award by the Contractor to the overseas supplier. The notice shall identify the-
(1) Foreign supplies;
(2) Country of origin;
(3) Contract number; and
(4) Scheduled delivery date(s).
(j) The Contractor shall include the substance of this clause in any subcontract if-
(1) Supplies identified in the Schedule to be accorded duty-free entry will be imported into the customs territory of the United States; or
(2) Other foreign supplies in excess of $20,000 may be imported into the customs territory of the United States.
(End of clause)