No Royalties, Other Intangible Costs in 'US Content' for Reciprocal Tariff Exemption, CBP Says
An exemption from reciprocal tariffs for U.S. content that rises above 20% should be calculated only on the basis of a good’s physical characteristics, CBP said in an update to its FAQ on International Emergency Economic Powers Act tariffs. “Non-physical elements” like research and development, intellectual property rights and royalties can’t be included toward exempt U.S. content, CBP said.
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“‘U.S. content’ refers to the portion of an article’s customs value, determined under 19 U.S.C. 1401a, attributable to components that are wholly obtained, entirely produced, or substantially transformed in the United States,” CBP said. “At least 20% of the total customs value must be of U.S. origin for the content to qualify under 9903.01.34. The exemption applies only to the U.S. portion; the remaining non-U.S. content remains subject to duties under headings 9903.01.25, 9903.01.35, 9903.01.39, and 9903.01.43 – 9903.01.76.”
CBP also clarified that the reciprocal tariffs apply to goods under the Haiti HOPE program and goods from U.S. insular possessions that aren’t a product of those possessions.
For Haiti HOPE, CBP said that reciprocal tariffs apply “to goods eligible under any preferential trade program listed in General Note 3(c)(i)” of the tariff schedule, “regardless of whether a claim is made under a specific Special Program Indicator (SPI) or Chapter 98 or 99 provision. Since the Haiti HOPE program is an amendment to Caribbean Basin Economic Recovery Act (CBERA)/Caribbean Basin Trade Partnership Act (CBTPA) -- which is listed in GN 3(c)(i) -- such goods are subject to the reciprocal tariff, including the 10% duty.”
As for insular possessions, CBP said the reciprocal tariffs apply to all goods imported into the customs territory of the U.S., which online includes the U.S. and Puerto Rico. “Goods imported from U.S. territories, also known as insular possessions, of the United States (specifically the U.S. Virgin Islands, Guam, American Samoa, Wake Island, Midway Islands, and Johnston Atoll) are subject to [the tariffs] unless exempt. In accordance with General Note 3(a)(iv) of the HTSUS, goods that qualify as a product of an insular possession are exempt from such duties.”