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1. The FAR and DFARS references quoted below in pertinent part are applicable to this response.
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FAR 2.101 – Definitions
“Customs territory of the United States” means the 50 States, the District of Columbia, and Puerto Rico.
FAR subpart 25.9 – Customs and Duties
FAR 25.901 – Policy
United States laws impose duties on foreign supplies imported into the customs territory of the United States. Certain exemptions from these duties are available to Government agencies. Agencies must use these exemptions when the anticipated savings to appropriated funds will outweigh the administrative costs associated with processing required documentation.
FAR 25.902 – Procedures
For regulations governing importations and duties, see the Customs Regulations issued by the U.S. Customs Service, Department of the Treasury (19 CFR Chapter 1). Except as provided elsewhere in the customs Regulations (see 19 CFR 10.100), all shipments of imported supplies purchased under Government contracts are subject to the usual Customs entry and examination requirements. Unless the agency obtains an exemption (see 25.903), those shipments are also subject to duty.
FAR 25.903 – Exempted Supplies
(a) Subchapters VIII and X of Chapter 98 of the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202) list supplies for which exemptions from duty may be obtained when imported into the customs territory of the United States under a Government contract. For certain of these supplies, the contracting agency must certify to the Commissioner of Customs that they are for the purpose stated in the Harmonized Tariff Schedule (see 19 CFR 10.102-104, 10.114, and 10.121 and 15 CFR part 301 for requirements and formats).
FAR Subpart 25.11 – Solicitation Provisions and Contract Clauses
FAR 25.1101 – Acquisition of Supplies
(e) Insert the clause at [see DFARS 225.1101(4) below], in solicitations and contracts for supplies that may be imported into the United States and for which duty-free entry may be obtained in accordance with 25.903(a), if the value of the acquisition--
(1) Exceeds the simplified acquisition threshold;
DFARS 225.1101 – Acquisition of supplies.
(4) Use the clause at 252.225-7013, Duty-Free Entry, instead of the clause at FAR 52.225-8. Do not use the clause for acquisitions of supplies that will not enter the customs territory of the United States.
DFARS subpart 225.9 – Customs and Duties
DFARS 225.900-70 – Definition
“Component,” as used in this subpart, means any item supplied to the Government as part of an end product or of another component.
DFARS 225.901 – Policy
Unless the supplies are entitled to duty-free treatment under a special category in the Harmonized Tariff Schedule of the United States (e.g., the Caribbean Basin Economic Recovery Act or a Free Trade Agreement), or unless the supplies already have entered into the customs territory of the United States and the contractor already has paid the duty, DoD will issue duty-free entry certificates for—
(1) Qualifying country supplies (end products and components);
(2) Eligible products (end products but not components) under contracts covered by the World Trade Organization Government Procurement Agreement or a Free Trade Agreement; and
(3) Other foreign supplies for which the contractor estimates that duty will exceed $300 per shipment into the customs territory of the United States.
DFARS 225.902 – Procedures.
Follow the entry and release procedures at PGI 225.902.
DFARS 225.903 – Exempted supplies.
(b)(i) For an explanation of the term “supplies,” see PGI 225.903(b)(i).
(ii) The duty-free certificate shall be printed, stamped, or typed on the face of, or attached to, Customs Form 7501. A duly designated officer or civilian official of the appropriate department or agency shall execute the certificate in the format provided at PGI 225.903(b)(ii).
DFARS 252.225-7013 – Duty-Free Entry (May 2016)
(b) Except as provided in paragraph (i) of this clause, or unless supplies were imported into the customs territory of the United States before the date of this contract or the applicable subcontract, the price of this contract shall not include any amount for duty on—
(1) End items that are eligible products or qualifying country end products;
(2) Components (including, without limitation, raw materials and intermediate assemblies) produced or made in qualifying countries, that are to be incorporated in U.S.- made end products to be delivered under this contract; or
(3) Other supplies for which the Contractor estimates that duty will exceed $300 per shipment into the customs territory of the United States.
(c) The Contractor shall—
(1) Claim duty-free entry only for supplies that the Contractor intends to deliver to the Government under this contract, either as end items or components of end items;
(d) Except as the Contractor may otherwise agree, the Government will execute duty-free entry certificates and will afford such assistance as appropriate to obtain the duty-free entry of supplies—
(1) For which no duty is included in the contract price in accordance with paragraph (b) of this clause; and
(2) For which shipping documents bear the notation specified in paragraph (e) of this clause.
(i) This clause does not apply to purchases of eligible products or qualifying country supplies in connection with this contract if—
(1) The supplies are identical in nature to supplies purchased by the Contractor or any subcontractor in connection with its commercial business; and
(2) It is not economical or feasible to account for such supplies so as to ensure that the amount of the supplies for which duty-free entry is claimed does not exceed the amount purchased in connection with this contract.
2. Because as indicated in FAR 25.902 that all shipments of imported supplies purchased under Government contracts are subject to import duties, then pursuant to the policy stated in FAR 25.901, agencies generally must use certain exemptions from these duties that are available to the Government in order to realize savings to appropriated funds. FAR 25.903(a) specifies the documents that list the supplies for which exemptions from any import duty may be obtained when imported into the customs territory of the United States under a Government contract.
3. As described above, any exemptions to import duties do not automatically apply and therefore such exemptions must be implemented by the terms and conditions set forth in the Government contract. Pursuant to FAR 25.1101(e)(1) and DFARS 225.1101(4), the clause DFARS 252.225-7013 must be inserted into DoD solicitations and contracts for supplies that may be imported into the United States and for which duty-free entry may be obtained in accordance with FAR 25.903(a), if the value of the acquisition exceeds the simplified acquisition threshold. Because such situation is clearly the case here, the above clause must be negotiated into the contract in question if it is not already included.
4 Clause DFARS 252.225-7013 specifies mutual obligations between the Government and the contractor in implementing its terms. DFARS 252.225-7013(b) essentially provides that the contract price shall not include any amount for duty on items listed in the documents referenced in FAR 25.903(a). If an exemption does apply to the “item coming from Norway”, then the contract price may not include any associated tariffs or import duties on that item that are currently being proposed by the contractor.
5. On the other hand, pursuant to DoD policy stated in DFARS 225.901 and as implemented by clause DFARS 252.225-7013(d), the Government is required to execute duty-free entry certificates and will afford such assistance as appropriate to obtain the duty-free entry of the “item coming from Norway” (1) For which no duty is included in the contract price in accordance with paragraph (b) of this clause; and (2) For which shipping documents bear the notation specified in paragraph (e) of this clause. The specific procedures for issuing duty-free entry certificates are referenced in DFARS 225.902 and in DFARS 225.903(b) as noted above.