FAR 25.903—Exempted supplies.
Plain-English Summary
FAR 25.903 explains two related customs-duty exemptions that can apply to supplies acquired under Government contracts. First, it points to the Harmonized Tariff Schedule of the United States (HTSUS), specifically Subchapters VIII and X of Chapter 98, which identify categories of supplies that may enter the customs territory of the United States duty-free when imported for Government contract purposes. It also explains that, for some of those HTSUS-listed items, the contracting agency must certify to U.S. Customs and Border Protection that the supplies are being imported for the specific purpose required by the tariff provision, using the procedures and formats in the cited customs and trade regulations. Second, it addresses supplies other than equipment for Government-operated vessels or aircraft, which may be withdrawn duty-free and free of internal revenue tax from customs-bonded warehouses, continuous customs custody, or foreign-trade zones under 19 U.S.C. 1309 and 1317. In practice, this section matters because it determines when the Government can avoid paying customs duties and certain taxes, but only if the correct legal authority is identified and the required customs documentation and certifications are completed accurately and on time.
Key Rules
HTSUS duty exemptions apply
Certain supplies listed in Subchapters VIII and X of Chapter 98 of the HTSUS may qualify for duty exemption when imported under a Government contract. The exemption is not automatic; the item must fit the tariff provision and the import must meet the stated Government-purpose conditions.
Agency certification may be required
For some HTSUS-listed supplies, the contracting agency must certify to the Commissioner of Customs that the supplies are intended for the purpose specified in the tariff schedule. The applicable customs regulations prescribe the required procedures and certification formats.
Vessel and aircraft supplies have special treatment
Supplies, excluding equipment, for Government-operated vessels or aircraft may be withdrawn duty-free and free of internal revenue tax from customs-bonded warehouses, continuous customs custody, or foreign-trade zones. This authority comes from 19 U.S.C. 1309 and 1317.
Correct customs citation is mandatory
When making purchases for Government-operated vessels or aircraft, the contracting activity must cite the statutory authority on the appropriate customs form. Failure to cite the correct authority can jeopardize the exemption or delay release of the goods.
Equipment is excluded from the vessel-aircraft rule
The special duty- and tax-free withdrawal authority in paragraph (b) applies to supplies, but not equipment. Users must distinguish between consumable supplies and equipment before relying on this provision.
Responsibilities
Contracting Agency
Determine whether imported supplies qualify under the HTSUS exemptions and, when required, certify to Customs that the items are for the tariff-specified purpose. The agency must also ensure the proper customs forms and supporting documentation are completed.
Contracting Activity
For purchases supporting Government-operated vessels or aircraft, cite the correct statutory authority on the customs form and ensure the procurement record supports the claimed exemption. It must also distinguish supplies from equipment before using the exemption.
Contracting Officer
Identify whether the acquisition involves exempted supplies, coordinate any required certification, and ensure the contract and import documentation reflect the correct customs authority. The contracting officer should verify that the exemption basis is legally available before award or import.
Customs Authorities
Process the import or withdrawal based on the cited HTSUS or statutory authority and the required certification or customs form. Customs determines whether the claimed exemption is supported by the documentation provided.
Contractor or Importer
Provide accurate item descriptions, origin, and shipment information needed to support the exemption claim and comply with customs filing requirements. The contractor must not assume duty-free treatment without the required legal basis and documentation.
Practical Implications
This section can save significant duty and tax costs, but only if the item actually falls within the cited HTSUS provision or vessel/aircraft authority.
A common pitfall is assuming all Government purchases are duty-free; the exemption depends on the specific item, its use, and the correct customs authority.
Another frequent error is failing to complete or cite the required customs certification, which can delay release, trigger duty assessment, or create compliance issues.
Contracting personnel should confirm early whether the acquisition involves imported supplies, bonded warehouse withdrawals, or foreign-trade zone movements so the right paperwork is in place before shipment.
Because the vessel/aircraft rule excludes equipment, teams should carefully classify items to avoid applying the wrong exemption to durable or installed items.
Official Regulatory Text
(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). (b) Supplies (excluding equipment) for Government-operated vessels or aircraft may be withdrawn from any customs-bonded warehouse, from continuous customs custody elsewhere than in a bonded warehouse, or from a foreign-trade zone, free of duty and internal revenue tax as provided in 19 U.S.C. 1309 and 1317. The contracting activity must cite this authority on the appropriate customs form when making purchases (see 19 CFR 10.59 - 10.65).