FAR 52.225-8—Duty-Free Entry.
Plain-English Summary
FAR 52.225-8, Duty-Free Entry, sets out the rules for obtaining duty-free treatment for qualifying foreign supplies imported into the customs territory of the United States for performance of a federal contract. It covers the definition of the customs territory of the United States; when the contractor may not include duties in the contract price; the notification process for foreign supplies over $20,000 that are not already identified in the Schedule for duty-free entry; the contracting officer’s decision process; price or cost adjustments when duty-free entry is granted; an exception to the notice requirement for commercially purchased items that cannot be economically or feasibly segregated; the contractor’s obligation to use duty-free entry only for supplies delivered to the Government and to pay duty on diverted items; the Government’s role in executing certificates and assisting with entry; shipping document and package-marking requirements; the contractor’s duty to notify the contract administration office; and the flow-down requirement to subcontracts. In practice, the clause is designed to prevent the Government from paying unnecessary customs duties while ensuring imported items are properly identified, documented, and controlled. It matters most when performance involves overseas sourcing, imported components, or end products entering U.S. customs territory. Contractors must coordinate early with the contracting officer and customs-related personnel, because missed notices or incorrect shipping paperwork can delay entry, create unallowable costs, or trigger duty liability. Contracting officers and contract administration offices must also act quickly to determine eligibility and execute required customs documents.
Key Rules
Duty-free items excluded from price
For supplies specifically identified in the Schedule as eligible for duty-free entry, the contractor generally must not include customs duties in the contract price unless the contracting officer approves otherwise. This prevents the Government from paying duties that should be waived.
Notice for foreign supplies over $20,000
For foreign supplies not already identified in the Schedule, the contractor must give written notice at least 20 calendar days before importation if the purchase exceeds $20,000. The notice must identify the supplies, estimated duty, and country of origin.
Contracting officer determination
After receiving notice, the contracting officer must decide whether the supplies should receive duty-free entry and notify the contractor within 10 calendar days. The contractor’s pricing or allowable cost treatment then follows that determination unless otherwise approved.
Price or cost reduction required
If duty-free entry is granted, the contract price must be reduced, or the allowable cost must exclude, the amount of duty that would otherwise have been payable. The contractor cannot recover duty costs that are waived for the Government’s benefit.
Commercial item exception to notice
The contractor does not have to provide the paragraph (c) notice if the foreign supplies are identical to items used in the contractor’s or subcontractor’s commercial business and segregation for Government-only use is not economical or feasible. This exception is narrow and must be supported by the facts.
Use only for Government delivery
Duty-free entry may be claimed only for supplies to be delivered to the Government as end products or incorporated into end products. If items, or any portion of them other than scrap, salvage, or authorized competitive sale, are diverted to nongovernmental use, the contractor must pay the duty.
Government assistance and certificates
The Government will execute required duty-free entry certificates and assist the contractor in obtaining duty-free entry. This means the contractor still drives the process, but the Government must complete certain customs-related actions.
Shipping and marking requirements
Shipping documents must consign the shipment to the contracting agency in care of the contractor and include specific information such as the contract number, carrier, duty-free notation, gross weight, and estimated value. The contractor must also instruct the foreign supplier to mark packages and include copies of the bill of lading or other shipping document.
Immediate notice to contract administration
Once duty-free entry is approved, or for Schedule-identified duty-free supplies upon award to the overseas supplier, the contractor must promptly notify the cognizant contract administration office with key shipment details. This helps the Government prepare customs forms and coordinate release at the port of entry.
Flow-down to subcontracts
The contractor must include the substance of the clause in subcontracts when qualifying supplies will be imported into the customs territory of the United States, or when other foreign supplies over $20,000 may be imported. This ensures downstream suppliers follow the same customs procedures.
Responsibilities
Contracting Officer
Determine whether foreign supplies should receive duty-free entry after receiving the contractor’s notice, notify the contractor within 10 calendar days, and approve any exceptions to including duties in the contract price. The contracting officer also helps trigger the customs-entry process by executing required certificates through the Government’s channels.
Contractor
Avoid pricing in duties for Schedule-identified duty-free supplies unless approved otherwise; provide timely written notice for qualifying foreign supplies over $20,000; claim duty-free entry only for supplies delivered to the Government; pay duty on diverted items; ensure shipping documents and package markings comply; notify the contract administration office when duty-free entry is approved or when award is made to an overseas supplier; and flow the clause down to applicable subcontracts.
Government
Execute required duty-free entry certificates and assist the contractor in obtaining duty-free entry for qualifying supplies. The Government also relies on the contracting and customs process to release shipments and complete customs documentation.
Cognizant Contract Administration Office
Receive the contractor’s immediate notice, coordinate customs processing, and handle or support execution of Customs Forms 7501 and 7501-A and any required duty-free entry certificates. This office is the operational link between the contract and customs clearance.
Foreign Supplier
Consign shipments as instructed, mark packages with the required Government and agency identification, and include at least two copies of the bill of lading or other shipping document with the shipment.
Subcontractor
Comply with the flowed-down duty-free entry requirements when its supplies may be imported into the customs territory of the United States, including notice, documentation, and shipment handling obligations as applicable.
Practical Implications
This clause is a planning clause: if the contractor waits until shipment is already moving, it may miss the 20-day notice window and lose the ability to claim duty-free treatment smoothly.
The $20,000 threshold applies to purchases of foreign supplies not already identified in the Schedule, so contractors should track foreign buys early and separately from domestic procurement.
Shipping paperwork is critical. Incorrect consignee language, missing contract numbers, or missing tariff references can delay customs release and create avoidable administrative work.
The commercial-business exception is not automatic. Contractors should document why the items are identical to commercial items and why segregation is not economical or feasible before relying on the exception.
If duty-free supplies are later diverted to nongovernmental use, the contractor may owe duty on the diverted portion, so inventory control and end-use tracking matter throughout performance.
Flow-down language is often overlooked, but subcontractors may be the ones actually importing the goods; failing to flow down the clause can create compliance gaps and customs delays.
Official Regulatory Text
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)