When an importer brings an item into the United States to examine, test or otherwise use it and then sends the item back out of the country, that importer can avoid paying duties on that item. It may do so in one of two ways: either by paying the duty at the time of entry and then applying for a duty-drawback refund, or by filing a Temporary Importation Under Bond (TIB) with U.S. Customs.

For some companies, TIBs may be a more appropriate way to avoid paying duties than duty drawback. In brief, here's how they work. An importer may pledge a special bond that allows it to bring an item into the United States without paying duty, provided that the item is exported within one year and is not made into something that remains in the United States. The TIB, which is canceled upon proof of export, is renewable for up to three years.

At the time of entry, the importer fully describes the goods, indicates how they will be used, and pledges a bond that is equal to double the potential duty liability. Customs must be satisfied that the importer fully intends to export the goods and that the import complies with applicable regulations. (All of the particulars are described in Customs Regulations §10.31 to §10.40 and in Tariff Schedule 9813.)

A simple example of a TIB would be the import of a foreign-made racing car and all of the equipment needed to support it. An automobile has a 2.5-percent rate of duty, and tires and tools are charged a rate of around 4.0 percent. The duty bill for this import would run into thousands of dollars. If, however, the importer or its customs broker correctly use a TIB, no duty would be due.

Once the goods have been released by Customs, the importer is free to carry out the plans that it outlined on the entry documents. The racing car and its equipment, in other words, can stay in the United States for one year and freely move from one event to another.

This sounds like a great way to avoid paying unnecessary import duties. And it is, as long as the importer is aware of the potential problems that can arise with TIBs.

Let's continue with our racecar example. Usually auto racing requires tire changes. The spent tires must either be exported with the car or otherwise accounted for, and they may not enter the U.S. economy. Thus, spent tires that are not exported must be destroyed and verification to that effect must be submitted to Customs. If they are not exported or destroyed, then a fine would apply.

Another common problem with TIBs is that the goods must be exported under Customs' supervision. But most import departments are not kept in the loop on the status of TIB goods after they've been released by Customs. Often the person who uses the imported goods sends them back overseas without informing the import department. As a result, there is no Customs supervision of the export and a penalty of double the duty will apply.

TIBs can be a great way to avoid duty in some circumstances. If, however, the importer is at all unsure about whether the goods can be tracked and controlled, then paying the duty up front and getting most of it back later via duty drawback probably is a wiser course of action.