Marshall Islands: Domestic Corporate Taxation
Compact of Free Association
Incentives under the Compact of Free Association with the United States include duty exemptions.
As a general rule, all articles wholly grown, made or produced in the Republic of the Marshall Islands have duty-free access into the United States except for the following categories of products:
- Watches, clocks and timing apparatus provided for in Chapter 9.1 of the Harmonized Tariff Schedule of theUnited States ;
- Buttons (whether finished or not finished) provided for in item 9606.21.40 of the above named Tariff Schedule;
- Textile and apparel articles which are subject to textile agreements;
- Footwear, handbags, luggage, flat good, work gloves, and leather wearing apparel which were not eligible for the Generalized System of Preferences in the Trade Act of 1974, and; Tuna canned in oil.
Articles exported from the RMI qualify for this duty-free treatment if the sum of the cost or value of the materials produced in the RMI, and the direct costs of processing operations performed in the RMI are not less than 35% of the appraised value of the merchandise at the time of its importation into the United States. As much as 15% of the value of the product may be contributed to this 35% added-value requirement when materials produced in the customs territory of the United States are used.
The cost of processing operations in the RMI can include the following:
- All actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
- Dyes, molds, tooling, and depreciation. Oil machinery and equipment which are allocable to the specific merchandise;
- Research, development, design, engineering, and blueprint costs insofar as they are a allocable to the specific merchandise, and;
- Costs of inspecting and testing the specific merchandise.
Products produced in the RMI are also not presently subject to any quota restrictions into the US market. This is particularly relevant in the area of textile production. Textile imports into the US are generally subject to highly restrictive quotas based on the country of origin.