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Court May Compel Issuance of TFTEA Drawback Regulations

Friday, June 29, 2018

The Court of International Trade has ruled that if U.S. Customs and Border Protection does not issue by July 5 regulations implementing the changes to drawback law made by the Trade Facilitation and Trade Enforcement Act it will create its own deadline and remedy for claimants. However, the CIT declined to require that CBP pay accelerated payment to claimants filing under the TFTEA changes.

Drawback is the refund of up to 99 percent of certain duties, internal revenue taxes, and fees collected on imports once either the imported substituted product or the article that has been manufactured from that product has been exported or destroyed. TFTEA made numerous changes to simplify the drawback law, including standardizing the time frames for filing claims and modernizing recordkeeping requirements. TFTEA also allows substitution drawback claims based on goods within the same eight-digit HTSUS number as well as claims against imports and exports that are within five years of the date of the claim. 

Drawback claimants have been able to utilize these statutory changes since they took effect Feb. 24. Without accelerated payment, however, claimants have been seeing no immediate benefit from filing under the new law. CBP has asserted that it cannot provide accelerated payment until calculation provisions under the implementing regulations become final. TFTEA required CBP to issue those regulations by Feb. 24 but the rules have been held up in interagency review, leaving claimants in limbo. In response, a number of companies filed a lawsuit seeking to force CBP to, among other things, pay accelerated payment to drawback claimants filing under the TFTEA and meet the statutory mandate to issue regulations.   

While CIT judge Jane Restani declined to order CBP to pay accelerated drawback, she did say it should issue a proposed rule by July 5. If that does not happen she plans to set forth a briefing schedule allowing the plaintiffs to recommend remedies she could consider, such as compelling the issuance of the regulations by a particular date. While it appears unlikely that CBP will meet the July 5 deadline, as the proposed rule is still under review by the Office of Management and Budget, it may be able to do so by July 27, when briefs are due to the CIT. 

Restani also said that if CBP cannot issue the entire regulatory package by July 5 it should at least issue regulations for important pieces of the package that satisfy the TFTEA mandate, such as those addressing the calculation methodology. The plaintiffs had argued that the proposed regulatory package included far more than was necessary to implement the TFTEA changes, resulting in a purported 450-page document that was taking too long to complete the interagency process.

It is also unclear when the TFTEA drawback regulations may become final. CBP has stated that it will not liquidate or pay accelerated payment until final regulations are issued, which will not occur until CBP has provided a notice and comment period and reviewed any input received. Judge Restani’s decision does not address how long that process may take.

For more information on the CIT decision or the TFTEA drawback changes, please contact ST&R’s Michael Cerny at (212) 549-0160.

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