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CBP Proposes Drawback Regulations and Elimination of Drawback for Certain Excise Taxes

Friday, July 27, 2018

U.S. Customs and Border Protection has issued a proposed rule to implement the changes to drawback law made by the Trade Facilitation and Trade Enforcement Act. However, the proposal goes beyond TFTEA implementation and also proposes a change to how CBP treats drawback of excise and other federal taxes. Comments on this proposal are due by Sept. 13.

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.

[Click here to register for ST&R’s upcoming webinar on using drawback to recover Section 232 and 301 tariffs.]

Highlights of the changes this rule proposes to the drawback regulations include the following.

- eliminating drawback for federal excise taxes where the exported goods are exported without payment of excise tax

- requiring electronic filing of drawback claims

- requiring the import entry summary line item to be identified for all imported goods for TFTEA drawback claims

- allowing substitution drawback claims based on goods within the same eight-digit HTSUS number (with some exceptions), thus eliminating the need to file a commercial interchangeability ruling

- specifying that substitution drawback will be calculated as 99 percent of the lesser of the amount of duties, taxes, and fees that (a) were paid on the imported goods or (b) would have been paid on the exported goods had they been imported (with certain exceptions)

- expanding the scope and calculation methods of drawback

- extending from three years after import to five the deadline for filing claims

- simplifying and modernizing recordkeeping requirements

- clarifying the process for filing claims during the transition period (Feb. 24, 2018, through Feb. 23, 2019) during which claimants may file under the existing or proposed processes and prior to the regulatory changes becoming final

- permitting the transfer of goods to be evidenced by business records kept in the normal course of business, thus eliminating the requirement for certificates of delivery or manufacture and delivery

- stating that importers are now jointly and severally liable with claimants for refunds associated with their imported goods when designated on a drawback claim

- adding a basic importation and entry bond condition to foster compliance

CBP has stated that it will not liquidate or pay accelerated payment on TFTEA drawback claims until final regulations are issued. While claimants can still get drawback under the current law (also known as core drawback, the law in effect prior to TFTEA) through Feb. 23, 2019, this has resulted in a halt to drawback refunds for claimants wishing to use TFTEA drawback. In addition, if final regulations are not issued and effective by Feb. 24, 2019, claimants will not even have access to drawback under the pre-TFTEA law.     

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

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