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Drawback Transitions to ACE Feb. 24; TFTEA Drawback Regulations Still Pending

Friday, January 19, 2018
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has announced that as of Feb. 24 the Automated Commercial Environment will become the sole authorized electronic data interchange system for processing claims filed under the current drawback law (19 CFR parts 181 and 191). However, CBP has not yet issued proposed regulations to reflect the statutory changes to drawback made by the Trade Facilitation and Trade Enforcement Act, which will also take effect Feb. 24.

Under TFTEA, claimants will be allowed to claim substitution drawback based on goods within the same eight-digit HTSUS number as well as make claims against imports and exports that are within five years of the date of the claim. However, the lack of regulations implementing these changes has left many unanswered questions only a few weeks before claims can be filed.

For example, the regulations are expected to include a new method for calculating drawback under TFTEA, possibly by using the average duty, tax, or fee on the entry summary line item. However, claims using direct identification are expected to still be based on the value of the goods on the commercial invoice. There is some concern regarding how this hybrid system will work for companies that have claimed drawback against entry summaries under the current drawback law using the invoice value but have remaining balances to claim using the new TFTEA drawback. Other concerns include a likely requirement that claimants use the unit of measure from the HTSUS even if the goods are not sold using that unit of measure, as well as new requirements that limit drawback based on the value of the item exported or used in production.

CBP had been expected to issue a proposed rule on the TFTEA drawback changes months ago but it has been caught up in administrative review. Many claimants and filers are now watching closely to see how CBP will roll out these changes beginning Feb. 24 in the likely event that the regulations are not issued by then. For example, CBP is considering whether or not to provide accelerated payment for TFTEA drawback claims in the absence of regulations.

When the proposed rule is issued there will likely be a 30-day comment period. If your company is interested in filing comments or has questions concerning TFTEA, the deployment of drawback in ACE, or other issues regarding drawback, please contact Michael Cerny at (212) 549-0160.

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