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CBP Issues Guidance on Filing Drawback Claims Under New Provisions

Tuesday, February 20, 2018
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued an interim guidance document on filing drawback claims under the Trade Facilitation and Trade Enforcement Act starting Feb. 24 even though CBP has not yet amended its regulations to reflect the changes made by that law. CBP states that it is “currently working to release” a proposed rule that will solicit public comments.

[Click here to register for ST&R’s Feb. 23 webinar on how to prepare for the TFTEA drawback changes.]

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) as well as the more advantageous provisions created by TFTEA. CBP’s guidance is important because it answers policy and procedural questions that claimants have had for months about this transition. However, CBP notes that there may be subsequent versions of this guidance issued during the interim period if further clarification or additional instructions are needed and that policies and procedures could change further in a proposed or final rule.

Highlights of this guidance include the following.

Delay of accelerated payment

- until the applicable regulations are implemented, claimants with accelerated payment privileges will not be able to obtain AP on TFTEA drawback claims and should not include the AP indicator for such claims, even if they are approved for AP

- once the regulations are implemented, eligible claimants will be able to receive AP on TFTEA drawback claims filed during the interim period (a) based on the bond information submitted at the time the claims were filed or (b) by contacting their drawback center and amending their claim to include a bond

Changes to calculating drawback

- for TFTEA drawback substitution claims, CBP intends to propose in its proposed rule that refunds will be calculated based on the per unit average value reported on the line from the entry summary that covered the designated imported goods

- for such claims, the claimant will be required to calculate the refund based on the value of the designated imported goods, with the equal apportionment of the amount of duties, taxes, and fees eligible for drawback for all units covered by a single line item on an entry summary to each unit of merchandise, and request a refund of 99 percent of the amount of duties, taxes, and fees applicable

- a consequence of using per unit averaging is that a single entry summary line item cannot be used for both direct identification and substitution drawback claims; as a result, CBP proposes to limit each line on an entry summary to designation as the basis for either direct identification or substitution claims, depending on the type claim first filed for a portion of the goods reported on each line

- TFTEA drawback substitution claims, both for manufacturing and unused merchandise drawback, will generally be subject to “lesser of” rules regarding the amount of duties, taxes, and fees to be refunded (i.e., such amount may not exceed the lesser of the amounts associated with the designated imported merchandise or the substituted merchandise), except for certain claims for wine and finished petroleum derivatives

TFTEA manufacturing rulings

- all existing rulings issued under 19 CFR Part 191 must be modified if claimants wish to continue filing manufacturing drawback claims under TFTEA drawback

- claimants, manufacturers, and producers may continue operating under their existing rulings without modification when filing under 19 CFR Part 191 (manual filing and core ACE filing) during the transition year.

- after the transition year ends Feb. 23, 2019, any rulings for which an application for limited modification has not been submitted will be moot by operation of law

- claimants, manufacturers, and producers who intend to make manufacturing drawback claims under TFTEA drawback and do not have an existing ruling should apply for a new ruling under 19 CFR Part 191 and attach a letter to apply for limited modification

Classification rulings

- the eligibility of imported and other goods for substitution claims under TFTEA drawback is generally based on their classification and reasonable care must be exercised when determining such classification

- CBP will accept requests for classification rulings for all potential drawback-eligible goods, even if they are not for importation, pursuant to the procedures outlined in 19 CFR Part 177

Legal requirements

- after the final rule is implemented, claims that were filed during the interim period must be perfected and corrected as necessary to comply with that rule (including with respect to the amounts of the calculated refunds) pursuant to procedures and timeframes that will be specified in future CBP guidance

- claimants are not allowed to file drawback claims under both 19 CFR Part 191 and TFTEA on the same exported or destroyed goods, even if they are seeking refunds of different types of duties, taxes, and/or fees for each claim, or to file multiple TFTEA drawback claims on the same exported or destroyed goods

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

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