[Editor’s note: This article was originally published in the Dec. 18, 2018, Sandler, Travis & Rosenberg Trade Report.]
Claims for drawback of duties and taxes should be easier to file and process under new U.S. Customs and Border Protection regulations that took effect Dec. 18. This rule, which implements the changes to drawback law made by the Trade Facilitation and Trade Enforcement Act, will also revise how CBP treats drawback of excise and other federal taxes as of Feb. 19, 2019.
(However, CBP officials have said the agency is not processing drawback entries during the current federal government shutdown.)
[Click here for ST&R’s on-demand webinar on using drawback to recover Section 232 and 301 tariffs.]
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.
According to CBP, this rule establishes new processes for drawback pursuant to TFTEA that liberalize the merchandise substitution standard, simplify recordkeeping requirements, extend and standardize timelines for filing drawback claims, and require the electronic filing of drawback claims. This rule also allows mixed TFTEA and non-TFTEA substitution drawback claims and includes the following changes from the proposed rule.
- removes the proposed requirement for joint and several liability bonds
- codifies existing CBP drawback practices, such as allowing waivers of prior notice for rejected merchandise and accepting continuous bonds for drawback claims with pending accelerated payment approval
- eases documentation requirements for transferred merchandise
- standardizes document submission timelines
- reduces drawback claim data submission requirements
CBP states that the benefits of this rule include streamlined claim submissions and processing for trade members and CBP, increased time for trade members to claim drawback, added administrative review time for CBP, a strengthened ability for CBP to validate drawback claims and recoup inaccurately over-claimed drawback, a simplified drawback process for trade members and CBP, added reassurance for trade members that rulings with potentially business-sensitive information will not be available for public consumption, and decreased business costs for trade members.
This rule also enables accelerated payment as to drawback claims made under the TFTEA. As a result, CBP is returning certain TFTEA drawback claims to trade control in anticipation that these claims will be resubmitted with a request for accelerated payment. The process for resubmission is as follows.
- TFTEA claims with bond information on file will be placed in trade control
- the filer will select the AP indicator and resubmit the claim
- resubmission will not change the original claim date
- claimant must have appropriate approved privileges on file
- upon claim acceptance, accelerated payment processing will generally take place within three weeks of the claim resubmission date
However, for TFTEA manufacturing claims, claims on file must be updated with the new manufacturing ruling number once an approval letter for TFTEA modification is received from CBP. After the claims are updated with the new ruling number, claimants will select the AP indicator and resubmit the claim.
In addition, CBP has maintained its controversial elimination of substitution drawback for excise taxes in certain situations. Specifically, the new rule considers as drawback situations where products such as alcohol and tobacco are exported free of excise tax and prohibits what CBP sees as a “double drawback.” For TFTEA substitution drawback claims potentially subject to this limitation (accounting class code 365), additional accelerated payment claims should not be submitted with the accounting class code 365 until CBP notifies the filer to do so; otherwise, there is a risk of bond decrementation and loss of accelerated payment for the life of the claims.
For more information on the TFTEA drawback changes, please contact ST&R’s Michael Cerny at (212) 549-0160.
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