Drawback Simplification Snapshot

Guest blog from Dave Corn, Vice-President, Comstock and Holt

After 12 years of work to modify the statute for drawback under Title 19 U.S.C. 1313, the conference report for drawback simplification passed through the Senate on 2/11/2016 as part of the Trade Facilitation and Trade Enforcement Act (TFTEA). With the President’s signature on 2/24/16, the two-year clock started to complete the writing of the new regulations for Section 906 of TFTEA!

Some of the highlights of the new legislation:

  • A switch to 8-digit substitution from commercially interchangeable merchandise unless there’s an 8-digit classification that starts with “other”, then 10-digit classification for substitution will be required.
  • Substitution claims will be calculated on a lesser-of basis. For manufacturing substitution, the duty to be claimed will be the lesser of the duties paid on the imported merchandise or the duties paid on the substituted merchandise if it had been imported. For unused substitution, the duty to be claimed will be the lesser of the duties paid on the imported merchandise or the duties that would apply to the exported article if the exported article were imported.
  • 5-year window from import date to file a claim will be uniform timeline across all types of drawback. Specific timelines outlined for certain drawback types will be maintained (1313(p), for example).
  • Removes requirements for Certificates of Delivery under 1313(j)(2)(C)(ii)(II). A direct or indirect transfer of merchandise will still be required.
  • An importer will be liable for drawback claims made by others in an amount equal to the lesser of the duties and fees the person claimed on the imported merchandise or the amount of duties and fees the importer authorized the other person to claim on the imported merchandise.
  • There will be a one-year period where claimants can choose to file drawback claims under the new law or under the current law. This could be beneficial for those programs that might be limited due to the classifications that start with “other” at 8- or 10-digits.
  • Drawback record retention times extended to 3 years from the date of liquidation of the claim, pushed out from 3 years from the date of payment of the claim. CBP can extend liquidation for 3 1-year periods, for a total of 4 years. Claimants should expect to hold onto paperwork for future reviews!
This is just a quick snapshot of what is changing for drawback in TFTEA. The notice of proposed rule-making is expected to be released toward the end of the summer, and once that is released, we will need to review it in detail to ensure that everything that has been reviewed is included. Keep your eyes open this summer for the regulations and be prepared to submit comments, if necessary. 

Stay tuned for what’s next in drawback!

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