Final regulations implementing the changes to drawback law made by the Trade Facilitation and Trade Enforcement Act must be issued and become effective by Dec. 17 under a recent order by the Court of International Trade.
Drawback is the refund of up to 99 percent of certain duties, internal revenue taxes, and fees collected on imports when the imported product or a substitute product is exported or destroyed or used in manufacturing a finished product that is exported or destroyed. TFTEA made numerous changes to modernize the drawback law, including allowing substitution drawback claims based on goods within the same eight-digit HTSUS number as well as claims against imports and exports that are within five years of the date of the claim. TFTEA also standardized the time frames for filing claims and modernized recordkeeping requirements.
The TFTEA amendments took effect Feb. 24, 2018, beginning a one-year period during which claimants may file under either the amended provisions or the drawback law as it existed previously. However, U.S. Customs and Border Protection has refused to process TFTEA claims or pay them through accelerated payment, citing uncertainties about the calculation of drawback until final regulations are in place. As a result, claimants have not received any immediate benefits from TFTEA. This situation has become even more problematic as more companies consider applying for drawback to recapture the additional tariffs the Trump administration has imposed on imported goods in recent months.
When CBP missed the Feb. 24, 2018, deadline for issuing the TFTEA regulations, a number of companies filed suit. CBP eventually issued on Aug. 2 proposed regulations that not only set forth the TFTEA changes but also revise how CBP treats drawback of excise and other federal taxes.
In an Oct. 12 order, the CIT directed CBP to file final regulations with the Office of the Federal Register on or before Dec. 17. Those regulations must become effective as of the day of their filing, except that the provisions related to drawback of excise taxes may become effective 60 days after publication in the Federal Register.
The CIT order expressly allowed CBP to issue an abbreviated final rule as long as it addresses the provisions identified by the plaintiffs as necessary for calculating a claim and providing accelerated payment. There is no word yet as to whether the government will appeal the ruling.
While drawback is complex, it offers an opportunity to recapture duties, taxes, and fees paid at import, including the Section 301 tariffs on imports from China. For more information or to discuss options, please contact Michael Cerny at (212) 549-0160.