update on duty drawback · pwc | update on duty drawback: managing the upcoming changes. duty...

Update on Duty Drawback

Hosted by United States Fashion Industry Association (USFIA) and PwC

March 6, 20182:00 P.M. Eastern/11:00 A.M. Pacific

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Update on Duty Drawback: Managing the Upcoming Changes

USFIA Webinar Series

March 6, 2018

PwC | Update on Duty Drawback: Managing the Upcoming Changes

Agenda

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• Duty Drawback Recap

• Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA)

• Interim Guidance

o Transition Period

o Accelerated Payment

o Manufacturing

o WPN

o Substitution

• Next Steps

• Q&A


Duty Drawback: A Quick Recap

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A refund of duty paid on imported merchandise that is linked to an exportation (or destruction) of an article.

NAFTA imposed certain limitations/restrictions on drawback%

Three Main Categories1. Manufacturing2. Unused merchandise3. Rejected merchandise

To be eligible for drawback: • An article must be imported and duty-paid, and • That article (or substitute) must be destroyed or exported• Without being used, or• After being used to produce another product in the U.S.• 3-year time frame for filing of claims from the date of export

The exportation or destruction* under Customs supervision of duty paid merchandise gives rise to the opportunity for Drawback

*Destruction must occur under Customs’ supervision unless other approval from Customs has been granted

Allows the refund up to 99% of duties paid on importation.


Drawback – Updates (there’s good news)

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In 2016, Congress signed into law the Trade Facilitation and Trade Enforcement Ace of 2015 (TFTEA) bringing sweeping changes to drawback

• Expanded substitution at the eight-digit HTS code

o Eliminates the current requisite criteria of same kind and quality(commercially interchangeable)

o The TFTEA contains an anti-abuse “lesser of” provision providing that the claim amount will be limited to the lesser of the duties, taxes or fees that were paid on the imported item or that would have been paid on the exported item if it had been imported.


Example – How Substitution is Done Today

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US Border US Border

Import of: T-shirt

SKU: XYZ123White

Medium6109.10.0005

Export of: T-shirt

SKU: XYZ123White

Medium6109.10.0005

• A refund of duties, taxes, and fees on imported merchandise that is commercially interchangeable with theexported merchandise

• Commercially interchangeable = Based on assessment of : government/industrial standards; part numbers;HTS classification; and relative value


Example – Substitution Under TFTEA

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US Border US Border

Import of white t-shirt

HTS -6109.10.00(05)

Export of colored t-shirt

HTS -6109.10.00(12)

• Ways to match imports and exports under substitution going forward• HTS codes - Same 8 digit classification - 6109.10.00


Drawback – Updates (there’s more good news)

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• Expanded refund opportunity

o Now MPF and HMF refunds will be available for

Manufacturing drawback; and

Rejected merchandise

• Electronic filing –

o All claims must be filed electronically

• Timeline changes to claim drawback

o Five years from the date of importation

• Documentation

o All supporting records now must be maintained for three years from the date of liquidation of the claim

o Elimination of certificates of delivery – replacement by “business records kept in in the normal course of business”


Interim Guidance

• Customs & Border Protection published guidance for filling TFTEA drawback claims

Link:

o https://www.cbp.gov/sites/default/files/assets/documents/2018-Feb/ACE%20Drawback%20Interim%20Guidance%20%2802-09-2018%29.pdf

• Consider subscribing to CBP’s email updates as the interim guidance is regularly updated

Link

o https://public.govdelivery.com/accounts/USDHSCBP/subscriber/new?preferences=true#tab1

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https://www.cbp.gov/sites/default/files/assets/documents/2018-Feb/ACE%20Drawback%20Interim%20Guidance%20(02-09-2018).pdf

https://public.govdelivery.com/accounts/USDHSCBP/subscriber/new?preferences=true#tab1


Interim Guidance – Transitional Issues

Delay of Accelerated Payment (AP) During the Interim Period

• Claimants previously granted AP privileges must be aware that a certification of conformity, acknowledged through ACE, will be required.

• Accelerated Payment (AP) will not be processed on TFTEA claims until the TFTEA-drawback regulations are implemented.

• AP will be available for core drawback claims under 19 CFR Part 191.

• TFTEA drawback claims submitted in ACE with an indicator to request AP privileges will not be accepted.

• The TFTEA drawback claim will need to be re-transmitted without the AP indicator in order for the TFTEA drawback claim to be accepted in ACE.

• TFTEA drawback claims can be amended for a AP after the regulations are implemented.

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TFTEA Manufacturing Rulings

• Existing manufacturing rulings were issued based on the requirements of 19 CFR Part 191, which differ from the TFTEA drawback requirements

For eligibility under TFTEA drawback based on an existing manufacturing ruling, a claimant/manufacturer, or producer must file a supplemental application for a limited modification to that ruling.

If applicant does not have an existing manufacturing ruling, they should apply for a ruling under 19 CFR Part 191 and attach an application for limited modification in order to make the ruling TFTEA-compliant.

• Detailed process can be found at “interim guidance” link

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Waiver of Prior Notice (WPN)

• WPN of intent to export or destroy privileges granted under 19 CFR Part 191 for will not be in accordance with TFTEA drawback requirements.

• Claimants previously granted WPN, including one-time waivers, must be aware that a certification of conformity, acknowledged through ACE, is required with each drawback claim filed under TFTEA drawback.

• Claimants may continue using their existing privileges without this certification when using non-TFTEA drawback during the transition year.

• Additionally, WPN or AP privileges granted for Direct ID unused merchandise drawback claims will automatically be approved for those privileges for substitution unused merchandise drawback claims

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Substitution Drawback• TFTEA substitution drawback claims are generally subject to the “lesser of” rule.

The amount to be refunded may not exceed the lesser of the refund amounts associated with the designated merchandise or the substituted merchandise (based on the applicable comparative value)

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Interim Guidance – Good to Know

Some issues may arise – what to do then? • If unable to transmit via ABI?

o Contact assigned CBP Client Representative, or

o CBP Help Desk at 1-866-530-4172.

• What if you receive a number of rejects?

o If Drawback Error Message use Dictionary provided in the CATAIR to research your error message.

o If existing error message, update the claim and resend.

o If you do not agree with the error message, send your issue to [email protected].

• If transmitting claims via ABI and no response message?

o Contact your CBP Client Representative or

o CBP Help Desk at 1-866-530-4172.

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Call to Action

• Review your drawback program

• Determine if new rules have expanded your opportunities

• Determine whether they may be any operational changes required to support under TFTEA drawback

• Are new applications required?

• Will your next claim be under core drawback vs. TFTEA?

• Monitor updates

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Q&A

Any questions?

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Thank You.

Mark Truchan

Director

PwC Customs & International Trade Practice+1 (646) 471 2102 / [email protected]

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Thank you for attending!

For additional questions and information:

Email: [email protected]: @usfashionPhone: +1-202-419-0444

update on duty drawback · pwc | update on duty drawback: managing the upcoming changes. duty...

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