Duty Drawback – The new regulations and what they mean

Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS. This document is for informational purposes only. It does not constitute legal advice –
please consult with your own legal counsel for such advice. Also, do not rely on this information without performing your own research.
© 2018 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
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Drawback Under TFTEA*
• Amendments to existing statute
• Signed 2/24/16, but applies to claims filed on or after 2/24/18
• Transition Period: Can file under current law for 1 year
*Trade Facilitation and Trade Enforcement Act of 2015

Overview of the TFTEA
benefits
• HTSUS-Based substitution standards
• Streamlined statutory time frame for
filing drawback claims
• Merchandise processing fee and harbor
maintenance fee extended to
manufacturing drawback
• Electronic submission of drawback claims
in ACE

A refund of 99% of
customs duties paid
for imported goods
that are
subsequently
exported or
destroyed.
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Unused Merchandise Drawback
Japan
Imports From
Peru
Exports To

TFTEA Changes: Substitution Unused Merchandise
Drawback 1313(j)(2)
• Standard for substitution is 8-digit HTS, not commercial
interchangeability
• Limitations if your 8-digit HTS starts with “other”
• 5 years import to claim
• No more Certificates of Delivery
• New rules for calculating drawback amount
• Consider value of exported/destroyed items
• Drawback for recovered materials
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What does 8-digit substitution mean?
• It means just that, same 8-digit HTS in and out
• Schedule B can be used at export, and it could be broader-
“without regard to whether the Schedule B number
corresponds to more than one 8-digit HTS subheading”
• Your Entry Summary could have an incorrect HTS, but still
qualify for drawback (PEAs, Protests, Disclosures, Rulings,
Court Cases)
• Previous CIDs, CI and same kind & quality rulings are
irrelevant
• Now obtain a classification ruling
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Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by STTAS a UPS Company.
This communication is for informational purposes nly. It does not constitute legal advice. © 2018 Uited Parcel Service of America, Inc. UPS, the UPS brandmark, the color
brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
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Women’s nightshirt
of man-made fibers
6208.22.0000
Girl’s pajamas
of man-made fibers
6208.22.0000
Women’s nightshirt
of man-made fibers
6208.22.0000
(different styles, colors, etc.)
6208.22.0000
New definition of
what can be substituted
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If the substituted, exported product
shares the same first 8 HTS code
digits as the imported product, then
it may qualify for duty drawback

1313(j)(2) Drawback
8-digit substitution and “other” categories
• What is this about? Basket Provisions
• You may not be able to use j2 if your 8-digit HTS starts with the word “other”
• However, you can use j2 if your 8-digit HTS has 10 digit breakouts and your product’s
breakout doesn’t start with the word “other.”
• If your 10 digit HTS begins with “other,” then you can only claim drawback under
1313(j) using j1.
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Example, 8509 “Electromechanical Domestic Appliances”
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(j)(1)
1313(j)(2) Drawback
8-digit substitution and “other” categories

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Unused Drawback
New Statutory Time Requirements
Current Law:
New Law:
Date of
Import
Date of
Export
3 Years
Date of
Claim
3 Years
5 Years
Date of
Import
Date of
Export
Date of
Claim

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Manufacturing Drawback
Imports From
Exports To
China
Brazil
Fans
Engines

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Substitution – Manufacturing
Engines
Fans
Sourced From
Exports To
Sourced From
Japan
USA
Brazil

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TFTEA Changes- Manufacturing Substitution Drawback
1313(b)
• 8-digit for 8-digit for substituted merchandise, looking at
the components used in the manufacturing process
• 8-digit substitution not permitted for NAFTA drawback claims
• Same kind and quality rulings are no longer required
• No tracking of receipt date and broader time limit
requirement on use
• BOM may be requested and will require HTS
• New rules for calculating drawback
• No Certificates of Manufacture & Delivery
• Can now claim HMF and MPF refunds
• For Manufacturing substitution claims, duty must be paid in
order to qualify for HMF and MPF refunds

Import
Manufacture
Export
File Claim
5
years
Future 1313(a) and (b)
Import Manufacture Export
Current 1313(a)
Current 1313(b)
Import
Received @ Plant
Used in
Manufacturing
Article
Manufactured
Export
5 years
3
years
5years
3years
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Manufacturing Drawback Timeframes

Certificates of Delivery and Certificates of Manufacture &
Delivery Eliminated
• “Transfers of merchandise may be evidenced by business records kept in the
normal course of business and no additional certificates of transfer shall be
required.”
• Must be received “directly” or “indirectly” (intermediate transfers) from the
importer
• With joint and several liability, some importers may feel more comfortable
with agreements and some type of transfer records (a private CD?)
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The takeaways on new key
provisions
• Calculation
o “Lesser of” rule
o Value exported / destroyed
o Component value
• First filed rule
• Mixed use
• Joint and several liability
• Recordkeeping period extended
• Excise taxes, application of
What they are

Other Key takeaways on new provisions
• First Filed Rule due to dual calculation methodology
• Line item designation based on first filed of direct identification or substitution claim
• Mixed use
• Import designated on claim filed under part 191 not permitted to designate on TFTEA substitution
• Joint and several liability
• Claimant liable for full amount of claim
• Importer liable for drawback claims made by another person on merchandise imported by importer
• Liable for lesser of:
• Duties, taxes and fees paid on imported merchandise; or
• Duties, taxes and fees that the importer authorized claimant to designate on claim
• Recordkeeping period extended
• 3 years after liquidation of drawback claim

Calculation of Drawback
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• Dual calculation methodology
• Calculate substitution drawback using average duty, tax, fee per line
item
• Calculate Direct ID drawback based on invoice values
• Lesser of rule: lesser of drawback available based upon value
of import or value of exported/destroyed item (unused) or
component used in manufacturing
• Value exported and destroyed item based upon EEI value
(Census FTR Regs)
• Value of components is acquisition value - use of standard
cost?

Proposed Limits on Drawback of Excise Taxes
• CBP and Treasury are seeking to eliminate drawback for certain excise taxes.
• Where goods are exported exempt of excise tax, they are proposing a new rule that will
define that export as a “drawback” and, therefore, make it unavailable for use in a second
drawback claim.
• This proposal seeks to eliminate drawback on excise taxes where the product is exported free
of excise tax.
• Industries affected include wine, beer, distilled spirits, tobacco, and some petroleum.
• Significant opposition to this rule in comments to the proposed regulations

Section 301 - Actions
The USTR has taken the following duty actions:
List 1 (Annex A) List 2 (Annex C) List 3
Import
Value
Items
Duty
Status
Timing
$34B
818
25%
Taken
Effective a/o July 6th
$16B
279
25%
Taken
Effective a/o Aug 23rd
$200B
5,745
10%
(25% a/o Jan 1, 2019)
Taken
Effective a/o Sep 24th
https://www.strtrade.com/f-tariff-actions-resources.html

Are Drawback Refunds Available on Section 301 Duties?
• Section 301 Duties are considered “ordinary duties”
• As per 191.3 and proposed 190.3, ordinary duties are subject to drawback
• Historically, drawback has been paid for previously imposed 301 duties
• USTR Federal Register Notice specifically states that drawback is allowed for Section
301 duties
• Bottom line: Section 301 tariffs can be recovered through drawback under 19 USC
Section 1313

Anticipated Implementation Timeline for TFTEA
Regulations
9/17/18
Public Comments
Deadline
10/31/18
U.S. Customs comment
to court regarding
completion of
regulations
2/24/19
Statutorily Deadline to
have revised new Duty
Drawback in place
March – Sept 2019
“Normal” review /
approve time

Please note
This presentation is for informational purposes only. It does not constitute legal advice – please
consult with your own legal counsel for such advice. Also, do not rely on this information without
performing your own research.

When you join forces with an expert
Consulting services Managed services
Compliance consulting Duty drawback
Trade consulting Process management
Tariff engineering Assistance with Broker/forwarder
management
Security initiatives consulting Assistance with FTA (free trade
agreement) management
FTA feasibility evaluations Post-entry management
Data management
Classification management
Assistance with Import/export license
management
Assistance with Denied-party screening
management

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Duty Drawback – The new regulations and what they mean

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