UPS Tradenomics: Duty drawback and the new regs

2019 UPS® Tradenomics Webinar Series
U.S. Duty Drawback Under the New Regs
April 25, 2019
Today’s webinar will begin shortly

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.
U.S. Duty Drawback Under the New Rules
Presenters
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Agenda
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Any questions?
Ask our panelists using the “Q&A” function
1 CCS/CES/MES Credit
New Duty Drawback
• The whole timeline / story
• Quick drawback primer
• The 5 TFTEA benefits
• Section 301 benefits
• The finer points
• UPS Tradenomics: how do the 5 benefits impact me

Please note
This presentation will be available upon check out to all attendees as well as a link to the event
recording.

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.

Implementation Timeline for TFTEA Regulations
2/24/2016
TFTEA
Passage
2/24/2018
Effective
period
2/24/2018
to
2/23/2019
TFTEA
“dual time
period”
8/2/2018
Proposed
regs
Lawsuit
9/17/18
Public
Comments
Deadline
12/18/2018
new regs
2/24/2019
TFTEA only
Interim
guidance
(Date
TBD)

7
Flash
review of
Duty
Drawback

What is drawback?
A refund of 99% of
customs duties paid
for imported goods
that are
subsequently
exported or
destroyed.
8

8_21 6_84
A Duty Drawback example
Total Annual Imports
Total
Annual Exports
$10 million
$3 million
Duty Rate: 4%
$600,000
$120,000
99%
$119,000 To recoup
Recoverable
Duty previously
paid
Import duty

10
What is unused Merchandise Drawback?
Japan
Imports From
Peru
Exports To

11
Manufacturing Drawback
Imports From
Exports To
China
Brazil
Fans
Engines

12
Substitution – Manufacturing
Engines
Fans
Sourced From
Exports To
Sourced From
Japan
USA
Brazil

13
5 Key drawback benefits from TFTEA
HTSUS –
Based
Substitution
Standards
MPF / HMF
Refund for
Manu.
Drawback
Streamlined
Claims
Timeframe
Electronic
Submission
Streamlined
Processing
xxxx-
xxxx
xxxx-
xxxx MPF/
HMF
1 2 3 4 5
Note: Title 19 CFR; Part 181 subpart E; Title 19 CFR Part 190

1a. HTSUS: Substitution
Unused Merchandise
Drawback
• Standard for substitution is 8-digit
HTS, not commercial
interchangeability
• What does 8-digit substitution
mean?
• It means just that, same 8-digit HTS
in and out
Also:
• Consider value of
exported/destroyed items
• Drawback for recovered materials
14
Note: 1313(j)(2)

1b. Unused drawback:
The finer points
• Schedule B export schedule can be
now be used
• In place of HTSUS
• Could provide broader applicability
• Even if your entry summary has an
incorrect HTS, it could still qualify
for drawback
• PEAs, Protests, Disclosures, Rulings, Court
Cases
• You can now obtain a classification
ruling
• Previous CIDs, CI and same kind & quality
rulings are irrelevant
15
Note: 1313(j)(2)

.
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
16
8 Digit
Substitution
Example

Example, 8509 “Electromechanical Domestic Appliances”
17
(j)(1)
8-digit substitution: certain “other” categories don’t apply
Note: 1313(j)(2)

1c. Substitution for
Manufacturing
Drawback
• Same 8-digit for 8-digit for
substituted merchandise as is for
unused drawback
• 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
18
Note: 1313(b)

19
2. Streamlined New Statutory Time Requirements
Unused Drawback
Prior 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

3. MPF & HMF savings now for manufacturing drawback
Example: Direction finding compass
20
Note: MPF: merchandise processing fee; HMF: harbor maintenance fee
Annual imports (U.S.$) $5,000,000
Duty rate: 4%
Annual duty: $200,000
Potential duty drawback (99%) $198,000
Potential additional savings
MPF paid (maximum) (.3464%) $17,320
HMF paid (.125%) $6,250
$23,570

4. Electronic claims via ACE provides more consistent process
21
Legacy ACS for duty drawback was just sunset 2/23/2019
Prior Process New Process
Mostly manual
submission
Broker/3rd Party/Importer/Exporter
CBP
Manual Time Stamp =
legal submission date
Process Claim
100% electronic filing
CBP’s acceptance = legal
submission date
Partial electronic
submission
Process Claim
CBP
Broker/3rd Party/Importer/Exporter

5. Streamlined processing
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?)
22
Certificates of
Delivery
Certificates of
Manufacture

Some lingering changes
(yet to be enacted)
• Interim guidance
• Business rules
23

24
Section
301 and
Duty
Drawback

Are Drawback Refunds
Available on Section 301
Duties?
Section 301 Duties considered “ordinary duties”
• Ordinary duties are subject to drawback
• Historically, drawback available 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
Note: per 191.3 and proposed 190.3

The finer points
• Calculation of drawback
• First filed rule
• Mixed use
• Joint and several liability
• Recordkeeping
What they are

Calculation of drawback
27
Dual calculation methodology
1. Calculate substitution drawback using average duty, tax, fee per line
item*
• Lesser of rule: based on value of import or value of exported/destroyed item
(unused) or component used in manufacturing
2. Calculate Direct ID drawback based on invoice values*
* Pursuant to 19 U.S.C. 1313(x), reduced by value of materials covered
during destruction.

Calculation of drawback
For finished goods being exported or
destroyed:
• Value based upon EEI value (Census
FTR Regs)
Valuing components in manufacturing
drawback:
• Based on acquisition value – the
use of standard cost
28

First filed rule and mixed use
First Filed Rule due to dual calculation
methodology
Line item designation based on first filed of
direct identification or substitution claim
Mixed use
Import line item designated on claim filed
under part 191, not permitted to designate
on TFTEA substitution under part 190

Liability and recordkeeping
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

UPS® Tradenomics:
The economic impact of trade on your business
31
5 Key drawback benefits from TFTEA

Questions and Answers
• Drawback law, 19 U.S.C. 1313
• Drawback Regulations: Title 19 CFR
• Part 181 subpart E
• Title 19 CFR Part 190
• Judicial/Administrative Decisions:
• www.rulings.cbp.gov
• www.customsinfo.com
• U.S. Customs and Border Protection (CBP) website (www.cbp.gov)
• NOITE (CBP Form 7553/Instructions):
• http://www.cbp.gov/document/forms/form-7553-notice-intent-export-destroy-or-return-merchandise-purposes-
drawback
• WPN and AP Application:
• http://www.cbp.gov/trade/programs-administration/entry-summary/drawback
References and Resources

Thank you for your participation!
Duty Drawback – the new regulations
• Check Out:
• NCBFAA: CES/CCS / MES continuing education credit
• Feedback / value
• Inquire about your own Tradenomics discussion
• Interest in upcoming webinars
• Next webinar: May 14, USMCA and implications to traders
• For more information contact Greg Maddaleni at gmaddaleni@ups.com

UPS Tradenomics: Duty drawback and the new regs

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