Major Drawback Updates Seem Likely as Legislation, ACE Move Forward

Excerpt from: International Trade Today | By: Tim Warren | June 2 2015

The progress of customs legislation and the transition to the Automated Commercial Environment has drawback processes poised for some major updates, some over a decade in the making, said industry members during a June 2 panel discussion.ACE-20Web2010

The customs bills, now in various stages, includes a number of ideas supported by the Trade Support Network, including the elimination of rulings on drawback issues and an eight digit HTS substitution standard, said Bobby Waid, CEO of Charter Brokerage, who spoke on the panel at the American Association of Exporters and Importers conference.

Recent work toward simplified process also includes potential updates to the program. The biggest update to drawback now included within customs legislation will be the eight digit HTS standard for substitution, he said. That change would allow for the substitution of exported goods for imports that are classified with the same eight-digit HTS number, he said.

This would apply to both unused and for manufacturing and is “the linchpin of the whole drawback simplification bill,” said Waid.

The bill would also make duties, taxes and fees available for drawback purposes, rather than just duties, which is sometimes the case, he said. Joint and several liability, which “puts all the parties in the claim essentially in bed together,” is another feature included within the bill, Waid said. Despite some major concerns with the idea among the Trade Support Network, CBP considered the provision important because it is “tired of chasing the surety,” Waid said.

The bill would also eliminate CBP rulings on drawback issues so filers would no longer need to wait the up to three years that occurs now, he said.

The legislation would also add language on the calculation of drawback claims. Specifically, the bill would say “you would be able to claim the lesser of duty, taxes and fees that are paid on the import, on a line item basis, or the duty, tax and fees that would have been paid on the export had it been imported,” he said.
There’s some question on the effective dates for the drawback provisions, he said. The bill seems to tie the effective dates to the ability of CBP to write corresponding regulations and add drawback functionality within ACE, something that history has shown not to be a simple process, he said. The drawback provisions largely stem from a House approach, which is more of a “tweak” to the existing program, instead of a wider overhaul approach proposed in the Senate, something which industry voiced some concerns with, said Waid.

The Senate passed the bill with the House approach and the House is expected to take up the trade legislation next week, he said. Concurrently with the work on customs legislation, there’s been a recent effort to update drawback within its current form, said Michael Cerny, a lawyer with Cerny Associates.

That work is part of a wider, longer-term modernization effort within ACE for Simplified Processes, he said. Among the ideas mentioned would be to modernize the electronic drawback claims so they are linked to the consumption entry line level, said Cerny.

That specific change would help resolve some issues pointed to by the Department of Homeland Security, he said. The Department of Homeland Security Office of the Inspector General raised
concerns about CBP’s drawback program for several years, most recently in May CBP has refunded some $686 million through drawback so far this fiscal year, according to CBP statistics.

That seems to follow the multi-year trend of increases in both the number of drawback claims and the dollar amounts refunded. A CBP official scheduled to speak on the panel was unable to attend due to travel complications at the airport.
Email for a copy of the presentations on drawback. — Tim Warren