TFTEA Transition Update

TFTEA Transition Update: Joint Customs and Drawback Trade Community Working Group

Members of the AAEI and NCBFAA (trade compliance organizations) Drawback Committees, Alliance included, met with CBP Drawback Officials in Virginia in late August to review outstanding issues with TFTEA drawback and ACE drawback filings. The CBP contingent consisted of national-level Customs officials from the Office of Trade Commercial Operations as well as attorneys from Regulations and Rulings.

Addressing the status of the modification of manufacturing drawback rulings required by Customs as part of the transition to the new regime was the first order of business, since not one substitution manufacturing drawback claim has been paid by Customs since the full transition to TFTEA drawback on February 24th, 2018!

A bit of background: The new drawback regime moved the matching of imports and exports from the part number level to the HTS level. To file manufacturing drawback, a claimant secures a manufacturing drawback ruling. The drawback ruling essentially serves as an agreement between the drawback claimant and Customs and Border Protection that outlines the rules for matching import and exports in manufacturing drawback scenarios. Over the years, Customs has published industry-general rulings that any allow any claimant to apply under its provisions. In other words, these are templates. We essentially fill in the blanks and submit to the local Customs Drawback office for approval.

Most of Alliance’s manufacturing drawback clients operate under the provisions of a general ruling. If a claimant’s manufacturing drawback scenario does not fall under the provisions of a general ruling, they must then submit a request for a specific ruling to Customs Headquarters Office of Regulations and Rulings. Historically, securing a specific ruling has been a painful process that could take a year or more.

As part of the TFTEA transition, Customs required that we submit a modification letter to add the HTS numbers to a claimants existing ruling. The entire trade community assumed this to mean that Customs would then allow a claimant to file HTS level substitution under the existing approved rulings. Many HTS level Manufacturing drawback claims were filed pending payment as we waited for Customs to approve the modifications. For nearly a year, Customs did not approve the modifications, citing a concern over HTS classifications and that it needed to give the field offices more direction on the matter.

We expected Customs to announce a time schedule for approval of the modifications. Instead, they dropped the proverbial bomb on the trade community. They announced that the modifications would not allow a claimant to file HTS level substitution under the existing rulings and that a claimant would then need to submit a request for a specific manufacturing ruling to Headquarters! The trade community representatives at the meeting were shocked by this revelation.

After much heated debate and discussion, we pushed Customs to draft a new general manufacturing drawback ruling, and to do so in short order, lest they be inundated with specific manufacturing drawback ruling requests. The bottom line for Alliance clients: Our only path forward to receive payment for drawback claims in relatively short order is to file under direct identification manufacturing drawback at the part number level. For those that cannot file under this provision, expect significant delays in the payment of manufacturing claims while the trade community attempts to resolve this issue with Customs. All options for the Trade Community are on the table, including bringing the matter to Congress or taking formal legal action in the Court of International Trade (we took Customs to Court last year and won).


Other Developments:

  • Customs Applications for Accelerated Payment and Waiver of Prior: Customs is supposed to act on drawback privilege applications within 90 days of receipt. They have been taking 6 months or more since the transition to new regime. Customs assured the Trade during the meeting that they are “working through the backlog” and are committed to keeping the 90-day standard in the future.


  • Excise Tax Drawback: The second formal legal action to result from Customs arbitrary administrative policy positions involves CBP’s denial of excise tax drawback under the substitution provision of the drawback law. Currently, the case is pending before the Court of International Trade. We can only hope Customs goes 0-2 in its TFTEA drawback court cases. If you recall, Customs lost in the CIT last year in their effort to deny payment of drawback claims until the new drawback regulations were finalized. On the positive front, CBP has created a mechanism in ACE to file expiring excise tax drawback pending the outcome of the Excise tax court case.


  • Proof of Export for Mexico: Mexico Customs, in efforts to streamline and automate the entry process, no longer requires a printed copy of the Pedimento. Importers now have the option of presenting a “DODA.” DODA, which is an acronym for Documento de Operacion para Despacho Aduanero (Customs Clearance Operation Document), is generated through the MX Customs portal or through the designated Customs broker web service and includes a QRC (Quick Response Code) linked to a URL which lists all the related Pedimentos. When this topic was raised, Customs indicated that they have access to the electronic data supporting the Pedimento, and as long as such can be properly linked to the drawback claimant’s documents (trucking bill of lading and commercial invoice) then a printed copy of the Pedimento is not absolutely required.


Alliance will keep you posted regarding any future developments.