The Trade Facilitation and Enforcement Act of 2016 (known by its acronym TFTEA) dramatically changed the playing field for drawback claimants.
The more significant changes include:
- A substantial liberalization of the rules for matching imports and exports for drawback purposes under the Substitution drawback provision. Specifically, the new rules eliminated the need to match at the part number level and allows for broader matching at the 8th digit of the Harmonized Tariff Schedule number. Example: previously, an export of Oakley sunglasses that came in duty paid (2.5% from China) would need to match to an imported pair of the same exact model number. Under TFTEA, an export of Oakley sunglasses can match against an imported pair or Ray-ban frames since both share the same HTS for “sunglasses”.
- Substitute domestic and duty-free products as well! Continuing with the sunglass example, let’s say a company buys Vogue frames from a domestic producer and/or imports from Mexico duty free under NAFTA provisions. The domestic Vogue glasses and the ones that entered the US duty-free from Mexico are subsequently exported. The exported Vogue glasses from Mexico and the ones produced in the US can also be matched against the imported duty-paid Oakley glasses.
- How about the eligibility of Duty Drawback Section 301 Tariffs on China Imports? The short answer is “yes” drawback is available on Section 301 tariffs, and the substitution provision also applies which means you can export goods not subject to Section 301 tariffs and still claim drawback against Section 301 imports as long as the import/export share the same 8-digit HTS.
- The new rules allow for a full five years of retroactive refunds! The previous regime limited a new filer to three years of past export activity. This is a huge expansion of recovery on past import/export activity.
- And for importers/exporters of various chemicals, don’t forget about the special chemical provision found under the “p” provision of the drawback law that allows for even more flexibility than some of the other drawback provisions.
- The now more flexible Substitution provision allows for “drawback trading” which matches excess import/export activity from companies not currently doing business together through the use of a special purpose trading company.
Do you need help understanding how these new changes, or with anything drawback related? Alliance Drawback Services can help.