Does fully automated push button drawback exist under the new regime?

Is there an intuitive, user-friendly software solution that will allow a company to simply plug in some import and export data elements, answer some basic regulatory questions, push a button and get drawback — a “Turbo Tax” for drawback claims?
The short answer is no, not even close.  

Most licensed Customs brokers that specialize in drawback matters either develop their own proprietary drawback system or purchase a license for the only comprehensive drawback software package on the market. The “off the shelf” drawback program costs $30,000-$40,000 up front with an annual maintenance fee of $5,000-$10,000 depending on the version.

A drawback claim processing software program involves two distinct functions: The initial matching of imports and exports once all the required data elements are loaded into the program, and the subsequent submission of the drawback claim data elements (in a very specific file layout) to Customs and Border Protection via Automated Broker Interface (an electronic pipeline to Customs Automated Commercial Environment referred to as ACE).

One needs to understand the difference between a drawback program that processes an actual claim and an electronic platform that simply submits the properly formatted data elements to Customs via ABI. Why? Because there are numerous companies now claiming they sell “drawback software” when in fact they offer only the final submission of the claim electronically to Customs via ACE system … the last step in the process.

A robust software application requires a highly sophisticated relational database application that would offer a myriad of functionality in order to accurately and compliantly process a number of different types of drawback claims. Not only does the program need to process claims under the more basic provision of unused merchandise drawback for goods imported and exported in essentially the same condition, but also offer a more complex bill of material functionality for manufacturing drawback claims on raw materials or components exported as part of a finished product.

Regardless, even if a company looking to establish a drawback program purchases or develops a drawback software application that actually performs the matching of the import and export data, there is much more to the process than just software.

For example:

  • Regulatory knowledge:The new duty drawback regulations found in 19 CFR 190 covers nearly 180 pages of rule-making.  Violating the drawback regulations can result in denied refunds and even penalties. Drawback claim processing software assumes the operator already understands the basic regulatory structure that underwent a massive revision due to the passage of an amendment to the drawback law as part of the Trade Facilitation and Enforcement Act in 2016.

  • Operations knowledge: Drawback requires a detailed administrative process with many steps. Initially, the claimant must gather required data elements from various sources. Once all the data elements have been captured and reviewed for accuracy, the operator must now generate drawback claims consistent with the applicable regulatory and statutory provisions. The software is not intuitive in this regard. The software cannot compensate for the drawback operator’s lack of operational knowledge. As an example, the NAFTA free trade agreement, now known by its new acronym, USMCA, placed significant restrictions on drawback claimants seeking drawback on exports to Canada or Mexico. The software user needs to understand these restrictions in order to accurately run the drawback claim for exports to these destinations.

  • Data processing: Drawback claimants cannot completely automate the preparation of drawback claims.  For example, compiling the import database for certain types of drawback claims requires invoice-level, part number-level detail.  Customs brokers do not submit invoice line items with part numbers into Customs’ ACE system during the import entry process. The import broker, and consequently the ACE system, does not capture this level of granularity. Part number level of detail must be keyed manually from the import documents (Customs Form 7501 and the related Commercial Invoice).

The bottom line, the marketplace does not offer intuitive, user-friendly software that would allow a company to manage its own in-house program compliantly while at the same time maximizing recovery.  Further, the highly specialized knowledge required to prepare compliant drawback claims serves as an additional barrier to in-house programs (and there are very few drawback specialists available for hire in this niche industry). The user of the software needs to possess drawback knowledge as a prerequisite before preparing claims.

So, what’s a company to do short of outsourcing the entire process to a customs broker that specializes in drawback matters? One could take a “hybrid” approach and prepare much of the data for conversion into the format needed for the drawback software. Any data entry would be performed prior to turning over files (typically in Excel) to the drawback service provider. The provider would be responsible for final vetting of the data, claim processing, and the submission of the claim via ABI to Customs ACE drawback module.  In exchange, the service provider would offer a lower fee, typically a percentage of the refund amount.

At the end of the day there is no simple automated solution for drawback claimants because of the barrier that highly specialized regulatory knowledge presents in addition to the more practical step-by-step experience needed to accurately process a drawback entry.  A potential claimant is best served at the initial stages by conducting a thorough assessment to properly estimate recovery potential. After all, regardless of the approach, a company needs to make sure that the “juice is worth the squeeze.”

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