TFTEA Drawback Update: The Day of Reckoning is Upon Us!

last updated: August 16, 2018

This week we enter the transition period from historical drawback regime to the new era promulgated by the TFTEA (Trade Facilitation and Enforcement Act of 2015 also referred to as the New Drawback Law) which officially becomes operational Saturday, 2/24/18. Alliance staff will begin submitting claims via the new drawback module in ACE on this date. We are hoping for the best, but the more cynical among us fears a complete initial failure of the ACE drawback module once live filing commences on Saturday.

The latest on the challenging transition:

Interim Rule Making – In the absence of regulations finalized in time for the new law’s implementation date on 2/24/18, CBP decided to issue temporary interim rulemaking for drawback filers and brokers. We have provided you a copy of the Interim Guide on your right.

The impact on all these monumental changes will vary for each filer based on the applicable legal provision. Alliances’s team can assess a claimant’s program and develop a filing strategy that compliantly maximizes recovery.

The following summarizes the various options available under TFTEA as well as the existing drawback law (also referred to as “Core” drawback in the Interim Guide on your right):

TFTEA Filers: This category includes new claimants that will file under TFTEA to take advantage of HTS level substitution. The bad news…CBP has taken the position that drawback claims will be paid under the new law until final rule making is in place. The trade community is taking CBP to court seeking a temporary injunction as we believe CBP is on tenuous legal ground. If we lose the motion for a temporary injunction, then we will most likely not continue with a protracted legal battle because the regulations will be published before we can fully litigate. Our industry attorneys seek additional plaintiffs to participate in the litigation. They asked us to refer smaller companies that rely on timely drawback payments to stay competitive in the global marketplace. The various trade associations are covering the legal expenses. If you believe that your company could assist with the effort and want to explore this option, please contact me directly.

NAFTA Drawback Filers: TFTEA left the NAFTA drawback restrictions untouched. If you export primarily to Canada and/or Mexico, then no change to your program other than the new drawback law expanded retroactive drawback to 5 years from date of importation to file a claim. This extends the export time frame beyond three-year maximum of the current law. The change only impacts new drawback claimants attempting to maximize the retroactive time frame. Problems related to the migration of Customs electronic filing platform from ACS to ACE also scheduled for February 24th could delay payment of both NAFTA related and other “Core” drawback claims.

Core Drawback Filers: Claimants may file under the existing law for any of the drawback legal provisions until February 24th of 2019. Core claims are eligible for payment under accelerated payment privileges. Why file under the existing law…mainly because HTS level substitution drawback is not available for tariff classifications that begin with “other” at the 8th and 10th digit so some will either not benefit from the new law or worse yet, will see less drawback recovery due to the “other” rule. We will file under the current law for clients in this predicament until the existing lawfully expires next year.

One possible strategy to eliminate the “other” problem with the new law is to compliantly reclassify merchandise to more specific HTS number, or if that option is not viable, petition the ITC for an HTS break out at the 10th digit. Alliance can refer you to specialists that assist you with a petition process to secure a statistical breakout at the 10th digit. Please contact us for additional details.

Anthony Nogueras

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