Customs Unveils Revamp of Duty Refund Process

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By Brian Flood

The Trump administration is set to propose new regulations clarifying how importers can get duty refunds, known as drawbacks, from the government.

The move comes after a trade court and senior Republican legislators dinged the administration for missing a deadline imposed by the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) to issue regulations making it easier to file these claims.

Drawbacks are refunds of up to 99 percent of duties, taxes, and fees paid on imported goods that importers are entitled to under certain circumstances—for example, if the imports are used directly in manufacturing goods to be exported from the U.S., or if the imports are sent out of the country because they don’t conform to specifications. Numerous industries use the program, including automobile, chemicals, and pharmaceutical manufacturers.

TFTEA made changes to the refund law to make it easier for importers to file claims. Customs and Border Protection was supposed to issue regulations implementing these changes by Feb. 24, 2018, but failed to do so.

Members of the public will be able to submit comments on the proposed regulations (RIN 1515-AE23) through Sept. 16.

That failure drew rebukes from both the judicial and legislative branches. In the case Tabacos de Wilson, Inc. v. United States, the Court of International Trade in June said it had jurisdiction to hear a case brought by a group of importers and customs brokers—including Brown-USA Inc., Nippon America Group, and Customs Advisory Services Inc.—challenging Customs over not fulfilling its duty to provide the regulations. “The implementing regulations required under TFTEA § 906 have been withheld in violation of the law,” said Judge Jane Restani, rejecting the government’s claims that the deadline wasn’t mandatory.

‘Delay Unacceptable’

In July, House Ways and Means Chairman Kevin Brady (R-Texas) and Ways and Means Trade Subcommittee Chairman Dave Reichert (R-Wash.) sent a letter to the administration calling the delay “unacceptable.”

“We are adamant that the agencies finalize and publish the TFTEA regulations without further delay,” the legislators wrote, adding that they were “particularly concerned that non-compliance has greatly complicated” refund claims.

Representatives of the congressmen did not immediately respond to Bloomberg Law’s requests for comment on Customs’ proposal.

Customs’ proposed regulations, scheduled to appear in the Federal Register Aug. 2, would among other things simplify recordkeeping requirements (e.g., clarifying how long certain records must be kept), require claims to be filed electronically, extend the timeline for filing refund claims, and liberalize the requirements for making certain claims (e.g., clarifying which merchandise may be substituted for imported merchandise as the basis for a substitution claim based on Harmonized Tariff Schedule of the United States classification).

It also set a transition period lasting until Feb. 23, 2019, under which claims can be filed under either the TFTEA process or the old system.

To contact the reporter on this story: Brian Flood in Washington at bflood@bloomberglaw.comTo contact the editor on this story: Jerome Ashton at jashton@bloomberglaw.com

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