February TFTEA Implementation

The U.S. Department of Customs and Border Protection (CBP) is preparing for the implementation of new changes to duty drawback specified in the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). Passed in 2015, the law gave CBP a two-year implementation period which expires on February 24, 2018.

Important changes of note concern ACE (Automated Commercial Environment) and how drawback, the refund of duties, taxes, and other fees, are handled. Starting on February 24th, drawback, as defined under current statue, will begin to be filed through ACE. Furthermore, TFTEA greatly changed many aspects of drawback law. These new TFTEA claims will also become effective starting on February 24th. This distinction is important because core drawback claims, under the current legislation, will continue to be accepted via ACE until February 24th, 2019, as specified under TFTEA. During this transition, claimants will be able to choose whether they would prefer to submit under the current legislation or under TFTEA.

Other important changes under TFTEA include:

  • Redefining the concept of “substitution” of exported goods for imports. This change
    uses the Eight-digit Harmonized Tariff Schedule of the United States (HTSUS)
    classification or Export Schedule B numbers instead of part number-based criteria.
  • The timeline for filing a drawback claim related to a given import has been expanded
    from three years to five years from the date of importation.
  • Certificates of delivery are no longer required. Claimants must only be able to produce
    “normal business records.”

Final touches are still being put on the exact specifics for how ACE and TFTEA will function. No new or revised regulations relating to TFTEA have been issued. However, regulations are currently being reviewed by the Treasury and must still be reviewed by other agencies as well. CBP is planning to release a guidance document for policies that will be applied to TFTEA claims while these regulations are still being reviewed. Keep your eye out for these finalized documents, as understanding the regulations and differences between regulations will be especially important for this transition year.

Max Krauskopf

All Duty Drawback Claims Filed Prior to December 2004 Deemed Liquidated by CIT

On January 13, 2015, the Court of International Trade ruled that all duty drawback claims filed prior to December 3, 2004 are to be deemed liquidated at the amount declared by the claimant at the time of the claim.  The CIT, finding in favor of the Ford Motor Company, deemed the claims liquidated pursuant to 19 U.S.C. § 1504(a)(2), which was enacted by Congress in 2004 as part of the Miscellaneous Trade and Technical Corrections Act.  

As stated by the CIT, due to the growing number of aging duty drawback claims, 19 U.S.C. § 1504(a)(2) was enacted in an effort to “both put in place a one-time mechanism for the swift resolution of the then-existing (i.e., pre-December 3, 2004, or pre-enactment) drawback claims and, in addition, establish a framework for the liquidation of all future (i.e., post-enactment) drawback claims.”  Subsection (A) of 19 U.S.C. § 1504(a)(2) establishes the general rule that all duty drawback entries that are not liquidated within one year of its filing are to be deemed liquidated at the amount asserted by the claim.  Subsection (B) offers an exception to subsection (A) that gives the claimant the option to have their drawback claims deemed liquidated, even if the underlying import entries are not yet final.  To have the claim deemed liquidated under subsection (B), the claimant must deposit the estimated duties on the unliquidated merchandise, file a written request for liquidation of the drawback, and file a waiver to the right to refund under the law.  Subsection (C) offers a second exception to Subsection A that applies to all drawbacks filed prior to December 3, 2004.  According to 19 U.S.C. § 1504(a)(2)(c) “An entry or claim for drawback filed before December 3, 2004, the liquidation of which is not final as of December 3, 2004, shall be deemed liquidated on the date that is 1 year after December 3, 2004 [i.e., on December 3, 2005], at the drawback amount asserted by the claimant at the time of the entry or claim.” 

Ford had filed 17 drawback claims prior to December 3, 2004 and obtained accelerated payment, in which Customs paid the estimated drawback amount prior to liquidation.  Although Ford was under the impression that these drawback claims were liquidated under 19 U.S.C. § 1504(a)(2)(c) on December 3, 2005 and finalized, Customs began to approach Ford for refunds where they had determined overpayments were made.  Customs argued that because some of the underlying import entries were not final on the 17 drawback claims by December 3, 2005, subsection (B) should apply.  According to Customs, the drawback claims were not liquidated because Ford had not provided the written request for liquidation and did not provide the waiver to right of a refund required by subsection (B).

The CIT, however, sided with Ford, ruling that 19 U.S.C. § 1504(a)(2)(c) should apply to the 17 drawback claims.  The court determined that the language of subsection (C) is clear, and should apply to all drawback claims made prior to December 3, 2004.  The court concluded that there is no language in 19 U.S.C. § 1504(a)(2) that would limit the application of subsection (C) to only claims that were finalized, and that subsection (B) is to be applied as an exception for drawbacks filed after December 3, 2004. 

(Ford Motor Company v. U.S., Slip Op. 15-02, CIT # 09.00375, dated 01/13/15, Judge Ridgway)

Aaron Ambrite, Extern, Global Trade Expertise, January 16, 2015