CBP Memorandum On the Drawback Changes Enacted by the Miscellaneous Trade Bill

This is Part I of a two-part series of summaries of this CBP memorandum and focuses on the general effective date of the drawback changes, and all drawback changes except those made to 19 USC Section 1504. See future issue for Part II, which will focus on drawback changes to 19 USC 1504.

General Effective Date of Changes to the Drawback Statute

According to CBP, unless otherwise specified in this memorandum, the modifications to the drawback statute made by P.L. 108-429 are effective for claims filed on or after December 3, 2004, and on claims where liquidation was not final on December 3, 2004.

1313(y) Unused Merchandise Drawback for Articles Entered into U.S. Insular Possessions

According to CBP and P.L. 108-429, P.L. 108-429 amended the statutory language under 19 USC 1313 by adding a new subsection 1313(y). This new provision allows for drawback on articles described in 1313(j)(1) (Unused Merchandise Drawback) if duty was paid on the merchandise upon importation into the U.S. and the person claiming the drawback demonstrates that the merchandise has entered the Customs territory of the United States Virgin Islands, American Samoa, Wake Island, Midway Islands, Kingman Reef, Guam, Canton Island, Enderbury Island, Johnston Island, or Palmyra Island.

According to CBP, this provision was effective December 18, 2004 and only applies to entries filed on or after that date.

1313(j) Unused Merchandise Drawback Allowed on HMF, etc.

CBP states that P.L. 108-429 amended the statutory language in 19 USC 1313(j) (Unused Merchandise Drawback) to allow for drawback on 99% of the harbor maintenance fee (HMF) and any other tax which was paid upon entry or importation of merchandise into the U.S.

Concurrently, this amendment provides for drawback of HMF under 19 USC 1313(p)(2)(A)(iii) and 1313(p)(2)(A)(iv) (substitution of finished petroleum derivatives).

Due to system limitations in ACS, CBP states that the HMF and any other tax, like the merchandise processing fee (MPF), can only be refunded at time of liquidation and cannot be issued via accelerated payment. A claim for refund of these taxes must be submitted to CBP manually and cannot be transmitted electronically.

1313(c) Drawback for Merchandise Not Conforming to Sample or Specifications

According to CBP, P.L. 108-429 made several amendments to 19 USC 1313(c) on drawback for merchandise not conforming to sample or specifications, as follows:

Sold at retail by importer, etc. P.L.108-429 amended 19 USC 1313(c)to allow for drawback upon the exportation or destruction of imported merchandise, entered or withdrawn for consumption, where such merchandise was ultimately sold at retail by the importer, or person who received that merchandise from the importer under a certificate of delivery, and returned to and accepted by the importer for any reason.

Time frame for exportation or destruction.19 USC 1313(c) is further modified to change the time frame for exportation or destruction; merchandise must be exported or destroyed under Customs supervision within 3 years from the date of importation or withdrawal.

Substitution.Additionally, 19 USC 1313(c) is modified to allow for substitution where the imported and exported merchandise is of the same eight-digit classification number and specific product identifier (such as part number, SKU, or product code) and the designated import entry was made within one year before the export or destruction

Certificates of delivery. The final change to 19 USC 1313(c) is in regards to certificates of delivery. A certificate of delivery is not required when the claimant and importer are the same party, or if the claimant is a successor to the importer under 19 USC 1313(s)(3). All other relationships require the submission of a certificate of delivery for a valid drawback claim.

1313(i) Time Limitation on Exportation/Destruction

CBP states that P.L. 108-429 amended 19 USC 1313(i) regarding time limitations on exportation, to read as follows:

Unless otherwise provided for in this section, no drawback shall be allowed under the provisions of this section unless the completed article is exported, or destroyed under the supervision of the Customs Service, within five years after the importation of the imported merchandise.

According to CBP, the revised text allows for destruction within five years after importation, where the statute does not allow for destruction or provide for a specific timeframe for destruction.

1313(k) Use of "Drawback Products" in Tradeoffs

CBP states that P.L. 108-429 amended 19 USC 1313(k) on the use of domestic merchandise acquired in exchange for imported merchandise of same kind and quality, in order to insert a new paragraph that allows for a "drawback product" to be used in tradeoff. The use of any domestic merchandise acquired in exchange for a drawback product of the same kind and quality shall be treated as use of such drawback product if no certificate of delivery or certificate of manufacture and delivery pertaining to such drawback product is used; other than a document that establishes the product's manufacture and delivery but does not establish drawback rights.

A "drawback product" is defined as any domestically produced product, manufactured with imported or any other merchandise (whether imported or domestic) of the same kind and quality that is subject to drawback.

CBP states that these changes to 19 USC 1313(k) will impact the trade and the record keeping necessary for a 1313(k) claim where a domestic product is used in trade-off.

1313(q) Drawback for Packaging Material

According to CBP, P.L. 108-429 made several amendments to 19 USC 1313(q) on drawback for packaging material, as follows:

No drawback on destruction of packing material. P.L. 108-429 amended 19 USC 1313(q) on packaging material to allow for drawback of packing material only upon exportation of such material. The destruction of packing material no longer qualifies for drawback.

Drawback when empty or containing articles not eligible for drawback. P.L. 108-429 further amends 19 USC 1313(q) to allow for drawback on packing material, even when such packing material contains articles or merchandise that is not eligible for drawback or does not contain any articles or merchandise.

Use of packing material prior to exportation is not treated as a "use."Additionally, the use of any packing material for its intended purpose prior to exportation shall not be treated as a "use" of such packing material for purposes of applying 19 U.S.C. 1313(a), (b), (c), or (j)(1)(B) or (j)(2)(C)(i).

CBP contact - Sherri Hoffman (202) 344-2684

CBP memorandum (dated 04/04/05) available at http://www.cbp.gov/linkhandler/cgov/import/communications_to_industry/changes_to_drawback.ctt/changes_to_drawback.doc.