CBP Memorandum On the Drawback Changes Enacted by the Miscellaneous Trade Bill (Part II- Final)

This is Part II, the final part of a two-part series of summaries of this CBP memorandum and focuses on the amendments to 19 USC 1504 (Limitation on Liquidation) for the "deemed liquidation" of drawback claims. (See ITT's Online Archives or 04/12/05 news, 05041205, for Part I covering the other drawback changes in P.L. 108-429.)

19 USC 1504 - "Deemed Liquidation" of Drawback Claims

CBP states that P.L. 108-429 amended 19 USC 1504 to allow for deemed liquidation of drawback claims and the extension of the period in which to liquidate such claims.

(Deemed liquidation of drawback claims allows for claims to deem liquidate at the drawback amount asserted by the claimant.)

Implementation timeframes. CBP states that this provision is retroactive and pertains to claims currently being held by a drawback office. Therefore, any unliquidated drawback claim where all underlying consumption entries which are designated on the claim and/or on the underlying Certificates of Manufacture to that claim were liquidated as of December 3, 2004, will deem liquidate on December 3, 2005, unless CBP liquidates such claims beforehand.

All claims filed on or after December 3, 2004, will deem liquidate 1 year from the date of such claim, if all underlying import entries designated on the claim and/or on the underlying Certificates of Manufacture to that claim have liquidated or if the claimant submits the appropriate waiver(s) within the 1-year from date of filing time-period, unless CBP liquidates such claims beforehand.

Waiver to expedite liquidation of claim's underlying entries, etc.CBP states that in order to expedite the liquidation of a claim when the underlying import entries designated on the claim and/or on the underlying Certificates of Manufacture to that claim have not liquidated, a waiver of any right to payment or refund under other provisions of law, to the extent that the estimated duties on the unliquidated import entry are included in the drawback claim for which drawback on estimated duties is requested, must be filed by the claimant and any other party responsible for the payment of liquidated import duties. There are no blanket waivers and waivers are to be submitted on a per claim basis.

If a claimant does not supply a waiver within the one-year from date of claim filing time-frame and the underlying consumption entries designated on the claim and/or on the underlying Certificates of Manufacture to that claim do not liquidate and become final within that one-year period, then the drawback claim will not deem liquidate. Although these claims will not deem liquidate, CBP states that drawback offices need to work these claims as expeditiously as possible.

New protest provisions affect drawback claims, underlying entries.CBP states that the new protest provisions in P.L. 108-429 apply to drawback claims. Information on these protest provisions can be found in CBP's December 15, 2004 and December 17, 2004 Memoranda on P.L. 108-429. (See ITT's Online Archives or 12/21/04 and 12/28/04 news, 04122105 and 04122805, for BP summaries.)

These protest provisions also affect when underlying consumption entries become final:

• Underlying consumption entries filed prior to December 18, 2004 are subject to 90-day protest period and afforded 520(c) period. CBP states that if the underlying consumption entry was filed prior to December 18, 2004, then the consumption entry is subject to the 90-day protest period and is afforded the 520(c) period. Therefore, the underlying consumption entry is not considered to be final until, at a minimum, it is 455 days past the date of liquidation.

Underlying consumption entries flagged for Reconciliation. CBP states that if the underlying consumption entry is flagged for reconciliation, the reconciliation entry must be liquidated and final. Therefore, the underlying consumption entry is not considered to be final until 455 days past the liquidation of the reconciliation entry. The 455-day time frame is the minimum standard.

Review of underlying consumption or reconciliation entry by Court, etc.CBP states that If the underlying consumption entry or reconciliation entry is subject to review by the Court, then the entry is not considered final until the Court has rendered a decision, or if the 520(c) decision is protested, then the entry is not considered final until the applicable time-frames have expired.

• Underlying consumption entries filed on/after December 18, 2004 are subject to 180-day protest period. CBP states that if the underlying consumption entry was filed on or after December 18, 2004, then the consumption entry is not considered final until, at a minimum, the 180-day protest period has expired.

Underlying consumption entries flagged for Reconciliation. CBP states that if the underlying consumption entry is flagged for reconciliation, the reconciliation entry must be liquidated and final. Therefore, the underlying consumption entry is not considered to be final until 180 days past the liquidation of the reconciliation entry.

Review of underlying consumption or reconciliation entries by Court. The 180-day time frame is the minimum standard, if the underlying consumption entry or reconciliation entry is subject to review by the Court, then the entry is not considered final until the Court has rendered a decision.

Period to liquidate drawback claim may be extended if more information needed.According to CBP, the period in which to liquidate a drawback claim may be extended, up to 4 years from the date of entry, if additional information is required to determine the proper drawback amount or at the request of the drawback claimant. Any drawback claim on file that will deem liquidate on December 3, 2005, that is older than December 3, 2001, can not be extended due to the extension time frame of 4 years.

Failure to extend claim to result in deemed liquidation. CBP states that the trade community should be aware that extensions are completed on a yearly basis up to the 4th year and can only be done with just cause. Therefore, at a minimum, a yearly review must be completed on a claim to verify that additional information is still required before the extension can be processed. Failure to extend a claim will result in a deemed liquidation when the claim was eligible for liquidation on December 3, 2004 or the appropriate waiver was filed prior to December 3, 2005 or when one-year from the claim filing all of the underlying consumption entries were liquidated and final or the appropriate waiver was filed within one-year of filing the claim.

Drawback offices to review claims scheduled to deem liquidate.CBP states that the deemed liquidation provision allows for claims to deem liquidate at the drawback amount asserted by the claimant. Therefore, CBP states that it is imperative that all drawback offices immediately begin to review and liquidate claims that are scheduled to deem liquidate on December 3, 2005 to ensure that claims are not liquidated for more money than a claimant is entitled to receive.

If a claim does not get reviewed prior to deemed liquidation drawback offices are still responsible for ensuring that the claim was not paid for more money than the claimant was entitled to receive. If the post-liquidation claim review reveals that the claimant did receive additional monies that they were not entitled to, drawback offices are to consider whether to pursue a penalty under 19 U.S.C. 1593a, the False Claims Act, or other appropriate authority.

CBP states that drawback offices are instructed to request additional information, whenever necessary. If a claimant does not respond to such request within the allotted time frame, drawback offices are instructed to liquidate such claims as a denied drawback or partial denied drawback, as appropriate. Drawback offices must ensure that such claims are not held any longer than necessary. According to CBP, when extra time is requested by a claimant to submit the additional information, stringent time frames must be mandated and adhered to.

ACS to be updated, reports needed to prevent deemed liquidations.CBP states that the Automated Commercial System (ACS) will be updated to allow for the deemed liquidation of drawback. Additional reports will need to be generated to ensure that drawback claims do not deem liquidate. Additionally, a flag for waivers will be added in ACS. As the ACS programming is completed, additional instructions will be issued.

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.