In some cases, companies are filing drawbacks for the first time in almost 20 years, according to Sandler Travis law firm attorney Michael Cerny.
The application of Section 301 duties to traditionally low-tariff products such as high-tech goods has generated several new drawback filers, Michael Cerny, an attorney for Sandler Travis law firm, said Tuesday.
Section “301 duties have really propelled a lot of companies into the drawback realm that were not there before,” he said. “An area that was fairly duty-free was the high-tech area, computer parts. Well now all the sudden, they’re paying 301 duties. They’re paying a lot of them, and they want their money back.”
In some cases, companies are filing drawbacks for the first time in almost 20 years, Cerny said during the National Customs Brokers and Forwarders Association of America (NCBFAA) Annual Conference in San Antonio.
He noted that Section 201 global safeguard duties on solar panels and washing machines also are eligible for drawback.
While imports of steel and aluminum subject to Section 232 duties are not eligible for drawback in practice, Cerny said he believes underlying U.S. law subjects Section 232 imports to drawback, and he suspects a legal challenge could be filed regarding their ineligibility.
“I don’t see how the government should not be able to give them” drawback, he said. “They are ordinary duties, and they’re covered, just like 301, just like 201.”
A proclamation setting forth Section 232 implementation issued about a year ago stated that no drawback was to be available for those imports, Cerny mentioned.
Another drawback issue to be sorted out is applicability of substitution drawback to federal excise taxes on alcoholic beverages, and a lawsuit is likely to be filed in the next few weeks, he said.
“Keep an eye on this, because there’s a lot of money involved in this,” Cerny said, “folks are out there filing in hopes that the litigation does come out successful.”
Customs and Border Protection in December published a final rule modernizing drawback procedures in which it maintained a provision against filing substitution drawback claims for excise tax paid on imports in situations in which no excise tax was paid on substituted merchandise, namely exports.
The rule limits the amount of drawback allowable to the amount of taxes paid on the substituted merchandise and thus eliminates “double drawback,” CBP said in the rule.
Allowing substitution drawback claims in circumstances in which internal revenue taxes haven’t been paid on the substituted — or exported — product results in the imported product being introduced into commerce with no net payment of excise tax — a “double drawback” at odds with the broader statutory schemes of customs drawback and excise taxation, CBP said in its rulemaking.
Granular data. CBP originally had said that filers for manufacturing substitution drawback had to find out exactly what part number they were substituting for the part for which filers were going to claim drawback and directly identify the SKU, as well as the specific entry listing the good, Anne-Marie Bush, president of drawback specialist Veritrade International, said during the NCBFAA conference.
CBP has “backed off that a little bit, not as much as I would like,” she said. “So we are still in the process of trying to clarify with CBP on how that’s going to work.”
Another issue that filers have experienced amid the rollout of modernized drawback applies to a “first-come, first-served” policy in which CBP is only honoring drawback claims when they’re filed before any necessary line item post-summary corrections (PSCs), Bush said.
“You still have to do the PSC, but you’re not necessarily going to get your [drawback] refund,” she said. “We asked CBP about this two weeks ago: Will you be able to submit it if it’s changing the HTS number we’ve already claimed using the old HTS number? They said, ‘Yes,’ but then there was a pause, because they’re not quite sure [how] that’s going to work.”
Bush added that CBP likely needs to review the issue before issuing a final determination, “but that was what they first came to us with, is that it’s first come, first served.”