U.S. BROKERS URGE CONTINUATION OF DRAWBACK IN CAFTA
The National Customs Brokers and Forwarders Association of America chastised the Bush administration for its attempt to eliminate or restrict duty drawback in the proposed U.S./Central America Free Trade Agreement.
Drawback is a refund of customs duties paid on imported materials that are either exported or used in the manufacture of exported articles.
“An export to a free trade partner is an export nonetheless,” said NCBFAA President Federico Zuniga in a letter to the U.S. Trade Representative. “When drawback is denied for that export, it increases the U.S. manufacturer’s costs, pure and simple.”
“As such, the elimination of drawback is contradictory to the goals of a free trade agreement,” he said. “In effect, the U.S. approach simply provides one incentive to trade only to take another away.”
With appropriate documentation, an exporter can receive refunds from the Bureau of Customs and Border Protection of up to 99 percent of duties paid. For some companies, drawback refunds could reach into the hundreds of thousands of dollars.
“U.S. manufacturers operate in a dynamic, global economy, where inputs are sourced from a wide variety of countries, based on a range of factors,” Zuniga said. “In this environment, duty drawback remains vitally important to ensure the profitability of U.S. companies competing in a global marketplace.”
Since the early 1990s, the ability to claim drawback in the United States has been squeezed. The 1993 North America Free Trade Agreement substantially reduced this privilege for U.S. companies shipping to Canada and Mexico.
Since the setback with NAFTA, drawback committees for the NCBFAA, American Association of Exporters and Importers, and the American Petroleum Institute, have turned their attention to bilateral free trade agreements between the United States and other countries to find ways to promote drawback and increase U.S. trade.
“Duty drawback can and should coexist in a free trade area,” Zuniga said.
The U.S. position in CAFTA negotiations, however, is similar to the policy followed by NAFTA and the recently concluded U.S.-Chile free trade agreement.
The drawback industry plans to keep a close watch on the development of the Free Trade Area of the Americas. The FTAA is being negotiated among 34 countries. It promises to decrease or mitigate trade barriers among the American nations and slated to become effective by the end of 2005. The trade treaty would supersede all other agreements between the United States and other countries in FTAA.