Duty Drawback Simplification – Part 1
Duty Drawback Simplification – Part 2
On February 24, 2018, there will be big changes to the way that Unused Merchandise Substitution duty drawback will be done due to the Trade Facilitation and Trade Enforcement Act of 2015 (i.e. TFTEA) being passed into law.
Currently, for Unused Merchandise Substitution Drawback, a drawback claimant is required to prepare and file with Customs an application for this type of drawback. This application is called a “Commercial Interchangeability Determination” (CID). In this application, the claimant must provide evidence and documentation that will prove to Customs that the imported merchandise and the substituted exported merchandise is commercially interchangeable. What is commercial interchangeability? Some of the criteria to be considered in order to determine this are: governmental and industry standards, the part numbers, the description of merchandise, the tariff classifications and the relative values. Customs will take all of this information, analyze it very carefully and come up with a determination of whether or not this merchandise is commercially interchangeable. If Customs determines this merchandise to be commercially interchangeable, the claimant may file these drawback claims. Once this is approved, the imported and the exported merchandise must be matched for duty drawback based on the same specifications described in the CID. For example, the import part number must be the same as the export part number.
However, after February 24th, 2018, preparing and filing a CID will no longer be required. In addition, it will no longer be required to match the imported merchandise and the exported merchandise by part number or composition specifications. You may ask, how will the imported and the exported merchandise be matched for Unused Merchandise Substitution drawback? The drawback claimant will have to match this merchandise based on the Harmonized Tariff Schedule number at the 8-digit level. In other words, if the HTS number of the imported merchandise matches the HTS number of the exported merchandise, the claimant may file a drawback claim. However, if the description in the tariff book begins with the word “other”, then the claimant will have to match these goods at the HTS 10-digit level. Furthermore, if the description at the 10 digit level still begins with the word “other”, the claimant will be required to file Unused Merchandise Direct Identification drawback.
As you can see, this will significantly simplify the claiming of unused substitution drawback.
Want to learn more about duty drawback? Consider signing up for one our upcoming Duty Drawback Lunch & Learns.