Importers and exporters in the USA as well as our drawback experts at JMR have been preparing for new drawback regulations that will be exclusively in effect come February 24, 2019. But there is a big lingering question within the trade industry: will Customs be ready for TFTEA?
A Long Time Coming
When the TFTEA was signed into law on February 24, 2016, it gave two years to allow for regulations to be written, edited, re-written, and implemented. This was a law that had been a long time coming, and so it was assumed that with this amount of time, Treasury and Customs could be able to have these implemented and ready to go.
However, this was not the case. 2/24/18 came and went without regulations, leaving only a preliminary “guidance document” for brokers to work from. Regulations were issued months later over the Summer, but have continued to be held up in inter-agency review, and have at times contradicted the guidance documents, leaving the industry uncertain as to what the final regulations will bring.
The law provided a grace period between 2/24/18 and 2/24/19 where both the new methods under TFTEA and the old methods (“core” drawback) could exist side-by-side to allow for an orderly transition. But without finalized regulations, TFTEA claim rules have lacked clarity.
Some of the primary issues have centered around how claims should be calculated. For example, the proposed “first filed” rule held that if a line on an entry was used in one kind of drawback (such as unused direct-identification) that line could not be used for substitution drawback. This would obviously restrict some refunds, especially with the requirement that all exports to Canada and Mexico must be claimed direct-ID being retained from NAFTA to USMCA.
Risks For Refunds
But because duty drawback in the end is all about money, the most important point to everyone involved has been the payment of refunds. When the initial guidance documents were issued, it was stated that until the regulations are finalized Customs would not be offering accelerated payment nor liquidating TFTEA claims- essentially denying any payment to claimants filing under the new law.
They held that they would indeed accept claims that were being filed, but would not be paying those out until the regulations were finalized. Because they were under no hard date to finalize these regulations, there was fear within the industry that the 2/24/19 deadline would pass without final rules, leaving a lot of uncertainty of what would happen.
This lack of clarity on laws has the potential to disrupt claimants who depend on these refunds, so a lawsuit was filed earlier this year under the name of Tobacos de Wilson, Inc., et al. v. United States that was brought by drawback claimants who believe that these restrictions and lack of clarity are illegal. They posited that Customs’ delay in issuing these regulations was harmful, and sought to compel more clarity and impose deadlines to allow claimants to prepare.
Earlier this week, on October 12, presiding Judge Jane Restani issued an opinion in the case that “an interim final rule is not an appropriate remedy, but concludes the promulgation of a final rule is warranted to prevent continued harm to plaintiffs as members of the importing public.” It was then mandated that the final rules must be published by December 17th, 2018. This is good news for the trade industry, as having this firm date will allow us to assure our clients that TFTEA claims will be honored and paid.
Our experts continue to monitor these situations closely, and through our industry associations and communications with Customs we are staying on the leading edge of any new changes. If you have any questions, please contact our VP of Sales Andrew Galloway at 973-726-5337 or email@example.com.