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Drawback was included in the first Tariff Act and is nearly as old as the United States itself. The original intent was to foster exports by encouraging the use of foreign materials where applicable, and otherwise not to discourage exports by the import duty penalty. The intent was to give United States companies a competitive edge. Of course, the extent of the use of foreign materials was technologically limited to such things as the use of salt in curing fish; this was the late 18th century after all.
As time progressed and as technology advanced, the need to expand drawback and have it keep up with the market was all too obvious to Trade, Congress, and Customs. Many changes and technological leaps have impacted the drawback program. The most significant have taken place in the last 20 years with the addition of "same condition" drawback and the changes NAFTA brought. Customs implemented the MODACT relative to Drawback earlier this year and issued new drawback regulations. The new regs involved sweeping changes to virtually the entire drawback process from A to Z. Further, Customs has just issued its proposed drawback penalty regulations which address the changes in the new regulations and addresses areas involving compliance concerns.
The message is clear and well expressed. Drawback is a well-defined very viable program available to exporters, the rules have been rewritten to address many open issues from years past and, while closing some doors, has opened many others. The new (proposed) penalty rules define the circumstances where the process fails, defines culpability and expresses in cogent terms the price for non-compliance with the rules.
First, and most notably, all the forms have changed. The old multi-function certificate & manufacturing forms and the same condition/ rejected merchandise forms have finally been tossed out. Almost everyone agreed that they were not really well designed, were decidedly unfriendly, and needed to be abandoned. The new forms are:
- C.F. 7551- This is the new drawback form. It serves all drawback purposes and replaces the C.F. 331 and C.F. 7539.
- C.F. 7552- This is the delivery certificate. It replaces the C.F. 331 and can be used as the certificate of delivery or as a certificate of manufacturing and delivery.
- C.F. 7553- This is the notice of intent to export or destroy goods for drawback purposes.
There is also a new coding sheet required and Customs strongly encourages the filing of drawback via diskette or via ABI. Non electronic claims will be handled, but with far less urgency. All imports dated 4-6-98 require the HTSUS number. All exports dated on or after 4-6-99 will require the Schedule B number.
Special Privileges for applicants have also changed and require close attention. Exporters Summary is no longer a privilege requiring prior approval. Proof of export consists of originally signed export bills, or certified copies and will be required as requested by Customs.
Waiver of prior notice concerns future exports only. If a claimant has "unused" exports, the new regulations allow for a company specific one-time retroactive waiver. Extreme caution needs to be used here in large companies with multiple divisions.
Accelerated payment continues to be a highly desirable privilege requiring bonding and special applications and handling. It is important to know that both accelerated payment and waiver of prior notice require reapplication prior to 4-6-99. All current approvals will terminate that day. Sections 191.91 and 191.92 specifically talk about the reapplication process. While Customs has gone to considerable lengths with respect to their responsibilities under the MODACT, it is incumbent upon drawback filers and claimants to fully understand the law and their respective responsibilities regarding the claim process and recordkeeping. Simply reading the Basic informed compliance publication available at the Customs website does NOT constitute reasonable care as defined in the MODACT.
Exporters/claimants are most interested in refunds while Customs is primarily interested in administration, enforcement, and elimination of fraud and port consistency. Customs has also provided for a heightened awareness in drawback by offering a voluntary drawback compliance program. Certification seems an interesting way to ensure internal procedures and to limit penalties, although only time will tell the whole story.
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