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Dispatch
January/February 2003 |
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New year, new goals and a reconstituting of our industry all make for a very busy 2003. What’s new? Well, for one thing, the Customs Web site is totally new. Once you get to know it, it’s quite navigable, although you’ll have to update all your favorite links. We’ve listed some of the more significant ones for you. And yes, Customs has officially decided to close three Drawback Centers - but take note as to where you'll need to send your claims.
We also have two guest writers: Ed DeSousa from Global Drawback, Inc. gives us an update to C-TPAT and how you can become certified. And Tom Ferramosca from American Drawback Services, LLC, explains regulation 191.14 - Identification of merchandise or articles by accounting method. Don't forget to forward Dispatch to your colleagues using the Forward to Friend form located at the end of this newsletter.
REMINDER: All Brokers, don't forget to file your Triennial Report before February 28th along with the $100 fee.
Carolyn Indreboe
President
carolyn@dutycalc.com
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Understanding Customs' Drawback Regulations
By Tom Ferramosca,
American Drawback Service, LLC
If you are involved in filing drawback claims, either as a company or as a customs broker on behalf of clients, one of the most important sections of the Customs Regulations to be familiar with is 191.14 - Identification of Merchandise or Articles by Accounting Method. Understanding what is said is obviously important, but understanding the implications is critical as well. Unfortunately, without experience or a background in the subject it is very difficult to deduce those implications.
191.14 can be used to identify merchandise or articles in inventory or storage for 1313(j)(1) direct identification unused merchandise or to identify merchandise used in manufacture or production under the provisions of 1313(a) direct identification manufacturing drawback. This section is not applicable where substitution is authorized.
By way of practical example, a claimant who maintains a common inventory may ship unused merchandise overseas and pursue 1313(j)(2) substitution to select imports with the highest duty return, while also utilizing one of the options in this provision to meet the NAFTA requirements for direct identification of same condition merchandise going to Canada and Mexico. Arbitrarily identifying an import for payment when claiming drawback on same condition goods shipped to a North American country is prohibited.
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Customs Launches New Web Site
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So what's up with the U.S. Customs Web site? New Web address, new everything!
Although the new site is growing on me now, it was quite disappointing when I logged on not so long ago and was brought to a totally foreign looking front page. Anger grew as my mind rapidly thought of all the time I was about to waste in getting familiar with this new site - and updating various links on the Dutycalc Web site.
But as time passes I find that it is actually easier to find what I'm looking for on the new site. A minor disappointment is the lack of a definitive "drawback" category. Site visitors must click on "Imports" on the main menu then "Duty Rates" before you see any reference to Duty Drawback.
Like a good bottle of red wine though, the new Customs Web site seems to be getting better with age. What do you think? Let me know at carolyn@dutycalc.com.
Link to new U. S. Customs Web site:
www.customs.gov
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What is often overlooked is that this section also applies to situations in the substitution statutes where substitution is not allowed. For instance, multiple substitutions are barred for articles manufactured under 1313(b) or for unused merchandise substitution, 1313(j)(2).
For example, a manufacturer who designates an import for payment under manufacturing substitution, 1313(b), and files certificates of manufacture with Customs must know from which production a subsequent export or drawback delivery came. If the situation is such that drawback articles identified on these pre-claim filed documents are withdrawn from a common inventory for export or domestic sale where such identification can't be made, then 191.14 should be used because multiple substitutions are prohibited. However, when a claim is filed that combines both production information and export data and a certificate of manufacture has not already been filed with Customs, the double substitution situation can be avoided. But these combination claims are not always the best option for every production circumstance.
The situation is similar when there is a designation for payment under the provisions of 1313(j)(2) for unused merchandise and there is a subsequent delivery to another company that stores in a common inventory. That company either must know from which receipt they are exporting or use an authorized accounting method.
There are five specific conditions that must be met in order to use 191.14. These are:
- The lots or articles must be fungible - that is, for commercial purposes they must be identical and interchangeable in all situations.
- The merchandise or articles must be received and withdrawn from the same inventory. Different locations are allowed but the goods must be treated as if in the same inventory in the normal course of business. If they are treated separately, the different inventories may not be accounted for together.
- Unless otherwise provided for in a subsection of 191.14, all receipts into, and all withdrawals from, inventory must be recorded.
- Customs may verify that all of these receipts and withdrawals are being accounted for. Simply put, falling short of the standard means you are substituting.
- The accounting method used for drawback purposes must be used without variation with another method for at least one year, unless Customs approves a shorter period.
Tom Ferramosca is President of American Drawback Service, LLC.
American Drawback Service is a Custom House Broker and is part of the American Companies.
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C-TPAT Update - Are You Certified Yet?
Edward X. DeSousa,
Global Drawback, Inc.
Every few years a new Customs program comes out that has a significant impact on the way companies operate. Last year, Customs introduced the Customs Trade Partnership Against Terrorism (C-TPAT). Although not found or published in the Customs Regulations, C-TPAT is administered by the U.S. Customs Service (under Homeland Security, the new name is "Bureau of Customs and Border Protection").
C-TPAT is a security program, geared towards protecting our homeland. Since its proposal in the beginning of 2002, C-TPAT struck the curiosity of U.S. importers, but most did not know what it entailed.
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Drawback Records
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Q: How long must drawback records be kept?
A: Records must be kept for at least three years after a drawback claim has been paid by accelerated payment. However, this can be extended by Customs and your particular situation may require that records be retained indefinitely.
For more information regarding recordkeeping for drawback data, check out our article: Recordkeeping - The Key to Drawback Compliance.
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The basic requirements are simple. Companies must have total knowledge of their supply chains and employ security measures to safeguard their imports. This means knowing who your vendors are, and insuring they have procedures in place to prevent illegal or terrorist merchandise from contaminating their supply chain and entering the United States.
Customs asked for importing companies (mostly the top 500 importers) to participate. In August 2002, C-TPAT was also extended to forwarders, brokers and carriers. There has been hesitancy by some in the industry to participate - driven by concerns over Longevity, Benefits and Cost:
- Longevity - Now that US Customs is a department under Homeland Security, C-TPAT is probably here to stay.
- Benefits - The benefits are supposed to be faster import clearances and less government oversight.
- Cost - The cost of the C-TPAT program depends on the size of your company and the company you may hire to assist you. In addition to information and training seminar costs, some companies are charging $10,000 to $60,000, just for obtaining certification; other costs include implementation and administration. Several initial participants have spent over $100,000 just to qualify. These fees may be expensive, but consider the cost of delays in obtaining your merchandise.
As a contradiction, many companies do not believe that C-TPAT will prevent a terrorist attack, and this is just another government bureaucratic burden. It is impractical to expect that money won't influence a C-TPAT supplier's employee (located in a country with an abundance of anti-U.S. terrorists) from contaminating an export shipment consigned to the U.S. However, companies are participating because they believe that if the U.S. falls prone to another terrorist attack, especially from cargo, all cargo will stop. The companies that are registered C-TPAT members will be the only, or the first, importers to have their merchandise cleared.
Although this is still a voluntary program, Customs is slowly "forcing" participation. Customs has been issuing CF-28's to companies who have not applied for participation. A CF-28 is a Customs Form called Request For Information (19 CFR 151.11 and 152.2). It is used by Customs to get more information (such as costs, assists, etc.) from an importer of record on the specific import entry. Most importers should know what it is and/or have received it at one time or other. If your company is receiving such CF-28's, we strongly suggest you start getting on board. Whether C-TPAT will prevent an attack on the U.S. remains to be seen, but as with other Customs programs, participate or go to the bottom of the pile.
Edward X. DeSousa is President of Global Drawback, Inc. located near Boston, MA.
Global Drawback is a C-TPAT certified Customs Broker specializing in Customs compliance and duty drawback. For more information regarding C-TPAT certification and receiving assistance in becoming certified, contact Ed at ed@drawback.com or phone him at 978.276.1999.
U.S. Customs offers additional information at the following links:
> C-TPAT Fact Sheet and Frequently Asked Questions
> C-TPAT for Importers
> C-TPAT for Customs Brokers
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It's Official - Customs to Close Three Drawback Centers
Closure of the U.S. Customs Drawback Centers located in Boston, New Orleans and Miami became official as of January 24, 2003. The New Orleans center closing became effective on February 24, with the Boston and Miami centers closing on July 23.
Customs says that these closures will not cause a burden to the remaining five Centers. However, in order for it to not become a burden to these Centers, Customs officials will need to stay abreast of operations at each and every Center. The question emerges, will Customs be able to swiftly remedy situations involving delays?
I know for a fact that certain offices, all of which are on the remaining open list, have delay issues and they have yet to receive any of the new workload from the closing offices. Once again, Customs claims they can handle the increase.
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Customs has taken another look at how they plan to divide up the drawback accounts among the five remaining Centers. They have determined that they should actually not burden the Chicago Drawback Center with Miami's unliquidated claims, so are now planning on having them sent to the Los Angeles Center. They have also decided to send the Boston Center's unliquidated claims to Chicago instead of the New York/Newark Center. Of course, this makes sense since the Los Angeles Center has less workload than the Chicago Center.
As for the New York Center, even considering to send additional workload to this Center would have made no sense at all since they are the busiest Center of the five slated to remain open. So Customs took another look and determined that they needed to make some changes due in part to the comments they received from the drawback industry. Obviously, none of the fourteen people that sent in comments to Customs regarding the proposed Center closures made an impressionable stand as to why the offices should not be closed. But with only 14 comments from our entire industry, we had little to hope for anyway.
On the bright side, Customs promises that advances in automation will continue and this in itself will reduce the workloads of those remaining Drawback Specialists. We are also told that continuing education will take place and new hires will be brought in as needed. Sounds good so far. And in the end, it doesn't appear that too many of us are worrying about it. After all, only 14 in the industry bothered to comment. Did you file comments with Customs? Why or why not? Email me a note with your thoughts on the Drawback Center closures.
For futher background on the closures, read:
> Customs Proposed Drawback Center Closures in the Dispatch November/December 2002 issue.
> Federal Register/Vol68, No. 16/ Friday January 24th - Consolidation of Customs Drawback Centers
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Industry News & Events
C-TPAT Anti-Terrorism Training Seminar - April 2003
"Supply Chain Security in a New Business Environment"
U.S. Customs training seminar will address the C-TPAT application process; how to complete a C-TPAT security profile questionnaire; the validation process; benefits; how to identify anomalies in the global supply chain and best practices.
April 21-24, 2003
Intercontinental Hotel - Miami, FL
Open to current C-TPAT members
C-TPAT Seminar Information
NCBFAA Annual Conference
March 16-20, 2003
Hyatt Hill Country Resort - San Antonio, TX
Sponsored by NCBFAA
Contact: NCBFAA Conference Dept. - br@ncbfaa.org
Phone: 202.466.0222; Fax: 202.466.0226
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About Dutycalc
Dutycalc Data Systems is a Software and Consulting Company that designs, develops and implements management support systems for the Import, Export and Brokerage Communities. Our primary area of focus is Duty Drawback and the implementation of our fully automated Drawback System. Dutycalc is the leading drawback software company—with more than 200 systems implemented throughout the U.S.
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