CROSS Rulings Database Need to find a ruling or curious whether or not one exists for your particular situation? Check out the Customs Rulings Online Search System (CROSS). CROSS is a searchable database of approximately 90,000 Customs rulings dating back to 1989. Link to CROSS: http://rulings.customs.gov/

Drawback 101 - How to Evaluate Your Duty Drawback Potential

Although it may be a piece of cake to a lot of you drawback geniuses, actually evaluating one's potential duty drawback can be quite a daunting task. By demystifying the process, we hope more companies will explore their duty drawback potential.

The key to determining one's drawback potential is actually a matter of asking the right questions to the right people. You are going on a scavenger hunt of sorts. And the treasure could be quite the prize: Duty drawback refunds.

Let us start with an unused drawback program. The term "unused" refers to the condition of the goods at the time of export. If an item is determined to be "unused" it was either exported in the same condition it was imported in or it was not put into its intended use.

So where do you start? You start with your import broker, asking him or her for the total annual amount of duty paid, minus any fees. Fees include those paid to a broker as well as any freight charges. You could also ask your company's cost accounting department for this information. One if not both should be able to provide it to you.

Next, you will want to speak with your sales department to find out the percentage of annual sales that are exported. And with that, you are now armed with the necessary information to calculate your potential unused duty drawback.

I say "potential" because that is exactly what it is. What you come up with using the outlined formula is as close as you will get to an actual dollar figure without actually pulling documents and determining an exact number.

That said, here is how you calculate your potential unused duty drawback: Take your "total duty paid" figure and multiply it by the percentage of annual sales that are exported. The dollar amount you come up with will be your annual estimate of duty refund.

By law, a company can file drawback retroactively (going back three years). If your company's imports and sales have been fairly steady over the years, you can assume your potential retroactive duty refund would be in the neighborhood of three times the annual estimate you calculated. It's not an exact amount, but if it's substantial it's definitely worth exploring.

Now, let's look at a manufacturing duty drawback program. If I need to explain what the term manufacturing means, I think we're in trouble. All kidding aside, though, there are manufacturing processes that are quite questionable. Which means that when it comes to determining what type of drawback it in fact is, such cases fall into what is known as a "gray area". But for the sake of this article, we are discussing "true" manufacturing-as in an item comes into the country, is used in the manufacture of another completely new item, and is then exported.

As with the unused drawback program, you will again start by approaching either your import broker or your cost accounting department, asking for the total annual amount of duty paid minus any broker fees and freight changes. And then you will want to speak with your sales department to find out the percentage of annual sales that are exported.

But unlike the process for calculating potential unused drawback, you also need a third number. That is, you will need to pinpoint the percentage of imported components used in the exported goods. Where do you find this information? Ask your Materials Manager. Why? Since he or she manages the materials, who better to tell you how many imports were used in the manufacturing of goods that were eventually exported?

Now you have gathered the necessary figures to determine your potential manufacturing duty drawback. So you're ready to crunch some numbers.

Once again you will multiply the annual import duties paid figure by the percentage of annual sales that are exported. Then take that dollar amount and multiply it by the percentage of imported components that were used in the exported goods.

The result of this procedure will provide you with the estimated annual duty refund. Once again, should your company's imports and sales have been fairly steady over the last several years, you can assume your potential retroactive duty refund would be in the neighborhood of three times your annual estimate.

Reiterating the fact that these figures are only estimates, your particular situation may vary.

Worst case example: Take a company that pays $1 million per year in duty, with exports being 50% of its sales. You would then think that it would be entitled to a duty refund of $500,000 for that year.

But what if all of the export sales were made up of non-imported items? And the non-imported items were not the same like and kind as the exported items? You could have zero drawback potential. This is the sort of scenario you need to be aware of, so be sure you do your homework.

More frequently, though, drawback is more likely an avenue for exporters than not. With over $2 billion worth of refunds sitting out there uncaptured, it certainly makes sense to at least explore the possibility! Try your hand at the above calculations, and should you find that duty drawback is a "potential" reality bingo. Should you need further assistance, whether in locating the necessary information or just a guiding hand to lead you in the right direction, talk to a drawback specialist. Don't wait another day-time is money.

For additional assistance in calculating your duty drawback potential go to the Dutycalc-ulator.

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Be Alert With Project Shield America

The agent's objective was to acquaint our office with one of the government's major enforcement programs. It is called Project Shield America and has actually been around since 1981. Project Shield America is designed to stop the illegal movement of U. S. munitions and sensitive technology, both civil and military, to restricted destinations around the world that pose a threat to our nation and its allies' security (those "restricted destinations" include terrorist organizations). With all that's happening in the world today, Customs sees fit to reacquaint the export community with this highly effective program.

Customs is sending agents out to customs brokers and companies working within the export community to alert them to this ongoing problem. How bad is it? The monetary value of illegal exports is in the range of $10 million annually.

Although this figure is high, it is really secondary to the potential military value these products have. In the wrong hands they can jeopardize both our country's security and that of our allies.

The technology most in demand by these rogue organizations includes all modern technology used to manufacture microelectronics, computers, digital electronic components, and signal processing systems. Such organizations are also looking to pillage our technology for aircraft, missile, and tactical weapon delivery systems-not to mention the blueprints for constructing nuclear weapons and biological and chemical warfare agents.

So what is it that we can do to help the government stop the illegal exportation of highly sensitive technology?

Simply put, keep informed. Know who you are working with-from the employees you hire to the customers you do business with. Be certain that the specialists you work with are sufficiently knowledgeable and follow the appropriate screening and licensing procedures. Make sure your employees understand their legal obligation to keep sensitive information confidential. Finally, know your customers and their typical purchasing routines. I know this all sounds ominous, but by being alert to any peculiar behavior we can all assist in the suppression of these illegal exports.

Project Shield America was designed to protect the technical accomplishments resulting from good old American ingenuity and labor. We all have a job to protect what is "ours" by making certain no one steals those ideas and in turn gains an advantage over us (military or otherwise).

Bottom line: Should you see or hear of any unusual export activity, report it to
U.S. Customs as soon as possible.

Click here for more information on Project Shield America.

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Drawback: What is and isn’t Eligible for Refund?

Starting the Drawback Application Process So you've determined that you have duty refund potential and you're ready to start the application process...where do you begin? Depending on what type of drawback you will be filing, there are several applications that need to be completed and submitted to Customs for approval. Check out Customs' link to sample applications: including the Application for Drawback Waiver of Prior Notice of Intent to Export or Destroy, the Application for Drawback Accelerated Payment, the Application for Drawback Compliance Program and the Application for Drawback One Time Waiver.

So, don't find out the hard way. Here is a list of the most common types of duty and fees that are and are not eligible for refund. (Remember that Customs keeps 1 percent for themselves, too.)

> Regular Duties - Almost always eligible under most circumstances.
> MPF - This fee is now eligible and, in fact, Customs is redesigning the drawback form to more efficiently accommodate MPF claims.
> IR TAX - Alcoholic beverages carry a high tax that is available via Customs.

> IR TAX - Tobacco also carries a high tax. But to claim the tax for refund, you have to apply to
not only Customs, but the BATF as well.
> 201 Duties - aEligible as of this writing. One example: The recent steel tariffs.
> Chapter 99 Duties - Almost always eligible. If in doubt on a particular HTSUS, contact a
drawback center or specialist just to be sure.
> ADA Antidumping - Antidumping used to be allowed, but for many years has not been available.
> CVD - Same as ADA (not eligible).
> Penalties - Penalties are not refundable via drawback. Even a TIB breach (which is based on
110% of the normal duty) isn't eligible, because it's a penalty.
> HMF - Harbor maintenance fee isn’t refundable as of this writing.

Remember that only the eligible duty that is actually paid will be considered for drawback. If an entry is protested between the time of entry and drawback claim filing, that fact needs to be declared and factored into the drawback claim. This goes for Post entry amendments, SILS, and even voluntary tenders and prior disclosures. Customs looks very disfavorably toward an exporter that has gained a refund via protest, then attempts to do so again via drawback.

There are many changes now being discussed with trade groups concerning drawback and we expect to see some significant modifications in the next few years. Stay tuned...

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Industry News & Events

World Trade Institute - Drawback Workshop
June 5-6, 2003
Chicago, IL
This two-day workshop program is designed to introduce duty drawback to importers unfamiliar with its advantages and potential pitfalls. Emphasis is placed on identifying eligible import activities, legal requirements, drawback on unused merchandise and rejected merchandise.
More information

World Trade Institute - Customs Audit and Security Seminar
July 28, 2003
New York, NY
This intensive one-day session is specifically designed to help companies function in the developing U.S. Customs' audit environment by analyzing the agency's new Focused Assessment, Importer Self-Assessment, and Customs-Trade Partnership Against Terrorism (C-TPAT) security programs.
More information

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