New Order for an Old Program
The new drawback regulations have been out for a bit over a year now, but there are still wide misconceptions, and in some cases a decided lack of understanding. The rules of the game have changed, and in some scenarios, quite dramatically. It is our intent to illuminate some of these changes in broad terms and encourage you to seek specific answers for your particular situation. The new regulations are available at the Customs web site, and in hard copy of the Federal Register (vol. 63, Number 43).
Any discussion of these new regulations should include the Voluntary Compliance Program. This is a new concept for Customs in that it allows a drawback claimant to make application for and be certified as being in compliance with the rules for drawback. The benefits for participation to Customs include post audit and review on an account level.
The benefits to the claimant are essentially a reduction of penalties when something does go wrong. For example, the first violation will mean a warning letter and the second calls for 20% of loss as opposed to a 50% loss for no-participants. There are other important benefits to participation, but these are not outlined in the new regulations. They revolve around the core requirements, which are:
- Demonstrate full understanding of the legal requirements for claiming drawback
- Develop and implement procedures for involved employees. This will fully explain the process of drawback and the company's commitment to accurate claim preparation and record retention.
- A specific individual or individuals are responsible for all things drawback
- Written procedures for claim preparation is place for Customs notification of any significant changes or violation of the established compliance program
- Have a record maintenance procedure for required documentation.
As you can see, certification ensures that the claimant is entitled to drawback by fully understanding and agreeing to comply with the rules.
Non-certified companies, or those companies that have not gone through the process may not have enough ability or commitment to compliance in order to pass and audit, when that occurs. If that happens, drawback will likely need to be repaid to the Government, with interest and penalties. Even if you do not intent to go through with a drawback certification process with Customs, much of what is required should still be thoroughly reviewed to gain a better knowledge of the companies overall compliance standard. The compliance program is not open to Brokers at this time, but they may tag on to the program on behalf of a particular client. The application process is complex but well structured. If you are interested in participating, contact Customs for further details.
Did you know......that retroactive waiver of prior notice (WPN) is as extinct as the brontosaurus? If you had it in the past and didn't file the required application by April 6th to extend it to the future, WPN is gone. Your reapplication can go in after that magic data, but any claims for exports yet unfiled will not qualify for drawback. Only exports on or after the date of approval will be drawback eligible. If you have not had previous WPN and have not claimed drawback in the past, Customs had a special program allowing a one-time retroactive file, but it isn't automatic and must be requested in writing with a complex application process involved. Again, this application process should not be attempted without the help of an export.
Finally, a word about record maintenance and retention periods. Drawback records must be kept for three years from the date of payment. This record period cam go 4, 5, 6 years or more from import. It is possible that the maximum period of records is over 11 years in the extreme. Before embarking on any drawback safari, keep an eye on the target. Failure to keep the right records, for the right amount of time can mean the need to repay the refund back to Customs with interest and very likely a penalty to boot. What's the point in going to all this trouble, if in the end the claimant just has to give it all back?
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