To file or not to file? That is the question which many companies and brokers are weighing when considering filing their duty drawback claims this time of year. With the new duty drawback simplification law looming and drawback filing in ACE on the horizon, the decision on whether it is better to wait to file drawback claims under the new law or maximize current opportunities needs to be decided for each drawback claimant.
When deciding whether to wait for the new law or not, there are several items to consider:
- Claimant’s goals and expectations
Is it more valuable for the claimant to maximize the earning potential now or to see possibly greater returns a year down the road? Often companies do not have the luxury of waiting for potential drawback revenue to come in, especially when the finance department is constantly receiving that money!
- New duty drawback time frames
Under the current law, the time frames vary depending on drawback type. For unused merchandise drawback, a claimant has three years to match an import to an export, and another three years from export to file a claim. For manufacturing drawback, a claimant has 5 years from imports which were received and used in manufacturing a finished article to export the article and three years to file a claim. For substitution of petroleum derivatives, claimants have a 180-day window from import entry date to match to a qualifying export and three years to file a claim.
With the new drawback simplification law, there is a blanket 5 years from import to date of filing of a drawback claim across all drawback types. This appears to reduce the time frame for unused merchandise and manufacturing drawback claimants, but it expands the opportunities of the exports that may have expired under the current law, opening them up again for eligibility under the new law.
If the claimant is consistently running against the clock to maximize the exports they can claim, filing a claim now to get ahead may be beneficial to maximize those imports that will expire under the new law.
- Expanded drawback recovery opportunities
If you have read our recent articles, seen us at various trade associations, or even participated in one of our webinars or seminars, you are well aware of the potential implications of the new drawback law on your drawback recovery. The new drawback law has increased internal opportunities for claimants through the expansion of substitution parameters to the 8-digit HTS; for unused merchandise, there’s no more need to match by style, color, and size or even part number, if an import and export that fall within the appropriate time periods match on an 8-digit HTS number, you have a match for drawback. This is a great opportunity, with one condition: if your 8-digit HTS description starts with the word “other”, you will have to expand to a the 10-digit HTS and if that description starts with the word “other”, you cannot make a match for unused substitution and will need to claim under unused merchandise direct identification through either a specific or alternative accounting method.
If your drawback program has many classifications that would be considered “other, other”, then the new drawback law might be limiting for unused substitution and it may be best to maximize your current opportunities now.
- New drawback calculation
For unused substitution claimants, the new way to claim drawback will likely mean an increase to their drawback programs, with the understanding that the new law introduces a provision in the drawback calculation that takes into account the value of the export. If your company often exports to related parties at a discount, provides samples to customers at reduced rates, or has varying values between similar products (for example entry level car compared to a sports car), you will need to determine if the expanded opportunity of substitution outweighs the potential “lesser of” provision of the new drawback law.
These decisions are not easy to make on your own; we recommend that you contact us to discuss your options. Drawback simplification is coming, and we want to ensure that you’re maximizing your opportunities!
