On December 18, 2018, the US Customs and Border Protection published a Federal Register Notice promulgating modernized drawback rules as directed by the Trade Facilitation and Trade Enforcement Act of 2015. The new regulations liberalize the merchandise substitution standards, simplify recordkeeping requirements, extend and standardize filing timelines and require electronic filing of drawback claims. Additionally, the FRN introduces the limitations of substitution drawback claims with respect to federal excise tax.
TFTEA expands on drawback-eligible exports from both an expanded timeline and substitution perspective. These changes potentially offer new opportunities for companies importing and exporting similar products that previously would not have met a commercially interchangeable test.
Some of the industries that should re-evaluate their drawback strategy include automotive, alcoholic beverages, textiles and apparel, petroleum and petrochemical products. Similarly, retailers of virtually all consumer products whose drawback eligibility was previously limited by goods returned by consumers can now explore drawback eligibility under the new regulations. This re-evaluation should not just focus on customs duties but also should include other federal taxes such as excise taxes.