Account Management Procedures to Eliminate Risk

Importers have legal responsibility for properly classifying merchandise, declaring its value, verifying admissibility, and meeting any other legal requirements including those enforced by Participating Government Agencies (PGA)s. An importer without a good plan in place to ensure merchandise is entered accurately and correctly puts themselves at great of incurring significant monetary cost through fines, supply chain disruption, or most commonly due to customs liquidation of their entries at a much higher unanticipated duty rate. City Business Brokerage Account Management Plan works closely with customers to setup a solid data base to ensure consistent entry of merchandise. We setup risk based analysis and encourage customers to provide appropriate attention to high risk areas, but will also advise when we believe that risk is low and certain assumptions may be appropriate.

This document applies to “Same Condition Drawback”  Merchandise that is exported in the same condition it was imported.  Some allowances are allowed for minor operations such as cleaning, sorting, labeling, and repackaging.  Exported merchandise claimed for drawback must be identifiable with a specific import entry or through using an accepted inventory accounting method, identifiable with a specific origin and vendor.

The normal process to file Drawback with US Customs and Border Protection (CBP) requires notifying CBP and making merchandise available for Inspection at the Port of Export prior being exported from the United States..  

For most firms, this is not practical.  This document does not address this process.  Another options exists:

A process exists whereby you can apply for Waiver of Prior Notice on Drawback Claims.  This allows firms to file drawbacks based on utilizing their internal inventory records if approved by CBP..

A process also exists to allow a firm to apply for a 1 Time Waiver of Past Prior Notice.  This authorizes  a firm to claim drawback on duties paid up to 5 years ago if sufficient records can be provided.

The Application process for both of the above requires the importer to provide CBP with a clear explanation of their inventory management program for imported merchandise.  Further, it must be proven that the system put in place will assure that all funds paid on merchandise claimed for drawback are equal to or less than the amount paid to CBP in duties at the time of entry.

In addition to a description of the process, sample documentation must be provided  showing every stop of the inventory management process. This includes copies of purchase orders, payment receipts, bills of lading, merchandise receipts, inventory withdrawal, foreign customs entries, and more.

A drawback claim is essentially a report to CBP that lists all merchandise exported for drawback, it associates all merchandise with an import entry and assigns a drawback value to the exported merchandise.

Ideally, all merchandise can be identified with merchandise imported on a specific import entry.

If this is not possible, there are several inventory accounting methods that can be used to assign the exported merchandise to an import entry, even if the exact entry of the exported merchandise cannot be identified.

A drawback process provides significant financial benefits to firms that have significant funds  they can recover through the drawback process. If the amount recoverable is minimal, the process of putting the drawback program together could exceed the amount of funds that are recoverable.

As a broker, we need significant information to put a drawback program together.  Once we have the necessary information, we will do all the work required, but it can often be very time consuming for the importer to put together the information we need to apply for the program and file the claims.

Some Importers have excellent data records that can be quickly reconciled to provide what is necessary for drawback purposes.  For others, it will take a significant amount of time to get all necessary information together.

We estimate it takes the average firm 40 hours of their own time to gather required information.  

For the typical firm, drawback is worthwhile if the amount of duties refunded are at least $7,500 to $10,000.  For firms with records that are extremely organized, this figure may be less.

Applications for waiver of drawback require approximately 6 months for processing after acceptance by CBP.

Claims can be filed in advance of approval.  Once approval occurs, all claims are processed within a period of about 60 days.  Future claims filed after approval will have a similar processing time.

Drawback claims take over one year to liquidate after acceptance by Customs.  Refunds of duties paid do not occur until after liquidation occurs, unless the importer applies for and is accepted to receive Accelerated Payment Processing.

Accelerated Payment Processing allows claims to be paid upon acceptance, but also requires purchasing and filing a bond in an amount equal to or greater than the drawback payment issued by CBP.