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US Court of International Trade May Compel Issuance of TFTEA Drawback Regulations

The U.S. Court of International Trade ruled on 29 June that if CBP did not issue by 5 July regulations implementing the changes to drawback law made by the Trade Facilitation and Trade Enforcement Act it would create its own deadline and remedy for claimants (no regulations had been issued as of 6 July, so the deadline has passed). However, the CIT declined to require that CBP pay accelerated payment to claimants filing under the TFTEA changes.

Drawback is the refund of up to 99 percent of certain duties, internal revenue taxes and fees collected on imports once either the imported substituted product or the article that has been manufactured from that product has been exported or destroyed. TFTEA made numerous changes to simplify the drawback law, including standardising the time frames for filing claims and modernising recordkeeping requirements. TFTEA also allows substitution drawback claims based on goods within the same eight-digit HTSUS number as well as claims against imports and exports that are within five years of the date of the claim.

Drawback claimants have been able to utilise these statutory changes since they took effect on 24 February. Without accelerated payment, however, claimants have not seen an immediate benefit from filing under the new law. CBP has asserted that it cannot provide accelerated payment until calculation provisions under the implementing regulations become final. TFTEA required CBP to issue those regulations by 24 February but the rules have been held up in inter-agency review, leaving claimants in limbo. In response, a number of companies filed a lawsuit seeking to force CBP to, among other things, pay accelerated payment to drawback claimants filing under TFTEA and meet the statutory mandate to issue regulations.  

While CIT judge Jane Restani declined to order CBP to pay accelerated drawback, she did say that the agency should issue a proposed rule by 5 July. If that did not happen, she vowed to set forth a briefing schedule allowing the plaintiffs to recommend remedies she could consider, such as compelling the issuance of the regulations by a particular date. While CBP has not met the 5 July deadline, as the proposed rule is still under review by the U.S. Office of Management and Budget, it may be able to do so by 27 July when briefs are due to the CIT.

Restani also said that if CBP could not issue the entire regulatory package by 5 July it should at least issue regulations for important pieces of the package that satisfy the TFTEA mandate, such as those addressing the calculation methodology. The plaintiffs had argued that the proposed regulatory package included far more than was necessary to implement the TFTEA changes, resulting in a purported 450-page document that was taking too long to wrap up the inter-agency process.

It is also unclear when the TFTEA drawback regulations may become final. CBP has stated that it will not liquidate or pay accelerated payment until final regulations are issued, which will not occur until the agency has provided a notice and comment period and reviewed any input received. The CIT decision does not address how long that process may take.

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