#### April 4, 2005

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#### FO:TCF:EDM:SM SLH

MEMORANDUM FOR: DIRECTORS, FIELD OPERATIONS

FROM: Acting Executive Director, Trade Compliance and Facilitation

Office of Field Operations

SUBJECT: Drawback Changes Enacted by the Miscellaneous Trade and
Technical Corrections Act of 2004

PLEASE PASS THIS INFORMATION TO PORT DIRECTORS, ASSISTANT PORT
DIRECTORS, DRAWBACK SPECIALISTS, IMPORT SPECIALISTS, ENTRY SPECIALISTS,
CBP OFFICERS, IMPORTERS, EXPORTERS, BROKERS, CARRIERS, AND ANY OTHER
INTERESTED PARTIES.

The purpose of this memorandum is to provide U.S. Customs and Border
Protection (CBP) port personnel additional information concerning
changes to drawback procedures described in the December 15, 2004
memorandum (TC# 05-0431) outlining the Miscellaneous Trade and Technical
Corrections Act of 2004. Unless otherwise specified in this Memorandum,
the modifications to the drawback statute are effective for claims filed
on or after December 3, 2004, and on claims where liquidation was not
final on December 3, 2004.

BACKGROUND:

The Miscellaneous Trade and Technical Corrections Act of 2004 (The Act)
was signed into law by the President on December 3, 2004 as Public Law
108-429. The Act made various changes to the drawback procedures. They
are as follows:

## Subtitle B --Other Tariff Provisions. Chapter 2 -- Miscellaneous Provisions.

# 

# Section 1556 -- Duty Drawback For Certain Articles. 

Amends statutory language under 19 U.S.C. 1313 by adding a new
subsection 1313(y). This new provision allows for duty drawback on
articles described in 1313(j)(1), that are entered into the Customs
territory of the United States Virgin Islands, American Samoa, Wake
Island, Midway Islands, Kingman Reef, Guam, Canton Island, Enderbury
Island, Johnston Island, or Palmyra Island. This provision is effective
December 18, 2004 and only applies to entries filed on or after that
date.

## 

## 

## 

## 

## 

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[Section 1557 -- Unused Merchandise Drawback.]{.underline}

Amends statutory language, [19 U.S.C. 1313(j),]{.underline} to allow for
drawback on 99% of harbor maintenance tax (HMT) and any other tax which
was paid upon entry or importation of merchandise into the United
States. Concurrently, this amendment provides for drawback of HMT under
1313(p)(2)(A)(iii) and 1313(p)(2)(A)(iv). Due to system limitations in
ACS, HMT and any other tax, like MPF, can only be refunded at time of
liquidation and can not be issued via accelerated payment. A claim for
refund of these taxes must be submitted to CBP manually and can not be
transmitted electronically.

[Section 1563 -- Modification Of Provisions Relating To Drawback
Claims.]{.underline}

Amends statutory language:

[19 U.S.C. 1313(c)]{.underline}, to allow for drawback upon the
exportation or destruction of imported merchandise, entered or withdrawn
for consumption, where such merchandise was ultimately sold at retail by
the importer, or person who received that merchandise from the importer
under a certificate of delivery, and returned to and accepted by the
importer for any reason.

1313(c) is further modified to change the time frame for exportation or
destruction; merchandise must be exported or destroyed under Customs
supervision within 3 years from the date of importation or withdrawal.

Additionally, 1313(c) is modified to allow for substitution where the
imported and exported merchandise is of the same eight-digit
classification number and specific product identifier (such as part
number, SKU, or product code) and the designated import entry was made
within one year before the export or destruction

The final change to 1313(c) is in regards to certificates of delivery. A
certificate of delivery is not required when the claimant and importer
are the same party, or if the claimant is a successor to the importer
under 1313(s)(3). All other relationships require the submission of a
certificate of delivery for a valid drawback claim.

[19 U.S.C. 1313(i)]{.underline}, by striking "No" to include the wording
"unless otherwise provided for in this section, no." Then, adding ", or
destroyed under the Supervision of the Customs Service" after
"exported." The insertion of the aforementioned words is to provide for
destruction within five years after importation, where the statute does
not allow for destruction or provide for a specific timeframe for
destruction.

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[19 U.S.C. 1313(k)]{.underline}, to insert a new paragraph that allows
for a "drawback product" to be used in tradeoff. The use of any domestic
merchandise acquired in exchange for a drawback product of the same kind
and quality shall be treated as use of such drawback product if no
certificate of delivery or certificate of manufacture and delivery
pertaining to such drawback product is used; other than a document that
establishes the product's manufacture and delivery but does not
establish drawback rights. A "drawback product" is defined as any
domestically produced product, manufactured with imported or any other
merchandise (whether imported or domestic) of the same kind and quality,
that is subject to drawback.

The changes under 1313(k) will impact the Trade and the record keeping
necessary for a 1313(k) claim where a domestic product is used in
trade-off.

[19 U.S.C. 1313(q)]{.underline}, to allow for drawback of packing
material only upon exportation of such material. The destruction of
packing material no longer qualifies for drawback.

P.L. 108-429 further amends 1313(q) to allow for drawback on packing
material, even when such packing material contains articles or
merchandise that is not eligible for drawback or does not contain any
articles or merchandise.

Additionally, the use of any packing material for its intended purpose
prior to exportation shall not be treated as a "use" of such packing
material for purposes of applying 19 U.S.C. 1313(a), (b), (c), or
(j)(1)(B) or (j)(2)(C)(i).

[19 U.S.C. 1504]{.underline}, to allow for deem liquidation of drawback
claims, as well as the extension of the period in which to liquidate
such claims. This provision is retroactive and pertains to claims
currently being held by a drawback office.

Therefore, any unliquidated drawback claim where all underlying
consumption entries which are designated on the claim and/or on the
underlying Certificates of Manufacture to that claim were liquidated as
of December 3, 2004, will deem liquidate on December 3, 2005, unless CBP
liquidates such claims beforehand. All claims filed on or after December
3, 2004, will deem liquidate 1 year from the date of such claim, if all
underlying import entries designated on the claim and/or on the
underlying Certificates of Manufacture to that claim have liquidated or
if the claimant submits the appropriate waiver(s) within the 1-year from
date of filing time-period, unless CBP liquidates such claims
beforehand.

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In order to expedite the liquidation of a claim when the underlying
import entries designated on the claim and/or on the underlying
Certificates of Manufacture to that claim have not liquidated, a waiver
of any right to payment or refund under other provisions of law, to the
extent that the estimated duties on the unliquidated import entry are
included in the drawback claim for which drawback on estimated duties is
requested must be filed by the claimant and any other party responsible
for the payment of liquidated import duties. There are no blanket
waivers. Waivers are to be submitted on a per claim basis.

If a claimant does not supply a waiver within the one-year from date of
claim filing time-frame and the underlying consumption entries
designated on the claim and/or on the underlying Certificates of
Manufacture to that claim do not liquidate and become final within that
one-year period, then the drawback claim will not deem liquidate.
Although these claims will not deem liquidate, drawback offices need to
work these claims as expeditiously as possible.

Please note that the new protest provision applies to drawback claims.
Information on the revisions to the protest process can be found in the
December 15, 2004, Memorandum summarizing the Miscellaneous Trade and
Technical Corrections Act of 2004, as well as in the December 17, 2004
Memorandum on the reconciliation and protest changes that resulted due
to the Act.

Furthermore, the new protest provisions affect when an underlying
consumption entry becomes final. If the underlying consumption entry was
filed prior to December 18, 2004, then the consumption entry is subject
to the 90-day protest period and is afforded the 520(c) period.
Therefore, the underlying consumption entry is not considered to be
final until, at a minimum, it is 455 days past the date of liquidation.
If the underlying consumption entry is flagged for reconciliation, the
reconciliation entry must be liquidated and final. Therefore, the
underlying consumption entry is not considered to be final until 455
days past the liquidation of the reconciliation entry. The 455-day time
frame is the minimum standard. If the underlying consumption entry or
reconciliation entry is subject to review by the Court, then the entry
is not considered final until the Court has rendered a decision, or if
the 520(c) decision is protested, then the entry is not considered final
until the applicable time-frames have expired.

If the underlying consumption entry was filed on or after December 18,
2004, then the consumption entry is not considered final until, at a
minimum, the 180-day protest period has expired. If the underlying
consumption entry is flagged for reconciliation, the reconciliation
entry must be liquidated and final. Therefore, the underlying
consumption entry is not considered to be final until 180 days past the
liquidation of the reconciliation entry. The 180-day time frame is the
minimum standard, if the underlying consumption entry or reconciliation
entry is subject to review by the Court, then the entry is not
considered final until the Court has rendered a decision.

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The period in which to liquidate a drawback claim may be extended, up to
4 years from the date of entry, if additional information is required to
determine the proper drawback amount or at the request of the drawback
claimant. Any drawback claim on file that will deem liquidate on
December 3, 2005, that is older than December 3, 2001, can not be
extended due to the extension time frame of 4 years.

Please be aware that extensions are completed on a yearly basis up to
the 4^th^ year and can only be done with just cause. Therefore, at a
minimum, a yearly review must be completed on a claim to verify that
additional information is still required before the extension can be
processed. Failure to extend a claim will result in a deem liquidation
when the claim was eligible for liquidation on December 3, 2004 or the
appropriate waiver was filed prior to December 3, 2005 or when one-year
from the claim filing all of the underlying consumption entries were
liquidated and final or the appropriate waiver was filed within one-year
of filing the claim.

The deem liquidation provision allows for claims to deem liquidate at
the drawback amount asserted by the claimant. Therefore, it is
imperative that all drawback offices immediately begin to review and
liquidate claims that are scheduled to deem liquidate on December 3,
2005 to ensure that claims are not liquidated for more money than a
claimant is entitled to receive. If a claim does not get reviewed prior
to deem liquidation; drawback offices are still responsible for ensuring
that the claim was not paid for more money than the claimant was
entitled to receive. If the post-liquidation claim review reveals that
the claimant did receive additional monies that they were not entitled
to, drawback offices are to consider whether to pursue a penalty under
19 U.S.C. 1593a, the False Claims Act, or other appropriate authority.

Drawback offices are instructed to request additional information,
whenever necessary. If a claimant does not respond to such request
within the allotted time frame, drawback offices are instructed to
liquidate such claims as a denied drawback or partial denied drawback,
as appropriate. Drawback offices must ensure that such claims are not
held any longer than necessary. When extra time is requested by a
claimant to submit the additional information, stringent time frames
must be mandated and adhered to.

The Automated Commercial System (ACS) will be updated to allow for the
deem liquidation of drawback. Additional reports will need to be
generated to ensure that drawback claims do not deem liquidate.
Additionally, a flag for waivers will be added in ACS. As the ACS
programming is completed, additional instructions will be issued.

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Questions from the importing and exporting community regarding these
changes will be referred to the appropriate drawback office. Questions
concerning this issuance should be directed to Ms. Sherri Hoffman,
Chief, Entry and Drawback, at (202) 344-2684 or via e-mail.

/S/

Lawrence J. Rosenzweig