Modernized Drawback

Federal RegisterAug 2, 2018

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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 113, 181, 190, and 191

[USCBP-2018-0029]

RIN 1515-AE23

Modernized Drawback

AGENCY:

U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document proposes to amend U.S. Customs and Border Protection (CBP) regulations to implement changes to the drawback regulations as directed by the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). These proposed regulations establish a new process for drawback pursuant to TFTEA which liberalizes the merchandise substitution standard, simplifies recordkeeping requirements, extends and standardizes timelines for filing drawback claims, and requires the electronic filing of drawback claims. TFTEA allows a transition period wherein drawback claimants will have the choice between filing claims under the existing process detailed in the current regulations or filing claims under the proposed new process. This document explains how filings during the transition period will work, discusses the interim policy guidance procedures for filing claims prior to these regulations becoming final, and proposes to make TFTEA-related changes, dealing with bonds, regarding joint and several liability for the importer of the goods and the drawback claimant, and technical corrections and conforming changes to CBP regulations. This document also proposes to clarify the prohibition on the filing of a substitution drawback claim for internal revenue excise tax paid on imported merchandise in situations where no excise tax was paid upon the substituted merchandise; or the substituted merchandise is the subject of a different claim for refund or drawback of tax under any provision of the Internal Revenue Code. CBP is proposing these amendments regarding excise taxes to protect the revenue by clarifying the relationship between drawback claims and Federal excise tax liability. Further, CBP proposes to add a basic importation and entry bond condition to foster compliance.

DATES:

Comments must be received on or before September 17, 2018.

ADDRESSES:

You may submit comments, identified by docket number USCBP-2018-0029, by

one

of the following methods:

•

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

•

Mail:

Trade and Commercial Regulations Branch, Regulations and Rulings, Office of Trade, U.S. Customs and Border Protection, 90 K Street NE, 10th Floor, Washington, DC 20229-1177.

Instructions:

All submissions received must include the agency name and docket title for this rulemaking, and must reference docket number USCBP-2018-0029 . All comments received will be posted without change to

http://www.regulations.gov,

including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the

SUPPLEMENTARY INFORMATION

section of the document.

Docket:

For access to the docket or to read background documents or comments received, go to

http://www.regulations.gov.

Submitted comments may also be inspected during business days between the hours of 9:00 a.m. and 4:30 p.m. at the Office of Trade, Regulations and Rulings, U.S. Customs and Border Protection, 90 K Street NE, 10th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Mr. Joseph Clark at (202) 325-0118.

FOR FURTHER INFORMATION CONTACT:

Randy Mitchell, U.S. Customs and Border Protection, Office of Trade, Trade Policy and Programs, 202-863-6532,

randy.mitchell@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

Public Participation

Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of the proposed rule. CBP also invites comments that relate to the economic, environmental, or federalism effects that might result from this proposed rulemaking. Comments that will provide the most assistance to CBP will reference a specific portion of the proposed rulemaking, explain the reason for any recommended change, and include data, information, or authority to support such recommended change.

See

ADDRESSES

above for information on how to submit comments.

Background

Table of Contents

I. Authority

II. Modernized Drawback

A. TFTEA-Drawback Modernization Overview

For purposes of this document, “TFTEA-Drawback” is the term generally used to refer to drawback under section 1313, as amended by the Trade Facilitation and Trade Enforcement Act of 2015.

1. Transition Period (February 24, 2018-February 23, 2019)

(a) Claims may be filed under the existing drawback process or the TFTEA-Drawback process during the transition period.

(b) TFTEA-Drawback substitution claims cannot designate imported merchandise if the associated entry summary was already included on a drawback claim filed prior to February 24, 2018.

2. Filing Requirements and Deadline

(a) All TFTEA-Drawback claims are required to be submitted electronically in ACE.

(b) The import entry summary line item must be identified for all imported merchandise for TFTEA-Drawback claims.

(c) TFTEA-Drawback claims have a uniform five-year filing deadline from the date of importation of the designated imported merchandise.

3. HTSUS-Based Substitution Standards

(a) TFTEA-Drawback substitution claims for most manufacturing and unused merchandise have new standards based on HTSUS classification.

(b) The new standards do not apply to certain claims if substitution is based upon alternative rules (source material for sought chemical elements, wine, and finished petroleum derivatives) or if pursuant to NAFTA drawback.

4. “Lesser of” Rule for Substitution Claims

(a) TFTEA-Drawback substitution claims are generally subject to a “lesser of” rule regarding the amount of duties, taxes, and fees to be refunded where the amount to be refunded will be equal to 99 percent of the lesser of (1) the amount of duties, taxes, and fees paid with respect to the imported merchandise; or (2) the amount of duties, taxes, and fees that would apply to the substituted merchandise if the substituted merchandise were imported.

(b) The TFTEA-Drawback “lesser of” rule does not apply to certain claims if substitution is based upon alternative rules (wine and finished petroleum derivatives) or if pursuant to NAFTA drawback.

5. Expanded Scope and Calculation Methods for Refunds

(a) The scope of refunds for direct identification and substitution manufacturing drawback claims will be expanded from duties to also include taxes and fees.

(b) TFTEA-Drawback direct identification claim refunds will be calculated based on the invoice value of the designated imported merchandise, which is unchanged from the current requirements.

(c) TFTEA-Drawback substitution claim refunds will be calculated based on the per unit average value reported on the line from the entry summary that covered the designated imported merchandise.

(d) The imported merchandise reported on a single entry summary line item may not be the basis of a direct identification and a substitution claim under TFTEA-Drawback.

6. Recordkeeping and Proof of Export

(a)

Congress, through TFTEA, changed the starting date for the three-year time period for maintaining supporting records for drawback claims from the date of payment to the date of liquidation.

(b) Claimants for manufacturing drawback must provide a certification that they are in possession of the relevant bill of materials or formula for the manufactured goods, in lieu of actual submission thereof, for each claim filed.

(c) Congress, through TFTEA, permits the future use of an electronic export system as automated proof of export for drawback claims, but no system will be reliable for this purpose on February 24, 2018; and, proof of export must be documented in records that are summarized for the drawback claim.

7. Transfers of Merchandise and Liability

(a) Specific formats for certificates of delivery and specific formats for certificates of manufacture and delivery are no longer required when drawback products or other drawback-eligible goods are transferred between parties, although records of manufacture and transfer must be provided and maintained to support the drawback claim.

(b) The first drawback claim to be filed that designates any portion of imported merchandise from a given entry summary line item will determine the type of drawback eligibility for all other imported merchandise covered by that entry summary line item.

(c) Importers are now jointly and severally liable with drawback claimants for refunds associated with their imported merchandise, when designated on a drawback claim.

B. Filing a TFTEA-Drawback Claim

C. Required TFTEA-Drawback Certifications for Existing Manufacturing Rulings and Privileges

D. Federal Excise Tax and Substitution Drawback Claims

III. Explanation of Proposed Amendments

A. Proposed New Part 190

B. Other Conforming Amendments

C. Amendments Regarding Federal Excise Tax and Substitution Drawback Claims

IV. Statutory and Regulatory Requirements

A. Executive Order 13563 (Improving Regulation and Regulatory Review) and Executive Order 12866 (Regulatory Planning and Review)

B. Executive Order 13771 (Reducing Regulation and Controlling Regulatory Costs)

C. Regulatory Flexibility Act

D. Paperwork Reduction Act

V. Proposed Effective/Applicability Dates

VI. Signing Authority

List of Subjects

Proposed Amendments to the Regulations

I. Authority

Drawback, as provided for in section 313 of the Tariff Act of 1930, as amended (19 U.S.C. 1313), is the refund or remission, in whole or in part, of duties, taxes, and fees imposed and paid under Federal law upon importation or entry and due on the imported merchandise. Drawback is a privilege, not a right, subject to compliance with prescribed rules and regulations administered by U.S. Customs and Border Protection (CBP).

See

19 U.S.C. 1313(l). Currently, the implementing regulations regarding drawback are contained in part 191 of the CBP Regulations (title 19 of the Code of Federal Regulations (CFR) (19 CFR part 191)) and part 181 of the CBP Regulations (19 CFR part 181, subpart E, which pertains to drawback claims under the North American Free Trade Agreement (NAFTA)). Additionally, the Internal Revenue Code (IRC) of 1986, as amended (IRC), codified as title 26 of the United States Code (26 U.S.C.), is the main body of domestic statutory tax law of the United States and includes,

inter alia,

laws covering Federal excise taxes. Federal excise taxes are imposed on the manufacture and distribution of certain consumer goods, such as distilled spirits, wines, beer, tobacco products, imported taxable fuel and petroleum products. These Federal excise taxes, and certain limitations regarding drawback claims, are discussed below in the section titled

Federal Excise Tax and Substitution Drawback Claims.

In essence, a drawback claim is a request for a refund or remission of certain duties, taxes, and fees imposed upon importation which is filed with CBP after the merchandise or articles have been exported or destroyed. There are three main categories of drawback: Manufacturing drawback, rejected merchandise drawback, and unused merchandise drawback. Each main category of drawback is discussed, in turn, below.

Manufacturing drawback may be claimed on exported articles that have been manufactured or produced in the United States with imported duty-paid merchandise (direct identification manufacturing drawback), as well as on exported articles that have been manufactured or produced in the United States using domestic merchandise substituted for imported duty-paid merchandise meeting the statutory criteria (substitution manufacturing drawback).

See

19 U.S.C. 1313(a) and (b).

Rejected merchandise drawback may be available upon the exportation or destruction of imported duty-paid merchandise entered or withdrawn for consumption meeting the statutory criteria (

i.e.,

not conforming to sample or specifications, shipped without consent, determined to be defective at the time of import, or ultimately sold at retail and returned).

See

19 U.S.C. 1313(c).

Unused merchandise drawback may be claimed on imported merchandise that was exported or destroyed without having been used within the United States (direct identification unused merchandise drawback) as well as on goods that were exported or destroyed without being used that were substituted for imported merchandise meeting the appropriate criteria (substitution unused merchandise drawback).

See

19 U.S.C. 1313(j)(1) and (2).

Originally, as provided for in section 3 of the second Act of Congress, the Tariff Act of July 4, 1789, drawback of 99% of duties paid on imported merchandise (except distilled spirits) was permitted if the merchandise was exported within a year. However, drawback expanded over time to, among other things, provide for refunds of taxes and fees in some situations, allow for merchandise to be destroyed as an alternative to exportation, allow for the substitution of goods on which drawback could be claimed, and provide more than just a single year within which goods must be exported or destroyed.

Historically, drawback claims were submitted entirely on paper. While filing a claim entirely on paper is currently still an option, most drawback claims consist of two portions: The electronic transmission of the entry summary data for the designated imported merchandise via the CBP-authorized electronic data interchange (EDI); and the physical delivery of the CBP Form 7551 (Drawback Entry) and all required documents supporting the claim. For TFTEA-Drawback claims, filers will electronically transmit the drawback entry summary data and the entry summary data for the designated imported merchandise to CBP and will upload all documents required to support the claim. CBP has programmed the Automated Commercial Environment (ACE) for receiving

electronic drawback claims.

An electronically submitted drawback claim will not be complete until the claim has been successfully transmitted with all required documents uploaded. Information for filing a drawback entry is contained in the relevant CBP and Trade Automated Interface Requirements (CATAIR) document, which is available at:

https://www.cbp.gov/trade/ace/catair.

On February 9, 2018, in anticipation of delays regarding the proposal and finalization of the TFTEA-Drawback regulations, CBP posted interim policy guidance for filing TFTEA-Drawback claims in ACE during the transition period, available at:

https://www.cbp.gov/trade/programs-administration/entry-summary/ace-process-and-policy.

This interim policy guidance is discussed in detail below in section B, Filing a TFTEA-Drawback Claim.

Upon receipt of a claim, CBP conducts an initial review, which allows CBP the opportunity to work with claimants to ensure that the claim is complete and timely. Once a complete claim is timely filed, drawback specialists review the supporting documentation to ensure that the claim is properly documented and the amount of the drawback is correctly calculated. In many instances, it is necessary for CBP to contact claimants to obtain additional supporting documentation, such as when there are questions regarding the identity of the merchandise in transfer scenarios or to confirm the actual date and fact of exportation. If additional information is required, CBP will send a request for information (CBP Form 28) to the claimant through the ACE portal or through the end of the transition period by physically transmitting the request, depending upon the method used to file the claim was filed. Claimants generally respond via the method by which they were contacted. The increased use of electronic filing and correspondence will expedite claim processing and payment.

Requests for information do not toll the deadlines for timely filing. In any event, claimants are bound by the deadlines for claims with respect to filing, amending, and perfecting.

II. Modernized Drawback

A. TFTEA-Drawback Overview

On February 24, 2016, the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) (Pub. L. 114-125, 130 Stat. 122, February 24, 2016) was signed into law. Section 906 of TFTEA,

Drawback and Refunds,

made significant changes to the drawback laws which generally liberalize the standards for substituting merchandise, ease documentation requirements, extend and standardize timelines for filing drawback claims, and require electronic filing. However, while the changes are significant, on balance, section 906 of TFTEA left most of 19 U.S.C. 1313 unchanged. In other words, except for the significant changes brought about by Section 906 of TFTEA which are discussed below, most of the underlying processes involved in drawback remain unchanged. CBP also notes that additional steps to further automate or simplify the drawback claims process (which may or may not require regulatory changes) are anticipated to be announced subsequent to the implementation of the changes proposed in this document.

1. Transition Period (February 24, 2018-February 23, 2019)

(a) Claims may be filed under the existing drawback process or the TFTEA-Drawback process during the transition period.

Section 906(q)(3) of TFTEA provides for a transition period, beginning February 24, 2018, and ending February 23, 2019, during which claimants may file claims under the current drawback process and regulations detailed in part 191 (and under section 313 of the Tariff Act of 1930 as in effect on the day before TFTEA was signed into law) or under the amended statute and the implementing regulations (proposed part 190). February 23, 2019, is the last day of the transition period. During the transition period, claimants may choose which process to file on a claim-by-claim basis, meaning that claimants may file some claims under the old drawback process and some claims under the TFTEA-Drawback process throughout the entirety of the transition period. For purposes of this document, “TFTEA-Drawback” is the term generally used to refer to drawback under section 1313, as amended by TFTEA, and the implementing regulations contained in proposed Part 190.

While TFTEA-Drawback claims have been accepted in ACE since February 24, 2018, it is not until February 24, 2019, that all claims must be filed in compliance with the amended statute. Section II.B,

Filing a TFTEA-Drawback Claim,

below, contains information on how to file claims, including during the transition period under the interim policy guidance procedures announced February 8, 2018, in anticipation of the delay in finalizing these proposed regulations. Accordingly, the changes proposed in this document have no immediate effect on the drawback processes and requirements contained in part 191 of the CBP regulations. The transition period allows claimants the opportunity to choose which drawback regime to operate under while providing additional time, if needed, to complete any programming requirements for transmitting claims in ACE.

(b) TFTEA-Drawback substitution claims cannot designate imported merchandise if the associated entry summary was included on a drawback claim filed under part 191(and vice versa).

Claimants are precluded from filing TFTEA-Drawback substitution claims for imported merchandise associated with an entry summary if any other merchandise covered on that entry summary has been designated as the basis of a claim under part 191, including during the transition period. Nevertheless, claimants may continue to make claims (including substitution claims) under part 191 for these entries through the end of the transition period on February 23, 2019. Similarly, claimants are precluded from filing any drawback claims under part 191 for imported merchandise associated with an entry summary if any other merchandise covered on that entry summary has been designated as the basis of a TFTEA-Drawback substitution claim, including during the transition period. These limitations exist because drawback refund amounts are claimed at the entry summary header level (

i.e.,

the aggregate of all lines for which drawback was claimed on an entry) for claims under part 191 and CBP is unable to trace whether merchandise from a specific line on an entry summary was designated as the basis for a drawback claim under part 191.

2. New Filing Requirements and Deadline

(a) All TFTEA-Drawback claims are required to be submitted electronically in ACE.

While all TFTEA-Drawback claims must be filed electronically, it is not until February 24, 2019 (the first day after the end of the transition period), that all drawback claims must be filed electronically.

See

19 U.S.C. 1313(r)(3)(B). Consequently, claims filed under part 191 do not have to be filed electronically. Drawback claims must be filed electronically through a combination of transmitting certain information to the system and uploading supporting documentation.

By moving to a fully electronic environment as of February 24, 2019, CBP will be able to better validate all drawback claims based upon certain criteria specific to the type of drawback claim, including (but not limited to) the timeliness of the claim, the amount of refund claimed, and the suitability of

the merchandise involved. As a result, drawback claimants should benefit from expedited processing, review, and payment of claims.

(b) The import entry summary line item must be identified for all imported merchandise for TFTEA-Drawback claims.

Many of the benefits for drawback claim processing noted above are made possible by systematic enhancements in ACE concerning line item reporting. Line item reporting, which is required for all TFTEA-Drawback claims, requires claimants to provide certain relevant information for the designated imported merchandise on a drawback claim associated with the line item on an entry summary, including the tariff classification, quantity, and value, as well as the duties, taxes, and fees assessed thereon. Line item reporting will enable more system validations at the line level and will help ensure that CBP does not overpay refunds.

(c) TFTEA-Drawback claims have a uniform five-year filing deadline from the date of importation of the designated imported merchandise.

All TFTEA-Drawback claims must be filed not later than 5 years after the date the merchandise on which drawback is claimed was imported.

See

19 U.S.C. 1313(r)(1). Previously, section 1313 provided three-year filing deadlines beginning from different starting points for various types of claims (

e.g.,

three years from the receipt of imported merchandise or three years after the date of importation or withdrawal). This five-year deadline does not apply to claims filed under the existing drawback laws provided for in part 191 during the transition period.

3. HTSUS-Based Substitution Standards

(a) TFTEA-Drawback substitution claims for most manufacturing and unused merchandise have new standards based on HTSUS classification.

Section 906(b) provides a new standard for determining which merchandise may be substituted for imported merchandise as the basis for a substitution claim. This standard generally requires that both the imported merchandise and the exported merchandise be classified or classifiable within the same the 8-digit number in the Harmonized Tariff Schedule of the United States (HTSUS) classification. This standard replaces the “same kind and quality” and “commercially interchangeable” standards that were applied, respectively, to substitution manufacturing drawback claims (19 U.S.C. 1313(b)) and substitution unused merchandise drawback claims (19 U.S.C. 1313(j)(2)). Prior to TFTEA, determining whether goods were of the same kind and quality or were commercially interchangeable was a commodity-specific question that imposed burdens on claimants (to prove that the merchandise met the applicable standard) and on CBP (to research and rule on the eligibility of the goods to be substituted). The new standards will reduce much of the above-cited burdens by generally eliminating uncertainty as to the whether the standard for substitution has been met.

Substitution under 19 U.S.C. 1313(b), for manufacturing drawback claims, is subject to a new standard that requires the substituted merchandise used in manufacturing to be classifiable under the same 8-digit HTSUS subheading number as the designated imported merchandise. Similarly, substitution under 19 U.S.C. 1313(j)(2), for unused merchandise drawback claims, is subject to a new standard that requires the substituted merchandise to be classifiable under the same 8-digit HTSUS subheading number as the imported merchandise, except that there are restrictions with respect to HTSUS basket provisions (

i.e.,

subheadings with descriptions that begin with the term “other”). Specifically, and only for unused merchandise drawback claims, merchandise cannot be substituted if the 8-digit HTSUS subheading number begins with the term “other”, unless the imported merchandise and the substituted merchandise are both classifiable under the same 10-digit HTSUS statistical reporting number and the description for that 10-digit HTSUS statistical reporting number does not begin with the term “other”.

See

19 U.S.C. 1313(j)(5). In lieu of the HTSUS classification for unused merchandise drawback claims, substitution may also be based on the first 8 digits of the 10-digit Department of Commerce Schedule B number (the code for exporting goods from the United States).

See

19 U.S.C. 1313(j)(6).

Under the new substitution standards, the correct HTSUS classification is a critical aspect of the exercise of reasonable care. Accordingly, importers and drawback claimants should take note that prospective rulings on classification may be requested pursuant to 19 CFR 177.1(a)(1).

Certain types of merchandise are exempt from the new substitution standards discussed above. Substitution manufacturing claims for sought chemical elements have a special rule for source material regardless of the 8-digit HTSUS subheading number.

See

19 U.S.C. 1313(b)(4) (which defines a sought chemical element as either an element from the Periodic Table of Elements or a chemical compound consisting of such elements). Unused merchandise claims involving wine have a distinct standard involving price variations and color.

See

19 U.S.C. 1313(j)(2). Both manufacturing and unused merchandise drawback claims for finished petroleum products, if filed under 19 U.S.C. 1313(p), are already subject to more specific HTSUS-based substitution standards. Substitution manufacturing claims for NAFTA drawback remain subject to the “same kind and quality” standard in part 181, consistent with 19 U.S.C. 3333(a)(3).

4. “Lesser of” Rule for Substitution Claims

Section 906(g) of TFTEA provides for a “lesser of” rule, as a safeguard, to ensure that the revenue is protected in light of the liberalization and simplification of the standards for substitution drawback claims. The “lesser of” rule provides that the refund will be equal to 99 percent of the lesser of the amount of duties, taxes, and fees paid with respect to the imported merchandise and/or that would have been paid on the substituted merchandise had it been imported. In all claims subject to the “lesser of” rule, it is incumbent on the claimant to properly calculate the proper amount of the claimed refund.

For manufacturing drawback claims, the substituted merchandise is that which was used in manufacturing, in lieu of the designated imported merchandise, and the “lesser of” comparison is based upon the amount of duties, taxes, and fees that would apply to the substituted merchandise if it were imported (with this amount reduced by the value of the materials recovered during destruction, if applicable).

See

19 U.S.C. 1313(l)(2)(C). For unused merchandise drawback claims, the substituted merchandise is the exported or destroyed merchandise and the

“lesser of” comparison is based upon the amount of duties, taxes, and fees that would apply to the exported or destroyed merchandise if it were imported (with this amount reduced by the value of the materials recovered during destruction, if applicable).

See

19 U.S.C. 1313(l)(2)(B). TFTEA-Drawback claimants must provide the comparative value (

i.e.,

the “lesser of” comparison for either manufacturing drawback claims or for unused merchandise drawback claims), as part of a substitution claim.

The “lesser of” rule does not apply to claims for wine based on 19 U.S.C. 1313(j)(2) or to claims for finished petroleum products under 19 U.S.C. 1313(p).

See

19 U.S.C. 1313(l)(2)(D). Claims under these provisions are subject to other specific limitations. It is important to note that sought chemical elements are not exempt from the “lesser of” rule, even though there is a special rule for the substitution of source material.

See

19 U.S.C. 1313(b)(4). NAFTA drawback allows for substitution manufacturing claims (under certain conditions) and these claims are not subject to the “lesser of” rule discussed herein, but they remain subject to the discrete NAFTA drawback “lesser of duty” rule regarding the amount of duty owed as compared between the relevant countries.

See

19 U.S.C. 3333 and 19 CFR 181.44.

5. Expanded Scope and Calculation Methods for Refunds

(a) The scope of refunds for direct identification and substitution manufacturing drawback claims will be expanded from duties to also include taxes and fees.

Section 906(g) of TFTEA provides for the refund of taxes and fees, along with duties, for manufacturing drawback claims.

See

19 U.S.C. 1313(l)(2)(C). This is an expansion of the scope of refunds available for manufacturing drawback claims (19 U.S.C. 1313(a) and (b)). Previously, the statutory provisions for direct identification and substitution manufacturing drawback specified only the refund of duties. This expansion is specifically provided for claims with respect to manufactured articles in paragraph (l)(2)(C) of 19 U.S.C. 1313. However, this expansion is not applicable to all drawback claim provisions. Refunds of duties, taxes, and fees were already allowed for in claims involving unused merchandise prior to the new language provided for by TFTEA.

See

19 U.S.C. 1313(l)(2)(B). In contrast, there was neither any pre-existing authority for refunds of taxes and fees for claims involving rejected merchandise nor did TFTEA otherwise expand the scope of refunds beyond duties by generally referencing 19 U.S.C. 1313(l). The provisions that provide for refunds of duties, taxes, and fees are limited to unused merchandise and manufacturing drawback claims in 19 U.S.C. 1313(l)(2)(B) and (C), respectively.

There is also a noteworthy difference regarding the statutory provisions for substitution manufacturing drawback claims whereby the merchandise must be imported duty-paid.

See

19 U.S.C. 1313(b)(1). No such requirement exists for direct identification manufacturing claims.

See

19 U.S.C. 1313(a). The result of this difference is that imported merchandise that is duty-free may be designated as the basis for a direct identification manufacturing drawback claim, but not for a substitution manufacturing drawback claim.

(b) TFTEA-Drawback direct identification claim refunds will be calculated based on the invoice value of the designated imported merchandise, which is unchanged from the current requirements.

CBP currently requires all drawback claimants, regardless of the type of claim, to calculate drawback refunds based on the invoice value of the designated imported merchandise. TFTEA-Drawback direct identification claims will continue to be calculated based on the invoice value of the designated imported merchandise. This includes all drawback claims that are based upon direct identification (

e.g.,

manufacturing, rejected merchandise, and unused merchandise drawback claims). It should also be noted that all NAFTA drawback claims will continue to be calculated based on the invoice value of the designated imported merchandise.

See

19 U.S.C. 3333 and 19 CFR 181.44.

(c) TFTEA-Drawback substitution claim refunds will be calculated based on the per unit average value reported on the line from the entry summary that covered the designated imported merchandise.

Section 906(g) of TFTEA authorized CBP to calculate refunds based upon the per unit average of the duties, taxes, and fees reported on the entry summary line item that covered the designated imported merchandise if this method would result in simplification of the drawback claims process for CBP without posing a risk to the revenue of the United States. Per unit averaging requires that the drawback claimant calculate the per unit average value of the designated imported merchandise (

i.e.,

the entered value for the applicable entry summary line item apportioned equally over each unit covered by the line item) and request a refund 99% of the amount of duties, taxes and fees applicable thereto. The legislative history for Section 906(g) clarifies that CBP is authorized to utilize per unit averaging solely to allow for the simplification of drawback claims and CBP is not to allow for the “manipulation of claims in order to maximize refunds to the detriment of the revenue of the United States.”

See

H.R. Rep. no. 114-376, at 221 (2015). Accordingly, CBP is proposing in these regulations to allow the use of per unit averaging in the context of substitution manufacturing drawback claims (19 U.S.C. 1313(b)) and substitution unused merchandise drawback claims (19 U.S.C. 1313(j)(2)), but not for direct identification manufacturing drawback claims (19 U.S.C. 1313(a)), rejected merchandise drawback claims (19 U.S.C. 1313(c)), or direct identification unused merchandise drawback claims (19 U.S.C. 1313(j)(1)).

This determination was made only after much internal consideration as well as outreach to various trade stakeholders. A significant justification for the use of per unit averaging exclusively for substitution claims is that TFTEA imposed a “lesser of” rule for drawback claims involving substitution that safeguards against risks to the revenue. Simply put, by importing high and low value goods together on a single line, the claimant could manipulate the drawback claim through per-unit averaging by strategically exporting or destroying the low value goods, where the per-unit average of duties, taxes, and fees to be refunded was greater than that associated with the low value goods. The lesser of rule prevents this type of manipulation. No “lesser of” rule was authorized under TFTEA for direct identification claims.

The application of per unit averaging method of calculating drawback refunds requires the equal apportionment of the amount of duties, taxes, and fees eligible for drawback for all units covered by a single line item on an entry summary to each unit of merchandise (and is required for certain substitution drawback claims). In this method, the ratio of the total value of imported units as reported on a line item divided by the total quantity of imported units reported on a line item is to be multiplied by the quantity of units designated as the basis for the drawback claim to determine the

average per unit value. The refund per unit of the designated imported merchandise is to be 99% of the duties, taxes, and fees applicable to the average per unit value and this amount is calculated to two decimal places (and subject to the “lesser of” rule).

Example 1. Substitution Unused Merchandise TFTEA-Drawback Claim

A substitution unused merchandise drawback claim is filed for 500 exported articles with a value of $110 per unit. The 500 units of designated imported merchandise were reported on an entry summary line item that covered 1000 units with an entered value of $100,000 and a duty rate of 2.5%. Therefore, regarding the amount of duties to be refunded pursuant to the “lesser of” methodology, the calculation of drawback will be based on the per unit value of $100 for the designated imported merchandise rather than the value of $110 for the exported merchandise.

The designated imported merchandise has a per unit value of $100. This applicable duty rate (2.5%) is applied to the average per unit value ($100) to determine the amount of duties apportioned to each unit at $2.50.

The amount available for a drawback refund is 99% of the duties paid per unit ($2.50), which is $2.48. This amount of refundable duties per unit ($2.48) is multiplied by the quantity of designated imported merchandise (500 units) to calculate the total amount available for the drawback refund, which is $1,240. Similar calculations must be completed for applicable taxes and fees as well.

Example 2. Substitution Manufacturing TFTEA-Drawback Claim

A substitution manufacturing drawback claim is filed for 200 exported finished articles with a value of $400 per unit.

The designated imported merchandise was reported on an entry summary line item that covered 800 units with an entered value of $160,000 (averaging $200 per unit) and a duty rate of 3.1%. To manufacture the finished articles, the manufacturer actually used 600 units of substituted domestically sourced merchandise that is classifiable under the same 10-digit tariff provision. The domestically sourced merchandise has a substituted value of $180 per unit. Therefore, regarding the amount of duties to be refunded pursuant to the “lesser of” methodology, the calculation of drawback will be based on the per unit value of $180 for the substituted merchandise rather than the value of $200 for the designated imported merchandise.

It is noteworthy that the value of the exported (or destroyed) finished article is not germane to the application of the “lesser of” rule for substitution manufacturing drawback claims. The comparison in value is between the value of the designated imported merchandise and the substituted merchandise.

The substituted merchandise has a per unit value of $180. This applicable duty rate (3.1%) is applied to the average per unit value ($180) to determine the amount of duties apportioned to each unit at $5.58.

The amount available for a drawback refund is 99% of the duties paid per unit ($5.58), which is $5.52. This amount of refundable duties per unit ($5.52) is multiplied by the quantity of designated imported merchandise (600 units) to calculate the total amount available for the drawback refund, which is $3,312. Similar calculations must be completed for applicable taxes and fees as well.

Per unit averaging facilitates verification of the amounts of drawback refunds claimed. CBP does not receive invoice data that is usefully searchable electronically. By moving to the per unit averaging calculation methodology for substitution claims that is based on entry summary line data, CBP will gain the ability to automate validations of refund calculations made by the claimant. This should lead to faster and more efficient processing of claims, which will benefit both drawback claimants and CBP. These efficiencies are gained through the use of entry summary line item data, which is required for all TFTEA-Drawback claims, and will enable the per unit averaging calculation to take place as an automated verification rather than a manual process.

(d) The imported merchandise reported on a single entry summary line item may not be the basis of a direct identification and a substitution claim under TFTEA-Drawback.

A consequence of using per unit averaging for substitution claims under TFTEA-Drawback is that a single entry summary line item cannot be used for both direct identification and substitution drawback claims. Consequently, CBP proposes to limit each line on an entry summary to designation as the basis for either direct identification or substitution claims, but never both. Therefore, all associated imported merchandise on that line may only be designated as the basis for either direct identification or substitution claims under TFTEA-Drawback. If both types of claims were allowed on a single line on an entry summary, CBP would be unable to issue full refunds for all drawback claims that could lawfully be made against a specific entry summary line item in some situations. For example, in some situations where substitution claims using the per unit average of the line item were to be claimed prior to a direct identification claim, the total amount of drawback remaining on the line may not be sufficient to pay the proper amount of drawback tied to the high value goods.

CBP has also chosen this proposed policy in expectation of the efficiencies to be gained by both claimants and CBP regarding calculating and verifying refunds. Accordingly, importers and drawback claimants need to be aware of the limitation on line item designations prior to importing merchandise or receiving transferred merchandise, because the first-filed claim on a line will dictate the type of claim available for any remaining merchandise of the same line.

6. Recordkeeping and Proof of Export

(a) Congress, through TFTEA, changed the starting date for the three-year time period for maintaining supporting records for drawback claims from the date of payment to the date of liquidation.

For all TFTEA-Drawback claims, section 906(o) replaced the previous requirement to maintain supporting records for three years from the date of payment of the claim with the new requirement to maintain records for three years from the date of liquidation of the claim.

See

19 U.S.C. 1508(c)(3). This extension of the recordkeeping time period provides CBP with more time to request documents needed to verify or audit claims. This new timeframe requires claimants with accelerated payment privileges to maintain supporting records longer than before TFTEA (because claims are paid prior to liquidation for claimants that obtain the privilege of accelerated payment).

Currently, claimants for manufacturing drawback are required to provide a bill of materials or formula to CBP upon request, for any claim filed. CBP has and will continue to request these records for review in the context of verifications, audits, and other administrative actions. The purpose of this requirement is to ensure that the claims are consistent with the applicable bill(s) of materials or formula(s) that accompanied the

claimant's application to operate under the applicable general or specific manufacturing drawback ruling. TFTEA expressly added a requirement for substitution manufacturing drawback claims that the person making the claim must submit the bill of materials or formula identifying the drawback-eligible merchandise and manufactured article(s) by the 8-digit HTSUS subheading numbers and the quantities of merchandise with each claim.

See

19 U.S.C. 1313(b)(3)(A). For administrative efficiency and consistency with how drawback claims are reviewed and verified, rather than requiring the actual submission of these records with each claim, CBP will require a certification in ACE as to possession of these records. This certification requirement applies to both direct identification and substitution manufacturing claims.

Claimants whose exported goods are the basis for a claim of drawback must provide proof that establishes fully the date and fact of exportation and the identity of the exporter. These requirements are provided for in proposed § 190.72. Under TFTEA-Drawback, proof of exportation is required in the form of export summary data that is provided as part of a complete drawback claim filed with CBP. However, the underlying supporting records must fully prove the exportation through records kept in the normal course of business. TFTEA also provides for proof of export to be established via an electronic export system of the United States, as determined by the Commissioner of CBP.

See

19 U.S.C. 1313(i). Currently, the Automated Export System (AES) is not able to fully establish the required elements. Accordingly, until such time as the Commissioner of CBP announces the availability of a capable electronic system through a general notice in the Customs Bulletin, records kept in the normal course of business shall be used to establish fully the date and fact of exportation and the identity of the exporter, and such records must be maintained by claimants whose exported goods are the basis for a claim of drawback.

7. Transfers of Merchandise and Liability

Section 906 removed the longstanding requirements for the submission of Certificates of Delivery (CDs) and Certificates of Manufacture and Delivery (CMDs) by stating that no additional certificates of transfer or manufacture shall be required 19 U.S.C. 1313(b), and by stating that no additional certificates of transfer are required in 19 U.S.C. 1313(c), (j), and (p). Section 906(l),

Drawback Certificates,

removed the recordkeeping requirements relating to these certificates for drawback claims by striking 19 U.S.C. 1313(t). Instead of CDs and CMDs, parties involved in transfers of drawback products or other drawback-eligible goods must maintain records, which may include records kept in the normal course of business, to evidence the transfers.

As previously explained in part 5(d), above, there is a limitation that imported merchandise on a single entry summary line item cannot be designated as the basis for both direct identification and substitution drawback claims under TFTEA, due to the different methods of calculating refund amounts. Because the transferor can transfer the merchandise covered by a specific line item to different transferees, the transferees might unwittingly attempt to file different types of claims, which is not permitted. In an effort to best inform transferees of the possible limitation, if a transferor has already filed a certain type of drawback claim designating a portion of merchandise from an entry summary line item, or otherwise has knowledge of an already-filed claim that does likewise, then the transferor must designate whether the merchandise is eligible for substitution or direct identification claims and notify the transferee of that designation at the time of transfer. This should help transferees to avoid attempting to make drawback claims for the transferred merchandise under the mutually exclusive bases of direct identification and substitution. If, at the time of transfer, the transferor is not aware of a particular type of drawback claim already filed relating to the entry summary line item, then the designation shall so indicate to the transferee. Notification of the designation from the transferor to the transferee must be documented in records, which may include records kept in the normal course of business. Notwithstanding the designation made, however, the type of the first drawback claim to be filed relating to that entry summary line item will dictate the type of any subsequent claims relating to that same entry summary line item.

Because this notification requirement is not effective until February 24, 2018, parties who anticipate making substitution-based claims under TFTEA-Drawback designating imported merchandise that was entered and transferred prior to this date, should consult with the transferor about whether the transferred merchandise potentially is eligible for substitution-based claims under TFTEA-Drawback. Such eligibility only exists if the transferred merchandise was not previously used as the basis for any non-TFTEA drawback claim, because all types of non-TFTEA drawback claims must be calculated based on invoice values, which conflicts with the use of per unit averaging when determining refunds for imported merchandise on a single entry summary line item.

It is important to note, again, that this notification of designation requirement is proposed in an effort to better inform claimants of possible limitations on the type of drawback claim that can be filed in situations involving transferred merchandise. The designation, however, is not a guarantee of the type of claim that can be filed. Drawback claimants must remain aware that the first drawback claim to be filed on a given entry summary line item will control the type of claim that subsequently can be filed in the case of transferred merchandise.

(c) Importers are now jointly and severally liable with drawback claimants for refunds associated with their imported merchandise, when designated on a drawback claim.

Section 906(f) established joint and several liability for the drawback claimant and the importer of the imported merchandise that is designated as the basis of the claim.

See

19 U.S.C. 1313(k). Accordingly, importers should be aware of this liability when transferring imported merchandise to other parties for purposes of drawback. Therefore, it is proposed to amend § 113.62 to reflect this liability in the import entry bond conditions.

B. Filing a TFTEA-Drawback Claim

TFTEA-Drawback claims must be filed electronically. A complete TFTEA-Drawback claim will consist of the successful transmission of the data required for the TFTEA-Drawback entry and the upload of all required documents supporting the claim. When submitting the claim, the filer must provide, among other things, the drawback entry number, filing port code, claimant ID number, drawback provision, total drawback claim amount requested, the import entry summary(s) and line item number(s) for the designated imported merchandise, other required line item data including the HTSUS subheading number at the 10-digit level, information on exportation or destruction, and, if applicable, the NAFTA coding sheet. Proposed section 190.51 provides detailed information about specific data elements, certifications, and supporting documents that may be required depending on the particular type of drawback claim.

After transmission, the filer will receive an automated message indicating either that the electronic transmission has been accepted or rejected. In the case of a rejection, the automated message will inform the filer regarding the reason(s) for the rejection. Uploads of required forms, and any other supporting documentation should be submitted through ACE, Document Image System, after the successful electronic transmission. Further, related to filing claims electronically, as noted below in the section explaining the proposed regulations, a definition for “drawback office” has been added to § 190.2 clarifying that CBP has the authority to share or transfer work between drawback offices at its discretion.

For the interim period between February 24, 2018 and the date on which the new TFTEA-Drawback regulations will become effective, CBP developed interim procedures for accepting electronically filed TFTEA-Drawback claims. Specifically, to enable ACE to recognize and accept such claims, notwithstanding the absence of the necessary regulatory requirements for a complete TFTEA-Drawback claim, ACE was programed with provisional placeholder requirements, modeled on the draft regulatory package then under development. Corresponding provisional Customs and Trade Automated Interface Requirements (CATAIR) Guidelines were provided to enable claimants to program their systems to interface with these provisional placeholder requirements in ACE. And on February 9, 2018, CBP posted on its website a document entitled

Drawback: Interim Guidance for Filing TFTEA Drawback Claims

(

Interim Guidance

), to further inform and provide guidance to the trading community regarding the temporary procedures for electronically filing TFTEA-Drawback claims during the interim period until the implementing regulations are finalized and operational. This

Interim Guidance

was subsequently twice updated, to provide additional clarity.

The

Interim Guidance

explained that the provisional requirements for electronically-filed TFTEA-Drawback claims that are reflected in the provisional CATAIR and described in the

Interim Guidance

document are placeholders only, and will not be used to process the claims beyond their initial acceptance in ACE. The actual final requirements for such claims will be established once the rulemaking process is complete and the new regulations are implemented and effective. To the extent that the final requirements established through rulemaking ultimately differ from the provisional placeholders used to accept TFTEA-Drawback claims in ACE prior to the effective date of the final rule, the

Interim Guidance

explained that claimants will be permitted to perfect their claims in accordance with the new requirements before the claims are processed for payment.

The interim procedures outlined and explained in the

Interim Guidance

will remain in place until this rulemaking is complete and the final rule to implement the regulatory changes pending for TFTEA-Drawback claims is implemented and effective.

The programming specifics for electronic transmission are explained in more detail in the TFTEA-Drawback CATAIR Guidelines, which can be accessed at:

https://www.cbp.gov/trade/ace/catair.

Specific questions related to filing TFTEA-Drawback claims may be directed to a client representative or the ACE Account Service Desk at 1-866-530-4172 or

ACE.Support@cbp.dhs.gov.

Filers should be aware that a delay of more than 24 hours in uploading all required accompanying documentation after the transmission of the claim data will mean that the filing date will be tied to the uploading of documents rather than the date of transmitting the claim data. In some instances, this later official date of filing could affect the timeliness of a claim.

C. Required TFTEA-Drawback Certifications for Existing Manufacturing Rulings and Privileges

While the processes regarding general and specific manufacturing rulings detailed in appendices A and B of the proposed part 190 will be largely unchanged from those described in the appendices of part 191, TFTEA does have some impact on existing rulings. The existing rulings were issued based on the requirements of 19 CFR part 191, which do not comport with the TFTEA-Drawback requirements (

e.g.,

the new substitution standard and timeframes). Accordingly, in order to continue operating under an existing manufacturing ruling, a manufacturer or producer must file a supplemental application for a limited modification to that ruling. To ensure compliance with the TFTEA-Drawback requirements, the limited application must include revised parallel columns and a bill of materials or formula, which must be annotated with the applicable HTSUS subheading numbers. In addition, a certification must be provided to confirm that all TFTEA-Drawback claims made under the subject manufacturing ruling will be in conformity with all of the applicable statutory and regulatory requirements. Any supplemental application to modify a ruling issued under 19 CFR part 191 (so that it remains viable for TFTEA-Drawback claims) must be submitted to CBP no later than February 23, 2019, which is the close of the transition period for drawback claimants. Any ruling issued under 19 CFR part 191 that is not modified by this deadline will not apply to TFTEA-Drawback claims; and, manufacturers and producers would need to apply for a new ruling under 19 CFR part 190.

Similar to manufacturing rulings, drawback privileges granted under 19 CFR part 191 will not comport with TFTEA-Drawback. The privileges are the waiver of prior notice of intent to export or destroy and accelerated payment. With each claim that is filed under 19 CFR part 190, a certification of conformity with TFTEA-Drawback is required for claimants to continue to operate under one or both privileges if granted pursuant to 19 CFR part 191. Unlike for manufacturing rulings, these certifications will be made electronically with each TFTEA-Drawback claim. These certifications are limited to the drawback provisions under which they were originally granted in accordance with 19 CFR part 191, except that privileges granted under 19 U.S.C. 1313(j)(1) and 19 CFR 191 may be applied to TFTEA-Drawback

claims made under 1313(j)(1) or 1313(j)(2).

The certification processes described above are designed to ease the administrative burden on CBP while minimizing the disruption to those operating under existing manufacturing rulings and/or privileges. However, claimants are responsible for performing the requisite due diligence prior to filing any TFTEA-Drawback claims; and, the consequences of false or inaccurate claims include, but are not limited to, the denial of drawback refunds and the associated privileges, noted above.

D. Federal Excise Tax and Substitution Drawback Claims

The Internal Revenue Code (IRC) of 1986, as amended, codified as title 26 of the United States Code (26 U.S.C.), is the main body of domestic statutory tax law of the United States and includes laws covering Federal excise taxes. Federal excise taxes are imposed on the manufacture and distribution of certain consumer goods, including upon the importation of distilled spirits, wines, beer, tobacco products, and certain imported taxable fuel and petroleum products. While there are also excise taxes on other products, it is these taxes, because of the structure of the tax and the manner in which they are collected, that are eligible for drawback under 19 U.S.C. 1313.

1. Distilled Spirits, Wines, and Beer: Imposition of Federal Excise Tax and Exemptions

Chapter 51 of the IRC sets forth excise tax collection and related provisions applicable to distilled spirits, wines, and beer. In general, this chapter provides that a Federal excise tax is imposed on all wines, distilled spirits, and beer produced in or imported into the United States. 26 U.S.C. 5001, 5041, 5051.

Statutory exceptions to the required payment of Federal excise tax exist. For example, when wine, distilled spirits, or beer are exported after payment or determination of tax, the IRC provides for “drawback” in an amount equal to the tax paid. 26 U.S.C. 5055, 5062. Under these provisions, the excise taxes are refunded upon exportation. Similarly, drawback is also available when wine, distilled spirits, or beer are exported from bonded premises regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB), where no tax has been paid, although tax liability attached at the time of production or import. While tax must ordinarily be paid upon removal of wine, distilled spirits, or beer from TTB-bonded premises, the removal may occur “without payment of tax” for the purpose of export. 26 U.S.C. 5214(a), 5362(c), 5053(a). Although removed from a TTB-bonded facility, the product is still subject to bond and still carries a tax liability until the product is exported. 26 U.S.C. 5053, 5175, 5362. Similarly, Title 19 also provides for “drawback equal in amount to the tax found to have been paid or determined on . . . bottled spirits and wines manufactured or produced in the United States” upon exportation. 19 U.S.C. 1313(d). Under these drawback provisions, a refund is made upon exportation if tax has already been paid, or if an unpaid tax liability exists, it is extinguished upon exportation. The net economic effect is identical.

2. Tobacco: Imposition of Federal Excise Tax and Exemptions

Under Chapter 52 of the IRC, a Federal excise tax is imposed on all tobacco products and cigarette papers and tubes manufactured in or imported into the United States. 26 U.S.C. 5701. The tax on domestically-produced tobacco products and cigarette papers and tubes is imposed at the time of manufacture but generally is not paid or determined until the products are removed from TTB-bonded premises. 26 U.S.C. 5702, 5703. Upon exportation of tobacco products and cigarette papers and tubes upon which the tax has been paid, the IRC permits drawback of the tax paid. 26 U.S.C. 5706. In addition, tobacco products and cigarette papers and tubes may be removed from TTB-bonded premises, without the payment of Federal excise tax, for export. 26 U.S.C. 5704. Under these provisions, the excise tax liability is extinguished upon exportation. The net economic effect is identical.

3. Other Excise Taxes

Chapter 32 of the IRC imposes various excise taxes, including taxes on gasoline, diesel fuel, and kerosene (taxable fuel). For example, 26 U.S.C. 4081 imposes tax on the removal of taxable fuel from any refinery or terminal and on entry into the United States for consumption, use, or warehousing. The IRC permits the refund of this tax when taxable fuel is exported. 26 U.S.C. 6416, 6427. When the taxable fuel is imported into an IRS-registered facility, it is taxed upon removal from the facility and is not eligible for drawback under 19 U.S.C. 1313. Some taxable fuel, however, is not imported into an IRS-registered facility, in which case the tax is due upon importation and may be eligible for drawback under 19 U.S.C. 1313.

4. Federal Excise Taxes Have Been Improperly Refunded

Under customs law, a form of drawback known as “substitution drawback” also occurs when products are imported into the United States and sufficiently similar products are exported or destroyed. 19 U.S.C. 1313(j)(2). Treasury Department audits and analyses have revealed that for a number of years, CBP has received and approved claims for substitution drawback under 19 U.S.C. 1313(j)(2) for imported bottled and bulk wine, even in circumstances in which no excise tax was paid on the substituted exported merchandise. CBP has not identified a record of the first time it granted a section 1313(j)(2) drawback claim for wine based on exported merchandise on which tax had not been paid—a claim for “double drawback,” drawback of the excise tax on both the imported product and the exported product.

An example of a claim for “double drawback” of wine proceeds as follows:

A domestic winery imports 100 liters of wine, pays Federal excise tax on the wine, and sells the imported wine in the United States. The domestic winery then exports 100 liters of its domestically-produced wine from TTB-bonded premises without payment of Federal excise tax. The domestic winery files a § 1313(j)(2) drawback claim with CBP on the basis that the 100 liters of domestically-produced wine are commercially interchangeable with the to the 100 liters of imported wine. The domestic winery receives a refund of 99 percent of the Federal excise taxes that it paid on the 100 liters of imported wine.

In this example, imported products are introduced into the U.S. market, in net effect, free of 99 percent of Federal excise tax. As a result, in this example, the U.S. Treasury ultimately receives only one percent of the Federal excise tax on the imported products that are consumed in the United States. By contrast, domestically-produced wine consumed in the United States is fully taxed. This practice results in revenue loss from having untaxed goods circulating in commerce. It also has the effect of giving imported wine a clear tax advantage in the domestic market over domestically produced wine. Because the revenue loss (or tax break) comes in the form of a reduction of tax on imported product, it puts domestically produced products at a disadvantage as compared to imports in the U.S. market.

This result is inconsistent with the broader statutory excise tax regime, which (on net) generally imposes excise taxes on all subject goods consumed in the United States, whether produced domestically or imported for domestic

consumption. In the above example, by contrast, the importer/exporter winery has (on net) paid no Federal excise tax on the exported wine and virtually no Federal excise tax on the imported wine. In net effect, the winery has introduced imported wine 99% free of excise tax to compete with domestically produced wine that is fully taxed.

CBP currently permits this practice only with respect to wine. But as explained, the IRC imposes excise tax and provides exemptions from such tax for other goods, including distilled spirits, beer, tobacco products, and certain taxable fuel. Some producers have already requested that CBP extend its current treatment of wine to distilled spirits, and it is possible that firms dealing in these other goods may seek similar treatment.

5. Statutory Prohibition on Double Drawback

The allowance of substitution drawback claims in circumstances where internal revenue taxes have not been paid on the substituted product results in imported product being introduced into commerce with no net payment of excise tax—a “double drawback” that is at odds with the broader statutory schemes of both customs drawback and excise taxation.

As noted above, the IRC generally imposes excise taxes upon all covered domestic products and products imported for domestic consumption. The Customs Modernization and Informed Compliance Act (Mod Act), Public Law 103-182, 632, 107 Stat. 2057 (1993) (enacted as Title VI of the North American Free Trade Agreement Implementation Act), added a clause to 19 U.S.C. 1313(v) providing in relevant part that “[m]erchandise that is exported or destroyed to satisfy any claim for drawback shall not be the basis of any other claim for drawback.” This provision is best read to preclude, among other things, exported or destroyed merchandise from being used as the basis for

both

a substitution drawback claim and a drawback of internal revenue taxes upon exportation or destruction. In other words, exported merchandise on which excise taxes have been paid

can

form the basis of a substitution drawback claim, but exported products on which

excise tax has been paid cannot be used to erase existing tax liability on imported products.

While Congress did not specifically define the term “drawback” in § 1313(v), its meaning is clear in context and within the broader statutory scheme governing drawback and excise taxes. In context, drawback encompasses the refund or remission of an excise tax that was paid, determined, or otherwise imposed by Federal law. The term is often used to refer to the refund of taxes that have been paid previously.

See, e.g.,

19 U.S.C. 1313(a), (c)(1), (j)(1), (j)(2) (providing for taxes to be “refunded as drawback”). But it is not limited to refunds, as other provisions use the term more broadly to refer to an unpaid tax liability that is extinguished.

See, e.g.,

§ 1313(d) (“there shall be allowed . . . a drawback equal in amount to the tax found to have been paid

or determined”

) (emphasis added); sections 1313(n)(2), (n)(4), (o)(3) (using the phrase “refunded, waived, or reduced” to refer to the extinguishing of tax liability under subsections (a), (b), (f), (h), (p), and (q), each of which uses the phrase “drawback”). Nor is section 1313(v)'s use of the term “drawback” limited to drawback of taxes imposed upon importation. Section 1313(v) refers to “any” claim for drawback. That broad and inclusive language contrasts with the language Congress used when it referred to only specific types of drawback.

See, e.g.,

sections 1313(j), (k)(1), and (1)(2)(A), (B), and (C) (referring to drawback “under this section”); section 1313(n)(2) (referring to “NAFTA drawback”); section 1313(n)(4) (referring to “Chile FTA drawback”). The fact that Congress expressly limited “drawback” in certain subsections of section 1313 but did not do so when it referred to “any” drawback in subsection (v) indicates that “drawback” is not so limited for purposes of this subsection.

Accordingly, when wine, distilled spirits, beer, tobacco products, or other products subject to excise tax are exported from TTB-bonded premises “without payment of tax,” pursuant to 26 U.S.C. 5214, 5362, 5053, or 5704, the extinguishment of tax liability upon export is best understood as a form of drawback within the broad prohibition of 19 U.S.C. 1313(v).

This interpretation is further supported by the broader statutory scheme, which operates (in net effect) to subject all wine, distilled spirits, and beer consumed in the United States, whether produced domestically or imported, to an excise tax. The evident purpose of section 1313(v) is to advance that objective by preventing excessive revenue loss through multiple claims for drawback based on a single export. And to the same end, the statutes that govern withdrawal of wine, distilled spirits, beer, or tobacco products from TTB-bonded premises authorize regulations that may be necessary to protect revenue.

See

26 U.S.C. 5175, 5214(a)(4), 5362(c), 5053(a), and 5704(b).

A contrary interpretation would undermine the statutory scheme of excise taxes that applies to imports and cause undue revenue loss. As just one example, a contrary reading of the statutory scheme would appear to permit an importer of distilled spirits to manufacture inexpensive liquor and destroy it, without having paid the excise tax imposed on domestically-produced liquor under 26 U.S.C. 5001. The importer in this scenario could then use the destruction of that domestically-produced liquor to seek a drawback under 19 U.S.C. 1313(j)(2) of the excise tax on liquor they import. Because the excise tax per gallon may far exceed the marginal cost of production of some types of liquor,

these manufacturers would receive a significant economic benefit, despite having never paid excise taxes on the domestically-produced liquor. They would also have avoided excise tax payment not once but twice—on both the domestically produced liquor and the imported liquor—without, on net, increasing domestic production for consumption or export. The statutory framework that imposes excise tax on the domestic consumption of alcohol would have been almost wholly subverted.

In 2006, the U.S. Department of Agriculture estimated that that the cost of production of neutral grain spirits at about $0.53 per proof gallon.

See

“Economic Feasibility of Ethanol Production from Sugar in the United States,”

available at https://www.usda.gov/oce/reports/energy/EthanolSugarFeasibilityReport3.pdf.

The excise tax on distilled spirits is $13.50 per proof gallon (

see

26 U.S.C. 5001(a)(1)), or more than 25 times the cost of production.

A contrary interpretation would also seem to permit the following hypothetical transaction:

A distilled spirits importer imports 200 gallons of liquor into a TTB-bonded facility. It pays excise tax on 100 gallons and sells those in the United States. It then exports the remaining 100 gallons without payment of Federal excise tax. The importer files a § 1313(j)(2) drawback claim with CBP on the basis that the 100 gallons of imported liquor sold in the United States is commercially interchangeable with the 100 gallons of imported liquor exported without payment of excise tax. The importer receives a refund of 99 percent of the Federal excise taxes that it paid on the 100 imported gallons sold in the United States.

In this hypothetical, too, imported products would be introduced into the U.S. market, in net effect, free of 99 percent of Federal excise tax. As a result, the U.S. Treasury would receive only one percent of the Federal excise tax on the imported products that are consumed in the United States. Such essentially tax-free treatment of domestically-consumed imported

alcohol does not comport with the statutory drawback scheme in the IRC or Title 19.

Because drawback under 19 U.S.C. 1313 does not require CBP to verify whether substitute exported merchandise is tax paid, CBP does not have records that would identify instances of double drawback at issue here. Treasury Department audits and analyses have revealed that CBP began refunding excise taxes on wine under 19 U.S.C. 1313(j)(2) in approximately 2004 when the San Francisco office permitted drawback for such a claim. Some of these drawback claims may have included a double refund. It is possible that this change took place due to a misunderstanding of a 2004 amendment to the drawback statute designed to provide for drawback of the Harbor Maintenance Tax.

See

Miscellaneous Trade and Technical Corrections Act of 2003, Public Law 108-429, 118 Stat. 2433, 2579 at section 1557(a)(1) (2004). CBP has never issued a ruling or regulation authorizing the current treatment with respect to wine. Nevertheless, because CBP has approved substitution unused drawback claims based on wine exports for which no excise tax has been paid, its treatment of this issue must be changed through a notice and comment process.

See

19 U.S.C. 1625(c).

Because of the concern that the statutory scheme was being subverted and because of concerns with revenue losses both realized and potential, on October 15, 2009, CBP proposed amending title 19 of the Code of Federal Regulations to preclude the filing of substitution drawback claims for internal revenue excise tax paid on imported merchandise in situations where no excise tax was paid upon the substituted merchandise or where the substituted merchandise had been the subject of a different claim for refund or drawback of excise tax under any provision of the IRC.

See

Drawback of Internal Revenue Excise Tax, 74 FR 52928. The Alcohol and Tobacco Tax and Trade Bureau (TTB) within the Department of the Treasury published a related proposed rulemaking in the same October 15, 2009, edition of the

Federal Register

(Drawback of Internal Revenue Taxes, 74 FR 52937). Both notices solicited public comments on the proposed amendments. Subsequently, the notices of proposed rulemaking were withdrawn as announced in the

Federal Register

(75 FR 9359) on March 2, 2010.

A number of importers of distilled spirits have since sought the same treatment for their products that wine currently receives. Consistent with the analysis in this document, CBP has denied these requests, but has not corrected the treatment of wine through a notice and comment process, as required by 19 U.S.C. 1625(c).

6. Impact of Failing To Curtail Double Drawback

For the reasons explained above, CBP believes that the phrase “any other claim for drawback” in section 1313(v), read in context of the broader statutory scheme, encompasses the refund or remission of an excise tax that was paid, determined, or otherwise imposed by Federal law. To the extent section 1313(v) can be considered ambiguous, however, CBP has determined that there are compelling economic and fiscal reasons to resolve any ambiguity to preclude substitution drawback claims for excise tax paid on imported merchandise where no excise tax was paid on the substituted merchandise.

As explained below, firms dealing in distilled spirits, beer, tobacco products, and certain taxable fuels have a strong economic incentive to seek the same double drawback treatment currently afforded to wine. If CBP fails to adopt a uniform interpretation and application of section 1313(v), firms dealing in other products subject to Federal excise tax could also pursue substitution drawback claims similar to those that have been made for wine under section 1313(j)(2). The statutory provisions governing excise tax on other goods—beer, distilled spirits, tobacco products, and certain fuels—are substantially similar (and in many material respects, identical) to those governing excise tax on wine. Maintaining the current treatment of drawback claims for wine risks a growth in future revenue loss attributable to double drawback.

While proponents of the double drawback practice argue that it promotes exports, the observed economic effects of the practice do not support the view that it is an effective or efficient export promotion measure. Double drawback also places domestic products made for domestic consumption, which are subject to excise tax across the board, at a relative disadvantage to products imported for domestic consumption, for which 99 percent of the excise tax may be refunded based on a double drawback claim. The interpretation of section 1313(v) reflected in this proposed rule would avoid such market-distorting disparities.

A more detailed analysis follows in two parts. First, the available trade data suggest that double drawback promotes imports. In contrast, the trade data provide little evidence that total wine exports increased in response to double drawback. Second, a revenue analysis elucidates the incentives that double drawback creates for firms that deal in goods other than wine and provides initial projections of U.S. Government revenue loss that could result if these firms were provided the same double drawback treatment currently available only for substituted wine.

7. Analysis of Trade Statistics

Imported wine that benefits from double drawback enters the U.S. market with a substantial tax advantage over domestically produced wine. While this tax advantage exists for all imported wine benefiting from double drawback, it is largest for imported bulk wine. Because the customs value of imported bulk wine is lower than the value for bottled wine, excise tax levied by volume comprises a greater percentage of its average price, meaning that producers have a stronger economic incentive to claim double drawback on bulk wine.

For most imported wine, the tax is $0.282 per liter. 26 U.S.C. 5041(b). On a percentage of unit value basis, the tax is larger for bulk wine than for bottled wine, because the average value of bulk wine is less. The average value of imports of bulk wine hovered around $1.10 per liter in the years 2001 to 2016—much less than the average value per liter of imported bottled wines, which was about five times as great during the same period.

See

Table E.

U.S. import statistics are consistent with these incentives. Import volumes of wine have grown rapidly during the period double drawback has been available. In 2004, total U.S. imports of wine, either bottled or bulk, were 576 million liters by volume.

See

Table B. By 2016, that figure had grown to 880 million liters, an increase of over 50 percent.

Id.

Much of this increase in imports has been driven by bulk wine, which has made rapid gains in U.S. market share. In 2004, imported bulk wine accounted for 0.9 percent of domestic wine consumption. By 2016, imported bulk wine accounted for 6.2 percent of domestic wine consumption.

See

Table A. By volume, imports of bulk wine grew by 875 percent over that period.

See

Table B. Of course, other factors affecting wine trade unrelated to drawback may also have affected this growth.

CBP believes the practice of double drawback began in or around 2004. For that reason, this analysis addresses trade statistics beginning in 2004.

In contrast to the rapid growth of imports, the U.S. trade statistics provide little evidence that total wine exports by volume increased from 2004 to 2016. The total volume of wine exports only grew by 5.5 percent over that period.

See

Table B. Disaggregating exports into those eligible for drawback and those ineligible for drawback casts further doubt on the effect of drawback on total exports. Exports from the United States to NAFTA countries, Canada and Mexico, are not eligible for substitution drawback. Therefore, they are not subsidized through the double drawback mechanism. Yet the volume of U.S. wine exports to these countries experienced a compound annual growth rate (CAGR) of 3.3 percent, while export volumes to countries for which substitution drawback was available experienced a 0.01 percent CAGR over the same period.

See

Table D.

Although the value of U.S. bottled wine exports has risen from 2004 to 2016 (from $600 million to $1.05 billion), the average unit value of the exports also increased during that period (from $2.30 to $6.10).

See

Table B and Table E. At the same time, volumes of bottled wine exports fell by a third.

See

Table B. U.S. wine export values grew substantially faster (5.2 percent CAGR) than did export volumes (0.4 percent CAGR) from 2004 to 2016.

See

Table B and Table C. This suggests that the increase in bottled wine exports by value was driven by price increases in the average unit value of the exports, not by an increase in export volumes. Because the excise tax on wine is levied by volume and not by value, this suggests that the increase in the value of exports is not directly connected to the availability of double drawback and is due to other factors.

While U.S. trade statistics do not indicate a significant increase in total wine exports, they do indicate a change in the composition of exports while double drawback has been available. From 2004 to 2016, the share of exported wine in bulk containers rose from 20.8 percent to 50.6 percent by volume, consistent with the shift in composition of imports discussed above.

See

Table B. This growth in the share of bulk exports is only evident for exports to non-NAFTA countries, which rose from 16.2 percent to 55.2 percent.

See

Table D. Exports to NAFTA countries, which are not eligible for double drawback, show no shift toward bulk exports over that period.

See id.

In addition, while U.S. exports of bulk wine have grown during the period from 2004 to 2016, growth in the volume of bulk wine imports has been much greater. Overall, during the same period, there has been an increase in the U.S. trade deficit for wine—including for bulk wine.

See

Table C.

In short, while it is not possible to say that double drawback is the primary driver of the wine trade trends, available trade data are consistent with the view that double drawback may have promoted wine imports but that it has not been an effective export promotion measure.

8. Revenue Loss Analysis

Maintaining the current double drawback treatment of wine and extending that treatment to other products subject to excise tax—distilled spirits, beer, tobacco products, and certain taxable fuels—would cause significant revenue loss to the U.S. Government.

(a) Data

Because drawback claims have not previously captured the tax-paid status on substituted exports, the exact amount of revenue lost to double drawback involving imported wine is not certain. Nevertheless, analysis of CBP import data and individual drawback claims at the firm level permit a reasonable estimate of the historical revenue loss from double drawback treatment of wine imports.

Because CBP has not kept drawback summary statistics based on tariff category and type of tax, this estimate with respect to wine is based on an analysis of individual drawback claims made by firms involved in wine trade and comparing the ratios of drawback claimed for duties with those claimed for taxes to differentiate between shipments of bulk and bottled wine. These firm-level data are statutorily-protected from public disclosure.

See

26 U.S.C. 6103 (confidentiality of tax return information); 18 U.S.C. 1905 (Trade Secrets Act). With respect to other products, Treasury's estimates are based on current excise tax revenue for each product.

The estimated rate at which firms are projected to take advantage of double drawback (“takeup rate”) is informed by the economic incentives and data described below—chiefly, excise tax as a share of product value, and the potential growth in exports resulting from the expansion of double drawback treatment.

See

U.S. International Trade Commission Interactive DataWeb,

available at https://dataweb.usitc.gov/

(trade data by product classification, volume, value, and country of origin, retrieved from the U.S. Census Bureau).

See

IRS Statistics of Income Tax Stats—Excise Tax Statistics,

available at https://www.irs.gov/statistics/soi-tax-stats-excise-tax-statistics/.

(b) Theory, Assumptions, and Estimate

Excise taxes on most products addressed in this rule are applied based on volume, not as a percentage of value. For example, the standard excise tax on wine is $1.07 per wine gallon.

The greater the ratio of excise tax to product value, the greater the incentive to avoid payment of the tax through means such as double drawback. The historical experience with respect to wine bears this out: Excise tax as a share of customs value has been about 5 percent for bottled wine and 25 percent for bulk wine in recent years.

See

Table E. Based on differences in the tariff rates for bottled and bulk wine that are reflected in the amounts of individual drawback transactions, Treasury estimates the takeup rate for double drawback of wine to be 13 percent for bottled imports and 24 percent for bulk imports. The difference in these rates indicates that tax as a share of value is an important determinant of takeup rate. For some products, such as beer, tax as a share of customs value is similar to that of wine. For other products subject to excise tax, tax as a share of value is much higher than it is for wine—sometimes exceeding 100 percent. Indeed, for some distilled spirits, excise tax can be many multiples the cost of production.

Excise tax as a share of tobacco products' value is also much higher than it is as a share of the value of wine.

This dynamic creates a strong incentive for firms that deal in these other products to seek double drawback of excise taxes paid on imports by inexpensively manufacturing domestic products for either export or destruction. Because of the strength of this incentive, firms dealing in these products likely would take advantage of double drawback at higher rates than the wine industry has historically if it were available to them.

26 U.S.C. 5041(b).

For example, the average customs value of exported grain alcohol is $2.78 per proof gallon (USITC DataWeb,

supra

note 7) while the tax is $13.50 per proof gallon (26 U.S.C. 5001(a)(1)). The customs value includes profits and other expenses in addition to the cost of production. In 2006, the U.S. Department of Agriculture estimated the cost of production of neutral grain spirits at about $0.53 per proof gallon.

See

“Economic Feasibility of Ethanol Production from Sugar in the United States,”

supra

note 1.

See

Table E;

infra

note 19.

A second factor of particular concern is the market-distorting incentive for re-routing shipments that an expansion of double drawback would create. Double drawback creates an incentive for firms that both import and export to route a shipment destined for another country through the United States to claim excise tax relief on imports into the United States. Under this approach, first, a firm imports 200 units of, for example, distilled spirits. It removes 100 units from customs custody for domestic sale and pays excise tax for their import. It then imports the second 100 units into TTB bond, without

having paid excise tax on their import and then exports the product from bond, and also uses that exportation to seek drawback under 19 U.S.C. 1313(j)(2) of the import tax paid on the first 100 units. The first 100 units of distilled spirits would then have been consumed domestically at 1 percent of the normal tax rate, without increasing domestic production or net exports. Depending on the cost of shipping, firms would have an incentive to route shipments destined for other countries through the United States—without increasing domestic production or exports—to claim double drawback on their U.S. imports. In the analysis, we assume trade re-routing of all distilled spirits from Canada and Mexico bound for non-NAFTA countries is feasible. We also assume that trade re-routing of gin, vodka, and grain alcohol worldwide is feasible, though the analysis does not rely on substantial rerouting of these products.

The following estimates also assume a 7 percent reduction in revenue loss by comparison to the historical data concerning wine due to the Craft Beverage Modernization Act (CBMA), Public Law 115-97, § 13801-13808 (2017). The CBMA provides lower overall effective tax rates for smaller producers than for larger producers. This assessment of the effects of the CBMA is based on the assumption that most double drawback claims would be taken by large multinational firms paying the full rate on marginal imports above the limit identified in the CBMA. The transaction costs involved in drawback support the view that drawback most benefits larger firms that are involved in both exporting and importing.

The following estimates further assume that double drawback of wine, distilled spirits, and beer would grow with real GDP. That is, Treasury assumes that consumption of excise-taxed beverages, and drawback on those taxes, would grow with the overall economy. Treasury uses the Administration's forecast of taxable fuel and tobacco excise tax revenue to estimate change over time. Both of these forecasts decrease slightly over time, consistent with recent trends in excise revenue.

Excise Tax Statistics,

supra

note 8. From 2010 to 2016, excise tax revenue for imported beer, wine, and distilled spirits grew much more quickly than revenue for tobacco products or taxable fuels.

See id.

In total, the incentives for firms that deal in distilled spirits, beer, tobacco products, and certain fuels—in addition to the continued double drawback treatment of wine—could cause a revenue loss of $674 million to $3.3 billion on an average annual basis over the next ten years, if double drawback treatment were extended to commodities other than wine and not eliminated.

These estimates are in nominal U.S. dollars, whereas the figures in the Executive Orders 13563 and 12866 analysis are in undiscounted and discounted 2016 U.S. dollars. Because of this difference, only a rough estimate of the total transfers from the rule and this alternate analysis can be determined. This estimate can be determined by adding the revenue losses of extending double drawback to the rule's undiscounted net transfers from the U.S. Government to trade members.

In fiscal year 2015, CBP paid $54.9 million in excise tax refunds and had initial tax collections from wine imports of $335 million, according to CBP data.

As noted above, the tax as a share of customs value is 5 percent for bottled wine and 25 percent for bulk wine. The estimated takeup rate—that is, the rate of double drawback claims—is 13 percent for bottled imports and 25 percent for bulk imports, demonstrating that tax as a share of value is an important determinant of the takeup rate. Assuming that double drawback continues to grow with real GDP, the current treatment of wine is estimated to cause between $51 million and $69 million in revenue loss to the U.S. Government annually over the next ten years.

See id.

Refunds or drawback paid in any given year may be paid for imports made in previous years. The $54.9 million figure is a summation of individual drawback claims from CBP data that are statutorily-protected from public disclosure. TTB publishes the $335 million figure.

See

TTB Statistical Release, “Tax Collections Cumulative Summary, FY 2015,”

available at https://www.ttb.gov/statistics/final15.pdf.

These estimates are slightly different from the wine double drawback estimates shown in Table 49 of the Executive Orders 13563 and 12866 analysis. This is because these estimates are in nominal U.S. dollars, whereas the figures in Table 49 are in undiscounted 2016 U.S. dollars.

(d) Distilled Spirits

With respect to distilled spirits, fiscal year 2016 excise tax revenue from imports was $1.5 billion, according to TTB collections data. A large portion of imports are, however, imported into TTB bond and then are treated as domestic collections. U.S. Census Bureau data suggest actual import excise tax revenue is closer to $2.6 billion.

The tax as a share of customs value for distilled spirits—currently $13.50 per proof gallon

—is 5 to 8 times higher than it is for wine, creating a significantly greater incentive to export to take advantage of double drawback. Further, as noted above, the tax is much higher than the cost of production for inexpensive distilled spirits.

For this reason, Treasury expects strong behavioral responses to generate substitution drawback claims if distilled spirits become eligible for double drawback, including purposeful destruction of inexpensive distilled spirits and routing of goods destined for other countries through the United States when feasible. We estimate that up to 45 percent of imported spirits would be commercially viable predicates for double drawback claims.

Varying the projected takeup rate between 25 percent and 75 percent for these claims, annual U.S. Government revenue loss from allowing double drawback on distilled spirits is estimated to range from $312 million to $937 million annually over ten years.

Accessed through the USITC DataWeb,

supra

note 7.

26 U.S.C. 5001(a)(1). The CBMA reduces the excise tax on a portion of imported goods. The estimates reported in this analysis assume the CBMA is extended indefinitely, reducing the revenue loss by roughly 7 percent.

See supra

note 10.

For the years 2014-2016, vodka, gin, and grain alcohol imports represented 34% of total spirits imports. Because the cost of production for these spirits is so low relative to the tax, we expect a strong behavioral response, including increased exports, trade re-routing, and destruction, such that all imports could qualify for duty drawback. In contrast, brandy, liqueurs, and cordials are relatively high value spirits, making destruction and increased exports less feasible. For these products, we assume that opportunities to claim double drawback are limited by current exports, which amount to 2 percent of current spirits imports. Finally, we assume that all spirits exports from Canada and Mexico to non-NAFTA countries could be re-routed through the United States to take advantage of double drawback. Using United Nations International Trade Statistics data for 2014-2016, we estimate that, at current trade levels, this re-routing would generate double drawback claims for up to 8 percent of US spirits imports. Adding these shares of imports together, without rounding, sums to 45 percent of US imports.

(e) Beer

With respect to beer, fiscal year 2016 excise tax revenue from imports was $542 million, according to TTB collections data. The tax of $18 per barrel is 12.3 percent of the value of imports and 15.5 percent of the value of exports,

suggesting firms have a stronger incentive to claim double drawback on beer than bottled wine. However, qualifying, non-NAFTA exports of beer amount to only 4 percent of imports, suggesting limited scope for

takeup of double drawback. Varying the projected takeup rate between 10 percent and 30 percent on existing imports and exports, and varying the increase in qualifying exports between 10 percent and 30 percent, annual U.S. Government revenue loss from extending double drawback to beer is estimated to range from $9 million to $28 million annually over ten years.

In 2016, the average customs value of imported beer was $145.98 per barrel while the average free alongside ship (FAS) value of exports was $116.06 per barrel.

See

USITC DataWeb,

supra

note 7. The U.S. Census Bureau defines “customs value” and “FAS export value” in their Guide to Foreign Trade Statistics, § 8,

available at https://www.census.gov/foreign-trade/guide/sec2.html#customs_value.

Treasury uses customs value and FAS value, because data on cost of production are not available.

(f) Tobacco Products

With respect to tobacco products, fiscal year 2016 excise tax revenue on imports was $829 million according to TTB collections data. The tax incentives to claim double drawback are especially strong for tobacco products. For instance, in 2016, the Federal excise tax on a carton of cigarettes was 199 percent of the average customs value of a carton of imported cigarettes and 408 percent of the average export value of a carton of cigarettes exported from the United States based on U.S. Census Bureau trade data.

The tax rate by value is about 40 times larger for cigarettes than that for bottled wine, suggesting the incentive to claim drawback on cigarettes is considerably larger than the incentive to claim drawback on wine. Extending the double drawback treatment to tobacco products would create significant incentives to shift production of tobacco products overseas. It would also create a great incentive for importers to contract with domestic producers to match imports and exports for drawback; the incentive would be to import products for domestic sale and export domestically produced cigarettes. Because domestically produced tobacco products account for 95 percent of domestic tobacco consumption, Treasury assumes that tobacco firms would gradually respond by contracting with importers and setting up foreign production facilities. Accounting for this slow ramp-up in drawback claims, Treasury estimates that between 3 percent and 18 percent of excise revenue on tobacco products would be lost due to an extension of double drawback to tobacco products over the next 10 years, or between $332 million and $2.2 billion annually.

In the long run, Treasury estimates that U.S. Government revenue losses would be substantially higher, with increasing shifts of domestic production overseas.

In 2016, the average customs value of 1,000 imported cigarettes was $25.335 while the average FAS value of 1,000 exported cigarettes was $12.345.

See

USITC DataWeb,

supra

note 6. The Federal excise tax on 1,000 cigarettes is $50.33. 26 U.S.C. 5701(b)(1).

The range of possible outcomes is large, primarily due to uncertainty in the timing of firm responses rather than the magnitude of response. Specifically, Treasury does not know how quickly tobacco companies might set up new or use existing overseas production operations to serve the U.S. market.

(g) Taxable Fuels

Finally, with respect to taxable fuels, current annual excise tax revenue on imports is roughly $2 billion according to U.S. Census Bureau data on imports of gasoline and diesel fuel.

Due to the lack of detailed data on fuel imports, differentiating between those importations eligible for drawback under 19 U.S.C. 1313 and those that are not, it is quite difficult to estimate the takeup rate on substitution drawback for taxable fuels. Even a small takeup rate, however, could have a significant economic impact. Assuming, for example, that 1 percent to 5 percent of imported fuel receives double drawback of excise taxes, the U.S. Government revenue loss would range between $20 million and $98 million annually over ten years.

Retrieved from USITC DataWeb,

supra

note 7.

9. Conclusion

This proposed rule would protect the integrity of excise tax revenue collections by ensuring that 19 U.S.C. 1313(j)(2) substitution drawback is not employed to evade the statutory prohibition on using a single exportation as the basis for two drawback claims. It would preclude the filing of substitution drawback claims for excise tax paid on imported merchandise in situations where no excise tax was paid upon the substituted merchandise or limit the amount of drawback allowable to the amount of taxes paid (and not returned by refund, credit, or drawback) on the substituted merchandise, and thus eliminate double drawback. CBP invites comments from interested members of the public on this proposal.

Table A—Import Shares by Volume of Total U.S. Table Wine Consumption

Year

Imported wine container size

Two liters or less (bottles)

Over four liters (bulk)

Imported sum

2004

26.0

0.9

26.9

2005

26.8

1.8

28.6

2006

26.5

3.6

30.1

2007

27.2

3.8

30.9

2008

25.4

4.6

30.0

2009

24.5

8.7

33.2

2010

25.7

6.5

32.2

2011

24.6

7.7

32.3

2012

22.8

12.7

35.5

2013

23.5

8.9

32.4

2014

21.9

7.3

29.2

2015

22.9

6.6

29.5

2016

21.9

6.2

28.1

2004-2016:

CAGR

(Pct)

−1.4

17.1

0.4

Total growth (Pct)

−15.7

567.2

4.5

Sources:

U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 2, 2018.

Alcohol and Tobacco Tax and Trade Bureau, “Tax Collections,” accessed March 2, 2018.

1. Total U.S. wine consumption is estimated using gross excise tax collections and tax rates for wine.

2. The ITC website explains that: “General Imports measure the total physical arrivals of merchandise from foreign countries, whether such merchandise enters consumption channels immediately or is entered into bonded warehouses under Customs custody or from Foreign Trade Zones.”

3. The amount of imported wine in containers between 2 and 4 liters in size is negligible and is omitted from the table.

4. CAGR is compound annual growth rate.

Note:

Wine trade data in the table include Harmonized Tariff Schedule (HTS) 10-digit imports codes 2204215005, 2204215015, 2204215015, 2204215025, 2204215030, 2204215035, 2204215040, 2204215045, 2204215046, 2204215050, 2204215055, 2204215060, and 2204296000.

Table B—Volume of U.S. Total Wine Exports and General Imports by Container Size (All Countries)

[Millions of liters of wine with not over 14 percent alcohol by volume]

Year

Total exports

Container

Two liters

or less

(bottles)

Size

Over two

liters

(bulk)

Exported

sum

Pct share

in large

containers

General imports

Container

Two liters

or less

(bottles)

Size

Over

four liters

(bulk)

Imported

sum

Pct share

in large

containers

2004

259

327

20.8

556

576

3.5

2005

177

100

278

36.2

602

642

6.2

2006

189

138

327

42.3

615

699

12.0

2007

207

169

376

45.0

661

753

12.2

2008

209

201

410

49.0

623

112

735

15.2

2009

177

171

349

49.2

612

218

830

26.3

2010

171

196

368

53.4

658

168

826

20.3

2011

185

190

375

50.8

673

211

884

23.9

2012

196

167

364

46.1

659

365

1024

35.6

2013

207

172

379

45.4

671

255

926

27.5

2014

195

176

371

47.5

655

219

874

25.1

2015

205

180

385

46.7

685

197

882

22.3

2016

171

175

345

50.6

685

195

880

22.2

2004-2016:

CAGR

(Pct)

−3.4

8.2

0.4

7.7

1.8

20.9

3.6

16.7

Total growth (Pct)

−34.1

156.6

5.5

143.2

23.2

875.0

52.8

538.2

Source: U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 2, 2018.

1. The ITC describes total exports as “Domestic exports plus foreign exports” on their website.

2. The ITC website explains that “General Imports measure the total physical arrivals of merchandise from foreign countries, whether such merchandise enters consumption channels immediately or is entered into bonded warehouses under Customs custody or from Foreign Trade Zones.”

3. The amount of imported wine in containers between 2 and 4 liters in size is negligible and is omitted from the table.

4. CAGR is compound annual growth rate.

Note:

Wine trade data in the table include Harmonized Tariff Schedule (HTS) 10-digit exports codes 2204214000 and 2204290020. HTS imports codes used include 2204215005, 2204215015, 2204215025, 2204215030, 2204215035, 2204215040, 2204215045, 2204215046, 2204215050, 2204215055, 2204215060, and 2204296000.

Table C—Value of U.S. Total Wine Exports and General Imports by Container Size (All Countries)

[Millions of U.S. dollars of wine with not over 14 percent alcohol by volume]

Year

Total exports, free

alongside ship (FAS)

Container

Two liters

or less

(bottles)

Size

Over two

liters

(bulk)

Exported

sum

Pct share

in large

containers

General imports,

general customs value

Container

Two liters

or less

(bottles)

Size

Over four

liters

(bulk)

Imported

sum

Pct share

in large

containers

2004

600

682

12.0

2,658

2,677

0.7

2005

452

543

16.8

2,891

2,926

1.2

2006

616

121

737

16.4

3,153

3,220

2.1

2007

635

151

786

19.2

3,494

3,571

2.2

2008

645

182

827

22.0

3,511

114

3,625

3.1

2009

549

202

751

26.9

3,029

157

3,186

4.9

2010

702

212

914

23.2

3,143

149

3,292

4.5

2011

869

213

1,082

19.7

3,420

225

3,645

6.2

2012

905

199

1,104

18.0

3,458

400

3,858

10.4

2013

1,037

235

1,272

18.5

3,652

281

3,933

7.1

2014

921

240

1,161

20.7

3,708

242

3,950

6.1

2015

1,035

227

1,262

18.0

3,709

202

3,911

5.2

2016

1,050

205

1,255

16.3

3,779

217

3,996

5.4

2004-2016:

CAGR

(Pct)

4.8

7.9

5.2

2.6

3.0

22.5

3.4

18.5

Total growth (Pct)

75.0

150.0

84.0

35.9

42.2

1,042.1

49.3

665.1

Source: U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 15, 2018.

The ITC describes total exports as “Domestic exports plus foreign exports” on their website. The U.S. Census Bureau provides definitions of FAS export value and customs value in their Guide to Foreign Trade Statistics, § 8,

available at https://www.census.gov/foreign-trade/guide/sec2.html#customs_value.

1. The ITC website explains that “General Imports measure the total physical arrivals of merchandise from foreign countries, whether such merchandise enters consumption channels immediately or is entered into bonded warehouses under Customs custody or from Foreign Trade Zones.”

2. The amount of imported wine in containers between 2 and 4 liters in size is negligible and is omitted from the table.

3. CAGR is compound annual growth rate.

Note:

Table D—Volume of U.S. Total Wine Exports

by Destination

[Millions of liters of wine with not over 14 percent alcohol by volume]

Year

Exports to

NAFTA

countries

Pct share in

large

containers

Exports to

non-NAFTA

countries

Pct share in

large

containers

2004

56.7

290

16.2

2005

50.7

243

34.1

2006

38.0

287

42.9

2007

37.2

325

46.2

2008

39.8

354

50.5

2009

29.4

301

52.3

2010

33.3

325

56.0

2011

33.4

329

53.2

2012

30.9

311

48.6

2013

18.0

330

49.6

2014

22.6

314

52.0

2015

27.0

324

50.4

2016

25.6

291

55.2

2004-2016:

CAGR

(Pct)

3.3

−6.4

0.0

10.8

Total growth (Pct)

47.6

−54.8

0.2

240.6

Source: Treasury calculations based on import data from U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 2, 2018.

1. The ITC website describes total exports as “Domestic exports plus foreign exports.”

2. Large containers is defined here as containers over 2 liters in size.

3. CAGR is compound annual growth rate.

Note:

Wine trade data in the table include Harmonized Tariff Schedule (HTS) 10-digit exports codes 2204214000 and 2204290020.

Table E—Average Value of U.S. Total Wine Exports and General Imports and Effective Tax Rates by Container Size (All Countries)

[U.S. dollars per liter of wine with not over 14 percent alcohol by volume]

Year

Average value per liter of total exports

Two liters or less

(bottles)

Value per

liter

Tax/value

(pct)

Over two liters

(bulk)

Value per

liter

Tax/value

(pct)

Average value per liter of general imports

Two liters or less

(bottles)

Value per

liter

Tax/value

(pct)

Over four liters

(bulk)

Value per

liter

Tax/value

(pct)

2004

2.3

12.2

1.2

23.5

4.8

5.9

1.0

29.8

2005

2.5

11.1

0.9

31.2

4.8

5.9

0.9

32.3

2006

3.3

8.7

0.9

32.2

5.1

5.5

0.8

35.4

2007

3.1

9.2

0.9

31.6

5.3

0.8

33.8

2008

3.1

9.1

0.9

31.2

5.6

5.0

1.0

27.8

2009

3.1

9.1

1.2

24.0

4.9

5.7

0.7

39.2

2010

4.1

6.9

1.1

26.2

4.8

5.9

0.9

31.9

2011

4.7

6.0

1.1

25.3

5.1

5.6

1.1

26.5

2012

4.6

6.1

1.2

23.8

5.2

5.4

1.1

25.8

2013

5.0

5.6

1.4

20.7

5.4

5.2

1.1

25.7

2014

4.7

6.0

1.4

20.7

5.7

5.0

1.1

25.6

2015

5.0

5.6

1.3

22.4

5.4

5.2

1.0

27.6

2016

6.1

4.6

1.2

24.1

5.5

5.1

1.1

25.4

2004-2016:

CAGR

(Pct)

8.5

−7.8

−0.2

0.2

1.2

−1.2

1.3

−1.3

Total growth (Pct)

165.7

−62.4

−2.6

2.6

15.4

−13.3

17.1

−14.6

Source: U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 2-15, 2018.

1. The ITC describes total exports as “Domestic exports plus foreign exports” on their website.

3. The amount of imported wine in containers between 2 and 4 liters in size is negligible and is omitted from the table.

4. The tax as a share of value is approximated by dividing the most common tax rate (28.266 cents per liter) by the average customs value per liter.

5. CAGR is compound annual growth rate.

Note:

III. Explanation of Proposed Regulations

The following proposed regulatory amendments are generally based on 19 U.S.C. 1313, including the new requirements, timeframes, and related operational decisions necessitated by TFTEA. When proposed regulatory language is based, at least in part, on authority other than 19 U.S.C. 1313, these instances are noted below.

A. Proposed New Part 190

CBP based the regulatory structure of the proposed new part 190 on the current part 191 in order to ease the transition for drawback practitioners by attempting to ensure, wherever possible, that the numerical regulations in each part correspond with each other. In some regulations, while the name of a section has changed, the content of the proposed section generally aligns with the content of the corresponding section in part 191. For example, § 191.10, Certificate of delivery, deals with transfers of merchandise and requirements related to certificates of delivery as evidence of the transfers. However, proposed § 190.10, Transfer of merchandise, also deals with transfers of merchandise but it is not called “certificate of delivery” because TFTEA eliminated certificates of delivery (as well as certificates of manufacture and delivery). In other instances, it was necessary to reserve a section (

e.g.,

§ 190.76, Landing certificate) if the corresponding section in part 191 was no longer required or to add a new section (

e.g.,

§ 190.63, Liability for drawback claims) if there was no corresponding section in part 191. However, for the most part, the regulations in proposed part 190 directly correspond with those in part 191. Accordingly, when describing the proposed regulations, comparisons to the corresponding section in part 191 are included to facilitate the transition to TFTEA-Drawback. Generally, these comparisons will note the major differences between the proposed regulation and the corresponding regulation in part 191 (such as in regulations dealing with substitution which is now generally based on the HTSUS), or, in many cases, will indicate that there are no differences (other than the references being to sections in part 191) or that the differences are minor. These minor differences will usually include grammatical or stylistic edits (for example, changing “shall” to “will” or “must”) or nomenclature changes (for example, changing “Customs” to “CBP” such as in “CBP custody” or “CBP supervision”).

New part 190 is drafted with a scope section and a section regarding claims filed under NAFTA followed by 19 subparts: General Provisions; Manufacturing Drawback; Unused Merchandise Drawback; Rejected Merchandise; Completion of Drawback Claims; Verification of Claims; Exportation and Destruction; Liquidation and Protest of Drawback Entries; Waiver of Prior Notice of Intent to Export; Accelerated Payment of Drawback; Internal Revenue Tax on Flavoring Extracts and Medicinal or Toilet Preparations (Including Perfumery) Manufactured From Domestic Tax-Paid Alcohol; Supplies for Certain Vessels and Aircraft; Meats Cured With Imported Salt; Materials for Construction and Equipment of Vessels and Aircraft Built for Foreign Ownership and Account; Foreign-Built Jet Aircraft Engines Processed in the United States; Merchandise Exported From Continuous CBP Custody; Distilled Spirits, Wines, or Beer Which Are Unmerchantable or Do Not Conform to Sample or Specifications; Substitution of Finished Petroleum Derivatives; Merchandise Transferred to a Foreign Trade Zone From CBP Custody; Drawback Compliance Program.

Section 190.0 briefly describes the scope of the new proposed part 190 dealing with drawback as amended by TFTEA.

Section 190.0a states that claims involving NAFTA are provided for in part 181. This section contains only grammatical changes from the corresponding section in part 190.

Subpart A—General Provisions

Section 190.1 briefly describes the authority of the Commissioner of CBP to prescribe, and of the Secretary of the Treasury to approve, rules and regulations regarding drawback. It is proposed to amend the corresponding section in part 191 as well as to identify Treasury Department Order Number 100-16 and DHS Delegation Order 7010.3 as sources of authority.

See

19 CFR part 0.

Section 190.2 lists definitions used throughout the proposed part 190. This section differs from the corresponding section in part 191 in that the definitions for certificate of delivery, certificate of manufacture and delivery, and commercially interchangeable merchandise have been removed and the definitions for the following terms were added: Bill of materials; document; drawback office; formula; intermediate party; per unit averaging; schedule B; sought chemical element; and wine.

Section 190.3 provides information regarding the duties, taxes, and fees subject or not subject to drawback. This proposed regulation differs from the corresponding regulation in part 191 in that it generally provides for refunds of duties, taxes, and fees based on the changes to 19 U.S.C. 1313(l) stemming from TFTEA. This proposed regulation differs from the current corresponding regulation in part 191 by allowing drawback on the merchandise processing fee (MPF) generally, whereas 19 CFR 191.3(a)(4) limits drawback on MPF to situations only involving claims under 19 U.S.C. 1313(j) and 19 U.S.C. 1313(p)(2)(A)(iii) or (iv). Consistent with the Miscellaneous Trade and Technical Corrections Act of 2004 (Pub. L. 108-429), which amended 19 U.S.C. 1313 to allow, inter alia, harbor maintenance taxes (HMT) refunds, this proposed regulation also allows drawback on HMT for claims under the provisions which provide for drawback of tax.

Title 19 of the Code of Federal Regulations may also refer to the harbor maintenance tax as the harbor maintenance fee (HMF).

Similarly, but subject to the limitations under 19 U.S.C. 1313 prior to being amended by TFTEA, this document proposes to update 19 CFR 191.3 by creating a new paragraph (a)(5) to allow drawback on HMT, but limited to situations involving only claims under 19 U.S.C. 1313(j) and 19 U.S.C. 1313(p)(2)(A)(iii) or (iv). In addition, 19 CFR 191.3(b)(1) is revised to otherwise prohibit HMT refunds except under the provisions specified in proposed new paragraph (a)(5). Relatedly, section 191.3 is retitled as “duties, taxes, and fees subject or not subject to drawback” for clarifying purposes.

Section 190.4 provides information regarding drawback and merchandise in which the U.S. Government has an interest. This section replicates the corresponding section in part 191.

Section 190.5 states that drawback is available on goods shipped to Guantanamo Bay and that drawback under 1313(j)(1) is permitted on merchandise shipped to certain insular possessions and trust territories. This section differs from the corresponding section in the current part 191 because the Miscellaneous Trade and Technical Corrections Act of 2004 (Pub. L. 108-429), amended 19 U.S.C. 1313 by adding paragraph (y) to allow drawback under 19 U.S.C. 1313(j)(1) on entries shipped from the customs territory of the United States to the U.S. Virgin Islands, American Samoa, Wake Island, Midway Islands, Kingman Reef, Guam, Canton Island, Enderbury Island, Johnston Island, and Palmyra Island.

Accordingly, while this 2004 change was not previously made in part 191, this document proposes to clarify this modification in proposed § 190.5 and in existing § 191.5. Further, consistent with proposed § 190.5, it is proposed to amend § 191.5 to clarify that drawback is not allowable on merchandise shipped to Puerto Rico from elsewhere in the customs territory of the United States because Puerto Rico is part of the customs territory of the United States (

see

19 CFR 101.1).

Section 190.6 specifies who has the authority to sign or electronically certify drawback documents. This section differs from the corresponding section in part 191 in that it provides for electronic signatures, removes references to Certificates of Delivery and Certificates of Manufacture and Delivery, and includes additional references to bill of materials and formulas.

Section 190.7 provides information on general manufacturing drawback rulings, states that the process to modify these rulings is the same as provided for in § 190.8, and also clarifies the longstanding CBP procedures for the modification of these rulings. This section differs from the corresponding section in part 191 in that it makes TFTEA-conforming changes, such as adding the requirement to provide the 8-digit HTSUS number, and it contains grammatical and nomenclature changes.

Section 190.8 provides information on specific manufacturing drawback rulings and establishes a process to modify these rulings to comply with TFTEA-Drawback requirements by providing the ability to annotate the ruling with the 8-digit HTSUS numbers for rulings issued prior to February 24, 2018, if accompanied by the relevant certification. This section differs from the corresponding section in part 191 in that it makes TFTEA-conforming changes, such as adding the requirement to provide the 8-digit HTSUS number, and it contains grammatical and nomenclature changes.

Section 190.9 provides information regarding agency relationships detailing how the owner of the identified merchandise, the designated imported merchandise, and/or the substituted merchandise used to produce an exported article may employ another person to do part, or all, of the manufacture or production under 19 U.S.C. 1313(a) or (b). This section is similar to the corresponding section in part 191; however, it updates the language by removing references to Certificates of Delivery and includes the requirement to provide the 10-digit HTSUS number.

Section 190.10 provides information regarding documenting and maintaining records regarding transfers of merchandise. This section contains significant differences specific to TFTEA-Drawback, from the corresponding section in part 191.

Section 190.11 provides information on the valuation of the designated imported merchandise for drawback claims, as well as for the application of the “lesser of” rules for substitution claims (

i.e.,

for exported or destroyed merchandise and articles, as well as substituted merchandise used in manufacturing). The corresponding regulation in part 191 deals with tradeoff, which was provided for in 19 U.S.C. 1313(k) prior to the TFTEA amendments. TFTEA deleted the provision that authorized tradeoff in 19 U.S.C. 1313(k) and replaced it with an unrelated new provision establishing joint and several liability for drawback claims.

Section 190.12 provides information regarding situations when a claimant files under an incorrect provision and this section states that the claim may be deemed filed pursuant to any other provision if it is determined that drawback is allowable under that provision but not under the provision as originally filed. With the exception of cross-references, this section is generally unchanged from the corresponding section in part 191.

Section 190.13 states that drawback is available under 19 U.S.C. 1313(q) on imported packaging material when used to package or repackage merchandise or articles exported or destroyed pursuant to certain other provisions. This section differs from the corresponding section in part 191 due to grammatical changes.

Section 190.14 provides for identification of merchandise or articles through accounting methods in situations not involving substitution, which remain the same as in part 191 and are based on a standard of fungibility. This section differs from the corresponding section in part 191 regarding the five-year time period and generally due to minor clarifying edits as well as grammatical and nomenclature changes.

Section 190.15 provides general information regarding recordkeeping requirements. With the exception of the recordkeeping time period, this section is unchanged from the corresponding section in part 191.

Subpart B Contains Requirements Specific to Manufacturing Drawback Claims

Section 190.21 provides the general rule regarding direct identification manufacturing drawback claims. This section differs from the corresponding regulation in part 191 in that it incorporates changes such as the amount of drawback provided for and the limitation of drawback of duties regarding flour or by-products of imported wheat.

Section 190.22 provides the general rule regarding substitution manufacturing drawback claims. This section differs from the corresponding regulation in part 191 in that it incorporates changes to 19 U.S.C. 1313(b) brought about in Section 906 of TFTEA such as the 8-digit HTSUS substitution standard and provides for the “lesser of” rule as it applies to TFTEA-Drawback and also contains grammatical and nomenclature changes. This section also includes language regarding the preclusion of claiming Federal excise taxes discussed in detail in the section titled

Federal Excise Tax and Substitution Drawback Claims.

Section 190.23 details the methods and requirements for claiming drawback specific to manufacturing claims. This section differs significantly from the corresponding section in part 191 in that it is titled differently, it provides for a different methodology for claiming drawback (relative value) and it is slightly reordered.

Section 190.24 directs parties involved in drawback-related transactions to § 190.10, the general section dealing with transfers of merchandise. This section differs from the corresponding section in part 191 by referencing the appropriate section in the proposed part dealing with transfers of merchandise.

Section 190.25 directs parties involved in the destruction of merchandise for drawback-related transactions to § 190.71, which contains the procedures for destroying merchandise under CBP supervision. This section is nearly identical to the corresponding section in part 191.

Section 190.26 provides information regarding recordkeeping requirements generally and specifically requires documents enabling CBP to trace the articles manufactured or produced from importation, through any transfers, to exportation or destruction. This section is substantially similar to the corresponding section in part 191 but it differs due to certain grammatical and nomenclature changes and it contains TFTEA-based modifications such as requiring the 8-digit HTSUS number rather than referencing same kind and quality.

Section 190.27 provides general information on the time limitations regarding manufacturing drawback. This

section is substantially similar to the corresponding section in part 191 but it differs in that it contains certain grammatical and nomenclature changes and TFTEA-based modifications such as changing the time period to 5 years after importation, from the 3-year time period after date of receipt by the manufacturer or producer at the factory in § 191.27.

Section 190.28 details the parties entitled to file a claim in situations involving manufacturing drawback. This section differs from the corresponding section in part 191 due only to a few grammatical changes.

Section 190.29 requires a claimant filing a manufacturing drawback claim to make certifications regarding the availability of the applicable bill of materials or formula including the HTSUS subheading number(s) and the quantities of merchandise. This regulation is new and does not have a corresponding regulation in part 191; however, the type of documentation covered by this certification has generally been required by CBP as part of a manufacturing drawback claim.

Subpart C Provides Specific Requirements Dealing With Unused Merchandise Drawback

Section 190.31 provides the general rule regarding direct identification unused merchandise drawback claims. This section differs from the corresponding regulation in part 191 in that it incorporates TFTEA-based changes to 19 U.S.C. 1313(j)(1) such as the 5-year period for filing a claim and it contains grammatical and nomenclature changes.

Section 190.32 provides the general rule regarding substitution unused merchandise drawback claims. This section differs from the corresponding regulation in part 191 in that it incorporates TFTEA-based changes to 19 U.S.C. 1313(j)(2) such as the 5-year period for filing a claim and HTSUS-based substitution determinations, provides for the “lesser of” rule regarding allowable refunds, and contains grammatical and nomenclature changes. This section also explains the special substitution rule for wine, which is not provided for in the corresponding section of part 191, and includes language regarding the preclusion of claiming Federal excise taxes discussed in detail in the section titled

Federal Excise Tax and Substitution Drawback Claims.

As discussed further below in the section titled

Amendments Regarding Federal Excise Tax and Substitution Drawback Claims,

this preclusion is also proposed as an amendment to § 191.32.

Section 190.33 details the parties entitled to claim in situations regarding unused merchandise drawback. This section differs from the corresponding regulation in part 191 in that it incorporates TFTEA-based changes such as referencing records kept in the normal course of business; it does not reference terms such as commercially interchangeable and certificate of delivery, which were eliminated for TFTEA-Drawback; and it contains grammatical and nomenclature changes.

Section 190.34 directs parties involved in drawback-related transactions to § 190.10, the general section dealing with transfers of merchandise. This section differs from the corresponding section in part 191 in that it merely directs to the general section dealing with transfers of merchandise rather than detailing specifics.

Section 190.35 contains specific instructions regarding the required notice of intent to export, destroy, or return merchandise, and the process regarding CBP's determination to examine merchandise. The process described in this section replicates the process as laid out in the corresponding section in part 191, with only grammatical and nomenclature changes.

Section 190.36 contains information regarding obtaining a one-time waiver of the requirement to provide notice of intent to export. The process described in this section replicates the process as laid out in the corresponding section in part 191.

Section 190.37 directs parties involved in the destruction of merchandise for drawback claims to § 190.71, which contains the procedures for destroying merchandise under CBP supervision. The process described in this section replicates the process as laid out in the corresponding section in part 191 and contains only one nomenclature change.

Section 190.38 provides information regarding recordkeeping requirements generally and specifically requires documents enabling CBP to trace the merchandise from importation, through any transfers, to exportation or destruction. This section is substantially similar to the process as laid out in the corresponding section in part 191 and contains grammatical and nomenclature changes.

Subpart D Provides Specific Requirements Regarding Rejected Merchandise Drawback Under 19 U.S.C. 1313(c)

Section 190.41 provides for drawback claims under 19 U.S.C. 1313(c) regarding rejected merchandise involving goods that do not conform to sample or specifications, were shipped without consent of the consignee, or determined to be defective at the time of importation. This section differs from the corresponding section in part 191 in that it contains nomenclature changes and includes additional language regarding goods sold at retail and returned, removes certain language regarding satisfactory evidence and includes language regarding the amount of drawback allowable.

Section 190.42 sets forth the general procedures for filing, documenting, and certifying claims under rejected merchandise drawback. This regulation differs from the corresponding regulation in part 191 in that it includes the expanded time frame of 5 years from the date of importation for filing claims and directs claimants to § 190.71 for procedures regarding the destruction of merchandise under CBP supervision. This regulation also differs from the current corresponding regulation in part 191 (at § 191.42(a)), which requires that the merchandise be in CBP custody prior to exportation or destruction. This was rendered obsolete by the Miscellaneous Trade and Technical Corrections Act of 2004 (Pub. L. 108-429), which removed the requirement that the merchandise be in CBP custody prior to exportation or destruction. Accordingly, it is proposed to update § 191.42(a) as well.

Section 190.43 informs claimants of the possibility of filing a direct identification unused merchandise claim under 19 U.S.C. 1313(j)(1) in lieu of a rejected merchandise claim, to the extent that the merchandise qualifies. This section replicates the corresponding section in part 191; however, the section title, unused merchandise drawback claim, differs from the corresponding section title in part 191, which is unused merchandise claim.

Section 190.44 is reserved. The corresponding regulation in part 191 directs claimants to § 191.71 for the procedures for destroying merchandise under CBP supervision. This section is unnecessary as a stand-alone regulation because the citation to § 190.71, dealing with destruction under CBP supervision, is included in § 190.42, as discussed above.

Section 190.45 is a new regulation regarding the special rule for substitution for returned retail merchandise, a subset of rejected merchandise provided for in 19 U.S.C. 1313(c). This section includes requirements that have been in effect since 2004, when the Miscellaneous Trade and Technical Corrections Act of

2004 (Pub. L. 108-429), amended 19 U.S.C. 1313(c) regarding drawback on returned items sold at the retail level. Specifically, this regulation provides for a special rule going beyond mere HTSUS interchangeability for substitution involving returned retail merchandise by requiring the specific product identifier to be the same for both the returned retail merchandise and the substituted exported or destroyed merchandise (

e.g.,

SKU or part number). Therefore, it is proposed to add a new § 191.45 as well.

Subpart E Deals With the Completion of Drawback Claims

Section 190.51 provides information regarding what constitutes a complete drawback claim and delineates those supporting documents that must be uploaded to complete a claim. This proposed section explains the requirement that the successful electronic transmission of drawback claims in the CBP-authorized EDI system includes upload of supporting documentation. This section, at 190.51(a)(4), includes the prohibition against designating imported merchandise from a line item on an entry summary as part of a TFTEA-Drawback substitution claim under part 190 if any other merchandise covered on that entry summary has been designated as the basis of a claim under part 191 (and the corresponding regulation in part 191 is similarly amended at 191.51(a)(3)). This section also provides information regarding the official date of filing, calculation of refunds relative to drawback-eligible duties, taxes, and fees, as well as information regarding the reporting of the HTSUS classifications and Department of Commerce Schedule B commodity numbers applicable to imported, substituted, exported, and destroyed merchandise and articles. This section also differs from the corresponding section in part 191 due to corrections of clerical errors in (b)(2)(i) regarding the mathematical calculations included in the example.

Section 190.52 concerns rejecting, perfecting, or amending drawback claims, including the applicable timeframes and limitations. This section differs from the corresponding section in part 191 in that it includes the TFTEA-based 5-year deadline and includes certain grammatical and nomenclature changes.

Section 190.53 details CBP's authority to require claimants to restructure claims if necessary to foster administrative efficiency. This section differs from the corresponding section in part 191 due only to nomenclature changes.

Subpart F Deals With the Verification of Drawback Claims

Section 190.61 provides information regarding the verification of drawback claims, including how verification is done and its impact on liquidation. This section differs from the corresponding section in part 191 slightly due to simplification of the language related to the electronic environment for TFTEA-Drawback claims and grammatical and nomenclature changes.

Section 190.62 provides information regarding criminal and civil penalties related to drawback claims. This section replicates the corresponding section in part 191.

Section 190.63 is a new regulation detailing the joint and several liability of the importer of the merchandise designated as the basis of a drawback claim and the party claiming drawback.

Subpart G Deals With the Exportation and Destruction of Articles Involved in Drawback Claims

Section 190.71 provides procedures and requirements regarding obtaining drawback on articles destroyed under CBP supervision. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.72 provides requirements regarding proof of export in drawback claims. This section differs from the corresponding section in part 191 in that it lists the required summary data for establishing exportation and references certain supporting documents to prove export.

Section 190.73 states that records kept through an electronic export system of the United States Government may be considered as actual proof of exportation only if CBP has officially approved the use of that electronic export system as proof of compliance. The corresponding regulation in part 191 provided information regarding export summary procedures.

Section 190.74 provides information regarding exportation by mail and how to claim drawback. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.75 provides information regarding exportation by the U.S. Government and how to claim drawback. This section differs slightly from the corresponding section in part 191 due to grammatical changes and it does not contain the reference to section 191.73, which in part 191 provided detailed information on export summary procedures (the relevant data elements from the export summary are now incorporated into the drawback entry summary, as provided for in 19 CFR 190.51(a)).

Section 190.76 is reserved as corresponding section 191.76 provides information regarding landing certificates, which are now obsolete.

Subpart H Deals With the Liquidation and Protest of Drawback Entries

Section 190.81 provides information regarding the liquidation of drawback claims. The Miscellaneous Trade and Technical Corrections Act of 2004 (Pub. L. 108-429), amended 19 U.S.C. 1504 to expressly impose limitations on the liquidation of drawback entries. Pursuant to this 2004 amendment, unless a claim for drawback is extended or suspended, an entry or claim for drawback not liquidated within 1 year from the date of entry or claim will be deemed liquidated at the drawback amount asserted at the time of entry or claim. Accordingly, this document in § 190.81 and in § 191.81 proposes to clarify this 2004 modification regarding drawback claims and deemed liquidations.

Section 190.82 specifies who is entitled to claim drawback. This section differs from the corresponding section in part 191 due only to grammatical changes.

Section 190.83 specifies who is entitled to receive drawback payments. This section replicates the corresponding section in part 191.

Section 190.84 provides information regarding protest procedures involving drawback claims. This section differs from the corresponding section in part 191 due only to a grammatical change.

Subpart I Deals With Applications for Privileges Involving Drawback

Section 190.91 provides procedures regarding applying for and obtaining the privilege of waiver of prior notice of intent to export. This section differs from the corresponding section in part 191 in that it references the need to meet the standard for substitution rather than using the term commercially interchangeable, it discusses grandfathering in existing privilege holders relative to TFTEA-based changes, and it contains grammatical and nomenclature changes.

Section 190.92 provides procedures regarding applying for and obtaining the privilege of accelerated payment in which payment of drawback claims may be obtained prior to liquidation. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.93 provides for the combined privileges of waiver of prior notice and accelerated payment and states that applications may be for one privilege, both privileges separately, or both privileges in a combined application. This section replicates the corresponding section in part 191.

Subpart J Deals With Internal Revenue Taxes on Flavoring Extracts and Medicinal or Toilet Preparations.

In addition to the proposed regulations described immediately below in subpart J (§§ 190.101—190.106), the Department of the Treasury and CBP are also considering transferring the administration of drawback refunds provided for in subpart J from CBP to the Alcohol and Tobacco Tax and Trade Bureau (TTB). This part of the law solely involves drawback for the export of domestic products, and such a transfer would place with the agency with responsibility for taxation of domestic products. It would also enable exporters of flavoring extracts and medicinal or toilet preparations to claim the full amount of drawback available at a single agency. CBP and TTB would greatly appreciate comments on this proposal.

Section 190.101 states that 19 U.S.C. 1313(d) provides for drawback for the refund of internal revenue tax upon the exportation of flavoring extracts and medicinal or toilet preparations (including perfumery) manufactured or produced in the United States in part from the domestic tax-paid alcohol. This section differs from the corresponding section in part 191 due only to grammatical changes.

Section 190.102 provides that provisions relating to direct identification drawback (contained in subpart B of this part) will apply to claims for drawback filed upon the exportation of flavoring extracts and medicinal or toilet preparations (including perfumery) manufactured or produced in the United States in part from the domestic tax-paid alcohol. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes and in paragraph (e), which states that the time period for completing claims is three years from the date of export.

Section 190.103 details additional requirements in situations where a declaration of the manufacturer showing whether a claim has been or will be filed by the manufacturer with the regional Director, National Review Center, TTB, is necessary. TTB was previously referred to as the Bureau of Alcohol, Tobacco and Firearms. This regulation has been updated throughout for accuracy, including updating the statutory citations to 26 U.S.C. 5111-5114, dealing with the Internal Revenue Code. This section also differs from the current corresponding section in part 191 due to grammatical and nomenclature changes. For the same reasons detailed here, it is proposed to update § 191.103 as well.

Section 190.104 provides information regarding required certificates involving drawback and TTB. This regulation has been updated for accuracy because, among other things, the relevant TTB Form (5100.4), was updated in November of 2015. This section also differs from the current corresponding section in part 191 due to grammatical and nomenclature changes. It is proposed to update that section, § 191.104, as well.

Section 190.105 provides that the drawback office must ascertain the final amount of drawback due by reference to the specific manufacturing ruling under which drawback was claimed. This section differs from the corresponding section in part 191, which requires that the final amount be made in reference to the certificate of manufacture and delivery, which is no longer required in TFTEA-Drawback.

Section 190.106 provides for the limitation of drawback available in situations in which the declaration required by § 190.103 of this subpart shows that a claim has been or will be filed and it states that drawback may not be granted absent receipt from TTB of a copy of TTB Form 5100.4 (Certificate of Tax-Paid Alcohol). This section also differs from the current corresponding section in part 191 due to grammatical and nomenclature changes regarding TTB. It is proposed to update that section, § 191.106, as well.

Subpart K Deals With Supplies for Certain Vessels and Aircraft

Section 190.111 states that 19 U.S.C. 1309 provides for drawback on articles laden as supplies on certain vessels or aircraft of the United States or as supplies including equipment upon, or used in the maintenance or repair of, certain foreign vessels or aircraft. This section replicates the corresponding section in part 191.

Section 190.112 provides procedures regarding obtaining drawback in situations involving supplies for certain vessels and aircraft and states that the provisions of this subpart will override other conflicting provisions of this part. This section differs from the corresponding section in part 191 due to TFTEA-based changes, such as the 5-year time period for filing claims, and due to grammatical and nomenclature changes.

Subpart L Deals With Meats Cured With Imported Salt

Section 190.121 states that 19 U.S.C. 1313(f) provides for drawback allowance on meats cured with imported salt. This section replicates the corresponding section in part 191.

Section 190.122 provides procedures regarding obtaining drawback in situations involving meats cured with imported salt. This section differs from the corresponding section in part 191 in that the organizational structure was changed because paragraph (b), regarding modifying a paper form, was removed, and grammatical changes have been made.

Section 190.123 provides that drawback will be refunded in aggregate amounts of not less than $100 and will not be subject to the retention of 1 percent of duties paid for claims involving meats cured with imported salt. This section differs from the corresponding section in part 191 due to grammatical changes.

Subpart M Deals With Materials for Construction and Equipment for Vessels and Aircraft for Foreign Ownership and Account

Section 190.131 states that 19 U.S.C. 1313(g) provides for drawback on materials for construction and equipment for vessels and aircraft for foreign ownership and account. This section replicates the corresponding section in part 191.

Section 190.132 states that other provisions of this part relating to direct identification manufacturing drawback will apply to claims for drawback filed under 19 U.S.C. 1313(g) and this subpart insofar as applicable to and not inconsistent with the provisions of this subpart. This section differs from the corresponding section in part 191 due to grammatical changes.

Section 190.133 provides an explanation of terms specific to this subpart dealing with drawback on materials for construction and equipment for vessels and aircraft for foreign ownership and account. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Subpart N Deals With Foreign-Built Jet Aircraft Engines Processed in the United States

Section 190.141 states that 19 U.S.C. 1313(h) provides for drawback on the exportation of jet aircraft engines manufactured or produced abroad that have been overhauled, repaired, rebuilt,

or reconditioned in the United States with the use of imported merchandise, including parts. This section replicates the corresponding section in part 191.

Section 190.142 states that other provisions of this part relating to direct identification manufacturing drawback will apply to claims for drawback filed under 19 U.S.C. 1313(h) and this subpart insofar as applicable to and not inconsistent with the provisions of this subpart. This section differs from the corresponding section in part 191 due to a grammatical change.

Section 190.143 provides specifics relating to the filing of entry and the contents of the entry regarding claims filed under this subpart. This section differs from the corresponding section in part 191 by removing the reference to CBP Form 7551 (as this data will be submitted through ACE) and due to grammatical changes.

Section 190.144 states that drawback under this subpart will be refunded in aggregate amounts of not less than $100 and will not be subject to the deduction of 1 percent of duties paid. This section differs from the corresponding section in part 191 due to grammatical changes.

Subpart O Deals With Merchandise Exported From Continuous CBP Custody

Section 190.151 states that 19 U.S.C. 1557(a) provides for drawback on merchandise upon which duties have been paid and which has remained continuously in bonded warehouse or otherwise in CBP custody for a specified period of time, when exported to certain locations. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.152 provides specified exceptions for when drawback will be allowed on merchandise released from CBP custody. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.153 provides information regarding when merchandise is considered in continuous CBP custody in certain scenarios. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.154 provides information regarding filing a direct export entry or entry for merchandise transported to another port for exportation. This section differs from the corresponding section in part 191 by not requiring the filing of CBP Form 7551 (as the data will be transmitted through ACE) and due to grammatical and nomenclature changes.

Section 190.155 states that the regulations in 19 CFR part 18 will be followed to the extent possible when merchandise is withdrawn from a warehouse for exportation. This section differs from the corresponding section in part 191 due to grammatical changes.

Section 190.156 provides information regarding the filing of a bill of lading and applicable timeframes. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.157 is reserved as the corresponding section in part 191 directed readers to section 191.76 regarding landing certificates, which are now obsolete.

Section 190.158 provides for procedures of liquidation for a complete drawback claim in accordance with § 190.81. This section differs from the corresponding section in part 191 due to grammatical changes.

Section 190.159 states that drawback due under this subpart will not be subject to the deduction of 1 percent of duties paid. This section differs from the corresponding section in part 191 due to grammatical changes.

Subpart P Deals With Distilled Spirits, Wines, or Beer Which are Unmerchantable or do not Conform to Sample or Specifications

Section 190.161 provides for the refund, remission, abatement or credit regarding imported distilled spirits, wines, or beer found after entry to be unmerchantable or not to conform to sample or specifications and which are returned to CBP custody. This section differs from the corresponding section in part 191 due to nomenclature changes.

Section 190.162 states that export procedures as provided for at § 190.42 apply, except that the claimant must be the importer. This section differs from the corresponding section in part 191 due to grammatical changes.

Section 190.163 provides for the required documentation in claims setting forth in detail the facts which cause the merchandise to be unmerchantable and any additional evidence that the drawback office requires to establish that the merchandise is unmerchantable. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes.

Section 190.164 states that there is no time limit for the return to CBP custody for merchandise covered under this subpart. This section differs from the corresponding section in part 191 due only to nomenclature changes.

Section 190.165 states that exportations by mail are not permitted for merchandise covered in this subpart. This section differs from the corresponding section in part 191 due only to grammatical changes.

Section 190.166 provides information regarding the destruction of merchandise under this subpart. This section differs from the corresponding section in part 191 due only to grammatical and nomenclature changes.

Section 190.167 states that no deduction of 1 percent of the internal revenue taxes paid or determined will be made in allowing entries under 26 U.S.C. 5062(c), as amended. This section differs from the corresponding section in part 191 due only to grammatical changes.

Section 190.168 is reserved because the 90-day time limit for exportation or destruction from the date of notification of acceptance of the drawback entry it is contrary to the statutory requirement that a claim be filed after exportation or destruction. Accordingly, this section differs from the corresponding section in part 191.

Subpart Q Deals With the Substitution of Finished Petroleum Derivatives

Section 190.171 states that 19 U.S.C. 1313(p) provides for drawback on the basis of qualified articles including petroleum derivatives imported or manufactured or produced in the United States (and qualified under 19 U.S.C. 1313(a) or (b)). TFTEA permits MPF refunds for all claims under 19 U.S.C. 1313(p), therefore there is no limitation on MPF refunds as there was in paragraph (c) in part 191. Additionally, there is a new paragraph (c) that explains the calculation of drawback for claims on petroleum derivatives. This paragraph requires per unit averaging for refunds, but clarifies that the refunds are not subject to the “lesser of” rule. Finally, this paragraph includes the preclusion of claiming Federal excise taxes discussed in detail in the section titled

Federal Excise Tax and Substitution Drawback Claims.

Section 190.172 provides relevant definitions for purposes of this subpart. This section replicates the corresponding section in part 191.

Section 190.173 provides specific requirements for drawback when the basis is 19 U.S.C. 1313(p) with no manufacture. This section replicates the corresponding section in part 191.

Section 190.174 provides specific requirements for drawback when the basis is 19 U.S.C. 1313(p) with a manufacture under 19 U.S.C. 1313(a) or (b). This section replicates the corresponding section in part 191.

Section 190.175 provides specific requirements regarding the identity of drawback claimants and maintenance of

records under this subpart. This section differs from the corresponding section in part 191 due to TFTEA-based changes removing requirements related to certificates of delivery and certificates of manufacture and delivery.

Section 190.176 states that the general procedures for filing claims are applicable to claims filed under 19 U.S.C. 1313(p) unless otherwise specified in this section. This section differs from the corresponding section in part 191 due to the timeframe for recordkeeping being changed to 3 years from the date of liquidation (rather than from the date of payment) and due to grammatical and nomenclature changes.

Subpart R Deals With Merchandise Transferred to a Foreign Trade Zone From Customs Territory

Section 190.181 states that drawback is provided under 19 U.S.C. 81c for merchandise transferred to a foreign trade zone for the sole purpose of exportation, storage, or destruction, with certain exceptions. This section replicates the corresponding section in part 191.

Section 190.182 states that merchandise in a foreign trade zone for purposes specified in § 190.181 will be given status as zone-restricted merchandise on proper application as provided for in 19 CFR 146.44. This section differs from the corresponding section in part 191 due only to grammatical changes.

Section 190.183 provides filing procedures for certain articles manufactured or produced in the United States, including transfers to a foreign trade zone. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes, and due to changes related to the electronic filing provisions of section 906 of TFTEA.

Section 190.184 states that the procedure described in subpart O of this part will be followed, as applicable, for drawback on merchandise transferred to a foreign trade zone from continuous CBP custody and provides information on the drawback entry, required certifications, modifications, and endorsement. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes, and due to changes related to the electronic filing environment of TFTEA-Drawback.

Section 190.185 states that the procedure described in subparts C and D of this part will be followed, as applicable, for drawback on merchandise under this subpart and provides information on the drawback entry, required certifications, modifications, and endorsement. This section differs from the corresponding section in part 191 due to grammatical and nomenclature changes, and to the electronic filing environment provisions of section 906 of TFTEA.

Section 190.186 provides information regarding which person may be considered the transferor and states that drawback may be claimed by, and paid to, the transferor. This section differs

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