Chapters 23 & 24 -Video Review On-Demand Webinar … Broker Exam Review Session Seven LLLLttttssss DUTY DRAWBACK Chapter 23 ... • Merchandise Processing Fee – Except for unused

Chapters 23 & 24 - Video Review On-Demand Webinar Session 7

© Logistics Training Systems, Inc.

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Customs Broker Exam

Review

Session Seven

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DUTY DRAWBACK

Chapter 23

19 CFR, Part 191

© Logistics Training Systems

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What is drawback?


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Drawback is the refund of certain

duties, fees and taxes when previously

imported goods exported or destroyed




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What can you draw back?

Eligible

• Duties paid on consumption

entry

• Marking duties

• Internal revenue taxes

• Merchandise Processing Fee

– For unused merchandise

drawback only!

Ineligible

• Harbor Maintenance Fee

• AD/CVD

• Merchandise Processing

Fee

– Except for unused

merchandise drawback


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Conditions for drawback


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Export

Destroy

U.S.

Possession

FTZ as

Zone Restricted

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Who can claim drawback


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The Exporter or

Destroyer

UNLESS

He/she assigns that right...

§191.28




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Types of Drawback


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Unused MerchandiseUnused MerchandiseUnused MerchandiseUnused Merchandise

ManufacturingManufacturingManufacturingManufacturing

Rejected MerchandiseRejected MerchandiseRejected MerchandiseRejected MerchandiseUSC 1313(c) - §191.41

D.I. USC 1313(j)(1) - §191.31

Sub. USC 1313(j)(2) - §191.32

D.I. USC 1313(a) - §191.21Sub. USC 1313(b) - §191.22

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Copies and

completion

instructions are

in your

References

book

Drawback Forms

• CBP Form 7551

– Drawback Entry

• CBP Form 7552

– Delivery Certificate

• CBP Form 7553

– Notice of Intent

– Export or destroy


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CBP 7551 – Drawback Entry

• Identifies

– Product

– HTS

– Duty rate

– Type of drawback

– Method of filing, etc.

• Must be signed by authorized

person (§191.6)


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1. P, VP, S or T

2. Full partner

3. Owner

4. Employee with a POA

5. Individual on own behalf

6. LCB with a POA




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CBP 7552 – Certificate of

Delivery


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Used if imported goods are sold to person claiming

drawback (§191.10)

Identifies who will get the check…

Company X

Imports product and

pays duty

Company Z

Exports product

Sells product to

7552

CD

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CBP 7553 – Notice of Intent

� Filed prior to export or destruction

– Unused

– Rejected

� Filed prior to destruction

– Manufacturing

• Direct or substitution

�Time frame for filing depends on type of

claim

�Can get waiver if approved (§191.91)


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Submission of CBP 7553 NOI


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Claim Submit Return Examine

Unused2 WD

prior2 WD

Within

5 WD

Rejected5 WD

prior2 WD

Within

5 WD

Destroy7 WD

prior4 WD




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Failure to file CBP 7553 NOI

• Claim denied

• One (1) time exemption

– Letter to PD

• Why not filed

• Can rule in 90 days

• OK – Claim will be processed

• No – Can file an appeal within 30

days of denial


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Rejected Drawback


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Wrong color, size,

product,

specification,

whatever

Import to export

Three years

Export to claim

Three years

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Rejected Process


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CBP 7553 NOI

5 WD Prior

2 WD to

Request

Inspection

Exporter CBP

No response?

OK to proceed

Response?

5 WD to inspect




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Rejected Claim

• Submit

– CBP 7551 – Entry

– CBP 7553 – NOI

– Proof of export/destruction

– Brief letter explaining reason for rejection

• Retain all documents for 3 years after payment of claim


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Unused Drawback


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Three years

Direct identification (§191.31)

Substitution (§191.32)

Three Years

Import to export

Three Years

Export to claim

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Unused Process


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CF7553 NOI

2 WD Prior

2 WD to

Request

Inspection

ExporterCBP

No response?

OK to proceed

Response?

5 WD to inspect




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Unused Claim

• Submit

– CBP 7551 – Entry

– CBP 7553 – NOI

– Proof of export/destruction

– CBP 7552 – If required

• Retain all documents for 3 years

after payment of claim


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When is claim paid?


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ExporterCBP

How long??

Original entry has to be liquidated!

Accelerated payment �

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Accelerated payment

• Submit drawback package

– Include bond in package

• Single or continuous

• Cover estimated amount of drawback

• Request accelerated payment

– PD approves and sent to GAO within 3 weeks

– Check issued in 4 to 6 weeks


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§191.92




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Manufacturing Drawback


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Imported articles and parts used in the manufacture of products

that are exported.

Must enter into a contract with US Government

Requires good pre-planning

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General Drawback Ruling

• Boiler plate ruling put forth by CBP

– Manufacturer sends “Acceptance” letter

• To PD where entries will be filed & liquidated

• CBP sends “Acknowledgement” letter

– Assigned unique number used on all entries

• Found in Appendix “A” of Part 191

• Expires if not used in 5 years


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Specific Drawback Ruling

• Manufacturer requests ruling

– Sent to HQ, not port

– Promises to comply with regulations

– Describes process

– Promises to maintain proper controls

• HQ issues acceptance letter

– Assigned unique number used on all entries

• Found in Appendix “B” of Part 191

• Expires if not used in 5 years


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Direct Identification


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Five years

Import to export Five years

Export to claim Three years

19 CFR 191.21

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Substitution


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Three years

Receipt from supplier to export Three years

Export to claim Three years

19 CFR 191.22

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Another way to look at it…


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Original

buyer

Import ManufacturerSells to Export

5 years

3 years

Five (5) years from import to export

Three (3) years to manufacture after receipt

Three (3) years to file claim




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How it works

Wheels from

France - 100

Unicycles

100

Export

100/week

400/month

Wheels from

USA - 100

Unicycles

100

Domestic

100/week

400/month

800

unicycles

a month

total

Receipts Production

Week

French

Wheels

Domestic

Wheels

Export

Sales

Domestic

Sales Total Sales

1 100 100 100 100 200

2 100 100 150 50 200

3 100 100 50 150 200

4 100 100 100 100 200

Totals 400 400 400 400 800

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Claiming Drawback

• Used in– Must be used when there are multiple

products and no valuable waste

• Appearing in– Based on quantity of imported material in

the exported article; not used if multiple products

• Used in less valuable waste– Claimed on quantity of imported goods

used to produce the exported article, less valuable waste


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§191.23(a) – (c)

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Abstract or Schedule


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Actual

Production

Records

Total quantity

used during a

time period

Abstract Schedule

Predicted

Production

Quantity of

merchandise per

unit of product

§191.23(d)




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Inventory Accounting Methods


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FIFO – First in, first out

LIFO – Last in, first out

Low-to-High Blanket

Average§191.14

4

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Nuggets

• Records kept for 3 years after payment

• Drawback amount (§191.3)

– 99% for duties and taxes

– 100% if exported from Customs custody

• Not eligible for drawback

– HMF, ADD, CVD, Over Quota Rate on Ag product, maybe MPF


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Definitions


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Predecessor

Original

person due

drawback

Successor

Manufacturer or producer to

whom the predecessor has

transferred drawback rights




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Touching up a claim

• Amending a claim

– Changes must be made within three

years after date of export/destruction

– Liquidated entries may not be

amended but can be protested

• Perfecting a claim

– Additional paperwork is

required by CBP

– 30 days to provide


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NAFTA Drawback

• Lesser of the two rule (§181.44)

– Manufacturing drawback only

– Finished product is exported to Canada or Mexico

– Drawback based on lesser of the CA or MX duty compared to US duty

• Eligible for full drawback (§181.45)

– CA or MX imported for manufacturing

– Same condition drawback claims


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Customs Brokers

Chapter 27

19 CFR, Part 111


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Customs business


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Transactions with CBP concerning:

Entry and admissibility of goods

Classification and valuation

Payment of duty, taxes and other charges

Refund, rebate or drawback of those duties, taxes

and other charges

Preparation of documents in connection with the above along

with the electronic transmission thereof

NOT the mere electronic transmission of

data received for transmission to CBP!!§111.1(a)

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License not Required

• Importer’s own account or as an

employee of a broker

• Marine Transactions

• Transportation in Bond

• Noncommercial shipments

• Foreign-trade zone activities


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§111.2

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$10,000 per incident

$30,000 in aggregate

§111.4

And if you don’t have a license?




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Exam eligibility…


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Requirements…

U.S. Citizen

Attained age of 18 years

Not an officer or employee of the U.S. Government

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Individual License

� 21 years of age or older

� Be of good moral character

� Citizen of the United States and

NOT an employee or officer of US

Government

� Pass the test with 75% or higher


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§111.11(a)

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Forms and Fees


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CBP Form 3124E Exam Application (08/11) Fee of $200

(§111.12 & .96(a))

CBP Form 3124 Application for Customs Broker License

Current fee ($200)

Fingerprints and fee ($32.49 as of 11/2011)




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3-years to apply…


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After passing test, you have three (3) years after date of notification

letter to apply.

§111.11(a)

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Other Licenses

• Partnership – One member who

is a broker

• Association or corporation:

• Empowered under articles to transact

Customs business

• At least one officer who is a broker


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Broker

Broker

111.11(b) and (c)

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Permits

� Issued in district where license is issued

o Application fee waived

o Only pay $138 for permit

� Need separate permit for other districts

o $100 permit fee

o $138 annual user fee

o Never, ever prorated

� Revoked because fee not paid?

o Must pay application AND user fee ($238)


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Open another office

• Same district

– No additional permit required

– Responsible supervision

• Different district

– Need permit for that district

– Employ licensed person

– Responsible supervision


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Miami (52)

Ft. Lauderdale (52)

Orlando (18)

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Permit Waiver

• Permit waiver may be granted if

broker works in a larger

geographical area that contains two

ports in different districts

• Must prove ability to provide

“responsible supervision” at both

ports


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§111.19(d)(2)

Mr.

Broker

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Permit Waiver


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Nogales, AZ

District 26

Columbus, NM

District 27




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National permit


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Place employee in client’s facility

File electronic drawback claims without permit in

district where filed

National Customs Automation Program (NCAP)

participation – remote filing

Represent after filing without permit in

district where filed

Applied for and renewed annually at port where

license issued !

Application information in §111.19(f)§111.2(b)(2)

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License and Permit Fees

• License

– $200 – take the exam

– $200 + finger print fee – with license

application

• Permit (including National Permit)

– Application fee – Free at port that issued

license, otherwise $100.00

– Annual User Fee - $138.00 never

prorated

• Triennial Status Report

– Currently $100 © Logistics Training Systems

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Records

• Records to keep - all of ‘em

• How long to keep

– Entries – 5 years after date of entry

– Warehouse – 5 years after last withdrawal

– Other requirements in §163

• Powers of Attorney

– 5 years

• After revocation

• Ceases to be “active client”

– Two entries in 12 month period


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§111.23

§111.29(b)(2)(ii)




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Employee Information


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Within 10 calendar days of 30

consecutive days of employment

Within 30 calendar days of

termination when employed longer

than 30 consecutive days

§111.28

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What to Report

�Social security number

�Date and place of birth

�Current home address

�Last prior home address

�3 prior years employment record

�After initial report, then with

Broker’s Triennial Status report


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§111.28

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Qualifying Member Leaves

• Broker must “immediately” notify

customs

– Letter to Assistant Commissioner

• Date of termination

– Copy to Port Director in permitted

ports


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Written

Notice

§111.28(c)

Port DirectorAsst

Comm




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Financial Management

• Money from government to client

– Sixty (60) days (Can keep any owed!)

– Must have authority of client to accept and endorse

• Money from client to government

– On or before due date – by due date

• Money from client to governmentafter due date

– Five (5) working days


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§111.29

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Triennial Status Report

• Started February 1, 1985 and due every three years (§111.30(d))

– Next one due in 2012 (85, 88, 91, 94, 97, 00, 03, 06, 09, 12, 15....)

• Current address and brokerage activities

– Active or not

• Fee currently is $100 (§111.96(d))

• Sent to port where license issued


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§111.30(d)

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Status Report Timing

• Due by February 1st

• Not received by March 1st

– Customs suspends license

• On March 31st

– Customs notifies broker to file in 60

calendar days or license will be

revoked

– No response then, license Revoked!


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§111.30(d)




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Loss by Operation of Law

• Partnership or Corporation

– 120 days to replace qualifying broker

license is REVOKED

• Permit

– 180 days to replace qualifying broker

permit is REVOKED


All Rights Reserved

§111.45

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Don’t be sad…


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…back with session 8 before you know it!

Documents

Chapters 23 & 24 -Video Review On-Demand Webinar … Broker Exam Review Session Seven LLLLttttssss DUTY DRAWBACK Chapter 23 ... • Merchandise Processing Fee – Except for unused