Drawback Filers Likely Face Long 'Interim Period' Under Draft Guidance After ACE Transition on Feb. 24

Drawback filers will likely face a period of at least four to six months under interim procedures once drawback transitions to ACE over the Feb. 24 weekend, Michael Cerny of Sandler Travis said during a Feb. 23 webinar. Though CBP finished talks with the trade community nearly a year ago, proposed regulations drafted by CBP on drawback processes under the Trade Facilitation and Trade Enforcement Act of 2015 continue to languish in the interagency review process, so filers will begin life in the new framework under a “draft guidance” issued by CBP on Feb. 9 (see 1802120020).

That “interim period,” as CBP calls it, will continue until CBP issues its final TFTEA drawback regulations, Cerny said. “We could end up with regulations that are different from the guidance document,” he said. The draft guidance says filers may be required to correct claims for any changes made by the final rule. It’s currently unclear whether these changes will be made manually with a drawback specialist or whether filers will even have to resubmit their claims, Cerny said. CBP hasn’t yet issued instructions because they don’t know whether corrections will be required.

The new rules will likely be found in a new 19 CFR Part 190. In the meantime, there’s a “bit of debate” over whether the current drawback regulations under 19 CFR Part 191 continue to apply to most other drawback claims, including those submitted under the tentative TFTEA rules outlined in CBP’s draft guidance, Cerny said. The guidance document does not have the same legal effect as the new regulations will, so it “remains to be seen how enforceable some of the requirements” will be, he said. But if “CBP is telling you to file it in a different way than Part 191, that’s the way it should be filed.”

The four to six month timeline mentioned by Cerny for final regulations would apply only if CBP issues its proposed rule next month. Cerny did not sound sure that would be the case, so the interim period could last longer. Once the proposed rule is issued, CBP will likely allow 30 days for comments. Cerny, urging commenters to read the proposal and get their comments in quickly, said CBP may not extend that comment period because “everyone wants these regulations out and final.” CBP will then take the comments back, review them, and issue its final TFTEA drawback regulations.

CBP has said it will not grant accelerated payment for TFTEA claims until those final regulations take effect (see 1801260036). But accelerated payment for “core” drawback claims under the existing regulations will continue, at least until a one-year grace period ends on Feb. 23, 2019, and only TFTEA claims are accepted. For filers of direct identification drawback it may make sense to continue to file “core” drawback claims to get accelerated payment, and only switch over to TFTEA procedures and benefit from the latter’s five-year time frame for claims once the final regulations are issued, Cerny said.

In the short term, over the next several days, CBP will turn off its ACS drawback system at around 8 p.m. Eastern time on Feb. 23 (see 1802210046). Filers will be able to transmit in the new electronic system as early as 12:01 a.m. Feb. 24, though filings will be held in a queue and processed once ACS drawback data is transitioned into ACE, so “don’t expect to see responses back until Sunday at some point,” Cerny said. In the new system, paper claims will not be allowed for TFTEA claims, and only limited paper claims for 25 lines at most will be allowed for “core” drawback, Cerny said.

Filers that get rejects following the transition should first review the error dictionary to see if it’s a simple, easily correctable error, Cerny said. Some might have to contact their software developers, or IT departments if the software is internal. If filers disagree with the rejection, they may email the drawback office at otdrawback@cbp.dhs.gov, which will likely be staffed with more technical personnel than if the filer contacts the ACE help desk or its client representative, he said. Filers that don’t get a response over the weekend must still meet deadlines, which can now fall on a weekend. CBP will “stamp” filings with the transmission date so issues can be fixed without missing the deadline “if you’re near the end of the three- or five-year period,” he said.