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Trade War and New Laws Bring Sea Change to Duty Drawbacks

tariffs ahead - blog

According to Dawn Olesky, senior manager of trade and customs at KPMG LLP, we’re seeing the most significant changes to Duty Drawback since its inception in 1789.

Duty Drawback provides companies with the opportunity to reclaim duties paid on imports that are ultimately exported from the United States. In her presentation at the recent AIAG Customs Town Hall, Olesky said while this process and the procedures behind it have been evolving steadily for the past 230 years, recent policy changes and economic conditions have led to a dramatic shift.

“Drawback does well in good times. It does even better when the economy is down,” Olesky said. “Drawback during this trade war are like on steroids times infinity.”

Drawback is a key strategy companies are implementing to mitigate the impact of the higher Section 301 tariffs for imported merchandise. In addition, the Drawback law changed substantially in February 2018, making it available to more importers and exporters as a cost-effective way to recoup and reduce total duty expense.

One of the most influential changes that took effect in 2018, Olesky said, is the allowance of electronic filing, simplified procedures, and streamlined validation and reporting to CBP.

“Being ready for the future of Drawback means being prepared,” Olesky said. “You have to master your data, undertake proactive analysis, and be ready to innovate.”

AIAG's Customs Town Hall, an annual gathering of importers, exporters, and associated service providers, is held to discuss new and ongoing programs which impact customs clearance, compliance programs, and cost. The 2019 program — held Nov. 7, at The Mint, in Lathrup Village, Michigan — focused on developments in trade policy, discussed effective best practices for trade compliance programs, and offered critical insight into understanding how the trade and U.S. CBP can work together toward maintaining effective relationships.

One example of the need for better and more strategic data control is a change in the record requirements.

“Under the old law, you had to retain all the records for three years after payment,” Olesky said. “Under the new law, it’s three years from liquidation. That means if you’re filing a Drawback with 100 entries, if just one import hasn’t liquidated, the timer hasn’t started yet. The need for mindful and strategic data collection, recording, filing, and analyzing is greater than ever.”

On the flipside, the increased data scrutiny comes along with some benefits.

“One of the really beneficial aspects is the digital application,” Olesky said. “You used to have to submit Drawbacks via physical copy. If it’s filed and rejected or sent back, the process could take weeks. If you have time-sensitive shipments, you might be in big trouble and not know it for weeks. Now you know — good or bad — within a couple hours.”

For more information on the event and how you can get involved as an attendee, exhibitor, or sponsor, visit www.aiag.org or call AIAG Customer Service at (248) 358-3003.

DawnOlesky

Dawn Olesky
Senior Manager of Trade and Customs
KPMG LLP