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Drawback

Drawback Terms

Designated Merchandise Abstract
An abstract is a summary of the manufacturer’s actual production records and shows the total quantity used or appearing in the articles during the period covered by t

Designated Merchandise Abstract
An abstract is a summary of the manufacturer’s actual production records and shows the total quantity used or appearing in the articles during the period covered by the abstract. The claimant must be able to demonstrate that the abstract accurately reflects the actual production.

Accounting Method
Identification by accounting method is used when the actual unit-for-unit identification of fungible merchandise or articles is lost (generally, when such merchandise or articles are commingled or recorded in a common inventory). Thus, identification by accounting method benefits drawback claimants in that, when such a method can be used, merchandise or articles do not have to be physically separated and tracked unit-by-unit. Identification by accounting method is distinguished from substitution. In the case of the latter, the person claiming benefit of the substitution may substitute any unit or lot of merchandise or articles as long as the criteria and conditions for substitution are met. In the case of the former, a unit or lot of merchandise or articles must be identified consistent with the accounting procedure used (e.g., if FIFO is used, the oldest unit of merchandise or articles in the inventory is that identified regardless of whether identification of that unit is favorable or unfavorable to the person claiming the benefit of the accounting method).

Agent
A person employed by an owner of the identified merchandise, the designated imported merchandise and/or the substituted other merchandise that is used to produce the exported articles, to do part, or all, of the manufacture or production under direct identification manufacturing drawback or substitution manufacturing drawback.

Certificate of Delivery
A certificate of delivery (Customs Form 7552, Delivery Certificate for Purposes of Drawback) is required to show the transfer of imported duty-paid merchandise, substituted merchandise under substitution unused merchandise drawback, or an article manufactured or produced under direct identification manufacturing drawback or substitution manufacturing drawback by a person other than the manufacturer or producer. A certificate of delivery documents the delivery of, and the assignment of drawback rights for, the merchandise or article. The certificate issuer is responsible for the accuracy of each fact stated in the certificate, and for retaining the evidence supporting the certificate.

Certificate of Manufacture and Delivery
A certificate of manufacture and delivery (Customs Form 7552, Delivery Certificate for Purposes of Drawback) must be prepared and certified by the manufacturer or producer whenever an article or drawback product manufactured or produced under a general or specific manufacturing drawback ruling is transferred from the manufacturer or producer to another party. The certificate is required to be filed with the drawback claim it supports, unless previously filed, in which case the certificate shall be referenced on the claim. The effect of a certificate of manufacture and delivery is to document the delivery of the article, identify the article as being one to which drawback potentially exists, and assign the drawback rights to the transferee. The certificate issuer is responsible for the accuracy of each fact stated in the certificate, and for retaining the evidence supporting the certificate.

Commercially Interchangeable Merchandise
Commercially interchangeable imported and other merchandise may be substituted under substitution unused merchandise drawback instead of requiring fungibility for substitution. This allows substitution of merchandise when it is “commercially interchangeable” rather than when it is “commercially identical.” In determining commercial interchangeability, Customs evaluates the critical properties of the merchandise and in that evaluation factors to be considered include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.

Designated Merchandise
Designated merchandise means either eligible imported duty-paid merchandise or drawback products selected by the drawback claimant as the basis for a drawback claim under substitution manufacturing drawback or substitution unused merchandise drawback, as applicable, or qualified articles selected by the claimant as the basis for drawback under substitution of finished petroleum derivatives drawback.

Direct Identification Drawback
Direct identification drawback means drawback authorized either under direct identification manufacturing drawback on imported merchandise used to manufacture or produce an article which is either exported or destroyed, or under direct identification unused merchandise drawback on imported merchandise exported, or destroyed under Customs supervision, without having been used in the United States. Merchandise or articles may be identified for purposes of direct identification drawback by use of the accounting methods provided for in the Customs Regulations.

Drawback
Drawback is a refund of duty paid on imported merchandise that is linked to an exportation (or destruction) of an article. In the U.S., drawback dates back practically to the dawn of the Republic. Drawback in the U.S. has changed greatly since its initial enactment, in section 3 of the second Act of Congress, the Act of July 4, 1789. That first drawback law provided for a drawback of 99% of duties paid on merchandise (except distilled spirits) if exported within a year after duty was paid or security given for duty. Changes, or adjustments, continue to be made to the drawback law, making it ever more complicated. There are three categories of drawback: manufacturing drawback, unused merchandise drawback, and rejected merchandise drawback. Within each category, there are variations such as the ability to substitute the imported article, and specific time limits to manufacture or export articles.

Drawback Claim
Drawback claim means the drawback entry and related documents required by regulation which together constitute the request for drawback payment.

Drawback Entry
Drawback entry means the document containing a description of, and other required information concerning, the exported or destroyed article on which drawback is claimed. Drawback entries are filed on Customs Form 7551.

Drawback Products
Drawback products are finished or partially finished products manufactured or produced in the U.S. under drawback procedures. In addition to being exported or destroyed to qualify for drawback, drawback products may be used in further manufacture or production of other drawback products under drawback procedures. In the latter instance, drawback products may be designated as the basis for drawback or be deemed to be the substituted merchandise. If a drawback product is designated as the basis for drawback in a further manufacture or production, a separate 3-year period for use in manufacture or production of the drawback product and other substituted merchandise is commenced.

Exportation
Exportation means the severance of goods from the mass of goods belonging to this country, with the intention of uniting them with the mass of goods belonging to some foreign country. An exportation may be deemed to have occurred when goods subject to drawback are admitted into a foreign trade zone in zone-restricted status, or are laden upon qualifying aircraft or vessels as aircraft or vessel supplies.

Exporter
Exporter means that person who, as the principal party in interest in the export transaction, has the power and responsibility for determining and controlling the sending of the items out of the United States. In the case of “deemed exportations” (e.g., when goods subject to drawback are admitted into a foreign trade zone in zone-restricted status, or are laden upon qualifying aircraft or vessels as aircraft or vessel supplies), the exporter means that person who, as the principal party in interest in the transaction deemed to be an exportation, has the power and responsibility for determining and controlling the transaction (in the case of aircraft or vessel supplies, the party who has the power and responsibility for lading the vessel supplies on the qualifying aircraft or vessel).

Fungible Merchandise or Articles
Fungible merchandise or articles means merchandise or articles which for commercial purposes are identical and interchangeable in all situations.

General Manufacturing Drawback Ruling
A general manufacturing drawback ruling means a description of a manufacturing or production operation for drawback and the regulatory requirements and interpretations applicable to that operation. A manufacturer or producer may operate under a general ruling by submitting a letter of notification of intent to operate under that general ruling to a drawback office which, if the letter complies with the regulations, the drawback office acknowledges. There are general manufacturing drawback rulings under direct identification manufacturing drawback, under direct identification manufacturing drawback or substitution manufacturing drawback for agents, under direct identification manufacturing drawback for burlap or other textile material, flaxseed, fur skins or fur skin articles, and woven piece goods, and under substitution manufacturing drawback for component parts, orange juice, petroleum or petroleum derivatives, piece goods, raw sugar, steel, and sugar.

Low to High Drawback Accounting Method
In the case of the low-to-high accounting method, three alternatives are provided. Under the ordinary low-to-high method, withdrawals from the inventory are from the merchandise or articles in the inventory at the time of withdrawal with the least drawback amount per unit, including merchandise or articles with no drawback attributable to them. Under the low-to-high method with established average inventory turn-over period, withdrawals from the inventory are from the merchandise or articles received into the inventory during the established average inventory turn-over period which have not already been identified. Under the low-to-high blanket method, withdrawals from the inventory are from the merchandise or articles received into the inventory during the period preceding the withdrawal equal to the statutory period for export for the kind of drawback involved (e.g., 3 years for unused and rejected merchandise drawback, 5 years for manufacturing drawback) which have not already been identified. All receipts, whether imported or not, and all withdrawals, whether or not for export, from the inventory must be accounted for in the accounting record in the case of all methods, except for the low-to-high method with established average inventory turnover period and the low-to-high blanket method. In the case of those alternatives of the low-to-high method, domestic withdrawals (not for export) from the inventory need not be accounted for.

Manufacture or Production
Manufacture or production is the process by which merchandise is made into a new and different article having a distinctive name, character or use. Also, it is a process in which, although merchandise is not made into such a new and different article, the merchandise is made fit for a particular use.

Multiple Products
Multiple products mean two or more products produced concurrently by a manufacture or production operation or operations.

Possession
Possession, for purposes of substitution unused merchandise drawback, means physical or operational control of the merchandise, including ownership while in bailment, in leased facilities, in transit to, or in any other manner under the operational control of the party claiming drawback.

Records
Records include, but are not limited to, statements, declarations, documents and electronically generated or machine readable data which pertain to the filing of a drawback claim, or to the information contained in the required records in connection with the filing of a drawback claim, and which are normally kept in the ordinary course of business. The purpose of drawback recordkeeping is to enable Customs to verify drawback claims. Generally, records are used to follow the flow of goods from one stage to another, and to support certain regulatory requirements at certain points in the flow. These records provide traceability of the drawback merchandise and articles. The main point to keep in mind is that there must be records linking and/or establishing the particulars of importation, manufacture (when applicable), exportation (or destruction under Customs supervision), and other drawback requirements.

Relative Value
Relative value means, except for purposes of calculating the merchandise processing fee, the value of a product divided by the total value of all products which are necessarily manufactured or produced concurrently in the same operation (see MULTIPLE PRODUCTS). Relative value is based on the market value, or other value approved by Customs, of each such product determined as of the time it is first separated in the manufacturing or production process. Market value is generally measured by the selling price, not including any packaging, transportation, or other identifiable costs, which accrue after the product itself is processed. Drawback law requires the apportionment of drawback to each such product based on its relative value at the time of separation.

Schedule
A schedule is the predicted production from the raw materials and shows the quantity of merchandise per unit of product. For example, a schedule could show that for every 10 pound unit of exports, 4 pounds of imported or substituted merchandise were used in its production, or appear in it. Unless a claimant indicates otherwise in regard to its general or specific manufacturing drawback ruling, the abstract method is used. The claimant must be able to demonstrate that the schedule accurately reflects the actual production.

Specific Manufacturing Drawback Ruling
A specific manufacturing drawback ruling means a letter of approval issued by Customs Headquarters in response to an application by a manufacturer or producer for a ruling on a specific manufacturing or production operation for drawback.

Substituted Merchandise
Substituted merchandise or articles means merchandise or articles that may be substituted under substitution manufacturing drawback, substitution unused merchandise drawback, or substitution of finished petroleum derivatives drawback as follows: (1) Under substitution manufacturing drawback, substituted merchandise must be of the same kind and quality as the imported designated merchandise or drawback product, that is, the imported designated merchandise or drawback products and the substituted merchandise must be capable of being used interchangeably in the manufacture or production of the exported or destroyed articles with no substantial change in the manufacturing or production process; (2) Under substitution unused merchandise drawback, substituted merchandise must be commercially interchangeable with the imported designated merchandise; and (3) Under substitution of finished petroleum derivatives drawback, a substituted article must be of the same kind and quality as the qualified article for which it is substituted, that is, the articles must be commercially interchangeable or described in the same 8-digit HTSUS tariff classification.

Third Party Transactions
Drawback eligible transactions that involve multiple companies importing and exporting the drawback merchandise.

Unused (Non-Manufacturing) Drawback 

Unused Substitution Drawback
A common form of drawback is “unused drawback” (commonly called “non-manufacturing drawback”) which can be claimed by two different methods. This type of drawback is used when a company follows the below fact pattern:

  • Import a duty, tax, fee paid product into the United States.
  • Export the same or similar product that has the same eight-digit HTS number as the imported product. 

 An Example of Substitution Drawback:

  • Company A: Imports Product under HTS: 123456.78
  • Pays 3% Duty, MPF, HMF, and 15% 301 Tariff resulting in $3,500 paid to CBP
  • Company A: Exports Product with HTS code 1234.56.78
  • Charter files a claim for the import and export of product HTS 1234.56.78 and can refund 99% of the duties/taxes and fees to Company A resulting in $3,465!

While the above is an example of a perfect unused/non-manufacturing substitution drawback scenario, there are a myriad of necessary compliance checks that need to be performed for every drawback claim. U.S. Customs regulations outline a complex set of rules and possible limitations that must be complied with in order to allow for substitution drawback. Charter’s experienced drawback experts and legal staff assist in navigating these regulations to ensure our clients are compliantly maximizing drawback refunds.

Direct Identification Unused Drawback
If companies cannot claim substitution drawback, there is still another option! Direct Identification (‘Direct ID’) drawback is a form of unused drawback that can be used for U.S. companies exporting to USMCA countries or for companies that cannot meet the specific limitations and compliance requirements under a substitution program. While more data- and document intensive than the substitution counterpart, these programs are still widely used across the drawback industry and provide significant benefits to Charter’s clients. This type of drawback programs follows the below basic fact pattern:

  • Import a duty, tax, fee paid product into the U.S.
  • Export the exact same product as the imported product
  • Note that, if the imported item is not serialized or uniquely identified in some manner, a U.S. Customs-approved accounting method can be used to account for the imported item through inventory to the exported item.

An Example of Direct ID Drawback

  • Company A: Imports Product under HTS: 1234,56.7890; SKU ABC123
  • Pays 3% Duty, MPF, HMF, and 15% 301 Tariff resulting in $3,500 paid to CBP
  • Company A: Exports Product with HTS code 1234.56.7890; SKU ABC123
  • Charter files a claim for the import and export of product HTS 1234.56.7890; SKU ABC123, with an approved accounting method, and can refund 99% of the duties/taxes and fees to Company A resulting in $3,465!

Direct ID programs are a steadfast and proven means to collect refunds and Charter has the expertise and compliance procedures to assist our clients in managing these drawback programs. 

 This provision of the drawback statute (19 U.S.C. § 1313(j)) allows for a refund of duties, taxes, and fees on imported merchandise exported in essentially the same condition. Imports can be matched to exports either by:

  • Direct Identification drawback (19 U.S.C. 1313 § (j)(1)) – the import item is the exported item (ex: serialized goods) or an authorized inventory method can be applied to track the imported item through to export; or
  • Substitution drawback (19 U.S.C. § 1313(j)(2)) – the export is classified in the same 8 digits of the HTSUS as the import. Note: some limitations apply (ex: “Other: Other rule)

This type of drawback can apply to all types of imports. The exports and drawback claim filing with CBP must occur within five years after the import.


Manufacturing Drawback

Manufacturing represents a sizable portion of the U.S. economy. Drawback is a means to help manufacturers recoup the duties, taxes, and fees that the manufacturer or the manufacturer’s suppliers paid on their imported parts, inputs or raw materials used in the manufacturing of their finished goods that the manufacturer or the manufacturer’s customers export. Charter files manufacturing drawback for over 50% of our clients and can work with your company to determine the validity of a manufacturing drawback program. Manufacturing drawback programs need to have a manufacturing ruling associated with their drawback claim. Charter can assist in the following for manufacturing drawback programs:

  • Determine which type of ruling would be best suited for our client’s manufacturing drawback program
    • General Manufacturing Ruling. Companies can avail themselves of several types of expedited general manufacturing rulings, such as:
      • Component Parts Ruling: whereas a company is imported parts and then assemble the parts into a final product for export
      • Petroleum Refining ruling
    • For manufacturing processes not covered by one of the General Manufacturing Rulings, Charter will draft and file a Specific Manufacturing Ruling. This type of ruling applied to a company that is performing a specific or unique process to manufacturing their final products. 
    • Charter can write and submit the ruling to U.S. Customs
    • Develop and manage a drawback program for any type of manufacturing process

The (a) and (b) provisions of the 19 U.S.C. § 1313 drawback statute allows for a refund of duties, taxes and fees paid on imported merchandise based upon the production and export of articles from imported, duty-paid merchandise or similar (“same kind and quality”) domestic merchandise, which is substituted for the imported merchandise. This type of drawback can apply to a variety of manufacturing operations. The manufacturing, export and claim filing must occur in the proper time order and be completed within five years from the date of import.

Duty Drawback in Your Supply Chain

Charter has a history of finding new and compliant ways to maximize our client’s drawback refunds. For over 25 years, Charter has been analyzing our clients’ supply chains and finding previously uncovered drawback opportunities. Charter works with supply chain, logistics, procurement, and sales groups to determine viable purchases, product transfers, sales, and manufacturing processes beyond the basic internal drawback program. Charter will take the extra steps needed to compliantly gather data and documentation from client’s counterparties in their supply chain to utilize their activity to expand our client’s drawback program. We have uncovered billions of dollars in supply chain drawback for our clients. Contact us today to help Charter uncover yours!

Glossary

Import Terms

Absolute (or quantitativequotas. “Absolute (or quantitative) quotas” are those which permit a limited number of units of specified merchandise to be entered or withdrawn for consumption during specified periods. Once the quantity permitted under the quota is filled, no further entries or withdrawals for consumption of merchandise subject to quota are permitted. Some absolute quotas limit the entry or withdrawal of merchandise from particular countries (geographic quotas) while others are global quotas and limit the entry or withdrawal of merchandise not by source but by total quantity.

Condition as Imported. “Condition as Imported” refers to the condition of the goods when they are brought within the jurisdiction of the United States with the intent to unlade. Imported merchandise must be classified with reference to its condition when imported.

Date of entry. The “date of entry” or “time of entry” of imported merchandise shall be the effective time of entry of such merchandise. The “time of entry” will be:

(1) The time the appropriate CBP officer authorizes the release of the merchandise or any part of the merchandise covered by the entry documentation, or

(2) The time the entry documentation is filed, if requested by the importer on the entry documentation at the time of filing, and the merchandise already has arrived within the port limits; or

(3) The time the merchandise arrives within the port limits, if the entry documentation is submitted before arrival, and if requested by the importer on the entry documentation at the time of submission.

Date of importation. “Date of importation” means, in the case of merchandise imported otherwise than by vessel, the date on which the merchandise arrives within the Customs territory of the United States. In the case of merchandise imported by vessel, “date of importation” means the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise.

Duties. “Duties” means Customs duties and any internal revenue taxes which attach upon importation.

Entered for consumption. “Entered for consumption” means that an entry summary for consumption has been filed with CBP in proper form, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system, with estimated duties attached. “Entered for consumption” also means the necessary documentation has been filed with CBP to withdraw merchandise from a duty-deferral program in the United States for exportation to Canada or Mexico or for entry into a duty-deferral program in Canada or Mexico

Entered temporarily under bond. “Entered temporarily under bond” means that an entry summary supporting a temporary importation under bond has been filed with CBP in proper form, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system.

Entry or withdrawal for consumption. “Entry or withdrawal for consumption” means entry for consumption or withdrawal from warehouse for consumption. This includes  documentation or data required by § 142.3  to be filed with the appropriate CBP officer or submitted electronically to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system to secure the release of imported merchandise from CBP custody, or the act of filing that documentation. “Entry” also means that documentation or data required by § 181.53 of this chapter to be filed with CBP to withdraw merchandise from a duty-deferral program in the United States for exportation to Canada or Mexico or for entry into a duty-deferral program in Canada or Mexico.

Entry summary. “Entry summary” means any other documentation or electronic submission of data necessary to enable CBP to assess duties, and collect statistics on imported merchandise, and determine whether other requirements of law or regulation are met.

Filing. “Filing” means:

(1) The delivery to CBP, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system, of the entry documentation or data required by section 484(a), Tariff Act of 1930, as amended (19 U.S.C. 1484(a)), to obtain the release of merchandise, or

(2) The delivery to CBP, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system, together with the deposit of estimated duties, of the entry summary documentation or data required to assess duties, collect statistics, and determine whether other requirements of law and regulation are met, or

(3) The delivery to CBP, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system, together with the deposit of estimated duties, of the entry summary documentation or data, which will serve as both the entry and the entry summary.

Importer. “Importer” means the person primarily liable for the payment of any duties on the merchandise, or an authorized agent acting on his behalf. The importer may be:

(1) The consignee, or

(2) The importer of record, or

(3) The actual owner of the merchandise, if an actual owner’s declaration and superseding bond has been filed, or

(4) The transferee of the merchandise, if the right to withdraw merchandise in a bonded warehouse has been transferred.

Port and port of entry. The terms “port” and “port of entry” refer to any place designated by Executive Order of the President, by order of the Secretary of the Treasury, or by Act of Congress, at which a Customs officer is authorized to accept entries of merchandise to collect duties, and to enforce the various provisions of the Customs and navigation laws. The terms “port” and “port of entry” incorporate the geographical area under the jurisdiction of a port director. (The Customs ports in the Virgin Islands, although under the jurisdiction of the Secretary of the Treasury, have their own Customs laws (48 U.S.C. 1406(i)). These ports, therefore, are outside the Customs territory of the United States and the ports thereof are not “ports of entry” within the meaning of these regulations).

Presentation. “Presentation” is the delivery in proper form to the appropriate Customs officer of:

(1) An entry summary for consumption, which shall serve as both the entry and the entry summary, with estimated duties attached)); or

(2) An entry summary for consumption, which shall serve as both the entry and the entry summary, without estimated duties attached, if the entry/entry summary information and a valid scheduled statement date have been successfully received by Customs via the Automated Broker Interface; or

(3) A withdrawal for consumption with estimated duties attached.

Quota-class merchandise. “Quota-class merchandise” is any imported merchandise subject to limitations under an absolute or a tariff-rate quota.

Quota priority. “Quota priority” is the precedence granted to one entry or withdrawal for consumption of quota-class merchandise over other entries or withdrawals of merchandise subject to the same quota.

Quota status. “Quota status” is the standing which entitles quota-class merchandise to admission under an absolute quota, or to a reduced rate of duty under a tariff-rate quota, or to any other quota benefit.

Released conditionally. “Released conditionally” means any release from CBP custody before liquidation.

Selectivity criteria. “Selectivity criteria” means the categories of information that guide CBP’s judgment in evaluating and assessing the risk of an immediate delivery, entry, or entry summary transaction. Based upon these criteria, immediate delivery or entry transactions will be subject to either general examination, general examination with document review, or intensive examination. Entry summary transactions will be subject to either system review or summary document review. General examination (entry/immediate delivery) and system review (entry summary) procedures will constitute electronic processing provided all conditions necessary for electronic processing contained in this part are met.

Service port. The term “service port” refers to a Customs location having a full range of cargo processing functions, including inspections, entry, collections, and verification.

Shipment. “Shipment” means the merchandise described on the bill of lading or other document used to file or support entry, or in the oral declaration when applicable.

Submission. “Submission” means the voluntary delivery to the appropriate CBP officer or electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system of the entry summary documentation or data for preliminary review or of entry documentation or data for other purposes.

Tariff-rate quotas. “Tariff-rate quotas” permit a specified quantity of merchandise to be entered or withdrawn for consumption at a reduced duty rate during a specified period.

Export Terms

AES. AES is a voluntary program that allows all exporters required to report commodity export information to submit such information electronically, rather than on paper, and sea carriers to report required outbound vessel information electronically. Eligibility and application procedures are found at subpart E of part 30 of the Census Regulations (15 CFR part 30, subpart E), denominated Electronic Filing Requirements – Exporters. These Census Regulations provide that exporters may choose to submit export information through AES by any one of three electronic filing options available. Only Option 4, the complete post-departure submission of export information, requires prior approval by participating agencies before it can be used by AES participants.

Certified. “Certified” when used with reference to a copy means a document issued by a government authority that includes on it a signed statement by the authority that the copy is an authentic copy of the original.

Copy. “Copy” refers to a duplicate or photocopy of an original document. Where there is any writing on the backside of an original document, a “complete copy” means that both sides of the document are copied.

Date of exportation. “Date of exportation” or “time of exportation” referred to in section 402, Tariff Act of 1930, as amended (19 U.S.C. 1401a), means the actual date the merchandise finally leaves the country of exportation for the United States. If no positive evidence is at hand as to the actual date of exportation, the port director shall ascertain or estimate the date of exportation by all reasonable ways and means in his power, and in so doing may consider dates on bills of lading, invoices, and other information available to him.

Export. “Export” refers to the transportation of merchandise out of the U.S. for the purpose of being entered into the commerce of a foreign country.

Exportation. “Exportation” means a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country. The shipment of merchandise abroad with the intention of returning it to the United States with a design to circumvent provisions of restriction or limitation in the tariff laws or to secure a benefit accruing to imported merchandise is not an exportation. Merchandise of foreign origin returned from abroad under these circumstances is dutiable according to its nature, weight, and value at the time of its original arrival in this country.

Freight forwarder. “Freight forwarder” means a person engaged in the business of dispatching shipments in foreign commerce between the United States, its territories or possessions, and foreign countries, and handling the formalities incident to such shipments, on behalf of other persons.

Self-propelled vehicle. “Self-propelled vehicle” includes any automobile, truck, tractor, bus, motorcycle, motor home, self-propelled agricultural machinery, self-propelled construction equipment, self-propelled special use equipment, and any other self-propelled vehicle used or designed for running on land but not on rail.

Ultimate purchaser. “Ultimate purchaser” means the first person, other than a dealer purchasing in his capacity as a dealer, who in good faith purchases a self-propelled vehicle for purposes other than resale.

Used. “Used” refers to any self-propelled vehicle the equitable or legal title to which has been transferred by a manufacturer, distributor, or dealer to an ultimate purchaser.

FTZ Terms

Act. “Act” means the Foreign-Trade Zones Act of June 18, 1934, as amended (48 Stat. 998-1003; 19 U.S.C. 81a-u).

Activation. “Activation” means approval by the grantee and port director for operations and for the admission and handling of merchandise in zone status.

Admit. “Admit” means to bring merchandise into a zone with zone status.

Alteration. “Alteration” means a change in the boundaries of an activated zone or subzone; activation of a separate site of an already-activated zone or subzone with the same operator at the same port; or the relocation of an already-activated site with the same operator.

“Applicant” means a corporation applying for the right to establish, operate, and maintain a foreign-trade zone;

“Board” means the Board which is established to carry out the provisions of 19 U.S.C. 81. The Board shall consist of the Secretary of Commerce, who shall be chairman and executive officer of the Board, and the Secretary of the Treasury;

Conditionally admissible merchandise. “Conditionally admissible merchandise” is merchandise which may be imported into the U.S. under certain conditions. Merchandise which is subject to permits or licenses, or which may be reconditioned to bring it into compliance with the laws administered by various Federal agencies, is an example of conditionally admissible merchandise.

Constructive transfer. “Constructive transfer” is a legal fiction which permits acceptance of a Customs entry for merchandise in a zone before its physical transfer to the Customs territory.

Customs territory. “Customs territory” is the territory of the U.S. in which the general tariff laws of the U.S. apply. “Customs territory of the United States” includes only the States, the District of Columbia, and Puerto Rico. (General Note 2, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202)).

Deactivation. “Deactivation” means voluntary discontinuation of the activation of an entire zone or subzone by the grantee or operator. Discontinuance of the activated status of only a part of a zone site is an alteration.

Default. “Default” means an action or omission that will result in a claim for duties, taxes, charges, or liquidated damages under the Foreign Trade Zone Operator Bond.

Domestic merchandise. “Domestic merchandise” is merchandise which has been (i) produced in the U.S. and not exported therefrom, or (ii) previously imported into Customs territory and properly released from Customs custody.

Entered for warehouse. “Entered for warehouse” means that an entry summary for warehouse has been filed with CBP in proper form, including electronic submission to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system.

Foreign merchandise. “Foreign merchandise” is imported merchandise which has not been properly released from Customs custody in Customs territory.

Foreign-Trade Zones (FTZ). “Foreign-Trade Zones” are secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States’ version of what are known internationally as free-trade zones. Foreign and domestic merchandise may be moved into zones for operations, not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing, and processing. All zone activity is subject to public interest review. Foreign-trade zone sites are subject to the laws and regulations of the United States as well as those of the states and communities in which they are located. Under zone procedures, the usual formal CBP entry procedures and payments of duties are not required on the foreign merchandise unless and until it enters CBP territory for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product. Domestic goods moved into the zone for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback.

Fungible merchandise. “Fungible merchandise” means merchandise which for commercial purposes is identical and interchangeable in all situations.

“Grantee” means a corporation to which the privilege of establishing, operating, and maintaining a foreign-trade zone has been granted

Merchandise. “Merchandise” includes goods, wares and chattels of every description, except prohibited merchandise. Building materials, production equipment, and supplies for use in operation of a zone are not “merchandise” for the purpose of this part.

Operator. “Operator” is a corporation, partnership, or person that operates a zone or subzone under the terms of an agreement with the zone grantee. Where used in this part, the term “operator” also applies to a “grantee” that operates its own zone.

Port Director. For those foreign trade zones located within the geographical limits of a port of entry, the term “port director” means the director of that port of entry. For those foreign trade zones located outside the geographical limits of a port of entry, the term “port director” means the director of the port of entry geographically nearest to where the foreign trade zone is located.

Prohibited merchandise. “Prohibited merchandise” is merchandise the importation of which is prohibited by law on grounds of public policy or morals, or any merchandise which is excluded from a zone by order of the Board. Books urging treason or insurrection against the U.S., obscene pictures, and lottery tickets are examples of prohibited merchandise.

Reactivation. “Reactivation” means a resumption of the activated status of an entire area that was previously deactivated without any change in the operator or the area boundaries. If the boundaries are different, the action is an alteration. If the operator is different, it is an activation.

“Secretary” means the Secretary of Commerce

Subzone. “Subzone” is a special-purpose zone established as part of a zone project for a limited purpose, that cannot be accommodated within an existing zone. The term “zone” also applies to a subzone, unless specified otherwise.

Transfer. “Transfer” means to take merchandise with zone status from a zone for consumption, transportation, exportation, warehousing, cartage or lighterage, vessel supplies and equipment, admission to another zone, and like purposes.

Unique identifier. “Unique identifier” means the numbers, letters, or combination of numbers and letters that identify merchandise admitted to a zone with zone status.

User. “User” means a person or firm using a zone or subzone for storage, handling, or processing of merchandise.

“Zone” means a “foreign-trade zone”

Zone lot. “Zone lot” means a collection of merchandise maintained under an inventory control method based on specific identification of merchandise admitted to a zone by lot.

Zone site. “Zone site” means the physical location of a zone or subzone.

Zone status. “Zone status” means the status of merchandise admitted to a zone, i.e., nonprivileged foreign, privileged foreign, zone restricted, or domestic.

Compliance Terms

ABI. “ABI” means the Automated Broker Interface functionality that allows entry filers to transmit immediate delivery, entry and entry summary data electronically to, and receive electronic messaging from, CBP and receive transmissions from Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system.

Activities. The following are activities for purposes of 19 CFR 163.1 (a)(1) of this section:

(i) Any importation, declaration or entry;

(ii) The transportation or storage of merchandise carried or held under bond into or from the customs territory of the United States;

(iii) The filing of a drawback claim;

(iv) The completion and signature of a NAFTA Certificate of Origin pursuant to § 181.11(b);

(v) The collection, or payment to Customs, of duties, fees and taxes; or

(vi) The completion and signature of a Chile FTA certification of origin and any other supporting documentation pursuant to the United States-Chile Free Trade Agreement.

(vii) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Singapore Free Trade Agreement (SFTA), including a SFTA importer’s supporting statement if previously required by the port director.

(viii) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Jordan Free Trade Agreement (US-JFTA), including a US-JFTA declaration.

(ix) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Australia Free Trade Agreement (AFTA), including an AFTA importer’s supporting statement.

(x) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Morocco Free Trade Agreement (MFTA), including a MFTA importer’s declaration.

(xi) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), including a CAFTA-DR importer’s certification.

(xii) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Bahrain Free Trade Agreement (BFTA), including a BFTA importer’s declaration.

(xiii) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Oman Free Trade Agreement (OFTA), including an OFTA importer’s declaration.

(xiv) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Peru Trade Promotion Agreement (PTPA), including a PTPA importer’s certification.

(xv) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Korea Free Trade Agreement (UKFTA), including a UKFTA importer’s certification.

(xvi) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Colombia Trade Promotion Agreement (CTPA), including a CTPA importer’s certification.

(xvii) The maintenance of any documentation that the importer may have in support of a claim for preferential tariff treatment under the United States-Panama Trade Promotion Agreement (PANTPA), including a PANTPA importer’s certification.

(xviii) Any other activity required to be undertaken pursuant to the laws or regulations administered by Customs.

AII. “AII” means Automated Invoice Interface and is a method of transmitting detailed invoice data through ABI.

Assistant Commissioner. “Assistant Commissioner” means the Assistant Commissioner, Office of International Trade, U.S. Customs and Border Protection, Washington, DC.

Audit. “Audit” means an evaluation by CBP under 19 U.S.C. 1509 of records required to be maintained and/or produced by persons listed in § 163.2, or pursuant to other applicable laws or regulations administered by CBP, for the purpose of furthering any investigation or review conducted to: ascertain the correctness of any entry; determine the liability of any person for duties, taxes, and fees due, or revenue due, or which may be due the United States; determine liability for fines, penalties, and forfeitures; ensure compliance with the laws of the United States administered by CBP; or determine that information submitted or required is accurate, complete, and in accordance with any laws and regulations administered or enforced by CBP. An audit does not include a quantity verification for a customs bonded warehouse or general purpose foreign trade zone. An audit may be as extensive or simple as CBP determines is warranted to achieve the audit’s purpose under applicable laws and regulations.

“Authorized agent” is a person expressly authorized by a principal to act on his behalf. A ruling requested by an attorney or other person acting as an agent must include a statement describing the authority under which the request is made. With the exception of attorneys whose authority to represent is known, any person appearing before the Customs Service as an agent in connection with a ruling request may be required to present evidence of his authority to represent the principal. The foregoing requirements will not apply to an individual representing his full-time employer, or to a bona-fide officer, director, or other qualified representative of a corporation, association, or organized group.

Authorized electronic data interchange system means any established mechanism approved by the Commissioner of CBP through which information can be transferred electronically.

Broker. “Broker” means a customs broker.

Business day. A “business day” means a weekday (Monday through Friday), excluding national holidays. In addition to Saturdays, Sundays, and any other calendar day designated as a holiday by Federal statute or Executive Order, CBP offices shall be closed on the following national holidays:

(1) The first day of January.

(2) The third Monday of January.

(3) The third Monday of February.

(4) The last Monday of May.

(5) The fourth day of July.

(6) The first Monday of September.

(7) The second Monday of October.

(8) The eleventh day of November.

(9) The fourth Thursday of November.

(10) The twenty-fifth day of December.

If a holiday falls on Saturday, the day immediately preceding such Saturday will be observed. If a holiday falls on Sunday, the day immediately following such Sunday will be observed.

CBP. The term “CBP” means U.S. Customs and Border Protection.

Certification. “Certification” means the electronic equivalent of a signature for data transmitted through ABI. This electronic (facsimile) signature must be transmitted as part of the immediate delivery, entry or entry summary data. Such data are referred to as “certified”.

Certified recordkeeper. A “certified recordkeeper” is a person who is required to keep records under this chapter and who is a participant in the Recordkeeping Compliance Program provided for in § 163.12.

Commissioner orCommissioner of Customs. The terms “Commissioner” or “Commissioner of Customs” mean Commissioner of U.S. Customs and Border Protection.

Corporate compliance activity. “Corporate compliance activity” means activity performed by a business entity to ensure that documents for a related business entity or entities are prepared and filed with CBP using “reasonable care”, but such activity does not extend to the actual preparation or filing of the documents or their electronic equivalents. For purposes of this definition, a “business entity” is an entity that is registered or otherwise on record with an appropriate governmental authority for business licensing, taxation, or other legal purposes, and the term “related business entity or entities” encompasses a business entity that has more than a 50 percent ownership interest in another business entity, a business entity in which another business entity has more than a 50 percent ownership interest, and two or more business entities in which the same business entity has more than a 50 percent ownership interest.

“Customs and related laws,” includes any provision of the Tariff Act of 1930, as amended (including the Harmonized Tariff Schedule of the United States), or the Customs Regulations, or any provision contained in other legislation (including the navigation laws), regulations, treaties, orders, proclamations, or other agreements administered by the Customs Service.

Customs broker. “Customs broker” means a person who is licensed under this part to transact customs business on behalf of others.

Customs business. “Customs business” means those activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by CBP on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. “Customs business” also includes the preparation, and activities relating to the preparation, of documents in any format and the electronic transmission of documents and parts of documents intended to be filed with CBP in furtherance of any other customs business activity, whether or not signed or filed by the preparer. However, “customs business” does not include the mere electronic transmission of data received for transmission to CBP and does not include a corporate compliance activity.

Customs orU.S. Customs Service. The terms “Customs” or “U.S. Customs Service” mean U.S. Customs and Border Protection.

Customs regulations or CBP regulations. The terms “Customs regulations” or “CBP regulations” mean chapter 1 of title 19 of the Code of Federal Regulations (19 CFR chapter 1).

Customs station. A “Customs station” is any place, other than a port of entry, at which Customs officers or employees are stationed, under the authority contained in article IX of the President’s Message of March 3, 1913 (T.D. 33249), to enter and clear vessels, accept entries of merchandise, collect duties, and enforce the various provisions of the Customs and navigation laws of the United States.

Customs territory of the United States. “Customs territory of the United States” includes only the States, the District of Columbia, and Puerto Rico.

Customstransaction” is an act or activity to which the Customs and related laws apply. A “prospective” Customs transaction is one that is contemplated or is currently being undertaken and has not resulted in any arrival or the filing of any entry or other document, or in any other act to bring the transaction, or any part of it, under the jurisdiction of any Customs Service office. A “current” Customs transaction is one which is presently under consideration by a port office of the Customs Service. A “completed” Customs transaction is one which has been acted upon by a Customs Service field office and with respect to which that office has issued a determination which is final in nature, but is (or was) subject to appeal, petition, protest, or other review, as provided in the applicable Customs laws and regulations. In a series of identical, recurring transactions, each transaction shall be considered an individual transaction for purposes of this part.

Data. “Data” when used in conjunction with immediate delivery, entry and/or entry summary means the information required to be submitted with the immediate delivery, entry and/or entry summary, respectively, in accordance with the CATAIR (CBP Publication 552, Customs and Trade Automated Interface Requirements) and/or CBP Headquarters directives. It does not mean the actual paper documents, but includes all of the information required to be in such documents.

Definitions of resident and nonresident. For the purposes of this subpart, “resident” means an individual who resides within, or a partnership one or more of whose partners reside within, the Customs territory of the United States or the Virgin Islands of the United States, or a corporation incorporated in any jurisdiction within the Customs territory of the United States or in the Virgin Islands of the United States. A “nonresident” means an individual, partnership, or corporation not meeting the definition of “resident.”

Department of Homeland Security or any representative of the Department of Homeland Security. “Department of Homeland Security or any representative of the Department of Homeland Security” means any office, officer, or employee of the U.S. Department of Homeland Security, wherever located.

District. “District” means the geographic area covered by a customs broker permit other than a national permit. A listing of each district, and the ports thereunder, will be published periodically.

EDIFACT. “EDIFACT” means the Electronic Data Interchange for Administration, Commerce and Transport that provides an electronic capability to transmit detailed CBP Forms 7501 and 3461, or their electronic equivalents and invoice data.

Electronic entry. “Electronic entry” means the electronic transmission to CBP of:

(1) Entry information required for the entry of merchandise; and

(2) Entry summary information required for the classification and appraisement of the merchandise, the verification of statistical information, and the determination of compliance with applicable law.

Electronic immediate delivery. “Electronic immediate delivery” means the electronic transmission of CBP Forms 3461 or 3461 alternate (CBP Form 3461 ALT) data to the Automated Commercial Environment (ACE) or any other CBP-authorized electronic data interchange system in order to obtain the release of goods under immediate delivery.

Electronic Invoice Program (EIP). “EIP” refers to modules of the Automated Broker Interface (ABI) that allow entry filers to transmit detailed invoice data and includes Automated Invoice Interface (AII) and any other electronic invoice authorized by CBP.

Employee. “Employee” means a person who meets the common law definition of employee and is in the service of a customs broker.

Entry records/(a)(1)(A) list. The terms “entry records” and “(a)(1)(A) list” refer to records required by law or regulation for the entry of merchandise (whether or not Customs required their presentation at the time of entry). The (a)(1)(A) list is contained in the Appendix to this part. See “Interim (A)(1)(a) List”.

Filer. “Filer” means the party certifying the electronic filing of the application for immediate delivery, entry or entry summary. Filer may be a broker or an importer of record filing his own entries through ABI without the use of a broker.

“Headquarters Office,” means the Regulations and Rulings, Office of international Trade at Headquarters, U.S. Customs and Border Protection, Washington, DC.

“Information letter” is a written statement issued by the Customs Service that does no more than call attention to a well-established interpretation or principle of Customs law, without applying it to a specific set of facts. An information letter may be issued in response to a request for a ruling when: (i) The request suggests that general information, rather than a ruling, is actually being sought, (ii) the request is incomplete or otherwise fails to meet the requirements set forth in this part, or (iii) the ruling requested cannot be issued for any other reason, and (iv) it is believed that general information may be of some benefit to the party making the request.

Inquiry. An “inquiry” is any formal or informal procedure, other than an investigation, through which a request for information is made by a Customs officer.

Interim (A)(1)(a) List: https://www.law.cornell.edu/cfr/text/19/part-163/appendix-lii5

Liquidation means the final computation or ascertainment of duties on entries for consumption or drawback entries.

Officer. “Officer”, when used in the context of an association or corporation, means a person who has been elected, appointed, or designated as an officer of an association or corporation in accordance with statute and the articles of incorporation, articles of agreement, charter, or bylaws of the association or corporation.

Original. The term “original”, when used in the context of maintenance of records, has reference to records that are in the condition in which they were made or received by the person responsible for maintaining the records pursuant to 19 U.S.C. 1508 and the provisions of this chapter, including records consisting of the following:

(1) Electronic information which was used to develop other electronic records or paper documents;

(2) Electronic information which is in a readable format such as a facsimile paper format or an electronic or hardcopy spreadsheet;

(3) In the case of a paper record that is part of a multi-part form where all parts of the form are made by the same impression, one of the carbon-copy parts or a facsimile copy or photocopy of one of the parts; and

(4) A copy of a record that was provided to another government agency which retained it, provided that, if required by Customs, a signed statement accompanies the copy certifying it to be a true copy of the record provided to the other government agency.

Party/person. The terms “party” and “person” refer to a natural person, corporation, partnership, association, or other entity or group.

Permit. “Permit” means any permit issued to a broker under § 111.19.

Person. “Person” includes individuals, partnerships, associations, and corporations.

Preclassification/binding ruling number. “Preclassification/binding ruling number” means the system by which classifications are approved and assigned a unique identifying number. This number may be transmitted as part of the ABI data.

Principal field officer. A “principal field officer” is an officer in the field service whose immediate supervisor is located at Customs Service Headquarters.

Records. “Records” means documents, data and information referred to in, and required to be made or maintained under, this part and any other records, that are required to be maintained by a broker under part 163 of this chapter. The term “records” means any information made or normally kept in the ordinary course of business. The term includes any information required for the entry of merchandise (the (a)(1)(A) list) and other information pertaining to, or from which is derived, any information element set forth in a collection of information required by the Tariff Act of 1930, as amended, in connection with any activity listed in 19 CFR 163.1(a)(2) of this section. The term includes, but is not limited to, the following: Statements; declarations; documents; electronically generated or machine readable data; electronically stored or transmitted information or data; books; papers; correspondence; accounts; financial accounting data; technical data; computer programs necessary to retrieve information in a usable form; and entry records (contained in the (a)(1)(A) list).

Region. “Region” means the geographic area covered by a waiver issued pursuant to § 111.19(d).

Responsible supervision and control. “Responsible supervision and control” means that degree of supervision and control necessary to ensure the proper transaction of the customs business of a broker, including actions necessary to ensure that an employee of a broker provides substantially the same quality of service in handling customs transactions that the broker is required to provide. While the determination of what is necessary to perform and maintain responsible supervision and control will vary depending upon the circumstances in each instance, factors which CBP will consider include, but are not limited to: The training required of employees of the broker; the issuance of written instructions and guidelines to employees of the broker; the volume and type of business of the broker; the reject rate for the various customs transactions; the maintenance of current editions of CBP Regulations, the Harmonized Tariff Schedule of the United States, and CBP issuances; the availability of an individually licensed broker for necessary consultation with employees of the broker; the frequency of supervisory visits of an individually licensed broker to another office of the broker that does not have a resident individually licensed broker; the frequency of audits and reviews by an individually licensed broker of the customs transactions handled by employees of the broker; the extent to which the individually licensed broker who qualifies the district permit is involved in the operation of the brokerage; and any circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.

“Ruling” is a written statement issued by the Headquarters Office or the appropriate office of Customs as provided in this part that interprets and applies the provisions of the Customs and related laws to a specific set of facts. A “ruling letter” is a ruling issued in response to a written request therefor and set forth in a letter addressed to the person making the request or his designee. A “published ruling” is a ruling which has been published in the Customs Bulletin.

Statement processing. “Statement processing” means the method of collection and accounting which allows a filer to pay for more than one entry summary with one payment. ACS, or any other CBP-authorized electronic data interchange system, generates the statement, which is transmitted electronically to the filer, consisting of a list of entry summaries and the amount of duties, taxes or fees, if any, due for payment. Upon payment and collection of the statement, those entry summaries designated as electronic will be scheduled for liquidation

Summons. “Summons” means any summons issued under this part that requires the production of records or the giving of testimony, or both.

Technical data. “Technical data” are records which include diagrams and other data with regard to a business or an engineering or exploration operation, whether conducted inside or outside the United States, and whether on paper, cards, photographs, blueprints, tapes, microfiche, film, or other media or in electronic or magnetic storage.

Third-party recordkeeper. “Third-party recordkeeper” means any attorney, any accountant or any customs broker other than a customs broker who is the importer of record on an entry.

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