Duty Drawback Newsletter - October 2011
Fall Foliage
If you remember anything from your elementary school science classes, it would probably be that the green color in tree leaves is caused by the chemical chlorophyll. This chemical is necessary for photosynthesis, the chemical reaction that turns sunlight, water and carbon dioxide into oxygen and sugar. The oxygen is released into the air for us to breathe, and the sugar is used as energy to help the trees to grow. Some of the manufactured sugar is also stored by the trees for use during the winter dormant period.
What you may not remember is that there are two other substances, carotenoids and anthocyanins, that are present in tree leaves along with chlorophyll. As the nights get longer and chlorophyll stops being produced, the green color fades and these other substances become visible, creating the vivid fall colors that we all enjoy at this time of year.
Just as the green of the chlorophyll covers up the other bright colors that are always present in the leaves, the effort to recover drawback refunds sometimes masks the need to maintain proper records in support of that cash. The prior two newsletters covered the requirements concerning proof of export for drawback purposes. This issue will address the opposite end of the spectrum, import documentation needed to support drawback claims.
If your company is importing merchandise into the United States, then you are already painfully aware of the information and documentation required to clear goods into this country. You and your Customs broker must present an incredible amount of information to satisfy Customs (CBP) and any of the 43 other alphabet agencies (EPA, FDA, USDA, etc.) that must sign off on your imports before you can get your hands on the merchandise. Luckily the drawback import documentation requirements focus on only a small subset of this mountain of paperwork.
Curiously, the drawback regulations, Part 191, do not provide a listing of the specific import records that must be maintained to support drawback. The Informed Compliance Publication from 2004 entitled "What Every Member of the Trade Community Should Know About Drawback" (see the "useful links" in the resources section on our website) lists some examples of the types of records that should be available, including the CBP 7501 Entry Summary, purchase order, invoice, and packing list, along with financial records such as accounts payable, disbursements, letters of credit and other payment documents. Records concerning the receipt of the imported merchandise into inventory are also mentioned.
Basically, you need to be able to prove what was imported, what entry did it come in on, who imported it, when was it imported, where was it imported, how much was imported, what was it worth, and how much duty was paid on it. Depending on the type of drawback being claimed, you may also need to prove that the imported merchandise was used (consumed) and when. All of this information is contained in the documentation required to clear the goods through CBP, along with financial and inventory records used and maintained in the normal course of business. The difficulty comes in knowing who in your firm has the records, where are they maintained, how long are they kept, and how do you get them!
You would think that it would be less bother to purchase merchandise imported by your supplier rather than importing the goods yourselves. "Let the importer keep all the records - I don't need that headache! Just give me a Certificate of Delivery (CD) and I'm good to go" - right? Wrong. Just because you are not the importer does not mean that the requirements become any easier.
While it is true that the issuer of the CD must maintain all of the supporting import documentation pertaining to the actual importation of the merchandise that you purchased, you still need to have all of your records showing purchase, payment, and receipt of the imported merchandise from your supplier. When CBP requests information in support of a claim, both you and the importer must supply documentation. Since you are the drawback claimant, CBP will come to you with the request because you are the party claiming the drawback. It is up to you to coordinate with your supplier to make sure the requested information is provided to CBP in a timely manner.
A logical argument could be made that CBP has all of the import documentation already, so we should not need to supply the same information again when we claim drawback against an import. Unfortunately, CBP is not your record keeper. If you want to claim drawback, then you must be able to support your claim. Any information that CBP might have pertaining to the imports will be used to verify what you have claimed, not to complete your claim. If you want the money, then you have to prove that you have the records.
So as you look to cash in on your drawback opportunities, don't forget that the green you receive cannot cover up the need to maintain proper records. Recovering the money is one thing - keeping the money by successfully supporting the claim is something else entirely!
|
