November 05, 2009
CBP Proposes To End Excise Exemptions on Certain Items

The U.S. Treasury Department and U.S. Customs and Border Protection (CBP) propose to amend 19 CFR 191.32 to preclude situations where imported merchandise subject to Federal excise tax is allowed into the U.S. virtually duty free through application of a substitution drawback claim.  The two agencies issued a proposed rule to this effect in the Federal Register on October 15, 2009 (see URL at the end of this bulletin). 

Drawback is a refund of certain duties, taxes and fees paid by the importer of record and granted to a drawback claimant upon the exportation, or destruction under CBP supervision, of eligible articles under specified conditions.  The purpose of drawback is to place U.S. exporters on equal footing with foreign competitors by refunding most of the duties paid on imports used in domestic manufactures intended for export.

Substitution drawback is a type of drawback that permits other commercially interchangeable merchandise to be substituted for imported merchandise for the purposes of satisfying the exportation or destruction requirement.

Under the proposed rule, importers would no longer be able to claim substitution drawback on certain alcohol, tobacco and petroleum products that are assessed federal excise taxes.  Drawback granted on the export or destruction of substituted merchandise would be limited to the amount of taxes paid (and not returned by refund, credit, or drawback) on the substitute merchandise.  The current rule allows an importer to claim a 99 percent refund on the excise taxes it pays on imported spirits, tobacco and petroleum products if it exports products that are commercially interchangeable with the imported goods.

Interested parties can participate in this rulemaking by submitting comments on or before November 16, 2009.  The Federal Register Proposed Rule explains how to submit them.

The Federal Register Proposed Rule (October 15, 2009 / Volume 74, Number 198 / Proposed Rules) can be accessed at the following URL: http://edocket.access.gpo.gov/2009/E9-24789.htm

For more information, please contact your local FedEx Trade Networks Transport & Brokerage office. For a complete list of office locations go to http://www.ftn.fedex.com/locations/index.html.