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HR 3443 IH

To amend the Tariff Act of 1930 to clarify the provisions relating to drawback for exported merchandise.

August 3, 2007

Mr. THOMPSON of California (for himself, Mr. HERGER, Mr. MCDERMOTT, Mr. REYNOLDS, Mr. CROWLEY, Mr. NUNES, and Mr. ISRAEL) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Tariff Act of 1930 to clarify the provisions relating to drawback for exported merchandise.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Drawback Simplification Act of 2007'.

SEC. 2. DRAWBACK FOR EXPORTED MERCHANDISE.

(a) In General- Section 313 of the Tariff Act of 1930 (19 U.S.C. 1313) is amended to read as follows:

`SEC. 313. DRAWBACK FOR EXPORTED MERCHANDISE.

`(a) Definitions- In this section:

`(1) BILL OF MATERIALS- The term `bill of materials' means records kept in the ordinary course of business that identify each component incorporated into an article.

`(2) DESTROYED- The term `destroyed' means a process by which merchandise or an article loses all commercial value. Merchandise or an article shall be considered to be destroyed even if valuable material is recovered from the merchandise or article.

`(3) DIRECTLY- The term `directly' means a transfer of merchandise or an article from 1 person to another person without any intermediate transfer.

`(4) FORMULA- The term `formula' means records kept in the ordinary course of business that identify the quantity of each element, material, chemical, mixture, or other substance incorporated into a manufactured article.

`(5) FUNGIBLE- The term `fungible' means goods that are commercially identical to 1 another in all instances.

`(6) GOOD SUBJECT TO CHILE FTA DRAWBACK- The term `good subject to Chile FTA drawback' has the meaning given that term in section 203(a) of the United States-Chile Free Trade Agreement Implementation Act (19 U.S.C. 3805 note).

`(7) GOOD SUBJECT TO NAFTA DRAWBACK- The term `good subject to NAFTA drawback' has the meaning given that term in section 203(a) of the North American Free Trade Agreement Implementation Act (19 U.S.C. 3333(a)).

`(8) HTS- The term `HTS' means the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202).

`(9) INCORPORATED INTO- The term `incorporated into' means any operation by which merchandise or an article becomes classifiable in a different 8-digit HTS subheading number.

`(10) INDIRECTLY- The term `indirectly' means a transfer of merchandise or an article from 1 person to another person with 1 or more intermediate transfers.

`(11) LINE ITEM-

`(A) IMPORT ENTRY- The term `line item' means, for an import entry filed pursuant to section 484, the identification of a commodity from 1 country by net quantity, entered value, HTS subheading number, and applicable duties, fees, and taxes.

`(B) DESIGNATED EXPORT- The term `line item' means, for a designated export, the identification of a commodity by HTS subheading number or Schedule B number, declared value, and quantity.

`(12) NAFTA COUNTRY- The term `NAFTA country' has the meaning given that term in section 2 of the North American Free Trade Agreement Implementation Act (19 U.S.C. 3301).

`(13) SCHEDULE B- The term `Schedule B' means the Department of Commerce Schedule B, Statistical Classification of Domestic and Foreign Commodities Exported from the United States.

`(14) SECRETARY- Except as otherwise provided, the term `Secretary' means the Secretary of Homeland Security.

`(15) SUBSTITUTE MERCHANDISE; SUBSTITUTE ARTICLE- The terms `substitute merchandise' and `substitute article' mean--

`(A) a good that is classifiable within the same 8-digit HTS subheading number as another good (the Schedule B number may be used to demonstrate this fact);

`(B) a good demonstrated to have been classifiable within the same 8-digit HTS subheading number as another good at some point during the 5-year period beginning on the date of importation of the designated imported merchandise (the Schedule B number may be used to demonstrate this fact); or

`(C) for goods classifiable under headings 2710 or 3901 through 3914 of the HTS, a good demonstrated to have been classifiable under the same 8-digit HTS subheading number as another good according to the HTS in effect on January 1, 2000 (the Schedule B number may be used to demonstrate this fact).

`(b) In General-

`(1) DRAWBACK- If merchandise is imported into the United States and that merchandise, or substitute merchandise, is then exported, or is incorporated into an article that is exported, or a substitute article is exported, duties, fees, and taxes paid upon entry or importation of the merchandise shall be refunded as drawback pursuant to this section notwithstanding any other provision of law.

`(2) ELIGIBILITY FOR DRAWBACK FOR MERCHANDISE INCORPORATED INTO MULTIPLE ARTICLES- Merchandise described in paragraph (1) that is incorporated into an article that is exported shall be eligible for drawback under this section regardless of the number of times that the merchandise is incorporated into an article or an article is incorporated into another article.

`(c) Eligibility to Claim Drawback-

`(1) PERSON MAKING CLAIM- A person may claim drawback under this section if the person--

`(A)(i) imports the merchandise on which the claim is based; or

`(ii) obtains the importer's permission to claim the drawback; and

`(B) exports the merchandise or article on which the claim is based or obtains the exporter's permission to claim drawback.

`(2) SPECIAL RULES-

`(A) IN GENERAL- When the exporter and importer are not the same party, the exporter shall have received the imported merchandise, substitute merchandise, imported or substitute merchandise incorporated into an article, or substitute article, directly or indirectly from the importer.

`(B) RULES FOR TRANSFER- The transfer of drawback rights under this section shall be a private transaction between parties that shall not be required to be governed by this section or by regulations promulgated under the authority of this section, and U.S. Customs and Border Protection of the Department of Homeland Security shall not be required to verify any transfer of merchandise or article under this subsection.

`(3) CLAIM FOR DRAWBACK ON MERCHANDISE INCORPORATED- If drawback is claimed for merchandise incorporated into an article, the person making the claim shall submit a bill of materials or formula identifying the merchandise and article by the 8-digit HTS subheading number and the quantity of the merchandise. Merchandise shall be deemed incorporated into an article if the bill of materials or formula for that article includes such merchandise.

`(4) ELECTRONIC FILING- A claim for drawback under this section shall be made through an electronic data interchange system authorized by the Secretary. Such system may include an Internet-based system.

`(5) TIME LIMIT FOR CLAIM- Drawback may be paid under this section only if the claim for drawback is filed within 5 years after the date the merchandise was imported. If the merchandise has multiple dates of importation, the earliest date of importation shall be used for purposes of this paragraph.

`(d) Amount of Drawback-

`(1) IN GENERAL- Except as provided in paragraph (2) and except for drawback claims filed pursuant to subsection (g)(2), the amount of a drawback made pursuant to this section shall be the number of units claimed times the lesser of--

`(A) the average of the duties, taxes, and fees paid per unit of the designated import line item, or

`(B) the average declared value per unit of the designated export line item times the duties, taxes, and fees that applied to the designated import line item,

less 1 percent.

`(2) EXCEPTION- Where drawback is claimed based upon imported merchandise or substitute merchandise being incorporated into an article, the drawback amount shall be the number of units of merchandise claimed times the average duties, taxes, and fees per unit of the designated import line item, less 1 percent.

`(3) LIMITATION- The amount of duties, taxes, and fees to be refunded pursuant to this subsection for merchandise shall not include any duties, taxes, and fees previously refunded to any person for such merchandise.

`(e) Refunds, Waivers, or Reductions Under Certain Free Trade Agreements-

`(1) IN GENERAL- If an article that is exported to a NAFTA country is a good subject to NAFTA drawback, no customs duties on the good may be refunded, waived, or reduced in an amount that exceeds the lesser of--

`(A) the total amount of customs duties paid or owed on the good on importation into the United States; or

`(B) the total amount of customs duties paid on the good on importation into the NAFTA country.

`(2) SPECIAL RULE FOR CANADA- If Canada ceases to be a NAFTA country and the suspension of the operation of the United States-Canada Free-Trade Agreement thereafter terminates, then for purposes of subsection (b), the shipment to Canada during the period such Agreement is in operation of an article made from or substituted for, as appropriate, a drawback eligible good under section 204(a) of the United States-Canada Free-Trade Implementation Act of 1988 (19 U.S.C. 1212 note) does not constitute an exportation.

`(3) SPECIAL RULE FOR CHILE-

`(A) IN GENERAL- For purposes of subsections (b) and (g)(1), if an article that is exported to Chile is a good subject to Chile FTA drawback, no customs duties on the good may be refunded, waived, or reduced, except as provided in subparagraph (B).

`(B) AMOUNT OF CUSTOMS DUTIES- The customs duties referred to in subparagraph (A) may be refunded, waived, or reduced by--

`(i) 100 percent during the 8-year period beginning on January 1, 2004;

`(ii) 75 percent during the 1-year period beginning on January 1, 2012;

`(iii) 50 percent during the 1-year period beginning on January 1, 2013; and

`(iv) 25 percent during the 1-year period beginning on January 1, 2014.

`(4) FUNGIBLE MERCHANDISE EXPORTED TO NAFTA COUNTRY- The exportation to a NAFTA country of merchandise that is fungible with and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (8) of section 203(a) of the North American Free Trade Agreement Implementation Act (19 U.S.C. 3333(a)), shall not constitute an exportation for purposes of subsection (b).

`(5) FUNGIBLE MERCHANDISE EXPORTED TO CHILE- Beginning on January 1, 2015, the exportation to Chile of merchandise that is fungible with, and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (5) of section 203(a) of the United States-Chile Free Trade Agreement Implementation Act (19 U.S.C. 3805 note), shall not constitute an exportation for purposes of subsection (b). The preceding sentence shall not be construed to permit the substitution of unused drawback under subsection (b) of this section with respect to merchandise described in paragraph (2) of section 203(a) of the United States-Chile Free Trade Agreement Implementation Act.

`(f) Proof of Exportation- A person claiming drawback under this section shall submit to the Secretary proof of the exportation by submitting at least 1 of the following:

`(1) The appropriate record from the United States Government automated export system, or evidence of the equivalent information if such system was unable to report the exportation.

`(2) Export documentation issued in the normal course of business.

`(3) If the drawback claims filed pursuant to paragraph (1), (2), or (4) of subsection (e), the Canadian or Mexican entry records.

`(4) For a deemed exportation, any record that establishes the fact of deemed exportation that includes a description of the article or merchandise by the 8-digit HTS subheading number (or equivalent Schedule B number) under which the article or merchandise would be classifiable, quantity, and declared value.

`(g) Special Eligibility Rules-

`(1) VESSELS BUILT FOR RESIDENTS OF A FOREIGN COUNTRY- Drawback under this section may be claimed for materials imported and used in the construction and equipment of vessels built for foreign account and ownership, or for the government of any foreign country, notwithstanding that such vessels may not within the strict meaning of the term be exported.

`(2) DESTROYED MERCHANDISE-

`(A) ELIGIBILITY FOR DRAWBACK- Drawback under this section may be claimed for--

`(i) imported merchandise,

`(ii) an article incorporating the imported merchandise, or

`(iii) substitute merchandise,

that is not exported because it was destroyed.

`(B) AMOUNT OF DRAWBACK- Subject to subparagraph (C), the amount of drawback paid for a claim filed pursuant to subparagraph (A) shall be--

`(i) the average entered value per unit of merchandise, multiplied by

`(ii) the duty, tax, and fee applicable to the designated line item of the merchandise, multiplied by

`(iii) the number of units claimed, minus 1 percent.

`(C) OFFSETTING AMOUNTS- The amount of duties, taxes, and fees to be refunded pursuant to this paragraph shall not include any duties, taxes, and fees previously refunded to an importer of record or the person claiming drawback. The value of the imported merchandise on which drawback is claimed shall be reduced by the value of any recovered materials (including the value of any tax benefit or royalty payment).

`(3) AGRICULTURAL PRODUCTS- No drawback under this section may be claimed for an agricultural product subject to over-quota rate of duty established under a tariff-rate quota, except under a direct identification basis and when such product has not been used in the United States.

`(4) MERCHANDISE NOT REGULARLY ENTERED- Imported merchandise that has not been regularly entered or withdrawn for consumption shall not satisfy the exportation or destruction requirements of this section.

`(5) FLAVORING EXTRACTS, MEDICINAL, OR TOILET PREPARATIONS; DISTILLED SPIRITS AND WINES-

`(A) FLAVORING EXTRACTS, MEDICINAL, OR TOILET PREPARATIONS- Upon the exportation of flavoring extracts, medicinal, or toilet preparations (including perfumery) manufactured or produced in the United States in part from domestic alcohol on which an internal revenue tax has been paid, there shall be allowed a drawback equal in amount to the tax found to have been paid on the alcohol so used.

`(B) DISTILLED SPIRITS AND WINES-

`(i) IN GENERAL- If distilled spirits and wines are imported into the United States and such spirts and wines, or substitute merchandise, are then exported, or are incorporated into an article that is exported, or a substitute article is exported, duties, fees, and taxes imposed upon entry or importation shall be refunded as drawback pursuant to subsection (b) notwithstanding any other provision of law.

`(ii) TAX ON BOTTLED DISTILLED SPIRITS AND WINES- Upon the exportation of bottled distilled spirits and wines manufactured or produced in the United States on which an internal revenue tax has been paid or determined, there shall be allowed, under regulations to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, a drawback equal in amount to the tax found to have been paid or determined on such bottled distilled spirits and wines. In the case of distilled spirits, the preceding sentence shall not apply unless the claim for drawback is filed by the bottler or packager of the spirits and unless such spirits have been stamped or restamped, and marked, especially for export, under regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury.

`(h) Prohibition on Other Claims for Drawback- Merchandise that is exported or destroyed to satisfy any claim for drawback shall not be the basis of any other claim for drawback, except that appropriate credit and deductions for claims covering components or ingredients of such merchandise shall be made in computing drawback payments.

`(i) Liability for Claim- Importers, up to the amount of duties, taxes, and fees on the designated import permitted by the importer for drawback by the claimant, and drawback claimants, for the full amount of the claim, are jointly and severally liable to the United States for drawback claims. In implementing this section, the Secretary shall provide by regulation that the United States attempt to recover from the drawback claimant before attempting to recover from the importer.

`(j) Payment From Receipts of Puerto Rico- A drawback under this section for merchandise shall be paid from the customs receipts of Puerto Rico if the duties for such merchandise were originally paid into the Treasury of Puerto Rico.'.

(b) Report-

(1) IN GENERAL- Not later than 1 year after the date the drawback processing module is operational and the Automated Commercial Environment becomes the exclusive system of record nationally for drawback entries, the Commissioner of the Bureau of Customs and Border Protection shall submit to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives a report that evaluates the utilization of direct identification in drawback claims, including measurement of the number of non-NAFTA, nondestruction claims filed using direct identification, and the impact on personnel allocation within the Bureau.

(2) AUTOMATED COMMERCIAL ENVIRONMENT DEFINED- In this subsection, the term `Automated Commercial Environment' means the automated trade processing system designed to collect, process, and analyze commercial import and export data to facilitate international trade and travel.

(c) Technical and Conforming Amendments-

(1) REFUNDS- Section 505(b) of the Tariff Act of 1930 (19 U.S.C. 1505(b)), is amended by adding at the end the following: `Refunds of excess moneys deposited, as determined on a liquidation or reliquidation, shall be reduced by any amount paid, on an accelerated basis or otherwise, to a drawback claimant pursuant to section 313.'.

(2) REVIEW OF PROTESTS- The second sentence of section 515(a) of the Tariff Act of 1930 (19 U.S.C. 1515(a)) is amended by striking the period at the end and inserting `in accordance with section 505.'.

(d) Effective Date-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall take effect on the date that the Commissioner of the Bureau of Customs and Border Protection publishes a finding that the Automated Commercial Environment (as defined in subsection (b)(2)) is the exclusive system of record in the United States for entry summaries and shall apply to drawback claims designating import entry summaries or reconfigured entries that are filed on or after that date.

(2) EXCEPTION- Subsection (a)(15) of section 313 of the Tariff Act of 1930 (relating to definitions of the terms `substitute merchandise' and `substitute article'), as added by subsection (a) of this section, shall take effect on the date of the enactment of this Act and shall apply for purposes of determining commercial interchangeability for unused merchandise drawback claims filed pursuant to subsection (j)(2) of such section on or after the date of the enactment of this Act but before the effective date described in paragraph (1).