Contents:
I. Introduction
II. Duty Suspension and Extension Measures
III. Changes to Entry and Protest Procedures
IV. Duty Drawback Law Changes
V. Miscellaneous Changes of Note
VI. Conclusion

I. Introduction

The Senate recently passed H.R. 1047, the "Miscellaneous Trade and Technical Corrections Act of 2004". The bill now goes to the President, who is expected to sign it shortly.

The Act implements a large number of temporary duty suspensions, as well as reinstatements of duty suspension measures which have expired. In addition, the Act contains a number of changes to the requirements pertaining to the filing of protests which will affect all importers. H.R. 1047 also makes important changes to the laws governing duty drawback.

For instance, H.R. 1047 will increase the time in which importers may file a protest from 90 days to 180 days after the liquidation of a Customs entry or other Customs decision. At the same time, the Act repeals Section 520( c) of the Tariff Act of 1930 [19 U.S.C. §1520( c)], which for many years has allowed importers to petition for the reliquidation of entries in order to correct clerical errors, mistakes of fact, or inadvertences not amounting to an error in the construction of a law.

H.R.1047 will expand the availability of duty drawback, most importantly by designating the Harbor Maintenance Tax paid on imported goods as a tax or charge which is eligible for unused merchandise duty drawback.

H.R. 1047 also enacts a number of miscellaneous changes which will affect particular importers or types of import operations.

This memorandum discusses the major provisions contained in H.R. 1047.

II. Duty Suspension and Extension Measures

H.R. 1047 enacts a number of new duty suspension measures - the first passed by Congress in more than three (3) years. Attached as Exhibit A is a copy of the Table of Contents for H.R. 1047, which identifies the products for which duties are being suspended.

The Act also reinstates and extends certain temporary duty suspensions which had expired at the end of 2002, and includes some "duty relief measures" directing Customs officials to reliquidate certain specific entries of merchandise.

Effective Date: It appears that all of the new duty suspension measures which Congress has enacted will be effective on a prospective basis only. Section 1571 of H.R. 1047 states that, "Except as otherwise provided in this title, the amendments made by this title shall apply with respect to goods entered, or withdrawn from warehouse for consumption, on or after the 15th day after the date of enactment of this Act."

Some degree of retroactive application is provided for certain duty suspension measures which expired at the end of 2002, but which are reinstated by Title I, Subtitle A, Chapter 2 of H.R. 1047 (these are primarily pigments). Section 1457 of H.R. 1049 is a separate effective date provisions which deals with measures in Chapter 2, and provides retroactive treatment to January 1, 2004. ¹

III. Changes to Entry and Protest Procedures

H.R. 1047 contains a number of changes to Customs entry and protest procedures which will affect all importers.

Entry Procedures: "Reconfigured" Entries Section 2101 of the bill provides authority for the "reconfiguration" of entries which are included on an "import activity summary statement". The wording of the legislation extends an importer's responsibility to use "reasonable care" to the filing of such reconfigured entries. This measure will allow Customs to implement importer activity summary statement procedures authorized by the 1993 Customs Informed Compliance and Modernization Act.

Limitation on Liquidations. Section 2102 of H.R. 1047 provides for the automatic liquidation, by operation of law, of reconfigured entries filed under an import activity summary statement. The liquidation of such reconfigured entry will become liquidated and final one year after "the date the import activity summary statement is filed or should have been filed, whichever it earlier.

As noted below, Section 504 is also amended to provide for the "liquidation by operation of law" of duty drawback claims.

Extension of Protest Period: Section 2103 of H.R. 1047 is extremely important for all exporters. It increases, from 90 to 180 days after liquidation (or other challenged Customs decision) the time within which a protest can be filed. It also amends the protest statute, 19 U.S.C.§1514, to make clear that a protest may be filed to challenge a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of the law. The statute also extends the importer's ability to amend a protest once filed.

Repeal of 19 U.S.C.§1520( c). As noted above, Section 2105 of H.R. 1047 repeals Section 520( c) of the Tariff Act of 1930, which allowed an importer to seek reliquidation of an entry, up to one year after the date of liquidation, in order to correct a clerical error, mistake of fact or other inadvertence not amounting to an error in the construction of a law. These errors may still be challenged, but only in a protest filed within 180 days after liquidation of the entry.

Voluntary Reliquidations: Section 2107 of H.R. 1047 amends Section 501 of the Tariff Act of 1930 [19 U.S.C.§1501 to provide that Customs may voluntarily reliquidate, within 90 days after the original liquidation, an entry which has liquidated by operation of law pursuant to Section 504 of the Tariff Act [19 U.S.C.§1504]. Previously, Customs' power to voluntarily reliquidate was limited to entries which had been affirmatively liquidated under 19 U.S.C.§1500, and did not extend to entries which liquidated automatically by passage of time under 19 U.S.C.§1504. Now, all types of liquidations may be reliquidated by Customs.

Please note, however, that while the time for importers to protest a reliquidation has been increased to 180 days, the time for Customs officials to reliquidate an entry remains just 90 days.

Accelerated Disposition of Protests: Section 2104 of H.R. 1047 allows an importer to request accelerated disposition of a protest at the time the protest is filed or any time thereafter. The importer no longer needs to wait 90 days before submitting a request for accelerated disposition of a protest. If a protest is not acted on by Customs within 30 days after a request for accelerated disposition is submitted, the protest is deemed denied and the importer may file a lawsuit challenging such denial in the United States Court of International Trade.

Effective Date of Changes Relating to Entries and Protests. Section 2108 of the Act provides that the changes regarding entry and liquidation procedures discussed above "shall apply to merchandise entered, or withdrawn from warehouse for consumption, or or after the 15th day after the date of enactment of this Act".

This effective date provision may lead to some confusion, and it will be important for importers to carefully track the entry dates for transactions which may be the subject of a protest or request for reliquidation.

For example, for entries made before the effective date of the new provisions:

• a 90-day protest period will apply;


• a 19 U.S.C.§1520( c) petition for reliquidation may be filed;


• entries liquidating by operation of law cannot be voluntarily reliquidated by Customs; and


• requests for acceleration disposition cannot be filed until 90 days after a protest is filed. will be subject to a 90-day protest period, while entries made after the effective date will be subject to

On the other hand, for entries made on or after the effective date of the new provisions:

• a 180-day protest period will apply;


• 19 U.S.C.§1520( c) reliquidation petitions may not be filed;


• entries liquidating by operation of law may be reliquidated by Customs; and


• requests for accelerated disposition can be filed at any time.

Since importers will have some "pre-H.R. 1047" entries (including those whose liquidation is extended or suspended by operation of law) and some "post-H.R. 1047" entries in their systems for at least the next year, and perhaps for several years thereafter, it will be important for importers to carefully monitor the liquidation of their entries, and determine what legal remedies are available.

IV. Duty Drawback Law Changes

The bill makes a number of important changes to the duty drawback statutes [19 U.S.C.§1313]. These may be summarized as follows:

Articles Exported to U.S. Insular Possessions Now Drawback - Eligible Section 1556 of H.R. 1047 amends the drawback statute to provide that, for purposes of direct identification unused merchandise drawback [19 U.S.C.§ 1313(j)(1)], any articles (except textile articles classified in HTS Chapters 50 through 63), will be eligible for duty drawback if duty was paid upon importation into the United States and the drawback claimant proves that the merchandise has entered the Customs territory of: the United States Virgin Islands, American Samoa, Wake Island, Midway Island, Kingman Reef, Guam, Canton Island, Enderbury Island, Johnston Island or Palmyra Island. This will enhance some duty drawback opportunities for firms which export or distribute imported goods to these possessions.

HMT Now Eligible for Unused Merchandise Drawback. Section 1557 of H.R. 1047 amends Section 313(j) of the Tariff Act [19 U.S.C.§1313(j)] to allow for the drawback of duties on duties, taxes or fees which are imposed "upon entry or importation". [Currently, the statute provides for drawback of duties on taxes and fees imposed "by reason of" importation].

The principal impact of this change is that Harbor Maintenance Taxes assessed on imports which are designated as the basis for unused merchandise drawback claims may be claimed for drawback. The HMT is collected at the rate of 0.125% ad valorem on all imported cargo arriving by water.

As noted below, these drawback changes will apply to all pending drawback claims which have not become final. Thus, drawback claimants have an opportunity to seek additional refunds on pending claims. [This will also be the case if liquidated claims are timely protested or otherwise prevented from becoming final].

The ability to recover HMT's may also furnish claimants with a motive to file 19 U.S.C.§1313(j) drawback claims just to recover HMT paid on imported goods which are otherwise duty free.

Rejected Merchandise Drawback

Section 1563 of H.R. 1047 amends the rejected merchandise drawback statute [19 U.S.C.§ 1313(c)] to extend the period in which merchandise not conforming to sample or specifications can be exported or destroyed under Customs supervision for drawback.

The law also extends the rejected merchandise drawback statute to imported goods which are ultimately sold at retail by the importer, or a person who received the goods from the importer together with a certificate of delivery (CD), and which for any reason are subsequently returned to and accepted by the importer, or the person who received the merchandise from the importer under a CD.

To qualify for rejected merchandise drawback, the rejected goods must be exported or destroyed under Customs supervision within three (3) years after their date of importation.

In the case of goods which are rejected as not conforming to sample or specifications, drawback will be claimed with respect to the specific import entry covering such goods. No substitution is provided for.

However, in the case of goods which are exported or destroyed after having been sold at retail, the importer may designate an entry of merchandise which is imported within 1 year prior to exportation or destruction, provided that the merchandise designated for drawback is identified as having the same 8-digit tariff classification, and specific product identifier (such as part number, SKU or product code) as the returned merchandise.

The amendments to the statute will expand rejected merchandise drawback opportunities for retailers, who previously were unable to claim drawback, due to an inability to tie rejected or returned merchandise back to a specific import entry. In addition to establishing drawback programs for goods they import themselves, retailers may begin requesting CDs from vendors who supply them with imported goods.

Manufacturing Drawback: Use of Domestic Merchandise. Section 1563 of H.R. 1047 expands a manufacturing drawback claimant's ability to substitute goods for the imported merchandise designated for drawback. The drawback statute requires that the designated imported merchandise be used in manufacture. However, under 19 U.S.C.§1313(k), where imported, duty-paid merchandise is exchanged for domestic merchandise of the same kind and quality, the use of that domestic merchandise in manufacture is treated as a use of the imported merchandise. H.R. 1047 amends section 1313(k) to provide that the use of domestic merchandise acquired in exchange for a drawback product of the same kind and quality may be treated as a use of the drawback product if no certificate of delivery pertaining to such drawback product is issued to another party.

Drawback on Packaging Material Section 1563 of H.R. 1047 expands the 19 U.S.C.§1313(q) provisions regarding drawback on packaging material. It specifies that:

• for purposes of rejected merchandise [19 U.S.C.§1313( c)] or unused merchandise [19 U.S.C.§1313(j)] drawback, duty-paid packaging material may be designated for drawback;


• packaging material manufactured under a manufacturing drawback ruling [19 U.S.C.§§1313(a), (b)] is eligible upon exportation for drawback in respect of any duty, tax or fee imposed under Federal law on the imported or substituted merchandise used to manufacture or produce such packaging material;


• these packaging materials are eligible for drawback regardless of whether they contain articles or merchandise, and regardless of whether the articles or merchandise they contain is eligible for drawback;


• The use of any packaging material for its intended purpose prior to exportation will not be treated as a "use" of the merchandise for purposes of the manufacturing, unused merchandise, and rejected merchandise drawback statutes.

Limitation on Liquidation of Drawback Claims In what is certain to be an important change in drawback administration, H.R. 1047 amends Section 504 of the Tariff Act [U.S.C.§ 1504] to provide that any drawback claim, which has not been liquidated within one year after the date of filing "shall be deemed liquidated at the drawback amount asserted by the claimant at the time of entry or claim." This is significant, since Customs at present routinely waits years before liquidating drawback claims.

Customs may, for good cause or at request of the importer of record or drawback claimant, extend the period for liquidating a drawback claim.

Furthermore, a drawback claim whose designated or identified import entries have not been liquidated and final within the 1 year period after filing of the drawback entry shall be deemed liquidated "upon the deposit of estimated duties on the unliquidated imported merchandise, and upon the filing of the Customs Service of a written request for the liquidation of the drawback entry or claim". Such a request must include a waiver of any right to payment or refund under any other provisions of law. The Secretary of the Treasury is authorized to issue regulations implementing this provision.

Effective Date Provisions: There are a number of effective date provisions which apply to the drawback amendments in H.R. 1047.

1. Eligibility of HMT and Other Import Taxes for Drawback - the Section 1557 provisions which designate the HMT as a drawback-eligible tax are effective "on the date of enactment of this Act, and shall apply to any drawback claim filed on or after that date and to any drawback entry filed before that date if the liquidation of the entry is not final on that date." This means that drawback claimants may try to recover HMTs paid on imports which are designated as the basis for any drawback claim which has not been liquidated and made final.


2. Rejected Merchandise, Exchange, Packaging Material Changes - Under Section 1563(g)(1) of H.R. 1047, the amendments relating to rejected merchandise drawback, treatment of packaging materials and exchange of materials, together with other technical changes, apply to "any drawback entry filed on and after the date of [ ] enactment" of H.R. 1047, as well as any "drawback entry filed before such date of enactment if the liquidation of the entry is not final on such date of enactment.


3. Automatic Liquidation of Drawback Claims - Under Section 1563(g)(2) of H.R. 1047, the changes relating to automatic liquidation of drawback claims apply to all drawback claims filed on or after the date of enactment of H.R. 1047, as well as any entry or claim for drawback filed before the date of fenactment is the liquidation of the claim is not final on such date of enactment. This means that drawback claimants will want to review their pending claims; if any of those claims are liquidated "as entered", the drawback claimant may wish to file a protest to protect its right to additional drawbacks not claimed at the time of entry.

Unliquidated drawback claims which were filed more than one year ago will be deemed liquidated one year after the date of enactment of H.R. 1047. Drawback claimants will want to monitor possible "automatic liquidations" of drawback claims one year after H.R. 1047 is signed into law, to determine whether it will be necessary to file protests to protect their rights to full drawback.

Customs may extend the period in which to liquidate a drawback entry if information is needed for the proper classification or appraisement of the imported or withdrawn merchandise, for determining the correct drawback amount, or for ensuring compliance with applicable law is not available to Customs. The period for liquidating an entry may also be extended if a drawback claimant request such extension and provides good cause therefore.

As is the case with import entries, the Secretary must provide the drawback claimant with notice of extension of the liquidation of the drawback claim. Drawback claims may have their liquidations extended for a year at a time, subject to a 4-year outside limitation on extension.

Effective Date of Drawback Changes With the exception of the deemed liquidated provisions noted above, the other drawback amendments made by Section 1563 of H.R. 1047 will be effective with respect to any drawback entries filed on or after the date of enactment of the statute, before any drawback entry filed before enactment of the statute "if liquidation the entry is not final on such date of enactment".

In addition to the changes noted above, H.R. 1047 makes various other changes of note. Among the more notable changes are the following:

Treatment of Certain Footwear Under CBERA: Section 1558 of H.R. 1047 designates certain footwear as eligible for duty-free entry under the Caribbean Basin Economic Recovery Act (CBERA). Such footwear will qualify for duty free entry into the United States, contingent of course on satisfying rules of origin imposed under that statute.

Repeal of 1916 Antidumping Act - Section 2006 of the Act repeals the Antidumping Act of 1916, a private remedy for price discrimination which was never used successfully. The World Trade Organization (WTO) had previously held the 1916 Act to violate world trading rules.

Extension of Normal Trade Relations to Laos Section 2005 of H.R. 1047 authorizes the President to proclaim Normal Trade Relations (NTR) status for Laos, permitting goods from that country to qualify to enter the United States at Column 1 duty rates.

Country of Origin Marking for Socks. Buried in the "technical amendments" section of H.R. 1047 is an amendment to the Textile Fiber Products Identification Act which will require that all packages containing socks be legibly, permanently and conspicuously marked to show the socks' country of origin. For packaged socks, the country of origin must appear on the front of the package, immediately adjacent to the size information.

Please note that this change applies not only to the packaging of socks at the time of importation, but also to imported socks repackaged after importation.

The new marking requirements for socks will become effective 15 months after enactment of H.R. 1047.

H.R. 1047 also contains provisions dealing with Iraqi cultural antiquities, extension and modification of the duty suspension on wool, and extension of the Wool Trust Fund.

VI. Conclusion

H.R. 1047 makes changes to the Customs laws which will affect all importers. It also creates substantial new opportunities for duty drawback claimants.

Please do not hesitate to contact us if you have any questions concerning this important new legislation.

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1. Section 1457 provides as follows:

SEC. 1457 EFFECTIVE DATE

(a) IN GENERAL - Except as otherwise provided in this chapter, the amendments made by this chapter apply to goods entered or withdrawn from warehouse for consumption, on or after January 1, 2004.

(b) RETROACTIVE APPLICATION - Notwithstanding section 514 of the Tariff Act of 1930 (19 U.S.C.§1514) or any other provision of law, upon proper request filed with the Bureau of Customs and Border Protection before the 90th day after the date of enactment of this Act, any entry, or withdrawal from warehouse for consumption, of any good -

(1) that was made on or after January 1, 2004, and before the date of enactment of this Act, and
(2) with respect to which there would have been no duty or a lower rate of duty if an amendment made by this chapter applied to such entry or withdrawal,

shall be liquidated or reliquidated as if such amendment applied to such entry or withdrawal.

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