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Duty Refund Newsletter - July 2010

GIGO

We are becoming totally dependent on computers. As the amount of available data and information increases at an explosive rate, we find it virtually impossible to keep up without these technological marvels. Companies must rely on computers to sift, sort, manipulate, process, compress, and otherwise manage the mountains of information that businesses generate in their normal operations. Since we can't humanly duplicate the blinding speed and enormous capacity of today's computers, we tend to trust the output from computers as always being trustworthy and accurate.

We forget that a computer is basically a dumb machine - it cannot think or reason, and will not make a judgment as to the accuracy of the data being processed. George Fuechsel, an IBM 305 RAMAC technician/instructor, coined the term "Garbage in, Garbage out" (GIGO) to remind programmers that a computer will accept and process incorrect data just as easily and as quickly as it does correct data. If your input is not reliable, your results will likewise be unreliable. Just because it comes out of a computer does not make it right.

This is an important concept that we often ignore, and it has direct bearing on many aspects of the duty drawback process. As information is accumulated and manipulated to create the databases necessary to prepare and process a drawback claim, it is easy to remove the "thinking" part of the equation and assume that once the data is in a computer, the result will automatically be valid and accurate. If the data being processed is not monitored for accuracy and updated to take into consideration factual changes, then it becomes invalid. This is particularly critical when dealing with import information.

As stated in §191.51(b) of the Customs Drawback Regulations, "Drawback claimants are required to correctly calculate the amount of drawback due." To accurately calculate the amount of drawback that can be claimed, you must start with accurate import information. That might sound like one of those "Duh" statements - so obvious that is does not need to be said - but in reality this requirement is often not given the importance that it deserves. An import entry is not a static document. The information on the entry can be changed through post entry amendments, protests, reconciliations, court cases or other adjustments initiated by the importer, the broker, or Customs. The duties on a liquidated import entry can be very different from those shown on the original import entry. If an import entry is liquidated at an increase or a refund, then any drawback claims predicated upon that import must also be changed.

Customs is acutely aware of this fact and will issue letters to claimants advising them that import entries designated on a drawback claim were liquidated at a refund. Customs will also ask if the change in duty was taken into consideration when the drawback claim was prepared. If you received a refund at the import level, then you cannot "double-dip" and also claim that refunded amount on a drawback claim. If the claim was not calculated using the reduced duty from the liquidated import, then you must amend the drawback claim accordingly.

Drawback claimants must establish procedures to ensure that the import data used in creating drawback claims is accurate and is updated to account for changes in the liquidation of the individual import entries. Updating the import data will allow for the proper calculation of drawback on future claims, but there must also be procedures established to correct claims prepared prior to the import data updates. It is the claimant's responsibility to notify Customs if drawback claims need to be re-calculated to account for changes to the underlying import entries.

Bottom line - don't fall into the GIGO trap. Monitor and update the data used by computers and maintain the integrity of the information on your claims. Be prepared to respond when Customs asks you to verify that the information on your claim is accurate, and to describe the procedures you have in place to monitor changes to imports.