Duty Drawback Newsletter - May 2011
Proof of Export
Have you ever looked into a microscope? It's amazing how something simple - like a drop of water - becomes a complex world unto itself when viewed through one of these devices. Microscopes have been around since two Dutch eyeglass makers, Hans Lippershey and Hans Janssen first fashioned one from some eyeglass lenses in 1590. The term "microscope" was not coined until 1625 to describe Galileo's version of this fascinating instrument.
Today there are many different kinds of microscopes. Optical microscopes like the early models use light to enable you to see the image of the sample being viewed. Electron microscopes and scanning probe microscopes use electrons instead of light to generate the image, which allows for better resolution.
The term "microscope" is usually used to describe a piece of equipment that enlarges the image of what you are looking at to a point where you can now see details that were not visible or apparent to the naked eye. This meaning of the term has yielded some incredible scientific advances that have greatly enhanced our wellbeing. But we also know of instances where the term "microscope" is meant to describe a process resulting in a detailed analysis of something, such as when the IRS reviews your tax returns. The results of those types of "microscopes" have not always been viewed so favorably.
When you look at the term "proof of export" as it relates to duty drawback, it is almost as if you need a microscope to see all of the ramifications of this apparently simple concept. At its basic form, an export is the "severance of goods from the mass of things belonging to this county with the intention of uniting them to the mass of things belonging to some foreign country." (19 CFR 191.1) That seems easy enough to understand, but let's crank the old scope up another notch and see how you prove exportation.
According to 191.72 of the drawback regulations, "Supporting documentary evidence shall establish fully the date and fact of exportation and the identity of the exporter". OK - you now know that you need to prove exportation through documentary evidence. But what constitutes acceptable documentary evidence? That appears to be determined by the circumstances surrounding the export transaction.
There are special requirements for mail shipments, supplies laden on vessels or aircraft, and articles manufactured in the US and transferred to a foreign trade zone, but most shipments fall under the provisions of 191.72(a) or (b). According to 191.72(a), actual evidence of exportation consists of documentary evidence such as an originally signed bill of lading, air waybill, freight waybill, Canadian customs manifest, and/or cargo manifest, or certified copies thereof issued by the exporting carrier. The next section, 191.72(b), is a provision that allows you to file claims without submitting the actual documentary evidence of exportation with the claim, but you still need to keep the supporting documents described above for review by Customs if requested.
If you are not already suffering from eyestrain, consider the statement in 191.72 that the procedures outlined above are not exclusive. "The procedures for establishing exportation outlined in this section include, but are not limited to," what is listed above. Customs can accept alternative documentation, as long as it clearly establishes the date and fact of exportation and the identity of the exporter.
For shipments to Canada or Mexico, the documentary requirements become even more specific. According to some recent requests made by Customs to our office, what is required for proof of export to Canada includes an export bill of lading, an export invoice from an American seller to a Canadian buyer, and a completed Canadian B-3 entry document certified as true and accurate by a US entity. The B-3 must be certified by the Canadian broker with the broker's name, the broker's firm, and the date, and must also show the release date.
Exports to Mexico are required to be documented by a bill of lading, an export invoice from an American seller to the Mexican buyer, and a completed Pedimento certified as true and accurate by a US entity. The Pedimento must have the release stamp and the duty stamp present on the document.
As you reach for your bottle of Advil to address the pounding in your head, it is astonishing how such a simple concept can get so out of hand. It's not enough to supply copies of the traditional documentation that is created for an export showing the movement of goods from one location to another. You also need to be able to obtain original signatures on the copies with certifications from various entities and even entry documents into other countries.
As international business continues to seek paperless methods of documenting import and export transactions, when will Customs begin to move away from the paper chase and look for the efficiencies that can be gained from electronic commerce? I guess that will only happen when they break their microscope!
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