Drawback Compliance: What does that mean for you?

You may have heard the phrase “Carrot and Stick Approach”. In looking into the origin of this idiom, I learned that it refers to a policy of offering a combination of rewards and punishment to induce behavior. It is named in reference to a cart driver dangling a carrot in front of a mule and holding a stick behind it. The mule would move towards the carrot because it wants the reward of food, while also moving away from the stick behind it, since it does not want the punishment of pain, thus drawing the cart. I’ve often referred to drawback as a carrot and stick process. While you can file a drawback claim and get paid in advance through the accelerated payment privilege (the carrot/benefits), you must be prepared to face the denial or reduction of drawback afterwards (the stick/threats). The latter typically is a result of a desk review or audit, which are designed for one purpose: to ensure that there is adequate proof of compliance to substantiate a drawback claim.So what does it mean to be in compliance with these requirements? With drawback, there is a great body of law, regulations, procedures, interpretive rulings, court cases, etc., that deal with this arcane Customs program known as Drawback. While an actual drawback claim may seem straightforward, and even simple upon filing, a lot goes into making that submission compliant with the requirements:• All applicable rulings and privileges must be submitted and approved.• Raw material of import, manufacturing, export data must be in good order.• Data must be checked for completeness and accuracy as well as for duplicates.• Import designation process must be followed with matching methodology (e.g. FIFO, LIFO, high-to-low unit duty, low-to-high unit duty, etc.).Customs will review claims periodically and to different degrees. Remember that just like tax refunds, the government may pay your requested drawback refund, but they are completely at liberty to scrutinize your submission and even deny your drawback, in whole or in part, before final liquidation.Feel free to discuss this topic with your Comstock/Holt account manager. Make sure that you thoroughly review all facets of your program to ensure that you are in compliance.