TFTEA Compliance Poses New Risks and Rewards in Apparel and Footwear Industries

February 2018 marked the second anniversary of the Trade Facilitation and Trade Enforcement Act (TFTEA) that has reshaped international trade for importers and exporters.

In addition to increased scrutiny of supply chains and border compliance, the remainder of the year ahead also promises significant changes to the drawback of customs duties, taxes and fees on the export of imported goods under certain circumstances.

Under TFTEA, U.S. Customs and Border Protection (CBP) has stepped up the pursuit of fines and penalties against importers and exporters to increase revenue collection.

CBP has more tools to investigate evasion of anti-dumping and countervailing duties and safeguard human rights by strengthening the prohibition of U.S. imports produced by forced labor. Also, CBP has initiated targeted efforts to keep counterfeit merchandise out of the U.S. supply chain. In fact, 2017 was a record year for seizing counterfeit and pirated goods, boosting intellectual property rights seizures by 8 percent over the previous year and capturing products with a retail value of more than $1.2 billion.

If your organization is involved in global trade, even if it is limited to North American partners in Canada or Mexico, the processes involved are built on an intricate foundation of rules, regulations, relationships, requirements and documentation.

In the fast-paced, sometimes reactionary world of global commerce, regulatory processes can become outdated relatively quickly. Unfortunately, the "I didn't know about it" defense doesn't work when all international shippers have access to the Automated Commercial Environment (ACE) which improves collection, sharing and processing of information submitted to CBP and government agencies.

For 2018, the apparel and footwear industries have new opportunities to reclaim duties paid on imported goods that are later exported. Since 1789, Congress has allowed importers to apply for refunds amounting to 99 percent of the duties paid on imported goods if those goods are later exported from the United States. Known as duty drawback, this system was designed to promote domestic production and competitive export trade.

In the past, using the drawback program was challenging for the apparel and footwear industry due to administrative and compliance burdens. The TFTEA and the ACE platform it establishes helps simplify the process to make drawback more accessible.

Under the new rules, importers/exporters can apply for a refund of duties, taxes and fees paid on imported merchandise that may have been used to produce articles that are either exported or could be substituted with another export (with the same eight-digit Harmonized Traffic Schedule classification). The rules allow for an extended filing window of five years from import.

To take advantage of the new TFTEA rules that enable companies to manage duty drawback more efficiently, each supply chain should be analyzed to ensure your organization understands its potential for savings from the program. Proper recordkeeping and planning can help recover cash that may be hidden in your supply chain.

To assist shippers and importers in understanding their risks under TFTEA, Transportation Insight developed an International Trade Compliance Assessment to review the trade practices of international importers and exporters and offer insight on process improvement. If your company does not have a comprehensive compliance initiative, your organization is exposed to risks that could significantly impair your company's future. It's vital to identify any existing compliance gaps and manage potential savings available via the simplified drawback process.

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