Companies involved in global trade can apply to access the refund program administered by US Customs and Border Protection (CBP). This program provides a refund for previously imported duties and taxes that have now been exported.
Using the handicap program is a tool that companies can use to reduce operating costs. The program can be used for unused, discarded or manufactured products.
The handicap program has several key factors that provide leverage to eligible companies.
THE PROCESS
The process of filing a refund claim and collecting a duty refund is an evidence-based business. Companies must have the required import, export and inventory documentation to support the refund claim.
The return applicant prepares a detailed sample to CBP, including lot numbers or SKUs to link the product to the import and export transaction. This presentation is submitted to CBP electronically using approved software.
Documentation specifically supporting the return claim will include bills of lading, commercial invoices, packing lists, and 7501 entry forms for the incoming department.
Documents supporting the outbound track will include the commercial invoice and bill of lading. Exports to Canada and Mexico will also require data elements from the Canadian B3 and Mexican gable (equivalent to CBP 7501).
RETRO ADVANTAGE
Refund claims can be made for up to five years from the date of admission. When this happens, it can be a windfall for a company resulting in a significant audit when back pay claims are paid.
It is important to understand that some digging (digging) through documents, evidence, and record keeping systems is needed to obtain historical data.
In the event that a company decides that it does not have complete documentation to support the claim, it will find itself requesting that documentation from customs brokers, carriers, carriers and third party providers.
Therefore, it is incumbent on a company to ensure that it maintains accurate and required documents as part of its import/export record keeping process. This may also require working internally with finance and information technology (IT) to obtain the necessary required data.
NOT THE “IMPORTER OR EXPORTER”
A company can file a refund claim for goods for which it may not have been the actual importer or exporter. This can be a bit difficult to manage.
On the import side, the company should be able to collect evidence that the domestic purchase price was inclusive of duties and taxes and the ability to support this claim from the supplier. CBP7501 data items will also be required to submit the refund claim. The actual file importer may be reluctant to provide this level of detail. Having a third party help broker and deal with this challenge can be beneficial.
Where the refund applicant is not the exporter, the company should obtain an export exemption from the actual exporter. In addition, supporting documentation will be required to provide the export data items.
This process is doable, and over the years, we’ve helped companies successfully meet this challenge. However, it would be remiss not to mention that it requires significant coordination and collaboration with vendors and buyers (sellers and customers).
Service providers with strong technology platforms can also help provide the necessary data.
MINORITY FORMS
When weighing a company’s eligibility for handicaps, it is important to understand the different types of handicaps. The most common types are:
- Unused merchandise
- Industrial Goods
- Rejected Goods
- Destruction
There are other types of cons that are niche and focus on specific industries and business models.
CHALLENGES OF MINORITIES
Challenges faced in coordinating disability claims can include management support, cross-organizational support, IT support, data collection, and data integration. These challenges can be resolved through an organized and responsible management process, using professional support and diligence and patience in the process.
To successfully manage these challenges, over the past 20 years we have developed a four-step process:
- Assessment
- Economic model
- Functional Model
- Application
The process begins with an intellectual assessment of your company’s likelihood (or not) of benefiting from a handicap program. The financial model generates the costs and profits associated with a refund claim to ensure a responsible and realistic return on investment.
ADDITIONAL FACTORS
The return process has been somewhat simplified due to the possibility of submitting a combined application. This application will include a waiver of notice of intent to export for past exports, a waiver of notice of intent for future exports, and a request for expedited payment of the refund claim by CBP.
NEXT STEPS
If you decide you are interested in a handicap, options for additional information and next steps include accessing both the CBP and Blue Tiger websites.
Disadvantage | US Customs and Border Protection (cbp.gov)
Consulting Management | Blue Tiger International (bluetigerintl.com)
We recommend that you first evaluate the opportunity and benefits of the handicap engagement to decide the need to proceed. Once that decision is made, create a financial model that addresses the cost and time required to manage a return program to determine the return on investment and justify the decision to proceed.
If the ROI is sufficient to proceed, you will need to assess what operational changes will be needed to collect the necessary data on imports and exports to create an accurate and detailed refund claim.
Consider aligning your company’s technology with the required data elements or work with an intermediary to act as an interface on your behalf. These companies typically charge a fee of 5% to 25% of the money raised, paid on a contingent basis. The amount is determined by the degree of difficulty in operating the specific return program as required by CBP.
Using a return consultant or intermediary is a potentially good option as it will streamline the process and speed up the ability to avoid delays, deal with challenges and most importantly help expedite the payment of your refund claim.
Author biography
Thomas A. Cook is a seasoned global supply chain practitioner, author of more than 20 books on global trade, and CEO of Blue Tiger International. He can be reached at tomcook@bluetigerintl.com or (516) 359-6232.
