MPF Drawback Always Apportioned at Entry Summary Line Level, Not Invoice Line, CBP Says

Drawback for merchandise processing fees should be calculated at the entry summary line level for both substitution and direct identification drawback claims, CBP said in a recently released ruling announced in a July 23 CSMS message.

Issued by CBP headquarters to clear up “disagreement” between the agency’s Petroleum, Natural Gas, and Minerals Center of Excellence and Expertise and “certain members of the trade community,” the ruling addresses whether merchandise processing fees on direct identification drawback claims should be apportioned at the invoice line level, as argued by the trade, or at the entry summary line level.

Noting that the maximum MPF of $614.35 is applicable to each entry, CBP found that it is “necessary that the merchandise processing fee be apportioned and refunded as a percentage of the entire entry” so that “MPFs are not over-refunded.”

The dispute arose following changes made by the Trade Facilitation and Trade Enforcement Act of 2015 to drawback. While CBP’s post-TFTEA modernized drawback regulations mandated that substitution drawback refunds be calculated based on the per unit average value reported on the entry summary line, they said direct identification claim refunds should be calculated based on the invoice value of the merchandise.

“Confusion has arisen as to whether the MPF calculation is similarly differentiated or should, no matter the type of claim (e.g., direct identification or substitution), be apportioned based on the entry summary line level,” CBP said in the ruling.

However, the modernized drawback regulations “did not change the MPF apportionment calculation instructions” issued as part of regulatory changes in 2002. While the regulations simply refer to the “line item,” without specifying whether that applies to the entry summary or the invoice, CBP did say in a response to a comment in its 2002 final rule that MPF should be “apportioned and refunded as a percentage of the entire entry” to avoid exceeding the MPF cap.

The relevant statutes give CBP the authority to dictate how to determine drawback refund amounts, including at the entry summary line level, the ruling said. And the way that the drawback regulations are organized, with a section for MPF separate from a section for “all other duties, taxes and fees,” makes clear that MPFs are treated differently from other drawback calculations, including invoice line item apportionment for direct identification claims, CBP said.

“Finally, although the MPF regulations only refer to ‘line item,’ CBP has been consistent throughout its regulations to use the term ‘line item’ when referencing the entry summary line,” CBP said.

In its CSMS message announcing the ruling, CBP said: “Claimants should work directly with the drawback office where their unliquidated claim(s) are on file should it be necessary to amend or perfect a claim in accordance with the ruling.”