What is a Duty Drawback?

A Duty Drawback is a procedure in which you could refund, reduce, or waive customs duties assessed or gathered upon the importation of an article or materials which are being exported.

The duty drawback law was the second law passed by the first Congress of the United States in 1789 and was then amended by Congress in 1980 to allow for 99% of taxes, duties, and fees to be paid when imported merchandise is exported, or destroyed, within three years of entering the United States.

Drawbacks encourage U.S. exports, manufacturing or both. With this, the U.S. manufacturer and/or exporter can compete internationally without the handicap of incorporating in their costs the duty paid on imported merchandise.

Companies are eligible for drawback if it has one or more of these attributes:

  • If the U.S. manufactured merchandise using imported, duty-paid components are exported or destroyed
  • Duty-paid imported item sold to a customer in the U.S. who exports the merchandise or uses to manufacture exported products is exported or destroyed
  • Unused imported duty-paid merchandise is exported or destroyed,
  • Rejected duty-paid, imported goods are exported or destroyed

Types of Duty Drawback

  • Manufacturing Direct Identification Drawback– When an imported material is utilized to make an item, which is therefore sent out from the United States, U.S. import obligation might be recovered. It is, nonetheless, important to follow the obligation paid imported material through manufacture and export.
  • Manufacturing Substitution Drawback– When the duty-free material of a similar quality and kind as the imported duty-paid designated material is utilized to produce the exported item, U.S. import duty may be recovered. This is true even when none of the assigned merchandise may have been used to produce the exported items.
  • Direct Identification Drawback of Unused Merchandise – When the imported material is unused, U.S. import duty may be recovered. It is necessary to trace the duty-paid imported material through to export.
  • Substitution Drawback of Unused Merchandise – When unutilized material, which is commercially interchangeable with the imported duty-paid material, is exported, U.S. import duty may be recouped.

Duty Drawback also gives strategic benefits or advantages to customers that are sources of an organization’s current and future competitive success relative to other providers of similar products.

Here are ways to ensure success in your Duty Drawback program:

  • Develop and manage detailed, customized drawback programs
  • Prepare and file electronically accelerated drawback entries enabling prompt payment of refunds
  • Get consultation through knowledgeable drawback consultants with experience in the regulations of U.S. Customs.
  • Utilization of customized drawback software for accurate processing and management reporting
  • Maintains frequent communication with U.S. Customs for advanced updates on all regulatory and compliance news

right to make entry ISFThe drawback amount can only be liquidated for the refund due once the claim is complete, verified, and satisfies all drawback requirements. Drawbacks are payable to the exporter/ destroyer, except if the right to claim drawback has been exchanged to a third party.

Lastly, it is the responsibility of the destroyer/exporter to verify that drawback on the exportation or destruction will not be transferred to any other party.

Do you have any questions about Duty Drawbacks? Call 303-365-1000 or email us anytime.