Why you may benefit from duty drawback based on the China tariffs.
Unlike additional Anti-Dumping and Countervailing taxes, Section 301 China tariffs are applicable for drawback claims. Many China imports are currently taxed with the Section 301 taxes between 15% – 25%. Duty Drawback allows the importer to receive 99% of the additional Section 301 taxes paid in addition to any standard duty paid on their original import.
What is a duty drawback?
Duty drawback is a procedure in which am importer could receive a refund of customs duties assessed on the importation of an article or materials which are exported or destroyed.
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 five years of entering the United States.
Companies are eligible for drawback if it has one or more of these attributes:
- If the U.S. manufactured merchandise uses imported, duty-paid components that are exported or destroyed
- A duty-paid imported item is sold to a customer in the U.S. who exports the merchandise or uses the merchandise to manufacture an exported product.
- 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 duty may be recovered thru a drawback claim. It is, nonetheless, important to follow the obligation paid imported material through manufacture and export.
- Manufacturing Substitution Drawback– When the material of a same quality and kind as the imported duty-paid designated material is utilized to produce the exported item, U.S. import duty may be recovered.
- 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.
We encourage clients to develop and manage detailed, customized, drawback programs. Gallagher’s brokers provide the following services to ensure success of the importer’s duty drawback program:
- Prepare and electronically file accelerated drawback entries enabling prompt payment of refunds.
- Convey the requirements and regulations of U.S. Customs.
- Utilize customized drawback software for accurate processing and management reporting.
- Maintain frequent communication with U.S. Customs for advanced updates on all regulatory and compliance news.
The 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 importer, exporter and/or destroyer, except if the right to claim drawback has been exchanged to a third party.
Lastly, it is the responsibility of the importer, exporter, and/or destroyer to verify that drawback on the exportation or destruction will not be transferred to any other party.