Duty drawback programs are a valuable opportunity for manufacturers, distributors, and retailers in the complex area of international trade. Drawbacks offer exemptions or refunds of up to 99% on payments made for imported products that are later exported. These payments vary from country to country but typically include duties, fees, and taxes.
Duty drawback programs allow companies to recover some of their expenses for products not meant to be consumed in the U.S. Since these import-related costs can add up, managing supply chain data and processes is essential. That’s easier said than done unless you’re aware of the common drawback mistakes and how to avoid them.
Challenges of Duty Drawback
Businesses of all sizes face several challenges when dealing with duty drawbacks. Many of these challenges involve supply chain data and processes.
Data
The common challenges with duty drawback related to data include:
- The entry number can’t be matched to a part level to identify drawbacks directly.
- Export dates are provided within data sets.
Processes
The duty drawback challenges related to processes include:
- Proper inventory management isn’t in place. As a result, companies can’t show evidence of production and inventory receipts or movements with the right processes.
- Failure to keep up with courier service providers (UPS, FedEx, DHL, etc.), allowing them to clear the cargo as the Importer of Record (IOR). A process must be developed to ensure the company is listed as the IOR.
- Drawback is self-handled or managed by a provider with the lowest price point. The duty drawback process is complicated, and there are few drawback providers. Paying a little more for experience, expertise, and compliance ensures companies get paid and claims liquidated at the total amount.
Like these common drawback challenges, companies also face drawback mistakes. However, there’s a tendency to see more drawback challenges than drawback mistakes. Company mistakes fall under importer record keeping because that needs to be done per customs law regardless of drawbacks. At J.M. Rodgers, we work with companies to help them through the process so that claims are mistake-free with Customs.
Common Duty Drawback Mistakes
Making duty drawback mistakes can lead to missed opportunities, compliance issues, and financial setbacks. Understanding the most common mistakes helps ensure your business maximizes the benefits of drawback programs while complying with Customs regulations.
The most common duty drawback mistakes vary from record keeping to misunderstanding the process.
1. Insufficient Record Keeping
Companies often make the mistake of not keeping good records, which results in them being unable to provide the correct data needed for duty drawback eligibility.
2. Overlooking Eligibility Criteria
Some companies also lack awareness of specific eligibility criteria to qualify for duty drawbacks. They miss drawback opportunities, especially if they don’t keep up with regulatory changes.
3. Misunderstanding the Process
A colossal mistake businesses make is misunderstanding the entire duty drawback process. They often fail to realize the complexity of filing claims, providing supporting documentation, and receiving refunds or credits.
4. Inadequate Filing of Claims
It’s not uncommon for a company to file claims inadequately. This might include submitting incomplete and inaccurate documentation or missing important deadlines, which can result in claim rejections, delayed refunds, or forfeiture of eligible benefits.
5. Not Utilizing Expert Help
Lastly, failing to seek and use expert help when faced with duty drawback challenges is a significant mistake. Due to the complexities of drawback, self-filers often incur errors in claim preparation, missed opportunities for duty recovery, and compliance issues.
If you’ve made any of these mistakes, you’re not alone. However, continuing to make them can ultimately cost your company a lot financially and in terms of efficiency.
How To Avoid Common Duty Drawback Mistakes
Drawback mistakes may be commonplace but can impact the amount received for drawbacks. Fortunately, there are various ways to address current mistakes and prevent them from happening in the first place.
Implement Regular and Thorough Record Keeping
Keeping good records in supply chain management provides a clear, organized account of transactions, inventory, and logistics. You should review your record-keeping process regularly and thoroughly. JMR offers software solutions to ensure your data is accurate and readily available for filing drawback claims.
Understand and Monitor Eligibility Criteria
You must take time to understand drawback eligibility criteria. Because regulations are ever-changing, monitoring requirements for updates that may affect your eligibility is essential. At JMR, it’s our job to help you understand eligibility and maximize your program.
Train Staff and Stay Updated on the Process
Businesses should invest in staff training and establish efficient internal procedures to address the mistake of misunderstanding the duty drawback process. This ensures everything from filing claims to documentation is done correctly to minimize errors and maximize benefits. JMR can help you develop Standard Operating Procedures (SOPs) based on your unique business needs. We outline the process to implement a stable long-term drawback program.
Ensure Precise and Timely Filing of Claims
Organize documents and submit claims on time to avoid filing inadequate claims. Double-check everything before sending claims and regularly review the process to receive full benefits without delays or rejections. JMR can help you understand the deadlines and timelines to ensure timely filing.
Leverage the Services of Experienced Experts
Companies should seek guidance from customs brokers or consultants specializing in drawbacks. Experts can help prepare claims and navigate complex regulations to reduce errors and maximize duty recovery. JMR is a duty drawback specialist that can do just that. We file drawback claims and conduct extensive audits to ensure compliance.
Conclusion
Companies that import products, whether finished or in part, for export out of the U.S. face numerous challenges with their data and processes. Insufficient record keeping, overlooked eligibility criteria, misunderstanding the process, inadequate claims filing, and failing to seek expert advice are all common drawback mistakes.
These can be avoided by maintaining regular and thorough records, understanding and monitoring eligibility criteria, training staff, ensuring precise and timely claims filing, and leveraging experienced experts.
The importance of a professional and experienced Customs House Brokerage for successful duty drawback processes can’t be expressed enough. Experts like JMR can help you avoid mistakes and maximize the drawbacks for which you’re eligible.
Contact a drawback specialist at J.M. Rodgers today for assistance with your duty drawback program.
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