Excise Tax Refunds Under Duty Drawback

Updated: February 26, 2026

Editor’s Note: This article has been updated to reflect post TFTEA regulatory interpretation and subsequent Court of International Trade decisions affecting excise tax drawback.

Duty drawback has long allowed importers and exporters to recover eligible duties paid on imported merchandise that is later exported or destroyed. However, duties are not the only amounts that may qualify for refund. In certain circumstances, excise tax refunds may also be available under the drawback statute.

Understanding how excise taxes interact with duty drawback is critical for companies operating in regulated industries such as alcohol, fuel, and tobacco.

What Is an Excise Tax?

An excise tax is a federal tax imposed on specific goods, activities, or transactions. Unlike customs duties, excise taxes are generally not collected by U.S. Customs and Border Protection as part of the import entry process. Instead, they are administered through divisions of the U.S. Treasury and typically apply to products such as:

• Alcohol
• Tobacco
• Fuel and petroleum products
• Certain firearms and other regulated goods

Excise taxes differ from tariffs and customs duties in that they are indirect taxes applied to particular categories of goods or activities rather than assessed broadly on imported merchandise based on classification and value.

Are Excise Taxes Eligible for Drawback?

The drawback statute permits refunds of duties, taxes, and certain fees imposed under federal law upon the entry or importation of merchandise into the United States. In qualifying situations, this includes certain excise taxes paid on imported goods that are later exported or destroyed.

While traditional duty drawback claims are filed with U.S. Customs and Border Protection, excise tax refund claims may be processed through the appropriate Treasury division, depending on the tax at issue. The procedural pathway differs, but the legal basis for recovery stems from the same drawback framework under 19 U.S.C. §1313.

The “Double Drawback” Controversy

Historically, excise tax drawback operated in a relatively stable manner across industries such as alcohol. However, following a 2004 interpretation by the San Francisco drawback office, a practice informally known as “double drawback” gained traction.

Under that interpretation, a claimant could receive a refund of excise taxes on exported merchandise even if the exported goods had been withdrawn from bonded warehouses and no excise tax had actually been paid on those exported goods. In effect, companies could avoid paying the excise tax and still receive a refund tied to the imported merchandise.

This interpretation created significant controversy and prompted legislative and regulatory scrutiny.

TFTEA and the Limitation on Excise Tax Drawback

With the enactment of the Trade Facilitation and Trade Enforcement Act, Treasury sought to curtail the double drawback practice. The revised regulatory interpretation limited excise tax drawback to the lesser of:

• The amount of excise tax paid on the designated import, or
• The amount of excise tax paid on the substituted export

Under this approach, if no excise tax had been paid on the exported goods, the claimant could not receive a refund exceeding the amount of tax actually paid on the export side. This “lesser of the two” calculation significantly restricted refund opportunities in certain scenarios.

The 2020 Court of International Trade Decision

On January 24, 2020, the U.S. Court of International Trade ruled against Customs and in favor of the trade community in litigation addressing this limitation. The court concluded that the statutory language did not support Treasury’s restrictive interpretation. The decision was subsequently affirmed on appeal.

As a result, where excise taxes were paid upon importation and all other drawback requirements are satisfied, claimants are entitled to recover those taxes without application of a lesser of the two calculation tied to export side payments.

For companies subject to excise taxes, this ruling materially affects refund strategy and may reopen opportunities that were previously viewed as restricted.

Compliance Considerations for Excise Tax Refunds

Excise tax drawback claims remain complex and highly regulated. Companies must ensure:

• Proper documentation of excise tax payments at import
• Accurate linkage between imported merchandise and exported or destroyed goods
• Compliance with applicable Treasury and CBP procedural requirements
• Alignment with current regulatory interpretations and case law

Given the intersection of customs law and Treasury-administered tax programs, excise tax refunds require coordinated compliance oversight.

Is Your Company Eligible for Excise Tax Refunds?

If your company imports merchandise subject to federal excise tax and later exports or destroys that merchandise, you may have recoverable tax exposure.

A structured review of your import data, excise tax payments, and export activity can determine eligibility and quantify potential refunds. J.M. Rodgers works with companies in regulated industries to evaluate excise tax recovery opportunities within the broader duty drawback framework.

If you would like to discuss how J.M. Rodgers can assist with excise tax refunds and duty drawback strategy, contact our team to begin a formal assessment.