Understanding the Different Types of Duty Drawback
The U.S. duty drawback program allows businesses to recover up to 99% of duties, taxes, and certain fees paid on imported merchandise when those goods are later exported or destroyed.
Administered by U.S. Customs and Border Protection (CBP), drawback claims are governed primarily by 19 U.S.C. §1313 and fall into several statutory categories depending on how imported merchandise is handled before export.
Understanding the different types of duty drawback is the first step in determining whether your company may qualify for duty refunds.
Most drawback claims fall into one of the following categories:
- Manufacturing Drawback
- Unused Merchandise Drawback
- Rejected Merchandise Drawback
In addition, several specialized drawback programs apply to certain industries or circumstances.
Manufacturing Drawback
Manufacturing drawback applies when imported merchandise or duty-paid materials are used to manufacture products that are later exported or destroyed.
Defined under 19 U.S.C. §1313(a) and §1313(b), this program allows companies to recover duties paid on imported inputs used in the production of exported goods.
Manufacturing drawback may be claimed using either:
Direct Identification – when the specific imported materials used in production can be traced to the exported product.
Substitution – when commercially interchangeable imported and domestic materials are used interchangeably in manufacturing.
Manufacturing drawback is widely used by companies in industries such as automotive, aerospace, electronics, and industrial manufacturing.
Learn more about Manufacturing Drawback.
Unused Merchandise Drawback
Unused merchandise drawback applies when imported merchandise is exported or destroyed without being used in the United States.
This program is defined under 19 U.S.C. §1313(j) and is commonly used by distributors, retailers, and companies that manage international inventory movements.
Two claim methods are available:
Direct Identification – when the exact imported merchandise is exported.
Substitution – when commercially interchangeable merchandise is exported instead of the imported item.
Unused merchandise drawback is sometimes referred to as “same condition drawback” because the merchandise must remain unused prior to export.
Learn more about Unused Merchandise Drawback.
Rejected Merchandise Drawback
Rejected merchandise drawback allows companies to recover duties when imported goods are rejected because they are defective, not as ordered, or otherwise unsuitable for their intended purpose.
Defined under 19 U.S.C. §1313(c), this program applies when rejected merchandise is exported or destroyed under Customs supervision.
Common qualifying scenarios include:
- merchandise that fails quality inspections
- goods shipped in error by a supplier
- damaged or defective products
- merchandise returned after retail sale
Learn more about Rejected Merchandise Drawback.
Destruction Drawback
Destruction drawback allows companies to recover duties on imported merchandise that is destroyed under U.S. Customs supervision rather than exported.
This type of drawback may apply when products cannot legally be sold in the United States or must be scrapped due to safety, regulatory, or commercial reasons.
Learn more about Destruction Drawback.
Petroleum Derivatives Drawback
Petroleum derivatives drawback applies to certain petroleum-based products exported after importation of qualifying crude oil or related materials.
Defined under 19 U.S.C. §1313(p), this specialized drawback program is commonly used by companies in the petroleum and energy sectors.
Learn more about Petroleum Derivatives Drawback.
How to Determine Which Duty Drawback Program Applies
Determining the correct drawback program depends on several factors, including:
- whether imported merchandise is used in manufacturing
- whether goods are exported unused
- whether products are rejected due to defects or nonconformance
- whether merchandise is destroyed under Customs supervision
- the availability of documentation linking imports and exports
Companies first need to understand how duty drawback works before determining which program applies to their transactions.
Because drawback claims require detailed documentation and compliance with U.S. Customs and Border Protection regulations, many companies work with experienced providers of duty drawback services to identify eligibility and prepare claims.
Explore Your Duty Drawback Opportunities
Each drawback program has specific eligibility requirements and documentation standards. Understanding the different types of duty drawback can help businesses identify opportunities to recover duties and reduce supply chain costs.
If your company imports and exports goods, you may qualify for significant duty refunds through the U.S. duty drawback program.
Complete the Duty Drawback Eligibility Form below to request a complimentary drawback review from our specialists.
Once submitted, a member of our duty drawback team will review your information and follow up to discuss potential drawback opportunities.