Substitution Drawback 

Substitution Drawback, also called Manufacturing Substitution, is the rebate of up to 99% of the duties, taxes, and tariffs paid on imported materials used for manufacturing an export product, even when the imported materials are substituted for domestically made materials of the same kind and quality. 

What Is the Purpose of Substitution Drawback? 

Substitution Drawback helps to encourage domestic manufacturing while simultaneously reimbursing manufacturers for import costs when materials are imported for export purposes. 

Assume that a manufacturer is using a combination of duty-paid imported computer chips and domestically produced computer chips of the same kind to manufacture personal computers for export. That manufacturer is free to claim the duty drawback on all of the computer chips exported in the finished products, even though some or all of the exported chips were produced domestically. 

That is, the manufacturer can use imported computer chips and domestically made computer chips interchangeably and still claim the full duty drawback on all exported items. It is also possible to claim this same duty drawback when export products are destroyed under Customs and Border Protection (CBP) supervision. 

When Can You Claim Substitution Drawback on Exports? 

Like other forms of duty drawback, exporters can claim Substitution Drawback retroactively, but no more than five years after the date of import. 

Additionally, for substituted materials to be considered of the same kind and quality, they must both share the same 8-digit or 10-digit HTS identification number and cannot be categorized in the schedule as “other.”