Unused Merchandise Drawback

Unused Merchandise Drawback is a type of duty drawback that allows importers to recover up to 99 percent of certain duties, taxes, and fees paid on imported merchandise that is subsequently exported or destroyed without being used in the United States.

Under 19 U.S.C. § 1313(j), unused merchandise drawback applies when the imported goods remain unused prior to exportation or destruction. “Unused” generally means the merchandise has not been manufactured, processed, or otherwise advanced in value or improved in condition while in the United States. Limited activities such as inspection, testing, repackaging, or relabeling may be permitted, provided they do not constitute use as defined by Customs and Border Protection.

There are two primary categories of unused merchandise drawback:

Direct Identification Unused Merchandise Drawback
This method requires the exporter to directly identify the specific imported merchandise that is exported or destroyed. Documentation must trace the exported goods back to the original import entry.

Substitution Unused Merchandise Drawback
This method allows drawback based on commercially interchangeable merchandise. The exported merchandise does not need to be the exact same item imported, but it must meet the statutory standard for commercial interchangeability as determined by CBP.

Key requirements include:

• The export or destruction must generally occur within five years of the date of import
• The claimant must have proper documentation to establish import, export, and non-use
• The claimant must have the right to claim drawback, either as the importer, exporter, or through proper assignment

Unused merchandise drawback is commonly utilized by distributors, wholesalers, and companies that import goods for resale and later export excess inventory or returned products. Proper compliance, documentation control, and audit-ready procedures are essential to support drawback claims.