Duty Drawback
What Is Duty Drawback
Duty Drawback Basics
“Drawback is the refund, reduction or waiver in whole or in part of customs duties assessed or collected upon importation of an article or materials which are subsequently exported”
U.S. Customs and Border Protection, Source
Duty drawback was the second law passed by the first Congress of the United States in 1789. The purpose of duty drawback is to encourage U.S. manufacturing as well as foreign export sales.
Types of Duty Drawback
- Manufacturing Direct Identification
- Manufacturing Substitution
- USMCA Manufacturing
- Rejected Merchandise and Returns after sold at retail
- Unused Direct Identification
- Unused Substitution
- Petroleum Derivatives
- Packaging Material
- Destruction
- Drawback Sharing
- Petroleum Derivatives Drawback
- Unused Substitution Drawback
Manufacturing Direct Identification Drawback
When duty-paid imported material is used to manufacture a product, which is subsequently exported from the United States, U.S. import duty may be recovered. It is, however, necessary to trace the duty-paid imported material through manufacture and export.
- Refunds of the duty paid on imported merchandise used to manufacture products exported or destroyed within 5 years after importation.
- Import part numbers are matched to the part numbers of the components used in the manufacture of the products.
Learn More About Manufacturing Direct Identification Drawback
Manufacturing Substitution Drawback
When imported duty-paid, duty-free or domestic material of the same kind and quality as the imported duty-paid designated material is used to produce the exported product, U.S. import duty may be recovered. This is true even when none of the designated merchandise may have been used to produce the exported articles.
- Refunds of the duty paid on imported merchandise used to manufacture products exported or destroyed within 5 years after importation.
- Import HTS numbers are matched to the same HTS numbers of the components used in the manufacture of the products.
USMCA Manufacturing Drawback
Refunds of whichever is the lessor between either:
– the duty paid on imported merchandise used to manufacture products exported to Canada or Mexico within 5 years after importation.
– The duty paid to Canada or Mexico Customs for product exported there.
Claims filed separate from other drawback claims
Rejected Merchandise Drawback & Goods Returned After Sold At Retail
Refunds of duty paid on goods rejected by importer within 5 years after importation for either:
– not conforming to sample or specifications
– shipped without the consent of the consignee
– for being defective
Goods Returned after sold at Retail
– Refunds of duty paid on goods sold for retail and then ultimately returned:
– Match is based on both part number and HTS number
– Matching imports are limited to 1 year prior to export date
Unused Merchandise Direct Identification Drawback
When material is imported duty-paid and subsequently exported unused, U.S. import duty may be recovered. It is, however, necessary to trace the duty-paid imported material through to export.
Unused Merchandise Substitution Drawback
When unused material, which is commercially interchangeable with the imported duty-paid material, is exported, U.S. import duty may be recovered. It is important to note that, under the provision, the imported duty paid material does not have to be exported if the substituted merchandise is.
Common Types of Duty Drawback
Unused Direct Identification – 1313j1
- Refunds of duty paid on goods directly matched by part number to the export within 5 years after importation by either:
- Direct Match by Serial Number
- Match using Customs an approved accounting methods
- Refund calculated based on Invoice quantity and invoice value
- May claim on exports to
- Canada & Mexico.
- Chile
- American Virgin Islands (St. John, St. Thomas, St. Croix)
- Samoa
- Wake Island
- Midway Island
- Kingman Reef
- Guam
- Canton Island
- Edinburgh Island
- Johnson Island
- Palmyra Island
Unused Substitution – 1313j2
- Refunds of duty paid on goods matched by HTS number to the export within 5 years after importation.
- Export Value per unit is a factor in refund calculation.
Petroleum Derivatives – 1313p
- Refunds of duty paid on goods matched by specific HTS numbers to the export within 5 years after importation.
- Matching imports are limited to 6 months prior to the export date.
Sharing Drawback
- Refunds of your excess unclaimed imports and excess unclaimed exports.
- Please contact JMR to discuss this further.
Manufacturing Drawback
Manufacturing Direct Identification – 1313a
- Refunds of the duty paid on imported merchandise used to manufacture products exported or destroyed within 5 years after importation.
- Import part numbers are matched to the part numbers of the components used in the manufacture of the products.
Manufacturing Substitution
- Refunds of the duty paid on imported merchandise used to manufacture products exported or destroyed within 5 years after importation.
- Import HTS numbers are matched to the same HTS numbers of the components used in the manufacture of the products.
USMCA Manufacturing Drawback.
- Refunds of whichever is the lessor between either:
- the duty paid on imported merchandise used to manufacture products exported to Canada or Mexico within 5 years after importation.
- The duty paid to Canada or Mexico Customs for product exported there.
- Claims filed separate from other drawback claims
Rejected Merchandise Drawback
- Refunds of duty paid on goods rejected by importer within 5 years after importation for either:
- not conforming to sample or specifications
- shipped without the consent of the consignee
-
- for being defective
Goods Returned after sold at Retail
- Refunds of duty paid on goods sold for retail and then ultimately returned:
- Match is based on both part number and HTS number
- Matching imports are limited to 1 year prior to export date
Destruction Drawback
- Refunds of duty paid on goods that are completely or partially destroyed
- Customs prior notification of destruction is required
How Our Duty Drawback Experts Can Help
Common Questions About Duty Drawback
More Duty Drawback Frequently Asked Questions
What are the types of duty drawback?
Manufacturing Direct Identification Drawback, Manufacturing Substitution Drawback, Unused Merchandise Direct Identification Drawback, Unused Merchandise Substitution Drawback amongst many others. Talk to our duty drawback specialists in order to find out which type may make sense for your business.
What is a duty drawback evaluation?
The process of identifying the duty drawback opportunity of a firm, including determining the extent of recoverable monies as well as the steps necessary to implement a duty drawback program. Contact J.M. Rodgers Co. today for a drawback evaluation to see if you qualify for duty drawback.
What is a duty drawback program?
The implementation of a professionally managed plan for the purpose of reducing export costs by recovering duty paid on previously imported items on a recurring basis. J.M. Rodgers Co. is a recognized leader in the field of duty drawback. Contact us today so we can develop and manage a custom drawback program that will benefit your company.
What information do I need to provide in order to file a duty drawback claim?
The documentation and applications needed to file a drawback claim vary based on the type of drawback and other factors. Contact J.M. Rodgers Co. today and a duty drawback specialist will work with you to address your unique needs.
How long does it take to get my duty drawback refund?
Generally, the duty drawback process can take between four and eight months from startup to receiving the first check. This depends on a number of factors including import and export transaction complexity, the availability of electronic records, and the number of parties involved. Accelerated payment is also available in certain situations. Contact a J.M. Rodgers drawback specialist to find out if you qualify.
How long do I have to file a drawback claim?
The drawback claim must be filed and completed within three years after exportation of the drawback product. J.M. Rodgers Co. can manage the duty drawback process on your company’s behalf including the handling and timing of drawback claims. Contact us today to learn more.
If I don’t import or export the goods, can I still recover drawback?
Only the importer of record can recover duties through duty drawback.
What if I am not the IOR/EOR but the goods belong to me? Can rights be assigned?
J.M. Rodgers can speak with the IOR and EOR to set up a drawback program through multiple avenues.
Are Section 301 tariffs duty drawback eligible?
Certain sections of the 301 tariffs are eligible for refund. Contact us today to learn more.
What is a waiver of prior notice?
A waiver of the prior notice requirement of export intent that companies who re-export their unused goods must provide to Customs. Once a waiver is obtained, the claimant can export its goods at will and without notice to Customs.
