Duty Drawback Basics
Duty drawback is a refund of 99% of the duties paid on goods imported into the United States that are subsequently exported. The drawback claimant can either be an importer, manufacturer or exporter, provided the proper authorization and documentation is filed with the U.S. Customs Service.
“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
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.
The Main Types of Duty 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.
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.
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.
Claimants under manufacturing or unused merchandise drawback may, if approved, file retroactively, provided that the drawback claims are filed within three years of the date of export. For many companies, this initial recovery of duty can be quite substantial.
Have additional questions about duty drawback?
Perhaps you’ll find the answer here in our Duty Drawback Frequently Asked Questions!