The Basics of Unused Merchandise Drawback
JM Rodgers specializes in many types of duty drawback, one of which is unused merchandise drawback. Unused merchandise drawback is outlined in subsection (j) of the drawback law 19 U.S.C. 1313(j). If imported merchandise is exported or destroyed under customs supervision within 5 years of import without being used inside the United States, then drawback is available.
Here’s the exact language of the law:
If imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation—
(A) is, before the close of the 5-year period beginning on the date of importation and before the drawback claim is filed—
(i) exported, or
(ii) destroyed under customs supervision; and
(B) is not used within the United States before such exportation or destruction;
then upon such exportation or destruction an amount calculated pursuant to regulations prescribed by the Secretary of the Treasury under subsection (l) shall be refunded as drawback. The exporter (or destroyer) has the right to claim drawback under this paragraph, but may endorse such right to the importer or any intermediate party.
(2) Subject to paragraphs (4), (5), and (6), if there is, with respect to imported merchandise on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation, any other merchandise (whether imported or domestic), that—
(A) is classifiable under the same 8-digit HTS subheading number as such imported merchandise;
(B) is, before the close of the 5-year period beginning on the date of importation of the imported merchandise and before the drawback claim is filed, either exported or destroyed under customs supervision; and
(C) before such exportation or destruction—
(i) is not used within the United States, and
(ii) is in the possession of, including ownership while in bailment, in leased facilities, in transit to, or in any other manner under the operational control of, the party claiming drawback under this paragraph, if that party—
(I) is the importer of the imported merchandise, or
(II) received the imported merchandise, other merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise, or any combination of such imported merchandise and such other merchandise, directly or indirectly from the person who imported and paid any duties, taxes, and fees imposed under Federal law upon importation or entry and due on the imported merchandise (and any such transferred merchandise, regardless of its origin, will be treated as the imported merchandise and any retained merchandise will be treated as domestic merchandise);
then, notwithstanding any other provision of law, upon the exportation or destruction of such other merchandise an amount calculated pursuant to regulations prescribed by the Secretary of the Treasury under subsection (l) shall be refunded as drawback. Notwithstanding subparagraph (A), drawback shall be allowed under this paragraph with respect to wine if the imported wine and the exported wine are of the same color and the price variation between the imported wine and the exported wine does not exceed 50 percent. Transfers of merchandise may be evidenced by business records kept in the normal course of business and no additional certificates of transfer shall be required.
(3) The performing of any operation or combination of operations (including, but not limited to, testing, cleaning, repacking, inspecting, sorting, refurbishing, freezing, blending, repairing, reworking, cutting, slitting, adjusting, replacing components, relabeling, disassembling, and unpacking), not amounting to manufacture or production for drawback purposes under the preceding provisions of this section on—
(A) the imported merchandise itself in cases to which paragraph (1) applies, or
(B) merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise in cases to which paragraph (2) applies,
shall not be treated as a use of that merchandise for purposes of applying paragraph (1)(B) or (2)(C).
(4)
(A) Effective upon the entry into force of the North American Free Trade Agreement, the exportation to a NAFTA country, as defined in section 2(4) of the North American Free Trade Agreement Implementation Act , of merchandise that is fungible with and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (8) of section 203(a) of that Act , shall not constitute an exportation for purposes of paragraph (2).
(B) Beginning on January 1, 2015, the exportation to Chile of merchandise that is fungible with and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (5) of section 203(a) of the United States-Chile Free Trade Agreement Implementation Act, shall not constitute an exportation for purposes of paragraph (2). The preceding sentence shall not be construed to permit the substitution of unused drawback under paragraph (2) of this subsection with respect to merchandise described in paragraph (2) of section 203(a) of the United States-Chile Free Trade Agreement Implementation Act.
(5)
(A) For purposes of paragraph (2) and except as provided in subparagraph (B), merchandise may not be substituted for imported merchandise for drawback purposes based on the 8-digit HTS subheading number if the article description for the 8-digit HTS subheading number under which the imported merchandise is classified begins with the term “other”.
(B) In cases described in subparagraph (A), merchandise may be substituted for imported merchandise for drawback purposes if—
(i) the other merchandise and such imported merchandise are classifiable under the same 10-digit HTS statistical reporting number; and
(ii) the article description for that 10-digit HTS statistical reporting number does not begin with the term “other”.
(6)
(A) For purposes of paragraph (2), a drawback claimant may use the first 8 digits of the 10-digit Schedule B number for merchandise or an article to determine if the merchandise or article is classifiable under the same 8-digit HTS subheading number as the imported merchandise, without regard to whether the Schedule B number corresponds to more than one 8-digit HTS subheading number.
(B) In this paragraph, the term “Schedule B” means the Department of Commerce Schedule B, Statistical Classification of Domestic and Foreign Commodities Exported from the United States.
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