Duty Drawback | A Simple Guide

The concept behind duty drawback is simple: importers pay certain duties, taxes, and fees when importing merchandise into the United States—if those articles are then exported or destroyed, claimants can receive a refund (up to 99%) on those duties if the merchandise is eligible for duty drawback.

Those entitled to claim drawback are the exporter or destroyer, or the importer if they are the same party as the exporter (or have been assigned the right to claim drawback).

Want to learn if your company is eligible for the Duty Drawback Program? Contact Shannon Alexander at (502) 380-8400 or salexander@cjinternational.com

Ever since the second Act of Congress in 1789, the United States government has recognized the need for a duty drawback program—according to U.S. Customs and Border Protection, its intent was to create jobs, encourage manufacturing, and encourage exports. Duty drawback has a long history in the United States, demonstrating its clear value to the economy. Approximately 3 billion dollars are available in duty drawback every year. But its long-standing place in U.S. trade law has also given it 231 years to be amended, adjusted, and complicated.

Over the course of two centuries, duty drawback has developed into a notoriously complex program, with a resulting 2.4 billion dollars going unclaimed annually. It is a vastly underutilized program that, though often overlooked, stands to save claimants thousands of dollars.

Primary Types of Drawback

  • Manufacturing Drawback — merchandise used to manufacture an article which is destroyed or exported within 5 years of import                              
  • Unused Merchandise Drawback — unused merchandise exported or destroyed within 5 years of import
  • Rejected Merchandise Drawback — defective or non-conforming merchandise returned to Customs for destruction or exportation within 5 years of import                                          
  • Same Condition Drawback under USMCA — merchandise exported to Canada or Mexico that has not been materially altered

Common Duties Subject to Drawback

  • All “Ordinary Customs duties”
  • Marking duties
  • Internal revenue taxes                                                          
  • Merchandise processing fees where pursuant to 19 U.S.C. 1313 (j)
  • Harbor maintenance taxes where pursuant to 19 U.S.C. 1313 (j)

Common Duties Not Subject to Drawback

  • Merchandise processing fees except as previously stated
  • Harbor maintenance fees except as previously stated
  • Anti-dumping and countervailing duties
  • On agricultural products duty-paid under a tariff-rate quota (with exceptions)

There is a 5-year statutory period for filing duty drawback claims which can be submitted to one of the drawback offices in Chicago, Houston, New York, or San Francisco. Claimants can self-file, but due to the complexity of the claim (as well as necessary software), it is advisable to enlist the service of a licensed customs broker.

C J International is a licensed Customs broker with specialized knowledge of duty drawback and can help guide you in processing all types of drawback entries.

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