What Is Duty Drawback

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, 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.

  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
    • 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

    1. Refunds of duty paid on goods matched by HTS number to the export within 5 years after importation.
       1. 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.

           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

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                 Common Questions About Duty Drawback

                 : ; How do I calculate the amount of duty drawback I can claim?

                 The amount of duty drawback that can be claimed depends on the type of drawback, the value of the imported goods, the value of the exported goods, and the amount of duties paid upon import. Each drawback type may have its own calculation method, and it is essential to consult the regulations of the country where the claim is being filed.

                 : ; How do I qualify for duty drawback?

                 To qualify for duty drawback, a company must import and export goods that meet the requirements of the specific drawback type, have accurate records of imports and exports, and submit a complete drawback claim to the appropriate government agency within the specified time frame.

                 : ; What are the different types of duty drawback?

                 There are three primary types of duty drawback: manufacturing drawback, unused merchandise drawback, and rejected merchandise drawback. Manufacturing drawback applies to imported goods that are used in manufacturing exported products, unused merchandise drawback applies to imported goods that are re-exported without any changes, and rejected merchandise drawback covers imported goods that are found to be defective or do not meet specifications and are subsequently returned.

                 : ; What is duty drawback?

                 Duty drawback is a refund or rebate of customs duties paid on imported goods that are subsequently re-exported or used in the production of exported goods. It helps to reduce the cost of doing business for companies involved in international trade and promotes global competitiveness.

                 : ; What is the time frame to file a duty drawback claim?

                 The time frame to file a duty drawback claim may vary by jurisdiction, but in many countries, including the United States, a claim must be filed within three years from the date of import or export, depending on the specific drawback provision.

                 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.