Duty drawback is a refund in payments that were initially collected upon importation of foreign-made goods; these payments could have been for Customs duties, sales taxes, or other fees. Customs issues these refunds only when the imported merchandise is either exported or destroyed.
Any article manufactured in the U.S. with imported foreign-made components and is then exported or destroyed may be accepted for duty drawback. This type of drawback allows for 99% of the duty paid on the foreign imported component to be recovered. To do so, you are required to have a pre-authorization, or to have approval from Customs prior to drawback declaration acceptance.
Any article that is manufactured using a mix of imported components or other components of the same type and quality that is in part or in full exported or destroyed may be accepted for duty drawback. This type of drawback allows for recovery of 99% of the duty paid on the foreign imported component. In this case, it doesn’t matter if the actual imported component or the domestic component of the same kind and quality were used in the exported or destroyed product. This provision makes it possible for companies to obtain drawback without having to maintain two separate inventories. This method also requires the pre-authorization or approval from Customs prior to drawback declaration acceptance.
If merchandise is exported or destroyed because it did not conform to original specifications, is defective, or was shipped without consignee consent, 99% of the duty paid on importation can be recovered as drawback.
If imported merchandise is exported or destroyed prior to being used, drawback of 99% of the original duty paid can be recovered. Note that the exportation or destruction of the merchandise must be done under Customs’ supervision for this to apply.
This drawback covers unused merchandise that is considered “commercially interchangeable” with imported merchandise and that is exported or destroyed under Customs’ supervision. This “commercially interchangeable” merchandise would be eligible for drawback of 99% of the duties, taxes, and fees paid on the imported merchandise.
A company can determine whether or not its merchandise is commercially interchangeable in one of three ways:
Drawback entries can be different for each type of drawback as outlined above. Generally claims must be filed within three years after the merchandise is exported or destroyed.
Since filing for drawbacks can be very complicated, it may be advisable to work with a customs drawback broker who is well versed in the process and has the software required to facilitate the process. Given that the process is so labor-intensive in terms of paperwork and action items, the cost to set up and file drawbacks is quite high. Getting an expert to guide you or file on your behalf could be worthwhile.
Duty Drawback - CBP
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