Duty Drawback: A 101 Guide - Ascent Global Logistics

Duty Drawback: A 101 Guide

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Duty drawback is a Customs and Border Protection (CBP) program where companies are refunded up to 99% of customs duties, taxes and/or fees that were previously levied upon imported merchandise, and of internal revenue taxes paid on domestic alcohol as well as other excise taxes. Duty drawback, however, is one of the most complicated commercial programs managed by CBP. Thus, it is important to have a clear understanding of all facets of how the program works and develop a relationship with a reputable drawback broker, who can help you navigate the rules and international laws.

Do You Qualify for a Drawback?

To qualify, you must meet one or more of the following
criteria, as noted by the U.S. Department of Commerce:

  • An importer who exports/destroys
  • An importer who manufactures and exports/destroys
  • A purchaser of imported merchandise
    who manufactures and exports/destroys
  • An exporter who purchases a product
    made from imported merchandise
  • An exporter who purchases imported duty-paid merchandise that is not used in the United States
  • An exporter of record with drawback rights

Common Duties Subject to Drawback

  1. All ordinary customs duties
  2. Voluntary tender
  3. Duties paid as part of a prior disclosure
  4. Marking duties
  5. Internal revenue taxes
  6. MPF (merchandise processing fees)
  7. HMF (harbor maintenance fees)
  8. 1592(d) duties
  9. Section 301 duties for Chinese goods
    (subject to change)

Duties NOT Subject to Drawback

  • Anti-dumping and countervailing duties
  • Limitations on over-quota agricultural
  • Duties may not be refunded of flour or by-products produced from imported wheat
  • Section 232 duties imposed on any
    aluminum or steel articles

What Are the Most Popular Types of Drawbacks?

Unused Merchandise Drawback: Imported merchandise that was not used in the United States before it was exported or destroyed under CBP supervision. There are limited operations that can be performed on the merchandise while in the United States (i.e. repacking and testing).

  • Direct Identification: Imported, unused merchandise must be identifiable by serial number, lot number or approved accounting method.
  • Substitution: Substituted merchandise classified under the
    same eight-digit HTSUS (Harmonized Tariff Schedule of the United States) as the designated imported merchandise. Limitations apply if the eight-digit HTSUS starts with the term “other.”
    There are also special lesser of rules that apply to the allowable refund.

Manufacturing: Imported articles used in manufacturing or production that are later exported or destroyed under CBP supervision. Drawback rulings are required for eligibility.

  • Direct Identification: Merchandise or articles must be identified by serial number or approved accounting method.
  • Substitution: Substituted merchandise used in manufacturing or production must be classified under the same eight-digit HTSUS as the designated imported merchandise. Special lesser of rules for allowable refund do apply.

Rejected Merchandise Drawback: Merchandise that is defective, does not meet specific standards or is shipped without consent that is exported back to the overseas manufacturer or destroyed.

It is important to understand the different types of drawbacks as a drawback can only be triggered by a claim. By knowing specific information about your imports and exports and the duty drawback they qualify for, you are more likely to maximize earning potential.

How to Calculate Drawback Potential

Calculating drawback potential will give you a rough estimate of how much earnings potential your company has. Below is an example:

Annual Duty: $10,000,000

Annual Export Sales: 20%

$10,000,000 x 20% = $2,000,000

$2,000,000 x 99% = $1,980,000

Multiply your estimated annual drawback eligibility duty paid by the percentage of sales that are exported annually; multiply by 99%. 

Note: This is only an estimate. The best way to be sure you are maximizing your duty drawback claims is to get an expert opinion.

Your Solution to Duty Drawback

Billions of dollars in duty drawback go unclaimed each year. Why? Many exporters are unaware of their eligibility or simply don’t have the right resources to file a drawback claim correctly and efficiently. That’s where Ascent Global Logistics can help. The team at Ascent Global Logistics is ready to help you navigate these complexities by developing an understanding of your process and determining if you are eligible for refunds.

Ascent offers services that handle any type of drawback to make sure clients receive any available duty back without the hassle. Get an expert opinion and build your custom duty drawback solution today with Ascent Global Logistics.


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