Duty Drawback

Drawback is the refund of Customs duties, certain Internal Revenue taxes, and certain fees that have been paid to U.S. Customs at the time of importation. The refund is administered after the exportation or destruction of either the imported/substituted product or article that has been manufactured from the imported/substituted product. Drawback is recognized as the most complex commercial program the U.S. Customs Service administers because it involves every facet of Customs business, including both exports and imports.

There are several kinds of drawbacks, the main ones being:

Unused Merchandise:
Imported merchandise is unused and exported or destroyed under Customs supervision. 99 percent of the duties, taxes or fees paid on the merchandise may be recovered as drawback.

Substitution Unused Merchandise:
Merchandise that is commercially interchangeable with imported merchandise upon which duties and taxes were paid and that has not been used, is exported or destroyed under Customs supervision. 99 percent of the duties, taxes or fees paid on the merchandise may be recovered as drawback.

Rejected Merchandise:
Merchandise is exported or destroyed because it does not conform with samples or specifications, or has been shipped without the consent of the consignee, or has been determined to be defective as of the time of importation. 99 percent of the duties which were paid on the merchandise may be recovered as drawback.

Direct Identification Manufacturing: If articles manufactured in the United States with the use of imported merchandise are subsequently exported or destroyed then drawback not exceeding 99 percent of the duties paid on the imported merchandise may be recoverable.

Substitution Manufacturing:
Both imported merchandise and any other merchandise of the same kind and quality are used to manufacture articles, some of which are exported or destroyed before use, then drawback not exceeding 99 percent of the duty which was paid on the imported merchandise may be payable on the exported/destroyed articles.

How to Obtain Drawback

The guidelines for completing a drawback claim are provided in the Customs Regulations, more specifically 19 CFR 191 Subpart E. We can help you with the application process, prepare inventory record and file the claim.

The locations for filing a drawback claim are Boston, Chicago, Houston, Los Angeles, Miami, New Orleans, Newark, and San Francisco.

A drawback entry and all documents necessary to complete a claim generally must be filed within three years after exportation or destruction of the articles.

Export Procedure

Duty Drawback – for Past Exports. Waiver form requirement of prior notice of intent to export must be supported by a direct inventory identification method.

The conditions for identification by accounting method are:

The lots of merchandise must be fungible
Inventory records must establish that the lots so identified as being received into and withdrawn from the same inventory are being used in the ordinary course of business.
All receipts into and all withdrawals from the inventory must be recorded in the accounting record.
Subject to verification by Customs

It must be used without variation for a period of at least one year unless approval is given by Custom for a shorter period.

Waiver of Prior Notice of Intent to Export
You may be eligible for Waiver of Prior Notice under Section 191.91 of the Customs Regulations. The approval is based on the submission of an application and compliance with the regulations.

Claim Period
In the case of unused merchandise drawback, it is necessary to establish that the merchandise was exported or destroyed within three years from the date of import

In the case of rejected merchandise drawback, you must establish that the merchandise was returned to Customs custody within three years after it was originally released from Customs custody.

In the case of manufacturing drawback, you must establish that manufactured articles on which drawback is being claimed were exported within five years from the date of import.

Payment of Drawback Claims

When a claim has been determined to be complete and satisfies all drawback requirements, the drawback amount is verified and the entry liquidated for the refund due. Drawback is payable to the exporter/destroyer unless the right to claim drawback has been transferred to a third party through a Certificate of Delivery and/or Manufacture. Furthermore, the exporter/destroyer must certify that drawback on the particular exportation or destruction will not be assigned to any other party.