Duty Drawback; an Untouched Goldmine

A company may be entitled to thousands or more dollars through a Duty Drawback claim and no business, which participates in exporting goods, should lose out on money that is owed to them. Navigating the US Customs Duty Drawback program may seem intimidating at first, but as long as a business has processes in place and has identified the items that are eligible for duty drawback, half of the work is done.

Before taking the leap into duty drawback it is important to know what a drawback is, who can file drawback and when a company can claim drawback.  A drawback is a 99% refund or return of customs duties, Taxes and/or fees collected by Customs at importation. The basic premise is that when a portion of goods or materials imported that are unused, manufactured or destroyed, are exported, they become eligible for 99% collection of the duties that were paid to customs upon importation. It is important to note that the exporter and the importer do not need to be the same company for drawback purposes. It is the U.S. Exporter who has right to claim over any drawbacks regardless if they imported the good. Furthermore, in order to claim drawback, a drawback entry and all relevant documents must be filed within three years of when the material was exported or destroyed.

The next step in understanding drawback is identifying what types of drawback to claim. There are two most commonly used types of drawbacks; Unused and Manufactured. Unused is the most direct type of drawback and is simply an exportation of an imported good that has been unchanged and undamaged.

The other, most commonly used drawback is manufacturing drawback. This works for companies that import parts and integrate parts into a different item which is then exported. To be eligible, the exported item must undergo a tariff shift. Note also that an advanced ruling must be obtained from Customs before manufacturing drawback can be claimed.

Substitution of both used and manufactured goods is another option for enterprising businesses. Substitution drawback allows for the drawback of commercially interchangeable goods independently of the country of origin. Customs included this provision to allow businesses to file drawback without having to maintain separate inventories. [1]

Though seemingly complex, drawback is a great way for businesses to implement savings at the beginning of 2016. If you would like additional information on whether Drawback would be beneficial to your company, or if you have any other Global Trade Compliance matter, please contact Allyn at (239-) 489-9900 or you can email us at sales@allynintl.com. Incorporated in the State of Florida in 1992, Allyn International is a boutique provider of logistics, corporate tax and global trade services. Our in-house Customs team has 6 licensed customs brokers on staff in the US and Europe.

[1] http://www.cbp.gov/sites/default/files/documents/drawback_refund_2.pdf