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What is duty drawback 2017-05-12T18:11:12+00:00

What is duty drawback?

Duty drawback in the United States is defined as the refund of certain duties, internal revenue taxes and certain fees collected upon the importation of goods. The amount of drawback that can be claimed is for 99% of the import duties, taxes, and fees that were paid on merchandise that qualifies for drawback.

The following provides a summary of each of the types of drawback available for claimants in the U.S.:

  • Unused Merchandise Direct Identification – 19 U.S.C. 1313(j)(1): Imported merchandise is unused and exported or destroyed under CBP supervision. Claimant must be able to directly identify the import that is subsequently exported either by a consistent identifier (i.e., serial number or lot number) or through an alternative accounting method. Time limit between import date and export date must be within 3 years.
  • Unused Merchandise Substitution – 19 U.S.C. 1313(j)(2): Merchandise that is commercially interchangeable with the imported merchandise is exported or destroyed under CBP supervision and at the time of exportation/destruction has not been used. Time limit between import date and export date must be within 3 years.
  • Manufacturing Direct Identification – 19 U.S.C. 1313(a): Articles manufactured in the U.S. using imported merchandise that are then exported or destroyed. Time limit between import date and export date must be within 5 years.
  • Manufacturing Substitution – 19 U.S.C. 1313(b): If both imported merchandise and merchandise of the same kind and quality (whether imported or domestic) are used to manufacture articles, some of which are exported or destroyed before use, then drawback is eligible for the duty paid imported merchandise. Time limit between import date and export date must be within 5 years. The imported merchandise must be used within 3 years after receipt, and the exported products must be manufactured within 3 years after the receipt of the designated imported merchandise.
  • Rejected Merchandise – 19 U.S.C. 1313(c): Drawback may be recovered on the duties paid for merchandise that is exported or destroyed because it does not conform to samples or specifications, was shipped without the consent of the consignee, or is determined to be defective as of the time of importation. Goods returned from retail sale can be claimed by designating an import within 1 year before the date of exportation or destruction of the returned goods.
  • Petroleum Derivatives – 19 U.S.C. 1313(p): This type of drawback applies to the HTS numbers listed in the statute. Imports and exports are matched based on the 8-digit classification for qualifying (p) articles. Time limit between entry date and export date must be within 180 days.

For all types of drawback, a claim must be filed within 3 years from the export date of the merchandise. The above time frames will all be affected by the regulatory changes taking place in 2018 as a result of TFTEA. At that time, there will be an all-encompassing 5 year window from date of import to date of filing of claim. Specifications for how drawback will be calculated and claimed will change for certain types of drawback; those changes will be made once the new regulations have been enacted for TFTEA.

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