Benefiting from Duty Drawback

Benefiting from Duty Drawback: What U.S. Businesses Need to Know

Duty Drawback is a U.S. Federal government program that allows businesses to claim a refund of import duties paid on exported goods, or on the materials used in the manufacture of exported goods. Even if the only foreign market you sell in is Canada or Mexico, duty drawback is an option for you. The program is designed to increase American competitiveness in the global marketplace and provides a substantial savings opportunity.

Types of Duty Drawback

There are three main types of duty drawback: Unused Merchandise, Manufacturing and Rejected Merchandise.

Unused Merchandise Drawback: for imported goods which are exported without having undergone any processing or manufacturing in the United States.

Manufacturing Drawback: for imported goods used to produce a product that is subsequently exported.

Rejected Merchandise Drawback: for imported goods which are either exported without being used or exported after being used but not as originally intended.

Who qualifies for a Drawback?

Your business qualifies if it is:

  • An exporter who purchases imported duty-paid merchandise and sells it in its original condition to a foreign buyer.
  • An exporter who purchases a product made from imported merchandise.
  • An importer who exports imported goods.
  • An importer who manufactures exported goods with imported content.
  • A manufacturer who uses imported merchandise in its manufacturing process and who exports or destroys the final product.

How much can I recover?

Businesses can recover 99% of the duty and taxes paid on an import. If your business is impacted by the high duties on items from China, refunds of the Trump-era Section 301 duties are also permitted. The only types of duties that can’t be recouped are anti-dumping and countervailing duties. Exports to any country, including Mexico and Canada, can be included in your drawback program.

The law allows for a five-year look-back from the date of importation. That means that in the first year of filing you may receive a financial windfall. For example, if your annual recovery is $100,000 and in Y1 of your program you file claims on the historical imports you can expect to receive $400,000-$500,000 in refunds.

How can a business get started?

A company new to duty drawbacks needs to apply to U.S. Customs for drawback privileges. The duty drawback application process can be complex, so it’s important to do your research and seek professional advice and assistance.

The application will describe the type of drawback program privileges being requested, and typically includes an application for Accelerated Payment and Waivers for both prior and future notice of exportation. U.S. Customs will review the Duty Drawback Privileges package within 90 days of receipt, either approving the request or asking for additional information. So, once an application is submitted, it can take 3 to 6 months for approval.

Claim Preparation and Filing

The most important part of filing drawback entries is collecting and validating your company’s import and export data. Once that has been done, a drawback claim is prepared and transmitted electronically to CBP.

There are three possibilities for drawback filing, each with its pros and cons.

  1. Work with a drawback specialist provider who will submit your application and all claims. Drawback specialists have deep experience in this area and can be a good choice for handling the most complex types of drawback claims. Drawback specialists are paid with a percentage of your duty recovery.
  2. Hire your customs broker to file a duty drawback claim on your behalf. This can be a good option if you have a low volume of entries, infrequent exports, or uncomplicated claims. A customs broker may charge either a fixed fee or a percentage of your duty recovery.
  3. Self-file your claim, using either a software service bureau or your company’s own data connection to CBP. This is a good option if you want to maximize the value of your recovery and have a consistent stream of import and export activity.

A consultant can work with you to evaluate the best option for your situation and help you set up your drawback program.

How long does it take to get refunds?

When you apply for drawback privileges, you’ll want to include a request for Accelerated Payment Privileges. Once CBP approves your application, government refund checks will come as quickly as 4 to 6 weeks after claims submission.

Tips and Best Practices

Here are some tips and best practices for maximizing your company’s drawback potential.

  1. Involve company stakeholders in your drawback planning and sell the value of the opportunity internally. Refunds add to the bottom line and may allow your company to sell more product, or to sell in new markets.
  2. Keep detailed records of all imported and exported goods.
  3. Regularly review your import and export processes to identify new opportunities for duty drawback.

Don’t miss out on the opportunity to benefit from duty drawback. Take action today by researching the program and consulting with a knowledgeable industry professional to determine your eligibility and explore your options. With the right approach, you can reduce costs, increase competitiveness, and achieve greater success in the global marketplace. Contact us today to learn more about how we can assist you in achieving your goals through duty drawback.

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