In this article
Talk to our experts- Duty drawback
- Duty drawback is a refund of the duties, taxes and fees paid on imported merchandise when that merchandise, or an article manufactured from it, is later exported or destroyed under customs supervision. In the United States it is governed by 19 U.S.C. 1313 and the US Customs and Border Protection (CBP) regulations in 19 CFR part 190.
Also called: Drawback
How it works
Duty drawback is a customs refund of duties paid on imported goods when those goods, articles made from them, or in some cases substituted merchandise are exported or destroyed. Under 19 CFR 190.3, drawback is allowable on duties, taxes and fees imposed under federal law upon entry or importation, including:
- Ordinary customs duties
- Marking duties under 19 U.S.C. 1304(c)
- Internal revenue taxes which attach upon importation
- Merchandise processing fees
- Harbor maintenance taxes
Drawback is not allowable on antidumping and countervailing duties.
For unused merchandise and for manufactured articles, 19 U.S.C. 1313(l) says the regulations provide for a refund equal to 99 percent of the duties, taxes and fees paid, with a "lesser of" calculation where merchandise is substituted.
A drawback entry must be filed not later than 5 years after the date the merchandise was imported, and claims not completed within that period are considered abandoned. No extension is granted unless CBP was responsible for the late filing, with one exception: CBP may extend the time by up to 18 months for a claimant who could not file because of an event the President declared a major disaster, if the extension is requested in time. Claims filed on and after February 24, 2018 must be filed electronically.
This is general information, not legal or customs advice.
Types of duty drawback
19 U.S.C. 1313 sets out several kinds of drawback. Four of them:
- Manufacturing drawback, 1313(a). Articles manufactured or produced in the United States with imported merchandise are exported or destroyed under customs supervision, and have not been used before then.
- Manufacturing drawback with substitution, 1313(b). Imported duty-paid merchandise, or merchandise classifiable under the same 8-digit HTS subheading, is used in manufacture within 5 years of importation, and the articles are exported or destroyed, even if none of the imported merchandise was actually used in them.
- Rejected merchandise drawback, 1313(c). Merchandise that did not conform to sample or specifications, was shipped without the consignee's consent, was defective at the time of importation, or was sold at retail and then returned to and accepted by the importer, is exported or destroyed under CBP supervision within 5 years.
- Unused merchandise drawback, 1313(j). Imported merchandise is exported or destroyed under customs supervision within the 5-year period and is not used in the United States before then. Under 1313(j)(1), the exporter or destroyer has the right to claim, but may endorse it to the importer or any intermediate party. Under 1313(j)(2), and subject to the conditions in that section, other merchandise classifiable under the same 8-digit HTS subheading can be substituted.
Duty drawback vs. bonded warehouse
Drawback refunds duties already paid. A bonded warehouse avoids paying them in the first place for goods that leave the country: under 19 U.S.C. 1557, merchandise stored there may be withdrawn for exportation without the payment of duties.
Example
A distributor imports 1,000 units and pays duties, taxes and fees of $4,000 on that entry summary line, or $4,000 / 1,000 = $4.00 a unit. Two years later, before any use in the United States, it exports 250 of the units to a foreign customer.
The duties, taxes and fees on those units are 250 x $4.00 = $1,000. An unused merchandise drawback claim at 99 percent returns $1,000 x 0.99 = $990. The claim must be filed within 5 years of the import date. The statute lets the regulations base the claim on the average per unit amount reported on the entry summary line item, as here.
On Shopify
For each physical product you ship internationally, Shopify's product details page lets you save the Harmonized System (HS) tariff code, which provides customs with information so that the correct tariffs can be applied to the order, and the country or region of origin, where the product was manufactured or assembled. For rejected merchandise drawback with substitution, 19 CFR 190.2 requires the same 8-digit HTSUS subheading and the same specific product identifier, such as part number, SKU or product code.
How Uncap helps
Uncap's Syspro integration page asks teams whose Syspro setup uses blanket orders, batch and serial tracking or landed costs to bring an example to scoping, because each one changes what the storefront should show and when.
Sources
Frequently asked questions
What is duty drawback in simple words?
Duty drawback is a refund of the import duties, taxes and fees paid on goods that are later exported or destroyed under customs supervision, either unused or after being made into another product. In the United States, 19 U.S.C. 1313 provides for a refund equal to 99 percent of the amounts paid for unused merchandise and manufactured articles, with a "lesser of" limit where goods are substituted.
When can you do a duty drawback?
Under 19 U.S.C. 1313, the merchandise or the articles made from it must be exported or destroyed under customs supervision, generally within 5 years of importation, and the drawback claim must be filed not later than 5 years after the date the merchandise was imported. Claims not completed within that period are considered abandoned.
What duties are not eligible for duty drawback?
Under 19 CFR 190.3, drawback is not allowable on antidumping and countervailing duties. It is also not allowed when the merchandise is an agricultural product paid at the over-quota rate of a tariff-rate quota, except that such products are eligible for unused merchandise drawback under 19 U.S.C. 1313(j)(1).
