News & Press

June 26th 2024

Rogers & Brown

Written By: Beth Morris, VP of Compliance at Rogers and Brown

Can my company benefit from duty drawback? How do I file a duty drawback claim? 

What is Duty Drawback?

Duty drawback allows companies to claim refunds on specific duties, taxes, and fees paid on goods imported into the United States that are subsequently exported, destroyed, or used in producing goods for export.

Duty Drawback remains one of the most overlooked opportunities offered by U.S. Customs.

The first duty drawback program dates back to 1789. It was implemented to create jobs, encourage manufacturing, and encourage companies to export manufactured goods out of the United States.

Over the years, drawback possibilities have expanded, and regulations have been revised. The Trade Facilitation and Trade Enforcement Act (TFTEA) brought about the most recent changes to the drawback regulations. In this article, we will focus on Unused Merchandise Drawback.

What is an Unused Merchandise Drawback?

An unused merchandise drawback allows a claimant to recover specific duties, taxes, and fees paid on imported goods that have been exported or destroyed. The merchandise cannot be used in the United States prior to the exportation or destruction. Certain incidentals are allowed on unused goods. Some examples of these incidentals are cleaning, relabeling, cutting, repacking, sorting, and testing.

There are Two Ways to Identify Your Unused Goods

1. Direct Identification 1313(j)(1): This method requires you to track specific merchandise from when you import it until you export or destroy it using a unique identifier such as a serial number, lot number, batch number, etc. You can also use an approved accounting method. Each approved accounting method has specific criteria that must be met.
2. Substitution 1313(j)(2): This method lets you substitute the imported merchandise with others that fall under the same tariff classification. The substituted and designated merchandise must be classified under the same 8-digit tariff number. If the article description for the tariff number begins with the word “Other,” then the merchandise must be classified under the same 10-digit tariff number, as long as the statistical tariff number does not begin with the word “Other.” The statistical tariff number is the last two digits of the tariff number.

Steps to File a Drawback Claim

1. Notice of Intent: If you are exporting or destroying merchandise just once, you might opt to file a Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on CBP Form 7553 at least five working days before the date of intended return to Customs custody. Customs will notify you within two working days if they would like to examine the merchandise prior to exportation or destruction. Customs can also opt to witness the destruction.
2. One-Time Waiver: If you do not file the CBP Form 7553 prior to your export or destruction, you can file a One-Time Waiver application with Customs. If approved, you can claim past exports that meet the timelines in the regulations. In most cases, this application is good for one-time only.
3. Future Claims: To claim future exports, you can apply for a Waiver of Prior Notice application to Customs. Upon approval, you can claim future exports without having to complete the CBP Form 7553 before the exportation of your merchandise.

Additional Changes to the Drawback Regulations with TFTEA:

1. Claim Period: All drawback claim types have five years from the date of importation to file a claim.
2. Recordkeeping: Supporting drawback records must be maintained for three years from the claim’s liquidation date.
3. Electronic Filing: All claims must be filed electronically in CBP’s Automated Commercial Environment (ACE).

Conclusion

This is a general overview of the requirements for filing an unused merchandise drawback. The duty drawback process can be complex, and the start-up can be time-consuming, but the reward in the end makes it all worthwhile. Please reach out to us if you would like to discuss the drawback further!