THE A-Z OF DUTY DRAWBACK
Duty Drawback Glossary
Summary of the actual production records of the manufacturer. When preparing a manufacturing drawback claim, a claimant can either choose the abstract method, which requires the use of actual production records, or the schedule method, which essentially provides a standard bill of material listing for the exported articles. Any component part manufacturing operation typically uses a bill of materials schedule when preparing its claims, while a manufacturing operation with significant variances from production run to production run (certain petrochemical processes for example).
Various approved methodologies used to match export transactions with designated import transactions for drawback purposes. Approved drawback accounting methods are used only for the purpose of complying with the direct identification requirements for drawback filed under 1313(j)(1) or 1313(a). A claimant’s selected accounting method does not actually need to reflect their actual accounting method utilized either for inventory or federal income tax purposes.
An outside entity that performs all, or a portion of, the manufacture process on behalf of the drawback claimant. By definition, the agent does not take title of the merchandise and only adds value during the manufacturing process.
Certificate of Delivery
Customs Form 7552. Delivery Certificate for Purposes of Drawback, summarizing information contained in original documents, establishing: The transfer from one party to another; and the identity of such merchandise or article as being that to which a potential drawback exists; and, the assignment of drawback rights for the merchandise or article transferred from the transferor to the transferee, commonly referred to as a “third-party” drawback transaction. The certificate of delivery transfers the potential drawback associated with a specific import transaction from the importer of record to another commercial entity that purchased the imported merchandise.
Certificate of Manufacture and Delivery
Customs Form 7552, Delivery certificate for Purposes of Drawback, summarizing information contained in original documents, establishing: The transfer of an article manufactured or processed from one party to another; and The identity of such article as being that to which a potential right to drawback exists; and the assignment of drawback rights for the article transferred from the transferor to the transferee.
Commercially Interchangeable Merchandise
Merchandise that is the same for the purpose of drawback under the provisions of 1313(j)(2). Customs shall evaluate critical properties of substituted merchandise including but not limited to part number, classification, industry specification, and HTS number.
Either eligible imported duty-paid merchandise or drawback products selected by the drawback claimant as the basis for drawback; or qualified articles selected by the claimant as the basis for drawback. Simply put, imports selected for inclusion on a drawback entry.
Complete destruction of articles or merchandise to the extent that they have no commercial value.
Direct Identification Drawback
Drawback on imported merchandise used to manufacture or produce an article which is either exported or destroyed without having been used in the United States authorized under 1313(j)(1) or 1313(a). Direct ID is a methodology of matching exports to designated imports exactly, either using lot number or serial number tracing, or through the use of an acceptable accounting method (FIFO, LIFO, LO to HI, etc.)
The refund or remission, in whole or part, of customs duty, fee, or internal revenue tax which was imposed on imported merchandise at time of importation, and the refund of internal revenue taxes paid on domestic alcohol. Destruction, transfer to an FTZ under zone-restricted status, or most commonly exportation triggers the opportunity for the refund of import duties via the drawback provision of USC 1313.
Drawback entry and required electronic data elements which together constitute the request for drawback payment.
The combination of required Customs forms, documents, and summarized reports containing export, import, and production information (if applicable) for the merchandise on which drawback is being claimed. Drawback entries are filed on Customs Form 7551.
A finished or partially finished product manufactured in the United States that carries with it the potential for drawback filed under the provisions of manufacturing drawback.
The severance of goods from the mass of goods belonging to this country, with the intention of uniting them with the mass of goods belonging to some foreign country. Or, goods admitted into a foreign trade zone under zone-restricted status, or are laden upon qualifying aircraft or vessel.
That person who, as the principal party of interest in the export transaction, has the power and responsibility for determining and controlling the sending of the items out of the United States.
Manufacture or Production
A process, including but not limited to, an assembly, by which merchandise is made into a new and different article having a distinct name, character, or use; or is made for a particular use even though it does not meet new and different article definition.
A manufacture process resulting in multiple products produced from the same raw materials. Typically, this term is associated with the production of petrochemicals or products with similar manufacture process. The refining of a barrel of crude oil produces many products including gasoline, jet fuel, motor oil, etc. The drawback associated with each product must be apportioned according to its relative value as compared against the other products, i.e. higher value finished products receive a greater portion of the duty drawback associated with the imported crude oil.
Includes, but is not limited to, statements, declarations, documents, and electronically generated or machine readable data maintained in support of a drawback entry.
The value of a product divided by the total value of all products which are necessarily manufactured or produced concurrently in the same operation. Relative value is based on market value, or other value approved by Customs, of each such product determined as of the time it is first separated in the manufacturing or production process. Market value is generally measured by the selling price, not including any packaging, transportation, or identifiable costs, which accrue after the product itself is processed. Additionally, MPF drawback is assigned to each line on an individual import invoice according to its value, relative to the other lines on an invoice.
A document filed with Customs showing the quantity of imported or substituted merchandise used in or appearing in each article exported or destroyed. The schedule method of determining the claim quantity typically utilizes a factor that can be applied against numerous exports. Example: an exported cell phone bill of materials that lists (1) battery, (1) motor, (12) integrated circuits, etc. would be applied to the exported articles (a cell phone) to determine the part number and quantity of components to be claimed.
Specific Manufacturing Drawback Ruling
A letter of approval issued by Customs Headquarters in response to a drawback application by a manufacturer or producer for a ruling on a manufacturing or production operation specific to the claimant’s operation. Specific rulings are issued to one claimant where general rulings apply to multiple claimants.
1. Manufacturing Drawback: Either imported duty paid, duty free, or domestic raw materials used in the production of an exported finished product. Under manufacturing substitution drawback, the duty paid import and the components used in the production of the export only need to fall within the same 8 digit Harmonize Tariff Schedule Number to be considered substitutable for drawback purposes.
2. Unused Drawback: The merchandise that is exported that falls within the same 8 digit Harmonized tariff schedule number as the duty paid import designated for drawback.
Trade Facilitation and Enforcement Act of 2015 (TFTEA Drawback)
The most recent amendment to the drawback law designed to simplify and expand the drawback program. The TFTEA drawback law amendment was the culmination of a 15 year process between the drawback trade community and Customs and Border Protection to make the drawback program easier to utilize by the drawback community and reduce the administrative resources required of Customs.