Duty Drawback Refunds

The concept of “drawback” allows for a refund of duty paid on imported merchandise that is subsequently exported from the United States. The purpose of allowing drawback refunds is to expand United States export activity, that in turns fuels economic expansion and domestic job growth. This is accomplished by allowing the importer or exporter to recover 99% of the customs duties paid on the imported article, once the imported article or a “commercially interchangeable” domestic article (the concept of drawback substitution) is exported from the United States.

Drawback law allows for duty drawback refunds under these primary provisions:

Manufacturing Drawback: Drawback on raw materials and component parts used to make a new unique good. Production must result in a product with either a new name, character, or use.

Unused Merchandise Drawback: Drawback on imported materials or finished products exported in essentially the same condition. This provision allows for an extensive list of incidental operations, such as testing, cleaning, and painting. Essentially any value-added process short of a manufacturer, as defined above, is allowable under unused merchandise drawback. However, the merchandise cannot be used in the United States for its intended purpose prior to exportation.

Rejected Merchandise Drawback: Drawback on imported materials that do not meet specifications at the time of importation or are shipped without the consent of the consignee. The imported merchandise can be either returned to the vendor or destroyed under Customs supervision and qualify for drawback. This provision does allow for the use of the merchandise in the US.