Duty drawback is a refund of up to 99% of the duties paid on goods previously imported into the United States, which are subsequently exported. The scenario is not always this easy. When foreign parts are included in a finished assembly, or raw materials are imported, and then processed to be less weight when exported, the calculable amount of duty which can be drawn-back can be difficult to ascertain. DTGruelle will work with the importer, manufacturer, or exporter to make the application and maintenance processes as seamless as possible.

Note that claimants under manufacturing or unused merchandise drawback may, if approved, file retroactively, provided that the drawback claims are filed within three years of the date of export. For many companies, this initial recovery of duty can be quite substantial.

There are four main types of duty drawback, but they fall into 2 categories. The first category is Manufacturing drawback related, and the second applies to Unused goods.

Manufacturing Direct Identification Drawback

This is the classic version of duty drawback. When imported material is manufactured into a product, which is subsequently exported from the United States, the duties paid when importing the product may be recovered. Customs will require full documentary substantiation of the applicant’s claim not only in the application, but with each subsequent shipment for which duty drawback will be claimed.

Manufacturing Substitution Drawback

This option should be chosen when the manufacturer imports goods that it also produces. Duty drawback can be claimed on goods which are exported, even though they may not have been imported. The imported goods for which duty drawback is being claimed must be of the same kind and quality (fungible) as the goods the manufacturer produces domestically. This is very helpful when there are no serialized parts, such as nails and screws.  

Unused Merchandise Direct Identification Drawback

‘Same Condition’ drawback is used when material is imported duty-paid and subsequently exported unused. This must happen within 3 years of importation. In certain instances, the goods can also be destroyed and drawback claimed. Duty can be claimed using the documentary substantiation procedures which are detailed below.  Unused merchandise drawback is subject to more stringent regulations than manufacturing drawback especially with respect to retroactive claims. Under unused merchandise drawback, certain incidental operations are allowed such as testing.

Unused Merchandise Substitution Drawback

This is a slight variation of the ‘Same condition’ drawback procedure listed above. When unused material, which is commercially interchangeable (fungible) with the imported duty-paid material, is exported or destroyed, U.S. import duty may be recovered.

RECORD KEEPING REQUIREMENTS

Import Records

In order to benefit from drawback, your company must identify the duties paid on the imported material. The documentation needed here is the import entry summary and its corresponding import invoice.

Manufacturing Records

Under manufacturing drawback, records verifying the processing of the imported material are required. A company should have documentation that will verify the following:

1. The withdrawal of imported duty-paid material from inventory for manufacture and the date it was used in a manufacturing process.

2. A record of the material, which is the same kind and quality as the imported duty-paid material, that was used to manufacture the export and the date the manufacture was completed.

Export Records

Drawback also requires the identification of the exports. The documentation needed here is the export bill of lading and its corresponding export invoice.

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D.T.Gruelle provides all of the transport and documentary services which  the importer, manufacturer, or exporter needs to complete the drawback process. We are required to retain all transport records for 5 years and our additional levels of compliance can ensure that drawback is as simple as possible. Even though we may not have been a part of all segments of transportation, D.T.Gruelle will work with the importer to retrieve the required documentation. Please contact us to discuss your particular scenario.