Drawback–Refund of Duties

U.S. Customs

The refund of all or part of customs duties, or domestic tax paid on imported merchandise which was subsequently either manufactured into a different article or reexported. The purpose of drawback is to enable a domestic manufacturer to compete in foreign markets without the handicap of including in his costs, and consequently in his sales price, the duty paid on imported raw materials or merchandise used in the subsequent manufacture of the exported goods.

There are several types of drawback:

(a) Direct identification drawback provides a refund of duties paid on imported merchandise that is partially or totally used in the manufacture of an exported article. Identification of the imported merchandise from import to export is required by proper record-keeping procedures. The imported merchandise must be used in the manufacturing process and exported within 5 years from date of importation of merchandise.

(b) Substitution drawback provides for a refund of duties paid on designated imported merchandise upon exportation of articles manufactured or produced with use of substituted domestic or imported merchandise that is of the same kind or quality as the designated imported merchandise. Same kind and quality means merchandise that is interchangeable in a specific manufacturing process. The imported materials must be used in a manufacturing process within 3 years after receipt by manufacturer, the domestic material of same kind and quality as imported materials must be used in manufacturing process within 3 years of receipt of the imported material and the exported products must be manufactured within 3 years after receipt of imported material by manufacturer, and exported within 5 years of date of importation of designated material.

(c) Rejected merchandise drawback is a 99 percent refund of duties paid on imported merchandise found not to conform to sample or specification, or shipped without the consent of the consignee, if returned to Customs custody within 90 days of its original Customs release (unless an extension is granted) for examination and exportation under Customs supervision.

Questions regarding the legal aspects of drawback should be addressed to: Chief, Entry Procedures and Carriers Branch, Office of Regulations and Rulings, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW, Washington, DC 20229; Tel: 1 (202) 927-2320; Web: www.cbp.gov.

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