Drawback

Drawback, also known as duty drawback is the refund of duties, certain taxes, and certain fees collected upon the importation of merchandise into the United States. Refunds are only allowed upon the export/destruction of the imported merchandise or a valid substitute, or the export/destruction of a certain article manufactured from the imported merchandise or a valid substitute. Drawback was established in 1789 in order to promote exports and manufacturing within the U.S. market. Claimants may be the importer, exporter, or intermediate party within the drawback transaction.

This article is about U.S. duty drawback. For other uses, see Drawback (disambiguation).

Claimants can recover the following duties, taxes and fees paid on the imported merchandise:

  • Regular duties paid on an entry
  • Voluntary tenders of duties
  • Marking duties
  • Certain excise taxes
  • Harbor maintenance fees
  • Merchandise processing fees
  • Duties tendered as a result of a 19 U.S.C. 1592(d) duty demand
  • Duties tendered in a prior disclosure per 19 C.F.R. 162.74
  • Trade Remedy duties collected under sections 201 and 301 of the Trade Act of 1974 (P.L. 93-618)
  • Other miscellaneous fees as authorized by U.S. Customs and Border Protection (CBP)

Most Common Types of U.S. Drawback
  • Direct Identification Manufacturing Drawback (19 U.S.C. 1313(a)): Upon the exportation or destruction under customs supervision of articles manufactured or produced in the United States with the use of imported merchandise, provided that the manufactured articles have not been used prior to exportation or destruction, drawback of 99% of the duty, taxes and fees paid upon importation may be claimed. If the manufactured articles will be destroyed, claimants must notify CBP of the destruction by filing CBP Form 7553 with CBP Officers at the port of examination.
  • Substitution Manufacturing Drawback (19 U.S.C. 1313(b)): If imported duty-paid merchandise, or merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise, is used in the manufacture or production of articles in the United states, upon exportation or destruction of the manufactured articles, notwithstanding the fact that none of the imported merchandise may actually have been used in the manufacture or production of the exported or destroyed articles, and only if the manufactured articles have not been used prior to such exportation or destruction, drawback of 99% of the duty, taxes and fees on the value of the imported or substituted merchandise, which ever is less, may be claimed. If the manufactured articles will be destroyed, claimants must notify CBP of the destruction by filing CBP Form 7553 with CBP Officers at the port of examination.
  • Rejected Merchandise Drawback (19 U.S.C. 1313(c)): If merchandise is exported or destroyed because it does not conform with samples or specifications, has been shipped without the consent of the consignee, determined to be defective as of the time of importation, or imported and sold at retail and returned, then 99 percent of the duties which were paid on the merchandise may be recovered as drawback. Prior to the export or destruction of the imported merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.
  • Unused Direct Identification Drawback (19 U.S.C. 1313(j)(1)): If imported merchandise is unused and exported or destroyed under Customs supervision, 99 percent of the duties, taxes and/or fees paid on the merchandise by reason of importation may be recovered as drawback. Prior to the export or destruction of the imported merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.
  • Substitution Unused Merchandise Drawback (19 U.S.C. 1313(j)(2)): If merchandise that is classifiable under the same 8-digit HTS subheading number as the imported merchandise, provided the HTS description of the imported merchandise is not "other," is exported or destroyed without being used in the United States, drawback of 99% of the duty, taxes and fees on the value of the imported or substituted merchandise, which ever is less, may be claimed. If the 8-digit HTS description of the imported merchandise is "other," drawback may be authorized if the substituted merchandise is classifiable under the same 10-digit HTS subheading number as the imported merchandise provided the 10-digit HTS description of the imported merchandise is not "other." Drawback under § 1313(j)(2) is limited when exporting to Canada and Mexico. Prior to the export or destruction of the merchandise, claimants must notify CBP of the export or destruction by filing CBP Form 7553 with CBP Officers at the port of examination, unless specifically exempted from this requirement.

North American Free Trade Agreement (NAFTA) Drawback

Drawback on merchandise exported to Canada or Mexico subject to NAFTA can be claimed per the guidance in 19 C.F.R. 181. Unused merchandise that is exported in the same condition as imported may be filed under 19 U.S.C. 1313(j)(1) and 19 C.F.R. 190. Claims under NAFTA may be filed on merchandise imported into the U.S. on or before June 30, 2020.

United States–Mexico–Canada Agreement (USMCA) Drawback

Drawback on merchandise exported to Canada or Mexico subject to USMCA can be claimed per the guidance in 19 C.F.R. 182. Unused merchandise that is exported in the same condition as imported may be filed under 19 U.S.C. 1313(j)(1) and 19 C.F.R. 190. Claims under USMCA may be filed on merchandise imported into the U.S. on or after July 1, 2020.

Filing Instructions

Claimants may self-file (claimants must possess the software to interface with CBP), use a licensed Customs Broker to file, or utilize a service provider. Brokers, service providers, and software vendors can be found on CBP.gov. Drawback claims must be submitted electronically to one of four drawback offices for processing: Newark/New York, Houston, Chicago, or San Francisco. Claimants may select any drawback office for processing regardless of the port of merchandise import. Claims must be filed through CBP's Automated Broker Interface (ABI); claimants can not file through the ACE portal. Claimants are required to provide the data defined in the drawback CATAIR, which can be found on CBP.gov. General instructions can be found on CBP.gov in the ACE Business Rules, section 14.

Privileges. CBP allows three “privileges” that enhance drawback claim processing: accelerated payment (an upfront estimated payment of drawback per 19 C.F.R. 190.92), waiver of the requirement to file CBP Form 7553 for prospective exports (19 C.F.R. 190.91), and waiver of the requirement to file CBP Form 7553 for past exports (19 C.F.R. 190.36). Claimants must submit an application for a privilege, which must be approved by a drawback office before a privilege can be used. Claimants may use either the generic privilege application sample found on CBP.gov , or provide the data elements defined in the specific regulation.

Manufacturing Rulings for Claims Filed Under 19 U.S.C. 1313(a)/(b). Claimants who use imported merchandise, or a valid substitute, to manufacture a drawback article for export/destruction must have an approved ruling prior to being approved for drawback. CBP has preapproved several common manufacturing processes as “general” rulings (found in Appendix A of 19 C.F.R. 190) that any claimant may use provided their manufacturing process falls within the manufacturing process described therein. If a claimant’s manufacturing process does not meet the requirements of a general ruling, they must request a specific ruling from CBP Headquarters per 19 C.F.R. 190.8. Claimants may file a drawback claim utilizing provisional ruling number 99-99999-999 while waiting for a ruling approval, but in such cases, CBP will not pay drawback or accelerated payment until a claimant’s ruling request has been approved.

Notice of Intent to Export or Destroy (NOI). Per 19 C.F.R. 190.35, exporters are required to notify CBP prior to the export of unused or rejected merchandise subject to drawback. Notification is made by submitting CBP Form 7553 to the CBP office of examination, which is usually the port of export. Once the requirements of the NOI have been met, the merchandise may be exported, and the executed Form 7553 is included with the drawback claim. The requirements in 19 C.F.R. 190.35 may be waived per the conditions outlined in 19 C.F.R. 190.36 or 19 C.F.R. 190.91.

For merchandise that will be destroyed, an NOI must be submitted to CBP prior to destruction per the requirements in 19 C.F.R. 190.71. Notification is made by submitting CBP Form 7553 to the CBP office of examination, which is usually the port where the destruction will occur.

Technical Assistance. CBP has personnel dedicated to assisting filers successfully transmit their claims. Claimants may contact an ABI rep by sending an email to clientrepoutreach@cbp.dhs.gov.

Public Law 114-125

On February 24, 2015, drawback law was updated via “The Trade Facilitation and Trade Enforcement Act of 2015” (TFTEA) which modernized the drawback statutes and regulations. The final rule was published in the Federal Register on December 18, 2018.

References

U.S. Statutory Reference: 19 U.S.C. 1313

U.S. Regulatory Reference (TFTEA): 19 C.F.R. Part 190 (supersedes 19 C.F.R. Part 191)

Drawback filing instructions at CBP.gov

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