The Duty Drawback Process: Why Drawback? Why Now?

Companies that import goods from other countries are required to pay a duty, tax, or fee before the products are allowed to enter the country. If these products are later exported as a finished product or as unused, the company can apply for a duty drawback, which is the refunding of these taxes, fees, or duties. A duty drawback can also be claimed for products eliminated or destroyed under U.S. Customs supervision.

U.S. Customs & Border Protection (CBP) introduced drawbacks to reduce costs and motivate exports in an attempt to spur the economy.

The Major Types of Duty Drawbacks

U.S. Customs duty drawbacks are available in three major types: unused merchandise, manufactured goods, and rejected merchandise.

Unused Merchandise

Companies can apply for the unused merchandise drawback refund if the merchandise was not used for any purpose while within the United States. After the merchandise is exported or eliminated under the supervision of CBP, you may qualify for a refund of any duties, taxes, or fees you paid to have the products brought into the country.

Manufactured Goods

The manufactured goods drawback provides for a refund of finished goods. If the products manufactured or produced within the United States used merchandise previously imported and are then not sold in the United States but exported to other countries for sale or use, or the products are destroyed under the supervision of the CBP, you can apply for a refund of any duties, taxes or fees you paid to import the foreign materials needed to produce the finished merchandise.

Rejected Merchandise

You may apply for the rejected merchandise drawback when your products are exported or destroyed under the supervision of the CBP if the imported merchandise was entered or removed from a warehouse for use or consumption and which:

• Does not meet your specifications or conform to the samples you received.

• Was shipped without appropriate authentication or consent from the consignee.

• Has been deemed defective prior to shipping or upon arrival.

• Has been sold at retail by the importer or the entity that received the merchandise from the importer and was then returned to the imported for any reason. Once the importer accepts the returned merchandise, a claim for a drawback can be made.

How Long Does it Take to Receive a Duty Drawback Refund?

How long it takes to receive a duty drawback refund can vary greatly and depends on a lot of different variables. Once a refund request is received by the proper authorities and approved, the Accelerated Payment Privilege program will typically issue a check within 4 to 6 weeks. If the accelerated payment program privileges are not applied to your refund request, it can take a year or two, or even longer to receive a duty drawback refund.

What is the Duty Drawback Accelerated Payment Privilege?

Drawback refund requests take years and years to process. Every day millions of requests are filed. The drawback processing agencies are overloaded and backlogged with requests from every port in the country. They do their best to process every request as quickly as possible, but inquiries need to made. Every claim must be investigated because there are nearly as many false claims filed as legitimate ones.

The country relies on duties, taxes, and fees to survive and can not pay out millions of false claims.

The Accelerated Payment program is a privilege that helps you get your refund faster. You must apply for this privilege, and if you meet the criteria, you can be put on the list of reputable importers. This weeds out the scammers and helps the authorities go through refund requests quicker. This, in turn, gets you your refund much quicker – four to six weeks as opposed to years and years.

The Amount of the Duty Drawback Refund

You will not usually get back every penny of the duties, taxes, or fees you paid to import your products. However, if you and your products meet all of the criteria required for a refund, you can expect to get back about 99 percent of what you paid.

Applying for a refund on your own can be cumbersome. You may want to hire a Duty Drawback Broker Service to help you with the grunt work. Fees charged by a duty drawback broker service vary greatly and depend on the types of drawbacks you are requesting and other wide variations of circumstances.

Getting Approved for the Duty Drawback Program

You need to apply to the United States Customs office to apply for part of the duty drawback program and the Accelerated Payment Privilege. You may also qualify for other privileges. Depending on your type of imports, your business, and other considerations, your application may or may not be approved.

The governing office may request additional information. Under normal circumstances, you should have an answer in about three to six months after you submit an application.

Why Drawback? Why Now?

The Covid-19 pandemic has changed the world forever. Borders are closing more and more every day – maybe opening for a glimpse or two and then closing again. If you don’t get your drawback now on products you may never be able to sell, you may never be able to recoup your losses.