28. Drawback—Refunds Of Duties

 

28. Drawback—Refunds Of Duties 

Drawback is a refund of monies⎯customs duties, certain internal revenue taxes and other  fees⎯that were lawfully collected at the time of importation. The Continental Congress  established drawback in 1789 to create jobs in the new United States and to encourage  manufacturing and exporting. 

For drawback to be paid, the imported merchandise must be exported or destroyed under  CBP supervision after importation. 

Types Of Drawback 

Although Section 1313, Title 19, of the United States Code provides for several types of  drawback, there are three primary types of drawback of interest to most importers: 

• Manufacturing drawback, 

• Unused-merchandise drawback, or 

• Rejected-merchandise drawback. 

Manufacturing drawback is a refund of duties paid on imported merchandise specifically  designated for use in manufacturing articles that are subsequently exported or destroyed. For  example: two-inch speakers are imported and are incorporated into a certain model clock radio.  The speakers themselves are not altered, just used in the production of a new and different  article. 

Manufacturing operations to produce the new and different article must take place within  three years receipt by the manufacturer or producer of the merchandise. The drawback product  must be exported or destroyed within five years from the date of importation. Drawback can be  paid on merchandise used to manufacture or produce a different article if it was not the  merchandise imported but is commercially interchangeable, i.e., of the same kind and quality, or  if it falls under the same eight-digit Harmonized Tariff Schedule number as the merchandise to  which it is compared, and the party claiming drawback has had possession of it for three years.  This is called “substitution.” 

Unused-merchandise drawback is a refund of any duty, tax, or eligible fees paid on  imported merchandise that is exported or destroyed without undergoing any manufacturing  operations and that is never used in the United States. The imported merchandise must be  exported within three years of the date it was imported. 

Rejected-merchandise drawback is refund of duties on imported merchandise that is  exported or destroyed because it: 

• Did not conform to sample or specifications, 

• Was shipped without the consignee’s consent, or 

• Was defective at time of importation. 

To qualify for rejected-merchandise drawback, the merchandise in question must be returned to CBP custody within three years of the date it was originally released from CBP  custody. 

Guidelines for completing drawback claims are provided in Title 19, Code of Federal  Regulations, Part 191. Drawback claims can only be filed at one of the five CBP port offices that  have drawback centers: 

• Chicago, IL, 

• Houston, TX, 

• Los Angles, CA, 

• New York/Newark, N.J., and 

• San Francisco, CA. 

Rejected merchandise drawback was amended in 2004 to permit limited substitution of imported  merchandise. The import merchandise on which drawback is claimed must be classified under  the same 8-digit HTSUS subheading and have the same specific product indicator (such as a part  number, product code or sku) as the merchandise that is exported or destroyed and must have  been imported within one year of the export or destruction. 

Additional questions about drawback should be addressed to: 

Chief, Entry and Drawback Management 

Office of Field Operations 

U.S. Customs and Border Protection 

1300 Pennsylvania Avenue, NW 

Washington, DC 20229.