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.