The Duty Drawback program allows importers to recoup the duties paid on imported merchandise that is exported or destroyed. The Customs and Border Protection (CBP) has a duty drawback office in every port around the country, but you can also file online.
What is a Duty Drawback Program?
A Duty Drawback Program is a government program that allows eligible businesses to recoup import taxes. The drawback program was created to encourage domestic businesses to import raw materials and other needed components which would not normally be produced domestically. The Duty Drawback Program allows companies to receive reimbursement for duties paid on imported goods used in manufacturing or processing. The drawback can be claimed by the manufacturer or processor of the product or by the importer of record, who can claim it on behalf of the manufacturer or processor.
You can apply for a duty drawback claim if:
- You import merchandise subsequently exported without substantially changing condition, character, or use.
- The merchandise you imported was manufactured in a foreign country.
- The merchandise you imported was damaged while in Customs and Border Protection possession.
- You are filing a claim under the Foreign Trade Zone program, which allows businesses to defer payment of duties on imported goods until they are shipped out.
Types of Duty Drawback Programs
There are two types of duty drawback programs. The first allows a producer to get back duties paid on imported goods if it can show that the good was exported within a certain period or under certain conditions. The second allows a manufacturer to get back duties paid on components used in the manufacture of their products, provided that such components were imported for use in manufacturing and not for sale.
The two types of duty drawback programs:
Manufacturers’ Drawback Program (MDP) – This program allows manufacturers to get back duties paid on components imported for use in manufacturing and not for sale.
Product Exportation Program (PEP) – This allows producers to get back duties paid on goods exported within a certain time period or under certain conditions.
Who Can Apply for Duty Drawback?
Anyone who pays an imported good’s duties may apply for duty drawback. Even if you don’t intend to export the goods or convert them into another product, you can apply. However, if you do plan to export your goods or convert them into another product, you should consider applying for duty drawbacks as soon as possible after importing them. This will ensure you have time to complete all necessary steps before exporting or converting your product(s).
How Long Do Duty Drawback Refunds Take to Process?
A typical drawback claim can take anywhere from 6 months to 1 year from the time of filing to receive a refund. The Customs and Border Protection (CBP) agency has a duty drawback program for imported merchandise processed through the Automated Export System (AES). When you file for a duty drawback, you must wait for approval from CBP before your refund can be processed. How long does it take to receive a refund if you’ve already filed your claim? It depends on several factors:
- The type of product you import.
- The type of shipment is either straight export or sale to a related party.
- Whether or not you have filed an advance ruling request.
- The type of drawback claim being filed.
- If the information submitted is accurate.
How to Claim a Refund of Value-Added Tax (VAT) and Customs Duty
If you have received a shipment of goods from a supplier that you intend to sell, you may be able to claim a refund of the Customs Duty and Value-Added Tax (VAT) that was paid on the goods. You will need to prove that the goods were imported for commercial purposes to get a refund. This can be done by providing your supplier with a letter of authority. The letter needs to be stamped by Customs. You need to submit an application form and pay a fee to obtain this stamp.
The duty drawback program is a great way for importers to receive reimbursement when the transaction value of imported goods has been increased due to certain government processes required of the goods. There are many duty drawback programs, and each one provides specific benefits based on the nature of your own business. The drawback programs will differ based on the industry, manufacturing process, country of origin, and export destination. It is important that your international business has an idea of which product category you will be importing before consulting with a counsel to assist you in entering this type of transaction. Your business will need to determine which programs are right for you.