Global Customs & Trade Specialists, Inc.


THE DUTY DRAWBACK REFUND PROGRAM

- What is duty drawback?

Duty drawback is a refund program enacted over 200 years ago that is designed to stimulate U.S. exports and manufacturing. Duty drawback allows companies to receive refunds of 99% of the customs duties paid on imported products that are subsequently exported or destroyed, or on imported raw materials and components that are used to manufacture products in the United States that are subsequently exported or destroyed. Moreover, a company can receive drawback refunds on duties paid by their domestic suppliers even if the products were purchased in the United States. Unfortunately, despite this tremendous potential for savings, U.S. Customs estimates that over $2 billion of duty drawback goes unclaimed each year.

- Who can qualify for duty drawback?

Many companies are unaware that they qualify for substantial duty drawback refunds. Any company that exports or destroys products that were imported or made from imported components or materials may qualify. Moreover, even if a company is not the exporter or importer of record, it may still qualify for refunds.

- What are the principal types of duty drawback?

Manufacturing Drawback refunds are available when a company manufactures finished goods in the United States using imported components or materials and then exports or destroys the finished products. Even if the company does not import the components or materials directly but purchases such imported goods from U.S. vendors, the exporting manufacturer is entitled to the drawback refunds. For example, Company A imports widgets and sells them to Company B in the United States. Company B uses the widgets to manufacture engines and exports the engines to South America. Company B, as exporter, is entitled to a refund of 99% of the customs duties paid by Company A for the imported widgets.

Unused merchandise drawback refunds are available when a company exports or destroys goods that have not been subjected to any manufacturing or assembly process in the United States (certain minor operations are allowed). For example, if a company imports finished goods in bulk from Taiwan, repackages them in the United States, and exports them to Europe, it is entitled to a refund of duties paid on the exported products. Again, even if the exporter did not import the goods directly, it is entitled to the drawback refunds.

Same Condition drawback to Canada and Mexico covers products that are exported to Canada or Mexico in the same condition as imported. While the North American Free Trade Agreement ("NAFTA") has complicated drawback eligibility, there are still significant refund opportunities available for companies exporting to these countries. Many companies have been advised incorrectly to terminate these drawback programs. Global has successfully implemented practical and compliant programs covering same condition merchandise to Canada and Mexico and we encourage companies in similar situations to explore with us the potential for filing claims for these exports.

Rejected goods drawback is available for imported merchandise that does not conform to sample or specifications or that is shipped without the consent of the importer.

- Can we obtain drawback refunds for past exports?

Yes, most drawback claims can cover exports made over the past three years.

- How do we file for duty drawback?

First, a company must determine the particular type of drawback for which it qualifies (e.g., Unused Merchandise, Manufacturing, Same Condition to Canada and Mexico, Substitution or Returned Goods). Second, the company must collect all of the proper supporting documentation required by Customs. Third, most companies then obtain Customs approval to file drawback. Finally, the amount of the claim must be properly calculated and the appropriate paperwork filed with U.S. Customs. Although this procedure may seem complicated, most companies use experts known as duty drawback specialists to facilitate the process. A duty drawback specialist is a licensed customs broker experienced in filing drawback claims.

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Why should you use Global?

While drawback claims have become more complex and burdensome to file under new statutes and regulations, Globalís experienced staff of in-house customs attorneys and brokers is expert at obtaining the maximum drawback available to clients in even the most complicated situations. Unlike other brokers, Globalís "full service" drawback program means that Globalís personnel, not your staff, identifies the proper documentation, copies those documents and files all necessary paperwork with Customs. All of Globalís clients truly appreciate that they are not burdened with tasks usually expected by other brokers. Moreover, the expertise of Globalís staff ensures that your claim is fully documented and compliant in all respects with Customs regulations. Finally, because Global performs drawback on a contingency basis, clients need not incur expenses until they actually receive refunds.

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