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Are You Eligible for Duty Drawback?
Duty drawback was first written into law by the Tariff Act of 1789, and was designed to encourage international trade. Duty drawback is a refund of duties paid on imported merchandise that is subsequently exported, destroyed or exported within a new, finished item. It provides competitive pricing in foreign markets and enhances American labor.
The exporter or destroyer is entitled to claim duty drawback. However, the exporter can assign his drawback rights to the manufacturer, producer, importer or intermediate party.
There are two major types of drawback programs:
Unused Merchandise Drawback: imported merchandise that is exported within three years of the date of importation and is in essentially the same condition as when imported. Incidental operations are allowable, including anything short of a manufacture
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Methods of Filing:
Direct Identification–trace the export to the actual entry
Substitution–matching exports and imports that are commercially interchangeable
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Time Frames:
Direct Identification and Substitution–within three years of importation
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Manufacture Drawback: a substantial transformation of an imported raw material that results in a new and different article with a new name, character or use
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Methods of Filing:
Direct Identification–direct link between import and export
Substitution–exported material that is of the same kind and quality as the imported material
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Time Frames:
Direct Identification–within five years of importation
Substitution–if used in manufacturing, within three years of receipt date; if exported or destroyed, within five years of date of importation
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To receive duty drawback, the claimant must apply for a Prospective Waiver of Prior Notice to Export, Destroy or Return Merchandise. The claimant must file an application with Customs, giving all the pertinent data regarding the claimant, the exporter (if the claimant is not the exporter of record), the commodity, the export period and port of export, along with other financial records. The claimant should also retain sample documents in order to establish compliance with the drawback regulations.
Moreover, the claimant is eligible to refund retroactively for up to three years of exports in one single claim after the application is approved.
As part of the drawback program, Customs also allows the claimant to file an application for Accelerated Payment of Drawback to expedite the payment process. Accelerated Payment of Drawback delivers payment of estimated drawback before liquidation of the drawback claim. The normal estimated pay time after the claim is accepted is about 30 to 45 days.
The normal approval time for these applications is three to six months. As you can see, it is a long process. But once Customs gives its approval, duty drawback privileges will last as long as there is no change to the drawback program or the business function of your company.
The responsibility for the claimant is preparing the documentation and electronic data, including import, export and product information. It is in the claimant’s best interest to maintain supporting documentation and record retention. Also, a basic understanding of the regulations will help to ensure compliance with Customs requirements. Drawback programs require tenacity, knowledge, documentation and exact monitoring. Periodic internal audits will prevent inadvertent errors in procedure.
Customs is trying to keep inexperienced people from tying up its staff with inappropriate claims. Claimants who do their homework know if they are entitled to a duty drawback claim, and should not experience any problems. But claimants must make sure that they are eligible. Not everyone can fit into the specific duty drawback provisions. Due to the benefits gained by specialization in this procedure and the significant out-of-pocket costs needed to develop an internal drawback program, many claimants view outsourcing as the most cost-effective approach to implementing and managing their duty drawbacks.
Duty drawback is an excellent means of increasing your company’s profits and cash flow, while also strengthening compliance. Estimates vary, but according to the United States Customs Service, American exporters are losing out on more than $3 billion every year in unclaimed duty drawbacks. Perhaps you are one of them?
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Duty drawback is
a refund of duties
paid on imported
merchandise that
is subsequently
exported, destroyed
or exported within a
new, finished item.
|
Duty drawback is an
excellent means of
increasing your
company’s profits
and cashflow, while
also strengthening
compliance.
|
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