CBP Duty Drawback Process: Documentation Needed To Support Your Claim

CBP Duty Drawback Process: Documentation Needed To Support Your Claim

US Customs and Border Protection (CBP) believes up to 85% of potential refunds of duty go unclaimed yearly. However, did you know that CBP has a program where an importer can request a refund of up to 99% of duties paid on goods that were later exported, destroyed, or returned to the supplier?

US duty drawback is an export-promotion program intended to eliminate or recover the costs of duties, taxes, and fees on goods sold in international markets. Today’s blog will discuss this export program and ways to electronically claim drawbacks under the Trade Facilitation and Trade Enforcement Act (TFTEA) to increase revenue and improve cash flow.

The Purpose Of Duty Drawback

Drawback claims promote US exports, increase investments and contribute to employment in domestic markets. You can request a drawback of import duties paid for goods subsequently exported within five years from the date of importation into the United States.

Why Can't I File a Drawback On All Duties, Taxes, And Fees?

The Types Of Drawbacks

There are four common types of duty drawbacks depending on the imported goods, which consist of the following: 

Unused Merchandise

This duty claim allows importers to recover the duties paid on imported goods that were exported unused. For example, you own a boutique with imported fabric to make twenty limited-edition spring dresses. However, the material used was under the amount imported, meaning you can claim a duty back of 99% on your export shipments. 

Substitution Unused Merchandise

This refers to the duties paid on imported goods substituted by identical or similar items used in exported manufacturing goods. For example, your boutique imports fabric to produce a spring collection but saves costs by sourcing some materials domestically and combining both domestic and imported materials to make the collection. The end product will be made from both materials meaning export shipments are subject to a 99% duty drawback. 

Rejected Merchandise Drawback 

This is when goods are exported or destroyed and do not conform to specifications. Additionally, it could refer to goods shipped without consignee consent or items identified as defective at the time of import. For example, the spring collection was inspected only to find that the shipment contained formal black dresses instead of casual yellow ones, which was rejected. This means that 99% of the duties paid on goods may be refunded as a drawback.

Manufacturing Drawback

A drawback made for goods manufactured in the US with imported materials and then exported or destroyed. For example, you have imported material to produce a spring collection that was produced in the US, sold to a US business, and eventually exported to Canada. This will qualify for a 99% duty drawback. 

However, not all monies paid during import are eligible for a duty drawback claim. They are limited to ordinary import duties, Section 301 (China) duties, Internal Revenue Taxes, Merchandise Processing, and Harbor Maintenance Fees.

What are Harbor Maintenance Fees?

Drawback Documentation Requirements 

You must provide detailed documentation when requesting a drawback of duties paid for imports that were later exported. Claiming duty drawback is heavily reliant on the accurate submission of documentation. 

CBP requires a documented accounting of the goods from import through to export. The documentation necessary consists of the following:

  • Copies of foreign entries
  • Credit memos
  • Export sales orders
  • Export waybills
  • Import entries
  • Import purchase orders and invoices
  • Inventory records
  • Third-party proof of destruction document
  • Warehouse receipts

CBP mentions once a drawback has passed all validations, the filer will receive an automated message indicating that the claim has been accepted or rejected. It is important to note that rejected claims can be corrected and resubmitted within the amendment period. 

A refund of duties paid for goods that were ultimately exported from the US can significantly benefit your company. Being prepared to provide the documentation required and having that documentation in hand before filing the drawback claim will help expedite the claim process.

Duty Drawback Accelerated Payment Privilege 

With the Accelerated Payment Privilege, the filer will be allowed to receive drawback payments based on the date the claim was filed. CBP stated, "to file a drawback claim with an Accelerated Payment request indicator, the claimant must have a valid bond with the CBP.” 

Without A Customs Bond, Your Goods Will Be Denied Into The US

If the bond is expired or insufficient, CBP will not reject the claim; instead, they will remove the Accelerated Payment request indicator. 

Drawback Best Practices 

Filing a duty drawback can be a complex and time-consuming process which is less of a hassle with an expert on hand. In most cases, businesses use a trade advisor to help them understand and navigate the complexities of drawback claims. 

The best practices for ensuring you get your returned duty for imports and exports consist of the following:

Maintain Records 

Updating and ensuring all records have been completed accurately is the first step in securing your return of duties paid for imports. Using a customs broker will help ensure that your documentation is accurate and compliant with government regulations and laws. 

Processing Times 

According to CBP, there is a uniform five-year filing deadline from the date of importation. Additionally, records need to be maintained for three years from the date of liquidation. You can get faster approval from CBP through the Accelerated Payment Program. 

Claims Are Not Guaranteed

Although CBP specifies that importers can claim 99% of duty drawback, this is only sometimes guaranteed. This could be due to various reasons, like inaccurate specifications that a trade advisor can quickly identify. 

Are you interested in learning more about the duty drawback process? We have specialists ready to help you understand the claims that can be filed in the US so you can receive your piece of the pie to maximize the potential returns on your business's trade.

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About Author
Misty Gibbins

Misty has been working in the brokerage business for 36 years. She was the manager of the Blaine Office of Peace Bridge Customs Brokers for nine years, before coming to Pacific Customs Brokers Inc. US operation. Misty has worked in the trade compliance group at PCB for the past 13 years. She is currently the Senior Trade Regulatory Analyst, which involves keeping up with trade related regulatory changes.

While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.
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