How Does Duty Drawback Work?

How Does Duty Drawback Work?

Before we begin with this week’s blog post, there are a few questions you should answer: 

  1. Are you a commercial importer importing into Canada or the US?
  2. Do some or all of your imports fall under one of the following categories?

                a. They are imported and then later exported as-is.

                b. They are imported and used to produce or manufacture other goods that are then exported.

                 c. They are obsolete or surplus goods that are set to be destroyed.

      3. Do you keep immaculate records that can be produced to prove the above?

      4. Would you like a refund on the duties you paid to Customs on those goods?

If you answered ‘yes’ to all of the above, we encourage you to read on for an overview of how the Duty Drawback Program works, how it can benefit you and your business, and how you can easily enroll.

If you said no to any of the above, this one isn’t going to be very relevant to you, but that shouldn’t suggest that you won’t gain something by reading on anyway. After all, your situation might change, and then you’ll be searching your bookmarks for that blog you saw that one time.

What is the Duty Drawback Program? 

The best way to think about the Duty Drawback Program is through the lens of the problem it attempts to solve. Both the US and Canadian Duty Drawback Programs exist, fundamentally, to answer the question - 

Should an import that makes a return trip, unchanged, back across the border to its country of origin pay the same duties as goods intended for commercial purposes?

The answer is an obvious ‘no,’ and the Duty Drawback Program addresses that elegantly, creating a system that solves the issue without leaving itself open to abuse.

The Duty Drawback Program is designed to refund all, or the large majority of, paid duties on imports intended to be immediately exported back to their country of origin with very little change to their physical being. All a business needs to take advantage of such a program is to import items that qualify in a very specific way and provide adequate records of that import’s journey after it crosses. The application process is fairly straightforward, and when it is all done, it feels just like free trade but with a few extra steps.

Who can claim a duty drawback?

As alluded to above, imported goods that fall into one of three categories can qualify for the Duty Drawback Program. Each category represents a similar but sufficiently different kind of circular journey where the import is either returned to its country of origin unchanged or is destroyed upon arrival at the importing country. Regardless of the category an import falls under, the duty drawback process is essentially the same. 

The criteria for these imports have slight variations by country, but in general, they can broadly be described with the following:

  1. The goods imported are later exported as-is.
  2. The goods are imported and used to produce or manufacture other goods that are then exported.
  3. The goods are obsolete or surplus and are being imported to be destroyed.

Of course, if you don’t know if your import qualifies or if this whole process seems overly tedious, we encourage you to get in touch with our Trade Advisory Team. We can help you identify which imports your business deals with that might qualify, and we can help you work through your records and make the application on your behalf. Leaving it with us grants you all the benefits of the Duty Drawback Program with none of the headaches. 

The US and Canada both have a Duty Drawback Program, but what are the differences?

A version of the Duty Drawback Program exists in both Canada and the US, and they are strikingly similar in their requirements and process. Despite that fact, you are advised to always examine the details of the relevant country’s program before you make a claim, as there may be different duty drawback documents required based on the country you are working with.

For an in-depth breakdown of everything you’ll need to know about the duty drawback procedure and required documents in Canada, be sure to check out our duty drawback post from 2022

If you are looking for more information on how to take advantage of this program in the US, we have you covered with a duty drawback post from 2023. Notably, many imports under China Section 301 qualify for Duty Drawback as well. 

There you have it—a quick look and a reminder about Duty Drawback’s benefits. If you’ve made it this far and you have questions or concerns or feel like you want the money back, but this seems like a lot of work, then our Trade Advisory Team should be your next stop. We would be happy to help you identify relevant imports and even help craft your application. Get in touch today, and let’s get started drawing back your duties!

Share this post
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.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.