What is Drawback?

Drawback is a term used in international trade to describe the refund of customs duties, taxes, or fees paid on imported goods that are later exported or used in the manufacture of exported goods. Drawback is a way for exporters to reduce their costs and increase their competitiveness in foreign markets.

There are different types of drawback, depending on the nature and use of the imported goods. The most common ones are:

• Manufacturing drawback: This applies when imported goods are used as inputs in the production of exported goods. For example, if a company imports raw materials and uses them to make finished products that are then exported, it can claim a refund of the duties paid on the raw materials.
• Unused merchandise drawback: This applies when imported goods are not used in the United States and are exported in the same condition as they were imported. For example, if a company imports clothing and decides not to sell it in the domestic market and exports it instead, it can claim a refund of the duties paid on the clothing.
• Rejected merchandise drawback: This applies when imported goods are defective, damaged, or do not conform to specifications and are returned to the foreign seller or destroyed under customs supervision. For example, if a company imports machinery and finds out that it is faulty and sends it back to the supplier, it can claim a refund of the duties paid on the machinery.

To claim drawback, exporters must comply with certain requirements and procedures established by the U.S. Customs and Border Protection (CBP). These include filing a drawback claim within five years from the date of importation, providing proof of exportation or destruction of the goods, keeping records of the importation and exportation transactions, and submitting to audits by CBP.

Drawback is a beneficial program for exporters who want to lower their costs and increase their profits. However, it also involves complex rules and regulations that require careful attention and compliance. Exporters who are interested in drawback should consult with a customs broker or an attorney who specializes in international trade law to determine their eligibility and obligations.