Duty Drawback, Explained

Duty drawback provides importers and exporters with a complete or partial refund of particular duties, excise, taxes, and fees they paid when they imported goods into the US. US Customs and Border Protection (CBP) offers these refunds when the imported goods are subsequently exported out of the US—either as unused products, or in a modified form after going through a manufacturing process. Refunds on duty can also apply when imported goods are destroyed.

Key takeaways

Duty drawback offers a full or partial refund of specific duties, internal revenue and excise taxes, and certain fees.
Drawbacks can be claimed by importers, manufacturers, or exporters, and refunds are provided by the US Customs and Border Protection agency.
Duty refunds apply when imported goods are either exported from the US or destroyed. There are several types of duty drawback.
Imported goods do not need to be exported in their original form, they can be manufactured into a different product, and some level of duty drawback may still apply.
Imported goods must be exported within a specific time limit to claim refunds on duty paid, typically within five years.

Duty drawback can also be referred to as duty recovery, duty claims, and duty refunds.

The duty drawback process

Here’s how the process normally works:

You import goods from another country into the US.
When you import, you pay duties, taxes, and other fees depending on the products you’re importing, where they are coming from, and the tariffs applied.
You decide to export your goods unchanged, manufacture your goods into something else and export the finished product, or destroy your goods.
Each of these makes you eligible for some type of duty drawback.
You raise a duty refund claim and file it with CBP.
You receive a refund of the previous duties, taxes, and fees you paid.

GEODIS provides comprehensive services across each step of the duty drawback process.

Get in touch with GEODIS to learn how our duty drawback services can help you optimize your exports and refunds.

The benefits of duty drawback

Duty drawback provides several benefits to businesses that can take advantage of it:

Get a refund of monies paid: Enjoy a refund of up to 99% of the original duties, taxes, and fees paid on import.
Expect plenty of time to file: File a claim up to five years after originally importing the goods.
Use several types of duty drawback: Get a refund if you re-export goods in their original or a manufactured or modified form.
Reduce losses on destroyed goods: Recover duty on goods you dispose of.

Duty drawback types

There are several different types of duty drawback for which you can claim a refund:

Unused merchandise duty drawback
Manufacturing duty drawback
Rejected merchandise duty drawback

There are two main ways that duty drawback can be filed when making a claim as part of unused merchandise drawback or manufacturing drawback—via “Direct ID” or through “Substitution”:

Direct ID uses serial numbers, lot numbers, and similar when filing claims.
Substitution focuses on the Harmonized Tariff Code for drawback claims.

Your customs broker can advise you on the correct approach.

Unused merchandise duty drawback

Unused merchandise drawback, also known as non-manufacturing drawback, applies when you import a product into the US, pay duties, and then export the same product without making substantial changes to it.

There are a couple of methods to achieve this when making a duty drawback claim for unused merchandise:

Direct ID means that importers would use the same serial numbers, lot numbers, and similar identification as the original imported items when filing claims.
Substitution focuses on using the correct Harmonized Tariff Code as part of the Harmonized Tariff Schedule (HTS) for drawback claims.

Different countries will require different duty drawback methods. For example, Substitution is not permitted for duty drawback claims when exporting to Canada or Mexico.

You can claim a complete or partial refund of the original duties paid when the product is exported.

Unused merchandise duty drawbacks cannot be claimed if the imported product is used directly within the US.
Unused merchandise duty drawbacks cannot be claimed if the imported product is manufactured into another product within the US.
If the imported product is manufactured into another product that is then exported from the US, you may be able to claim a manufacturing duty drawback.
Products do not need to be imported and exported by the same company to claim a duty refund, but you must keep compliant documentation on the transfer of goods.
Unused merchandise duty drawbacks can be claimed if the imported product is destroyed in the US, in line with CBP supervision and regulations.

Unused merchandise duty drawback example
For Direct ID drawback, you import plastic tubing into the US under a particular lot or serial number and pay duties according to the amount levied on that particular tariff. You store the tubing in the US for a period of fewer than five years and then export the plastic under the same lot or serial number without making changes to it. When you export the product, you can make a duty drawback claim on the duties you originally paid.

Manufacturing duty drawback

Manufacturing duty drawback applies when a company imports a product into the US and pays duties on it. The company or another manufacturer then uses the imported products as ingredients, parts, or raw materials to make a finished product. When the finished product is exported, the company can claim a full or partial refund of the duties. The exported product is effectively “substituted” for the imported products.

Manufacturing duty drawbacks cannot be claimed if the manufactured product is used in the US.
Products do not need to be imported, manufactured, and exported by the same company to claim a duty refund, but you must keep compliant documentation on the transfer and manufacture of goods.
Manufacturing duty drawbacks can be claimed if the manufactured product is destroyed in the US, in line with CBP supervision and regulations.

Manufacturing duty drawback example
You import stainless steel into the US under an HTS code and pay duties according to the amount levied on that particular HTS code. You then use the stainless steel in the manufacture of household appliances. When you export the appliances, you can make a duty drawback claim on the duties you originally paid on the stainless steel.

Rejected merchandise duty drawback

Rejected merchandise duty drawback applies when a company imports a product to the US and pays duties on it. The imported products are then rejected for one or more of the following reasons:

The products do not meet required specifications.
The products have been shipped without the consent of the consignee.
The products are defective or not fit for purpose.
The products are returned after being sold.

Rejected merchandise duty drawback example
You import wheat into the US under an HTS code and pay duties according to the amount levied on that particular HTS code. The wheat you receive is defective and you decide to destroy it. When you destroy the product, you can make a duty drawback claim on the duties you originally paid on the wheat.

Please note that there are regulations, limitations, and strict compliance requirements for all types of drawback claims. GEODIS can help you decide on, manage, optimize, and negotiate any type of duty drawback.

Contact GEODIS to understand the best types of duty drawbacks for your needs.

Filing for duty drawback

Proper authorization and documentation must be correctly filed with CBP to claim duty drawback. Companies have several options on how to file. You can:

Hire a licensed customs broker like GEODIS to handle duties and file drawbacks on your behalf.
Self-file your duty drawback claims through a service bureau.
Establish your own communications connection to the CBP to self-file your claims.

Please note that all duty drawback claims must be filed electronically with CPB using their Automated Commercial Environment (ACE) system. CPB does not accept paper-based filing for duty drawback.

GEODIS customs insights
“For most of the duty drawback claims we process, we’re also the import broker. That means we have access to the import documents, and we can analyze the details of the original entry. This helps us speed up drawback filings and easily resolve any issues.”
Diane Raffle, Senior Manager, Trade Services

GEODIS will file your duty drawback claims with the CBP ACE system.

Duty drawback document information requirements

CPB requires that drawback claims contain the following information:

Claimant ID Number, Drawback Entry Number, and Filing Port Code
Drawback Provision, Drawback Claim Date, and Total Drawback Claim Amount Requested
Import Entry Summary/Harmonized Tariff System Data
Information on Exportation or Destruction and Notice of Intent to Export or Destroy (if applicable)

Please note that each drawback claim can contain a maximum combination of 10,000 parts, pieces, and styles in the import, manufacturing, and export or destroyed records.

GEODIS will prepare, file, and manage duty drawback claims on your behalf.

GEODIS customs insights
“We do in-house analysis and spot-checks on duty drawback information—comparing spreadsheet and filings, and reconciling data to make sure that everything is correct and accurate. That’s especially helpful when we compare to our internal post-entry reports to find any discrepancies. We can flag any inconsistencies back to the client and make changes to the duty drawback claim prior to processing. That internal audit process is very helpful for maintaining a strong compliance record with customs.”
Diane Raffle, Senior Manager, Trade Services

Discover how GEODIS can file, manage, and accelerate your duty drawback claims.

Deadlines for claiming duty drawback

CPB normally requires you to file a duty drawback claim within five years of the date of importation of the original products. Some types of products must have claims filed within three years.

Speed of duty drawback refunds

The speed of your duty drawback refund depends on whether you have an “Accelerated Payment” privilege.

With the Accelerated Payment privilege, you will receive a duty drawback refund based on when the claim is filed, and will typically wait for around four to eight weeks.
Without the Accelerated Payment privilege, you will receive a duty drawback refund based on when the entry has liquidated and might wait up to one or two years.

GEODIS can help you obtain an Accelerated Payment privilege to speed up your duty drawback refund times.

Duty drawback refund amounts

If you claim a duty drawback and meet CBP regulations, you can expect a refund of up to 99% of the duties, taxes, and fees you paid on import.

Learn how GEODIS maximizes your duty refunds.

Sharing duty drawback within your supply chain

Imports, manufacturing, and exports do not all need to originate from the same company to be eligible for duty drawbacks. Provided that you and your supply chain partners keep careful records of goods, tariff codes, duties, and other information, you can jointly qualify for duty drawback and split it once received. GEODIS can assist and advise you with duty drawback requirements, documentation, and information sharing at every point in your supply chain.

Free trade agreements and duty drawbacks

The US has many free trade agreements in place. These agreements can reduce or eliminate duties and tariffs on some imported products, reducing or removing the benefits of duty drawback.

GEODIS duty drawback services

GEODIS customs experts provide duty drawback services through full monitoring, including internal controls, filing for refunds, drawback preparations, analysis, submission to authorities, and assistance in case of audits.

Our duty drawback specialist services include:

Understanding the duties, taxes, and fees you will pay when importing goods.
Advising on the right duty drawback types based on re-export, manufacturing, or destruction of goods.
Filing duty drawback claims on your behalf.
Managing duty drawback across your supply chain partners, including information sharing and document compliance.
Providing licensed destruction services to allow for duty drawback claims on destroyed goods.
Optimizing drawback across combinations of purchases, sales, imports, exports, manufacturing, and destruction.
Obtaining Accelerated Payment privileges on your behalf to speed up the duty refund process.
Modeling drawback scenarios to maximize your refunds.
Establishing correct HTS and tariff codes on import and export.
Assisting with drawback audit preparations.
Consulting on any other aspects of duty drawbacks and refunds.

We’ll optimize the drawback process, file your claims, and maximize your refunds throughout the supply chain.

GEODIS customs insights
“It’s all about the documentation. Customs is only going to refund your money if what you’re transmitting is accurate, and that means keeping good records. This means tracking everything—what comes in, what goes out, what’s in your inventory at every step of the import/ export process. Claimants must be able to produce all documentation to provide traceability on products. Much of what we do is getting our clients to understand that process. If customers can provide that information, it makes the duty drawback process much more streamlined and effective.”
Diane Raffle, Senior Manager, Trade Services

Frequently asked questions about duty drawback

What is the definition of customs duty drawback?

The CBP defines duty drawback as: “Drawback is the refund of certain duties, internal revenue taxes, and certain fees collected upon the importation of goods and refunded when the merchandise is exported or destroyed.”

Customs duty drawback allows importers, exporters, and manufacturers to claim a full or partial refund of the duties, taxes, and fees they paid when importing goods. These imported goods must be re-exported from the US, manufactured into another product and exported, or destroyed to claim duty drawback.

Who can claim duty drawbacks?

Importers, exporters, and manufacturers can claim duty drawback, provided they follow drawback regulations and keep compliant documentation. Duty drawback can only be claimed once on a particular product. If multiple businesses are involved with the import, manufacture, and export of products, duty drawback might be split between them.

Who provides duty refunds?

Duties are paid to, and refunded from, the US Customs and Border Protection agency.

Can you explain the duty drawback process?

You import goods into the US. Those goods are then either re-exported from the US, manufactured into a new product and exported from the US, or destroyed. This makes the products eligible for a duty refund, and you would file a claim with CBP. They would then process the claim and, provided you’re compliant, issue a refund.

What are the different types of duty drawback?

There are three main types of drawback:

Unused merchandise drawbacks for goods that you re-export in their original form, under the same tariff code.
Manufactured drawbacks for goods that you manufacture into a new product and then export under a new tariff code.
Rejected merchandise drawbacks for goods that are not fit for purpose.

Are customs duties refundable?

Yes, provided you meet the duty drawback requirements, which are primarily that imported goods should be re-exported from the US to claim a refund. You must also keep compliant documentation, follow customs regulations, and file a drawback claim.

Will I get a refund of all duties, taxes, and fees paid?

In most cases, refunds are available of up to 99% of the amount you originally paid when importing the goods.

Do goods need to be exported in their original form to be eligible for a duty refund?

No, goods can also be manufactured into another product and then exported from the US to claim duty drawback. Goods may also be destroyed in line with CBP regulations to be eligible for a refund.

Is there a time limit on claiming duty drawback?

Claims must normally be filed within five years of importing the goods.

How do I file a duty refund claim?

Duty drawback claims must be filed electronically, using the ACE system provided by CBP. You can use a licensed customs broker, a service bureau, or your own systems to file such claims. GEODIS is a licensed customs broker that can file duty drawback claims on your behalf.

Can I file for duty drawback using a paper-based system?

No, CBP requires that all claims are made electronically.

What documents are required to file a duty drawback claim?

You must maintain compliance documents in line with CBP regulations to file a claim. When you file for duty drawback, you must provide the following information to the ACE system:

Claimant ID Number, Drawback Entry Number, and Filing Port Code
Drawback Provision, Drawback Claim Date, and Total Drawback Claim Amount Requested
Import Entry Summary/Harmonized Tariff System Data
Information on Exportation or Destruction and Notice of Intent to Export or Destroy (if applicable)

How long do duty drawback refunds take?

If you have Accelerated Payment privileges, duty refunds can take around four to eight weeks. Without this privilege, refunds can take up to a couple of years.

How can I obtain Accelerated Payment privileges?

You can apply directly with CBP and go through their approval process, or GEODIS can obtain Accelerated Payment privileges on your behalf.

How can I access a duty drawback specialist?

GEODIS provides a wide range of duty drawback specialist services. We are a licensed customs broker with deep experience in duty drawback claims and management. We will support you in the necessary duty drawback services through full monitoring, including internal controls and filing for refunds (for certain duties), drawback preparations, analysis, submission to authorities, and assistance in case of audits.

Talk to a GEODIS duty drawback specialist today.