When you’re importing into the US, you generally need to pay duties and other fees on any products you bring into the country. The amount you pay is based on how the Harmonized Tariff Schedule classifies your goods, the duty amounts the US government imposes on products, and several other factors like trade agreements.
But, in some cases, you can get an almost complete refund of the duties you’ve paid. This is known as “Duty Drawback” and applies when you re-export or destroy your products. This can lead to significant savings on your duties for goods that never enter the US domestic marketplace.
A customs broker can help with every aspect of importing and duty, including duty drawback claims. We’re here to answer your questions on all the key aspects of duty drawback.
Here we go.
Are import and customs duties refundable?
Yes, based on certain factors. In most cases, you can get a refund on goods you’ve already imported, so long as you meet a few criteria:
- You paid duty when you originally imported goods into the US.
- You’re either re-exporting the goods in their original or manufactured form, or you’re destroying the goods.
- You file your duty drawback claim within five years of the original import date.
- You file your refund in the correct way with all necessary supporting information.
There are certain other restrictions that may apply to getting an import duty refund, so it’s important to speak to a licensed customs broker about your unique circumstances.
Who are import duty refunds available for?
Import duty refunds are typically available to the importer. In some cases, others may be able to receive duty refunds with the permission of the importer. For example, a customs broker can file duty drawback claims on an importer’s behalf and obtain the refunds for them.
What is customs duty drawback, including it’s meaning and definition?
Here’s how we define duty drawback in our in-depth guide:
“Customs 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 (USCBP) 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.”
Can I only get a refund for the original duties paid?
No, a duty drawback claim can also recover additional fees such as merchandise processing, some excise taxes, harbor maintenance, special duties, and other fees.
How do I claim back import duty and get a refund?
You need to file a duty drawback claim with US Customs and Border Protection. This refund claim must be supported by certain documentation that shows the original import and duties you paid, the re-export or destruction of your products, and supplementary information.
The documentation must be filed electronically with USCBP either by you through self-filing, a duty drawback filing service, or a licensed customs broker. Duty drawback claims are filed through USCBP’s Automated Commercial Environment (ACE) system. USCBP does not accept paper-based filing for duty drawback.
Who pays the original duty on imported goods?
It will almost always be the importer of the goods that will pay duties as products are imported into the country. In some cases, a licensed customs broker may pay duties on your behalf and then reclaim the duties from you.
Is there any way to avoid paying duty when I import goods?
Yes, generally, you can avoid duty in several ways:
- By importing specific types of goods under a trade agreement eliminates tariffs on those products.
- By making a “Temporary Import Under Bond,” when the goods must be re-exported from the US within a certain period.
- By taking advantage of a Foreign Trade Zone (FTZ) that suspends duty payments until you move goods out of the FTZ and into the domestic US marketplace.
Each of these options can be complex and means you’ll need to meet strict regulations. Speak to your customs broker about the best choice for your imports.
Can I get a customs duty refund on returned goods in the US?
Yes, if you then re-export or destroy those goods and file a duty drawback claim. If the goods are re-sold in the US marketplace, then no duties will be refunded.
What are the different types of duty drawback?
Duty drawback refunds typically come from the way you handle goods after they are imported and duties are originally paid:
- Unused merchandise duty drawback that is based on you re-exporting the same products that you imported without making changes to those goods.
- Manufacturing duty drawback that is based on you importing goods, putting them through a manufacturing process in the US, and then exporting the manufactured product.
- Rejected merchandise duty drawback for returned, defective, or similar goods when you then re-export or destroy the products.
How is duty drawback calculated on imported goods?
In most cases, the amount of duty that you will receive as a refund is based on 99% of the original duties and fees you paid when first importing the goods. Your refund claim amount will be pro-rata’d to the percentage of the original import that you are re-exporting or destroying.
What is the time limit on making a duty drawback claim?
In most cases, claims must be filed within five years of the original import date of the products.
When is duty drawback most beneficial?
Duty drawback works best when you need a refund on goods that you have imported into the US and are not planning to sell in the US domestic marketplace. It’s a way to recover fees on returned and rejected merchandise and products that you’re re-exporting in their original or a manufactured state. Duties and other customs fees can have a significant impact on an importer’s profit margins, so recovering duty on products you’re not selling can make a difference to the bottom line.
What is the duty drawback process?
The duty drawback process typically works as follows:
- You import goods into the US.
- When you import, you pay duties, taxes, and other fees.
- You decide to export or destroy your goods.
- You raise a duty refund claim and file it with CBP.
- You receive a refund of the previous duties, taxes, and fees you paid.
- A licensed customs broker can take care of many of these steps on your behalf. They can classify your goods, clear products through customs, arrange to pay duties, and file your duty drawback claims.
What are duty drawback rules?
Rules around duty drawback mean that you must:
- Have paid duties and possibly other fees when bringing your products into the US.
- Be re-exporting or destroying products and removing them from the US domestic marketplace to make a duty drawback claim.
- File your duty drawback claim within five years of your original import.
- Keep excellent records on the products you have imported and all subsequent treatment of those products, including re-export or destruction.
- Include all required documents and supplementary information to file your refund claim.
- File your claim electronically with USCBP.
What information must I include on a duty drawback claim?
Specific requirements may vary, but at a minimum, you can expect to provide:
- 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)
Can I file a duty drawback claim on the export of previously imported goods?
Yes, so long as you follow the duty drawback rules.
How long will it take for my duty drawback refund to be processed?
If you have an “Accelerated Payment” privilege, you can expect a refund within four to eight weeks of filing your claim. Without this privilege, you might wait up to one to two years. We can help you get an Accelerated Payment privilege.
Where can I learn more about duty drawback services?
We’re glad you asked. USCBP has a list of frequently asked questions on duty drawback. If you want to discover how we can help you, please do get in touch.