loader image

What is Duty Drawback?

October 7, 2020

What is Duty Drawback?

Charter Brokerage is the leading duty drawback provider in the United States.

Drawback Fundamentals

Duty drawback refunds 99% of duties, taxes and fees paid on imported products, if those products, comparable products, or products produced from the imported productare exported within five years.

The program recovers the costs of duties, taxes and fees on merchandise sold on international markets.

There are multiple drawback models used to maximize a company’s refund.

Charter advises which model(s) can be used for the largest monetary gain.

Types of Drawback

These are the main types of duty drawback:

  • Unused Drawback – HTS Substitution
  • Unused Drawback – Direct Identification
  • Manufacturing Drawback
  • Supply Chain – Multi-Party Drawback
  • Drawback Trading

Unused Substitution Drawback

A common form of drawback is “unused drawback” (also called “non-manufacturing drawback”) which can be claimed by two different methods: Substitution drawback and Direct Identification drawback.

Substitution Drawback:

  • Import a duty, tax, fee paid product into the United States.
  • Export the same or similar product that has the same eight-digit HTS number as the imported product.

Substitution drawback is the most efficient and streamlined approach to duty drawback. It is less data-intensive while yielding the same, if not bigger, benefit. While other drawback methods require detailed, product level data, drawback substitution can be conducted at the 8-digit HTS code. This allows for greater possibilities for what items can be imported and/or exported.

While there are specific rules around substitution drawback, Charter can advise and help companies navigate to fully benefit from this type of unused drawback.

Direct Identification Unused Drawback

Direct Identification (‘Direct ID’) drawback is used for U.S. companies exporting to USMCA countries or for companies that cannot meet the requirements under a substitution program. While more data-intensive, these programs are widely used in the drawback industry.

Direct Identification Unused Drawback follows this pattern:

  • Import a duty, tax, fee paid product into the U.S.
  • Export the same product as the imported product
  • Note that, if the imported item is not serialized or identified in some manner, a U.S. Customs-approved accounting method can be used to account for the imported item through inventory to the exported item.

Manufacturing Drawback

Drawback is a means to help manufacturers recoup the duties, taxes, and fees that the manufacturer or the manufacturer’s suppliers paid on their imported parts, inputs or raw materials used in the manufacturing of their finished goods that the manufacturer or the manufacturer’s customers export.

Manufacturing drawback programs need to have a manufacturing ruling associated with their drawback claim. Charter can assist in the following ways:

  • General Manufacturing Ruling
  • Specific Manufacturing Ruling — for manufacturing processes not covered by one of the general rulings
  • Charter can write and submit the ruling to U.S. Customs

Duty Drawback in Your Supply Chain

For over 25 years, Charter has expanded compliant ways to maximize our client’s drawback refunds. We are experts at analyzing our clients’ supply chains and finding previously uncovered drawback opportunities. 

Charter will take the extra steps needed to gather data and documentation from client’s supply chain to expand their drawback refunds.

We have uncovered billions of dollars in supply chain drawback for our clients. 

The Trading Drawback Model

The Trading Drawback Model is a compliant method of recovering import duty and fees via duty drawback by matching imports against exports of unrelated parties through a partnership with DL Trading.

We partner with existing importers and exporters to recover duties which they can’t recover on their own. Our unique partnership brings significant and ongoing duty which flow directly to our partners’ bottom-line profits.

Why Charter Brokerage?

Charter recovers more duty and tax refunds than any other service provider in the United States.

Charter Brokerage has incorporated compliance into all its service offerings and now provides a complete customs clearance solution for its clients.

Our clients are our focus.

To learn more, contact us at: inquiries@charterbrokerage.net