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What is Manufacturing Drawback?

December 12, 2023

Manufacturing Drawback

Are you getting your maximum refund of customs duty? You can claim duty drawback on exports under H.R. 644.

What is Manufacturing Drawback?

Manufacturing drawback can be claimed when duty-paid materials are used to produce final goods to be exported. A company can go back five years and claim on imports used in a manufacturing process to export. There are two types of manufacturing drawback:
  • Direct Identification Manufacturing Drawback
  • Substitution Manufacturing  Drawback

Direct Identification Manufacturing Drawback §1313(a)

Manufacturing Direct ID Drawback can be used to claim drawback on imported duty paid products that can be tracked through the manufacturing process by a unique identifier or accounting method. The manufactured goods are then exported and a claim can be filed on the original imported products.

Substitution Manufacturing Drawback §1313(b)

Substitution manufacturing drawback is a refund of duties, taxes and fees when the imported products, classified to the 8-digits HTS, can be substituted with materials used to manufacture a final good. The imported products and substituted materials used in the manufacturing process must have the same 8-digit classification number. The manufactured product is then exported, and a claim can be filed to recoup the duties, taxes and fees.

Manufacturing Drawback Ruling

A ruling is needed when running a manufacturing program. A company will need to apply for either:
  1. A General Components Ruling stating that the company is importing duty paid parts / components to create their final good. For example, importing parts to produce an engine and exporting the engine.
  2. A Specific Ruling stating that the company importing duty paid raw materials and applying a more complex manufacturing / producing / refining process to create a final good for export.
Charter’s experienced legal team can assist in reviewing the manufacturing process and writing the ruling four clients.

Supply Chain Opportunities

A drawback claim can be made with evidence of a sale or exchange within the supply chain. An example of this is when a company imports material used in their manufacturing operations, and sells the manufactured product to a company that ultimately exports it. The supply chain experts at Charter Brokerage can assist with preparing and executing sharing agreements for the parties in your supply chain that benefit from the drawback refund.

Why Charter Brokerage?

Manufacturing Drawback is complex and can be difficult to manage. Charter Brokerage is here to guide you through this challenging process, with access to our legal team at every step of the way. Our clients are our focus. To learn more, contact us at: inquiries@charterbrokerage.net