RGCI-Duty RGCI - Drawback What Is It and How You Can Take Advantage of the ProgramDo you import and export? Does your company use imported components in your manufactured goods? Has your company been affected by the Section 301 Tariffs on Chinese imports?

If the answer to any of these questions is yes, then you could be taking advantage of the Duty Drawback program to mitigate the effects of tariffs and the trade war with China and recoup some of your costs.

What is Duty Drawback?

Duty Drawback is a refund of certain duties, fees and taxes paid on goods imported into the U.S. that are subsequently exported from the U.S. or destroyed under CBP (U.S. Customs and Border Protection) supervision. Similar to how you are refunded sales tax when you return an item to a store, you can potentially claim a duty refund when you export an item that was previously imported. 

The Many Faces of Duty Drawback

There are many different categories of duty drawback, but the most common are Manufacturing and Unused Merchandise. Though Substitution Drawback, while complicated, can also be very flexible and useful. Drawback is recognized as one of the most complex commercial programs the U.S. Customs and Border Protection administers because it involves multiple facets of the Customs business, including both exports and imports. Even complicated supply chains can take advantage of the program as long as the necessary import and export documentation is maintained.

  • Manufacturing Duty Drawback applies when you import an item that is then incorporated into, or further manufactured into, a different item. For example, if you import bicycle tires and export finished bicycles, then you can get the duty you paid for the bicycle tires refunded when you export the finished bicycle.
  • Unused Merchandise Duty Drawback applies when you import something, and then export it in the same, unused condition. If you import bicycle tires, and then export them again without changing them, then you can get a refund for the duty you paid when you export the tires.
  • Substitution Duty Drawback. If you use both imported and domestically sourced materials, you can potentially take advantage of Substitution Duty Drawback. If the substituted, exported product shares the same first 8 HTS code digitsas the imported product, then it may qualify for duty drawback.

Please remember that there are caveats and exclusions to the above descriptions. NAFTA, or the soon-to-be USMCA, has special exclusions and calculations. Other Free Trade Agreements affect Duty Drawback, but if you import and export—even across a complicated supply chain—Duty Drawback is worth further research.

If you would like to know more, contact Redstone Government Consulting. Our team can provide guidance to help your team reduce the impact of the recent trade war and take advantage of a variety of concessions.

 

Fill out the form below if you are interested in more information and training opportunities related to duty drawback.

Written by Carolyn Quinn Turner

Carolyn Quinn Turner Carolyn assists Redstone Government Consulting, Inc. in the area of International Trade and Import/Export Compliance, specifically the International Traffic in Arms Regulations (ITAR) the Export Administration Regulations (EAR). Carolyn assists a wide variety of contractors with compliance in international trade and ITAR/EAR regulations as well as implementing policies and procedures that assist companies in those areas. Professional Experience Starting in 2002, Carolyn was an International Research Analyst at the Alabama International Trade Center. While here, she conducted country and market analyses and translated trade documents. She then worked at Page & Jones, Inc., handling freight coordination for the NVO imports and exports, gathered freight rates for all customers, both import and export, and acted as the NVO controller by handling training, coordinating shipping rates, and record keeping. Starting in 2008, Carolyn held the position of International Trade Specialist at the Alabama International Trade Center. She assisted small and medium sized companies with international trade, expanded company’s sales via international opportunities, problem solved wide ranging international topics such as ITAR and EAR, classification, regulations, contracts, finance options, risk mitigation, and more. She also conducted country/market analyses for international market research, provided international business training and presented educational industry seminars and oversaw research staff on international trade projects and assignments. During the period of 2011-2016, Carolyn was also an Adjunct Professor at the University of Alabama, developing and teaching online International Business classes. In addition to her international experience, Carolyn has studied in Spain, Chile, and Cuba and has work experience in trade missions in Thailand, Norway, Sweden, and Chile. She can read, write, and speak Spanish proficiently. Certifications In 2005, Carolyn became a Licensed US Customs Broker during her time with Page & Jones, Inc., and focused on HTS and Schedule B Classification as well as Entry Filing. In 2009, Carolyn earned the NASBITE Certified Global Business Professional Certification. She has training on these topics: Incoterms, International Distributor Agreements, How to Prepare for an Import & Export Audit, ITAR and EAR, NAFTA, and other FTA’s, Developing an Import/Export Compliance Program, Import and Export Documentation, Customs Brokers License Training Course with Logistics Training Systems, Hazardous Materials, SBA and EXIM Trade Financing, Trade Promotion Coordination Committee (TPCC) Training, SBIR Grants, International Intellectual Property Rights, and global e-commerce. Education Carolyn has earned her Bachelor of Science degree in Commerce and Business Administration from the University of Alabama in Tuscaloosa. She has also earned her Masters in Management with a Global Business Concentration from the University of Alabama in Tuscaloosa. Affiliations She has been a board member of the Japan America Society of Alabama since 2009 and a board member of Destination Hoover International since 2018. Carolyn is also a member of the Export Alabama Alliance.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Export and Import