Calculating Your Duty Drawback
Quantifying the duty recovery potential is the first step in determining whether a drawback program is right for your company.
There are two basic models for calculating estimated recovery:
Exportation to Importation
Working from exportation of your goods back to importation, is ideal when you source your imported merchandise from a domestic vendor and the merchandise undergoes a manufacture prior to exportation.
| Annual Export Sales | $20,000,000 |
| Ratio of Cost of Goods Sold | x 50% |
| Export Cost of Goods: | $10,000,000 |
| Ratio of Imported Materials | x 30% |
| Your Cost of Imported Materials | $3,000,000 |
| Your Vendor's Cost | $2,000,000 |
| Approx. Duty Rate | x 4% |
| Annual Drawback Potential | $80,000 |
| Retroactive Drawback | x 3 Years |
| Total Potential Drawback | $ 240,000 |
In this model, certain variables such as cost of goods, ratio of imported materials, vendor mark-up, duty rate, etc. are approximated. These will vary depending on commodity and industry.
Importation to Exportation
Working from importation to exportation, is best for importers that can accurately assess their duty payments.
| Annual Duty Paid | $400,000 |
| Ratio of Export Sales To Total Sales | x 25% |
| Annual Drawback | $100,000 |
| Retroactive Drawback | x 3 years |
| Total Potential Drawback | $300,000 |
It should be noted that these models will only provide a theoretical framework for duty recovery. Actual recovery will ultimately depend on the claimant's ability to collect the data and documentation required by Customs regulations.