• Our Company
  • About Us
  • Philosophy
  • Key Facts
  • History
  • Leadership
• Core Services
  • Supply Chain Solutions
  • Transportation
  • Customs & Compliance
  • Distribution
  • Order Management
  • Risk Management
• Customer Solutions
  • Industries
  • Project Cargo
  • Network Solutions
  • Tradeflow
  • Tradewin
• Technology
  • Our Systems
  • Online Tools
• Sustainability
  • Our Program
  • Environmental Stewardship
  • Health & Safety
  • Social Responsibility

• 
  • Tradewin ^® Consulting
  • Duty Drawback Center
    • Duty Drawback Solutions
    • Why Tradewin?
    • Types of Drawback
    • Drawback Toolbox
    • Drawback Privileges
    • Drawback Reviewer ^™ Login
  • Trade Account Profiles
  • Seminars & Training
  • Terms & Conditions
  • Contact Tradewin ^®

Types Of Drawback

Unused Merchandise Drawback

19 USC 1313(j)

Imported Merchandise that has not been used or put to its intended purpose in the US is eligible for Unused Merchandise Drawback if the merchandise has been re-exported from the US or destroyed under Customs supervision within 3 years from the date of importation.

"Direct Identification"

19 USC 1313(j)(1)

Although Customs generally requires the drawback claimant to directly track its merchandise from point of importation to exportation, it will allow the use of certain accounting methods such as LIFO, FIFO, or Low to High if the claimant can demonstrate its ability to comply with the accounting requirements.

Direct Identification is required for all exports to Canada and Mexico. See part 191.14 of the Drawback Regulations for more information on accounting methods.

"Substitution"

19 USC 1313(j)(2)

A claimant may file for Unused Merchandise Substitution Drawback if it exports or destroys merchandise (domestic or foreign) that is commercially interchangeable with the imported merchandise and does so before the close of a 3 year period beginning on the date of importation of the imported merchandise subject to the drawback claim. Before a claimant can file under this provision, Customs must make a determination as to whether the imported and substituted merchandise are commercially interchangeable.

Customs also requires the claimant to possess both imported and substituted merchandise. The Substitution allowance is not available on exports to Canada or Mexico.

Manufacturing Drawback

19 USC 1313

Imported merchandise that has been transformed into a new and different product that is subsequently exported (or destroyed in the U.S.) is eligible for Manufacturing Drawback if the exportation occurs within 5 years from the date of the merchandise's importation. Customs further stipulates that the article manufactured from imported materials cannot be used for its intended purpose in the US prior to its exportation.

In addition to claiming drawback on the actual imported merchandise that is exported, Customs also allows the claimant to collect drawback on any waste or yield loss of imported merchandise that is incurred in the production of the exported articles. Records that identify the quantity and value of the waste must be maintained by the claimant.

"Direct Identification"

19 USC 1313(a)

Although Customs generally requires the drawback claimant to directly track its merchandise from the point of importation, through production, and then exportation, it will allow the use of certain accounting methods such as LIFO, FIFO, or Low to High if the claimant can demonstrate its ability to comply with the accounting requirements.

"Substitution"

19 USC 1313(b)

A drawback claimant may file for Manufacturing Substitution Drawback if it exports a finished article that is made in whole or in part with the use of raw material or components (domestic or foreign) that are of the "same kind and quality" as the imported merchandise subject to the drawback claim.

Although Customs does not require the claimant to actually export the imported merchandise that is the subject of the drawback claim, it does require that the claimant use the imported merchandise in its production process. The resulting article may or may not then be exported.

Before a claimant can file under the substitution allowance, it must obtain a manufacturing substitution drawback ruling. This ruling will, among other things, establish the fact that both the imported and substituted merchandise are truly "same kind and quality" material. The primary criteria that Customs uses to establish whether two materials are "same kind and quality" or "substitutable" is whether they can be used interchangeably in the manufacturing process that produces the same exported article.

The original intent of Manufacturing Substitution when it was introduced by Customs in the 1950's was to relieve the claimant of having to maintain two separate inventories, one for domestically-sourced raw material and another for imported, duty-paid raw material. Today, most companies that take advantage of the Substitution allowance do so because it relieves them of the administrative burden of having to track its materials from import to export. Another advantage of using Substitution is the claimant's ability to match older, higher duty value imports with newer exports, thereby maximizing its drawback rate of return.

Rejected Merchandise Drawback

19 USC 1313(c)

Imported merchandise that has been shipped without the consent of the consignee; does not conform to sample or specification; or is defective at the time of importation is eligible for Rejected Merchandise Drawback if the claimant returns the merchandise to Customs custody within 3 years from the date of its original release. Once in Custody, the claimant can export or destroy the merchandise.

Under this provision, the claimant must be able to track the merchandise from importation to destruction or exportation. No substitution allowance or accounting method is permitted.

If the rejected merchandise has not been used in the U.S., most claimants will typically file under the Unused Merchandise Drawback provision since the documentary requirements for Unused are not as severe as Rejected Merchandise