Duty Drawback Seems So Complicated, How Can I Make it Simple and Efficient?

Duty drawback is an international compliance program that allows for the refund of Customs duties paid on imported merchandise when the products have been subsequently exported or destroyed. This program was established in 1789 to promote exports by means of offering duty refund when imported merchandise has been exported.

The duty drawback program requires an investment of both time and labor, but the results can be rewarding in terms of substantial refunds.

The benefits of duty drawback include:

• A refund of 99% of the U.S. import duties & taxes (in most situations)
• Reduces cost of goods
• Expedited payment of claims with granted privilege
• Promotes U.S. manufacturing & U.S. exports
• Allows more U.S. companies to be competitive in the global market

It is important to note that duty drawback is a privilege, not a right. This program entails a strict compliance and extensive recordkeeping. However, if a company anticipates its duty drawback program as a continuous process and not just a one-time, case-by-case occurrence, there are several measures that could make the process of running a drawback program simpler and more efficient.

DRAWBACK PRIVILEGES

There are four privileges that a drawback participant may apply for and be granted by U.S. Customs and Border Protection (CBP):

• WAIVER OF PRIOR NOTICE
• ONE-TIME WAIVER OF PRIOR NOTICE
• ACCELERATED PAYMENT
• DRAWBACK COMPLIANCE PROGRAM

A request must be submitted to CBP by the drawback claimant or their Customs broker. These are lengthy applications and may take up to 6 months to secure an approval from CBP.

WAIVER OF PRIOR NOTICE 

The waiver of prior notice privilege allows the drawback claimant to export or destroy goods as needed, without any advanced notice given to CBP. Typically, without this privilege, a company would be required to notify CBP of their intent to export or destroy goods before doing so.

Filing a Notice of Intent to Export or Destroy with CBP is reasonable if exports or destructions occur sporadically, but this can become very burdensome for companies that plan to do so regularly, as it could delay their process of exporting and destroying the goods, and subsequently, filing their drawback claim.

Without this privilege, if a company failed to notify CBP prior to exporting or destroying the goods, the drawback claim would be denied with no recourse.

ONE-TIME WAIVER OF PRIOR NOTICE 

This is a similar concept to the WAIVER OF PRIOR NOTICE, but the difference is that it deals with previously exported or destroyed items. It essentially allows the claimant a “get out of jail free” card, which waives the requirement of notifying CBP prior to exporting or destroying for up to the previous five years. This privilege can only be used once, so it is important to use it wisely.

ACCELERATED PAYMENT 

It can often take more than a year to receive a duty refund for a drawback claim. With the accelerated payment privilege in place, the claimant would post a separate drawback bond with their claim and would be able to obtain their duty refund much faster, usually within 30 days.  However, with this privilege, Customs retains the right to request the funds back at a later time if the claim is denied.

DRAWBACK COMPLIANCE PROGRAM

This privilege is for more experienced drawback claimants that can demonstrate strong recordkeeping and adherence to the complexities of the drawback program.  If approved for this program, any penalties or denials of claims are lesser in scale than those without this granted privilege.

Applying for any drawback privilege requires substantial initial preparation, time, and effort. However, if granted, these privileges can make the duty drawback process run more smoothly and more efficiently and are certainly worth pursuing in most cases.

Reach out to Green’s duty drawback experts who can walk you through the privilege application process to streamline your company’s duty drawback program.

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