FAQ: Can I Get a Refund on Duties Paid for Obsolete Product?

LET’S CONSIDER THE FOLLOWING SCENARIO

A company imports seasonal merchandise, such as Christmas decorations, and most of the product is sold. However, due to lack of demand, some remaining inventory may not have been sold, even at a discounted price. If it is financially feasible for the company, the remaining inventory may be stored until the following year.

But what if the product becomes obsolete? Products such as annual calendars, date/time sensitive product, or even outdated technology?  Once highly sought-after gadgets are replaced seemingly overnight by newer and better versions. As a result, importers may have an inventory of obsolete product on-hand and will be in search of ways to recover some expenses. Getting a refund of the duties paid for the imported merchandise is one way to achieve this.

Fortunately for many importers, there is a U.S. Customs program, called duty drawback, that specifically covers unused imported merchandise.

A drawback claimant may receive up to 99% of duties paid back on their imported merchandise.

IMPORTERS, AND OTHER PARTIES ELIGIBLE TO CLAIM DRAWBACK, HAVE TWO OPTIONS TO SECURE A DUTY REFUND:

1. Export the imported merchandise outside of United States, or
2. Destroy the obsolete inventory under CBP’s supervision.

STEPS IN FILING A DUTY DRAWBACK CLAIM:

• Gather import documentation
  • Includes, but is not limited to the purchase order, commercial invoice, packing list, bill of lading/airway bill, delivery order, and inventory receipt.
• Gather Customs documents, such as Entry Summary (CF 7501) that covers imported merchandise that will be exported or destroyed.
• File the Notice of Intent to Export / Destroy (CF 7553).
• Gather records that tie together the items that were imported, and duty paid with the items to be exported or destroyed.
• Provide proof of export, such as export invoice and export bill of lading, or proof of destruction.

All documentation must be submitted with the duty drawback claim, which is filed electronically. The documentation must be in order, to support both the import of the goods and export or destruction of the merchandise.  During the claim review, CBP may request additional information to support the claim. Ultimately the claim will be liquidated – either duty refunded or denied.

It is important to remember that this is not a cookie-cutter process, especially in the initial stage, and each case may have different requirements based on the particular product and the regulations that cover it.

WITH KNOWLEDGE COMES POWER

Duty drawback options can be incredibly beneficial for the international trade community and are important to be aware of. There are many resources for self-filing, but it is always a good idea to first reach out to a U.S. Customs broker, who is knowledgeable in duty drawback regulations.

Contact our Global Trade Solutions team today for more information on how unused merchandise drawback may help your bottom line.

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