We live in a global, interconnected economy in the 21st century. If you trade across borders, the chances are you're using manufacturing partners or raw materials from outside your own nation too.
And if you're bringing products or components in, the chances are you're paying more import duties than ever before. However, did you know that if you happen to be exporting a product that has previously been imported, you could be eligible for a refund of the duty on the original import?
This is called Duty Drawback and it's something we'll go into more detail on here in order to help your business see if it could be clawing back valuable funds.
What is Duty Drawback?
Duty Drawback is, according to the definition from US Customs and Border Protection, "the refund, reduction or waiver in whole or in part of customs duties assessed or collected upon importation of an article or materials which are subsequently exported".
Essentially, it's a reimbursement of 99 per cent of the duty paid on something brought into the US that was eventually sent out to somewhere else.
This is nothing new - in fact, it was only the second law passed by US Congress back in 1789 and was designed to encourage American manufacturing and foreign exports.
A claimant of Drawback can be an importer, exporter or a manufacturer, as long as they file the proper documentation and have the authority of the US Customs Service.
Why would I want to claim Drawback?
The main benefit of participating in Duty Drawback is not only being able to get taxes back into your pocket, but also having the ability to sell into foreign markets more cheaply because you don't have to take the cost of duties into account when you're pricing up.
Types of Duty Drawback
There are four main types of Duty Drawback:
1. Manufacturing Direct Identification Drawback
2. Manufacturing Substitution Drawback
3. Unused Merchandise Direct Identification Drawback
4. Unused Merchandise Substitution Drawback
Each has its own individual set of conditions and requirements, so it will be necessary to look into which one might apply to your company as you start your claim.
How to claim Duty Drawback and what information you will need.
The US Customs service is strict in terms of ensuring that all Drawback claimants follow exactly all of the procedural requirements for claims set out in law, which means careful record-keeping and attention to detail is vital.
Drawback claims must be submitted to offices in either Newark/New York, Houston, Chicago, or San Francisco for processing, regardless of where goods were imported.
Submission is paperless and must be received through the US Customs and Border Protection's (CBP) Automated Broker Interface, with the electronic TFTEA (Trade Facilitation and Trade Enforcement Act) being the only means of filing as of 2019.
General instructions can be found via CBP.gov on the ACE Business Rules section, but you will need to provide proof of exportation; information concerning any manufacturing conducted in the US; and information concerning the import entries, including a Certificate of Delivery and/or a Certificate of Manufacture and Delivery to the transferee of the drawback product.
It is likely to take anywhere between four and eight months between starting the Duty Drawback claim and receiving any monies owed, although this can depend on the complexity of transactions, the accuracy of records and any number of other circumstances.
You must file and complete any claims for Drawback within three years of the product in question being exported.
It sounds complicated - but MIC can help
If you think that sounds difficult, you're not alone. Indeed, that might be why US Customs estimates that as much as 85 per cent of available Duty Drawback is not claimed each year.
Just the process of gathering the necessary data and puzzling over where to submit it could be off-putting enough for the inexperienced.
Add to this the fact that there are currently fewer than 25 companies permitted by US Customs authorities to file Duty Drawback claims and you'd be forgiven for wanting to forget the idea altogether.
Don't do that though, because MIC happens to be one of those select few approved companies - and we have dedicated tools in place to make an efficient, streamlined claim on your behalf.
MIC's MIC-CUST® Duty Drawback module has allowed us to file Duty Drawback claims worth millions of dollars since September 2019 alone, allowing our clients to quickly get their export duties back using our highly organised methods and proprietary software.
As you can see from our brief introduction, the potential for a cash refund using Duty Drawback is very much there, despite the finicky regulations and documentary requirements.
So, don't try to go it alone or abandon dreams of a refund - contact us today to see how we could help you get those duties back.
