Duty Drawback: It’s a hot topic lately

Camelot can assist importers and exporters in a review that determines if there are meaningful dollars on the table to be recovered from Customs through duty drawback.  Drawback is the process of receiving a refund of paid import duties on qualifying exports from the USA to foreign countries.  This differs slightly from Foreign Trade Zones, or FTZ’s, where duty is not paid at the time of importation of items going into the zone, but rather on the finished good leaving the zone.

Duty drawback, for instance, could be components or a finished article which are imported and then exported either as a further manufactured item or as they were imported (“same condition drawback”).  Under the scenario, the duty is paid as a consumption entry at the time of importation and 99% of the duty can be recovered after the entry has liquidated and the conditions met to prove the goods left the country.  Drawback is an arcane art and many brokers will either partner with a Customs broker whose sole practice is drawback (which Camelot has done with Northstar Drawback Consultants), or who have set up an internal department separate from their brokerage groups who handle the transactions.

Foreign Trade Zones differ in that they resemble what their name implies. Goods are brought into the zone which is treated as a foreign country and duties and taxes are not paid when goods enter the zone.  The imported goods are then lose their identity through further manufacturing and the duty rate is based on the finished article exported from the zone.  A good example is an automotive plant in downstate Illinois where parts of varying duty rates are brought into the zone, but the finished article which leaves the zone is a car.  That car is then dutiable at the rate of an auto which would otherwise show up directly from a foreign country.

There is a disconnect between the information that needs to be presented for import entry and what needs to be presented for drawback approval.  Drawback tracks the individual number of items imported and exported to a SKU level and will require some level of additional data entry if an import broker is not already receiving invoices or data electronically at this level of detail.  Importers and exporters who are seeking to take advantage of duty drawback should be aware that there will be a cost associated with the capturing of this data, likely through  manual process, as well as the percentage recovery fee that drawback companies charge for their services.

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