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Working with a Duty Drawback Broker

Working with a Duty Drawback Broker
If the process of customs duty drawbacks is like speaking a foreign language, consider consulting with a professional who can translate the process. Learn how working with a duty drawback broker eases the stress.
April 1, 2020
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Last Modified: January 16, 2024

Did you just come to the realization that you’ve been leaving a substantial amount of money on the table by not claiming duty drawback? Working with a duty drawback broker can alleviate that issue. But the bigger issue is how to go about finding one.

Thankfully, working with a duty drawback broker isn’t hard to do and a good one will even make the whole ordeal painless, quick and efficient. With a bit of knowledge about duty drawbacks and what to look for in a duty drawback broker, you’ll be recouping money in no time.

Read more below and have a better understanding of how to best navigate the way with the help of a reputable broker like USA Customs Clearance to add valuable dollars back to your bottom line. With just some paperwork from you, USA Customs Clearance can help you file for those duty drawbacks and get you the refund you’re entitled to. Just like your supply chain, you want your duty drawback filings to go as smoothly and efficiently as possible.

What is a Duty Drawback?

What is a Duty Drawback

First, a quick overview on what a duty drawback is so you know what you’re recruiting help for. A duty drawback is a refund issued by the Customs and Border Protection (CBP) on duties, taxes or fees previously collected during the importation of goods. 

If those imported goods to the United States are exported or destroyed, the importer, exporter or an associated party can get up to 99 percent of the duties back if the appropriate paperwork is kept and submitted, and a CBP Form 7553 is successfully filed.

The best comparison to this in everyday life is if you buy an item from a store. If you have to return the product, you are refunded not only the item’s unit price but also the sales tax you were assessed during the purchase. This is roughly how duty drawbacks work, although with a greater deal of complexity than a simple sales tax refund on one good.

The whole concept of a duty drawback began in the aftermath of the Revolutionary War in the 1780s. Although the process is now different, the purpose remains the same. It was then created to allow the United States to compete in the global marketplace and not be at a disadvantage. Lowering the price of doing business for exporters promotes more domestic business, which in turn usually strengthens America’s economy.

The way fees paid on imported items might have changed, but they still exist because they’re an effective way to encourage the overall production and importing and exporting of materials.

How Duty Drawback Can Help Your Business

If you could lop off 25 percent of your business’ cost in any area, or conversely increase profits by that amount, would you do it?

That rhetorical question aside, that is an example of what the difference between claiming drawback and not claiming drawback can mean to your business. Let’s use a quick comparison to illustrate how much of an advantage your operations could gain from participating in the duty drawback program.’

The base cost of an imported item for you and your competitor is $400. Both of you have to factor in a 25 percent duty ($100) and then mark the item up 50 percent ($200) to bring the total to $700 as the export selling price.

But wait a minute — you participate in duty drawbacks and your competitor doesn’t. So you know you’ll get a 99 percent refund on the initial duty payment ($99). So you are both selling your products for $700 but it costs you only $401 to fully export it but it costs your competitor $500. Or you can lower your product’s price to $601, still realize your 50 percent markup and severely undercut your competitor.

You can also tweak the windfall to employ a combination of those two tactics, to increase the markup you get while still selling for less than a competitor. Taking advantage of these drawback rules will help your company complete much more effectively in the global market, which is why duty drawback law exists in the first place.

You can even take it a step further and have a skilled duty drawback broker such as USA Customs Clearance do the work of filing for you in exchange for a percentage of the drawbacks, so you have less work to do but still enjoy the great benefits of still receiving the refund.

About $600 million is claimed in drawback per year. Yet, that is only 15 percent of the money total that is eligible for drawbacks. This means there are literally billions of dollars going unclaimed every 12 months. A slice of that might be yours and it’s time to learn how to go get it.  

Duty Drawback Process

Duty Drawback Process

The duty drawback program for earning back the money you’re entitled to can be pretty complex as far as making sure it is extremely accurate to ensure you receive a refund but the information you are responsible for submitting is straightforward as long as you have diligently kept records on what you’ve imported and are then exporting or destroying to qualify.First, a quick overview on what a duty drawback is so you know what you’re recruiting help for. A duty drawback is a refund issued by the Customs and Border Protection (CBP) on duties, taxes or fees previously collected during the importation of goods. 

To be in a position to make your claim, there are three items a claimant must submit:

  1. The proof of destruction or exported goods
  2. A certificate of any manufacturing of the goods that occured in the United States
  3. Any descriptive information pertinent to the import of products, to prove you qualify for a drawback.

A Certificate of Delivery is a great document to keep and use for this purpose since it could satisfy more than one of the requirements by itself. Another important thing to consider is that drawbacks can be claimed up to 5 years from the date that the goods were originally imported. So if you have documentation, you can apply for previously imported and then exported or destroyed items.

There are only four drawback center locations in all of America: they are in San Francisco, Houston, Chicago and New York/Newark. Applications to receive drawbacks can be filed with any of these offices, regardless of where the goods were imported to or from. You can call, write or email all of the centers with any questions. Filing your drawback claim, however, is done electronically.

This is a source of significant savings for a company. It is estimated that 85 percent of duty drawback available in totality goes unclaimed each year. That is a lot of money to leave on the table when the U.S. has specifically earmarked it for your business to receive back. Let an industry expert like USA Customs Clearance make sure that money ends up back in your business’ pocket.

Work with a specialist to make importing and exporting to the USA a hassle-free process.

Get the details you need with our import consulting services.

Different Types of Duty Drawbacks

Different Types of Duty Drawbacks

There is not just one scenario where duty drawback can be claimed. In fact, there are many different scenarios in which you can claim duty drawback under 19 USC 1313, which deals with duty drawback and refunds. As mentioned in the previous section, you will need complete documentation as evidence that you’re complying with the guidelines of qualifying for a drawback.

Articles made from imported merchandise

Once products are exported or destroyed, the exporter can then file for duty drawback. One of the few exceptions is on flour or by-products from imported wheat. If the merchandise has been manipulated in any way — i.e. broken down into parts or similarly pieced out — the drawback will be drawn on each piece’s value at the time it was broken down. This is also known as manufacturing drawback.  

Substitution of items for drawback purposes

Basically, if you have to swap out items within a 5-year period of the original products being imported and not used in production, you can still claim duty drawback on new items. However, in order to do this, the original products must be exported or destroyed.

Items not conforming to sample or specs

Basically, if you receive items or components that are not up to your specifications, it can be sent back to the original importer within 5 years or destroyed. Under this particular example, if a company sends you items without your consent or that are defective, you can also receive back the amount paid on imported merchandise.

Work with a specialist to make importing and exporting to the USA a hassle-free process.

Get the details you need with our import consulting services.

Foods and Beverages

Several things related to food, drinks, medicine or toilet-related products are covered under the drawback and refund program:

  • Flavoring extracts; Medicinal or toilet preparations: With these two items, the drawback available is based on the amount of alcohol used to create the products. Once the product is exported, the drawback can be claimed. 
  • Liquor and wine: When these drinkable types of alcohol are produced and exported, there are taxes levied. However, the duties are eligible only for bottles of alcohol which are exported internationally and not on any taxes paid on normal domestic business.
  • Salt for curing fish: If salt is imported and then used to cure fish that are either wild-caught or farmed from a fishery, you can draw a refund on the tax originally paid for the salt.
  • Exported meats cured with imported salt: Similarly when using imported salt on meats which are then exported, you can get a duty drawback on that salt as well.

Construction and equipment for vessels built for foreigners

This one is self-explanatory — if you import materials or equipment that are used to build vessels for any country outside of America, you can claim duty drawback on those materials.

Jet aircraft engines

If a jet engine is built, reconditioned, repaired or otherwise overhauled in the U.S. using foreign parts, then the duties charged can be recouped.

Proof of exportation

This is a crucial aspect of the whole enterprise. It’s imperative the business claiming a duty drawback provides proof of the exportation of the products.

This means that such documentation should firmly state the date, your identity as the exporter and the facts surrounding the exportation. The way this will be accomplished is through the normal business records kept by you — so if your recordkeeping is somehow lax, now is the time to tighten that up. U.S. CBP also has its own electronic export system; you probably filed your exports through this originally.

Still, keep your own records in the event there was any discrepancy between what you did and what the U.S. government has on file. These records will also greatly aid a duty drawback broker like USA Customs Clearance in filing on your behalf and assuring 

Work with a specialist to make importing and exporting to the USA a hassle-free process.

Get the details you need with our import consulting services.

Unused Merchandise Drawback

Sometimes materials or products are imported into the country with the full intention of being used. But if the items aren’t implemented into your original plans, there’s no reason to take the loss of both the initial cost of the items themselves, plus the duty that was charged on top.

So if you are still within a five-year period of the date of importation, you can file to receive duty paid back. The materials in question will have to be exported, or destroyed under the supervision of the CBP. Also, as it strongly implies in the heading of this section, the items have to be unused to qualify for this type of drawback.

Benefits of a Duty Drawback Broker

Benefits of a Duty Drawback Broker

There are numerous positive aspects of working hand in hand with a duty drawback broker. The first benefit is if you’ve kept the proper documentation, you can submit that to a customs broker and have them fill out the CBP Form 7553 on your behalf. This will save you the headache of having to do paperwork and correctly filing it all on your own, especially if you are unsure of how to proceed.

A competent customs broker will also have great attention to detail, which is also very important since incomplete or inaccurate information on a CBP Form 7553 could lead to your duty drawback request to be delayed or, worse, rejected.

Further down the line of how a broker can help is their vast knowledge of not only how to process and file the information but are up to date on the laws and bylaws. This knowledge will allow the broker to get you the maximum amount of drawback you’re entitled to.

If you have an ongoing relationship with a duty drawback broker, they will even annually check in with your operation to do a yearly audit so that — heading into the future — you don’t forget about the money you’re entitled to receive a refund on. 

In some cases, the initial assessment is offered complimentary and the duty drawback broker will determine whether or not you are able to initiate a refund on duties, taxes and fees previously paid. Once that decision is made, the duty drawback broker will generally charge a small percentage of the total drawback as a fee for their work.

Work with a specialist to make importing and exporting to the USA a hassle-free process.

Get the details you need with our import consulting services.

If you work for a period of time with a duty drawback broker and your drawback requests are going off without a hitch, you can even begin to get accelerated payments. This is when the CBP will pay you very quickly after your form is filed for the estimated amount of drawback. 

At a later time, you may be asked to repay part of the disbursement if the CBP finds it overpaid you and you will be asked to provide a bond to cover the good faith payout to ensure you don’t decide to keep money that isn’t yours. 

Working with USA Custom Clearance on Duty Drawbacks

When you’re ready to begin the process of initiating your rightful customs duty drawback, enlist the help of the experts at USA Custom Clearance. We can help in knowing the ins and outs of compiling the right paperwork, filling out the form and getting back the duties, taxes and fees paid upon importation.

USA Customs Clearance can also track the status of your duty drawback and assist in minimizing the amount of time it would take to receive a refund. We also provide additional services like customs bonds for your importation needs. USA Customs Clearance can also warehouse your imports for you and even offers transportation options — which is all backed by our always available customer service.

If you need additional services for your business, such as freight transportation, warehousing or even managing your supply chain, we can also help with that through R+L Global Logistics, our partner company. USA Customs Clearance can truly offer a comprehensive experience in this way.
For a free quote today for any of our services or to specifically get started on your duty drawback request, call 855.912.0406 or visit our customs consulting services page today!

Work with a specialist to make importing and exporting to the USA a hassle-free process.

Get the details you need with our import consulting services.
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