Have you been overpaying customs duty? Perhaps you’re an exporter, import, or eCommerce merchant shipping packages internationally. Or maybe you do online shopping a lot. Of course, you usually pay duties and taxes on each shipment. But you probably don’t know that you could claim a refund on some of the duties and taxes you’ve paid.
For example, if you pay duties to buy a product from another country into the US and that product is to be returned or resold out without being used, you can claim a refund on the duties paid. This is known as duty drawback.
What is the duty drawback?
A duty drawback is a refund on duties, taxes, and other fees paid on imported goods that are later exported as part of a finished product or without being used. It also applies to products destroyed under US customs supervision.
Duty drawback was introduced by Customs and Border Protection to reduce costs and promote exports, boosting the economy.
So if you’ve been paying duties on packages that were later returned, destroyed, or exported unused, you may be eligible to file a duty drawback claim.
Types of duty drawback
Many kinds of duty drawback claims exist, but there are three major ones:
1. Unused merchandise drawback
Unused merchandise drawback is applicable when a product is exported or destroyed under Customs supervision without being used in the United States. In this case, the product is exported or destroyed as-is, meaning no changes are made to it. It is neither used by a consumer nor used to manufacture another product.
2. Manufacturing drawback
Manufacturing drawback applies when a product manufactured using imported merchandise is exported or destroyed in the United States under Customs supervision. For example, you imported a car component into the US, which is then used to manufacture a vehicle. If that car is later exported or destroyed, you could seek a duty drawback if you paid custom fees on the car component during importation.
The reason is that duty will typically apply to the car’s exportation. So that results in paying twice (during import and export). If the car is to be destroyed, it means the product is more or less wasted. You have the right to claim a duty drawback so your money doesn’t go to waste.
3. Rejected Merchandise Drawback
Rejected Merchandise Drawback applies to imported goods that have been rejected and then destroyed or returned to the shipping country. This may result when the imported product:
- Was not what you expected
- Was shipped to you without your consent
- Was found to be defective
- Has been sold at retail but then returned by the buyer, and you wish to export it back to the sender.
If you own a warehouse and ship tons of products, you may be eligible for thousands of dollars in duty drawback a year. That’s because you will likely get to return many defective or unsatisfactory products.
How to file a duty drawback claim
If you are filing for a duty drawback for the first time, you will need to apply to US Customs for their Accelerated Payment Request and Waivers for past and subsequent notices. After receiving your application, they will approve or respond to your claim after some days or weeks. Sometimes, it can take up to three months.
To ensure you get the process right the first time, you might want to have a professional working on your behalf, such as a duty drawback broker. It’s important to file your claim with all relevant details, so your application is treated with due regard. A duty drawback broker may also help when time isn’t on your side, especially when you’re a busy international trader.
Duty Drawback Frequently asked questions
How much can I get from a duty drawback refund?
A duty drawback refund allows you to claim up to 99% of your duties, taxes, and other fees paid on imported merchandise.
How long does it take to receive a duty drawback refund?
The simple answer is this: it varies. With Accelerated Payment Privilege, your application is usually approved, and checks are issued within 4-6 weeks after filing your request. If no accelerated Payment Privileges are applied, it can take a year or two to receive your refund.
What is the Duty Drawback Accelerated Payment Privilege?
With the Duty Drawback Accelerated Payment Privilege, you can get your duty drawback refund as quickly as 4-6 weeks after filing your claim. Without it, your refund can take months or years to come. This is something a duty drawback broker can help with, as they can help you see if you are eligible for the privilege and to apply accordingly.
Final words
Duties may seem insignificant, sometimes costing just $3 on a $100 product. However, they quickly add up and may amount to tens of thousands of dollars a year, especially when you do a ton of import/export. If you’re not willing to let such an amount of money go down the drain, consider filing for a duty drawback now.
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.