Strategy 05 of 08

Duty Drawback

Recover up to 99 percent of the duties, taxes, and fees you paid on goods that were later exported, destroyed, or used to make something that is exported.

Best for: Importers who export, or whose customers do

How it works

The order the work actually runs in.

1
Identify which imported goods leave the country again, whether as-is, as a component of something else, or destroyed under supervision.
2
Choose the drawback type that fits: unused merchandise, manufacturing, or rejected merchandise.
3
Build the trace from import entry to export event. This is the real work and the reason most eligible claims are never filed.
4
File the claim, including retroactive claims covering entries from the previous five years.
5
Apply for accelerated payment so refunds arrive before liquidation rather than years after it.

A worked example

What the strategy looks like once you put numbers on it.

Worked example (illustrative)

Five years of exports that had never been claimed

A components distributor imported $9M a year and re-exported roughly 18 percent of it to customers in Europe and South America, without ever filing drawback.

18%

of imported volume re-exported

$411k

recoverable per year going forward

$2.0M

recovered on the first retroactive filing

The Situation

The distributor had always treated duty as a sunk cost. Nearly a fifth of what it imported was shipped straight back out to overseas customers, with the duty never recovered.

The Move

Import entries were matched to export documentation across the previous five years, and an unused merchandise drawback program was set up so future exports are claimed on a rolling basis rather than in an annual scramble.

The Result

About $2.0M came back on the first retroactive filing, and roughly $411k a year is now recovered on an ongoing basis. Accelerated payment brought those refunds forward by a considerable margin.

Figures are illustrative math on a representative volume, not a specific client engagement. Your own numbers depend on your product, your codes, and current policy.

Before you commit

What this needs from you, and where it goes wrong.

What it takes

Import entry data and export proof that can be matched, unit by unit or through an accepted accounting method
A five-year look back at what you have already shipped out
A named owner for the filing, whether in-house or a drawback specialist
Patience on the first claim. Setup is front-loaded, then it becomes routine.

Watch-outs

Drawback is a documentation exercise. If you cannot trace import to export, the claim will not survive review.
Eligibility varies by action: Section 301 duties are generally eligible, but check each Section 232 or emergency proclamation's drawback terms. Exports to Canada and Mexico are capped under USMCA.
The five-year limit runs from the date of importation. Every month you wait, the oldest entries drop out of the window.

Keep reading

Other ways to reduce a duty bill

Tariff mitigation strategiesEight legal routes to a lower duty bill, and when each one applies.Tariff engineeringDesigning the product so it classifies into a lower duty rate.First sale for exportPaying duty on the factory price rather than the middleman's.Foreign trade zonesDeferring, reducing, or avoiding duty by where you hold inventory.HTS classification reviewMost overpayment starts with the wrong code on the entry.Section 301 exclusionsWhether your product falls under an active exclusion.Supply chain diversificationA qualified second country before you need one.Duty sharing with suppliersNegotiating who absorbs a tariff increase mid-contract.

Would this one work for your product?

Send us your HTS codes and volumes. We will tell you whether this strategy applies to you, what it is worth, and what it takes to put in place.

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