Drawback is a
refund of 99% of all ordinary Customs duties and internal revenue
taxes. Drawback was initially authorized by the first tariff act of
the United States in 1789. Since then it has been a part of
the law, although from time to time the conditions under which it is
payable have changed. For example, as a result of the Omnibus
Trade & Competitiveness Act of 1988, antidumping and countervailing
duties are not refundable on a drawback claim.
The rationale for
drawback has always been to encourage American commerce or
manufacturing, or both. It permits the American manufacturer
to complete in foreign markets without the handicap of including in
his costs, and consequently in his sales price, the duty paid on
The Types of
drawback are authorized under Title 19, United States Code, Section
1313, and implemented by Title 19, Code of Federal Regulations, Part
There are two
types of manufacturing drawback:
identification drawback which provides a refund of duties paid on
imported merchandise that is partially or totally used in the
manufacture of an exported article. Identification of the
imported merchandise from import to export is required by proper
record‑keeping procedures. The imported merchandise must be
used in the manufacturing process and exported within 5 years from
date of importation of merchandise (19 U.S.C. 131 3(a)).
drawback provides for a refund of duties paid on designated
imported merchandise upon exportation of articles manufactured or
produced with use of substituted domestic or imported merchandise
that is of the same kind and quality as the designated imported
merchandise. Same kind and quality means merchandise that is
interchangeable in a specific manufacturing process. The imported
materials must be used in a manufacturing process within three
years after receipt by manufacturer, the domestic material of same
kind and quality as imported materials must be used in
manufacturing process within these years of receipt of the
imported material, and the exported products must be manufactured
within three years after receipt of imported material by
manufacturer, and exported within five years of date of
importation of designated material (19 U.S.C. 131 3(b)).
Another type is
same condition drawback (19 U.S.C. 131 3(J)).
refunded on imported material which is subsequently exported in the
same condition as when imported, or when destroyed under Customs
supervision. The material must not have been used within the U.S..
However, incidental operations such as testing, cleaning, inspecting
and repacking are permitted. The materials must be exported or
destroyed within three years of the date of importation.
condition drawback allows claimants to file for drawback on imported
material even if the imported material is not the exact material
which is exported. However, exported material must be fungible with
the designated material. Fungible merchandise is merchandise which
is for commercial purposes identical and interchangeable in all
A 99 percent
refund of duties is also allowed for any imported merchandise found
not to conform to sample or specification, or shipped without the
consent of the consignee, if returned to Customs custody within 90
days of its release (unless an extension is granted) for examination
and exportation under Customs supervision.