U.S. businesses are legally entitled for reimbursement of up to 99 percent of duties paid on qualified goods that are imported into the U.S., but then subsequently exported or destroyed.
So why do more than $2.4 billion in eligible reimbursements go unclaimed each year?
It’s complicated. That is to say the process for seeking reimbursement is complicated, so most businesses don’t even try to claim the monies to which they are legally entitled.
The process for seeking duty reimbursement is called “duty drawback,” and is administered by U.S. Customs and Border Protection (CBP). Drawback has actually existed in the United States since 1789, when the first session of the U.S. Congress sought to encourage manufacturing within the young nation.
A new white paper from Purolator International, “Duty Drawback: Could your Business be Eligible for a Duty Reimbursement?,” offers a detailed overview of the drawback process, and helps make sense of what is generally regarded as a highly complicated application and qualification process.
Any business that imports materials into the United States must pay duty on those goods. If those materials are then used in the manufacture of products that are subsequently exported – they are taxed again. For example: A U.S. manufacturer imports a quantity of zippers from Canada, and those zippers are used in the production of jackets that are subsequently exported. Well, the U.S. manufacturer would pay a duty on the zippers when they arrived from Canada, and again upon export from the U.S.
Through drawback, the manufacturer could be eligible for a refund of up to 99 percent of duties paid on the zippers when they were initially imported.
To qualify, a business must maintain meticulous records and be able to provide a clear “trail” that a product initially imported into the U.S. is the same – or in some cases nearly the same – as the product subsequently exported (or destroyed). In addition, a business must demonstrate that a product meets CBP’s strict conditions for qualification.
As Purolator’s new white paper makes clear, most businesses rely on a third party logistics expert or customs broker to manage the drawback process on their behalf. And with good reason, since CBP’s own website acknowledges: “[T]he process of filing for drawback can be involved and the time it takes to receive refunds can be lengthy.”
Despite the apparent bureaucratic hassle involved, an experienced logistics provider will be well versed in understanding the process. With billions of dollars waiting to be claimed, what do you have to lose?
A good first step is to download Purolator’s white paper, which can be accessed here.