TradeLane

Duty Drawback: Looking Beyond the Obvious

Posted by Lawrence Tobia

12/11/13 12:24 PM


Savings-SignThe US government offers businesses the opportunity to recoup the duties they pay on imported goods that are taxed, subsequently exported, and taxed again. An astonishing estimate of $2.5 billion of those monies is unclaimed by businesses eligible for duty drawback.

The basics of a drawback program may appear straightforward, but the complexities of drawback reveal the true potential for significant duty recovery. It is worth taking the time to look when the payback has so much potential.

When investigating drawback opportunities, companies need to look beyond their own imports and exports. In fact, many lucrative opportunities can be uncovered when vendors are included in a drawback feasibility assessment. Lack of knowledge about the intricacies of drawback often finds exporters waiving drawback rights to importers when at the very least the duty savings should be shared between parties.

For example, Alpha Company imports a trash compactor and pays $8000 in duties. Two years later it sells the compactor in the same condition and without having been used in the United States, to the Bravo Company, which exports it. The Bravo Company claims drawback equal to 99% of the duties that Alpha paid, or $7920 (Note: Alpha has to provide a Certificate of Delivery in order for Bravo to do this). So even though the law states that the exporter (Bravo Company) is the recipient of the drawback refund, they may not be the party that has paid the duties. In this example, the importer (Alpha Company) still had to cooperate and provide the correct information on the import entry of the trash compactor.

Although this is one basic example, it does suggest some alternative routes to claiming a refund of duties paid. Many companies enjoy significant financial rewards after investing some time and effort to set up a drawback program.

As you look to plan your goals and outline your budgets for 2014, take the time to ask whether your recoveries are meeting your expectations. Perhaps equally important, are you in compliance with the law?  Do you want to hear more about duty drawback? Tradewin can work with you to review the feasibility of implementing a drawback program.

Topics: Duty Drawback

Written by Lawrence Tobia

For more than 25 years, Larry has been working with the U.S. trade community designing, implementing and managing Customs duty and fee recovery programs. He's worked for companies in every industry, including automotive, chemical, retail, and pharmaceutical. Nearly half of that time was spent as the Vice President of a prominent drawback specialist and customhouse brokerage firm in New York City. Since 1999, Larry has been Principal for Drawback Services at Tradewin.