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Drawback Frequently Asked Questions | N.F. Stroth & Associates

Frequently Asked Questions (FAQs)

Have a question? All you have to do is ask. We can either answer your question or get you in contact with the appropriate person. Click on the links below to find answers to some of our most frequently asked questions.

Answers

Q: What is Duty Drawback?

A: The object of duty drawback is to allow the U.S. exporter to better compete in the world market. It lowers the exporters material cost by removing the Customs duty from the transaction. Upon importation of goods, a company pays duties due to U.S. Customs based on the product being imported. If the goods are subsequently exported or destroyed, these duties may become eligible for drawback. Duty is limited to 99% of the duties paid on the imported merchandise designated for drawback. Duty drawback is defined as the recovery of Custom Duty on merchandise that is imported and is:

a) Re-exported in an Unused Condition or,

b) Manufactured into a new articles which is then exported or,

c) Rejected as not meeting specifications and re-exported or,

d) Destroyed under Customs supervision rather than exported if the other conditions of a), b), or c) are met.

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Q: What is a Drawback Evaluation?

A: Does a company have a drawback opportunity? If so, what is the extent of the dollars that can be recovered? What steps will be necessary to implement a drawback program at this firm? How much time and effort is required to recover these dollars?

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Q: What is a Duty Drawback Program?

A: A Duty Drawback Program seeks to reduce the exporter's cost by recovering duty paid on previously imported items. A program can be established for importers who regularly export product and would therefore have repetitive claims. N.F. Stroth is committed to making your program cost effective. It lowers the exporters materials cost by removing the Customs duty from the transaction. Drawback is limited to 99% of the duties paid on the imported merchandise designated for drawback.

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Q: What are Customs Requirements?

A: There are many varied documents required depending on the different types of drawback programs a company chooses to file under. These might include writing of the contract where a Manufacturing Drawback approval is sought or a Request for Waiver of Prior Inspection in the case of Unused Merchandise Drawback. The claimant must also choose which type of bond they wish to file under.

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Q: What is necessary for Compliance Approval?

A: A new facet of the drawback process, this submission lists the records and documents each company has to support its claims. Past approvals were based on generalized information. The compliance format will allow each company to tailor the report to its circumstances and record processes. N.F. Stroth & Associates will guide the client through this.

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Q: What is involved in Claims Processing?

A: Collecting proper documents from the claimant and others involves a process that brokers, forwarders and vendors are involved in. This is the next step after putting in the applications with U.S. Customs. Verification of the document trail as reflected in the claimants internal records follows. After this, claims are prepared, submitted to Customs and payment is secured.

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Q: What is Unused Merchandise?

A: The imported item is said to be "Unused" if it is not employed for the purpose for which it was intended while part of the commerce of the United States.

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Q: What is Manufacturing?

A: The change or advancement in condition from what it was before the imported article:

a) Has attained a distinctive name, character or use different from that originally possessed, or

b) Has under gone a process which made the article fit for a new and different purpose, or

c) Has under gone a purpose which made it better fit for the same purpose.

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Q: What Monies Are Eligible For Drawback Recovery?

A: All regular Customs duties, Internal Revenue taxes and most fees are eligible for recovery under drawback.

Note: Fines and penalty fees are not eligible. Countervailing and anti-dumping duties are also prohibited from drawback recovery.

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Q: When Is Drawback Not Allowed?

A: Drawback is not allowed on shipments to US held territories or military installations. All other shipments out of the U.S. can be considered "exportations for the purposes of drawback".

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Q: Who Is The Exporter?

A: The exporter is the person named on the Bill of Lading, freight bill, Canadian Customs manifest, etc. as shipper. The exporter is the party entitled to receive the drawback.

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Q: What Is The Timeframe To File A Drawback Claim?

A: There are series of time frames to keep in mind about drawback. A complete drawback claim may be filed up to three years after the date of exportation. An import used within a drawback claim may have been entered into U.S.:

A) For Unused Merchandise up to three years prior to export;

B) For Manufacturing up to five years to export and;

C) For Rejected Merchandise up to three years prior to export.

A drawback claimant must maintain all records concerning a drawback for the three years after payment.

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