Since his election in 2024, President Donald Trump has instituted tariffs that have dramatically reshaped U.S. trade policy.  Almost every product from around the world now faces a tariff. To soften the impact of tariffs and gain a competitive edge on their competitors, importers and manufacturers are relying more often on the United States’s Duty Drawback Program.

 

Under the authority granted by 19 U.S.C. §§ 1401 et seq., import duties are collected by U.S. Customs and Border Protection (CBP).  The collection and implementation of those duties are shaped through regulations in Title 19 of the Code of Federal Regulations. Under 19 U.S.C. §1313 Congress has outlined a mechanism for companies to obtain refunds of duties paid through the Duty Drawback Program.

 

What is the Duty Drawback Program?

The CBP’s Duty Drawback Program allows for a 99% refund, or drawback, of the duties paid on goods imported into the United States that are later exported out of the United States or are destroyed.

 

What qualifies for a refund?

An importer may be eligible for a refund of duties paid on imported items under the Duty Drawback Program if the imported item falls into one of the following categories:

  • Unused merchandise: When goods are imported into the United States and then exported without being used or significantly changed.
    • Example 1: A U.S. distributor imports goods from Taiwan. Before they’re ever sold domestically, a Canadian retailer places a bulk order, and the bicycles are shipped directly to Canada.
    • Example 2: A fashion company imports seasonal goods from France. The goods do not sell as expected, so the company exports the unsold goods to its stores in Japan.
  • Manufacturing: When imported goods are further processed or used to manufacture an item in the United States that is later exported, the portion of the imported good used in the further processed or manufactured good may be refunded.
    • Example 1: A chocolatier imports Peruvian cocoa beans. The cocoa beans are used in making specialty chocolate. Some of the chocolate bars are exported to Europe. The chocolatier can seek a refund for the duties paid on the portion of cocoa beans used in the exported chocolate.
    • Example 2: An electronics manufacturer imports microchips from Taiwan. The chips are assembled into computers in California. A portion of the computers are sold in Asia. The importer may recover duties on the chips used in the exported computers.
  • Rejected merchandise: When goods do not conform to specifications, shipped without consent, or are defective at the time of import.
    • Example 1 (wrong specifications): A furniture company imports a shipment of wooden chairs from Vietnam. Upon inspection, the chairs do not match the agreed specifications. The furniture company may reject the goods and pursue a refund of the duties paid.
    • Example 2 (goods shipped without consent): A tech distributor orders external hard drives from a supplier in Singapore. Instead, the supplier ships solid-state drives (SSDs), assuming the buyer would accept them as equivalent. The tech distributor rejects the SSDs. Because the SSDs were not ordered or consented to, the duties paid on them may be refunded by CBP.
    • Example 3 (defective goods): A toy retailer imports dolls from a Chinese supplier.  The shipment arrives, but many dolls are missing parts and are unsafe for sale. The defective toys are exported back to the supplier, making the importer eligible for a refund of the duties.

What is the refund application deadline?  

Most drawback applications must be filed within five years after the date the item was imported into the United States.

 

How do I file the refund application?

A licensed attorney can help you identify eligible claims, maximize your refund, ensure compliance with federal regulations, and represent you before the CBP in cases of challenges or denials to your claims.

A licensed customs broker can handle drawback applications for you. A list of customs brokers is available here.

If you choose not to use a customs broker or a licensed attorney, the following steps explain how to file a drawback application on your own:

Step 1: Identify the items. You can identify the imported goods to be refunded either by:

  • Direct identification: Use identification numbers such as a VIN or serial number or use an inventory methodology (first in, first out).
  • Substitution: Any items that share the same eight-digit Harmonized Tariff Schedule of the United States (HTSUS) code, found here, can be substituted for each other, even if they aren’t exactly the same product.

Step 2: Fill out and submit CBP Form 7553 with an applicable notice of intent to export, destroy, or return merchandise, applicable import entry data, and evidence of exportation or destruction.

 

Step 3: If you have not done so already, apply for an automated commercial environment (ACE) exporter account here.

 

Step 4: File claims through either:

  • Option 1 – self-file claims: Purchase filing software and establish an automated broker interface (ABI) with CBP. CBP’s approved list of software can be found here.
  • Option 2 – use a service provider: Find a service provider to submit the claim in ACE.

Step 5: If you choose option 1 of step 4, fill out the drawback paperwork in the filing software portal. The following information will be required:

  • Claimant identification number from ACE
  • Port code for the drawback office where the claim is filed
  • Entry number for the item for which drawback is claimed and the federal regulation under which drawback is claimed
  • Statement of eligibility for applicable privileges (as provided for in subpart I of this part)
  • For each designated import entry line item:
    • Amount of refunds claimed for duties, taxes, and fees
    • The entry number and the line-item number designating the merchandise
    • A description of the merchandise
    • A unique import tracing identification number(s) (ITIN)
    • The 10-digit HTSUS classification
    • Amount of duties paid
    • Applicable entered value, quantity, and unit of measure
    • The types and amounts of any other duties, taxes, or fees for which a refund is requested
  • Indicate whether the good was transferred to you before the exportation or destruction of the eligible merchandise
  • Indicate whether the eligible merchandise was exported or destroyed and provide the applicable 10-digit HTSUS
  • For manufacturing claims only:
    • Each associated ruling number
    • Corresponding information for the factory location
    • The basis of the claim
    • The date(s) of use of the imported and/or substituted merchandise in manufacturing or processing
    • A description of and the 10-digit HTSUS classification
    • The quantity and unit of measure
    • Indicate whether it was transferred, exported, or destroyed
    • Identify the unique manufacture tracing identification number(s) (MTIN)
    • Provide a certification from you as follows: “The article(s) described above were manufactured or produced and disposed of as stated herein in accordance with the drawback ruling on file with CBP and in compliance with applicable laws and regulations.”

 

Step 6: If you choose option 1 of step 4, transmit the application from the software portal to ACE.

 

Where to go from here?

By using the Duty Drawback Program, importers can reduce the burden of tariffs and strengthen their position in the global marketplace. Leveraging the Duty Drawback Program transforms tariff costs from unavoidable losses into opportunities for a competitive advantage. If you have questions about eligibility, compliance, or filing a drawback claim, please contact Joseph Brubaker or Jackson Nasby at Kirton McConkie for legal guidance tailored to your business needs.