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Refund Programs

What is Drawback?

A refund of duties paid on imported goods that are subsequently exported, destroyed, or used in manufacturing for export. In the context of U.S. customs and tariff recovery, understanding drawback is essential for navigating the CAPE refund process and ensuring accurate duty assessment.

Definition

Drawback is a refund of customs duties paid on imported goods that are subsequently exported, destroyed under CBP supervision, or used in the manufacture of goods that are exported. The drawback program, authorized by 19 U.S.C. section 1313, has existed since the first U.S. tariff act of 1789 and is one of the oldest trade facilitation mechanisms. There are three main types: manufacturing drawback (imports used to produce exported goods), unused merchandise drawback (imports exported in the same condition), and substitution drawback (commercially interchangeable goods). The TFTEA (2015) modernized drawback rules, expanding substitution eligibility.

How Drawback Relates to Tariff Refunds

Drawback and CAPE are separate refund programs. Entries that have already received a drawback refund may be ineligible for a CAPE refund on the same duties — 'double dipping' is one of the primary CAPE rejection reasons. Tariffi's analysis cross-references drawback indicators to flag potential conflicts before CAPE submission.

Example

An importer brings in $1 million of fabric from China, pays $250,000 in Section 301 duties, then manufactures clothing and exports it to Canada. Under manufacturing drawback, they recover 99% of the duties ($247,500). This entry would not also be eligible for a CAPE refund on the same $250,000.

Frequently Asked Questions

Can I claim both drawback and a CAPE refund?
Generally no. If the same duties have been refunded through drawback, they are not eligible for a CAPE refund. Entries with drawback claims are one of the top CAPE rejection reasons.
What is the drawback refund percentage?
Under the modernized rules (TFTEA), drawback refunds up to 99% of the duties, taxes, and fees paid on qualifying entries.

Related Terms

Duty DrawbackThe refund mechanism under 19 U.S.C. section 1313 for duties paid on imported goods later exported or destroyed.CAPEConsolidated Administration and Processing of Entries — CBP's portal for filing tariff refund declarations under IEEPA and Section 301.DutyA tax imposed by the government on imported goods, based on the HTS classification and country of origin.Entry SummaryCBP Form 7501 — the document that declares the value, classification, and duty owed on imported goods.LiquidationCBP's final determination of the correct rate of duty and total amount owed on an import entry.

Legal References

  • 19 U.S.C. § 1313 — Drawback
  • 19 CFR Part 190 — Modernized Drawback

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