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Manufacturing Drawback Methods

A) Direct Identification Method

A claimant may file a claim for drawback on imported material if it is used in the manufacture of an exported product. The claimant’s records must clearly establish the fact that the exported merchandise was produced from a specific lot of imported material.

Applications: 

In order to file claims for drawback the following applications must be filed with U.S. Customs:

1. Manufacturer’s Drawback Ruling: 

  • Filed in the port where the claims are filed
  • Three to six months for approval from U.S. Customs
  • Claims may be filed pending approval, no payment until approved

2. Accelerated Payment Privilege:

  • Must be filed after drawback ruling is approved; one to three months for approval
  • Allows for the payment of drawback refund within three to four weeks of filing
  • Drawback bond must be posted
  • Claims may be filed pending approval, no payment until approved

Documentation: 

The documents needed to prepare the applications and the actual claims include but are not limited to: 

  • Import purchase order
  • Import purchase invoice
  • Receiving record
  • Entry summary*
  • Production record**
  • Export sales invoice
  • Export bill of lading***

Click on the link to see a recommended list of items needed for Drawback Application

* The drawback claimant need not have paid the import duties directly to U.S. Customs. Import duties are often buried in the purchase price on imported merchandise obtained from an American distributor. U.S. Customs assumes that the drawback value of the merchandise passes on with the sale of the imported merchandise.

** The production record must clearly show which lot of imported material was used in production. This production record should also be referenced on the export invoice along with the quantity exported.

*** The Customs Regulations state that the exporter is entitled to the drawback refund unless he waives that right. Many companies sell drawback eligible merchandise to Domestic companies who subsequently export the merchandise. If the proper waiver is obtained from the exporter claims can also be filed against those exports. 

Time Frames:

  • Drawback will be allowed on imported merchandise used to manufacture or produce articles that are exported or destroyed under CBP supervision within five years of importation

B) Substitution Method

claimant may file a claim for drawback on imported material even if it is not physically incorporated into the exported product. The imported material need only be consumed in production by the manufacturer. Other imported or domestic merchandise “classifiable under the same 8-digit HTSUS subheading” may be used in the production of the exported product. The claimant’s records must clearly establish the fact that the exported merchandise was produced from merchandise “classifiable under the same 8-digit HYSUS subheading” as the imported merchandise. (One plant may import while a second plant exports provided both plants are divisions of the same company.)

Applications:

In order to file claims for drawback the following applications must be filed with U.S. Customs:

1. Manufacturer’s Drawback Ruling:

  • Filed with Customs in Washington, DC
  • Six to nine months for approval from U.S. Customs
  • Claims may be filed pending approval, no payment until approved

In addition to the application, certain privileges can be filed with the application:

2. Accelerated Payment Privilege:

  • Must be filed after drawback ruling is approved one to three months for approval
  • Allows for the payment of drawback refund within three to four weeks of filing 
  • Drawback bond must be posted
  • Claims may be filed pending approval, no payment until approved

Documentation:

The documents needed to prepare the applications and the actual claims include but are not limited to:

  • Import purchase order
  • Import purchase invoice
  • Receiving record
  • Entry summary*
  • Date exported merchandise is produced
  • Bill of material
  • Export sales invoice
  • Export bill of lading**

* The drawback claimant need not have paid the import duties directly to U.S. Customs. Import duties are often buried in the purchase price on imported merchandise obtained from an American distributor. U.S. Customs assumes that the drawback value of the merchandise passes on with the sale of the imported merchandise.

** The Customs Regulations state that the exporter is entitled to the drawback refund unless he waives that right. Many companies sell drawback eligible merchandise to Domestic companies who subsequently export the merchandise. If the proper waiver is obtained from the exporter claims can also be filed against those exports.

Time Frames:

Drawback will be allowed on the imported merchandise if the following conditions are met:

  • The designated merchandise is used in manufacture or production within five years of importation
  • Within the five year period, the exported or destroyed articles, or drawback products, were manufactured or produced
  • The completed articles must be exported or destroyed under CBP supervision within five years of the date of importation of the designated merchandise  

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