If you’re looking for any information about duty drawback, you will find it right here.
This guide explains everything about duty drawback, from basic to advanced concepts.
Keep reading if you want to learn more about duty drawback
- What is Duty Drawback?
- What is a Duty Drawback Program?
- How can a Duty Drawback help your Business?
- How do Duty Drawbacks Work?
- What is a Duty Drawback Evaluation?
- What is a Duty Drawback Assessment?
- Who can Claim Duty Drawback?
- How do you Claim Duty Drawback?
- What is the Percentage of Duty Drawback?
- When is Duty Drawback not allowed?
- What Types of Duties are Eligible for Duty Drawback?
- Are there any Exceptions to allowable Duty Drawbacks?
- Do you need Government Permission to Claim Duty Drawback?
- Can you Claim Drawbacks if you Buy Imported Goods from a Local Vendor?
- What is the Timeframe for Filing a Duty Drawback Claim?
- Should you Submit one Drawback Claim for each Export?
- What are the Elements necessary to Claim a Duty Drawback?
- How many Types of Duty Drawbacks are there?
- How do you Calculate Drawbacks?
- What Paperwork do you need when Obtaining a Duty Drawback?
- How Long does it take to get a Duty Drawback Claim?
- What is a Waiver of Prior Notice?
- How do you know if you Qualify for Duty Drawback?
- What are the Possible Duty Drawback Compliance issues?
- Can you Claim a Drawback for Past Imports and Exports?
- What is Substitution?
- What are the Advantages of Substitution?
- Can you Apply Drawbacks to Damaged Exports?
- What is a Drawback Shipping Bill?
- What should you look for in a Reliable Duty Drawback Broker?
- How much do Duty Drawback Services Cost?
What is Duty Drawback?
Duty Drawback scheme
Duty drawback is a refund of import duties, taxes, and fees paid on imports that are subsequently exported.
The term also refers to recovered duties on imported articles manufactured and re-exported from the country.
A refund of duties and taxes paid on imported goods exported unused is also known as duty drawback.
Unused, in this case, refers to imports that were not used for their intended purpose.
Please note that customs authorities only issue drawbacks on imports that are re-exported or destroyed.
You also have to make an official claim within the stipulated timeframe to get drawbacks.
What is a Duty Drawback Program?
A duty drawback program is a scheme drawn to evaluate and implement a duty drawback opportunity.
Most countries allow duty drawback programs as a means to encourage local manufacturing and promote trade among nations.
These programs are aimed at reducing the financial burden and regrets experienced by international traders.
The program particularly focuses on preventing double taxation of goods brought in and out of the country.
You can easily reduce exportation costs by claiming refunds of duties paid on goods that you’d previously imported-recurrently.
You should find a reputable duty drawback agent to help you develop and manage a drawback program that will benefit your business.
How can a Duty Drawback help your Business?
Your business can benefit from duty drawbacks in the following ways;
- It can help you grow your sales with more competitive pricing.
- A duty drawback can be a great source of cash for your business. You can plow back the money into your business as stock capital or use it to cater for operational costs and other things.
- It increases your business revenue and general cash flow.
- Drawbacks can help enhance your business competitiveness by leveling the playing field. With almost 99% refund of customs duties when you export, you can easily manufacture or run your business duty-free.
- Lowers cost of goods thereby maximizing your profits.
How do Duty Drawbacks Work?
Duty Drawback Process
Duty drawbacks work in a fairly similar way as a sales tax refund.
You can claim a duty refund when you export goods that had previously been imported.
Similarly, you can also get a sales tax refund when you return goods to a store.
What is a Duty Drawback Evaluation?
A duty drawback evaluation is a process through which your eligibility for drawback is determined.
It identifies if you have a drawback opportunity as well as the number of duties you can recover.
The evaluation process determines the necessary steps to implement your drawback program if any.
Through this process, you get to know your eligibility for drawback and how much time and effort you will put in to get the refund.
You can contact us today to see if you qualify for a duty drawback program.
What is a Duty Drawback Assessment?
A duty drawback assessment determines if claiming a drawback is a viable option for your business.
For this process, you need to fill out a duty drawback assessment form.
This helps your agent work out a way forward in getting you the maximum drawback on duties in the shortest time possible.
Understand that getting started with a duty drawback assessment is quite tedious.
The process is meticulous and requires lots of information.
You will have to present the value and number of imports and exports over a specified period.
Specific export and import documents are also needed at this stage.
Note that the first steps of a duty drawback assessment will help you move through the process quickly despite all the work.
So make sure you provide every necessary information and paperwork to avoid delaying the process.
Who can Claim Duty Drawback?
Anybody can claim a duty drawback as long as they are in the business of importing and exporting goods in their country.
It can be an importer, manufacturer, or exporter.
All you need to do is provide the necessary authorization and paperwork to your respective country’s customs office.
How do you Claim Duty Drawback?
To get a duty refund, you must prove that, indeed, customs owes you some money.
The first step to proving this is to understand the circumstances that can make you eligible for a duty drawback.
That is, your imports must have been re-exported, used to manufacture other export goods, or destroyed.
After evaluating your eligibility for drawback, it is now upon you to get the necessary details and paperwork before applying for drawback.
Once your agent drafts a viable duty drawback program for you, go ahead and file your application.
Please note that in recent years, the procedure for claiming duty drawback has become much simple.
Just make sure that you have all the data about your import and export transactions for the past five years.
Once you have this, proceed to fill out a claim form.
It is important to give accurate data and account transactions for you to be guaranteed a 99% drawback.
After you fill the claim form and present it, the time frame to receive the refund via your bank account will vary.
Generally, you should allow 3-6 weeks to get the duty refund.
As you can tell, the entire process of claiming duty drawback requires patience and understanding.
If your claim application is unsuccessful, try to follow up and get the reasons for rejection.
If you feel that it was unjust, consult with your broker on ways to appeal the decision.
What is the Percentage of Duty Drawback?
You can claim up to 99% of duties, taxes, or fees paid to customs.
This is if your import goods are unused, exported, or used to manufacture another export product.
When is Duty Drawback not allowed?
In most countries, drawback recovery is prohibited for goods exported to the country’s held territories and military installations.
You may also fail to get a duty refund when you export to countries that do not allow duty drawback.
Check with your respective customs office to be sure of the exact circumstances you can claim drawback.
Your duty drawback broker can also advise you on this.
What Types of Duties are Eligible for Duty Drawback?
You can claim a refund on the following types of duties:
- AD Valorem where assessment is done according to the value of the shipment. The percentage of refund will be based on the entered value after assessment.
- The voluntary tender linking to a specific entry.
- Duty paid on goods with an incorrect country of origin label.
- Merchandise processing fees. This is charged based on the declared value of shipments.
- Specific duty, per unit of goods
- Harbor maintenance fees. This is imposed on goods that you ship by sea. A specific percentage of HMF fees (set by respective customs) are charged on the shipment’s value.
Are there any Exceptions to allowable Duty Drawbacks?
Yes, there are exceptions to duty drawbacks.
Apart from the circumstance we’ve mentioned in Q1, there are other specific instances in which you’re allowed to claim drawback.
These are the most instances in which you pay fees for operations that are not part of the manufacturing process.
They include fees paid for the inspection, repair, cleaning, repackaging, and blending, among other things.
Do you need Government Permission to Claim Duty Drawback?
Yes, you do. But first things first, you need to know the exact type of duty drawback you qualify for.
Then the types of applications and rulings you require before you qualify for the drawback.
Acquisition of the applications and rulings are subject to approval by the government.
The government needs to approve documents of transactions incurred before applying for duty drawback.
Can you Claim Drawbacks if you Buy Imported Goods from a Local Vendor?
You can receive duty drawbacks in most cases, even if you are dealing with local vendors; you are purchasing from local vendors and exporting.
You need to agree with the vendor on personal terms and the manner of handling confidential cost data.
Additionally, you can approach the third party to keep your secret information and that of the vendor.
After agreeing and claiming the duty drawback, everyone wins without loss of any confidential information.
What is the Timeframe for Filing a Duty Drawback Claim?
The provided duty drawback regulations allow for three years from export to file for a duty drawback claim.
Lucky for you, if you’ve been exporting imported goods, you can file duty drawback claims for goods that you exported up to five years ago.
Besides, brokers are allowed five years to claim duty drawbacks on your behalf.
All you need to do is liaise with a broker of your choice.
Complete the broker’s drawback assessment and allow them to claim duty drawback on your behalf.
Should you Submit one Drawback Claim for each Export?
This depends entirely on you.
However, the process of duty drawback claim is hectic if done on a single export.
Assume you export more than ten products.
Attaching documents for each product will be tiresome and time-consuming.
To reduce strain and minimize time wastage, you can apply duty drawbacks on your exports together.
You start by grouping them periodically, that is, monthly, quarterly, or annually.
Then you claim drawbacks based on the quantities exported during these periods.
Grouping helps you claim lump-sum duty drawbacks at once.
What are the Elements necessary to Claim a Duty Drawback?
The whole process of duty drawback claim relies on data.
The data provided should be accurate and can be easily proven.
If you are claiming a drawback, you should provide documents whenever needed to back up the claim.
Accurate data is key as it saves on time wastage when you are asked for other information.
More importantly, your claim must meet all the elements necessary for a drawback.
- You must have previously imported the goods for which you’re claiming drawback
- You must have paid duty for these goods during importation and have proof to back up the claim.
- The goods should be entered for export within the government-stipulated time from the date you paid for their import duty-no matter provisional or final duty.
Customs can always extend the period for entry as long as you provide sufficient reasons for the extension.
- Customs must be able to identify the goods as what you’d previously imported.
- Re-exportation of the goods must be outside their import country.
- The claim amount must not exceed the market price of the goods for which you’re claiming drawback.
These elements are not cast in stone as each country has its requirements that drawback claims must meet.
How many Types of Duty Drawbacks are there?
There are three major types of duty drawbacks provided by the Customs services.
· Manufacturing Drawback
This is applicable when you import a product and then transform it into a new product or improve its quality before exporting.
In such a case, you can claim a refund on duties paid.
If the manufactured goods are destroyed before exportation, you can also ask for manufacturing duty recovery.
· Unused Drawback
In cases where you import a product and export it essentially in the same form, you are eligible for a refund on duties charged.
· Rejected Merchandise Drawback
This drawback provides for duty refunds on goods imported and destroyed or not used under customs supervision.
You can apply for this drawback if your goods are;
- Defective and do not conform to specifications.
- Shipped without the consent of the consignee
- Has been confirmed to be substandard during the time of importation
How do you Calculate Drawbacks?
Duty drawbacks are calculated based on set parameters.
You can use the following parameters in calculating duty drawback.
- industry prescribed rates
- the brand rate
- Special brand rate
Duty drawback is applicable when expenses are incurred on the packaging and acquiring extra indigenous goods to supplement the Import good.
The prescribed rates of calculating drawbacks are based on the following; duty drawback amounts, minimum drawback amount, and the minimum percent of duty drawback.
To calculate the duty drawbacks, multiply the estimated annual drawback paid by the percentage of sales made annually.
Further, calculate 99% of the amount you get after multiplying.
This will give you a rough estimate of your duty drawbacks.
What Paperwork do you need when Obtaining a Duty Drawback?
Depending on the type of drawback applied, paperwork usually varies.
It is important to select an agent who will help you navigate the whole process and file the applicable documents.
The needed paperwork is categorized into;
· Import Paperwork
Here, you should be able to provide data that shows the duty charged on the imported materials.
Information can be in summary, and invoices received on duty charged.
· Manufacturing Paperwork
You should have details that verify the manufacturing of the imported product up to a finished product.
There should be time frames and details on the imported materials used of the same kind and quality as the exported final good.
· Export Paperwork
You should also provide export invoices and loading documents that prove the products were exported.
How Long does it take to get a Duty Drawback Claim?
The time frame varies depending on;
- Number of parties involved
- Existence of electronic records
- The complexity of the import and export transactions
Normally, the whole process of receiving the first check ranges from four to eight months.
To hasten the process, investing in a customs broker is beneficial.
You can also request customs privileges that can help hasten the compensation process.
The accelerated payment privilege (APP) for claimants in the US is one such example.
An APP can guarantee your claim within 45 days from the date of application.
You may have to wait for the estimated time ranges or even longer, depending on your customs service, without such privileges.
What is a Waiver of Prior Notice?
If you are in the re-exporting business, then you qualify for the waiver of prior notice.
It is a notice of intent that you provide to customs, and once obtained, you can always export your goods at will.
The waiver of prior notice may be applicable for a period allowed by the custom.
You are required to obtain another one once the given period lapses.
How do you know if you Qualify for Duty Drawback?
As long as you import or export products, you are eligible for some duty drawback.
Suppose within your business, one or more products that you supply are exported.
In that case, you and your customer can qualify for duty drawback.
To know if you are eligible for duty drawback, simply choose a trusted broker; inform them of your transaction.
They will help you evaluate the nature of your transaction and the possibility of qualifying for a duty drawback.
What are the Possible Duty Drawback Compliance issues?
You must conform to set standards and provide the needed proof before being eligible to receive duty drawbacks.
Among the possible duty drawback compliance issues are;
- Being able to prove the manufacture of materials
- Ability to keep with the statutory time frames
- Failure to keep the accurate bill of materials
- Failure to keep privileges and rulings current
You should address the following issues to increase your chances of getting duty drawbacks.
Can you Claim a Drawback for Past Imports and Exports?
You can claim duty drawback from imports and exports you made up to five years ago.
You only need to have the necessary documents, check if you qualify, and apply for a duty drawback.
The process can prove tiresome and cumbersome, but it is worth every second of your time.
The refund can help boost your business.
Nevertheless, the date of the qualifying export should be after the date the import was made.
What is Substitution?
Substitution is for example where you, as a trader, import toys from China and at the same time acquire toys locally that are similar to those imported, mix them, and export.
In such a case, substitution makes it difficult to differentiate those imported goods from the domestic acquired ones.
What are the Advantages of Substitution?
Substitution is profitable to the importer who mixes imports with similar domestic products and later export to customers.
It has the following advantages:
- The customer receiving the exported goods is not able to differentiate goods exported.
They cannot specify the source of import.
- Substitution increases the duty drawbacks to be claimed on exports and imports.
Assume there is free duty to be imposed after a specific period. Duty drawbacks can be claimed on goods that are imported and exported after the period.
This can generate extra revenue for the company or business.
- Substitution can increase your output to be exported. You simply match the imports with similar domestic products and export.
Can you Apply Drawbacks to Damaged Exports?
Yes, you can apply drawbacks on goods that are destroyed.
But this has to be on the condition that the goods got damaged under customs supervision.
You need to provide solid proof that indeed the goods got destroyed under customs supervision.
The government will also have to ascertain this fact before deciding whether to issue you a refund on duties paid.
What is a Drawback Shipping Bill?
The shipping bill is an important document issued by customs services upon request by the exporter.
Its purpose is to allow the exporter to load goods, claim duty drawbacks, and get cleared.
Sample Shipping Bill
A drawback shipping bill contains the following crucial information;
- Exporter, buyer, and customs agent’s details
- General cargo details
- The loading port and transportation port details
- Exchange rates and container numbers
- Duty drawback details
- Insurance amount of the commodity
- The invoice value of the cargo
The bill facilitates easy movement of the product out of the country.
To receive duty drawbacks on goods imported, you must attach the drawback shipping bill during application.
What should you look for in a Reliable Duty Drawback Broker?
It is paramount for any business engaging in importing and exporting to have a good broker to aid them in claiming duty drawbacks.
A good broker deals with the whole process meticulously to guarantee you the result desired.
In choosing a good broker, the following factors have to be put into perspective.
· Service Cost
The broker should charge a reasonable and competitive fee.
It would be best if you chose a broker with the best services at an affordable cost.
Compare different brokerage companies and choose the most cost-efficient one.
· Experience and Area of Expertise
The longer the broker has been in the market, the higher their experience.
It is important to choose a broker with a good reputation implied by a long time in providing brokerage services.
You can always verify the broker’s reputation based on their portfolio and testimonials.
The broker should be perfect and professional to increase the success rate of getting you the most drawbacks on time.
· Instant File Claims
Time is crucial when it comes to claiming duty drawbacks.
A good broker cuts the deal and begins the due process.
Your chosen broker should deliver on the agreement at the earliest possible time.
The whole process needs to be swift and such that you receive your drawbacks in your account at the earliest time possible.
· Connection with the Government
A reliable broker should have connections in the government to hasten the whole process.
You need your money as fast as possible.
With connection comes trust and favors hence improving the duty recovery process.
Claiming duty drawbacks is a legal process backed up by tariffs and laws.
The process should be transparent and in your favor. Contact us today for the best and affordable brokerage services.
How much do Duty Drawback Services Cost?
Usually, the cost of duty drawback services varies depending on several factors.
These are the type of duty drawback, the information you’re presenting, and the amount of refund.
To get a clear estimate, you’ll need to complete an evaluation questionnaire.
Your agent will use the information therein to create a befitting service quote for you.
Depending on your specific needs, BanSar will help you in all your freight forwarding needs.
Contact now for all your shipping needs.