Import parts, materials or ingredients and export what you make? The duty you paid on those inputs can come back.
Manufacturing drawback refunds duty paid on imported inputs that are used to make products you then export. It is often the largest drawback opportunity a manufacturer has, and one of the most overlooked.
U.S. manufacturers can recover up to 99% of eligible duty, with five years from import to claim.
Canadian manufacturers can recover the full customs duty on exports outside North America, with four years from release to claim.
Exports across the U.S.–Canada border are capped in both countries by the “lesser of two duties” rule, so where your products go matters as much as what you paid.
Every production run that ships abroad creates a new claim. That is why manufacturing drawback works best as a program: we build the link from your imports to your bill of materials once, then claim on a set schedule.
Import inputs and export finished goods?
| Manufacturing in the U.S. | Manufacturing in Canada | |
|---|---|---|
| Customs agency | CBP | CBSA |
| Refund | Up to 99% of eligible duty | Full customs duty on exports outside CUSMA countries |
| Time to claim | 5 years from import | 4 years from the release of the imported materials |
| Before you can claim | A manufacturing drawback ruling. Most file a letter of notification under a general ruling | File on Form K32 through the CARM portal. Waivers on K32A or K32B if another party could claim |
| Mixing imported and domestic materials | Substitution: material with the same 8-digit HTS code counts | Equivalence: imported goods used first, in sufficient quantity, and finished goods exported within 2 years |
| Exports across the border | To Canada or Mexico: capped at the lesser of U.S. duty and the destination country's duty | To the U.S. or Mexico: capped at the lesser of Canadian duty and the destination country's duty |
| Not refunded | Section 232 duties, antidumping and countervailing duties. IEEPA tariffs go through a separate CBP process | GST and HST. Fuel and plant equipment |
This is the rule that catches most manufacturers. When non-originating imported inputs go into a product exported between the U.S., Canada and Mexico, the refund cannot exceed the lesser of:
| Where the finished goods go | Drawback on non-originating inputs |
|---|---|
| Europe, UK, Asia or anywhere outside North America | Full refund (Canada) or up to 99% (U.S.) |
| Across the border, finished goods enter duty-free | Lesser amount is zero, so no drawback |
| Across the border, duty paid on entry | Capped at the lower of the two duty amounts |
Canada: to claim under the cap, you need satisfactory evidence of the U.S. or Mexican duty paid, usually from the importer or their broker. Inputs of U.S. or Mexican CUSMA origin are not subject to the cap.
If your finished goods now pay duty on entry, there may be a refund where there was none before.
Simple repacking or relabelling is not manufacturing. Those goods follow the rules for goods exported unchanged. See marketplace sellers or the Drawback Program.
A U.S. electronics maker pays $400,000 a year in duty on imported circuit boards, including Section 301 tariffs. About 35% of finished products ship to Europe and Asia. Duty on those inputs is $140,000, so the refund at 99% is about $138,600 a year.
An Ontario manufacturer pays $40,000 a year in duty on imported components. 30% of the components go into products sold in Germany and the UK, and 30% into products sold to a U.S. customer. The European share, $12,000, may be fully recoverable. The U.S. share is capped: $0 if the products entered the U.S. duty-free, or up to $8,000 if the U.S. importer paid $8,000 in duty. Total: $12,000 to $20,000.
Example figures are simplified for illustration. Actual duty depends on classification, origin, customs value and the records available.
A manufacturing claim connects three things: the duty-paid import, the production, and the export.
Exports across the U.S.–Canada border follow different math from exports elsewhere. Splitting exports by destination is the first step.
If your finished goods paid duty on entry, some drawback may be available.
Without a bill of materials or production records, customs cannot see how much of each import went into exports.
Valuable waste or scrap can reduce the refund in both countries and must be accounted for.
Claims without a manufacturing ruling and letter of notification will be denied.
The clock runs from each import. Inputs held in stock for a long time can expire before the finished goods ship.
We split your exports by destination, apply the right rules in each country, and build the link from your import entries through your bill of materials to your exports. Licensed drawback specialists prepare and file with CBP or the CBSA, coordinated by us. If the cross-border cap wipes out part of the claim, we tell you and focus on where the refund is real. No successful recovery, no success fee.
Yes, in both the U.S. and Canada. Imported materials, parts and components used in products that are exported may qualify.
No. The U.S. allows substitution with material of the same 8-digit HTS code. Canada allows equivalence between imported and domestic goods of the same class, under conditions.
Yes, for non-originating inputs in products exported across the border. The refund is capped at the lesser of the two countries' duties.
Then the lesser of the two duties is zero and there is no drawback on those exports. Exports outside North America are not affected.
Five years from import in the U.S. Four years from release in Canada.
The assessment is free. After that we earn a percentage of what is recovered. No successful recovery, no success fee.
This page provides general information and is not legal, tax or customs advice. Sources: 19 U.S.C. 1313(a) and (b), 19 CFR Part 190, CBSA Memorandum D7-4-2 and Memorandum D7-4-3. Eligibility depends on the facts of each transaction and the rules in effect at the time.
Free opportunity assessment. If there is a refund worth pursuing, we build and run the program. No successful recovery, no success fee.
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