If you import parts or materials and export what you make, the duty on those inputs can come back.
Manufacturing drawback refunds up to 99% of U.S. duties paid on imported materials that are used to make products in the U.S., which are then exported or destroyed. It is set out in 19 U.S.C. 1313(a) and 1313(b).
With substitution, the imported material does not even have to be the one you used. Domestic or other material with the same 8-digit HTS code counts.
Claims must be filed within five years of import.
Manufacturers who import components, raw materials or ingredients often pay duty on inputs that leave the country inside a finished product. That duty is usually recoverable. It is often the largest drawback opportunity a business has, and one of the most overlooked.
Import inputs and export finished goods?
It is a refund of duties paid on imported merchandise that is used in manufacturing or production in the U.S. The new article must then be exported or destroyed under CBP supervision.
"Manufacture or production" means the imported material is changed into a new and different article, such as steel into machinery, fabric into apparel, or chemicals into a finished compound. Simple repacking or labelling is not manufacturing. That falls under unused merchandise drawback.
| Direct identification, 1313(a) | Substitution, 1313(b) | |
|---|---|---|
| What is used | The actual imported material | Any material with the same 8-digit HTS code |
| Tracing | Track imported lots into production | No need to trace the imported lot |
| Time to use | Export or destroy within 5 years of import | Substitute used within 5 years of import |
| Refund | Up to 99% | Up to 99% |
Say you import aluminum sheet and also buy the same grade from a U.S. mill. Under substitution, you can claim duty on the imported sheet when products made from the U.S. sheet are exported, as long as both share the same 8-digit HTS code.
One exception: if the 8-digit description begins with "Other", the match must be made at the 10-digit level, and that 10-digit description must not begin with "Other".
Before claiming, the manufacturer must operate under a manufacturing drawback ruling. Most use a general manufacturing ruling and file a letter of notification with CBP. Unusual processes need a specific ruling.
| Charge | Drawback? |
|---|---|
| Regular (MFN) duties, MPF and HMF | Yes |
| Section 301 duties | Generally yes |
| Section 232 steel and aluminum duties | No |
| Antidumping and countervailing duties | No |
| IEEPA tariffs | Not through drawback. Recovered through CBP's IEEPA refund process |
For manufactured goods exported to Canada or Mexico, USMCA limits drawback on non-originating inputs to the lesser of the U.S. duty paid and the duty paid in the destination country. Exports to the rest of the world are not capped this way.
A U.S. electronics maker imports circuit boards from China and pays $400,000 a year in duties, including Section 301 tariffs. About 35% of its finished products are exported to Europe and Asia.
Duty on inputs in exported products: $140,000. Refund at 99%: about $138,600 a year.
With five years of lookback, unclaimed past exports can add up to a much larger first claim.
Example figures are simplified for illustration.
Claims must be filed within five years of the import date. Exports must happen inside that window, so older imports are the first to expire.
Claims made without a manufacturing ruling and letter of notification will be denied.
CBP needs to see how much imported or substituted material went into each exported article. Gaps in records mean lost refunds.
Valuable waste from production must be accounted for, which can reduce the refund.
Substitution on an 8-digit code described as "Other" must match at 10 digits.
We review your imports, bill of materials and exports to size the opportunity. Our licensed U.S. drawback partners set up the ruling, build the claim and file it with CBP. No upfront cost. We are paid a percentage of what we recover.
A refund of up to 99% of duties paid on imported materials used to make products in the U.S. that are then exported or destroyed.
No. Under substitution drawback, material with the same 8-digit HTS code can be used instead.
Yes. Most manufacturers file a letter of notification under a general manufacturing ruling. Unusual processes need a specific ruling.
Generally yes. Section 232 steel and aluminum duties and antidumping or countervailing duties are not.
Yes, but USMCA limits the refund on non-originating inputs to the lesser of U.S. duty and the duty paid in Canada or Mexico.
Five years from the date of import.
This page provides general information and is not legal, tax or customs advice. Sources: 19 U.S.C. 1313(a), (b), (j)(5) and (r), and 19 CFR Part 190. Eligibility depends on the charges paid and the rules in effect at the time.
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