Definition
Manufacturing drawback is the refund of up to 99% of the duties, taxes and fees paid on imported merchandise used to make articles that are then exported or destroyed, under 19 U.S.C. 1313(a). Under 1313(b), the articles can instead be made with other merchandise classifiable under the same 8-digit HTS subheading as the duty-paid imports. Manufacturers operate under a manufacturing drawback ruling, and claims must be filed within five years of import.
Also known as: 1313(a) Drawback, 1313(b) Drawback
How does manufacturing drawback work?
- Import and pay duty on materials or components.
- Use them in manufacturing, or, under substitution, use other merchandise classifiable under the same 8-digit HTS subheading.
- Export or destroy the finished articles without using them in the United States first.
- File the claim in ACE within five years of the import, supported by production records that show how much of the material went into each exported article.
- Recover up to 99% of the duties, taxes and fees on the materials.
The refund follows the material, not the finished product: what matters is how much duty-paid material the exported articles consumed.
What's the difference between direct identification and substitution manufacturing drawback?
Direct identification (19 U.S.C. 1313(a)) traces specific imported material into the exported articles, so your records have to follow that material through production. Substitution (1313(b)) lets the exported articles be made from other merchandise classifiable under the same 8-digit HTS subheading as the imports, within five years of the import date, which spares you from tracing each lot. Substitution claims are capped at 99% of the lesser of the duty paid on the import or the duty that would apply to the substituted merchandise. See substitution drawback.
How do manufacturers use bills of materials and production records to support a claim?
A manufacturing claim has to show how much imported (or substituted) material went into each exported article. Manufacturers usually do that with bills of materials or formulas that state the quantity of each component per unit, production records that tie material to production runs, inventory records for the receipt and use of the material, and export records for the finished goods. Before claiming, the manufacturer operates under a manufacturing drawback ruling: it either notifies CBP that it will follow a general manufacturing drawback ruling or applies for a specific ruling (19 CFR Part 190). Keep the records ready for review, because CBP can ask for them to verify any claim.
Who should look at manufacturing drawback?
Any U.S. manufacturer that pays duty on imported components or materials and exports finished products, or destroys rejected production, should check its eligibility. Duties paid on materials often go unclaimed because the importing team, the plant and the export team keep separate records. A drawback provider or your customs broker can size the opportunity from your import entries and export data before you commit to a program.
Where does Stable Software fit?
DrawbackAI by Stable Software gives customs brokers the matching and claim assembly to run manufacturing drawback for their clients under their own filer code and POA. Flat software license. No contingency, no percentage of the refund. See DrawbackAI and drawback matching.
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Frequently asked questions
We manufacture in the US with imported components and export finished goods. Can we claim manufacturing drawback?
Usually, yes. If you paid duty on the imported components and the finished articles are exported or destroyed within five years of import, you can claim up to 99% of that duty under 19 U.S.C. 1313(a), or under 1313(b) if you substitute merchandise classifiable under the same 8-digit HTS subheading. You need a manufacturing drawback ruling and production records that show how much of the component went into each exported article.
Do I need a ruling to claim manufacturing drawback?
Yes. A manufacturer either notifies CBP of its intent to operate under a general manufacturing drawback ruling or applies for a specific manufacturing drawback ruling, under 19 CFR Part 190.
What is the 'lesser of' rule in manufacturing drawback?
For substitution claims, the refund is capped at 99% of the lesser of the duty paid on the imported merchandise or the duty that would apply to the substituted merchandise if it were imported.
How long do I have to file a manufacturing drawback claim?
Five years from the date the merchandise was imported. Under substitution, the substituted merchandise must also be used in manufacturing within five years of the import.