The historical reasons for drawback are economic and ancient. Encourage American exporting and manufacturing. Title 19 United States Code Section 1313(a) drawback  provides that when articles manufactured in U.S. with use of imported merchandise, are exported or destroyed, then duties paid on imported merchandise so used may be refunded as drawback, less one percent retained by Customs. In the simplest form, merely a refund to American exporter for duty or tax paid on imported merchandise used to create export.

Completion of Drawback Claims

Claims must be filed within 3 years after exportation of the articles. To avoid being time-barred by the statute of limitations, a claim may be filed before a drawback contract (rate) is effective, although no payments will be made until the contract is approved. For completion of same condition drawback claims, see your local Customs office prior to exportation.

Export Procedure

It is necessary for a drawback claimant to establish that the articles on which drawback is being claimed were exported within 5 years after importation of the imported merchandise which is the basis for the drawback. In the case of same-condition drawback, the time period for exportation is 3 years after importation.

There are three methods which can be used to do this, and these are described in sections 191.51 through 191.56 of the Customs Regulations. Before exporting, a future claimant should make certain that he is taking the steps necessary to comply with one of these procedures.

To obtain drawback, first prepare a drawback proposal (statement) and file it with a Customs Port Director for section 1313(a) drawback and with the Duty and Refund Determination Branch, Customs Headquarters, for other types of drawback, including combination 1313 (a) and (b) drawback.

There are currently several general drawback contracts available (orange juice, steel, sugar, component parts, and greige goods) which eliminate the need for submission of a proposal.

Types of Drawback

Several types of drawback are authorized under Section 1313, Title 19, United States Code Section 1313

1. If articles are exported or destroyed, which were manufactured in the United States with the use Of imported merchandise, then the duties paid on the imported merchandise used may be refunded as drawback, less one percent, which is retained by Customs to defray costs.
   (Section 1313(a) drawback)
   
2. If both imported merchandise and any other merchandise of the same kind and quality are used to manufacture articles, some of which are exported or destroyed before use, then drawback not exceeding 99 percent of the duty which was paid on the imported merchandise is payable on the exports. It is immaterial whether the actual imported merchandise or the domestic merchandise of the same kind and quality was used in the exported articles. This provision in the Code makes it possible for firms to obtain drawback without the expense of maintaining separate inventories for imported and domestic merchandise.
   (Section 13131(b) drawback-the substitution provision)
   
3. If merchandise is exported or destroyed because it does not conform with samples or specifications, or was shipped without the consent of the consignee, then 99 percent of the duties which were paid on the merchandise may be recovered as drawback.
   (Section 1313(d drawback)
   
4. When certain products manufactured with the use of domestic alcohol are exported or shipped to various island possessions, a drawback of the internal revenue taxes paid on the domestic alcohol may be refunded.
   (Section 1313(d) drawback)
   
5. If imported salt is used to cure fish, the duties on the salt may be remitted.
   (Section 1313(e) drawback)
   
6. If imported salt is used to cure meat which is exported, a drawback, in amounts not less than $100, of the duties paid on the salt may be obtained.
   (Section 1313(f) drawback)
   
7. If imported materials are used to construct and equip vessels and aircraft built for foreign account and ownership, 99 percent of the duties paid on the materials may be recovered as drawback, even though the vessels and aircraft are not, in the strict meaning of the word, exported.
   (Section 1313(g) drawback)
   
8. If imported merchandise is used in the United States to repair jet aircraft engines originally manufactured abroad, the duties paid on the imported merchandise may be recovered as drawback, in amounts not less than $100, when the engines are exported.
   (Section 1313(h) drawback)
   
9. If imported merchandise is exported without being used, or is destroyed under Customs supervision, 99 percent of the duties paid on the merchandise may be recovered as drawback.
   (Section 1313(j)(1) drawback)
   
10. If merchandise that is commercially interchangeable with imported merchandise is exported or destroyed under Customs supervision and at the time of exportation or destruction has not been used, 99 percent of the duties on the merchandise may be recovered as drawback.
    (Section 1313(j)(2) drawback)
    
11. Packaging material used to package merchandise exported or destroyed under section 1313(a), (b), (c), or (j), may receive 99 percent of the duties paid on the packaging material as drawback.
    (Section 1313(q) drawback)

How To Obtain Drawback

Drawback Proposal

These have been published in the Customs Bulletin with instructions as to the procedure for adhering to them. A sample drawback proposal to serve as a model may be obtained from Customs port directors for section 1313(a) drawback. For other types of drawback, including combination 1313(a) and (b), write to:

U.S. Customs Service, Duty and Refund Determination Branch 1301 Constitution Avenue NW, Franklin Court Washington, DC 20229 or call (202) 482­7040.

For same-condition drawback, no proposal is required but applicant should see his local Customs office prior to exportation.

Approval

The approval of a section 131 3(a) proposal takes the form of a letter from a port director of Customs to the applicant. The approval of a section 1313(b) drawback proposal takes the form of a letter from Headquarters, U.S. Customs Service to the port director where the applicant will file claims. The applicant receives a copy of this letter. Synopses of all contracts are published in Customs Bulletin and Decisions. The proposal and approval together are called a drawback contract or drawback rate.

If the manufacturer desires to have his contract (rate) changed in any way, he should file a new proposal (statement) and the procedure is the same as above.

Export of qualified U.S.-made petroleum products may be shown by matching production at a specific refinery with exports of qualified petroleum products of the same kind and quality that occur within 180 days after the refinery produced the designated petroleum product.

Export of qualified imported petroleum products may be shown by matching the amount imported with exports of qualified petroleum products of the same kind and quality that occur within 180 days after the import. (Section 1313(p) drawback)

Payment of Claims

When a claim has been completed by filing all required documents, the entry will be liquidated by the port director to determine the amount of drawback due. Drawback is payable to the exporter unless the manufacturer reserves to himself the right to claim the drawback.

Accelerated Payment

Accelerated payment of drawback under certain conditions is authorized by section 192.72 of the Customs Regulations. Accelerated payment generally will insure that a claimant will receive his drawback no later than 2 months after he files a claim. Accelerated drawback currently applies to same-condition drawback.

Effect of North American Free Trade Agreement (NAFTA)

The NAFTA provisions on drawback will apply to goods imported into the United States and subsequently exported to Canada on or after January 1, 1996. The NAFTA provisions on drawback will apply to goods imported into the United States and subsequently exported to Mexico, on or after January 1, 2001.