Duty Drawback


Glossary of Terms

Summary of the actual production records of the manufacturer. When preparing a manufacturing drawback claim a claimant can either choose the abstract method which requires the use of actual production records or the schedule method which essentially provides a standard bill of material listing for the exported articles. Any component part manufacturing operation typically uses a bill of materials schedule when preparing its claims while a manufacturing operation with significant variances from production run to production run (certain petrochemical processes for example).

Accounting Method
Various approved methodologies used to match export transactions with designated import transactions for drawback purposes. Approved drawback accounting methods are used only for the purpose of complying with the direct identification requirements for drawback filed under 1313(j)(1) or 1313(a). A claimant’s selected accounting method does not actually need to reflect their actual accounting method utilized either for inventory or federal income tax purposes.

An outside entity that performs all or a portion of the manufacture process on behalf of the drawback claimant. By definition, the agent does not take title of the merchandise and only adds value during the manufacturing process.

Certificate of Delivery
Customs Form 7552. Delivery Certificate for Purposes of Drawback, summarizing information contained in original documents, establishing: The transfer from one party to another; and the identity of such merchandise or article as being that to which a potential drawback exists; and, the assignment of drawback rights for the merchandise or article transferred from the transferor to the transferee, commonly referred to as a "third-party" drawback transaction. The certificate of delivery transfers the potential drawback associated with a specific import transaction from the importer of record to another commercial entity that purchased the imported merchandise.

Certificate of Manufacture and Delivery
Customs Form 7552, Delivery certificate for Purposes of Drawback, summarizing information contained in original documents establishing: The transfer of an article manufactured or processed from one party to another; and The identity of such article as being that to which a potential right to drawback exists; and the assignment of drawback rights for the article transferred from the transferor to the transferee.

Commercially Interchangeable Merchandise
Merchandise that is the same for the purpose of drawback under the provisions of 1313(j)(2). Customs shall evaluate critical properties of substituted merchandise including but not limited to part number, classification, industry specification, and HTS number.

Designated Merchandise
Either eligible imported duty-paid merchandise or drawback products selected by the drawback claimant as the basis for drawback; or qualified articles selected by the claimant as the basis for drawback. Simply put, imports selected for inclusion on a drawback entry.

Complete destruction of articles or merchandise to the extent that they have no commercial value.

Direct Identification Drawback
Drawback on imported merchandise used to manufacture or produce an article which is either exported or destroyed without having been used in the United States authorized under 1313(j)(1) or 1313(a). Direct ID is a methodology of matching exports to designated imports exactly either using lot number or serial number tracing to through the use of an acceptable accounting method (FIFO, LIFO, LO to HI, etc..)

The refund or remission, in whole or part, of customs duty, fee or internal revenue tax which was imposed on imported merchandise at time of importation, and the refund of internal revenue taxes paid on domestic alcohol. Destruction, transfer to an FTZ under zone restricted status, or most commonly exportation triggers the opportunity for the refund of import duties via the drawback provision of USC 1313 as amended.

Drawback Claim
Drawback entry and related documents required by regulation which together constitute the request for drawback payment.

Drawback Entry
The combination of required Customs forms, documents, and summarized reports containing export, import, and production information (if applicable) for the merchandise on which drawback is being claimed. Drawback entries are filed on Customs Form 7551.

Drawback Product
A finished or partially finished product manufactured in the United States that carries with it the potential for drawback filed under the provisions of manufacturing drawback.

The severance of goods from the mass of goods belonging to this country, with the intention of uniting them with the mass of goods belonging to some foreign country. Or goods admitted into a foreign trade zone under zone-restricted status, or are laden upon qualifying aircraft or vessel.

That person who, as the principal party of interest in the export transaction, has the power and responsibility for determining and controlling the sending of the items out of the United States.

Merchandise or articles which are identical and interchangeable in all situations.

Claimants filing under the provisions of manufacturing drawback must secure a ruling in order to receive payment for a manufacturing drawback entry. The ruling establishes the basis for matching the exported and the designated merchandise as well as providing Customs with a description of a manufacturing or production operation for drawback and the regulatory requirements and interpretations applicable to that operation. Any claimant that can comply with its previously established terms and conditions can elect to file under the general ruling. A claimant's manufacturing operations not covered by one of the general rulings must seek approval for a ruling specific to its own operations.

Low to High Drawback Accounting Method
An accounting method available under both manufacturing and unused merchandise drawback that determines exact method of how exports and imports will be matched for drawback purposes. This accounting method carries the least amount of administrative effort as it does not require accounting for domestic sales transaction. The method requires the claimant to build an accounting record or data base of all import transactions and then designate them in an order according to which import transaction for a given part number that has the lowest amount of duty per unit. The import transaction with the lowest amount of drawback value is designated first. This method is most commonly used when filing direct identification drawback on exports to NAFTA countries as NAFTA eliminated the substitution method under the provisions of same condition drawback (referred to currently as unused merchandise drawback).

Manufacture or Production
A process, including but not limited to, an assembly, by which merchandise is made into a new and different article having a distinct name, character, or use; or is made for a particular use even though it does not meet new and different article definition.

Multiple Products
A manufacture process resulting in multiple products produced from the same raw materials. Typically, this term is associated with the production of petrochemicals or products with similar manufacture process. The refining of a barrel of crude oil produces many products including gasoline, jet fuel, motor oil, etc.. The drawback associated with each product must be apportioned according to its relative value as compared against the other products, i.e. higher value finished products receive a greater portion of the duty drawback associated with the imported crude oil.

Physical or operational control of the merchandise, including ownership while in bailment, in leased facilities, in transit to, or in any other manner under the operational control of the party claiming drawback.

Include, but are not limited to, statements, declarations, documents and electronically generated or machine readable data maintained in support of a drawback entry.

Relative Value
The value of a product divided by the total value of all products which are necessarily manufactured or produced concurrently in the same operation. Relative value is based on market value, or other value approved by Customs, of each such product determined as of the time it is first separated in the manufacturing or production process. Market value is generally measured by the selling price, not including any packaging, transportation or identifiable costs, which accrue after the product itself is processed. Additionally MPF drawback is assigned to each line on an individual import invoice according to its value relative to the other lines on an invoice.

A document filed with Customs showing the quantity of imported or substituted merchandise used in or appearing in each article exported or destroyed. The schedule method of determining the claim quantity typically utilizes a factor that can be applied against numerous exports. Example: an exported cell phone bill of materials that lists 1 battery, 1 motor, 12 integrated circuits, etc.. would be applied to the exported articles (a cell phone) to determine the part number and quantity of components to be claimed.

Specific Manufacturing Drawback Ruling
A letter of approval issued by Customs Headquarters in response to a drawback application by a manufacturer or producer for a ruling on a manufacturing or production operation specific to the claimant's operation. Specific rulings are issued to one claimant where general rulings apply to multiple claimants.

Substituted Merchandise
1. Manufacturing Drawback: same kind and quality as the imported designated merchandise. Must be capable of being used interchangeably in the manufacture or production of the exported or destroyed articles.

2. Unused Drawback: substituted merchandise must be commercially interchangeable with the imported merchandise. Essentially, substituted merchandise is that merchandise either exported, or in the case of manufacturing drawback, used in the production of the exported articles. The merchandise can be from either a domestic or imported source but must meet the same general specifications as the imported merchandise on which drawback is being claimed..

Drawback eligible transactions that involve multiple companies importing and exporting the drawback merchandise.