Drawback Entries in International Shipping

In international shipping, a drawback is a refund of duty and taxes. When international shipping goods were imported to the USA, duties, and taxes were paid, and now they are exported out of the USA.

A refund can take place if:

• Internationally shipping/Exporting imported merchandise;
• Destroy imported merchandise;
• Put in Foreign Trade Zone in Restricted Status (for export or destruction only).

The refund can be on:

• Duty;
• Taxes;
• Marking duty, if any;
• Merchandise processing fee, BUT only under one condition: it has to be used merchandise drawback;
• Harbor maintenance fees are NOT refundable.

Types of drawbacks in international shipping:

1. Unused international shipping merchandise. I.e., the same condition and quality in and out;
2. Rejected international shipping merchandise;
3. Manufacturing drawbacks when international shipping items are used in a manufacturing process.

PROCEDURE FOR FILING DRAWBACKS IN INTERNATIONAL SHIPPING:

A. DRAWBACK ENTRY:

1. CF 7551 - "Drawback Entry Form";
2. CF 7553 - "Notice of intent to Export."

a. FOR EXPORT: You give Customs Drawback Entry forms (7551 and 7553 in 2 (TWO) working days BEFORE the goods leave the USA. If Customs does not respond, you are free to export.

b. FOR DESTRUCTION: 7 (SEVEN) working days' notice to Customs is required. Customs must respond in 4 working days.

c. If you did not file 7553, then Customs will reject the claim for drawback.
However, Customs may give you ONE-TIME exemptions if you file a written application, including that you did not file the 7553. Customs will respond within 90 days and advise whether or not they reject the international shipping claim.
If they reject it, you have 30 days to file a claim at headquarters.

d. Customs may waive NOTICE OF EXPORT (CF 7553) if you have good international shipping records and request in advance. It is for large corporations, which has a lot of drawbacks.

B. DRAWBACK CLAIM (Package of the drawback claim):

1. CF 7551 - "Drawback Entry";
2. CF 7552 - "Assignment of rights" if required, since another exporter;
3. CF 7553 - "Notice of intent to Export";
4. Proof of Export - Airbill, BOL, SED (7525), etc.

There are 5 offices in the United States where Drawbacks on international shipping can be filed (not 9 like before):

1. Chicago;
2. Houston;
3. Long Beach;
4. New York;
5. San Francisco.

The time limit is 3 (THREE) YEARS of the date of EXPORT. No extensions unless there is a national disaster (records had been destroyed). Then, it can be extended for 18 more months.

Drawback claims on international shipping take a long time to get the money back. It can take up to ONE YEAR AFTER THE ORIGINAL ENTRY IS LIQUIDATED.
However, you can get an accelerated payment. Since you put a bond on your import (i.e., the amount of money you're getting back), Customs will certify the payment:
- Within 3 weeks;
- 2-3 months if the entry is filed manually.

You can perform ANY operation of the international shipping merchandise in the USA, except assembly.

Substitution is ALLOWED in drawback, but it must be commercially interchangeable.
To find ether, whether it is interchangeable or not, you have to get a ruling from Customs:
- Non-binding ruling from the Port Director;
- Binding ruling from Headquarters.

UNUSED INTERNATIONALLY SHIPPED MERCHANDISE

It must be exported within 3 (THREE) YEARS OF THE DAY OF IMPORTATION. You submit the whole package of the international shipping drawback claim)

REJECTED MERCHANDISE

It must be exported within 3 (THREE) YEARS OF THE DAY OF IMPORTATION.
You must file 7553 with a written explanation of why international shipping goods had been rejected and submit it to Customs in 5 (FIVE) working days. Customs must respond within 2 (TWO) working days whether or not they will inspect it.

2 (two) TYPES OF MANUFACTURING DRAWBACKS - When international shipping goods are manufactured in the U.S. with foreign parts, an entire item is sent out of the country.

1. GENERAL MANUFACTURING DRAWBACKS;
2. SPECIFIC MANUFACTURING DRAWBACK

GENERAL MANUFACTURING DRAWBACK:

Customs publishes General Drawback Ruling in the CFR 19 part 191 appendix A.
Each has a treasury decision # on it.
A manufacturer sends to the Port Director a letter that it will comply with the manufactory drawback, and the drawback will be filed and later liquidated.
Customs sends back an acknowledgment letter with a UNIQUE computer-generated # that will be used on ALL the drawback claims.

SPECIFIC MANUFACTURING DRAWBACKS:

The applicant applies to Headquarters (not to the Port Director), and the Headquarters sends back an acknowledgment letter with a UNIQUE computer-generated # that will be used on ALL the international shipping drawback claims.

They apply to DIRECT EDIFICATION (1) and SUBSTITUTION (2).

Substitution - you CAN substitute domestic and international shipping merchandise in drawback claim on export referred to the TRADE-OFF.
Substituted international shipping merchandise must be the same in brand and quality.

The requirements for the TRADE-OFF are:
It must be used by the manufacturer within 3 YEARS of receipt and exported within the same 3 YEARS.
The completed international shipping articles must be exported within 5 YEARS of the date of import, i.e.
YOU MUST INTRODUCE PARTS WITHIN 3 YEARS, AND EXPORT COMPLETED ARTICLES WITHIN 5 YEARS.

TRADE-OFF MUST BE:

1. Two separate legal entities. I.e., you cannot trade off to yourself;
2. No cash sales since there is no paper trail;
3. Headquarters approved merchandise as equal class and quality.

DRAWBACK TERMINOLOGY

PREDECESSOR - original exporter who is entitled to the drawback

DRAWBACK SUCCESSOR - who has rights assigned by CF 7552 ("Assignment of rights" if required, since another exporter)

USED IN - multiply foreign products in one item

APPEARED IN - one foreign item

VOLUNTARY-TENDER - intentional overpayment (usually to bulk)

MISCELLANEOUS:

• Drawbacks, as a rule, are in the sum of 99%, except for export from continuous custody. Then 100%.
• NAFTA DRAWBACKS COVERED BY CFR 19 part 181 (non by 191)
• No drawback on international shipping agricultural products permitted under tariff rate quota, which paid over quota rate.
  EXCEPT FOR TOBACCO.
• Customs has the right to request additional information even with correctly filed drawback claims. Then, the importer must respond in 30 days.

RECOUP OF TIME LIMITS FOR DRAWBACK EXPORTS:

1. Not ordered - 3 years;
2. Unused/in same conditions - 3 years;
3. Manufactory drawback - 5 years;
4. Substitution - 3 years;
5. Time to file a claim - 3 years;
6. Records keeping - 3 years after the payment