Learn how your business can reclaim up to 99% of duties, taxes, and fees paid on imported goods through the duty drawback program.
What is duty drawback? (the 30-second version)
Duty drawback is a refund of customs duties you paid on imported goods — if those goods are later exported, destroyed, or used in manufacturing exported products.
Think of it like a cashback program for international trade. The U.S. government doesn't want to penalize American businesses with import taxes on goods that ultimately leave the country, so they offer refunds through this program.
Quick example
Your company imports $1 million worth of electronics from Taiwan and pays $200,000 in duties. Six months later, you export 40% of that inventory to Canada. You can file for duty drawback and recover up to $79,200 (40% × $200,000 × 99%).
Who qualifies for duty drawback?
More businesses than you might think. If you import goods into the U.S. and any of the following apply, you likely qualify:
✓ You export products (even occasionally)
✓ You destroy unsold inventory under CBP supervision
✓ You manufacture products using imported materials that get exported
✓ You handle returns that go back overseas
✓ You have excess or obsolete inventory that leaves the U.S.
Industries that commonly benefit:
- Manufacturing - Using imported components in exported products
- Retail & E-commerce - Managing international returns and excess inventory
- Distribution - Moving goods through the U.S. to other countries
- Fashion & Apparel - Seasonal inventory that gets exported or destroyed
- Electronics - High-value goods with significant duty exposure
- Food & Beverage - Products with expiration dates requiring destruction
The three main types of duty drawback
1. Unused Merchandise Drawback
What it is: Get refunds on imported goods you export without using them in the U.S.
Example: Import 10,000 smartphones, sell 6,000 domestically, export 4,000 to Mexico → claim drawback on the 4,000 exported units.
2. Manufacturing Drawback
What it is: Get refunds when you use imported materials to make products that are exported.
Example: Import steel from Japan, manufacture car parts, export those parts to Germany → claim drawback on the steel used in exported parts.
3. Rejected Merchandise Drawback
What it is: Get refunds on defective or non-conforming goods that are returned or destroyed.
Example: Import custom packaging that arrives with wrong specifications, return it to supplier → claim drawback on the duties paid.
How much money can you get back?
Up to 99% of eligible duties, taxes, and fees, including:
- ✓ Customs duties
- ✓ Merchandise Processing Fees (MPF)
- ✓ Harbor Maintenance Fees (HMF)
Simple calculation:
Refund = Import Duties Paid × % of Goods Exported × 99%
If you paid $500,000 in duties last year and exported 30% of your imports, your potential refund is approximately $148,500.
The 5-step duty drawback process (simplified)
Step 1: import & pay duties
You bring goods into the U.S. and pay customs duties at the port.
Step 2: export or destroy
Within 5 years, you either:
- Export the goods (as-is or in manufactured products)
- Destroy them under CBP supervision
Step 3: match your records
Link your imports to exports using:
- Direct identification (exact item tracking)
- Substitution (similar items with same classification)
Step 4: file your claim
Submit electronically through ACE within 5 years, including:
- CBP Form 7551
- Proof of import and export
- Documentation of duties paid
Step 5: get your refund
CBP reviews and approves → You receive 99% of duties back (typically within 90-180 days).
Common misconceptions about duty drawback
"It's only for huge companies"
False. While some brokers only work with companies paying $1M+ in duties, modern solutions like Pax AI make it accessible to businesses of all sizes.
"The paperwork is overwhelming"
Not anymore. Automated platforms handle the complex matching and documentation requirements that used to require entire teams.
"It takes forever to get paid"
With proper documentation and accelerated payment status, refunds can arrive in weeks, not months.
"We need to track every single item"
Substitution drawback allows you to claim refunds on equivalent goods — you don't always need serial-number-level tracking.
Why most companies miss out (and how to avoid it)
The top 3 reasons companies leave money on the table:
- They don't know they qualify - Many businesses assume drawback is only for manufacturers or major exporters
- They think it's too complex - Without the right tools, matching millions of transactions is daunting
- They've been told it's not worth it - Traditional brokers often have high minimums that exclude smaller importers
The hidden opportunity: retroactive claims
You can file claims on exports from the past 5 years. Many companies are sitting on hundreds of thousands in unclaimed refunds from historical transactions.
Getting started: your duty drawback checklist
Documents you'll need:
- Import entry summaries (CBP Form 7501)
- Export documentation (bills of lading, AES filings)
- Proof of duty payment
- Commercial invoices
- Inventory records showing product movement
Questions to ask yourself:
- How much did we pay in import duties last year?
- What percentage of our imports do we export?
- Do we destroy any imported inventory?
- Can we trace products from import to export?
Red flags that you're leaving money behind:
- You import from high-tariff countries (China, India, Vietnam)
- You export even 10% of what you import
- You've never filed for duty drawback before
- You work with brokers who say "it's not worth it"
The bottom line: why duty drawback matters now
In today's environment of rising tariffs and global trade tensions, duty drawback isn't just a nice-to-have — it's a competitive advantage. Companies that master this program can:
- Improve cash flow with regular refund payments
- Reduce effective tariff rates on their global operations
- Price more competitively in export markets
- Reinvest savings into growth initiatives
Ready to claim your refunds?
If you import and export (or destroy) goods, you're likely eligible for significant refunds through duty drawback. The question isn't whether you qualify — it's how much money you're leaving on the table.
Start with Pax AI's free eligibility check to see your potential refund amount. Our AI-powered platform makes duty drawback simple, automated, and accessible to businesses of all sizes. We only get paid when you get paid.
Want to dive deeper? Read our Ultimate Guide to Duty Drawback for a comprehensive look at maximizing your refunds, understanding complex scenarios, and implementing a successful drawback program.