If your company imports goods into the U.S. and later exports them — or uses them to make exported products — you may be eligible for a duty drawback refund. But to file a successful claim, you first need to answer one critical question:
What type of duty drawback are you filing for?
There are several types of duty drawback, each with its own rules, documentation requirements, and eligibility criteria. Filing under the wrong provision can delay your refund — or result in your claim being denied altogether.
In this guide, we'll break down every major type of duty drawback recognized by U.S. Customs and Border Protection (CBP), including:
- Unused merchandise drawback
- Manufacturing drawback
- Substitution drawback
- Rejected merchandise drawback
You'll learn how each one works, who qualifies, and which documents you'll need to support your claim. We'll also show you how Pax AI helps businesses automatically identify the right provision — so you can file with confidence and get your refund faster.
Let's dive into the details.
What is duty drawback? (quick refresher)
Duty drawback is a U.S. government program that allows businesses to recover up to 99% of the duties, taxes, and fees they paid on imported goods — as long as those goods are later:
- Exported from the U.S.
- Used to manufacture exported products
- Destroyed under CBP supervision
- Rejected and returned to the seller
The idea is simple: if you didn't benefit from the imported goods domestically, you shouldn't be stuck paying import duties on them. Duty drawback gives that money back.
Administered by U.S. Customs and Border Protection (CBP)
CBP oversees the duty drawback program, which was most recently modernized by the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). That law simplified many rules and expanded eligibility — especially for substitution claims and digital filings.
Why it matters
For companies that import and export, duty drawback can result in hundreds of thousands or even millions of dollars in recovered duties each year. But claiming it successfully starts with knowing which type of duty drawback applies to your situation — and how to file correctly.
Why the type of duty drawback matters
Understanding the type of duty drawback you're filing isn't just helpful — it's essential. U.S. Customs and Border Protection (CBP) treats each provision as a separate pathway, with its own rules, documentation requirements, and approval standards. Filing under the wrong type can cause delays, trigger audits, or result in a denied refund — even if you were otherwise eligible.
Whether you're exporting unused inventory, manufacturing goods with imported inputs, or returning defective shipments, the type of duty drawback you choose defines your entire claim process.
Filing eligibility varies by type
Each drawback provision outlines who can file the claim — and under what conditions. For example, an importer can file for unused merchandise drawback if they still own the product at export. But if the goods are used in manufacturing, a manufacturer's ruling may be required, and the claim may need to be filed by or through the manufacturer.
This is especially important in shared supply chains, where importers, exporters, and producers are different entities. In these cases, the correct provision also dictates who must transfer rights and sign off on documentation.
Documentation requirements are provision-specific
Every type of duty drawback has its own set of required records. A rejected merchandise claim, for instance, demands return authorizations, QA logs, and photos of defective goods. A manufacturing claim, on the other hand, needs production records, bills of materials, and export logs.
Mixing up the documentation — or filing with an incomplete packet — is one of the most common reasons CBP delays or rejects a claim.
Your refund calculation depends on the type
The provision you file under also determines how your refund is calculated. For unused merchandise, you're typically refunding duties based on a 1:1 match between import and export units. In manufacturing, the refund is based on how much imported input went into a finished exported product — which requires precise inventory and production tracking. Substitution adds another layer of complexity by allowing similar goods to be matched using HTS codes.
Each method has its own benefits, but also different compliance risks if not executed correctly.
The filing timeline can change based on type
Some drawback types — like unused merchandise or substitution with accelerated payment privileges — can be processed quickly if documentation is clean. Others, like rejected merchandise or complex manufacturing claims, may face longer review times and more scrutiny from CBP.
Choosing the right type from the start helps set expectations for how long your claim will take and what resources you'll need.
The main types of duty drawback
There are four primary types of duty drawback that businesses can file under, depending on what happens to their imported goods. While each type falls under the broader CBP drawback program, the rules, paperwork, and eligibility vary significantly.
Below, we break down each type — including how it works, who qualifies, and when to use it.
1. Unused merchandise drawback
Unused merchandise drawback applies when you import goods into the U.S. but later export them without using or altering them. These goods must remain in their original condition — though repackaging, testing, or inspection is allowed.
Common examples:
- Returning excess inventory to overseas suppliers
- Re-exporting unsold retail goods
- Selling unused stock to foreign buyers
To qualify, you'll need:
- Import records (e.g., CBP Form 7501)
- Export records (e.g., bill of lading, commercial invoice)
- Proof that the product was not used in the U.S.
This is one of the most straightforward types of duty drawback, ideal for traders, wholesalers, and global distributors.
2. Manufacturing drawback
Manufacturing drawback applies when imported goods are used to manufacture or produce a finished product, which is then exported.
This provision requires a manufacturing ruling or letter of intent to outline your process. You'll also need to prove the imported input was consumed in the production of the exported good.
Common examples:
- Importing fabric and exporting finished garments
- Using imported chemicals in pharmaceutical production
- Making electronics with imported semiconductors
Because this type involves transformation of goods, documentation must include:
- Bills of material (BOMs)
- Production logs
- Inventory and export tracking
3. Substitution drawback
Substitution allows you to file for drawback even if the exact imported good wasn't exported — as long as it's commercially interchangeable with the exported item.
Under TFTEA, substitution is allowed when:
- The import and export share the same 8-digit HTS code
- The products are considered interchangeable for commercial purposes
You can use substitution with either unused or manufacturing drawback provisions.
Common examples:
- Importing sugar but exporting an equivalent lot from domestic inventory
- Using one brand of raw material for manufacturing but exporting a similar product
This type of duty drawback expands refund eligibility dramatically, especially for companies with high inventory turnover or pooled goods.
4. Rejected merchandise drawback
Rejected merchandise drawback applies when imported goods are defective, shipped without consent, or fail to meet specifications, and are either returned or destroyed.
To qualify, the goods must not have been used in the U.S., and you must export or destroy them under CBP supervision.
Common examples:
- Receiving a shipment with damaged or contaminated goods
- Canceling a purchase order but receiving the inventory anyway
- Importing noncompliant components for regulated industries
Documentation must include:
- Proof of rejection (QA reports, supplier communication)
- Export or destruction records
- CBP authorization for destruction, if applicable
Special categories and exceptions
While most businesses file under one of the four main types of duty drawback, U.S. Customs also recognizes a handful of special categories. These provisions are more narrowly applied but can be valuable for certain industries — particularly oil & gas, food packaging, and logistics.
Here's what to know.
Petroleum derivatives drawback
This is a specialized form of substitution drawback that applies to petroleum and petroleum-based products, such as:
- Jet fuel
- Gasoline
- Plastic resins
- Chemical derivatives
To qualify, the importer and exporter must both be registered under an approved petroleum derivative drawback contract, and the substituted goods must fall under qualifying HTS codes.
Because the petroleum industry deals with large, fungible inventories, this drawback type helps simplify claims for refineries and large distributors.
Packaging material drawback
If you import packaging materials and later use them to ship exported goods, you may be eligible for drawback on the import duties paid for that packaging.
Examples include:
- Imported glass bottles used to package exported perfume
- Imported plastic wrap or cartons used to ship food abroad
This provision is only available if the packaging is not reused and is considered an incidental component of the exported item.
Destruction without drawback rights transfer
In some cases, goods may be destroyed domestically rather than exported, and the party that owns the goods may not have the original import documentation. If that's the case, it's possible — under specific conditions — to file drawback without a formal transfer of rights, provided the destruction occurs under CBP oversight.
This typically applies in cases where:
- Imported goods are spoiled, expired, or recalled
- A third-party vendor manages destruction on behalf of the original importer
- There's no commercial resale value for the goods
While not common, this provision can salvage refunds in what would otherwise be a total loss scenario.
These exceptions won't apply to every claimant, but they reflect how the duty drawback program is flexible across different industries and supply chains. If you're unsure whether your product or scenario qualifies under a special category, it's worth speaking with a drawback specialist.
How to know which type applies to you
Figuring out the right type of duty drawback for your business isn't always straightforward. With multiple provisions and complex supply chains, even seasoned importers and exporters can struggle to categorize their claims correctly.
But choosing the right provision is crucial. It determines what documentation you need, how your refund is calculated, who can file the claim, and how long the process will take. Below, we'll walk through the key questions that can help you identify which type of duty drawback applies to your specific situation.
Were the goods used in the U.S.?
One of the most important distinctions CBP makes is whether the imported goods were used domestically before being exported or destroyed. If they weren't used, transformed, or consumed in any way, your claim likely falls under unused merchandise drawback. This provision is designed for goods that are exported in essentially the same condition as when they arrived — even if they were repackaged, tested, or inspected.
If the goods were used as inputs in a manufacturing process, however, then the correct provision is typically manufacturing drawback. This applies when the imported item is incorporated into a new product or consumed in the course of making it.
Is the export the same as the import?
Another factor to consider is whether the exact same item that was imported is the one being exported — or if you're substituting a similar product. If your export is identical to the import, your claim will fall under direct identification drawback (either unused or manufacturing).
If you're exporting a commercially interchangeable item — such as a domestically sourced version of the imported good — then you're likely eligible for substitution drawback. Under TFTEA, substitution can be based on an 8-digit HTS code match, making it easier for companies with pooled inventory to qualify for refunds.
Did you manufacture a new product?
If your business uses imported inputs to create a new product — whether it's food, electronics, apparel, or industrial components — you're dealing with manufacturing drawback. This is one of the most common types of duty drawback among producers and exporters.
To file under this provision, you'll need to maintain detailed production records, bills of materials, and export documentation. You'll also need to establish a manufacturing ruling with CBP or file under a general approval, depending on your process.
In some cases, you can apply substitution rules within manufacturing, if the imported and exported items meet the commercial interchangeability test.
Were the goods rejected or destroyed?
If the imported goods were damaged, noncompliant, or shipped without consent, and you either destroyed them or returned them to the supplier, you may qualify for rejected merchandise drawback.
This provision is unique in that it doesn't require the goods to be sold or exported. Instead, it's focused on proving that the goods were unusable, unmarketable, or not delivered as expected — and that they were properly removed from commerce under CBP supervision.
This type is often used by quality control teams, contract manufacturers, or retailers dealing with international suppliers.
Who owns the goods — and the right to file?
Sometimes, the correct type of duty drawback depends on how your supply chain is structured. If you're the importer but someone else exports the goods, you may need to transfer the right to claim drawback. Some provisions require formal drawback rights assignments between parties, while others are more flexible.
The type of provision you use will determine whether the importer, exporter, or manufacturer can file — and whether those roles can be split between different entities.
When in doubt, get expert help
Because duty drawback types often overlap, especially in complex operations, many companies benefit from working with a drawback specialist or platform. At Pax, our system automatically analyzes your import and export activity, identifies eligible claims, and maps them to the correct provision — minimizing the risk of errors or delays.
Choosing the right type of duty drawback doesn't just improve your odds of success — it can also maximize the size of your refund.
Up next, we'll dive into how documentation and filing requirements change depending on the provision you're using.
Document and filing differences by type
Once you've identified the right type of duty drawback, your next priority is gathering the correct documentation and understanding how to file. Each provision has different requirements, and using the wrong set of documents — or missing key forms — can delay your refund or get your claim denied altogether.
In this section, we'll break down how the documentation and filing process varies across the main types of duty drawback.
Unused merchandise drawback
Unused merchandise claims are typically the most straightforward. Since the goods aren't altered or consumed, your primary task is proving that the imported and exported items are the same, and that no domestic use occurred.
Key documents often include:
- The original CBP entry summary (Form 7501)
- Proof of export (such as a bill of lading or AES filing)
- Commercial invoices showing item details
- Inventory or warehouse records demonstrating no use
If you're using substitution under this provision, you'll also need to match the 8-digit HTS codes and demonstrate commercial interchangeability if challenged.
Manufacturing drawback
Manufacturing drawback claims are more complex because the goods change form. You'll need to show that the imported item was used in producing a new product — and that the final good was exported.
Typical documentation includes:
- A CBP-approved manufacturing ruling or letter of intent
- Bills of materials (BOMs) linking inputs to outputs
- Production logs or batch records
- Import and export documentation tied to specific production lots
Because manufacturing claims require more operational detail, it's essential to maintain clean, auditable records over time. If you're claiming substitution manufacturing, you'll also need to match HTS codes and ensure your products meet interchangeability standards.
Substitution drawback
Substitution can apply to both unused and manufacturing provisions, and it introduces another layer of documentation. While it removes the need to trace the exact imported item, you'll still need to prove that the imported and exported goods are commercially interchangeable or share the same 8-digit HTS code.
This type of drawback often requires:
- Product specifications or catalogs
- Inventory records showing interchangeable items
- Consistent HTS classifications across imports and exports
The benefit of substitution is that it broadens refund eligibility — but CBP may scrutinize your matching logic, especially for high-value claims.
Rejected merchandise drawback
Rejected merchandise claims revolve around proving the goods were either defective, unauthorized, or noncompliant — and that they were either exported or destroyed.
For these claims, expect to provide:
- Import documentation (entry summaries, commercial invoices)
- Written statements explaining the rejection (e.g., QA reports, supplier correspondence)
- Export or destruction records, including CBP Form 7553 if destroyed
- Photos, inspection reports, or return authorizations as supporting evidence
Timing also matters. These claims must be filed within five years of import, and destruction must happen under CBP supervision or with prior approval.
Filing formats and systems
Across all provisions, claims must be submitted electronically through ACE (Automated Commercial Environment). CBP requires specific formats and data structures, which can be difficult to manage manually — especially if your records span multiple ERP systems or vendors.
This is where using a dedicated platform or drawback broker becomes critical. Systems like Pax automatically structure your documents, validate your data, and upload your claim in the correct format.
Filing privileges and accelerated payments
Regardless of which type of duty drawback you're filing, it's possible to apply for additional privileges that make the process faster and smoother. For example:
- Accelerated payment allows approved filers to receive refunds within 45 days, rather than waiting for full claim liquidation.
- Waivers of prior notice streamline repeat claims without needing pre-approval for every shipment.
- One-time waivers may be available for new filers with qualifying history.
These options are provision-specific and require additional approval from CBP, but they can dramatically shorten the timeline for receiving your refund.
How Pax helps you file in the right way
Navigating duty drawback on your own can feel overwhelming. Between choosing the right provision, managing documentation, and staying compliant with CBP rules, it's easy to make a mistake — especially if your team doesn't have dedicated drawback expertise.
That's where Pax comes in. Our platform automates the entire process, from identifying eligible claims to filing the final application with Customs. Here's how we simplify each step of the journey, no matter what type of duty drawback you're claiming.
Smart provision matching
The first hurdle in any drawback claim is choosing the right provision. Pax automatically analyzes your import and export activity — including SKUs, HTS codes, supplier data, and manufacturing inputs — to determine which type of duty drawback applies.
Whether your goods are unused, transformed, substituted, or rejected, Pax identifies the correct category and applies the corresponding CBP rules to your claim. No guesswork, no mismatches, no rejections for filing under the wrong provision.
Built-in documentation intelligence
Each type of duty drawback comes with its own documentation requirements, and Pax is built to handle them all. Our system ingests your invoices, packing lists, BOMs, production logs, and shipment data — and organizes them based on the specific claim type.
Rather than manually uploading hundreds of PDFs or trying to format Excel sheets for CBP, you simply connect your data sources. Pax's document engine tags and formats everything behind the scenes, ensuring your claim is structured and audit-ready.
ACE-compliant filing, automatically
Once your claim is assembled, Pax generates a fully compliant electronic filing package for submission via CBP's ACE system. Whether you're filing under unused merchandise, manufacturing, or rejected goods, the output is structured correctly for each type of duty drawback.
The platform also tracks deadlines, validates your entries, and flags missing data in real time. This means fewer delays, faster refunds, and less back-and-forth with Customs.
Support for accelerated payment and privileges
If you're applying for privileges like accelerated payment or one-time waivers, Pax helps you prepare the necessary documentation and submit requests to CBP. Once approved, the system automatically routes your claims for early payout — sometimes within 30 to 45 days.
This is especially valuable for high-volume exporters looking to improve cash flow without hiring an in-house compliance team.
Final thoughts and next steps
Filing a duty drawback claim isn't just about paperwork — it's about understanding which rules apply to your specific situation. With multiple types of duty drawback available, from unused merchandise to rejected goods, identifying the correct path early on is the key to a smooth, successful refund process.
Each provision comes with its own documentation requirements, filing timelines, and calculation methods. Filing under the wrong type — or submitting incomplete records — can lead to costly delays, denials, or even penalties. That's why having the right tools and support matters.
Whether you're new to drawback or managing dozens of export lanes, Pax AI is built to help you:
- Identify the right type of duty drawback based on your data
- Gather and format your documents automatically
- File a compliant claim through ACE, with built-in validation
- Get your refund faster — without the back-and-forth
If you're ready to reclaim what you've already paid in duties, we can help you get started. No manual forms, no legal guesswork — just a smarter, easier way to file.
Curious how much you might be eligible to recover? Reach out to our team or schedule a demo to see Pax in action.