Duty Drawback
A refund of customs duties paid on imported goods that are subsequently exported, either in their original form or as part of a manufactured product. A powerful cost recovery tool for brands that sell internationally.
Duty drawback is a US customs program that allows importers to recover up to 99% of duties, taxes, and fees paid on imported goods that are subsequently exported. If you import a product, pay 25% duties, and then export that product (or a product made from it) to another country, you can claim back most of those duties from CBP. This program has existed since 1789 and is one of the most underutilized cost savings tools in international trade.
There are three main types of drawback: unused merchandise drawback (goods imported and then exported in the same condition -- for example, products shipped to Amazon fulfillment centers in Canada or Europe), manufacturing drawback (imported materials or components used to manufacture goods that are then exported), and rejected merchandise drawback (goods that are returned to the foreign supplier due to defects or other issues).
For DTC brands selling internationally, duty drawback can be significant. If you import products from China at a 25% duty rate and 30% of your sales are international (shipped to customers in Canada, UK, or EU), you could potentially recover nearly 25% of duties on 30% of your imports. On $500,000 in annual imports, that could mean $37,000+ in recovered duties. The process requires detailed record-keeping and typically a drawback specialist or broker, but the return is often substantial.
Why it matters
If you re-export any percentage of your imports (including selling to international customers via Amazon global or your own website), investigate duty drawback. A drawback specialist can assess your potential recovery with minimal upfront cost.
Practical Tip
If you re-export any percentage of your imports (including selling to international customers via Amazon global or your own website), investigate duty drawback. A drawback specialist can assess your potential recovery with minimal upfront cost.
You'll hear this when…
When arranging payment
“"The factory requires a Duty Drawback before they'll book production time on their line."”
When reviewing an invoice
“"Our accountant flagged the Duty Drawback terms on this supplier invoice — make sure they match the contract."”
When negotiating terms
“"We proposed net-30 but the supplier countered with Duty Drawback — standard for first-time buyers."”
Related Terms
Harmonized Tariff Schedule
HTSThe US system for classifying imported goods and determining applicable duty rates. Every imported product is assigned an HTS code that determines how much customs duty you pay.
Customs Broker
A licensed professional authorized to clear goods through customs on behalf of importers. In the US, customs brokers must hold a federal license and are responsible for correctly classifying goods, calculating duties, and ensuring regulatory compliance.
Landed Cost
The total cost of a product delivered to your warehouse, including the product price, shipping, insurance, customs duties, customs broker fees, and drayage. The true cost you must use for pricing and margin calculations.
Bonded Warehouse
A customs-approved storage facility where imported goods can be stored without paying duties or taxes until they are withdrawn for domestic consumption, re-exported, or destroyed.
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