US Customs and Border Patrol is collecting tariffs on more goods and at higher rates than they have for decades. The rates and scope of goods affected may soon go even higher. Now is a good time for large and small exporters to assess drawbacks on goods that they export, even if they never directly paid any import tariffs.
Drawbacks are essentially refunds of tariffs that were previously collected. Drawbacks can be requested when the tariffed good is subsequently exported or destroyed. Drawbacks can be claimed by any exporter, even if they were not the one who paid tariffs when the goods or components were originally imported.
In many cases, the exported goods need not be the exact same physical product but can be substituted with equivalent products. The rules are complex and the time to payment can be slow, but with higher tariff rates affecting more and more goods this is the right time to consider starting a drawback management program, or improving one that already exists.
Analysts estimate that up to 85% of duties eligible for drawback are never claimed.
A strong drawback program will have the following components:
An ability to gather and track duties paid on imported goods (and imported components) from the start of the value chain, extending beyond direct and Tier 1 vendors.
An ability to gather and track assignment of drawback rights from the company who originally paid them.
An ability to match imported goods (and imported components) to the exported or destroyed goods, either directly or by substitution.
An understanding of how much the drawback program will cost, a plan to implement it, and a business case justifying the investment.
A partner. Tariffs and drawbacks are complex and most companies will benefit from partnering with a logistics company or Customs broker. Even very large companies typically seek the help of a specialist. The paperwork, filing and follow-up is complex.
Establishing an effective drawback capability requires strong collaboration between the accounting, operations and IT functions. A cost effective drawback program will be systematized and automated - collecting and producing the information a customs broker will need to periodically file your claims.
For help starting or evaluating a drawback program at your company contact Cunningham CPA today.
AL: (251) 300 - 2552
CA: (619) 344 - 0404
Visit the CPB Drawback page at https://www.cbp.gov/trade/programs-administration/entry-summary/drawback
Jonathan Cunningham has led the design, build and deployment of over a dozen accounting and ERP systems, many of which supported import, export, and drawback requirements at a global scale.