Duty Drawback 2026: How to Recover Up to 99% of US Tariffs
If you import goods into the US and then re-export them, destroy them, or use them in manufacturing a product that's exported, you may be able to recover up to 99% of the duties, taxes, and fees you paid. This is called duty drawback, and with Trump-era tariffs pushing duty rates to 50%, 80%, or higher, drawback has become one of the most valuable tools in the importer's playbook. This guide explains how it works, who qualifies, the types, and the practical process.
What duty drawback is
Duty drawback is a refund of import duties paid on goods that don't ultimately enter US commerce. Section 313 of the Tariff Act of 1930 (as amended) is the governing statute. CBP retains 1% as an administrative fee; you can recover the other 99%.
The principle: tariffs are intended to protect US commerce from unfair foreign trade. If the goods don't compete in US commerce because they're re-exported or destroyed, the original tariff rationale doesn't apply, so the duty is refunded.
What duties are eligible for drawback
- Base MFN duty — yes
- Section 301 (China) — yes, including the 25% layer
- Section 232 (metals, autos) — yes
- IEEPA — yes
- Reciprocal baseline — yes
- MPF and HMF — yes
- AD/CVD — yes (with specific rules)
This is one of the most powerful aspects of drawback: all major Trump-era tariff layers are recoverable. A Chinese electronics import paying 60% combined duty becomes 0.6% net cost if successfully re-exported and claimed.
The three main types of drawback
1. Unused Merchandise Drawback (UMD)
You import goods, they sit in inventory, and you re-export them without using them in the US. Conditions:
- The exported goods must be the same articles imported (or commercially interchangeable)
- Re-export within 5 years of import
- Goods unused or in same condition as imported
Common use: distributors who re-export to Mexico, Canada, or other markets.
2. Manufacturing Drawback
You import a component, use it in manufacturing a different product, then export that product. Conditions:
- The imported component must be used in the manufacturing process
- The manufactured article must be exported within 5 years of import of the component
- Detailed records linking imported components to exported finished goods
Common use: US manufacturers exporting finished products that contain imported parts or materials.
3. Rejected Merchandise Drawback
Goods that don't conform to sample, were shipped without consent, or are otherwise defective. You can return or destroy them and claim drawback. Conditions:
- Documented non-conformity
- Re-export or destruction under CBP supervision within 5 years
How much is recoverable
| Scenario | Recovery |
|---|---|
| $50,000 of Chinese electronics (~$28,000 duty) → re-exported intact | ~$27,720 (99% of $28,000) |
| $200,000 of Vietnamese textile inputs (~$72,000 duty) → manufactured into garments exported | ~$71,280 |
| $30,000 of Mexican non-USMCA auto parts → returned defective | ~$14,850 (99% of duty) |
The drawback process
- Obtain a drawback bond. CBP requires a specific drawback bond, separate from your import bond. Get from your customs broker or surety.
- Set up your drawback program. Decide which type applies. Document your inventory and accounting systems.
- Maintain detailed records. Match imports to exports. CBP requires precise records linking specific imported lots to specific exported lots.
- File the claim. Use ACE drawback module. Most importers file via a specialized drawback service provider or attorney.
- CBP review. 90 days to 24 months depending on complexity.
- Payment. CBP issues refund check or ACH transfer.
Who actually claims drawback
Three party roles:
- Importer of record — the entity that imported and paid duty
- Manufacturer/producer — the entity that used the goods in manufacturing
- Exporter — the entity that exports the finished or unused goods
The drawback claimant is normally the exporter, but the importer can claim if they handle the export themselves. Rights can be assigned via a Certificate of Delivery (CD) so the exporter can file even if they didn't import.
The 99% rule and "substitution"
You don't need to export the exact physical units you imported. Substitution allows you to use commercially interchangeable goods. Under 2018 reforms (TFTEA):
- Substitution is permitted if the goods share the same 8-digit HTS classification
- This dramatically simplifies record-keeping vs the old "same condition" rule
- You can pool exports across multiple imports of the same HTS code
The trade-off: cost vs benefit
Drawback isn't automatic — it requires:
- A drawback bond (~$300-$1,000/year depending on volume)
- Specialized record-keeping (an ERP module or service)
- Filing service or attorney (often 10-25% of recovery as fee, or hourly)
- CBP review time
Break-even threshold: drawback is worthwhile if annual recoverable duty exceeds approximately $25,000-$50,000. Below that, the administrative cost eats the benefit.
Drawback vs Foreign Trade Zone vs Bonded Warehouse
All three reduce duty exposure but work differently. See our Foreign Trade Zones guide for the comparison.
- Drawback — pay duty upfront, recover later
- FTZ — defer duty until goods leave the zone for US consumption
- Bonded warehouse — defer duty up to 5 years; pay or re-export
Common mistakes
- Filing without proper records. CBP can deny claims for poor documentation.
- Missing the 5-year deadline. No exceptions.
- Confusing manufacturing vs unused merchandise drawback. Different rules, different paperwork.
- Not getting Certificates of Delivery when buying from importers.
- Trying DIY for complex manufacturing drawback. Use a specialist.
Frequently asked questions
How much of my duty can I recover via drawback?
Up to 99% of duties, taxes, and fees paid. CBP retains 1% as administrative fee. Section 301 and Section 232 tariffs are eligible alongside base MFN duty.
How long do I have to file a drawback claim?
5 years from the date of importation. Claims older than 5 years are barred.
Can I claim drawback on AD/CVD duties?
Yes, with specific rules. The exported goods must demonstrably correspond to the AD/CVD-paid imports.
Does drawback apply if I sell to Canada via USMCA?
Yes, but with restrictions. NAFTA/USMCA drawback rules limit recovery on goods exported to USMCA countries to the lesser of US duty paid or destination country duty paid.
Can I get drawback retroactively?
Yes for entries within the past 5 years. Many importers discover years of recoverable duty when they first set up a drawback program.
What's the typical cost of filing drawback?
10-25% of recovery as a service fee, or hourly attorney/specialist rates. Make sense when annual recovery exceeds $25,000-$50,000.