Duty Drawback for Beginners: Everything You Need to Know in 2025

Import duties, taxes, and fees are a significant expense for businesses that import goods into the United States.

However, many businesses are unaware that they may be eligible for refunds on these costs through a program called duty drawback. This guide explains eligibility requirements, benefits, and the application process in 2025.

Duty drawback is a refund program administered by U.S. Customs and Border Protection (CBP) that allows importers to recover duties, taxes, and fees paid on imported merchandise that is subsequently exported or destroyed under CBP supervision.

The program has existed since 1789 and encourages American manufacturing and international trade by eliminating the disadvantage of having paid duties on materials later exported.

Several types of duty drawback exist under U.S. law. Understanding which type applies to your business is crucial for a successful claim:

This drawback applies when the exact imported merchandise is exported or destroyed without being used in the U.S.

The claimant must trace the specific imported items to the exported or destroyed goods through lot numbers, serial numbers, or other tracking methods.

Substitution drawback recovers duties when commercially interchangeable merchandise is exported or destroyed instead of the actual imported merchandise.

TFTEA changed the standard from “commercially interchangeable” to “classification under the same 8-digit HTSUS subheading number” for claims filed on or after February 24, 2018.

This type allows duty recovery when imported merchandise is used in the U.S. to manufacture or produce a different article that is subsequently exported.

There are two subcategories:

Applies to imported merchandise returned to CBP custody and exported or destroyed because it does not conform to sample or specifications, was shipped without the consignee’s consent, or was defective at import.

Duty can be recovered when imported merchandise is destroyed under CBP supervision. This is relevant for retailers who import merchandise later returned by customers and cannot be resold.

Eligibility depends on the drawback type, but generally the following parties may qualify:

Parties can transfer their right to claim drawback to another eligible party through certificates of delivery and certificates of manufacture and delivery.

The Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015, fully effective in February 2018, introduced major changes:

The financial upside can be substantial:

For businesses with significant import and export activity, duty drawback can deliver hundreds of thousands or even millions of dollars in recovered funds.

The process for claiming duty drawback involves several key steps:

Assess your business activities to determine if you qualify for drawback and which type is most appropriate. Review import and export records to identify recovery opportunities.

Most drawback claims require a customs bond, which serves as financial security for CBP in case the claim is later found invalid.

Gather all required documentation, which typically includes:

For manufacturing and some other drawback types, obtain a ruling from CBP before filing claims. The ruling outlines your process and establishes eligibility.

File electronically through the Automated Commercial Environment (ACE) with all required information and documentation.

CBP reviews your claim and may request additional information or conduct verifications to ensure compliance.

If approved, CBP issues a refund for eligible duties, taxes, and fees. Timing varies based on claim complexity and CBP workload.

Duty drawback offers significant financial benefits, but businesses face several recurring challenges:

Maintaining the detailed records required to support claims can be difficult, especially for companies with high transaction volumes or complex supply chains.

Duty drawback regulations are complex and change frequently, requiring ongoing expertise and education.

The drawback process can be time-consuming and resource-intensive, often demanding dedicated personnel with specialized knowledge.

Standard accounting and inventory systems often lack the functionality to track the data points required for claims, such as linking imports to exports.

A few focused investments can remove the friction that keeps companies from filing claims:

Implementing drawback-focused software or modules automates tracking and documentation, reducing administrative burden and minimizing errors.

Working with customs brokers, trade consultants, or specialized providers like Evana delivers expertise and resources that may not exist in-house.

Investing in training ensures teams understand drawback requirements and bake them into daily operations.

Integrating drawback considerations into broader import/export workflows makes it easier to capture and maintain the necessary information across the supply chain.

Different industries face unique challenges and opportunities:

Retailers and e-commerce brands that ship internationally or destroy returns may qualify for drawback. The challenge lies in tracking individual items from import to export or destruction.

Manufacturers benefit when imported components go into exported goods. Documenting the use of specific imported materials requires detailed manufacturing records.

These industries handle fungible products that are hard to track individually. Substitution drawback lets companies recover duties based on volume or quantity.

With high duty rates often exceeding 15%, fashion brands have significant recovery potential. Challenges include seasonal inventory changes and tracking country of origin for similar items.

Technology is simplifying and optimizing the process:

Blockchain can create immutable transaction records across the supply chain, simplifying documentation requirements.

APIs enable seamless integration between e-commerce platforms, inventory tools, and customs systems, reducing manual entry and improving accuracy.

AI algorithms analyze import and export data to identify drawback opportunities that might otherwise be missed.

Cloud platforms improve collaboration between importers, brokers, and drawback specialists, streamlining workflows and reducing delays.

Duty drawback is a major opportunity for businesses that import and export goods or destroy imported goods that cannot be used or sold.

While the process can be complex, the financial benefits often outweigh the administrative costs, particularly for businesses with:

By understanding eligibility requirements, process steps, and common challenges, businesses can decide whether to pursue this recovery opportunity.

Effective systems and processes help brands realize significant financial benefits while maintaining compliance.

Specialized service providers like Evana offer technology-driven solutions that automate documentation and filing, especially for Shopify-powered eCommerce businesses.