Import duties are a cost of doing business for many manufacturers, but they don't always have to be permanent.
Companies that import components, use them in U.S. manufacturing, and then export the finished article may be able to recover up to 99% of the duties paid on those imports. It's a refund available through 'manufacturing duty drawback,' which has been a part of U.S. trade law since 1789.
Many manufacturers overlook drawback, with fewer than 15% of eligible companies filing a claim. Drawback rules can be detailed, particularly when it comes to documentation and tracing imported materials through production, but the basic concept isn't. The potential refunds are often substantial, which makes drawback worth a closer look.
Since details matter, this guide covers how manufacturing duty drawback works, what qualifies, what doesn't, and what U.S. Customs and Border Protection requires before paying a claim.
What 'Manufacturing Duty Drawback' Covers
U.S. Customs and Border Protection (CBP) describes manufacturing duty drawback as a refund, in whole or in part, of duties, fees, and internal revenue taxes on imported goods, paid on the export or destruction of that merchandise (CBP Drawback overview). Manufacturing drawback allows producers to recover up to 99% of duties, authorized under 19 U.S.C. 1313(a) and 1313(b), and administered under 19 CFR Part 190.
The concept is rather straightforward. Duties were paid when the components entered the country. The finished merchandise left the country. If the transaction meets drawback requirements, then CBP returns most of what was paid of the duties and other eligible amounts.
The basic concept is simple, but the challenge is having the documentation to prove it. A drawback claim has to connect the dots between the imported merchandise, how it was used in production, and the product that was ultimately exported.
What Manufacturers Can Actually Recover
Drawback covers more than the duty line on the entry summary. It also covers these eligible amounts:
- Ordinary customs duties assessed at entry
- Merchandise Processing Fee (MPF)
- Harbor Maintenance Fee (HMF)
- Certain federal excise taxes paid on imported merchandise
- Section 301 duties on Chinese origin goods
Recent tariff actions changed which of those dollars are actually recoverable, so the duty bill is worth sorting program by program. Section 301 duties are drawback eligible, and CBP reaffirmed that in August 2026 after an ACE validation update briefly rejected claims on the affected classifications. Section 232 duties on steel, aluminum, and copper generally are not, because the proclamations that imposed them bar drawback. IEEPA tariffs sit outside the drawback program altogether; after the Supreme Court struck them down, CBP began refunding those duties through a separate correction process rather than through a drawback claim. For a manufacturer with a mixed duty profile, that means the recoverable share can land well below the total tariff spend, which is why the review has to happen line by line before anyone puts a number on it.
Eligible manufacturers can recover 99% of the duties paid on qualifying imported materials, and CBP retains 1%. For a manufacturer paying seven figures a year in duties and fees and exporting a significant share of its production, even a portion of that spend can add up to a sizable recovery.
What Manufacturers Cannot Recover
There are a few things that can prevent a manufacturing drawback claim from moving forward:
- Antidumping (AD) and Countervailing Duties (CVD). AD/CVD cannot be recovered through drawback under any provision. If a large portion of your duty spend comes from AD/CVD, the amount available for recovery will be lower than the total duties shown on your entry summaries.
- Entries more than five years old. Claims must be filed within five years of the date of importation. Once that window closes, the entry can no longer be included in a drawback claim. For a first review, it's worth looking back across the full five years that are still open.
- Merchandise you cannot trace. A company may have qualifying imports and exports but still have trouble filing a claim if its records don't show how the imported materials were used in production and connect them to the exported product.
Eligibility is rarely what stops a manufacturing claim. But documentation certainly does. It's the reason why good record-keeping matters from the very start.
Two Ways Manufacturers Qualify
There are two ways a manufacturer qualifies for drawback:
Direct Identification | Under 1313(a)
The imported merchandise is used in the exported article. Your records must trace where the merchandise went during production lot by lot. This approach works well for manufacturers that already track materials by batch or serial number, where inputs are already tracked to finished units for other reasons.
Substitution | Under 1313(b)
With substitution, the merchandise used in production does not have to be the exact merchandise that was imported as long as it is classifiable under the same 8-digit HTS subheading as the imported merchandise. The substitute may be domestic or imported. You still recover against the duty paid on the import.
This can be particularly useful for manufacturers that commingle inventory. Materials such as resins, chemicals, fasteners, and wire may be difficult to track back to a specific import once they enter the production process. Substitution allows manufacturers to use a different but qualifying input and still claim drawback on the duties paid.
What CBP Requires Before Paying a Claim
Manufacturing drawback has certain requirements that 'unused merchandise drawback' does not.
- An approved manufacturing ruling. Claims under 1313(a) or 1313(b) require a ruling before CBP approves payment. Several common production processes are pre-approved as general rulings in Appendix A to 19 CFR Part 190. Processes outside those need a specific ruling, which takes time to obtain and should be started early.
- Electronic filing in ACE. Drawback claims are filed electronically through Automated Commercial Environment (ACE) via the Automated Broker Interface (ABI). A manufacturer can file its own claims using drawback software and a filer code, or work with a licensed customs broker (CBP Drawback ACE FAQs).
- Production records. Records need to show what went into the manufacturing process and how much was used. Depending on the operation, this can include bills of material, yield or waste factors, and the records that connect input quantities to finished goods.
- Proof of export or destruction. It's required to show documentation that the finished article was exported or that it was destroyed under CBP supervision.
- CBP Form 7553 where notice applies. A Notice of Intent to Export, Destroy or Return Merchandise generally needs to be filed before the export or destruction takes place unless the company has an approved prior notice in place.
There is also one privilege worth applying for. It doesn't change eligibility, but it can affect when you receive the refund.
- Accelerated payment allows CBP to pay the drawback claim before liquidation against a bond. The sequence matters: the manufacturing ruling number is applied for first, and accelerated payment follows once that ruling is in place.
CBP modernized the drawback program under the Trade Facilitation and Trade Enforcement Act, moving it into ACE on February 24, 2018. The implementing final rule was published on December 18, 2018 (Drawback in ACE). Manufacturers who evaluated drawback before 2018 and decided it wasn't worth pursuing were looking at a different program. It may be time to take another look.
Two Assumptions Manufacturers Have About Drawback
There are two common assumptions worth clearing up before getting started with drawback.
You don't have to be the importer or exporter of record. You just have to be a party to the transaction. You don't even have to be the manufacturer. Drawback rights can be transferred, so a manufacturer that purchases duty-paid components from a domestic distributor may still be eligible for drawback.
You don't have to change customs brokers, either. Drawback claims are separate from your company's regular entry activity. You can add a drawback program and continue working with your existing customs brokerage relationship.
Where to Start
A quick review of two numbers can give you a good idea of whether drawback is worth exploring. Start with annual duties, MPF, and HMF paid each year on imported production inputs, excluding AD/CVD. Then look at how much of your finished production is exported or destroyed. If both numbers are meaningful, the next step is to look back over the five-year claim window.
Zarach Logistics has been filing customs entries since 1981 and has an in-house drawback practice with three CBP-filed drawback privileges. If you're interested in seeing whether your company has an opportunity in its five-year lookback, we can start with a free duty drawback assessment.
