Here’s the exact language of … Section 313(j)(2) of the Act, as amended (19 U.S.C. This application is called a “Commercial Interchangeability Determination” (CID). (2) Drawback successor. Unused Merchandise Drawback USC 1313 (j) A refund of duties on imported merchandise exported in essentially the “same condition”. J1: Direct Identification J2: Substitution Lot Number, Serial Number, or Drawback Accounting Method Match like Merchandise within time frames. For purposes of drawback of internal revenue tax imposed under Chapters 32, 38 (with the exception of Subchapter A of Chapter 38), 51, and 52 of the Internal Revenue Code of 1986, as amended (IRC), drawback granted on the export or destruction of substituted merchandise will be limited to the amount of taxes paid (and not returned by refund, credit, or drawback) on the substituted merchandise. Claimants under manufacturing drawback may, if approved, file retroactively, provided that the drawback claims are filed within three years of the date of export. 1313 (j) (2)): If merchandise that is classifiable under the same 8-digit HTS subheading number as the imported merchandise, provided the HTS description of the imported merchandise is not "other," is exported or destroyed without being used in the United States, drawback of 99% of the duty, taxes and fees on the value of the imported or substituted … In instances in which assets and other business interests of a division, plant, or other business unit of a predecessor are transferred, the predecessor or successor must specify, and maintain supporting records to establish, the value of the drawback rights and the value of all other transferred property. § 190.32 Substitution unused merchandise drawback. A “drawback successor” is an entity to which another entity (predecessor) has transferred, by written agreement, merger, or corporate resolution: (i) All or substantially all of the rights, privileges, immunities, powers, duties, and liabilities of the predecessor; or. 1313(j)(2) with respect to wine if the imported wine and the exported wine are of the same color and the price variation between the imported wine and the exported wine does not exceed 50 percent. Copyright © 2020, J.M. As such, Umbrella can claim drawback equal to 99% of the original duties paid to US customs on the imported motors, calculated as 0.99 x $500 = $495.00. In substitution manufacturing drawback, any other merchandise, whether imported or domestic, of the same kind and quality as the imported merchandise, may be substituted for the imported merchandise. There are other forms of Drawbacks available under this section: Successorship 1313 (s) This type of drawback is outlined in section Subsection 1313(b) of the Tariff Act [19 U.S.C. Determination of HTSUS classification for substituted merchandise. 1313(j)(2) are still ineligible for drawback under NAFTA and USMCA. (ii) Merchandise not otherwise designated. It then ships the motors to an assembly factory in Greenville, SC where it also maintains an inventory of domestically produced motors of “same kind and quality” as the imported motors. Umbrella Widget Corporation imports 1000 motors and pays US customs duties of $1000 (in this case, $1 per motor imported). Recent Court of International Trade findings have held that for drawback 1313(j)(2)), before the close of the 5-year period beginning on the date of importation of the imported merchandise and before the drawback claim is filed, and before such exportation or destruction the substituted merchandise is not used in the United States (see paragraph (e) of this section) and is in the possession of the party claiming drawback. Drawback not allowed Direct Identification Substitution Determination of commercially interchangable. Note: Claims under unused substitution drawback, 19 U.S.C. 1313(s), a drawback successor as defined in paragraph (f)(2) of this section may designate either of the following as the basis for drawback on merchandise possessed by the successor after the date of succession: (i) Imported merchandise which the predecessor, before the date of succession, imported; or. Unused; Manufacturing; NAFTA/USMCA; Duty drawback tracking methodologies. Section 190.32. (a) General. § 190.32 Substitution unused merchandise drawback. 190.32 Substitution unused merchandise drawback. Brown DHL Drawback Services Attorney in Fact 22210 Highland Knolls Drive Katy Texas, 77450 RE: Unused Merchandise Substitute Drawback Ruling Request Dear Mr. Brown, We are … Substitution Same Condition/Unused Merchandise Drawback: The most common type of duty drawback is unused merchandise. (C) The price variation between the imported wine and the exported wine does not exceed 50 percent. 3. In both cases Drawback is permitted if exported within 3 years at the rate of 99% of the duties paid at import. 1313(j)(2). ever more complicated. Regardless, Umbrella is still entitled to 99% of the duties pain on the imported motors just the same as if the motors had been used to manufacture the 500 dishwashers that were exported to foreign markets. Bills of Material must contain the HTS numbers for ALL components used in manufacture, 99% of the lesser of the amount of duties, taxes and fees paid with respect to the imported components and the amount of duties, taxes and fees paid that would apply to the components if the components were imported, Claim attachments identify part number and quantity used in manufacture, Claim attachments identify merchandise used in manufacture by 8 digit HTS number. Section 313(j)(2) of the Act, as amended (19 U.S.C. 1313(j)(3)(B), on the substituted merchandise is not a use of that merchandise for purposes of this section. MANUFACTURING DRAWBACK. Electronic Code of Federal Regulations (e-CFR), Chapter I. U.S. CUSTOMS AND BORDER PROTECTION, DEPARTMENT OF HOMELAND SECURITY; DEPARTMENT OF THE TREASURY. (iv) Review by CBP. Substitution same condition drawback/unused merchandise drawback [19 U.S.C. Additional information required for drawback compliance program: 20. Rodgers Co, Inc. | Site By, If you or your business imports and export goods to and from the United States, it’s possible that  you may qualify for duty drawback, which is a 99% refund on goods imported into the United States that are subsequently exported . 1313(x)). The new rules ease the requirement for unused substitution drawbackby allowing a match to the 8-digit tariff classification (of the 10-digit classification) to the imported article. (ii) The claimant provides a certification, as part of the complete claim (see 190.51(a)), stating that: (A) The imported wine and the exported wine are a Class 1 grape wine (as defined in 27 CFR 4.21(a)(1)) of the same color (i.e., red, white, or rosé); (B) The imported wine and the exported wine are table wines (as defined in 27 CFR 4.21(a)(2)) and the alcoholic content does not exceed 14 percent by volume; and. Manufacturing Drawback provides for “Direct Identification” USC 1313(a) and Substitution under Subsection (b). This is true even when none of the designated merchandise may have been used to produce the exported articles. drawback claims • 1313(j)(2) substitution unused merchandise • 1313(b) manufacturing substitution • §190.51(a)(2)(ix) • The 10-digit HTSUS classification for the imported merchandise and would be applicable for the substitute merchandise along with the unit of measure must be reported standards established by industry wide organizations. (2) Destruction. Formal ruling obtained Even if you don’t do both, you may still be able to qualify as long as but importing and exporting happen along your supply chain. Unused merchandise drawback can be claimed under the direct identification provision of 19 U.S.C. The performing of any operation or combination of operations, not amounting to manufacture or production as provided for in 19 U.S.C. §1313(j)(1) or Substitution under 19 U.S.C. Products used in Manufacture at the part number level, Products used in Manufacture at the 8-digit HTS level. As a result, significantly more products will be eligible for unused substitution drawback. The new rules ease the requirement for unused substitution drawbackby allowing a match to the 8-digit tariff classification (of the 10-digit classification) to the imported article. Section 1313(b)]. If you or your business imports and export goods to and from the United States, it’s possible that  you may qualify for duty drawback, which is a 99% refund on goods imported into the United States that are subsequently exported . In the case of an article that is exported, subject to paragraph (b)(3) of this section, the total amount of drawback allowable will not exceed 99 percent of the lesser of: (i) The amount of duties, taxes, and fees paid with respect to the imported merchandise; or. One set of import and export documents … Drawback is granted when a company exports or destroys the goods made from the imported merchandise, the substituted goods or articles, or some combination of the two. Unused Merchandise Drawback. Currently, for Unused Merchandise Substitution Drawback, a drawback claimant is required to prepare and file with Customs an application for this type of drawback. The designated import must fall within the three-year period prior to the export date. Section 1313(j)(2)] is a 99% refund of duties paid on imported goods when other “commercially interchangeable” domestic or foreign goods are exported. Drawback not allowed Yes Yes Has substituted merchandise been used in the United States? Rodgers Co., Inc is a 3rd generation, family owned corporation that has redefined the role of a service provider for companies that demand more than “formula” service that others provide. Unused Merchandise Substitution Drawback When unused material, which is commercially interchangeable with the imported duty-paid material, is exported, U.S. import duty may be recovered. Upon compliance with the requirements of this section and under 19 U.S.C. Figure 5: Example of Substitution Unused Merchandise Drawback upon Exportation 9 Figure 6: Example of Rejected Merchandise Drawback 10 Figure 7: Timeline of Selected Changes to the Drawback Program 12 Figure 8: Example of Change in Drawback Eligibility for Substituted Underwear 19 Figure 9: Example of Basket Provision in Harmonized Tariff Drawback will be allowed on imported merchandise used to manufacture or produce articles that are exported or destroyed under CBP supervision within five years of importation B) Substitution Method claimant may file a claim for drawback on imported material even if it is not physically incorporated into the exported product. When the basis for substitution for wine drawback claims under 19 U.S.C. In 1984, the concept of substitution was added for same condition drawback and exchange, or tradeoff, of domestic merchandise for imported Substitution unused merchandise drawback (1313(j)(2)) Substitution is allowed if both the imported and substituted merchandise are classified under the same 8-digit HTS, provided the imported merchandise 8-digit HTS is not described as “other.” 1313(j)(1) or under the substitution provision under 19 U.S.C. drawback claims • 1313(j)(2) substitution unused merchandise • 1313(b) manufacturing substitution • §190.51(a)(2)(ix) • The 10-digit HTSUS classification for the imported merchandise and would be applicable for the substitute merchandise along with the unit of measure must be reported (3) Required certification. Note: Unused substitution drawback (under 1313(j)(2)) on exports to Canada or Mexico is not available. A claimant may file a claim for drawback on imported material that is subsequently exported in an unused condition. (ii) Imported and/or substituted merchandise that was transferred to the predecessor from the person who imported and paid duty on the imported merchandise. As a result, significantly more products will be eligible for unused substitution drawback. Others goods enter and go unused, are rejected, or are transformed through a manufacturing process--these goods, or substitute goods, are then often exported. Drawback is granted when a company exports or destroys the goods made from the imported merchandise, the substituted goods or articles, or some combination of the two. For substitution unused merchandise drawback: (1) The claimant must have had possession of the exported or destroyed merchandise at some time during the 3-year period following the date of importation of the imported designated merchandise; and. 1313(j)(2)), provides for drawback of duties, taxes, and fees paid on imported merchandise based on the export or destruction under CBP supervision of substituted merchandise (as defined in § 190.2, pursuant to 19 U.S.C. In 1980, drawback was permitted on the exportation of imported merchandise if the condition of the merchandise was unchanged and it was not used in the U.S. Additionally, the exported and imported merchandise must be commercially interchangeable in the case of unused substitution drawback and of the same kind and quality in the case of manufacturing drawback. The written agreement, merger, or corporate resolution, provided for in paragraph (f)(2) of this section, and the records and evidence provided for in paragraph (f)(3)(i) through (iii) of this section, must be retained by the appropriate party(s) for 3 years from the date of liquidation of the related claim and are subject to review by CBP upon request. For many companies, this initial recovery of duty can be quite substantial. To simplify the drawback process for this article, I will be using a pen as my claimable merchandise to walk through the different types of drawback. (a) General. (e) Operations performed on substituted merchandise. Operations performed on substituted merchandise. In this case, import duty can be recovered when other unused material substitutes the imported goods and is exported. 4. 1313 (j). Rodgers Co. Inc specializes in customs brokerage, duty drawback, freight forwarding and freight management with a focus on high-tech and high-touch solutions. Substitution Unused Merchandise Drawback (19 U.S.C. Essentially any value-added process short of a manufacturer, as defined above, is allowable under unused merchandise drawback. prev | next. Substitution Manufacturing Drawback: U.S. import duty may be recovered when imported duty-paid, duty-free or domestic material of the same kind and quality as the imported duty-paid designated material is used to produce the exported product. Substitution Same Condition/Unused Merchandise Drawback: (1) Alternative substitution standard. 4. NAFTA will affect each of these types of drawback in different ways. NAFTA will affect each of these types of drawback in different ways. 3. Substitution Same Condition/Unused Merchandise Drawback In 1984, Congress again amended the drawback law to provide for “substitution” same condition drawback. For purposes of drawback of internal revenue tax imposed under Chapters 32, 38, 51, and 52 of the Internal Revenue Code of 1986, as amended (IRC), drawback granted on the export or destruction of substituted merchandise will be limited to the amount of taxes paid (and not returned by refund, credit, or drawback) on the substituted merchandise. The predecessor or successor must certify that the successor is in possession of the predecessor's records which are necessary to establish the right to drawback under the law and regulations with respect to the imported and/or substituted merchandise. (c) Determination of HTSUS classification for substituted merchandise. Substitution Same Condition/Unused Merchandise Drawback In 1984, Congress again amended the drawback law to provide for “substitution” same condition drawback. but importing and exporting happen along your supply chain. Under this procedure, a company may recover a 99% drawback of duties paid on imported merchandise, if, within three years, it exports “fungible” domestic or foreign merchandise. The predecessor or successor must certify that the predecessor has not designated and will not designate, nor enable any other person to designate, the imported and/or substituted merchandise as the basis for drawback. •USMCA adopts TFTEA substitution standards when drawback is permitted (e.g. This simplified timeframe replaces a variety of timeframes for Unused Merchandise, Manufacturing, and Rejected Merchandise Drawback. Note: Unused substitution drawback (under 1313(j)(2)) on exports to Canada or Mexico is not available. Therefore, this provision may only be used where there are exports to non-NAFTA countries. 1313(j)(2)), provides for drawback of duties, taxes, and fees paid on imported merchandise based on the export or destruction under CBP supervision of substituted merchandise (as defined in § 190.2, pursuant to 19 U.S.C. (1) General rule. open/close. For any drawback claim for wine (as defined in § 190.2) based on 19 U.S.C. For unused merchandise substitution drawback, proof the merchandise was commercially interchangeable • Product specifications, engineering reports, quality oriented standards, e.g. 1313(s) -. NAFTA’S Drawback Provisions Unused Merchandise Drawback: Drawback on imported materials or finished products exported in essentially the same condition.This provision allows for an extensive list of incidental operations, such as testing, cleaning, and painting. (a) General. Substitution Manufacturing Drawback: U.S. import duty may be recovered when imported duty-paid, duty-free or domestic material of the same kind and quality as the imported duty-paid designated material is used to produce the exported product. Unused; Substitution; Time limits for Statute of Limitation Unused Merchandise Drawback USC 1313 (j) A refund of duties on imported merchandise exported in essentially the “same condition”. When imported duty-paid, duty-free or domestic material of the same kind and quality (SKAQ) as the imported duty-paid designated material is used to produce the exported product, U.S. import duty may be recovered. If imported merchandise is exported or destroyed under customs supervision within 5 years of import without being used inside the United States, then drawback is available. The amount of duties, taxes, and fees eligible for drawback is determined by per unit averaging, as defined in 19 CFR 190.2, for any drawback claim based on 19 U.S.C. 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