Manufacturing drawback, under 19 USC 1313(a), refunds duty on imported merchandise that is used in the manufacture or production of articles in the United States, when those articles are then exported. The imported material goes into a finished product, the finished product leaves the country, and CBP refunds up to 99 percent of the duty paid on the material. The program is old, it dates back to 1789, and it was modernized by the Trade Facilitation and Trade Enforcement Act of 2015, with the current regulations in 19 CFR Part 190.
The windows are the discipline. The manufacture must happen within three years of the manufacturer's receipt of the imported merchandise, and the completed article must be exported, or destroyed under customs supervision, within five years after importation. The article must not have been used prior to exportation. Those are the same windows that govern substitution drawback, and they run from the same dates, which is why a manufacturer who tracks receipt dates carefully rarely loses a claim to the calendar.
Section 1313(b) adds substitution to manufacturing drawback. If imported duty-paid merchandise and any other merchandise, whether imported or domestic, of the same kind and quality are used in the manufacture or production of articles within three years of receipt, drawback is allowed on the exportation of any such articles, even if none of the imported merchandise was actually used in the exported ones. The exported article qualifies by kind and quality, not by identity, and the total drawback cannot exceed 99 percent of the duty paid on the imported merchandise.
This is the provision that makes manufacturing drawback workable at scale. A manufacturer who buys steel from three sources, one imported and duty-paid, two domestic, and uses all three interchangeably on the same line does not need to trace which coil went into which exported unit. The substitution rule lets the export of any article of the same kind and quality support the claim. The alternative, direct identification of materials through a production line, is a recordkeeping burden that kills most programs before they start.
Most manufacturing drawback claims fail on records, not on law. The claim needs the import entries that paid the duty, the production records showing the materials were used within three years, and the export records showing the finished articles left within five years. Where substitution is used, the claim needs the same-kind-and-quality showing instead of unit tracing, which is simpler but still needs documentation: purchase records, inventory records, and production records that tie the materials to the articles.
Drawback claims also liquidate under the same one-year rule as entries: under 19 USC 1504, a drawback claim not liquidated within one year of the date of entry or claim is deemed liquidated at the drawback amount asserted by the claimant. The claim is the importer's assertion until CBP says otherwise, and the records are what make the assertion stick. A manufacturer who files drawback without a record system is filing a refund request with no evidence, and the evidence is the program.
Keep reading: FTZ vs Bonded Warehouse: Which Defers Duty Better, Drawback Claims: Recovering Duty on Re-Exported Goods.
Manufacturing drawback covers imported duty-paid materials used in the manufacture of an exported article. Unused merchandise drawback covers imported goods exported in essentially the same condition, without being used. The line between them is manufacture: if the imported material was built into something else, it is manufacturing drawback; if it left in the same condition it arrived in, it is unused merchandise drawback.
Within three years of the manufacturer's receipt of the imported merchandise. The manufacture or production must happen inside that window, and the finished article must then be exported, or destroyed under customs supervision, within five years after importation of the imported merchandise.
Use substitution under 19 USC 1313(b). If imported duty-paid merchandise and other merchandise of the same kind and quality are used in manufacture within three years of receipt, drawback is allowed on the export of any of the articles, even if none of the imported merchandise was actually used in the exported ones. The total drawback cannot exceed 99 percent of the duty paid on the imported merchandise.
Up to 99 percent of the duty paid on the imported merchandise. The same 99 percent cap applies across drawback: direct identification, substitution, and manufacturing all refund 99 percent, not 100, because the statute reserves one percent. The refund covers duties, taxes, and fees paid on the import, including the merchandise processing fee.