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Q. I believe my company has about $10,000 worth of drawback going back the three years allowed. Is it worth capturing and can you help me?
A. It depends on: The volume of data; The type of drawback; and Where the product is exported.
Volume of Data
Let's first look at the volume of data, that is, one needs to look at the amount of data that would need to be keyed into the drawback system. If it takes an inordinate amount of time for you to key in data, it probably isn't cost-effective to pursue a drawback program of this size.
But if you don't have a lot of data to key in, or even better, if some of the data is available in your company's mainframe and can be downloaded to the drawback system, then this may be a worth-while drawback program.
Type of Drawback
The type of drawback (whether it be unused or manufactured goods) is also a major factor in determining whether or not a drawback program is worthwhile. Unused drawback may be the least complicated when it comes to applying for approval from Customs to file for drawback. Manufacturing drawback, on the other hand, requires that a special contract be obtained from Washington, D.C. - or perhaps your local port (if you're using a general contract in addition to the usual information required on the application).
For a drawback program estimated at $10,000, only an unused drawback program would warrant further attention. The time it would take to prepare a manufacturing application and process a manufacturing drawback program would outweigh the commission one would potentially receive.
Where the Product is Exported
Finally, we come to the absolute "do or die" question that makes or breaks a drawback program these days: Does any of the product get exported to Canada or Mexico?
Where a product is exported and whether it is an unused or manufactured product come into play when a product is exported to Canada or Mexico. If exporting manufactured goods to Canada or Mexico, the drawback will fall under the "lesser of" rule - meaning whichever duty is less than the U. S. duty (be it Canadian or Mexican) will be the one that is refunded.
In a lot of cases this duty is actually zero and no drawback is obtained. Even if the lesser of the two duty amounts is not zero (but a modest sum of money), it still may not be worthwhile. Why? Because on top of U.S. duty payment proof, you have to provide Canadian Import Entries and proof of payment to Canadian Customs.
Plus, if you want to file an unused drawback to either Canada or Mexico, you have to do so using the direct ID method. This, too, can be a bit of a task if the data is not in the proper format to allow direct identification.
Let's say, however, that the product is exported to Canada and doesn't fall under the 'lesser of' rule - and you are able to provide the necessary direct identification documentation with little effort. Then this drawback program may still be one worth pursuing.
So where does this all leave us? Determining an amenable commission.
We'll start with the best scenario, using an unused drawback program with products exported to countries other than Canada or Mexico. Assume the data is very clean and accessible with imports available electronically - 12 to 15 imports per year and four to six exports per year. You'd have to expect average fees in the range of 30% to 40% for a drawback program with these characteristics (keeping in mind the estimated total duty refund is $10,000).
Now let's say that the drawback program has unused product exported to Canada, which means the direct identification rule applies. Assume the data is accessible, but less so (that is, it seems to be okay for direct ID but it's not electronically available). Then assume you have 24 to 30 imports per year and 10 to 15 exports per year (meaning much more data entry). In this case, a commission fee of 40% to 50% would not be out of line. But bear in mind that even though these commissions may sound high enough to make even a lawyer blush, they may also include 1) time to prepare the applications to Customs and 2) the compliance program setup.
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