Duty drawback is a valuable program that allows businesses to recover duties, taxes, and fees paid on imported goods that are later exported or destroyed. However, many businesses fail to maximize their refunds due to common errors in the claims process.
Common Mistakes in Duty Drawback
In this blog post, we'll highlight some of the most frequent mistakes companies make when filing duty drawback claims—and how to avoid them.
1. Inadequate Record-Keeping
The Mistake: One of the biggest reasons duty drawback claims are denied is poor documentation. CBP requires detailed records linking imported goods to their exported counterparts, and missing or incomplete paperwork can lead to rejected claims.
How to Avoid It:
- Implement a structured record-keeping system to store all relevant import and export documentation
- Maintain import documents, invoices, duty payment receipts, bills of lading, inventory records and other supporting documents in an organized manner
- Use automated software to track shipments and store digital copies of necessary paperwork
2. Missing Deadlines
The Mistake: CBP has strict time limits for filing duty drawback claims. Claims must be submitted within five years from the date of importation, and failure to meet this deadline results in forfeited refunds.
How to Avoid It:
- Regularly review import and export records to ensure timely filing of claims
- Set up reminders or work with a customs consultant to avoid missing crucial deadlines
- File claims as early as possible to reduce last-minute errors and ensure compliance
3. Incorrect Classification of Goods
The Mistake: Misclassifying imported goods under the wrong Harmonized Tariff Schedule (HTS) code can result in incorrect duty drawback claims and potential penalties.
How to Avoid It:
- Work with a customs expert or broker to ensure proper classification of all imports
- Train internal teams on the importance of accurate HTS classification
- Conduct regular audits to verify classification accuracy
4. Failure to Link Imports with Exports
The Mistake: A successful direct identification duty drawback claim requires clear proof that exported goods are directly related to previously imported items. If this link is missing or unclear, the claim may be denied.
How to Avoid It:
- Use automated tracking systems to match imports with exports efficiently
- Keep detailed logs of inventory movement from import to export
- Ensure invoices and shipping documents clearly establish this connection
- Keep accurate inventory records documenting all receipts and withdrawals from inventory if using an accounting methodology
5. Not Leveraging the Right Duty Drawback Program
The Mistake: There are multiple types of duty drawback programs, including unused merchandise drawback, manufacturing drawback, and rejected merchandise drawback. Choosing the wrong program or misunderstanding its requirements can result in lost refunds.
How to Avoid It:
- Research and understand the different types of duty drawback programs available
- Work with a duty drawback specialist to determine which program best fits your business
- Ensure you meet all program-specific documentation and eligibility requirements
6. Lack of Expertise and Professional Assistance
The Mistake: Duty drawback regulations can be complex, and businesses that attempt to navigate the process without professional guidance often make costly errors.
How to Avoid It:
- Consult with a licensed customs broker or duty drawback specialist
- Train internal compliance teams on best practices for duty drawback claims
- Stay updated on changes in CBP regulations to remain compliant
Conclusion
Maximizing duty drawback refunds requires careful attention to detail, proper documentation, and adherence to regulatory requirements. By avoiding these common mistakes and implementing best practices, businesses can streamline the claims process and recover significant duty payments.
How Can Pax AI Help?
At Pax AI, we understand these challenges and have built sophisticated software to help you avoid these common pitfalls. Our AI-powered platform streamlines the entire process, from documentation to filing, ensuring accuracy and compliance every step of the way.
The best part? We operate on a success-based model—we don't make any money until we help you get your money back, making duty drawback accessible to businesses of all sizes.
Ready to maximize your duty drawback refunds? Contact Pax AI today for a zero-cost eligibility check and let us help you navigate the process efficiently and effectively.