Navigating Post-Minimum Tariff Refunds: How Duty Drawback Aids Brands in Gaining Advantage in the Modern Trade Climate
In the world of international trade, the U.S. government has been offering a refund mechanism called Duty Drawback since 1789. This mechanism, which allows for the recovery of up to 99% of duties, tariffs, and certain fees paid on goods that are imported and later exported in the same condition, is a valuable tool for many ecommerce brands. However, for these brands, the recent changes in customs regulations have resulted in higher landed costs and tighter margins.
Every shipment, regardless of size, now requires a full customs entry and will incur applicable duties. This means that managing the Duty Drawback process can be complex and time-consuming. But, with the help of a licensed customs broker, the process can be streamlined. The initial setup may take months, but once in place, refunds can be processed in as little as 3-6 weeks.
There are three main categories of Duty Drawback for ecommerce brands: Unused Merchandise Drawback, Rejected or Destroyed Merchandise Drawback, and Manufacturing Drawback. The key rule for Unused Merchandise Drawback is that the goods must leave the U.S. in substantially the same condition they arrived. This means that brands that ship to Canada, Mexico, the UK, the EU, or Australia from U.S. inventory may qualify for Duty Drawback.
For instance, Unused Merchandise Drawback applies to finished goods imported and later re-exported unchanged, such as apparel shipped from a U.S. warehouse to a customer in Canada. In such a case, a brand could potentially receive a significant refund. For example, a $6,000 refund for $500,000 worth of footwear imported from Vietnam and later shipped to customers in Canada and the UK.
Despite the potential benefits, most brands do not file Duty Drawback claims due to misconceptions about complexity, size, and the time required. Thomas Taggart, Vice President (VP) of Global Trade at Passport, a leading global e-commerce solutions provider that helps brands scale internationally, emphasizes the importance of understanding and utilising Duty Drawback.
The U.S. de minimis exemption for all countries ended on August 29, 2025. This means that even small shipments will now be subject to duties, making Duty Drawback even more crucial for ecommerce brands looking to minimise costs and maintain competitive prices. It's time for brands to re-evaluate their international shipping strategies and consider the potential benefits of Duty Drawback.
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