Knowledge of NAFTA drawback and duty deferral programs can be a substantial money saver.
Under the NAFTA, certain programs allow for duty exemptions, refunds, and waivers for inputs imported into a country for the purpose of manufacturing goods for export. NAFTA Drawback and Duty Deferral are types of such programs that were applied to all three signatory countries as of January 1, 2001.
According to the NAFTA, the term “drawback” refers to the refund, reduction, or waiver of any part of customs duties assessed or collected upon importation of an article or materials which are subsequently exported. Additionally, “duty deferral” programs refer to trade zones, temporary importations under bond, bonded warehouses, maquiladoras, and inward processing programs.
When determining the customs duties amount to be refunded, reduced, or waived for imported goods or materials, identify the total amount paid or owed on those goods or materials when imported into a NAFTA country and compare this amount with the total amount paid or owed on the finished good in the NAFTA country to which those goods and materials will eventually be exported. The NAFTA drawback and duty deferral amount to be refunded, reduced, or waived will be the lesser of these two totals.
There are, however, some specific exceptions in which case drawback will not be offered:
- Antidumping or countervailing duties
- Premiums offered or collected pursuant to any tendering system with respect to the administration of quantitative import restrictions
- Tariff rate quotas or trade preference levels
- Fees pursuant to Section 22 of the U.S. Agricultural Adjustment Act
Duty Deferral Application
If the manufactured goods made from inputs or materials imported from a NAFTA country are also exported back to a NAFTA country, those exports qualify for a new method of NAFTA duty drawback and deferral. Under this method, upon exporting, the goods are treated as though they were withdrawn for domestic use, allowing for customs officials to levy customs on them, but also to deduct up to the amount of the duties charged by the country to which the goods are exported. To receive such a waiver or reduction, the exporter must produce documentation within sixty days of having paid those customs in the country to which the goods were exported.