Types of Duty Drawback Explained

You might be eligible for duty drawback, but unsure which one to choose?

You’re not alone.

Most importers learn they can recover duties, but the confusion starts right after:

Unused? Manufacturing? Rejected? Substitution?

Which category does my export fall under?

So in this guide, we break down every type of duty drawback in plain English, with examples to help you identify your category instantly.

Come let's find out where you qualify?

1. Unused Merchandise Drawback 

This one applies when you import goods into the U.S., but they remain unused, unprocessed, and unaltered before you export or destroy them.

Think of it like this:

• You imported 500 units of raw material, planning to use them, but the order got canceled, or the product specifications changed.
• Those goods sat in your warehouse untouched, so you decided to ship them overseas instead of letting them gather dust.

If this sounds like your situation, Unused Merchandise Drawback is your lane.

To qualify:

• The goods must be in the same condition as imported
• No manufacturing, processing, or use is allowed
• Must be exported or destroyed within 5 years of import
• You will need proof of import + proof of export

2. Manufacturing Drawback 

This type applies when you import raw materials, components, or parts, use them in your manufacturing process, and then export the finished goods out of the U.S.

Let’s put you in the situation:

• You import steel sheets 
• You manufacture them into machine casings 
• You export the final product to South America.

Even though the export isn’t the same item you imported, the drawback still applies — because the imported goods were used in the manufacturing process.

To qualify:

• Imported materials must be used in production
• The finished goods must be exported or destroyed within 5 years
• Manufacturing records, BOM, and traceability documents are required
• Must be accounted as waste, scrap, or by-products

3. Rejected Merchandise Drawback

Sometimes you import goods with every intention of using or selling them, but what arrives is not what you paid for.

Wrong specs.

Defective batch.

Damaged during transit.

Not usable for your customer.

If you receive goods that you cannot use, sell, or accept, you may qualify for Rejected Merchandise Drawback.

To qualify:

• Goods must be defective, non-conforming, or not as ordered
• Items must be exported, destroyed, or returned to the supplier
• Must prove that the goods were never used in the U.S.
• Must file within the 5-year drawback window

4. Substitution Drawback 

This is where the drawback gets interesting.

You don’t always have to export the exact same item you imported, sometimes exporting a commercially equivalent product also qualifies.

Here’s what that looks like in your world:

• You import Brand A copper wire reels.
• Later, you export Brand B copper wire of the same grade, quality, and HTSUS classification.
• Even though it’s not the same shipment, they are considered equivalent.

That means you may still claim drawback — as long as the imported and exported items are commercially interchangeable.

To qualify:

• Imported goods & exported goods are similar in function/description
• They share the same HTSUS code (or meet equivalency criteria)
• You can prove traceability between import and export volumes
• Export happens within the required eligibility window

5. Tax & Fee Refund Drawback 

This type of drawback applies even if the goods themselves don’t qualify, because sometimes you can recover taxes and fees, not just customs duty.

So imagine this scenario:

• You import machinery parts into the U.S.
• You didn’t re-export the same goods, but you paid MPF (Merchandise Processing Fee) and Harbor Maintenance Fee (HMF) during import.
• Later, those parts are used in products that get exported.

Even if duties were low or zero, the fees you paid may be refundable — which makes this category extremely valuable for regular importers and manufacturers.

To qualify, you must have:

• Paid MPF, HMF, or eligible excise taxes at import
• Produced or exported goods associated with those imports
• Proof of fee payment + export documentation
• Filing must fall within the 5-year drawback window

6. Drawback for Returned U.S. Goods 

Sometimes you export U.S.-made goods with full confidence —

only for them to return back due to cancellations, incorrect specs, or rejected quality.

Now you’re stuck with imported duties on goods that started in the U.S. to begin with.

That’s where this type of drawback helps you recover cost.

Scenario:

• You manufacture industrial pumps in the U.S. using imported components.
• You ship them to a buyer in Mexico — but the buyer rejects the order.
• The shipment returns to the U.S. unused and unopened.

Since those goods originated here and simply came back, you may still qualify for drawback related to the imported materials used in production.

To qualify:

• The goods must be originally U.S.-made
• They must return unused & without value added abroad
• You must prove they are the same exported goods
• Import + export + re-entry documentation must match
• Must be filed within the 5-year eligibility window

7. Destruction-Based Drawback

Not everything you import gets sold or shipped out.

Sometimes products expire, become obsolete, fail QA checks, or simply have no resale value.

Instead of exporting them, you choose the only practical option — you destroy them. For goods like these you may still be able to recover the duties you paid, even without exporting the goods.

Scenario:

• You import 5,000 pharmaceutical bottles.
• Later, the product line is discontinued — no demand, no buyers, no export plans.
• Holding inventory only costs storage, and disposal becomes the only solution.

If you destroy those goods under CBP supervision, you can claim drawback for the duties paid at import.

To qualify:

• Goods must be destroyed under CBP supervision or approved method
• Proof of import & destruction is required
• Goods must remain unused before destruction
• Must be claimed within the 5-year window
• No export is required — destruction itself qualifies

How to File a Duty Drawback Claim

Once you’ve identified which drawback type fits your case, the next step is filing — and this is where many importers get stuck.

Documents, timelines, ACE submissions… it can feel like a lot.

But don’t worry — we’ve already broken the filing process down in a simple step-by-step guide you can follow. Click

Takeaway

You’ve just seen the full picture — multiple drawback paths, each with financial value most importers never reclaim.

So the real question is this:

Are you going to leave that duty unclaimed, or are you going to take it back?

The right drawback type could be the difference between loss and leverage. And with the right trade partner, the process becomes faster, cleaner, and stress-free.

1. What is duty drawback in simple terms?

Duty drawback is a U.S. Customs program that allows importers, manufacturers, and exporters to recover up to 99% of the duties, taxes, and certain fees paid on imported goods when those goods are exported, destroyed, or used in qualifying manufacturing.

2. How do I know which duty drawback category applies to my shipment?

The right category depends on what happened to the imported goods:

• Never used? → Unused Merchandise Drawback
• Used in manufacturing? → Manufacturing Drawback
• Defective or wrong shipment? → Rejected Merchandise Drawback
• Exported an equivalent product? → Substitution Drawback
• Destroyed instead of exported? → Destruction-Based Drawback

Matching the actual business activity to the drawback type is key.

3. Can I claim drawback if I didn’t export the exact same item I imported?

Yes. Under Substitution Drawback, you may qualify if the imported and exported goods are commercially interchangeable—meaning they share the same HTSUS classification and equivalent characteristics.

4. What does “unused” mean for Unused Merchandise Drawback?

“Unused” means the goods were:

• Not consumed
• Not manufactured or processed
• Not altered in any way

Even minor processing or usage can disqualify the claim.

5. How long do I have to file a duty drawback claim?

You have up to 5 years from the date of import to file a drawback claim. This applies to all drawback types.