Quiz 2 – Question 8

This is an old question that is based on old reference material and so its answer is inconsistent with the current drawback rules.

Drawback rules have undergone many changes over time. Initially, drawback was limited to a refund of duties paid on materials or components which were previously imported into the United States and used here in the manufacture of goods for export. But over the years, the concept of drawback has been expanded by numerous amendments.

In 1980, the drawback regulations were amended to provide for “same condition” drawback, a refund of 99% of duties, fees and taxes paid with respect to imported merchandise which is subsequently exported (or destroyed under Customs supervision) within three years after its date of importation, without having been changed in condition or used in the United States prior to such exportation or destruction.

However, in 1993 the drawback regulations were again amended, replacing the “same condition” drawback provisions with new provisions for “unused merchandise” drawback. In direct identification cases, these changes dispensed with the requirement that a product be exported in the “same condition” as when imported, and expanded the list of incidental operations which may be performed without disqualifying a product for drawback.

The current drawback regulations do not refer to “same condition” drawback.
19 CFR § 191.35 refers to Unused Merchandise Drawback (drawback in respect of merchandise which has not been used within the United States before its exportation or destruction). A notice of intent to export merchandise which may be the subject of an unused merchandise drawback claim (19 U.S.C. 1313(j)) must be provided to the Customs Service to give Customs the opportunity to examine the merchandise. The claimant, or the exporter, must file at the port of intended examination a Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on Customs Form 7553 at least 2 working days prior to the date of intended exportation unless Customs approves another filing period or the claimant has been granted a waiver of prior notice (see § 191.91 of this part).

19 CFR § 191.42 refers to Rejected Merchandise drawback upon the exportation or destruction under Customs supervision of imported merchandise which has been entered, or withdrawn from warehouse, for consumption, duty-paid; and which does not conform to sample or specifications; has been shipped without the consent of the consignee; or has been determined to be defective as of the time of importation. The claimant must show by evidence satisfactory to Customs that the exported or destroyed merchandise was defective at the time of importation, or was not in accordance with sample or specifications, or was shipped without the consent of the consignee. A notice of intent to export or destroy merchandise which may be the subject of a rejected merchandise drawback claim (19 U.S.C. 1313(c)) must be provided to CBP to give CBP the opportunity to examine the merchandise. The claimant, or the exporter (for destruction under CBP supervision, see § 191.71), must file at the port of intended redelivery to CBP custody a Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on CBP Form 7553 at least 5 working days prior to the date of intended return to CBP custody.

Form CF-7539 is no longer in use and appears to have been replaced by CBP Form 7553.

Yes, the old drawback rules provided for “same condition” drawback, a refund of 99% of duties, fees and taxes paid with respect to imported merchandise which is subsequently exported (or destroyed under Customs supervision) within three years after its date of importation, without having been changed in condition or used in the United States prior to such exportation or destruction.

This terminology has been replaced in the current rules with two different types of drawback viz. Unused merchandise drawback, and Rejected merchandise drawback. Further, the rules are more liberal now for unused merchandise drawback as the performance of any operation or combination of operations, not amounting to manufacture or production under the provisions of the manufacturing drawback law will not disqualify the item from eligibility for drawback upon export or destruction.

For rejected merchandise drawback, the claimant must show by evidence satisfactory to Customs that the exported or destroyed merchandise was defective at the time of importation, or was not in accordance with sample or specifications, or was shipped without the consent of the consignee.