How to Claim Duty Drawback | Shipping Solutions

At ITM, we specialize in working with the United States Customs Service primarily in duty drawback. We work very closely with the United States Customs Service and we are active members of the Drawback Committee which help establish the regulations and laws that are used to allow people to get back.  You can recoup 99% of the duty paid on the import upon export. And while you can also often recover the merchandise processing fee and the harbor maintenance fee in unused drawback, those fees are not refundable and manufacturing drawback. 

We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.

Transcript

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Welcome to the Duty Drawback podcast from International Tariff Management here at ITM. We help our clients secure refunds and reductions of duty burdens on imported and exported goods. With more than 40 years of classification, free trade and compliance experience, if you're engaged in international trade, you can expect to learn actionable tips and strategies that you can implement in your business to become a more profitable importer and or exporter. Thanks for tuning in. Now let's dove into this month's episode. Hello, everyone, and welcome to today's webinar. How to Claim Duty Drawback. Thank you for joining us. My name is Dave NOER and I am founder and president of Shipping Solutions. Since 1995, our export documentation and compliance software has helped thousands of successful exporters more efficiently generate accurate export documents and stay compliant with import export regulations to help educate our customers and the wider international trade community. We regularly host free webinars like this one on the various aspects of international trade. Today, we are lucky to have two speakers from International Tariff Management, which helps exporters and importers reduce their duty burdens. Jay Charcot is president of the company and a licensed customs broker, and he is well versed in the intricacies of the duty drawback regulations, as well as foreign trade agreements and the harmonized tariff schedule of the United States. He is active. He is an inactive member of the AEI and NCB, FAA duty drawback committees. This is an industry that loves acronyms. Jill of Madeleine is the vice president at International Tariff Management. She's also a licensed customs broker. And since 1994, 1994 has worked with many companies across numerous industries with duty, drawback, classification analysis and USMCA certification. Welcome to you both. Thank you for joining us. Before they get started with their presentation, I'd like to explain how today's webinar is going to work. All attendees at today's webinar are muted. At the end of the presentation, Jay and Jill have graciously agreed to take your questions, which you can submit to the Zoom Webinar Q&A window on your screen. So for most of you, if you've logged in, you'll find a Q&A button at the bottom of the screen. Although depending on the device you joined with, it might be located elsewhere on the screen. But look for that Q&A screen. Please enter your questions in there. We will not be monitoring the chat button in the chat window for your questions. So please use the Q&A button. I will monitor, though, at that window and we will ask as many questions as time allows. After Jay and Jill have done their presentation, we have a hard stop at the top of the hour, so we'll go that long. Now this webinar is being recorded, so if you do not wish to be part of this recording, please log out. Now. We will be making the recording available to everyone who registered for this webinar in a few days so you can watch the webinar at that time. So if everyone's ready, let's please get started. Jay and Jill, please go ahead now. This is Jay, by the way. Thank you very much for that lovely introduction as David said, I am the president of International Tariff Management. We've been around for 40 years. We specialize in working with the United States Customs Service, which is not a very easy thing to do. And that's why I put an older picture of me up on the screen. Because I've gotten much older over the 40 years working with U.S. Customs. But we thank you for joining us. And we hope that you will be able to walk away with some knowledge on how to implement and get some money back from the United States government. From Duty Drawback After today. And my name is Jill La Madeleine and I am the vice president at International Tariff Management. And as David mentioned, I am also a licensed customs broker with over 28 years of experience. And today, Jay and I are looking forward to presenting you with an overview of what duty Drawback is and how you can take advantage of it should your organization have a viable program. But first, Jay's going to give you a little more information about international tariff management. As as it was pointed out, we are 40 years old. We specialize primarily in duty drawback. So it's a subject that we are well versed in. We speak at various trade groups about it. We've worked with different companies and implementing programs. We work very closely with the United States Customs Service, as David had pointed out. We are active members of the Drawback Committee which help establish the regulations and laws that are used to allow people to get back. Drawback. We work in various industries to name a few. Automotive chemicals jewelry is a big industry. We've worked with data processing, food and beverage, toys, furniture, almost every area of import station and exportation out of the United States. As long as is a duty collected, is and is an applicant for duty. Drawback. So what is duty drawback? Duty drawback is a law that dates back to 1789. It was initially established to encourage exporting from the United States as well as to support U.S. manufacturer and U.S. economy to understand duty, drawback simply if you import something into the United States, pay a duty on it and export it as is or as part of a U.S. manufactured product. You can recoup 99% of the duty paid on the import upon export. And while you can also often recover the merchandise processing fee and the harbor maintenance fee in unused drawback, which we're going to talk about the different types of drawback a little later on those fees are not refundable and manufacturing drawback. And just a note that there are no situations where anti-dumping duties or countervailing duties are eligible for drawback. It's also important to note that you need not be the direct importer or the direct exporter of a product to claim duty. Drawback. We're also going to get more into that as we proceed through the presentation. The original drawback law from 1789 was updated in 2015. This new law, the Trade Facilitation and Trade Enforcement Act, or FTA as it has been, has become to be known, was passed in 2015, enacted in 2018, and became fully functional in February of 2019. The purpose of FTA was to streamline the drawback process and make filing claims easier, but is nothing is easy when dealing with U.S. Customs. Two tier has actually made filing drawback more difficult, and while the implementation of NAFTA has definitely provided some challenges, it has redefined substitution. Drawback and in doing so has opened up more opportunities. One example of that is that claimants no longer need to link imports, and exports are part numbers, but instead can now in some situations file drawback based on the eight digit number. The opportunity now exists to file drawback on items that fall under the same number, even if they are not the same. Joe raises a very interesting point with the same numbers. When people bring goods into the country, it's very important that they classify them properly. And this is relevant for drawback because if you importing something under one H2 number, it could be a product that is imported and you export something with the same number. Even though it's not the same, you are entitled to get drawback. So it's extremely important because you're going to implement a drawback program that you make sure that the items that you import are classified properly according to the harmonized tariff schedule, and also which many companies do not to make sure if they're going to implement a drawback program that their exports are classified properly according to usually the schedule B number on the export document patient, but it also relevant to the number, the harmonized tariff number. The other thing is if you're getting involved in importing and exporting, you should all be aware of the free trade agreements that this country has. There are 14 free trade agreements that we have with 20 different countries and that the opportunities to save money are very significant. If one sources goods from a particular country where we have a specific free trade agreement today. Only about 25% of eligible duty is being recovered from the U.S. government. That means of an estimated $2 billion, only $500 million is being claimed. That leaves $1.5 billion left unclaimed in July of 2018. Importers were also introduced to the 301 or China tariffs. They were rolled out under four lists and over the next several years subjected many items coming in from China to an additional duty of up to 25%. These three or one duties are in addition to the base rate imposed according to the number. So, for example, industries that often see a base rate of 25% and an additional 25% from China are now looking at a potential 50% duty charge on imports from China. And while the steel impose 301 tariffs, which was on list, one of the roll out are not eligible for drawback. All of the other three ones are. And this is good news for importers who may have been importing items duty free and now are seeing a 25% duty. Starting to get into the nitty gritty about duty drawback. There are basically three types of drawback. The first one is unused merchandise drawback. That's essentially you bring something into the country and you export the same thing. You just use the United States as a warehouse warehousing facility under that kind of drawback, one is able to inspect the material, tested, clean it and repackage it, but can not do anything that infers it's been manufactured. There are two kinds of unused drawback. One is direct identification. You bring an automobile in as a serial number. You export the automobile very directly able to identify it. And the other is substitution drawback. And we'll get into the different requirements to have applications and get approval from customs concerning these different kinds of drawback. But substitution drawback is you bring in an automobile, you export. It doesn't have to be exactly the same one. The second type of duty drawback is manufacturing drawback. And a manufacturing drawback program allows you to claim on articles that are manufactured in the United States with the use of imported merchandise. When the finished product is exported, a claimant can recover the duties that were paid on the imported merchandise. And there are two types of manufacturing drawback just as there are of unused direct identification and substitution. Under direct identification, a manufacturer can claim drawback upon the export of a manufactured article that contains imported merchandise, but the claimant must trace the import by part number or SKU level to the export substitution. Manufacturing drawback is broader and was made even more so by tier. Substitution allows the manufacturer to claim drawback upon the export of a manufactured article that contains an imported duty paid product or a duty free or domestic product of the same kind in quality. As long as the substituted merchandise is classified under the same eight digit number as the imported product. What this means is that you can claim on imported duty paid items when the duty free or domestically sourced items that are classified under the same eight digit each year number are used to produce the exported articles. As Joe pointed out, this gets a little complicated and we're going to get into after I say a few words about the rejected merchandise, exactly what we mean by following the goods through the manufacturing process and the end use process. But the third type of drawback is rejected merchandise, and that's, as it says on the chart, the goods come in, they're rejected. You can get drawback on those. You might not. You also might want to destroy them here in the country because it might be too expensive to ship them back. And that's used in the case. So therefore you can get rejected merchandise approval for the destroyed goods. This usually has to be done through customs supervision. They have to come out and watch the destruction process to make sure that the goods have been totally destroyed. They want to make sure that the goods are not usable in any form and you're allowed to get drawback, which is, again, 99% of the duty paid on those things. So now we have a chart that shows sort of different scenarios for unused merchandise drawback. And if you follow the red line, your company located in Texas imports a cell phone directly. And then sells it, shipped it, outsources it, exports it directly looks like it's going to Florida, but I think it's going beyond that. As in an export this is a scenario where you are the direct importer and the direct exporter and you can claim drawback on that cell phone if you follow the green line. This is a scenario where you are not the importer. So the cell phone comes in to your supplier in, let's say, Wyoming, and they sell it to you in Texas and then you export it directly or you sell it domestically, and then it's exported by your customer. So these are different scenarios where you can claim drawback, where you are not necessarily the importer or the exporter, but you can get the duties back on the imported product when it is exported. The manufacturing drawback is similar to what Joe had explained, but it gets a little more complicated. If you look at the bottom arrows, I think they're brown or gold. Somebody, a company is importing steel coil and that goes directly into the factory, which is in Texas. They put that steel coil into their car and they export the car. They manufacture the car that is manufacturing drawback. And the claimant, the person trying to get drawback in this case is the direct importer. What the steel coil and the direct exporter shipped out the car. There are many complexities in manufacturing drawback and if you follow the red line, somebody imports the steel coil to a warehouse up in Washington, Oregon, and they then sell it to the factory in Texas. This is an indirect import and the factory in Texas then takes it, manufactures the car and ships it out. This is allowable under the drawback regulations, but one needs to work with the importer and get the import rights assigned over to you. If you're the exporter, the green line makes it a little more complicated. A company imports the steel coil, shipped it to their factory up in Minnesota. They manufacture a spring out of the steel coil and sell the finished spring to the company in Texas. The company in Texas puts the spring in the car, ships the car out of the country is entitled to drawback. By the way, as we're talking, the entity that is allowed to get drawback under the regulation is the exporter. The export would record this right could be signed back, but the person entitled to it is the exporter. In this example for manufacturing drawback, the factory in Texas can sell the car up to somebody in Pennsylvania. That person in Pennsylvania could export it and then they are entitled to the drawback through all of the steps that I just described. So as Joe pointed out earlier, and it's also true in manufacturing drawback that you need not be the importer, you need not be the exporter. In some cases, you need not to be either as long as you have some part of the chain, you could be entitled to some of the duties that have been paid on the imported material. If that material then gets exported. This is a very complex process, but we try to make it as simple as possible. So regardless of whether you're managing an unused or manufacturing drawback program in order to participate, a claimant must be able to provide an audit trail. This holds true even if you are or are not the importer and or the exporter. This verification will be required with any privilege requests that are submitted and also in the event that Customs requests any of the supporting data. So the information that will be required must show the goods coming into the country and into your inventory. If the imported product is manufactured, a claimant will have to show the imported item going into manufacture, along with a bill of material showing the imported product being used in the finished goods. Then for every program one will have to show the goods coming out of inventory and ultimately out for export. And it's also important to note that one must also show any and all domestic movements that happen while the goods are in the United States. And on the next slide, Jay is going to talk more specifically about what data and or documentation will provide this information. And here it is. If you are the importer and with the documentation that you need is the commercial invoice that you got from your vendor. The entry summary form, which is the form that the importer uses to get the material through customs and you need to have access to the liquidation notice. Liquidation is when customs closes out a particular entry which usually takes place 330 days after it's come into the country. If you're not the importer, you have to get the rights assigned over to you from the importer. It's not a complicated process. It's just a simple letter that says We, the importer, assign the rights over to you, the manufacturer or the exporter. And we, the importer, will not claim drawback against these import entries. If you have a manufacturing program, what you need is the building materials. Obviously, we need to show what raw materials go into the finished product. You have to show bits when they came into your facility, when your exports were produced and shipped and produced, and if it's a chemical process, you need to have data on waste and asset of the finished products. On the export side, what's required to prove to US customs? Now you have to remember U.S. Customs is on the import side of the equation. They have the entry summary, they have the commercial invoice, they have the data that has been created, the import side on the export side, they have nothing. So that is very important that if you do establish a drawback program, that you get the bill of lading and the export invoice that goes along with that to prove the fact that the goods have left the country. If it goes to Canada or Mexico, sometimes customs requires if it's going to Canada, you have to get the B three, which is the import paper into Canada. If it's going to Mexico, they might require you have to get some kind mentor, which is the same document on the Mexican side, the border. If you're not the exporter of record, as we talked before, you need not be to claim drawback. You need the exporter to ship that across the border to give you the rights and make available to you the documentation. The bill of lading and the export invoice to show that it didn't leave the country. So how would one determine if they have a viable opportunity? You would ask yourself a series of questions Do you import goods and pay duty on them? Do you source goods domestically that are imported with the duty paid? Do you export the imported duty paid merchandise as is or manufactured into another product? If you do, then there's a relatively simple calculation we use to determine whether a company has an opportunity. How much duty do you pay annually, both direct and indirect, if applicable, and how much do you export annually and as Jay mentioned before, the export is entitled to claim drawback. But you can get those rights signed back over. Doing this simple calculation, we'll give you a basic idea of how much duty you may be able to draw back. But it's really important to know that initiating and establishing a duty drawback program is complicated and very time consuming. It must be a lucrative opportunity in order to embark on the process. We typically advise prospective claimants that your estimate should be in the tens of thousands of dollars. Anything less than that is simply not worth pursuing. Given the submission of the applications to customs and the back and forth and accumulating all of the information. But if you feel like you have an opportunity worth pursuing, Jay is going to talk a little bit more about what comes next. Where do I start? If you're really serious about doing duty drawback, if you have an unused program, this is, as we described before, the goods come in. They could be repackaged, they can be tested, and then they leave the country. What you have to do is you have to submit an application to the United States Customs Service for accelerated payment and waiver of prior notice. What the hell was that? Waiver of prior notice is the way the drawback laws read is that every time you export something out of the country, you have to give customs prior notice of the fact that it's going to leave the country. So every time you export something, you have to let them inspected. If they wanted to do that, that would make doing duty drawback almost impossible. So one can get a waiver. And to get a waiver you show customs some of the documentation of how you're going to accumulate your data and keep it. And they will then give you a waiver of not requiring you to have it inspected every time you ship it. The other thing is accelerated payment that means you'll get paid within 45 days of submission of your drawback claims. If you don't do that, customs has to pay your drawback within one year according to the regulations, and they can spend that three times that one year period. So if you do not have accelerated payment, you might have to wait four years to get paid for an unused program data collection. What you need to do is look back five years. You are able to claim drawback on goods over a five year period. So looking at the day is 2022, you can go back to 2017 and claim on exports that have taken place since then. And the other thing to know is you can file your claims actually put your claims into customs pending approval. The Customs Service is backed up. They have a lot of drawback clients and people applying for drawback and to get your applications approved will probably take at least six months. So the idea here is that the law states that once you have your application in, you can file your claims. So you don't lose that six month period retroactive relief and you're able to file it. You will not get paid until the application is approved, but you can file and protect the date in the manufacturing program. There is just one more step you have to put in what they call a ruling. That's to show customs what the manufacturing process is about. There's a general ruling that deals with component parts. If you get if you make a product and you create A and B and C together and weld them all together and ship it out, that's kind of like the component parts general ruling. Usually if it's a chemical product, that's a specific ruling and you have to go to Washington to get that kind of award. Again, accelerated payment is applicable for manufacturing. You need not worry about the waiver of prior notice. That's not applicable for manufacturing. So you need to get an application in for payment because you don't want to wait four years to get paid again. The data collection goes back five years and you can also file your claims pending approval. So so we've covered a lot of information in a relatively short period of time and we hope that we've given you enough information to give you a general idea of what drawback is, what types of programs there are, and how to determine if you have a viable opportunity. And now we'd be happy to take any questions that you may have. So thank you, Jo. That was very interesting. I know I learned a lot. I want to remind everyone that if you do have questions that you please submit them to the Q&A button. In Zoom, we have five questions that have been submitted so far. And so please go in there and enter in any additional questions and we've got some time to answer questions. So we should be able to get to quite a few here. The first question that was submitted is what kind of waivers does the Customs and Border Protection expect from my customer, if any, if I further sold the goods? But I am the party applying for and receiving the duty drawback or the initial import of such goods. Instead of my customer. So if you are the claimant for duty drawback and you are not the importer of record, customs requires what's called a certificate of delivery. So you need to show that you have purchased the goods from someone domestically who imported them, and you would require the information that Jay had talked about on that slide, all that import information you would need to get from your domestic supplier if you are not the exporter to record the waiver, is a blanket statement from each and every exporter of record that you are going to claim drawback on those exports for assigning those rights back to you as the claimant. And typically those cover a blanket period of time. It could be ten years, but you also need to get the supporting data on the export side in order to file the drawback claims. So you need the waivers, but you will also need the data that accompanies the import and the export. If you're going to piece it all together and claim the duty drawback not as the importer and not as the exporter. Yeah. Another point to be brought up to answer that question is if you're not the importer and you have a vendor who is supplying you with an import, the last thing that vendor wants to do is tell you what their prices on the import side. They might bring it in for a dollar and sell it to you for $3. And they don't want you to see the fact that it costs them $1 and they're making $2 profit on you. So many times the importer will say, Well, I don't want to participate in the drawback program because I don't want you to see that data. We've handled programs like that for the last 40 years. And what one does is you use a third party to do that, and the third party has a confidential disclosure agreement where it gets the import information, does not disclose it to the exporter, gives it to the Customs Service, and therefore allows one to get the drawback without disclosing the actual import price to the customer who is doing the export. In your experience, who usually ends up claiming the drawback? Which party? Typically it's the exporter. The exporter is the one claiming the duty drawback. But we have clients. We have clients who are on both spectrums and we have we have programs that are all different types of program, but it is predominantly the exporter of records. And is that usually thinking in terms of the business case for it? Is that usually built into the when they're when they're purchasing an item and they're trying to determine what they're willing to pay for the item, is that part of their calculation, knowing that they're going to get duty drawback on a particular item. And so they're willing maybe to pay more than they otherwise would? Or is it more of just kind of gravy on top? And, you know, they pay what is a good what they consider to be a good price for the goods. And then if they can get any duty drawback, that's just extra money. Yeah. In my experience, I think it's typically clients will come to us and they're paying all this duty and I don't know how they manage their pricing situation, but they're paying all this duty and they want to get it back. So I would assume that it comes into play that if they can import something and get that drawback program initiated, then they can pay, you know, a lower price and get and pay the duty and then get the duty back and drawback. Okay. Okay. Please confirm that list. One articles are not subject to drawback included in a manufactured article. Well, it's not all list one, it's just steel. So list one encompassed many items. I don't know specifically which items were included on list one. I know it was the smallest of the four, but these steel items are not eligible for drawback. But anything else that appears on the list one that's not a steel item would be eligible. Okay. How can the end exporter claim a drawback when they don't have record of imported material used to produce the goods that you bought? And now exported? We've got to go ahead. J Now they have to as we described, they don't have the import documentation they need to get the import documentation or work with a third party that will mediate the import and the exporting information together. As I described, the employer probably doesn't want to give the exporter the costs, and that's therefore a third party is necessary to keep that confidential. But in order to claim drawback, one needs to get the import information. As a matter of fact, the drawback is paid specifically against an import entry against a particular 7501 import entry. The duty that was paid to the government in that entry is refund against that entry when you put a drawback claim. So you have to trace it back directly or indirectly through substitution or direct identification to a specific import entry. Yeah. What are the rules of filing drawback for 301? The rules for the 4301 are the same as for regular duties. You just need access to the import information to see how much duty was paid and you get back 99% of the real ones, just as you do with the regular base duty rates. Okay. What level of detail is required in the waiver? Well, on the import, the certificate of delivery, there's a little more information required because you need to have the transfer of that information, the 7501 and the commercial invoice and all the import data on the export side, the waiver is really just a single document that says that the ABC company waives their right to drawback and gives it to the C, b, d company. And you know, it's a blanket period and it covers all of their exports and it's just a form letter essentially. Okay, we are man, we are manufacturers with factory in China. We import our products, hold them in the U.S. and then sell them all over the world. Are we entitled to drawback? It sounds like it to me. If you're importing and you're paying a duty on it and whether you're not whether you're manufacturing it here or not and then shipping it back out, you can claim duty drawback. And the the issue is when it crosses the U.S. border is a duty paid and if it is duty paid, whether the goods come from a factory in China or anywhere else, that material is eligible for drawback and you can get it when you export to anywhere in the United States. There's a few caveats and we didn't get into our details. But because of the U.S. NCA, the United States Mexican Free Trade Agreement, manufacturing is not allowed if you export goods to Canada, but if you export goods to Mexico, there's a lower of the two duty rules, which means if you import something into the United States and pay 10% duty on it and then you manufacture a product, and that chronicles into Mexico from the United States, and there's an 8% duty on the product going into Mexico. You can get back 8% of the 10%. You can get back 8% instead of the 10%. I say it's not eligible to Canada because 99.99% of the goods manufactured in the United States that go to Canada have no duty on them. So the lower of the two duties would be zero. So you wouldn't be able to get anything back, right? Okay. If I import fertilizer and that are that sprayed on almonds, would that fertilizer be eligible for duty? Drawback If you could determine the amount of fertilizer that went into the finished almonds scientifically, the answer would be yes, which probably is not possible, and therefore the answer would be no. Okay. Do you do classification review, official tariff management do classification review? Yes, we do. It's it's one of the we do three things. As we pointed out briefly in the beginning, drawback by far is the biggest we review classification for goods coming into the country to make sure items are classified properly. And as I touched on briefly in the beginning, we also help companies with free trade agreements because when you ship goods to a country that's eligible for free trade, there's a lot of documentation that's required and one needs to have the right documentation together. Okay. And so your email addresses are on the screen right now and phone number, they can reach out to you, any of those methods they want some help? Absolutely. So do you teach all the ins and outs are doing duty drawback do you have a longer than this half hour overview that you provide to companies. We have in the past, but our experience has found that most companies either hire somebody internally that has a background in drawback to work internal to the company or hires someone like ourselves to manage a program for that company. We do not do any direct training anymore. Okay. Is there a way or what's the length to see the application process? Typically, once we start working with a client and submit the applications, those go in pretty quickly, probably within the first month to six weeks. And then we are, for lack of a better way to describe it, at the mercy of of customs. So typically we spend an exorbitant amount of time to make sure the applications and rulings are done very specifically and contain all the necessary information for customs. Because what happens is you submit them and then there's a 90 day cycle. Customs has 90 days to come back and ask a question and then the 90 days starts again. So the more succinct and detail all your applications and rulings can be, the quicker they will be approved. And as Jay pointed out earlier, once you submit the application, you can filing the drawback. But typically the approvals take anywhere in the 6 to 9 months range. Once submitted. So once you have made an application, you can start submitting. That claims. Private claims right away. Yep. And in is there drawback information on the Customs and Border Protection website? Absolutely. Yeah. Okay. How does the benefits of field warehousing affect duty? Drawback proceeds? And maybe you can explain what field warehousing is if you know. I wish I could. I don't know what it is. Nor do I. Okay, so if someone wants to enter in, tell us what field warehousing is. We will try to get to that question and a bit of the duty drawback left on the table. What percentage would you estimate are smaller payers that might not be worth claiming versus the larger payers? That's a good question. Well, it's hard to say, but as I pointed out earlier, unless you have a program in the tens of thousands of dollars, it's not worth getting involved in. I would think that number is an insignificant amount of the people want twosies that don't have big programs. So most most would be large. Well, most that want to get involved in a duty drawback program would be large. There's a lot that goes into the application process and collecting the data and everything that goes into it. So it's tedious and time consuming. So unless you have a program in the 20, 30, $40,000 range, it's not worth embarking upon. So I think you used a number of two or$3 billion of eligible duty drawback what what percentage of that is from really big operations and what what percentage of that is from small companies that wouldn't be worth doing duty drawback program. If we had to throw a number at it. I think there's a lot of companies, as Joe has pointed out, that have 20, 30, 40, $50,000 in drawback. That is probably doesn't make sense to expect start working on a program. I would say that of the $5 billion that goes on claims that could be as much as 1000000000 to $2 billion of all these little pieces. But again, there's a lot of effort and work required. An individual company can decide that. But yeah, they want to go after $50,000 and they can do that. But as pointed out, there's a lot of work, but I would say it's probably a significant part of that$5 billion. Okay. Can you give us a ballpark estimate of the fees for your service? We can. We operate on a contingency basis, and the contingency basis is predicated on the size of the program. It starts at 30% of the recovery rate and it could go down to the single digit numbers if the program is significant. Okay. Will the claimant need a duty drawback program implemented in their organization? I don't know what that means. Do they do they need to have something formal set up for a duty drawback within their organization before they it makes sense for them to make a claim. Well, you have to make sure all the departments and all the data that you're going to use for Duty Drawback program will be assimilated together. And if you don't have that, then establishing your Duty Drawback program would work because you would be able to gather all of the documentation necessary to substantial you and defend the drawback claim that you put in so yes, the answer is yes. When you're working with an organization to help them with their duty. Drawback How many people are involved? Is it usually one point person at that company? Is it a committee of people who touch the various aspects of the process that have the different parts of the information? How do companies usually have that you work with, have it set up? So when we typically start a drawback program, we'll have a startup meeting and we typically meet with whoever has signed the agreement. It would be the CFO or the controller, and also we ask for somebody from accounts receivable to be involved. So for the import side and someone from the shipping side, for the export side, if it's a manufacturing program, we need a representative from the manufacturing. And typically that meeting will set up the the scenario as to who we will contact for what information. A lot of clients do assign one point person and we work through them, but there are others that have multiple in those departments that we work with and then we have one assigned tariff manager at our organization who is assigned to each account. So we have one person that each account reaches out to and contacts and works with and and that tariff manager at ITM acts as a liaison between the client and customs to manage the program and get it moving ahead. So you really need to go if you're going to participate in a duty drawback, you really need to have your ducks in a row and and organized before you can dove too deep in this process. It's funny. It's funny you say that because one of the people who used to work with the customs used to use that term all the time and said, if you don't have your ducks in a row, you're not going to get paid from the Customs Service. So, yes, indeed. You need to have your you need to have a commitment to gather up the documentation, maintain that documentation, because another side of drawback is once you put your claim in, once you get paid, customs has the right and they use it to come back and audit that claim. They might come back a year from now or two years from now and ask for usually the plane goes in on a date. It's just data that goes into customs. It's fed into their computer system and they pay the money based on the data you put in. But they can come back. And as I said, they do come back and ask for the documentation a year, two years later, so that if you're going to implement a program, it's very important that you set it up properly and make sure that your data and your procedures are compliant with the regulations. And you would hope that somebody involved in importing and or exporting has a somewhat formal process set up for all aspects of the import and export process, because that could be true not just for duty drawback, but for importing and for export. So if you want that, you would hope so. Yes. Is there a place. Where one can go to find the various forms and fill them out? So if someone decides they don't want to utilize a service like the one your company offers and wants to try to to do this themselves, is there a place where they can see the different types of forms and and the process that they need to follow in order to make an application with customs? All the forms are delineated on the Customs website under the regulations. Drawback is defined under section 190 of the Customs Regulations. And in that section it's I wouldn't say it's clear because it was written by lawyers, but one can follow through and see what is necessary to put the applications in and what kind of data you need to fill out for the applications and the forms are available on the customs website. Okay. When you are manufacturing a new chemical from an imported chemical and say 100 kilograms of the imported material is required to manufacture 50 kilograms of the new chemical to be manufactured. I guess the question is, does that work? Can then the quantities not add up if you if it takes two parts to make one refining part. There's there's two kinds of chemical provisions. One are drawback provisions. So I should say one is a term used in how much material is used in the manufacture of your product. And the other term that you work with is a period how much of the finished product has the goods that you use to make it so depending on your manufacturing process, depending on if we used to to ramp two kilos to make one kilo, what happens to the other kilo? Is it sold or go away a scrap? Does it go down the drain? All of that needs to be looked at. But if you do use in, you can get use the total amount that is used in the manufacture or drawback, even though it didn't go out in the finished product. Okay. If I received goods in the US but send them to for manufacture in Mexico but then am reentering the finished goods back into the U.S. for domestic consumption and possible export. Does the finishing process in Mexico and the re-importation of that finished product negate the possibility of doing duty? Drawback You can if goods are imported into United States and they subsequently and the duty is paid and they subsequently go to Mexico, drawback is allowable on the exportation to Mexico. If it's converted into a different product and that product comes back into from Mexico, probability is entering the United States from Mexico. That product probably comes in duty free and that would not be eligible for drawback if the product went to Mexico and duty Drawback was claimed on it and it came back into the United States non manufactured. If it didn't change in the harmonized tariff number or then one would have to refund the duties that were paid on drawback upon the initial exportation. Okay. If I am an importer of record, do we have to export the product to and to enable to to file a drawback? I think you talked about that already. We shipped mainly domestically, but sometimes to Mexico and Canada. If they ship it out of the country, they can get it back. If you ship it domestically and one of your customers subsequently exports it, you can work with them and take advantage of their exports against your imports. Okay. Can we use duty drawback for all subsidiary shipments? So for example, we ship inventory between our U.S. and Irish entities. We ship some things both ways. When inventory is procured at one site, shipped to another for manufacturing, and then shipped back to the originals site to ship to a customer or a finished manufacturing. Yeah, it doesn't matter if you sell goods to an interested third party or if a company sells it to a subsidiary of theirs. In a foreign country, the determining factor is on the import side that you paid the duty and did that material leave the country? It doesn't matter who it goes to, but if it left the country, whether it's a subsidiary or an independent third company, you're still entitled to the drawback. Do we get the duty drawback? If the FDA refused the cargo and we had to export it. That would be very clearly defined as unused merchandise rejected, mature. We ship via express shipments such as FedEx, which clears the package under their name. How do we claim the drawback? They need to and we work with this all the time. They need to assign back the rights to you because customs looks at them as the exporter. And we work with many clients in that regard. You can do it yourself, whoever asked the question and just ask them to sign it back to you. The export rights. And as Joe pointed out earlier, it's a very simple letter. And a courier like FedEx is pretty. They're willing to do that. They're pretty they know how to do that. It's not going to it's not going to be a question that surprises them. It won't surprise them. They know how to do it. They're not the easiest people to work with. Sometimes if our vendor claims incorrect. Yes. And country of origin. And so the incorrect tariff was applied. Do we have to submit an adjustment to customs on the export dock or the export on the export dock? Or do we just file a drawback? How do you handle that if it was incorrectly entered? That depends on when it came in. And if it's if it comes in before a liquidation on the entry side, what you need to do is put in a post entry adjustment the importer to pay the right amount of duty if it was subsequent and pass the the liquidation date. The importer should be should make what they call voluntary tender if they've paid too little or put in a protest, if they take too much to get some money back. But the point is that the goods should be properly classified, especially if you're going to do duty drawback, especially if you're going to do it by h t s number under the new regulations. It's very important to make sure you're compliant with the customs regulations in putting in the right yes. Number nine. So I want to thank you all for attending and I especially want to thank Jay and Jill for their great presentation and their willingness to answer all these questions. We hope you've gained some valuable insight into the world of customs tariffs. With all the supply chain challenges, the world is facing, our aim is to maximize your duty, drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.