Thank you for tuning in with us today. I'm Carrie Irwin with International Tariff Management, and I'm the director of sales. Today, we're going to discuss destruction, drawback opportunities for all our importers and exporters out there. My guest today is Jill La Madeleine, who is the vice president and a licensed customs broker with ITM. Jill has been with ITM for over 25 years and works regularly with destruction drawback.
Hello, Jill.
Hi, Kerry. Thanks for having me today.
Great to have you. Could you tell us what is destruction Drawback destruction?
Drawback is the eligibility to claim drawback on items that are destroyed in the United States that have once been imported and duty paid. So for the purposes of drawback, a lot of claimants are aware that you can import a product into the country, pay a duty on it and export it.
But you can also import product into the United States, destroy it in the United States so completely that it has no commercial value. And also claim drawback on those products that are destroyed. Great. Could you tell us why would a company destroy their goods? There are various reasons that a company would destroy their goods. The number one reason would be that they're defective, that they were imported and they didn't meet Specification.
They had been destroyed, not destroyed. They had been ruined in some way in the warehouse also for food items that have expired. One may want to destroy them in the United States and take advantage of duty. Drawback or items could be outdated and no longer salable because they're out of fashion or outdated. What types of industries and or products do you feel take advantage of destruction drawback the most?
I would say that the ones who take advantage the most are food and edible items. For example, we have a dairy company that we had worked with. They were exploring the opportunity of opening a warehouse in the United States. Before they did that, they wanted to see if there was a market for their product. So they imported a whole bunch of yogurt and they sold some domestically.
And throughout the course of doing studies and finding out if there was a market for it, a lot of that yogurt expired and clearly they couldn't sell it at that point and they weren't going to ship it back out of the country. So we put together a duty drawback program for them, and they destroyed the the expired yogurt.
And we were able to recover over $1,000,000 in duty for them just on the imported yogurt that was destroyed in the United States. That's great for them, huh? Yes. Yeah, It was a very good little program. I know, too. I'm from the fashion industry, and I know that fashion and textiles will do destruction due to "deadstock" things not moving.
And then also luxury brands would rather destroy products than risk products such as logo, purse, getting into the wrong hands and selling authentic goods at a discount. They really do not want to devalue their brand right? That makes perfect sense. And we've worked with some companies in that situation where they've wanted to control who got their hands on their their products, and they would rather destroy them in the United States than have them go for retail.
Yes. What is the process? What are they going to have to go through for destroyed merchandise? Well, when you claim duty drawback and destroyed merchandise, that's very similar to the the standard drawback program. So you want to apply for privileges because drawback is a privilege, not a rig
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.
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, in each episode, we explore real life examples of how companies are taking full advantage of numerous programs in place for both importers and exporters, and how these little known programs can yield substantial returns to their bottom lines. 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 dive into this month's episode. Thank you for tuning in with us today. I'm Carrie Irwin with International Tariff Management, and I'm the director of sales. Today, we're going to discuss destruction, drawback opportunities for all our importers and exporters out there. My guest today is Jill La Madeleine, who is the vice president and a licensed customs broker with ITM. Jill has been with ITM for over 25 years and works regularly with destruction drawback. Hello, Jill. Hi, Kerry. Thanks for having me today. Great to have you. Could you tell us what is destruction Drawback destruction? Drawback is the eligibility to claim drawback on items that are destroyed in the United States that have once been imported and duty paid. So for the purposes of drawback, a lot of claimants are aware that you can import a product into the country, pay a duty on it and export it. But you can also import product into the United States, destroy it in the United States so completely that it has no commercial value. And also claim drawback on those products that are destroyed. Great. Could you tell us why would a company destroy their goods? There are various reasons that a company would destroy their goods. The number one reason would be that they're defective, that they were imported and they didn't meet Specification. They had been destroyed, not destroyed. They had been ruined in some way in the warehouse also for food items that have expired. One may want to destroy them in the United States and take advantage of duty. Drawback or items could be outdated and no longer salable because they're out of fashion or outdated. What types of industries and or products do you feel take advantage of destruction drawback the most? I would say that the ones who take advantage the most are food and edible items. For example, we have a dairy company that we had worked with. They were exploring the opportunity of opening a warehouse in the United States. Before they did that, they wanted to see if there was a market for their product. So they imported a whole bunch of yogurt and they sold some domestically. And throughout the course of doing studies and finding out if there was a market for it, a lot of that yogurt expired and clearly they couldn't sell it at that point and they weren't going to ship it back out of the country. So we put together a duty drawback program for them, and they destroyed the the expired yogurt. And we were able to recover over$1,000,000 in duty for them just on the imported yogurt that was destroyed in the United States. That's great for them, huh? Yes. Yeah, It was a very good little program. I know, too. I'm from the fashion industry, and I know that fashion and textiles will do destruction due to deadstock things not moving. And then also luxury brands would rather destroy products than risk products such as logo, purse, getting into the wrong hands and selling authentic goods at a discount. They really do not want to devalue their brand right? That makes perfect sense. And we've worked with some companies in that situation where they've wanted to control who got their hands on their their products, and they would rather destroy them in the United States than have them go for retail. Yes. What is the process? What are they going to have to go through for destroyed merchandise? Well, when you claim duty drawback and destroyed merchandise, that's very similar to the the standard drawback program. So you want to apply for privileges because drawback is a privilege, not a right. And in order to apply for privileges, you submit an application to Customs and Border Protection asking them to allow you to claim drawback on destroyed merchandise. And because destroyed merchandise is a little different than exported merchandise, we typically suggest that our clients do a live destruction. And we we found this out. We worked with a luggage company who was destroying merchandise. So I'm getting off topic a little bit, but I will circle back, I promise. They were destroying luggage in the United States that was defective or outdated, and they didn't want to have it end up being sold by a third party. So they were destroying their merchandise in the United States, and they had not been accumulating the necessary documents that CBP requires in order to file destruction drawback. Their CBP is very specific. You need to show the goods being exported to a third party. The destruction has to be done by a third party. They require affidavits proving the destruction of the merchandise. So what we did with that luggage company and what we've done with other clients is that we do a live claim, and in doing so, you provide CBP with five days notice of the destruction, and Customs has the opportunity to inspect the destruction and witness it, or they can sign off on it. If they sign off on it, that destruction is protected. And you can claim drawback on it because they chose not to witness it. If they do witness this, witness it, they come and they they witness the destruction. And then you have that added security, that they have watched it. But when we do a live destruction, it allows us to accumulate the necessary documents that are required. So when we do apply for privileges, we have everything and we have all the T's crossed and the eyes dotted. And we know we have exactly what customs requires in order to allow privileges and destruction drawback. So that's great. They've paid these duties and maybe the product has expired or it's not good they're able to get those duties back. Exactly. And in a lot of these opportunities, they're going to destroy the merchandise anyway. So why not get the duties back that you paid on the import upon the destruction? And the best way is to notify them in advance that you're going to destroy this. And it doesn't have any commercial value. Exactly how long do they have to claim the duty destruction? It's the same as in another program. Any other program that we would run an unused or a manufacturing program. You can go back five years from the date of the claim to the import date, and the destruction needs to take place within those two dates. You know, I worked with a wine and spirits company recently and they came to us because they wanted to have destruction claim and they had a very large shipment that was destroyed. They had approval. But for whatever reason, either they had change employees or, you know, for whatever reason, there was a delay in processing the claim. And unfortunately, that company, even though they had an approval and went beyond the five years and that company lost $1,000,000 and recovery. Right. And that's not unheard of. That's why it's important if there is an opportunity, a company feels like they're destroying goods that are duty paid. Contact us a.S.A.P and let us handle the processing. You know, we will accumulate what we need and we'll get the process going so you don't fall outside that five year time time period. Right now, would one company be allowed to claim two or more different types of drawback programs? The short answer is absolutely. You can run concurrent drawback programs. We have several companies that we work with that have an unused drawback program for exports and unused program for destruction and a manufacturing program, something that you can think about when you start up a drawback program. If you know you're going to destroy merchandise as well as export, we can apply for those privileges together. So for our clients that come to us and and they're exporting and destroying, we will consolidate that application into one submission with CBP. But you're not limited to that. You can be exporting goods and then a destruction opportunity comes up and then we can apply at that time for the destruction drawback. So yes, you can have concurrent programs and you can apply for them at the same time or you can apply for them individually. Yes, I remember we worked with an electronic components company and they did an unused drawback program and we recovered $106,000 for them. And then while we were working that program, they had a need for destruction and we were able to also recover 10,000 for the destruction program right. And that was done at the same time? Yep, that was done at the same time. And you bring up a good point. A lot of the people who contact us and that we work with for drawback programs are unaware of that. There's an opportunity for destruction drawback. So we start working with them on a standard drawback program. And by standard I mean it's exported. And then they, through working with us, discover that they can claim on their destroyed goods as well. So this podcast is great because we're letting people know that you don't have to export in order to take advantage of duty. Drawback? Yes, exactly. Well, thank you so much for joining us today, Joe. This was such great information regarding just this topic destruction drawback. Next month, please join us. We're going to have Alan Weinberg, who will be our guest, and he will be covering the topic of rejected merchandise, which is a little bit different. And please remember, every situation is unique and do not hesitate to contact us. We always have complimentary consultations. We hope you 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.