Canadian Duty Drawbacks: A Risk-Free Way to Recover Money

Trade Update • July 18, 2019

What is Drawback?

Duty drawback is a customs program utilized by both Canada and the United States, that enables companies to claim a refund of the duties, taxes and other fees paid on imported goods which are subsequently exported under certain conditions.

What Are the Benefits?

• Recovering import duties by means of drawback when you export can significantly reduce your manufacturing costs.

• Drawback refunds can be obtained even when you are not the importer, so always ensure that your domestic suppliers transfer their drawback rights to you. This way, you will be entitled to full recovery of the duties paid once the goods have been exported.

• If your company has never claimed drawback before, in light of the 4-year timeframe during which claims can retroactively be made, the refund could provide quite a substantial one-time boost to your bottom line.

How Drawback Works

To use a simple example, let’s say you are a Canadian apparel company who imports neckties that are mainly sold to retailers in the United States. Once the goods have been exported any import duties that were paid on the neckties can be entirely recovered from the government.

Claims for a duty drawback can be made up to four years after the goods were imported into Canada by filing the appropriate form with a Canada Border Services Agency office. Supporting documentation that must be provided include records such as the import transaction details ,sales invoice, bill of lading, shipping receipts and import/export customs transaction details.

What Goods Are Eligible?

In Canada, various companies are entitled to claim a full drawback including the importer, exporter, processor, owner or producer of the goods, provided the following conditions apply:

• you are directly or indirectly involved in importing goods that are subsequently exported in the same condition they were imported; or

• you further manufacture or use imported goods in a limited manner (e.g., minor processing operations) to produce other goods for export.

Drawbacks and USMCA

Under USMCA, the duty paid to CBSA for imported components used in manufacturing of a finished item is compared to the duty paid to U.S. Customs and Border Protection on the finished item entering the U.S., with the lesser amount being refunded.