Key Takeaways
• Duties paid at import can still be recovered when goods are destroyed rather than sold or exported, including inventory lost to fire, flood, or storm damage.
• Product found defective at import or after manufacture can also qualify, including goods that carry Internal Revenue Tax.
• The paperwork has to be assembled before anything is discarded. Once the goods are gone, the claim usually goes with them.
• For imported goods, the supporting documents are the commercial invoice, packing slip, and entry summary.
• For U.S. produced goods carrying IR tax, the support is the production run records plus proof the tax was paid.
• CBP is notified of the intended destruction on the claimant’s behalf, then confirms which product qualifies and what value is available for refund.
• Companies that already hold accelerated payment privileges are paid far sooner than companies without them, where the refund waits until after liquidation.
Many businesses around the U.S. have an amazing product, a booming business model, and an awesome customer base. Then one day, out of nowhere, a hurricane hits, a fire rages or maybe it could even be something as simple as your product having defects upon import or manufacture (where Duties or IR Taxes apply).
Although sometimes it may feel like all is lost, here at CITTA Brokerage Co. (CBC) we tend to help shed some serious light at the end of the tunnel through our Drawback “Destruction of Goods Program.”
So, let’s go ahead and say maybe you’ve been hit by a disaster and part of your products are ruined. Prior to your discarding of those goods, you will need to identify them specifically and gather the supporting documentation accordingly. That means that if the products arrived via import then you would need a Commercial Invoice, Packing Slip and Entry Summary.
If it was a product that was manufactured in the U.S. that is subject to Internal Revenue Tax (IR Taxes), then you would need to provide us with your production runs of the product and the support documents where the IR Taxes were paid. Now that you have been able to do so on either circumstance, you would then contact us as your Customs Broker to prepare the appropriate documentation for Customs review.
REMEMBER, all of these things will HAVE TO HAPPEN PRIOR to the final destruction of the goods.
Then, as your Drawback Broker, we would notify Customs on your behalf that you have qualifying merchandise for Destruction. Upon this request, then Customs would work with us to be able to determine qualifying product and amounts in value available for drawback refund.
For those qualifying companies who are already our clients, and already have a full Drawback program in place, we can make claims for the Destruction under Accelerated Privileges and the refunds can be made within and approximate two month time frame. Without Accelerated Privileges though, you can expect refunds anywhere from twelve months after liquidation or more.
So, if this makes you feel just a little bit better in the midst of the chaos, then allow CBC to implement a program to help you claim revenues back on goods that are set aside to be destroyed. Don’t let your money to waste with your product. Help your revenues to pay for the new product we know you have coming down the pipeline.
If you want to have some help with a Destruction program, then go ahead and give us a call. We like to chat! Contact us HERE.
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Frequently Asked Questions
At least 7 working days before the destruction date, on CBP Form 7553, filed with the port where the destruction will take place (19 CFR 190.71). CBP then has 4 working days to say whether it intends to witness. The notice period for exports is shorter, at 5 working days under 19 CFR 190.35.
The claim is not automatically lost. 19 CFR 190.36 allows a one time written application to the drawback office covering merchandise already exported or destroyed without notice. It is an exception rather than a routine fix, and CBP can deny it. Future destructions still require advance notice unless a waiver of prior notice is granted.
Yes. Under 19 U.S.C. 1313(x), the value of materials recovered from the destroyed goods, including any tax benefit or royalty that accrues to the claimant, is deducted before the refund is calculated. Recycling revenue lowers the recovery. It does not disqualify the claim.
If CBP attends, it certifies the Form 7553. If CBP does not attend, the claimant supplies evidence from a disinterested third party, such as the landfill or destruction facility operator. A certificate written by the company that destroyed its own goods does not meet that standard on its own.
No. CBP defines destruction as destroying articles to the extent that they have no commercial value (19 CFR 190.2). An accounting write off, a donation, or a discounted liquidation sale all leave the merchandise commercially usable, so none of them support a destruction claim.
Usually yes. The notice names the date and the specific location where destruction will occur, and that location can be a company site, a contracted destruction vendor, or a landfill. Because the location is part of the filing, it has to be settled before the notice goes in rather than afterward.
