Duty drawback |
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Also known as no-drawback provision.
Duty drawback provision relates to reclaims or refunds of customs duties previously paid on inputs. In the context of FTAs, duty drawback provision, usually relates to the ability to claim back duties paid on non-originating materials used to produce the final good which is exported under preferential tariffs.
Duty drawback provision does not need to be listed in the text of the agreement in order to apply to trade between FTA countries. Many local customs legislation address the issue of duty drawback as it applies to a wider customs regime. As such, even if duty drawback is not addressed in the text of the FTA but local customs legislation in the exporting country forbids it, no drawback can be applied.
Exporters should familiarise themselves with duty drawback provisions in their country.
Example:
Input A is imported from a non FTA country and subject to customs duties upon entry. It is then used in the production of a final good which is exported to an FTA partner. The good meets the relevant rule of origin and is exported under preferential tariff treatment. Duty drawback would allow the exporter to claim back the tariffs paid for the import of input A used in the production.
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