Manufacturing Drawback: 19 U.S.C. 1313(a) and (b) Guide

Key Points

• Manufacturing drawback refunds 99 percent of the duties paid on imported merchandise that is used to manufacture or produce an article that is then exported or destroyed.
• Section 1313(a) covers direct identification of the imported merchandise, while 1313(b) allows substitution of merchandise classifiable under the same eight-digit HTS subheading.
• A manufacturer operates under a general manufacturing drawback ruling by letter, or applies for a specific ruling when no general ruling fits.
• The bill of materials and production records are the proof that connects imported inputs to exported or destroyed output.
• The export window is five years, counted from the date of importation, and the claim is filed in ACE.

On this page

1. How manufacturing drawback works under 1313(a) and (b)
2. What counts as manufacture or production
3. General and specific manufacturing drawback rulings
4. The bill of materials and production records
5. Timing and filing the claim in ACE
6. What importers should do
7. Key references

The links in this article go to the primary documents: the statute, the regulations, and CBP's own pages. Read the source.

Short answer: Manufacturing drawback under 19 U.S.C. 1313(a) and (b) lets a manufacturer recover 99 percent of the duties paid on imported merchandise when an article made with it is exported or destroyed. The manufacturer works under a general or specific ruling, proves the link with a bill of materials and production records, and files the claim in ACE within the five-year window counted from importation.

How manufacturing drawback works under 1313(a) and (b)

Both subsections refund duties on imported merchandise used in manufacture or production. They differ in how the imported merchandise is tied to the finished article.

Direct identification under 1313(a)

Under 1313(a), the imported merchandise itself is used to make an article that is exported or destroyed. The refund is 99 percent of the duties paid on that imported merchandise. The claimant must be able to trace the specific imported inputs into the exported or destroyed article.

Substitution under 1313(b)

Under 1313(b), the merchandise used in manufacture does not have to be the imported merchandise. It must be classifiable under the same eight-digit HTS subheading as the imported merchandise, and it must be used within five years of the importation. This helps manufacturers who hold imported and domestic inputs in common inventory and cannot tell them apart.

Section 1313(l) limits the substitution refund to 99 percent of the lesser of two figures: the duties paid on the import, or the duties that would apply to the substituted merchandise. Substitution cannot produce a larger refund than the duties actually at stake on either side.

Substitution also applies to unused merchandise, which follows different rules. See Unused Merchandise Drawback Under 19 U.S.C. 1313(j).

What counts as manufacture or production

Drawback under this provision requires a manufacture or production, not just handling. The definition in 19 CFR 190.2 covers two situations:

• A process that produces a new and different article with a distinctive name, character, or use.
• A process that makes an article fit for a particular use that it was not fit for before.

Cleaning, repacking, sorting, or simple assembly that leaves the article's name, character, and use unchanged raises a real question under this test. Document the transformation before you apply for a ruling, because the ruling will rest on how you describe the process.

General and specific manufacturing drawback rulings

A manufacturer needs a ruling before it can claim. The rulings are governed by 19 CFR part 190, and there are two routes.

General manufacturing drawback rulings

The general rulings are published in an appendix to part 190. They describe common manufacturing situations. A manufacturer whose operation fits one of them joins it by sending a letter, rather than applying for an individual ruling. Read the general ruling text closely, since your process, inputs, and records must match what it describes.

Specific manufacturing drawback rulings

When no general ruling fits, the manufacturer applies for a specific ruling. In words, the application describes the company and its facilities, the imported merchandise to be used, the manufacturing or production process, the articles produced, whether the claims will rely on direct identification or substitution, and the records system that will support the claims. Be precise about the process, because CBP's decision depends on it.

Do not assume a ruling covers a new product line or a changed process. If your operation moves outside what the ruling describes, review whether the ruling still applies.

The bill of materials and production records

The bill of materials is the core document. It lists the inputs that go into each finished article, including the imported merchandise, and ties quantities to units of output. Production records then show what was actually made, when, and from which inputs.

A defensible record set generally lets you show:

• Which imported merchandise was received, with the entry and its HTS classification.
• How much of it went into production, and any waste or by-product.
• What was produced, and which articles were exported or destroyed.
• For substitution, that the substituted inputs share the same eight-digit HTS subheading as the imports.

Keep the bill of materials consistent with the production records. A gap between what the bill says and what the floor records show is the most common point where claims get questioned.

Timing and filing the claim in ACE

The export window runs five years from the date of importation of the merchandise. Track that date for each entry line you plan to claim against, especially under substitution, where inventory can sit for a long time before use.

Claims are filed electronically in ACE. For the filing mechanics, entry-level steps, and documentation common to all drawback types, see Customs Duty Drawback: How to File Under 19 U.S.C. 1313. For defective goods returned to the supplier, a different provision applies: Rejected Merchandise Drawback under 1313(c).

What importers should do

• Test your process against the 19 CFR 190.2 definition, then check whether a general ruling fits before preparing a specific ruling application.
• Decide whether you can trace imported inputs (1313(a)) or need substitution (1313(b)), and set up inventory and HTS records to support that choice.
• Align the bill of materials with production records, and keep both for every claim.
• Calendar the five-year window from each importation date so eligible entries do not expire unclaimed.

Key references

• 19 U.S.C. 1313: the drawback statute, including subsections (a), (b), and (l).
• 19 CFR part 190: drawback regulations, including the definition of manufacture or production in 190.2 and the general ruling appendix.
• CBP drawback page: CBP's program information for drawback claimants.