Customs
Duty drawback: reclaiming duty on materials you exported
If you imported raw materials, made something, and exported it, you probably paid duty you are entitled to get back. Korea and the United States both run refund schemes, both work on imported inputs rather than on the finished export, and both are lost the same way — by a deadline running out while nobody was counting.
The Korean scheme
Korea Customs Service describes the principle simply: where imported raw materials are used for export, the exporter or producer may apply for a drawback and get a refund. The duty was paid at import; the export is what makes it refundable.
Two methods exist, and choosing between them is the first decision.
| Individual drawback | Simplified fixed drawback | |
|---|---|---|
| Basis | The customs duties actually paid on the specific raw materials used in the exported goods | A predetermined rate, paid as a fixed amount “for every KRW 10,000 in export value” |
| Evidence | Export verification, proof of duty payment, and detailed material requirement calculations | Export verification documents only |
| Character | Precise, administratively heavy | Simple, not tailored to what you actually paid |
The simplified route is bounded by eligibility rather than by preference. It is available to small and medium enterprises meeting the criteria under Korean law, including having received no more than KRW 600 million in annual drawbacks in the application year and the two years before it. Companies grow past that threshold, and the first sign is often a rejected application rather than a warning.
The deadline is two years from the date the goods are used for export. That clock is worth putting somewhere automated. It does not start at import, and it does not start at invoice.
The US scheme
US drawback sits in 19 U.S.C. § 1313, with the procedure in 19 CFR Part 190. It refunds up to 99 percent of duties, taxes and fees — the remaining one percent is retained by statute, so a claim promising a full recovery is describing something else.
The Trade Facilitation and Trade Enforcement Act reshaped it into a broadly five-year structure: merchandise is exported or destroyed within five years of import, and the claim is filed within the timeframe the regulation sets. It also loosened substitution, which is the part worth understanding even if you never file yourself.
Substitution is a classification question
Under the modernized rules, substitution drawback does not require you to trace the specific imported unit through to the specific exported one. Units sharing the same 8-digit HTSUS classification can be substituted for each other.
Read that as what it is: the tariff code determines what is interchangeable. Classification stops being only a duty-rate question and becomes an eligibility question — two materials you think of as the same thing are substitutable if the code says so and are not if it does not. Anyone maintaining classifications for a bill of materials is, without necessarily knowing it, maintaining the boundary of a refund.
That is a third consequence of the same decision. Classification sets the duty rate, it decides FTA origin under a tariff-shift rule, and it defines the substitution pool here. Which is also why the 2028 revision of the Harmonized System deserves a look before it arrives rather than after.
Why drawback is so often left unclaimed
The schemes are not obscure. What defeats them is record-keeping, because a claim asks a question your normal paperwork was not designed to answer: which import did this export consume?
- Identify the imported inputs that go into exported goods, by tariff code, at the point you classify them.
- Check the duty you are reclaiming was computed on the right base — see customs valuation, where assists and related-party pricing change the figure.
- Keep the import entry and duty payment evidence linked to the material, not filed by date.
- Record the consumption relationship — which materials went into which production, and which production went into which export.
- Keep export evidence that matches: the declaration, the transport document, and the dates.
- Diary the deadline from the correct event. In Korea that is the date the goods are used for export; in the US the five-year structure runs from import.
- Decide the method before you accumulate a year of records the other method would have needed.
That last point is the expensive one. Individual drawback in Korea needs material requirement calculations that are far easier to produce as you go than to reconstruct afterward, and a company that assumed it would use the simplified route can find itself outside the SME threshold with two years of records that do not support the alternative.
Before you rely on any of this
Drawback is a tax procedure with conditions this page does not attempt to reproduce — exclusions, evidence standards, and interactions with free trade agreements among them. Confirm the current requirements with Korea Customs Service, with CBP and 19 CFR Part 190, or with a licensed customs broker. Keep your export shipping documents in a state where the link between an import and an export can actually be shown.
The link a claim depends on
Every drawback claim is an assertion about a chain: this material entered, became that product, and left. Cargovate's platform keeps one record of a shipment across carriers and borders, so the export half of that chain is evidence rather than an archaeology project two years later.
Last reviewed 2026-09-20