1880 S Dairy Ashford Rd, Suite 650, Houston, TX 77077

Understanding Duty Drawbacks

When it comes to international trade, duty drawbacks are a crucial aspect that companies need to consider. Essentially, duty drawbacks are refunds on tariffs that are designed to prevent a company from being double-taxed. They encourage ongoing trade between nations by reducing the financial burden on companies that participate in cross-border trade.

A Scenario Without Duty Drawbacks

To better understand the importance of duty drawbacks, let’s take a look at an example. Imagine an American company importing raw minerals and paying the United States’ standard 2% tariff. The company then refines those minerals into metal and exports their product to the European Union, which typically tariffs cross-Atlantic trade up to 3%.

In this scenario, the company would be taxed twice for the same items and take a significant financial hit. That cost could have them rethinking the entire arrangement and stifle their import/export business.

Benefits of Duty Drawbacks

The benefits of duty drawbacks are quite clear. They allow companies to avoid double taxation, which can save them significant amounts of money. Moreover, by reducing the financial burden on companies that participate in cross-border trade, they encourage ongoing trade between nations, which is essential for a healthy global economy.

The Duty Drawback System

Despite the benefits, the duty drawback system is rarely taken advantage of to the fullest. The US Customs and Border Protection Agency (CBP) estimates that 78%-85% of potential duty drawback refunds go unclaimed every year. Companies may be unaware of drawbacks, or the process could seem too complicated.

Therefore, understanding what duty drawbacks are, their benefits, and how to claim them is key to maximizing your import/export savings. Companies can work with experts in the field to navigate the process and ensure they are taking advantage of all the benefits available.

What are Denied-Party Lists?

When engaging in international trade, it’s crucial to be aware of denied-party lists. These lists are collections of entities, either individuals or organizations, that are deemed unlawful to do business with to some extent or completely.

Denied-Party Lists Vs. Restricted-Party Lists

There are two types of lists: denied-party lists and restricted-party lists. Denied-party lists contain entities who export, import, and/or exchange services and have been denied by a governing body (e.g. a Government Agency). Restricted-party lists contain entities who have been denied some business privileges. Certain types of transactions may be blocked, or a license may be required before any transactions with this party may take place.

International Denied-Party Lists

Denied-party lists are compiled by international governments and organizations, such as:

  • U.S. Bureau of Industry and Security [BIS] (Denied Persons List, Entity List, Military End-User List, etc.)
  • U.S. Food and Drug Administration (Debarment List)
  • U.S. Treasury (Office of Foreign Assets Control Sanctions List)
  • U.S. Securities and Trade Commission (Anti Money Laundering Checklist)
  • U.S. Department of Justice (Foreign Corrupt Practices Act)
  • United Nations (Sanctions List, Al-Qaida and Taliban UN Consolidated List)
  • World Bank (List of ineligible firms)
  • European Union (Financial Sanctions List)

Why Businesses Need Denied-Party Screening

Entities are added to a denied-party list because of being a terrorist organization or affiliate, being a threat to national security, or having a history of corrupt or criminal behavior. Every individual and company, small and large, is responsible for adhering to these prohibitions.

The penalties for non-adherence can be quite severe, including criminal fines up to $1 million dollars per violation, incarceration for up to 20 years, administrative penalties of $300,000 per violation or twice the transaction’s worth. If you want more information regarding duty drawbacks, you can check with professionals such as those at OCR-inc.com.