Drawback refunds up to 99% of the duty paid on imports that are later exported or destroyed. That one rule changes the math of moving a factory.

A reshoring plan that claims to escape a tariff is only half right. It escapes the share that stays in the United States. The refund is a rule from 1789, not a loophole.

The big picture:

Most cost models treat a tariff as lost cash. Drawback treats it as a loan. U.S. Customs and Border Protection (CBP) pays back certain duties, taxes and fees when a company exports or destroys the goods [1][3].

Federal rules cap the refund at 99% of what was paid [2][3].

My read: this substitution rule is why a reshoring case often overstates the saving. A firm can match a duty-paid import to an export with the same tariff code [3]. The exported item need not be the exact goods that came in.

The duty a factory move promises to kill is often cash the firm could already recover.

Today’s stacked tariffs make that a big prize. Firms can claim drawback on Section 301 duties, the extra tariffs on Chinese goods [4]. Section 201 duties, the tariffs on specific imports, also qualify [4].

By the numbers

  • 99% — Refund cap: companies recover up to 99% of duties and fees paid on goods they later export or destroy [2][3].
  • 5 years — Matching window: importers can match a paid import to an export of the same code for up to five years [3].
  • 19 U.S.C. 1313 — The law: the drawback statute behind the refund, which covers Section 301 and Section 201 duties [1][4].
  • Section 232 — The carve-out: steel, aluminum, and copper tariffs, plus some emergency duties, are generally left out [5].

What I’d watch:

The operators I keep watching already have clean export records. The paper, not the tariff list, is the real gate.

  • The export share: only the part of an import that leaves the country gets a refund. I’d want to know what share of a given part actually ships out.
  • The paper trail: drawback runs on proof. A valid claim needs the entry record, the export or destruction record, and a match between them [1][4].
  • The program test: CBP decides refunds tariff by tariff. China tariffs are largely in, while metal tariffs and some emergency duties are out [4][5].
  • The clock: the matching window runs five years from the import date [3]. A claim filed late is a claim never filed.

Everyday field friction stays high. A part quoted at $18 offshore can land at $24.80 once freight, demurrage and audit travel are counted.

In one case, a customs code change triggered a retroactive $1.2 million duty bill. A refund window softens that kind of blow.

The catch

Drawback only covers the exported share. A reshoring case built on U.S. sales gets no help, because those goods never leave the country.

The newest tariffs are the most likely to face limits. Steel and aluminum tariffs (Section 232) and some emergency duties sit outside the program [5]. That limit is one vendor’s reading of current practice as of June 2026, not a fixed rule [5].

I could be wrong, but the shape of the trap is what sticks. The team modeling a factory move often counts duty savings. The firm could have refunded that cash without moving a machine.

Reshoring still buys real gains, like shorter lead times and less risk at a single port. But the duty saving itself is smaller than most models claim.

At a glance

  • The Big Shift: Drawback refunds up to 99% of the duty paid on imports that are later exported or destroyed. Substitution rules let companies match a paid import to an export of the same tariff code for up to five years.
  • Why It Matters: Reshoring plans that credit a factory move with escaping a tariff often overstate the cash savings. The recoverable share of that duty never required a new U.S. plant.
  • What I’d Watch: Where the recoverable duty actually sits inside a supply chain.
  • The export share: only the specific fraction of an import that leaves the country or gets destroyed carries a refund.
  • The proof chain: a valid claim requires the entry record, the export record, and a strict match between them.
  • The program test: the government decides rules tariff by tariff, generally leaving out metal tariffs (Section 232) and some emergency duties.
  • The Catch: Drawback only applies to the exported share, and the newest tariffs are the most likely to face limits based on current practice as of June 2026 [5].

Related reading

Sources

[1] U.S. Customs and Border Protection, “Drawback” — https://www.cbp.gov/trade/programs-administration/entry-summary/drawback-overview [2] eCFR, 19 CFR Part 190 — Modernized Drawback — https://www.ecfr.gov/current/title-19/chapter-I/part-190 [3] Cornell Legal Information Institute, 19 U.S. Code § 1313 — Drawback and refunds — https://www.law.cornell.edu/uscode/text/19/1313 [4] U.S. Customs and Border Protection, “Drawback” (Trade Remedies note on Section 301/201 claims) — https://www.cbp.gov/trade/programs-administration/entry-summary/drawback-overview [5] Borderless, “Duty drawback in 2026: what you can (and can’t) recover” (last reviewed June 2026) — https://borderless.us/blog/duty-drawback-2026