Also called duties relief, drawback, duty refund, K32
What is duty drawback?
Getting back duty you paid on imported material that you then exported, either as it was or built into something else.
What else it is called
- Other names
- duties relief, drawback, duty refund, K32
- In French
- drawback
Related entries
Understanding duty drawback
If you import material, pay duty on it, and later export it, Canada will refund that duty. The goods can be exported in the same condition or built into something else, which is the case that matters for manufacturers: components imported with duty paid, assembled here, and shipped to a customer abroad.
There are two routes. Drawback is a refund claimed after the export has happened. The duties relief programme works the other way, allowing qualifying importers to bring material in without paying duty at all provided it is exported within the allowed period, which is better for cash flow but requires approval and record-keeping in advance.
Either way the obligation is documentary. You must be able to tie the exported goods back to the specific imports, which means tracking through receiving, production and shipping. Plants that do not track to that level often cannot claim even when they are clearly entitled.
Trade agreements complicate it. Drawback on goods exported to the United States or Mexico is restricted under the continental agreement, so the entitlement depends on where the goods went.
In practice
If you import components and export finished product, work out roughly what duty you paid on last year’s exported volume. For some plants the number is large enough to justify the tracking on its own.
Frequently asked
How far back can we claim?
Generally four years from the date of import, which means a plant looking at this for the first time can often file for several past years at once. Confirm the current limitation period with your broker before assuming it.
Does drawback apply to goods exported to the United States?
It is restricted. The continental trade agreement limits drawback on goods exported to the United States and Mexico, so the answer depends on the destination and on the duty originally paid. This is worth professional advice rather than a general rule.