Section 301 Duties and Drawback Eligibility
The Section 301 tariffs imposed on Chinese goods represent one of the most significant duty recovery opportunities in recent memory. Unlike Section 232 duties on steel and aluminum, Section 301 duties ARE eligible for drawback.
This means companies importing Chinese-origin goods subject to 7.5 percent, 25 percent, or even higher Section 301 tariff rates can recover up to 99 percent of those duties if the goods (or products made from them) are subsequently exported or destroyed. Given the magnitude of these tariffs, drawback has become a critical cost recovery tool.
Industries Most Affected
The industries hit hardest by Section 301 tariffs include semiconductors and electronic components, computer equipment, cut and sew apparel manufacturing, and battery and electric vehicle production. For companies in these sectors that export any portion of their products, drawback represents substantial recovery potential.
Even companies that primarily sell domestically may have drawback opportunities through indirect exports, distribution to Canadian or international affiliates, or destruction of obsolete inventory.
Calculating the Opportunity
Consider a company importing $10 million annually in Chinese-origin components subject to 25 percent Section 301 duties—that’s $2.5 million in duties paid. If 40 percent of finished products are exported, the company may be eligible to recover approximately $990,000 annually (99 percent of $1 million in attributable duties).
The five-year lookback period means companies just discovering drawback may have multiple years of unclaimed refunds available. At 25 percent duty rates, even modest export percentages generate meaningful recovery.
Documentation Considerations
Section 301 drawback requires the same documentation as any drawback claim—entry data showing duties paid, export documentation proving goods left the country, and evidence linking the two. For manufacturing drawback, bills of material documenting how imported components were incorporated into finished goods are also required.
The key is ensuring your import data clearly identifies Section 301 duty payments. Work with your customs broker to confirm entries properly capture the applicable duty rates and amounts.
Acting Before the Window Closes
The five-year claim window means imports from 2021 and earlier are already ineligible. If your company has been paying Section 301 duties since 2018-2019 without claiming drawback, significant refunds have already been lost.
Taking action now preserves remaining claims and establishes processes to capture future refunds. Given the magnitude of Section 301 rates, delaying drawback evaluation is increasingly expensive.
About TLR Drawback Services
TLR’s drawback team combines decades of specialized experience with modern technology to maximize duty recovery for our clients. From program evaluation through claim filing and payment, we handle the complexity so you can focus on your business. Contact us to explore your drawback opportunity.
