Certified in Logistics, Transportation and Distribution (CLTD) 2025 – 400 Free Practice Questions to Pass the Exam

Duty drawbacks are a provision that allows exporters to claim refunds on duties paid for imported products that are subsequently exported. The correct understanding regarding the restriction on duty drawbacks is that they are indeed not available for products exported to NAFTA countries.

This is primarily because the North American Free Trade Agreement (NAFTA), which has now been replaced by the United States-Mexico-Canada Agreement (USMCA), emphasizes the elimination of tariffs and duties among the member countries. As a result, goods traded among Canada, the U.S., and Mexico generally would not qualify for duty drawbacks since the incentive of recovering duties becomes irrelevant due to the absence of tariffs on those goods.

This understanding highlights the nature of trade agreements and their role in shaping customs duties and responsibilities. Duty drawbacks serve as a way to encourage exports by reducing the financial burden of tariffs on raw materials and components that are later exported, but this incentive does not apply within NAFTA/USMCA as those three countries promote tariff-free trade between them.