Certified Supply Chain Professional (CSCP) Practice Exam

What is duty drawback?

1. Tax exemption for domestic goods

2. A penalty for late customs declarations

3. Refund of duties paid on imported goods that are reexported

4. A method to calculate tariffs on exports

The correct answer is: Refund of duties paid on imported goods that are reexported

Duty drawback refers to the refund of duties, taxes, and fees that are paid on imported goods when those goods are exported or destroyed under specific regulations. This system is designed to promote international trade by allowing businesses to recover some of the costs associated with importing goods that they ultimately do not retain for domestic consumption but rather return to the international market. The process typically involves importing goods, paying the applicable customs duties, and then, upon re-exporting those goods, claiming a refund for the duties paid. This can significantly reduce the overall cost for businesses engaged in import-export activities and can incentivize them to re-export rather than keep goods in the domestic market. Understanding duty drawback is crucial for supply chain professionals because it impacts cost management strategies and compliance with customs regulations. The other options do not accurately reflect the nature of duty drawback. For instance, a tax exemption for domestic goods does not involve refunds related to imports, and a penalty for late customs declarations refers to a compliance issue rather than a financial refund mechanism. Additionally, calculating tariffs on exports is an entirely different process that pertains to pricing and regulatory assessments but does not involve the concept of reimbursement for duties as seen in duty drawback.