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[Customs Drawback System in Japan]
Kinds of drawback
Drawback by the Customs Act
Refund of Mistakenly paid customs
Drawback by the Customs Tariff Act
①Drawback by deterioration, damage, etc.
Article 10, Paragraph (2)
②Drawback for raw materials used for the manufacture of export goods
③Drawback for alternative import such as bonded factory, etc.
Article 19, Paragraph (2)
④Drawback for re-exportation as original status
Article 19, Paragraph (3)
⑤Drawback for re-exportation of goods different from contract terms and disposal
Ⅰ. Outline of Customs Drawback, etc.
Customs drawback refers to paying back previously paid customs duties at the time of importation for some reasons. But, each country is operating different system of customs drawback to fulfill political purposes, to secure taxation income, to support export, etc.
Customs drawback system in Japan is classified into the refund of mistaken payment prescribed in the Customs Act and the drawback in an original meaning prescribed in the Customs Tariff Act, under which has 5 subcategories.
The refund of mistaken payment prescribed in the Customs Act has its meaning to correct the errors, so it's not a unique system related to trade. It's fair to say that practical drawback system is the drawback prescribed in the Customs Tariff Act.
■ Characteristics of the Customs Drawback System in Japan
The customs drawback system has its distinct characteristics in the case where raw materials are imported from abroad, and processed in domestic and reexported. The characteristics of the Customs Drawback System in Japan are as below:
1) Japan is taking policy of the collection of customs duties and drawback at the time of re-exportation for exporting raw materials, not duty-free imports and post-management.
Duty-free imports and post-management refer to the system that once customs duties of imported specific goods, parts, raw materials, etc. are exempted providing that they're subsequently to be reexported and placed in bonded area, and the exemption from customs duties is determined when they were exported. Under this system, the workplace not in bonded area has similar rules with those of the workplace in bonded area, which is currently line with China's system(a series of processing trade system).
Japan adopted the system under which customs duties of imported raw materials are collected frist, and previously paid customs are refunded when the goods manufactured by using such raw materials are re-exported.
2) Japan has operated drawback system in a very narrow meaning, which is a significant characteristic.
Under the current laws, Japan is limiting to sugar as the only item of being qualified for drawback in the case where raw materials are imported from aborad, processed domestically and re-exported(Article 19 of Customs Tariff Act).
※ As for Korea, items subject to drawback are covering almost all sorts of export raw materials, and especially, a certain ratio of export amount is being refunded in a simplified way even though a good fails to verify the import of raw materials and its customs duties payable, covering various items prescribed by related laws. (so-called "Simplified Duty Drawback System")
※ As for China, once import duty is exempted for the goods whose raw materials are imported, going through processing domestically, providing that are subsequently exported. The duty exemption is completely determined when such finished products are actually re-exported, which means it's operating the trade system very widely.
Ⅱ. Refund by the Customs Act - Refund for the mistaken payment
ㅇRefund for mistaken payment means that mistakenly overpaid duties, or simply mistakenly paid duties are returned. The system is based on Article 13 of the Customs Act.
The system is less than an administrative measure to correct mistakenly overpaid customs, so it's not a unique system related to trade.
ㅇThe head of a customshouse shall promptly refund mistakenly overpaid or simply mistakenly paid customs duties by authority or at the request of interested party. The customs may preferentially allot refund amount over amount payable in the case where a recipient of refund amount is liable to pay any customs duties, etc. for other reasons.
ㅇThe refund amount shall be paid by adding 7.3% annual interest from the date on which such reasons have arisen.(refund surcharges)
Ⅲ. Drawback by the Customs Tariff Act
1. Drawback by deterioration, damage, etc.
Drawback by deterioration, damage, etc. means the system under which paid customs are returned when imported goods have been destroyed, deteriorated and damaged due to calamities, and other unavoidable reasons during the storage in bonded area after import was permitted(Article 10, Paragraph 2 of the Customs Tariff Act).
The system is based on the nature of consumption tax of customs duties in that customs equivalent to such reduced value are forced to return if imported goods have become useless, but already paid customs duties.
This drawback system lies on the extended system of customs exemption for damaged or deteriorated goods, and if imported goods have been deteriorated and damaged before payment of import duty, the reduction or exemption from customs duties is applied, and if after payment, customs drawback is valid.
■ Drawback Requirements
1) Imported goods shall be stored in bonded area.
The goods which have been stored in other places than bonded area, with the permission from the head of a customshouse, are applied with same effect as the goods in bonded area. But if imported goods have been destroyed, etc. during the transportation to bonded area, such goods may not be subject to the drawback because they're not stored in bonded area yet.
2) Imported goods shall be destroyed, deteriorated and damaged due to disasters, and other unavoidable reasons.
Loss, etc. caused by a theft are excluded.
ㅇThe importer shall submit a disaster cargo declaration to the head of the competent customshouse having jurisdiction over the location of import to get issued with a confirmation.
ㅇSuch importer shall submit <disaster cargo customs drawback application> to the head of the competent customshouse having jurisdiction over the location of import within 3 months from the date on which such disaster has arisen.
ㅇSuch importer shall present a disaster confirmation, an import permit or other substitute confirmation issued by the head of a customshouse along with the application.
■ The Effect
ㅇFull amount of paid customs duties may be refunded for completely destroyed goods.
ㅇIn the case of partially damaged and deteriorated goods, customs amount equivalent to such reduced value may be refunded.
2. Drawback for raw materials used for the manufacture of export goods
Drawback for raw materials used for the manufacture of export goods means returning paid import duties on raw materials in the case where they're imported, manufactured in Japan, and then re-exported to aborad.(Article 19 of the Customs Tariff Act)
This system, which is, in theory, based on the nature of consumption tax of customs duties, is designed to maintain international competitiveness of Japanese goods, to promote exportation, and to facilitate processing trade in Japan, and to supplement bonded factory system.
■ Goods Subject to Drawback
Goods manufactured and exported by using imported sugar as raw materials, which are canned or bottled and sealed in other containers, covering items such as jam, marmalade, fruit, fruit juices, tomato ketchup, etc.
1) Shall import a specific raw material(sugar) to produce specific products which are specified as above.(Please mind it may not be applied to all products)
2) Shall have paid customs duties for importing raw materials.
3) Shall export finished products within 2 years from the date on which import of raw materials was permitted
4) Shall manufacture in a factory whose approval was granted from the head of a customshouse.
■ The Procedure of Drawback
☉ Acquirement of required documents for drawback
ㅇAt the time of exporting finished products manufactured by using raw materials, cargo manufacture report shall be submitted along with an export declaration form to the head of a customshouse.
ㅇAt the time of export permit, the head of a customshouse shall deliver a cargo manufacture report or a cargo manufacture certificate(referred to as "customs drawback documents") to th relevant exporter by stating an export permit has been granted.
ㅇWhere relevant goods were actually exported, the head of a customshouse shall deliver back such customs drawback documents to the export declarant after stating the relevant goods were exported.
※ The person who received customs drawback documents with stated export permit shall submit such documents to the customs promptly if whole amount of relevant goods failed to be exported because of breach of a contract, loss of cargo, etc.
☉ Application for drawback
ㅇDrawback application shall be presented to the customs in the name of the manufacturer or exporter of export goods(exceptional when exported in the name of export association, etc.)
ㅇDrawback is made every fiscal year on a quarterly basis, and applicants shall present drawback application form containing following contents by item subject to drawback to the head of a customshouse, within 2 months following the last day of such quarter whose drawback is possible.
-Drawback amount and calculation based thereof
-Goods exported in relevant quarter, and items name and quantity of raw materials used for the manufacture of such goods
ㅇApplicants shall submit customs drawback documents, issued by the head of a customshouse along with the above drawback application form.
■ The Effect
Full amount of paid customs duties for imported raw materials, which are used to manufacture finished products, may be refunded.
3. Alternative import such as bonded factory, etc.
The system is related to the aims of bonded factory or general bonded area system(hereinafter referred to as "bonded factory, etc.").
That is, in case where products are manufactured by using imported raw materials whose customs duties have been paid for some unavoidable reasons in bonded factory, etc. and then, such finished products are exported to abroad, customs duties paid for imported raw materials may be refunded(Article 19-2, Paragraph 2 of the Customs Tariff Act).
It's designed to activate exportation based on the purpose of bonded factory or general bonded area system.
The system, at the time of alternative import in bonded factory, etc. is largely in line with customs exemption system(Article 19-2, Paragraph 1 of the Customs Tariff Act) except for the decisive difference between pre-tax exemption and post-drawback.
ㅇThe subject shall be the bonded factory or general bonded area.
ㅇWith respect to products manufactured in bonded factory, etc. there shall be some unavoidable reasons, forcing the use of domestic raw materials which are imported being levied under the situation where foreign goods to be used as raw materials are not available.
ㅇThere shall be some situations where alternative goods exemption system for such raw materials is applied.
ㅇImported raw materials, without change in nature and form from importation, shall be brought in bonded factory within 3 months from the date of such importation.
ㅇOther unavoidable reasons, obtaining permission from the head of a customshouse.
ㅇThe goods using relevant raw materials shall have been exported.
ㅇBonded factory shall report to the head of a customs house concerning items name and quantity of taxed materials, and the item name of export goods thereby, usage purpose of taxed materials, etc. to get an approval.
ㅇWhere manufacture of export goods has been completed in bonded factory, manufacturing report which contains the item name, quantity and price of export goods, and item name and quantity of taxed materials, and presumed export date of export goods, etc. shall be presented to the head of a customshouse.
ㅇThe head of a customshouse returns such report to bonded factory, etc. after reviewing, confirming and stating the purpose on it.
ㅇAfter the export is completed, customs drawback application form by relevant bonded factory shall be presented to the Customs along with import permit of taxed materials, manufacturing report, etc.
ㅇWhere Customs received such drawback application form, it shall carry out inspection to determine the amount of drawback, and offer an drawback approval.
■ Other Effects
The drawback amount for the goods in conformity with above requirements and procedures covers full amount of customs duties paid for importation of raw materials which were used for the manufacture of the relevant finished products.
4. Drawback for re-exportation as original status
Drawback for re-exportation as original status is the system that customs duties paid at the time of import are paid back when imported goods are exported back to aborad because such goods failed to be sold, or for some other reasons.
Customs duties are levied on imported goods on the premise that such imported goods are to be consumed in Japan, but if they aren't consumed and returned to aborad, it's fair to refund levied customs.
The system may be usefully utilized on enterprise risk management in the cases as below, which requires mindful attention regarding its requirements and procedures;
①Where inventory of imported goods occurs, drawback for customs is possible if such inventory is exported to abroad;
②Where counterpart of re-exportation doesn't necessarily have to be the original counterpart.
ㅇShall be goods imported after paying customs
ㅇShall not be changed in nature and form from the importation
ㅇShall be re-exported within 1 year from the date of import permit, in principle(Provided, That such period may be extended exceeding 1 year with the approval from the head of a customshouse).
☉ Procedure for import
ㅇThe importer, at the import declaration, requires to obtain confirmation on <Re-exportation goods confirmation declaration> containing presumed date and presumed place of re-exportation, and the nature and form of goods, etc. from the head of a customshouse having jurisdiction over the location of import.
ㅇIn the case where it's deemed necessary by the head of a customshouse, the importer shall take some measures such as labeling some symbols on imported cargo to check the identification.
☉ Approval procedure for extending re-exportation period
Any person who desires to extend re-exportation period shall obtain an approval by presenting an extension approval application stating item names and quantity of goods, and reasons for application, etc. to the head of a customshouse having jurisdiction over the location of import.
☉ Procedure of re-exportation
The exporter shall submit following documentation along with an export declaration to the head of a customshouse.
ㅇCustoms drawback application - to fill out item names, quantity and reasons for export, etc. of the goods being re-exported in the same status as the importation.
ㅇ<Re-exportation goods confirmation declaration> issued by the head of a customshouse at the time of original import shall be attached.
ㅇAn import permit at the original import, or its equivalent substitute documents shall be attached.
■ The Effects
Full amount of paid customs duties at the import may be refunded.
5. Drawback for re-exportation of goods different from contract terms and for Disposal
Where imported goods which are different from the terms of a contract, or which may not be used due to the revision of laws in Japan, such imported goods shall be re-exported or disposed. In this case, paid customs duties shall be paid back, which is so-called Drawback for re-exportation of goods different from contract terms and Disposal
This system is designed to protect importers by returning customs duties on unconsumed goods.
■ Requirements for Drawback
☉ Drawback for re-exportation of goods different from contract terms
1) The goods shall be the one whose import permit was granted and customs duties were paid.
2) The goods whose import permit was granted shall be different from the terms of a contract.
ㅇWhere goods imported through telecommunications sales (net sales) for a private use are forced to be returned due to unexpected quality issue, etc. such goods may be included in the category of goods different from contract terms.(different size of clothing, etc.)
ㅇThe goods which are forced to be re-exported because such goods are prohibited for sales or use due to change in related Acts after the importation may be subject to drawback for goods different from contract terms.
ㅇSimple mistakes in trade contract, mistakes in opening a letter of credit, and deteriorated and damaged goods after the import permit is granted, etc. shall be excluded from the category of goods different from contract terms.
3) Nature and form of goods shall be consistent with goods at the time of import declaration. It's because goods which has been changed in form or nature by being processed or during storage may not verify the sameness with the goods whose import was declared.
4) Goods shall be declared to the head of a customshouse within 6 months from the date on which import declaration was accepted, and such goods shall be brought in bonded area(within 1 year, where obtained approval of the head of a customshouse due to unavoidable reasons).
5) The goods shall be exported to abroad.
☉ Drawback for disposal on goods different from contract terms
ㅇThe drawback is possible limitedly to disposed goods with the approval of the head of a customshouse, and proof documents that disposal of such goods is unavoidable shall be presented to the head of a customshouse(basic matters such as item name and standards of goods, etc. reasons for disposal, disposal methods, disposal places, etc.).
ㅇOther requirements are in line with the requirements and principles of the drawback for re-exportation of goods different from contract terms.
☉ Procedure for re-exportation
1) Receiving an entry application receipt
In principle, a receipt of entry application may be received after the relevant goods are placed in bonded area and entry application is presented to the head of a customshouse within 6 months from the date of import.
2) The submission of customs drawback application
The applicant shall present a customs drawback application form containing item names, quantity, export reasons, etc. of export goods to the head of a customshouse having jurisdiction over the location of export. Attached documentations are as follows.
ㅇProof documents to verify goods different from contract terms, etc.
ㅇAn import permit acquired at the importation or its substitute certificates
ㅇAn entry application receipt to prove the entry in bonded area
☉ Procedure for disposal
1) Receiving an entry application receipt
In principle, a receipt of entry application shall be received after brought in the relevant goods in bonded area and presented an entry application to the head of a customshouse within 6 months from the date of import.
2) Submission and approval of disposal approval application
The applicant shall submit disposal approval application form attaching with following documentation to the head of the competent customshouse in relevant bonded area, and acquire disposal approval.
ㅇProof documents to verify the disposal of goods different from contract terms is unavoidable
ㅇAn import permit acquired at the importation or its substitute certificate
ㅇAn entry application receipt to prove the entry in bonded area
3) Submission of a customs drawback application
The applicant shall present the application form along with disposal approval to the head of a customshouse who approved such disposal.
■ The Effect
Full amount of customs duties paid for re-exported or disposed goods may be refunded.
Provided, that where there are remnants after disposal, customs duties, etc. in proportion to such remnants shall not be refunded.