Examkin

Question

Difficulty: HardTrade Restrictions, Tariffs, and Customs Control

A garment manufacturing company imports raw cotton subject to customs duties. The company processes the cotton into finished apparel entirely intended for sale in external markets. Upon exporting the finished apparel, the firm successfully claims a refund from the customs authority for the import duties previously paid on the raw materials. Which customs control mechanism is being utilized in this scenario?

  1. Duty drawback schemeAnswer
  2. B
    Bonded warehousing facility
  3. C
    Preferential tariff arrangement
  4. D
    Foreign exchange rationing control

Answer

The duty drawback scheme is the customs control mechanism that entitles manufacturers to a full or partial refund of import duties paid on raw materials once the finished goods derived from those materials are exported.
The correct answer is the duty drawback scheme. Under customs regulations, duty drawback is an export promotion tool designed to relieve domestic exporters of import duty costs on raw materials, components, or packaging that are incorporated into products sold in foreign markets.

Step-by-Step Solution

1
Analyze the operational scenario described in the stem.
Identified that raw materials were imported with duty paid, processed into finished goods, and exported out of the country, triggering a duty refund claim.
Determining the flow of goods and funds is required to identify the matching trade and customs instrument.
2
Distinguish between duty deferment, duty concession, and duty refund mechanisms in international trade.
Duty drawback specifically refers to the reimbursement of import duties paid on imported inputs when the final products are re-exported.
Exporters are encouraged to compete in international markets without bearing the burden of domestic tariff costs on raw materials.

Key Concept

Duty Drawback and Customs Control Measures
Rate this question

Topics

Trade Restrictions, Tariffs, and Customs Control

More questions from this topic