Refunding The Border: Duty Drawback Rules In Preferential Trade And Wto Law

Abstract

This paper evaluates how duty drawback—refunds of import duties on inputs embodied in exports or re-exported in the same state—is treated across regional trade agreements and whether such regimes cohere with WTO disciplines. Grounded in the rise of global value chains where intermediates dominate trade and imported content in exports is substantial, the analysis situates drawback as a pivotal policy tool for pricing inputs at world levels while maintaining border protection for domestic markets. Using doctrinal legal analysis, the study interprets MFN obligations under GATT Article I, limits on quantitative restrictions under Article XI, the conditions for regional agreements under Article XXIV, and the Enabling Clause for developing countries to assess RTA drawback provisions. It finds that common no-drawback rules in RTAs can disadvantage non-parties and lack firm justification under WTO law, recommending a shift toward more flexible, WTO-consistent allowance of drawback. The discussion clarifies how proper remission up to duties actually paid interacts with anti-dumping and subsidy rules, and distinguishes design choices such as full, partial, and substitution drawback. Policy guidance favors moving from blanket bans to calibrated permission with safeguards, reducing distortions and administrative burdens while aligning preferential regimes with multilateral norms.