HMDWBK2100 - Overview: Why do we need drawback?

Traders, particularly those dealing in small scale exports of excise goods, have found that they can obtain goods on the open market at a better price duty paid than duty free. Provided they are able to reclaim the duty on exportation, they can compete more effectively with the large players in their market sector. This type of trading is known as parallel trading. In 1992 the EC recognised the need to ensure that these traders were not disadvantaged when competing in the Single Market. The resultant Directive required all Member States to put in place legislation to repay excise duty charged on goods which have been released for consumption where those goods are not intended for consumption in that Member State. In other words, goods may become eligible for reimbursement of excise duty when they are despatched to another Member State.

From June 1995 the UK extended the drawback legislation to cover excise goods exported to third countries and excise goods warehoused for export.