Impact of U.S. duty drawback on the demand for orange juice

A demand system model differentiating goods by origin is developed to examine impacts of duty drawback on U.S. orange juice exports and prices. An empirical analysis suggests that on average duty drawback has increased annual orange juice exports by about 16.5 million SSE gallons or 11% of export sales, and has supported the U.S. price of orange juice by about 2 cents per gallon. Not all benefits of duty drawback go to exporters. Importers who own drawback credits but do not export product may realize benefits by selling their credits to exporters. The analysis suggests these benefits effectively reduce by the U.S. orange juice tariff, positively impacting imports and negatively impacting the U.S. price.