DRA-2-02-CO:R:C:E 223701 PH
District Director of Customs
One Virginia Avenue
Wilmington, North Carolina 28401
RE: Same Condition Drawback; Exportation; Protest 1503-91-
100025
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the points raised by your
office, the protestant, and the materials in the file. Our
decision follows.
FACTS:
The protest is of the reliquidation of a same condition
drawback entry. According to the file, on January 15, 1991, the
protestant imported 1,648 kilograms (quantity: 3,943,876) of
certain digestive preparations in the forms of tablets, valued at
$907,091. Duty in the amount of $57,146.73 was paid on the
merchandise. By a drawback entry dated April 24, 1991, the
protestant claimed drawback on 1,972,686 of the tablets, valued
at $453,718, on which duty in the amount of $28,584.23 was stated
to have been paid. Examination was waived by Customs and,
according to the Notice of Exportation of Articles with Benefit
of Drawback (CF 7511), the merchandise was exported to Canada on
April 26, 1991.
In Canada, the merchandise and packaging materials were
transported to a packaging facility. In the packaging facility,
the merchandise was placed in bottles of 30 tablets each, the
bottles were sealed with caps and a label was attached to each
bottle. The bottles were then placed into individual cartons
with a product information sheet. The individual cartons were
placed in a tray, 24 cartons to a tray, and shrink-wrapped. Two
of the shrink-wrapped trays were placed into a shipping case to
complete the packaging operations.
The packaged merchandise was then shipped back to the
protestant in the United States. The protestant paid full duty
on the value of the merchandise and the cost of the packaging.
In the United States, according to the protestant, the
merchandise is distributed to physicians free of charge for the
purpose of soliciting future orders of the merchandise.
The drawback claim was liquidated on June 21, 1991, with
drawback in the amount of $28,298.38 granted. On September 17,
1991, the entry was reliquidated, with no drawback. The bulletin
notice of the reliquidation was posted on the same date. The
protest was filed on December 13, 1991.
ISSUE:
Was the merchandise in this case exported, for drawback
purposes, when it was sent abroad for packaging and, as intended
when it was sent abroad, returned in its packaged form to the
United States?
LAW AND ANALYSIS:
Initially, we note that the protest, with application for
further review, was timely filed under the statutory and
regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR
Part 174) and is protestable (see 19 U.S.C. 1514(a)(6)).
Basically, 19 U.S.C. 1313(j)(1), which is the authority for
the drawback claim in this case, provides that if imported
merchandise on which was paid any duty, tax, or fee imposed under
Federal law because of its importation is, within 3 years
beginning on the date of importation, exported in the same
condition as when imported or destroyed under Customs supervision
and is not used in the United States before its exportation or
destruction, then on its exportation or destruction 99 percent of
the duty, tax, or fee shall be refunded as drawback. The Customs
Regulations pertaining to drawback are found in 19 CFR Part 191.
The principal issue in this case is whether the merchandise
upon which drawback was claimed was exported. The merchandise
was sent to Canada for packaging with the intent that it be
returned, in its packaged form, to the United States and it was
so returned.
"Exportation" is defined in the Customs Regulations (19 CFR
101.1(k)) as "a severance of goods from the mass of things
belonging to this country with the intention of uniting them to
the mass of things belonging to some foreign country." This
provision also provides that "[t]he shipment of merchandise
abroad with the intention of returning it to the United States
with a design to circumvent provisions of restriction or
limitation in the tariff laws or to secure a benefit accruing to
imported merchandise is not an exportation." This definition is
consistent with the decision of the Supreme Court in the leading
case of Swan v. Finch v. United States, 190 U.S. 143 (1903) (see
also, 17 Op. Att'y Gen. 579 (1883)).
Customs has issued a number of rulings interpreting this
definition. In Customs Service Decision (C.S.D.) 82-154, we
ruled that an exportation occurred, for drawback purposes, when
finished watches were shipped to a distribution center in Canada
for sale and shipment, even though some of watches may have been
returned to the United States. In C.S.D. 82-155, we ruled that
an exportation did not occur when the owner of an imported truck
sent the trucks to Canada for disassembly and re-entry into the
United States. In this latter case, the duty on the original
importation was 25 percent and the duty on the disassembled truck
would have been less than 5 percent. The sole purpose of
shipping the truck abroad was to obtain drawback and to take
advantage of the difference in duty. In an unpublished ruling
(File: DRA-1-CO:R:CD:D 212451 RB, February 13, 1981), we held
that sugar refined in the United States was exported, for
drawback purposes, when it was sent to Canada for packaging and
thereafter returned to the United States for consumption.
On the basis of the February 13, 1981, ruling cited above,
we conclude that an exportation occurred in this case. We note
that, in contrast to C.S.D. 82-155, the merchandise in this case
was shipped abroad for a legitimate commercial purpose
independent of obtaining drawback. There is no evidence in the
file that the merchandise was shipped abroad "with the intention
of returning it to the United States with a design to circumvent
provisions of restriction or limitation in the tariff laws or to
secure a benefit accruing to imported merchandise", as proscribed
in 19 CFR 101.1(k), quoted above. In this regard, we note that
full duty was paid on the merchandise and packaging on its return
to the United States. Accordingly, the protest is GRANTED.
HOLDING:
The merchandise in this case, which was sent abroad for
packaging and, as intended when it was sent abroad, returned in
its packaged form to the United States, is considered to have
been exported, for drawback purposes (note that upon return to
the United States, full duty was paid on the merchandise and
packaging).
The protest is GRANTED. A copy of this decision should be
attached to the Form 19 and provided to the protestant as part of
the notice of action on the protest.
Sincerely,
John Durant, Director