DRA-4 CO:R:C:E 224346 TLS
Mr. Arthur W. Bodek
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway 43rd Floor
New York, New York 10036
RE: Ruling request concerning same condition drawback and
substitution same condition drawback eligibility of
importer/claimant after sale to exporter; 19 U.S.C. 1313(j)(1)
and (2).
Dear Mr. Bodek:
This office has received the above-referenced request for a
ruling as provided for under Customs regulations. We have
considered the request and made the following decision.
FACTS:
The importer imports women's sportswear and dresses which
are generally sold or distributed in the U.S. Occasionally, the
importer will import and take possession of the merchandise and
sell it in the same condition as imported to satisfy their own
accounts overseas. The imported merchandise is exported by the
domestic purchasers within 3 years of the importation of the
goods.
The importer wishes to claim a refund of the duties, taxes,
and fees imposed, which it paid upon the importation of such
goods.
ISSUES:
Whether the importer must also be the exporter of the
subject merchandise to successfully claim direct identification
drawback under 19 U.S.C. 1313(j)(1).
Whether the importer is entitled to substitution same
condition drawback under the facts submitted.
LAW AND ANALYSIS:
Section 1313(j)(1) of the United States Code (19 U.S.C.
1313(j)(1)) provides:
(1) If imported merchandise, on which was paid any
duty, tax, or fee imported under Federal law because of
its importation-
(A) is, before the close of the three-year
period beginning on the date of importation-
(i) exported in the same condition
as when imported, or
(ii) destroyed under Customs
supervision; and
(B) is not used within the United States
before such exportation or destruction;
then upon such exportation or destruction 99 per centum
of the amount of each such duty, tax, and fee so paid
shall be refunded as drawback.
This provision was enacted by the Act of December 28, 1980, Pub.
L. 96-609, Title II, Section 201, 94 Stat. 3560.
Section 1313(j)(2) of Title 19 of the United States Code (19
U.S.C. 1313(j)(2) provides:
(2) If there is, with respect to imported merchandise
on which was paid any duty, tax, or fee imposed under
the Federal law because of its importation, any other
merchandise (whether imported or domestic) that-
(A) is fungible with such imported
merchandise;
(B) is, before, the close of the three-year
period beginning on the date of importation
of the imported merchandise, either exported
or destroyed under Customs supervision;
(C) before such exportation or destruction-
(i) is not used within the United
States, and
(ii) is in the possession of the
party claiming drawback under this
paragraph; and
(D) is in the same condition at the time of
exportation or destruction as was the
imported merchandise at the time of its
importation;
then upon the exportation or destruction of such other
merchandise the amount of each such duty, tax, and fee
paid, regarding the imported merchandise [not to exceed
99 percent] shall be refunded as drawback. (Emphasis
added.)
Your submission compares the position of the importer to
that of Central Soya in the case of Central Soya v. United
States, 761 F. Supp. 133 (CIT 1991), aff'd, 953 F.2d 630 (Fed.
Cir. 1992). In that case, "A" imported and possessed duty-paid
merchandise and also possessed substituted merchandise which was
fungible with the imported duty-paid merchandise. "A" consumed
the imported duty-paid merchandise and sold and delivered the
substituted merchandise to "B". Under its contract with a
foreign buyer, "B" exported the substituted merchandise. "B"
waived its right to claim the exportation for drawback to "A".
Since "A" possessed both imported duty-paid and substituted
fungible merchandise during the three-year time limitation of the
law (19 U.S.C. 1313(j)(2)), and "B" waived its right to claim
drawback, the Court held that "A" was entitled to claim drawback.
In this case, the imported merchandise is also sold to
another party, which presumably exports fungible merchandise
within the three-year period as required under statute. You
claim that since the importer is no longer required to be the
exporter of the substituted merchandise, the importer needs to
have only possessed the fungible merchandise at some point after
importation and before the three-year period has run its course.
Central Soya, supra. The importer states that such is the case
here, having imported the fungible merchandise and then sold it
to a second party, who then exported it (or its substitute)
within the three-year period. Thus, you claim that the
possession requirement will be satisfied under the given
scenario.
In B.F. Goodrich v. United States, 794 F. Supp. 1148 (CIT
1992), the court held that Customs improperly promulgated 19 CFR
191.141(h), which required that a drawback claimant must have
possessed the imported duty-paid merchandise. The court
concluded that the underlying statute (19 U.S.C. 1313(j)(2)) does
not require and that Congress did not intend such. The court
held that the claimant is only required to possess the
substituted merchandise during the three-year limitation and have
paid the duty, tax, or fee for the privilege of importing the
goods.
To implement the Central Soya and B.F. Goodrich decisions,
the Customs Service issued the General Notice published in the
Customs Bulletin and Decisions on October 21, 1992. By its
terms, the General Notice is made applicable to substitution same
condition drawback only. Furthermore, we have recently ruled
that the General Notice is not applicable to direct
identification same condition drawback under 19 U.S.C.
1313(j)(1). Customs ruling HQ 224325 (February 16, 1993).
More directly, the Central Soya decision was considered only
in the substitution same condition context; drawback under 19
U.S.C. 1313(j)(1) was not at issue. As noted in HQ 224325,
"[t]he respective provisions (sections 1313(j(1) and 1313(j)(2)
are separate statutes separately enacted at different times with
different requirements." It is incorrect to infer from the
court's holding in Central Soya that its effect should extend to
cases where 1313(j)(1) is at issue. Consequently, those cases
ruling that a claimant under 1313(j)(1) must be the exporter of
the subject merchandise still stand as good precedent.
Therefore, we do not find 19 U.S.C. 1313(j)(1) to be applicable
to the facts of this case.
We do believe, however, that your client might be able to
claim drawback under 19 U.S.C. 1313(j)(2). In order to implement
that provision to comply with what we believe were the orders of
the Central Soya and B.F. Goodrich courts, we announced that we
would honor any drawback claim which met the terms of the General
Notice.
The General Notice implements the following requirements,
including those already noted herein:
1) The drawback claimant is responsible for insuring
that all applicable documentation is filed in
accordance with section 191.141(a)-(g) of the Customs
Regulations, including the notice of intent to export,
where applicable.
2) the claimant must certify that it paid the duty and
the amount applicable to the quantity of designated
imported merchandise claimed for drawback, and that it
will keep evidence in support of that certification to
be made available to Customs after reasonable notice.
The claimant must also show that it possessed the
exported or destroyed merchandise at some time after
importation of the imported merchandise and before its
exportation or destruction, and must otherwise comply
wit all Customs laws and regulations for the filing of
a drawback claim under section 1313(j)(2). (Emphasis
added.)
3) The claimant must provide evidence that:
(a) the exporter or destroyer of the
merchandise did not and will not authorize
any entity (including itself) other than
claimant to claim the exportation or
destruction for drawback;
(b) the exporter or destroyer of the
merchandise did not use the substituted
merchandise while in its possession;
(c) the merchandise exported or destroyed was
the identical merchandise received from the
claimant and;
(d) the merchandise was in the same condition
upon exportation or destruction as was the
imported merchandise upon importation.
Both 1313(j)(1) and (2) are conditioned by the requirement
that in no case may the total drawback on the imported
merchandise, whether available under this paragraph or any other
provision of law exceed 99 percent of the duty paid. In order to
implement that provision, the Customs Service promulgated 19 CFR
191.141(a)-(g). Those provisions were addressed by the Central
Soya or B.F. Goodrich courts. If A is the claimant, the
questions become by what evidence will A show that B did not use
merchandise and that the merchandise was in the same condition at
the time of exportation by B as it was when imported by A. With
respect to the implementation of 1313(j)(2), the B.F. Goodrich
court stated that the claimant had to be the person who paid the
duty. Under the stated facts, A would be the person who paid the
duty and would meet the requirement. A could truthfully certify
that it paid the duty, thereby meeting the first paragraph of
item 3 of the General Notice.
In this case, the importer has stated that the exporter will
export the substituted merchandise in the same condition as the
imported merchandise within the three-year limitation. You state
that the merchandise will be substituted between the different
shipments that will be imported and exported. It is also stated
that the exporters will waive any claim to drawback. To the
extent that the importer complies with all other requirements
outlined in the General Notice, we find the only requirement at
issue to be whether the exported merchandise is fungible with the
imported duty-paid merchandise.
We have recently ruled in a similar case regarding similar
merchandise. In Customs ruling HQ 224287, we held that where
imported duty-paid women's wearing apparel and the substituted
counterpart "perfectly conform [with each other] with respect to
type of garment, style number, color, and size", the fungibility
requirement is satisfied. HQ 224287 (April 16, 1993). Thus, if
the same standards are adhered to in this case, we will find the
imported duty-paid merchandise fungible with the exported
merchandise.
HOLDING:
The situation described above does not fall under 19 U.S.C.
1313(j)(1) because the claimant in this case is not the exporter
of the subject merchandise.
The situation described above would fall under 19 U.S.C.
1313(j)(2) if the General Notice requirements are met and the
imported duty-paid merchandise is fungible with the exported
merchandise. Fungibility would only be found if the imported
merchandise and exported merchandise perfectly conformed with
each other with respect to type of garment, style number, color,
and size.
Sincerely,
John Durant, Director
Commercial Rulings Division