DRA-4-CO:R:C:E 224869 PH
Regional Director
Commercial Operations
New Orleans, Louisiana 70130
RE: Protest 1901 93 100022; Substitution Unused Merchandise
Drawback; Possession of Exported Merchandise; 19 U.S.C.
1313(j)(2); Public Law 103-182, Section 632
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. Our decision follows.
FACTS:
The protest is of the liquidation of two drawback entries
(or claims) filed on April 24, 1991 (one for $19,720, and the
other for $21,510). According to the file, the imported
merchandise designated as the basis of drawback for the first
claim was imported on March 28, 1988 (in two entries), and the
exportation upon which the claim is based was on January 27,
1991. According to the file, the imported merchandise designated
as the basis of drawback for the second claim was imported on
January 20, 1990, and the exportation on which the claim is based
was on February 17, 1991.
FIRST CLAIM
According to documents in the file, the protestant was the
importer of the designated imported merchandise (231,625.47
barrels of No. 2 fuel oil) and paid the duty on that merchandise
($24,320.67). The protestant, by its Treasurer in an affidavit
dated June 26, 1991, stated, among other things, that "[w]e do
not issue a certificate of delivery covering the designated
merchandise nor a certificate of manufacture and delivery
covering articles manufactured or produced therefrom." In a
certificate, dated December 16, 1992, the Treasurer of the
protestant stated that "[the protestant] was the exporter of the
product and the only claimant for duty drawback on the imported
product." In each statement, the Treasurer stated that the
protestant maintained records in support of the affidavits. The
file contains copies of the contract of purchase with
specifications provided, invoice, and reports of analysis of the
imported merchandise.
According to the Customs Form 7511 (Notice of Exportation of
Articles with Benefit of Drawback) for this claim, the exported
merchandise upon which drawback was claimed was 189,707 barrels
of "No. 2 gas oil" exported from Chevron Dock No. 5 at
Pascagoula, Mississippi, on the ELIZABETH S.K., ultimately
destined for Indonesia.
In the file there is a copy of a January 14, 1991 (time:
1531 hours, EDT), telex stated to confirm a January 10, 1991,
agreement between the seller (Chevron U.S.A. Inc.) and the buyer
(the protestant). Under the telex "[the seller] agrees to sell
to [the protestant] petroleum products under the following terms
and conditions [and the telex] shall serve as the formal contract
between the parties in governing this transaction." The telex
describes the product to be sold as 225,000 barrels (plus/minus
10%, buyer's option) of No. 2 oil meeting provided specifications
to be delivered into buyer's nominated vessel during January 20-
30, 1991, F.O.B. Pascagoula, Mississippi. The telex provides
that the protestant is to provide a "standby irrevocable letter
of credit" in an amount and form acceptable to the buyer. The
telex provides for quantity and quality determinations and/or
inspections. The telex provides for payment by wire transfer of
"immediately available Federal funds" within 2 working days after
receipt of wired invoice and supporting documents. The telex
requests confirmation by return wire of agreement or disagreement
with the terms and conditions within 24 hours of receipt of the
telex and states that failure to reply will be deemed to
constitute acceptance of the terms of the agreement.
In the file there is also a copy of a December 5, 1990 (time
not available), telex stated to confirm a November 29, 1990,
agreement between the seller (the protestant) and the buyer
(Sintra Oil Pte. Ltd. (Intraco)) (there is also a copy of a
November 29, 1990, telex from a "broker" stated to confirm this
agreement). The December 5, 1990, telex states that the product
is 225,000 barrels (plus/minus 10% at the buyer's option) of No.
2 fuel oil meeting provided specifications to be delivered
"F.O.B. into buyer's designated vessel ... during January 20-31,
1991, basis US Gulf Coast." The telex provides for an
irrevocable letter of credit, if sufficient credit is not
established. The telex provides for payment on the "due date"
(five working days after completion of loading) (there is a
January 30, 1991, telex from the protestant to the buyer
referencing the invoice and stating that payment is due on
February 1, 1991, via wire transfer of Federal funds). The
protestant requests that the buyer promptly advise if it is not
in agreement with any of the provisions, otherwise "the terms and
conditions indicated herein shall be considered binding on both
parties."
There are copies of reports of inspection in the file.
According to a "Loss Control Report", 189,707 barrels of cargo
described as "gasoil" (in the file there is a statement, by an
official of the protestant, that according to the New York
Mercantile Exchange "Glossary of Terms", "Gasoil" is the European
designation for "No. 2 Heating Oil") were loaded from Chevron
tank 324 into the ELIZABETH S.K. According to a "Shore Quantity
Summary", at the time of loading there were 189,707 barrels of
gas oil in Chevron tank 324. A laboratory report, with
specifications of samples, stated to have been taken from tank
324 on January 25, 1991, is provided. According to a "Time Log",
loading of gas oil into the ELIZABETH S.K. commenced at 2130
hours on January 25, 1991, and was completed at 2254 hours on
January 26, 1991. According to "Vessel Quantity Summary" and
"Vessel's Experience Factor (at loading)" reports, the quantity
of gas oil so loaded was 189,553.17 barrels ("Gross Standard
Volume", corrected to 198,707 actual barrels, per other documents
in the file). According to a "Tanker Bill of Lading", on January
26, 1991, 189,707 barrels of gas oil were shipped on board by the
protestant on the ELIZABETH S.K. The party unto whom delivery of
the shipment is to be made is stated to be Sintra Oil Private
Limited, and the shipment is stated to be carried under and
pursuant to the terms of the charter dated "as per Charter Party
[charter agreement]." No copy of such a charter party is
provided.
SECOND CLAIM
According to documents in the file, the protestant was the
importer of the designated imported merchandise (219,023.27
barrels of "other, fuel oils Nos. 2 & 3", according to the
consumption entry) (other documents in the file, including a
statement of the shore vessel discharge and shore receipt of the
merchandise by an laboratory service and an invoice, describe the
merchandise as "No. 2 fuel oil") and paid the duty on that
merchandise ($22,997.44). The protestant, by its Treasurer in an
affidavit dated June 26, 1991, stated, among other things, that
"[w]e do not issue a certificate of delivery covering the
designated merchandise nor a certificate of manufacture and
delivery covering articles manufactured or produced therefrom."
In a certificate, dated December 16, 1992, the Treasurer of the
protestant stated that "[the protestant] was the exporter of the
product and the only claimant for duty drawback on the imported
product." In each statement, the Treasurer stated that the
protestant maintained records in support of the affidavits. The
file contains copies of the contract of purchase for the imported
merchandise (describing the merchandise as "No. 2 fuel oil"; this
is also the description in the Bill of Lading for the imported
merchandise) with specifications provided, invoice for the
imported merchandise, and reports of analysis of the imported
merchandise.
According to the Customs Form 7511 (Notice of Exportation of
Articles with Benefit of Drawback) for this claim, the exported
merchandise upon which drawback was claimed was 206,927 barrels
of "gas oil" exported from Chevron Dock No. 5 at Pascagoula,
Mississippi, on the NINFEA ultimately destined for Indonesia.
In the file there is a copy of a January 31, 1991 (time:
1036 hours, EDT), telex stated to confirm a January 29, 1991,
agreement between the seller (Chevron U.S.A. Inc.) and the buyer
(the protestant). Under the telex "[the seller] agrees to sell
to [the protestant] petroleum products under the following terms
and conditions [and the telex] shall serve as the formal contract
between the parties in governing this transaction." The telex
describes the product to be sold as 225,000 barrels (plus/minus
10%, buyer's option) of No. 2 oil meeting provided specifications
to be delivered into buyers-nominated vessel during February 10-
15, 1991, F.O.B. Pascagoula, Mississippi. The telex provides for
an irrevocable letter of credit, if sufficient credit is not
established. The telex provides for payment on the "due date"
(five working days after completion of loading) (there is a
January 30, 1991, telex from the protestant to the buyer
referencing the invoice and stating that payment is due on
February 1, 1991, via wire transfer of Federal funds). The
protestant requests that the buyer promptly advise if it is not
in agreement with any of the provisions, otherwise "the terms and
conditions indicated herein shall be considered binding on both
parties." There is another telex of the same date (time: 1437
hours EDT) referencing the foregoing telex containing modified
provisions, none of which affect the substance of the foregoing
telex, for purposes of this ruling.
In the file there is also a copy of a February 15, 1991
(time not available), telex stated to confirm a January 29, 1991,
agreement between the seller (the protestant) and the buyer
(Sintra Oil Pte. Ltd. (Intraco)). This telex states that the
product is 225,000 barrels (plus/minus 10% at the buyer's option)
of No. 2 fuel oil meeting provided specifications to be delivered
"F.O.B. into buyers designated vessel ... during February 10-15,
1991, basis US Gulf Coast." The telex provides for an
irrevocable letter of credit, if sufficient credit is not
established. The telex provides for payment on the "due date"
(five working days from the bill of lading date) (there is a
February 19, 1991, telex from the protestant to the buyer
referencing the invoice and stating that payment is due on
February 22, 1991, via wire transfer of Federal funds). The
protestant requests that the buyer promptly advise if it is not
in agreement with any of the provisions, otherwise "the terms and
conditions indicated herein shall be considered binding on both
parties."
There are copies of reports of inspection in the file.
According to a "Loss Control Report", 206,927 barrels of cargo
described as "gas oil" (in the file there is a statement, by an
official of the protestant, that according to the New York
Mercantile Exchange "Glossary of Terms", "Gasoil" is the European
designation for "No. 2 Heating Oil") were loaded from Chevron
tanks 324, 361, and 370 into the NINFEA. According to a "Shore
Quantity Summary", at the time of loading there were 206,927
barrels of gas oil in Chevron tanks 324, 361, and 370.
Laboratory reports, with specifications of samples, stated to
have been taken from tank 324 on February 17, 1991, and from
tanks 361 and 370 on February 14, 1991, are provided. (Note:
Because the time of loading was February 16 and 17, 1991, the
sample from tank 324 taken on February 17, 1991, may have been
taken after loading, and thus not be pertinent for establishing
commercial interchangeability. However, our ruling makes this
issue moot.) According to a "Time Log", loading of gas oil into
the NINFEA commenced at 1618 hours on February 16, 1991, and was
completed at 1042 hours on February 17, 1991. According to a
"Vessel Quantity Summary" report, the quantity of gas oil so
loaded was 206,836.92 barrels ("Gross Standard Volume", corrected
to 206,927 actual barrels, per other documents in the file).
According to a "Tanker Bill of Lading", on February 17, 1991,
206,927 barrels of gas oil were shipped on board by the
protestant on the NINFEA. The party unto whom delivery of the
shipment is to be made is stated to be [a party issued or
endorsed to the order of a Singapore bank], and the shipment is
stated to be carried under and pursuant to the terms of the
charter dated "30/1/91". No copy of such a charter party is
provided.
As stated above, on April 24, 1991, the protestant filed the
above claims for drawback, on 189,707 barrels of gas oil in the
first claim and 206,927 barrels of gas oil in the second claim.
By letter of August 16, 1991, Customs advised the protestant that
it was suspending the claims, pending resolution of the B.F.
Goodrich Co. v. United States (794 F. Supp. 1148 (CIT 1992))
case. By letters of December 18, 1992, the protestant requested
reactivation of the drawback claim. With these letters, the
protestant provided certifications relating to the claim, in
accordance with Customs General Notice published in the Customs
Bulletin & Decisions on October 21, 1992 (Vol. 26, No. 43, page
7). Customs Regional Laboratory was requested to review the
merchandise in the claim for fungibility and found that the
imported merchandise and the exported merchandise were fungible
in the case of each claim. In letters dated February 19, 1993,
Customs advised the protestant that although the imported and
exported merchandise were found to be fungible, drawback was
being denied because Customs was unable to establish compliance
with the requirement for possession of the exported product. In
these letters, Customs referred to ruling 224103, dated October
19, 1992.
The protested drawback claims were liquidated, without
drawback allowed, on March 19, 1993. The protestant filed the
protest under consideration on May 19, 1993, and by letter of May
18, 1993, filed with Customs an amended protest form with the box
for further review checked (we assume that Customs received this
amended protest within the 90 days for filing or amending a
protest, otherwise the application for further review should have
been denied and the protest processed at the district level (19
CFR 174.14, 174.23; Customs Directive 099 3550-065 dated August
4, 1993, page 23, section (1)(a))).
ISSUE:
Is there authority to grant the protest of denial of
drawback in this case?
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed under
the statutory and regulatory provisions for protests (see 19
U.S.C. 1514 and 19 CFR Part 174). We note that the refusal to
pay a claim for drawback is a protestable issue (see 19 U.S.C.
1514(a)(6)).
The law described in the LAW AND ANALYSIS portion of our
ruling 224868, on protest 1901 93 100021 by the same party, is
the same as that which is applicable in this case. We are
incorporating into this case by reference the description of the
applicable law in that case, rather than repeating it in this
case. As in ruling 224868, the issue to be resolved in this case
is whether the possession requirement has been met, assuming, as
appears to be the case, that the other requirements for drawback
under 19 U.S.C. 1313(j)(2) have been met.
In the first claim in this case, according to documents
submitted by the protestant, the exported merchandise claimed in
the drawback claim (the 189,707 barrels of gas oil loaded on the
ELIZABETH S.K.) was purchased by the protestant pursuant to a
January 10, 1991, agreement confirmed by a January 14, 1991,
telex. The telex, by its terms, was to take effect within 24
hours of receipt by the protestant, in the absence of a return
wire of confirmation or disagreeing with the terms and conditions
of the telex. Under the telex, the oil was to be delivered
during January 20-30, 1991, into the buyer's nominated vessel.
The oil was, in fact, delivered into the ELIZABETH S.K. on
January 25 and 26, 1991.
Also according to documents submitted by the protestant, the
protestant sold 225,000 (plus/minus 10%) barrels of oil to
another company, pursuant to a November 29, 1990, agreement
confirmed by a December 5, 1990, telex. The oil was to be
delivered into the buyer's designated vessel during January 20-
31, 1991. The December 5, 1990, telex was to become binding on
the parties unless the buyer "promptly" advised the protestant
that it was not in agreement with any of the provisions. As
stated above, the oil was, in fact, delivered into the vessel on
January 25 and 26, 1991. The shipment of oil was carried
pursuant to the terms of a charter "as per Charter Party [charter
agreement]", but no copy of the charter party is provided. (We
note that the protestant states, in its accompanying submission,
that the vessel was "[its] customers ship". According to Lloyd's
Register of Ships, 1991-92, the ELIZABETH S.K. was not owned by
any of the parties referred to in this ruling, so we assume that
the protestant must mean that the vessel was chartered by the
company which purchased the oil, as confirmed in the December 5,
1990, telex.)
In the second claim, according to documents submitted by the
protestant, the exported merchandise claimed in the drawback
claim (the 206,927 barrels of gas oil loaded on the NINFEA) was
purchased by the protestant pursuant to a January 29, 1991,
agreement confirmed by a January 31, 1991, telex. The telex, by
its terms, was to take effect within 24 hours of receipt by the
protestant, in the absence of a return wire of confirmation or
disagreeing with the terms and conditions of the telex. Under
the telex, the oil was to be delivered during February 10-15,
1991, into the buyer's nominated vessel. The oil was, in fact,
delivered into the NINFEA on February 16 and 17, 1991.
Also according to documents submitted by the protestant, the
protestant sold 225,000 (plus/minus 10%) barrels of No. 2 fuel
oil to another company, pursuant to a January 29, 1991, agreement
confirmed by a February 15, 1991, telex. The oil was to be
delivered into the buyer's designated vessel during January 20-
31, 1991. The February 15, 1991, telex was to become binding on
the parties unless the buyer "promptly" advised the protestant
that it was not in agreement with any of the provisions. As
stated above, the oil was, in fact, delivered into the vessel on
February 16 and 17, 1991. The shipment of oil was carried
pursuant to the terms of a charter dated January 30, 1991, but no
copy of the charter party is provided. (We note that the
protestant states, in its accompanying submission, that the
vessel was "[its] customers ship". According to Lloyd's Register
of Ships, 1993-94, the NINFEA was not owned by any of the parties
referred to in this ruling, so we assume that the protestant must
mean that the vessel was chartered by the company which purchased
the oil, as confirmed in the January 29, 1991, telex.)
Thus, delivery of the oil was directly from the seller (to
the protestant) to the purchaser (from the protestant) into a
vessel chartered by the purchaser. In the second claim delivery
was also directly from the seller (to the protestant) to the
purchaser (from the protestant) into a vessel chartered by the
purchaser. In these situations, we conclude that the protestant
did not have possession of the exported merchandise. At no time,
according to the documents in the file, did the protestant have
physical possession, or possession by bailment, in leased
facilities, in transit, or by operational control, of the oil
(i.e., because delivery was directly from the seller (to the
protestant) to the buyer (from the protestant) into the buyer's
chartered vessel). (See, in this regard, the definition of
"delivery" in Black's Law Dictionary, 5th Ed.: "The act by which
the res or substance thereof is placed within the actual or
constructive possession or control of another.")
As stated above, the description of the applicable law in
ruling 224868 is incorporated by reference in this case. The
analysis of the applicability of C.S.D.'s 85-52, 87-18, and 89-
108, and the legislative history to Public Law 108-182 (H. Rep.
103-361) in which it is stated that the creation of a "market"
for drawback rights is not intended is also pertinent for this
case.
The protestant cites ruling 224103 and contends that it
meets the possession requirement, as interpreted in that ruling.
For the same reasons given in ruling 224868, we conclude that our
decision in this protest is not inconsistent with ruling 224103.
HOLDING:
There is no authority to grant the protest of the denial of
drawback in the protested drawback claims.
The protest is DENIED. In accordance with Section 3A(11)(b)
of Customs Directive 099 3550-065, dated August 4, 1993, Subject:
Revised Protest Directive, this decision should be mailed, with
the Customs Form 19, by your office to the protestant no later
than 60 days from the date of this letter. Any reliquidation of
the entry in accordance with the decision must be accomplished
prior to mailing of the decision. Sixty days from the date of
the decision the Office of Regulations and Rulings will take
steps to make the decision available to Customs personnel via the
Customs Rulings Module in ACS and the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act, and
other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division