DRA-4-CO:R:C:E 224881 PH
Regional Director
Commercial Operations
New Orleans, Louisiana 70130
RE: Protest 1901 93 100027; Substitution Unused Merchandise
Drawback; Substitution Finished Petroleum Derivatives
Drawback; Commercial Interchangeability of Jet Fuel; 19
U.S.C. 1313(j)(2); 19 U.S.C. 1313(p); 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 a drawback entry (or
claim) filed on November 2, 1992 (this is the third amendment of
the claim). The claim was the subject of HQ ruling 224368
(August 3, 1993; published as Customs Service Decision (C.S.D.)
93-23), in which the protested claim was identified as claim 19.
According to the file, the imported merchandise designated as the
basis of drawback for the claim was imported on July 26, 1987
(43,793 barrels of merchandise designated), and October 14, 1989
(9,374 barrels of merchandise designated), and the exportation
upon which the claim is based was on December 15, 1989.
According to documents in the file and Customs records, the
protestant was the importer of the designated imported
merchandise (the entry summary for the July 26, 1987, importation
is for 68,994 barrels of jet fuel, kerosene-type, classifiable
under item 475.1550, Tariff Schedules of the United States (TSUS)
(sic, the correct TSUS item is 475.2550, TSUS, and the entry was
liquidated in accordance with the correct item), valued at
$1,521,309, with $36,221.65 in duty; and the entry summary for
the October 14, 1989, importation is for 9,374 barrels of jet
fuel, kerosene type, classifiable under subheading 2710.00.15304,
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA), valued at $233,503, with $4,926.60 in duty). The
protestant in an affidavit dated December 8, 1989, stated, among
other things, that "[the protestant] has not issued a Certificate
of Delivery covering the designated merchandise nor a Certificate
of Manufacture and Delivery covering articles manufactured or
produced therefrom." The affiant stated that records were
maintained to verify this and other statements in the affidavit.
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 222,536 barrels
of "jet fuel (DERD 2494, no ASA) (jet fuel, kerosene type)",
classifiable under subheading 2710.00.1530, HTSUSA, with a value
of $5,374,245, exported from the Chevron refinery at Pascagoula,
Mississippi, on the CROWN BRIDGE, ultimately destined for Japan.
In the file there is, for the July 26, 1987, importation, a
copy of a July 22/24, 1987, Certificate of Quantity for the July
26, 1987, importation showing 84,246.57 barrels (3,538,355.94
U.S. gallons) of "Kerosene (Low WSIM Jet A)" in tanks 201
(83,960.98 barrels) and D.1. (285.59 barrels) at Westridge
Terminal, Burnaby, British Columbia. There is a copy of a July
24, 1987, Vessels Ullage/Sounding & Capacity report for the
CHEVRON COLORADO showing 84,537.08 barrels (Gross Standard Volume
at 60 degrees F.) (3,550,557.36 U.S. gallons at 60 degrees F.) of
Kerosene (Low WSIM Jet A). There is a Report of Analysis dated
July 13, 1987, for a sample "[d]rawn by [a British Columbia
office of a laboratory service] ... [r]epresenting Westridge
Terminal Shoretank 201", according to which the specifications
reported for the sample meet the standard specifications for
aviation turbine fuels (ASTM D 1655), with the possible exception
of the aromatics content (20.7% by volume) and the electrical
conductivity (53 pS/m).
For the October 14, 1989, importation, in the file for
C.S.D. 93-23 (referred to above) there is a Certificate of
Quality dated October 5, 1989, for a sample the source of which
was Shore Tanks 1111TA and 1111TC, taken on September 23, 1989,
before loading the importing vessel (CHEVRON PACIFIC). According
to the specifications reported for this sample, the sample met
the standard specifications for aviation turbine fuels (ASTM D
1655), including aromatics content (16.9% by volume), with the
possible exception of net heat of combustion (aniline gravity
product (6723, 6771) is reported). Otherwise, there are no
documents such as those described above for the October 14, 1989,
importation.
There is a copy of a "Bill of Lading" dated December 16,
1989, which states that 222,536 barrels of "jet fuel (DERD 2494,
no ASA)" were loaded on board the CROWN BRIDGE by the protestant.
The party unto whom the merchandise was to be delivered was
Mitsubishi Corporation, at one or more safe ports in Japan.
There is a Shipper's Export Declaration reflecting the same
information for a like quantity of "jet fuel (DERD 2494, no ASA)
(jet fuel, kerosene type)", loaded at the Chevron refinery at
Pascagoula, Mississippi. There are reports of inspection in the
file, including a "Quantity Certificate" for 222,536 barrels in
the CROWN BRIDGE at the port of [the protestant], Pascagoula,
Mississippi, (dated December 15-16, 1989). There is also a
"Statement of Facts" reporting that the loading of the CROWN
BRIDGE was attended and approximately 222,500 barrels of jet fuel
were loaded with loading commencing at 0842 hours on December 15,
1989, and completed at 1518 hours on December 16, 1989. There is
a report of analysis for a sample identified as "M/V 'CROWN
BRIDGE' Composite at Chevron USA, Inc., Pascagoula, MS. on
12/18/89", according to which the specifications reported for the
sample meet the standard specifications for aviation turbine
fuels (ASTM D 1655), with the possible exception of the aromatics
content (23% by volume).
As stated above, on November 2, 1992, the protestant filed a
claim for drawback on the 53,167 barrels of jet fuel. Customs
Regional Laboratory was requested to review the merchandise in
the claim for fungibility. As indicated above, this claim was
amended three times and, therefore, there is some confusion with
regard to the Laboratory's opinions on fungibility. In a
memorandum dated October 12, 1990, the Laboratory gave its
opinion that the exported merchandise and the October 14, 1989,
importation met the ASTM D 1655 specifications for "Jet A" fuel
and were, therefore, fungible, but that the July 26, 1987,
importation did not meet those specifications and, therefore, was
not fungible with the exported merchandise.
According to your November 30, 1992, memorandum, the
protestant then amended its claim and accelerated payment
($4,877.33) was granted on the basis of the fungibility
determination for the October 14, 1989, importation. Later, the
protestant again amended the claim, adding the July 26, 1987,
importation which, as stated above, the Laboratory stated was not
fungible. According to your memorandum, the protestant contended
that the July 26, 1987, importation met the fungibility
requirements on the basis of ruling 223769 (October 20, 1992).
In your November 30, 1992, memorandum, you requested an
opinion on fungibility for the amended claim. You referred to a
February 24, 1992, memorandum on fungibility from the National
Petroleum Chemist in Customs San Francisco, California, office
(C.S.D. 93-23 referred to this opinion, which concluded that
neither of the importations in the protested claim were fungible
with the exported merchandise). In response to your November 30,
1992, memorandum, the Laboratory requested additional
information, i.e., "[a]n analytical report from a domestic (USA)
Customs approved laboratory for the imported product on the
vessel [CHEVRON COLORADO]." You forwarded the request for
additional information to the protestant.
The protestant responded to your request by letter of
January 22, 1993. In this letter, the protestant stated that
"because [the protestant] imported the fuel aboard its own
vessel, it accepted as a definitive statement of the fuel's
specifications the lab report based on the sample drawn at the
Canadian terminal several days prior to vessel loading." The
protestant noted that although the sample was drawn in Canada, it
was analyzed by an approved Customs laboratory in the United
States. According to the protestant, "[it, (i.e., the
protestant)] did not further analyze the subject imported
merchandise [after the July 13, 1987, certificate of analysis
described above]."
This information was forwarded to your Regional Customs
Laboratory with a request for a determination on fungibility and
clarification of the earlier opinion, in which the Laboratory had
advised that the exported merchandise and the October 14, 1989,
importation were fungible. The Laboratory advised that the
October 14, 1989, importation and the exported merchandise were
not fungible since the imported merchandise met the unrestricted
specifications in ASTM D 1655 and the exported merchandise did
not (because of its aromatics content of over 20%). As for the
July 26, 1987, importation, the Laboratory stated that the
importer had not furnished the necessary information to properly
determine the condition of the merchandise as imported (i.e.,
"[a] laboratory report on a sample of product from a shore tank
in Canada taken at least nine days prior to loading of vessel is
unacceptable to this office in making a determination of
fungibility").
In a letter dated February 24, 1993, Customs advised the
protestant that drawback was being denied because the imported
merchandise and the exported merchandise were not fungible, on
the basis of the Laboratory opinion described in the immediately
preceding paragraph. The protested drawback claim was
liquidated, without drawback allowed, on March 19, 1993. The
protestant filed the protest under consideration on June 11,
1993.
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)). In regard to the amendments made to this drawback
claim, we note that the amendments were timely made (i.e., within
3 years of the exportations; see 19 U.S.C. 1313(r) and 19 CFR
191.61 and 191.64).
Generally, under 19 U.S.C. 1313(j)(2), as amended, drawback
may be granted if there is, with respect to imported duty-paid
merchandise, any other merchandise that is commercially
interchangeable with the imported merchandise and if the
following requirements are met. The other merchandise must be
exported or destroyed within 3 years from the date of importation
of the imported merchandise. Before the exportation or
destruction, the other merchandise may not have been used in the
United States and must have been in the possession of the
drawback claimant. The party claiming drawback must be either
the importer of the imported merchandise or have received from
the person who imported and paid any duty due on the imported
merchandise a certificate of delivery transferring to that party
the imported merchandise, commercially interchangeable
merchandise, or any combination thereof.
Under 19 U.S.C. 1313(p) (the following describes the
provision as it is pertinent to this case and not as it is
applicable in all instances), if an article of the same kind and
quality as a qualified article is exported, certain requirements
are met, and a drawback claim is filed regarding the exported
article, drawback may be granted. "Qualified article", for
purposes of this subsection, means an article described in
heading 2710, HTSUSA (among other headings), which is imported
duty-paid. An exported article is of the "same kind and quality"
as the qualified article for which it is substituted under this
subsection if it is a product that is commercially
interchangeable with or referred to under the same eight-digit
classification of the HTSUS as the qualified article. The
"requirements" required to be met for purposes of this subsection
are that the exporter of the exported article imported the
qualified article in a quantity equal to or greater than the
quantity of the exported article; that the exported article is
exported within 180 days after the date of entry of the imported
qualified article; that the drawback claimant complies with all
requirements of section 1313, including providing certificates
which establish the drawback eligibility of articles for which
drawback is claimed; and that the manufacturer, producer,
importer, exporter, and drawback claimant of the qualified
article and the exported article maintain all records required by
regulation.
The drawback law was substantively amended by section 632,
title VI - Customs Modernization, Public Law 103-182, the North
American Free Trade Agreement Implementation Act (107 Stat.
2057), enacted December 8, 1993. The foregoing summaries of
sections 1313(j)(2) and 1313(p) are based on the law as amended
by Public Law 103-182. Title VI of Public Law 103-182 took
effect on the date of enactment of the Act (section 692 of the
Act). Except for subsection (p), according to the applicable
legislative history the amendments to the drawback law (19 U.S.C.
1313) are applicable to any drawback entry made on or after the
date of enactment as well as to any drawback entry made before
the date of enactment if the liquidation of the entry is not
final on the date of enactment (H. Report 103-361, 103d Cong.,
1st Sess., 132 (1993); see also provisions in the predecessors to
title VI of the Act; H.R. 700, 103d Cong., 1st Sess., section
202(b); S. 106, 103d Cong., 1st Sess., section 202(b); and H.R.
5100, 102d Cong., 2d Sess., section 232(b)). The amendments to
section 1313(p) apply to claims filed or liquidated on or after
January 1, 1988, and claims that are unliquidated, under protest,
or in litigation on the date of enactment of Public Law 103-182.
Compliance with the Customs Regulations on drawback is
mandatory and a condition of payment of drawback (United States
v. Hardesty Co., Inc., 36 CCPA 47, C.A.D. 396 (1949); Lansing
Co., Inc. v. United States, 77 Cust. Ct. 92, C.D. 4675; see also,
Guess? Inc. v. United States, 944 F.2d 855, 858 (1991) "We are
dealing [in discussing drawback] with an exemption from duty, a
statutory privilege due only when the enumerated conditions are
met" (emphasis added)).
JULY 26, 1987, IMPORTATION
The issue raised for this importation is whether the
imported merchandise is commercially interchangeable with the
exported merchandise, for purposes of 19 U.S.C. 1313(j)(2).
Before its amendment by Public Law 103-182, the standard for
substitution under section 1313(j)(2) was fungibility. House
Report 103-361, supra, contains language explaining the change
from fungibility to commercial interchangeability. According to
the Report (at page 131), the standard was intended to be made
less restrictive (i.e., "the Committee intends to permit the
substitution of merchandise when it is 'commercially
interchangeable,' rather than when it is 'commercially
identical'") (the reference to "commercially identical" derives
from the definition of fungible merchandise in the Customs
Regulations (19 CFR 191.2(l))). The Report (at page 131) also
states:
The Committee further intends that in determining whether
two articles were commercially interchangeable, the criteria
to be considered would include, but not be limited to:
Governmental and recognized industrial standards, part
numbers, tariff classification, and relative values.
Before enactment of the above-described changes to 19 U.S.C.
1313(j)(2) by Public Law 103-182, we ruled on whether this
imported merchandise and the exported merchandise in this claim
were fungible, under the then applicable law (see C.S.D. 93-23,
referred to above). We stated that a finding of fungibility was
not precluded on the basis of the aromatics content (i.e., both
the imported merchandise and the exported merchandise contain
between 20% and 25% aromatics) or the description of the
merchandise("jet A-1" for the imported merchandise and "jet fuel
(DERD-2494)" for the exported merchandise), if certain conditions
were met. (Note: The protestant cites ruling 223769, October
20, 1992, for this proposition; i.e., that if imported
merchandise and exported merchandise both contain between 20% and
25% aromatics and they otherwise meet the ASTM D 1655 standards,
they are fungible.) However, in C.S.D. 93-23 we went on to hold
that the imported merchandise and the exported merchandise were
not fungible because the imported merchandise had an electrical
conductivity additive and the exported merchandise did not (i.e.,
this specification for the imported merchandise was 53 and that
for the exported merchandise was 1). In this regard, we noted
the protestant's statement (in regard to another claim) that the
claimant does not supply jet fuel containing the antistatic ASA 3
except on special request and that the claimant is aware of no
jet fuel producer that routinely manufactures jet fuel containing
that antistatic.
As stated above, the standard for substitution under 19
U.S.C. 1313(j)(2) is now commercial interchangeability, not
fungibility, and the new standard is less restrictive than
fungibility. According to House Report 103-361, the criteria
Customs should consider in determining whether two articles are
commercially interchangeable should include, but not be limited
to, Governmental and recognized industrial standards, part
numbers, tariff classification, and relative values. In this
case, the tariff classification was the same (i.e., the corrected
classification for the importation, item 475.2550, TSUS, is the
predecessor to subheading 2710.00.15, HTSUSA (USITC Publication
2051, January 1988, Annex 1, Cross-Reference Between the TSUSA
and the HTS, page 195)). The value of the imported merchandise
is $22.05 per barrel (68,004 barrels valued at $1,521,309), as
compared to $24.15 for the exported merchandise (222,532 barrels
valued at $5,374,245). Part numbers as a criteria are clearly
inapplicable. There is a recognized industrial standard (i.e.,
ASTM D 1655).
As stated above, the imported merchandise and the exported
merchandise meet the standard in ASTM D 1655 for jet fuel (A-1)
(restricted as to aromatics; i.e., containing between 20% and 25%
aromatics) except that the specification for electrical
conductivity for the imported merchandise is 53 pS/m and that for
the exported merchandise is 1 pS/m. According to footnote J to
the specifications in ASTM D 1655, "[a] limit of 50 to 450
conductivity units (pS/m) applies only when an electrical
conductivity additive is used and under the condition at point of
use." We note the protestant's statement (in the request for
advice upon which we ruled in C.S.D. 89-23) that it (the
protestant/claimant) does not supply jet fuel containing an
antistatic except on special request and that it is aware of no
jet fuel producer that routinely manufactures jet fuel containing
the antistatic. In regard to this point, we note that all of the
documentation in the file for the exported merchandise describes
it as being without "ASA", which, according to the protestant's
submission upon which we ruled in C.S.D. 93-23, indicates that
the contract of sale provided that fuel with an antistatic
additive was unacceptable. Since the imported merchandise does
have an antistatic additive, the protestant's own submission
provides evidence that the July 26, 1987, importation and the
exported merchandise are not commercially interchangeable. Based
on the foregoing, we conclude that the imported merchandise and
exported merchandise are not commercially interchangeable. The
protest is DENIED in regard to the July 26, 1987, importation.
In view of the above conclusion, we are not addressing the
question of whether the laboratory report for the imported
merchandise, in which the sample was taken at the port of export
13 days before the date of importation, is acceptable for
establishing commercial interchangeability for drawback purposes.
However, we note that what is required to be established under
the law is that the imported merchandise is commercially
interchangeable with the exported merchandise (i.e., the
laboratory report should describe the specifications of the
imported merchandise at the time of importation and, at the very
least, if a sample is taken before the time of importation, there
should be documentary evidence showing that the specifications
could not have been affected by the treatment of the merchandise
between the time the sample was taken and the time of
importation). Documentary evidence referred to in the foregoing
parenthetical statement could include accounting records to show
that nothing was removed from or added to the shore tanks sampled
between the time of sampling and the time of loading the vessel
(not provided in this case), reports on the condition of the
vessel tanks into which the merchandise was loaded (provided in
this case), reports identifying the tanks into which the
merchandise was loaded (provided in this case), and a vessel log
or other evidence showing that no action was taken from the time
of loading the vessel to the time of importation which could have
affected the merchandise in the vessel tanks (not provided in
this case). We also note that the sample in this case was taken
from shore tank 201, from which most of the imported merchandise
was withdrawn, but that no specifications are provided for shore
tank D.1., from which a small amount of the imported merchandise
was withdrawn. Finally, in regard to the protestant's statement
in its January 22, 1993, letter (quoted above) that it did not
analyze the imported merchandise after the July 13, 1987,
analysis, we note that in the file there is a bill to the
protestant from the British Columbia office of the laboratory
service which obtained the sample for that analysis for
"[s]ampling tank 201, three gallon samples and hand delivery to
Chevron Lab, Vancouver" on July 15, 1987.
OCTOBER 14, 1989, IMPORTATION
In the case of this importation, the imported merchandise is
a "qualified article" for purposes of 19 U.S.C. 1313(p) (i.e., it
is classified under heading 2710, HTSUSA, and it was imported
duty-paid). The exported merchandise is of the same kind and
quality as the imported qualified article (i.e., both are
classified under subheading 2710.00.15, HTSUSA). The exporter of
the exported article imported the qualified article in a quantity
equal to the exported article (i.e., 9,374 barrels). The
exported article was exported within 180 days after the date of
entry of the imported qualified article (i.e., date of entry of
imported article: October 31, 1989; date of export of exported
article: December 15, 1989). Based on the information available
to us, there are no requirements under the drawback law which
would be applicable to a claim for drawback under section 1313(p)
for this importation which have not been complied with.
We note that under 19 U.S.C. 1313(r)(2), a drawback entry
filed pursuant to any subsection of section 1313 shall be deemed
filed pursuant to any other subsection of section 1313 if it is
determined that drawback is not allowable under the entry as
originally filed but is allowable under such other subsection.
(House Report 103-361, supra, makes it clear that this provision
is not intended to require Customs "to investigate all
alternatives in addition to the claimed basis before liquidating
[a] drawback claim as presented.") Accordingly, the protest is
GRANTED in regard to the October 14, 1989, importation. Because
of our decision in this regard, we are not addressing the issue
of whether the October 14, 1989, importation and the exported
merchandise are commercially interchangeable. (Note, that
section 1313(p) is inapplicable to the July 26, 1987, importation
because more than 180 days elapsed between the entry of the
imported merchandise and the exportation.)
HOLDING:
There is no authority to grant the protest of the denial of
drawback in regard to the July 26, 1987, importation (because the
exported merchandise is not commercially interchangeable with the
imported merchandise) but there is authority (under the amended
19 U.S.C. 1313(p)) to grant the protest of the denial of drawback
in regard to the October 14, 1989, importation.
The protest is GRANTED in part and DENIED in part. 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