DRA-2-RR:CR:DR 227627 IOR
Port Director
U.S. Customs Service
555 Battery Street
P.O. Box 2450
San Francisco, CA 94126
Attn: Drawback Unit
RE: Application for Further Review Protest No. 2809-97-100797; drawback; 19 U.S.C. 1313(b); 19 U.S.C. 1313(v); 19 U.S.C. 1514(c)(1); 19 CFR 174.12; 19 CFR 174.14(a); 19 CFR 174.28; 19 CFR 191.51; 19 CFR 191.52
Dear Madam:
The above-referenced protest was forwarded to this office for review. We have considered the facts and issues raised, including information obtained from additional submissions and a meeting at our offices between my staff and counsel for protestant, and our decision follows.
FACTS:
This protest was filed against the denial of drawback in four substitution manufacturing drawback claims. The subject drawback entries were filed in San Francisco on June 10, 1996 (110-xxxx6070), June 21, 1996 (110-xxxx6047), and August 27, 1996 (110-xxxx6088 and 110-xxxx6062). Prior to the filing of the four subject drawback entries, four different drawback entries were filed in Miami on August 17, 1994, and were liquidated with no drawback on April 7, 1995. According to a letter from Customs dated December 9, 1994, the claims were denied for several procedural reasons, including that the protestant’s drawback ruling had expired. According to the protestant, it hired a broker for assistance in drawback matters, and received approval of a specific drawback ruling, by Customs letter dated October 26, 1995, pursuant to which, the drawback claims were to be filed in Miami, Florida. Subsequently, the protestant filed the subject drawback entries, in San Francisco, California, based on the new drawback ruling. The subject drawback claims were based on the same exportations upon which the four prior claims had been based, with the exception of entries 110-xxxx6088 and 110-xxxx6047. Drawback entry 110-xxxx6088 does not include 15 small exports to Canada that had been included in the prior entry, and drawback entry 110-xxxx6047 includes six exports that were included in the prior entry, plus two additional exports that were not the subject of any of the prior drawback entries for which drawback was disallowed.
At the time under consideration in this matter, the protestant had an approved drawback contract (see T.D. 96-17-X; at the time the drawback proposal was approved, such approvals were referred to as “contracts” under 19 CFR 191.21, but under the current revised regulations they are “rulings”) for substitution manufacturing drawback under 19 U.S.C. §1313(b). The ruling provided for drawback in an operation in which "concentrated orange juice for manufacturing" was the imported merchandise (or drawback product) to be designated as the basis for drawback on the exported articles and the same merchandise was the duty-paid, duty-free, or domestic merchandise of the same kind and quality as that designated. According to the ruling, the exported articles on which drawback was to be claimed was 1) frozen concentrated orange juice; 2) bulk concentrated orange juice; 3) orange juice from concentrate (reconstituted); and 4) juices of various juice blends, each containing concentrated orange juice for manufacturing.
A letter dated November 20, 1996 from Customs, informed the protestant that the reason the claim would be liquidated with no drawback was that the exported merchandise claimed on the subject drawback claims was also the basis for other drawback claims. The subject four drawback claims were liquidated with no drawback by Customs on February 7, 1997. The protest was filed on May 7, 1997, in which the protestant takes the position that because the prior claims were liquidated with no drawback, "the prior, imperfect drawback claims cannot bar the subsequent, later claims, as long as such later claims were timely filed and otherwise met all of the applicable drawback requirements." The San Francisco Drawback Unit takes the position that the administrative remedy for the denial of drawback on the prior claims would have been to protest the liquidation, and not the filing of new entries, and in support of its position cites 19 U.S.C. §1313(v).
The drawback entries identified the designated imported duty paid merchandise, receipt and use in manufacturing date, and exported product, as follows:
Drawback entry Import entry # and date Receipt / use date CD Del. date Export article
110-xxxx6047 032-xxxx2384 9/28/93 9/30/93 / 10/25/93 9/28/93 orange concentrate
110-xxxx6070 032-xxxx0306 9/01/93 9/ 3/93 / 10/ 7/93 9/2/93 orange concentrate
110-xxxx6088 032-xxxx2607 11/2/93 10/29/93 / 11/29/93 11/2/93 orng/straw peach base
110-xxxx6062 032-xxxx8111 7/12/93 7/13/93 / 7/29/93 7/12/93 orng/straw peach base
In the above, the import dates are according to Customs Automated Commercial System (ACS) records, and the "CD Del. date" refers to the date the imported merchandise was delivered to the protestant as shown on the certificates of delivery included with the entry. According to drawback entry 110-xxxx6070, the receipt date and the CD Del. date of the designated merchandise is prior to the first warehouse withdrawal of the merchandise, which according to ACS occurred on September 22, 1993. The use date shown above, is the last date of use shown on the drawback entry.
All of the exportations were to Japan. Each drawback entry was accompanied by a chronological summary of exports which identified the date of export, exporting carrier, destination, and quantity of 52 gallon drums of manufactured article exported. The quantity of single strength orange juice exported is calculated by using the factors provided on the schedule attached to the drawback ruling, which schedule is periodically updated by the protestant. Each chronological summary includes the total number of single strength gallons of orange juice exported for the entire drawback entry.
For purposes of verifying that the subject claims meet the requirements for drawback under 1313(b), this office requested that the protestant provide evidence of exportation for the exportations of January 18, 1994 and February 15, 1994, supporting drawback entry 110-xxxx6047. The documentation provided by the protestant, by submission dated April 7, 1998, for each of the two exportations included an uncertified Notice of Exportation of Articles with Benefit of Drawback (CF7511), a Shipper’s Export Declaration ("SED"), a through bill of lading, and invoices for the exported articles with attached drum manifest showing the barrel number and production date of each drum covered by the invoice.
The CF7511's identify the exporter, date of export, consignee, export articles, quantity of drums exported and the quantity of single strength gallons of orange juice exported. The bills of lading are dated and signed, and indicate the quantity of drums exported, the shipper/exporter and the consignee. The invoices are on the protestant’s invoice form, identify the foreign purchaser, the article sold, the quantity of drums sold, and the quantity of gallons of concentrate sold. The drum manifests identify the production date of each barrel of the exported article, as well as the pounds solid in each barrel. The dates of production of the articles exported January 18, 1994, are from December 17, 1993 through January 5, 1994. The dates of production of the articles exported February 15, 1994, are from February 8, 1994 through February 9, 1994.
By letter dated February 6, 1997, the protestant confirmed a February 5 telephone conversation with Customs regarding a revision in the appearing in factor for the Orange Strawberry Peach Base exported to Japan. In its submission of April 7, 1998, the protestant requests that the February 6, 1997 letter be treated as a request for correction of a clerical error under 19 U.S.C. §1520(c), and that the drawback claims be reliquidated to reflect greater refunds as a result of the correction in the error in the appearing in factor. Alternatively, the protestant requests that the correction of the erroneous computation be considered an "alternative claim" or "additional grounds or arguments" under 19 CFR 174.28. The corrected appearing in factors are applicable to entry numbers 110-xxxx6062 and 110-xxxx6088. The merchandise which is the subject of entry 110-xxxx6062 was exported from March 1, 1994 through June 28, 1994, and the merchandise which is the subject of entry 110-xxxx6088 was exported from January 11, 1994 through July 12, 1994. For entry 110-xxxx6088, three exportations took place prior to February 5, 1994. Application of the corrected appearing in factors to the two drawback entries and the calculations on the chronological summary of exports results in an increase in drawback claimed for each of the two entries.
ISSUE:
Whether the liquidation of a drawback claim with no drawback allowed, precludes a subsequent drawback claim in which the basis of drawback is the same exported merchandise as for the previously liquidated drawback claim for which no drawback was allowed.
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)).
This protest involves drawback under 19 U.S.C. §1313(b). Section 1313(b), often called the substitution manufacturing drawback law, provides that if imported duty-paid merchandise and any other merchandise (whether imported or domestic) of the same kind and quality are used within three years of the receipt of the imported merchandise in the manufacture or production of articles by the manufacturer or producer of the articles and articles manufactured or produced from either the imported duty-paid merchandise or other merchandise, or any combination thereof, are exported or destroyed under Customs supervision, 99 percent of the duties on the imported duty-paid merchandise shall be refunded as drawback, provided that none of the articles were used prior to the exportation or destruction, even if none of the imported merchandise was actually used in the manufacture or production of the exported or destroyed articles. Under section 1313(i), no drawback may be allowed under section 1313 unless the completed article is exported within five years after the importation of the imported merchandise, and under section 1313(r), the drawback entry must be filed within three years of the exportation or destruction of the merchandise.
The drawback statute was substantively amended by section 632, title VI Customs Modernization, Pub. L. No. 103 182, the North American Free Trade Agreement Implementation ("NAFTA") Act (107 Stat. 2057), enacted December 8, 1993. Title VI of Public Law 103 182 took effect on the date of enactment of the Act (section 692 of the Act). 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 Customs Regulations were revised on March 5, 1998 to implement the amended statutes.
The drawback statute prohibits multiple drawback claims on the basis of the same exports. Under 19 U.S.C. §1313(v), "[m]erchandise that is exported or destroyed to satisfy any claim for drawback shall not be the basis of any other claim for drawback." The provision was added at the time the statute was amended. The protestant takes the position that section 1313(v) does not preclude a drawback entry based upon an exportation upon which a prior drawback entry was based, if that entry was liquidated without the allowance of any drawback. The protestant argues that the purpose of section 1313(v) is "to prohibit two successful drawback claims covering the same merchandise, under which more than 99 percent of the duties paid with respect to that same merchandise might otherwise be refunded in the absence of such a prohibition." The protestant takes the position that the claims that were denied were not satisfied.
The statute does not provide any guidance as to what is meant by "to satisfy". In construction of a statute, the “starting point must be the language employed by Congress.” American Tobacco Company v. Patterson, 456 U.S. 63, 102 S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 337, 99 S.Ct. 2326, 2330, 60 L.Ed.2d 931 (1979)). A statute’s words must be given their ordinary, commonly accepted meaning. MacDonald v. General Motors Corporation, 784 F.Supp. 486, 493 (M.D. Tenn. 1992); American Tobacco Company, supra, 102 S.Ct. at 1537 (“the legislative purpose is expressed by the ordinary meaning of the words used”) (quoting Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962)). If the language is clear and unambiguous, there is no reason to search for a different meaning. Akawo, Morimura & Co. v. United States, 6 Ct. Cust. Appls. 379, 381, T.D. 35921 (1915). Unless application of the plain meaning of the language results in a construction that is an anomaly, unjust, absurd or contrary to the intent of Congress, that meaning must prevail. United States v. Palm, Fechteler & Co., 4 Ct. Cust. Appls. 1, T.D. 33195 (1913); United States v. The best Foods, Inc., 47 CCPA 163, C.A.D. 751 (1960); International Expediters, Inc. et al. v. United States, 38 Cust. Ct. 230, C.D. 1868 (1957).
The word "satisfy" is defined in Black’s Law Dictionary as:
To answer or discharge, as a claim, debt, legal demand or the like....To comply actually and fully with a demand; to extinguish, by payment or performance.
Id. 1205 (5th ed. 1979).
It appears in this case that clearly, the first claims for drawback were not satisfied, as no drawback was paid. This is consistent with the legislative history of the statute. With respect to the addition of section 1313(v), the legislative history states that the section "provides that only one drawback claim per exportation or destruction of goods would be allowed." (H. Report 103 361, 103d Cong., 1st Sess., 130). The definition of "allow" in Black’s Law Dictionary is as follows:
The word has no rigid or precise meaning, its import varying according to circumstances or context in connection with which it is used. It may mean to bestow or assign to any one as his right or due. To approve of, accept as true, admit, concede, adopt, or fix. To grant something as a deduction or an addition; to abate or deduct; as, to allow a sum for leakage. [citation omitted] To sanction, either directly or indirectly, as opposed to merely suffering a thing to be done; to acquiesce in; to suffer; to tolerate.
Id., at 70. From the legislative history then, it is apparent that the intent of Congress was not to restrict the number of times a "claim" per exportation was filed, but that only one claim per exportation could be "approved" or paid.
In support of its position the protestant cites HQ 224815, dated April 11, 1994. In HQ 224815, an importer filed a drawback entry and subsequently discovered that two importations had been designated in error. The importer requested that Customs deny the claim and accept an "amended" claim, which designated another importation for the two erroneously designated importations. In both claims, the exportations were the same. The first claim was liquidated with no drawback because the second claim was based on the same exportations. The second claim was untimely filed, as the exportations occurred more than three years prior to the date of filing of that entry. The liquidation of the first drawback claim was protested. In HQ 224815, Customs instructed the field to deny drawback under the second claim as it was untimely, and Customs partially granted the protest and allowed drawback under the first entry, as to the correctly designated importation, and disallowed drawback as to the incorrectly designated importations.
The protestant takes the position that HQ 224815 supports the protest because Customs allowed one entry (at least in part), although another entry had been filed relating to the same exported merchandise. At most, HQ 224815 supports the position that the filing of an untimely second claim does not preclude drawback under a prior claim, moreover, section 1313(v), was not discussed in the decision.
In addition, the protestant cites E. Fucini & Co., Inc. v. United States, 4 Cust. Ct. 174, C.D. 317 (1940); and 718 Fifth Ave. Corp. v. United States, 14 CIT 403, 741 F. Supp. 1577 (1990), in support of the position that merchandise may be the subject of a drawback claim, although the same merchandise was also the subject of a previous claim that was denied and liquidated with no drawback. We find the cited cases inapplicable as they were decided prior to the enactment of section 1313(v).
As the first claims, nos. C18-xxxx0163, C18-xxxx0171, C18-xxxx0148 and C18-xxxx0189, were liquidated and were not amended, but instead a second set of claims, nos. 110-xxxx6070, 110-xxxx6047, 110-xxxx6088 and 110-xxxx6062, were filed, the restriction in 19 CFR 191.52(c), which provides that "liquidated drawback entries may not be amended; however, they may be protested....", is not applicable.
As to the alleged errors in the appearing in factors for the orange-strawberry-peach base to Japan and resultant revision in the amount of drawback claimed, we must consider whether the revision is a timely amendment of the second claims. Under 19 U.S.C. §1313(r)(1), as added by section 232 of Public Law 103-182 (and effective as to this protest):
A drawback entry and all documents necessary to complete a drawback claim, including those issued by the Customs Service, shall be filed or applied for, as applicable, within 3 years after the date of exportation or destruction of the articles on which drawback is claimed.... Claims not completed within the 3-year period shall be considered abandoned. No extension will be granted unless it is established that the Customs Service was responsible for the untimely filing.
House Report 103-361 (supra, at p. 130) explains this provision as "set[ting] a period of 3 years from the date of exportation or destruction in which to file a complete claim." This provision is implemented by Customs Regulations 191.51 -191.53. Customs Regulations 191.52(c), provides that amendments to drawback entries which have not been liquidated must be made within 3 years of the date of exportation or destruction of the articles which are the subject of the original drawback entries. A drawback claim may however be perfected after the three years have passed. The examples of perfections, provided in section 191.52(b), consist of the submission of documents supporting elements of the drawback claim that have already been set forth, not changes to the existing claim.
In our interpretation of the prior regulations pertaining to complete claims and amendments, 19 CFR 191.61 and 19 CFR 191.64, we have taken the position that to be complete, the designated imports and the exports upon which a drawback claim is based must be included in a drawback claim. We have ruled that a claim may not be amended by changing the scope of the claim after the expiration of the 3 year period. We find that changing the basis on which drawback is claimed and the amount claimed, is a change in the scope of the claim, is not simply the submission of supporting evidence, and therefore is an untimely amendment of the claim, if done more than three years after the date of exportation or destruction. In this case, February 5, 1997, the earliest date on which Customs was allegedly notified of the errors in the appearing in factors, occurred more than three years after three of the exportations which are the subject of entry 110-xxxx6088. Therefore the amendment of the amount of drawback claimed is prima facie untimely as to those three exportations. However, as the notice regarding the error was allegedly provided to Customs within three years of the remaining exportations for entry 110-xxxx6088, and for all of the exportations in entry 110-xxxx6062, the recalculated appearing in factor and resultant increase in drawback could have been a timely amendment of the claims. However, there is no evidence that the amount claimed was actually revised, or that notice of revised calculations of the summaries of exports was provided to Customs prior to the liquidation of the entries on February 7, 1997. Notice of the revised calculations or amount claimed given to Customs after the liquidation of the drawback entries, is an amendment precluded under 19 CFR 191.52(c). Therefore the amendment of the claims is untimely as to both claims, as to all of the exports.
The protestant has requested that Customs treat the mathematical error in the appearing in factor as a clerical error under 19 U.S.C. §1520(c), or in the alternative that Customs treat the erroneous computation an "alternative claim" or "additional grounds or argument" with respect to the protest under 19 CFR 174.28. The computation error was brought to Customs attention by telephone on February 5, 1997 and by a letter dated February 6, 1997. Both of these dates are prior to February 7, 1997, the date of liquidation of the subject entries, and relief under section 1520(c) is available only for claims made within one year after the date of liquidation. Therefore, the protestant’s notice of a request that the error be treated under 19 U.S.C. §1520(c) was premature. There is no evidence regarding the date the February 6, 1997 letter was received by Customs, or whether it was received by Customs, therefore there is no evidence that notice of the error was received after the liquidation of the entries. Moreover, section 1520(c)(1) requires that the error be adverse to the importer. The drawback claimant is not the importer. See HQ 227364, dated January 11, 1999. The correction of the error was not raised in the protest until April 7, 1998, over 90 days from the date of the protested liquidation.
The amendment of a protest is provided for in 19 U.S.C. §1514(c)(1):
[a] protest may be amended, under the regulations prescribed by the Secretary, to set forth objections as to a decision or decisions...which were not the subject of the original protest, in the form and manner prescribed for a protest, any time prior to the expiration of the time in which such protest could have been filed under this section....
The above statute is implemented by 19 CFR 174.14(a), which allows a protest to be amended at any time prior to the expiration of the 90-day period within which such protest may be filed, in accordance with 19 CFR 174.12(e) (i.e., in this case, within 90 days after liquidation of the entries), to include additional claims on the same issue protested or to challenge an additional administrative decision relating to the same category of merchandise. Beyond the 90-day period, 19 CFR 174.28 provides that a protestant may submit alternative claims, and additional grounds or arguments with respect to any decision which is the subject of a valid protest.
Before we may consider the error in calculation of the appearing in factor and the increase in the amount of drawback that is claimed, we must determine whether the calculation error argument raised is an amendment to the protest, or an alternative claim or additional ground or argument with respect to the decision which is the subject of the instant protest. The protest does not raise the issue of the amount of drawback claimed, prior to the April 7, 1998 submission, and we find that the calculation error is an additional claim on the same issue protested, and is not an alternative claim or additional argument or grounds with respect to the decision protested. Accordingly, the notice regarding the error in computation is untimely under 19 CFR 174.14 and, as such, may not be entertained pursuant to 19 CFR 174.28, and the protestant is not entitled to the additional drawback for the entries in question.
Before we can determine that drawback should be allowed in this case, we must make the determination that the protestant otherwise qualifies for drawback under 19 U.S.C. §1313(b).
Based on the records submitted and included with the protest, and ACS, we conclude that in three of the four drawback entries, the imported designated merchandise was used within three years of the receipt of the imported merchandise, in the production of articles. The use date is provided on the drawback entries. However, according to the drawback entry, in entry 110-xxxx6070, the imported designated merchandise was received and delivered on September 2 and 3, 1993, which is prior to its withdrawal from warehouse. The discrepancy in dates indicates that either the information on the Certificate of Delivery is incorrect or that the warehouse/consumption entry is incorrectly identified. Without a clarification of the discrepancy, no drawback can be allowed on this claim, as the discrepancy in the dates raises a question with regard to the accuracy of the designated entry. No new import or imports may be designated, as more than three years have passed since the exportation of the merchandise, and the drawback entry has been liquidated. We also find that the exported articles were produced within three years of the date of receipt of the designated merchandise by the protestant, based on the information contained in the drum manifests attached to the invoices for the exported articles, in our randomly selected exports. Also, according to the export summary, the drawback entries, and supporting documentation, the exported articles were exported within five years of the importation of the designated merchandise, and such exportation is documented. We find that based on the documentation submitted, the protestant has met the statutory and regulatory requirements for drawback (with the exception of entry 110-xxxx6070). Please note that our review of the claims did not include an audit or review of any inventory records, or verification of the appearing-in-factors.
There are some procedural matters, that while they are not sufficient grounds to deny drawback, may warrant a review for purposes of 19 U.S.C. §1593a, or a general review of compliance with the drawback regulations and the drawback ruling. In this case, the drawback ruling provides that the drawback entries will be filed in Miami, Florida, however, the subject drawback entries were filed in San Francisco, California, and Customs was not notified of any change in the drawback office where claims will be filed, as required under the current regulations, 19 CFR 191.8(g)(2)(iii).
HOLDING:
The liquidation of a drawback claim with no drawback allowed, does not preclude a subsequent drawback claim in which the basis of drawback is the same exported merchandise as for the previously liquidated drawback claim for which no drawback was allowed. The protestant’s attempted correction of the appearing in factor is an untimely amendment to the protest, and; therefore, the protest should be denied to the extent additional drawback is claimed due to the error. With the exception of entry 110-xxxx6070, the claims otherwise meet the statutory and regulatory drawback requirements, and the protest should be granted as to those entries. As to entry 110-xxxx6070, the protest should be denied, unless the protestant provides satisfactory evidence which shows a correct date of receipt and use of the designated merchandise on the warehouse entry 032-xxxx0306, in accordance with the statute.
The protest should be 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, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant
Director
Commercial Rulings Division