DRA-4-RR:CR:DR 227916 IOR
Port Director
U.S. Customs Service
10 Causeway Street, Room 801
Boston MA 02222
ATTN: Drawback Office
RE: Application for further review of protest No. 0401-98-100020; Internal Revenue Tax; tobacco; 19 U.S.C. §1313(j)(1); 19 CFR 24.36; 26 U.S.C. §5701
Dear Sir:
The above-referenced protest was forwarded to this office for review. We have considered the facts and issues raised, and our decision follows.
FACTS:
This protest has been filed against the denial of drawback of internal revenue tax paid on cigarettes upon importation. The subject protest concerns a drawback entry filed by the protestant on September 12, 1996, under which drawback was claimed on cigarettes exported, for the amount of duty paid and internal revenue taxes paid. The protestant states:
Prior to the exportation of the cigarettes with benefit of drawback, the importer and drawback claimant, [protestant], consulted with both U.S. Customs in Buffalo, New York and the Bureau of Alcohol, Tobacco and Firearms in Buffalo, New York. [The protestant] was advised that the proper way to claim drawback was to file a CF-7539 with Customs and allow Customs to examine the merchandise prior to exportation. Essentially, [the protestant] was advised that a claim could be filed under 19 U.S.C. 1313(j) and the implementing regulations, 19 C.F.R. Part 191. [The protestant] filed in this manner, the goods were examined and found to be in the same condition as when imported, and were exported.
A Notice of Action (CF 29) was issued by Customs on September 10, 1997, notifying the protestant of the following:
Customs Headquarters has determined that drawback of tax paid on tabacco [sic] products can be paid only when application has been made directly to the Bureau of Alcohol, Tabacco [sic] & Firearms.
The procedure for such claims are described in Headquarters letter 227347, a copy of which is attached.
The tax portion of this cliam [sic],... has been denied.
The drawback entry was liquidated on October 31, 1997, partially denying drawback. Drawback of the duty was allowed, and drawback of the internal revenue service tax was denied, on the basis of HQ 227347, dated April 18, 1997. A protest of the denial of drawback was filed January 29, 1998. The protestant takes the position that 19 U.S.C. §1313(j)(1) provides for drawback of “any” tax, that 19 CFR 24.36 provides for drawback of taxes on tobacco products, and that from a legal and equitable standpoint the protest should be allowed and the drawback on the tax paid should be allowed.
ISSUE:
Whether drawback of internal revenue tax paid upon the importation of tobacco products is allowed under 19 U.S.C. §1313(j) or 19 CFR 24.36.
LAW AND ANALYSIS:
Initially we note that this protest was timely filed pursuant to 19 U.S.C. §1514(c)(3). The date of the liquidation was October 31, 1997, and the protest was filed on January 29, 1998. In addition, the denial of a claim for drawback is a protestable matter pursuant to 19 U.S.C. §1514(a)(6).
Section 313(j) of the Tariff Act of 1930, as amended (19 U.S.C. §1313(j)(1)), provides for a refund of duties on imported merchandise, exported or destroyed under Customs’ supervision, within three years from the date of importation, and not used within the U.S. before such exportation or destruction. Prior to the amendment of the drawback statute 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, an additional requirement under section 1313(j) was that the merchandise be in the same condition as when it was imported. In 19 U.S.C. §1313(j) it is provided that upon the exportation or destruction of imported merchandise, “on which was paid any duty, tax, or fee imposed under federal law because of its importation” 99 percent of the amount of each duty, tax or fee so paid shall be refunded as drawback.
The protestant takes the position that the term “any” means that the IRS tax is subject to refund. We disagree, believing that the term “any” must be read in conjunction with the other language in the provision which limits the duties, taxes and fees subject to drawback to those which are imposed because of the importation of the merchandise. The tax imposed pursuant to 26 U.S.C. §5701, is imposed whether the merchandise has been manufactured in or imported into the U.S. (26 U.S.C. §5703 provides for the method of payment of the tax). Similarly, the drawback of tax on tobacco products provided for in 26 U.S.C. §5706, is not limited to tax imposed because of importation. It cannot be said that the tax is imposed because of the importation, because it is imposed on tobacco products manufactured in the U.S. as well. In Seeberger v. Castro, 153 U.S. 32, 38 (1894), in analyzing the provisions of the internal revenue laws regarding tobacco, the Supreme Court concluded that the purpose of the provisions was to regulate the manufacture and disposition of all classes of tobacco. The exact purpose of the tax is not for the Customs Service to determine, but for the IRS.
However, even if it could be said that the IRS tax is imposed because of the importation of the merchandise, Customs has previously concluded that drawback of the tax imposed under 26 U.S.C. §§5701 and 5703, is provided for by 26 U.S.C. §5706. See HQ 227347, dated April 18, 1997, which is incorporated herein by this reference. In HQ 227347, Customs stated that “the exclusive provisions for both importation taxes on tobacco products and drawback were established by Congress in 26 U.S.C. 5701-5706.”
In addition to claiming entitlement to drawback for the IRS tax under 19 U.S. C. §1313(j), the protestant claims that drawback for the tax is also provided for under 19 CFR 24.36. The refund of excessive duties and taxes provided for under 19 CFR 24.36 is clearly not applicable in this case. There is no claim that any excessive taxes were paid on the merchandise by the protestant. The provision in 19 CFR 24.36 is only for the refund of excessive duties or taxes. Finally, the protestant also asserts that it is entitled to drawback of the tax from an equitable standpoint. In support of the equity position, the protestant cites Lockheed Petroleum Services, Inc. v. United States, 557 F. Supp. 583, 4 CIT 25 (1982), which was reversed in United States v. Lockheed Petroleum Services, Ltd., 709 F.2d 1472 (Fed. Cir. 1983), and equitable relief was not allowed. In addition, the protestant makes the bald assertion that it was given incorrect advice by Customs and BATF. This assertion is not substantiated or even provided in sufficient detail for our verification. Thus, in this case the protestant has not provided any evidence to substantiate its claim for equitable relief.
HOLDING:
Drawback of internal revenue tax paid upon the importation of tobacco products is not allowed under 19 U.S.C. §1313(j) or 19 CFR 24.36.
The protest should be DENIED. 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.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant
Director
Commercial Rulings Division