DRA-1-06-DRA-1-02-DRA-2-02
RR:CR:DR 229879 IOR
Andy Yood
Director of Tax
American Petroleum Institute
1220 L Street, NW
Washington DC 20005-4070
Re: Drawback; 19 U.S.C. 1309(b); 19 U.S.C. 1313(p); vessel or aircraft operated by the United States; documentation of lading
Dear Mr. Yood:
The following is in response to your request for a ruling, dated March 6, 2003, on behalf of the member companies of the American Petroleum Institute (“API”). The ruling request concerns drawback under 19 U.S.C. §§1309(b) and 1313(p).
FACTS:
The API represents companies involved in the oil and gas industry. Several API member companies sell fuel to the Defense Energy Support Center (“DESC”) for use in, among other things, aircraft and vessels. Those companies that supply the DESC with fuel (hereinafter referred to as the “sellers”) propose to claim drawback on duties paid, on the basis of eligible exports of fuel. Each seller proposes the following facts in their sales transaction:
Fuel is entered duty-paid by the seller, or may also be purchased domestically;
the ordered quantity of fuel is sold to DESC pursuant to the seller’s contract or agreement with the DESC;
the DESC allocates the purchased fuel to the appropriate vessel or aircraft and maintains specific, detailed records of all such allocations;
the DESC assigns the rights to claim drawback on the fuel back to the seller of the fuel; and
the seller then files the claim for drawback with Customs under 19 U.S.C. §1313(p).
The role of DESC is further described. DESC purchases fuel from suppliers and maintains the fuel inventory for the various branches of the Department of Defense and other civilian agencies. Upon lading of the fuel, the DESC bills the respective agency for the quantity of fuel provided. Each lading is assigned a unique transaction number which creates a unique record in DESC's Fuel Automated System (“FAS”). A DESC information publication entitled “Fuel for Today’s Forces/ Energy for Tomorrow’s Mission”, states on p. 5 that “DESC now owns all DoD bulk petroleum product from point of purchase until it is used to power aircraft, tanks and ships.” Further, on p. 6, it is stated that the DESC manages the products, which include the petroleum products.
With regard to the recordkeeping, it is asserted by DESC that using FAS, it will retrieve the qualifying activity to develop a report of eligible ladings. The report will be utilized to assign the activities to the vendors that want to participate in claiming duty drawback with the DESC, and to ensure that the activity assigned to one vendor will not be assigned to another vendor.
API asserts that each seller will meet the requirements of section 1313(p), and requests a ruling limited to whether the documentation submitted is sufficient to establish lading of fuel upon aircraft or vessels operated by the U.S., in accordance with section 1309(b).
The documentation submitted consists of a sample completed Drawback Notice, CF 7514, attachment to the CF 7514, and data elements accompanying one unique transaction record number. The CF 7514 indicates that the “seller” has transferred 3,976,770 gallons of jet fuel laden on various aircraft. The seller is identified as the “manufacturer or producer”. The exporter is identified as the DESC. In the section pertaining to the receipt of the merchandise, it is indicated that DESC is the “airline” and received the merchandise from the seller. The certification is not signed as the CF 7514 is a sample document created for purposes of this ruling request.
The Blanket Certificate of Lading, on the reverse of the CF 7514 identifies the aricraft as “various”, and the airline as DESC. The columns reference an attachment and identifiy the type of fuel laden as “jet fuel”. In the endorsement section, DESC authorizes the seller to make entry and receive drawback on the described merchandise.
The attachment to the CF 7514 contains the following type of information:
Line Counter
Unique
Record Number
Type of Fuel
Trans. Date
Quantity Sold
Cumulative
1
……..3527
Jet Fuel
11/6/02
25,490
25,490
2
……..4973
Jet Fuel
11/20/02
3,982
29,472
3
……..5228
Jet Fuel
11/22/02
2,022
31,494
The attachment contains a total of 1958 transactions in the above format. The cumulative total of the fuel sold is 3,976,770 gallons. The quantity is not identified as gallons on the documents submitted, however, the DESC has asserted that the quantity is in gallons.
Customs was provided with transaction detail for six of the 1958 transactions, five of which were selected at random by Customs. The data elements in the transaction detail pertaining to the unique record number “4973”, above, include the following:
Trans Date: 11/20/02
Document Id: xxxxxx2324xxxx
Record Id: ……..4973
Trans Name: SALE
Processing DODAAC: FP2067
Sellers DODAAC: FP2067
NSN (stock number): 9130010315816
Type of Trans: N
Sig Code: A
Fund Code: 6Z
Cust DODAAC: FP2067
Tail Number: 81000628
TMS Code (type of
Aircraft): C130H
Create Date: 11/21/2002 [Date of posting to FAS]
Bill Number: B0023 [Bill from DESC to FP2067]
Bill Date: 11/1/2002 [Bill date is actually end of November, but 1st date of month is used as a default in the system]
Quantity: 3,982
Extended Cost: $3,344.88
According to DESC, the foregoing describes the transaction as follows:
These records show that on Nov. 20, 2002 (Transaction Date, and Document ID), 3,982 gallons (quantity) of JP-8 jet fuel (NSN National Stock Number = JP-8) was laden on an aircraft (Tail Number [8]1000628) belonging to the customer, Robbins AFB (Customer DODAAC = FP2067 and also Document ID) as a sale (Transaction name). The record ID number is the unique identifier used to retrieve this data from our system.
Descriptions of the field names and clarification of the information and codes has been provided by DESC. See attachment “A” for DESC’s description of each of the above Field name’s.
For the “Type of Trans” field, Customs was provided with a list of the available codes, which range from “A” to “Z”, and the description of each code. For the other five transactions, the codes consisted of “A”, “B” and “N”. The code “A” is for “flight line servicing of aviation equipment” and the code “B” is for “aviation products within service”, both of which are for standard flight line refueling, and are the most commonly used codes. The only distinction is that one code is for Air Force aircraft landing at Air Force Bases, and the other is for any aircraft landing at any other military base. Both codes “A” and “B” require a valid tail number for Air Force and Army customers. The Navy uses a different numbering system but which also has a unique identifier for an individual aircraft. The code “N” is for “engine maintenance and mod center (engine test cell)”. DESC has informed this office that code “N” is for engine repair, for which a tail number should not be assigned, and moreover, the transaction should not have been included among the drawback eligible transactions. According to DESC, the query which pulls the eligible transactions will be changed so that no transactions with the code “N” will be included in any drawback claim.
There is only one transaction code used for vessels, type “S”. Vessels do not have tail numbers, but each vessel has its own DoDAAC, therefore a vessel transaction would not indicate a tail number, but the DoDAAC would identify the vessel upon which the fuel is laden.
The remaining transaction codes, “C” to “M”, “O” to “R”, and “T” to “Z”, refer to other types of sales of fuel. See attachment “B” for DESC’s description of each transaction type. For example “G” is for in-flight refueling for Air Force use only, and “I” is for other in-flight refueling.
The DoDAAC code used stands for the “Department of defense Activity Address Code. According to a DESC submission, every activity in the Department of Defense is assigned this type of code. According to DESC, the entire list of DoDAAC’s can be found at https://www.daas.dla.mil/dodaaf/down dodaaf.pl or individual DoDAAC queries can be searched at https://day2k1.daas.dla.mil/dodaac/dodaac.asp. The processing DoDAAC is the activity which actually inputs the data into the system.
DESC does not intend to include any civilian aircraft or vessel supplies among the transactions on which the drawback claims are based. Therefore the DESC has not provided Customs with details regarding these transactions.
You also ask whether the lading of fuel onto a vessel or aircraft operated by the United States is eligible under 19 U.S.C. §1309(b), no matter where in the world the lading takes place.
ISSUE:
Whether the documentation submitted is sufficient to establish the lading of fuel on vessels or aircraft operated by the United States, for purposes of claiming drawback under 19 U.S.C. §§1309(b) and 1313(p).
LAW AND ANALYSIS:
Generally, section 1313(p) of the United States Code (19 U.S.C. §1313(p)) provides for drawback for certain petroleum derivatives. Under section 1313(p)(1), notwithstanding any other provision in section 1313, if:
(A) an article (referred to in section 1313(p) as the “exported article”) of the same kind an quality (as specifically defined in section 1313(p)) as a qualified article is exported; (B) the requirements set forth in section 1313(p)(2) are met; and
(C) a drawback claim is filed regarding the exported article, the amount of the duties paid on, or attributable to the qualified article shall be refunded as drawback to the drawback claimant. The “notwithstanding” clause was included in order to overcome the requirements in 19 U.S.C. §§1313(a) and (b) that the export article made by the petroleum refiner be the article that is actually exported, and that it be commercially interchangeable for purposes of §1313(j).
The requirements in section 1313(p)(2), compliance with which is a condition precedent to drawback under section 1313(p), are that the exporter must have: (1) manufactured the qualified article; or (2) purchased/exchanged the same from the manufacturer; or (3) imported a qualified article; or (4) purchased/exchanged an imported qualified article from the importer; and the exportation occurs within 180 days after the date of entry of the imported qualified merchandise or during the manufacturing period or within 180 days after the close of such period.
Under 19 U.S.C. §1309(b), imported articles or articles of domestic manufacture or production, laden as supplies upon any vessel or aircraft of the United States or laden as supplies (including equipment) upon, or used in the maintenance or repair of, any such foreign vessel or aircraft, shall be considered to be exported within the meaning of the drawback provisions. Such a lading constitutes a deemed exportation if the vessel or aircraft is shown to be engaged in an activity set forth in 19 U.S.C. §1309(a).
The Customs Regulations regarding drawback 191.2(m)(2) (19 CFR 191.2(m)(2)), defines “exporter” as that “. . . person who, as the principal party in interest in the export transaction, has the power and responsibility for determining and controlling the sending of the items out of the United States.” The regulation further provides that for §1309(b) purposes, “. . . the exporter means that person who, as the principal party in interest in the transaction deemed to be an exportation, has the power and responsibility for determining and controlling the transaction (in the case of aircraft or vessel supplies under 19 U.S.C. §1309(b), the party who has the power and responsibility for lading the vessel supplies on the qualifying aircraft or vessel).”
Under 19 CFR 191.175(a), the “drawback claimant under 19 U.S.C. §1313(p) must be the exporter of the exported article, or the refiner, producer, or importer of that article.” The regulations provide that any of these persons eligible to claim drawback may designate another person to file the drawback claim. Further, 19 CFR 191.82 provides that the exporter may waive the right to claim drawback and assign such right to the manufacturer, producer, importer or intermediate party. Thus, under the facts presented, because the DESC purchases the fuel, manages the use of the fuel and owns it until it is laden on the aircraft and ships, the DESC is the exporter of the merchandise. The DESC purchases the fuel from the seller and as manager of the fuel supply has the power and responsibility for lading the fuel onto the qualifying aircraft or vessel. As the exporter, DESC has the right to claim drawback, and may also designate another person to file the drawback claim, and waive its right to claim drawback and assign such right to another party. In this case the party to which the right to claim drawback is being assigned, is the seller of the fuel on the basis of which the drawback claim is made.
In HQ 227994, dated June 3, 1998, we found that a fuel supplier, provided it meets certain requirements, can be the exporter for purposes of section 1309(b). In this case those requirements set forth in HQ 227994 are inapplicable because the purchaser of the fuel seeks to be the exporter and to have the right to claim drawback. The distinction is that in HQ 227994, the fuel was sold by the supplier to the vessel operator or airline who in turn managed or determined the use of the fuel. The supplier was dependent upon the purchaser’s fuel lading records in order to determine whether the requirements of section 1309(b) had been met and in order to claim drawback. In this case, the supplier (“seller”) sells the fuel to the DESC which in turn sells the fuel to the various organizations to which it is responsible for supplying fuel. The distinction is that in these cases the DESC determines how the fuel will be used and keeps a record of the lading. In HQ 227994, in most cases the lading was performed and documented by the carrier, which did not seek to be the exporter of the fuel. This is consistent with HQ 227826, dated October 20, 1998, in which we found that without meeting the contractual criteria set forth in HQ 227994, the seller of fuel to the DESC, cannot be considered the exporter for purposes of drawback.
With respect to the documentation submitted, we find that an executed CF 7514 with the attachment and the data elements for the unique record number is sufficient to establish lading upon a qualified aircraft, provided that the list of ladings includes only those transactions which are eligible. According to DESC, all “N” type transactions will be removed from the lists of transactions. From the list of codes provided, others require the inclusion of numbers specifically identifying the aircraft or vessels. For purposes of clarity, we would require that the quantity in which the fuel is measured be included, such as gallons in this example.
It is not clear from the ruling request whether the data elements for each unique record number would be submitted with the claim or only made available upon request by Customs, after a drawback claim is filed. In HQ 229590, dated October 24, 2002, we stated that by filing a drawback claim based upon a deemed exportation under 19 USC §1309, a claimant asserts that the aircraft or vessel is eligible. Consequently, unless there is evidence of eligibility in the claim it is appropriate to request that evidence from the claimant. It is the act of lading on a qualified vessel or aircraft that constitutes the deemed exportation under 19 U.S.C. §1309. See Asiatic Petroleum Corp. v. United States, 36 CCPA 9 (1948); and United States v. Gulf Oil Corp., 12 Cust. Ct. 108, aff’d 32 CCPA 133 (1945). See also, Mexican Petroleum v. United States, 2 Cust. Ct. 239, rev’d 28 CCPA 90 (1948) ; Standard Oil of Puerto Rico v. United States, 23 Cust. Ct. 70 (1949); and Socony-Vacuum Oil Co. v. United States, 37 Cust. Ct. 129 (1956).
If no aircraft or vessel is identified in the drawback claim, Customs would be compelled to request such information. Customs cannot allow drawback without evidence that the basic requirements of the statute have been met. In the data elements, the most important information provided is the identifying number of the aircraft receiving the fuel (in the case of a vessel, it would be the identification of the particular vessel) and the date of lading. The date of lading has been provided with the claim in the transaction data, as well as the data elements. The date of lading is the date used by Customs to determine whether the lading occurred within 180 days after entry or manufacture or production, for purposes of 19 U.S.C. §1313(p). Therefore, the identification of the aircraft or vessel should be submitted with each drawback claim. The remaining data elements in the transaction detail are not required to be submitted with each drawback claim, but should be available upon request by Customs for verification purposes.
In the facts presented, the fuel laden on aircraft in the four of six transactions, is eligible to be the basis of a claim for drawback, because the fuel was laden on aircraft operated by the U.S., and the act of lading fuel onto eligible aircraft constitutes a deemed exportation. Because there was no lading on an aircraft with respect to the remaining two type “N” transactions, including the sample transaction with unique record number ……..4973, the fuel used for those is not eligible to be the basis of a drawback claim. Under the terms of section 1309(b), there is no requirement that the lading take place anywhere particular in order to be eligible under the statute. We note that no information has been provided regarding the qualified article, and we are unable to address whether the requirements of 19 U.S.C. §1313(p) have been met.
HOLDING:
The documentation submitted, provided the eligible aircraft and vessel is identified upon submission of the drawback claim, and all type “N” transactions are removed from the documentation, is sufficient to establish the lading of fuel on vessels or aircraft operated by the United States, for purposes of claiming drawback under 19 U.S.C. §§1309(b) and 1313(p).
Sincerely,
Myles B. Harmon
Director
Commercial Rulings Division
Attachment “A”
FIELD NAME
DESCRIPTION
RECORD ID
Unique number that is system generated as the transaction is created
TRANSNAME
Transaction Name, e.g. SALE, DEFUEL
PROCESSING DODAAC
DoDAAC of the activity that processed the transaction
PROCESS DATE
TRANS DATE
Date the transaction occurred
SELLERS DODAAC
DoDAAC of the selling activity
NSN
Stock Number
TYPE OF TRANS
The type of transaction, e.g., in-flight refueling, sale to a non-capitalized customer, etc.
DOCUMENT ID
Document Number assigned by the FES. Positions 1-6 are the requesting activity, positions 7-10 are the Julian date (ydd) and the last 4 are sequentially assigned by FES
QUANTITY
Quantity of the transaction
SIG CODE
Denotes the activity to be billed. If=B, then CUST SUP DoDAAC will be billed
FUND CODE
Fund related to the billed activity
CUST DODAAC
DoDAAC of buying activity
CUST SUP DODAAC
Supplemental DoDAAC – only used if Signal Code=B
CUST ORG CODE
Organization code within the Customer’s DoDAAC (A.F. only)
TAIL NUMBER
Tail number of the aircraft receiving the fuel
TMS CODE
Type of aircraft being fueled, e.g. F16
REVERSE FLAG
If this field= ‘YES’, it means the transaction has been reversed, else it will be “NO”
EXTENDED COST
Extended dollar value of the transaction
CREATE DATE
Date transaction posted to FES
BILL NUMBER
Bill Number applied to the transaction
BILL DATE
Date of the bill
Attachment “B”
TYPE of TRANS
A: Flight Line Servicing of Aviation Equipment
B: Aviation Products within Service (Air Force Use Only)
C: Fuel Purchased from DESC Into-Plane Contract (AVCARD Contract)
D: Aviation Fuel between DoD Components (Air Force Use Only)
E: Bulk Sales, Sale to a Non-Capitalized Customer (Air Force Use Only)
F: Non-RIK/FEA Fuel Purchase from a Foreign Government (Air Force Use Only)
G: Free Fuel (In-flight Refueling) (Air Force Use Only)
H: Aircraft Mod or engine Test/Production Centers (Air Force Use Only)
I: In-flight refueling
J: Fuel Consumed by Aircraft Ferrying to First Home Station (Air Force Use Only)
K: RTD/E Comp Improvement Program (FLY) (Air Force Use Only)
L: Local Purchase Non-Contract AVCARD
M: RDTE Construction Improvement Project Contracts (Air Force Use Only)
N: Engine Maintenance and Mod Center (Engine Test Cell)
O: In-flight RIK (Air Force Use Only)
P: Free Fuel Flight Line
Q: Cash Sale (Air Force Use Only)
R: Issues/Purchases Against a RIK (Installation) (Air Force Use Only)
S: Navy Ship and Non DoD Customer Document Id Supplied
T: Jettison Fuel – Not Currently Supported (Air Force Use Only)
U: Commercial Contract Operations (Air Force use Only)
V: Commercial Civil Operations (CAP) (Air Force Use Only)
W: RDTE Funded Contracts for AC/Engines Not Active Inventory (Air Force Use Only)
X: Bailed Aircraft, Must Use “SYS” CIC (Air Force Use Only)
Y: Commercial Charter Operations (Air Force Use Only)
Z: Aerial Bulk Fuel Delivery Systems (ABFDS) Air Force Use Only)