HQ H293813
DRA 4; FOR 1
H293813 SMS
OT:RR:CTF:ER
Port Director
U.S. Customs and Border Protection
Port of New York/Newark
1100 Raymond Blvd., Suite 402
Newark, NJ 07102
Attn: Sonia Elmalis, Supervisory Drawback Specialist
RE: Application for Further Review of Protest No: 4601-2016-101317; Refund Eligibility of Quarterly Harbor Maintenance Tax Payments, under 19 U.S.C. § 1313(j)
Dear Port Director:
The above-referenced protest has been forwarded to our office for further review. We have considered the points raised by BMW of North America, LLC (“BMW”) regarding the denial of the refund of Harbor Maintenance Taxes (“HMT”) paid on a quarterly basis on merchandise admitted into a foreign trade zone (“FTZ”). Our response follows.
FACTS:
BMW is in the business of importing and manufacturing motor vehicles in the United States. On March 13, 2015, BMW imported 629 vehicles at the Port of Baltimore and admitted the vehicles into an FTZ in Baltimore. BMW explains that the vehicles were intended for immediate export to Canada; however, due to inclement weather, the vehicles were diverted to the Baltimore FTZ. Because of the unloading of the vehicles at the Port, BMW was assessed and paid HMT. Additionally, according to BMW, HMT was remitted to U.S. Customs and Border Protection (“CBP”) as part of the HMT payment submitted with CBP Form 349, Quarterly Summary Report in the first quarter of 2015. The vehicles were withdrawn from the FTZ and formally entered, under entry number xxx-xxxxxx340-8, into the customs territory of the United States on March 31, 2015, and were subsequently exported to Canada.
On March 9, 2016, BMW filed drawback entry xxx-xxx002-3 for the refund of the HMT under 19 U.S.C. § 1313(j)(1), unused merchandise drawback, designating the 629 vehicles. In support of its claim BMW submitted the following documentation:
A completed CBP Form 7551 (Drawback Entry) signed by BMW’s Assistant, dated August 7, 2015, which lists both the FTZ admission number xxxxxxxxxxxxx0l06 and the underlying entry number xxx-xxxxxx340-8;
A copy of CBP Form 214 (Application for Foreign-Trade Zone Admission and/or Status Designation), dated March 18, 2015, with designated Zone Admission No. xxxxxxxxxxxxx0l06, covering 629 vehicles, imported on the FIGARO CA509 vessel, and lists the HMT owed for the 629 vehicles;
A copy of BMW’s “Admission Detail Report” which lists the 629 vehicles by
Vehicle Identification Number (“VIN”), this report also includes the bill of lading number (“BOL”), export date, date of removal, and entry number and date. We note that this report includes 98 vehicles under seven other entry numbers and 531 vehicles under entry number xxx-xxxxxx340-8;
A copy of the CBP Form 349 (Harbor Maintenance Fee Quarterly Summary Report), which lists the total amount of HMT paid by BMW during the first Quarter of 2015. The report includes every FTZ admission number, vessel name, import and admission date, BOL value, and the HMT amount assessed for each BOL;
Acknowledgment e-mail from [email protected], entitled Pay.gov Payment Confirmation: Harbor Maintenance Fees, for the total amount of HMT paid on April 30, 2015, for the first quarter of the year; and
BMW Chorological Summary of Exports, which lists each of the 629 vehicles by VIN under FTZ admission number xxxxxxxxxxxxx0l06, along with their date of exportation, and respective BOL number.
BMW also submitted a separate drawback claim requesting a refund of the duties it paid on entry number xxx-xxxxxx340-8, which was liquidated with the appropriate refund of duties on September 30, 2016.
On September 30, 2016, drawback entry xxx-xxx002-3 was liquidated with no drawback paid for HMT, by the Port of Newark’s Drawback Office. The Drawback Office asserts that drawback was denied because HMT imposed on merchandise admitted to an FTZ does not appear to have been “paid” upon entry or importation, as required in section 1557(a) of the Miscellaneous Trade and Technical Corrections Act 2004 (“the 2004 Trade Act”); which amended Section 313(j) of the Tariff Act of 1930 (19 USC 1313(j)). According to the Drawback Office, the HMT that is the subject of this AFR was paid on a quarterly basis on merchandise admitted into an FTZ, and thus, there is insufficient information to determine if there is drawback eligibility under 1313(j) based on this submission. The Port contends that the documentation submitted with the protest does not adequately link the payment of HMT to the designated import entries. BMW protested this decision on November 28, 2016. BMW asserts that because the HMT was assessed upon importation, drawback is expressly refundable in accordance with 19 U.S.C. § 1313(j)(1), and the 2004 Trade Act.
On February 12, 2019, Regulations and Rulings (“RR”) reached out to the Port of Baltimore and their Trade Zone Operations, Inc. (“TRO”) personnel, and obtained the documentation submitted by BMW with their FTZ admission, which included:
A copy of CBP Form 214 (Application for Foreign-Trade Zone Admission and/or Status Designation), dated March 18, 2015, with designated Zone Admission No. xxxxxxxxxxxxx0l06, covering 629 vehicles, imported on the FIGARO CA509 vessel, and lists the HMT owed for the 629 vehicles;
Five Sea Waybills for the FIAGARO CA509, which lists the vehicles by description and includes addendums that lists the vehicles by their VIN; and
Five Commercial Invoice Summaries, which lists every vehicle by VIN, BOL number, and includes the vessel name, and the value of each vehicle.
An Automated Commercial Environment (“ACE”) search of entry number xxx-xxxxxx340-8, resulted in no supporting documentation. Subsequently, RR requested additional information from BMW and TRO and obtained TRO’s operator reports regarding BMW’s entry of their merchandise withdrawn from the FTZ. TRO provided the following entry documentation:
CBP Form 7501, Entry Summary, for entry number xxx-xxxxxx340-8, dated March 31, 2015, which contained twenty-one lines of a total of 531 vehicles;
TRO prepared Detailed Duty Owed Report by Entry Line for entry number xxx-xxxxxx340-8, which lists a total of 531 vehicles by entry line, model number, vessel name, VIN, and zone admission number xxxxxxxxxxxxx0l06;
CBP Form 3461, Entry/Immediate Delivery, dated March 31, 2015;
United States Environmental Protection Agency Declaration Form;
United States Department of Transportation National Highway Traffic Safety Administration Declaration Form; and
BMW’s detailed Report of 531 Vehicles for entry number xxx-xxxxxx340-8, which includes the VIN, model year, description, and value of each vehicle.
In addition to the above information submitted in connection to entry number xxx-xxxxxx340-8, TRO provided information for two other entries that were made by BMW containing 28 more vehicles, admitted under zone admission number xxxxxxxxxxxxx0l06.
ISSUE:
Whether quarterly payments of Harbor Maintenance Tax imposed on goods admitted to a foreign trade zone are refundable under 19 U.S.C. § 1313(j).
LAW AND ANALYSIS:
We note initially that the refusal to pay a claim for drawback is protestable pursuant to 19 U.S.C. § 1514(a)(6). The instant protest was timely filed, within 180 days from the date of liquidation. See 19 U.S.C. § 1514(c)(3)(A). CBP denied BMW’s drawback claim on September 30, 2016, when it liquidated the subject drawback entry without drawback, and this protest was filed on November 28, 2016, within 180 days of that liquidation. BMW requests further review per 19 C.F.R § 174.24. Under 19 C.F.R. § 174.24, further review shall be accorded a party when the decision against which the protest was filed is alleged to involve questions of law or fact which have not been ruled upon by CBP. See 19 C.F.R. § 174.24(b). Upon review of the application for further review, we find that these facts and issues have not been the subject of a CBP ruling. See 19 C.F.R § 174.24(b) and 19 C.F.R § 174.26(b)(1)(iv). Accordingly, further review is warranted.
Section 313(j)(1) of the Tariff Act of 1930, as amended (19 U.S.C. § 1313(j)(1)), provides for drawback, which is a refund of certain duties, taxes, and fees imposed on imported merchandise after the timely filing of a claim with CBP, providing there is sufficient evidence linking to an article’s exportation or destruction. Drawback is a privilege, not a right, and is subject to compliance with the prescribed rules and regulations. See 19 U.S.C. § 1313(l); Swan & Finch Co. v United States, 23 S Ct 702 (1903). The relevant drawback provision in 19 U.S.C. § 1313(j) states that, for unused merchandise drawback, the refund includes duties, taxes, and fees. Specifically, the statute provides,
If imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation—
is, before the close of the 5-year period beginning on the date of importation and before the drawback claim is filed—
(i) exported, or
(ii) destroyed under customs supervision; and
is not used within the United States before such exportation or destruction . . . shall be refunded as drawback. . . .
19 U.S.C. §1313(j)(1) (emphasis added). Congress amended the language of 19 U.S.C. § 1313(j) with section 1557 of the 2004 Trade Act, changing “any duty, tax, or fee imposed under Federal law because of its importation” to “any duty, tax, or fee imposed under Federal law upon entry or importation.” See 2004 Trade Act, Pub. L. No. 108-429, § 1557(b), 118 Stat. 2434, 2579 (Dec. 3, 2004) (emphasis added); see also, H. Rept. No. 108-771, § 1557 (Oct. 8, 2004).
The statutory authority for the HMT is in the Water Resources Development Act of 1986 (Pub. L. 99-662; 100 Stat. 4082, 4266; 26 U.S.C. § 4461 et seq.). Under this statute, a tax is imposed for the use of a port, defined as any channel or harbor or component thereof in the United States, which is not an inland waterway, is open to public navigation, and at which Federal funds have been used for construction, maintenance, or operation. The HMT is only collected on imports, domestic shipments, FTZ admissions, and passengers. The fee is assessed based on the value of the shipment; specifically, 0.125% of the value of the commercial cargo shipped through identified ports. Once the fee is collected by CBP, it’s deposited into the Harbor Maintenance Trust fund, for harbor maintenance and related expenses. See https://help.cbp.gov/app/answers/detail/a_id/283/~/what-is-the-harbor-maintenance-fee-%28hmf%29%3F (last visited Feb. 7, 2019).
Pursuant to 19 C.F.R. § 24.24(a), the HMT is to be assessed on “commercial cargo loaded or unloaded from a commercial vessel.” Specifically, for HMT imposed because of import vessel movements, the fees is imposed under 19 C.F.R. § 24.24:
(i) Time and place of liability. . . . when imported cargo is unloaded from a commercial vessel at a port within the definition of this section, and destined for either consumption, warehousing, or foreign trade zone admission, the . . . [responsible party], is liable for the payment of the port use fee at the time of unloading. . . . The fee will be collected on all formal entries, including warehouse entries and temporary importation under bond entries, and admissions into foreign trade zones.
(ii) Fee payment. The port use fee on unloading of imported cargo must be paid in accordance with the normal CBP collection procedures set forth in §§ 24.1 and 141.1 of this chapter, except as provided for merchandise admitted into foreign trade zones in paragraph (e)(2)(iii) of this section. . . . The fee must be paid by the importer by adding it to any normal duty, tax or fee payable at the time of formal entry processing.
(iii) Foreign Trade Zones. In cases where imported cargo is unloaded from a commercial vessel at a port within the definition of this section and admitted into a foreign trade zone, the applicant for admission (the person or corporation responsible for bringing merchandise into the zone) who becomes liable for the fee at the time of unloading pursuant to paragraph (e)(3)(i) of this section, must pay all fees for which he is liable on a quarterly basis in accordance with paragraph (f) of this section by submitting to CBP a Harbor Maintenance Fee Quarterly Summary Report, CBP Form 349. . . . . Fees must be paid for all shipments unloaded and admitted to the zone. . . .
19 C.F.R. § 24.24(e)(2).
Section 1557 of the 2004 Trade Act broadened Section 1313(j)’s language specifically allowing drawback on fees and taxes such as HMT. Previously, the Court of Appeals for the Federal Circuit (“CAFC”) ruled that the HMT was ineligible for drawback in Texport Oil Co. v. United States, 185 F.3d at 1297 (Texport Oil). In Texport Oil, the court found that the HMT was assessed in a nondiscriminatory fashion, meaning that the fee applied to all shipments using ports regardless if the shipment was an importation. See id. at 1296 and 19 C.F.R. § 24.24. Thus, because the fee covered both imports and domestic activities, the court held that the HMT did not meet the statutory requirement “because of its importation” or fit with congressional intent for eligible fees under 19 U.S.C. § 1313(j). See id. at 1296-97 (stating “[t]his purpose does not require the refund of generalized Federal charge; we do not think Congress intended section 1313(j)(2) to grant a broad tax break to exporters.”). However, Congress responded to this case by removing the “because of importation” clause to include the HMT as an eligible fee consistent with its original congressional intent. See S. Rept. No. 108-28, § 1708.
In 2003, the Senate Committee on Finance commented on its reasoning in changing 19 U.S.C. § 1313 under the 2004 Trade Act, as follow:
Under current law drawback is not granted for payment of the Harbor Maintenance Tax (HMT) under Section 313(j) of the Tariff Act of 1930 (19 U.S.C. 1313(j)). . . The provision amends Section 313(j) of the Tariff Act of 1930 (19 U.S.C. 1313(j)) to clarify that the Harbor Maintenance Tax (HMT) is a fee eligible for drawback under the statute.
Reason for Change: The Committee believes that the U.S. Court of Appeals for the Federal Circuit erred in overturning the U.S. Court of International Trade’s ruling in Texport Oil Company v. United States (185 F.3d 1291, 1297 (Fed. Cir. 1999)), that Section 313(j) of the Tariff Act of 1930 (19 U.S.C. 1313(j)) allows drawback of the Harbor Maintenance Tax. Section 313(j) of the Tariff Act of 1930 (19 U.S.C. 1313(j)) allows for drawback of any duty, tax, or fee imposed under Federal law because of its importation. The Committee believes allowing for drawback of the Harbor Maintenance Tax is consistent with original Congressional intent.
Senate Report 108-28. In a 2012 decision, the CAFC explained that through the 2004 amendment, Congress intended to eliminate the distinction between discriminatory and nondiscriminatory taxes and fees, respectively meaning fees that apply only to imports and fees that apply to both imports and domestic merchandise. See Shell Oil Co. v. United States, 688 F.3d 1376, 1380 (Fed. Cir. 2012). The court clarified that the amendment allows drawback for any fee imposed upon entry or importation. Id. As it has been established the HMT is refundable under 19 U.S.C. § 1313(j), we must only make a determination as to whether HMT imposed on goods admitted into an FTZ and paid on a quarterly basis, is a duty, tax, or fee imposed upon “entry or importation.” See 19 U.S.C. § 1313(j)(1).
Generally, FTZs are considered areas outside of the Customs territory of the United States for the purposes of payment of duty. Pursuant to the provisions of Section 3 of the FTZ Act:
Foreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States . . . be brought into a zone. . . and be exported, destroyed, or sent into customs territory of the United States therefrom, in the original package or otherwise; but when foreign merchandise is so sent from a zone into customs territory of the United States it shall be subject to the laws and regulations of the United States affecting imported merchandise.
19 U.S.C. § 81c(a).
CBP regulations define the date of importation and entry. The date of importation is defined as: “[i]n the case of merchandise imported by vessel, “date of importation” means the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise.” 19 C.F.R. § 101.1. The FTZ regulations define foreign merchandise as: “imported merchandise which has not been properly released from Customs custody in Customs territory.” 19 C.F.R. § 146.1 (emphasis added). As such, the importation event occurs at the point of arrival to the port limits with the intent to unlade, prior to admission into an FTZ. See HQ H275567 (May 8, 2018) (the arrival of merchandise in the United States prior to the admission into an FTZ constitutes an importation.) In the case of merchandise admitted into an FTZ, merchandise has been “imported,” but it simply has not been entered into the Customs territory of the United States. Generally, the time of entry is determined when proper entry and entry summary documentation are submitted, with estimated duties attached, and a CBP officer authorizes the release of merchandise into the Customs territory. See 19 C.F.R. § 141.68. Subpart F of Part 146, of Title 19, explains the transfer of merchandise from an FTZ, including entry for consumption at 19 C.F.R § 146.63, and the release of merchandise from the zone at 19 C.F.R. § 146.71. In the case of merchandise admitted into an FTZ, the entry event does not occur until the merchandise is withdrawn from the zone for consumption, with the proper documentation and estimated duties attached.
As discussed above, under 19 C.F.R. § 24.24, HMT imposed on merchandise admitted into an FTZ must be paid on a quarterly basis. See 19 C.F.R. § 24.24(e)(2)(iii). As such, HMT imposed on merchandise admitted into an FTZ is imposed upon importation; however, payments are made quarterly, potentially, prior to or after entry. While, entry occurs when merchandise is withdrawn from an FTZ, after the imposition of HMT; as defined above, the importation event occurs when the vessels arrives at the port with the intent to unlade, corresponding with the time and place of the HMT imposition. As such, CBP has established, for import vessels, that the imposition of HMT occurs once the vessels arrive to the port and unlade, prior to the admittance of merchandise into an FTZ. Consequently, HMT is imposed “upon importation” and the actual payment is required at a later time. See 19 U.S.C. § 1313(j) and 19 C.F.R. § 24.24(e)(2)(iii).
In this instance, BMW imported 629 vehicles and was imposed HMT upon this importation and unloading. BMW then admitted the merchandise into an FTZ and made HMT payments during the first quarter of the year. As listed above, BMW submitted documentation demonstrating what portion of its quarterly HMT payment was imposed on 629 vehicles, and on which import dates. As indicted by the Drawback Office; however, the BMW documentation did not link the FTZ admissions and payment of HMT to the designated import entry. However, CBP obtained extensive documentation, from the FTZ operator in Baltimore, to verify that the exact vehicle identification numbers of 531 vehicles entered under the designated import entry, number xxx-xxxxxx340-8 are identical to the identification numbers of 531 vehicles admitted into the FTZ under admission number xxxxxxxxxxxxx0l06, with the imposition and payment of HMT.
The totality of the documentation, listed in detail above, demonstrates that 629 vehicles were imported into the United States on March 13, 2015, at which point HMT was imposed due to the unlading of the vehicles. See BMW’s CBP Form 214, Application for Foreign-Trade Zone Admission and/or Status Designation, dated March 18, 2015. The 629 vehicles were then admitted into the FTZ in Baltimore under zone admission number xxxxxxxxxxxxx0l06, and because the merchandise was admitted into an FTZ, the HMT payment was made on a quarterly basis, as provided for under 19 C.F.R. § 24.24(e)(2). See BMW’s CBP Form 349 Harbor Maintenance Fee Quarterly Summary Report, and the Acknowledgment e-mail from [email protected], dated April 14, 2015. On March 31, 2015, 531 vehicles were entered into the Customs territory of the United States, under entry number xxx-xxxxxx340-8. See BMW’s CBP Form 7501, dated March 31, 2015, and Trade Zone Operations, Inc.’s Detailed Duty Owed Report by Entry Line, dated March 31, 2015. Lastly the vehicles were exported, to Canada. See BMW’s Chorological Summary of Exports.
Consequently, the HMT paid on the 531 vehicles entered under number xxx-xxxxxx340-8 is eligible for a refund pursuant to direct identification drawback under 19 U.S.C. § 1313(j). We find this consistent with Congress’s clear intent, to allow the refunds of HMT, irrespective of the manner in which the payment was made. However, we note that documentary proof adequately linking the payment of HMT to the designated import entries and exportation or destruction, is required to obtain approval of a claim for drawback. Here the vehicle identification numbers of each individual vehicle can be traced from the point of admission, to the point of HMT payment, to the time of entry, and the time of exportation, all through a review of the FTZ admission and entry documentation. Additionally, while BMW provided admission documentation regarding HMT payment for 629 vehicles, as stated above, only 531 vehicles were verified as entered on the designated import entry, and under this drawback claim. Accordingly, we find that there is sufficient documentary proof to demonstrate that BMW is eligible for the refund of its HMT payments made on the 531 vehicles entered under entry number xxx-xxxxxx340-8 and claimed under drawback entry xxx-xxx002-3.
HOLDING:
Based on the above discussion, Protest No. 4601-2016-101317 should be GRANTED in PART. HMT is imposed upon importation and is therefore refundable under 19 U.S.C. § 1313(j), with the appropriate documentary proof, linking the HMT payment to the designated import entry. BMW has provided such proof for the 531 vehicles entered under entry number xxx-xxxxxx340-8 and claimed under drawback entry xxx-xxx002-3. As BWI has not demonstrated that it filed a claim on any other entry regarding the remaining 98 vehicles, only HMT on the verified 531 is appropriate, at this time.
Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division