DRA-2-01-CO:R:C:E 223779 SR
Chief
Region Drawback Branch
Chicago, Illinois 60607
RE: Internal Advice request successorship for purposes of
drawback substitution; 19 U.S.C. 1313(b)
Dear Sir:
This request for internal advice was initiated by a letter
dated March 2, 1992, from the Chief, Region Drawback Branch, of
the North Central Region of Customs.
FACTS:
On May 26, 1986, Peavey Company, a Minnesota Corporation,
merged with ConAgra, Inc., a Delaware Corporation. Under the
Articles of Merger, ConAgra, Inc., became the surviving
corporation and Peavey Company became a corporate division.
Currently, Peavey operates under its own name as a separate
division even though it is part of the corporation ConAgra, Inc..
ISSUE:
Whether a division of a corporation that operates under a
different name is required to have a drawback contract approved
under its own name in order to receive drawback.
LAW AND ANALYSIS:
Under 19 U.S.C. 1313(b), duties are refunded as drawback,
for merchandise that is used to manufacture or produce articles
which are exported. 19 U.S.C. 1313(b) provides as follows:
If imported duty-paid merchandise and duty-free or
domestic merchandise of the same kind and quality are used
in the manufacture or production of articles within a period
not to exceed three years from the receipt of such imported
merchandise by the manufacturer or producer of such
articles, there shall be allowed upon the exportation of any
such articles, there shall be allowed upon the exportation
of any such articles, notwithstanding the fact that none of
the imported merchandise may actually have been used in the
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manufacture or production of the exported articles, an
amount of drawback equal to that which would have been
allowable had the merchandise used therein been imported;
but the total amount of drawback allowed upon the
exportation of such articles, together with the total amount
of drawback allowed in respect of such imported merchandise
under any other provision of law, shall not exceed 99 per
centum of the duty paid on such imported merchandise.
Accordingly, to qualify for drawback under 19 U.S.C.
1313(b), the same legal entity which used substituted merchandise
to manufacture or produce the exported articles must also use in
manufacture or production the duty-paid merchandise which is
designated as the basis for the claim. (See C.S.D. 89-12).
As stated in Safeco Insurance Company of America v.
Franklin, 185 F. Supp. 499, (N.D. Ca. 1960), a corporation is "a
single legal entity in contemplation of law and, although it may
have many departments or subdivisions, being a corporation, it is
an indivisible unit." After the merger, ConAgra and Peavey
became one corporation. Peavey continues to operate as a
division of the corporation; it does not operate as a separate
legal entity.
C.S.D. 89-12, discusses drawback rights after a corporation
merger. However, the facts at issue here are different than the
facts in C.S.D. 89-12. C.S.D. 89-12, found that merchandise that
was imported and manufactured by a division of a corporation
before the division was merged into another corporation could not
be claimed for drawback by the surviving corporation. This was
found because the corporation that was merged into the surviving
corporation ceased to exist, therefore, it could not be a part of
the legal entity that exists after the merger. The facts in the
case at issue are different because the corporations have already
merged. If Peavey is currently importing and manufacturing
merchandise it is doing so as a division of the corporation.
Even though Peavey and ConAgra, Inc. are still doing business
under their original names, together they comprise only one legal
entity.
Peavey and ConAgra, Inc. do not need to have separate
drawback contracts. However, in the drawback contract for the
corporation, it is important that the factories of the corporate
division are all included in the contract under the heading
LOCATION OF FACTORIES, and the name of the division should be
mentioned under the GENERAL STATEMENT. The drawback contract for
ConAgra, Inc., appears to be complete.
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HOLDING:
ConAgra and Peavey have merged to form one legal entity;
therefore, Peavey is also governed by the drawback contract that
was approved for ConAgra, Inc.. For purposes of the drawback
contract Peavey and ConAgra are to be considered as one entity.
Therefore, a separate drawback contract is not necessary for the
corporation division.
Sincerely,
William G. Rosoff
Chief