DRA-4-RR:IT:EC 226413 PH
Area Director of Customs
10 Causeway Street
Boston, Massachusetts 02222-1059
ATTN: Mr. Dave Goguen
RE: Protest 0401-95-100566; Unused Merchandise Drawback; Waiver
of Prior Notice of Intent to Export; C.S.D. 88-14; C.S.D.
86-25; C.S.D. 85-35; C.S.D. 83-68; C.S.D. 83-1; 19 CFR
191.141(b)(2)(ii); 19 U.S.C. 1313(j)
Dear Sir:
The above-referenced protest was forwarded to this office for
further review. Our decision follows.
[The decision in the HOLDING of this ruling grants the protest,
subject to the conditions stated in the LAW AND ANALYSIS and
HOLDING sections of the ruling (i.e., in summary, that the
protestant, within the time period given in this ruling, submits
a written request for waiver of prior notice of intent to export,
that the request contains sufficient information (as described in
the ruling) to enable your office to act on the request with a
reasonable exercise of discretion, that your office grants the
request, and that the protestant satisfactorily establishes
compliance with the requirements for drawback in 19 U.S.C.
1313(j)). The protestant should be given written notice of these
conditions (a draft letter providing such notice is enclosed and
is being electronically forwarded to the preparer of the Customs
Form 6445 for this protest). If the protestant fails to meet any
of these conditions (i.e., if the protestant fails to submit a
written request for the waiver within 45 days of the written
notice, if the request for the waiver does not contain sufficient
information, if your office does not approve the request for the
waiver, or if the protestant fails to satisfactorily establish
compliance with the requirements in section 1313(j)), the protest
should be DENIED.]
FACTS:
The protest is of the liquidation, without drawback, of a
drawback entry/claim for drawback under 19 U.S.C. 1313(j)(1)
(unused merchandise drawback). The amount of drawback claimed
was $77,668.53. Sixteen consumption entries, for entries between
March 25 and August 31, 1994, were designated as the basis for
drawback. The total amount of duties for the merchandise under
consideration for these entries was $78,452.98 (the slight
discrepancy between 99% of this figure and the amount claimed is
apparently due to the manner in which the claimant "rounded off"
subtotals; of course no more than 99% of the duty paid may be
granted as drawback under 19 U.S.C. 1313(j)). According to the
entry documents and Customs records, the merchandise entered on
these consumption entries was dental cement, classifiable under
subheading 3006.40.0000, Harmonized Tariff Schedule of the United
States (HTSUS). One pro-forma invoice for "Dyract Bulk",
"Compules ...", and "PE barrels dark" is provided.
On June 20, 1995, according to Customs records, the protestant
filed a drawback claim on Customs Form (CF) 7539 for drawback in
the amount of $77,668.53. The imported merchandise designated
for drawback was that described above, described in the drawback
claim as 1015.405 kilograms of "Dyract bulk". The exported
merchandise is described in the drawback claim as 1015.405
kilograms of "Dyract". In block 31 of the CF 7539, the date
given is November 30, 1994, and there is a signature stated to be
by a person described as attorney in fact for the protestant. In
block 43 through 45 of the CF 7539, the box indicating "Customs
has decided not to examine the merchandise and it may now be
exported" is checked and there is a signature with the date
December 5, 1994.
There is a document titled "[PROTESTANT] CHRON. EXPORTS" (we
assume this is meant to be the chronological summary of exports
provided for in 19 CFR 191.53) providing the information required
in the format provided for in section 191.53 for a chronological
summary of exports. According to this document, the exports were
in 42 shipments between April 9 and October 7, 1994, and the
exports consisted of 2778.6210 net kilograms of "Dyract". There
is an air waybill and invoice, both of which can be correlated to
one of the exports listed in the chronological summary. The
invoice describes the merchandise as "FLD DYRACT COMPULE DG".
(The air waybill and invoice are inconsistent with the data on
the chronological summary of exports, in that Switzerland is
shown as the country of export and the date of export appears to
be October 9, 1994 (instead of, respectively, Germany and October
7, 1994, as shown on the chronological summary of exports.)
There is a Notice of Action (CF 29), dated June 22, 1995,
advising the protestant that the drawback claim was denied
because "[t]he merchandise was exported prior to filing the
claim." There is a notation on the CF 7539 that the claim is
"[d]enied - mdse was exported prior to filing the claim."
According to Customs records, the drawback entry was liquidated,
with no drawback, on July 7, 1995.
The drawback claimant filed the protest under consideration on
July 14, 1995. In the protest, the protestant concedes that the
merchandise "was indeed exported prior to filing [its] claim
...." The protestant contends, on the basis of Customs Service
Decision (C.S.D.) 85-35, that your office has authority to waive
the requirement for prior notice "at any time." The protestant
contends that a waiver of prior notice should be granted in this
case. The protestant describes the operation in this case as
follows:
The merchandise that is the basis for this [d]rawback entry
is dental cement that was imported by [the protestant] from
their sister division in Germany. It was put into capsules
and immediately shipped back to Germany for sale in the
European market. None of the cement remained in the U.S.
...
Further review was requested and granted.
ISSUE:
Is there authority to grant the protest of denial of drawback in
this case?
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)).
Under 19 U.S.C. 1313(j)(1), as amended by section 632, title VI -
Customs Modernization, Public Law 103-182, the North American
Free Trade Agreement Implementation Act (107 Stat. 2057), enacted
December 8, 1993, drawback may be granted if imported duty-paid
merchandise is exported or destroyed under Customs supervision
within 3 years from the date of importation. The imported duty-paid merchandise may not have been used in the United States.
The exporter (or destroyer) of the merchandise may claim
drawback, or may endorse the right to claim drawback to the
importer or any intermediate party. Substitution for the
imported merchandise is provided for under 19 U.S.C. 1313(j)(2),
subject to the conditions therein. Under 19 U.S.C. 1313(j)(3),
the performing of any operation or combination of operations,
including, among others, repacking, not amounting to manufacture
or production for drawback purposes on the imported merchandise
(or the substituted merchandise, if substitution is involved) is
not treated as a "use" of that merchandise.
The Customs Regulations pertaining to drawback under 19 U.S.C.
1313(j) are found in 19 CFR 191.141. Section 191.141(b) provides
that a person who desires to export merchandise with drawback
under section 1313(j) is required to file with the drawback
office a completed CF 7539 at least 5 working days prior to the
date of intended exportation, unless Customs approves a shorter
filing period.
Subsection 191.141(b)(2)(ii) provides a procedure for waiver of
prior notice of intent to export. A request for such a waiver is
required to be in writing to the drawback office and "[t]he
appropriate Customs officer may waive prior notice at any time
...." Subsection 191.141(b)(2)(ii) provides that a waiver shall
be granted after the person requesting the waiver files with the
appropriate Customs official six consecutive claims free of
substantial error, provided that the person has operated under
the same condition (now unused) program for a minimum of six
months.
Section 191.141 was added, as a new provision, to the Customs
Regulations when the drawback regulations were revised by T.D.
83-212 in 1983 (formerly, the drawback regulations were found in
19 CFR Part 22). The requirement for prior notice of intent to
export was the subject of considerable comment and consideration,
resulting in evolution of the original proposal in the rulemaking
process (see August 26, 1982, Federal Register notice (47 F.R.
37563, 37567, 37583-37584), and 1983 bound edition of the Customs
Bulletin and Decisions, 465, 496-499).
The requirement for prior notice of intent to export, with the
provision for waiver of that requirement, has been the subject of
several published administrative rulings. Customs Service
Decision (C.S.D.) 83-1, concerned the applicability of same
condition drawback on medicinals under interim operating
instructions (i.e., instructions used before issuance of
regulations), one of which required a claimant to notify Customs
prior to exportation so that Customs could examine the
merchandise in its discretion. The instructions also provided
that if the goods were not examined, Customs could allow the
claim if Customs was satisfied that the conditions of law had
been met. Customs field office disallowed the same condition
drawback claim involved on the basis that examination was
required. We agreed with that decision, stating:
Unless it is evident a Customs officer has acted in an
arbitrary or capricious manner we will not substitute our
judgment for his. We will not do so here. The very nature
of the merchandise involved, medicinals, would indicate an
examination was in order if only to determine if they had
deteriorated. [Note that under the amended 19 U.S.C.
1313(j), no longer requiring same condition, deterioration
would no longer be relevant.]
In C.S.D. 83-68, also involving the interim operating
instructions used before promulgation of 19 CFR 191.141, Customs
noted that under these instructions, a CF 7539 is required to be
filed with Customs at least 12 working days prior to exportation.
Similar to the decision in C.S.D. 83-1, Customs stated in this
C.S.D. that:
... Customs can waive this requirement, either before or
after exportation, if it is satisfied that the merchandise
was exported in the same condition as when imported.
Headquarters does not review a decision in this regard made
by a field office unless there is an allegation that the
official acted arbitrarily or capriciously.
C.S.D. 85-35 concerned the current regulatory provision (19 CFR
191.141(b)(2)(ii)). According to this ruling:
Inasmuch as the appropriate Customs officer, by virtue of
[section] 191.141(b)(2)(ii), can waive the prior notice "at
any time," this language is broad enough to allow the
officer to waive the requirement in cases where the
merchandise has already been exported. The burden on the
claimant of proving same condition in these cases is
naturally greater, as such proof of same condition must be
based on secondary evidence.
The holding in C.S.D. 85-35, in part, was that:
... Written permission for a waiver of the prior notice
requirement must be made and permission granted to allow the
retroactive claims.
The most recent published ruling on this matter is C.S.D. 88-14.
In that ruling, Customs stated:
The requirement of prior notice in same condition
drawback may, however, by waived by the appropriate Customs
office in the reasonable exercise of its discretion "at any
time for any exporter-claimant" (emphasis added) (
191.141(b)(2)(ii)). This would include retroactive waivers
as provided in C.S.D. 85-35. To this end, in the absence of
a clear abuse of discretion, Customs Headquarters will not
substitute its judgment for that of the appropriate field
office (see C.S.D. 83-1; C.S.D. 83-68). [C.S.D. 88-14 also
modified C.S.D. 86-25, which was stated to appear to
preclude retroactive waivers of the prior notice
requirement.]
Thus, Customs current position in this regard, under the current
Customs Regulations, is that the requirement for prior notice of
intent to export may be waived at any time, including after the
exportation. When the requirement for prior notice of intent to
export is waived after export, the burden on the claimant of
proving compliance with the requirement of the law is greater. A
waiver of prior notice of intent to export must be requested in
writing. When such a request is filed, the appropriate Customs
field office must act on the request, using "the reasonable
exercise of its discretion." Absent a clear abuse of discretion,
Customs Headquarters will not substitute its judgement for that
of the appropriate Customs field office.
In this case, although the protest included the statement that
"... we respectfully request this one-time waiver of the prior
notice requirement", no request for waiver of prior notice of
intent to export was submitted in writing such that the
appropriate Customs office could act on the request, using "the
reasonable exercise of its discretion." That is, this "request"
does not provide enough information for Customs to reasonably
exercise discretion in granting or denying the request. In this
regard, we note that the applicable Customs Regulation (19 CFR
191.141(b)(2)(ii)) provides that reliability, insofar as drawback
is concerned, is a criterion for approval of a request for waiver
of prior notice of intent to export. Therefore, a request for
such a waiver should include such evidence. Such evidence should
include identifying evidence such as that described in Customs
Directive (C.D.) 099 3740-007, April 21, 1992, "EXPORTER'S
SUMMARY PROCEDURES FOR MANUFACTURING AND SAME CONDITION DRAWBACK"
(note that this C.D. refers to retroactive approval of Exporter's
Summary Procedures in regard to waiver of prior notice of intent
to export for drawback under 19 U.S.C. 1313(j) (page 5)). The
evidence should also include evidence as to the claimant's
drawback history with any Customs office, as well as the amount
of potential drawback (in dollars) which could be claimed under
the request for a waiver. The evidence, for a drawback claim
under 19 U.S.C. 1313(j)(1) (as is involved in this case), should
show how (e.g., by sample records) the claimant will establish
that duty was paid on the imported merchandise upon which
drawback is claimed, that the merchandise was not used in the
United States, and that the merchandise was exported within 3
years of the date of importation.
As stated above, in this case no such request (as described
above) for waiver of prior notice of intent to export has been
filed with Customs by the claimant. In view of the several
published rulings (described above) permitting a claimant to
request a waiver of prior notice of intent to export at any time,
including before or after export, we are granting the protest,
subject to each of the following conditions:
(1) The protestant must file a written request for waiver of
prior notice of intent to export with your office within the
time stated below;
(2) The request for waiver of prior notice of intent to
export must include sufficient information to enable your
office to reasonably exercise its discretion in acting on
the request (see above, for a description of the sort of
evidence that should be included);
(3) Your office, in a reasonable exercise of discretion
(based on the information submitted and your past action in
regard to requests for such waivers), must act on the
request (either granting or denying it) (only if the request
is granted, may the protest be granted (subject to the
fourth condition, below)); and
(4) The claimant must satisfactorily establish compliance
with the requirements for drawback in 19 U.S.C. 1313(j)(1)
(see above), bearing in mind the "greater burden" for a
claimant to establish compliance, since Customs had no
opportunity to inspect the merchandise prior to export and
proof of compliance must be based on secondary evidence
(C.S.D. 85-35).
Only if each of the above conditions is met, may the protest be
granted. A satisfactory written request for waiver of prior
notice of intent to export must be filed with your office within
45 days of the date written notice is provided to the protestant
of the above conditions (a draft letter providing such notice is
enclosed).
HOLDING:
The protest is GRANTED, subject to the following conditions:
(1) The protestant must file a written request for waiver
of prior notice of intent to export with your office within
45 days of the date written notice is provided to the
protestant of these conditions, as provided for in this
ruling;
(2) The request for waiver of prior notice of intent to
export must include sufficient information to enable your
office to reasonably exercise its discretion in acting on
the request;
(3) Your office, in a reasonable exercise of discretion
(based on the information submitted and your past action in
regard to requests for such waivers), must act on the
request (only if the request is granted, may the protest be
granted (subject to the fourth condition, below)); and
(4) The claimant must satisfactorily establish compliance
with the requirements for drawback in 19 U.S.C. 1313(j)(1)
(see LAW AND ANALYSIS section of this ruling).
If any one of these conditions is not met, the protest is DENIED
(for failure to provide prior notice of intent to export under 19
CFR 191.141(b), in the absence of an approved waiver of prior
notice of intent to export under 19 CFR 191.141(b)(2)(ii), or for
failure to satisfactorily establish compliance with the
requirements for drawback in 19 U.S.C. 1313(j)(1)).
After action in accordance with this ruling is taken to resolve
this matter, this decision should be mailed, with the Customs
Form 19, by your office to the protestant no later than 60 days
from the date of such resolution. Any reliquidation of the entry
in accordance with the decision must be accomplished prior to
mailing of the decision. Please advise this office of your
action in this matter so that the Office of Regulations and
Rulings may take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information
Act, and other public access channels.
Sincerely,
Director, International
Trade Compliance Division
Enclosure