DRA-2-02-RR:IT:EC 226752 SAJ
Port Director
U.S. Customs Service
2323 South Shepard, Ste. 1200
Houston, TX 77019
RE: Application for further review of Protest No. 5301-96-100062; 19 C.F.R. 191.141; 19 C.F.R. 191.52; 19 U.S.C. 1514;
19 U.S.C. 1313(j)(1); Unused merchandise drawback; C.S.D.
84-6; HQ 222284; HQ 223791; Export examination requirement
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the facts and issues
raised, and our decision follows.
FACTS:
According to the documentation in the file, Capro, Inc.
(protestant) filed two claims for unused merchandise drawback
under 19 U.S.C. 1313(j) for wired cable. The subject protest was
timely filed against the denial of drawback for entry numbers
027-2xxxx29-2 (29-2) and 027-2xxxx82-6 (82-6) on the grounds of
failure to present shipments for examination prior to export, as
provided under 19 C.F.R. 191.52.
Customs Form (CF) 7501, which has an export date of February
10, 1995 and an import date of March 3, 1995, reveals that under
entry number 601-xxxx66-9, protestant entered 17,787 kg of
"ROPES, CBLS, CRDG, OTH:OTH, GALVAN" under 7312.10.9030/3.6% of
the Harmonized Tariff System of the United States.
Invoice No. AC95-0206 dated February 6, 1995 reflects that
1,000,000 m of "GT Cable Capro" Parts No. 10-3064, 1.5mm1x19+8x7
"GT" (20 Pallets, 80 Reels), 750,000 m of "GO Cable Capro" Parts
No. 10-3062,, 1.5mm1x19+8x7 "GO" (15 Pallets, 60 Reels), and 610
m "KIKU-GT" 7x7 GT/0 1.5 mm , were imported from Japan..
Protestant filed the two subject drawback entries with
Customs on Customs Form (CF) 7539. Entry number 29-2 has a
drawback entry date of April 11, 1995, and describes the
merchandise as "ROPES, CBLS, CRDG, OTH: OTH, GALVAN". Blocks 15
and 16 list the imported part numbers as "JP PART #10-3064" "80
reels 10,160 kgs", "JP PART #10-3062" "60 reels 7,620 kgs", and
"JP PART #KIKU-GT" "1 case 7 kgs", and the exported part number
as "JP PART #10-3062" "32 reels 4,064 kgs". Block 46 of the CF
7539, which states that "Customs examination is required",
contains a check mark and the inspector's initials. Sections 50
and 51 of the CF 7539, contains handwritten remarks by the
inspector stating that the protestant "[f]ailed to present
shipment for examination." These remarks are dated September 28,
1995.
Entry number 82-6 has a drawback entry date of October 26,
1995, and describes the merchandise in Block 17 of the CF 7539 as
"CABLE". Blocks 15 and 16 list the imported part number as "JP
PART #10-3062" "40 reels 5080 kg", and the exported part number
as "JP PART #10-3062" "3 reels 381 kg". Block 46 of the CF 7539,
which states that "Customs examination is required", is checked
and also contains the inspector's initials. Sections 50 and 51
of the CF 7539 contain handwritten remarks by the inspector dated
October 27, 1995, stating that the "[m]erchandise [was] exported
without supervision or examination."
The file also contains copies of two Pedimentos covering the
merchandise exported to Mexico. Pedimento No. 1200-50056959 has
an entry summary date of April 18, 1995. This Pedimento contains
14 lines of merchandise. Line number 6 describes the merchandise
as "CARRETES DE CABLE GALVANIZADO C/CA PA E/ESTANO,
1.5mm.1x19+8x7, 1.584113, 73129001, 150000.00-03, 1500.0000-01,
MQ 2824, PC 0", which are "Reels of Galvanized Cable" measuring
1.5mm.1x19+8x7. Line number 7 describes the merchandise as
"CARRETES DE CABLE GALVANIZADO, MEDIDAS: 1.5mm.1x9+8x9, 0.508902,
73129001, 38587.00-03, 386.0000-01, MQ 2824, PC 0", which are
"Reels of Galvanized Cable" measuring 1.5mm.1x9+8x9. We note
that there are no matching part numbers to the CF 7539 on the
Pedimento for this merchandise. We also note that protestant's
broker was alerted of this fact and given ample opportunity to
submit matching documentation.
The second Pedimento No. 1200-5018045 has an entry summary
date of October 23, 1995. This Pedimento has 22 lines of
merchandise. Line number 17 describes the merchandise as
"CARRETES D/CABLE GALVANIZADO C/CA - 10-3064 PA D/ESTANO
P/ENS..10-3062, 1.784567, 10-3070, 73129001, 1519834.00-03,
17624.0000-01, MQ 2824, PC 0", which are "Reels of Galvanized
Cable". This Pedimento identifies the part numbers of the
merchandise as 10-3064, 10-3062, and 10-3070.
Drawback claims on entry numbers 29-2 and 82-6 were denied
on November 13, 1995 and December 15, 1995 respectively, due to
exporting the merchandise without proof of Export Summary
Procedure privilege or Customs supervision or examination
requirement under the regulations.
Protestant refers to Headquarters ruling 225569 which
provides internal advice on whether certain documentation
satisfies the regulatory requirements for proof of exportation.
The file also contains copies of the Pedimentos covering the
merchandise exported.
Entry number 29-2 was liquidated on November 3, 1995 and
entry number 82-6 was liquidated on December 15, 1995. The
subject protest, with application for further review was filed
for each of the entries on January 19, 1996.
ISSUE:
Whether unused merchandise drawback may be denied for
failure to comply with the exportation exam requirement under 19
C.F.R. 191.141.
LAW AND ANALYSIS:
We note initially that the refusal to pay a claim for
drawback is a protestable issue pursuant to 19 U.S.C. 1514(a)(6).
Drawback for entry 29-2 was denied on November 13, 1995 and entry
82-6 was denied on December 15, 1995. This protest was timely
filed against the denial of drawback for the subject entries on
January 19, 1996, since the 90-day statutory and regulatory
filing deadline was met under 19 U.S.C. 1514 and 19 C.F.R. Part
174.
The applicable law if found in section 632, title VI -
Customs Modernization, Public Law 103-182, the North American
Free Trade Implementation Act (107 Stat. 2057), enacted December
8, 1993. Title VI of that Act amended 19 U.S.C. 1313(j).
Section 692 of the Act provides that Title VI provisions take
effect on the date of enactment.
Section 632 of the new act changes same condition direct
identification drawback by providing that imported merchandise
for which duty was paid and is, before the close of the 3-year
period beginning on the date of importation, exported or
destroyed under Customs supervision and is not used within the
United States before such exportation or destruction is eligible
for "unused merchandise drawback." The law no longer requires
that the merchandise be in the same condition as when imported.
In the instant case, the protestant asserts that the
merchandise was exported. The Customs Regulations issued under
the authority of this provision are found in 19 C.F.R. 191.141.
Under paragraph (b) of 19 C.F.R. 191.141, an exporter who desires
to export merchandise with drawback under 19 U.S.C. 1313(j) is
required to file a completed Customs Form (CF) 7439 (Drawback
Entry Covering Same Condition Merchandise) at least 5 working
days prior to the date of intended exportation unless a shorter
filing period is approved.
The exporter-claimant may request, in writing, waiver of
this advance notice. Customs may grant such a waiver or, in
certain circumstances, is required to grant it. Within 3 working
days after the CF 7539 is filed, Customs is required to notify
the exporter-claimant whether the merchandise will be examined.
If the exporter-claimant is not so notified, he or she is
required to export the merchandise without delay. Under
paragraph (c) of 19 C.F.R. 191.141, within 3 years after
exportation of merchandise under 19 C.F.R. 191.141(b), an
exporter-claimant is required to complete his or her drawback
claim by filing with the same Customs official who received the
CF 7539 evidence of exportation under the procedures described in
19 C.F.R. 191.52 or 191.54. Under paragraph (e) of 19 C.F.R.
191.141, the provisions relating to direct identification
drawback apply to claims for drawback, insofar as applicable and
not inconsistent with 19 C.F.R. 191.141-191.142.
One of the provisions relating to drawback claims is that
drawback claim "shall be subject to verification by the director
at whose port the claim is filed. 19 C.F.R. 191.10(a). Such
verification means "the examination of any and all records ...
maintained by the claimant ... which are required by the
regulatory auditor to render a meaningful recommendation
concerning the drawback claimant's conformity to the law and
regulations and the determination of supportability, correctness,
and validity of the specific claim or groups of claims being
verified." 19 C.F.R. 191.2(o). It is specifically provided that
verification includes "an examination of ... all the accounting
and financial records relating to the transaction(s)." 19 C.F.R.
191.10(c)).
Under 191.51, exportation of articles for drawback purposes
shall be established by one of the procedures listed in that
section, one of which is 19 C.F.R. 191.52. Under section 191.52,
a drawback claimant may support the drawback claim with a notice
of exportation on Customs Form 7511 which is required to show the
information listed in paragraph (b) of section 191.52. Under
paragraph (c) of section 191.52, the notice of exportation may be
certified or uncertified. If uncertified, it must be supported
by documentary evidence of exportation, such as "the bill of
lading, air waybill, freight waybill, ... cargo manifest, or
certified copies thereof, issued by the exporting carrier."
As provided in the FACTS portion of this ruling,
protestant's broker was given ample opportunity to submit the
necessary documentation. Customs has previously considered the
question which is raised in this case, whether drawback may be
denied whenever records requested by Customs are not provided by
a drawback claimant. In Customs Service Decision (C.S.D. 82-38)
this question was thoroughly considered. In that case, we held
that a claimant must make available records which prima facie
evidence show importation, manufacture, and exportation for
purposes of the drawback law. Headquarters ruling (HQ) 222431
(January 30, 1991), provided that although C.S.D. 82-38 concerned
manufacturing drawback, there is no reason why C.S.D. 82-38
should not be applicable to "same condition drawback" (currently
referred to as unused merchandise drawback). C.S.D. 82-38 was
modified to hold that the claimant must make available records
which prima facie show, with regard to the merchandise for which
drawback is sought, importation, exportation or destruction of
the imported merchandise within 3 years from importation, and
non-use in the United States. Thus, the provisions relating to
direct identification drawback apply to claims for unused
merchandise drawback insofar as applicable and not inconsistent
with 19 C.F.R. 191.141 - 191.142.
Prima facie evidence to show importation may consist of an
entry or entry summary, with detailed invoice, for the
merchandise. Prima facie evidence to show that the merchandise
was not used in the United States may consist of the completed
Customs Form 7539 where it is marked and signed by the
appropriate Customs officer to indicate that either "Customs has
decided not to examine the merchandise that it may now be
exported" or, of the form is checked to indicate that "Customs
examination is required", that Customs has examined the
merchandise and found it to comply with the regulations.
Protestant filed the two subject drawback entries with
Customs on CF 7539. For entry number 29-2, Block 46 of the CF
7539 contains a check mark and the inspector's initials
indicating that "Customs examination is required." Section 50
and 51 of the CF 7539 contains handwritten remarks by the
inspector stating that the protestant "[f]ailed to present
shipment for examination." Block 46 of the CF 7539 for entry
number 82-6 is also checked and contains the inspector's initials
indicating that "Customs examination is required." Sections 50
and 51 of the CF 7539 contain handwritten remarks by the
Inspector stating that the "[m]erchandise [was] exported without
supervision or examination."
In this case, there is prima facie evidence of importation
(i.e., entry summaries and detailed invoices). However, there is
no prima facie evidence that the merchandise was not used in the
United States before it was exported, since Customs did not have
the opportunity to examine the merchandise to determine whether
it matched the imported merchandise. Moreover, there are no
matching part numbers to the CF 7539 on the Pedimento for this
merchandise. Again we note that protestant's broker did not
submit any further documentation to match the identity and the
quantity of the cable imported and exported. Without the
imported merchandise matching the Pedimento, drawback cannot be
authorized.
Protestant refers to section 191.141(3)(iii) which indicates
that not more than 10% of the exports will be examined. It is
protestant's contention that because Customs had already examined
prior exportations for the protestant, Customs should have
"waived on the next 250 exportation in order to reach the 10%
mark." See Block 9 of CF 19. We disagree with protestant's
reasoning since nowhere in the regulations does it state that the
requirement under 191.141(2)(I) is waived if the 10% figure is
exceeded.
The Customs Court has held that right to recover drawback
arises only when all of the provisions of the statute and the
applicable and lawful regulations prescribed under its authority
have been completed. Romar Trading Co. v. United States, 27
Cust. Ct. 34, C.D. 1344 (1951), followed in 718 Fifth Avenue
Corp. v. United States, 741 F. Supp. 1579, CIT slip op. 90-59
(1990). Thus, the regulations must be adhered to before the
exporter is eligible for drawback. Customs reserves the right to
examine merchandise before exportation to verify that the
exported goods were the imported goods and that those goods bear
no evidence of a change in condition or of use. In the case at
hand, protestant failed to meet the statutory and regulatory
requirements in depriving Customs the opportunity to examine the
exported merchandise.
In United States v. Lockheed Petroleum Services, Ltd., 709
F.2d 1472 (Fed. Cir. 1983), the Court of Appeals reversed the
lower court and held that the drawback claimant was not entitled
to drawback of customs duties because the claimant had failed to
file an abstract of manufacture with Customs prior to the subject
vessel's departure, and thereby Customs had no opportunity to
verify the contents of the abstract through an examination of the
vessel. The court held that the subject regulation was mandatory
and "compliance is a condition to the right of recovery of
drawback." Id. at 1474. In the case at hand, protestant also
failed to meet the statutory and regulatory requirements by
depriving Customs the opportunity to examine the exported
merchandise.
Protestant refers to HQ 225569, which provides internal
advice on whether certain documentation satisfies the regulatory
requirements for proof of exportation. However, the issue for
the subject drawback claims is not whether certain documentation
satisfies the regulatory requirements for proof of exportation.
The drawback claims at issue failed to comply with the export
examination requirement under the regulations.
Drawback claims 29-2 and 82-6 were properly denied on
November 13, 1995 and December 15, 1995 respectively, due to
exporting the merchandise without proof of Export Summary
Procedure privilege or Customs supervision or examination
requirement under the regulations.
HOLDING:
In view of the fact that protestant failed to show that the
merchandise exported was the imported merchandise, and that the
drawback claims at issue failed to comply with the export
examination requirement, which determines that exportation or
destruction of the merchandise was not used in the United States,
this protest is DENIED.
Consistent with the decision set forth above, you are hereby
directed to deny the subject protest. In accordance with Section
3A(11)(b) of Customs Directive 099 3550-065, dated August 4,
1993, Subject: Revised Protest Directive, this decision should be
mailed by your office to the protestant no later than 60 days
from the date of this letter. Any reliquidation of the entry in
accordance with the decision must be accomplished prior to
mailing the decision. Sixty days from the date of the decision
of the Office of Regulations and Rulings will 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