DRA-5-01-RR:IT:EC 227461 IOR
Port Director
U.S. Customs Service
10 Causeway Street
Boston MA 02222-1056
Attn: David Goguen, Drawback Section, Room 884
RE: Protest 0401-97-100099; rejected merchandise drawback; 19
U.S.C. 1313(c); timeliness of destruction; extension; 19
CFR 191.42
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:
Entry 036-xxxxx85-9, filed April 11, 1991, was for the
importation of swinging dolls (identified as Swing Art on the
invoice). The merchandise was released from Customs custody on
April 11, 1991. According to the protest, the merchandise was
shipped to several vendors and was subsequently returned because
the plastic dolls became discolored when exposed to direct
sunlight. At the time the protestant was advised by its broker
to claim drawback for the dolls, provided they are exported or
destroyed, the protestant determined that the three year time
limit for filing a same condition drawback claim had expired.
The protestant then concluded that under rejected merchandise,
Customs Regulations 191.142(a) (19 CFR 142(a)) provides for
Customs permission for an extension of the time limitation.
The protestant describes the subsequent actions as follows:
The proper documentation was filled out to file under
rejected merchandise and again [the protestant]
contacted Customs [the first contact with Customs is
not described] to see one more time if he could give
[the] product away [to non-profits so that the value of
the donation could be written off] instead of
destroying it. One more time he was advised that he
would have to either export it or destroy it and that
Customs in Gloucester would have to be contacted to
witness the destruction of the goods. Inspector
Richard Stevens arrive[d] on the designated date and
time and then signed off that in fact the destruction
of the product was complete. Documents were then
forwarded to the district and later rejected based on
the fact that the proper length of time had expired.
The protestant states that it had hoped for approval of an
extension so that it could comply with the drawback requirements,
and that had it known that the extension would not be granted,
other steps would have been taken to dispose of the merchandise.
The file consists of the Entry Summary for the subject
merchandise; an invoice for the imported merchandise, dated March
13, 1991; protestant's invoice to Customs, dated May 30, 1994,
describing merchandise, quantity and value, being delivered to
Customs for destruction; letter dated June 10, 1994 from the
protestant to Customs, Boston District; Application and Approval
to Manipulate, Examine, Sample or Transfer Goods (CF 3499);
Drawback Entry Covering Rejected Merchandise (CF 7539), no. C04-xxxxx38-5 filed July 11, 1994; Notice of Action dated January 15,
1997; and the protest filed February 21, 1997. The letter of
June 10, 1994 states that the merchandise is being returned to
Customs custody for destruction and describes the defect with the
merchandise. The letter does not mention any drawback claim.
The CF 3499 indicates that 360 cartons of the subject merchandise
were destroyed by crushing on June 14, 1994. The Notice of
Action denies the drawback claim based on 19 CFR 191.8(b) which
requires that merchandise for which drawback is claimed, be
exported or destroyed within three years from the date of
importation.
ISSUE:
Whether the imported merchandise is eligible for drawback
under 19 U.S.C. 1313(c).
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 under 19 U.S.C.
1514(a)(6). This protest involves the denial of drawback under
19 U.S.C. 1313(c). The drawback law was substantially amended
by 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(c). Section 692 of the Act provides that Title VI
provisions take effect on the date of enactment. 19 U.S.C.
1313(c), which concerns drawback for merchandise not conforming
to sample or specifications, provides that:
Upon the exportation, or destruction under the
supervision of the Customs Service, of merchandise--
(1) not conforming to sample or specifications,
shipped without the consent of the consignee, or
determined to be defective as of the time of
importation;
(2) upon which the duties have been paid;
(3) which has been entered or withdrawn for
consumption; and
(4) which, within 3 years after release from the
custody of the Customs Service, has been returned to
the custody of the Customs Service for exportation or
destruction under the supervision of the Customs
Service;
the full amount of the duties paid upon such
merchandise, less 1 percent, shall be refunded as
drawback.
Regarding the issue of rejected merchandise, House Report
103-361, 103d Cong., 1st Sess., 129, states the following:
Section 632 amends the rejected merchandise drawback
provisions to extend the period for return to Customs
to 3 years, to allow destruction of the imported
merchandise as an alternative to exportation, and to
allow the importer and foreign supplier to agree that
the imported merchandise was defective without
reference to purchase specifications or samples. If
the importer and foreign supplier could not agree that
the merchandise was defective, Customs would be
required to make that determination. Under Section
632, imported merchandise could be used for up to 3
years and the importer could get a duty refund if it
was shown that the merchandise did not conform to
specifications or sample or was defective at the time
of importation.
Therefore, to qualify for rejected merchandise drawback, the
claimant must provide evidence that the importer and foreign
supplier agreed that the imported merchandise was defective at
the time of importation, or that the imported merchandise did not
conform to sample or specification, and either export or destroy
the imported merchandise within three years from the release from
Customs custody. The protestant has not provided any evidence
that the importer and foreign supplier agreed that the imported
merchandise was defective at the time of importation, or that the
imported merchandise did not conform to sample or specification.
In this case, as conceded by the protestant, the imported
merchandise was destroyed more than three years after the
merchandise was released from Customs custody. In addition,
according to the protestant's invoice form of May 13, 1994, the
imported merchandise was not returned to Customs custody within
three years after the release of the merchandise.
The facts do not indicate any agreement between the
protestant (the importer) and foreign supplier that the imported
merchandise was defective as of the time of importation. Because
there is no agreement or insufficient evidence of an agreement,
Customs is required to make the determination as to whether the
imported merchandise was defective at the time of importation.
The type of documentation necessary to support such a
determination was described in HQ 221245, dated October 19, 1990.
In HQ 221245, we stated there were two ways in which a claimant
can demonstrate to Customs satisfaction that merchandise did not
conform to sample or specifications: "(1) by presenting
specifications and showing that the defect was caused by a
failure to meet those specifications; or (2) by proving that the
imported merchandise failed to meet a warranty guaranty as to
length of service, and the credit allowed for it amounted to 90%
or more of the purchase price." See also HQ 224227, dated May 2,
1996. The protestant has not provided specifications for the
products or evidence that they were indeed defective.
With respect to an extension of time, Customs Regulations
191.42 (19 CFR 191.42), pertaining to merchandise not conforming
to sample or specifications, do provide for extensions. However,
the regulations are not applicable to the amended statute.
Customs has no authority to extend the period of time in which to
return the merchandise to Customs custody for exportation or
destruction beyond three years from the date of release from
Customs custody. The regulations are applicable to the statutory
provision prior to its amendment, when the merchandise was
required to be exported within 90 days after the release from
Customs custody. However, if the regulations were construed to
be applicable to 1313(c) as amended, in any event, the protestant
does not have any evidence that it received an extension of time
authorized in writing, or any other authorization of an extension
in time in which to export or destroy the merchandise. The June
10, 1994 letter to Customs from the protestant, does not make any
reference to drawback or an extension.
Based on the facts, we find that the destruction of the
merchandise and return of the merchandise to Customs custody
occurred outside of the three year time limit set forth in the
statute and the protestant has not established that the importer
and foreign supplier agreed that the imported merchandise was
defective at the time of importation, or that the imported
merchandise did not conform to sample or specification, and
therefore the protestant has not established that it qualifies
for drawback under 19 U.S.C. 1313(c).
HOLDING:
The protest should be denied because the statutory
requirements of 19 U.S.C. 1313(c) have not been met.
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 of the decision. Sixty days from the date of the
decision 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