DRA-2-02-RR:IT:EC: 227740 BJB
Port Director of Customs
U.S. Customs Service
Liquidation Branch
555 Battery Street, Rm. 107
P.O. Box 2450
San Francisco, CA 94126
RE: Application for further review of Protest 2904-97-100107; 19 U.S.C. §1313(a), manufacturing drawback; Exports prior to imports; Imported bicycle parts; Burley Design Co-Operative; 19 C.F.R. §191.52(b); 19 C.F.R. §191.52(c); 19 C.F.R. §174.26(b)(1)(iv); T.D. 81-234; Denied.
Dear Sir or Madame:
We are in receipt of the above-referenced protest and application for further review. We have considered the facts and the issues raised, and our decision follows:
FACTS:
Burley Design Co-Operative (“protestant” or “Burley”), filed the present protest and application for further review on May 12, 1997. Burley has protested Customs liquidation of Burley’s drawback claim on 291,697 bicycle parts and pieces. The protestant filed the drawback claim subject of this present application for further review, on July 6, 1994. The protestant seeks $10,916.34 in drawback for entry AC1-xxxx693-3, pursuant to 19 U.S.C. §1313(a). Prior to liquidation, Customs issued a letter of pending liquidation to the protestant’s broker on February 13, 1997. Customs afforded protestant 30 days to provide additional information and a response. Neither the protestant, nor the protestant’s broker, responded to Customs letter-notice of pending liquidation and denial of the claim. On April 18, 1997, Customs denied drawback in full and liquidated the claim.
No manufacturing records were presented with the claim or protest to show the source of the parts used to produce any of the exported bicycles, bicycle carriers, and bicycle parts. The Bill of Materials, which is dated July 5, 1994, (“1994 Bill of Materials”) purports to relate back to usage of bicycles, carriers, and parts during 1991-1993. It clearly is not a manufacturing record contemporaneous with the actual processing, or even an acceptable manufacturing record at all.
Customs found that: (1) a large number of the finished articles listed by Burley, were exported prior to the receipt of the imported merchandise into the United States; and (2) many export shipments were not supported by accompanying export bills of lading. Protestant states that, “[a]pparently some of the dates of export of the finished products are prior to the dates of import of the designated materials, but not all items.” Protestant claims that, “Customs should have allowed the claim in part rather than denying the claim entirely.”(Page continuation from page 1, Block 9, Protestant’s CF 19).
Protestant’s Customs Broker, Patrick Gallagher CH Brokerage, P.O. Box 55488, Portland, Oregon 97238-5488, filed the following documentation in support of the protest and Application For Further Review:
1. Attachment to Manufacturing Drawback Entry Certificate - No. AC1-xxxx693-3;
2. Chronological Summary of Exports, Exporter/Claimant Burley Design Cooperative, Period 7/10/91-12/14/93 (“Export Summary”);
3. Bill of Materials - Burley Design Cooperative - Designation Summary - approximately 65 (sixty-five) items (“1994 Bill of Materials”);
4. Exports/Drawback List; and
5. Designation Summary by Import Number Sequence.
ISSUE:
Whether this protest should be granted.
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). This drawback claim was liquidated on February 13, 1997. Under 19 U.S.C §1514(a)(6), a protest may be filed against a refusal to pay a claim for drawback. The protest was filed on May 12, 1997, 90 days after the liquidation. The protest is timely filed pursuant to 19 U.S.C. § 1514(c).
The claim identifies T.D. 81-234 as the basis for approval in “Block 16" of the claim form (“CF331"). That T.D. is a general drawback manufacturing ruling based upon compliance with 19 U.S.C. §1313(a), and is now published as Section II, Appendix A, Part 191, Customs Regulation.
The relevant statutory text provides that upon exportation of articles manufactured in the United States with the use of imported merchandise, 99 percent of the duties paid upon the merchandise so used shall be refunded as drawback. The statute requires that the claimant show that specific imported merchandise was used to make a specific export article. The relevant regulations permit the imported merchandise so used to make the export article to be identified as prescribed by 19 C.F.R. 191.14. Paragraph J. 1. of T.D. 81-234, provides that records will be maintained to establish that the exported articles on which the claim is based were produced with the use of imported merchandise. This provision requires a drawback manufacturer to show that the export article was produced with imported merchandise identified to a specific import entry.
The claim form (“CF 331") appears to have been incorrectly completed in that the information provided in “Block 17" states that the imported duty-paid merchandise used, consists of 291,697 pieces of bicycle parts. However, under “Block 29," which requires the claimant to list quantity and description of the articles produced, the claimant lists the articles produced as 291,697 pieces of bicycle parts. Obviously, if the same 291,697 pieces of bicycle parts were imported and exported without processing, there would be no manufacture of those parts into a new article, as required by the plain words of the statute, 19 U.S.C. §1313(a) . However, despite the apparent shortcoming in preparing the claim, the claim includes export summaries which indicate that bicycles, bicycle trailers, and bicycle accessories were assembled as the export articles.
It is important to reiterate, that no manufacturing records were presented with the protestant’s claim or protest, sufficient to show the source of the parts used to produce any of the exported bicycles. The 1994 Bill of Materials, purports to relate back to usage of parts during 1991-1993. This document is clearly not a manufacturing record contemporaneous with the actual processing, assuming there was an actual manufacture at all.
Burley has claimed drawback pursuant to 19 U.S.C. §1313(a), manufacturing drawback for imported parts used in the manufacture of bicycles trailers, and accessories. Burley appears to claim that the 18" Bungi cords are used in the manufacture of bicycles or bicycle trailers. Burley lists parts in its 1994 Bill of Materials that include bicycle trailer parts. It is Customs understanding from representations made by a Burley representative and Burley’s broker, that the Bungi cords are actually used to secure the canopy of a bicycle trailer. We understand that the exported article is a bicycle with a bicycle trailer/carrier combination. Assuming this is the case, without deciding whether Bungi cords constitute a manufacture or production of bicycles or bicycle trailers, Burley would still be required to demonstrate, as in HQ 22643, and in C.J. Holt & Co., Inc., v. United States, 27 Cust. Ct. 88, C.D. 1352 (1951), whether a manufacture or production within in the meaning of 19 U.S.C. §1313(a) is described, in order that manufacturing drawback could be allowed under this statutory provision.
As noted above, the recordkeeping inadequacies of the claimant caused the claimant to assert that it used imported Bungi cords that were imported after 1,267 bicycles were exported to make those exported bicycles. This is a physical impossibility. The error with respect to 1,267 bicycles out of an apparent claimed 6,571 bicycles is a significant proportion. Again, as previously noted above, the failure of the claimant to correctly list the quantity and description of the exported articles on the claim form, makes it difficult to ascertain the identity of the exported articles. However, the other documents indicate that the 6,571 bicycles are the claimed exported articles.
The 1994 Bill of Materials does not attempt to show the source of the parts used to make any particular bicycle. This failure is significant as it renders impossible Customs ability to verify that the claim meets the statutory requirements of 19 U.S.C § 1313(a). Although protestant has sought again to amend its claim, when given the opportunity, protestant failed to do so. Even now, under its application for further review, where protestant had the opportunity to provide fundamental documentation with respect to the source of the parts used, to demonstrate which of the bicycles were packaged with bicycle carriers, to clarify that the titles, inter alia, “Rock n’ Roll,” “Duet,” “Lite,” “d’Lite,” and “Burley Roo,” are in fact actually bicycles, protestant failed to do so.
Whether an amendment of the claim to permit drawback on those items that were properly imported prior to the designated exports is permitted, is governed under Customs Regulation, 19 C.F.R. §191.64. This provision permitted a claimant to amend or correct a drawback entry. However, in this protest, protestant was already provided notice and 30 additional days, prior to liquidation and denial of the drawback claim, to provide additional information. No attempt was made by the protestant at that time to correct the claim. Moreover, it is specifically these failures, to properly file a proper claim, i.e., ensuring that designated imports occurred prior to the designated exports, and to respond, even minimally, to a Customs notice (Customs letter of notice February 13, 1997), that has caused the very delays the protestant so earnestly deplores in its protest.
In sum, protestant has presented insufficient evidence to show compliance with the statute. In circumstances, like those claimed here, where parts were imported before the bicycles were exported, and it might have been possible to show that those parts could have been used in accordance with the statute, payment of drawback is conditioned on showing that there was compliance with the statute, rather than there might be compliance with the statute. It is an established rule of law that determination of issues in Customs litigation may not be based upon supposition. U.S. v. Enrique C. Lineiro, 37 C.C.P.A. 5, 10 (1949). Further, in the case, Guess? Inc., v. U.S., 944 F.2d 855, 9 Fed. Cir. 111, 115 (1991), where the court dealt specifically with drawback, it held that a statutory privilege was due only when the enumerated conditions are met. A claim, like the present one, is within the general legal principle that exemptions must be strictly construed and that doubt must be resolved against the one asserting the exemption.
In this case, there is a complete lack of manufacturing records necessary to demonstrate the exported bicycles were made from parts imported under duty-paid entries. Customs informed the claimant of these deficiencies. However, even at this point, the protestant has failed to demonstrate rudimentary compliance with the statute on any exported bicycle.
We note that the 1994 Bill of Materials provides various names of merchandise. However, none of the names are specifically linked with a specific type of bicycle or bicycle and bicycle carrier. The 1994 Bill of Materials lists quantities and items as, 1465 “Lite," “154 Tourist,” 4798 “d’Lite,” and 154 “d’Lite Cargo.” As mentioned above, even this documentation fails to state that each of these items is actually a bicycle or bicycle with a bicycle carrier. Is a “d’Lite” a”d’Lite bicycle” or is it a “d’Lite” bicycle with a bicycle carrier that is “manufactured” with an 18" Bungi cord. Absent this basic clarity, it is unclear whether protestant could claim manufacturing drawback for the 18" Bungi cord on bicycles absent a carrier without first resolving the question of whether an actual manufacture has taken place.
More significantly, on the 1994 Bill of Materials, there are apparently 6,571 bicycles, each of which contains an 18" Bungi Cord. There were two import entries, to cover these 6,571, 18" Bungi Cords. However, both of these import entries are dated March 6, 1992, a date well after the export date of this item.
The first import entry, entry number AC1-xxxxx87-2, for a quantity of 3,000 18" Bungi Cords. The remaining quantity was included under import entry AC1-xxxxx44-1, imported on April 10, 1992. There are 1,267 bicycles exported prior to March 6, 1992. This merchandise was clearly exported prior to the importation of the 18" Bungi Cords. Therefore, it is clear that drawback on this quantity of 18" Bungi Cords should be disallowed. Although all of the bicycles exported after March 9, 1992, might be eligible for drawback, it is not Customs responsibility or obligation to correctly file or amend Burley’s drawback claim. On February 13, 1997, prior to liquidation, Customs issued at letter of pending liquidation to the protestant’s broker affording the protestant 30 days to correct the drawback claim. As stated in the facts above, neither Burley nor its broker responded to the notice. Only on April 18, 1997, did Customs liquidate the claim.
Although Burley is obligated to provide or at least maintain specific records to support its drawback claim, there is substantial prima facie evidence that it is unable to do so. On Burley’s chronological summary of exports under the category of “export bill of lading numbers,” we find that of the 414 shipments listed, in approximately 147 instances there are no export bills of lading available. The column/category for export bill of lading number prominently shows the word “NONE” in these cases, meaning no bills of lading are available. Absent reliable documentary support, Customs is unable to verify the basis for Burley’s drawback claim and would have to deny drawback for these exports.
In summation, with respect to these 18" Bungi Cords, 5,304 pieces out of 6,571 pieces comply with the statutory and regulatory requirement that imports must be actually imported prior to the date that exports were exported. However, there is no evidence to show use of those imported pieces in any exported article, a key requirement to establish drawback eligibility under 19 U.S.C. §1313(a).
HOLDING:
The subject protest must therefore be DENIED, for lack of evidence showing compliance with 19 U.S.C. §1313(a).
In accordance with Section 3A(11)(b) of Customs Directive 099 355-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office, with the Customs Form 19, 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,
John A. Durant
Director
Commercial Rulings Division