DRA-4 RR:CR:DR 227826 CB
Judith A. Lee, Esq.
Gibson, Dunn & Crutcher, LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5306
RE: Ruling request regarding drawback on sales of fuel; 19 U.S.C. §1313(b); 19 U.S.C. §1309; 19 U.S.C. §1313(p); definition of “exporter”; definition of “exportation”; deemed exportation
Dear Ms. Lee:
This is in reply to your letter of December 10, 1997, on behalf of Mobil Oil Corporation (“Mobil”), wherein you requested a ruling confirming that Mobil would be entitled to duty drawback on the different proposed sales described in your letter. We have reviewed your request and the applicable case law and our decision follows. You have requested confidential treatment of certain pricing information pursuant to 19 CFR §177.2(b)(7). We have reviewed your request and determined that confidential treatment is hereby granted for the information contained in the Form DD-250.
FACTS:
Mobil (“Seller”) has entered or anticipates entering into an agreement with the Defense Energy Support Center of the Defense Logistics Agency, an agency within the United States Department of Defense (“Buyer”). The agreement is for the sale of certain types of fuel products manufactured in the United States from both domestic and imported crude oil. You have set forth the following three possible factual situations:
Scenario 1: Seller would sell JP4 or JP5 jet fuel to Buyer. The product would be manufactured at a United States refinery in accordance with a manufacturing drawback contract under 19 U.S.C. §1313(b). Seller would sell to Buyer F.O.B. refinery or terminal. Buyer would have the responsibility for transporting the product in pipelines, barges, vessels or trucks from the United States refinery or terminal to its various facilities.
Scenario 2: Seller would sell F76 diesel fuel to Buyer for use as supplies in vessels operated by the United States. The fuel would also be manufactured at a United States refinery in accordance with a manufacturing drawback contract under §1313(b). Seller would sell the product to Buyer F.O.B. refinery or terminal. Buyer would be responsible for transporting the product to its various facilities.
Scenario 3: This transaction would be very similar to the first, except that the product sold by Seller to Buyer would consist of JP8 jet fuel, a fuel that may be used in aircraft and vehicles. Buyer’s primary use for this product would be in aircraft operated by the United States. Buyer’s potential secondary use might be in vehicles operated by the United States. Buyer evaluates the product awards based on various destination locations, and may be able to provide documentation detailing locations won by Seller and that might be so used. Seller proposes that the volume so documented for Buyer’s primary use should be available for drawback purposes.
In all three scenarios, you propose to evidence delivery of the product to the Buyer by using a “Material Inspection and Receiving Report” (DD Form 250) executed by Buyer, or a similar document. The DD Form 250 includes, among other things, the following information: acceptance point, shipped from, shipped to, description of the item, quantity, unit, unit price, and amount.
ISSUE:
For purposes of 19 U.S.C. §§1309(b) and 1313(p), is the Seller the exporter of the jet fuel?
LAW AND ANALYSIS:
Generally, section 1313(p) of the United States Code (19 U.S.C. §1313(p)) provides for drawback for certain petroleum derivatives. Under section 1313(p)(1), notwithstanding any other provision in section 1313, if:
(A) an article (referred to in section 1313(p) as the “exported article”) of the same kind an quality (as specifically defined in section 1313(p)) as a qualified article is exported;
(B) the requirements set forth in section 1313(p)(2) are met; and
(C) a drawback claim is filed regarding the exported article,
the amount of the duties paid on, or attributable to the qualified article shall be refunded as drawback to the drawback claimant. The “notwithstanding” clause was included in order to overcome the requirements in 19 U.S.C. §§1313(a) and (b) that the export article made by the petroleum refiner be the article that is actually exported, and that it be commercially interchangeable for purposes of §1313(j).
The requirements in section 1313(p)(2), compliance with which is a condition precedent to drawback under section 1313(p), are that the exporter must have: (1) manufactured the imported qualified article; or (2) purchased/exchanged the same from the manufacturer; or (3) imported a qualified article; or (4) purchased/exchanged an imported qualified article from the importer; and the exportation occurs within 180 days after the date of entry of the imported qualified merchandise or during the manufacturing period or within 180 days after the close of such period.
Under 19 U.S.C. §1309(b), imported articles or articles of domestic manufacture or production, laden as supplies upon any vessel or aircraft of the United States or laden as supplies (including equipment) upon, or used in the maintenance or repair of, any such foreign vessel or aircraft, shall be considered to be exported within the meaning of the drawback provisions. Such a lading constitutes a deemed exportation if the aircraft is shown to be engaged in an activity set forth in 19 U.S.C. §1309(a).
The Customs Regulations regarding drawback were revised to implement the changes contained in the Customs Modernization portion of the North America Free Trade Agreement. The revised regulations are effective as of April 6, 1998. See 63 Fed. Reg. 10970 (March 5, 1998). Section 191.2(m)(2) defines “exporter” as that “. . . person who, as the principal party in interest in the export transaction, has the power and responsibility for determining and controlling the sending of the items out of the United States.” The regulation further provides that for §1309(b) purposes, “. . . the exporter means that person who, as the principal party in interest in the transaction deemed to be an exportation, has the power and responsibility for determining and controlling the transaction (in the case of aircraft or vessel supplies under 19 U.S.C. §1309(b), the party who has the power and responsibility for lading the vessel supplies on the qualifying aircraft or vessel).”
Recently, the Customs Service held that for purposes of claiming drawback under 19 U.S.C. §1309(b) in combination with 19 U.S.C. §1313(p) only, the entity which transfers title to an airline or vessel owner, in a transaction in which certain contractual and evidentiary criteria are met, and which obtains the CF 7514 signed by the carrier on a qualifying flight or vessel operator for a qualifying voyage, will be considered to have the power and responsibility for the lading onto an eligible aircraft or vessel. See HQ 227994, dated June 3, 1998. We do not believe the fact situations set forth in your ruling request meet this criteria. No evidence has been provided to show that the following elements are met:
1. We have not been provided with a copy of a contract between the Seller and Buyer showing that the Buyer agrees to provide Seller with the appropriate documents required to support the drawback claim and appropriate assignment waivers.
2. That Seller is responsible for preparing and filing drawback claims and maintaining the appropriate records required by Customs.
3. That title and risk of loss of the products passes from Seller to Buyer at the Seller’s (or its contractor’s) outlet.
Additionally, you have not indicated how Seller will insure that the time requirements in 19 U.S.C. §1313(p) are met, i.e., that the jet fuel is exported within 180 days from the date of entry or the close of the manufacturing period. Thus, we conclude that the Seller is not the exporter for purposes of claiming drawback under 19 U.S.C. §1313(p). Further, your proposed delivery scenarios are based on the assumption that delivery to the U.S. Government is the equivalent of lading the fuel on a qualified vessel or aircraft as required for a deemed exportation. The plain language of 19 U.S.C. §1309 requires lading on a vessel or aircraft operated by the United States rather than merely delivery to a Government agency.
We also note that in delivery scenario 3, the product is being used in vehicles operated by the United States. There is no statutory authority in 19 U.S.C. §1309 for treating fuel laden on a truck as a deemed export. Instead, it is the act of lading on a qualified vessel or aircraft that constitutes the deemed exportation under 19 U.S.C. §1309. See Asiatic Petroleum Corp. v. United States, 36 CCPA 9 (1948); and United States v. Gulf Oil Corp., 12 Cust. Ct. 108, aff’d 32 CCPA 133 (1945). See also, Mexican Petroleum v. United States, 2 Cust. Ct. 239, rev’d 28 CCPA 90 (1948) ; Standard Oil of Puerto Rico v. United States, 23 Cust. Ct. 70 (1949); and Socony-Vacuum Oil Co. v. United States, 37 Cust. Ct. 129 (1956).
Finally, you state that the DD Form 250 would take the place of the drawback notice of lading on Customs Form (CF) 7514 and would also satisfy the requirements in 19 C.F.R. §191.4(b)(2). We disagree with this conclusion. The regulation states that if merchandise is sold to the U.S. Government, drawback shall be available only to the department, agency, etc., which purchased it unless the Government certifies that the right to claim drawback was reserved by the supplier with the knowledge and consent of the Government. Such a certification is not included anywhere on the face of the DD Form 250. Thus, said DD Form 250 can not be used to satisfy the requirements of 19 C.F.R. §191.4(b). Likewise, we conclude that the DD Form 250 cannot be used instead of the CF 7514. The DD Form 250 does not include the same information which is required in the CF 7514. Additionally, please note that pursuant to 19 C.F.R. §191.112(b), the CF 7514 has to be attached to the CF 7551 (this is the new drawback entry form). This form requires that the claimant indicate, among other things, the date on which the merchandise actually left the United States and the export destination. As previously stated, the DD Form 250 does not contain this information. Furthermore, the DD Form 250 does not comply with 19 U.S.C. §1309(b). The form will not identify the aircraft or vessel on which the fuel was laden nor the date of lading.
HOLDING:
The Seller, as described in the FACTS portion of this ruling is not the exporter for purposes of claiming drawback under 19 U.S.C. §1309(b) in combination with 19 U.S.C.
§1313(p). Additionally, the DD Form 250 cannot be used instead of the CF 7514 or CF 7551 required under 19 C.F.R. §191.112(b).
Sincerely,
John A. Durant, Director
Commercial Rulings Division