DRA-4 RR:CR:DR
229320 RDC
Port Director
10 Causeway Street
Suite 603
Boston, MA 22220
Attn: Ms. Elaine Kwiecien
RE: Application for Further Review of Protest number 0401-01-100210; Martlet Importing Company; Beer; Destruction; 19 USC § 1313(j)(1); 19 USC § 1313(j)(2); 26 USC § 5062(c); 19 CFR § 191.161; HRL 229322.
Dear Ms. Kwiecien:
The above-referenced protest was forwarded to this office for further review. We have considered the points raised by your office and the Protestant, including its additional submission dated May 27, 2002. Our decision follows.
FACTS:
Martlet Importing Co., (“Martlet”), protests the denial of its drawback claim number 112-xxxxx37-9. According to the CF 7551, this drawback claim was filed on October 20, 1999. The merchandise is described as “aged El Presidente beer identified by product code in liters” and was imported from September 2, 1998, through September 23, 1998. The 17,850 cases of beer are said to be destroyed. The total drawback claimed is zero and the total internal revenue (IR) tax claimed is $22,353.16. The CF 7551 contains 6 declarations - one of which Martlet has indicated. This declaration states:
The undersigned hereby certifies that the merchandise herein described is commercially interchangeable with the designated imported merchandise and further certifies that the substituted merchandise is unused in the US and that the substituted merchandise was in our possession prior to exportation or destruction.
The drawback provision named in box 15 of the CF 7551 is “19 CFR 191.161-68.”
Attached to the CF 7551 are three computer generated documents titled Duty Drawback Data Management System Unused: import information; chronological summary of exports; and calculation sheet. These documents are dated October 18, 1999. The “calculation” sheet shows entry numbers, their import dates and the product codes and amounts imported as does the “unused” sheet. The “chronological summary of exports” shows the information that is contained in the CF 7553.
The destruction of the beer is evidenced by a CF 7553. The beer was destroyed in August 1999 by being “poured down the drain” at Beverage Recycling. Section 18 of the CF 7553 contains the names of the various types of drawback with small boxes next to the names. The drawback claimant is to indicate which type of drawback it intends to claim by marking one of these boxes. Martlet indicates on this CF 7553 that will claim drawback on: DISTILLED SPIRITS, WINE OR BEER UNDER SECTION 5062(C), INTERNAL REVENUE CODE. The beer destroyed is described as “Aged El Presidente beer: 22108 – 8856 cases; 22110 – 8844 cases; 22102 – 150 cases.”
On May 9, 2001, Customs notified Martlet that drawback claim 112-xxxxx37-9 was denied because:
No evidence has been presented to show that the destroyed beer can be traced to any range of consumption entries, or that it is commercially interchangeable with the designated merchandise.
The drawback claim was liquidated on May 25, 2001, with zero drawback paid and on August 21, 2001, Martlet filed this Protest and Application for Further Review. On September 21, 2001, the port forwarded it to this office. The port’s position is summarized on the CF 6445 as:
The beer was destroyed because of its age, which rendered it unmarketable. This office believes that the drawback merchandise had no commercial value, and thus was not commercially interchangeable with the imported merchandise.
As further evidence of the protested drawback claim the Protestant includes the following:
a purchase order hand labeled “shipping info” showing an order of Presidente, product code 22102.
2 photocopies of invoices, one of which is almost completely illegible. The second invoice is between Molson Breweries and Phoenix Beverage but it too is almost completely illegible.
a CF 7501 for entry number 112-xxxxx60-4 which shows Martlet Importing Co. as the importer of record for beer exported from the Dominican Republic on 9/20/98 and imported into the US on 9/23/98.
two photocopies of delivery orders which contain large portions that are illegible.
a photocopy of a document which is, in part, illegible but appears to be an invoice for an entry 112-xxxxx60-4, dated 9/22/98 between Phoenix Beverage and Martlet Importing for “containers said to contain: 3796 packages Presidente beer.” The following information is circled by hand: “REF. NO. 901MX 1773/901MX 178” and “CONT SEAL 7837409 (40’).”
photocopies of three computer-generated documents, one of which is labeled “Phoenix pricing” and “Pricing and Product Code info.” On all three the only information discernable as relevant here are a five digit product code and the price. These product codes match the SKU numbers column and the prices match the OLD DIRECT PRICE column which appear below. There is no other identifying information.
a photocopy of a computer-generated document dated 5/20/02, labeled “pricing 98” and titled “Martlet Importing Co., Inc. Price Listing” (only the pertinent information contained therein is reproduced here):
SKU
DESCRIPTION
OLD
DIRECT PRICE
22102
Presidente NR24 / 12oz 4 X 6MU
14.66
22108
Presidente NR12 / 22 oz LS MU
13.28
22110
Presidente NR24 / 12oz 2X12MU
14.15
page 2 of a computerized report dated 5/17/02 and labeled “Miller / Molson Item Cross Reference by Brand / Package” (only the pertinent information contained therein is reproduced here):
Molson Item ID
Molson Description
Eq Case Conversion Factor
22110
Presidente NR24 / 12oz 2X12MU
1.0000
22103
Presidente NR24 / 12oz 2X12RG
1.0000
22104
Presidente NR24 / 12oz LSE RG
1.0000
22103
Presidente NR24 / 12oz LSE MU
1.0000
22105
Presidente NR24 / 12 oz 4 X 6 RG
1.0000
22302
Presidente NR24 / 12oz 4 X 6MU
1.0000
22108
Presidente NR12 / 22 oz LS MU
.9167
22107
Presidente NR12 / 22 oz LS RG
.9167
a photocopy of an undated document on which is handwritten in two different handwriting styles:
Presidente – Phoenix Bvg.
beer to be destroyed
(22108)
8858 cases Presidente 22 oz dated March 1
(22110)
8544 cases Presidente 12 pk dated Feb 1
(22102)
150 cases Presidente 6 pk dated March 1
Reason for destruction.
Sales did not perform to inventory levels.
From: Petie D.
Phoenix Bvg.
ISSUES:
1. Whether the claimant has satisfied 26 USC § 5062(c)?
2. Whether drawback of internal revenue taxes can be paid per 19 USC § 1313(j)(1) or § 1313(j)(2)?
3. If drawback of internal revenue taxes can be paid per 19 USC § 1313(j)(1) or § 1313(j)(2) has the claimant satisfied the requirements of either provision?
LAW AND ANALYSIS:
We note initially that the instant Protest was timely filed, i.e., within 90 days of the liquidation of the entry (19 USC § 1514(c)(3)(B)). Under 19 USC § 1514(a) “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the liquidation or reliquidation of an entry . . . are final unless a protest of that decision is filed within 90 days of the decision (19 USC §1514(c)(3)(B)). The subject entry was liquidated on May 25, 2001, and this Protest filed on August 21, 2001. Also, the matter under protest, denial of drawback, is protestable per 19 USC § 1514(a)(6).
It is the opinion of the port that this Protest warrants further review: we disagree that further review is warranted. Under 19 USC § 1515, “[u]pon the request of the protesting party . . . a protest may be subject to further review by another appropriate customs officer, under the circumstances and in the form and manner that may be prescribed . . . in regulations." 19 CFR § 174.24 provides for further review of a protest when, inter alia, “the decision against which the protest was filed” is included in this section. The Protestant seeks further review per 19 CFR § 174.24(a), which provides for further review when the decision against which the protest was filed,
is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise
(19 CFR § 174.24(a)). The Protestant does not state with which ruling of the Commissioner of Customs or his designee, or decision made at a port it believes the decision to deny its drawback claim is inconsistent. Furthermore, the issues presented herein were addressed conclusively in HRL 229322 (December 19, 2001). Consequently, we note at the outset that the criteria for further review as set out in 19 CFR § 174.24 have not been met by the subject Application, and will treat this application as a request for internal advice per 19 CFR § 177.11.
There is also considerable confusion regarding under which statutory provision the Protestant is claiming drawback. According to the CF 7551, the Protestant filed its drawback claim pursuant to "19 CFR 191.61-68." We note that Title 19, Part 191, subpart P of the Code of Federal Regulations (§ 191.161-§ 191.168) promulgated under authority of 26 USC § 5062(c), provides for the verification of drawback claims and is not a drawback provision. We assume that the Protestant intended a reference to 26 USC § 5062(c) which pertains to refund of IR taxes.
However, the Declaration in Section V of the CF 7553 refers to merchandise that is “commercially interchangeable with the designated imported merchandise,” which clearly refers to substitution unused merchandise drawback per 19 USC § 1313(j)(2). Further, the Protestant’s counsel argues that “substitution unused drawback is provided for in 19 CFR § 191.32.” Obviously, drawback is not provided for in the Customs Regulations - substitution unused drawback is payable per 19 USC § 1313(j)(2). Title 19, Part 191, subpart C of the Code of Federal Regulations (§ 191.31 - § 191.38) contains the regulations for unused merchandise drawback.
In its “submission in support of Protest 0401-01-100210” the Protestant argues that drawback of its IR taxes should be granted pursuant to 19 USC § 1313(j)(2), substitution unused merchandise drawback or § 1313(j)(1) direct identification unused merchandise drawback, but, the Protestant’s counsel also states,
it is the protestant’s position that no substitution takes place, but for the purposes of this protest, since substitution is allowed, the term “substitution” will be used . . . .
We are at a loss as to the meaning of this statement since the Protestant also sent an additional submission with supplementary evidence (in addition to its original protest) supporting its argument for substitution unused merchandise drawback.
Protestant’s counsel also argues that “there is no requirement that the destroyed merchandise be linked in any way to an importation.” Again we are at a loss as to the meaning of this statement since, per the statutory language, drawback per § 1313(j)(2) or § 1313(j)(1) requires an importation. Finally, Protestant’s counsel states that the claim was originally filed as a “rejected merchandise claim” but then argues that the destroyed beer can be traced directly to a “particular import entry,” presumably arguing that the claim meets the requirements of direct identification unused merchandise drawback (per or § 1313(j)(1)), but a claim under this section does not require that the goods be rejected. Therefore, given the confusion as to under which statute the Protestant is claiming drawback, we address the viability of this drawback claim under all three sections: drawback of Customs duties per 19 USC § 1313(j)(2) or 19 USC § 1313(j)(1); and drawback per 26 USC § 5062(c) (19 CFR § 191.161), which provides for a refund of IR taxes paid on unmerchantable beer.
26 USC § 5062(c) provides,
(c) Exportation of imported liquors.
(1) Allowance of tax. Upon the exportation of imported distilled spirits, wines, and beer upon which the duties and internal revenue taxes have been paid or determined incident to their importation into the United States, and which have been found after entry to be unmerchantable or not to conform to sample or specifications, and which have been returned to customs custody, the Secretary shall, under such regulations as he shall prescribe, refund, remit, abate, or credit, without interest, to the importer thereof, the full amount of the internal revenue taxes paid or determined with respect to such distilled spirits, wines, or beer.
(2) Destruction in lieu of exportation. At the option of the importer, such imported distilled spirits, wines, and beer, after return to customs custody, may be destroyed under customs supervision and the importer thereof granted relief in the same manner and to the same extent as provided in this subsection upon exportation.
(26 USC 5062(c).) 19 CFR § 191.161, states,
Section 5062(c), Internal Revenue Code, as amended (26 USC 5062(c)), provides for the refund, remission, abatement or credit to the importer of internal-revenue taxes paid or determined incident to importation, upon the exportation, or destruction under Customs supervision, of imported distilled spirits, wines, or beer found after entry to be unmerchantable or not to conform to sample or specifications and which are returned to Customs custody.
(19 CFR § 191.161). Therefore, IR taxes paid for unmerchantable or nonconforming distilled spirits, beer and wine, exported or destroyed under Customs supervision, and which are returned to Customs' custody, may be refunded per 26 USC § 5062(c) and Customs Regulations 19 CFR § 191.161 through § 191.168.
In order to qualify for drawback under 26 USC § 5062(c), the importer must claim drawback by filing a CF 7551 (per § 191.163(a)) which
shall be accompanied by a certificate of the importer setting forth in detail the facts which cause the merchandise to be unmerchantable and any additional evidence that the drawback office requires to establish that the merchandise is unmerchantable
(19 CFR § 191.163(b)). The Protestant has not met the requirements of § 191.163; Martlet has not provided a certificate attached to the CF 7551 setting forth in detail the facts which caused the merchandise to be unmerchantable. Martlet has included a photocopy of an undated handwritten document which states, in part: “Reason for destruction. Sales did not perform to inventory levels.” It is signed, “From: Petie D. Phoenix Bvg.” It is unclear whether this document is an attempt to satisfy § 191.163(b), however, if so, it is untimely and wholly inadequate. First, 19 CFR § 191.163(b) requires that the importer’s certificate be filed with the CF 7551. There is no evidence that this document was filed contemporaneously with the CF 7551. Moreover, an undated document, signed by an unidentified individual with no apparent connection to the claimant cannot constitute “a certificate of the importer” as required. Without this certification, drawback per 26 USC § 5062(c) cannot be granted. (See HRL 229322 (December 19, 2001).
The Protestant appears to address the unmerchantability of the beer when stating its position regarding the “traceability issue,” which we presume to be the Protestant’s argument for drawback per § 1313(j)(1), direct identification unused merchandise drawback. However, it is also unclear as to whether this section applies to the instant Protest because it is labeled “Miller Brewing,” and states “according to documentation provided by Miller;” we fail to find the connection between Miller Brewing and Martlet. Nevertheless, we address the issue here.
There are additional requirements but essentially § 1313(j)(1) provides for a refund of 99 percent of the amount of each duty, tax or fee imposed under federal law because of importation of merchandise which is not used within the U.S. and exported or destroyed under Customs supervision, within three years from the date of importation. Under § 1313(j)(1) the merchandise exported or destroyed must be the same merchandise that was imported, hence, direct identification unused merchandise drawback.
In the section labeled “Miller Brewing,” it is explained how beer with an “expired shelf life [which] must be returned” because it is unmerchantable can be “traced back to a specific import entry” using “key data elements.” Among these elements are the brewery order number, the date of production and the entry number. These identifiers are used when a retailer returns older, “out of code” beer to its distributor for credit. Given that the only evidence to support the contention that this accounting process enables the direct identification of the destroyed beer is a “deposit credit request” from SilverFoam Distribution to Foster’s USA, Inc., (neither of which are identified as parties here) the Protestant has not proved a drawback claim per 19 USC § 1313(j)(1).
The best evidence of a direct identification drawback claim is the documents attached to the CF 7551: the import information; chronological summary of exports; and calculation sheet. However, these are of limited value because they all originate with Martlet and require corroborating evidence. But the additional evidence supplied by Martlet still does not prove direct identification because so much of that evidence is either illegible or unidentified. The additional evidence either cannot be read or cannot be linked sufficiently to other evidence.
In its “submission in support of Protest 0401-01-100210” the Protestant argues that drawback of its IR taxes should be granted pursuant to 19 USC § 1313(j)(2), substitution unused merchandise drawback but, the Protestant’s counsel also argues that “there is no requirement that the destroyed merchandise be linked in any way to an importation.” Again we are at a loss as to the meaning of this statement since, drawback per § 1313(j)(2) or § 1313(j)(1) requires an importation. However, drawback of IR taxes is not permissible under either § 1313(j)(2) or § 1313(j)(1).
Customs has determined that drawback per 19 USC § 1313(j) does not apply to IR taxes paid. In HRL 229322 (December 19, 2001) we held that a claimant “may not receive drawback of its IR taxes pursuant to 19 USC §§ 1313(j)(1) or (j)(2), because the beer taxes are imposed by 26 USC § 5051(a) and drawback thereto is established by 26 USC § 5062(c).” This holding was based on HRL 227347(April 18, 1997) and 227916, (January 6, 1999) both of which held that IR tax on tobacco products was not refundable under § 1313(j) inasmuch as the tax on tobacco products and drawback thereof is specifically provided for in the Internal Revenue Code: drawback of IR tax paid on cigarettes under 26 USC § 5701 is provided by 26 USC § 5706. Likewise, in the present case drawback for destroyed beer is established exclusively under the Internal Revenue Code per 26 USC § 5062(c).
This position is required by the Court of International Trade’s decision in Dynacraft Industries, Inc. v. United States, (118 F. Supp. 2d 1286 (Ct. Intl. Trade 2000)). In this case Dynacraft argued that it was entitled to interest under 19 USC § 1505(b) and (c ) on a refund of cash deposits of antidumping duty. The CIT denied Dynacraft’s claim and found that 19 USC §§ 1673f and 1677g provide exclusively for the payment of interest on antidumping duties:
First, a specific statute that addresses a narrow, precise subject, such as §§ 1673f and 1677g, will be given preference over a later-enacted more general statute, such as the provision of § 1505 relied on by Dynacraft, unless there is a clearly expressed congressional intent to the contrary. See Radzanower v. Touche Ross & Co., 426 U.S. 148, 153, 48 L. Ed. 2d 540, 96 S. Ct. 1989 (1976) ("It is a basic principle of statutory construction that a statute dealing with a narrow, precise, and specific subject is not submerged by a later enacted statute covering a more generalized spectrum.").
Second, if 19 USC § 1505 applied in the manner sought by Dynacraft, the interest provision of 19 USC § 1673f(b) would be redundant. Pierce v. Underwood, 487 U.S. 552, 582, 101 L. Ed. 2d 490, 108 S. Ct. 2541 (1988) (citations omitted) (noting that statutes should not be construed to render a part redundant).
Therefore, since drawback for destroyed beer is established exclusively under the Internal Revenue Code per 26 USC § 5062(c) it is not available under 19 USC §§ 1313(j)(1) or (2). Despite this conclusion we next address Martlet’s positions regarding the denied drawback claim.
Under 19 USC §1313(j)(2), as amended, substitution unused merchandise drawback may be granted if there is, with respect to imported duty-paid merchandise, any other merchandise that is commercially interchangeable with the imported merchandise and if the following requirements are met. The other merchandise must be exported or destroyed within 3 years from the date of importation of the imported merchandise. Before the exportation or destruction, the other merchandise may not have been used in the United States and must have been in the possession of the drawback claimant. The party claiming drawback must be either the importer of the imported merchandise or have received from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to that party the imported merchandise, commercially interchangeable merchandise, or any combination thereof. Since the statute does not define commercially interchangeable we refer to the legislative history.
Before its amendment by Public Law 103-182, the standard for substitution under section 1313(j)(2) was "fungibility". House Report 103-361, 103d Cong., 1st Sess. (1993), contains language explaining the change from fungibility to commercial interchangeability. According to the Report (at page 131), the standard was intended to be made less restrictive (i.e., "the Committee intends to permit the substitution of merchandise when it is 'commercially interchangeable,' rather than when it is 'commercially identical'") (the reference to "commercially identical" derives from the definition of fungible merchandise in the Customs Regulations (19 C.F.R. § 191.2(1))). The Report (at page 131) also states:
The Committee further intends that in determining whether two articles were commercially interchangeable, the criteria to be considered would include, but not be limited to: Governmental and recognized industrial standards, part numbers, tariff classification, and relative values.
Moreover, the amended Customs Regulations, 19 C.F.R. § 191.32(c), provide that in determining commercial interchangeability:
Customs shall evaluate the critical properties of the substituted merchandise and in that evaluation factors to be considered include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.
Thus, in order to determine commercial interchangeability, Customs adheres to the Customs regulations which implement the operational language of the legislative history. The best evidence of whether those criteria are used in a particular transaction are the claimant’s transaction documents. Underlying purchase and sales contracts, purchase invoices, purchase orders, and inventory records show whether a claimant has followed a particular recognized industry standard, or a governmental standard, or any combination of the two, and whether a claimant uses part numbers to buy, sell, and inventory the merchandise in issue. The purchase and sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant’s records would show that fact which will enable Customs to follow the Congressional directions. Therefore, to determine whether the designated beer and the destroyed beer are commercially interchangeable, an analysis of the supplied documents is required.
With regard to the supplied documents we note at the outset that they are, at best, of marginal evidentiary value. As stated in the FACTS portion above, several of the documents are either completely or partially illegible, such as the invoices and delivery orders. Some documents pertain to entities not identified by the Protestant, i.e., Phoenix Beverage, Miller / Molson, Molson Breweries. Still other documents are completely unidentified, such as the three pages containing the “price / factors.” These three pages identify no issuer. Another document is undated and signed simply, “from Petie D.” Taken together the documents supplied are wholly inadequate to support any claim herein considered.
Governmental and Recognized Industry Standards
The Protestant states that “there are certain governmental standards that are in place concerning alcoholic beverages, one of which is packaging that requires certain warnings and also alcohol content.” However, no evidence of or citation to any of these “certain governmental standards” has been provided. Martlet further states that the destroyed beer and the designated beer “have exactly the same packaging and contents” and thus meet the governmental and industry standard. We disagree.
First, without an explanation of what the government standards require we cannot evaluate whether the imported and destroyed beer met such standards. Second, there is no proof that the destroyed beer and the designated beer had the same packaging and contents. Third, it seems likely that the standards envisioned by Congress as criteria for commercial interchangeability must relate specifically to the goods, i.e., industry consensus standards that ensure all products meeting a standard are used in the same manner, regardless of manufacturer. Under normal circumstances, materials that meet the same industry accepted or government standard can be used to produce the same products or utilized for the same purposes. These uses are normally stated in the standard. The labeling and alcohol content standards referred to by the Protestant would apply to any beer, not just Presidente beer.
Tariff Classification
According to the CF 7501 the imported beer was classified at subheading 2203.00.0030, (HTSUS), as beer made from malt, in containers of glass holding not over 4 liters. The drawback calculation sheet attached to the CF 7551 applies the same subheading number to the destroyed beer. Again, any beer made from malt in glass packages not over 4 liters would be classified under this subheading. Therefore, the fact that the imported merchandise and the destroyed merchandise were classified under the same subheading is evidence that both merchandise was in fact beer made from malt. However, since such a description is very broad, the tariff classification of the imported and destroyed beer is only minimally persuasive.
Part Numbers
It is clear from the evidence that Martlet identifies the beer at issue by a product code that identifies the beer by name and how it is packaged, i.e.,
Product Code Name Packaging
22102 Presidente NR24 / 12oz 4 X 6MU
22108 Presidente NR12 / 22 oz LS MU
22110 Presidente NR24 / 12oz 2X12MU.
The above product codes appear on the purchase order, price listing, CF 7551 and CF 7553. The destroyed beer, as evidenced by the 7553 and the imported beer, as evidenced by the documents attached to the 7553, which identify the entry numbers associated with the destroyed product codes, both consisted of Presidente beer packaged as stated above.
Relative Values
The purchase order between Martlet and the brewery lists the price of product 22102 (NR24 / 12oz 4 X 6MU) per unit. There is no other information available on the prices Martlet pays the brewery for the two other product codes. The price as between Martlet and Phoenix Beverage is included for all three product codes. The value of the destroyed beer is provided for each product code but the unit given is liters. When compared, the value per liter of the destroyed beer is 54 percent less than the price per liter as between Martlet and Phoenix Beverage for the same product code. The Protestant states that the designated and imported beer are of “substantially the same value taking into account the market fluctuation which is not significant.” In light of Martlet’s argument (detailed below) that “the designated merchandise and the destroyed merchandise were produced on or about the same day” it is unclear what “market fluctuation” to which the Protestant refers.
Additional Relevant Factors
The beer at issue is identified by a unique trade name, i.e., Presidente, that identifies a specific kind or brand of beer. Presidente is a pilsner type beer brewed by the Cerveza Cervecería Nacional Dominicana in Santo Domingo, Dominican Republic. The use of a unique trade name to identify this beer, indicates that any beer bearing this name is the same beer.
The Protestant further states,
the beer destroyed and the beer designated is one and the same as it was imported and sent to Phoenix Distributors and returned from Phoenix Distributor for destruction. However, if not exactly the same beer, the production dates are so similar as to not give rise to any question that the quality of one differs from the quality of the other.
We do not agree that because the designated and destroyed beer were produced at the exact, or almost the exact same time that this supports the argument that such beer is commercially interchangeable. It is clear that beer is a perishable product; it deteriorates as it ages. The Protestant explains,
[w]hile returns over 120 days [old] are accepted for credit, the distributor controls the actual shelf-life, and given he time frames involved, the shelf life [of the destroyed beer] was set at 180 days.
Therefore, by the Protestant’s own standard, fresher beer is more desirable beer. In fact, the older beer was destroyed because it could not be sold. The beer that was destroyed in August 1999 was less fresh, and therefore less desirable than the designated beer which was imported in September 1998. The destroyed beer is described as “aged” on the CF 7553 and the CF 7551. If the aged, destroyed beer was not less desirable, if it was in fact commercially interchangeable with the designated beer, the distributor would not have returned it for credit.
The Protestant cites Texport Oil Co. v. United States, in support of its position that the designated and destroyed beer are commercially interchangeable (185 F.3d 1291 (U.S. App 1999)). In that case the Court of Appeals for the Federal Circuit stated,
we are convinced that Congress intended "commercially interchangeable" to be an objective, market-based consideration of the primary purpose of the goods in question. See, e.g., S. Rep. No. 103-189, at 83 (noting intention to create objective, fact-based standard); H.R. Rep. No. 103-361, at 131 (1993), reprinted in 1993 U.S.C.C.A.N. 2552, 2681. Therefore, "commercially interchangeable" must be determined objectively from the perspective of a hypothetical reasonable competitor; if a reasonable competitor would accept either the imported or the exported good for its primary commercial purpose, then the goods are "commercially interchangeable" according to 19 USC § 1313(j)(2).
(Id. at 1295.) Using the CAFC’s standard it is clear that a “reasonable competitor” would not accept the destroyed beer in place of the imported beer for its primary commercial purpose, retail sales, because the destroyed beer had exceeded its shelf life and was no longer suitable for sale to retail customers. Therefore, the imported beer and the destroyed beer are not "commercially interchangeable" according to 19 USC § 1313(j)(2).
HOLDING
1. The protestant is not entitled to drawback under 26 USC § 5062(c) as implemented by 19 CFR § 191.163(b) for failure to comply with that provision by neglecting to provide the required supporting evidence. The protest should be DENIED regarding this claim.
2. The protestant is not entitled to drawback of its IR taxes under 19 USC § 1313(j)(2) or 19 USC § 1313(j)(1), because the tax on beer is imposed by 26 USC § 5051(a) and drawback thereto is established exclusively by 26 USC § 5062(c). The Protestant also has not provided sufficient evidence to support this claim. The protest should be DENIED regarding this claim.
3. The protestant is not entitled to drawback of its IR taxes under 19 USC § 1313(j)(2) or 19 USC § 1313(j)(1), because Martlet importing has not proved that the designated and destroyed beer were either commercially interchangeable or directly identified; the Protestant has not provided sufficient evidence to support this claim. The protest should be DENIED regarding this claim.
In accordance with Section 3A (11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with this decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make this decision available to Customs personnel, and to the public via the Customs Home Page on the World Wide Web, the Freedom of Information Act, and other public distribution channels.
Sincerely,
Myles Harmon, Acting Director
Commercial Rulings Division