Customs Ruling HQ H008953 - Protest 5301-06-100333; Application for Further Review; 19 U.S.C. 1514; Direct Identification, Unused Merchandise Drawback, 19 U.S.C. §1313(j)(1).

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HQ H008953
Feb 17, 2010

Type : • HTSUS :
Related: 228272

OT:RR:CTF:ER H008953 PTM

Ms. Christina D. Brooks
2350 N. Sam Houston Parkway East, Ste. 1000
Houston, TX 77032-3126

RE: Protest 5301-06-100333; Application for Further Review; 19 U.S.C. 1514; Direct Identification, Unused Merchandise Drawback, 19 U.S.C. §1313(j)(1).

Dear Ms. Brooks,

You have forwarded to this office an Application for Further Review pursuant to 19 U.S.C. §1514 for the above-referenced protest. Our response follows.

FACTS:

The protest involves the disallowance of drawback claim no. AA6-0314463 filed pursuant to 19 U.S.C §1313(j)(1), direct identification, unused merchandise drawback on a shipment of 18” x 30” red color mesh bags imported under entry number 336-484XXXXX by Fritz Marketing, Inc. (herein “Fritz”), imported on September 7, 2003. Drawback was disallowed by U.S. Customs and Border Protection, Port of Houston TX (herein the “Port”) on June 12, 2005 because it determined that the claimant had failed to establish that the designated imported merchandise was the same product as the exported merchandise.

Protest was timely filed by Fritz on August 11, 2006. In the protest, Fritz claims that it sufficiently matched the designated imports with the exported merchandise and that the documentation supporting its claims substantiates this position. Fritz claims that the product description, quantity, and the use of a specific reference number for the order “AFMP 2013/03” for both the imported and exported merchandise is evidence that the imported merchandise is the same as the exported merchandise.

For the import transaction, Fritz provided the following documentation:

CBP Form 7501 Entry Summary for entry # 48XXXXX-6 covering 200 Containers of “TEXT/MAT.POLYETHYL/PROP. <1 KG. The importer of record is Fritz, and the ultimate consignee is United Bags, Inc. Commercial Invoice by Zhejiang Chemicals Import and Export Corporation to Fritz for the sale of size 18X30 Red Color bags with black woven draw-tape packed in two hundred bale lots. The Invoice contains the reference “AFMP 2013/03” dated August 7, 2003. Import packing list for 400,000 bags made from Leno Mesh Fabric, Red Color, Size 18X30, with reference “AFMP 2013/03” A purchase order for dated 4/15/2003 from United Bags, Inc. (“United Bags”) to Fritz indicating the purchase of 400,000 mesh 18x30 red bag OXG tight weave, black woven draw-tape, plain no label, packaged 500 bags per bundle with each bundle wrapped in polypropylene, shipping to Stockton, Missouri. The unit price is listed as 0.0820. The document contains a hand notation “FM2013/03.” A contract between Fritz and United Bags, Inc. for the purchase of 400,000 bags sized 18x30, red color with black woven draw-tape, packaged in 200 bundles. A Contract and Rate Quotation from Consolidated Transfer & Warehouse Co., Inc. to Fritz Marketing for the storage of Plastic Bags in Bale dated September 23, 2003. Invoice No. 133333 of Consolidated Transfer & Warehouse for the account of Fritz showing the receipt of 200 units into warehouse on October 1, 2003, with reference number TEXU7405340. An Accuplus inventory statement for the period of January 1, 2003 through December 31, 2006 showing the receipt on October 1, 2003 of 200 units of merchandise from Fritz. The Lot No. assigned is 72845. The container reference number is TEXU7405340. It also shows the shipment of 200 units of merchandise, Lot No. 72845 on February 23, 2005. The shipment shows reference No. 3962. A bill of lading dated August 21, 2003 showing the shipment of 200 bales of bags made from Leno mesh Fabrics, consigned to Fritz Marketing Inc. C/O Danzas/ AEI Customs Brokerage Services, laden on the Ever Guide, with place of delivery listed as Stockton, MO. Under the “Marks and Numbers” column the document references the code “AFMP 2013/03, Size 18X30, Red Color, TEXU7405340”

For the export transaction, the Fritz provided the following documents:

An amended Canadian Customs entry, dated March 11, 2005, showing the entry of 200 units of mesh bags on February 24, 2005. Export Bill of Lading showing the shipment of 400,000 Red bags with black draw tape, dated February 14, 2005. Invoice #021105 dated February 11, 2005 from United Bags, Inc to Fritz, showing the sale of 400,000 size 18X30 bags, and referencing customer order reference No: AFMP 2013/03. Export packing list dated February 11, 2005 showing the shipment of 400,000 size 18X30 mesh bags with red color and black woven draw tape. It lists the shipper as United Bags., Inc. shipping from KC Warehouse of Consolidated Transfer & Warehouse Co., and referencing invoice #021105, with delivery to Fritz at Norwich, Ontario. The “Deliver To” field shows “Fritz Marketing c/o Agripack ”

ISSUE: Has the claimant properly established that the exported merchandise is the same as the import as required for direct identification unused merchandise drawback?

LAW AND ANALYSIS

Imported duty-paid merchandise that is exported or destroyed is eligible for drawback under 19 U.S.C. §1313(j)(1) if the imported merchandise was not used within the United States before its exportation or destruction. Direct identification means that the identity of the imported merchandise must be maintained, and traceable in the claimant’s records, from time of importation, through receipt, entry into and withdrawal from inventory, and ultimate exportation or destruction of the unused article. The drawback statutes and regulations for unused merchandise drawback provide that the exporter or destroyer has the right to claim drawback as long as all related events and documents comply with applicable Customs drawback statutes and regulations.

In a telephone conversation concerning this protest, Fritz states that the bags were imported from China by Fritz to fill an order placed by United Bags, and were warehoused with Consolidated Transfer and Warehouse Co. of Kansas City, Missouri. The bags did not conform to United Bags’ requirements and were rejected. The bags remained in the warehouse until Fritz was able to find a new purchaser for the bags in Canada, AgriPack Company in Norwich, Ontario. Fritz states that it codes orders according to what country the product is imported to. As Fritz is a Canadian company, orders labeled “FM” or “FMP” denote import orders to Canada. Orders labeled “AFM” or “AFMP” denote import orders to the United States. The “FM” stands for “Fritz Marketing” while “AFM” stands for “American Fritz Marketing” and the “P” stands for a purchase order. Consequently, the order inventory reference code “AFMP 2013/03” denotes purchase order number 2013/03, with the import destination of the United States. Here, Fritz identified 400,000 size 18X30 red drawstring polyurethane bags as the imported merchandise. Although there are slight differences in the description of the product in the various import documentation, the commercial invoice, import packing list, purchase order, contract, and bill of lading all describe the merchandise similarly: either as bags or mesh bags, red color, with black drawstring, with size 18X30. The quantity is listed either by the number of bags (400,000), or the number of bales of bags prepackaged in 2,000 bag lots (200 bales of 2,000 bags for a total of 400,000 bags).

The commercial invoice, import packing list, purchase order and bill of lading all reference order inventory reference AFMP 2013/03. The ACCUPLUS inventory record shows the storage of container number TEXU74053. There is an invoice showing the receipt of 200 bales into warehouse in container number TEXU74053, which corroborates the information on the ACCUPLUS inventory record.

For the export transaction, the ACCUPLUS inventory record shows that the same container of bags, container number TEXU74053, was withdrawn from inventory on February 23, 2005. The bill of lading shows the export of 400,000 red bags, dated February 24, 2005, laden one day after the bags were withdrawn from the warehouse. The invoice shows the sale of 400,000 size 18X30 bags, and references the same reference number (AFMP 2013/03) as the designated import. The export packing list shows the shipment of 400,000 size 18X30 bags, references the aforementioned invoice and also shows the same reference number (AFMP 2013/03) as the designated import.

Thus, both the imported and exported merchandise have substantially similar descriptions. The quantity of the imported and exported bags is identical as described in the supporting documents: either 400,000 or 200 bales of 2,000 bags each for a total of 400,000 bags. Most of the documents pertaining to the imported and exported merchandise reference the same reference number: AFMP 2013/03. Finally, the warehouse inventory record shows the receipt and withdrawal of the same container: TEXU7405340, with no withdrawal of the product for use in the intervening period. This evidence supports Fritz’s claim that the imported merchandise sat unused in the warehouse before its exportation to Canada, and that the designated imported merchandise is the same as the merchandise exported.

The Port expressed doubt over the reliability of the AFMP 2013/03 notation used to track the shipment. In some cases the notation was added manually and initialed. Fritz has informed this office that the notation was added by Lina Morales, The Traffic Import Coordinator of Fritz. Fritz has provided a signed and notarized affidavit wherein Ms. Morales attests to this fact. Specifically, in paragraphs 1&3 of the affidavit, Ms. Morales states: “I am the Office manager of Fritz Marketing Inc. and have personal knowledge of the matters hereunto deposed… I wish to further state that on April 26, 2005, I proceeded to manually write reference number AFMP 2013/03 on United Bags Inc. Invoice and Packing List as United Bags Inc. had failed to specify the aforesaid Reference Number on its Invoice and Packing List.”

Due to the evidence outlined above, we find that the identity of the imported merchandise was maintained and traceable in the claimant’s records, from time of importation, through receipt, entry into and withdrawal from inventory, and ultimate exportation or destruction of the unused article. Consequently, the requirements of direct identification unused merchandise drawback as set forth in 19 U.S.C. §1313(j)(1) have been met.

The next issue is whether Fritz provided sufficient evidence of exportation. The Customs Regulations 191.72 (19 CFR 191.72) require evidence of exportation as follows:

Exportation of articles for drawback purposes shall be established by complying with one of the procedures provided for in this section (in addition to providing prior notice of intent to export if applicable (see §§ 191.35, 191.36, 191.42, and 191.91 of this part)). Supporting documentary evidence shall establish fully the date and fact of exportation and the identity of the exporter. The procedures for establishing exportation outlined by this section include, but are not limited to:(a) Actual evidence of exportation consisting of documentary evidence, such as an originally signed bill of lading, air waybill, freight waybill, Canadian Customs manifest, and/or cargo manifest, or certified copies thereof, issued by the exporting carrier;(b) Export summary (§ 191.73);(c) Certified export invoice for mail shipments (§ 191.74);(d) Notice of lading for supplies on certain vessels or aircraft (§ 191.112); or(e) Notice of transfer for articles manufactured or produced in the U.S. which are transferred to a foreign trade zone (§ 191.183). (emphasis added)

Additionally, the regulations state that the procedures for establishing exportation include, but are not limited to, the procedures listed in (a) through (e). The regulation also requires that the evidence “establish fully the date and fact of exportation.” Therefore, any procedure used to establish exportation must establish the date and fact of exportation.

For goods subject to NAFTA drawback, there are additional requirements for evidence of exportation set forth in 19 CFR §181.47(G). This office, in HQ 228272 (November 8, 1999), held that “allowance of drawback based on exportations to Canada or Mexico, is also subject to the regulations implementing the [NAFTA] in 19 CFR Part 181.” As the imported goods were exported to Canada, the additional requirements for evidence of export must be met. CBP Regulation 181.47(ii)(G) provides: (G) Evidence of exportation. Acceptable documentary evidence of exportation to Canada or Mexico shall include a bill of lading, air waybill, freight waybill, export ocean bill of lading, Canadian customs manifest, cargo manifest, or certified copies thereof, issued by the exporting carrier. Supporting documentary evidence shall establish fully the time and fact of exportation, the identity of the exporter, and the identity and location of the ultimate consignee of the exported goods. (Emphasis added).

You state that Fritz was unable to provide sufficient proof of exportation because the Canada Customs Coding forms provided are defective because they either a) are missing the release date or, b) do not reference the product exported. We do not agree with this assessment. The Canada Customs Coding Form B-3 accompanying this protest shows the import of 200 units (bales) of polymesh bags, imported by Fritz Marketing Inc. and shows a release date of February 24, 2005. Therefore, we find that the Canada Form B-3 is sufficient evidence of exportation per 19 CFR §191.72(a) and §181.47(G).

HOLDING:

You are instructed to GRANT the protest in full. Sixty days from the date of the decision Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, DirectorCommercial and Trade Facilitation Division