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228541
OT:RR:CTF:ER H011707 PTM
Port Director
U.S. Customs and Border Protection
555 Battery Street
San Francisco, CA 94111-2316
RE: Protest No. 2809-07-100171, 19 U.S.C. 1313(c), 19 CFR 191.41
Dear Sir or Madam,
This ruling addresses the request for further review of protest of drawback claim no. APN-XXXX084-9 submitted by Apex Digital, Inc. (herein “Apex”). Our decision follows.
FACTS
Apex makes and sells electronics such as DVD players, televisions, cameras and car stereos. Apex sells these products to numerous retailers including Walmart, K-Mart, Sears and Target. Apex occasionally conducts business under various corporate affiliates, which include United Delta, Inc., LSY Trading and Apex Digital LLC.
On March 1, 2005, Apex filed drawback claim number MQ6-XXXX682-8 as a type 43, rejected merchandise claim in the Long Beach Drawback Office. With this claim, Apex filed an original U.S. Customs and Border Protection (CBP) Form 7553, Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback. The drawback specialist sent the broker, Baltran Logistics, Inc. (“Baltran”), a request for additional information, including copies of certificates of delivery from the importer (United Delta), to Apex. Baltran responded on June 9, 2005, requesting that the subject claim be liquidated at zero drawback, including 17 additional drawback claims filed on behalf of Apex. The claim was liquidated on July 8, 2005, without benefit of drawback. No protest was filed.
On January 19, 2006, Apex filed drawback claim number APN-XXXX084-9 as a type 43, rejected merchandise drawback claim pursuant to 19 U.S.C. §1313(c), for entry no. APN-XXXX084-9, which entered on January 16, 2006. On April 19, 2006, the drawback specialist contacted the broker and requested documentation necessary to establish that the merchandise was defective at the time of importation, and an original CBP Form 7553, “Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback” containing original signatures of CBP inspectors. On May 9, 2006, the broker, N.F. Stroth and Associates (“Stroth”), responded by a letter. Stroth stated that the original copy of the CBP Form 7553 was not provided because it was submitted to the CBP Los Angeles office under claim number MQ6-XXXX682-8. On December 8, 2006, Stroth was informed that drawback was denied on the subject entry due to failure to provide the CBP Form 7553 with original signatures of the CBP inspectors. On December 28, 2006, the entry was liquidated without the benefit of drawback.
Apex filed a protest on March 5, 2007. In the protest, Apex states:
Apex Digital has filed seven drawback claims in the San Francisco port all of which did not have the original 7553, however Customs was able to liquidate five of the drawback entries for the requested drawback amount because there was sufficient proof of Customs knowledge of inspection and exportation. We {would} like to request Claim APNXXXX084-9 be given the same consideration.
The protest did not identify the drawback claims that were liquidated with the benefit of drawback without an original CBP Form 7553. The protest did include a copy of the original CBP Form 7553 filed for the abandoned drawback claim MQ6-XXXX682-8 that was originally filed with the Long Beach Drawback Office and which the claimant states should now be used for the current protested claim. However, the protest did not include any evidence to substantiate its position that its customers had refused the merchandise. On April 30, 2007, the protest was forwarded to this office for further review.
ISSUES
Is Apex entitled to drawback pursuant to 19 U.S.C. §1313(c)?
Has Apex been subjected to inconsistent treatment?
LAW AND ANALYSIS
Initially, we note that the protest was timely filed within 180 days of liquidation of the drawback entry on December 28, 2006, under the statutory provisions for protests. See 19 U.S.C. § 1514(c)(3). 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), which provides for a refund of duties on imported merchandise, exported or destroyed under CBP’s supervision, within three years from the date of importation, and not used within the United States before such exportation or destruction.
The criteria for further is provided in 19 CFR §174.24, which states:
§174.24 Criteria for further review
Further review of a protest which would otherwise be denied by the port director shall be accorded a party filing an application for further review which meets the requirements of §174.24 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;
Is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts.
Since the protest involves questions of law or fact that have not previously been ruled upon, the criteria for further review by this office have been met per 19 CFR §§174.24(a) and 174.26(b)(1). Additionally, although the claimant does not specifically raise the claim, it suggests that it has been subjected to inconsistent treatment, which would meet the criteria for further review per 19 CFR §174.24(b). Specifically, the protestant is alleging that because CBP did not require the Notice of Intent to Export (CBP Form 7553) in liquidating some of its other claims, that its decision to require the CBP Form 7553 in the instant case constitutes inconsistent treatment.
Rejected merchandise drawback is provided for pursuant to 19 U.S.C. §1313(c). The statutory provision states:
(c) Merchandise not conforming to sample or specifications. (1) Conditions for drawback. Upon the exportation or destruction under the supervision of the Customs Service of articles or merchandise-- (A) upon which the duties have been paid, (B) which has been entered or withdrawn for consumption, (C) which is-- (i) not conforming to sample or specifications, shipped without the consent of the consignee, or determined to be defective as of the time of importation, or (ii) ultimately sold at retail by the importer, or the person who received the merchandise from the importer under a certificate of delivery, and for any reason returned to and accepted by the importer, or the person who received the merchandise from the importer under a certificate of delivery, and (D) which, within 3 years after the date of importation or withdrawal, as applicable, has been exported or destroyed 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.
(2) Designation of import entries. For purposes of paragraph (1)(C)(ii), drawback may be claimed by designating an entry of merchandise that was imported within 1 year before the date of exportation or destruction of the merchandise described in paragraph (1) (A) and (B) under the supervision of the Customs Service. The merchandise designated for drawback must be identified in the import documentation with the same eight-digit classification number and specific product identifier (such as part number, SKU, or product code) as the returned merchandise. (3) When drawback certificates not required. For purposes of this subsection, drawback certificates are not required if the drawback claimant and the importer are the same party, or if the drawback claimant is a drawback successor to the importer as defined in subsection (s)(3).
See 19 U.S.C. §1313(c).
A review of CBP’s Automated Commercial System (“ACS”) shows that the entries were liquidated and duty was paid, satisfying the first two elements requiring that the merchandise must be duty paid and entered for consumption. See 19 U.S.C. §1313(c)(1)(A) & (B). Next, Apex must establish that the televisions were “determined to be defective as of the time of importation.” See 19 U.S.C. §1313(c)(1)(C)(i); 19 CFR §191.42(b). To accomplish this, Apex “must provide evidence that the importer and foreign supplier agreed that the imported merchandise was defective at the time of importation.” See HQ 228541 (April 5, 2000). If no such agreement is provided, the importer must demonstrate it is defective by either showing that it did not conform to the specifications or showing that it failed meet a warranty guarantee. See, e.g., id.
In the instant case, the drawback specialist reviewing the claim contacted Stroth on April 19, 2006, to inform it that it needed to submit documentation establishing that the merchandise was indeed defective at the time of importation. No certificates of delivery, returned merchandise authorizations, or other documentation corroborating the assertion that merchandise was refused by its customers was provided by Apex. On January 21, 2010, this office also contacted Stroth to request documentation establishing that the merchandise was defective, and we received no response.
It is well established that drawback laws confer a privilege, not a right. See Swan & Finch Company v. United States, 190 U.S. 143, 146 (1903). When merchandise is imported and a drawback statute may potentially be applicable, an accruing or inchoate right may be said to arise. However, the right to recover drawback ripens only when all provisions of the statute and applicable regulations prescribed under its authority have been met. See, e.g., Guess? Incorporated v. United States, 944 F.2d 855, 858 (Fed. Cir. 1991); Romar Trading Co., Inc. v. United States, 27 Cust. Ct. 34 (1951); General Motors Corporation v. United States, 32 Cust. Ct. 94 (1954). Drawback claimants must strictly adhere to the requirements set forth in the statutes and the applicable regulations. See Guess? Incorporated v. United States, 944 F.2d at 858; United States v. W. C. Hardesty Co, Inc., 36 CCPA 47, C.A.D. 396 (1949); Spencer, Kellogg & Sons (Inc.) v. United States, 13 CCPA 612 (1926).
Because 19 CFR §191.42(b) unambiguously requires the applicant to provide documentation establishing that the merchandise was defective at the time of importation, and because Apex failed to do so, it has not satisfied the statutory requirements to recover drawback pursuant to 19 U.S.C. §1313(c). Consequently, the dispute over whether the original CBP Form 7553 was provided as required is moot. Even if the CBP Form 7553 submitted with the earlier claim was sufficient to satisfy the requirements of providing a notice of intent to export or destroy merchandise pursuant to 19 CFR §191.42(c), the claim is nevertheless deficient for failure to establish that the merchandise was defective at the time of importation.
Although Apex did not specifically allege inconsistent treatment, it stated that other entries were liquidated in the Port of San Francisco with drawback without the original CBP Form 7553, and requested that this claim be given the same consideration. While we have determined that it is not necessary to analyze the sufficiency of the CBP Form 7553 for this claim, we note that 19 CFR §191.42(c) requires the Form 7553. Additionally, Apex has not identified the other drawback claims that might give rise to a claim for inconsistent action between the two ports. Therefore, Apex failed to properly allege inconsistent treatment pursuant to 19 CFR §174.24(a).
HOLDING
Consistent with the decision set forth above, you are hereby directed to DENY the protest. Sixty days from the date of the decision the Office of 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, Director Commercial and Trade Facilitation Division