OT:RR:CTF:ER
H259469 MES
Port Director
U.S. Customs and Border Protection
Port of San Francisco
555 Battery Street
San Francisco, CA 94111
Attn: Karen Cheung, Drawback Chief, Liquidation Branch
RE: Application for Further Review of Protest No: 2809-14-100672 concerning a claim for drawback on the damaged portion of a screen printing machine
Dear Port Director,
The purpose of this correspondence is to address the application for further review of Protest Number: 2809-14-100672, dated October 15, 2014. The protesting party is CCL Tube, Inc. (“CCL"). We regret the delay in our response.
FACTS:
On May 19, 2009, CCL entered a screen printing machine from Germany. CBP Form 7501, for entry number XXX-XXXX652-3, lists the screen printing machine as a single line item. It was classified under subheading 8479.89.9899, of the Harmonized Tariff Schedule of the United States (HTSUS). The commercial invoice for the entry, dated April 15, 2009, lists the article number as 112194, describes the merchandise as “ISIMAT automatic 6-colour screen printing line for plastic tubes” and provides the total value of the merchandise. The delivery note for the entry, dated April 17, 2009 also lists the article number as 112194 and describes the merchandise as “ISIMAT automatic 6-colour screen printing line for plastic tubes” and does not provide a value. The sea waybill for the entry, dated April 26, 2009, identifies one piece as the screen printing machine, one piece as the switchboard, and one piece as accessories (chaintransporter), provides the weight for each piece, but provides no value.
Upon arrival in the United States, part of the screen printing machine was found to be damaged. The undamaged components of the screen printing machine were exported on June 23, 2009, to the manufacturer in Germany to be re-fitted into another screen printing machine. Both the export invoice and the packing list identify the components as follows: “Electrical cabinet, blower cabinet, outlet belt, pipes for water cooling system, exhaust pipes, UV-metal sheet and 1 set of mandrels for 50mm, 2 touch screen displays, and 7650 sample test tubes (no value).” The export invoice provides a total value but the packing list does not.
CCL filed CBP Form 7553, the notice of intent to export, destroy, or return merchandise for purposes of drawback, on December 9, 2009. CBP waived supervision of the destruction on December 14, 2009. According to the certification of destruction filed on behalf of CCL, the damaged portion of the screen printing machine, described as “ISIMAT Machine No/Commission NO. 10247” and “ISIMAT Machine Art No. 112194,” was destroyed on December 17, 2009, by torch cutting.
On December 23, 2009, CCL entered a screen printing machine from Germany. CBP Form 7501, for entry number XXX-XXXX104-6, lists three line items. The first line item, covering the undamaged components of the screen printing machine imported on May 19, 2009, is listed as “Reimported Nonconforming; Same P” classified under subheading 9801.00.2500 HTSUS, which provides for the duty-free entry of previously imported article on which the duty was paid upon such previous importation. The second line item, covering the portions of the screen printing machine replacing the damaged and destroyed portions of the screen printing machine imported on May 19, 2009, is listed as “Other Machines/Mech APL NSPF” classified under subheading 8479.89.9899, HTSUS. The third line item, covering the user’s manual for operators of the screen printing machine, is listed as “Prof Books, Etc. Returned to US” classified under subheading 9801.00.85003, HTSUS.
The November 3, 2009, pro forma invoice accompanying the December 23, 2009, entry, generally describes the merchandise as article number 112194, “Isimat Automatic 6-Colour Screen Printing Line for Plastic Tubes Including Switchboard and Accessories.” The merchandise is itemized into three line items. The first item is a “Machine electrical Component” with a notation indicating it was “Merchandise Previously Imported in the U.S.A.” The second item, a “Machine Isimat,” is listed as a “Machine Previously Imported, Damaged and Destroyed.” The pro forma invoice also contains the user’s manual, listed as “Tool Box for Isimat Technicians.”
On April 2, 2010, entry number XXX-XXXX652-3 liquidated. On September 3, 2010, CCL filed a claim for drawback with CBP’s San Francisco Drawback Office for the apportioned duty paid relating to the component part of the screen printing machine entered on May 19, 2009, entry number XXX-XXXX652-3, that was damaged and destroyed. On August 15, 2014, the claim was liquidated without drawback. On October 15, 2014, CCL filed a protest regarding CBP’s refusal to pay the claim for drawback. On October 15, 2014, the protest was sent to this office for further review.
In its protest, CCL points to the documents involved in the entry of the screen printing machine on December 23, 2009, including the November 3, 2009, pro forma invoice, in order to show the appropriately apportioned value and duty paid. CCL also notes that the claim for drawback should be amended to state that the merchandise was defective at the time of importation and therefore it is requesting drawback under 19 U.S.C. § 1313(c). Additionally, CCL requests, pursuant to 19 CFR § 24.36, a refund of excessive duties and fees. Further, CCL cites to prior rulings indicating that drawback may not be paid on duties that have been apportioned, and distinguishes its situation from those prior rulings. The Drawback Office states that the protest should be denied due to CBP’s policy that drawback will only be granted on component parts of an item that was imported as a complete unit where the value and duty paid on the component parts can be determined from the entry documents submitted at the time of importation.
ISSUES:
Whether drawback under 19 U.S.C. § 1313(c) is available on the damaged portion of the screen printing press.
LAW & ANALYSIS:
We note initially that the refusal to pay a claim for drawback is a protestable issue and that the protest was timely filed, within 180 days from the date of denial. See 19 U.S.C. § 1514(a)(6) and 19 U.S.C. § 1514(c)(3)(B). CCL’s drawback claim was denied on August 15, 2014, and this protest was filed on October 15, 2014. Further, the protestant requests further review per 19 CFR § 174.24. CBP’s regulations provide for further review of a protest when, inter alia, the decision against which the protest was filed:
(b) 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 19 C.F.R. § 174.24(b).
Upon review of the application for further review, we find that these facts have not been the subject of a Headquarters ruling. See 19 CFR § 174.24(b) and 19 CFR § 174.26(b)(1)(iv). Specifically, protestant alleges that it should be granted drawback under 19 U.S.C. § 1313(c) on the damaged component of the screen printing device that was destroyed prior to arrival. Accordingly, further review is warranted.
Section 313(c) of the Tariff Act of 1930, as amended (19 U.S.C. § 1313(c)), provides for the refund of duties upon the exportation or destruction of duty paid merchandise not conforming to sample or specifications, including merchandise determined to be defective as of the time of importation. See 19 U.S.C. §1313(c)(1)(C)(i). The statute also requires that duties had been paid on the nonconforming merchandise and that it had been entered or withdrawn for consumption. See 19 U.S.C. 1313(c)(1)(A) and (B). Therefore, if CCL can demonstrate the duties paid on the merchandise that was defective as of the time of importation, then it may be able to claim drawback.
Further, when determining the duty paid for drawback purposes, CBP only must consider the documentation submitted at the time of entry. U.S. Courts have held that CBP does not have to undertake special appraisement procedures in order to determine the amount of duties, taxes, or fees paid on portions of merchandise imported as a complete unit. In Windmoeller & Hoelscher Corp. v. United States, 31 CIT 1780 (Nov. 14, 2007), which dealt with 19 U.S.C. § 1313(j)(1), Windmoeller sought to recover a portion of the duties paid on a flexographic printing press that it had imported from Germany because two major components of that printing press were damaged during unloading. The component parts of the printing press were not classified separately at entry. Rather, the printing press was entered under a single subheading and duty was paid at a single rate. When filing its drawback claim, Windmoeller determined the individual component values by reviewing internal cost of production calculations, price lists, parts records and files that were maintained by the manufacturer, none of which were provided at the time of the entry on which drawback was claimed. Further, Windmoeller made a second entry, of replacement parts for the damaged components, and CBP did not dispute the value provided on the second entry for the replacement components. Despite accepting this provided value on the second entry, CBP denied the claim based on its longstanding policy of referring only to documents submitted with the entry on which drawback was claimed. The court stated that neither the statute nor the regulations required CBP to devise and undertake special appraisement procedures to grant drawback. Accordingly, the court discussed prior rulings showing CBP’s consistent policy of only reviewing documents submitted with the entry and determined that CBP did not err in denying Windmoeller’s drawback claim. Id. at 1789-1793.
CBP has prior rulings regarding drawback claims on portions of merchandise imported as a single entry. In HQ 206209, dated May 18, 1976, CBP granted drawback under 19 U.S.C. § 1313(c), on one of two sets of diamonds imported in a single entry because the value of the nonconforming portion was able to be ascertained from the entry documents. In that case, the entry covered two separate transactions of diamonds supported by separate invoices and the entirety of the merchandise on the second invoice was exported. Therefore, the full value of what was exported could be easily identified by the line item on the invoice. In HQ 219606, dated August 24, 1987, CBP stated that drawback could be claimed under 19 U.S.C. § 1313(c) for subway car shells that were to be destroyed under CBP supervision and exported to the foreign manufacturer. In that ruling, CBP stated the following:
Drawback is allowed on the subway car shells insofar as the importer is conclusively able to establish the amount of duty paid for the particular item of rejected merchandise. The Customs officer must be able to verify from the entry documents the amount of duty paid on the car shell, apart from the merchandise that is not rejected.
It is important to note that the assembled subway cars were imported under item 807, TSUS (currently 9802, HTSUS), because they contained U.S. articles that were incorporated into the subway cars abroad. Thus, upon entry, the importer would have had to provide an itemization and exclude the U.S. parts that were incorporated into the imported subway cars. Therefore, CBP has held that drawback is permitted on portions of an entry provided the value of the exported or destroyed merchandise on which drawback is claimed is able to be determined from the entry documents provided at the time of importation.
In this case, for the May 19, 2009, entry on which CCL is claiming drawback, there were multiple entry documents provided at the time of importation. CBP Form 7501, dated May 19, 2009, identifies the merchandise as “other machines/mech APL NSPF” classified under subheading 8479.89.9899, HTSUS. There is no breakdown of value or duty paid based on the component parts of the single imported item. The accompanying April 15, 2009, invoice describes the merchandise as a single “ISIMAT automatic 6-colour screen printing line for plastic tubes” with an article number of 112194 and provides a single amount for the value (in Euros), with no breakdown of value for the component parts. The April 17, 2009, delivery note also describes the merchandise as a single “ISIMAT automatic 6-colour screen printing line for plastic tubes” with an article number of 112194. The May 15, 2009, arrival notice describes the goods as a “Screen Printing Machine” shipped in 3 pieces. The April 26, 2009, sea waybill lists one “Screen Printing Machine,” one “Switchboard,” and one “Accessories (Chaintransporter).” The merchandise is almost exclusively referred to as a single unit throughout these entry documents. Further, the value and duty paid are listed as totals with no breakdown indicating the value or duty paid on component parts of the screen printing machine. Therefore, CBP is not able to determine the value of the damaged and subsequently destroyed portion of the screen printing machine from the entry documents submitted with the May 19, 2009, importation. Accordingly, CCL is unable to obtain drawback under 19 U.S.C. § 1313(c).
In its October 15, 2014, protest, CCL submitted additional documents that were not submitted at the time of the May 19, 2009, importation. The June 23, 2009, commercial invoice regarding the exported (undamaged) components listed the following: “Electrical cabinet, blower cabinet, outlet belt, pipes for water cooling system, exhaust pipes, UV-metal sheet and 1 set of mandrels for 50mm, 2 touch screen displays, and 7650 sample test tubes (no value)” and provided a total value which was less than 10% of the value of the screen printing machine entered on May 19, 2009. The December 23, 2009, CBP Form 7501, lists the entered items on three lines. The first line item is listed as “Reimported Nonconforming; Same P” classified under subheading 9801.00.2500 HTSUS, which provides for the duty-free entry of previously imported article on which the duty was paid upon such previous importation. The second line item is listed as “Other Machines/Mech APL NSPF” classified under subheading 8479.89.9899, HTSUS. The third line item is listed as “Prof Books, Etc. Returned to U.S.” classified under subheading 9801.00.85003, HTSUS. The November 3, 2009, pro forma invoice, related to the December 23, 2009, entry generally describes the merchandise as article number 112194, “Isimat Automatic 6-Colour Screen Printing Line for Plastic Tubes Including Switchboard and Accessories” and the merchandise is itemized into three line items. The first item is a “Machine Electrical Component” with a notation indicating it was “Merchandise Previously Imported in the U.S.A.” The second item, a “Machine Isimat,” is listed as a “Machine Previously Imported, Damaged and Destroyed.” The pro forma invoice also lists a “Tool Box for Isimat Technicians.” CCL contends that the actual value of the damaged and subsequently destroyed portion of the screen printing press, on which it is requesting drawback, can be ascertained by reviewing the documents provided with the June 23, 2009, commercial invoice and the second entry from December 23, 2009. This was similar to Windmoeller, where there was a second entry, accepted by CBP, providing a value for the parts at issue. As explained in Windmoeller, CBP is not required to undertake additional appraisement procedures in order to ascertain the value or duty paid on component parts. Referring to documents that were not submitted with the May 19, 2009, entry, including documents submitted to and accepted by CBP for a subsequent entry, would amount to additional appraisement procedures. Accordingly, the documents accompanying the December 23, 2009, entry have no impact on CCL’s drawback application relating to the entry that occurred on May 19, 2009.
In its protest, CCL cites to two prior rulings, HQ 226473, dated March 19, 1996, and HQ 228199, dated March 26, 1999, in which CBP denied drawback on portions of merchandise imported as a single entry. In HQ 226473, CBP held that a pistol that is imported with a magazine and exported without a magazine is not eligible for drawback pursuant to 19 U.S.C. § 1313(j)(1) because the exported merchandise was not the same as the imported merchandise. In that case, CBP stated the following:
…assuming arguendo that Customs determined that it was appropriate to pay drawback in this situation, the value of the exported item is less than the value of the imported item. Thus, it would seem clear that the payment of "99 percent of the amount of each duty" would not adequately protect the revenue.
In HQ 228199, CBP denied a drawback claim under 19 USC § 1313(j)(1), involving imported lamps and exported lamp arms because the exported merchandise was not the same as the imported merchandise. CBP held that, “[t]here is simply no language in 19 U.S.C. §1313(j) which permits Customs to apportion drawback when a component of the imported merchandise, rather than the imported merchandise itself, is exported.” Further, in that case, HQ 206209, discussed above, was quoted as follows:
It is . . . incumbent upon the importer to establish his claim in all particulars and, clearly, he must establish that the merchandise exported is in fact the merchandise that is the subject of the import entry at issue.
Therefore, not only are those cases dealing with different types of drawback than at issue in this case, in those cases, CBP denied the drawback claim because the exported and imported merchandise were not the same and apportionment of the import duties was not permitted. In its protest, CCL notes that the relevant documents establish that the merchandise it destroyed is the same as the merchandise it imported and that “[t]he commercial invoice returning the undamaged component establishes the value of that component, and, by deduction, the value of the damaged component.” Therefore, CCL is attempting to contrast its situation from the rulings it cited. Similarly, in Windmoeller, the protestant was seeking to contrast its situation from the prior rulings, yet the court stated the following:
But Windmoeller misses the point. It would have been possible to have the individual [items] separately appraised for purposes of calculating drawback (or to have somehow otherwise determined the [item’s] value), just as Windmoeller solicited information on the valuation of the components at issue in this case. The fundamental essence of Customs’ concern, however, was that the value of the individual [items] could not be ascertained from the entry papers.
(Original emphasis). See Windmoeller, 31 CIT at 1789. Therefore, distinguishing CCL’s situation from those involved in the cited rulings has no impact on CCL’s drawback claim because, as explained above, CBP is not able to determine the value of the damaged and subsequently destroyed portion of the screen printing machine from the entry papers submitted with the May 19, 2009, importation.
Additionally, in its protest, CCL cites 19 CFR § 24.36(a) and requests a refund of excessive duties and fees paid, stating that “[t]he documents associated with the claim in question and this protest establish that, at the recent liquidation of the claim at zero, there have been overpayments of duties and fees that should be refunded to the protestant.” See CCL’s Protest (Oct. 15, 2014). Therefore, CCL is claiming that the excessive duties and fees to be refunded are those it paid on entry number XXX-XXXX652-3.
Refunds of duties are provided for in 19 U.S.C. § 1505(b), which states, in pertinent part, that “[t]he Customs Service shall … refund any excess moneys deposited, together with interest thereon, as determined on a liquidation or reliquidation…” Further, 19 U.S.C. § 1520(a) provides, inter alia, for the refund of excessive duties when it is ascertained “on liquidation or reliquidation” or “prior to liquidation of an entry...” See 19 U.S.C. § 1520(a). The regulation at issue, 19 CFR § 24.36(a), provides for a refund “[w]hen it is found upon, or prior to, liquidation or reliquidation of an entry… that a refund of excessive duties, taxes, fees or interest…is due…” (Emphasis added). Accordingly, the time frame for issuing a refund of excessive duties is “upon” or “prior to” liquidation or reliquidation and the ability to issue a refund, therefore, expires after liquidation becomes final. See also, HQ H095403 (Nov. 28, 2011) (citing 19 CFR § 24.36(a) and stating “[t]he port director may not issue the refund if liquidation is final”). Liquidation is final on all parties unless protested within 180 days of the decision protested. See 19 U.S.C. §1514. Therefore, if the timeframes for filing protest and reliquidation have passed, liquidation is final and a refund may not be issued. Further, this regulation does not extend to drawback. It only concerns the refund of duties, taxes, fees, or interest for entries. This regulation does not extend to payments to drawback claimants as an alternative to a drawback claim. Compare 19 CFR § 24.36(a) with 19 CFR § 191, Subpart D.
Generally, drawback claims are only liquidated once the liquidation of the underlying entries is final. See 19 CFR § 191.81(a)(1). The entry at issue here, entry number XXX-XXXX652-3, liquidated on April 2, 2010. The liquidation became final on September 29, 2010. The importer did not raise this issue until October 15, 2014, when it protested the denial of its drawback claim, well after the liquidation became final for this entry. Further, this goes beyond the scope of this protest, which only concerns the liquidation of the drawback claim and not the liquidation of the underlying entry to that claim.
HOLDING:
The protest should be DENIED. Drawback under 19 U.S.C. § 1313(c) is not available on the damaged portion of the screen printing press because the amount of duty paid cannot be determined from the entry documents. Moreover, CCL cannot get a refund under 19 CFR § 24.36(a) as the liquidation of the entry is final and not at issue in this protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision, the Office International Trade, 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