DRA 5-02
H289069 SMS
OT:RR:CTF:ER
Nebras Qaradeh
614 Quincy Ave, N.E.
Renton, WA 98059
RE: Request for a determination of the availability of Drawback: Rejected Porsche
Dear Mr. Qaradeh:
This is in response to your letter, dated July 25, 2017, for a formal ruling on the availability of drawback, for the exportation of a rejected 2005 Porsche 911 S 2DR coupe, under the Tariff Act of 1930 (“the Tariff Act”), as amended (19 U.S.C. § 1313). We note at this time you have not filed a claim for the vehicle at issue.
FACTS:
On July 8, 2017, you imported a 2005 Porsche 911 S 2DR Coupe (“Porsche”), manufactured in Germany, that you purchased in Vancouver, British Columbia, Canada. You paid duties and fees on the vehicle upon importation at the Port of Blaine, Washington. The Porsche was driven from the purchase location in Canada to your home in Washington State. Upon arrival in the United States, you determined that the Porsche was faulty, including: “smoking from exhaust at cold start, oil leaking, and other problems.” You ultimately rejected the Porsche and returned it to the seller, exporting the Porsche back to Canada on July 15, 2017. On July 15, 2017, after contacting the Office of Trade (“OT”) Drawback, via e-mail, you, requested a binding ruling regarding the eligibility of drawback on this transaction. Included in your submission is U.S. Customs and Border Protection (“CBP”) Entry Summary Form 7501, receipts of duties paid, and a letter from the seller, indicating his acceptance of the rejected merchandise.
ISSUES:
Whether drawback of the rejected Porsche is available under rejected merchandise drawback provisions, pursuant to 19 U.S.C. § 1313(c).
Whether drawback of the rejected Porsche is available under direct identification unused merchandise drawback provisions, pursuant to 19 C.F.R. § 1313(j)(1).
LAW AND ANALYSIS:
The Tariff Act provides for drawback, which is the refund or remission, in whole or in part, of any duties, taxes, and fees imposed under Federal law upon importation or entry and due on the imported merchandise. Generally, the purpose of drawback is to increase exports and promote manufacturing and employment in the United States. Drawback is a privilege, not a right, subject to compliance with the prescribed rules and regulations. See 19 U.S.C. § 1313(l). Currently, the implementing regulations regarding drawback are contained in Part 191 of the CBP regulations (19 C.F.R. § 191). Specifically, drawback is a refund of certain duties, taxes, and fees imposed on imported merchandise, which are paid after timely filing a claim with CBP and providing sufficient evidence linking to an article’s exportation or destruction. One type of drawback at issue here is rejected merchandise drawback.
Whether drawback of the exported Porsche is available under rejected merchandise drawback provisions, pursuant to 19 U.S.C. § 1313(c).
Section 313(c) of the Tariff Act, as amended (19 U.S.C. 1313(c)) and 19 C.F.R. § 191.41, provide for drawback upon the exportation or destruction under CBP supervision of imported merchandise which has been entered, or withdrawn from warehouse, for consumption, duty-paid, and which: does not conform to sample or specifications; has been shipped without the consent of the consignee; has been determined to be defective as of the time of importation; or ultimately sold at retail by the importer or the person who received the merchandise from the importer, and for any reason returned to and accepted by the importer or the person who received the merchandise from the importer. The amount of drawback allowable will be equal to 99 percent of the amount of duties, taxes, and fees paid with respect to the imported, duty-paid merchandise.
CBP regulations found in 19 C.F.R. Subpart D (19 C.F.R. §§ 141-144), outline the procedures for claiming drawback on rejected merchandise. In the instance of defective merchandise, the claimant must show by evidence satisfactory to CBP, that the exported or destroyed merchandise was defective at the time of importation. See 19 C.F.R. §§ 191.41 and 191.42(b). Additionally, pursuant to 19 C.F.R.§ 191.42(c), a drawback claimant must submit to CBP a notice of intent to export or destroy the merchandise, which is the subject of a rejected merchandise drawback claim, under 19 U.S.C. § 1313(c). See 19 C.F.R. § 191.42(c). “The claimant, or the exporter, must file at the port of intended redelivery . . . a Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on Customs Form 7553 at least 5 working days prior to the date of intended return to Customs custody. Waiver of prior notice for exportations under 19 U.S.C. 1313(j) (see § 191.91 of this part) is inapplicable to exportations under 19 U.S.C. 1313(c).” Id. (emphasis added).
A review of CBP Form 7501 shows that the entry was liquidated and duty was paid, satisfying the first two elements of a rejected merchandise drawback claim, requiring that the merchandise must be duty paid and entered for consumption. See 19 U.S.C. § 1313(c)(1)(A) & (B). Next, it must be established that the Porsche was “determined to be defective as of the time of importation.” See 19 U.S.C. §1313(c)(1)(C)(i) and 19 C.F.R. §191.42(b). In Headquarters Rulings (“HQ”) 228541 (April 5, 2000) and HQ H011707 (March 12, 2010), CBP found that the drawback claimant could accomplish this by providing evidence that the importer and foreign supplier agreed that the imported merchandise was defective at the time of importation. In HQ 228541, a drawback claimant protested the denial of his rejected merchandise claim, regarding die cast locks. The protestant could not show an agreement that the imported merchandise was defective at the time of importation; therefore, its claim for rejected merchandise was properly denied. See also HQ H011707 (March 12, 2010) (19 C.F.R. §191.42(b) unambiguously requires documentation establishing that merchandise was defective at the time of importation; because claimant failed to do so, it has not satisfied the statutory requirements to recover drawback pursuant to 19 U.S.C. §1313(c)).
Here, as in HQ 228541 and HQ H011707, no documentation was submitted establishing that the merchandise was defective at the time of importation; only a letter from the seller of the merchandise was submitted which states: “I . . . have received . . . my 2005 Porsche Carrera S . . . in return for the full reimbursement . . . I have inspected the car and have found no damage or additional wear incurred while in the possession of Mr. Qaradeh.” You have not articulated how the Porsche was defective, nor demonstrated, to CBP’s satisfaction, that it was, in fact, defective, or did not conform to sample or specification. As, 19 C.F.R. §191.42(b) unequivocally requires the applicant to provide documentation establishing that the merchandise did not conform to sample or specification or was defective at the time of importation, you have not satisfied the statutory requirements to recover drawback pursuant to 19 U.S.C. §1313(c).
In addition and more importantly in this case, a claimant for rejected merchandise drawback must submit a notice of intent to export the merchandise to the Port of intended redelivery at least five days prior to its exportation. See 19 C.F.R. § 191.42(c). On Thursday, July 13, 2017, in your e-mails with OT Drawback, you indicated that you intended to return the Porsche to the seller on Saturday, July 15, 2017. When OT Drawback responded to your e-mail on Monday, July 17, 2017, to provide further guidance, the Porsche had already been exported. You did not submit CBP Form 7553, or provide the Port of Blaine, Washington with timely notice of your intent to export the Porsche, prior to returning it to the seller in Canada. The failure to file the proper notice, deprives the Government of the ability to verify the identity of the merchandise being exported, and the condition of the merchandise for purposes of the drawback statute. See e.g. Swan Tricot Mills Corp. v. U.S., 63 Cust. Ct. 530, C.D. 3948 (1969); Customs Service Decision (“C.S.D.”) 86-25, citing U.S. v. Lockheed Petroleum Services, 1 Ct. Appls. Fed. Cir. 63, 709 F.2d 1472 (1983); HQ 224133 (April 19, 1993); and HQ H011707. The regulations requiring notice of intent to export are mandatory, and compliance with the regulations is a condition precedent to the right to recover drawback. See W.R. Grace & Co. v. United States, 15 Cust. Ct. 105, C.D. 953 (1937); and HQ 229512 (Aug. 5, 2002). As, 19 C.F.R. §191.42(c) explicitly requires the applicant provide prior notice of its intent to export, without the possibility of waiver, you have not satisfied the regulatory requirements to recover drawback pursuant to 19 U.S.C. § 1313(c).
Whether drawback of the exported Porsche is available under direct identification unused merchandise drawback provisions, pursuant to 19 C.F.R. § 1313(j)(1).
Another type of drawback that warrants examination is unused merchandise drawback claim under 19 U.S.C. 1313(j)(1). See 19 C.F.R. § 191.43. Pursuant to 19 U.S.C. § 1313(j)(1), drawback is authorized “if imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation” is, within three years of the date of importation, exported or destroyed under CBP supervision and was not used in the United States before such exportation or destruction. Therefore, merchandise that was used prior to exportation is ineligible for drawback under 19 U.S.C. § 1313(j)(1).
In HQ H240038, dated June 16, 2014, CBP held that a truck driven under its own power, which transported equipment from Canada to customer’s facilities in Massachusetts, was a transportation, the purpose for which the truck was built, and therefore, a “use.” The fact that the equipment on the truck was not used at the intended job site had no impact on our analysis. Similarly, in HQ 230037, dated November 4, 2003, CBP held that a yacht was ineligible for drawback under 19 U.S.C. § 1313(j)(1) because it was sailed under its own power within the United States. In that case, the yacht was imported to be sold and the protestant argued that it was unused because sailing the yacht under its own power was incidental to the intended reason for importation, which was to put it up for sale. CBP disagreed, stating that the sailing of the yacht from Florida to Massachusetts was a prohibited use within the meaning of 1313(j)(1). The yacht was put to the exact use for which a yacht is built. HQ 230037 (Nov. 4, 2003). As such, the truck and yacht were used prior to exportation and were therefore, ineligible for drawback under 19 U.S.C. § 1313(j)(1).
Here the same principle applies, an article used in the capacity for which it was designed constitutes a “use.” In this instance, the Porsche was used and operated, under its own power, for travel from Vancouver, Canada, to your home in Washington State. Like the truck and yacht in HQ H240038 and HQ 230037, respectively, we find under these facts that driving the Porsche is a “use”, as it was employed for the purpose for which it was built. Accordingly, the exportation of the rejected Porsche is not eligible for unused drawback under 19 U.S.C. § 1313(j)(1).
We note that 19 C.F.R. Part 181, Subpart E sets forth the provisions regarding drawback claims under Article 303 of the North American Free Trade Agreement (“NAFTA”) and applies to any good that is a “good subject to NAFTA drawback” within the meaning of 19 U.S.C. § 3333. See 19 C.F.R. § 181.41. The provisions of NAFTA Drawback apply to goods which are imported into the United States and then subsequently exported from the United States to Canada or to Mexico, under 19 U.S.C. § 1313(j)(1). Id; see also 19 C.F.R. § 181.43(a). Here the Porsche was manufactured in Germany, imported into the United States, and later exported to Canada; accordingly, NAFTA drawback rules would apply to this transaction. However, the requirements and procedures set forth for NAFTA drawback are in addition to the general definitions, requirements, and procedures for all drawback claims set forth in part 191 of the C.F.R. See 19 C.F.R. §§ 181.41 and 181.47. As such, while some transactions are eligible for NAFTA drawback, the requirements of proper notice and use, as provided in 19 C.F.R. § 191, must be strictly adhered to. Accordingly, the exportation of the rejected Porsche, to Canada, is not eligible for NAFTA drawback under 19 U.S.C. § 3333.
HOLDING:
Based on the facts submitted, we find that the 2005 Porsche is ineligible for rejected merchandise drawback, under 19 U.S.C. § 1313(c), and direct identification unused merchandise drawback, under 19 U.S.C. § 1313(j)(1).
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If the activities vary from the facts stipulated to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. § 177.9(b).
Sincerely,
Monika R. Brenner, Acting Chief
Entry Process & Duty Refunds Branch