DRA-4-OT:RR:CTF:EP W230762 LLB
Category: Drawback
Customs and Border Protection
Port of Houston
2350 N. Sam Houston Parkway East, Suite 1000
Houston, Texas 77032-3126
Attn: Ms. Christina D. Brooks
Re: Protest/AFR No. 5301-03-100780; Dow Chemical Company; 19 U.S.C. §§ 1313(j)(2) and 1313(p); Crude MDI; HQ 230776(Aug. 10, 2005); 19 C.F.R. § 191.32(1998); Cargill Citro-America v. United States, 395 F. Supp. 2d 1222(Ct. Int’l Trade 2005).
Dear Ms. Brooks:
The above-referenced protest has been forwarded to this office for further review. We have considered the arguments raised by the protestant, Dow Chemical Company, and your office. Our decision follows.
FACTS
This timely protest concerns an October 21, 1997, drawback claim under 19 U.S.C. § 1313(j)(2) for Crude MDI imported June 28,1997 and exported October 2, 1997. The drawback claim, filed on October 21, 1997, included a substitution affidavit and a chronological export summary.
On December 15, 1999, the port requested that the protestant provide a request for a non-binding predetermination of commercial interchangeability; documents to support the protestant’s claim of commercial interchangeability; or a copy of a request for a formal ruling from CBP Headquarters. On December 27, 1999, the protestant submitted a request for a nonbinding predetermination of commercial interchangeability which the port rejected on January 26, 2000, because the request was not supported by sufficient documentation.
On July 19, 2000, the protestant submitted a copy of its July 13, 2000, ruling request that the protestant sent to this office for a determination of commercial interchangeability for various petrochemicals, including Crude MDI. In response to the foregoing ruling request, this office issued ruling HQ 228898 (Dec. 10, 2001); however, because the protestant only provided specific import and export information regarding the petrochemical Dowper®” (Perchloroethylene, also known as tetrachloroethylene”), and not for the other petrochemicals listed in the ruling request, our ruling was limited only to the exportations of Dowper®.
On May 15, 2003, the port requested that the protestant provide Certificates of Analysis for the imported and exported product, an export invoice, and documentation supporting possession of the exported product. According to the port’s notes, the port had not received the requested information as of August 3, 2003, and on August 22, 2003, the port liquidated the claim without benefit of drawback pursuant to 19 C.F.R. § 191.32.
On November 4, 2003, the protestant filed a protest against the denial of the subject drawback claim arguing that the claim qualifies for drawback under 19 U.S.C. § 1313(j)(2). The protestant argues for the first time in its protest that alternatively, drawback under 19 U.S.C. § 1313(p) and the port’s liquidation of the drawback entry without payment of the Merchandise Processing Fee (MPF) and the Harbor Maintenance Tax (HMT) was erroneous. The protestant submitted an “amended” drawback claim including its claims for drawback under § 1313(p), MPF, and HMT. The following are the import and export documents that were submitted with the protest:
Import Documents
-CF-7501 indicating the entry date as June 30, 1997 and the import classification as 3909.50.5000, HTSUS
-Import Invoice which cross-references the June 30, 1997 entry and describes the imported merchandise as “Crude MDI-US Polymeric (Feedstock)” and Crude MDI HOP390
-Certificate of Analysis which cross references the June 30, 1997 entry and the import invoice
Export Documents
Unsigned Bill of Lading dated October 2, 1997 which describes the exported merchandise as “Crude MDI Polymeric-DOWPA” and “Diphenylmethane-4,4’Diicoyante Mixture”
ISSUES
1. Whether the protestant has established, based on the evidence presented, drawback eligibility
2. Whether the protestant’s claim for drawback for Harbor Maintenance Taxes and Merchandise Processing Fees was timely
LAW and ANALYSIS
Issue 1
The protestant argues that it has met the requirements for commercial interchangeability under 19 U.S.C. § 1313(j)(2) and in the alternative, has met the requirements for drawback under 19 U.S.C. § 1313(p). The port denied the protestant’s claim pursuant to 19 C.F.R. § 191.32 which is the regulation that was promulgated under the authority of 19 U.S.C. § 1313(j)(2). The protestant’s argument pursuant to 19 U.S.C. §1313(p) is raised for the first time in its protest. We will discuss both arguments in seritiam.
A. 19 U.S.C. § 1313(j)(2)
Under 19 U.S.C. § 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 provided certain 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.
The drawback law was substantively amended by § 632, title VI - Customs Modernization Act, Public Law 103-182, The North American Free Trade Agreement ("NAFTA") Implementation Act (107 Stat. 2057), enacted December 8, 1993. Before its amendment by Public Law 103-182, the standard for substitution under § 1313(j)(2) was "fungibility". House Report No. 103-361, 103d Cong., 1st Sess. (1993) contains language explaining the change from fungibility to commercial interchangeability. According to the Report (at p. 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 CFR § 191.2(l)), prior to their amendment on March 5, 1998. The Report, at p. 131, also states:
The Committee further intends that in determining whether the two articles were commercially interchangeable, the criteria to be considered would include, but not be limited to: Governmental and recognized industry standards, part numbers, tariff classification, and relative values.
The Senate Report for the NAFTA Act (S. Rep. No. 103-189, 103d Cong., 1st Sess., 81-85 (1993)) contains similar language and states that the same criteria should be considered by Customs in determining commercial interchangeability. In addition, the Senate Report states that Customs “should evaluate the critical properties of the substituted merchandise, rather than basing its determination on subjective standards.” Senate Report at page 83.
In order to determine commercial interchangeability, the criteria to be considered by CBP would include, Governmental and recognized industry standards, part numbers, tariff classification, and relative values. Underlying purchase and sales contracts, purchase invoices, purchase orders, and inventory records show whether a claimant has followed a particular recognized industry standard or governmental standard, or any combination of the two, relative values of the imported and exported merchandise, and whether a claimant uses part numbers to buy, sell, and inventory the merchandise in issue. See HQ 227473(March 3, 1998)(determining whether imported and exported merchandise met government and industry standards and relative values using contracts and purchase orders); HQ 227106 (September 3, 1997)(determining use of part numbers, using purchase orders, sales documents and invoices, and warehouse receipts). see also, 19 C.F.R. § 177.2(b)(4)(“If the question or questions presented in the ruling request directly relate to matters set forth in any invoice, contract, agreement, or other document must be submitted with the request.”). The protestant did not submit any commercial documents with its drawback claim to support its claim of commercial interchangeability, nor did it do so in response to the two document requests from the port.
Our review of the documents submitted with the protest reveals that the protestant has not established commercial interchangeability of the imported and exported merchandise. Initially we note that it is questionable whether the exported merchandise is the same as the imported merchandise because the descriptions are inconsistent insofar as the import invoice describes the imported merchandise as “Crude MDI Polymeric (Feedstock)” and the export bill of lading describes the alleged exported merchandise as “Crude MDI Polymeric-DOWPA” and “Diphenylmethane-4,4’Diicoyante Mixture”.
Further, because the protestant has not provided CBP with any sales documents, we cannot determine whether the Government or Industry Standards or Part Numbers criteria are applicable to the exported merchandise. Without the sales documents, CBP cannot determine the value of the exported merchandise. In addition, the tariff classification criterion has not been met. The import entry indicates that the merchandise was imported under subheading 3909.50.5000, HTSUS (1997). The bill of lading indicates that no Shipper’s Export Declaration (SED) was required at exportation; therefore, there is no Schedule B number to which we could compare the HTSUS subheading. In such instances, CBP has held that the tariff classification criterion can be met if there is no dispute as to the identity of the exported merchandise and if the description of the exported merchandise and the imported merchandise fall within an eo nomine provision of the HTSUS. See HQ 230459 (Feb. 27, 2006). In this case, Crude MDI polymeric does not fall under an eo nomine provision of the HTSUS. Based on the foregoing, because we cannot determine whether the Government and industry standards, relative value, and part numbers criteria have been met due to lack of evidence and we conclude that the tariff classification criterion has not been met, the protestant has failed to establish that the imported and exported merchandise are commercially interchangeable.
However, the protestant argues, without citation to authority or analysis, that the port violated the legal doctrine of ex post facto when it applied the 1998 drawback regulations for substitution drawback under 19 C.F.R. § 191.32, which provides the criterion for commercial interchangeability, by requiring the protestant to provide certificates of analysis for the import and the export and a commercial invoice. The ex post facto clause of the U.S. Constitution, “forbids . . .penal legislation which imposes or increases criminal punishment for conduct lawful previous to its enactment . . . and has no relation to retrospective legislation of any other description.” U.S. v. JAC Natori, Co. Ltd., 821 F. Supp. 1514 (Ct. Int’l Trade 1993)(internal citations omitted) reversed on other grounds, 108 F.3d 295 (Fed. Cir. 1997). To the extent that drawback is a privilege, enforcement of the drawback laws would not fall under the rubric of “criminal punishment”; therefore, the doctrine of ex post facto would not apply in this instance.
In Cargill Citro-America v. United States, CBP denied the plaintiff’s drawback claim under § 1313(j)(2) because the plaintiff’s certificate of delivery did not identify the commercially interchangeable merchandise that had been substituted for imported merchandise pursuant to 19 C.F.R. § 191.34(1998). 395 F. Supp. 2d 1222, 1225-27(Ct. Int’l Trade 2005). The Court of International Trade(CIT) found that the 1997 regulations did not require the plaintiff to make the foregoing identification, rather, the 1997 regulation, § 191.41(b) required the plaintiff to submit a certificate of delivery recording the transfer of merchandise between the importer and the plaintiff. Id. at 1229. As such, the CIT held that because the plaintiff filed its drawback claim prior to the effective date of the 1998 regulations and the language of the 1998 regulations did not indicate that it should be given retroactive effect, CBP’s denial of Cargill’s drawback claim under § 1313(j)(2) was improper. Id. at 1228-30.
In the present case, the port cited 19 C.F.R. § 191.32 as the basis for its denial. Insofar as § 191.32 became effective April 6, 1998, the port’s application to the protestant’s October 21, 1997 drawback claim was improper. However, such retroactive application did not result in the improper denial of the protestant’s drawback claim under 19 U.S.C. § 1313(j)(2). Although the requirements to establish commercial interchangeability were not found in the CBP regulations prior to April 6, 1998, the requirement to establish commercial interchangeability was well established by the legislative history of 19 U.S.C. § 1313(j) and OR&R rulings which interpret § 1313(j)(2) prior to the April 6, 1998, effective date. As such, the requirement to establish commercial interchangeability found in 19 C.F.R. § 191.32 existed prior to its April 6, 1998 effective date. Thus, the port’s retroactive application of 19 C.F.R. § 191.32 was harmless error.
The protestant also argues, without citation to authority, that CBP cannot require the protestant to produce additional records to support its drawback claim insofar it has been three years since the drawback claim was paid. Specifically, the protestant argues, “the time for record retention has expired.” With regard to retention of records to support drawback claims, 19 U.S.C. § 1508(c)(3) provides that “records for any drawback claim shall be kept until the 3rd anniversary of the date of payment of the claim.” The protestant posits its argument as if the port did not request records until May 15, 2003, when in fact, the port first requested records from the protestant on December 15, 1999. The protestant also confuses the recordkeeping requirement with the statutory requirement for filing a complete drawback claim. With regard to filing of drawback claims, 19 U.S.C. § 1313(r) provides, in pertinent part:
A drawback entry and all documents necessary to complete a drawback claim, . . . shall be filed or applied for, as applicable, within 3 years after the date of exportation . . . of the articles on which drawback is claimed, . . . . Claims not completed within the 3-year period shall be considered abandoned. . . .
19 U.S.C. § 1313(r)(1)(emphasis added). Thus, pursuant to § 1313(r)(1), the protestant had until October 2, 2000, three years from the October 2, 1997,exportation date, to provide CBP with the documents necessary to support its drawback claim. Prior to October 2, 2000, on December 15,1999, the port requested that the protestant submit documents to support its claim of commercial interchangeability. In response to the foregoing request, and prior to October 2, 2000, the protestant made two submissions. The first submission was a request for nonbinding predetermination of commercial interchangeability, which was rejected because it was not supported by sufficient documentation. The second submission was a copy of a ruling request for determination of commercial interchangeability of, inter alia, Crude MDI, which was sent to this office for a formal ruling; however, the ruling, as issued, did not cover Crude MDI, because, again, the protestant had not provided sufficient documentation to support the commercial interchangeability of Crude MDI.
When this office issued a response to the protestant’s formal ruling request on December 10, 2001, see HQ 228898, the port could have considered the protestant’s claim abandoned pursuant to 19 U.S.C. § 1313(r)(1) and liquidated the claim; however, the port, sent out an additional request for documents on May 15, 2003, to which it did not receive a response. In addition, the protestant has also had the opportunity to provide the documents necessary to support its commercial interchangeability claim in the present protest. As explained above, the documents the protestant provided with its protest are insufficient to support its claim for commercial interchangeability. Insofar as the protestant has continually failed to provide sufficient documents to support its claim for commercial interchangeability, the protestant’s drawback claim is administratively abandoned.
B. 19 U.S.C. § 1313(p)
Alternatively, the protestant asserts that the evidence presented supports a claim for drawback under 19 U.S.C. § 1313(p). Under 19 U.S.C. § 1313(p)(1):
Notwithstanding any other provision [in §1313], if:
(A) an article (referred to in section 1313(p) as the “exported article”) of the same kind and quality (as specifically defined in section 1313(p)) as a qualified article is exported;
(B) the requirements set forth in section 1313(p)(2) are met; and
(C) a drawback claim is filed regarding the exported article,
the amount of the duties paid on, or attributable to the qualified article shall be refunded as drawback to the drawback claimant.
For purposes of § 1313(p) a "qualified article" means an article described in heading 3909, HTSUS (among other headings), which is imported and duty-paid. See 19 U.S.C. § 1313(p)(3)(A). An exported article is of the "same kind and quality" as the qualified article for which it is substituted under this subsection if it is a product that is commercially interchangeable with or merchandise referred to under the same eight-digit classification of the HTSUS as the qualified article. Id. at § 1313(p)(3)(B).
The merchandise in the import entry is classified under subheading 3909.50.5000, HTSUS. In regard to the exported merchandise, as discussed above in our commercial interchangeability analysis, the Schedule B commodity number was not provided. Therefore, “same kind & quality” for purposes of 19 U.S.C. § 1313(p) cannot be established by reference to the classification of the merchandise in the import entry to the exported merchandise by the 8-digit classification of the HTSUS. In addition, as indicated above, the evidence criteria for purposes of commercial interchangeability has not been established. Therefore, the evidence is insufficient to show that the merchandise is a “qualified article” pursuant to 19 U.S.C. § 1313(p)(3)(B) and thus, the protestant’s drawback claim under § 1313(p) fails.
Issue 2
The protestant submitted with its November 4, 2003, protest, an amended drawback claim which included drawback claims for MPF and HMT. In HQ 230776(Aug. 10, 2005), CBP held that amended drawback claims for MPF and HMT are changes to the scope of the claim, i.e. an increased amount of drawback claimed, and not simply submission of supporting evidence; therefore, amendments filed more than three years after the date of last exportation are untimely. Here, insofar as the last exportation for the protestant’s drawback claim was October 2, 1997, the protestant’s November 4, 2003, amendment of its drawback claim that included a claim for payment of MPF and HMT, 6 years later, was untimely.
HOLDING
1. The protestant has not met the requirements to establish a drawback claim under 19 U.S.C. § 1313(j)(2) or 1313(p). The protest should not be allowed.
2. The amended drawback entry filed on November 4, 2003 was an untimely amendment of the claim because it was filed more than three years after the date of exportation, i.e. after October 2, 1997. The protest should not be allowed.
In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 in accordance with the decision must be accomplished prior to mailing of the decision. 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