HQ 0221645 - Application for Further Review of Protest No. 2809-8-001245 - United States International Trade Commision Rulings

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HQ 221645

February 10, 1992

DRA-1-06-CO:R:C:E 221645 SR

CATEGORY: ENTRY DRAWBACK

District Director
555 Battery St.
P.O. Box 2450
San Francisco, CA 94126

RE: Application for Further Review of Protest No. 2809-8-001245

Dear Sir:

The above-referenced protest was forwarded to our office on Application for Further Review of Protest No. 2809-8-001245, dated May 26, 1988. We have considered the facts and the issue raised; our decision follows.

FACTS:

Applied Magnetics Corporation imports magnetic recording heads. A large number of shipments were entered between October 13, 1982 through December 14, 1983. Some of the merchandise was found to be defective and was then reexported to Korea between January 6 and December 18, 1983. On October 11, 1985, the first form J request for same condition drawback was filed. The claims were filed in accordance with the "Accelerated Payment Provision" for which the protestant received $39,000.00. An audit was performed to verify that the merchandise had been exported or destroyed under Customs supervision within 3 years from the date of exportation.

Customs auditors determined that Applied Mechanics had not kept the appropriate inventory records that would identify the consumption entry number from which the merchandise was received. Customs auditors also determined that the exported merchandise was not the same magnetic recording heads that were imported. The drawback entry was liquidated on February 26, 1988, with the drawback denied. The monies paid under the accelerated payment program were refunded on April 4, 1988.

The protest was filed on May 26, 1988, against the denial of drawback. It was filed on the 90th day after liquidation and is, therefore, timely. The protestant wishes to amend the drawback claim to add import entries and change the accounting method used
from FIFO to another blanket identification method. The protestant claims that Customs erred by not giving immediate notice that the drawback claim was "incomplete", as required by 19 C.F.R. 191.61.

There are many discrepancies in the facts of this case. For example the importer's attorneys claim that the merchandise was tested in a warehouse, the Custom's auditors found that some of the merchandise was rejected by consumers; substitution drawback is mentioned in the Customs reports whereas only same condition drawback was available at the time these importations and exportations were taking place. Due to the discrepancies in the facts presented, we will assume for the purpose of this ruling, that the audit was accurate. The audit found that the claimant's records failed to substantiate that exported merchandise was imported under the claimed consumption entry. We also assume that might be possible to match exports to other import entries if the claimant is permitted to amend its claim.

It is mentioned in the auditor's report that the protestant reimported the tapes after they were repaired and only paid duty on the value added. There is no documentation in the file to show that this is correct; however, if this is so then the protestant must be denied drawback for this reason. Subpart B Headnotes to Subpart B, Part 1, Schedule of the Tariff Schedules of the United States state that this subpart does not apply to any article exported with the benefit of drawback. The classification provision that allows duty only on the value added to articles repaired abroad falls under the Subpart B Headnotes.

ISSUE:

Whether protestant can amend a claim for drawback after more than 3 years have expired after exportation.

LAW AND ANALYSIS:

The proper completion of a drawback claim is provided for in 19 C.F.R. 191.61, which states as follows:

A drawback entry and all documents necessary to complete a drawback claim, including those issued by one Customs officer to another, 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. No extension will be granted unless it is established that a Customs officer was responsible for the untimely filing.

The protestant claims that their protest was untimely filed because Customs neglected to tell them that their drawback entry was incomplete, as required by 19 CFR 191.142(g)(2). 19 CFR 191.142(g)(2) states that "[u]pon review of a drawback claim by the liquidator, if the claim is determined to be incomplete, the liquidator shall notify promptly the claimant, who shall then have the opportunity to amend the claim prior to its denial. The claimant shall respond in writing within 20 days of Customs notice."

A complete drawback entry consists of (1) the filing of the appropriate drawback entry form completely filled out with all the necessary information required on the form, (2) proof of exportation (i.e., the "Notices of Exportation of Articles with Benefit of Drawback" (CF 7511)) and its supporting documents, and (3) certificate(s) of delivery, when necessary, or certificate(s) of manufacture and delivery. T.D. 83-212; 19 CFR 191.2(i) and 191.62.

In this case all the appropriate forms were filled out and submitted; the drawback entry was a complete entry. It was not until the Customs auditor examined the protestant's bookkeeping records that it was determined that the company could not qualify for drawback. Although an importer claiming drawback must complete the claim within 3 years, there is no time limit placed on Customs. 19 U.S.C. 1504, which was added to the Tariff Act of 1930 by the Customs Procedural Reform and Simplification Act of 1978, Public Law 95-410, does not prescribe a time limit within which Customs must liquidate or complete drawback entries (see C.S.D. 79-445, HQ 209929). Therefore, although Customs must inform a drawback claimant if the claim is incomplete, 19 C.F.R. 191.141(g)(2) does not apply to verification of the filed claim documents.

The protestant states that the protest was filed within three years of the request for drawback and therefore, timely filed. The last exportation occurred in December of 1983. The protestant states that they made a request to amend or correct the drawback entry on October 20, 1987; the protest is dated May 26, 1988. Supplementary filing of drawback claims are provided for in 19 CFR 191.64 as follows: "[w]ith the permission of the regional commissioner, a claimant may amend or correct a drawback entry or file a timely supplemental entry. Corrections or amendments permitted shall be certified by the appropriate parties." Section 191.64 does not provide an extension of time beyond the three years allowed in Section 191.61. Section 191.61 provides that a drawback entry must be complete within 3 years after the date of exportation of the articles on which drawback is claimed. The protestant's request to amend was not made within 3 years of the date of exportation of the magnetic recording heads; therefore, it was not timely filed.

This issue was addressed in Headquarters Ruling Letter (HQ) 207897 dated June 15, 1977. In this ruling the importer was informed by Customs that his drawback claim could not be approved until certain information and/or an application for an amendment from the company were forthcoming to enable it to file drawback claims on a schedule basis. Because this information was not furnished until the 3 year period had expired the claim for drawback was denied. In C.S.D. 81-173, drawback was denied to an importer because he had failed to submit proof of exportation or certificates of manufacture within the 3 year period prescribed by law.

In HQ 222857, dated September 24, 1991. This ruling states "We assume that drawback entries and documents necessary to complete the drawback claims (see 19 CFR 191.62 - 191.67), as opposed to the documentation necessary to verify the claims, have been timely filed. If not, of course, the drawback claims must be denied (see 19 CFR 191.61)." This language shows that only documentation required to verify a claim can be submitted after the 3 year time period. The amendment of importation entries and the change of accounting methods would be a change of an already complete claim; it would be more than a verification of the claim. The submission from the protestant's attorneys states that the protestant should be allowed to amend the drawback claim based on C.S.D. 84-100 and C.S.D. 84-19. These cases did allow the correction of erroneous drawback claims, however, the 3 year time limit was not at issue in either of these cases.

HOLDING:

The protestant may not amend a claim for drawback after 3 years have passed from the last date of exportation according to 19 C.F.R. 191.61. Accordingly you are directed to deny the protest. A copy of this decision should be furnished to the protestant in order to satisfy the notice requirement of section 174.30(a), Customs Regulations.

Sincerely,

John A. Durant
Director

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