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HQ 223075


July 10, 1991

DRA-2-02-CO:R:C:E 223075 C

CATEGORY: DRAWBACK

District Director of Customs
U.S. Customs Service
477 Michigan Avenue
Suite 200
Detroit, Michigan 48266

RE: 19 U.S.C. 1313(j); same condition drawback upon transfer of duty-paid merchandise to a foreign trade zone; 19 U.S.C. 81c(a); merchandise transferred to a foreign trade zone for exportation, destruction or storage considered exported; merchandise transferred to a foreign trade zone for manufacturing purposes not eligible to be considered exported for drawback

Dear Sir/Madam:

This responds to a memorandum from the Chief of the Drawback Branch, New York Region, dated March 8, 1991, transmitting Protest and Application for Further Review Nos. 3801-0-02552 through 3801-0-02554, dated July 23, 1990 (PRO-2-06:O:C:D BCH). We have reviewed the protests and our decision follows.

FACTS:

The protests pertain to three drawback entries filed at Detroit for drawback under 19 U.S.C. 1313(j). The company imported merchandise, duty-paid, and transferred such merchandise to a foreign trade subzone where it was used in the further manufacture of other articles. It was admitted into the zone in the same condition it was in when imported. The company, invoking the rule of Customs Headquarters letter ruling 218551, dated January 29, 1986, asserted that the merchandise is considered exported for drawback purposes upon admission into the zone. Consequently, it filed a claim for same condition drawback.

Customs at Detroit denied the claim for drawback on the grounds that T.D. 89-4 revoked the referenced letter ruling, along with CSD (Customs Service Decision) 84-97 and CSD 85-10. (See Treasury Decision 89-4, 23 Cust. Bull., p. 96; CSD 84-97, 18 Cust. Bull., p. 1069; and CSD 85-10, 19 Cust. Bull., p. 509.) Consequently, merchandise transferred to a foreign trade zone for manufacturing is no longer considered exported for drawback purposes. The company then filed the instant protests for further review. The company's protests request that a decision be withheld until the United States Court of International Trade decides the case of Chrysler Motors Corp. v. United States, 89- 5-00252 (CIT).

ISSUE:

The question at issue in these protests is the same as that considered by the Court of International Trade in the recently decided Chrysler Motors Corp. v. United States, No. 89-05-00252, slip op. 90-130 (CIT December 11, 1990), 25 Cust. Bull. No. 4, p. 4 (appeal pending). The issue is as follows: Can duty-paid merchandise be transferred and admitted into a foreign trade zone for the purpose of further manufacture and be considered exported for drawback purposes under the fourth proviso of 19 U.S.C.

LAW AND ANALYSIS:

The fourth proviso provides that duty-paid merchandise admitted into a foreign trade zone for the purposes of exportation, destruction, or storage can be considered exported for the purposes of the drawback and other laws. 19 U.S.C. 81c(a). In CSD 84-97, CSD 85-10, and letter ruling 218551, Customs held that duty-paid merchandise could be admitted into a foreign trade zone for further manufacturing and be considered exported for drawback. Subsequently, Customs, recognizing that these rulings were based on an erroneous interpretation of the foreign trade zones law, specifically 19 U.S.C. 81c(a), published T.D. 89-4 which revoked these rulings as unsupported by law. The TD corrected Customs position to be in accordance with law, and held that merchandise admitted into a foreign trade zone for manufacturing purposes cannot be considered exported for drawback under the fourth proviso of 19 U.S.C. 81c(a).

In the Chrysler Motors case, the Court of International Trade agreed with Customs position as expressed in T.D. 89-4. The court granted the government's motion for summary judgment. The drawback entries which form the basis of the instant protests are essentially the same as the drawback entry that was the subject of Chrysler Motors. Based on T.D. 89-4 and the opinion in Chrysler Motors, the instant protests must be denied.

HOLDING:

The fourth proviso of 19 U.S.C. 81c(a) applies to deem as exported imported duty-paid merchandise admitted into a foreign trade zone solely for exportation, destruction, or storage. Merchandise admitted into a zone for manufacturing purposes is not eligible to be considered exported. You are hereby instructed to deny the protests, submit a copy of this decision to the protesting company, and otherwise comply with section 174.30 of the Customs Regulations.

Sincerely,

John Durant, Director

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