United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0223773 - HQ 0224015 > HQ 0224014

Previous Ruling Next Ruling

---

HQ 224014

July 24, 1992

DRA-4 CO:R:C:E 223014 C

CATEGORY: DRAWBACK

David N. Simcox
President
COMSTOCK & THEAKSTON, INC.
466 Kinderkamack Rd.
Oradell, NJ 07649

RE: Substitution same condition drawback; possession of exported fungible merchandise; 19 U.S.C. 1313(j)(2); 19 U.S.C.

Dear Mr. Simcox:

This responds to your letter of June 8, 1992, concerning the possession requirement of substitution same condition drawback. The letter references an earlier letter, dated May 4, 1992, requesting a ruling on this subject on behalf of your client. We have reviewed all relevant materials, and our response follows.

FACTS:

Generally, your client, Dibrell Brothers, Inc. (Dibrell), purchases, processes, and sells leaf tobacco and products produced therefrom. Dibrell's wholly owned subsidiary, Dibrell Brothers International S.A. (Dibrell S.A.), located in Switzerland, purchases and sells tobacco but has no facilities to process or store it. On the facts here, Dibrell S.A. purchases tobacco that is imported into the United States by Dibrell. The imported tobacco is sold to U.S. customers, with Dibrell S.A. issuing the invoice. Dibrell also exports other tobacco. You have asserted that the imported tobacco can be designated for drawback under 19 U.S.C. 1313(j)(2) upon exportation of the other tobacco. You also asserted that Dibrell has physical possession and control over the imported tobacco.

ISSUE:

Can the company designate imported tobacco that it either possesses or not and receive drawback of duties paid thereon upon exportation of other fungible tobacco that it possesses?

LAW AND ANALYSIS:

Under the substitution same condition drawback law, 19 U.S.C. 1313(j)(2), a drawback of duty paid on imported merchandise can be paid to a claimant who possesses and exports fungible merchandise. This formulation differs from the position taken by Customs prior to the decision by the United States Court of International Trade in B.F. Goodrich Company v. United States, Slip op. 92-68, 26 Cust. Bull. No. 24, June 10, 1992, p. 11 (No. 90-05-00228 CIT, May 12, 1992). Before the decision, Customs required possession of both the imported and substituted (exported) merchandise. In B.F. Goodrich, the court stated the following regarding possession: "From this Court's reading of the statute, it is clear that the possession requirement attaches only to the exported goods, not to the imported goods. The operative portion of [section] 1313(j)(2) with regard to imported goods mentions only that a duty, tax or fee was paid because of their importation. Therefore, [section] 1313(j)(2) requires only that a drawback claimant have paid the duty, tax or fee for the privilege of importing goods." Id. at 13. (Emphasis in original.)

Based on the foregoing, we conclude that your client need not prove that it had possession and control over the imported tobacco. On the facts here, Dibrell, the drawback claimant, pays the duty on the tobacco it imports. Thus, if it has possession of the substituted tobacco it exports, it would fulfill the possession requirement of section 1313(j)(2)(C)(ii). Of course, the substituted tobacco would have to be fungible with the imported designated tobacco for drawback to be approved.

HOLDING:

The possession requirement of 19 U.S.C. 1313(j)(2)(C)(ii) does not apply to the imported-designated merchandise; it applies to the substituted-exported merchandise. If the drawback claimant has paid duty on designated merchandise it imports, and has possessed the substituted fungible merchandise it exports, drawback under 19 U.S.C. 1313(j)(2) is warranted (provided that any other pertinent requirements are met).

If you have any further questions regarding this matter, please contact this office.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling