HQ 0224791 - Internal Advice Request Regarding Alternate Forms of Record Retention; evidence of exportation; exporter's summary procedure; 19 CFR 191.53(e)(1) and (e)(2) - United States International Trade Commision Rulings

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HQ 224791

December 15, 1993

DRA-1-02/DRA-2-03-CO:R:C:E 224791 JRS

CATEGORY: DRAWBACK

Chief, Drawback Branch
New York Region
U.S. Customs Service
6 World Trade Center
New York, New York 10048-0945

RE: Internal Advice Request Regarding Alternate Forms of Record Retention; evidence of exportation; exporter's summary procedure; 19 CFR 191.53(e)(1) and (e)(2)

Dear Madame:

This is in response to your request of June 16, 1993, on the above-referenced subject.

FACTS:

The Eastman Kodak Company (hereinafter simply referred to as the "Company") is currently operating under the general manufacturing drawback contract for steel, T.D. 81-74. The Company exports film, cameras, steel sheet, parts of film magazines, and liquid nicotine. Its customs broker has proposed an alternate form of record retention. In lieu of retaining the hard copy of the bills of lading to support its claims when using the exporter's summary procedure, the Company proposes to microfilm the hard copy ocean bill of lading, air waybill or straight form bills of lading along with its copy of the paid freight forwarder's bill. The Company intends to microfilm both documents in the regular course of business one week after its payment of the freight forwarder's bill and immediately destroy the originals. The microfilm documents will be retained for a minimum of 5 years.

Your office is reluctant to accept this form of record retention as proof of exportation because of Customs inability to verify the authenticity of microfilmed documents. Moreover, your office is concerned that it would be possible to microfilm the same export document numerous times and file many claims for drawback designating different import entries, though only one export had occurred.

ISSUE:

Whether a microfilm copy of either a hard copy ocean bill of lading, air waybill or straight form bill of lading is an acceptable form of record retention for the proof of exportation for drawback purposes under the exporter's summary procedure.

LAW AND ANALYSIS:

The Customs Regulations require that the exporter-claimant shall maintain complete and accurate records of exportation for at least 3 years after payment of such claims, see 19 CFR 191.53(e)(1), and shall support the drawback entry with a chronological summary of the exports and any additional evidence required by Customs to establish fully the identity of the exported articles and the fact of exportation, see 19 CFR 191.53(e)(2). The number listed on the freight or air waybill, bill of lading, manifest No., etc., on the "Chronological Summary of Exports" is to be used to associate the claim with exportation evidence retained by the claimant (19 CFR 191.52(d)).

The use of the word "shall" in the above-cited regulations denotes a mandatory requirement of law which may not be waived. See C.S.D. 79-399. The drawback claimant is required to keep the original bills of lading accurate and available for audit purposes as proof of exportation. The rationale for the retention of the original bills of lading is that there is a certification on it by a disinterested third party (the carrier) that the articles, in fact, have been exported. This kind of evidence is more reliable than copies of self-serving internal company or corporate invoices documenting exportation. See T.D. 78-283; C.S.D. 79-254; C.S.D. 82-59. Unless the regulations are amended to allow for microfilmed copies of the original bills of lading, such a requirement for the retention of originals "or certified copies thereof, issued by the exporting carrier" (19 CFR 191.52(c)(2)) cannot be waived.

The proposal to eliminate the original bills of lading after payment of the freight forwarder's bill by microfilming both documents together in the regular course of business appears to be a rational method of reducing the paperwork burden for a business. In United States v. Carroll, 860 F.2d 500, 518 (1st Cir. 1988), the court held that when a print of a microfilm copy of bank checks, kept by a bank in the regular course of business, is properly identified by a custodian of records as a complete and accurate reproduction thereof, such prints are "duplicates" under the Federal Rules of Evidence and the microfilm itself need not be produced as the "best evidence".

Although it is clear that a court of law equates the microfilm and reproductions therefrom as equally competent as the original check for evidentiary purposes, when satisfactorily identified, see Williams v. United States, 404 F.2d 1372, 1373 (5th Cir. 1968), cert. denied, 394 U.S. 992, 89 S.Ct. 1482 (1969), the Federal Rules of Evidence, although instructive and informative, are inapplicable to the requirements of the Customs Regulations. However, it is possible that if the legislation introduced on November 4, 1993 (H.R. 3450) and passed by the 103d Congress is signed by the President, an alternative recordkeeping format other than the original records may be applicable here if given prior approval/permission by Customs as part of a recordkeeping compliance program. See H.R. 3450 (Title VI - Customs Modernization, Subtitle A).

Before the Customs Service could approve the use of microfilmed copies instead of the actual documents, the applicant must establish that the microfilming was done pursuant to a routine procedure designed to assure the accuracy and genuineness of the copies, that it must be made at or near the time of the event it records, and that the microfilmed copies were created for purposes that would tend to assure accuracy and trustworthiness (i.e., as a matter of routine to reflect regular business transactions, rather than for a calculated use such as litigation oriented records). We think the creation of copies only to support a claim for drawback is not such a purpose. Customs should also know the identity of the individuals who prepared the copies in the regular course of business and the identity of the custodian of the records; this information could be included on a portion of the microfilmed copy.

We note that a recent audit of the Company revealed no problem with the authenticity of the documents retained as proof of exportation on a random selection and verification of past exportations. The Office of Regulatory Audit in Boston reported that each ocean bill of lading is tied to the Company's export invoice by a "seal" number. The Company can trace the payment of its freight forwarder's bill to each bill of lading. The payment records ties the bills of lading and the export invoice numbers together to prove exportation of the various exported articles.

HOLDING:

The Customs Regulations (namely, 19 CFR 191.52(c)(2) and 191.53(e)) currently do not provide for the retention of a microfilmed copy instead of an original bill of lading or certified copy thereof as proof of exportation for drawback purposes under the exporter's summary procedure.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

John Durant, Director

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