HQ 0224824 - Complementary records; 19 CFR 191.22(d); Bureau Circular Letter 014; 15 Customs Bulletin 720; T.D. 81-300; T.D. 81-181; bankrupt agent. - United States International Trade Commision Rulings

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HQ 224824

February 10, 1994

DRA-2-01-CO:R:C:E 224824 AJS

CATEGORY: DRAWBACK

Ms. Barbara Seward
Fritz Companies, Inc.
40 Exchange Place, 12th Floor
New York, NY 10005

RE: Complementary records; 19 CFR 191.22(d); Bureau Circular Letter 014; 15 Customs Bulletin 720; T.D. 81-300; T.D. 81-181; bankrupt agent.

Dear Ms. Seward:

This is in reply to your request of July 1, 1993, that Sony Professional Products Company (SPPC) be recognized as a complimentary record-keeper for the Dorez Corporation pursuant to 19 CFR 191.22.

FACTS:

SPPC is a drawback claimant under T.D. 81-300. It is claimed that certain agents perform a portion of their manufacturing process. Dorez submitted a contract as an agent for SPPC under T.D. 81-181 to the Regional Commissioner of Customs in Miami on August 30, 1990. Your submission of April 27, 1993, states that Dorez has declared bankruptcy. You claim that the drawback records of Dorez are not readily available and SPPC desires to provide complimentary records for those required to be produced by Dorez as its agent.

ISSUE:

Whether section 191.22(d), Customs Regulations, enables a manufacturer to use its own manufacturing records in lieu of the production records of the manufacturer's agent.

Whether the manufacturer's own records are sufficient to establish that the exported articles were made with the use of duty-paid, imported merchandise.

LAW AND ANALYSIS:

19 CFR 191.22(d), Customs Regulations, has remained substantially unchanged since its promulgation as section 22.4(e) of the Customs Regulations of 1943. The purpose of the section was to permit the person, other than a manufacturer, for whom the manufacturer was making the articles to keep drawback records. See Bureau Circular Letter 014 of June 21, 1943. The section requires the abstracts of those records to be filed with the drawback claim.

In this situation, SPPC chose to operate under the general component parts contract published as T.D. 81-300. In this case, SPPC is the manufacturer. The agent employed by SPPC is not the manufacturer. Since operation under a general contract does not require any approval by the Customs Service, SPPC is bound by the recordkeeping agreements as set forth in T.D. 81-300. Under that contract SPPC agreed to keep records to establish:

(1) The identity and specifications of the merchandise we designate;

(2) The quantity of merchandise of the same kind and quality as the designated merchandise we used to produce the exported articles;

(3) That, within 3 years after receiving it at our factory, we used the designated merchandise to produce articles. During the same three-year period, we produced the exported articles.

See 15 Customs Bulletin 720, 721 (1981).

Under the circumstances, since SPPC asserts that it is the manufacturer for drawback purposes, it cannot be a person for whom the manufacturer was making the articles. The agent of SPPC, if there is a bona fide agency relationship, is viewed for the purposes of 19 U.S.C. 1313(b) as being no more than an additional factory of SPPC. Consequently, section 191.22(d), Customs Regulations, simply does not apply to the presented facts.

The agent of SPPC, Dorez, filed the general agent's contract set forth in T.D. 81-181 with Customs. Again, as in the case of T.D. 81-300, no approval from Customs was needed or given in order for Dorez to operate. Dorez is alleged to be bankrupt. However, no evidence was presented to show that
the records Dorez agreed to keep with respect to its activities as agent are unavailable for Customs verification. Consequently, even if Dorez was the manufacturer of the exported articles for the purpose of compliance with 19 U.S.C. 1313(b), the bankruptcy of Dorez alone would not provide satisfactory evidence under section 191.22(d), Customs Regulations. In any event SPPC asserts that it, rather than Dorez, is the manufacturer for the purpose of 19 U.S.C. 1313(b) and, therefore, SPPC is outside the scope of section 191.22(d), Customs Regulations. Moreover, under T.D. 81-181, Dorez, the agent of SPPC, agreed to keep records to show the identity and specifications of the merchandise it received from SPPC. It agreed to keep records as to the date it received the merchandise from SPPC, the date it processed that merchandise into articles, and the date it returned those articles to SPPC.

Assuming that Dorez complied with its agreement, the subsequent bankruptcy of Dorez would not necessarily result in a loss of those records. In any event no evidence was presented to show that those records are unavailable.

The next consideration is whether the records kept by SPPC are sufficient to show compliance with 19 U.S.C. 1313(b) by SPPC.

The available evidence, which is stated by SPPC to be an accurate representation of the work performed by Dorez for SPPC, shows that Dorez received components in kit form from SPPC and assembled those kits into a subassembly. Although the invoices from Dorez were set in terms of a sold price, SPPC furnished cost data which tends to show that the money received by Dorez was payment for services rather than a sales price. We assume the accuracy of that information for the purpose of this ruling. We also assume that evidence is representative of the SPPC-Dorez relationship for the purpose of this ruling.

The evidence shows the identity of the kit imported by SPPC from Japan; it shows receipt of components from SPPC, subsequent to importation, by Dorez; it shows that the items received by Dorez were subsequently returned by Dorez to SPPC as an assembly and that SPPC used that assembly to make an article that was exported to Canada. Consequently, those records if verified as accurate, would be sufficient to show compliance by SPPC.

This ruling does not preclude Customs access to the records of Dorez for the purpose of verification of SPPC's records.

HOLDING:

Section 191.22(d), Customs Regulations, does not enable a manufacturer to use its own manufacturing records in lieu of the production records of the manufacturer's agent. However, the manufacturer's own records may be sufficient to establish that the exported articles were made with the use of duty-paid, imported merchandise.

Sincerely,

John Durant, Director

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