HQ 224526 - Ruling request concerning possession requirement to qualify for drawback under 19 U.S.C. 1313(j)(2); B.F. Goodrich Co. v. United States, CIT slip op. 92-68 (1992); C.S.D. 87-18 (June 15, 1987). - United States International Trade Commision Rulings

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HQ 224526

July 13, 1993

DRA-4 CO:R:C:E 224526 TLS

CATEGORY: ENTRY

Mr. Patrick D. Gill
Rode & Qualey
295 Madison Avenue
New York, New York 10017

RE: Ruling request concerning possession requirement to qualify for drawback under 19 U.S.C. 1313(j)(2); B.F. Goodrich Co. v. United States, CIT slip op. 92-68 (1992); C.S.D. 87-18 (June 15, 1987).

Dear Mr. Gill:

This office has received the above-referenced request for a ruling and has considered the points raised in your submissions. Our decision is as follows:

FACTS:

Gelatin is imported for use in the importer's manufacturing facilities in the United States. The claimant also purchases gelatin from a domestic manufacturer for use in its domestic and overseas facilities. It is claimed that the imported and domestic gelatins are fungible and are used interchangeably.

The claimant plans to hire a freight forwarder to act as its agent and take possession of the gelatin material from the vender for shipment overseas. These shipments are accounted for by the claimant as "in-transit inventory." The claimant proposes to claim substitution same condition drawback on the importations.

ISSUE:

Whether the purchased domestic merchandise in this case is within the possession of the drawback claimant sufficient enough to sustain a substitution same condition drawback claim.

LAW AND ANALYSIS:

Under 19 U.S.C. 1313(j)(2)(C), a drawback claimant must export substituted merchandise in the same condition as the imported merchandise upon its importation within three years of the importation. This merchandise must not have been used within the United States before exportation and must have been within the possession of the party claiming drawback.

In B.F. Goodrich Co. v. United States, CIT slip op. 92-68 (1992), the court held that while possession of the imported merchandise is not required of the drawback claimant, the claimant must obtain possession of the exported substituted merchandise to sustain a successful drawback claim.

In this case, the claimant has hired a freight forwarder to take possession of the purchased merchandise for shipment to Europe on its behalf. The exporter contends that it will maintain complete control over the merchandise even though it will not take physical possession of such except to export it. In cases where possession was at issue, Customs has made the determining factor whether or not the claimant has complete control over the merchandise on premises or locations where the possessor can put the merchandise to any use chosen. C.S.D. 85-52 (August 16, 1985); see also C.S.D. 81-76; C.S.D. 81-218. From the facts presented here, we find that the claimant does not have such control over the subject merchandise.

The concern in these types of cases is that commercial paper is traded merely to establish a climate of drawback when no true dominion over the merchandise is taken. C.S.D. 81-76. Whether or not the exporter takes ownership directly itself or through an agent is irrelevant to the question of possession. The establishment of ownership alone will not satisfy the possession requirement. Possession requires at least the possibility of putting the merchandise to its intended use while in the physical control of the possessor.

The facts of this case indicate that such is not true here. The agent of the exporter is apparently only obtaining commercial paper and rerouting the merchandise for immediate transport overseas. Clearly, the merchandise cannot be put to any use, intended or otherwise, while in transport. As noted above, the B.F. Goodrich case left intact the possession requirement with regards to exported merchandise in drawback claims. Therefore, we are compelled to find that the claimant in this case has not met the all the requirements for drawback under 19 U.S.C.

HOLDING:

The exporter of the subject merchandise is not eligible for substitution same condition drawback in this case because it did not take possession of the exported merchandise as required under 19 U.S.C. 1313(j)(2). This ruling is limited to the facts of this case.

Sincerely,

John Durant, Director

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