HQ 225671 - Internal Advice; Importer of record may claim drawback under 19 U.S.C. 1313(c); Section 203(a)(4), NAFTA Implementation Act; H. Rep. No. 103-361; 19 CFR 18.45(c); 19 U.S.C. 1313(c); Section 632, NAFTA Implementation Act; 19 CFR 181.48(b). - United States International Trade Commision Rulings

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HQ 225671

February 16, 1995

DRA-5-02-CO:R:C:E 225671 AJS

CATEGORY: DRAWBACK

Ms. Elaine Kwiecien
Regional Director, Commercial Operations
U.S. Customs Service
10 Causeway, Room 801
Boston MA 02222-1056

RE: Internal Advice; Importer of record may claim drawback under 19 U.S.C. 1313(c); Section 203(a)(4), NAFTA Implementation Act; H. Rep. No. 103-361; 19 CFR 18.45(c); 19 U.S.C. 1313(c); Section 632, NAFTA Implementation Act; 19 CFR 181.48(b).

Dear Ms. Kwiecien:

This is in reply to your request for internal advice of August 30, 1994, concerning G. Rosenthal Import Ltd. (GRI) and the applicability of drawback.

FACTS:

GRI imports merchandise into Canada, then fills orders from its customers in the U.S., primarily large retailers. The merchandise is then entered into the U.S. with GRI as the importer of record. The customshouse broker arranges shipment to the U.S. customers.

When customers have occasion to return merchandise unused (e.g., goods arrived damaged, wrong color shipped, late shipment etc.,) it is sent to the broker's warehouse, then shipped back to GRI.

In all cases GRI apparently will be both the importer and the exporter/claimant. The merchandise, however, is not actually in Rosenthal's physical possession between the time it is sent to the customer and its return to the broker.

ISSUE:

Whether GRI, as importer of record, may claim drawback under 19 U.S.C. 1313(c). More specifically, whether GRI is competent to attest to both the condition and identity of the subject merchandise in order to qualify for drawback.

LAW AND ANALYSIS:

Your request does not specify which type of drawback GRI intends to claim. Our review of this request indicates that 19 U.S.C. 1313(c) would appear to be the most appropriate type of drawback.

Regarding exportations to Canada and Mexico, section 203 of the North American Free Trade Agreement (NAFTA) Implementation Act of December 8, 1993, (Public Law 103-182; 107 Stat. 2057, 2086; 19 U.S.C. 3333) provides for the treatment of "goods subject to NAFTA drawback". Under section 203(a), such goods do not include, among other things-

(4) A good exported to a NAFTA country for which a refund of customs duties is granted by reason of-

(A) the failure of the good to conform to sample or specification, or

(B) the shipment of the good without the consent of the consignee.

Section 203(a) implements NAFTA Article 303, paragraph 6 by specifically exempting those categories of goods listed therein from NAFTA drawback treatment. H. Rep. No. 103-361, 103d Cong., 1st Sess. 40 (1993). The subject goods would appear to be a good under section 203(a)(4). Therefore, they are not subject to NAFTA drawback treatment.

The Customs Regulations issued under the authority of the NAFTA Implementation Act specifically provide for the availability of drawback on the exportation of merchandise to a NAFTA country. Under 19 CFR 181.45(c), an imported good exported to Canada by reason of failure of the good to conform to sample or specification or by reason of shipment of the good without the consent of the consignee is eligible for drawback under 19 U.S.C. 1313(c) without regard to the limitation on drawback set forth in section 181.44 of this part. The subject imported goods are claimed to be exported to Canada for these reasons.

Section 632, title VI-Customs Modernization, of the NAFTA Implementation Act amended 19 U.S.C. 1313(c) to read as follows:

(c) MERCHANDISE NOT CONFORMING TO SAMPLE OR SPECIFICATIONS.- Upon the exportation, or destruction under the supervision of the Customs Service, of merchandise-

(1) not conforming to sample or specifications, shipped without the consent of the consignee, or determined to be defective as of the time of importation;

(2) upon which the duties have been paid;

(3) which has been entered or withdrawn for consumption; and

(4) which, within 3 years after release from the custody of the Customs Service, has been returned to the custody of the Customs Service for exportation or destruction under the supervision of the Customs Service:
the full amount of the duties paid upon such merchandise, less 1 percent, shall be refunded as drawback.

In this case, imported goods will be exported to Canada for such reasons as they arrived damaged, in the wrong color or due to late shipment. Such goods would appear to fail to conform to sample or specifications in the first two cases. In the last case, the goods would appear to be shipped without the consent of the consignee if they were shipped late. Therefore, such goods would be eligible for nonconforming or improperly shipped goods drawback under 19 U.S.C. 1313(c).

Your request specifically requests whether GRI is competent to attest to both the condition and identity of the merchandise in order to qualify for drawback. There is no such specific competency requirement under part 181. However, 19 CFR 181.48 does specify the persons entitled to receive drawback. Paragraph (b) states that only the importer of record or the actual owner of the merchandise or its agent may claim drawback under 19 U.S.C. 1313(c) for nonconforming or improperly shipped goods drawback. In this case, GRI is the importer of record. There- fore, GRI may claim drawback under 19 U.S.C. 1313(c). The fact that the subject goods may not be in the possession of GRI between the time they are sent to the customer and their return to the broker does not affect its right to claim drawback under section 1313(c) as long as GRI satisfies the requirements of section 181.48. In addition, 19 CFR 181.47(b)(2)(iii) specifies the required documentation for nonconforming or improperly shipped goods drawback claims. Thus, GRI must also submit this documentation in order to claim drawback under 19 U.S.C. 1313(c).

HOLDING:

GRI, as importer of record, may claim drawback under 19 U.S.C. 1313(c). There is no specific requirement of competency to attest to the condition and identity of merchandise in order to qualify for drawback under 19 U.S.C. 1313(c). There is a
requirement to show that the goods did not conform to sample or specification, or were shipped without consent of consignee as provided in 19 U.S.C. 1313(c) and 19 CFR 181.45(c).

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, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

John Durant, Director
Commercial Rulings Division

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