HQ 224418 - Protest 1703-92-100122; 19 U.S.C. 1313(b); 19 CFR 191.34(a); T.D. 55027(2); C.S.D. 83-72; "owned by"; HQ 221914; "sale"; principal and agent relationship; accounting records as evidence of sale; 19 CFR 191.22(c); C.S.D. 83-54; inventory procedure. - United States International Trade Commision Rulings

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HQ 224418

March 23, 1995

DRA-2-01-CO:R:C:E 224418 AJS

CATEGORY: DRAWBACK

Acting Director
Commercial Operations
Southeast Region
U.S. Customs Service
909 S.E. 1st Avenue
Miami FL 33131

RE: Protest 1703-92-100122; 19 U.S.C. 1313(b); 19 CFR 191.34(a); T.D. 55027(2); C.S.D. 83-72; "owned by"; HQ 221914; "sale"; principal and agent relationship; accounting records as evidence of sale; 19 CFR 191.22(c); C.S.D. 83-54; inventory procedure.

Dear Madame:

This is our decision in Protest 1703-92-100122, dated August 13, 1992, concerning the applicability of drawback under 19 U.S.C. 1313(b)

FACTS:

The subject protest involves 32 entries which were liquidated on either May 15 or May 22, 1992. The Office of Regulatory Audit selected 62 protested drawback entries for further review as representative of the factual situations before Customs. Of the 32 drawback entries covered by the subject protest, 29 entries were included within the 62 selected entries. The remaining 33 entries (62-29) were covered by the following Savannah protests: 1703-92-100109 (7 entries reviewed), 1703-92-100130 (7 entries reviewed), 1703-92-100131 (17 entries reviewed) and 1703-92-100128 (2 entries reviewed). There were two fact patterns. In the first, Savannah asserted that it was the actual refiner of the imported designated raw sugar and of the substituted raw sugar used to make the exported articles. In the second, Savannah asserted that it was the actual refiner of the imported designated raw sugar and the legal manufacturer, by virtue of an agency contract with Everglades Sugar Refinery, of the substituted raw sugar used to make the exported articles.

Our analysis of the first fact pattern is covered by our decision on further review of the protest 1703-92-100113 (HQ 224417). This decision covers our analysis of the Savannah-

Everglades agency relationship with respect to production of the exported articles using the substituted raw sugar.

Savannah Foods & Industries, Inc. (SFI) through its sugar refinery located at Port Wentworth, Georgia, is engaged in the manufacture and exportation of hard, soft and liquid sugars, molasses and leafcoat. The original drawback contract for SFI or its predecessor dates back to December 18, 1933. SFI has a wholly owned subsidiary, Everglades Sugar Refinery, Inc. (ESR), located in Clewiston, Florida. ESR produces bulk, liquid, and a limited line of packaged sugar under the name of Evercane. In 1979, ESR entered into a drawback contract with Customs to manufacture sugar as SFI's agent in accordance with the provisions of Treasury Decision (T.D.) 55207(1).

A principal and agent agreement between SFI and ESR was submitted to this office. See Counsel's Submission of November 29, 1993, p. 1993. This agreement commenced on January 1, 1979 and was to continue thereafter until cancelled by mutual consent. The agreement required SFI to have delivered raw sugar to ESR. ESR agreed to toll raw sugar for SFI and produce refined sugar therefrom. SFI was to settle with ESR on sugars which ESR tolled for SFI, such settlement to be based upon a toll equal to the cost of refining at ESR.

SFI generally purchased raw sugar from two unrelated third parties, U.S. Sugar Corporation (USSC) and Florida Sugar Marketing & Terminal Association, Inc. (FSMT). Id. at 1898 to 1974. In one contract, the parties are "United States Sugar Corporation" as "Producer" and "Savannah Sugar Refining Corporation" as "Refiner". Id. at 1962. Counsel claims that SFI is the successor to the SSRC. Paragraph 4 provides that USSC agrees to sell and SFI agrees to purchase raw sugar produced by USSC. Id. at 1964. Paragraph 6 provides that SFI shall pay USSC for the raw sugar delivered to SFI. Id. at 1964. Paragraph 8 provides that USSC shall ship raw sugar to SFI's refinery. Id. at 1965. Later amendments to the contract provided for delivery to ESR. Id. at 1921 and 1898. In these amendments calling for delivery of raw sugar to ESR, the parties to the purchase, sale, and contract remain the same (i.e., USSC and SFI). The other contract between SFI and FSMT has similar provisions. Id. at 1972, et seq.

The Customs audit report for SFI states that the delivery of raw sugar owned by SFI to ESR is initially recorded on ESR's books with a subsequent reverse accounting entry. This entry is only done once a month. ESR recorded all deliveries of raw sugar owned by any of the corporate entities on its own books. Reverse accounting entries were made for that portion ESR did not itself own. SFI claims that this initial entry and reversal system was strictly for internal use and was done simply for administrative
convenience. We note that ESR subsequently changed the way in which the delivery of raw sugar is recorded. The audit report also states that ESR invoices the customer for the export sales. At the end of each month, journal entries are made on the books of ESR and SFI to transfer drawback and other export shipments from ESR to SFI. On an intercompany journal entry, the cost of the raw sugar is charged to SFI. Accounting personnel explained that cash disbursements for ESR were handled by SFI. One treasury department handles cash disbursements for both corporations.

The following is a review of one of the sample drawback entries which illustrates the evidence on the Savannah-Everglades agency relationship. Import entry 83-xxxx00-9, dated October 7, 1982, indicates that SFI imported 31,302,962 pounds of raw sugar on the vessel "M/V Argos". A letter of September 23, 1982, indicates that this raw sugar was sold to SFI by Czarnikow-Rionda Trading Company, Inc.

Customs Form (CF) 7575-B, Drawback Entry and Certificate of Manufacture for Exported Articles, contains drawback entry number 86-xxxx59-3 and internal reference number 1610. This form indicates that two shipments of 305 packages (i.e., approximately 30,500 pounds) totaling 61,012 pounds of refined sucrose was exported on September 26 and 27, 1985, by the vessels "Food Carrier", numbers T-102 and T-98. In addition, it indicates that this refined sucrose was designated against raw sugar imported by SFI in import entry number 83-xxxx00-9. It also cites to abstract 69E as the abstract showing production of the exported sucrose.

The CF 7575-B also indicates that import entry number 83-xxxx00-9 was imported by SFI, on the vessel "Argos", on October 7, 1982, consisted of 31,302,962 pounds of raw sugar, received at the factory between October 14 and 20, 1982, and used in manufacture between October 16 and 31, 1982. However, the space for the Certificate of Manufacture (C of M) number was blank. On August 4, 1994, Counsel submitted documentation stating that the C of M numbers for this import entry are 22896 and 22897, and the corresponding abstract numbers are 471 and 472. Abstract 471 indicates that import entry number 83-xxxx00-9 was imported by SFI, on the vessel "Argos", on October 7, 1982, consisted of 31,302,962 raw pounds, received at the refinery between October 14 through 20, 1982, used in a melt between October 16 and October 31, 1982, and produced 29,476,722 pounds sucrose. Abstract 472 indicates the same information except the date of melt is November 1, 1982, and 1,468,306 pounds sucrose was produced. In summary, SFI is exporting 30,500 pounds of refined sucrose manufactured by its agent and designating this against 31,000,000 pounds of imported raw sugar which was manufactured into refined sugar less than three years earlier. We note that our file contains a list of

Certificates of Delivery recorded by your region referring to other drawback claims designated against import entry 83-xxxx00-9 which total approximately 2 million pounds of refined sugar.

CF 7577-B, Certificate of Manufacture and Delivery, indicates that 61,012 pounds of refined sucrose was manufactured by ESR on September 26-27, 1985, and delivered to "Food Carrier" on the same dates. Abstract 69E, number 1610 and drawback entry number 86-xxxx59-3 are referenced. This information indicates that the sucrose for export was manufactured by the agent and delivered for export.

An unsigned CF 7511, Notice of Exportation of Articles with Benefit of Drawback, indicates that SFI exported 30,515 pounds of refined sucrose from Ludlow, Kentucky (i.e., SFI's bulk melt station and storage location) to H.J. Heinz of Leamington, Canada on September 27, 1985. The exporting carrier was "Food Carrier", number T-102. The order number was LK 1563 and number 1610 was also referenced on the CF 7511. This information is also supported by a Canadian Customs invoice and a trip lease from the carrier. This information indicates that the claimed exported sucrose was in fact exported.

Drawback entry number 86-xxxx59-3 is listed on page 344. See Counsel's Submission of February 14, 1994. Abstract 69E indicates that lots 66-71 contained 5,522,740 pounds of refined sugar manufactured at ESR from raw sugar of USSC origin during the period of August 26, 1985, to September 29, 1985. Id. at 345. This raw sugar of USSC origin appears to be owned by SFI based on the previously discussed sales contract with USSC. Number 1610 shows 30,515 pounds of refined sucrose was cleared on September 26, 1985, on the vessel "Food Carrier", and that this sugar was designated against sugar from the vessel "Argos". Id. at 346. This document is referenced to number 1610 and abstract 69E. A Canadian Customs invoice indicates SFI exported 30,515 pounds of refined sucrose from Ludlow under number 1610 on September 26, 1985, in purchase order LK 1563. Id. at 349. A trip lease agreement indicates that purchase order LK 1563 was transported from Ludlow to Canada by "Food Carrier" and arrived on September 26 or 27, 1985. Id. at 350.

A report of Ludlow weekly inventory for the week ending September 29, 1985, was submitted. Id. at 268. This report indicates that the beginning inventory consisted of 289,135 pounds, receipts consisted of 2,280,000 pounds and ending inventory consisted of 176,100 pounds. These receipts consisted of serial number 290 which corresponds with order number 003907. The receipts (i.e., serial and order number) for the subject week total 2,280,000 pounds. Internal number 1610 was shipped from ESR to Ludlow under serial number 290, order number 003907, and in vehicle
number SBD 201392. Id. at 1382-1384. At page 1383 there is a bill of lading covering the shipment from Clewiston to Ludlow in which the merchandise is described as having been sold to SFI. The submitted documentation indicates that serial number 290, order number 003907, and SBD 201392 were received at Ludlow on September 25, 1985. Id. at 274. Abstract 69E indicates that sugar from lots number 66-71 with an origin of USSC was produced in August through September of 1985. Id. at 345.

A daily shipment report for September 26, 1985, for Ludlow indicates that order number 1563 was to be shipped to H.J. Heinz in Leamington, Ontario in vehicle T-102, and that it weighed 30,515 pounds. Id. at 275. Serial number 290, order number 003907, SBD 201392, and 190,000 pounds of refined sugar were received at Ludlow on September 25, 1985. Id. at 274.

A document referred to as "Savannah Records Showing Ludlow Transaction" was submitted. Id. at 286. For the week ending September 29, 1985, receipts consist of 2,280,000 pounds and end with a balance of 176,100 pounds. These amounts match those listed on page 268. Of these receipts, 950,000 pounds were from SFI and 1,140,000 pounds were from ESR. Number 1610 and 30,515 pounds were included within these receipts. We also note that the balance of the week ending September 22, 1985, is listed as 289,135 pounds which corresponds to the amount listed on page 268.

ISSUE:

Whether imported duty-paid raw sugar and duty free or domestic raw sugar of the same kind and quality were used in the manufacture of refined sugar within three years from the receipt of such imported sugar by the manufacturer and whether this refined sugar was subsequently exported.

LAW AND ANALYSIS:

Initially, we note that the protest was timely filed pursuant to 19 U.S.C. 1514(c)(2)(A). The date of liquidation of the subject entries was either May 15 or May 22, 1992, and this protest was filed on August 13, 1992. In addition, we note that refusal to pay a claim for drawback may be protested pursuant to 19 U.S.C. 1514(a)(6).

19 U.S.C. 1313(b) states:

If imported duty-paid merchandise and duty free or domestic merchandise of the same kind and quality are used in the manufacture or production of articles within a period not to exceed three years from the receipt of such imported merchandise by the manufacturer or producer
of such articles, there shall be allowed upon the exportation of any such articles, notwithstanding the fact that none of the imported merchandise may actually have been used in the manufacture or production of the exported articles, an amount of drawback equal to that which would have been allowable had the merchandise used therein been imported; but the total amount of drawback allowed upon the exportation of such articles, together with the total amount of drawback allowed in respect of such imported merchandise under any other provision of law, shall not exceed 99 per centum of the duty paid on such imported merchandise.

Import entry 83-xxxx00-9 indicates that SFI imported 31,302,962 pounds of raw sugar, and a letter from the seller indicates that SFI purchased this sugar. Therefore, SFI originally owned imported duty-paid merchandise which is the initial statutory requirements of section 1313(b) when the nominal manufacturer employs an agent to perform the actual use in the manufacture or production of either the designated or substitute merchandise.

19 CFR 191.34(a) provides, in part, that if an owner of imported or domestic merchandise furnishes this merchandise to an agent in accordance with a contract between the two parties, and the agent manufactures from it articles for the owners' account, the owner shall be considered the user of the merchandise. This language was adopted from T.D. 55027(2), which provides:

T.D. 55027(2) Substitution.-Imported merchandise which is owned by Corporation "A" and furnished by that corporation to Corporation "B" for use by the latter in the manufacture of products for the account of Corporation "A", is used by Corporation "A" within the meaning of section 313(b), Tariff Act of 1930, as amended, and may be designated by that corporation as the basis for the allowance of drawback on articles manufactured by it in compliance with the regulations under section 313(b).

The essential question in this protest is whether SFI continued to own the raw sugar which was manufactured into refined sugar by ESR (i.e., its agent).

In C.S.D. 83-72, Customs stated that the term "owned by" as it appears in T.D. 55027(2) is defined in Black's Law Dictionary, as follows:

Although these words may be used synonymously with "belonging to" or "forming part of"; * * * in a stricter sense they denote an absolute and unqualified title, whereas the words "belonging to" do not import that the whole title to property or thing is meant, for a thing may belong to one who has less than an unqualified and absolute title. (Emphasis added).

Customs also stated that Black's Law Dictionary defines the terms "own" and "owner" as follows:

Own-To have a good legal title; to hold as property; to have a legal or rightful title to; to have; to possess (Emphasis added). Owner-The person in whom is vested the ownership, dominion, or title of property * * * He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases, even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right.

Counsel asserts that SFI owned the imported raw sugar because it purchased this sugar and that in order for ESR to acquire ownership, a subsequent sale from SFI to ESR must occur. Counsel states that in order for a sale to occur, the normal elements of a transfer of title for a consideration must be met. U.C.C. section 2-301; Restatement (Second) of Contracts section 71 (1979).

In HQ 221914 (March 8, 1991), Customs discussed the requirements of a "sale" under section 1313(b). A "sale" is an agreement whereby the seller transfers property in goods to the buyer for a consideration called the price. See MacCluney v. Kelsey-Hayes Wheel Co., 87 F.Supp 58 (1949); Uniform Commercial Code (U.C.C.) Section 2-106(1). An agreement is necessary to show that the buyer and seller mutually assented to all the terms and conditions of a sale. See United Wholesalers v. A.J. Armstrong Co., 251 F.2d 860 (1958); Coastal Chemical Corporation v. Filtrol Corporation, 374 F.2d 108 (1967). Without an agreement, there can be no binding contract of sale between the two parties. U.C.C. Section 2-204(1). SFI had agreements to buy raw sugar from both USSC and FSMT, as well as a letter from another party indicating that SFI purchased raw sugar. However, Counsel claims that no corresponding agreements exist in the record supporting a sale from SFI to ESR.

Counsel cites to Crocker Nat. Bank v. Ideco Div. of Dresser Ind., 889 F.2d 1452 (5th Cir. 1989) cert. denied, 495 U.S. 919 (1990), in support of its claim that no sale occurred between SFI and ESR. In that case, the court looked to the parties identified in the sales contract and in subsequent invoicing to determine which party possessed title to the merchandise. Copies of invoices and statements from USSC for the raw sugar sales in September of 1986 pursuant to contract were submitted. See Counsel's Submission of November 29, 1993, pp. 1975-1992. The invoices and statements are made out to SFI, the buyer of the raw sugar, even though ESR deliveries are also listed on the invoices. Id. p. 1980. Copies
of SFI's accounts payable vouchers showing actual payment by SFI to USSC and FSMT for raw sugar invoices were also submitted. Id. p. 3850-3861. Thus, SFI paid consideration for the raw sugar it agreed to buy and furnish to ESR. No such corresponding information was found indicating that ESR paid consideration to SFI for raw sugar. Therefore, this evidentiary record supports the conclusion that SFI rather than ESR owned the raw sugar which was provided to ESR for manufacture and which was the source of the exported sucrose.

A principal and agent agreement was submitted for SFI and ESR. This agreement required SFI to furnish raw sugar to ESR. ESR was to toll raw sugar for SFI and produce refined sugar. SFI was to pay to ESR the cost of refining sugar which ESR tolled. This agreement satisfies the requirements of T.D. 55027(2), and supports the conclusion that ESR did not purchase raw sugar from SFI.

Customs decisions regarding a principal and agent relationship require that a bona fide agency relationship exist and that the principal must own the merchandise at the time that the articles were made. See HQ 223431 (April 15, 1992), T.D. 78-313, T.D. 78-405. As stated previously, SFI owned the raw sugar which was furnished to ESR for manufacture. At the same time, the Customs Service has denied drawback based on this exception where it determined that the agency relationship, the sale, or both were illusory. See HQ 223431 (April 15, 1992), C.S.D. 81-76, C.S.D. 83-72.

The CF 7575-B for drawback entry 86-xxxx59-3 indicates that 61,012 refined pounds of sucrose was exported, and that production of this sucrose is supported by abstract 69E and C of M 39229 between September 26-27, 1985. This refined sugar was designated against raw sugar from import entry 83-xxxx00-9, which was received at SFI's refinery between October 14 and 20 of 1982, and manufactured into more than 30,945,028 pounds of refined sugar between October 16 and 31 or on November 1 of 1982. Abstract 69E itself indicates that more than 61,012 pounds of refined sucrose was produced. Abstract 69E also indicates that lots 66-71 contained 5,522,740 pounds of refined sugar at ESR which was produced from raw sugar during the period of August 26 to September 29, 1985, and purchased from USSC. This raw sugar is identified on ESR abstract 69E as USSC-Clewiston. As noted above SFI had contacts with USSC to buy raw sugar for delivery at Everglades refinery. A USSC invoice on lots 66-71 was furnished to Customs by its counsel. A letter from SFI to USSC dated October 8, 1985, records the confirmation of payment on lots 66-71. This evidence supports SFI's assertion that it, and not ESR, was the purchaser of the raw sugar from USSC. The extract for Abstract 69E indicates that approximately 33 million pounds of refined sugar was manufactured between August 26 and September 29, 1985, by ESR.

Thus, SFI furnished raw sugar to ESR and raw sugar of the same kind and quality was manufactured into refined sugar by ESR, and this sugar was designated against imported duty-paid raw sugar of the same kind and quality which was manufactured into refined sugar by SFI. Therefore, the second statutory requirement of section 1313(b) was satisfied.

A report of Ludlow weekly inventory for the week ending September 29, 1985, indicates that the beginning inventory of refined sugar consisted of 289,135 pounds, receipts consisted of 2,280,000 pounds, and ending inventory consisted of 176,100 pounds. These receipts consisted of serial number 290 which corresponds with order number 003907. Internal number 1610 was shipped from ESR to Ludlow under serial number 290 and order number 003907, and in vehicle number 201392. Accordingly, the subject refined sugar from ESR was shipped and arrived at Ludlow.

The CF 7575-B also indicates that 30,500 pounds of sugar was exported by the vessel Food Carrier (i.e., number T-102) on September 26, 1985, under order number 1610. The CF 7577-B indicates that 61,012 pounds of refined sugar was delivered to the "Food Carrier" for export on September 26 or 27, 1985 from reference number 1610. This form also indicates that 61,012 pounds of refined sugar from the consumption entry was exported. The CF 7511 indicates that SFI exported to Canada approximately 30,515 pounds of refined sugar from Ludlow relating to reference number 1610 on the vessel "Food Carrier". A Canadian Customs Invoice indicates that SFI exported 30,515 pounds of refined sugar from Ludlow, under internal number 1610 on September 26, 1985, in purchase order LK 1563. A trip lease agreement indicates that purchase order LK 1563 was transported from Ludlow to Canada by the vessel "Food Carrier" and that it arrived on September 26 or 27, 1985. This information supports the conclusion that the required refined sugar from ESR was exported. Accordingly, the exportation requirement of section 1313(b) has also been satisfied.

The audit report states that the imported raw sugar was on the ESR books at the time of manufacture and thus not owned by SFI. Counsel claims that the manner the imported raw sugar was recorded on ESR books and subsequent reverse entry to SFI books does not change the conclusion that the raw sugar was owned by SFI. Counsel asserts that accounting records do not govern the legal conclusion as to sale or ownership. See Crocker Nat. Bank v. Ideco Div. of Dresser Indus., 839 F.2d 1104, 1107 (5th Cir. 1988); cert. denied, 495 U.S. 119 (1989) In Crocker, the court stated that the seller's accounting records reflecting an increase in its accounts receivable and a decrease in its inventory upon invoicing do not determine title. Id. at 1107. Instead, these record transactions represent bookkeeping procedures performed by the accounting department which do not negate the express delivery term of the
agreement. Id. Counsel claims that other more probative accounting records (e.g., how the cost of the raw sugar was carried in the financial records) are consistent with SFI's ownership claim.

We agree that the above described accounting entries do not determine ownership in this case. The vast weight of information submitted indicates that SFI purchased raw sugar and furnished this raw sugar to ESR. No information, other than one shipping document, was found to indicate that ESR subsequently purchased this sugar from SFI. In fact, the express terms of the agreement between the parties indicate that ESR did not purchase raw sugar from SFI. As the court found in Crocker, we find that the express terms of this agreement govern over bookkeeping procedures for determining ownership of the raw sugar. As counsel points out, if the subject situation was reversed and ESR claimed ownership of the raw sugar based solely on accounting records and in conflict to the vast weight of the other submitted information Customs would not accept that claim.

19 CFR 191.22(c) provides:

(c) Identification of two or more lots. Manufacturers, producers, or claimants may identify for drawback purposes commingled lots of fungible merchandise and commingled lots of fungible products by applying first-in-first-out (FIFO) accounting principles or any other accounting procedures approved by Customs.

SFI claims that its method of identification should be approved because under it SFI does not receive a greater amount of drawback than would be available under the method of separate storage and specific identification. In C.S.D. 83-54, Customs approved an inventory procedure for commingled merchandise that limited drawback to that which would be available under the method of separate storage and specific identification. SFI described its inventory method as a "perpetual inventory" method. It is claimed that this method shows at all times the available balance of both domestic and export sugars in inventory. SFI claims that in the Ludlow inventory, records are maintained of drawback receipts, drawback withdrawals, non-drawback receipts, and non-drawback withdrawals. It is claimed that this system records the amount of drawback available at any point in time.

SFI admits, however, that there are three instances in which their inventory method at Ludlow resulted in more drawback than a method of separate storage and specific identification would allow. See Counsel's Submission of February 14, 1994, tab 8. For three consecutive weeks (1/27/85, 2/3/85 and 2/10/85), SFI made export shipments from Ludlow, in quantities greater than the drawback
balance available. The excessive quantities were taken from non-eligible inventory from Okeelanta. These oversights resulted in erroneous drawback claims by SFI in the total amount of $28,389.12. Attached are documents showing the calculation of this figure for your information. SFI has abandoned its drawback claims as to this amount. We note that these errors indicate that SFI's inventory method does not, as asserted by counsel, prevent drawback from being claimed when no drawback is in fact available.

SFI claims that Customs previously reviewed and approved its accounting procedure in a 1981 audit. This audit covered the verification of one drawback entry and not the drawback program of SFI and does not mention the approval of any accounting procedures or inventory methods. Customs also reviewed an audit from 1979. This report covers the validity of one Certificate of Manufacture and stated that the manufacturer (i.e., SFI) uses a first-in-first-out (FIFO) write-off basis to relieve the quantity of raw sugar entered into production during a particular manufacturing period. The audit noted a problem with the sugar inventory write-off. It also noted a problem with the abstract showing SFI as having imported sugar when in fact SFI was not the importer of record and the importer of record did not issue a certificate of delivery to SFI. In addition, we note that the Ludlow inventory was not even part of the SFI drawback program in 1979 and 1981. Therefore, Customs has not previously approved SFI' s accounting and inventory procedures and does not do so now.

Nevertheless, this office reviewed the inventory procedure for drawback entry 86-xxxx59-3 and did not find export shipments from Ludlow in quantities greater than the drawback balance available. In addition, this office reviewed additional drawback entries and also did not find export shipments from Ludlow in quantities greater than the drawback balance available. Therefore, we conclude that the inventory procedure only for these drawback entries does not show an overclaim in this regard. However, this inventory procedure will not prevent the claiming of non-drawback eligible merchandise as evidenced by SFI's above admissions. Consequently, future drawback claims should be evaluated with this potential inventory problem in mind.

HOLDING:

The protest is granted. Attachment I is a list of the 32 drawback claims included in this protest. This office reviewed 29 of these 32 claims in the same manner as drawback entry 86-xxxx59-3 (i.e., the sample claim) and determined that the requirements of 19 U.S.C. 1313(b) were satisfied.

Attachment II is a list 48 drawback claims. Claims 1-17 are included within protest 1703-92-100131 which it being held in your office. These 17 claims should also be approved based on the
analysis of the sample claim. Claims 18-46 were included within the subject protest and should be approved as described above. Claims 47 and 48 are included within protest 1703-92-100128 which is also being held in your office. These two claims should also be approved based on the analysis in the sample claim.

Attachment III is a list of 14 drawback claims. These 14 claims involved SFI as both the importer and manufacturer, and not ESR as an agent. They should be approved based on our decision rendered in HQ 224417 (February 16, 1995). Claims 1-7 are included within protest 1703-92-100109 which is being held in your office. Claims 8-14 are included in protest 1703-92-100130 which is being held in your office.

All other drawback claims under protest being held by your office which deal with the same issues should also be approved if they satisfy the analysis in the sample claim.

Attachment IV is a list of 7 drawback claims for which SFI has abandoned its claim. These claims should be adjusted to reflect the abandoned amounts.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed, with the Customs Form 19, by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the 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.

Sincerely,

John Durant, Director
Commercial Rulings Division

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