HQ 226572 - Extension of time to file drawback claims; 19 CFR 191.61; 19 CFR 191.23(c); 19 CFR 191.43; 19 CFR 191.45; 19 U.S.C. 1313(r)(1); Campell v. United States - United States International Trade Commision Rulings

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HQ 226572

May 1, 1996

DRA-2-RR:IT:EC 226572 JRS

CATEGORY: DRAWBACK

George C. Steuart, Esq.
Steuart & Parker
1919 Pennsylvania Ave., N.W.
Suite 300
Washington, D.C. 20036

RE: Extension of time to file drawback claims; 19 CFR 191.61; 19 CFR 191.23(c); 19 CFR 191.43; 19 CFR 191.45; 19 U.S.C. 1313(r)(1); Campell v. United States

Dear Mr. Steuart:

This is in response to your letter dated October 4, 1995, wherein you request an extension of time to file certain drawback claims by Associated Textile Converters in the Miami drawback office.

FACTS:

You allege, on behalf of your client, Associated Textile Converters, Inc. ("ATC"), that the Customs drawback office in New York was responsible for the untimely filing of drawback claims by Associated Textile Converters in the port of Miami. You assert that, based on 19 CFR 191.61, "ATC should be allowed to file those claims [based on exports in 1991 and 1992] which ATC was prohibited from filing due to Customs' wrongful denial of ATC's drawback application."

As evidence that a Customs officer was responsible for the untimely filing of certain drawback claims, you outline the following events:

By letter dated March 2, 1994, ATC "applied" for a general drawback contract (T.D. 83-73) for piece goods in Customs' New York office on March 10, 1994. Per the telephonic request of New York Customs, ATC's former attorney submitted, on April 25, 1994, a new amended page 2 of the Notification of Acceptance of General Drawback Contract (T.D. 83-73) and added a reference to "Appendix A" which set forth the names and addresses of ATC's unrelated sub-contractors. Subsequently, on July 28, 1994, Customs "denied" ATC's "application" in a letter (misdated July 28, 1993):

Please be advised that an approval of a manufacturer's statement may not be issued to a company which does not conduct manufacturing operations in accordance with drawback regulations. Therefore, your application is denied. If your circumstances change, you may reactivate your request. At that time, you must submit a thoroughly prepared statement, describing in detail the manufacturing operations which Associated Textile Converters, Inc. performs... .

You allege that ATC's "application" under T.D. 83-73 documents the fact that ATC "intended to be a manufacturer by operation of law in accordance with T.D.'s 55027(2) and 55207(1)", and that Customs' letter of July 28, 1994, ignored facts presented in the GENERAL STATEMENT portion of the T.D. 83-73 which states that "another producer may process piece goods for our account under contract within the principal and agency relationship outlined in T.D. 55027(2) and 55207(1)." You also assert that "[Q]uite naturally this incorrect letter from the Drawback Liquidation Section in New York delayed ATC's establishing its drawback program."

ISSUE:

Whether the documentary evidence as set forth in the FACTS section establishes that the Customs Service was responsible for the untimely filing of ATC's drawback claims so as to permit the drawback claimant an extension of time to file such claims.

LAW AND ANALYSIS:

Section 191.61 of the Customs Regulations (19 CFR 191.61) states the time limitation for the filing of drawback claims:

A drawback entry and all documents necessary to complete a drawback claim, including those issued by one Customs officer to another, shall be filed or applied for, as applicable, within 3 years after the date of exportation of the articles on which drawback is claimed, ... . Claims not completed within the 3-year period shall be considered abandoned. No extension will be granted unless it is established that a Customs officer was responsible for the untimely filing.

(Please note that this regulation was adopted, almost verbatim, by Congress in the 1993 amendment of the drawback statute, 19 U.S.C. 1313(r)(1), by section 632(r)(1) of the North American Free Trade Agreement Implementation Act, Public Law 103-182, 107 Stat. 2057 (December 8, 1993): "...No extension will be granted unless it is established that the Customs Service was responsible for the untimely filing.")

Section 191.23 of the Customs Regulations (19 CFR 191.23) governs the issue of the approval of specific drawback contracts filed either with a Customs field office under 19 U.S.C. 1313(a) or, with Customs Headquarters under 19 U.S.C. 1313(b), (d), (g), or (h), or in any combination of section 1313(a) with section 1313(b), (d), or (g) . Paragraph (c) of section 191.23 provides for drawback entries filed before a specific drawback contract is issued:

Drawback entries may be filed before the drawback contract covering the claim is approved, but no drawback shall be paid until the contract is approved.

Subpart D of 19 CFR Part 191 controls the procedure of the general drawback contracts.
Section 191.43 of the Customs Regulations (19 CFR 191.43) provides that:

The port director [formerly regional commissioner] shall acknowledge in writing the receipt of the letter of acceptance of the manufacturer or producer of an offer for a general drawback contract. The general drawback contract for that manufacturer or producer shall be effective for a period of 15 years from the date of the letter of acknowledgment.

Section 191.45 of the Customs Regulations (19 CFR 191.45) further states:

Drawback will be paid on articles manufactured or produced and exported in accordance with the law, regulations, and general drawback contract. (Emphasis ours.)

At the outset, it is clear from reading the above-quoted regulations that there is not an "approval" process for general contracts as there is for specific contracts, such as substitution manufacturing contracts under section 1313(b). Section 191.43, CR, uses the word "acknowledge" rather than "approve." Customs does not approve or reject general contracts, but simply acknowledges receipt of a general contract. The reason is because the compliance with the terms of a general contract will not be determined until any filed claims are liquidated; general drawback contracts save the resources of the Customs Service until liquidation. See 19 CFR 191.45 and 191.71(d).

Customs New York letter of July 28, 1994 (misdated 1993) did not state that ATC could not file any claims. The Customs New York letter, at most, is a statement by New York that it would most likely deny drawback on any claim filed because New York Liquidation believed that such a claim would not comply with the terms of the general contract. If ATC was "intending to become a manufacturer" as stated in your letter, ATC nevertheless could have filed claims with Customs until it became eligible as a manufacturer in its own right under T.D. 83-73, but it chose not do so. Customs New York letter did not prevent ATC from filing any claim or from protesting any denial of drawback if, in fact, drawback was subsequently denied for its failure to be a "manufacturer" as required by T.D. 83-73. See generally HQ 223072, dated August 12, 1991 and HQ 224879, dated March 31, 1994.

Contrary your assertions, New York Customs was well aware of T.D.s 55027(2) and 55207(1) by the fact that Customs asked ATC through ATC's then-attorney for the list of sub-contractors to whom ATC subcontracted its work. See April 25, 1994, letter. Through that information, it was revealed to Customs that ATC did not manufacture finished piece goods. The first sentence in the GENERAL STATEMENT of T.D. 83-73 unequivocally states: "We process goods for our own account." New York Customs reported to this office that they verbally informed ATC's attorney that although ATC could not claim drawback as a "manufacturer" under T.D. 83-73 since ATC did not manufacture finished piece goods at that time, ATC, however, could claim drawback if the sub-contractors who manufactured finished piece goods delivered the CMDs (Certificates of Manufacture and Delivery) to ATC and assigned to ATC their right to drawback.

We find the case of Campbell v. United States, 107 U.S. 407 (1882) to be dispositive on the issue at hand. In Campbell, the collector of customs, upon receipt of the claimant's drawback entry, refused to issue a certificate of drawback on claimant's exportation of linseed cake manufactured from imported, duty-paid linseed, and therefore denied drawback. The court stated that upon exportation there resulted a contract [implied from the statute] that when exported the government would refund the amount of 17 cents per hundred pounds the duty on the imported seed so converted into cake. The Supreme Court held that it is the law which gives the right, and the fact that the customs officers refuse to obey the regulations [in failing to issue the drawback certificate] cannot defeat a right which the Act of Congress gives.

In the instant case, the issue is whether the alleged error by Customs caused ATC to miss the statutory filing deadline. The manufacture and exports occurred almost three years before the Customs letter of July 28, 1994, was sent. That letter could have nothing to do with that passage of time. At most, the letter of July 28, 1994, signaled an intention to question the validity of ATC's assertion that it was a manufacturer entitled to drawback if ATC filed a claim. If ATC could show that its manufacturing operations met the published terms of T.D. 83-73, and that its 1991 and 1992 exports complied with the statutory requirements for drawback, the Customs letter of July 28, 1994, could not possibly be a successful bar to drawback following the court's analysis in the Campbell case. There is simply no valid connection between the Customs letter and ATC's failure to file.

Since the facts do not show that ATC's failure to file its claims was due to Customs' refusal to acknowledge ATC's notification to operate under T.D. 83-73, we conclude that there is no basis for an extension of the time period for the filing of the two pending drawback claims in the Customs Miami drawback office.

HOLDING:

An extension of time is NOT warranted on the facts presented because the Customs Service was not responsible for the untimely filing of claims by the drawback claimant.

Sincerely,

Director
International Trade Compliance

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