United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 114022 - HQ 226416 > HQ 224420

Previous Ruling Next Ruling
HQ 224420





April 11, 1997

DRA-2-01-RR:IT:EC 224420

CATEGORY: DRAWBACK

Port Director of Customs
U.S. Customs Service
1 East Bay Street
Savannah GA 31401

RE: Production by agent for principal; 19 U.S.C. 1313(b); Evidence of ownership by principal before production; Identification of goods to sales contract; Sufficiency of evidence; HQ 221914; HQ 223431; Protest 1703-92-100120.

Dear Sir:

The above protest was forwarded for further review. There are two other protests at your port which involve the same issue. Our decision here should be applied to those protests.

FACTS:

There were 40 drawback claims filed which were liquidated without drawback on May 8, 1992. This protest was filed on August 6, 1992, 90 days after the liquidation. The protest would be timely within the requirement of 19 U.S.C. 1514(c). Under 19 U.S.C. 1514(a)(6), a protest may be filed against a refusal to pay a claim for drawback.

The protestant, Savannah Foods & Industries, Inc. (Savannah), asserts that it employed an agent, Michigan Sugar Company (Michigan), to produce the refined sugar that was exported so that it, Savannah, could claim (l) that it was the sole manufacturer for drawback purposes. Savannah submitted evidence to show it actually and legally used the imported, designated raw sugar at its sugar refinery in Georgia to make refined sugar.Savannah is identified as the manufacturer on the manufacturer's statement under 19 CFR 191.21 - 191.34 and T.D. 83-59. Michigan identified itself as an occasional agent of Savannah on its manufacturer's statement.

The dispute centers on whether the evidence supports Savannah's assertion that the exported refined sugar was made from Savannah's raw sugar or whether the evidence shows that Savannah merely bought refined sugar from Michigan. If Savannah cannot show that the refined sugar that it exported was produced from raw sugar that it owned before processing was begun by Michigan as its agent, Savannah cannot meet the requirements of 19 U.S.C. 1313(b).

Although these claims were the subject of two earlier decisions; HQ 221914 and HQ 223431, further review was requested on the grounds that new evidence was available that had not been considered in the prior decisions and that new legal issues were raised that were not considered in the prior decisions. Further review appears warranted on those grounds. Evidence has been furnished on the records of the agent which were not previously considered by Headquarters.

Two distinct formulas are involved. The mass balance formula determines the amount of raw beet sugar that results in the production of refined sugar. The agency formula separates the respective ownership of that sugar between Savannah and Michigan. That is, with respect to the refined sugar that can be attributed by the mass balance formula to raw sugar, the agency formula allocates 100 pounds of refined sugar to Savannah for every 110 pounds of Savannah's raw sugar that Michigan refined as Savannah's agent.

As discussed below, the mass balance formula separates the starting materials in terms of the finished refined sugar. Savannah and Michigan found that when 100 pounds of refined sugar is made, about 64 pounds of that refined sugar is attributable to raw beet sugar, the remainder being refined sugar that is produced from thick juice that itself is produced directly from sugar beets without going to the raw sugar step.

The agency formula further separates the refined sugar between the principal, Savannah, and its agent, Michigan. If 100 pounds of refined sugar was produced, 64 pounds of that refined sugar was attributable to raw beet sugar. If all the raw sugar belonged to Savannah, then as a result of the agreement between Savannah and Michigan, Michigan would have had to use 70 pounds of Savannah's raw sugar(64 x 1.1 = 70) to make those 64 pounds.

SEGREGATION OF SAVANNAH AND MICHIGAN'S RAW SUGAR

Savannah asserts that it purchased the raw sugar in advance of the creation of that raw sugar by Michigan. Savannah asserts that the processing of that raw sugar by Michigan should be attributed to production by Savannah to meet the statutory criterion of 19 U.S.C. 1313(b) that one manufacturer use both the designated imported merchandise and the merchandise that is the source of the export articles.

Savannah asserts that all of the refined sugar carried on Michigan's inventory records for export was produced from Savannah's raw sugar. Savannah and Michigan assert that if Michigan is processing beets into refined sugar all of refined sugar that is made from raw sugar, produced up to the amount of Savannah's advance payment, is produced for Savannah. Refined beet sugar is manufactured from raw sugar juice, which contains raw beet sugar. A "mass balance formula" is used to calculate the quantity of raw sugar used to make the refined sugar.

The mass balance formula is asserted by Savannah to show the amount of raw sugar owned by Savannah. Savannah asserts that as a result of the formula's application to daily production, the production records show that about 64 percent of the end product comes from raw sugar belonging to Savannah.

The explanation of the mass balance formula is contained in Exhibit T to counsel's letter of November 29, 1993 and Exhibit 4 to counsel's letter of September 21, 1995. Savannah asserts, in its counsel's letter of November 29, 1993, that the results of application of the mass balance formula are recorded, for the protested claims, in Michigan's perpetual inventory for fiscal years 1985 through 1988. The Michigan perpetual inventory records are based on the daily production records from each of Michigan's plants.
The payment records indicate that Savannah bought 20 million pounds of future raw sugar from Michigan by virtue of sales documents dated October 31, 1984. Savannah's inventory records run from October 1 of one year to September 30 of the following year. The payment records indicate that Savannah also bought 25 million pounds of future raw sugar from Michigan on January 2, 1985. The total shown by those records would be 45 million pounds of raw sugar. The Michigan inventory is carried in refined pounds. The conversion ratio used by Savannah and Michigan is that 110 raw pounds would make 100 refined pounds. In addition, Savannah and Michigan assert that Savannah's ownership in the refined pounds can be calculated by applying the mass balance formula of 64 percent to the amount of total refined pounds made during a period.

Ownership by Savannah of Raw Sugar

Savannah asserts that its payments in advance of the production by Michigan, shows that Savannah owned the raw sugar before that sugar was refined. Customs has taken the position that the raw sugar from beets is susceptible of being owned for drawback purposes. The evidence offered in support of Savannah's assertion are: (1) an agency contract between Savannah and Michigan, (2) purchase contracts for future delivery between Savannah and Michigan of raw sugar,(3) records of checks issued by Savannah to Michigan,(4) the inventory allocation on Michigan's perpetual inventory records of refined sugar available for export, and (5) the records which are said to show Michigan's credits of exported sugar against Savannah's raw sugar advance payments.

In addition, Savannah in its counsel's letter of March 24, 1995 asserts an alternative theory: Savannah did not need Michigan, as an agent in order to show that the production at Michigan's plants was production by Savannah. That is, Savannah asserts that its total ownership of Michigan's stock and its method of consolidated finances among its wholly-owned subsidiaries show an equivalency in identity between Savannah and Michigan. However, that argument was not further developed and has not been considered.
The agency contract between Savannah and Michigan is in Exhibit V to counsel's letter of November 29, 1993.

The agency contract is dated September 28, 1984 and is signed by both Savannah and Michigan. The contract provides for an effective date of September 30, 1984.

The contract provides for Savannah to buy raw sugar from Michigan and for Michigan to refine 100 pounds of refined sugar from each 110 pounds of raw sugar owned by Savannah. Any residuals or byproducts belonged to Michigan.

There is a memorandum dated October 31, 1984 recording the sale of 20 million pounds of future raw sugar from Michigan to Savannah. The terms are $21.50 for the raw sugar plus a tolling charge that would be the difference between the average gross sales price of refined product and the $21.50 price. Exhibit V to counsel's letter of November 29, 1993 contains invoices and memoranda said to show the purchase of future raw sugar by Savannah from Michigan.

Mich. to Savannah invoice 10/31/84 No. Illegible 20 mill.$21.60/100 ($4,300,000)

Michigan memorandum 01/3/85 25 million $20.67/100

Michigan to Savannah invoice 01/2/85 25 million $20.67/100 ($5,167,500)
Savannah confirmation 10/1/85
38 million $18.23/100

Michigan to Savannah invoice 10/01/85 1001 38 million $18.23/100 ($6,927,400)

Savannah memorandum 09/30/86 60 million $20.88/100

Michigan memorandum 09/26/86 60 million $20.88/100 Michigan to Savannah invoice 09/26/86 1001 60 million $20.88/100 ($12,900,000)

Michigan to Savannah invoice 09/29/87 1001 60 million $21.50/100

Savannah confirmation 09/30/87 60 million $21.50/100

Savannah letter and memorandum 10/06/87 30 million $21.50/100

Michigan letter 12/09/87 30 million

Savannah memorandum 12/11/87 ($6,450,000)

Michigan to Savannah invoice 10/05/87 1002 30 million $21.50/100 ($6,450,000)

Michigan to Savannah invoice 09/29/88 1001 80 million $21.77/100 ($17,406.000)

Savannah memorandum 09/19/88 80 million $21.77/100

Exhibit W to counsel's letter of November 29, 1993 contains canceled checks said to represent payment for the future raw sugar.
Invoice No.
Illegible
Check 45675 Nov. 12, 1984 $4,300,000

Check 49241 Jan. 14, 1985 $5,167,500 1107

Check 586 Oct. 9, 1985 $6,927,400 1001

Check 32630 Oct. 3, 1986 $12,528,000 1001

Check 71520 Oct. 16, 1987 $12,900,000 1001

Check illegible Nov. 11, 1988 $18,504,500 1001 By letter dated April 12, 1996, counsel asserted that evidence of Savannah's ownership of raw sugar at Michigan was set forth in certain listed pages to Savannah's submission of November 29, 1993. The information on those pages relative to Savannah are listed above except the following:

Page 03781 and 03785 are duplicates of the Michigan to Savannah invoice 1001 of 9/24/87.

Page 03773, 03774, 03780, 03783 and 03787 contain material involving Great Lakes Sugar Company which is claimed to have been bought by Savannah and be part of Michigan. There is no apparent basis for considering that material in connection with these drawback claims.

Savannah also asserts that all of Savannah's accounting records were available for reexamination during the audit.

By its counsel's letter of July 18, 1995, Savannah asserts that the October 31, 1984 date for the memorandum of sale and the Michigan invoice in Exhibit V to its letter of November 29, 1993 is not indicative of the date of the sale of sugar in 1984.

Savannah asserts that the sale actually occurred before the date shown on that evidence submitted. Savannah characterizes the evidence as a memorializing of a prior act.

Counsel's letter of July 18, 1995 also acknowledges that for the week ending November 3, 1984 at the Croswell plant application of the mass balance formula for export sugar, which is asserted to be Savannah's sugar, results in more sugar available than is actually recorded. Counsel asserts that the quantity in the last week of export production was adjusted accordingly.

Counsel and Mr. John Yuill of Savannah in a telephone conference on February 14, 1996 stated that the daily records of production are accurate as to the amounts processed. They acknowledge, however, that the 64 percent mass balance figure is an average, and that the actual daily mass balance calculations can vary. Attachment 4 to Counsel's letter of September 21, 1995 contains a Michigan memorandum dated September 20, 1995 which showed the variations in raw sugar usage on a daily basis and showed how a weekly average of 64 percent was calculated. During the week of November 1 - 7, 1985 the white sugar produced from raw sugar was 61.96, 72.41, 66.36, 65.28, 68.93, 55.26, and 62.21. Those daily amounts average 64.60 for the week. Attachment T to Savannah's letter of November 29, 1993 contains the methodology that Michigan uses to calculate the percent of raw sugar used to make the refined white sugar. In the telephone conference call of February 14, 1996, Savannah's counsel and Mr. Yuill confirmed that the calculation could not be made from the daily records alone because the detailed daily 12-page report from each plant would be needed. Also, in that conference call Savannah's counsel and Mr. Yuill confirmed that there is no written record between Savannah and Michigan which reflects an agreement between the parties to use the mass balance formula which results in a 64 percent average.

Essentially, it is Savannah's assertion that all of Michigan's production of refined sugar that was shown by the mass balance formula to have been made from raw sugar from the date of Savannah's advance purchase until the amount bought was satisfied. Since, on average, 64 percent of the refined sugar is asserted to be attributable to the use of raw sugar, then verification depends on the evidence of purchase, the daily records used to make the claims, the evidence that the 64 percent weekly average was used consistently, in recording the Michigan inventory, and the claimed dates of production for the export shipments.

The evidence of purchases for the period October 1, 1984 to September 30, 1985 is as follows:

The Michigan to Savannah invoice dated October 31, 1984 covers the purchase of 20 million pounds of raw sugar. A second purchase of sugar for that period is covered by a Michigan to Savannah invoice dated January 2, 1985 on 25 million pounds of raw sugar. The payment amounts match the invoices. A summary for the fiscal year ending September 30, 1985 reflects the following: 45 million raw pounds (20 million plus 25 million pounds) divided by the raw-to-refined conversion rate of 1.10 equals 40,909,090 pounds of refined sugar. That summary which was provided to Customs by Savannah on December 22, 1993 also shows that the amounts were allocated to three Michigan plants expressed in refined pounds: Caro (9,090,909), Croswell (29,545,455) and Carrollton (2,272,727 pounds).

The Michigan inventory records show the following: export production occurred during the weeks of:

Caro

October 28, 1984 to November 3, 1984 4,120,128 November 4, 1984 to November 10, 1984 425,328 January 6, 1985 to January 12, 1985 3,305.472 January 13, 1985 to January 19, 1985 1,239,983 9,090,909

Croswell export production occurred during the weeks of:

October 28, 1984 to November 3, 1984 1,401,189 November 4, 1984 to November 10, 1984 1,446,131 November 11, 1984 to November 17, 1984 2,726,080 November 18, 1984 to November 24, 1984 1,888,320 November 25, 1984 to December 1, 1984 2,391,680 December 2, 1984 to December 8, 1984 1,984,000 December 9, 1984 to December 15, 1984 2,168,000 December 16, 1984 to December 22, 1984 1,951,040 December 23, 1984 to December 29, 1984 2,077,760 December 30, 1984 to January 5, 1985 1,940,800 January 6, 1985 to January 12, 1985 1,612,800 January 13, 1985 to January 19, 1985 2,048,000 January 20, 1985 to January 26, 1985 1,484,600 January 27, 1985 to February 2, 1985 2,048,653 February 3, 1985 to February 9, 1985 1,561,613 February 10, 1985 to February 16, 1985 814,609 29,545,455
Carrollton export production records were furnished February 14, 1996 by Savannah and show that export production occurred during the week of:

December 30, 1984 to January 5, 1985 2,272,727

The 20 million pound purchase of raw sugar covered by the invoice of October 31, 1984 would equal 18,181,818 refined pounds (20,000,000 divided by 1.10). The export production at Caro for the period October 28, 1984 to November 10, 1984 is 4,545,456. The export production at Croswell for the period October 28, 1984 to December 29, 1984 is 18,034,200. There also was export production at Croswell during the week of December 30, 1984 to January 5, 1985 of 1,940,800 pounds. Savannah asserts that the total of export production that was shipped prior to January 2, 1985 was 1,710,000 pounds.

Savannah asserts that the perpetual records it prepared showing weeks of export production were prepared solely for the customs audit of its claims and were not the records it used to make its drawback claims. Instead, Savannah asserts that the claims were based on its daily records of production. Consequently, Savannah asserts that its daily production records for the corrected production dates should be used by Customs to evaluate the validity of the claims covered by this protest.

Savannah relies on the daily production records for the corrected production dates to show compliance with 19 USC 1313(b). For those corrected dates, Savannah asserts that the application of the mass balance formula average of 64 percent will show use of Savannah's raw sugar by Savannah's agent, Michigan, as the source of the exports of refined sugar. The daily records for fiscal year 1986 (October 1, 1985 to September 30, 1986) show the following:

Caro
October 6, 1985 741,500
7 636,700
8 766,000
9 677,200
10 764,400
11 742,600
12 700,000
5,028,400

October 13 848,900
14 705,600
15 744,000
16 849,000
17 839,300
18 864,300
19 840,000
5,691,100

October 20 673,900
21 850,500
22 783,200
23 831,600
24 904,600
25 810,800
26 862,700
5,717,300

October 27 733,100
28 731,800
29 777,900
30 852,200
31 831,400
Nov. 01 823,000
02 896,500
5,645,900

Croswell
September 29, 1985 n/a
30 n/a
October 1 n/a
3 n/a
4 None
5 None
6 None
7 None
8 None
9 None
10 None
11 None
12 None

October 13, 1985 None
14 None
15 198,000
16 213,000
17 323,600
18 405,600
19 345.000
1,485,200

October 20, 1985 403,800
21 448,300
22 380,400
23 304,800
24 313,200
25 420,100
26 420,000
2,690,600

October 27, 1985 313,500
28 385,600
29 435,300
30 369,700
31 394,500
Nov. 01 459,900
02 459,900
2,818,400

Nov. 03, 1985 460,800
04 466,100
05 449,100
06 559,100
07 420,900
08 440,500
09 372,000
3,168,500

Nov. 10, 1985 510,000
11 414,000
12 470,300
13 480,000
14 432,900
15 428,000
16 168,000
2,903,200

Nov. 17, 1985 416,300

18 465,000
19 555,000
20 462,100
21 440,000
22 437,100
23 483,000
3,258,500

Nov. 24, 1985 402,000
25 363,000
26 468,400
27 480,000
28 500,600
29 484,700
30 541,000
3,239,700

December 1, 1985 510,000
2 470,000
3 450,000
4 360,000
5 361,000
6 419,000
7 350,000
2,920,000

Dec. 8, 1985 315,000
9 420,000
10 485,000
11 376,000
12 510,000
13 400,200
14 412,000
2,918,200

Carrollton
Oct.6, 1985 532,000
7 583,200
8 660,900
9 661,200
10 614,100
11 645,000
12 673,800
4,370,200

Oct. 13, 1985 630,600
14 643,200
15 690,900
16 636,000
17 630,000
18 664,000
19 691,200
4,585,900

Sebewaing
Oct. 6, 1985 602,500
7 515,000
8 603,200
9 934,800
10 910,700
11 895,500
12 769,600
5,231,300

The Caro daily records for the period October 28, 1984 to November 3, 1984 show the following:

October 28, 1984 943,900
29 901,100
30 914,300
31 992,900
Nov. 1 761,300
2 947,700
3 974,00Q
6,435,200

Nov. 4, 1984 960,000
5 855,500
6 938,300
7 826,400
8 908,200
9 813,500
10 688,200
5,990,100

Jan. 6, 1985 769,300
7 745,100
8 811,000
9 735,100
10 789,000
11 721,000
12 568,200
5,138,700

January 13, 1985 492,000
14 725,300
15 756,000
16 705,400
17 773,300
18 818,100
19 742,200
5,012,300

The Croswell daily records for the period October 28, 1984 to February 16, 1985 show the following:

October 28, 1984 495,000
29 420,000
30 510,000
31 480,000
November 1, 1984 479,600
2 407,500
3 480,00Q
3,272,100

November 4, 1984 495,000
5 397,500
6 457,500
7 482,500
8 487,000
9 420,000
10 512,500
3,252,000

November 11, 1984 489,000
12 468,500
13 455,500
14 487,000
15 534,500
16 507,500
17 483,000
3,425,000

November 18, 1984 510,000
19 472,500
20 443,000
21 502,000
22 497,000
23 485,500
24 427,500
3,337,500

November 25, 1984 390,000
26 477,500
27 477,500
28 480,000
29 472,500
30 440,000
December 01 413,000
3,150,500

December 2, 1984 372,000
3 423,500
4 474,000
5 505,000
6 465,000
7 519,000
8 473,500
3,232,000

December 9, 1984 471,500
10 516,000
11 480,000
12 462,500
13 452,000
14 383,000
15 369,000
3,134,000

December 16, 1984 456,000
17 480,000
18 457,000
19 451,500
20 444,000
21 450,500
22 444,500
3,183,500

December 23, 1984 450,000
24 482,500
25 480,000
26 495,000
27 435,000
28 487,500
29 425,000
3,255,000

December 30, 1984 440,000
31 425,000
January 01, 1985 480,000
02 340,000
03 440,000
04 369,000
05 451,000
2,945,000

January 6, 1985 380,000
7 432,000
8 448,000
9 480,000
10 500,000
11 460,000
12 440,000
3,140,000

January 13, 1985 400,000
14 500,000
15 420,000
16 412,500
17 367,500
18 412,500
19 352,500
2,865,000

January 19, 1985 352,500
20 420,000
21 355,000
22 427,500
23 417,500
24 395,000
25 331,000
26 369,000
3,067,500

January 27, 1985 460,000
28 387,500
29 413,500
30 389,700
31 393,300
February 1, 1985 377,500
2 436,500
2,858,000

February 3, 1985 420,000
4 423,000
5 310,500
6 360,000
7 270,000
8 33,100
9 24,000
1,840,600

February 10, 1985 0
11 0
12 0
13 0 (final)
14 not produced
15 not produced
16 not produced

The Carrollton daily records for the period of December 30, 1984 to January 5, 1985 show the following:

December 30, 1984 676,500
31 714,000
January 1, 1985 694,500
2 696,900
3 744,300
4 714,300
5 700,500
4,941,000

PRODUCTION DATE DISCREPANCY

The 11 sample claims listed dates of production for export shipments that were produced when no export production was recorded as having occurred in Michigan's perpetual inventory records. If the production dates listed on the drawback claims were accurate, then Savannah's basis for asserting ownership of that raw sugar would be faulty since Savannah's basic assertion is that the export production was produced solely with raw sugar that Savannah had bought from Michigan before it was made into refined sugar.

The discrepancy is illustrated by Drawback entry 86-xxx 0401. The first export shipment on that entry occurred on April 30, 1986. The refined sugar exported is listed on the entry itself and on the export shipment documents as having been produced on November 14, 1985 at Michigan's Caro refinery. Michigan's perpetual inventory records show that export production ceased at Caro on the week ending November 2, 1985. Thus, if as Savannah asserts, the recordation of export production on Michigan's perpetual inventory shows the use of Savannah's raw sugar, any production after the November 2, 1985 period could not have been with use of Savannah's raw sugar.

Savannah acknowledged the above and asserted that the dates of production shown on the drawback entry and the export documents were erroneous. Savannah submitted a new list of production dates asserting that the date shown on the drawback entry and the export shipping documents was the date that the refined sugar was removed from bulk storage in preparation for shipment and not the actual date of production. The new evidence was supplied on August 25, 1995. The new evidence uses the customer order number that is listed next to each export shipment on the drawback entries and on each of the respective export shipping documents associated with the drawback entries and purports to show the actual date of production. Savannah asserts that it assigned the production amounts by export customer order in a chronological sequence. Thus, on Drawback entry 86-xxx-040-1, the adjusted production date for the first export shipment is October 25, 1985. Because Savannah is relying on an accounting method of attribution rather than records that would actually identify and trace the use of Savannah's sugar, the only acceptable method of verification is to determine if there was export production recorded on the amended date in an amount sufficient to account for the shipped amount. Because of the potential for double payments for the same refined sugar, Savannah also compiled a list purporting to be a list of all exports that were claimed for drawback based on the amended dates, by customer order, invoice, amount and date.

ISSUES:

(1) Whether the submission of additional information to add the certificate of manufacture and abstract numbers to each claim to show use of the duty-paid, imported raw sugar was a permissible amendment of the drawback claim? (2) Whether the submission of more information on the export shipments of refined sugar that were listed on the claims was a permissible amendment of the drawback claim?

(3) Whether the manufacturing records of the claimant and its agent show that the exported sugar on which drawback was claimed was made from raw sugar that belonged to the claimant before the claimant's agent began to process that raw sugar into refined sugar so that requirement of 19 U.S.C. 1313(b) of manufacture by one entity was satisfied?

LAW AND ANALYSIS:

Paragraph (r) of 19 U.S.C. 1313, as amended by the Act of December 8, 1993 (107 Stat. 2057, Pub. L. 103-182) pertinently provides that a drawback claim be completed within 3 years after the date of exportation. The text follows 19 CFR 191.61 (4-1-84 to 4-1-96 ed.). Under 19 CFR 191.64(4-1-84 to 4-1-96 ed), a drawback claim or entry may be amended or corrected.

Paragraph (b) of 19 U.S.C. 1313 requires that one manufacturer use both the imported, duty-paid merchandise that is designated as the basis for the refund and the merchandise that actually is used to make the articles that are exported for which drawback is claimed. Under 19 CFR 191.34(4-1-84 to 4-1-96 ed.), the requirement that one manufacturer use both the designated and the substituted merchandise can be met if both the designated merchandise and the merchandise actually used to make the exported articles are owned by one entity and the actual processing is done by an agent on behalf of that entity.

There were several amendments of the protested claims.

In each of the sample drawback claims, the claimant stated in block 28 of CF 331 (Quantity/Description of Merchandise used) for the New York Certificate of Manufacturing Number "N/A". In each of the sample drawback claims covered by this protest in block 24 of the CF 331 (CM/CD Number) the protestant wrote "N/A". Despite these patent deficiencies, Customs accepted the claims. The CM/CD number is required under paragraph 14 of T.D. 83-59, the general manufacturer's drawback contract for raw sugar. The requirement provides a quick verification of dates, amounts, and ownership of the raw sugar involved. It is particularly important where the manufacturer employs an agent to meet the requirements of 19 U.S.C. 1313(b) or where the manufacturer is an agent for another person who will be enabled to claim drawback by the manufacturer's processing. The importance of requiring that information was illustrated in this protest. The protestant provided certificate numbers that could not possibly cover the raw sugar involved because of discrepancies between the dates of processing shown on the claim and the dates shown on the certificates and the factory location shown on the claim and the factory location shown on the certificates. The protestant subsequently resubmitted correct certificate numbers. Also, a comparison between the corrected certificate numbers with the same certificate numbers that were used to support another company's drawback claim enabled Customs to determine that there was no duplication with respect to the same lots of raw sugar on the two different entities respective drawback claims.

For each of the sample claims, the production dates for the designated raw sugar were compared to the ownership, quantity, and dates shown in the corrected certificates of manufacture and corresponding abstract number. To illustrate, drawback claim 86-xxx 040-1 designated the raw sugar imported on import entry 83-xxx 912-2, which, on the drawback claim was stated to be the protestant's sugar imported on May 3, 1983 and used during the period from May 5, 1983 to July 7, 1983. The corrected cert- ificate certificate and abstract numbers were 28099, 28098, and 28336 and 478, 479, and 480, respectively. Certificate 28099 (abstract 478) listed the relevant import entry number, 83-xxx 912-2, showed the same import date as on the claim, and showed that 30,339,046 pounds of raw sugar were melted during the period from May 5, 1983 to May 18, 1983. Certificate 28098 (abstract 479) also listed the designated import entry and recorded that 4,069,812 pounds of raw sugar was processed during the period from June 30, 1983 to July 1, 1983. Certificate 28336 (abstract 480) also listed the designated import entry and recorded that 176,940 pounds of raw sugar was processed on July 7, 1983. The records filed with Customs on November 7, 1983, account for the sugar imported as shown on the import entry which was verified by this office. Those records show, years before these drawback claims were filed, that duty-paid raw sugar was imported and used by the protestant in an amount sufficient to meet the terms of the statute. A similar analysis was done for each entry on each of the drawback claims in the sample.

The protestant also submitted amendments for the production dates of the refined sugar that was exported. The protestant did not attempt, nor would such a request have been approved, to amend or change the export shipments themselves. The discrepancy in the export shipments was that the export sugar processing was done by a company other than the protestant during periods when no export production was recorded. Consequently, the protestant had to show that the refined sugar exported belonged to the protestant before any processing began. Otherwise, the protestant could not meet the requirement of 19 U.S.C. 1313(b) that the substituted merchandise from which the exported shipments were processed was used in manufacture or production by the protestant. If records showed that the protestant simply bought refined sugar from another person and then exported that refined sugar, it would not be able to designate its earlier imports of raw sugar on a claim under 19 U.S.C. 1313(b), because it could not assert that it used in manufacture or production both the imported, duty-paid raw sugar and the raw sugar that was used to make the exported refined sugar.

The shipment of April 30, 1986 that was listed in drawback claim 86-xxx 040-1 illustrates the discrepancy. The export shipping documents consisting of a CF 7512, a Canadian Customs duty form, and a commercial bill of lading show that 45,000 pounds of granulated sugar were shipped, to a Canadian buyer on April 30, 1986 from Michigan's sugar refinery at Croswell, Michigan. On the drawback claim the protestant asserted that the sugar in that shipment was produced on January 28, 1986. The production records for the Michigan Sugar refinery at Croswell, Michigan showed that export production ceased during the week beginning on December 14, 1985 and did not begin again until September 25, 1986.
To meet this deficiency, the protestant provided a written acknowledgment from the Vice President of Operations stating that the date asserted on the claims and shipment documents as the date of production was actually the date that the refined sugar was withdrawn from the bulk storage facility rather than the date that it was refined. The protestant also submitted a concordance which collated each of the claimed export shipments by the export customer's purchase order number, the claimed, but admitted erroneous, date of production, and corrected date of production, based on the existing production records. Those production attributions are based on the companies' asserted mass balance formula which was discussed under "Facts" dealing with the ownership of the sugar.

Also, as described under "Facts", the protestant changed the methodology in order to show that the processing performed by Michigan to make the export sugar was done with the use of raw sugar owned by the protestant before Michigan started to process that raw sugar.

1. AMENDMENT OF CLAIMS

The first legal issue is whether any of these changes is permissible. Under 19 CFR 191.64, Customs permits a claimant to amend or correct a drawback entry. However, previously by regulation, 19 CFR 191.61, Customs required a claimant to complete its drawback claim within three years from the date of export. The substance of that regulation was adopted by Congress and by the Act of December 8, 1993 (107 Stat. 2057, Pub. L. 103-182) enacted as 19 U.S.C. 1313(r). The relevant legislative history states that the provision sets a period of three years from the date of exportation to file a complete claim. H. Rpt. 103-361, Part 1, 130 (November 15, 1993). In that report Congress acknowledged that Customs would not be able to verify every claim or every aspect of each claim. Op. Cit., pp. 131-132. Because of that fact Customs can not permit a claimant to substitute new import entries or export shipments outside the three-year period set by 19 U.S.C. 1313(r). In this protest, the additional information submitted on the import entries supplemented the material on those entries. No attempt was made to substitute new import entries. The entries, the dates of importation, dates of use, and the identity of the importer and manufacturer(the protestant here) remained the same. The additional information was needed by Customs to verify that the same imports were not the subject of other drawback claims. Accordingly, the additional information is within 19 CFR 191.64 and does not violate 19 U.S.C. 1313(r).

Likewise, the submission of additional information on the export shipments listed in the claims does not violate 19 U.S.C. 1313(r). There was no attempt to substitute different shipments. Instead, the information submitted was given to bolster the protestant's claim that those shipments were of refined sugar produced from raw sugar that belonged to the protestant before the protestant's agent started to process that raw sugar.

2. AMENDED EXPORT SHIPMENT INFORMATION

The next issue is whether that additional information on the export shipments is satisfactory to show that they were produced with the use of protestant's raw sugar so as to permit the protestant to satisfy 19 U.S.C. 1313(b), albeit under the agency concept in 19 CFR 191.34.

As stated in the "Facts" the protestant provided different dates and asserts that, by use of the mass balance formula, it will be able to show that on the corrected dates of production there was sufficient use of raw sugar in total production of refined sugar to account for use of raw sugar owned by it.

Based on the submission of information by the protestant, Customs scientists determined that the protestant's assertion that the average production value of 64% of the total white sugar production is correct. However, to protect the revenue, the Customs Service has not permitted the use of an average. Since the actual values are known or can be computed, either those actual values for each day must be used or the least possible conversion factor could be used.

The protestant contends that its agent accounts for the use the Protestant's raw sugar by applying the mass balance formula average of 64% to the quantity of refined sugar produced. The protestant's counsel stated, that while it is possible to compute the actual amount of raw sugar processed, the parties, protestant and Michigan, simply do random verifications and use the average figure to segregate their respective ownership interests. There is no contrary evidence.

This is a separation of property interests on the merchandise used rather than an attempt by a drawback claimant to claim on average output. That is, by application of the formula, Michigan is obligated to the protestant for that raw sugar usage. Consequently, the 64 per cent average, between the parties, is asserted to be the refined sugar made by Michigan from the Protestant's raw sugar. As such, the use of that formula is distinguishable from the situation in C.S.D. 89-20 (in which a "weighted average value method" was held unacceptable as a means of calculating drawback).

3. PURCHASES OF RAW SUGAR

The next issue is whether the evidence shows that the protestant bought raw sugar from Michigan. That is, whether there is sufficient evidence of a sale of raw sugar from Michigan to the protestant before any processing into the exported refined sugar began or whether the protestant bought refined sugar from Michigan.

As outlined under Facts", the Michigan sales invoices to the protestant generally were issued before Michigan began to use the raw sugar. The protestant issued checks to Michigan as listed under "Facts" in payment of those invoices, and those checks were negotiated. The first paragraph of the Protestant's agency contract with Michigan states that protestant will from time to time purchase raw sugar manufactured by Michigan. The second paragraph of that contract provides that the protestant would receive 100 pounds of refined sugar for each 110 pounds of its raw sugar.

The protestant provided a mass balance formula, asserted to be standard in the sugar beet refining industry, in which they show that during the manufacture of their refined sugar from beets they also produce raw sugar. The raw sugar is re-introduced in their process and converted to refined sugar. In the stated process, the amount of refined sugar from a given quantity of raw sugar averaged 64 per cent. That is, if 100 pounds of refined sugar was produced, 64 pounds of refined sugar would be attributable to raw beet sugar. Customs laboratory scientists reported that, based on the refining records provided by the protestant, the formula appeared to be valid and resulted in a 64 per cent average as asserted by the protestant.

The protestant had access to the production records of Michigan. In fact, the protestant provided copies of those records as noted under "Facts".

The protestant also provided Michigan accounting records that involved the protested claims, but those records did not relate to the sample claims. Those records relate to the September, 1986 transaction listed under "Facts". They show a purchase of 60 million pounds of raw sugar for $12,528,000. The above Michigan accounting records show at page 0558 of the Michigan General Ledger for the period from October, 1985 to September, 1986, records for account 495-00 "Raw Sugar Sales" a credit of $12,528,000.00, posted on September 28, 1986. Interestingly, there are sales recorded against that credit which appear to have been posted before the credit. Since the period was not involved in the sample claims, no verification was made against the sales invoices. Further, Michigan sales invoices 50919 and 50920, which were the first two export shipments in protestant's drawback claim 86-XXX040-1, do not reflect a credit against a prior purchase of raw sugar. The protestant admits that such failures occurred. Export invoice 147068, which is said to be involved in the protest, but is not involved in the sample claims reviewed, does show a credit of $10,335.60 against a sale of $12,037.50 for the protestant. While inconclusive as to the sample claims reviewed, and there is a question as to the shipments that reduced the credit, the records tend to show that Michigan did record the transactions as advance payments for raw sugar.

In HQ 221914, based on the evidence presented, Customs determined that Michigan did not sell raw beet sugar to the protestant so that the production of refined sugar at Michigan's refineries could not be claimed by the protestant as its own processing to satisfy 19 USC 1313(b). The key points of the decision turned on the lack of evidence to show "delivery" to the protestant so as to identify the protestant's raw sugar and whether there was consideration passing from the protestant to Michigan to support the sale.

The protestant requested a reconsideration asserting that critical evidence was missing. In HQ 223431 Customs reconsidered the sale issue and reached the same conclusion. That is, based on the evidence presented, there was no sale of raw sugar from Michigan to the protestant to enable the protestant to claim Michigan's processing as its own processing to satisfy 19 U.S.C. 1313(b).

A sub-issue in HQ 221914 was whether the raw sugar asserted to have been sold to Savannah by its agent, Michigan, could be identified as belonging to Savannah before that raw sugar was refined. If Savannah merely bought refined sugar from Michigan, it could not designate its earlier imports against the exported refined sugar because that processing would not have met the requirements of 19 USC 1313(b).

The use of the mass balance formula to show what per cent of raw sugar was used to make refined sugar, and the application of that formula on the daily records of production are set forth in the "Facts". Before analyzing the export shipments against the corrected production dates, the legal basis of identification needs review.
On the issue of the legal basis for identification, the protestant relies on:

Martin Marrietta Corp, v, N.J.~ Natl Bank; 612 F.2d.745, 749 (3rd Cir. 1979)

K.L. Rewes v. Pillsbury Co., 229 Kan. 423, 625 P.2d 440, 445 (1981)

Harney v. Spellman, 113 Ill. App. 2d 463, 251 N.E. 2d. 265

Bowman v. American Home Assur. CO,, 190 Neb. 810, 213 N.W. 2d.446 (1973)

Goodpasture Inc. v. M/V Pollux, 688 F.2d 1003 (5th Cir. 1982)

Cone Mills Corp. v. A.G. Estes Inc., 377 F. Supp. 222 (N.D. Ga. 1974)

Great Western Sugar Co. v. Pennart Products, 748 P.2d. 1359 (Co. Ct. App. 1987)

Henry Heide. Inc. v. Atlantic Nat. Inc. Co., 80 Misc. 2d. 485, 363 NYS 2d. 515 (Sup. Ct. 1975)

U.S v. Amalgamated Sugar Co., 72 F. 2d 755 (10th Cir, 1934)

In Martin Marietta Corp. v. N.J. Nat'l Bank, there was a dispute over the ownership of sand. Plaintiff bought about 140,000 tons of sand from a company whose inventory was subject to the defendant bank's security interest. Plaintiff took delivery on about half of the sand and left the other half with the company which had given the defendant bank a security interest on its inventory. That company defaulted on repayment of the bank's loan to it. The defendant bank took over that company's inventory, which included sand left with that company by the plaintiff. The plaintiff had placed signs on some of the piles of sand which stated that the sand was the property of the plaintiff. The court decided that there was sufficient identification and remanded back to the district court. On remand, Martin Marietta Corp. v. N.J. Nat'l Bank, 505 F. Supp. 946, 949 (N.J. 1981), the district court noted that the record was unclear as to when the identification occurred. The appellate court had considered the factors of an oral contract between the plaintiff and the seller, the plaintiff's sign demarcations and the seller's written confirmation of inventory. There also was a record of the seller's acknowledgment in the business records of the seller. In the present case no similar piles of raw sugar existed at Michigan. Because of a difference in significant facts, it is unclear how the Martin Marietta case helps the protestant.

In Reeves v. Pillsbury Co., the dispute concerned wheat belonging to plaintiff that was stored in Pillsbury's grain elevator. Pillsbury on accepting the grain, issued checks to Brownsville grain company on the belief that the grain was the grain involved in a sale by Reeves to Brownsville. The court found that the wheat was not identified to the Reeves-Brownsville sale. The court found that Reeves had more than the quantity to satisfy the Reeves-Brownsville contract at another location. The court found that when Reeves delivered the grain to Pillsbury, Reeves did not notify Brownsville of the delivery or present the elevator receipt to Brownsville for payment. The contract between Reeves and Brownsville required Brownsville to make trucks available for Reeves tender of delivery. The court found there was no evidence in support of that event. There were five delivery tickets. Four were not marked for "storage" by defendant Pillsbury's elevator employees. Pillsbury argued that title vested in Brownsville when the contract was executed. There was no dispute that the wheat existed when the contract was executed. There was a dispute that the contract identified the 5,000 bushels involved in the contract with the 20,000 bushels Reeves had when the contract was executed. The court found no identification to the contract because the contract failed to refer to the wheat involved within the 20,000 existing bushels. There was no shipment to Brownsville, nor was the shipped wheat marked or designated by Reeves as belonging to Brownsville. Again, unlike the situation in Reeves, there are no identified piles of raw sugar at Michigan. In view of the significant factual differences, the Reeves decision is not persuasive.

Harney v. Spellman involved a suit between a landlord asserting a rent lien against a kitchen appliance company that sold various appliances to the landlords tenant. The seller delivered the appliances to the tenant but failed to perfect its security interest provided under a conditional sales contract. Inasmuch as the issue here involves goods not in existence, goods asserted to be fungible, and goods asserted to be left in the possession of the asserted agent, the protestant's reliance on Harney v. Spellman is not persuasive.

Bowman v. American Home Assur. Co, involved a suit between an insured and an insurance company on a damage policy for an aircraft. The insurance company denied liability for damage to the aircraft because the insured did not have title to the aircraft. The court agreed that there was evidence to show that the aircraft remained in possession of the insured and that the insured and the aircraft's buyer had contracted to pass title only when the Government's transfer requirements were met and the full purchase price was paid. Again, there is a disparity between the relevant facts here and in the court case, since seller who retained possession was held to be the owner, the goods existed when the contract was executed, and the protestant's position that a transfer of ownership occurred despite Michigan's possession of the raw sugar when it came into existence after the erstwhile contract was executed, the protestant's reliance on the case appears to be misplaced.

Goodpasture v. M/V Pollux also involved goods that were in existence at the time of disputed ownership. The plaintiff loaded wheat aboard the defendant vessel. The vessel asserted a maritime lien against the wheat. The vessel had a time charter with a foreign shipping company. The court found that the plaintiff had not transferred title of the wheat to the buyer. Since title had not passed to the vessel, the time charterer's seizure of the wheat was an unlawful conversion. Because of the factual differences in the court case--the existence of the wheat, the physical movement without passage of title--it is far from clear how this case supports the protestant's position regarding whether there was identification of raw sugar not in existence purported to be sold by Michigan to Savannah even though it remained in Michigan's custody.

Cone Mills Corp. v. A. G. Estes and Dabbs involved a suit on the validity of a contract. Defendant Dabbs, a cotton grower, made a future sale of cotton to defendant Estes. The written price was at "twelve cents above loan". Defendant Dabbs asserted that there was an oral agreement of one-half cent higher than the written price. Estes denied the oral agreement's existence. The issue before the court was a motion to dismiss defendant Dabbs counter claim and cross claim on a suit for specific performance and other injunctive relief. The plaintiff and defendant Estes also filed identical motions to dismiss. The court denied both motions. The court here simply concluded that under Georgia law there could be a contract for the sale of goods in the future and that the goods must both exist and be identified before any interest can pass. The court did not discuss whether identification occurred. That is a critical issue in this protest and it is unclear how the court decision resolves that issue in the protestant's favor. At best, it merely holds that such a showing is possible as a matter of law; a point with which there is no dispute.

Great Western Sugar Co. v, pennant Prods. concerned contracts under which the defendant was to purchase refined sugar from plaintiff's inventory. The contract allowed the defendant to terminate by written notice. After ordering and receiving some sugar, the defendant made no more orders. The plaintiff, at all times, retained sugar in its inventory to cover the possible orders. The defendant never sent any termination notice. Plaintiff sued for damages. The court found that the existing sugar was identified because it existed when the contract was made and contracts called for periodic shipments of sugar at specified prices. Again, because of the different facts, this case is not persuasive.
Henry Heide Inc. v. Atlantic Mut. Ins. Co. involved an insurance contract on bags of sugar that disappeared from the warehouse. The warehouse was dispossessed and the sugar was found missing. The insurer refused to honor its contract on the ground that there was no showing that the sugar ever existed. The court found that the defendant submitted no evidence to impeach the plaintiff's evidence as to the existence of the sugar in the warehouse. The insurer argued, but offered no supporting evidence, that the sugar was not segregated by the warehouse. The court noted the absence of evidence and held that segregation was not needed for the plaintiff to collect on its insurance contract. The court held that the delivery to the third party warehouse and the issuance of receipts by that warehouse to the plaintiff provided identification. In the court case there were findings on the sugar's existence when the insurance contract was issued, and the third party warehouse issued receipts to the plaintiff to identify the sugar. The protestant's situation differs from those facts in that at the time of the purchase no raw sugar existed and the sugar did not leave Michigan's premises until after it was refined.

In U.S. v. Amalgamated Sugar Co., the issue was whether a sale occurred in 1917, as reported by the company, or in 1918, as asserted by the Internal Revenue Service. The sugar in issue was bagged and sold. The company was on an accrual tax basis. The court held that the sale occurred in 1917 even though the sugar remained in the company's warehouse until after the start of the company's new tax year. The court was persuaded by the fact that the contracts referred to the transaction as a sale, not an agreement to sell at a future time; the company kept a memorandum purporting to show, on a daily basis, the amount of sugar manufactured, the amount sold, and the amount on hand. The latter included both the amounts sold and delivered and the amounts paid for but not delivered. The court found the transactions were recorded as a charge to inventory cost of sugar sold with a corresponding credit to inventory. The company's insurance policy specified that it covered sugar sold but not delivered which the court found was a recognition that the company regarded the sold, but undelivered, sugar as property of another. While there is some evidence that Michigan recorded some advances made by the protestant as sales of raw sugar, there has been no consistent equivalent evidence presented by the protestant on these sample entries to show consistent application of those procedures, particularly, with respect to the export shipments covered by Michigan invoices 50919 and 50920, as noted above. It seems clear that if there was a consistent recordation of each sale as a sale of raw sugar and if Michigan set up an inventory account, based on production, which identified the refined sugar production from that raw sugar, this dispute might have been avoided.

However, in this case the documentary evidence shows that Michigan issued invoices for specified pounds of raw sugar, the protestant issued checks on those invoices which Michigan negotiated, the agency agreement obligated Michigan to furnish 100 pounds of refined sugar for each 110 pounds of the raw sugar bought from Michigan, and the amount used in production would be calculated by application of the mass balance formula, with the protestant having access to Michigan's production records.

The protestant's cited court cases do not involve situations of purchases for future production, other than the possible exception of Martin Marietta Corp. v. N.J. Nat'l Bank, and the sand in issue in that case was in piles some of which had Martin Marietta's declaration of ownership. There are, however, other decisions involving contracts for future production.

In Riegel Fiber Corp. v. Anderson Gin Co., 512 F. 2d 784, 791 (5th Cir. 1975), the court found that a contract provision that listed the defendant farmer's acreage and projected yields was sufficient identification for allocation of contract and non-contract cotton. See also footnote 18.

In the case of In re Quality v. Processing Inc., 9 F. 3d 1360 (8th Cir. 1993), the plaintiff buyers contended that Quality identified certain beans to their contracts when Quality invoiced specified quantities, the plaintiff buyers prepaid the invoices and submitted shipping instructions to Quality and Quality scheduled buyers contracts for processing. There was conflicting evidence. The trial court found that the testimony of Quality's operations manager to the effect that Quality did not designate beans to a particular buyer's contract before processing even for prepaying buyers and that the plaintiff buyers' contracts were never designated to be the most convincing. The appellate court, noting that whether a seller has designated future goods to a particular contract is a fact-intensive inquiry that turns on the specific manner in which the seller conducts its business, upheld the trial court. Here, the parties contend that all of the raw sugar used from the time it was invoiced until the amount used met the terms of the purchase was raw sugar that belonged to the protestant. There is no direct evidence to contradict the parties' contention other than there are unexplained reductions in credit on claims that are not part of the sample selected for review by the Customs auditor.

The case of Weisz Graphics v. Peck Industries, 403 S.E. 2d 146 (S.C. App. 1991), involved the manufacture of custom decals by the plaintiff. The court found that there was an industry practice of the decal manufacturer warehousing the finished decals for up to a year to await shipping instructions by the customer. The contracts referred to this practice by such terms as "to be billed and shipped as released", "order as needed for a period of 1 year 500 ship as release", and "break up into multiple shipments". The court in noting that in the case of goods manufactured to order, identification usually occurs when the first step of production begins, found that the plaintiff manufacturer identified the goods to the defendant buyer's contracts even though the goods were not shipped. Here, the nature of beet sugar refining is consistent with the parties' contention that from the time of purchase until the time that the amount purchased was used up, the raw sugar so used belonged to the protestant.

On this point, the effective dates for the 1984-1985 year must be determined. The protestant asserts that the invoice of October 31, 1984 was a memorializing of an earlier purchase. As noted in "Facts" the memorandum states:
An invoice for the sale of 200,000 cwts. of raw sugar to Savannah Foods and Industries at a price of $21.50 on October 31, 1984 has been forwarded to SF & I for payment. This is an interim sale and will ultimately be consummated after the tolling charge to SF & I has been established. It is understood that the tolling charge for refined sugar (produced from "raw sugar" sold to SF & I) will be established at the date of delivery of refined sugar to SF & I for subsequent export.

The relevant invoice states:

To Savannah Foods & Industries Inc. Raw sugar to be tolled into refined sugar for export sales. Weight 200,000 cwt unit price $21.50, extension $4,300,000 Terms Net due 11-12-84. The invoice date is 10-31-84.

The relevant canceled check has an issue date of November 12, 1984.

As noted above in the discussion on the agency contract between the protestant and Michigan, the terms provide that the protestant will from time to time purchase from Michigan raw sugar manufactured by Michigan. There is no language in that contract that specifies a specific purchase.

Based on the prior analysis, there is no evidence in support of the protestant's assertion that it bought raw sugar before October 31, 1984. Consequently, any production that occurred before October 31, 1984 cannot involve use of the protestant's raw sugar. In this regard the Michigan General Ledger with respect to establishing a credit with respect to the September 26, 1986 purchase discussed above was posted on September 28, 1986. This illustrates that the invoices and payments relating to the sale and the credit in Michigan's books were done together. Also, the transaction of October 6, 1987, in which there was a delay in payment agreed to by the parties, was recorded as such. No similar evidence was presented to contravene the plain language of the October, 1984 sales documents that the sale occurred on October 31, 1984. Consequently, any claim based on production before October 31, 1984, has not been shown to be done with the protestant's raw sugar and is to be denied for failure to comply with 19 U.S.C. 1313(b).

The 1984-1985 year involved two purchases by the protestant. The second purchase is evidenced by the Michigan memorandum of January 3, 1985, Michigan invoice 1107 dated January 2, 1985, and the protestant's check on invoice 1107 issued January 14, 1985. For the same reason, the raw sugar involved in this sale could not be used before January 2, 1985 to make any refined sugar that would satisfy 19 U.S.C. 1313(b).

Finally, if the raw sugar that was purchased in the sale of October 31, 1984 was accounted for by the mass balance formula said to be used by the parties in the period from December 13, 1984 to January 2, 1985, any claim based on production that occurred during that gap, as explained below, should also be denied for the same reason. The protestant asserts that it bought 20 million pounds of raw sugar represented by the invoice of October 31, 1984. Using the actual Michigan production records and applying the mass balance formula which the parties agree shows the amount of the protestant's raw sugar usage in the refined amounts, that purchase was accounted for prior to the second purchase of January 2, 1985. The Michigan daily production records for the 1984-1985 year show that production occurred at three of Michigan's refineries: Caro, Croswell and Carrollton.

However, production at Carrollton did not begin until December 30, 1984. At Caro in the period from October 31, 1984 to November 3, 1984 there was a total of 3,675,900 pounds of refined sugar produced. Application of the mass balance formula shows that 2,352,576 pounds of refined sugar was attributable to raw sugar (3,675,900 x .64 = 2,352,576). Likewise, at Croswell for that same period 1,847,100 pounds of refined sugar was made, of which 1,182,144 pounds of refined sugar was attributable to the use of raw sugar. During the period from November 4-10, 1984 at Caro, Michigan produced 5,990,100 pounds of refined sugar, of which 3,833,684 pounds of refined sugar is attributable to raw sugar. Thereafter, for the raw sugar in issue, production occurred only at the Croswell refinery. The following table shows the usage in raw sugar pounds using the mass balance formula: October 31, 1984 to November 3, 1984 Caro & Croswell 4,619,644 November 4, 1984 to November 10,1984 Caro & Croswell 6,506,438 11,126,082
November 11, 1984 to November 17, 1984 Croswell 2,411,200 13,537,282
November 18, 1984 to November 24, 1984 Croswell 2,349,600 15,886,882
November 25, 1984 to December 1, 1984 Croswell 2,217,952 18,104,834
December 2, 1984 to December 6, 1984 Croswell 1,576,608 19,681,442
December 7, 1984 Croswell 318,558
20,000,000

The actual pounds of refined sugar produced at Croswell on December 7, 1984 was 519,000 pounds. The formulas would show that the use of 318,558 pounds of raw sugar would use up Savannah's raw sugar. The 20 million pound purchase of raw sugar(Savannah's purchase of October 31, 1984)would be completely attributed when only 318,558 pounds was introduced into production on that day. (December 7, 1984)

Consequently, any production on December 7, 1984 in excess of the usage of 318,558 pounds (which would equal 289,598 refined pounds of raw sugar [318,558 รถ 1.1 = 289,598] must be disallowed because it could not be made with the use of raw sugar owned by Savannah. Any production thereafter could not have been with the use of the protestant's raw sugar until the purchase of January 2, 1985.

A similar problem does not exist with respect to the 1985-1986 year since there was one purchase of 38 million pounds of raw sugar as shown by the invoice of October 1, 1985 and corresponding payment check of October 9, 1985. However, the gross amounts for raw sugar usage in each Michigan plant for each year must be checked to insure that the production did not exceed the raw sugar purchased for each year.
The next point of dispute is whether the evidence shows that the protestant bought and obtained title to raw sugar or refined sugar. The protestant contends that it and Michigan explicitly agreed that title would pass when the raw sugar came into existence. The protestant argues that its explicit agreement is stated in the protestant's agency agreement with Michigan in which the protestant was to buy raw sugar from time to time from Michigan and the Michigan invoices that list raw sugar as the commodity. The protestant has not pointed to any text in which the words "title will pass when the raw sugar comes into existence" appear. Given this absence, reliance on the case of Harney v. Spellman, supra, is not persuasive. In that case, Harney sold a washer, dryer, range, refrigerator and a television set to a Mr. Hupp, who rented from the defendant, Spellman. The court found the contract between Harney and Hupp to include the following language: "Title to the goods is vested in the Seller and shall not pass to Buyer. . .until the time balance shall have been fully paid". The court, in discussing the language quoted by protestant observed: "The contract in question explicitly agreed that title to the goods was vested in the seller until full payment was made." See pages 265 and 266 of 251 N.E. 2d 265. The protestant has pointed to no comparable language in the contractual relationship between it and Michigan with respect to the sale of the raw sugar.

In HQ 221914 Customs determined that the protestant bought refined sugar rather than raw sugar from Michigan. Customs determined that Michigan's records of crediting only refined sugar sales against the earliest advances made by the protestant indicated a sale of refined rather than raw sugar. Customs also determined that Michigan did not keep a raw sugar inventory. The protestant was found not to have recorded the processing as a cost of sale.

In HQ 223431, HQ 221914 was simply affirmed since no new evidence was made available.
The protestant attacks the determination by asserting that Customs erred in finding that title did not pass between Michigan and the protestant. That, of course, was not the determination. In HQ 221914, Customs found that the sale consisted of a sale of refined sugar rather than a sale of raw sugar. See discussion pages 6-7 of HQ 221914 and discussion pages 7-8 of HQ 223431.

The protestant then contends that the explicit agreement with respect to title transfer can be ascertained by examination of the circumstances of the transaction. The protestant relies on the following court decisions: Kamakazi Music Corp. v. Robbins Music Corp., 534 F. Supp. 57 (S.D. NY, 1981); Crocker Nat. Bank v. Ideco Div. Of Dresser Ind., 660 F. Supp. 186, aff'd and remanded, 839 F. 2d 1104 (5th Cir. 1988), 702 F. Supp. 615, rev. and remd. 889 F. 2d 1452 (5th Cir. 1990), cert. den. 495 US 919. 110A Sup. Ct. 1949 (1990).

The protestant cites Kamakazi Music Corp. v. Robbins Music Corp.,for the proposition that the explicit agreement need not be within the parties' written document but a court could consider the factors of the parties' conduct, trade usages, and circumstances in the case. That case involved an action for copyright infringement. The language relied on by the protestant related to a preliminary injunction request. Kamakazi sought to bar Robbins from selling or printing certain music sheet folios, unless Robbins made advance royalty payments. The dispute concerned contract language which set a formula for royalty payments. The motion for an injunction was denied. Moreover, the court at pages 66-68 found that, based upon the delivery of possession to Robbins with full right of disposition, Kamakazi's challenge to the sale based solely on the contract was defeated. Since the subject matter before the court dealt with property in existence when the contract was made and there was an actual delivery from the seller to the buyer, the support that the protestant derives from this case is unclear.

The protestant's citation of Crocker Nat. Bank v. Ideco Div, Of Dresser Ind., assumes that the 1988 opinion controlled. A review of the case history in the 1990 Fifth Circuit decision and the certiorari denial shows that assumption to be incorrect. The protest cites the 1988 Fifth Circuit opinion for the proposition that bookkeeping procedures do not negate express agreements on when title passes. In 1981, T.O.S. Industries agreed to buy 40 drilling rigs from defendant Ideco. In January, 1982, T.O.S. told Ideco it did not need the rigs. Ideco told T.O.S. that it almost completed 6 of the 40 and that T.O.S. would have to purchase those. Ideco recorded the rigs as a sale showing an increase in accounts receivable and a decrease in inventory. In July, 1987 the parties executed a mutual release, Ideco recorded an increase in inventory and decrease in accounts receivable. Plaintiff bank had a security interest in the inventory of T.O.S. Ideco possessed the rigs. The court held seller's security interest superior to that of plaintiff bank on ground that by retaining possession, its security interest was perfected. The 1988 opinion found the seller's retention of property critical.

The 1990 decision concerned title to certain engines which were the subject of a remand in the 1988 appellate decision. The court determined that the engines had been delivered to a T.O.S. affiliate, which was covered by the plaintiff bank's security interest on the inventory of T.O.S. Although Ideco delivered the engines to the T.O.S. affiliate, Ideco was not paid. When T.O.S. was in financial distress it returned the engines to Ideco. When the engines were returned from the affiliate to Ideco, T.O.S. received the credit from Ideco. The 1990 court reversed the district court and held that the bank had the superior interest because Ideco had delivered the engines, unlike the situation with the drilling rigs.

Unlike the situation of the drilling rigs and engines, the raw sugar did not move from Michigan's refineries to Savannah's. The raw sugar never moved from Michigan's refineries until after it was refined. As such, the case is not persuasive to advance the protestant's argument.

There is evidence that tends to show that some raw sugar credit was given to the protestant on Michigan's books of account and some evidence that the protestant received an offset against the price when the refined sugar was sent to the protestant's customers.
The evidence with respect to Michigan invoice 147068 shows that a credit of $10,335 was offset against the price $12,037.50 when the granular sugar was exported. The protestant asserts that the difference between the $10,335 and $12,037.50 is the tolling fee. The problem with respect to the sample claims is that Michigan invoices 50919 and 50920 which are said to represent the first two export shipments in drawback claim 88-xxx040-1, do not show a similar raw sugar credit. Further, unlike the two of the granular sugar listings for the protestant on page A15745 of the Michigan A/R Invoice, invoices 147070, 147071, 147072, the listing for liquid invert and liquid sucrose do not show a raw sugar credit. The third granular sugar listing for the protestant, invoice 147067, also does not show a raw sugar credit.

The review of the export documents showed that many of the invoices to Savannah from Michigan failed to reflect any credit for the raw sugar advance payment. The lack of a credit was particularly evident in the liquid sugar shipments from the Caro refinery.

The protestant submitted additional evidence on October 30, 1996, December 10, 1996, January 3, 1997, January 30, 1997 and February 4, 1997.

The protestant asserted that all of the raw sugar which was bought by Savannah was held under Michigan's customer account 19134. The protestant also asserts that account 495-00 in Michigan's General Ledger was the raw sugar advance payment credits account. The protestant asserts that if the proper raw sugar credit was shown on the Michigan to Savannah invoice, Michigan General Ledger account 495-00 would have reflected that credit. If, as was the situation with the liquid sugar shipments from the Caro refinery, the raw sugar credit was not shown on the Michigan to Savannah invoice, there was a periodic reconciliation between Michigan and Savannah which applied that credit for each involved shipment.
The evidence offered in support of these assertions includes a copy of Michigan customer account 19134, as well as other customer accounts for Savannah. The account lists five U.S. shipping points which Michigan asserts were listed in error. Mr. Yuill, Michigan's Senior Tax accountant, stated that the five U.S. customers of Savannah never received any shipments that were credited to that account. If any such shipment occurred, the amount of the raw sugar must be deducted from the amount available for the drawback and any claim based on that raw sugar is to be denied.

Also submitted were affidavits of a Joyce Sheredy-Bierlein and a Barry Brown. Ms. Sheredy-Bierlein stated that she was a sales clerk for Michigan from 1979 to April, 1986. She stated that an account was set up for Savannah's export shipments. She also stated that Mr. Brown was her supervisor. Mr. Brown stated that he was the Michigan vice-president for sales and marketing since 1982. He stated that Michigan account 19134 was established solely for shipments of refined sugar to Savannah's Canadian customers. Mr. Brown stated that "only transactions not other than exports and drawbacks were to be posted to other Savannah accounts." He also stated that account 19134 was set up beginning with the 1984/1985 refining season.

Neither affiant referred to the presence of the five U.S. "ship-to" locations in the accounts. See items 27/22, 38/17, 50/23, 57/22 and 68/13 listed in account 19134, a copy of which will be provided. Also; only two of the five locations are listed in any of the other customer accounts for Savannah. The location identified as 27/22 in account 19134 is also listed as item 4/22 in account 19125. The location identified as 50/23 is also listed as item 50/23 is also listed as item 53/23 in account 19125. The evidence shows that account 19134 was opened 11-30-84 while account 19125 was opened 10-15-90. Further, account 19125 does list a Canadian location in item 63/61.

The evidence also shows that the export shipments reference two contracts which are identified as MSC(presumably Michigan Sugar Company) contract 8889 and 3062. Neither the protestant nor Michigan was able to provide a copy of either contract. There was a concern that those contracts were sales contracts between Michigan and the foreign buyer of the export shipment. In that situation, the validity of the principal-agency manufacturing set-up between the protestant and Michigan would be called into question. Although copies of those contracts were not provided, alternative evidence was which tends to show that the export shipments were the result of a sales contract between a foreign buyer and the protestant appeared on the shipping and Canadian Customs documents. Moreover, in all of the claims involved in the sample, that protestant-foreign buyer contract number is listed on the export shipment listing under the heading titled "cont. number." The evidence is consistent with the protestant's assertion that the export sale was a sale between the protestant and the foreign buyer.

The order and contract numbers provide a key to the protestant's production and export records. An amendment of the correct production dates must reflect the original contract and order numbers. In the supplemental evidence, the order number was also referenced as the invoice number on the summary listing of exports on a drawback claim that was not part of the sample claims on the protest. However, the difference in terminology has no substantive importance for drawback verification purposes.

Despite the discrepancies noted above the evidence of the reconciliation of the raw sugar account identified by customer number 19134 on the commercial invoice covering each export shipment is consistent with the protestant's assertion that the export was not a sale of refined product.

To the extent that an export shipment is not barred as a result of being refined in a period that Michigan could not have the protestant's raw sugar, that is, before October 31, 1984, and the period between December 7, 1984 and January 2, 1985, or because the claim exceeds the amount of raw sugar processed on the daily production records, the claim should be allowed if the Michigan invoice and accounting records reflect a raw sugar credit as does invoice 147068. Drawback on an export shipment should be denied if the invoice fails to record the raw sugar credit or evidence fails to show that the invoice and order was the subject of a raw sugar advance reconciliations. The protestant is to be permitted to furnish that additional evidence for every export on which the invoice fails to show a credit.

The sample entries in the protest involve shipments of refined sugar said to be made during the 1985-1986 period. That is, the refined sugar is said to have been made with the 38 million pounds of raw sugar that was the subject of the sale evidenced by the protestant's confirmation of October 1, 1985, Michigan's invoice to the protestant of that date, and protestant's check 586 dated October 9, 1985.

The evidence indicates that the sale occurred no earlier than October 1, 1985. The evidence discussed above, with respect to the transactions for the 1986-1987 period, shows that Michigan established a credit with respect to the September 26, 1986 transaction for the protestant on September 28, 1986. The protestant offered that evidence as representative of its raw sugar purchases from Michigan. If that is accurate, and we have no evidence to the contrary, the sale would have occurred on October 1, 1985 when there was a definite offer and acceptance and the raw sugar was identified by the establishment of a credit account. Sugar processed on and after that date that is evidenced by a raw sugar advance payment credit by Michigan would be eligible for drawback. That eligibility would depend also on the protestant showing that the total of all such eligible shipments did not exceed the 38 million pounds purchased in the October 1, 1985 transaction and that there was no export shipment that exceeded the relevant daily refinery production records.

The relevant daily refinery records were examined against each of the export shipments in the 11-drawback claim sample. The dates of production involved in the drawback claims reviewed began on October 5, 1985 and ended December 8, 1985.

October 5, 1985:

The production for this day involved claim 86-xxx419-3. There were two shipments of 12,550, and 900 pounds totaling 13,400. The sugar was refined at Michigan's Sebewaing refinery and shipped from that place. The daily records for that day shows 317,500 pounds of refined sugar was produced. Using the attribution formula it can be seen that 203,200 pounds of refined sugar are said to have been Savannah's (317,500 x .64 = 203,200) Since the total shipments of refined sugar produced on October 5, 1985 at Sebewaing were less than the amount of refined sugar produced through use of the raw sugar, those shipments would be eligible so long as the Michigan invoices on those shipments reflect that they were against the raw sugar purchase documents of October 1, 1985.

October 6, 1985 is the next date of production involved in these claims. The amount produced on that date was claimed on claim 86-xxx 419-3. The shipments were from Michigan's Sebewaing refinery. The shipments total 30,418 pounds. The daily record for October 6, 1985 for the Sebewaing refinery shows 602,500 pounds. Use of the mass balance formula shows that 385,600 pounds of refined sugar was made from raw sugar(602,500 x .64 = 385,600). That amount exceeds the amount shipped and would be eligible assuming evidence of a raw sugar credit.

The next day of production involved in these claims is October 8, 1985. The amounts produced on that date were claimed on drawback claim 86-xxx 040-1. This shipment was produced and shipped from Michigan's Carrollton refinery. This shipment totals 177,811 pounds. The daily record for October 8, 1985 for the Carrollton refinery shows 660,900 pounds. Use of the mass balance formula shows that 422,976 pounds of refined sugar was made from raw sugar (660,900 x.64 = 422,976). That amount exceeds the amount shipped. This shipment would be eligible assuming the Michigan invoices reflect credit for the October 1, 1985 advance.

October 9, 1985 is the next date of production involved in these claims. The production was claimed in three of the claims: 86-xxx 421-6, 86-xxx 414-8, and 86-xxx 412-2. All of these shipments were from Carrollton refinery. The daily records for that date at Carrollton show that 661,200 pounds were produced. Use of the mass balance formula shows that 423,168 pounds of refined sugar was made from raw sugar (661,200 x.64 = 423,168). The total of all shipments from Carrollton attributable to production on that date is 132,222 pounds and would be consistent with the protestant's assertions.
October 10, 1985 is the next involved production date. This date was not asserted in the original listing provided as exhibit II, which did not allocate production that occurred on two consecutive days. On October 18, 1996 Savannah amended exhibit II to reflect the amounts produced on each day. Again, that amendment is permissible for the reasons stated in the discussion on amendments; it does not attempt to substitute new imports or export shipments but supplies additional information on the shipments originally filed as the claim. The production is relevant to claim xx-xxx 421-6. The shipment total 1,120 pounds. The shipment was made from Michigan's Carrollton refinery. The daily record for Carrollton on that date shows 614,100 pounds were produced. Use of the mass balance formula shows that 393,024 pounds of refined sugar were made from raw sugar(614,100 x .64 = 393,024). That amount exceeds the amount shipped and would be consistent with the protestant's assertions.

October 25, 1985 is the next date of production involved in these claims. That production is relevant to three claims: 86-xxx 040-1, 86-xxx 419-3, and 86-xxx 420-3. All shipments were from the Caro refinery. The daily records for Caro show 810,800 pounds were produced. The mass balance formula shows that 518,912 pounds of refined sugar were made from raw sugar (810,800 x.64 = 518,912). The total shipped in the three claims is 426,657, which would be consistent with the protestant's assertions.

October 26, 1985 is the next involved date of production. That production is relevant to four claims: 86-xxx 040-1, 86-xxx 419-3, 86-xxx 420-3 and 86-xxx 414-8. All of the shipments in those claims were from the Caro refinery. The daily records for Caro show 862,700 pounds were produced. Use of the mass balance formula shows that 552,128 pounds of refined sugar were made from Savannah's raw sugar (862,700 x.64 = 552,128). The exports claimed total 522,508 pounds and would be consistent with the protestant's assertions.

October 27, 1985 is the next involved production date. That production is relevant to three claims: 86-xxx 419-3, 86-xxx 420- 3, and 86-xxx 414-8. All of the shipments were from the Caro refinery. The daily records show 733,100 pounds were produced at Caro. Use of the mass balance formula shows that 469,184 pounds of refined sugar were made from raw sugar (733,100 x.64 = 469,184). The exports attributed to production on October 27, 1986 total 433,493 pounds, and would be consistent with protestant's assertions.

October 28, 1985 is the next relevant production date. That production is relevant to three claims: 86-xxx 421-6, 86-xxx 419-3, and 86-xxx 412-2. The shipments were from the Caro refinery. The daily records show 731,800 pounds were produced at Caro. Use of the mass balance formula shows that 468,352 pounds of refined sugar were made from raw sugar (731,800 x.64 = 468,352). The export shipments total 396,614 pounds which would be consistent with protestant's assertions.

October 29, 1985 is the next relevant production date. That production is relevant to six claims: 86-xxx 445-2, 86-xxx 421-6, 86-xxx 419-3, 86-xxx 420-3, and 86-xxx 413-5 and 86-xxx 412-2. All of the shipments were from the Caro refinery. The daily records show that 777,900 pounds were produced at Caro. Use of the mass balance formula shows 497,856 pounds of refined sugar were made from raw sugar (777,900 x.64 = 497,856). The export shipments total 445,218 pounds, which would be consistent with the protestant's assertions.

October 30, 1985 is the next involved production date. That production is relevant to four claims: C17xxxx 313-5, C17-xxxx 312-7, C17-xxxx 311-9, and 86-xxx 445-2. All of the shipments were from the Caro refinery. The daily records show that 852,200 pounds were produced. Use of the mass balance formula shows 545,408 pounds of refined sugar were made from raw sugar (852,200 x.64 = 545,408). The export shipments total 432,085 pounds, which would be consistent with the protestant's assertions.

October 31, 1985 is the next involved production date. That production is relevant to two claims: C17-xxxx 313-5 and C17-xxxx 311-9. All of the shipments were from the Caro refinery. The daily records show that 831,400 pounds were produced. Use of the mass balance formula shows that 532,096 pounds of refined sugar were made from raw sugar (831,400 x.64 = 532,096). The export shipments total 293,154 pounds, which would be consistent with the protestant's assertions.

November 28, 1985 is the next involved production date. That production is relevant to claim 86-xxx 040-1. The shipment was from the Croswell refinery. The daily records show that 500,600 pounds were produced at Croswell. Use of the mass balance formula shows that 320,384 pounds of refined sugar were made from raw sugar (500,600 x.64 = 320,384). The export shipments total 74,576 pounds, which would be consistent with the protestant's assertions.

November 29, 1985 is the next involved production date. The production is relevant to claim 86-xxx 040-1. All of the shipments were from the Croswell refinery. The daily records show that 484,700 pounds were produced at Croswell. Use of the mass balance formula shows that 310,208 pounds of refined sugar were made from raw sugar (484,700 x.64 = 310,208). The export shipments total 305,640 pounds which would be consistent with the protestant's assertions.

November 30, 1985 is the next involved production date. That production is relevant to claim 86-xxx 040-1. The export shipments were from the Croswell refinery. The daily records show that 541,000 pounds were produced at Croswell. Use of the mass balance formula shows that 346,240 pounds of refined sugar were made from raw sugar (541,000 x.64 = 346,240). The export shipments total 204,784 pounds, which would be consistent with the protestant's assertions.

December 1, 1985 is the next involved production date. That production is relevant to claim 86-xxx 414-8. All of the export shipments were from the Croswell refinery. The daily records show that 510,000 pounds were produced at Croswell. Use of the mass balance formula shows that 326,400 pounds of refined sugar were made from raw sugar (510,000 x.64 = 326,400). The export shipments total 90,000 pounds, which is consistent with the protestant's assertions.
December 2, 1985 is the next involved date. That production is relevant to claim 86-xxx 414-8. All of the export shipments were from the Croswell refinery. The daily records show that 470,000 pounds were produced at Croswell. Use of the mass balance formula shows that 300,800 pounds of refined sugar were made from raw sugar (470,000 x.64 = 300,800). The export shipments total 233,224 pounds, which is consistent with the protestant's assertions.

December 3, 1985 is the next involved production date. That production is relevant to claim 86-xxx 414-8. All of the export shipments were from the Croswell refinery. The daily records show that 450,000 pounds were produced at Croswell. Use of the mass balance formula shows that 288,000 pounds of refined sugar were made from raw sugar (450,000 x.64 = 288,000). The export shipments total 305,552,000 pounds. There is an overclaim of 17,552 pounds. The export shipment of June 2, 1986 (45,000) must be disallowed to the extent of the 17,552 pounds over claimed.

December 4, 1985 is the next involved production date. That production is relevant to claim 86-xxx 414-8. All of the export shipments are from the Croswell refinery. The daily records show that 360,000 pounds were produced at Croswell. Use of the mass balance formula shows that 230,400 pounds of refined sugar were made from raw sugar (360,000 x.64 = 230,400). The export shipments total 45,000 pounds, which would be consistent with the protestant's assertions.

December 5, 1985 is the next involved production date. That production is relevant to claim 86-xxx 412-2. All of the export shipments were from the Croswell refinery. The daily production records show that 361,000 pounds were produced at Croswell. Use of the mass balance formula shows that 231,040 pounds of refined sugar were made from raw sugar(361,000 x.64 = 231,040). The export shipments total 53,560 pounds, which would be consistent with the protestant's assertions.
December 6, 1985 is the next involved production date. That production is relevant to claim 86-xxx 412-2. All of the export shipments were from the Croswell refinery. The daily production records show that 419,000 pounds were produced at Croswell. The mass balance formula shows that 268,160 pounds of refined sugar were made from raw sugar (419,00 x .64 - 268,160). The export shipments total 37,664 pounds, which would be consistent with the protestant's assertions.

December 7, 1985 is the next involved production date. That production is relevant to claim 86-xxx 412-2. All of the export shipments were from the Croswell refinery. The daily records show that 350,000 pounds were produced at Croswell. Use of the mass balance formula shows that 224,000 pounds of refined sugar were made from raw sugar (350,000 x.64 = 224,000). The export shipments total 190,176 pounds which would be consistent with the protestant's assertions.

December 8, 1985 is the next involved production date. That production is relevant to two claims: 86-xxx 413-5 and 86-xxx 412-2. All of the export shipments were from Croswell refinery. The daily production records show that 315,000 pounds were produced at Croswell. Use of the mass balance formula shows that 201,600 pounds of refined sugar were made from raw sugar (315,000 x .64 = 201,600). The export shipments total 226,248 pounds. There is an overclaim of 24,648 pounds. The export shipment of July 3, 1986 (45,000) of claim 86-xxx 413-5 must be disallowed to the extent of the overclaim of 24,648 pounds.

December 9, 1985 is the next involved production date. That production is relevant to two claims: 86-xxx 413-5 and 86-xxx 412-2. All of the export shipments were from the Croswell refinery. The daily records show that 420,000 pounds were produced at Croswell. Use of the mass balance formula shows that use of 268,800 pounds of refined sugar were made from raw sugar (420,000 x.64 = 268,800). The export shipments total 293,352. There is an overclaim of 24,552 pounds. The last export shipment involving that production was the shipment (45,000) made on July 10, 1986 covered by order 52882 in claim 86-xxx 413-5. That shipment must be disallowed to the extent of the overage of 24,552 pounds.

December 10, 1985 is the next involved production date. That production is relevant to three claims: 86-xxx 421-6, 86-xxx 420- 3, and 86-xxx 413-5. All of the export shipments were from Croswell. The daily records show that 485,000 pounds were produced at Croswell. Use of the mass balance formula shows that 310,400 pounds of refined sugar were made from raw sugar (485,000 x.64 = 310,400). The export shipments total 285,848 pounds which would be consistent with the protestant's assertions.

December 11, 1985 is the next involved production date. That production is relevant to claim 86-xxx 421-6. All of the export shipments were from the Croswell refinery. The daily records show that 376,000 pounds were produced at Croswell. Use of the mass balance formula shows that 240,640 pounds of refined sugar were made from raw sugar(376,000 x.64 = 240,640). The export shipments total 153,112 pounds, which would be consistent with the protestant's assertions.

December 12, 1985 is the next involved production date. That production is relevant to claim 86-xxx 421-6. All of the export shipments were from the Croswell refinery. The daily records shows that 510,000 pounds were produced at Croswell. Use of the mass balance formula shows that 326,400 pounds of refined sugar were made from raw sugar (510,000 x.64 = 326,400). The export shipments total 111,264 pounds, which would be consistent with the protestant's assertions.

December 13, 1985 is the next involved production date. That production is relevant to claim 86-xxx 445-2. The export shipments were from the Croswell refinery. The daily records show that 400,200 pounds were produced at Croswell. Use of the mass balance formula shows that 256,128 pounds of refined sugar were made from raw sugar (400,200 x.64 = 256,128). The export shipments total 45,000 pounds, which would be consistent with the protestant's assertions.

December 14, 1985 is the next involved production date. That production is relevant to two claims: C17-xxxx 313-5 and 86-xxx 445-2. All of the export shipments were from Croswell refinery. The daily records show that 412,000 pounds were produced at Croswell. Use of the mass balance formula shows that 263,680 pounds of refined sugar were made from raw sugar (412,000 x.64 = 263,680). The export shipments total 147,472 pounds, which would be consistent with the protestant's assertions.

December 15, 1985 is the next involved production date. The daily production records for that date were not provided. However, the records for December 15, 16, and 17, 1985(the next involved production dates)can be computed from the protestant's daily to perpetual compilations. Since those compilations contain the records for December 12, 13, and 14, 1985 and the use of the mass balance figures match with our results, they have been accepted for the purpose of this analysis. The export shipments were from the Croswell refinery. That production is relevant to two claims: C17-xxxx 313-5 and C17-xxxx 312-7. The amount of refined sugar made from raw sugar at Croswell on December 15, 1985 is 257,920 pounds. The export shipments total 302,136 pounds. There is an overclaim of 44,216 pounds. The export shipment of August 14, 1986 (45,000) in claim C17-xxxx 312-7 is the latest export for the production. That shipment must be disallowed to the extent of the 44,216 pounds overclaimed.

December 16, 1985 is the next involved production date. That production is relevant to two claims: C17-xxxx 312-7 and C17-xxxx 311-9. As noted above with respect to December 15, 1985 there are no daily records, but the protestant's mass balance calculation of 268,800 pounds of refined sugar made from raw sugar at Croswell is accepted for the purpose of this analysis. The export shipments were made from the Croswell refinery. The export shipments total 224,584 pounds, which would be consistent with the protestant's assertions.
December 17, 1985 is the next involved production date. That production is relevant to claim C17-xxxx 311-9. As noted above, only the mass balance computation for that date was provided, but it is accepted for this analysis. The export shipments were from the Croswell refinery. The mass balance compilation shows that 266,880 pounds of refined sugar were made from raw sugar at Croswell. The export shipments total 229,736 pounds, which would be consistent with the protestant's assertions.

December 18, 1985 is the final involved production date. That production is relevant to claim C17-xxxx 311-9. As noted above, only the mass balance computation for that date was provided, but it is accepted for this analysis. The export shipments were from the Croswell refinery. The mass balance computation shows that 221,643 pounds of refined sugar were made from raw sugar. The export shipments total 61,072 pounds, which would be consistent with the protestant's assertions.

HOLDINGS:

The protestant may provide additional records to support its entitlement to drawback on the claimed exports and designated imports.

The protest should be allowed if sufficient refined sugar was produced for Savannah as noted in this analysis on pages 38 through 55, and the third and fourth paragraphs of these Holdings, to the extent that no claim is based on export production which occurred in excess of the usage of 318558 (289,598 refined pounds) pounds of raw sugar on December 7, 1984 until the purchase on January 2, 1985. Any export shipment attributed to production in that December 7, 1984 to January 2, 1985 period is to be disallowed. Likewise, any export shipment attributed to production before October 31, 1984 is to be disallowed.

The protest is to be allowed for other export shipments if the protestant furnishes copies of the Michigan-to-Savannah export sales invoices or other records which show that the export shipment was refined sugar that was credited against the relevant advance purchase by the protestant. Copies of the relevant documents which are to be used as a basis of comparison to implement this holding are enclosed. Since they are business records they are protected from disclosure.

The protest is to be disallowed to the extent that there has been an overclaim using the Michigan daily production records for corrected production dates are not otherwise barred as noted in the second paragraph of these Holdings. The last export shipment working backwards is to be disallowed for each production date until the amount over claimed has been taken into account.

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,

Stuart P. Seidel

Previous Ruling Next Ruling