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HQ 225463




February 10, 1995

DRA-4-CO:R:C:E 225463 SR

CATEGORY: DRAWBACK

Ms. Claire Jamal
Shell Oil Company
One Shell Plaza
P.O. Box 2463
Houston, Texas 77252

RE: Drawback under 19 U.S.C. 1313(p)(2)(A)(iii) when the export is to a NAFTA country; Article 303, NAFTA; Sections 102 and 203, Public Law 103-182 (NAFTA Implementation Act); 19 U.S.C.

Dear Ms. Jamal:

This is in response to your letters dated April 6, 1994, and June 1, 1994, concerning drawback for petroleum products exported to Mexico.

FACTS:

Shell Oil Company requests a ruling on whether drawback may be obtained under 19 U.S.C. 1313(p), as amended by the North American Free Trade Agreement (NAFTA) Implementation Act (Public Law 103-182; 107 Stat. 2057, 2194-2196), on the basis of certain exportations to Mexico. The company states that it will import gasoline and jet fuel at various ports in the United States and pay duty at the rate of $.52.5 per barrel. The company states that it intends to export other molecules of gasoline to Mexico. The company states that it will be both the importer and exporter of record. The company states that it will comply with all requirements of 19 U.S.C. 1313(p), including the requirement that exportation must occur within 180 days of importation. The company states that it plans to claim drawback in the amount of $.52.5 per barrel on the exportations, on the basis of 19 U.S.C. 1313(p).

ISSUE:

Whether drawback for petroleum products under 19 U.S.C. 1313(p)(2)(A)(iii) may be granted for exportations, in the situation described in the FACTS portion of this ruling, to Mexico?

LAW AND ANALYSIS:

Under 19 U.S.C. 1313(p)(2)(A)(iii), if an article of the same kind and quality as a qualified article is exported, certain requirements are met, and a drawback claim is filed regarding the exported article, drawback may be granted. "Qualified article", for purposes of this subsection, means an article described in heading 2710, HTSUSA (among other headings), which is imported duty-paid. An exported article is of the "same kind and quality" as the qualified article for which it is substituted under this subsection if it is a product that is commercially interchangeable with or referred to under the same eight-digit classification of the HTSUSA as the qualified article (we note that motor fuel, including gasoline and jet fuel (naphtha-type and kerosene-type) is referred to in subheading 2710.00.15, HTSUSA). The "requirements" required to be met for purposes of this subsection are that the exporter of the exported article imported the qualified article in a quantity equal to or greater than the quantity of the exported article; that the exported article is exported within 180 days after the date of entry of the imported qualified article; that the drawback claimant complies with all requirements of section 1313, including providing certificates which establish the drawback eligibility of articles for which drawback is claimed; and that the manufacturer, producer, importer, exporter, and drawback claimant of the qualified article and the exported article maintain all records required by regulation.

Article 303 of the NAFTA provides, in pertinent part, that "No Party may, on condition of export, refund, waive or reduce ... customs duties paid or owed on a good imported into its territory and substituted by an identical or similar good that is subsequently exported to the territory of another party" (Article 303 2.(d)). Article 303 was implemented in United States law by section 203 of the NAFTA Implementation Act (107 Stat. 2057, 2086-2092; 19 U.S.C. 3333) (i.e., "[s]ection 203 ... makes significant changes to U.S. drawback law in order to implement NAFTA Article 303 obligations restricting drawback and duty deferral programs between the Parties" and "[s]ection 203 implements the limitations on drawback established under NAFTA Article 303 ..." (House Report 103-361, 103d Cong., 1st Sess., Part I, pp. 38-40 (1993)). In specific regard to Article 303 2.(d), quoted above, this provision was implemented by section 203(c) of Public Law 103-182 which added a new paragraph to 19 U.S.C. 1313(j) providing that:

Effective upon the entry into force of the [NAFTA], the exportation to a NAFTA country, as defined in section 2(4) of the [NAFTA] Implementation Act, of merchandise that is fungible with and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (8) of section 203(a) of that Act [paragraphs (1) through (8) are not applicable to the situation under consideration], shall not constitute an exportation for purposes of [19 U.S.C. 1313(j)(2)].

According to the legislative history for Public Law 103-182, this provision "eliminates, effective upon entry into force of the Agreement, 'same condition substitution drawback' by amending [19 U.S.C. 1313(j)(2)], thereby eliminating the right to a refund on the duties paid on a dutiable good upon shipment to Canada or Mexico of a substitute good, except for goods described in paragraphs one through eight of section 203(a)" (House Report 103-361, 103d Cong., 1st Sess., Part I, pp. 39-40 (1993)).

The "same condition" drawback referred to above is that which was provided for in 19 U.S.C. 1313(j). Under amendments to the provision effected by Public Law 103-182 (see section 632; 107 Stat. 2192, 2193-2194), this provision now provides for "unused merchandise" drawback. Paragraph (2) of section 1313(j) provides, and provided (before the amendments effected by Public law 103-182) for the substitution of such merchandise. In either case (i.e., whether for same condition or unused merchandise), the substituted merchandise was prohibited from being used in the United States prior to the exportation (i.e., the substitution was between imported merchandise and merchandise substituted for it which was commercially interchangeable and was not used, whether for manufacture or otherwise (except for certain "incidental" uses), after the substitution).

Thus, it is clear that the NAFTA, and the implementing legislation in Public Law 103-182, intended to, and did, amend the drawback law to preclude same condition substitution drawback (now unused merchandise substitution drawback) for merchandise exported to a NAFTA country. Article 303 2.(d) of the NAFTA basically provides that drawback may not be granted by a NAFTA country "on a good imported into its territory and substituted by an identical or similar good that is subsequently exported to the territory of another party." This would appear to preclude drawback under 19 U.S.C. 1313(p)(2)(A)(iii), under which, upon compliance with certain other requirements, drawback may be granted on certain petroleum products when a petroleum product is imported into the United States and an article of the same kind and quality as the imported merchandise (i.e., a substitute article) is exported within 180 days of the importation.

Although, as stated above, Article 303 2.(d) of the NAFTA may appear to preclude drawback under 19 U.S.C. 1313(p)(2)(A)(iii), the statutory provision (i.e., Public Law 103-182) which implemented NAFTA did not specifically so provide, in contrast to the specific provision in this regard for 19 U.S.C. 1313(j)(2) (i.e., section 203(c), NAFTA Implementation Act, quoted above). Under section 102, NAFTA Implementation Act (107 Stat. 2062-2063), "[n]o provision of the Agreement [i.e. NAFTA], nor the application of any such provision to any person or circumstance, which is inconsistent with any law of the United States shall have effect [and] [n]othing in [the NAFTA Implementation Act] shall be construed to amend or modify any law of the United States ... unless specifically provided for in [the NAFTA Implementation Act]." In explaining this provision, the legislative history to the NAFTA Implementation Act stated it means "U.S. laws shall prevail if inconsistent with any provision of the NAFTA [and] nothing in the NAFTA Implementation Act, unless specifically provided for in the Act, shall be construed to amend or modify any U.S. law, ... or to limit any authority conferred under any U.S. law" (House Report 103-361, 103d Cong., 1st Sess. Part 1, p. 16 (1993)). In explaining the reasons for this provision, the legislative history stated:

The NAFTA Implementation Act incorporates all amendments to existing Federal statutes or provision of new authorities ... known to be necessary or appropriate to enable full implementation of, and compliance with, U.S. obligations under the NAFTA. Those provisions of U.S. law that are not addressed by the implementing bill are left unchanged ... . In the unlikely event that any future changes in Federal statutes should be necessary to remedy an unforeseen conflict between requirements of a Federal law and the Agreement, such changes can be enacted in subsequent legislation. [House Report 103-361, 103d Cong., 1st Sess. Part 1, pp. 17-18 (1993))

The basic rule of statutory interpretation is that the first step is to examine the text of the statute (United States v. Alvarez-Sanchez, 114 S. Ct. 1599, 1603 (1994) (i.e., "[w]hen interpreting a statute, we look first and foremost to its text"). "Where the content of the statute is clear and unambiguous, 'that language must ordinarily be regarded as conclusive'" (Norfolk and Western Railway Co. v. United States, CIT Slip Op. 94-173 (printed in the November 30, 1994, edition of the Customs Bulletin and Decisions, vol. 28, No. 48, p. 25, p. 30), quoting from Negonsott v. Samuels, 113 S. Ct. 1119, 1122-1123 (1993)).

In the statutory provisions applicable in this case, the text of 19 U.S.C. 1313(p)(2)(A)(iii) provides for drawback when a covered petroleum product is imported into the United States and an article of the same kind and quality as the imported merchandise is exported within 180 days of the importation, assuming compliance with all other applicable requirements. Although Article 303 2.(d) of the NAFTA provides that drawback may not be granted on a good imported into a NAFTA country when a substituted article is exported to another NAFTA country, this provision was specifically implemented only in regard to 19 U.S.C. 1313(j)(2), and not in regard to 19 U.S.C. 1313(p)(2)(A)(iii). Section 102 of the NAFTA Implementation Act specifically provides that no provision of NAFTA which is inconsistent with any United States law shall have effect and that nothing in the NAFTA shall be construed to amend or modify any law of the United States unless specifically provided for in the NAFTA Implementation Act.

Based on these provisions, we have no choice but to conclude that the limitation in Article 303 2.(d), implemented in United States law by the addition of paragraph (4) to 19 U.S.C. 1313(j), does not apply to drawback claimed under 19 U.S.C. 1313(p)(2)(A)(iii). This conclusion is consistent with the "clear and unambiguous" text of the applicable statutory provisions (see above). Furthermore, it is consistent with the stated intent of Congress (i.e., see above quotation from House Report 103-361, pp. 17-18, stating that "provisions of U.S. law that are not addressed by the implementing bill are left unchanged [and if] any future changes [are] necessary to remedy an unforeseen conflict ... such changes can be enacted in subsequent legislation").

The above conclusion is also consistent with the maxim of statutory construction that expressio unius est exclusio alterius (the expression of one thing is the exclusion of another). Under this maxim if a statute "... assumes to specify the effects of a certain provision, other ... effects are excluded" (Black's Law Dictionary, 6th ed. (1990), p. 581; see also, e.g., United States v. Azeem, 946 F. 2d 13, 17 (2nd Cir. 1991), "In general, congressional consideration of an issue in one context, but not another, in the same or similar statutes implies that Congress intends to include that issue only where it has so indicated"). That is, in Pubic Law 103-182 Congress specifically stated that the restriction on substitution under NAFTA was to apply to same condition substitution drawback (or unused merchandise substitution drawback) under 19 U.S.C. 1313(j)(2). Congress did not so provide in regard to the substitution allowed under 19 U.S.C. 1313(p)(2)(A)(iii), even though that provision was added by the same enactment. Therefore, under this maxim we must conclude that the restriction on substitution under NAFTA was to apply only to 19 U.S.C. 1313(j)(2), and not 19 U.S.C.

For the information of the inquirer, we note that drawback under 19 U.S.C 1313(p)(2)(A)(iii), unless exempt under section 203(a)(1) through (8) of the NAFTA Implementation Act (and we note that the merchandise under consideration does not appear to be so exempt), will be subject to NAFTA drawback, as provided for in section 203(b) of the NAFTA Implementation Act, when that provision takes effect (see section 213(c) of the NAFTA Implementation Act). In this regard, the attention of the inquirer is directed to 19 CFR Part 181, subpart E.

HOLDING:

Based on current statutory provisions, stated legislative intent, and the rules of statutory construction, upon compliance with all applicable requirements, drawback for petroleum products under 19 U.S.C. 1313(p)(2)(A)(iii) may be granted for exportations, in the situation described in the FACTS portion of this ruling, to Mexico.

Sincerely,

John Durant, Director

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