HQ 226749 - Protest 5301-94-100443; Manufacturing Drawback; Time for Completion of Drawback Claims; Time for Amendment of Drawback Claims; 19 U.S.C. 1313(b); 19 U.S.C. 1313(r)(1) - United States International Trade Commision Rulings

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HQ 226749

January 27, 1997

DRA-2-01/LIQ-9-01-RR:IT:EC 226749 PH

CATEGORY: DRAWBACK

Area Director
U.S. Customs Service
1717 East Loop
Houston, Texas 77029

RE: Protest 5301-94-100443; Manufacturing Drawback; Time for Completion of Drawback Claims; Time for Amendment of Drawback Claims; 19 U.S.C. 1313(b); 19 U.S.C. 1313(r)(1)

Dear Sir:

The above-referenced protest was forwarded to this office for further review. Our decision on the protest follows. Our ruling on this matter addresses only the issue raised; no other issues are considered.

FACTS:

The protest is of the liquidation of three drawback entries (or claims), as follows:

Claim # Date of Amount Liq. Date of filing claimed amount liq.

65...3634 05/20/92 $7,971.90 $6,104.11 06/24/94 65...3683 06/02/92 $6,551.76 $1,111.53 06/24/94 65...3774 06/19/92 $9,920.23 $1,522.27 06/24/94

Accelerated payment of drawback was requested and granted for the entries, resulting in a total accelerated payment of drawback for the protested entries in the amount of $24,443.89 (the total of the amount claimed, above).

The drawback rate (contract) cited in the drawback entries was Treasury Decision (T.D.) 81-74), the general rate under 19 U.S.C. 1313(b) for articles manufactured using steel.

In drawback entry 65...3634, 324,985 pounds of steel of various dimensions, entered under three listed consumption entries (dates of importation stated to be 09/14/90, 08/10/90, and 11/29/90), were designated. The dates of receipt at the factory (all after the dates of importation) and the dates of use in manufacture (all on or after the dates of receipt) are listed on the drawback entry, as are Certificates of Delivery for the first two consumption entries. According to the drawback entry, 63,985 pounds of valueless waste resulted. The articles claimed to have been exported are described as 90 pieces of oil well drilling tools and, according to a Schedule A attached to the drawback entry, these articles were 90 "drill collars", with listed dimensions, and a net weight of 261,000 pounds (gross weight 324,985 pounds) (the date of manufacture listed on this Schedule A is November 28, 1990; i.e., it is before the dates of importation and receipt at the factory of the merchandise from the last of the three consumption entries). There is a bill of lading (dated February 7, 1991) on a rider of which 90 pieces of merchandise appearing to meet the description of the exported articles are listed.

In drawback entry 65...3683, 272,131 pounds of steel of various dimensions, entered under four listed consumption entries (dates of importation stated to be 06/29/90, 09/14/90, 08/10/90, and 11/29/90), were designated. The dates of receipt at the factory (all after the dates of importation) and the dates of use in manufacture (all after the dates of receipt) are listed on the drawback entry, as are Certificates of Delivery for each of the consumption entries. According to the drawback entry, 56,371 pounds of valueless waste resulted. The articles claimed to have been exported are described as 60 pieces of oil well drilling tools and, according to a Schedule A attached to the drawback entry, these articles were 60 "drill collars", with listed dimensions, and a net weight of 215,760 pounds (gross weight 272,131 pounds) (the date of manufacture listed on this Schedule A and the drawback entry is November 28, 1990; i.e., it is before the dates of importation and receipt at the factory of the merchandise from the last of the four consumption entries). There is a bill of lading (dated March 15, 1991) but no rider appearing to list the exported articles (as in drawback entry 65...3634, above).

In drawback entry 65...3774, 353,449 pounds of steel of various dimensions, entered under two listed consumption entries (dates of importation stated to be 09/14/90 and 11/29/90), were designated. The dates of receipt at the factory (all after the dates of importation) and the dates of use in manufacture (all after the dates of receipt) are listed on the drawback entry, as are Certificates of Delivery for each of the consumption entries. According to the drawback entry, 76,855 pounds of valueless waste resulted. The articles claimed to have been exported are described as 90 pieces of oil well drilling equipment and, according to a Schedule A attached to the drawback entry, these articles were 90 "drill collars", with listed dimensions, and a net weight of 338,100 pounds (gross weight 414,955 pounds) (the dates of manufacture listed on this Schedule A and the drawback entry are between January 7, 1991, and June 20, 1991). There are bills of lading (dated March 31, April 17, and July 3, 1991) but no rider appearing to list the exported articles (as in drawback entry 65...3634, above).

Drawback entry 65...3634 was liquidated with a partial denial of drawback (as described above) for that part of the claim based on the designation of 72,214 pounds of imported merchandise, on the basis that the third consumption entry designated (dated November 29, 1990) was "[n]ot a good delivery" and the entry "... is beyond the 3 yr. period in which the claim can be amended." Drawback entry 65...3683 was liquidated with a partial denial of drawback for those parts of the claim based on the designation of 39,798 pounds of imported merchandise (this part of the denial was not protested and is not in controversy) and on the designation of 185,340 pounds of imported merchandise, on the basis that the second consumption entry designated (dated September 14, 1990) and the fourth consumption entry designated (dated November 29, 1990) were "[n]ot a good entry #" or "[n]ot a good delivery" and the entry was "[b]eyond 3 yr. period in which claim can be amended." Drawback entry 65...3774 was liquidated with a partial denial of drawback (as described above) for that part of the claim based on the designation of 353,449 pounds of imported merchandise, on the basis that the second consumption entry designated (dated November 29, 1990) was "[n]ot a good delivery".

On July 21, 1994, the representative of the claimant filed the protest under consideration. The basis for the protest is stated to be:

The cause of the reduction [in drawback] was an inadvertent clerical error made in preparation of a "Certificate of Delivery of Imported Merchandise," by the importer[']s Customs Broker. ... At the time of submission of the referenced drawback entries the claimant ... believed that the entries and supporting documentation were in compliance with the drawback regulations. The fact that one of the documents, the CD in question, referenced an incorrect entry number was unknown to the claimant. All other information on the CD was correct, the importer, size and quantity of merchandise, importing vessel and date received. The claimants first knowledge of the clerical error on the CD was upon review of the liquidated entries. The fact that at time of liquidation and discovery of the clerical error on the CD, the time frame of 3 years from date of exportation had been exceeded was no fault of the claimant. The clerical error was made in the process of copying the entry number onto the Certificate of Delivery.

Attached to the protest is a July 13, 1994, letter from a Customhouse Broker stating that the broker had on November 29, 1990, prepared a Certificate of Delivery (CD) for 303 pieces of alloy steel rounds and had mailed the CD to the claimant in this matter. According to the letter, the person writing the letter had received a call (4 to 6 weeks before the date of the letter) from Customs in Houston and Customs had advised her that Customs "had a Certificate which [the broker] prepared which appeared to have a wrong entry number shown as the import entry number ...." Also according to this letter:

The circumstances are as follows: We had two large files for this customer with the same product and on the same vessel. Certificates of Delivery were prepared at the same time. On this Certificate we showed entry number J[..-....]672-2 when in fact the correct entry number was J[..-....]631-8."

A copy of the "corrected" CD is in the file. The "corrected" CD has a line drawn through import entry number J[..-....]672-2 and below the lined-through entry is listed import entry number J[..-....]631-8, with a date of import being listed as November 29, 1991, and a quantity designated being listed as 303 pieces weighing 504,556 kilograms, and the importer being identified. The portion of the Customs Form 331 titled "Certificates of Delivery of Imported merchandise" is completed. There is an attachment to the CD, referring to two invoices, listing 303 pieces of merchandise, stating diameters and lengths, and stating a total weight of 504,556 kilograms.

ISSUE:

Is there authority to grant the protest of denial of drawback in this case?

LAW AND ANALYSIS:

Initially, we note that the protest was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR Part 174). We note that the refusal to pay a claim for drawback is a protestable issue (see 19 U.S.C.

This protest involves drawback under 19 U.S.C. 1313(b). Basically, section 1313(b), often called the substitution manufacturing drawback law, provides that if imported duty-paid merchandise and any other merchandise (whether imported or domestic) of the same kind and quality are used within three years of the receipt of the imported merchandise in the manufacture or production of articles by the manufacturer or producer of the articles and articles manufactured or produced from either the imported duty-paid merchandise or other merchandise, or any combination thereof, are exported or destroyed under Customs supervision, 99 percent of the duties on the imported duty-paid merchandise shall be refunded as drawback, provided that none of the articles were used prior to the exportation or destruction, even if none of the imported merchandise was actually used in the manufacture or production of the exported or destroyed articles. Under section 1313(i), no drawback may be allowed under section 1313 unless the completed article is exported within five years after the importation of the imported merchandise.

The drawback law was substantively amended by section 632, title VI - Customs Modernization, Public law 103-182, the North American Free Trade Agreement (NAFTA) Implementation Act (107 Stat. 2057), enacted December 8, 1993. Title VI of Public Law 103-182 took effect on the date of the enactment of the Act (section 692 of the Act). According to the applicable legislative history, the amendments to the drawback law (19 U.S.C. 1313) are applicable to any drawback entry made on or after the date of enactment as well as to any drawback entry made before the date of enactment if the liquidation of the entry is not final on the date of enactment (House Report 103-361, 103d Cong., 1st Sess., part I, page 132 (1993); Senate Report 103-189, 103d Cong., 1st Sess., page 85 (1993)).

Under 19 U.S.C. 1313(r)(1), as added by section 232 of Public Law 103-182 (and effective as to this protest, see above):

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

Thus, the provision now in the Customs Regulations (19 CFR 191.61) was enacted into law by Public Law 103-182 (with the addition of the conforming provision for destruction). House Report 103-361 (supra, at p. 130) explains this provision as "set[ting] a period of 3 years from the date of exportation or destruction in which to file a complete claim."

In our interpretation of 19 CFR 191.61, we have taken the position that to be complete, the designated imports and the exports upon which a drawback claim is based must be included in a drawback claim. We have ruled that the provision in 19 CFR 191.64, under which a claimant may amend or correct a drawback entry or file a timely supplemental entry with the permission of the appropriate drawback office, is governed by the 3-year time limit for completion of a claim. We have ruled that corrections which only perfect a drawback claim may be permitted after the 3-year period, but a claim may not be amended by changing the scope of the claim after the expiration of the 3-year period. Adding different consumption entries designating different imported merchandise would be such a change of the scope of a drawback claim. (See, e.g., HQ rulings 222987 (February 14, 1996), 224107 (February 23, 1993), 224812 (February 15, 1995), and 224815 (April 11, 1994).)

In this case, the protestant seeks to amend the protested drawback claims more than three years after the dates of exportation (dates of exportation between February 7 and July 3, 1991; dates on which amendment sought July 13 and/or July 21, 1994). The amendment sought is to change the consumption entry designated for some of the imported merchandise (the change sought is from one existing consumption entry to another existing consumption entry, and does not reflect a mere transposing of digits in the same consumption entry). The reason that the change is stated to be needed is that a Customhouse broker who completed the CD for this merchandise referenced an incorrect entry number. In the letter explaining this reason, it is stated that all other information on the CD was correct, including date received. It is contended that the fact that at the time of liquidation and discovery of the error the 3-year time period for completing a drawback claim had expired "was no fault of the claimant."

We are unable to provide relief in this matter. The statute is clear. A complete drawback claim is required to be filed within 3 years of the date of exportation. Based on our long-standing interpretation of 19 CFR 191.61 and 191.64, an amendment to a drawback claim which changes the scope of the claim may only be permitted within this 3-year period. The only exception is if "it is established that the Customs Service was responsible for the untimely filing." Clearly, that is not the case in this matter; in fact the evidence submitted by the protestant alleges that responsibility for the error (necessitating the untimely filing) was with the broker who prepared the CD.

Furthermore, even if the proposed amendment could be accepted, as is made clear in the FACTS portion of this ruling, the documents in the file relating to the portions of the protested claims based on the allegedly incorrect CD raise serious questions about the availability of drawback for those portions of the claims. That is, in the case of drawback entry 65...3634, the date of manufacture (November 28, 1990) of the exported articles was before the date of importation (November 29, 1990) and the dates of receipt (December 3 - 4, 1990) of the merchandise covered by the CD. The statute and regulations clearly require that the merchandise used to manufacture or produce the exported articles be used in such manufacture or production after the date of receipt in the factory of the imported merchandise (19 U.S.C. 1313(b); 19 CFR 191.32(a)(3)), and the drawback rate (T.D. 81-74) under which the protestant stated it was operating also clearly so provides. The same failing exists with regard to drawback entry 65...3683 (date of manufacture: November 28, 1990; date of importation: November 29, 1990; and dates of receipt at factory: December 4 and December 18-19, 1990).

HOLDING:

There is no authority to grant the protest of the denial of drawback in the protested drawback claims.

The protest is DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed, with the Customs Form 19, by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,

Director, International

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