HQ 228587 - Protest Application for Further Review No. 5301-97-100355; 19 U.S.C. 1313(j)(2); melons; asparagus; asparagus; apportionment; commercial interchangeability; evidence of exportation - United States International Trade Commision Rulings

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HQ 228587

August 14, 2001

DRA-2-02-DRA-4-RR:CR:DR: 228587 IOR

CATEGORY: DRAWBACK

Port Director
U.S. Customs Service
2350 N. Sam Houston Pkwy East
Houston TX 77032

Attn: Deidra Golden

Drawback Unit

RE: Protest Application for Further Review No. 5301-97-100355; 19 U.S.C. 1313(j)(2); melons; asparagus; asparagus; apportionment; commercial interchangeability; evidence of exportation

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We note that this is the lead protest for Protest no. 5301-97-100436. Our decision follows.

FACTS:

The protest is of the liquidation of drawback entry 264-xxxx470-5. The drawback entry was filed on January 28, 1997, and liquidated on June 6, 1997. The entry was liquidated with no drawback. The drawback claim designated entries of melons and asparagus imported from Mexico, and drawback was claimed under 19 U.S.C. §1313(j)(2) on the basis of melons and asparagus exported to non-North American countries. Drawback was denied on the grounds that the export documents do not correlate with the chronological summary of exports.

According to the protest, the protestant is of the understanding that drawback was denied because the export dates occurred prior to the import dates of the corresponding designated merchandise. The protestant has supplied documentation intended to show that the exports occurred after the importation of the designated merchandise.

The documentation submitted consists of the following:

1) Exhibit A- Exporters chronological summary by date: This document includes the date of export, export carrier, export bill of lading no., protestant’s export invoice no., description of merchandise, quantity exported, and the destination country. This document is ordered according to the date of export.

2) Exhibit B- Exporters chronological summary by part: This document includes the same information as Exhibit A, but is ordered according to the merchandise description. For example, all of the exports of jumbo asparagus (“ASP-JUM”) are listed first, by date of export, followed by all of the exports of large asparagus (“ASP-LGE”), by date of export.

3) Exhibit C- CF 7539 continuation sheet by 7501#: This document includes the consumption entry no., import date, port code, merchandise description, total quantity designated for that entry, value of each unit merchandise, duty rate, duty paid on each unit of merchandise, and the drawback claimed for that entry. The document is ordered according to the entry number.

4) Exhibit D- CF 7539 continuation sheet by part #/ product code: This document includes the same information as Exhibit C, but is ordered according to the merchandise description as was Exhibit B. Within the merchandise descriptions the data is ordered according to the entry number.

5) Exhibit E- Certificate of Delivery in ship-date order: This document includes the import entry no., port code, date of import, merchandise description, delivery date, quantity delivered, export bill of lading no., and total amount of duty paid for the quantity delivered. This is a report of certificates of delivery that were prepared, and the delivery dates reflect the dates the merchandise was delivered to the shipper.

6) Exhibit F- CF 7539 continuation sheet by part #/product code: This document includes the same information as Exhibits C & D, and the imports are ordered according to the merchandise description, as in Exhibit D. Within the merchandise descriptions the data is ordered according to the entry date.

The protestant provided exportation documents and import entry documents for two of the exports on which drawback is claimed, as well as identifying the two designated imports and/or exports in each of the six exhibits. One of the two examples (“Example1”) is set forth below, from import to export:

There is a CF 7501 for entry 218-xxxx039-2, dated September 8, 1995. The CF 7501 indicates the protestant’s importation of “OTH MELONS,FRSH,ENTR 6/1-11/30” from Mexico, classified under subheading MX0807.10.8000, HTSUS. There is only one line item of melons. According to the CF 7501 the gross weight was 9700 kg and the net quantity was 13189 kg. The entered value was $5,270.00, and the duty rate was 30.3%. The total duty paid was $1,596.81. The invoice submitted with the CF 7501 is for the sale of 9900 kg of “melon honey dew” for N$11,880 (New Pesos)($1899.28

 The conversions to U.S. currency are based on the quarterly exchange rate of 0.159872, for July 1 through September 30, 1995, published in T.D. 95-51.), and 5940 kg of “melon orange flesh” for N$7128 ($1139.57). The total weight of melons is 15640 kg and the total invoice price is N$19,008 ($3038.85). There is a worksheet that appears to have been prepared by the protestant, which indicates a total quantity of 1199 cartons of honeydew and honeydew orange flesh melons, including 240 cartons of honeydew #6. The total value on the worksheet is $5269.62, and the total weight of melons is 13,189 kg. The worksheet is not dated, does not indicate by whom it was prepared, and has no apparent relation to the import invoice, other than having been prepared by the importer of the melons.

There are two transportation and exportation CF 7512’s, dated September 11, 1995 or November 9, 1995 showing proposed shipment of melons from Calexico, California to Montreal, Canada. The CF 7512’s indicate the proposed shipment of 120 cartons of #9 honeydew melons, 660 cartons of #5 honeydew melons and 660 cartons of #6 honeydew melons. The only melons indicated as being related to entry 218-xxxx039-2, are one carton of #9 melons and 240 cartons of #5 melons. The CF 7512’s are not signed by Customs.

With respect to the exported merchandise, there is an export invoice, no. 018693, for a sale from the protestant to a customer in Japan, of 1,320 cartons of “Honeydews [brand name] carton 06’s”. The invoice is dated November 16, 1995. There is also a bill of lading, no. SEAU767119323, indicating that the merchandise, 1320 cartons of honeydews, was on board on November 16, 1995, for shipment to Japan. The bill of lading identifies the protestant as the shipper/exporter.

The documents provided in the second example (“Example 2”) pertaining to the import are similar, and have similar inconsistencies between the invoice, “worksheet” and CF 7501. According to Customs Automated Commercial System (ACS), the entries in both examples were bypass entries. With regard to the export in Example 2, the export invoice and bill of lading for the export do not reflect the same quantity exported as stated on Exhibits A and B.

Using Exhibits A through F, the export on which drawback is claimed can be matched to the designated import entry. In Example 1, according to Exhibit A and B, 32 units of #6 honeydew melon were exported to Japan on November 15, 1995. The invoice number was 18693 and the bill of lading number was SEAU767119323. On Exhibit E we can identify the export by the merchandise description, export date, quantity and bill of lading number. Exhibit E shows that the designated import entry is 218-xxxx039-2. Exhibits C, D and F each show the amount of duty paid for each unit and the total amount of drawback claimed on the basis of the export.

ISSUE:

Whether the requirements for drawback under 19 U.S.C. §1313(j)(2) have been met.

LAW AND ANALYSIS:

We note initially that the refusal to pay a claim for drawback is a protestable issue pursuant to 19 U.S.C. §1514(a)(6). Drawback for the subject entry was denied on June 6, 1997, when it was liquidated with no drawback. This protest was timely filed on September 3, 1997, which is within the 90-day filing deadline set forth in 19 U.S.C. §1514(c).

Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if there is, with respect to imported dutypaid merchandise, any other merchandise that is commercially interchangeable with the imported merchandise and if the following requirements are met. The other merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Before the exportation or destruction, the other merchandise may not have been used in the United States and must have been in the possession of the drawback claimant. The party claiming drawback must either be the importer of the imported merchandise or have received from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof.

Compliance with the Customs Regulations on drawback is mandatory and a condition of payment of drawback (United States v. Hardesty Co., Inc., 36 CCPA 47, C.A.D. 396 (1949); Lansing Co., Inc. v. United States, 77 Cust. Ct. 92, C.D. 4675; see also, Guess? Inc. v. United States, 944 F.2d 855, 858 (1991) "We are dealing [in discussing drawback] with an exemption from duty, a statutory privilege due only when the enumerated conditions are met" (emphasis added)).

In order to determine commercial interchangeability, Customs adheres to the Customs regulations which implement the operational language of the legislative history. The best evidence whether those criteria are used in a particular transaction are the claimant’s transaction documents. Underlying purchase and sales contracts, purchase invoices, purchase orders, and inventory records show whether a claimant has followed a particular recognized industry standard, or a governmental standard, or any combination of the two, and whether a claimant uses part numbers to buy, sell, and inventory the merchandise in issue. The purchase and sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant’s records would show that fact which will enable Customs to follow the Congressional directions.

In this case, a review of Examples 1 and 2, and randomly selected Examples 3 and 4 (Examples 3 and 4 only consisted of the information in Exhibits A though F, and ACS), shows that the exports occurred after the importation of the designated merchandise. In Example 1, the claimed export is supported by the documentation. Drawback was claimed on 32 cartons of #6 honeydews, and the documentation shows that 1320 cartons of #6 honeydews were exported. Therefore, at least as many units of merchandise were exported, as were claimed as the basis of drawback. In Example 2, 55 units of “Asparagus-Jum” were claimed to be exported to Brazil on January 27, 1996, however the documentation only shows that 9 units of jumbo asparagus were exported to Brazil pursuant to the referenced invoice number. Therefore, as asserted by the port, with regard to Example 2, the export documents do not correlate to the chronological summary of exports.

From our review, we find that the claim of commercial interchangeability is not substantiated. We cannot determine from the import documents the quantities of merchandise entered, or the value of the units of merchandise. The CF 7501’s do not correspond to the invoices submitted, and the supporting documentation such as protestant’s “worksheets” and the CF 7512’s do not clarify the quantities of merchandise entered or the value of the units of merchandise. As Customs is unable to identify the specific type of merchandise entered, such as the size of honeydew melon or the size of the asparagus, no determination of commercial interchangeability can be made.

Even if the types of merchandise entered could be determined, drawback would still be precluded as the value of the merchandise cannot be determined from the invoices and CF 7501’s. The values and weights on the invoices are different from the entered values and weights on the CF 7501’s therefore the unit values on the invoices cannot be the basis for determining the values of the entered merchandise or the amount of duty paid for the designated merchandise. In Example 1, the CF 7501 indicates that the gross weight was 9700kg and the net weight was 13189kg, and the invoice has a total weight of 15640kg and a weight for honeydews of 9900kg. None of the weights correspond. The entered value was $5,270.00 and the total invoice price was $3,038.00. None of the value figures correspond. The 13189kg and the 5,270.00 entered value figures correspond to those on the protestant’s “worksheet”, however, the worksheet is not signed or dated, and we have not been provided with any explanation or description of the worksheet or reason why it should be taken into consideration instead of the import invoice. In Example 2, there are similar discrepancies with respect to the weight and value of the merchandise, and as a result the quantity and duty paid on the different units of merchandise cannot be determined.

Where the determination of the amount of duty paid for the exported merchandise can only be approximately determined, by apportionment, Customs is not permitted to pay drawback under 19 U.S.C. §1313(j)(1). See HQ 228317, dated December 5, 2000 and HQ 228199, dated March 26, 1999, in which this issue was thoroughly discussed.

Due to the discrepancies between the invoices and CF 7501’s, we recommend that the circumstances of the purchase and importation, and preparation of documents be more closely examined to determine if reasonable care was taken in the preparation of the documents. Under 19 U.S.C. §1484(a)(1)(B)(ii), the importer is required to use reasonable care in completing the entry, including the value and quantity of entered merchandise.

HOLDING:

The protestant has not met the requirements of 19 U.S.C. §1313(j)(2) because the duty paid on the designated merchandise cannot be determined, commercial interchangeability cannot be determined due to the discrepancies in the import documents, and in one of the examples for which documentation of export was provided by the protestant, the export documents did not correlate with the chronological summary of exports.

The protest should be 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 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 make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

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