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HQ 228270





January 3, 2002

DRA-2-02/ FOR2-03
RR:CR:DR 228270 IOR
CATEGORY: ENTRY

Director, Trade Agreements
U.S. Customs Service
1300 Pennsylvania Ave., NW
Washington, D.C. 20229

Attn: Joyce Metzger

RE: Request for Internal Advice on Toyota Motor Manufacturing, Kentucky, Inc.; NAFTA Duty Deferral; Foreign Trade Zones; Export Claims; 19 U.S.C. §81c(a); 19 U.S.C. §1313; 19 U.S.C. §1558; 19 U.S.C. §1515(a); 19 CFR §181.53

Dear Madam:

This is in reply to your memorandum of November 2, 1998, on behalf of the Port Director, Cleveland, Ohio, seeking internal advice regarding the liquidation of certain NAFTA duty deferral export entries submitted on behalf of Toyota Motor Manufacturing, Kentucky, Inc. (“TMMK”). The following is based on our review of submissions from TMMK and documentation received from your office and follows two meetings with counsel for and representatives of TMMK, on January 7, 1999, and July 11, 2001. The entries are the subject of Protest no. 4115-98-100002. FACTS:

Toyota Motor Manufacturing, Kentucky, Inc., (“TMMK”), imports foreign parts into a U.S. foreign trade zone (“FTZ”) to manufacture motor vehicles. The vehicles are then withdrawn from the FTZ for export to Canada under the North American Free Trade Agreement (“NAFTA”) duty deferral program.

According to the file, the Port of Cleveland liquidated and issued duty bills on TMMK entries, where TMMK did not provide satisfactory evidence of Canadian duties paid within the regulatory period of 60 calendar days, to qualify for the waiver or reduction of duties provided for under 19 CFR 181.53(a)(3). TMMK protested the duty bills and claimed that they partially submitted satisfactory evidence within the 60-day period. TMMK wants the opportunity to perfect and present any missing satisfactory evidence in order to waive any U.S. duties owed on these entries. According to the Port, prior to the liquidation of the entries, Customs staff met with TMMK staff on several occasions to describe and explain what is required for a duty deferral claim and several letters were sent by TMMK attempting to explain the subject protest.

According to the record, Customs Forms (CF) 7501 were timely filed. The Port has taken the following position with respect to the protest:

1. It does not dispute that TMMK did pay the Canadian duties. However, TMMK did not, in all cases, present its claims to Customs within the 60-calendar-day time frame.

2. The protested entries did not have the required information that is to be reported in Part II of the CF 7501. In some instances, incomplete summary sheets were submitted within 60 days, others were submitted incomplete and after 60 days had passed, and other entries were never followed-up with a Part II submission before a substantial amount of time had passed.

3. The information provided by protestant does not contain accurate Canadian entry numbers, tariff classification numbers, rate of duty or amount of Canadian duties paid.

Your memorandum indicates that TMMK submitted complete claims subsequent to the receipt of duty bills, which was after the expiration of the 60-day period, and the port has now concluded that TMMK did pay Canadian duties. However, it is your position that the 60-calendar-day period is a date certain for submitting satisfactory evidence in support of the claim and that a claim cannot (or should not) be perfected thereafter.

The port concludes that TMMK has not met all of the essential procedural requirements with respect to the NAFTA duty deferral entries in question as required by 19 C.F.R. §181.53(a)(3)(ii), because the information initially provided was insufficient to fulfill the requirements of the regulations.

Reference to a “Part I”, is to the CF 7501 NAFTA duty deferral entry (“08” type entry) that contains the U.S. import/export information setting forth the exporter’s obligation of U.S. duties due and payable. Reference to a “Part II”, is to the Canadian entry information and amount of duty paid to Canada, required to be submitted to Customs within 60 days after the date of exportation to Canada, on a CF 7501, under 19 CFR 181.53(a)(3). Reference to an “initially-filed Part II” is to a document filed with Customs by TMMK prior to the submission of a Part II. The submission provided by the port to this office, divided the entries into different groups, depending upon the filing date of the initially-filed Part II or just the Part II, in relation to the filing date of the Part I.

In determining whether the initially-filed Part II or Part II was filed within 60 days from the export date, the port relied on the entry date on the Part I. According to the applicable regulations, 19 CFR 181.53(a)(2)(iii)(B), “for purposes of completing [the CF] 7501, any reference on the form to the entry date shall be taken to refer to the date of exportation of the good or the date the goods are entered into a duty-deferral program in Canada.” The regulations further require that the CF 7501 be filed “no later than 10 working days after the date of exportation to Canadaor 10 working days after being entered into a duty-deferral program in Canada.” According to TMMK, the export date of the merchandise is not the date given in the entry date space on the CF 7501, but is the date in the “entry date” column on the initially-filed Part II or Part II. Most of the initially-filed Part II’s have several dates in the column for “entry date”. For purposes of this decision, we are using the earliest date on the initially-filed Part II as the export date for purposes of determining what documents were filed within 60 days of the exportation of the merchandise. We do not have the initially-filed Part II’s for all of the entries which are a subject of the protest and internal advice request, therefore this decision cannot specifically address all of the entries. Three examples are addressed below.

Entry BG9-xxxx030-7

Entry BG9-xxxx030-7 was initially included in Attachment F of the port’s submission, in the group of “incorrect summaries filed untimely”. The Part I is date-stamped as having been filed on August 9, 1996, and is broken down into 9 line items of vehicles and parts, including the quantity, value, duty rate and duty for each line item. Attached to the Part I is a spreadsheet of “Canadian Vehicles” for the week of July 29, 1996 to August 4, 1996. The spreadsheet breaks down the information on the Part I as to the day each vehicle was produced, with the value, weight, and duty attributable to the items used each day in production, and is broken down into 10 different classification numbers, each of which correspond to all but one of the classification numbers on the Part I. One of the classification numbers on the spreadsheet is not on the Part I. The spreadsheet shows the use of all of the entered merchandise, in the production of 81 vehicles. On the Part I the entry date is identified as “8.8.96”. The import date is identified as “072996”. Customs Automated Commercial System (ACS) indicates an entry date of July 29, 1996. According to the port’s Attachment F summary, the export date was July 29, 1996. July 29, 1996 is the date in Block 27 of the CF 7501, for the “import” date. TMMK, at the meeting of July 11, 2001, explained that on the Part I, the “import date” represents the date the vehicles physically crossed the border from the U.S. into Canada, and the “entry date” on the initially-filed Part II represents the date of entry into Canada, and is the same as the date of entry on the Canadian Customs form.

The initially-filed Part II for entry BG9-xxxx030-7, contains the following information:

Customs Entry #
BG9-xxxx030-7
Date Range:
60th Day:
9-28-96
Exit #
Broker’s ref. #
Entry Date
50784
411-981418
8-16-96
50773
411-975256
03225
310-343839
8-15-96
32974
815-932043
8-21-96
03224
411-983082
8-21-96
03228
310-347869
8-27-96

The initially-filed Part II is date-stamped October 4, 1996, and is not on a CF 7501. This document is identified as a “NAFTA Duty Deferral” pertaining to “Canadian Export Vehicles”. According to TMMK’s submission of May 9, 2001, the “exit number” refers to a small group of vehicles that were exported to Canada together on one Canadian entry. The “Broker’s Ref. #” refers to a number on the bottom of each Canadian B-3.

For entry BG9-xxxx710-5, on the initially filed Part II, the first column containing the same type of 5-digit number is headed “reference #”, and the middle column containing the same type of 9-digit reference number is headed “Canadian Entry #”. For entry BG9-xxxx662-7, on the Part II, that same column is headed “Transaction #”, and contains a 14-digit Canadian entry number. In a nine page submission dated November 13, 2001, TMMK explained that the 9-digit broker’s reference number is a number on the bottom of each Canadian entry. In that same submission, TMMK pointed out that of the 86 protested entries, 55 initially-filed Part II’s listed 9-digit broker’s reference numbers, and the remaining 31 initially-filed Part II’s listed 14-digit Canadian entry numbers. The “entry date” refers to the date of entry, of a group of vehicles, into Canada. Therefore the earliest “export date” for entry BG9-xxxx030-7, was August 9, 1996. According to this information, the 60 day time period in which a claim for a waiver of duties must be filed, ended on October 8, 1996. Therefore, the initially-filed Part II was filed within 60 days of the export of the merchandise, whether the entry date is considered the “entry” date on the Part I, or the “entry” date on the initially-filed Part II. At the top of the document the Customs entry number of the Part I is referenced. According to TMMK, the “date range” of “7-29-96 to 8-4-96” shows the dates the vehicles were completed at the subzone. There is a “60th day” identified as “9-28-96”, which according to TMMK, was TMMK’s internal deadline for filing a duty waiver claim, and is based on the date range and not the export date. We note that some of the Exit #’s on the initially-filed Part II correspond to the last five digits of the 14-digit Canadian entry number on the Part II. However, Customs had no knowledge of what the Exit number represented, and even TMMK in its subsequent submissions has never indicated that the Exit number had any relation to the Canadian entry number. In the other representative entries, there does not appear to be any consistent correspondence between the Exit numbers and the Canadian entry numbers.

There is a third document, referred to as the “Part II”. This document is not date-stamped. This document is on a CF 7501, contains 11 line items of vehicles, each having a 14-digit Canadian entry number, the date of import into Canada, a classification number, rate of duty, and two different amounts of duty According to Customs field officers, the amount of duty on the Part II’s included Canadian GST, and the Part II’s were later amended to reflect the duty only, without GST., one being in parentheses. The duty shown is that paid upon entry into Canada, and the amount in parentheses is the amount of duty paid in Canadian Dollars. There is a Block 37 summary, which shows three lines of duty. The first is the amount of duty owed for the entry of the merchandise under the Part I, the second is the total amount paid in Canadian duty (in U.S. dollars) on the merchandise shown on the CF 7501, and the third is the difference between the first amount and the second amount. For this entry the amount of Canadian duty paid is greater than the U.S. duty owed according to the CF 7501. With respect to the 11 line items, each represents motor vehicles. None of the line items identify a quantity of vehicles. With respect to the Canadian entry numbers, none correspond to the Broker Ref. #’s on the initially-filed Part II. As stated above, the last five digits of the Canadian entry numbers correspond to three of six of the Exit numbers on the initially-filed Part II. With respect to the dates of import into Canada, the different dates, varying by the line items, are August 1, August 9, August 13, and August 16, 1996. We note that only the August 9 and 16 dates correspond to the entry dates listed on the initially-filed Part II. According to the port, all of the Part II’s were submitted to Customs in September and October, 1997, including this one.

There is a fourth document, referred to as the “Amended Part II”. According to a summary prepared by the port, the Amended Part II was submitted to Customs on September 28, 1998. The Amended Part II consists of 12 line items of vehicles, each with a 14-digit Canadian entry number, tariff classification, Canadian entry date, duty rate, and amount of Canadian duty paid. Four of the line items were not on the Part II. Three line items from the Part II are not on the Amended Part II. Relating to the Amended Part II, the file has lists of Vehicle Identification Numbers (VIN), shipment notifications which list the VIN, description and unit price of each vehicle on a Canadian entry form (B3), and the completed B3 forms. It is not clear whether the VIN lists, shipment notifications and B3 forms were submitted with the Amended Part II or afterwards. A comparison between the Part II and Amended Part II shows that the Canadian duty amounts on the Amended Part II were changed. The quantity of vehicles which are the subject of the Amended Part II, can be determined by reference to the B3 and comparison of the tariff classification numbers, and amount of duty paid. As to the export dates, on the Amended Part II, they are August 1, August 13, August 15, August 16, and August 21. We note that only the August 15, 16 and 21 dates correspond to the entry dates on the initially-filed Part II. We also note that if August 1, 1996 was in fact an export date of the merchandise, the initially-filed Part II, filed on October 4, 1996, would not have been filed within 60 days of the export of the merchandise to Canada.

There are several inconsistencies and questions that arise from a review of the supporting documentation (VIN lists, shipment notifications and B3 forms). First, not all of the 81 VINs on the VIN list appear on the shipment notifications. Second, in TMMK’s submissions of November 13, 2001 and May 9, 2001, TMMK stated that the typical exit number refers to 15 vehicles in a single rail car load. However, there are 15 vehicles identified on each shipment notification, and with respect to Entry BG9-xxxx030-7, four different shipment notifications, with a total of 60 vehicles, all contained references to the same exit number, 50784. The number 50784 also appears to correspond to a Canadian entry number.

Entry BG9-xxxx827-7

Entry BG9-xxxx827-7 was initially included in Attachment E of the Port’s submission, in the group of “Part II summaries not initially provided”. The Part I is date-stamped as having been filed on April 26, 1996, and is broken down into 10 line items of vehicles and parts, including the quantity, value, duty rate and duty for each item. Attached to the Part I is a spreadsheet of “Canadian Vehicles” for the week of April 15, 1996 to April 21, 1996. The spreadsheet breaks down the information on the Part I as to the day each vehicle was produced with the value, weight and duty attributable to the items used each day in production. The classification numbers on the spreadsheet correspond to those on the CF 7501. On the Part I the entry date is written in as “4-25-96”. The import date is identified as “041596”. ACS indicates an entry date of April 15, 1996. On the first page are written the words “Canadian Duty Deferral” (written by TMMK).

The initially-filed Part II for entry BG9-xxxx827-7, contains the following type of information, of which we provide two rows as an example:

TMM Entry #
BG9-xxxx827-7
Date:
60th Day:
6-17-96
Canada
Import
Date
60th
Day
Reference #
Canadian Entry #
Entry Date

02552
411-900930
96/04/24
4/15/96
6/14/96
02593
411-905962
96/05/02
4/24/96
6/23/96

This initially-filed Part II is date-stamped by Customs on June 17, 1996. The information in this initially-filed Part II is similar to that for entry BG9-xxxx030-7, except the term “reference #” is used instead of “exit #”, and the 9-digit reference number is under a column headed “Canadian Entry #” instead of “Broker’s ref. #”. In this document a distinction is made between the entry date and Canadian import date, although there is no indication of what that distinction is. In its May 9, 2001 submission, TMMK described the “entry” dates used on the initially-filed Part II as the date of importation into Canada. Using the later date of April 24, 1996, described as the “entry” date, the document was filed within 60 days of entry into Canada. The remaining “entry” dates are through June 13, 1996.

There is a third document, referred to as the Part II. The Part II is not date- stamped. This document is on a CF 7501, contains 54 line items consisting of vehicles, each having a Canadian entry number, the date of import into Canada, a classification number, rate of duty, and the amount of Canadian duty owed, both in Canadian and U.S. dollars. The Part II includes a “Block 37 summary” which shows three lines of amounts. The first is the amount of duty owed for the entry of the merchandise under the Part I, the second is the total amount paid in Canadian duty (in U.S. dollars) on the merchandise shown on the Part II, and the third is the difference between the first amount and the second amount. For this entry, the amount of Canadian duty paid is greater than the U.S. duty owed according to the CF 7501. With respect to the 14-digit Canadian entry numbers on the Part II, none correspond in any way to the 9-digit “entry numbers” or the 5-digit “reference numbers” on the initially-filed Part II. With respect to the dates of entry into Canada, on the Part II, they range from April 15, 1996 through May 10, 1996. According to the Port, all of the Part II’s were filed in September and October, 1997, including this one.

There is a fourth document, referred to as the “Amended Part II”. The Amended Part II is date-stamped September 17, 1998. The Amended Part II consists of 72 line items of vehicles, each with a 14-digit Canadian entry number, tariff classification, Canadian entry date, duty rate, and amount of Canadian duty paid. At least 13 of the line items were not on the Part II at all. At least 11 of the described items on the Amended Part II have the same Canadian entry number and tariff classification as on the Part II, but have different entry dates. The last five digits of one of the Canadian entry numbers on this document correspond to one of the "reference #’s” on the initially-filed Part II.

There are two entries, BG9-xxxx662-7, and BG9 -xxxx296-4, for which the initially-filed Part II’s provided to Customs are not date-stamped at all. Therefore for those entries, there is no evidence that the initially-filed Part II’s were filed within 60 days of the export of the merchandise.

Entry BG9-xxxx662-7 is also an example of different information provided in the initially-filed Part II. The Part I information is essentially the same as that described for the entries above. The type of information on the initially-filed Part II for entry BG9-xxxx662-7 consists of the following, of which we provide two rows as an example:

Customs Entry #
BG9-xxxx662-7
Date Range:

60th Day:
8-22-97
Exit #
Transaction #
Entry Date
4821
567xx000071142
4823
567xx000013835

The difference in information on the initially-filed Part II, from the examples above, is that the “Transaction #” provided is a 14-digit Canadian entry number. The Part II consists of twelve line items of vehicles, each having a 14-digit Canadian entry number, the date of entry into Canada, a classification number, rate of duty, and the amount of Canadian duty paid. There is also the Block 37 summary as with the above two entries. According to the Port, all of the Part II’s were filed in September and October, 1997, including this one.

Of the twenty-four 14-digit “Transaction #’s” on the initially-filed Part II, fourteen correspond to the Canadian entry numbers on the Part II. The remaining transaction numbers do not correspond to any of the Canadian entry numbers on the Part II. The entry dates on the initially-filed Part II do not correspond to any of the entry dates on the Part II. For example, line items 10,11, and 12 each reference Canadian entry number 567xx000071142, and each indicates an entry date of June 30, 1997, as opposed to the entry date of July 4, 1997 as indicated on the initially-filed Part II.

TMMK acknowledged in its May 9, 2001 submission, with respect to the initially-filed Part II’s, that “the part II submissions, as initially filed, did not contain all the information specified in 19 C.F.R. §181.53(a)(3)(ii) (emphasis supplied).” With respect to the Part II’s, TMMK acknowledged that “the submissions were not, in all cases, filed within the applicable 60-day period.” Despite the incomplete and untimely filing of information, TMMK takes the position that 1) it is entitled to a waiver of duties for the exported merchandise under 19 U.S.C. §81c(a), seventh proviso; 2) TMMK has met all procedural requirements for such waiver of duties; 3) prior to liquidation of the entries Customs should have considered the information provided by TMMK in verification of the duty waiver claims; 4) verification issues of the duty waiver claims can be resolved in the protest procedure; and 5) the assessment of Customs duties on the exported merchandise is contrary to the prohibition of Article I, §9, clause 5 of the U.S. Constitution.

In general we note other discrepancies. In its submission of November 13, 2001, TMMK admits that for Entry BG9-xxxx710-5, the initially-filed Part II was over-inclusive. According to TMMK the first three exit numbers listed on the initially-filed Part II pertained to vehicles that were included on another duty deferral export entry, BG9-xxxx700-6. Also with respect to entry BG9-xxxx710-5, the initially-filed Part II referred to an incorrect broker’s reference number for exit number 02265.

ISSUE:

Whether the protestant met the requirements of 19 U.S.C. §81c(a) and 19 CFR 181.53(a) for waiver of duties on merchandise withdrawn from an FTZ and exported to Canada?

LAW AND ANALYSIS:

Section 203(b)(5) of the NAFTA Implementation Act amended 19 U.S.C. §81c(a) to apply the “NAFTA drawback” formula (set forth in Article 303(1) of the NAFTA) to goods that are exported from a foreign trade zone to Canada. See Pub. L. 103-182; 107 Stat. 2057, 2086; 19 U.S.C. §3333. Pursuant to the NAFTA Implementation Act, U.S. duties assessed on merchandise exported from a foreign trade zone to Canada are waived or reduced to the extent of duties paid to Canada on that merchandise. Where the duties paid to Canada exceed U.S. duties that would have been payable on that merchandise, the exporter is entitled to a waiver of all U.S. duties. Satisfactory evidence of the payment of duties to Canada must be presented before the 61st day after the date of exportation. The specific language of 19 U.S.C. §81c(a), seventh proviso, provides with respect to foreign merchandise withdrawn from a Foreign Trade Zone (FTZ) as follows:

That no merchandise that consists of goods subject to NAFTA drawback, as defined in section 3333(a) of this title, that is manufactured or otherwise changed in condition shall be exported to a NAFTA countrywithout an assessment of a duty on the merchandiseand the payment of the assessed duty before the 61st day after the date of exportation of the article, except that upon the presentation, before such 61st day, of satisfactory evidence of the amount of any customs duties paid or owed to the NAFTA country on the article, the customs duty may be waived or reducedin an amount that does not exceed the lesser of (1) the total amount of customs duties paid or owed on the merchandise on importation into the United States, or (2) the total amount of customs duties paid on the article to the NAFTA country[.]

(Emphasis added). The Customs Regulations implementing the NAFTA Implementation Act are set forth in 19 C.F.R. Part 181. More specifically, 19 C.F.R. §181.53(a) sets forth the procedures to be followed for the collection and waiver or reduction of duty under the NAFTA duty-deferral programs. Under subsection 181.53(a)(3), Customs shall waive or reduce the duties paid or owed provided a claim is filed with Customs within a 60-calendar-day time frame. In the case of merchandise exported from a foreign trade zone, the 60-calendar-day period runs from the date of exportation of the good or the date of entry into a duty-deferral program in Canada. 19 C.F.R. §181.53(b)(4). A claim for a waiver or reduction of duties shall be made on a Customs Form (CF) 7501 and must set forth a description of the goods, the Canadian import entry number, date of importation, tariff classification, rate of duty and amount of duties paid. 19 C.F.R. §181.53(a)(3)(ii). After the expiration of the 60-calendar-day period, if no claim for waiver or reduction of duties is filed, Customs shall determine the final duties due and liquidate the entry. 19 C.F.R. §181.53(a)(4)(i).

As to the time of filing of the initially-filed Part II’s, it appears that the documents that were believed to have been filed after the required 60 day time period, may in fact have been filed within 60 days. In some instances, Customs calculated the 60 days on which the Part II was due, from the “import” date in Block 27 of the CF 7501, as opposed to the “entry” date in Block 4 of the CF 7501. This was done in entry BG9-xxxx030-7. In other instances, such as in entry BG9-xxxx662-7, the 60 day time period was calculated from the “entry” date in Block 4 of the CF 7501. To add further confusion regarding the 60th day, according to TMMK, the “entry” date in Block 4 of the CF 7501, was not necessarily the export date of the merchandise, as defined in 19 CFR 181.53(a)(1)(i). Instead the “export” date for purposes of 19 CFR 181.53(a) was the “entry” date on the initially-filed Part II. In some instances, this date is different from the date in Block 4 of the CF 7501. For example in entry BG9-xxxx662-7, the “entry” date in Block 4 of the CF 7501 is June 25, 1997, and the earliest “entry” date on the initially-filed Part II is July 4, 1997. If the timeliness of the filing of the initially-filed Part II were to determine the outcome of the issues presented, given the different dates provided, Customs would be required to firmly establish for each entry the date of export of the merchandise, as defined in 19 CFR 181.53(a)(1)(i). Generally however, if no other dates were provided or the issue were not raised, Customs would be correct in relying on the date in Block 4 of the CF 7501.

We now turn to the information required for a duty waiver or reduction claim, and what in fact was and was not submitted. As cited above, the statute, 19 U.S.C. 81c(a), requires “satisfactory evidence of the amount of any customs duties paid or owed to the NAFTA country on the article.” The regulations, 19 CFR 181.53(a)(3)(ii), require the claim to set forth “a description of the good exported to Canada or Mexico and the Canadian or Mexican import entry number, date of importation, tariff classification number, rate of duty and amount of duty paid.” Thus, six elements are required to be set forth in the claim.

Using entry BG9-xxxx030-7, as an example, we can describe the information missing from the initially-filed Part II, which was required by statute and regulation. Specifically missing from the initially-filed Part II was 1) a description of the merchandise, 2) the Canadian import entry number, 3) the tariff classification number, 4) the rate of duty, and 5) the amount of duty paid. The only information actually provided for this entry, and many others, was the date of importation of the merchandise into Canada, the dates of entry in this case. We do not even know whether those dates are accurate as they differ between the initially-filed Part II and the Part II. In the case of some other entries, such as BG9-xxxx662-7, the Canadian entry number was provided on the initially-filed Part II.

We conclude that the information filed in the form of the initially-filed Part II’s was insufficient for a duty waiver or reduction claim under 19 CFR 181.53. The amount of duty paid, specifically the amount of duty paid or owed to the NAFTA country, as expressly required by the statute was missing. In addition, at least three other elements were missing from every one of the initially-filed Part II’s. Those are a description of the merchandise, the tariff classification number and the rate of duty. The information provided in the examples above simply does not amount to a claim for waiver or reduction of duty. Too much information is missing and unexplained. For example if the “exit number” or “reference number” is a cross reference to the required information, an explanation of the cross reference would be required. Apparently there is no cross-reference, but the initially-filed Part II leaves Customs being required to guess at the meaning of the information. As another example, according to TMMK the 9-digit “Broker’s reference numbers” (also referred to as “Canadian Entry numbers” on some initially-filed Part II’s) on the initially-filed Part II’s apparently do relate to the Canadian Entry numbers. That should have been explained. Customs should not have to compare numbers and make guesses as to what they may represent, and have to search for correspondence which may in fact just amount to a coincidence. In any event, at the time the initially-filed Part II’s were filed, the Part II’s with the complete Canadian Entry numbers were not filed yet and Customs did not have anything to compare with the other numbers. More importantly, even for the initially-filed Part II’s which did contain a 14-digit Canadian entry number, the information provided gives no indication that any duty was paid in Canada, and thus there is no indication that in fact a reduction or waiver is sought. TMMK’s protest suggests that Customs should have known from TMMK’s course of conduct, including filing the entries without payment of duties, that a complete waiver of U.S. duties was sought. Customs does not have the authority to make such assumptions, nor is it reasonable to expect Customs to examine an importer’s course of conduct in determining how to proceed in terms of liquidation of an entry.

TMMK maintains that, although its claims may not have been in the proper form, the essential procedural requirements for a waiver were met and liquidation should have been extended to allow TMMK to perfect the claims. While we agree with TMMK that form over substance should not be determinative of whether a valid claim has been filed, we disagree with the proposition that the submission of any one piece of document that does not even attempt to provide the required information will suffice to stop the 60-calendar-day clock from running. Once a timely claim is filed, the regulations do provide, in 19 CFR 181.53(a)(4)(ii), for an automatic extension of liquidation in order to allow Customs to verify any claim. We note that there is no evidence in the record, nor does the claimant contend, that an extension of liquidation was sought by TMMK. Rather, TMMK implies that it is Customs responsibility to extend liquidation in order to allow a claimant time to develop procedures for filing timely and accurate claims. It is reasonable for a claimant to expect that during this verification period it would be allowed to cure a defect in the claim which is discovered through the verification process (such as the defects described in the FACTS section, where the amount of Canadian duty paid needs to be corrected, removal of incorrect Canadian entry numbers, correction of entry dates, or correction of line items). However, there is no basis in the statutory or regulatory provisions for the proposition that, once any document subsequently asserted to be a claim is filed, a claimant then has four years (before the entry is liquidated) to get its documentation in order and submit a complete claim. Likewise, there is no support in the statute or regulations for the proposition that a claimant can file a stack of papers with Customs and ask Customs to sort the information out. TMMK contends that the Port Director should examine all relevant facts and circumstances when determining whether a proper claim for duty waiver has been filed.

With regard to most of the Part II’s, there is no evidence or assertion that they were submitted to Customs within 60 days of the exportation of the subject merchandise. However, if as set forth in a summary prepared by Customs officers, all of the Part II’s were submitted in September and October, 1997, it is likely that for the entries for merchandise exported in July and August, 1997, the Part II’s were submitted within the required 60-day time period. The Part II’s met the requirements of the statute and regulations, in that they set forth a description of the good exported to Canada, the Canadian import entry number, date of importation, tariff classification number, rate of duty and amount of duty paid. Prior to deciding the protest, the Port would be required to determine when it received the Part II’s, and if timely received, verify the information therein. If the waiver of duties is warranted, the protest can be granted with respect to those entries.

With respect to the entries determined to have been timely filed, if any, upon verification of the information therein, the Port should include in its consideration the types of discrepancies and errors noted in the FACTS section. The discrepancies and errors consisted of: 1) claim for exported vehicles which had also been claimed on another duty deferral entry; 2) incorrect broker’s reference numbers; 3) discrepancies between the VIN lists and vehicles shipped according to the shipment notifications; and 4) exit numbers that refer to more than 15 vehicles and/or correspond to Canadian entry numbers.

In support of its position, that the 60-day time limit does not preclude TMMK from obtaining a refund of the duties paid to Customs upon the liquidation of the entries, in this protest procedure, TMMK relies upon the following language in Article 303, of the NAFTA, specifically that in paragraph 5(b):

Where a good is imported into the territory of a Party pursuant to a duty deferral program and is subsequently exported to the territory of another Party, or is used as a material in the production of another good that is subsequently exported to the territory of another Partythe Party from whose territory the good is exported:
shall assess the customs duties as if the exported good had been withdrawn for domestic consumption; and may waive or reduce customs duties to the extent permitted under paragraph 1 [lesser of rule].

In determining the amount of customs duties that may be refunded, waived or reduced pursuant to paragraph 1 on a good imported into its territory, each Party shall require presentation of satisfactory evidence of the amount of customs duties paid to another Party on the good that has been subsequently exported to the territory of that other Party.

Where satisfactory evidence of the customs duties paid to the Party to which a good is subsequently exported under a duty deferral program described in paragraph 3 is not presented within 60 days after the date of exportation, the Party from whose territory the good was exported:
shall collect customs duties as if the exported good had been withdrawn for domestic consumption; and may refund such customs duties to the extent permitted under paragraph 1 on the timely presentation of such evidence under its laws and regulations.

(Emphasis added)

The protestant relies on the highlighted language in paragraph 5(b), to support its position that upon the presentation of evidence of the duties paid to Canada, it is entitled to a refund of the duties paid to the U.S. Customs through the protest procedure. The protestant argues that while the seventh proviso of the FTZ statute provides for the collection and waiver of duties allowed by Article 303, it is silent as to the refund of duties allowed in paragraph 5(b) of Article 303. The protestant further asserts that neither the seventh proviso, nor any other provision of the NAFTA Implementation Act preclude Customs from refunding the subject duty upon a valid protest. The protestant relies on the language in 19 U.S.C. §1515(a), which provides that after a decision to allow or deny a protest is made, “any duties, charge, or exaction found to have been assessed or collected in excess shall be remitted or refunded.”

First, the duties collected were not in excess. There is no error asserted with respect to the classification, rate or amount of duties assessed. The duties were assessed and collected in accordance with the seventh proviso of the FTZ Act, because satisfactory evidence of the amount of customs duties paid or owed to Canada, was not presented before the 61st day after the date of exportation of the articles.

Second, 19 U.S.C. §1558(a), specifically prohibits refunds of liquidated duties because of the exportation of merchandise, after its release from the custody of the Government. An exception is “when articles are exported with respect to which a drawback of duties is expressly provided for by law.” 19 U.S.C. §1558(a)(1). Drawback is expressly provided for by 19 U.S.C. §1313, and within that section, paragraph (n) incorporates the drawback limitations set forth in Article 303. The only means for the protestant to obtain a refund of the money it paid to the U.S. in duties, which was not collected in excess or error, and not exacted, is through a drawback claim in accordance with 19 U.S.C. §1313. The drawback statute provides specifically for “refunds”, provided that the statutory requirements are met. The refund procedure of Article 303.5(b) is implemented by section 1313, and is therefore not disregarded as the protestant asserts.

The protestant also relies on 19 CFR 10.112, as another basis for the refund of the U.S. duties paid. Section 10.112 provides:

Whenever a free entry or a reduced duty document, form, or statement required to be filed in connection with the entry is not filed at the time of the entry or within the period for which a bond was filed for its production, but failure to file it was not due to willful negligence or fraudulent intent, such document, form, or statement may be filed at any time prior to liquidation of the entry or, if the entry was liquidated, before the liquidation becomes final. See § 113.43(c) of this chapter for satisfaction of the bond and cancellation of the bond charge.

The foregoing is a regulatory provision, and cannot expand a statutory provision. Under section 81c(a), seventh proviso, as stated above, a waiver or reduction of duties requires the presentation of satisfactory evidence of customs duties paid or owed to the other NAFTA country before the 61st day after the date of exportation. The regulatory language cannot expand the 60-day requirement of the FTZ statute, and it cannot create an exception to section 1558 to allow for a refund. The cases cited by the protestant in support of the application of section 10.112 in this instance, all pertain to requirements established by regulation, as opposed to statute.

The protestant asserts that Customs failure to view the initially-filed Part II’s as “claims”, elevates form over substance. The protestant cites to instances where protests have been determined to be valid even in the absence of procedural sufficiency, and cases where courts, faced with defective pleadings and notices of appeal, allow “relation back” of amendments and treat other timely documents as effective notices of appeal. In the cases cited, the inadequacies would have resulted in denial of jurisdiction, whether for a protest, right to hearing or appeal. In the instant case, the protestant has an alternative remedy to the failure to file a sufficient claim, that of drawback.

Finally, TMMK takes the position that the subject duties assessed on the merchandise, under 19 U.S.C. §81c(a), seventh proviso, are in violation of the Export Clause of the U.S. Constitution. Specifically, the Export Clause, Article I, section 9, clause 5, states: “No Tax or Duty shall be laid on Articles exported from any State.” TMMK relies on the decision in United States Shoe Corp. v. United States, 114 F.3d 1564 (Fed. Cir. 1997), which was affirmed by the Supreme Court, in United States v. United States Shoe Corporation, 523 U.S. 360 (1998), in which it was held that the Harbor Maintenance Tax (HMT) is not a permissible user fee but a tax imposed on cargo being exported.

Customs disagrees that the statutory provision violates the Export Clause of the U.S. Constitution which prohibits the levy of a tax or duty on exports. While such duties have never before been applied to foreign trade zones, the change is the result of the three NAFTA Parties having agreed to restrict the benefits of drawback and other duty-deferral programs such as foreign trade zones. With respect to duty-deferral programs, Article 303(5) of the NAFTA requires the Party from whose territory the good was exported to collect customs duties as if the exported good had been withdrawn for domestic consumption and to refund such duties only to the extent permitted under paragraph 1 of Article 303 on timely presentation of the required evidence to carry out the “lesser of” formula.

That policy was implemented with respect to U.S. foreign trade zones by an amendment to 19 U.S.C. 81c(a) made by section 203(b)(5) of the NAFTA Implementation Act. Goods in a zone that are “subject to NAFTA drawback”, as defined in 19 U.S.C. §3333(a), are controlled by that statutory restriction.

Under the terms of the NAFTA as implemented by the NAFTA Implementation Act, no tax or duty is imposed based on the shipment from a duty-deferral program. Instead, the statutory amendments simply provide for the end of the duty-deferral program after their importation into the U.S.

It is the importation which triggers the liability for duties, and Section 8, Clause 3, of Article I of the Constitution gives Congress the exclusive jurisdiction to provide for the assessment, deferment and refund of those duties. Under General Note 1, HTSUS (19 U.S.C. §1202), all goods imported into the customs territory of the U.S. are subject to duty or exempt therefrom, as prescribed by the other General Notes of the HTSUS. Under 19 U.S.C. §1315, the amount and rate of duties is generally fixed when the imported good is entered.

The liability for those duties accrue when the good is imported. United States v. Estate of Boshell, 14 Ct. Cust. Apples. 273, 275 T.D. 41884 (1926) involved a case in which rifles were imported for experimental purposes under a bond which guaranteed that they would be exported within six months from importation. Although the rifles were exported, they were exported outside the six-month period. Customs assessed duty and the court upheld that assessment by reversing the Board of General Appraisers decision which had sustained the importer’s protest against the assessment of duty. The courts have long held that the right of the Government to exact import duties accrues when imported goods reach the port of destination. See United States v. Cordero, 1 Ct. Cust. Appls. 108. In the case of Headley Asphalt Division et al. V. United States, 24 CCPA 427, T.D. 48873 (1937), the court held that all of the crude oil manufactured on a tanker as cargo, including the portion that was never landed, was imported. The portion that was not landed, but instead was pumped from the Norwegian tanker’s cargo tanks into its bunker tank, was imported merchandise and subject to duty notwithstanding the fact that that portion was to be used on its outward voyage. The court held that the oil having been imported was subject to duty as a result of its importation. See also Art Craft Jewelry Co. v. United States, 64 Cust. Ct. 414 (1970); United States v. Goodman, 6 CIT 132 (1983); and Henry Mast Greenhouses, Inc. v. United States, 966 F. Supp. 1226 (CIT, 1995), which held that the liability for the payment of import duties falls on the importer and is tied to the fact of importation. Even with respect to foreign trade zones, there is no blanket exclusion from the liability for duty imposed as a result of importation. See Nissan Motor Mfg. Corp., U.S.A. v. United States, 884 F.2d 1375, (Fed. Cir. 1989).

The case of U.S. Shoe Corp. v. United States, supra, is distinguishable both on the facts and on the law from the situation covered by the statute and regulations at issue. First, even with respect to the harbor maintenance fee imposed under 26 U.S.C. §§4461-4462, the Court of International Trade noted the liability distinction between an importation and an exportation. In the case of Carnival Cruise Lines v. United States, 927 F. Supp. 1570 (CIT, 1996), the court held that while section 4461(c)(1)(B) imposed liability on exports, the liability imposed under section 4461(c)(1)(A) was a separate and distinct category and applied only to imports. Second, if the statutes which provide for the remission or refund of import duties based on exportation are controlled by the proscription of the Export Clause, those statutes would be unconstitutional because they set time limits for eligibility. For example, under 19 U.S.C. §1557, merchandise must be removed from the warehouse and exported within a period not to exceed five years from the date of importation. Temporarily imported merchandise under subchapter XIII, Chapter 98, HTSUS, must be exported within three years from the date of importation. Under 19 U.S.C. §1313(j), merchandise must be exported within three years of importation to be eligible for drawback. Other drawback eligibility is controlled generally by 19 U.S.C. §1313(i) which sets a five-year period. Under 19 U.S.C. §1313(p), the export period is 180 days. If those provisions related to an export tax, those time limits would be of questionable constitutionality. Courts have observed that the Export Clause contains flat prohibitory language which is to be given broad construction. International Business Machines Corp. v. United States, 59 F.3d 1234, 1236, 1238-1239 (Fed. Cir. 1995).

The failure to refund or remit the import duties upon exportation of the imported good, or its lawful substitute, in accordance with 19 U.S.C. §1558, does not amount to a tax or duty on the exportation. A review of the court decisions on the export Clause supports Customs position.

The first case, Aquirre v. Maxwell, 1 Fed. Cases 212 (No. 101)(CC.SD. NY 1853), involved the imposition of a special tonnage duty on Spanish vessels coming to the U.S. from Cuba or Puerto Rico, then Spanish possessions. The payment was due before the vessel cleared for a return voyage to either island. The court held that the Export Clause has no application to the imposition of a tax on a foreign vessel arriving in the U.S. The court found that requiring the payment before departure did not turn the import duty into an export tax or duty.

The Supreme Court, in Dooley v. United States, 183 U.S. 151, 156 (1901), noted the difference between duties on imports and duties on exports. A duty due as a consequence of importation need not be refunded on exportation in order to avoid violating the Export Clause.

The Supreme Court, in Cornell v. Coyne, 192 U.S. 418 (1904), considered a tax imposed on the manufacture of filled cheese and on the importation of such cheese. The plaintiffs asserted that the failure of the tax law to provide for a remission of either tax if the cheese was made for exportation and was exported constituted a violation of the Export Clause. The court disagreed. At page 426, the court stated its understanding of the scope of the Export Clause:

But this means that no burden shall be placed on exportation and does not require that any bounty be given therefor.

Again, at page 427, the court construed the Clause:

The true construction of the Constitutional provision is that no burden by way of tax or duty can be cast upon the exportation of articles, and does not mean that articles exported are relieved from the prior ordinary burdens of taxation which rest upon all property similarly situated. The exemption attaches to the export, and not to the article before its exportation.

In Turpin v. Burgess, 117 U.S. 504 (1886) a tax that became due before the goods left the factory was found to not violate the Export Clause. It is clear from the discussion at pages 507-508 that while Congress could remit a portion of the tax when the goods were to be exported, the Court did not conclude the provision of such an exemption was required by the Export Clause.

In A.G. Spaulding & Bros. V. Edwards, 262 U.S. 66 (1923) a tax that became due on a sale for exportation was held to be an unconstitutional tax. But the Court made it clear that a tax on the manufacture would have been constitutional.

In William E. Peck & Co. v. Lowe, 247 U.S. 165 (1918) the Court held constitutional a tax on income derived from prior years export sales. A similar conclusion was reached in Liggett & Myers Tobacco Co. v. United States, 77 F.2d 65 (3rd Cir. 1935), in Moon v. Freeman, 379 F.2d 382, 388, 390 (9th Cir. 1967), and in International Business machines Corp. v. United States, supra (noting the distinction between Cornell v. Coyne, supra, and United States v. Hvoslef, 237 U.S. 1 (1915)).

Consequently, the congressional modification of the Foreign trade Zone Act concerning the assessment of duties of merchandise withdrawn from the FTZ does not amount to a tax or duty on the exportation in violation of the Export Clause.

HOLDING:

The requirements of 19 U.S.C. §81c(a) and 19 CFR 181.53(a), for waiver of duties on merchandise withdrawn from an FTZ and exported to Canada were not met for those entries where only the initially-filed Part II was filed within 60 days of the exportation of the merchandise.

You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, 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,

John Durant, Director
Commercial Rulings Division

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