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HQ 228715

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March 6, 2002

Dra-2-02-RR:CR:DR 228715 IOR

CATEGORY: DRAWBACK

Port Director
U.S. Customs Service
610 S. Canal St., Room 602
Chicago, IL 60607

Attn: Drawback Unit

RE: Protest Application for Further Review No. 3901-99-101345; drawback; 19 U.S.C. 1313(j)(1); evidence; exportation; destruction; drawback regulations; 19 CFR 191.61; 19 CFR 191.72; 19 CFR 191.73

Dear Madam:

The above-referenced protest was forwarded to this office for further review. Our decision follows.

FACTS:

The protest is of the liquidation of five drawback entries. The drawback entries at issue are 110-xxxx176-7, 110-xxxx174-2, 110-xxxx098-3, 110-xxxx184-2, and 110-xxxx185-9. The entries were liquidated with no drawback on July 2, 1999, and the subject protest was filed on September 24, 1999.

The drawback entries were filed in January and July, 1995. By letter to the drawback claimant, dated May 22, 1997, the Drawback Unit requested that the claimant submit signed and dated bills of lading for all of the subject drawback claims, except for 110-xxxx098-3. By CF 29 dated July 2, 1999, the Drawback Unit notified the claimant that with respect to three of the protested entries (all but 110-xxxx098-3 and 110-xxxx174-2), the drawback claims would be denied in full for failure to comply with Customs Regulations 191.52(b), and that both the claimant and the broker had failed to comply with a request for additional information.

The imported merchandise consists of collector’s plates. With respect to claims 110-xxxx176-7, and 110-xxxx174-2, the imported merchandise is asserted to have been exported. The issues are the same with respect to the two claims and of those two claims, 110-xxxx176-7 will be described and used as a representative example for purposes of this decision. The drawback unit takes the position that the claims were denied for the claimant’s failure to provide the proof of exportation requested.

With respect to the remaining three claims, the imported merchandise is asserted to have been destroyed. For claims 110-xxxx098-3 and 110-xxxx184-2, CF 3499’s were submitted with the protest and satisfied the Drawback Unit that the merchandise had been destroyed and that drawback was warranted with the exception of $149.31 for claim 110-xxxx184-2. The $149.31 was found to be not subject to drawback due to miscalculations of the duty paid for the imported merchandise, or lack of evidence of the specified part number having been imported on the specified consumption entry. The miscalculations are as follows:

Consumption entry
Reason
Amount denied
110-xxxx266-5
Miscalculated $ .160887
110-xxxx365-4
Miscalculated no assists $34.6967395
110-xxxx761-3
Miscalculated $12.655288
110-xxxx670-8
P/N not on C/E $ 7.8705
110-xxxx767-2
P/N not on C/E $ 1.0296
110-xxxx989-9
P/N not on C/E $ 3.5343
408-xxxx232-7
P/N not on C/E $ .4851
509-xxxx772-4
Miscalculated $80.480446
509-xxxx248-7
P/N not on C/E $ .0594
509-xxxx715-5
Miscalculated $ 8.334156

Based on a review of two of the consumption entries, 110-xxxx365-4 and 509-xxxx772-4, we concur with the finding of miscalculations. The miscalculations were not raised in the protest. A review of drawback claim 110-xxxx184-2 and the documentation of destruction shows that the specified entries all occurred no more than three years prior to the May 25, 1995 destruction, and we agree with the port’s conclusion. Therefore with regard to claim 110-xxxx184-2, the protest should be granted in part and denied in part to the extent that the excess drawback claimed as a result of miscalculations and misdescribed consumption entries should not be paid.

With regard to drawback claim 110-xxxx098-3, the date of destruction appears to be January 16, 1995, based on the documents submitted with the claim. The merchandise was delivered to the disposal company on January 16, 1995, and there is a letter from the disposal company dated January 16, 1995, indicating that the merchandise was destroyed. There is also a CF 3499, with an undated Customs signature asserting that the destruction of 1243 pieces had been observed. The claim is for 1,389 pieces of merchandise. The import designation for the claim identifies 1,389 pieces of merchandise, however a line has been drawn through merchandise imported on two entries, and the revised total pieces of merchandise on the import designation is 1,248. It is not clear who made the revision on the import designation. The import dates for three of the entries on the list of import designations are more than three years prior to the January 16, 1995 destruction date. Of those three entries, one does not show up as a valid entry in Customs Automated Commercial System (“ACS”). Those entries are the following:

Consumption entry no.
ACS entry date
Duty paid
Part no.
No. pieces
509-xxxx512-8 $3.45
3857
1
509-xxxx407-1
12/23/91 $514.20
5741
218
509-xxxx430-2
Not in ACS $147.99
5754
31

With respect to claim 110-xxxx185-9, in the protest, the protestant asserts that the drawback claim was for the destruction of the collectors’ plates, and that the supporting documentation is included with the protest as attachment “E”. Attachment “E” does not include a CF 3499, or any other evidence of destruction. The attachment includes documents substantially similar to those submitted for claims 110-xxxx176-7 and 110-xxxx174-2, and the description of claim 110-xxxx176-7 is representative of 110-xxxx185-9 also. The drawback unit takes the position that the claim was denied for failure to submit a CF 3499. Counsel for protestant was given the opportunity to supply any missing evidence of destruction, in the form of a CF 3499, or otherwise, telephonically on January 16, 2002, and any evidence of exportation on February 25, 2002. No evidence was provided.

Drawback claim 110-xxxx176-7

The drawback entry was filed on July 19, 1995. The entry described the imported and exported merchandise as 35,511 units of “unused – international”. The amount of duty paid is stated to be $8,532.86. Filed along with the entry was a chronological summary of exports, and seven other summaries in various formats. The chronological summary of exports identifies eleven shipments, and for each contains an NE number, bill of lading or airway bill of lading number, foreign destination, client reference number (blank or consisting of “00000000”), export date, exporter (indicates the claimant for four of the shipments and is blank for the remaining shipments), invoice number, carrier, the exported part numbers, and the quantity of items exported.

The chronological summary of exports for claim 110-xxxx185-9 is similar however, for the bill of lading number it indicates “DES041495”, for the foreign destination indicates Canada, and the exporter is identified as “destruct”. The carrier is identified as Cargo, Inc. The export date is June 28, 1995. The total quantity is 35,511.

The seven other summaries consist of:
Chronological summary “by export part no.”, consists of the part number of the exported article, a description of the article (the name of the plate, “Cinderella Doll” for example), NE number, export date, carrier, bill of lading or airway bill of lading number, invoice number, exporter, destination, and export quantity. Under the “exporter” column, the claimant is listed with respect to nine of the thirty-three different part numbers. Claim 110-xxxx185-9 differs, by indicating on the Chronological Summary by Export Part No., that the exporter is “destruct” and the destination is “Canada”. The “export” date is June 28, 1995 for all of the merchandise. According to counsel for the protestant, there are no destruction records with respect to this entry, and the drawback claim is based upon exportation of the imported merchandise. The total quantity of items exported is 35,511. “Recap of exported articles/where used”, consists of the part number and description (by name) of the imported article, “BOM Quantity”, part number and description (by name) of the exported article (which is the same as the imported), and the quantity exported. The total quantity of items exported is 35,511. “Import Designation by Import Date”, consists of the consumption entry number, port, import date, invoice number, part number of imported merchandise, available quantity of imported merchandise, amount of duty per unit, number of units claimed, amount of duty paid for total quantity claimed. The total quantity of items claimed is 35,511, and the total amount of duty in the duty paid column is $8,532.86. “Import Designation by Part No & Process”, consists of the part number of imported merchandise, consumption entry number, port, import date, date received, invoice (column indicates “Fast”), available quantity, amount of duty per unit, claimed quantity, and total duty paid. The total quantity of items claimed is 35,511, and the total amount of duty in the duty paid column is $8,532.86. “Import Designation for Drawback”, consists of the consumption entry number, port, and total amount of drawback claimed on the particular consumption entry. The total amount of duty claimed is $8,447.37. “Recap of Exported Articles/Bill of Material”, consists of the part number of the exported article, the quantity of each part number exported, the BOM quantity, the part number of the imported merchandise (which is the same as that for the export), the extended quantity (which amount is the same as that under export quantity), and claim quantity (which amount is the same as that in the exported quantity and extended quantity). The total quantity of items claimed is 35,511. Recap of substituted Parts, consists of zero items of substituted parts or substituted parts claimed.

No bills of lading, whether signed or unsigned were submitted, either with the entry, or with the protest, or subsequently. In the protest, it is stated that the claimant, through its broker, “provided a copy of its standard chronological summary of exports.” The claimant takes the position that the chronological report is an acceptable method for presenting Customs with proof of exportation, that the chronological summary of exports may be submitted as part of the claim in lieu of actual documentary evidence of exportation, and the summary and report “should have been an acceptable alternative to the signed and dated bills of lading and airway bills requested by Customs.”

ISSUE:

Whether the exportation or destruction of the merchandise has been established in accordance with the statute and regulations?

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 entries was denied on July 2, 1999, when it was liquidated with no drawback. This protest was timely filed on September 24, 1999, which is within the 90-day filing deadline set forth in 19 U.S.C. §1514(c). This protest involves the denial of drawback under 19 U.S.C. §1313(j)(1).

The drawback statute was substantively amended by section 632, title VI - Customs Modernization, Pub. L. No. 103-182, the North American Free Trade Agreement Implementation ("NAFTA") Act (107 Stat. 2057), enacted December 8, 1993. The Customs Regulations were revised on March 5, 1998 to implement the amended statutes.

The Customs Regulations 191.72 (19 CFR 191.72) provide for exportation procedures:

Exportation of articles for drawback purposes shall be established by complying with one of the procedures provided for in this section (in addition to providing prior notice of intent to export if applicable (see §§ 191.35, 191.36, 191.42, and 191.91 of this part)). Supporting documentary evidence shall establish fully the date and fact of exportation and the identity of the exporter. The procedures for establishing exportation outlined by this section include, but are not limited to: (a) Actual evidence of exportation consisting of documentary evidence, such as an originally signed bill of lading, air waybill, freight waybill, Canadian Customs manifest, and/or cargo manifest, or certified copies thereof, issued by the exporting carrier;

(b) Export summary (§ 191.73);
(c) Certified export invoice for mail shipments (§ 191.74); (d) Notice of lading for supplies on certain vessels or aircraft (§ 191.112); or (e) Notice of transfer for articles manufactured or produced in the U.S. which are transferred to a foreign trade zone (§ 191.183).

Under 19 CFR 191.73, the export summary procedure (“ESP”), consists of a Chronological Summary of Exports used to support a drawback claim, which may be submitted as part of the claim in lieu of actual documentary evidence of exportation. There is no similar provision for a document such as a “Chronological Summary of Destruction”. Under the export summary procedure, the drawback claimant, whether or not the exporter, "shall maintain the Chronological Summary of Exports and such additional evidence of exportation required by Customs to establish fully the identity of the exported articles and the fact of exportation." 19 CFR 191.73(c)(1). In the same subparagraph, the regulation further states that “actual evidence of exportation, as described in 191.72(a) of this subpart, is the primary evidence of export for drawback purposes.” In the following subparagraph, the regulations require the claimant to retain records supporting the Chronological Summary of Exports for three years after payment of the related claim, and state that such records are subject to review by Customs. 19 CFR 191.73(c)(2). The prior regulations also required, in 19 CFR 191.53 (e), the claimant to maintain the records of exportation, and support the chronological summary with “any additional evidence required by Customs officers to establish fully the identity of the exported articles and the fact of exportation.”

As to “actual evidence of exportation”, 19 CFR 191.72(a) describes such evidence as “consisting of documentary evidence, such as an originally signed bill of lading, air waybill, freight waybill, Canadian Customs manifest, and/or cargo manifest, or certified copies thereof, issued by the exporting carrier.”

Verification of drawback claims is provided for in 19 CFR 191.61. The provision is substantially similar to that in the regulations, 19 CFR 191.10, prior to their revision. The regulations, 19 CFR 191.61(a)(1) provide that “[a]ll claims shall be subject to verification by the port director where the claim is filed.” The regulation further provides, in paragraph (b) as follows with respect to the method of verification:

The verifying office shall verify compliance with the law and this part, the accuracy of the related general manufacturing drawback ruling or specific manufacturing drawback ruling (as applicable), and the selected drawback claims. Verification may include an examination of all records relating to the transaction(s).

In this case, the May 22, 1997 request for information was an attempt to verify the drawback claims. Both of the claims for drawback on the basis of exportation (110-xxxx176-7 and 110-xxxx174-2), and the claim questionably based on destruction (110-xxxx185-9) were subject to that request for information.

Due to the claimant’s failure to provide the evidence required to establish fully the identity of the exported articles and the fact of exportation, or give any reason why it was unable to provide such evidence, the drawback unit was unable to verify the subject claims, and as a result, denied drawback.

The ESP privilege was an alternative means to establish exportation, under the Customs Regulations 191.51 (19 CFR 191.51) prior to the revision of the regulations. The ESP was an alternative to filing a notice of exportation, under 19 CFR 191.52, with Customs. Under prior 19 CFR 191.52, the notice of exportation could be certified by Customs at the time of exportation, or submitted, uncertified, to Customs with the drawback entry along with supporting documentary evidence that fully established the time and fact of exportation and the identity of the exporter. Under the current, revised regulations, any drawback claimant may use the ESP, for drawback under 19 U.S.C. §1313(a), (b), (c), (j) or (p), without having previously been approved for such procedure. However, the ESP did not in the past and does not currently exempt a drawback claimant from submitting the actual evidence to Customs, upon a verification of a drawback claim.

With respect to drawback entry 110-xxxx098-3, the drawback statute, 19 U.S.C. §1313(j)(1)(A), requires that the imported merchandise be exported or destroyed before the close of the 3-year period, beginning on the date of importation. Therefore, for this drawback claim, due to the importations which occurred more than three years prior to the date of destruction, and the entry which is not a valid entry in ACS, the amount of duty paid which is subject to drawback, must be reduced by $665.64, and the 1,248 number of pieces of merchandise identified must be reduced by 250. The drawback entry must be reliquidated accordingly.

As to claim 110-xxxx185-9, from which it is not clear whether the merchandise is claimed to have been exported or destroyed, the requested evidence of exportation was not provided. In the event that the merchandise is claimed to have been destroyed, counsel for the protestant was given the opportunity to provide any existing evidence of destruction, and none has been provided. No such evidence was provided at the time the claim was filed, or with the protest, or subsequently. The Customs Regulations, prior to their amendment in 1998, at the time the drawback claim was filed, 19 CFR 191.141(f), provided that the claimant should notify Customs at least seven working days prior to the intended date of destruction, by submitting a CF 3499 with a CF 7539. The regulations provided that destruction after such notification on the CF 3499 shall be deemed to have occurred under Customs supervision. The regulations further provided that after destruction, “the claimant and any Customs officer who witnessed destruction shall certify on Customs Form 7539 or an attachment thereto the time and place of destruction.” The file does not have a CF 3499 with any notification of destruction to Customs. The CF 7539 has the broker’s signature certifying to the exportation or destruction and asserting “see attached” as to the time and place of destruction. The Chronological Summary of Exports does not provide sufficient evidence of the time and place of destruction, as it is not even clear from that document whether the merchandise was asserted to have been exported or destroyed.

It is well established that drawback laws confer a privilege, not a right. Swan & Finch Company v. United States, 190 U.S. 143, 23 Sup. Ct. 702 (1903). When merchandise is imported and a drawback statute may potentially be applicable, an accruing or inchoate right may be said to arise. However, the right to recover drawback ripens only when all provisions of the statute and applicable regulations prescribed under its authority have been met. Guess? Incorporated v. United States, 944 F.2d 855 (Fed. Cir. 1991); Romar Trading Co., Inc. v. United States, 27 Cust. Ct. 34 (1951); General Motors Corporation v. United States, 32 Cust. Ct. 94 (1954). Drawback claimants must strictly adhere to the requirements set forth in the statutes and applicable regulations. United States v. W. C. Hardesty Co, Inc., 36 CCPA 47, C.A.D. 396 (1949); Spencer, Kellogg & Sons (Inc.) v. United States, 13 CCPA 612 (1926). The regulations requiring notice of intent to export or destroy are mandatory, and compliance with the regulations is a condition precedent to the right to recover drawback. See id., and W.R. Grace & Co. v. United States, 15 Cust. Ct. 105, C.D. 953 (1937).

HOLDING:

With respect to drawback claims, 110-xxxx176-7, 110-xxxx174-2, and 110-xxxx185-9, neither the exportation nor destruction of the merchandise has been established in accordance with the applicable statute and regulations. With respect to drawback claim 110-xxxx098-3, the destruction of the merchandise has been established, and drawback should be allowed with the exception of the entries which occurred more than three years prior to the destruction, and the invalid entry. With respect to drawback claim 110-xxxx184-2, the destruction of the merchandise has been established, and drawback should be allowed, with the exception of the miscalculated duty and merchandise which cannot be established to have been imported on the specified entries.

The protest should be DENIED in part and GRANTED in part in accordance with the above instructions. 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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