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HQ 228724

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January 9, 2002

DRA-2-01-RR:CR:DR 228724 IOR

CATEGORY: DRAWBACK

Port Director
U.S. Customs Service
Port of Los Angeles Seaport
301 E. Ocean Blvd
Long Beach, CA 90802

Attn: Richard Andrejko, Drawback Unit

RE: Protest AFR 2704-99-102135; drawback; 19 U.S.C. 1313(g); 19 CFR 191.131; 19 CFR 191.51

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 drawback entry H55-xxxx2706-6. The imported merchandise consists of two diesel marine engines. The engines were used in the manufacture of a motor yacht, in accordance with a specific manufacturing drawback ruling, approved September 27, 1996. The drawback ruling states that the drawback claims will be filed in San Francisco. Drawback is claimed under 19 U.S.C. §1313(g).

The protestant, through its broker located in San Diego, filed the drawback entry on a CF 331 at the Port of Otay Mesa, California, on December 10, 1998. Customs officials at Otay Mesa forwarded the entry to the Los Angeles Drawback Unit, which is the Drawback Unit for San Diego. According to the Customs Summons and Information Report, CF 6445A, it is unclear when the drawback entry was received by the Los Angeles Drawback Unit. The file contains a letter dated December 18, 1998, stamped as received by the Los Angeles Drawback Unit on December 22, 1998, from the broker, forwarding the “entry submitted to Otay Mesa Customs on 12-10-98 with form changes on new ones.” There is a form letter dated January 13, 1999, from the Los Angeles Drawback Unit rejecting the subject drawback entry as incomplete. The reason given for the rejection is that the claim must be filed on drawback entry form CF 7551.

According to the CF 6445A, on January 19, 1999, the broker submitted the entry on the CF 7551. By letter dated February 9, 1999, the Drawback Unit notified the broker that in order to process the subject drawback entry, the CF 7551 needed correction consisting of the correct entry type, the claimant identification number, completion of the receipt date and use date information, and completion of the back side of the form, which provides for descriptions of the manufactured articles, information on the exported merchandise and the declarations. A complete and corrected entry was received by the drawback unit on February 12, 1999.

By letter dated July 7, 1999, the Drawback Unit notified the broker that liquidation of the drawback claim at $0.00 is proposed, for the reason that the broker/claimant 1) failed to file the entry on CF 7551 in accordance with 19 CFR 191.51(a); 2) failed to timely file the entry on the correct form within three years after the exportation; and 3) failed to provide evidence of exportation in accordance with 19 CFR 191.72. The broker responded by letter dated July 12, 1999, stating that the delay in filing the correct entry form was due to Customs failure to timely notify the broker of the error. With regard to evidence of exportation, the broker states that the proof of export is a U.S. Customs Cruising Permit, and a vessel document showing British Registry. By letter dated July 19, 1999, the Drawback Unit notified the broker that the drawback entry had been liquidated as proposed for the reasons stated in the July 7, 1999 letter, and additionally if the Cruising Permit and British Registry were proof of export, the claim was not timely filed. The drawback entry was liquidated with no drawback on August 6, 1999.

The subject protest was filed on August 13, 1999. The protest stated that “we have to submit drawback entries through Otay Mesa”, and “[a]s we must submit through Customs Otay Mesa not direct, we feel the entry was timely”. In the application for further review section, the protestant responded “yes” to the questions “[h]ave you made prior request of a district director for a further review of the same claim with respect to the same or substantially similar merchandise” and “[h]ave you received a final adverse decision from the U.S. Court of Int’l Trade on the same claim with respect to the same category of merchandise or do you have action involving such a claim pending before the U.S. Court of International Trade.”

There is a facsimile cover sheet dated February 8, 2000 to the U.S. Customs Drawback Division, referencing the subject protest and drawback entry, stating:

Per our conversation this A.M., copy of protest follows. Original in the mail.

Attached is a revised CF 19, which contains the same protest information, but which has been rewritten and in the application for further review section the protestant has responded “no” to all of the questions regarding the criteria.

With regard to the manufactured yacht, the drawback entries on the CF 331 and corrected CF 7551, contain substantially the same information. According to the drawback entries, the imported merchandise consisted of two diesel marine engines imported on December 23, 1993 and entered on January 3, 1994, the yacht was produced in 1995, the imported merchandise was used in manufacture on August 31, 1995, and the manufactured yacht was delivered to the purchaser on December 15, 1995. In addition, the file contains the following documents:

Builder’s Certificate – dated August 31, 1995, and specifies that the yacht on which the drawback claim is based was “built/moulded/fitted out” to the order of the purchaser, located in Grand Cayman; Bill of Sale – dated September 28, 1995, for the sale of the yacht from the shipbuilder, protestant herein, to the purchaser in the Cayman Islands; Certificate of British Registry – dated October 5, 1995, indicating that the Port of Registry of the yacht is in the Cayman Islands, and gives the principal place of business address of the purchaser as the Cayman Islands (the document appears to be a copy of a certified document); U.S. Customs Service Application and License to Cruise in United States’ Waters – issued October 19, 1995, for the period of October 19, 1995 to January 19, 1996, to the yacht, identified as being under British registry, for permission to arrive and depart from the U.S. and to cruise in the waters of the Customs areas of Vancouver, Washington; Astoria, Oregon; San Diego, California; and Florida; and Delivery Receipt – dated December 15, 1995, accepts delivery of the yacht in Ft. Lauderdale, Florida, by the purchaser.

ISSUES:

1) Whether the application for further review was timely filed?

2) Whether the protestant is entitled to drawback under 19 U.S.C. §1313(g)?

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 August 6, 1999, when it was liquidated with no drawback. This protest was timely filed on August 13, 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(g).

It appears however that the Application for Further Review was not timely filed. Under 19 U.S.C. §1515(a), an application for further review must also be filed within 90 days of the protested action. In accordance with the Customs Regulations, 174.25 (19 CFR 174.25), an application for further review “shall” contain allegations that the protesting party:

Has not previously received an adverse administrative decision from the Commissioner of Customs or his designee nor has presently pending an application for an administrative decision on the same claim with respect to the same category of merchandise; and Has not received a final adverse decision from the Customs courts on the same claim with respect to the same category of merchandise and does not have an action involving such a claim pending before the Customs courts.

On the protest form filed within the 90 day filing period, the protestant responded to (ii) above, in the affirmative, and thereby did not meet the criteria for further review.

With regard to the drawback claim, 19 U.S.C. §1313(g) provides, in pertinent part, for drawback on materials for construction and equipment of vessels built for foreigners:

The provisions of this section shall apply to materials imported and used in the construction and equipment of vessels built for foreign account and ownership, notwithstanding that such vessels may not within the strict meaning of the term be articles exported.

The statute is implemented by 19 CFR Subpart M, and within that subpart, 19 CFR 191.33(b) defines foreign account and ownership as:

[o]nly vessels or aircraft built or equipped for the account of an owner or owners residing in a foreign country and having a bona fide intention that the vessel or aircraft, when completed, shall be owned and operated under the flag of a foreign country.

Clearly, the Builder’s Certificate and the Certificate of British Registry, show that the vessel was built for the account of the purchaser, whose principal place of business is in the Cayman Islands, a British Crown Colony, and that the vessel is in fact owned and operated under the British flag.

Two additional requirements under the drawback statute are under section 1313(i), which requires that the completed article is exported within five years after the importation of the imported merchandise, and section 1313(r)(1), which requires that a drawback entry be filed within three years after the date of exportation. Both require a determination of the date the vessel was “exported”.

It is not clear from the evidence that the vessel was ever exported at all, whether or not within the strict meaning of the term. In HQ 223874, dated October 9, 1992, in a decision under the same drawback provision, there was no evidence that the ownership of the vessel had or would transfer to a foreign concern, and in any event, at the time the vessel left the Customs territory, the vessel was owned by a domestic company.

The statutory language requires an exportation, although that exportation is not required to meet the strict definition of an export. If no exportation were required, the statute could say so. Instead, the statutory language requires a “limited” export. "Exportation" has been defined as "a severance of goods from the mass of things belonging to this country with an intention of uniting them with the mass of things belonging to some foreign country. United States v. The National Sugar Refining Co., 39 C.C.P.A. 96, 100 (1951). In this case, there is no evidence of any intent to unite the vessel with the mass of things belonging to any other country. However, such is not required pursuant to section 313(g).

An “export” is defined as “to send or carry (a commodity, for example) abroad, esp. for trade or sale.” American Heritage Dictionary, 2d College ed.(1982) at 478. There is no evidence that the yacht in question ever went outside of the U.S. Customs territory, however it was delivered to a foreign purchaser. The Application and License to Cruise references cruising in waters of the U.S. Customs area, and arriving to and departing from the U.S. However there is no evidence that the vessel actually departed for the U.S.

Prior to the revision of the drawback regulations by T.D. 98-16 (63 FR 10970), 19 CFR 191.62(d) provided for filing procedures under 19 U.S.C. §1313(g), as follows:

For drawback under [19 U.S.C. §1313(g)], the claimant shall file with the drawback entry a copy of the part of the construction contract showing that the vessel or aircraft was built for foreign account and ownership. In the case of a vessel, except a warship, the claimant also shall file a certificate of clearance for a foreign port and a certified copy of the registry certificate or, in its place, a certificate of the consul of the foreign nation to which the vessel belongs, showing that the vessel has been documented under the flag of that country. No certificates of clearance or foreign documentation shall be required for a warship.

The foregoing provision was deleted by T.D. 98-16 (63 FR 11003).

In this case, with respect to the prior requirements of 19 CFR 191.62(d), the protestant has provided a Builder’s Certificate that shows the vessel was built for a foreign account, as opposed to part of the construction contract. The protestant has also provided what appears to be a copy of a certified registry certificate. The protestant has not provided a certificate of clearance for a foreign port. The formerly required documents would have been helpful in this case, however they are not required, and we must determine eligibility for drawback based on the documentation presented.

If we are to rely on the British Registry document and Application and License to Cruise as evidence of exportation, as claimed by the protestant, we would nevertheless find that the drawback claim was untimely filed in Otay Mesa. The entry on CF 331 was filed on December 10, 1998, more than three years after the dates of the British Registry document and the Application and License to Cruise. We do not agree that the foregoing documents are sufficient evidence of “exportation”, because those documents do not establish that the yacht ever went outside of the U.S. Customs territory.

In this case, however, taking into consideration the Certificate of British Registry, we would consider the Delivery Receipt, indicating delivery of the yacht to the purchaser, to be evidence of delivery to the foreign owner, and sufficient to establish “exportation” for purposes of 19 U.S.C. §1313(g). In United States v. Lockheed Petroleum Services, Ltd., 709 F.2d 1472 (Fed. Cir. 1983), the court looked to the date the vessel “left” the U.S. However, that decision was in the context of the claimant’s failure to file an abstract of manufacture with Customs prior to the departure of the vessel from the U.S., in accordance with regulations no longer applicable. We do not find that departure from the U.S. is required under the facts presented in this case.

The date of the Delivery Receipt is December 15, 1995. The delivery is within five years of the importation, therefore meeting the requirement of 19 U.S.C. §1313(i). Although an exportation within the strict meeting has not been established, the language of section 1313(g), that the “provisions of [section 1313] shall applynotwithstanding that such vessels may not within the strict meaning of the term be articles exported,” creates an exception to the strict requirement of section 1313(i).

On the same grounds, the December 15, 1995 delivery is also the date of “export” for purposes of 19 U.S.C. §1313(r). The drawback entry filed at Otay Mesa on December 10, 1998, was within three years of the delivery of the yacht, however the location of the filing was not in accordance with Customs regulations, as discussed below, and did not constitute a filing as required by the regulations.

The Customs Regulations require the entry to be filed with the drawback office listed in the specific manufacturing drawback ruling (19 CFR 191.51(d)). With respect to the filing location, the protestant gives no reason why it filed the entry in Otay Mesa and failed to file the entry in San Francisco, in accordance with the provisions of its drawback ruling, and the Customs Regulations. 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] instead with an exemption from duty, a statutory privilege due only when the enumerated conditions are met" (emphasis added)).

The December 22, 1998 filing of the entry in Los Angeles, was not within three years of the delivery of the yacht, nor was it in the agreed upon location of San Francisco. The Los Angeles Drawback Unit did not reject the entry at any time on the basis of incorrect filing location, nor did it forward the entry to San Francisco. Customs in Otay Mesa, also did not forward the entry to San Francisco. Customs actions indicate that the filing of the entry elsewhere than in San Francisco was acceptable, and not prejudicial. However, unlike the protestant’s failure to use the proper drawback entry form, as discussed below, there is no basis for the drawback claim not having been filed in San Francisco, in accordance with the drawback ruling approved on September 27, 1996, and Customs should have required that the entry be filed in the correct location. We acknowledge that at the time the entry was received in Los Angeles, it was already untimely and the errors could no longer be corrected.

The Customs Regulations also require the entry to be filed on the CF 7551 (19 CFR 191.51(a)(1)). In this case, the initial entry was on a CF 331, however, it doesn’t appear that any substantive information was not available on that form that would preclude the allowance of drawback. Furthermore, there is a Customs Port (Cargo) Information Notice dated April 27, 1998, which states that the CF 331 was eliminated by the revised Customs regulations, effective on April 6, 1998, and that the new forms, including the CF 7551, are not yet available and their use is not mandatory until further notice. The failure to use the correct form therefore was not prejudicial to Customs, would not preclude drawback, as there is no evidence that on December 10, 1998 the new form was mandatory.

HOLDING:

1) The application for further review, meeting the criteria for further review was not timely filed.

2) The claimant is not entitled to drawback under 19 U.S.C. §1313(g), on the grounds that the drawback claim was not timely filed at the approved place of filing, in accordance with the approved drawback ruling and 19 CFR 191.51(d).

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,

John Durant
Director, Commercial
Rulings Division

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