United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2002 HQ Rulings > HQ 228898 - HQ 229413 > HQ 228981

Previous Ruling Next Ruling
HQ 228981




June 21, 2002

DRA-4-RR:CR:DR: 228981 IOR

CATEGORY: DRAWBACK

Port Director
U.S. Customs Service
555 Battery St.
San Francisco, CA 94126

Attn: Thomas Valenzuela

Drawback Unit

RE: Protest Application for Further Review No. 2809-00-100502; 19 U.S.C. 1313(j)(2); broccoli; commercial interchangeability; evidence of exportation; 19 CFR 191.72

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 DG2-xxxx069-2. The drawback entry was filed on July 28, 1999, and liquidated on May 19, 2000. The protestant was identified as the drawback claimant. The entry was liquidated with no drawback. The drawback claim designated entries of broccoli imported from Mexico, and drawback was claimed under 19 U.S.C. §1313(j)(2) on the basis of broccoli exported to non-North American countries. Drawback was denied on the grounds that the evidence does not establish that the imported and exported merchandise was commercially interchangeable.

On December 2, 1999, the protestant’s broker submitted to the San Francisco Drawback Unit, a Request for a Non-Binding Predetermination of Commercial Interchangeability. In that request, it was stated that the protestant imports and exports fresh broccoli. The request states that USDA specifications for broccoli are for three grades, USDA Fancy, USDA No. 1 and USDA No. 2. With regard to broccoli crowns, the request states that “product labeled ‘Broccoli Crowns’ under this request will be considered Commercially Interchangeable based solely on a grade basis.” By Customs letter dated February 1, 2000, to the broker, Customs stated that the December 2 request was insufficient as Customs was unable to validate the assertions that the imported and exported broccoli are commercially interchangeable. Customs decision was appealed by the broker’s letter of February 11, 2000, which stated that the fresh produce industry has established standards governing the sale of broccoli, including “the type of broccoli, i.e. bunches or crowns”. The letter also states that for purposes of the non-binding determination, the broccoli bunches and crowns are treated as two separate products. With respect to relative value, the letter states that U.S. Customs issues values for each size and type of broccoli, and that the value of the broccoli is driven by factors such as market location, supply and demand.

There is a letter from the protestant’s broker to the Drawback Unit, dated December 15, 1999, enclosing a copy of “the U.S. Standards for Grades of Broccoli”. In an apparent response to a Customs notice of proposed liquidation with no drawback, the broker stated that the imported and exported broccoli “are commercially interchangeable and both meet industry standards for fresh/chilled broccoli for the fresh market.”

On March 15, 2000, Customs requested additional information and documentation from the protestant, including sample sale contracts, USDA certificates supporting the grades, and import and export invoices. In a Notice of Action, dated May 4, 2000, Customs notified the protestant that the drawback claim had been liquidated with no drawback, because based on the limited information provided, Customs had been unable to validate that the imported and exported broccoli is commercially interchangeable. The subject protest was filed on July 28, 2000.

The drawback entry describes both the imported and exported merchandise as “Broccoli Fr/Ch”. The attached summary of imports describes the merchandise as “Sp. Broccoli Fr/Ch”. The attached summary of exported or destroyed merchandise describes the exported merchandise as “Broccoli Crowns”. Both the imported and exported broccoli is asserted to be classified under subheading 0704.90.4020, Harmonized Tariff Schedule of the United States (HTSUS). Subheading 0704.90 refers to “other (including sprouting broccoli)”, thus the “Sp. Broccoli” on the summary of imports appears to refer to the “sprouting broccoli”. According to the summaries, 42,778 cartons of broccoli were imported, and 42,778 cartons of broccoli were exported.

With regard to the imported merchandise, on the CF 7501’s, the merchandise is described as both “SP BROCOLI” and “BROCCOLI FRESH OR CHILLED”. On the Customs House Brokers Pro-forma invoices, the merchandise is described as “CTNS BROCCOLI”. On the Mexican invoices, the merchandise is described as “Cajas de [boxes of] Brocoli”. The entered value of the broccoli ranges from $3.00 to $10.26.

All of the import invoices indicate a unit value of $3.00. The entries on which the broccoli is valued at more than $3.00 had been subject to reappraisement by Customs. The broccoli was entered from January 22, 1998 through April 2, 1998. Thirty-five consumption entries are designated. Documentation was provided for fifteen of the import entries. The CF 7501’s for two of the fifteen entries (K76-xxxx453-0 and K76-xxxx505-7) indicate that the protestant’s broker was the importer of record.

With regard to the exported merchandise, on the bills of lading, the merchandise is described as “BROCCOLI IN CARTONS”. On the protestant’s invoices the merchandise is described as “Broccoli”, except on two of the export invoices the merchandise is described as “Broccoli – D&E” and on one export invoice the merchandise is described as “Broccoli – R&L”. Of the 46 exports, the purchaser was the same for all but two of the exports. The export price per unit ranged from $9.50 per unit to $24.28. The $24.28 unit price was for one of the two sales to a different purchaser. Of the remaining 44 exports, the unit price ranged from $9.50 per unit to $20.80. The invoice dates for the exports were from January 26, 1998 through April 23, 1998. In some instances there was a range in the prices for a shipment of the same quantity, to the same purchaser, invoiced on the same day and shipped on the same Bill of Lading. For example, 960 cartons of broccoli were sold to purchaser A by protestant’s invoice 106157 dated March 4, 1998, for $13.00 per unit. Protestant’s invoice 106158, dated March 4, 1998 was for 960 cartons of broccoli, sold to purchaser A, for $18.00 per unit. All 1920 cartons were shipped by the same Bill of lading, dated March 5, 1998.

Except for the shipments under invoices 106126 and 106502, all of the exports are documented with a certified copy of a dated bill of lading. The bills of lading are certified as being true and accurate copies of the original bills of lading, by the protestant’s president, and indicate the merchandise was laden on board the outbound vessel. The export under invoice 106126 is documented only with a certified copy of a Shipper’s Export Declaration (SED). The SED does not indicate a date of export or date of lading. The bill of lading for the export under invoice 106502 is not dated and does not have an export date or date of lading.

According to the protest, the protestant is of the understanding that drawback was denied because the imported and exported merchandise consisted of broccoli crowns for which there are no USDA grading standards. The protestant has supplied documentation intended to establish the fresh market criteria for broccoli crowns. In support of the claim that there is no grade for broccoli crowns, and that the broccoli crown standard is “fresh market criteria”, the protestant has provided the following documents:

A copy of a Federal-State Inspection Certificate for “loose broccoli”, dated February 28, 2000. The document indicates that there is “no established U.S. grade”. A letter dated May 31, 2000 from the U.S. Department of Agriculture (USDA), which states that there currently is no USDA recognized grading standard for broccoli crowns. The letter states that there are U.S. grade standards for Bunched Italian Sprouting Broccoli, but those are not applicable to broccoli crowns. A page from the USDA inspection manual for Bunched Italian Sprouting Broccoli is attached, and according to the letter the information on the Bunched Italian Sprouting Broccoli provides inspectors with proper information and procedures to complete an inspection based on industry or customer specifications for Broccoli Crowns. A letter dated December 1, 1999 from the protestant to a Mexican grower, stating that the grower is under contract to grow, pack and supply the protestant with broccoli crowns for sale in the U.S. and foreign markets. The letter sets forth the standards for acceptable broccoli crowns. Department of Food and Agriculture California Code of Regulations, section 1414, standards for Italian sprouting broccoli. A letter dated July 12, 2000 from a California produce company stating that it purchases broccoli crowns from the protestant, and that the merchandise purchased meets the criteria set forth therein (the criteria is the same as that in the December 1, 1999 letter). The Packer 2000 Produce Availability & Merchandising Guide, p. 58 on broccoli. The publication describes the U.S. Grades as “U.S., Fancy”, “U.S., No. 1”, and “U.S., No. 2”. The publication describes broccoli choices as follows:

Broccoli options include bunches, florets and gourmet spears of uncut stalks 4 to 6 inches long. Broccoli crowns, which have a 5-inch stalk, are becoming more popular at retail.

The protest also contains a chart which depicts the availability of broccoli from Mexico and California throughout the year.

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 May 19, 2000, when it was liquidated with no drawback. This protest was timely filed on July 28, 2000, 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.

From our review, we find that the claim of commercial interchangeability is not substantiated. We cannot determine from the import documents the type of broccoli imported, whether it consists of bunches, crowns, spears or florets. Similarly for the exported merchandise, we cannot determine from export documents whether the exported broccoli consists of bunches, crowns, spears or florets. The broccoli is just described as “broccoli” or “sp broccoli”. We can only assume that the latter is sprouting broccoli, and do not know what type of broccoli the former is. As Customs is unable to identify the specific type of merchandise entered, such as crowns or bunches, no determination of commercial interchangeability can be made. In the protest, the protestant appears to assert that the imported and exported merchandise consisted of broccoli crowns. However, this is not apparent from the documentation submitted. In the appeal of the denial of the request for a non-binding predetermination of commercial interchangeability, the protestant states that broccoli bunches and crowns are treated as two separate products. The transaction documents do not include any information such as part numbers or descriptive terms from which it could be determined whether the merchandise consisted of broccoli crowns or bunches or other types.

The letters submitted dated December 1, 1999, and July 12, 2000 regarding the standards for broccoli crowns, refer to the protestant purchasing and selling broccoli crowns. However, that documentation does not establish that the protestant does not purchase and sell other types of broccoli. None of the documentation submitted establishes what type of broccoli is the subject of the drawback claim. The lack of a USDA grade for broccoli or broccoli crowns may not preclude a finding of commercial interchangeability, however, a failure to document the type of broccoli imported and exported, on which a determination of commercial interchangeability could be based does preclude a finding of commercial interchangeability.

The May 31, 2000 letter from the USDA refers to inspection based on industry or customer specifications for Broccoli Crowns. In this case the letters dated December 1, 1999 and July 12, 2000 discuss specifications for broccoli crowns, however, no specifications were provided for the imported and exported merchandise which is the subject of this protest. None of the transaction documents submitted with the drawback entry included specifications or industry standards for broccoli crowns. According to the May 31, 2000 USDA letter, such documentation had to exist in order for the merchandise to be inspected.

We note that subheading 0704.90.4020, HTSUS, under which both the imports and exports are said to be classified, are basket tariff provisions. Without additional information, classification under a basket tariff provision may not be persuasive on the issue of commercial interchangeability under 19 U.S.C. §1313(j)(2).

In addition to the lack of descriptions of the merchandise, the commercial interchangeability of the broccoli is also not supported by the difference in relative values of the imported and exported broccoli. As stated in the facts, the entered value of the imported broccoli ranges from $3.00 to $10.26, and the sales price of the exported broccoli ranges from $9.50 to $24.28. The difference in relative value between the export and import ranges from the export value being less than the import value, to the export value being over 700% greater than the import value. Even the price difference, of 38.4%, between exported broccoli sold and shipped to the same customer, on the same day, under the same bill of lading, with no explanation of the price differences, raises a question as to whether all of the merchandise exported is the same type or quality of broccoli. While Customs may determine the correct entered value of the imported merchandise, Customs does not have anything to do with the invoice price of the imported merchandise or the invoice price of the exported merchandise. The corrected entered value for some of the imports, does not explain the difference in the relative values of the imported and exported merchandise. Finally, the chart submitted by the protestant regarding the availability of broccoli, does not explain the difference in relative values. It has no bearing on why broccoli sold and shipped to the same customer on the same day has a price difference of 38.4%.

We also note two evidentiary issues that would preclude drawback for at least a portion of the subject claim. Regarding exportation, in general, the proof of exportation requires evidence of an intent for the merchandise at issue to unite with the mass of things belonging to that of another country, and evidence that the merchandise left the U.S. See 19 CFR 101.1. The documents submitted generally support the intent for the subject merchandise to join the commerce of another country. Such intent is shown by the invoices. Evidence that the merchandise left the U.S. could consist of, for example, a bill of lading indicating that the goods are on an outbound vessel or aircraft, or that the goods were entered into a foreign government’s Customs. The fact that the merchandise under export invoices 106126 and 106502 left the U.S. has not been established. Under the regulations applicable at the time the drawback claim was filed, 19 CFR 191.52(c)(2), for uncertified notice of exportation, the supporting documentary evidence must establish fully the time and fact of exportation. The current regulations, 19 CFR 191.72, also require that the date and fact of exportation be established. The date of exportation is not indicated by the documents for either invoice.

Secondly, for at least two of the designated entries, the protestant’s broker was the importer of record. The Customs regulations, 19 CFR 191.33(b), require the drawback claimant to have a certificate of delivery documenting the transfer of the merchandise from the person who imported and paid the duty on the imported merchandise. The file does not contain any certificates of delivery documenting a transfer of merchandise from the importer to the protestant.

HOLDING:

The protestant has not met the requirements of 19 U.S.C. §1313(j)(2) because the commercial interchangeability of the imports and exports cannot be determined from the transaction documents.

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

Previous Ruling Next Ruling

See also: