HQ 229276 - Application for Further Review: Protest No. 0401-01-100196; drawback of Internal Revenue taxes; 19 U.S.C. § 1313(j)(1); 27 C.F.R. § 252.171; Mitsubishi v. United States, 55 Cust. Ct. 319 (1965); Rotschild v. United States, 16 Ct. Cust. App. 442, T.D. 43190 (1929). - United States International Trade Commision Rulings

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HQ 229276

December 10, 2001

DRA-4 RR:CR:DR 229276 LLB

Category: DRAWBACK

Port Director of Customs
10 Causeway Street
Boston, MA 02222-1056

RE: Application for Further Review: Protest No. 0401-01-100196; drawback of Internal Revenue taxes; 19 U.S.C. § 1313(j)(1); 27 C.F.R. § 252.171; Mitsubishi v. United States, 55 Cust. Ct. 319 (1965); Rotschild v. United States, 16 Ct. Cust. App. 442, T.D. 43190 (1929).

Dear Sir or Madam:

The above-referenced protest has been forwarded to this office for further review. We have considered the points raised by the protestant and your office. Our decision follows.

FACTS

This protest concerns a claim for drawback of internal revenue taxes (hereinafter IR taxes) for exported spirits. The following facts were gathered from the protestant’s drawback entry and attachments thereto. According to the CF 7501, the protestant imported 1, 026 cases of Chambord Liqueur, a cordial, on October 25, 1999, upon which an excise tax was assessed. Based on the protestant’s application to the Bureau of Alcohol, Tobacco and Firearms (BATF), it withdrew 140 cases of an unidentified cordial from a BATF distilled spirits plant on February 18, 2000, upon which IR taxes were assessed. The protestant’s drawback documents also include a bill of lading, which shows that an unidentified quantity of alcoholic beverages was shipped to the U.S. Virgin Islands on February 18, 2000.

The protestant filed a claim for drawback of its IR taxes under 19 U.S.C. § 1313(j)(1) for 135 cases of Chambord liqueur. The port denied drawback reasoning that drawback was not allowed for merchandise shipped to the U.S. Virgin Islands pursuant to 19 C.F.R. § 191.5, which provides in pertinent part: “[u]nder 19 U.S.C. § 1313, drawback of Customs duty is not allowed on articles shipped to . . .the U.S. Virgin Islands.” In its protest filed thereto, the protestant argued that since it was not seeking a refund of Customs duty, the foregoing provision is inapplicable. Further, the protestant argues that refund of the IR tax is provided for under BATF regulation, 27 C.F.R. § 252.171.

ISSUES

Whether the protestant may receive drawback of its IR taxes pursuant to 27 C.F.R § 252.171

Whether protestant may receive drawback of its IR taxes under 19 U.S.C. § 1313(j)(1)

LAW AND ANALYSIS

Initially, we note that the matter under protest, denial of drawback, is protestable under 19 U.S.C. § 1514(a)(6) and the protest was timely filed inasmuch as it was filed within 90 days from the May 25, 2001, denial of drawback. See 19 U.S.C. § 1514(a); 19 C.F.R. § 174.12(e)(1).

The protestant argues in its protest that Customs should refund its IR taxes pursuant to 27 C.F.R. § 252.171, which provides in pertinent part:

Distilled spirits manufactured, produced, bottled in bottles, packed in containers, or packaged in casks or other bulk containers in the United States on which an internal revenue tax has been paid or determined which have been marked . . . especially for export with the benefit of drawback may be: (a) Exported; . . .
(d) Transferred to and deposited in a customs bonded warehouse . . . On receipt by the regional director (compliance) of required evidence of exportation . . . or transfer, there shall be allowed to the bottler (or packager) drawback . . .

(emphasis added). Pursuant to 27 C.F.R. § 252.11, the “regional director(compliance)” is defined as “[t]he principal ATF regional official responsible for administering regulations in this part.” It is clear from the foregoing regulations that claims for drawback of IR taxes under § 252.11 should be obtained from a BATF regional director and not from Customs.

Whether the evidence presented meets the requirements of 27 C.F.R. 252.171 is within the discretion of the regional director (compliance); therefore, we will not review protestant’s drawback claim to determine whether the evidence is sufficient under this regulation.

Insofar as protestant is claiming drawback of IR taxes under 27 C.F.R. § 252.171, the protestant may not receive drawback under 19 U.S.C. § 1313(j)(1), the provision under which the protestant originally filed for drawback. In HQ 227347(April 18, 1997) & 227916, we determined that IR tax on tobacco products was not refundable under § 1313(j) inasmuch as the tax on tobacco products and drawback thereof is specifically provided for in the Internal Revenue Code. Likewise, in the present case, drawback on distilled spirits is established under the Internal Revenue Code. See 26 U.S.C. § 5062(b); 27 C.F.R. § 252.171.

If the claim is based on 19 U.S.C. § 1313(j)(1), drawback eligibility requires that the goods be exported. Shipments to U.S. possessions are not exports under the Customs laws. Mitsubishi v. United States, 55 Cust. Ct. 319 (1965); Rotschild v. United States, 16 Ct. Cust. App. 442, T.D. 43190 (1929). Also, the claimant under § 1313(j)(1) must show that the liqueurs imported under entry 113-xxxx859-5 were the liqueurs exported. The evidence as to the identity of the goods shipped to the U.S. Virgin Islands, even if the shipment was an export, is inadequate. The liqueurs sent to the U.S. Virgin Islands were removed from a BATF distilled spirits plant on February 4, 2000 and sent to a Customs bonded warehouse. The liqueurs were removed from the Customs bonded warehouse for shipment to the U.S. Virgin Islands on February 18, 2000. However, there is no evidence to show that the liqueurs in the BATF distilled spirits plant were part of the shipment entered under consumption entry 859-5 of October 25, 1999, and thereby released from Customs custody.

Consequently, based on the available evidence, even if 19 U.S.C. § 1313(j)(1), rather than 26 U.S.C. § 5062, was the appropriate statutory basis and a shipment to a U.S. possession was an export, the evidence is inadequate to show that the liqueurs imported were the liqueurs shipped to the U.S. Virgin Islands.

HOLDING

The protestant may not receive drawback of its IR taxes pursuant to 26 U.S.C. § 252.171 insofar as drawback under this provision is within the authority of the Bureau of Alcohol Tobacco and Firearms. The protestant may not receive drawback of its IR taxes pursuant to 19 U.S.C. § 1313(j)(1) because the taxes on distilled spirits imposed by 26 U.S.C. § 5001(a) and drawback thereto is established by 26 U.S.C. § 5062(b). Further, even if a claim under 19 U.S.C. § 1313(j)(1) was appropriate, a shipment to the U.S. Virgin Islands is not an export and the evidence is inadequate as to the identity of the liqueurs shipped with the liqueurs imported even if the shipment to a U.S. possession was an export. The protest is DENIED.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing 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.ustreas.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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