HQ 229880 - Protest 5301-02-100130; drawback claim; 1313(j)(1); Direct identification; - United States International Trade Commision Rulings

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HQ 229880

July 2, 2003

DRA-4- RR:CR:DR
229880

Bureau of Customs & Border Protection
Port Director of Houston
2350 N. Sam Houston Parkway East
Suite 1000
Houston Texas 77032-3126

Attn: Christina D. Brooks, Drawback Specialist

RE: Protest 5301-02-100130; drawback claim; 1313(j)(1); Direct identification;

Dear Sir or Madam:

Reference is made to Protest No. 5301-02-100130 filed by Danzas AEI Drawback on March 28, 2002 on behalf of Ezrason’s Inc. against the denial of refunds concerning the following drawback entries which were liquidated on December 28, 2001:

AA6-XXXX003-5
AA6-XXXX020-9
AA6-XXXX128-0
AA6-XXXX149-6
AA6-XXXX054-8

FACTS:

The subject drawback entries were filed at the Port of Houston between June 30, 1998 through October 30, 1998. These claims were filed under 19 U.S.C. 1313(j)(1), direct identification unused merchandise drawback. The designated merchandise consisted of textile goods imported from various countries such as Japan, Indonesia and Thailand. The protestant claimed drawback under 1313 (j) (1) alleging that the merchandise had been exported unused to Canada. The Port initially allowed the accelerated payment of these claims, however, upon review of the documents, the Port liquidated the claims without the benefit of drawback on December 28, 2001. The Port’s denial was based on the alleged “failure to establish proof of export and failure to support direct identification of exports to Canada”.

Drawback claim AA6-XXXXX03-5 (03-5) is based on fabric imported under import entry 336-XXXX909-9. The imported fabric is identified as 54 cartons of cotton of style 40S, and Asst.17878. The packing list identifies the contents of each carton by color, number of rolls, yards, net weight and gross weight. For example, carton #7 contains material having a "mini black" color, 156/153/178/74/74 is listed as the contents without further explanation, 5 rolls, 635 yards, 89 kilograms and 98 kilograms, respectively. Carton 13 (handwritten notation as 13A) contains material having a "mini black" color, 146/148/77/111/136/59 as the contents, 6 rolls, 677 yards, 95 kilograms and 104 kilograms respectively. Carton 14 is said to contain material having a" mini black" color, 185/62/48/155/63/64/34/81 as the contents 8 rolls, 692 yards, 98 kilograms and 107 kilograms, respectively. There is a bill of lading covering the movement from the importing vessel to a warehouse, the Industrial Bonded Warehouse, that lists the warehouse storage number of IBW - 964. The warehouse provided a packing list of the received cartons to the protestant. That packing list identified the goods by piece number, yards, weight, and description. For example, piece number 964-7 contains 635 yards, a weight of 216 (apparently in pounds based on the truck bill of lading and 216 pounds would equal 98 kilograms), and described as black 5 rolls. The corresponding identification for lot IBW-964-13 is 677 yards, 229, black 6 rolls and the corresponding information for IBW 964-14 is 692 yards, 236, black 8 rolls.

The import invoice contains a reference to the term " ASST 17878". The import packing list contains the term "17878".

The export shipment is covered by the protestant's instructions to Radix dated May, 28, 1998. Those instructions directed the protestant's broker to pick up lots IB-964-7 (635 yards), IB-964-13 (136 yards) and IB-964-14 (692 yards) for shipment to Canada. The bill of lading on the shipment describes the goods with the numbers 964-7, 964-13 and 963-14 with the respective weights of 216, 228 and 236. The sales invoice to Canada lists the color as mint black watch , lot 18019, cases as 7, 13A and 14 and the respective quantities as 635, 136 and 692. There is an affidavit from the Canadian customer that asserts receipt of fabric described as "40S Wide, Combed Cotton Yarn, Dyed Stripes, Merc., Preshrunk, 100% Cotton " of mint black watch pattern, lot 18019, numbers 7, 13A and 14 and 635, 136 and 692 yards respectively.

Drawback claim AA6-XXXXX20-9 (20-9) is based on fabric imported under import entry 336-XXXX439-9. The imported fabric is identified as 37 cartons of textile piece goods. The import invoice has a reference to the term "ASST 18096". The import packing list contains the heading "ASSORTMENT & WEIGHT" and describes the contents of the cartons. That document contains the handwritten notation "18096" opposite carton numbers 2650,2651 and 2652. The term "ASST 18096" also is typed on the packing list. The respective descriptions of the fabric, pieces and yards in cartons 2650, 2651 and 2652 are "cobalt blue, 10, 976 ", "cobalt blue, 9, 959" and "cobalt blue, 9, 969 ". There is a bill of lading covering the transfer of 38 cartons of piece goods from the dock to the Industrial Bonded Warehouse. The warehouse issued a receipt and packing list to the protestant for 38 cartons received in lot 976. That list identifies the cartons as 976-2650 having 976 yards of cobalt blue fabric, 976-2651 having 959 yards of cobalt blue fabric and 976-2652 having 969 yards of cobalt blue fabric.

The export shipment is covered by the protestant's instruction to Radix dated June 11, 1998 that instructs the broker to pick up goods from the Industrial Bonded Warehouse and lists lots IBW-976 2650 (976 yards), 2651 (959 yards) and 2652 (969 yards). The bill of lading covering the shipment to Canada lists the goods as 976-2650, 976-2651 and 976-2652. The export invoice describes the goods as e/end, cobalt blue color, and lot 18096 for cartons 2650 (976 yards), 2651 (959 yards) and 2652 (969 yards). The drawback claim identified the goods as 100% cotton yarn dyed poplin and lot 18096.

Drawback claim AA6-XXXXX28-0 (28-0) is based on 46 cartons of fabric imported under import entry 336-XXXX239-8. The import packing list lists the relevant cartons as 232 (460 yards), 233 (620 yards), 234 (634 yards) 240 (660 yards), 241 (690 yards), 246 (254 yards), 251 (718 yards), 253 (792 yards), 260 (614 yards), 261 (652 yards), 262 (381yards). There is a bill of lading covering 38 cartons sent to the Industrial Bonded Warehouse and a warehouse receipt issued to the protestant stating that the cartons were in warehouse lot 1019. The warehouse packing list refers to the relevant cartons as 1019-232 (460 yards), 1019-233 (620 yards) 1019-234 (634 yards), 1019-240 (660 yards), 1019-241 (690 yards), 1019-246 (254 yards), 1019-251 (718 yards), 1019-253 (792 yards), 1019-260 (614 yards), 1019-261 (652 yards) and 1019-262 (381 yards).

The export shipment is covered by protestant's instruction to Radix dated August 27,1998 which orders the broker to send the fabric in the Industrial Bonded Warehouse to the protest's customer in Canada and identifies that fabric by the warehouse lot number, carton number and number of yards: IBW-1019- 232 (460 yards), 233(620 yards), 234(634 yards), 240 (660 yards), 241(690 yards), 246 (254 yards), 251 ( 718 yards), 253 (792 yards), 260 (614 yards), 261(652 yards) and 262 (381 yards). The bill of lading covering the shipment to the Canadian customer also lists the same warehouse lot and carton numbers and the corresponding carton weights in pounds. The import packing list states the carton weight in kilograms, but the weights would correspond to those on the import packing list if converted to pounds. The export invoice lists the style numbers, carton numbers and yards. That export invoice lists the lot as 18454.

Drawback claim AA6-XXXXX49-6 (49-6) is based on fabric imported under import entry 336-XXXX839-5.the fabric is identified as 123 packages. There is an import packing list that identifies the cartons by the protestant's purchase order number, carton number, fabric style number, number of rolls, yards, net weight and gross weight as noted above with respect to claim 03-5. There are two bills of lading covering 185 units of fabric from the dock to the Industrial Bonded Warehouse. The warehouse issued a receipt for 187 units (there is a handwritten notation stating 3 pieces over in 1027-87 and 1 piece short in 1027-196) and provided a packing list which identified the fabric as being in lot 1027 and listed the carton number, number of yards, weight and the design or style number. For example, the import packing list identified carton 163 as containing 7 rolls of cobalt blue fabric, design number 2601, 713 yards, 75.5 kilograms net weight and 80.5 kilograms gross weight and covered by protestant's purchase order C-1383E. The warehouse packing list identified carton 163 as being in lot 1027-163, 713 yards, 177 (apparently in pounds since 177 pounds corresponds to 80.5 kilograms) and design number 2601.

The export shipment is covered by the protestant's instruction to Radix dated October 2,1998, which orders the broker to ship fabric in warehouse lot 1027 and lists the carton numbers and corresponding yards. For example, the first item is carton 163 of lot 1027 that contains 713 yards. The bill of lading that covered the shipment to Canada lists the warehouse lot and carton number and weight (apparently in pounds). The export invoice listed the fabric by pattern, lot number, carton number and quantity in yards. For example, the first item is listed as 2601, lot number18454, carton number 163 and 713 yards.

Drawback claim AA6-XXXXX54-8 (54-8) is based on fabric imported under import entries 336-XXXX579-8 (579-8) and 336-XXXX810-0 (810-0).

The fabric on import entry 579-8, in relevant part, covered 26 cartons identified on the import invoice by the protestant's purchase order number, style number, number of rolls and yards. Unlike the other import entries, the import documents do not include a packing list that describes the contents for each carton. The import invoice lists 10 cartons for purchase order CX-4773 containing white cotton broadcloth, style EZZ, ASST.18245, 104 pcs and 6,237.5 yards. The bill of lading covering the movement from the dock to the Industrial Bonded Warehouse describes the merchandise as 26 cartons of woven finished cotton piece goods. The Industrial Bonded Warehouse issued a receipt listing the 26 cartons by warehouse lot number, carton number, yards, weight (apparently in pounds) and a description. The 10 cartons identified on the import invoice are listed on the warehouse packing list by reference to the warehouse lot number (994) and the import purchase order number. For example, the second item on the warehouse packing list for lot 994 is lot 994-1-4773, 660 yards, 165 (apparently in pounds ) and 11 pcs white.

The fabric on import entry 810-0 is identified as 12 cartons of cotton piece goods in cartons 16-27. The import invoice contains the term "ASST 17727" The import packing list describes the contents of cartons 16-27 by reference to the protestant's purchase order number, pattern number, color, number of pieces and yards per piece. Carton 16 is listed as containing 6 pieces of french blue with a total of 724 yards and a net weight of 96 kilograms. The bill of lading from the dock to Bell Distribution Services covers cartons 16-27 that are to be put in lot BD-536. Bell Distribution lists the receipt of 12 cartons, but Carton 25 is not listed in the document that appears to cover lot 536. However, the document does not appear to be a complete copy.

The export shipment is covered by an instruction to Radix dated July 23,1998 that orders the broker to send carton 16 of lot BD-536 from Bell Distribution Services and cartons 6,7 and 8 of lot IBW-994-CX4773 to Canada. Carton 16 is listed as containing 482 yards. Cartons from lot IBW-994-CX4773 are listed as containing 644, 660 and 636 yards, respectively. The bill of lading covering the shipment to Canada from Industrial Bonded Warehouse lists the merchandise as 994-6-4773 (181 apparently in pounds), 994-7-4773 (185 apparently in pounds) and 994-8-4773 (179 apparently in pounds). The bill of lading covering the shipment from Bell Distribution Services to Canada lists the merchandise as lot BD-536 carton 16 containing 482 yards of woven finished cotton piece goods. The export invoice covering the Industrial Bonded Warehouse shipment describes the merchandise as 100% white cotton from lot 18245 and cartons 6, 7 and 8. The yards are listed as 644.5, 660 and 636, respectively. The export invoice covering the shipment from Bell Distribution Services describes the merchandise as 100% french blue combed cotton oxford from lot 00536, carton 16 and containing 482 yards.

The protestant asserts that the six-digit numbers (18019, 18454, 18454, 18096 and 18245) referenced as lot numbers on the export invoices from the goods in the Industrial Bonded Warehouse were assortment numbers rather than lot numbers. The protestant provided a letter of its president that asserted the six-digit numbers were computer-generated numbers that provides a processing link form order through sales shipment. According to the explanation there is no logic in the numbering sequence of the assortment numbers.

ISSUE:

Whether the evidence is sufficient to show that the identity of the fabric was maintained from importation through exportation to Canada to qualify for the exemption provided by 19 CFR 181.45 and 19 USC 1313(j)(1)?

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 was denied on December 28, 2001, when the five subject drawback claims were liquidated without drawback. The protest was timely filed on March 28, 2002, within the 90-day filing deadline set forth in 19 U.S.C. § 1514(c). This protest involved the denial of drawback under 19 U.S.C. § 1313(j)(1) for textile goods allegedly exported to Canada.

Under 19 USC 1313(j)(4), after January 1,1996, the shipment to Canada of a substitute good in place of an imported dutiable good would not be an exportation for the purpose of 19 USC 1313(j)(2). The statute implements Article 303.2 (d) of the North American Free Trade Agreement (NAFTA). Article 303. 6 (b) of the NAFTA exempted from the limitation on drawback with respect to inter-party trade a good that is exported in the same condition as when imported. By 19 CFR 181.45 (b) that exemption was implemented. An imported good that is exported in the same condition to Canada after January 1,1996 would not violate 19 USC 1313(j)(4) and would be entitled to drawback without the NAFTA limitation of Article 303 of the NAFTA and 19 USC 3333.

The issue is whether evidence shows that the fabric sent to Canada was that same fabric that was imported under the identified import entries and entitled to the benefit of the NAFTA drawback exemption in 19 CFR 181.45(b).

The evidence indicates that the specific identification method was used to identify the imported fabric rather than an inventory management method. See Part II, Section 13 of the Appendix to 19 CFR Part 181.Under the specific identification method, the goods are not commingled with other goods. There is no evidence that the imported fabric was commingled with any other fabric. Consequently, resort to identification of commingled merchandise by means of an inventory management method (see 19 CFR 191.14 and Schedule X of the Appendix to 19 CFR Part 181) is not needed.

The use of the assortment numbers is inconsistent. On claim 03-5, the import invoice and import packing list contain the term "ASST 17878" and "17878", while the export invoice and the Canadian customer's affidavit use "18019". On claim 20-9, the term "ASST 18096" and "18096" are used consistently on the import and export invoices and packing lists. On claims 28-0 and 49-6, the terms "18454" is used on the two respective export invoices and does not appear on any of the import documents on either of the two different identified import entries. Claim 28-0 was based on import 239-8 and claim 49-6 was based on import 839-5. On claim 54-8, the import invoice import entry 579-8 contained the term "ASST 18245 and that same term "18245" appears on the corresponding export invoice. On import entry 810-0, the term "ASST 17727" is on the import invoice but it is not on the corresponding export documents. At most, the use of the so-called assortment number is inconclusive as a link. On claim 03-5, two different numbers were used. On claims 28-0 and 49-6 there is no use of the term on either import, yet the same term is used on exports covering those different imports. On claim 54-8, the term "ASST 18245" appears on the import invoice and export invoice on import entry 579-8, but the term "ASST 17727" appears on the import invoice for entry 810-0 and is not used on the export documents. Consequently, only with respect to claim 20-9 is the so-called assortment number used in a manner consistent with the explanation of the protestant's president.

On claim 03-5, the conflict in evidence occurs with respect to the lot number used on the export documents. The imported fabric was moved from the importing vessel to the Industrial Bonded Warehouse and stored in lot IBW-964 as shown by the comparison of the CF 7501, invoice, packing list and warehouse receipt. The protestant's written instructions and the bill of lading identify the fabric by means of the warehouse lot number and the carton numbers. The carton numbers and the description of the contents of the cartons also provide a means to trace the fabric to the import. The protestant's export invoice and the affidavit from the Canadian customer refer to the goods as coming from a different lot, namely: 18019 rather than IBW-964. The protestant's instructions to the broker were made before the shipment occurred and show an intent to draw the fabric from the identified imported lot. The bill of lading appears to have been signed by the Industrial Bonded Warehouse and the carrier who moved the goods to Canada. The bill of lading refers to the warehouse lot numbers that match the warehouse operator's receipt of the imported fabric. All of the carton numbers, and the carton contents for two of the three cartons on the export invoice, match the corresponding data on the warehouse receipt; the export shipment for the third carton is less than the imported amount so that difference would not be significant in terms of drawback entitlement. The carton numbers and quantities match on the protestant's instructions, the export bill of lading, the export invoice and the customer's affidavit. Consequently, the reference to lot 18019 instead of lot IBW-964 on the invoice and affidavit, while confusing, does not override the evidence of the warehouse receipt, the protestant's instructions to its broker and the carrier's bill of lading.

On claim 20-9 the conflict in evidence occurs with respect to the lot numbers used on the export documents. As in claim 03-5, a comparison of the data on the CF 7501, invoice, packing list, bill of lading to the Industrial Bonded Warehouse and the warehouse receipt and packing list shows that the imported fabric was placed in warehouse lot 976. As in claim 03-5, the protestant's instructions to its broker and the carrier's bill of lading to Canada are linked to warehouse lot 976. The number "18096" that is shown on the export invoice as the relevant lot, rather than 976, is the same number that was handwritten on the import packing list opposite cartons 2650,2651 and 2652. Except with this claim, the use of the six-digit assortment number is inconsistent. However, that annotation on the import packing list links the import to the export. In this case, there seems to be little doubt that the exported fabric was the same fabric placed in lot 976 of the Industrial Bonded Warehouse, which, in turn, came from the importing vessel.

On claim 28-0 the conflict in evidence occurs in the lot number. As in claim 03-5 a comparison of the data on the CF 7501, import packing list, the bill of lading to the Industrial Bonded Warehouse, the warehouse receipt and the warehouse packing list show that the imported fabric was in warehouse lot 1019. The protestant's instructions to its broker and the bill of lading covering the shipment to Canada identify the fabric as being from lot 1019. The export invoice lists the relevant lot as 18454. However, the carton numbers, style numbers and number of contained yards link back to the import and warehouse lot.

On claim 49-6 the conflict in evidence is with respect to the lot numbers used on the export documents. As in claim 03-5, a comparison of the data on the CF 7501, the import packing list, the bills of lading covering the shipment to the Industrial Bonded Warehouse, the warehouse receipt, and warehouse packing list shows that the imported fabric was placed in warehouse lot 1027. The protestant's instruction to its broker and the bill of lading covering the shipment to Canada identify the fabric as being from lot 1027. The export invoice identifies the merchandise as being from lot 18454 instead of lot 1027. However, the style number, carton number and the number of yards on that invoice link back to the imported fabric.

As noted above the use of the term "18454" is used on the export shipments in both claims 28-0 and 49-6 even though the claims are based on different imports.

On claim 54-8 the conflict in evidence occurs only with respect to the lot numbers on the export documents covering the fabric in the Industrial Bonded Warehouse. The protestant's instructions to its broker and the export bill of lading identify the fabric as cartons that were in warehouse lot 994-(carton numbers 6, 7 and 8)-CX4773. Those documents also list the corresponding number of yards of fabric in the cartons (644, 660 and 636). The export invoice lists the relevant lot as 18245, but matches the carton numbers (6,7 and 8) and the corresponding number of yards of fabric in the respective cartons (644, 660 and 636). While the use of lot number 18245 on the export invoice is confusing, that does not override the evidence of the instructions and the export bill of lading when coupled with the match in carton numbers and the corresponding number of yards of fabric in the instructions and export invoice. With respect to the lesser amount of fabric being exported than imported on the fabric in the Bell Distribution Services, that difference would not be significant for drawback entitlement since there is no requirement to export the total quantity imported.

Only the evidence of the entry invoices and packing lists, warehouse receipts and packing lists and the export bills of lading is sufficient to demonstrate the required link between the imported fabric and the exported fabric. Conversely, the protestant's explanation of the use of the so-called assortment number would not be sufficient to demonstrate compliance with the exemption from NAFTA drawback because of the discrepancies and inconsistencies noted above.

HOLDING:

The evidence is sufficient to show that specific identification of the imported fabric was maintained and the fabric that was exported was the imported fabric. The protest is to be granted.

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 Customs Form 19 to the protestant no later than sixty (60) days from the date of this letter. Any reliquidation of the entry or entries in accordance with this decision must be accomplished prior to mailing of the decision. Sixty (60) days from the date of the decision the Office of Regulations and Rulings will make this decision available to Customs personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, the Freedom of Information Act and other public access channels.

Myles Harmon, Director
Commercial Rulings Division

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