HQ 230122 - AFR Protest No. 5301-02-100460; 19 CFR 191.35; 19 CFR 191.72 - United States International Trade Commision Rulings

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HQ 230122

February 10, 2004

DRA-4
RR:CR:DR
230122 AL

Port Director
U.S. Customs and Border Protection
2350 N. Sam Houston Parkway East
Houston, Texas 77032-3126
Attention: Ms. Christine Brooks
Drawback Office, Suite 900

RE: AFR Protest No. 5301-02-100460; 19 CFR 191.35; 19 CFR 191.72

Dear Madam:

The above-referenced protest has been forwarded to this office for further review. The following decision is based on the consideration of points raised by the protestant, Isaac Industries, Inc. and by your office.

FACTS:

The protest is against a decision made by the U.S. Bureau of Customs and Border Protection (“CBP”), to deny payment on drawback entry 558-XXXX852-3.

According to the CF 7501, import entry 224-XXXX028-9 entered into the United States on October 5, 1998. The merchandise consisted of 1,504,831 kilograms (1,504.831 metric tons) of “2-ETHYLHEXAN-1-OL” which was exported from Korea on August 28, 1998. On April 26, 2000, drawback entry 558-XXXX852-3 was filed under 19 U.S.C. section 1313(j)(1) designating the aforementioned importation. March 11, 2000 was asserted as the date of exportation of the imported merchandise.

The “Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback” (“NOI”) for the subject drawback entry was signed and dated March 13, 2000. The NOI asserted an intended export date of March 13, 2000 and was received by CBP in Houston on March 14, 2000. The location of the merchandise is described as “Lay Berth Barbours Cut C-3.”

“Lay Berth Barbours Cut C-3” is a dock location at the Port of Houston. The exporting carrier was described as the “Stolt Puffin.” In box 20 of the NOI, the “waived” box was checked and signed by a CBP officer on March 14, 2000. The subject merchandise’s exportation is supported by a bill of lading entitled, “Tanker Bill of Lading B/L No. 208,” with a “First Original” stamp. According to the Port, this bill of lading is an original document, with an original signature. The bill of lading stated that the subject merchandise was on board the “Stolt Puffin” on March 11, 2000, at the Port of Houston, to be delivered to Venezuela.. The commodity on this bill of lading was described as, 1,257.124 metric tons of “2 ETHYLHEXAN-1-OL.”

Prior to April 26, 2000, the Office of Investigations and Regulatory Audit performed a series of investigations on the protestant. The first issue was whether the protestant was filing valid drawback claims, specifically listing drawback entries not relevant to this protest. The second concern was whether the protestant could establish inventory records prepared and used in the ordinary course of business to account for merchandise identified as being received into and withdrawn from inventory. Two types of merchandise were involved in these investigations: polypropylene and ethylhexan. An investigation of ethylhexan was conducted specifically for the single drawback claim that was filed by the protestant. According to a report dated December 15, 2000, “[t]he review of inventory receipts, withdrawals, cash receipts and shipping documents showed that ethylhexan entered on October 5, 1998 . . . and was exported on March 11, 2000.” The report further concluded that “Isaac Industries’ automated inventory system used a first-in, first-out method to account for fungible ethylhexan movements . . . ” and thus, the CBP officials “. . . were able to attest to the accuracy of merchandise movements.” An additional subject of the investigation was whether valid Notices of Intent to Export were being filed by the protestant. We note that further investigative reports were found irrelevant to the drawback claim that is the subject of this protest. On November 9, 2000, a Regulatory Audit report of technical assistance listed drawback claims filed by the protestant and recommended to deny drawback for those claims. However, those claims are not the subject of this protest.

With regard to the NOI, in this case, a second NOI was provided to the Port, signed and dated March 10, 2000. This second NOI submission identified the same drawback entry 558-XXXX852-3 and stated the same exporting carrier, the “m/v Stolt Puffin,” as the NOI dated March 13, 2000. The description and the value of the merchandise are described as, 126,000 kilograms of “2-Ethylhexan in bulk” which converts to 126.000 metric tons. The location of the merchandise reads “Paktank Houston, TX” which differs from the NOI dated March 13, 2000. Also, in box 27 of this second NOI, on March 13, 2000, the CBP examining officer provided the following comments: “The vessel m/v Stolt Puffin was cleared to sail on 3-10-00. There have been no amendments filed. Therefore, action date of 3-13-00 is incorrect. Exam could not be conducted.” According to this second NOI, the examination of the merchandise had not been waived. However, this second NOI was not filed with the drawback claim here.

On September 13, 2002, the drawback entry was liquidated with no drawback and subsequent to that liquidation, a protest was received from the protestant on December 10, 2002.

The protestant asserts that the subject merchandise qualifies as “unused,” the drawback claim has been timely filed, and that the necessary documentation was provided for the drawback claim. The protestant also asserts that it is entitled to waivers.

ISSUE:

Whether the drawback claimant has complied with the notice of intent to export requirement pursuant to 19 CFR 191.35.

Whether the documentary evidence supports an entitlement to drawback pursuant to 19 CFR 191.72.

LAW and ANALYSIS

We note initially that the protest was timely filed under the statutory provisions for protests under 19 U.S.C. § 1514.

Section 313(j) of the Tariff Act of 1930, as amended (19 U.S.C. §1313(j)(1)), provides for a refund of duties on imported merchandise, exported or destroyed under CBP’s supervision, within three years from the date of importation, and not used within the United States before such exportation or destruction. Here, the protestant filed a drawback claim for unused merchandise under 19 U.S.C. §1313(j)(1). The Port denied the claim, stating that the protestant exported the merchandise prior to the presentation of the NOI to CBP.

Issue 1.

According to Section 191.35, Customs Regulations, a notice of intent to export must be filed and completed prior to exportation. Under 19 CFR 191.35(a) “[t]he claimant, or the exporter, must file at the port of intended examination a Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback on Customs Form 7553 at least 2 working days prior to the date of intended exportation.” This regulation applies to exporters who have filed for unused merchandise drawback under 19 U.S.C. §1313(j). The purpose of the regulation is to provide an opportunity for CBP to examine merchandise on which drawback is to be claimed. The Port stated, based on the Tanker Bill of Lading B/L No. 208, that the protestant exported the unused merchandise prior to the submission and completion of the CF 7553 and thereby failed to comply with 19 CFR 191.35(a). However, if the protestant had exported the merchandise before, the regulations do not necessarily preclude a protestant from drawback for failure to comply with 19 CFR 191.35(a) because the regulation does not specify an absolute consequence for default. Although, if exportation occurred before CBP could act and CBP was deprived of its right to examine, drawback could be denied on the ground of a failure to allow examination. U.S. v. Lockheed Petroleum Services, Ltd., 709 F.2d 1472 (1983).

Here, the CBP officer waived the examination and the Port did not indicate otherwise that it was deprived of its right to examine the merchandise. 19 CFR 191.35(c), in pertinent part, states that “[i]f Customs notifies the designated party, in writing, of its decision to waive examination of the merchandise, or, if timely notification of a decision by Customs to examine or to waive examination is absent, the merchandise may be exported without delay.” Under the described situation, the purpose of 19 CFR 191.35(a) was not violated because the CBP officer waived the examination and also, there was no indication that notification for examination was made to the protestant. Similar facts are involved in HQ 229657 (signed January 8, 2003) where a Notice of Intent to Export stated that the intended date to export the merchandise was January 27, 2002. The CBP officer waived the examination of the merchandise on January 24, 2002. A bill of lading supporting the exportation of the merchandise asserted an exportation date of January 23, 2002. HQ 229657 advised the Port that under the described situation, the purpose of 19 CFR 191.35(a) was not violated because the CBP officer waived the examination and also, there was no indication that notification for examination was made to the protestant. Similarly here, CBP was not deprived of its right to examine the merchandise.

With regard to the Notice of Intent to Export (“NOI”) dated March 10, 2000, there is no evidence that it was submitted with any fraudulent intent. However, we note that the vessel was the same as that for the NOI dated March 13, 2000, and the bill of lading for the subject drawback claim indicates the merchandise was on board the vessel on March 11, 2000 and that the same vessel was also cleared to sail on March 10, 2000. We recommend that the local Fines, Penalties and Forfeitures Office look into the discrepancy of dates regarding the Bill of Lading and the assertion that the vessel had been cleared to sail prior to the date of the Bill of Lading No. 208 and verify compliance with clearance procedures in 19 CFR 4.60-4.76.

Issue 2

The documentary evidence supports the entitlement to drawback where the evidence conveys a link between the imported subject merchandise to the amount claimed to be exported on the drawback entry 558-XXXX852-3. The protestant used an approved accounting method, the “First-in, First-out” (“FIFO”) method in accordance with 19 CFR 191.14(c)(1).

The import entry consisted of 1,504.831 metric tons of the subject merchandise. The drawback claim is supported by a bill of lading that describes an export of 1,257.124 metric tons of the subject merchandise. The authenticity of the bill of lading is subject to 19 CFR 191.72, which states, in pertinent part, that:

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:

Actual evidence of exportation consisting of documentary evidence, such as 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.

The regulation by its terms does not require a specific form. The requirement for either a signed original document or a certified copy of a document authenticates the evidence being submitted for proof of date and fact of exportation. For purposes of proof of export, an original “Tanker Bill of Lading B/L No. 208,” originally signed, with a “First Original” stamp, as submitted, in this case, is in compliance with the aforementioned provision.

HOLDING

Since the purpose of 19 CFR 191.35 is to provide an opportunity for CBP to examine the export shipment and CBP waived that opportunity, it would be improper to deny drawback solely on that ground. This regulation is not jeopardized simply because the protestant may have exported prior to submission or completion of the CF 7553. In addition, the documentary evidence is supported by the use of the FIFO method and meets the requirements of 19 CFR 191.72. The protest is GRANTED.

In accordance with Section 3A(11)(b) of CBP Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with CBP 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 this 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 CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles Harmon, Director
Commercial Rulings Division

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