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HQ 230147




May 10, 2004

RR:CR:DR DRA-4 230147 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. 5301-02-100464; 19 USC 1313(j)(1); 19 USC 1313(k); 19 CFR 191.11(b); 19 CFR 191.10

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. (“Isaac Industries”) 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-XXXX723-5.

According to the CF 7501, import entry 224-XXXX027-1 entered into the United States on October 5, 1998 and the imported goods were placed at the Paktank facility in Houston, Texas. The merchandise consisted of 1,530,285 kilograms of polypropylene glycol, which was entered under subheading 3907.20.0000, Harmonized Tariff Schedule of the United States (“HTSUS”) that covers “Polyethers, Other.” On July 22, 1999, the Port received drawback entry 558-XXXX723-5, with an attachment of a list of 26 exportations covering the period from February 8, 1999 to June 24, 1999, which identified 433,131 kilograms of polypropylene glycol, claiming drawback under 19 U.S.C. section 1313(j)(1). Subsequent to this claim, the Port received an amended claim on November 15, 1999, which increased the amount to 444,545 kilograms of polypropylene glycol. The export documents show that only 424,331 kilograms of polypropylene glycol were exported. Originally, the list of exportations attached to the claim indicated that the exportation on May 16, 1999 to Brazil was 35,200 kilograms of the subject merchandise but its NOI stated that 26,400 kilograms was shipped. The list of exportations was subsequently corrected indicating that for the exportation on May 16, 1999 to Brazil, 26,400 kilograms was shipped.

Twenty-six “Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback” (“NOIs”) were filed for drawback entry 558-XXXX723-5. All twenty-six NOIs identified Paktank facility in Houston, Texas as the location of the polypropylene glycol. The NOI representing the exportation of March 31, 1999 indicated that the intended port of export of the subject merchandise was “Houston/Laredo.” The remaining twenty-five NOIs indicated that the intended port of export was Miami, Florida.

The export to Mexico is covered by a NOI, bill of lading and a pedimento. The NOI provides the following information:

Exporter: Isaac Industries (address in Florida) Intended Date of Export: March 11, 1999
Location of Merchandise: Paktank-Deerpark, Shoretank 305 (Houston, Texas) Exporting Carrier Name: Terrier Trucking
Intended Port of Export: Houston/Laredo
Description and Value of Merchandise: Polypropylene Glycol (Polyol) 47,040 pounds Qty & Unit of Measure: 98 Drums; 47,040 pounds (handwritten is “21,337 kgs” and “shipped 22,281 kgs”)

The bill of lading identified by its shipper no. “REL #1683” states the following:

Shipper: Isaac Industries/Paktank Corp
Carrier: Chemical Leaman
Origin: Deer Park, Texas
Description of Goods: Polypropylene Glycol Weight (net): 49,120 pounds (handwritten next to it “ 22,281 kgs” Signed by/date: Shipper and Carrier representatives, March 11, 1999

A “Pedimento de Importacion” is attached to the bill of lading (without translation) with a stamped date of March 31, 1999. After reviewing this document, CBP has translated the following information:

Description of Merchandise: Polypropylene Glycol HTS Number: 3907.20.99
Quantity: 2200.000 kilograms
Value: $13.96364 per kilogram
Total Price: $30,720

The information relative to the exports from Miami is illustrated by the export to Senegal of May 13, 1999. This exportation includes a bill of lading, and a Shipper’s Export Declaration (“SED”). The bill of lading states the following:

Bill of Lading number: MIA117233
Exporter: Isaac Industries, Inc. (in Miami, Florida) Consignee: Societe Generale de Bangue du Senegal SGBS Point and Country of Origin: Miami Florida, USA Place of Receipt: Miami
Vessel: Paris
Port of Loading: Miami
Port of Discharge: Dakar (in Senegal)
Description of Goods: “Polyol”
Amount: 18,398 kilograms
Signed/Dated: Maersk Inc. (carrier) Agent/May 13, 1999

The SED indicates that 17,600 kilograms of polypropylene glycol was exported to Senegal. The SED states the following:

Exporter: Isaac Industries, Inc. (in Miami, Florida) Date of Exportation: May 13, 1999
Exporter Carrier: Paris
Port of Export: Miami, Florida USA
Port of Unloading: Dakar, Senegal

The file contains several CBP investigative reports, and an audit report, beginning with a report dated July 20, 1999. The investigators concluded that no polypropylene glycol stored at the Paktank facility was “ever shipped to Miami or anywhere else in Florida.” Another conclusion reached in the reports was that the protestant sold the imported polypropylene glycol to Flexible Foam, Inc. of Terrell, Texas.

Protestant, through its counsel, provided seven documents for consideration by a letter dated February 20, 2004. The first document is entitled, “Certificate of Delivery” which is signed on February 19, 2004, by a representative from Isaac Industries and a representative of Flexible Foam Products (“Flexible Foam”). The certificate of delivery (“CD”) states that “Isaac and Flexible Foam agree to exchange and/or swap each other[’]s goods between September 1998 and December 1999.” The CD further stated that “[b]oth corporations are exchanging goods with each other because they are of the same type, quality and are interchangeable.” The second document is a two-page statement from Isaac Industries to Chas Inc., who according to the February 20, 2004 letter is Flexible Foam’s assignee. This second document is dated September 9, 1999 and is a statement as of August 31, 1999 of “material” received by Isaac Industries from Chas Inc. and material received by Chas Inc. from Isaac Industries from September 8, 1998 through August 31, 1999. The third and fourth documents are copies of checks from Isaac Industries to Chas Inc. for the “materials” received from Chas, Inc. reflected on the September 9, 1999 statement. The fifth document is entitled, “Chemicals to Isaac Industries” and is made to the attention of David Evans of Isaac Industries. The sixth document is a December 31, 1999 statement from Isaac Industries to Chas Inc., dated January 4, 2000, reflecting polyol deliveries between Isaac Industries and Chas Inc. from September 1, 1999 through December 31, 1999. The seventh document is a copy of a check from Isaac Industries to Chas Inc. for the polyol delivered to Isaac Industries reflected on the December 31, 1999 statement.

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

ISSUE:

Whether the subject merchandise exported is the same merchandise imported for purposes of drawback under 19 U.S.C. section 1313(j)(1).

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). In order to support its claim, the protestant must demonstrate that the exported merchandise can be identified as the designated imported merchandise.

The imported merchandise consisted of 1,530,285 kilograms of polypropylene glycol imported into the United States at the Port of Houston. The entry documents show that the polypropylene was placed into storage at the Paktank facility at Deer Park, Texas.

The documents covering the first exportation described in the FACTS section contain several inconsistencies. The claim is for 22,281 kilograms. The NOI and bill of lading show differing amounts. The NOI asserts 47,040 pounds (24,381 kilograms) in 98 drums with handwritten annotations of “21,337 kgs” and “shipped 22,281 kgs.” The bill of lading shows 49,120 pounds with a handwritten annotation of “22,281 kgs” (2.2 X 22,281 kilograms = 49,018 pounds). In addition, the carrier identified on the NOI is Terrier Trucking while the carrier on the bill of lading is Chemical Leaman. More significant is the discrepancy between the amount claimed and the amount listed on the pedimento. The pedimento can account for only 2,200 kilograms and is inadequate to support the claim for drawback on 22,281 kilograms.

The CBP investigators and auditor noted that the records of the Paktank facility showed every receipt and withdrawal. The absence of those records with respect to this exportation to Mexico would appear to be significant. The imported polypropylene glycol is shown by the entry documents to be in the Paktank facility on October 5, 1998. The export to Mexico is said to have taken place almost a half year later on March 31, 1999. Neither the NOI, the bill of lading nor the pedimento show anything more than identifying the merchandise as polypropylene glycol. None of those documents show that the polypropylene glycol was the polypropylene glycol imported under entry 224-XXXX027-1. The bill of lading is dated March 11, 1999, 20 days before the pedimento which purports to show entry into Mexico. In addition to the above noted discrepancies as to the different carriers and quantities, the absence of an identification of the polypropylene glycol with the entered polypropylene glycol and the delay of almost a month to move the polypropylene glycol from Houston, Texas to Laredo, Texas is unexplained.

The evidence simply does not show that the terms of the statute - exportation of the identified duty-paid imported merchandise – was met. Accordingly, under the principle in Guess?, Inc. v. United States, 944 F.2d 855 (Fed. Cir. 1991) (we are dealing with an exemption from duty, a statutory privilege due only when enumerated conditions are met), denial of drawback is appropriate. There, the issue was whether the evidence demonstrated satisfaction of, during that time, the requirement of fungibility. Here, drawback eligibility requires that the evidence show that the imported duty-paid merchandise on which the drawback claim is based was the merchandise exported. The evidence here fails that test.

With respect to the exports from Miami, the protestant asserts:

The protestor has been repackaging imported bulk plastic for export for a number of years. The merchandise arrives by tanker in Houston. It is either stored in a bonded facility or then shipped by bonded railway cars to Miami. At a warehouse in Miami, the bulk shipment is repackaged in drums. The warehouse in Miami, the bulk shipment is repackaged in drums. The drums are then exported based on sales orders from protestor’s customers.

The paper trail is very clear from the consumption entry to the bonded movement to the sales order to the exportation. The protestor does not deal in other products. The protestor’s products are not used in manufacturing. There are no domestic shipments.

There is a complete lack of evidence to support that assertion.

The remaining twenty-five exports from either Miami or Port Everglades are insufficient because the evidence shows a complete lack of connection between the polypropylene glycol imported under entry 224-XXXX027-1 at Houston, Texas and export shipments from Miami and Port Everglades. The representative export of May 13, 1999, shows no link with the polypropylene glycol at the Paktank facility. The documents provided by the protestant confirm the conclusions made by the CBP auditors and investigators in their reports. That is, the protestant sold the imported polypropylene glycol to Flexible Foam and purchased other polypropylene glycol to cover the exportations from Miami and Port Everglades.

The protestant’s use of the so-called certificate of delivery appears to be based on a misapplication of the trade-off provision in 19 USC 1313(k). The drawback provision of 19 USC 1313(j)(1) does not provide for trade-off or the exchange of merchandise. The provision for tradeoff only applies to 19 USC 1313(a) and (b). In addition, the terms in the document entitled, “certificate of delivery” provide for the sale of merchandise at $0.04 per pound and the regulation, 19 CFR 191.11(b) prohibits sales.

The certificate of delivery agreement between Isaac Industries and Flexible Foam, which references the subject import entry, stated that “[b]oth corporations are exchanging goods with each other because they are of the same type, quality and are interchangeable.” Not only is this document inconsistent with the regulatory provision of a “Certificate of Delivery,” but the statements contained within this document are inconsistent with the Protestant’s assertion that the subject merchandise was imported into the Port of Houston and shipped by bonded railway cars to the Port of Miami where the subject merchandise was exported. First, a certificate of delivery provided under 19 CFR 191.10, is for a party who imports and pays duty on the imported merchandise and receives the imported merchandise, then transfers this same imported merchandise to another party. Here, Isaac Industries does not state that a transfer of imported merchandise occurred, but states that exported merchandise was purchased from Flexible Foam in Florida. In order to be eligible for drawback under 19 USC 1313(j)(1), the claimant must be able to identify that the exported merchandise was in fact the same merchandise that was imported. The evidence indicates that the polypropylene glycol which was exported from Florida was the polypropylene glycol that Isaac Industries purchased from Flexible Foam in Florida rather than the polypropylene glycol imported under consumption entry 558-XXXX723-5. Consequently, the evidence shows a failure to meet the statutory requirements of 19 USC 1313(j)(1) on the twenty-five exports from Miami and Port Everglades, Florida.

HOLDING:

The protest should be denied.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 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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