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HQ 230242

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March 26, 2004

DRA-2-01-RR:CR:DR 230242 IOR

CATEGORY: DRAWBACK

Lewis E. Leibowitz, Esq.
Craig A. Lewis, Esq.
Hogan & Hartson, L.L.P.
555 Thirteenth St., NW
Washington DC 20004-1109

RE: Successorship of Tropicana Manufacturing Company, Inc. to Tropicana Products, Inc.; 19 U.S.C. 1313(s); 19 U.S.C. 1313(b)

Dear Messrs Leibowitz and Lewis:

This is in response to your letter dated November 21, 2003 on behalf of Tropicana Manufacturing Company, Inc. (“TMC”) submitted to the Customs and Border Protection (“CBP”) Port of San Francisco. Your letter concerned the issue of successorship of TMC to Tropicana Products, Inc. (“TPI”) under 19 U.S.C. §1313(s). We are treating this response as a ruling letter and are sending a copy of the response to the Port of San Francisco. This response follows the receipt of additional information submitted by your letter dated February 11, 2004. We have granted your request to keep certain business proprietary information confidential.

FACTS:

Prior to January 1, 2001, TPI purchased imported orange juice products (i.e., pasteurized orange juice and frozen concentrated orange juice) and manufactured this imported merchandise into various exported juice products (i.e., various orange juices and juice blends containing orange juice). Such manufacturing actitivities were covered by various specific drawback rulings issued by CBP covering substitution manufacturing drawback under 19 U.S.C. §1313(b).

Specifically, according to your submissions, claims under section 1313(b) and (s) have been filed by TMC under drawback ruling no. 44-06607-000, and are anticipated to be filed under drawback ruling no. 44-06606-000. The drawback rulings issued to TMC are further identified as follows:

Drawback Ruling No.
HQ Control No.
Date Approved
Product
44-06606-000
230177
2/17/04
Pasteurized Orange Juice
44-06607-000
230178
2/17/04
Concentrated Orange Juice for Manufacturing

The drawback rulings under which the designated merchandise was used were the following issued to TPI:

Drawback Ruling No.
HQ Control No.
Date Approved
Product
44-03903-001
230087
9/10/03
Pasteurized Orange Juice
44-04505-000
226269
10/26/95
Concentrated Orange Juice for Manufacturing

TMC has submitted a copy of an agreement, according to which, effective as of the close of business on December 30, 2000,TMC acquired the assets and other business interests of TPI. TMC has submitted a copy of the TPI balance sheet as of the time of the transfer, and a summary of the duty paid on the imported merchandise used by TPI. The value of the transferred assets exceeds the value of the potential drawback rights acquired by TMC.

TMC asserts that upon claiming drawback for the merchandise imported and used by TPI, the certifications required by section 1313(s) will be submitted by TMC. The requests for drawback rulings submitted under HQ control numbers 230087 and 226269, resulting in, respectively, Drawback Ruling nos. 44-03903-001 and 44-04505-000, did not make any reference to claims under section 1313(s), although they were submitted for approval on November 3, 2003, just prior to the date of this request for approval to make claims under section 1313(s). TMC asserts that it should be authorized, under section 1313(s)(1) to designate the imported merchandise used by TPI before the date of succession as the basis for drawback on articles manufactured by TMC after the date of succession. TMC refers to the date of succession as January 1, 2001.

ISSUE:

Whether TMC has established a right to claim drawback under 19 U.S.C. §1313(s) for merchandise imported and used by TPI.

LAW AND ANALYSIS:

Generally, in order to qualify for drawback under the substitution manufacturing drawback law (19 U.S.C. §1313(b)), the same manufacturer or producer must use both the duty-paid merchandise in manufacture or production and the substitute duty-free or domestic merchandise in the manufacture or production of the articles which are exported. Section 1313(s)(1) addresses the situation in which a drawback successor may designate imported merchandise used by the predecessor before the date of succession as a basis for claiming drawback on articles manufactured by the successor after the date of succession. Under section 1313(b), a successor uses “substitute” merchandise to manufacture an article that is exported or destroyed, and the imported merchandise or drawback product to be designated in the drawback claim was used in manufacture by a different entity (i.e., the predecessor).

A drawback successor is defined is defined in section 1313(s) as:

[A]n entity to which another entity (in this subsection referred to as the “predecessor”) has transferred by written agreement, merger, or corporate resolution – (A) all or substantially all of the rights, privileges, immunities, powers, duties, and liabilities of the predecessor; or (B) the assets and other business interests of a division, plant, or other business unit of such predecessor, but only if in such transfer the value of the transferred realty, personalty, and intangibles (other than drawback rights, inchoate or otherwise) exceeds the value of all transferred drawback rights, inchoate or otherwise.

In addition, under section 1313(s)(4), no drawback can be paid under section 1313(s), unless the predecessor or the drawback successor certifies 1) that the successor is in possession of the predecessor’s records which are necessary to establish the right to drawback under the law and regulations with respect to the merchandise or drawback product, and 2) that the predecessor has not designated and will not designate, nor enable any other person to designate, such merchandise or product as the basis for drawback.

Based on the documentation submitted, TMC meets the requirements to claim drawback as a successor to TPI, and designate imported merchandise used by TPI prior to December 31, 2000, as the basis for drawback on articles manufactured by TMC after December 30, 2000. TMC has established that it acquired assets and other business interests of TPI, valued in excess of the transferred drawback rights. As the succession became effective at the close of business on December 30, 2000, the date of succession would be December 31, 2000. TMC would also have to provide the required certifications described above before any drawback would be paid.

Also, 19 U.S.C. §1313(b) requires that the export articles be made within three years after receipt by the manufacturer of the designated duty-paid merchandise. Therefore, the export articles would have had to have been made no later than December 30, 2003 and exported within five years of the designated importation. We note that Drawback Ruling No. 44-03903-001, issued to TPI on September 10, 2003, cannot possibly involve the use of imported duty-paid merchandise after December 30, 2003, for purposes of section 1313(s).

Finally, TMC must submit modification requests for the drawback rulings just approved, nos. 44-03903-001 and 44-04505-000, as required under Customs Regulations 191.8(g) (19 CFR 191.8(g)). For future reference, we note that the ruling requests for specific manufacturing drawback rulings could have included the successorship information in which case all of the issues would have been resolved without any need for modifications.

HOLDING:

TMC has established a right to claim drawback under 19 U.S.C. §1313(s) for merchandise imported and used by TPI, provided the required certifications are submitted.

Sincerely,


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