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HQ W230187

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November 27, 2007

DRA-4 OT:RR:CTF:ER W230187 RDC

CATEGORY: PROTEST

Customs and Border Protection
610 S. Canal Street
Chicago, Illinois 60607
ATTN: drawback unit

RE: Internal Advice request; application for further review of protest numbers 0401-03-100192; 0401-03-100193; 0401-03-100194; 0401-03-100296; Martlet Importing Company; Beer; Destruction; 19 U.S.C. § 1313(j)(1); 19 U.S.C. § 1313(j)(2); 26 U.S.C. § 5062(c); 19 C.F.R. § 191.161; HRL 229322.

Dear Sir or Madam:

This is in response to a memo dated 11/4/2003, from the drawback unit at the Port of Boston (Boston), requesting internal advice with regard to four protests filed against the denial of drawback. We understand that drawback claims filed at the Port of Boston which were still pending at the time that drawback unit ceased operations were transferred to the drawback unit at the Port of Chicago. Consequently, we address our response to you.

FACTS:

This internal advice request involves four protests against the denial of seventeen drawback claims. The Boston drawback office decided that that the protests did not meet the criteria for further review but that it still needed guidance on the claims, hence it forwarded this request.

Century Importers, Inc., (Century), filed Protests numbers 0401-03-100296 and 0401-03-100194; Martlet Importing Company, Inc., (Martlet), filed protest number 0401-03-100192; and Molson USA, LLC, (Molson), filed protest number 0401-03-100193. Martlet and Molson are wholly owned subsidiaries of Miller Brewing Company (Miller). Prior to being merged into Martlet, Century was a wholly owned subsidiary of Miller. Hereafter we will refer to the Protestants collectively as “Miller.”

On 3/17/2004, representatives of this office met with representatives of Miller and its counsel. Additional arguments and evidence in support of the protested drawback claims were supplied on 3/19/2004. After all Miller’s contentions and the evidence submitted was reviewed, on 10/1/2004, representatives from this office spoke with Miller’s counsel by phone and requested additional evidence and described the evidence in a letter to Miller’s counsel dated 10/6/2004. In response to this request, additional evidence was received on 8/9/2005, and is included in the evidence described below. Also, Miller has provided a listing used in 1998 of product codes (PC) containing descriptions of the applicable products.

Protest number 0401-03-100194 protests the denial of 3 drawback claims, 596-2, 550-7 and 992-6. These three drawback claims claimed drawback of duty and IR tax per 19 U.S.C. § 1313(j) by using a form titled, “drawback entry covering same condition merchandise.” In addition, the attachments to the form state that drawback is type “42” and state, “for purposes of unused merchandise drawback . . . . Claim 992-6 states that drawback is per § “1313(j)(2),” substitution unused merchandise drawback. Protest number 0401-03-100192 protests the denial of two drawback claims, 546-5 and 433-7. These claims too were filed as unused merchandise drawback claims per § 1313(j). The claims also are for drawback of duty and IR tax. The drawback claims protested by these three protests were denied by letter dated 4/16/2003, because these claims did not “comply with requirements set forth in Part 191-161, 68 of the Customs Regulations.” Protest number 0401-03-100296 protests the denial of drawback claim 650-1, which claimed drawback of duty and IR tax per 1313(j). This claim was denied on 7/25/2003 because it did “not meet the direct identification criteria . . . .”

In its letter of March 16,2004, Miller asserts that the requirement of direct identification does not apply to a refund of tax under 26 U.S.C. 5062(c ) and Miller concedes that the destroyed beer can not be shown to have been imported under the import entries that were designated as the basis for refund on the respective drawback claims. In addition, Miller requests that the claims filed under the provisions of 19 U.S.C. § 1313(j) should now be treated only as claims for refunds of Internal Revenue Taxes under 26 U.S.C. § 5062(c) and the applicable regulations, and claims for drawback of duty should be ignored. Consequently, we consider the denied claims for drawback only under the requirements of 26 U.S.C. § 5062(c) and do not address the viability of Miller’s claims for drawback of duty and of IR tax under 19 U.S.C. § 1313(j) or any other provision of 19 U.S.C. § 1313.

Because the four protests at issue include seventeen drawback claims, each claim involving multiple entries and destructions, Miller submitted a large number of documents in support of the protested drawback entries. Since the protested drawback claims raise identical issues and the supporting evidence for each is similar, for the sake of clarity, we will consider five of the protested claims as representative. Miller requests that protest number 0401-03-100193 be designated as the lead protest. Thus, one drawback claim representative of each of the five causes of unmerchantability has been selected randomly from this protest as illustrative of the denied claims, the evidence provided and the law applicable. Only the evidence relevant to the representative claims will be described and considered here.

Protest number 100193 protests the denial of 11 drawback claims: 814-8; 819-7; 146-1; 241-0; 010-4; 022-9; 031-7; 997-8; 195-2; 989-4; 066-9. The five representative claims and the cause of unmerchantability are: 819-7, leakage due to improperly sealed cans; 022-9, smoke damage caused by fire; 195-2, faulty glass; 031-7, expired shelf life; and 066-9, damage due collision during transit. By letter dated 4/16/2003, Boston denied these claims because they did not “comply with requirements set forth in Part 191-161-68 of the Customs Regulations.” The “Importer’s Certificates” as Miller calls them, which state the reasons for unmerchantability for each drawback claim were submitted with a letter dated 6/25/2003, after the claims were denied. They were returned to Miller with the advice that they be submitted with the protest. These “Importer’s Certificates” are dated “6/24,” (no year) signed by “Stephen D. Rogers, Secretary” and were included with the protests.

Drawback claim 819-7 claims drawback of IR tax on “undrinkable Molson beer identified by product code in liters in ‘Merchandise Used,’ page 1.” The beer was said to have been imported from 2/5/1998 to 5/4/1998 and destroyed on 9/14-15/1999. The reverse of the CF 7551, “Drawback Entry,” states that “undrinkable Molson beer identified by product code in liters” and identified by “Can Return #259 – Portland” was destroyed. Page one was prepared by Miller and designates nine entries as the basis for claim 819-7. The entry summaries for entries 733-9 and 643-9 have been provided.

The beer imported with entry 733-9 was imported at the Champlain, New York port on 2/5/1998 and is identified as product code 12730, Foster’s Lager 24/12. A bill of lading marked 733-9 shows that on 2/4/1998 Molson Breweries shipped an amount of Foster’s beer 4x6 (24) “non-ret cans” to a location in Champlain. The beer imported with entry 733-9 was imported through Champlain on 2/23/1998 and also identifies product code 12730, Foster’s Lager 24/12. A BOL shows that on 2/21/1998 Molson Breweries shipped an amount of Foster’s beer “4x6 (24) non ret cans” to Champlain. These BOLs indicate that the destination is F.W. Meyers & Co., Champlain, N.Y.

The CF 7553, “Notice of Intent to Export, Destroy or Return Merchandise for Purposes of Drawback,” states that Molson intended to destroy “aged Molson Beer,” [PC] 12730 and [PC] 16215. The method of destruction is described as “beer to be treated and poured down the drain at Parallel Products . . . .” A CBP representative signed the CF 7553 as destruction that was not to be witnessed. On the product code list PC 12730 stands for “Foster’s Lag[er] can 24/12 4/6 MU” and PC 16215 represents “Molson Ice 5.6 24/12.” The “unique identifier” is “#259.”

“Can Return # 259 Portland” refers to a document with that title containing the following information: 5,120 cases of “Foster’s Lag Can 24/12 4.6 MU” and 2130 cases “Mol Ice Can 24/12 2X12MU.” Five documents labeled “Beer destruction Affidavits,” numbered 2440B, 2437B, 2436B, 2438B and 2438B, state that a specified quantity “of imported beer imported by Molson” was delivered and subsequently “destroyed by crushing and disposal” at a given location on 9/15/1999 or 9/14/1999. These documents identify a BOL number and are signed by a representative of the disposal company.

Attached to each of these “Beer Destruction Affidavits,” is a BOL with the corresponding number, from a carrier reflecting that an amount of “24x12 oz Foster’s Lag Can” or “24/12 Mol Ice 5.6 can 2x12” were delivered to the disposal company. For example, “affidavit” number 2437B identifies BOL 476303. This BOL reflects that an amount of Foster’s Lager was shipped to Portland, Oregon, and the freight bill was to be sent to “Asahi USA.” Also provided is a copy of an unidentified document with only partial information on the left side. This document seems to reflect the BOL information, i.e., order number 476303, order date 9/15/1999, 12730, 24/12 oz Foster’s Lag Can 4x6MU. The document appears to reference Molson-USA in Milwaukee and Parallel Products.

The “importer’s certificate” for drawback claim 819-7 states that the beer was unmerchantable because it was found after entry that “the lids were not properly sealed on the cans, causing the cans to leak ” and that the brewer, Molson Canada, purchased the faulty cans from a supplier

According to the CF 7551, drawback entry 022-9 claims drawback of IR tax on “undrinkable Molson beer identified by product code in liters . . . .” On the reverse of the CF 7551, the unique identifier is given as “Fire Damage Cans - Romulus.” The beer is said to have been imported from 1/5/1998 to 12/21/1998. However, except for the one import on 12/21/1998, the claimed imports occurred no later than 11/5/1998 and the destruction occurred on 12/8/1999 to 1/5/2000. Also supplied is a “Certificate of Destruction” from Schupan Recycling. This document states that “2965 cases of aluminum cans of Molson Beer” were destroyed. A document titled “Molson Can Product to be Destroyed” lists by PC, batch, case quantity, brand name and brew date, the beer to be destroyed. The brands listed are Canadian, Foster’s Lager, Foster’s Special Bitter, Molson Golden, Molson Ice, Molson Light, and Canadian Light. The “importer’s certificate” supplied with the protest states that the beer “became unmerchantable because of smoke damage caused by a fire at the warehouse where it was stored.”

Also provided are copies of correspondence between Miller’s counsel and the Liquor Control Commission of Michigan, and between Miller employees and the warehouse’s insurance company. The letters between Miller and the insurance company discuss Miller’s claim for “damages to Molson and Asahi product,” i.e., all 9000 cases stored by Miller, as a result of a fire at a warehouse. The letter from Miller’s counsel to the Liquor Control Commission of Michigan requests “guidance as to the appropriate disposition of 9000 cases of beer damaged in a fire at a warehouse . . . .” There is also a copy of a completed form containing information about the fire at the warehouse that appears to have been completed by the responding fire department.

The CF 7553 provided is neither dated nor completed by CBP and describes the beer as “Fire damaged Molson beer by product code and case quantity.” The CF 7553 notes “deemed destroyed under Customs [sic] supervision per 19 C.F.R. 181.71(a) and the attached.” There is also a copy of a memo from Miller’s broker to the port of Detroit dated 10/5/1999, advising that “2 CF 7553s for your review” were enclosed. The memo requests that if CBP will witness the destruction to note so on the forms and fax them to the broker or, if CBP did not want to witness the destruction, the request was to complete the CF 7553s and return them in the “stamped, self-addressed envelope” to the broker. Attached is a photocopy of the “shipper’s copy” of an express carrier air bill, addressed to CBP, Detroit, from Miller’s broker. This air bill, number 7772969853, is signed and dated 10/5/1999. The destination is “DTX” and in the space provided for “Picked Up By” there is marked “10/5.” Also attached is a letter dated 10/15/1999, from the express carrier stating that air bill number 7772969853 was delivered on 10/6/1999, and signed for.

Drawback entry 195-2 claims drawback of IR tax on “undrinkable Molson beer.” The CF 7551 states that “undrinkable Molson beer” was to be destroyed at “Glass Recyclers, Inc.” The beer is said to have been imported from 11/23/1998 to 5/4/1999. The last five entries involve imports from 4/23/1999 to 5/4/1999. The beer was destroyed 4/11/2000. The provided CF 7553 states that the beer is to be destroyed by being “treated and poured down the drain.” This form is signed by a CBP representative as requiring that the destruction be witnessed and the same CBP employee signed as having witnessed destruction on 4/11/2000. Attached to the drawback entry are documents prepared by Miller’s broker identifying entry numbers, import dates, ports of importation, and amount designated for each entry by PC code. Two representative entry summaries and corresponding invoices have also been provided.

A document labeled “Bottle Return # CH001” describes the beer by brand name, PC, and number of cases. The brands to be destroyed are Molson Golden, Molson Ice and Canadian. A certificate of destruction dated 4/5/2000 states that a number of “cases of glass of Molson Beer” was destroyed between 2/21/2000 and 3/31/2000. According to the “importer’s certificate” the beer on which claim 195-2 is based was found to be unmerchantable after entry “because the glass used to make the bottles was faulty.”

Drawback claim 031-7 claims drawback of IR tax on “undrinkable Molson beer identified by product code . . . .” imported from 3/1/1998 to 2/10/1999 with only one importation after 11/5/1998. The beer was claimed to have been destroyed in the period from 12/17/1998 to 12/30/1998.. The CF 7553 is signed by a CBP representative as having waived examination and witnessing destruction. The merchandise is described as “Aged Molson beer” by PC and number of cases per PC. A list of beer described by PC, brand and packaging, quantity, lot number and warehouse. A “Beer Destruction Affidavit No. 2571B” states that “beer imported by Molson” listed on BOL number 481516 in bottles was destroyed by crushing and disposal. BOL number 481516, issued by the carrier BOL states that PCs 10991, 12734 and 18104 were shipped to the destruction entity.

According to the PC code list 10991 refers to “Canadian GTNR 24/12 2/12,” 12734 to “Foster’s LAG NR 24/12 2/12MU” and 18104 to “Canadian 24/11.5 AT24x6 MU.” Also supplied are six additional “beer destruction Affidavits” and their corresponding bills of lading. On the “importer’s certificate” submitted with the protest, Miller states that the beer “became unmerchantable after entry because its shelf life expired before it was sold at retail.” The additional evidence supplied on 8/4/2005, other than duplicates of that already submitted, consists of an entry summary and bills of lading for two entries.

The CF 7551 for claim 066-9 states that drawback of IR tax is claimed on Foster’s beer, PC 12718. According to Miller’s list PC 12718 stands for “FOSTER’S LAG[er] CAN 12/25.4LSE MU.” The beer was imported on 7/9/2000 and destroyed on 9/14/2000. The reverse of the CF 7551 gives the unique identifier as “Order 4073346” and states that destruction is to be at a specified location. Attached to the CF 7551 is a CF 7553, which describes the beer to be destroyed as “damaged in transit . . . .” The notice of intent is signed by a Customs’ representative and states that cans of beer were destroyed by crushing the cans and flushing “the liquid down the drain.” Attached to the CF 7551 is a page that lists one entry, number 675-5 of PC 12718. This page identifies PC 12718 as “FOSTER’S LAG 12/25.4.”

Next attached are 3 documents that relate to the transport of the beer to the place of destruction. Among these is a BOL from a carrier, which reflects that “damaged beer” was shipped by “Pacific Commodities on 9/5/2000, to Parallel Products. According to the “importer’s certificate” provided, the beer at issue for drawback claim 066-9 “became unmerchantable after entry because it was damaged in transit in a vehicle collision.” “The truck carrying the beer was involved in a traffic accident” during which some of the beer it carried was damaged. The designated entry summary and corresponding invoices are also supplied.

The representative drawback entries that are the subject of this matter involve destruction of Foster’s Lager, Foster’s Special Bitter, Molson, Molson Ice, Molson Golden, Molson Light, Canadian and Canadian Light brands of beer. At the meeting on 3/17/2004, Miller’s representatives supplied CBP with additional documents to support its claim. These documents included copies of what Miller describes as agreements “designating Miller or its subsidiaries as the exclusive importers of the products into the United States: “Foster’s Supply and License Agreement among Miller Brewing Company, Molson Breweries and Carlton and United Breweries Limited;” the “License / Beer Supply Agreement Between Miller Brewing Company and Molson Breweries.”

As stated in the “License / Beer Supply Agreement between Miller Brewing Company and Molson Breweries,” (Molson Agreement), Molson Breweries (Molson), an “Ontario general partnership,” entered into this agreement with Miller on 4/2/1993. On page 6 it states that Molson grants to “Miller the following exclusive (even as against Molson, except as specifically provided herein) rights, . . . (a) to purchase, import . . . process, package, market, sell and distribute in the Territory Molson Owned Brands and Molson Licensed Brands; (b) to use the Recipes to manufacture Beer in the Territory and to package, market, sell and distribute such Beer . . . subject to conditions . . . .” Section 10 of the Agreement is devoted to “License of Manufacturing Rights.” On page 5 “Territory” means all of the geographical area included within the United States.” Exhibit 1(y) to this agreement lists “Molson Owned Brands (current production) Canada,” including “Canadian,” “Molson Light,” “Molson Bock” and “Molson Special,” and “Molson owned brands (current production) United States,” which includes “Molson Canadian,” Molson Golden,” and “Molson Light.” “Molson Ice” brand is not included.

On page 24 of the Molson Agreement it states that “The term of this Agreement shall commence on the date hereof and shall continue until terminated . . . .” On page 7, Section 4, Miller’s obligations, (c) “Disposition of Aged Molson Beer and Licensed Beer” requires Miller to “refrain from selling of disposing of (except by destruction) Licensed Beer or Molson Beer that is damaged, unmarketable or aged beyond the periods called for by the guidelines used by Miller . . . .” Finally, though this agreement grants Miller, under certain specified circumstances, the right to brew Molson products in the U.S., Miller’s counsel has represented that Miller has not done so.

The “Foster’s supply and License Agreement Among Miller Brewing Company, Molson Breweries and Carlton and United Breweries Limited,” (Foster’s Agreement), is dated 4/2/1993. In this agreement it states that Carlton and United Breweries Limited granted to “Molson the right to brew and sell Foster’s marked beer (“Foster’s Lager” and “Foster’s Light”) in Canada.” Page 5, Section 2 states that “Molson hereby grants to Miller the following exclusive (even as against Molson and [Carlton and United Breweries Limited], except as specifically provided herein) rights, . . . “ (a) to purchase, import . . . , package, market sell and distribute in the Territory [Carlton and United Breweries Limited] Owned Brands . . . .” On page 5 it states that the “Territory” is the United States, being all the geographical area presently included within any state, the District of Columbia, Puerto Rico . . . .”

On page 6, under “Miller Obligations” it states, (c) “Disposition of Aged Foster’s Beer” requires Miller to “refrain from selling of disposing of (except by destruction) Licensed Beer or Molson Beer that is damaged, unmarketable or aged beyond the periods called for by the guidelines used by Miller . . . . On page 24 it is stated that the term of the agreement begins on 4/2/1993, and continues until terminated. Exhibit 1(h) to the Foster’s Agreement lists the beer brands then-owned by the Carlton and United Breweries: Foster’s Light, Foster’s Lager and Foster’s Special Bitter.

Miller has also included copies of its agreements with its distributors: a “Martlet Importing Co., Inc. Distributor Agreement,” and a “Miller Brewing Company Import Products Distributor Agreement.” The unexecuted Miller / Martlet Distribution Agreement provided constitutes the agreement between the distributor, responsible for selling the imported beer to retail establishments, and Miller, responsible for importing the beer and supplying the distributors. On pages two and three of this agreement, the distributor’s responsibilities with regard to Martlet’s “Quality Control Standards” are outlined in section 4.(d)(i) through (iv):

“Distributor shall take all necessary actions to ensure the quality control of Importer products in compliance with Importer’s Quality Control Standards. Those actions shall include, but not be limited to: (i) observance of Importer’s code-date requirements; (ii) proper stock rotation in the warehouse, vehicles and retail locations; (iii) proper handling and protection damage of all Importer products, containers and dunnage; (iv) sales of Importer products solely out of inventory in Distributor’s warehouse and on an oldest code-date-first basis, unless Importer shall otherwise approve in writing . . . .”

On page one of the “Miller Brewing Company Import Products Distributor Agreement” it states, in part, that the agreement sets forth Miller’s expectations of the distributor’s performance with regard to, amount other things, product quality.

Miller has also supplied two portions of its “Distribution Handbook, Ordering & Shipping Guide,” dated 8/1990. These two portions are titled “Full Beer Returns,” and “Quality Assurance.” However, these documents refer only to domestically brewed beer and are not relevant to importations. Miller also has provided a document labeled “Quality Standards for Distributors,” dated 1/2004 which also pertains only to domestic production. Additional evidence provided by Miller is a copy of drawback entry 146-1 submitted as a “sample claim;” evidence of drawback claims previously filed by Miller that were paid by CBP; and a sampling of copies of Bureau of Alcohol, Tobacco and Firearms’ (BATF), form 5100.31, “Application for and Certification / Exemption of Label Bottle Approval.”

ISSUE:

Do the representative drawback claims meet the requirements of 26 U.S.C. § 5062(c) so as to be entitled to drawback of Internal Revenue (IR) tax on the destroyed beer?

LAW AND ANALYSIS:

In its letter of 3/16/2004 Miller argues that CBP was wrongly applying the requirements of 19 U.S.C. § 1313(j) and that “[t]his provision requires that the merchandise be directly identified . . . or be commercially interchangeable . . . . However, these requirements are not applicable to claims for refund of Internal Revenue Taxes under 26 U.S.C. § 5062(c), and the regulations requiring direct identification of unused merchandise or commercial interchangeability . . . do not apply to claims under 26 U.S.C. § 5062(c).” What Miller fails to acknowledge, however, is that the drawback claims protested with protest numbers 0401-03-100194, 0401-03-100192 and 0401-03-100296 all claimed drawback of duty and IR tax per 19 U.S.C. § 1313(j) and thus were properly considered and denied using the requirements of § 1313(j). Miller now requests that CBP pay each of its drawback claims

. At the outset it is necessary to clarify that whether it is called “drawback,” “refund” or “remission,” 26 U.S.C. § 5062(c)(1) provides for the payment or credit to the beer importer of internal revenue tax on unmerchantable beer under the circumstances described. The CBP Regulations define drawback as
the refund or remission, in whole or in part, of a customs duty, fee or internal revenue tax which was imposed on imported merchandise under Federal law because of its importation . . . .

(19 C.F.R. § 191.2(i)). Thus, whether payment of IR taxes to the beer importer is called a refund or drawback is immaterial because there is no difference between the action described as a “refund” of IR taxes per Title 26 and the action described as a “drawback” of duties and taxes per Title 19 U.S.C. Moreover, as is made clear in this opinion, in determining the whether the protestant’s claims are eligible for a refund of IR tax, only those requirements applicable to 26 U.S.C. § 5062(c)(1) and Part 25 of Title 27, Code of Federal Regulations, have been used. under 26 U.S.C. § 5062(c) regardless of how the claim was originally filed.

The first point is whether 26 U.S.C. § 5062(c) requires the claimant to identify the beer asserted to be unmerchantable as the same beer imported under the designated import entry. Miller states that, due to the nature of the beer importing business and this industry’s recordkeeping practices, Miller is unable to identify with which entry the destroyed beer was imported. Miller states that the brands of beer upon which the drawback claims are based are not produced in the U.S. and concludes that, since it alone had the right to import lawfully these brands of beer, it must have been the importer of record on the entries covering the destroyed beer and that it is entitled to the refund of the tax paid on the beer covered by the designated entries, even though the destroyed beer at issue here was not imported under those entries. That is, Miller argues that the statute allows the substitution of imported beer for the destroyed beer.

Section 5062(c) provides for a refund of IR taxes paid . The Internal Revenue (IR) tax is imposed on imported beer by 26 U.S.C. § 5051 (1998), which states:

Imposition and rate of tax. (a) Rate of tax. (1) In general.

A tax is hereby imposed on all beer . . . imported into the United States. Except as provided in paragraph (2) [certain domestic production], the rate of such tax shall be $ 18 for every barrel containing not more than 31 gallons and at a like rate for any other quantity or for fractional parts of a barrel.

(26 U.S.C. § 5051(a)(1) (1998)). on, inter alia, imported beer that becomes unmerchantable after importation and provides:

Upon the exportation [or destruction per (c)(2)] of imported . . . beer upon which the duties and internal revenue taxes have been paid or determined incident to their importation into the United States, and which have been found after entry to be unmerchantable . . . the Secretary shall, under such regulations as he shall prescribe, refund, remit, abate, or credit, without interest, to the importer thereof, the full amount of the internal revenue taxes paid or determined with respect to such . . . beer.

(26 U.S.C. § 5062(c)(1). In determining whether Miller is entitled to such a refund, we begin with the language of the statute. (See Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108, (1980), stating “The starting point for interpreting a statute is the language of the statute itself.”) In addition, “as a basic rule of statutory interpretation, we read the statute using the normal meanings of its words. . . . ‘Absent a clearly expressed legislative intent to the contrary, that language is generally dispositive.’” Consolidated Bank, N.A. v. United States’ Dep’t of Treasury, 118 F.3d 1461, 1463 (11th Cir. 1997) (quoting Gonzalez v. McNary, 980 F. 2d 1418, 1420 (11th Cir. 1993)).

The issue here is whether the word “such” in § 5062(c) refers back to the “. . . imported beer upon which the . . . internal revenue taxes have been paid . . . .” In construing a statute, the courts have recognized that the grammatical rules often demonstrate congressional intent. (See Sturm, A Manual of Customs Law, 161 (1974) (It is a well settled rule of construction that statutes are to be construed in their grammatical sense unless there is a clear indication of contrary intent by the lawmakers). The word “such,” when used as a pronoun in a statute, has been the subject of judicial interpretation. The court, in Chas. E. Washburn Co. v. U.S., 32 Cust. Ct. 596, (Cust. Ct. 1955), construed “such” as used in 19 U.S.C. § 1402(c) (1955) and which provided in pertinent part, “The foreign value of imported merchandise shall be the market value or price at the time of importation of such merchandise . . . .” The Washburn Court stated that the existence of “such” or identical merchandise in the foreign market removes from any discussion any consideration of “similar” merchandise because the imported merchandise in question was freely offered for sale in the country of export and the sales price of that merchandise was the basis of appraisement. (Id. at 599). That is, in the present situation, the word can only refer to the designated imported beer on which the internal revenue tax had been paid on importation and not beer imported under some other entry.

The case of C.J. Tower & Sons v. United States, (295 F. Supp. 1104, 62 Cust. Ct. 822 (Cust. Ct. 1969)) dealt with the interpretation of “such and similar” in 19 U.S.C. 1402(f) (1969) which provided in pertinent part, “. . . such merchandise or similar merchandise, at a time preceding the date of exportation of the particular merchandise under consideration which would ordinarily permit the manufacture or production of the particular merchandise under consideration in the usual course of business.” The C.J. Tower Court found that time sequence phrase and the presence of the term “similar merchandise” demonstrated that Congress did not intend that the actual cost of the materials used in the production of the imported merchandise being appraised was to be used. Here, in 26 U.S.C. § 5062 (c), there is no qualifying language or any reference to substitute beer to show any but the ordinary grammatical usage of the term “such” was intended. (See also, Charles Stockheimer, Inter-Maritime Forwarding Co. Inc. v. United States, 44 CCPA 92 (1957), on which the C.J. Tower Court relied and North American Asbestos Corp v. United States, 43 Cust. Ct. 500 ( 1959) aff’d. 44 Cust. Ct. 801 (1960)).

The provisions of the drawback law, under which Congress provided for a refund of duty show the same intent. Under 19 U.S.C.§ 1313 (c), until amended by the Act of Dec. 3,2004 (Pub. L 108-429 , 118 Stat 2579), drawback of duty on merchandise that did not conform to sample or meet specification was limited to the actual imported merchandise as a result of the use of the term “such “ in the statute. With the 2004 amendment, Congress provided expressly for the substitution of other merchandise. A change in the language of a statute generally is construed to import a change in meaning (Sturm, op. cit. 168). Clearly, the 2004 amendment provided that a drawback claimant may substitute one article of imported merchandise for another article of imported merchandise and still be eligible for drawback. Unless Congress enacted a wholly superfluous provision by the 2004 amendment, the converse cannot be said to be true where the statute used the word “such” to identify the merchandise on which drawback was to be based. This amendment illustrates the principle discussed by the C.J. Tower Court, supra, that the addition of a qualifying phrase negates a construction based solely on grammatical rules. It is the normal meaning of the words “such . . . beer” which is fatal to Miller’s argument that substitution of any imported beer for the destroyed unmerchantable beer is permitted under 26 U.S.C. § 5062(c).

In addition, where Congress has intended to permit substitution for purposes of refunding duty, it has stated so explicitly and provided the standard for the substitution. Besides the 2004 amendment of 19 U.S.C. § 1313 (c), which allowed a drawback claimant to substitute if the merchandise to be substituted had the same eight-digit tariff classification number and product identifier (part number, SKU or product code) and was imported within one year of the destruction date, 19 U.S.C. § 1313( b), (j)(2) and (p) provide statutory standards for substitution that are missing from 26 U.S.C. 5062. Congress enacted 19 U.S.C. § 1313(b) to provide specifically for substitution of the imported materials for manufacturing drawback purposes and supplied the standard for the substitution. . Section 1313(b) substitution manufacturing drawback provides:

If imported duty-paid merchandise and any other merchandise (whether imported or domestic) of the same kind and quality are used in the manufacture or production of articles within a period not to exceed three years from the receipt of such imported merchandise . . . there shall be allowed upon the exportation, or destruction . . . of such articles, notwithstanding the fact that none of the imported merchandise may actually have been used in the manufacture or production of the exported or destroyed articles, an amount of drawback, . . . .

(19 U.S.C. § 1313(b)). Per § 1313(b), substitution of the imported merchandise is permitted only if the substituted merchandise is “of the same kind and quality” as the imported merchandise and both the designated imported merchandise and the substitute merchandise are used by the same manufacturer to make articles within three years after the manufacturer receives the imported merchandise.

The Federal Circuit court has decided that two materials are of the same kind and quality if either can be used interchangeably in the manufacturing process without significant change to that process. (See International Light Metals v. United States, (194 F.3d 1355 (Fed. Cir. 1999)). Section 1313(j)(2) describes the circumstances under which other merchandise may be substituted for the imported merchandise on which drawback is claimed. Among these requirements is that the substituted merchandise must be “commercially interchangeable” with the imported merchandise. The test for commercial interchangeability has been articulated as whether a reasonable competitor would accept either the imported or substituted goods for the goods’ primary purpose. (See Texport Oil Co. v. United States, 185 F.3d 1291 (Fed. Cir. 1999)). Section 1313(p) permits the substitution of petroleum products within time limits if both the imported petroleum product and the exported petroleum product are classified within listed tariff subheadings at the eight-digit level or are shown to be commercially interchangeable. Congress amended 19 U.S.C. § 1313(p) . The drawback law was substantively amended by § 632, title VI - Customs Modernization Act, Public Law 103-182, The North American Free Trade Agreement (NAFTA) Implementation Act (107 Stat. 2057), enacted December 8, 1993. For purposes of drawback per § 1313(p) the standard for substitution is : defined explicitly by § 1313(b) and § 1313(j)(2):

An exported article if of the same kind and quality as the qualified article for which it is substituted . . . if it is a product that is commercially interchangeable with or referred to under the same eight-digit classification of the Harmonized Tariff Schedule of the United States as the qualified article.

(19 U.S.C. § 1313(p)(3)(B)). to relax the standards of finished petroleum derivatives which may be substituted for one another.

Miller also argues that a comparison between 26 U.S.C. § 5056 and 5062 shows an intent to permit substitution in the latter provision. The legislative purpose of 26 U.S.C. § 5062 is set out in the Senate report accompanying H.R. 98, the bill that added subsection (c) to § 5062, in which it was noted that the Internal Revenue Code then provided for a refund of tax on domestic spirits (S. Rep. No. 1242 (1964) reprinted in U.S.C.C.A.N. 3318, 3319). The refund of tax on domestic spirits, wine and beer not afforded to imported wine and beer was the “discrimination” to which the Senate Report referred when describing the purpose of H.R. 98:

Explanation of bill.— To remove this discrimination against imported alcoholic beverages which have been found after entry not to be suitable for certain uses, H.R. 98 provides for refund or credit of the tax. The refund or credit is to be available in the case of imported . . . beer where these beverages (1) have been found to be “unmerchantable or not to conform to sample or specifications”; . . . (3) have been exported or destroyed under customs supervision.

There is nothing in this explanation that shows an intent to permit substitution of one imported beer for another imported beer. Moreover, the Alcohol and Tobacco Tax and Trade Bureau (TTB), Regulations which implement § 5056, Part 25 of 27 C.F.R., do not provide for substitution and limit the refund of tax on unmerchantable domestic beer to only beer the title to which has not been transferred by the brewer, i.e., the brewer has maintained custody and control. Thus, in contrast to § 5062(c), refund of tax on domestic beer is not available after title has passed from the brewer. In this regard, Miller’s claim that it has provided “the type of information required by TTB” for claims per 26 U.S.C. § 5056 . Section 5056 provides in pertinent part:

(a) Beer returned or voluntarily destroyed. Any tax paid by any brewer on beer removed for consumption or sale may be refunded or credited to the brewer, . . , if such beer is returned to any brewery of the brewer or is destroyed under the supervision required by such regulations. . . . .

(b) Beer lost by fire, theft, casualty, or act of God. Subject to regulations prescribed by the Secretary, the tax paid by any brewer on beer removed for consumption or sale may be refunded or credited to the brewer, . . . , if such beer is lost, whether by theft or otherwise, or is destroyed or otherwise rendered unmerchantable by fire, casualty, or act of God before the transfer of title thereto to any other person. In any case in which beer is lost or destroyed, whether by theft or otherwise, the Secretary may require the brewer to file a claim for relief from the tax and submit proof as to the cause of such loss. . . . .

. . . .

(d) Limitations. No claim under this section shall be allowed (1) unless filed within 6 months after the date of the return, loss, destruction, rendering unmerchantable, or receipt on the bonded premises of a distilled spirits plant or (2) if the claimant was indemnified by insurance or otherwise in respect of the tax.

(26 U.S.C. § 5056) (emphasis added). is unfounded.

The plain language of 26 U.S.C. § 5062, that is, the use of the word “such” to refer back to the imported beer on which the clam is made, permits a refund only if the claimant shows that the unmerchantable beer was the actual imported beer identified as the basis for the refund. The absence of express language or legislative history permitting substitution of one imported beer for another imported beer and the absence of any standard to substitute one beer for another beer demonstrate that a claimant under 26 U.S.C. § 5062 must be able to identify the unmerchantable beer to a specific entry. Miller’s contention, that a drawback claimant under 26 U.S.C. § 5062(c) need not demonstrate that it was the importer of the destroyed beer but only demonstrate that it was the importer of the beer identified as the basis for the refund of the tax, requires that the word “such” in the law be replaced by the word “any” so that the sentence would read: “the internal revenue taxes paid or determined with respect to any imported beer” shall be paid to the importer of the unmerchantable beer.

We have concluded above that the drawback claimant under 26 U.S.C. § 5062(c) must directly identify the exported goods as those goods imported by the designated entry. Two options are available to the exporter when required to directly identify the exported goods. The first method, identification by reference to the actual entry with which the exported goods were imported has been discussed above. Since Miller cannot identify the goods that were exported by reference to the actual entry with which the goods were imported, i.e., not identical goods, but the same goods as imported, Miller cannot use the first method. The second method of directly identifying goods is by use of an accounting method as specified in 19 C.F.R. § 191.14. Section 191.14(b) provides the conditions and criteria for identifying merchandise by accounting method. Among those requirements and conditions for identification by accounting method under 19 CFR 191.14, is that the lots of merchandise be fungible and that

[t]he person using the identification method must be able to establish that inventory records (for example, material control records), prepared and used in the ordinary course of business, account for the lots of merchandise or articles to be identified as being received into and withdrawn from the same inventory. Even if merchandise or articles are received or withdrawn at different geographical locations, if such inventory records treat receipts or withdrawals as being from the same inventory, those inventory records may be used to identify the merchandise or articles under this section, subject to the conditions of this section . . .

(19 CFR § 191.14(b)(2)). We note that Miller was given an opportunity to submit additional evidence to identify the exported beer by accounting method but that the documents provided did not support the finding that the beer was identified by inventory management method. Accordingly, since Miller is unable to demonstrate that the exported beer is related to an import entry, it has failed to meet the standard required by 26 U.S.C. § 5062.

In addition to failing to identify the exported beer by either of the two methods described above, Miller did not provide sufficient evidence that it was the importer of the destroyed beer here. Miller’s contention is based on various exclusive marketing agreements. However, the import dates of the destroyed beer were not provided and the ending dates of the marketing agreements were not provided. Consequently, the link between the marketing agreement and the importation date is not shown. Claims 819-7, 022-9 and 195-2 involve imports of Molson Ice brand beer. However that brand is not included among the brands listed in the relevant marketing agreement as those brands subject to the agreement. Thus, the contention that Miller alone was entitled to import “Molson Ice” brand into the U.S has not been supported by any evidence.

Claims 819-7, 022-9 and 195-2 also involved imports of Foster’s brand beer and Molson brands other than Molson Ice. The Foster’s Agreement, which Miller relies upon to show that it had to have been the importer of the destroyed Foster’s Brand beer, has a starting effective date of 4/2/1993. The Molson Agreement that covered the brands other than Molson Ice also has a starting effective date of 4/2/1993. There is no evidence to show the period that either agreement was in effect. The destruction occurred on 9/14 and 9/15/1999. However, there is no evidence of the import date for any of the destroyed beer. Without evidence of the effective period of the Agreements and evidence of the dates of importation of the destroyed beer, it is impossible to conclude that the destroyed beer was imported under those Agreements. Moreover, without the dates of production, it is impossible to tell if the destroyed beer was past its shelf life. The Foster’s beer designated as the basis for drawback on claim 819-7 was entered at Champlain, New York (N.Y.), on 2/12 and 3/3/1998 and is asserted to have been sent to the Oregon Transfer distribution Center in Portland, Oregon on the importer’s certificate. There is no evidence to support that assertion.

According to the entry papers, the ultimate consignee was Molson in care of the broker who filed the entries and who was located at Champlain, N.Y. There is no evidence showing the movement of the destroyed beer from Champlain, N.Y. to Portland, Oregon. Claim 022-9 involved Canadian, Molson Light and Foster’s beer. The entries under which that beer was said to have been imported occurred at Detroit, Michigan on 1/21/1998 and 2/12/1998. According to the document ‘Molson Can product to be destroyed,” the Canadian beer was brewed 3/22/1999, the Molson Light beer was brewed 12/29/1998 and the Foster’s beer was brewed 3/25/1999, 3/30/1999 and 4/8/1999. Obviously, it would be impossible for the destroyed beer to have been the beer entered more than a year before it was brewed. Claim 195-2 also involved Molson Golden. Molson Golden is said to have been entered under entries 914-9, 139-2 and 451-0 on 3/11, 12 and 18/1999. Molson Golden is said to have been entered under entry 518-2 on 3/26/1999. All four entries are said to have been at Buffalo, N.Y. According to the claim documents, the beer was destroyed in Dearborn, Michigan in February and March, 2000. Unlike the situation in claim 022-9, the brew date of the destroyed beer was not identified. There is no evidence to show that the beer entered at Buffalo, N.Y. in March 1999 was the beer that was destroyed in Dearborn, Michigan about one year later. Claim 066-9 involved Foster’s beer entered with entry 675-5 on 7/19/2000 at Port Huron, Michigan. The destroyed beer was moved from Oakland, California to Rancho Cucamonga, California, in September, 2000. There is no evidence of the movement of the beer from Port Huron, Michigan to Oakland, California.

In addition to the failure to show that 26 U.S.C. § 5062 provides for the substitution of one imported beer for another imported beer and the failure to show that Miller was the importer of the destroyed beer, the evidence of the representative entries does not meet the requirements of 19 C.F.R. § 191.163(b). That regulation requires that a drawback claim under 26 U.S.C. § 5062(c) provide a certificate of the importer that details the facts that caused the beer to be unmerchantable and any additional evidence required to establish that the merchandise is unmerchantable. The plain meaning of “unmerchantable” is not “merchantable,” i.e., not of commercially acceptable quality, or not saleable, i.e., not capable of being or fit to be sold, not fit for market; being of a kind, quality, or quantity that is unsalable. . The Supreme Court has used unmerchantable to mean “not susceptible of being used for the ordinary purposes . . . .” See Patton v. United States 159 U.S. 500, 503 (1895) (stating “The prominent characteristic running through all these definitions is that of refuse, or material that is not susceptible of being used for the ordinary purposes of manufacture. It does not presuppose that the article is absolutely worthless, but that it is unmerchantable and used for purposes for which merchantable material of the same class is unsuitable.”) See also Navajo Tribe of Indians v. United States, 9 Cl. Ct. 336, 431 (U.S. Cl. Ct. 1986) (stating “The record indicates that as ponderosa pine get older, the proportion of timber that is defective, i.e., unmerchantable, increases.”) Thus, § 5062(c) requires that Miller prove the destroyed beer was not capable of being or fit to be sold. According to Miller’s protest, the beer destroyed on the five representative drawback claims was rendered unmerchantable, i.e., not fit for sale, due to improperly sealed cans or smoke damage caused by fire or faulty glass or expired shelf life or damage during transit. Miller has not provided sufficient evidence of “unmerchantability” for any of the representative drawback claims. In addition, for some of the claims the cause of unmerchantability is not only unproven but the documents reflect different causes of unmerchantability for the same claim.

Also, the evidence indicates that at least some of the unmerchantable beer had been forwarded for destruction by distributors. Miller has set procedures for its distributors with regard to returns and credits of domestic beer. It would seem that Miller must have such procedures for imported beer and that Miller should be able to provide the paperwork associated with the destroyed beer that was provided to it by the distributors who have requested credit for this beer. Further, Miller argues that CBP had the opportunity to examine the beer before it was destroyed and thus, a CBP representative would have been able to see the evidence of unmerchantability. We find that this was not the case for two of the representative claims, claims 819-7 and 195-2, because the Notice of Intent does not reflect the same cause of unmerchantability as does the importer’s certificate.

Claim 031-7 involves Canadian and Foster’s beer for which the shelf life is said to have expired. Claim 031-7 identifies beer imported at Port Huron, Michigan, in March and April of 1998. The beer that was destroyed was destroyed at Portland, Oregon, in December, 1999. There is no evidence to show that the beer imported at Port Huron was the same beer that was destroyed in Portland, Oregon. There is no evidence to show the age of the beer that was destroyed at Portland. The beer destruction affidavits of the company that destroyed the beer certify the brand and container type and size of the destroyed beer. The importer certificate states that the beer was past its shelf life, but provided no details or evidence in support of that statement.

Claim 066-9 involves Foster’s beer. The CF 7553 describes the beer to be destroyed as “damaged in transit . . . .” The notice of intent is signed by a Customs’ representative and states that cans of beer were destroyed by crushing the cans and flushing “the liquid down the drain.” According to the “importer’s certificate” provided, the beer at issue “became unmerchantable after entry because it was damaged in transit in a vehicle collision.” “The truck carrying the beer was involved in a traffic accident” during which some of the beer it carried was damaged. The drawback entry describes the beer to be destroyed as “damaged in transit.” The BOL reflects that “damaged beer” was transported. However, there is no evidence of the traffic accident, no copy of an insurance claim form, police report or any statement from the truck driver.

According to Miller, the beer associated with drawback entry 819-7 was unmerchantable because it was found after entry that the lids were not properly sealed on the cans. When the beer left Molson’s brewery the cans leaked and the beer was unmerchantable. The cans were purchased from a supplier whose machinery that was supposed to seal the lids onto the cans was not functioning properly. However, no evidence of the improperly sealed can lids has been provided, i.e., no Miller internal documents that address this defect, or evidence of communications with Molson Canada, nor Molson Canada’s communications with its supplier, with regard to the defective cans. Claim 819-7 asserts a second basis of unmerchantability. The Notice of Intent to Destroy states, “aged Molson beer.” That statement appears to contradict the assertion of faulty cans and instead, indicates a different ground of unmerchantability, i.e., expired shelf life and evidence to support the assertion of an expired shelf life is also missing. That is, the date that the destroyed beer was brewed and the date of importation are unknown. The Notice of Intent reflects that CBP waived witnessing the destruction, but, if CBP had examined the unmerchantable beer prior to destruction, the CBP representative would only have had the Notice of Intent to rely on for the cause of unmerchantability because the importer’s certificate was not yet filed. Therefore, the CBP representative would not have known whether that the cause of unmerchantability was improperly sealed, leaking cans or expired shelf life. Since evidence of neither has been provided, Miller has not substantiated the cause of unmerchantability with regard to drawback claim 819-7.

Claim 022-9 is based on the destruction of “undrinkable Molson beer identified by product code in liters . . . .” The “importer’s certificate” supplied with the protest states that the beer “became unmerchantable because of smoke damage caused by a fire at the warehouse where it was stored.” There are portions of reports on the fire. Those documents state that the fire occurred on 4/10/1999. On the document “Molson Can Product to be Destroyed” there is one lot of beer included in the claim which, based on the product code, has a brew date of 4/15/1999, five days after the date of the fire shown on the fire report provided. Miller has provided letters between Miller and the insurance company discussing Miller’s claim for “damages to Molson and Asahi product.” But, that correspondence shows that the insurance company for the warehouse disputed Miller’s assertion that the beer was damaged. The letter from the Michigan Liquor Control Commission dated 10/29/1999, objected to the sale to a salvage company on the ground that that company was not a licensed wholesaler, rather than that the beer was not fit for sale. While the bills of lading show that the destroyed beer came from the warehouse identified in the fire reports there is no evidence to indicate that the beer destroyed was that beer damaged in the fire. For example, if the date of the fire was 4/10/1999, it is unclear how beer brewed in Canada on 4/15/1999 could have been affected by that fire.

The Importer’s certificate for claim 195-2 states that the beer was unmerchantable because the bottles were made of “faulty glass,” but, the Notice of Intent describes the beer to be destroyed as “aged Molson beer.” According to the certificate, the brewer, Molson Canada, purchased the bottles from a supplier. The glass used to make the bottles was “faulty” and, as a result, did not meet quality control standards. In this instance, the destruction was witnessed by CBP. Thus, even though CBP did witness the destruction, the CBP representative would have had no indication that the glass bottles were defective. Since the defect in the glass is not described, it is not known whether the defect was so obvious as to be seen in the glass or if the defect was of a nature that it could not be noticed by examining the bottle. ” No evidence was presented that the beer destroyed was in faulty glass bottles. Again, like the cans in claim 819-7, no evidence of the faulty glass has been provided, i.e., no Miller internal documents that address this defect, or evidence communications with Molson Canada nor Molson’s communications with the bottle supplier, with regard to the faulty glass. Also, as with claim 819-7, this claim asserts two different bases of unmerchantability: expired shelf life and faulty glass bottles. No evidence of the brew date or import date was provided to support the assertion of expired shelf life.

Claim 031-7 is based on beer asserted to have been beyond its shelf life. However, nowhere is provided evidence of the brew date or the import date. Even though, according to Miller, the “sell-by” or “don’t sell after” date is printed on both sides of all bottles and can cases (except for returnable bottle cases), in copy-free areas designed for this purpose. In the Distribution Handbook, Quality Assurance portion, several pages are devoted to the markings on bottles, cans, and cases indicating the “don’t sell date.” Since the “don’t sell date” appears to be important to Miller’s quality standards, and given the fact that Miller can provide a significant amount of information about the destroyed beer, including “lot number and warehouse,” the lack of the “don’t sell date” becomes conspicuous and requires explanation. Finally, we note that claim 022-9, based upon beer damaged by fire, includes a document labeled “Molson Can Product to be Destroyed.” This page describes the beer to be destroyed by, among other things, brew date. The absence of that document for the other four claims reviewed is inexplicable, particularly for claims based on the assertion of an expired shelf life.

The CBP Regulations at Subpart P of Part 191, require that a refund of the IR tax paid on imported beer be claimed by filing a CBP form 7551 (19 C.F.R. § 191.163). A CBP form 7551 requires the claimant to identify the type of drawback claimed, the port where the form will be filed, to provide its taxpayer identification number, total IR tax claimed, method of filing (how the form is to be presented to the port), the section of law under which the claim is filed, name and address of claimant, import entry number, port of entry, date received, description of merchandise, quantity and unit of measure, status of the relevant entries, date destroyed, how destroyed, name of destroyer, description and quantity and unit of measure of destroyed goods. Essentially, CBP form 7551 § 191.163 requires the same general information that is required under 27 C.F.R. 25.283(b). The CBP Regulations also require that a CBP form 7553, be filed. This form gives notice of exportation or destruction to CBP and provides an opportunity to examine the unmerchantable beer before it is destroyed.

The only documentation required by the CBP regulations besides the filing of the two forms described above is required by § 191.163(b). This section requires that the explanation of why the beer is unmerchantable be filed with the drawback entry:

The drawback entry for unmerchantable merchandise shall be accompanied by a certificate of the importer setting forth in detail the facts which cause the merchandise to be unmerchantable and any additional evidence that the drawback office requires to establish that the merchandise is unmerchantable.

(19 C.F.R. § 191.163(b)). The explanation required by § 191.163(b) was not provided until Miller’s claims were denied. In HRL 229245 and HRL 229320 (published after the claims at issue were filed), no certificates explaining the causes of unmerchantability were ever provided and in both we held that failure to comply with 19 C.F.R. § 191.163(b) was fatal to a claim under 26 U.S.C. § 5062(c).

The Federal Circuit Court (CAFC) has stated, “Numerous decisions have held that compliance with drawback regulations is mandatory.” . See, e.g., United States v. W.C. Hardesty Co., 36 CCPA 47, 52 (1949); American Tobacco Co. v. United States, 61 Ct. Cl. 980, 991-92 (1926); Nestle’s Food Co. v. United States, 16 Ct. Cust. App. 451, 457, T.D. 43199 (1929); Spencer, Kellogg & Sons v. United States, 13 Ct. Cust. App. 612, 615-16, T.D. 41459 (1926); Lansing Co. v. United States, 77 Cust. Ct. 92, 424 F. Supp. 112, 114, C.D. 4675 (Cust. Ct. 1976). See e.g., United States v. Lockheed Petroleum Services, Ltd., (709 F. 2d 1472, 1474 (Fed. Cir. 1983), holding that, where Lockheed failed to comply with an applicable regulation, denial of drawback was proper. Miller’s failure to comply with a regulation, namely § 191.163, denied CBP the opportunity to verify the allegations of unmerchantability contained in the certificates by examining the beer before it was destroyed. Thus, per the CAFC’s decision in Lockheed, where Miller failed to comply with the regulation Miller’s drawback claims must be denied. See also, Volvo Trucks v. United States, 367 F.3d 204, 210 (Fed. Cir. 2004), holding that denying tax relief for non-compliance with an IRS regulation, adherence to which was a condition precedent to the tax relief, was within the IRS’ authority).

In addition, the claimant’s certificates themselves are of little evidentiary value. In Carmichael Int’l Service v. United States, 78 Cust. Ct. 143 (Cust. Ct. 1977) the plaintiff offered as evidence an affidavit from its supplier’s bookkeeper. The U.S. Customs Court said the following about this affidavit:

Miss Wan’s assertions about transactions which took place five years earlier are unsupported by any reference to books of account, price lists, letters, or other documents except for the two invoices attached to the affidavit. Thus, her affidavit suffers from the same deficiencies as the affidavit in Andy Mohan, Inc. v. United States, 74 Cust. Ct. 105, 114, C.D. 4593, 396 F. Supp. 1280, 1287-88 (1975), aff’d 63 CCPA 104, 107, C.A.D. 1173, 537 F. 2d 516, 518 (1976), and is entitled to little weight. In fact, she even fails to allege that at the time of executing the affidavit she was in possession of any of Croset’s books, records, or other documents (except for the two invoices) which enabled her to reach the conclusions set forth in her affidavit. As the appellate court stated in Andy Mohan, supra, 63 CCPA at 107, 537 F. 2d at 518:

Evidence should be assessed “in practical terms, considering such factors as completeness, adequacy of bases, and possible motives to deceive,” rather than on the basis of artificial distinctions between ultimate and evidentiary facts.

(Citations omitted). (Id. at 152). In Andy Mohan, Inc. v. United States, (396 F. Supp. 1280, 1287-88 (1975), aff’d 537 F. 2d 516, 518 (1976)) the court found that the plaintiff failed to rectify a lack of evidence because the affidavits provided consisted entirely of conclusory statements but no corroborating evidence was provided to support those conclusions. The same defects are found in the “importer’s certificates” supplied by Miller.

The certificates are all signed by “Stephen D. Rogers, Secretary” and dated 6/24 (no year is given). Mr. Rogers’ capacity as secretary is not explained. It is unknown with which entity he is affiliated. It is unclear whether Mr. Rogers was a secretary at all three companies, or with Miller or was a secretary with the broker. Further, it is not clear whether Mr. Rogers’ title of “secretary” indicates that his position is clerical or if he is an officer of one of the entities. Moreover, Mr. Rogers’ knowledge of the cause of unmerchantability is not explained. Therefore, the designation “secretary” is, at best, ambiguous as to this individual’s capacity to represent the drawback claimants. We find Mr. Rogers’ name on none of the evidence provided for the five representative claims. The evidentiary value of Mr. Rogers’ statements are also undermined by the fact that the certificates were filed years after the unmerchantability was caused and when, as explained below, the cause of unmerchantability is not supported by evidence.

Miller also states that CBP paid claims that were filed by Miller for drawback of IR tax “included forms and supporting documents that are the same as” those at issue. Though not explicitly stated, Miller seems to be making the argument that, since CBP has paid such claims previously, those protested here should be “treated” the same. Section 177.12(c)(1) of the CBP Regulations provides that the following rules will apply for purposes of determining whether a treatment was previously accorded by CBP to substantially identical transactions of a person:

(i) There must be evidence to establish that: (A) There was an actual determination by a Customs officer regarding the facts and issues involved in the claimed treatment; (B) The Customs officer making the actual determination was responsible for the subject matter on which the determination was made; and (C) Over a 2-year period immediately preceding the claim of treatment, Customs consistently applied that determination on a national basis as reflected in liquidations of entries or reconciliations or other Customs actions with respect to all or substantially all of that person’s Customs transactions involving materially identical facts and issues.

19 C.F.R. 177.12(c)(1)). Section 177.12(c)(ii) provides that the determination of whether the requisite treatment occurred will be made on a case-by-case basis and will involve an assessment of all relevant factors. In particular, CBP will focus on past transactions to determine whether there was an examination of the merchandise by CBP or the extent to which those transactions were reviewed by CBP. Diminished weight will be given to transactions involving small quantities or values, and no weight to informal entries or transactions processed without examination or CBP officer review.

As evidence of the “treatment,” Miller has provided copies of paid drawback claims, including the checks form CBP payable to Miller. However, Miller has not provided evidence that there was “an actual determination by a [CBP] officer,” and therefore there is no evidence that such a CBP office was responsible for making that determination. Also, the evidence provided reflects transaction only at port 0401, Boston. There is no evidence that CBP consistently liquidated “substantially identical” drawback claims filed by Miller on a national basis.

Section 177.12(c)(2)(iv) further provides that “the evidentiary burden as regards the existence of the previous treatment is on the person claiming the treatment.” Section 177.12(c)(iv), further states the following:

The evidence of previous treatment by Customs must include a list of all materially identical transactions by entry number (or other Customs assigned number), the quantity and value of merchandise covered by each transaction (where applicable), the ports of entry, the dates of final action by Customs, and, if known, the name and location of the Customs officer who made the determination on which the claimed treatment is based. In addition, in cases in which an entry is liquidated without any Customs review (for example, the entry is liquidated automatically as entered), the person claiming a previous treatment must be prepared to submit to Customs written or other appropriate evidence of the earlier actual determination of a Customs officer that the person relied on in preparing the entry and that is consistent with the liquidation of the entry.

The evidence provided by Miller does not substantiate that it is entitled to a treatment. Miller has identified three entry numbers, but has not provided a “list of all materially identical transactions by [drawback] entry number.” No “dates of final action by CBP” are provided. Neither the name nor location of the CBP officer who made the determination on which the claimed treatment is based has been provided.

Miller has not supplied evidence that it was the importer of the destroyed beer and has failed to identify the importations with which the destroyed beer was entered, nor corroborate that the destroyed beer was imported with the claimed import entries. No explanation of the causes of unmerchantability was provided until after the claims were denied. There is insufficient evidence of the causes of unmerchantability and insufficient evidence that the beer destroyed was unmerchantable as a result of the described causes. Accordingly, the five representative claims do not meet the requirements of 19 U.S.C. § 5062(c). Miller has also not met the requirements of a “treatment” for its previous claims.

HOLDING:

The five representative drawback claims do not meet the requirements of 26 U.S.C. § 5062(c) so as to be entitled to drawback of Internal Revenue tax on imported beer. To the extent that the other claims at issue do not meet the statutory requirements, they too should be denied.

With regard to the five claims considered herein, the Protest should be DENIED. The protest should also be DENIED to the extent that the remaining claims do not meet the statutory requirements.

Please mail this decision to the claimant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of 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 B. Harmon, Director

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