Protest and Application for Further Review No. 5301-97-100369; 19 U.S.C. §1313(j)(2); NAFTA; exports to Canada

HQ 227935 March 26, 1999 DRA-4-RR:CR:DR 227935 IOR CATEGORY: Drawback Port Director U.S. Customs Service 2350 N. Sam Houston Pkwy E. Suite 1000 Houston, TX 77032 ATTN: Drawback Center, Suite 900 RE: Protest and Application for Further Review No. 5301-97-100369; 19 U.S.C. §1313(j)(2); NAFTA; exports to Canada Dear Sir: The above-referenced protest was forwarded to this office for further review. We have considered the evidence provided and the arguments made by the protestant. FACTS: The protestant imported cantaloupe and honeydew melons and dry onions from Mexico, from November 21, 1992 through June 27, 1993, and exported cantaloupe and honeydew melons and dry onions to Canada, from July 8, 1994 through July 19, 1995. Drawback entry 635-xxxx4635, was filed on May 22, 1995, claiming drawback under 19 U.S.C. §1313(j). The drawback entry was liquidated on August 22, 1997 with no drawback allowed. The liquidated drawback entry, CF 7539, has a handwritten note on it stating "[m]od Act eliminated unused substitution for exports to CA effective 1/1/94." A protest of the denial of drawback was filed on September 19, 1997. While it is not clear from the drawback entry that the claim for drawback was for substitution or direct identification, the protest refers to the subject entry as a substitution drawback entry. In block 9 of the protest form (CF 19), the protestant states: Our understanding was that merchandise "imported" after 01/01/94 could not be substituted for duty refund with exports done to Canada. Also, that merchandise imported before 12/31/93 had the period of three years to file a substitution drawback claim. Please let us know what the cut-off date for exports to Canada is in regard to substitution drawback for unused, same condition merchandise. ISSUE: Whether an exportation of merchandise to Canada after January 1, 1994, qualifies as an exportation under 19 U.S.C. §1313(j)(2). LAW AND ANALYSIS: Initially, we note that the protest was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. §1514 and 19 CFR Part 174). We note that the refusal to pay a claim for drawback is a protestable issue (see 19 U.S.C. §1514(a)(6)). Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if there is, with respect to imported dutypaid merchandise, any other merchandise that is commercially interchangeable with the imported merchandise and if the following requirements are met. The other merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Before the exportation or destruction, the other merchandise may not have been used in the United States and must have been in the possession of the drawback claimant. The party claiming drawback must either be the importer of the imported merchandise or have received from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof. The drawback statute was substantively amended by section 632, title VI  Customs Modernization, Pub. L. No. 103182, the North American Free Trade Agreement Implementation ("NAFTA") Act (107 Stat. 2057), enacted December 8, 1993. The foregoing summary of section 1313(j)(2) is based on the law as amended by Public Law 103182. Title VI of Public Law 103182 took effect on the date of enactment of the Act (section 692 of the Act). According to the applicable legislative history the amendments to the drawback law (19 U.S.C. §1313) are applicable to any drawback entry made on or after the date of enactment as well as to any drawback entry made before the date of enactment if the liquidation of the entry is not final on the date of enactment (H. Report 103361, 103d Cong., 1st Sess., 132 (1993); see also provisions in the predecessors to title VI of the Act; H.R. 700, 103d Cong., 1st Sess., section 202(b); S. 106, 103d Cong., 1st Sess., section 202(b); and H.R. 5100, 102d Cong., 2d Sess., section 232(b)). The amendment to the drawback law included the addition to 19 U.S.C. §1313(j), of the following: (4) Effective upon the entry into force of the North American Free Trade Agreement, the exportation to a NAFTA country, as defined in section 3301(4) of this title, of merchandise that is fungible with and substituted for imported merchandise, other than merchandise described in paragraphs (1) through (8) of section 3333(a) of this title, shall not constitute an exportation for purposes of paragraph (2). The legislative history, in House Report 103361, 103d Cong., 1st Sess., 39 (1993), states as follows: Subsection (c) eliminates, effective upon entry into force of the Agreement, "same condition substitution drawback" by amending section 313(j)(2) of the Tariff Act of 1930 (19 U.S.C. 1313(j)(2)), thereby eliminating the right to a refund on the duties paid on a dutiable good upon shipment to Canada or Mexico of a substitute good, except for goods described in paragraphs one through eight of section 203(a). The goods described in paragraphs one through eight of section 203(a) (19 U.S.C. §3333(a)) are those that are not subject to NAFTA drawback. There is no indication that the subject exported merchandise is described in paragraphs one through eight of section 203(a). Contrary to the protestant’s position stated in the protest, 19 U.S.C. §1313(j)(4) provides that effective upon the entry into force of the NAFTA, the exportation to a NAFTA country, of the described merchandise, does not constitute an exportation. Nothing in the statute suggests that the provision applies only to that merchandise substituted for merchandise imported after the date of entry into force of the NAFTA. Similarly, the legislative history also clearly states that effective upon entry into force of the NAFTA, the right to substitution drawback is intended to be eliminated for goods shipped to Canada or Mexico. A Presidential Memorandum on the Implementation of the NAFTA, directs that the Secretary of State take action to provide for the entry into force of the NAFTA on January 1, 1994. See 29 Weekly Compilation of Presidential Documents 2641, January 3, 1994. Therefore, as of January 1, 1994, the exportation of the cantaloupe and honeydew melons and dried onions, does not constitute an exportation for purposes of 19 U.S.C. §1313(j)(2). Nothing in the statute prevents exportation of the substituted merchandise to a country other than a NAFTA country. However, no determination has been made regarding the other requirements for entitlement to drawback such as commercial interchangeability. The file does not contain any evidence on the issue of commercial interchangeability. HOLDING: An exportation of merchandise to Canada after January 1, 1994, does not qualify as an exportation under 19 U.S.C. §1313(j)(2). The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, dated August 4, 1993, Subject: Revised Protest Directive, 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 or entries in accordance with the 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 Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, John Durant Director Commercial Rulings Division