Ruling Request Regarding Eligibility of Consolidated Corporation to Claim Substitution Unused Merchandise Drawback; 19 U.S.C. §1313(j)(2); 19 C.F.R. § 190.32

90 K Street, N.E., Washington, D.C. 20229-1177 U.S. Customs and Border Protection HQ H309489 June 11, 2021 DRA 2-01 OT:RR:CTF:ER H309489 CC John P. Donohue, Esq. Ciardi Ciardi & Astin One Commerce Square 2005 Market St., Suite 3500 Philadelphia, PA 19103 Re: Ruling Request Regarding Eligibility of Consolidated Corporation to Claim Substitution Unused Merchandise Drawback; 19 U.S.C. §1313(j)(2); 19 C.F.R. § 190.32 Dear Mr. Donohue: This responds to your February 3, 2020, request for a prospective ruling under 19 C.F.R. § 177.1(a)(1) on behalf of Volvo Car USA LLC (“Volvo Car USA”) regarding its eligibility to make claims for substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2) on Volvo passenger vehicles produced in the United States and exported against passenger vehicles it has previously imported from overseas. FACTS: Volvo Car USA LLC (“Volvo Car USA”) or its predecessor companies, has been importing finished Volvo automobiles and genuine Volvo car parts into the United States since 1955. In 2015, Volvo Car US Operations Inc. (“Volvo Car US Operations”) was established in Ridgeville, South Carolina to manufacture passenger vehicles. Both Volvo Car USA and Volvo Car US Operations were wholly owned subsidiaries of Volvo Car North America, LLC (“VCNA”). In 2016, VCNA was restructured to drop down most of its assets into Volvo Car USA so that VCNA would be the holding company of both Volvo Car USA and Volvo Car US Operations. In December 2019, Volvo Car US Operations and Volvo Car USA consolidated such that Volvo Car USA was the surviving corporate entity and Volvo Car US Operations became a division of Volvo Car USA. For legacy and marketing reasons, the U.S. production facility in Ridgeville, SC, may sometimes be referred to as “Volvo Car USA d/b/a Volvo Car US Operations.” You state, however, that Volvo Car US Operations ceased to exist as a separate legal entity and Volvo Car USA has now assumed the responsibility for all Volvo passenger vehicle import activity, Volvo passenger vehicle production in the United States, and subsequent export activity of Volvo products from the United States. You also indicate that since the reorganization, Volvo Car USA remains as the only corporation with only one board of directors, one C-suite, and operates as the sole importer and exporter of Volvo passenger vehicles in the United States. Volvo Car USA intends to export passenger vehicles produced by its division, Volvo Car US Operations. Volvo Car USA expects to file unused merchandise substitution drawback claims under 19 U.S.C. § 1313(j)(2) and it will match exports of Volvo automobiles produced in Ridgeville against automobiles previously imported by Volvo Car USA. These vehicles will be classified in the same the eight-digit Harmonized Tariff Schedule (“HTS”) subheading number as Volvo vehicles imported by Volvo Car USA. You write that “Volvo Car USA LLC will be the owner of both the imported and designated export merchandise.” In support of that statement, you assert that Volvo Car USA owns and controls the imported merchandise, it owns and controls the US production facility, and it owns and controls that facility’s output. ISSUES: Whether Volvo Car USA may claim drawback under 19 U.S.C. § 1313(j)(2) for substituted exported merchandise produced by its division Volvo Car US Operations. Whether the use of a formerly separate corporate entity name, Volvo Car US Operations, to identify the Ridgeville facility will restrict Volvo Car USA’s drawback rights. LAW AND ANALYSIS: As an initial matter, we note that this prospective ruling request does not implicate the drawback successorship provisions of 19 U.S.C. § 1313(s) because although Volvo Car USA consolidated with the formerly separate Volvo Car US Operations in 2019 and could be considered a drawback successor, the current iteration of Volvo Car USA will not be designating (A) imported merchandise which the predecessor, before the date of succession, imported; or (B) subject to . . . [19 U.S.C. §1313(j)(5) and (6)], imported merchandise, other merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise, or any combination of such imported merchandise and such other merchandise, that the predecessor received, before the date of succession, from the person who imported and paid any duties, taxes, and fees due on the imported merchandise; as the basis for drawback on merchandise possessed by the drawback successor after the date of succession. 19 U.S.C. § 1313(s)(2) (emphasis added); see also 19 C.F.R. § 190.32(f)(1). In this case, there is no statement in your request that Volvo Car USA, which includes the Volvo Car US Operations division, plans to claim substitution unused merchandise drawback on passenger vehicles which it has imported before the date of its consolidation with Volvo Car US Operations in 2019 and you note that “[n]o drawback application or drawback entry has been filed since the completion of the [2016] corporate reorganization . . .” Consequently, the drawback successor provisions of 19 U.S.C. § 1313(s) and 19 C.F.R. § 190.32(f) would not apply to the transactions planned by Volvo Car USA because the relevant import and export operations will all take place within a single successor corporation. Whether Volvo Car USA may claim drawback under 19 U.S.C. § 1313(j)(2) for substituted exported merchandise produced by its division Volvo Car US Operations. In relevant part, 19 U.S.C. §1313(j)(2) provides that: [I]f there is, with respect to imported merchandise on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation, any other merchandise (whether imported or domestic), that— (A) is classifiable under the same 8-digit HTS subheading number as such imported merchandise; (B) is, before the close of the 5-year period beginning on the date of importation of the imported merchandise and before the drawback claim is filed, either exported or destroyed under customs supervision; and (C) before such exportation or destruction— (i) is not used within the United States, and (ii) is in the possession of, including ownership while in bailment, in leased facilities, in transit to, or in any other manner under the operational control of, the party claiming drawback under this paragraph, if that party— (I) is the importer of the imported merchandise, or (II) received the imported merchandise, other merchandise classifiable under the same 8-digit HTS subheading number as such imported merchandise, or any combination of such imported merchandise and such other merchandise, directly or indirectly from the person who imported and paid any duties, taxes, and fees imposed under Federal law upon importation or entry and due on the imported merchandise (and any such transferred merchandise, regardless of its origin, will be treated as the imported merchandise and any retained merchandise will be treated as domestic merchandise); then, notwithstanding any other provision of law, upon the exportation or destruction of such other merchandise an amount calculated pursuant to regulations prescribed by the Secretary of the Treasury under subsection (l) shall be refunded as drawback. Similarly, CBP’s implementing regulation, 19 C.F.R. § 190.32(a), provides that: Section 313(j)(2) of the Act, as amended (19 U.S.C. 1313(j)(2)), provides for drawback of duties, taxes, and fees paid on imported merchandise based on the export or destruction under CBP supervision of substituted merchandise (as defined in §?190.2, pursuant to 19 U.S.C. 1313(j)(2)), before the close of the 5-year period beginning on the date of importation of the imported merchandise and before the drawback claim is filed, and before such exportation or destruction the substituted merchandise is not used in the United States (see paragraph (e) of this section) and is in the possession of the party claiming drawback. The amount of duties, taxes, and fees eligible for drawback is determined by per unit averaging, as defined in 19 CFR 190.2, for any drawback claim based on 19 U.S.C. 1313(j)(2). According to CBP regulations, “[i]n situations where the exporter or destroyer of the substituted merchandise is also the importer of the imported merchandise, that party will be entitled to claim [substitution unused merchandise] drawback.” 19 C.F.R. § 190.33(b)(i); 19 U.S.C. § 1313(j)(2)(c)(ii)(I). You describe Volvo Car USA in your request as currently organized to be both the importer of the duty-paid passenger vehicles and the exporter of the substituted unused passenger vehicles produced by its Volvo Car US Operations division. You also note in your request letter that Volvo Car USA will be in “possession” of the substituted unused merchandise within the meaning of 19 U.S.C. § 1313(j)(2)(c)(ii) and 19 C.F.R. §§ 190.2 and 190.32(a), which is logically consistent with Volvo Car USA being both the importer of the imported merchandise and exporter of the substituted merchandise. In the context of drawback, it has long been the position of CBP that a corporation is “a single entity in contemplation of law, and, although it may have many departments, or subdivisions, being a corporation, it is an indivisible unit.” HQ 223779 (March 30, 1992), (quoting Safeco Insurance Company of America v. Franklin, 185 F. Supp. 499, at 501 (N.D. Ca. 1960)); see also Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 770 (1984). In this case, as discussed above, you state that Volvo Car US Operations ceased to exist as a separate legal entity and Volvo Car USA has now assumed the responsibility for all Volvo passenger vehicle import activity, Volvo passenger vehicle production in the United States, and subsequent export activity of Volvo products from the United States. You also indicate that since the reorganization Volvo Car USA remains as the only corporation with only one board of directors, one C-suite, and operates as the sole importer and exporter of Volvo passenger vehicles in the United States. You indicate that “Volvo Car USA LLC will be the owner of both the imported and designated export merchandise.” In support of that statement, you assert that Volvo Car USA owns and controls the imported merchandise, it owns and controls the US production facility, and it owns and controls that facility’s output. Accordingly, because Volvo Car USA’s 2019 restructuring includes Volvo Car US operations as a division under the parameters asserted above, we concur with your assertion that Volvo Car USA will be eligible to claim substitution unused merchandise, provided that its planned operations comply with all other applicable requirements of 19 C.F.R. Part 190. Whether the use of a formerly separate corporate entity name, Volvo Car US Operations, to identify the Ridgeville facility will restrict Volvo Car USA’s drawback rights. Your letter also contains a request for a ruling on the question of whether Volvo Car USA’s continued identification of its Ridgeville, South Carolina facility as “Volvo Car USA LLC d/b/a Volvo Car US Operations” or “Volvo Car US Operations, a division of Volvo Car USA LLC” would impair Volvo Car USA’s drawback rights. You cite Safeco and HQ 223779 in support of your advice to your client that “so long as the post-organizational company is a single indivisible legal unit, with control over both the imported and designated merchandise, the separate identification of one division as opposed to another is legally irrelevant.” As discussed above in addressing the inapplicability of successorship provisions to your request, Volvo Car US Operations is already a division of Volvo Car USA and “not a separate corporation” prior to the operations giving rise to the drawback claims, which renders the facts analogous to HQ 223779 and distinguishable from C.S.D. 89-12. Moreover, as discussed above regarding Volvo Car USA’s eligibility to claim substitution unused merchandise drawback under 19 U.S.C. §1313(j)(2) and 19 C.F.R. §§ 190.32 and 190.33, Volvo Car USA’s right to claim substitution unused merchandise drawback is not predicated on organizational nomenclature or self-identification, but rather its underlying corporate identity as both the exporter of the substituted merchandise and the importer of the duty-paid imported merchandise under 19 U.S.C. § 1313(j)(2)(c)(ii)(I) and 19 C.F.R. § 190.33(b)(i). Accordingly, we concur with your conclusion that Volvo Car USA’s right to substitution unused merchandise drawback would not be affected by the continued identification of the Volvo Car US Operations South Carolina facility as “Volvo Car USA LLC d/b/a Volvo Car US Operations” or “Volvo Car US Operations, a division of Volvo Car USA LLC.” HOLDING: Based on the above discussion, assuming that Volvo Car USA complies with all relevant statutory and regulatory requirements, CBP finds that Volvo Car USA is eligible to claim substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2) on exported passenger vehicles produced in the U.S. by Volvo Car US Operations when the eight-digit HTS subheading number of passenger vehicles imported and exported by Volvo Car USA are the same. CBP also finds that Volvo Car USA may continue to use the name “Volvo Car USA LLC d/b/a Volvo Car US Operations” or “Volvo Car US Operations, a division of Volvo Car USA LLC” to identify its Ridgeville, South Carolina facility without affecting its future drawback claims. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If the activities vary from the facts stipulated to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. § 177.9(b). Sincerely, Gail G. Kan, Chief Entry Process and Duty Refunds Branch