Substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2); Temporary Importation under Bond (TIB); manufacture of tobacco entered under a TIB.

H326296 April 8, 2026 OT:RR:CTF:EPDR H326296 MY CATEGORY: Entry David McGurk, Center Director Petroleum, Natural Gas, and Minerals Center of Excellence & Expertise 2323 S. Shepherd #1300 Houston, TX 77019 RE: Substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2); Temporary Importation under Bond (TIB); manufacture of tobacco entered under a TIB. Dear Center Director, This is in response to your request for a ruling on behalf of Japan Tobacco International, Inc. (JTI), submitted on July 11, 2021, to determine whether JTI can claim substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2) on certain cigarettes. JTI intended to claim drawback on cigarettes manufactured with raw tobacco that was entered as a Temporary Importation under Bond (TIB). On July 10, 2025, JTI revised its request to seek internal advice pertaining to the disposition of pending drawback claims in lieu of a prospective ruling. We have considered the facts and issues raised, and our decision follows. FACTS: JTI imports cigarettes from the Republic of Türkiye under subheading 2402.20.80, Harmonized Tariff Schedule of the United States (HTSUS). Cigarettes imported under this classification are subject to Internal Revenue Code (IRC) federal excise taxes. JTI proposes to substitute the imported cigarettes with domestically produced cigarettes classified under the same 8-digit HTSUS subheading and thereafter export the substituted cigarettes to foreign countries. JTI states that the substituted cigarettes it intends to export, and upon which it seeks to claim drawback, are manufactured in the United States from domestic components and imported raw tobacco entered under TIB subheading 9813.00.05, HTSUS. The imported tobacco entered under a TIB is never entered for consumption, and duties are never paid, prior to its manufacture and exportation. 2 JTI has requested a ruling addressing whether it may claim substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2) on domestically produced cigarettes that were manufactured with imported raw tobacco that was accorded duty-free treatment due to entry under TIB subheading 9813.00.05, HTSUS. We note that JTI submitted two duplicate ruling requests to our office on September 1, 2021, and December 22, 2022. JTI later submitted a supplement, on January 11, 2023, raising additional arguments in support of its position. In a subsequent letter, dated July 10, 2025, JTI asked our office to convert the request for a binding ruling pursuant to 19 C.F.R. § 177.2 to a request for internal advice pursuant to 19 C.F.R. § 177.11, because the request now concerns pending drawback claims rather than a prospective transaction. JTI’s position is that exported merchandise that was manufactured with articles accorded duty-free treatment due to entry under a TIB are eligible for drawback without regard to the limitation in 19 U.S.C. § 1313(u). JTI argues that eligibility for substitution unused merchandise drawback is contingent solely on compliance with the requirements enumerated under 19 U.S.C. § 1313(j)(2). Specifically, JTI asserts that 19 U.S.C. § 1313(u), which states that imported merchandise not regularly entered or withdrawn for consumption cannot satisfy any requirement for use, exportation, or destruction for purposes of 19 U.S.C. § 1313, is inapplicable to claims filed under §1313(j)(2). JTI maintains that the amendment to §1313(j)(2) by the Miscellaneous Trade and Technical Correction Act of 2004, Pub. Law. 108-429, 18 Stat. 2585 (Dec. 3, 2004), rendered § 1313(u) inapplicable to § 1313(j)(2) through the addition of the phrase “notwithstanding any other provision of law.” JTI posits that this phrase places § 1313(j)(2) in a “special place” such that “[i]f with respect to imported designated merchandise, there is any other merchandise, whether foreign or domestic, and which is substitutable, then upon exportation of that other merchandise, drawback shall be granted[.] No other provision of law[] may defeat the right to such drawback.” JTI cites to National Association of Manufacturers v. United States, 10 F.4th 1279 (Fed. Cir. 2021) (NAM) in support of its position. JTI alleges that in NAM the Court of Appeals for the Federal Circuit (CAFC) held that the “notwithstanding” clause in § 1313(j)(2) signifies that no other provision of the drawback statute applies to substitution unused merchandise drawback. Accordingly, JTI claims that U.S. Customs and Border Protection (CBP) Headquarters Ruling (HQ) H305251, dated December 10, 2021, was incorrect in holding that pursuant to § 1313(u) when vehicles are produced within an FTZ from domestic and foreign status components and exported without being entered for consumption, only the domestic status components are eligible for drawback under §1313(j)(2). In the alternative, JTI argues that § 1313(u) only covers “imported merchandise” and is therefore inapplicable to merchandise produced in the United States in whole or in part from components entered under a TIB. In order to address the issues raised as part of a request for internal advice pursuant to 19 C.F.R. § 177.11, we contacted the New York drawback office where JTI has filed drawback claims implicated in this decision. The office concurred in JTI’s request for internal advice with respect to the pending claims. The office maintains that 19 U.S.C. § 1313(u) precludes drawback on exported merchandise manufactured from materials entered under a TIB that have not been entered for consumption. The office cites to 19 C.F.R. § 190.151(a)(2) in support of its position, which states that: “[i]mported merchandise that has not been regularly entered or withdrawn for 3 consumption, will not satisfy any requirement for use, importation, exportation or destruction, and will not be available for drawback, under section 313 of the Act, as amended (19 U.S.C. 1313) (see 19 U.S.C. 1313(u)).” ISSUE: Whether exported cigarettes manufactured from imported tobacco entered under a TIB, and domestic components, are eligible for drawback under 19 U.S.C. § 1313(j)(2). LAW AND ANALYSIS: General Note 1, HTSUS, dictates that all merchandise imported into the United States is subject to duty unless specifically exempted. Such an exemption is accorded to merchandise temporarily imported under bond that is not imported for sale, on the condition that it is exported or destroyed within a year of importation. See e.g. Notes 1-2 of Subchapter XIII, Chapter 98, HTSUS; 19 C.F.R. § 10.31. Eligibility for entry under a TIB is further conditioned on the imported merchandise satisfying the criteria for a specific subheading listed in Subchapter XIII, Chapter 98. Subheading 9813.00.05, HTSUS, is applicable to articles imported to be “repaired, altered, or processed (including processes which result in articles manufactured or produced in the United States).” Merchandise entered under a TIB is not entered for consumption. See e.g. HQ 223491 (March 30, 1992) (“Customs has consistently held that a TIB entry is not an entry for consumption”); HQ 225700 (June 16, 1995) (“a TIB entry is not an entry for consumption”). Pursuant to 19 C.F.R. § 190.151(a)(2), “[i]mported merchandise that has not been regularly entered . . . for consumption, will not satisfy any requirement for use, importation, exportation or destruction, and will not be available for drawback.” Drawback “means the refund, in whole or in part, of the duties, taxes, and/or fees paid on imported merchandise.” 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(2), drawback may be claimed on exported or destroyed merchandise which is substituted for imported and duty-paid merchandise “notwithstanding any other provision of law.” Among the requirements for claiming drawback under 19 U.S.C. § 1313(j)(2), the substituted merchandise must be: classifiable under the same 8-digit HTS subheading as the imported merchandise; exported or destroyed under CBP supervision within 5-years of the importation date; remain unused; and be in the possession of the drawback claimant prior to its exportation or destruction. Additionally, eligibility for drawback is conditioned on compliance with all applicable statutory and regulatory requirements, to include the requirement for imported merchandise to be “regularly entered . . . for consumption” 19 U.S.C. § 1313(u). This statutory provision prohibits imported merchandise “that has not been regularly entered or withdrawn for consumption [from] satisfy[ing] any requirement for use, exportation, or destruction” for purposes of claiming drawback under 19 U.S.C. § 1313 – accordingly, this is a provision of general application to drawback claims, not just substitution unused merchandise claims under 19 U.S.C. § 1313(j)(2). Id. Consequently, imported merchandise which has not been entered for consumption is incapable, as a matter of law, from satisfying any prerequisite for drawback eligibility pertaining to use or exportation. Id.; see also 19 C.F.R. § 190.151(a)(2) (stating that such merchandise “will not be available for drawback”). 4 Merchandise is entered for consumption once an entry summary has been filed in proper form with estimated duties attached. 19 C.F.R. § 141.0a(f). In contrast, merchandise is entered under a TIB once an entry summary supporting a temporary importation under bond has been filed with CBP in proper form, without any estimated duties attached. See 19 C.F.R. §§ 141.0a(h); 10.31(a)(1)-(2). It is well established that merchandise entered under a TIB is not regularly entered for consumption. As the Court of International Trade has explained, “Congress’s rationale for subchapter XIII of the HTSUS is that an article temporarily imported, and subsequently exported, does not actually enter the U.S. market and thus ‘should be exempt from duty because it is not in reality an importation for consumption.’” Trans-Border Customs Servs. v. United States, 18 C.I.T. 22, 27 (1994) (quoting S. Rep. No. 1081, 88th Cong., 2d Sess. (June 16, 1964); see also Titanium Metals Corp. v. United States, 19 C.I.T. 1143 (1995). Similarly, in HQ 223491, dated March 30, 1992, CBP distinguished a TIB entry from an entry for consumption that is liquidated and goes into the commerce of the United States” (internal citations omitted). CBP held that “a TIB entry is not an entry for consumption,” and underscored that TIB entries “shall not be liquidated as the transaction does not involve liquidated duties.” Quoting 19 C.F.R. § 10.31(h); see also HQ 225700 (Jun. 16, 1995) (holding that antidumping duties are not applicable to TIB entries because a TIB entry is not an entry for consumption). Accordingly, a TIB entry is not regularly entered for consumption and no duties are paid or payable on the imported merchandise because TIBs function as a duty exemption. JTI contends that the phrase “notwithstanding any other provision of law” in 19 U.S.C. § 1313(j)(2) renders the requirement for imported merchandise to be entered for consumption under 19 U.S.C. § 1313(u) inapplicable. According to JTI, the CAFC in NAM espoused this interpretation of the phrase “notwithstanding any other provision of law” in relation to 19 U.S.C. § 1313(v). JTI is mistaken as to both the effect of this phrase on the applicability of other relevant laws and the holding of NAM. The “notwithstanding” language in 19 U.S.C. § 1313 means that a particular provision is controlling in the event of a conflict with another relevant law. The Supreme Court has held that the use of a “notwithstanding” clause evidences the drafter’s intention that the provision of the “notwithstanding” section override the conflicting provisions of any other section. Cisneros v. Alpine Ridge Grp., 508 U.S. 10, 18 (1993); see also NLRB v. SW Gen., Inc., 580 U.S. 288, 290 (2017) (explaining that a notwithstanding clause can be used to show which of two or more provisions prevails in the event of a conflict). Absent a conflict, the “notwithstanding” clause in a provision is not intended to override or negate any other provision of a law, signifying that a provision containing a “notwithstanding” clause should be read jointly with all nonconflicting provisions because they are jointly applicable. This is consistent with CBP’s past treatment of the “notwithstanding” clause in the context of drawback. To illustrate, in HQ 230591, dated February 17, 2005, we addressed the applicability of § 1313(u) to § 1313(p), another provision which contains a “notwithstanding” clause. There, a petroleum product, MTBE, was produced within an FTZ from domestic feedstocks and exported without being entered for consumption. CBP considered whether § 1313(u) precluded drawback eligibility under § 1313(p). CBP held that §1313(u) only prohibited drawback upon the exportation of imported goods that had not been regularly entered for consumption and that “no similar rule against paying drawback on exported domestic goods 5 [substituted] for imported duty-paid goods” existed. This holding illustrates that the “notwithstanding” clause in § 1313(p) is not implicated in circumstances where the drawback eligibility of a covered article does not conflict with § 1313(u) – specifically, when drawback is claimed on an article produced from domestic inputs, § 1313(u) is inapplicable. However, as explained above, § 1313(u) also does not necessarily entail a conflict with another provision containing a “notwithstanding” clause if the provisions can be read jointly. As in HQ 230591, at issue in NAM was the drawback eligibility of domestically produced merchandise. In that case, the government sought to prohibit duty drawback under § 1313(j)(2) on domestically produced exports which would have been subject to IRC excise taxes if made available for domestic use. The Government proposed a rule to limit drawback eligibility to exports on which IRC excise taxes had actually been paid, arguing that drawback encompassed the cancellation of excise taxes imposed on domestic products that were exported without the payment of such taxes. For purposes of treating the excise tax extinguishment upon exportation as a drawback, the government relied on § 1313(v) to establish that a single export may not serve as a basis for multiple drawback claims. The CAFC, however, held that the government’s interpretation of § 1313(v) was invalid because it undermined the “notwithstanding” clause in §1313(j)(2) and created irreconcilable statutory conflicts. 10 F. 4th 1279, 1287-1288. In relevant part, the court reasoned that the government’s proposed regulation created a new requirement for eligibility under § 1313(j)(2) – paying excise taxes on domestically produced exports – which did not appear among the statutory preconditions for substitution unused merchandise drawback. Id. The government’s proposed rule thus impermissibly narrowed drawback eligibility under 19 U.S.C. § 1313(j)(2) to substituted domestically produced exports on which excise taxes have been paid. This is not the case here, because the issue is not whether JTI has paid excise taxes on the domestically produced cigarettes, but whether JTI has complied with the statutory requirement to enter imported merchandise for consumption in accordance with 19 U.S.C. § 1313(u). First, the statutory text of § 1313(u), as well as its implementing regulation, 19 C.F.R. § 190.151(a)(2), clearly and unambiguously prohibits any imported merchandise that was not regularly withdrawn or entered for consumption from fulfilling the use, exportation, or destruction requirements for drawback eligibility under the statute. Second, this prohibition does not impact the eligibility of domestically produced merchandise under 19 U.S.C. § 1313(j)(2) - it merely clarifies the requirements for claiming drawback when the exported merchandise was previously imported. Consequently, there is no conflict between the eligibility requirements specified for substitution unused merchandise drawback in § 1313(j)(2) and the eligibility limitation specified for all drawback claims in § 1313(u). As detailed above, the Supreme Court has explained that absent a conflict with a statutory provision containing a “notwithstanding” clause, all other provisions are equally applicable and must be considered jointly. See Cisneros 508 U.S. at 18 and NLRB 580 U.S. at 290. Consequently, § 1313(u) applies to substitution unused merchandise drawback if the exported merchandise on which drawback is claimed contains imported articles which have not been regularly entered for consumption. The imported tobacco within JTI’s exported cigarettes is thus precluded from drawback eligibility by § 1313(u) not because the cigarettes were domestically manufactured, but because the imported tobacco that was entered under a TIB and never entered for consumption. 6 We now address JTI’s alternative argument that § 1313(u) only covers “imported merchandise,” and it is therefore inapplicable to merchandise produced in the United States in whole or in part from components entered under a TIB. JTI’s argument is contravened by the legislative history of 19 U.S.C. § 1313(u). Congress has specifically addressed the intersection of duty deferral or exemption programs and drawback. In Senate Report 103-189, 84, dated November 18, 1993, the legislative policy underlying 19 U.S.C. § 1313(u) was explained as preventing “‘piggybacking’ other duty exemption benefits ([provided by] FTZs, bonded warehouses and duty-free temporary importation) onto [] drawback benefits.” (emphasis added). Congress thus specifically intended § 1313(u) to deny drawback benefits to imported articles accorded duty-free entry under a TIB that were never “regularly entered” for consumption – including exported merchandise manufactured from such imported articles in accordance with TIB subheading 9813.00.05, HTSUS. Finally, we address JTI’s assertion that, in HQ H305251, dated December 10, 2021, CBP incorrectly held that domestically manufactured articles were ineligible for drawback, in light of the CAFC’s decision in NAM. In that case, CBP addressed whether Mercedes-Benz USA, LLC (“Mercedes”) could claim drawback under 19 U.S.C. § 1313(j)(2) on vehicles produced in an FTZ from domestic and foreign status components withdrawn for exportation under bond without filing an entry for consumption. CBP held that such exports of imported articles were not regularly withdrawn or entered for consumption as required by 19 U.S.C. § 1313(u) and thus could not satisfy the requirement for exportation for purposes of drawback eligibility – any drawback on exported vehicles containing such imported components was thus limited to the value of the domestic status components. Significantly, CBP noted that no act of manufacture, or commingling with domestic status merchandise, could transform the foreign status imported components that were not regularly entered into a “domestic” finished product. Just as in HQ H305251, JTI’s exported cigarettes are manufactured from imported tobacco that was never entered for consumption, and on which no duties are paid, yet include domestic components. The drawback eligibility of JTI’s exported cigarettes are therefore similarly limited to the value of the domestic components. We note that CBP is required to verify the accuracy of all drawback claims, which includes “examination of all records relating to the transaction(s)” as needed. 19 C.F.R. § 190.61(b). For JTI to substantiate the accuracy of the refund amount claimed, a drawback entry must include supporting documents such as a spreadsheet demonstrating the deduction of all components previously entered under a TIB from the value of the manufactured and exported cigarettes. Upon submission of a drawback entry and supporting documents, JTI must certify that no part of its drawback claim is based upon the value of tobacco entered under a TIB that was utilized in the manufacture of exported cigarettes. 19 C.F.R. § 190.61(e)(1)(i). Drawback under § 1313(j)(2) may only be granted if the criteria enumerated therein are met, the criteria cannot be met because as a matter of law the imported tobacco entered under TIB subheading 9813.00.05, HTSUS, cannot satisfy the requirement for exportation pursuant to the plain text of § 1313(u). CBP’s position in HQ H305251is consistent with the CAFC’s decision in NAM, as neither preclude unused merchandise substation drawback on exported articles that were manufactured within the United States. Accordingly, merchandise entered 7 under a TIB cannot be considered “regularly entered for consumption,” and, in turn, cannot satisfy the “exportation” criteria required for a substitution drawback claim under § 1313(j)(2). HOLDING: Based on the foregoing, drawback eligibility under 19 U.S.C. § 1313(j)(2) for exported cigarettes manufactured from imported tobacco entered under a TIB, and domestic components, is limited to the value of the domestic components. You are instructed to provide this decision to the internal advice requester no later than sixty (60) days from the date of the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution. Sincerely, Yuliya A. Gulis, Director Commercial and Trade Facilitation Division