DRA-4 CO:R:C:E 224133 TLS
Mr. James Geraghty
Donohue and Donohue
26 Broadway
New York, New York 10004
RE: Ruling request concerning substitution same condition
drawback on merchandise marketed specifically towards foreigners
visiting the U.S.; 19 U.S.C. 1313(j)(2); 19 CFR 191.141(h);
Central Soya Co., Inc. v. United States, 761 F. Supp. 133 (CIT
1991); 26 Cust. Bull. 7 (October 21, 1992).
Dear Mr. Geraghty:
The above-referenced request has been received by this
office for our consideration. We have considered the points
raised in your submissions, and our decision follows.
FACTS:
Your client plans to market television sets for retail sale
in this country to foreigners visiting the U.S. The television
sets are designed to receive multiple types of transmitted
broadcast signals. (For example, the North American continent
operates on a "NTSC" system, while most countries in East Africa
operate on a "PAL" system.) The TV sets adjust automatically to
operate on 100 volts through 290 volts of electrical current,
depending on which system they are used.
Your client wishes to sell these TVs to people in the U.S.
for a temporary stay. It is expected that these consumers will
find the TVs an attractive buy because the price compares
favorably to the prices of similar sets sold in foreign markets.
A ruling of drawback eligibility is requested on this
merchandise; it is expected that the purchasers will be exporting
the sets soon after purchase.
ISSUE:
Whether the TV sets are eligible for substitution same
condition drawback under 19 U.S.C. 1313(j)(2) when they will be
exported by the purchaser but the drawback claim will be made by
the distributor of the merchandise.
LAW AND ANALYSIS:
Under 19 U.S.C. 1313(j)(2)(C)(i), an article is eligible for
substitution same condition drawback only if the exported
merchandise was not used prior to exportation (or destruction).
Cases interpreting this "use" provision generally determine what
activities constitute use under the statute. See, e.g., C.S.D.
83-23 (July 15, 1982); C.S.D. 81-222 (May 27, 1981). Merchandise
is considered "used" when it is employed for the purpose for
which it was manufactured and intended. C.S.D. 82-135 (June 4,
1982). Where Customs has a question about whether merchandise
has been used or not, it must be given an opportunity to examine
it prior to exportation. It is for this reason that a notice of
intent to export must be filed with Customs if a claim for
drawback is made on the merchandise. Failure to file the notice
would invalidate such a claim. C.S.D. 86-25 (January 10, 1986).
You have suggested that your client could preserve any
potential claims arising from this case by exercising its rights
to request a waiver of notice of intent to export. It is true
that a drawback claimant may request a waiver in these cases;
whether Customs will grant the waiver is strictly a matter of
discretion, however. 19 CFR 191.141(b)(2)(ii). Should a waiver
in fact be requested with respect to the exportation of the
subject merchandise, this office is compelled by regulation to
defer to the discretion of the commissioner of the region (or
director of the Customs district, as the case may be) through
which the exportations will occur. Id. This office will handle
any application for exporter's summary procedure or accelerated
drawback payment in a likewise manner.
On the issue of using the postmarked warranty cards to
identify exported merchandise, the following guidelines must be
met:
1) the exporter did not authorize any entity (including
itself) other than claimant to claim the exportation
for drawback; 2) the exporter of the merchandise did
not use the substituted merchandise while in its
possession; 3) the merchandise exported was the
identical merchandise received from the claimant; and
4) the merchandise was in the same condition upon
exportation as was the imported merchandise upon
importation. 26 Cust. Bull. 7 (October 21, 1992).
In this case, the exporter would obviously be the purchaser who
returns to (or visits?) a foreign country. The claimant in this
case must obtain signed certification of the above evidence from
each exporter, along with agreement from both the claimant and
exporter that the evidence will be available to Customs after
reasonable notice. Id. Only to the extent that the claimant
could do so would we find that the proposed scenario meets these
guidelines.
It is also proposed that Exporter's Summary Procedure (ESP)
could be used in the subject transactions. If such is applied
for, the claimant will need to furnish to Customs, among other
evidence, the location where the supporting evidence will be
kept, ports where future exports will take place, and the mode of
export transportation used in each export. See Customs Directive
3740-007 (April 21, 1992). It would also have to maintain of
evidence of the date of export, which particular carrier it was
exported on, and something equivalent to an air waybill (such as
an airline ticket stub or boarding pass) as proof of exportation.
Such evidence would be needed if Customs chooses to verify the
exportation. The claimant would need to obtain much of this
evidence from the exporter. We do not find that the warranty
cards alone would provide such, however.
The warranty cards as printed would provide evidence of the
exporter's name, his address, the model and serial numbers for
the TV set, where it was purchased, date of purchase, and what
country it will be used in. The cards do not give the location
where the supporting evidence will be kept (exporter's address is
not conclusive here), ports where future exports will take place
(the identity of future exporters will be needed here), or the
mode of transportation used during export. Obviously, the
claimant will need additional information from the exporter (and
future exporters) in order to comply with the above-cited
Directive and ESP regulations. Id.; 19 CFR 191.53. In the
present scenario, however, we find that sufficient evidence would
be lacking to grant ESP treatment in this case.
You have also proposed that the subject transactions be done
under the "first-in, first-out" (FIFO) accounting method for
identification purposes, in compliance with 19 CFR 191.22. That
provision requires, inter alia, that merchandise be commingled
before FIFO can be applied. 19 CFR 191.22(c). There is no
showing here that the merchandise would be commingled, however.
Furthermore, there is no need to apply the FIFO method in cases
where the goods are fungible. Therefore, 19 CFR 191.22 does not
apply to this case.
HOLDING:
The claimant may obtain substitution same condition drawback
under the proposed set of circumstances only if the requirements
listed above and under 19 CFR 141 are met. The use of the
warranty cards alone would not meet those requirements. This
decision is limited to the facts of this case.
Sincerely,
John Durant, Director
Commercial Rulings Division