DRA-2-02
DRA-2-01
DRA-4
OT:RR:CTF:ER H025565 CSO
U.S. Customs and Border Protection Port Director
Attn: Ms. Christina D. Brooks, Drawback Specialist
Houston Drawback Center
2350 North Sam Houston Parkway, East
Houston, Texas 77032
Re: Application for Further Review of Protest 5301-08-100341; 19 U.S.C. § 1313(p); Chevron Oronite Company, LLC; Drawback; Petroleum
Dear Ms. Brooks:
On January 31, 2008, a request for internal advice was submitted on behalf of Chevron Oronite Company, LLC ( “Chevron”) pursuant to 19 C.F.R. § 177.11(b). This request for internal advice was withdrawn by Chevron on May 29, 2008. Your office then requested, via email dated May 30, 2008, that we consider the matter despite the withdrawal of the request.
On June 10, 2008, Protest 5301-08-100341 was filed on Customs and Border Protection (CBP) Form 19 on behalf of Chevron and was subsequently forwarded to this office as an Application for Further Review (“AFR”) as requested by Chevron, pursuant to 19 C.F.R. § 174.23-25. Chevron claims that the decision against which the protest was filed was inconsistent with a prior ruling with respect to the same or substantially similar merchandise. Your office properly granted the AFR and, as discussed below, we determine that the decision of the Port of Houston (Port) in this case was inconsistent with previous rulings. Because the request for AFR covers the same factual and legal matters as the request for internal advice, we are treating this matter as an AFR.
FACTS:
Chevron manufactures and exports an engine oil additive, classified under subheading 3811.21.00, Harmonized Tariff Schedule of the United States (HTSUS). A Certificate of Manufacture (CM) 200375, CBP Form 7552 shows that the engine oil additive, 3811.21.00 HTSUS, was manufactured between January 1, 2005 and December 31, 2005. The CM 200375 also shows the material used to produce the engine oil additive. The imported material, was AL 304 Alkylbezene Mixed Linear, 3817.00.10 HTSUS. Our drawback ruling number 44-06856-00 states that the location of the factory in which the engine oil lubricant is produced is Oakpoint Plant, Highway 23 South, Belle Chasse, Louisiana 70037 and also states that “AL 304 & AL 304B Alkylbenzenes a/k/a alkylate” may be used to manufacture the engine oil article and is authorized for drawback pursuant to 19 U.S.C. § 1313(b).
Chevron protested the liquidation of the following drawback entries for the manufactured engine oil additive:
Port Code FY Entry No. Date Liquidation Date
5301 2006 XXX-XXXX091-0 1-24-2007 1-11-2008
5301 2006 XXX-XXXX090-2 1-24-2007 1-11-2008
The Automated Commercial System (ACS) shows that both drawback entries were liquidated on January 11, 2008. The CBP Form 7551 shows that on drawback entry number XXX-XXXX091-0, Chevron claimed $245,895.85 for drawback. According to the Exporter’s Chronological Summary dated January 23, 2007, drawback was denied for the following exports of the engine oil additive:
Date of Exportation Export ID Date of Production
01/12/06 xxxx10-1 01/02/06
01/14/06 xxxx02-1 thru-5 01/04/06
01/16/06 xxxx32 01/06/06
01/16/06 xxxx27 01/06/06
The Port indicated that drawback was denied for the above mentioned exports because the Port determined that the “exports are not covered within the certificate of manufacture production period.” These exports are considered to be “substituted” exports pursuant to 1313(p)(1)(A) as they are of the same kind and quality as the “qualified article,” the lube oil, produced during the time period set forth in the CM (January 1, 2005 to December 31, 2005). The Port’s position is that the substituted exports under 1313(p)(2)(A)(i) must be manufactured within the CM period of the qualified article. In other words, the Port determined that because these dates of production (January 2, 4, and 6, 2006) fell outside of the time period set forth in the CM (January 1, 2005 to December 31, 2005) drawback could not be claimed for those exports.
Similarly, CBP Form 7551 shows that on drawback entry number XXX-XXXX090-2, Chevron claimed $239,104.34 for drawback. The Exporter’s Chronological Summary dated January 23, 2007, shows that drawback was denied for the following export of engine oil additive because it also fell outside of the time period set forth in the CM (January 1, 2005 to December 31, 2005):
Date of Exportation Export ID Date of Production
01/16/06 xxxx14 01/06/06
Chevron argues that “it is legally irrelevant whether the ‘exported article’ was the actual ‘qualified article’ produced under a certificate of manufacture, or whether the ‘exported article’ was produced during some other time and was substituted for the qualified article.” It argues that the only legally relevant considerations under 19 U.S.C. § 1313(p) are “(1) whether the exported article and qualified article are classifiable in the same 8-digit HTSUS subheading and 2) whether the exported article that is being substituted for the qualified article is exported no later than 180 days after the close of the manufacturing period of the qualified article.”
ISSUE:
Whether Chevron’s “exported article” that is of the same “kind and quality” as the “qualified article” and was exported within 180 days of the end of the manufacture period is eligible for drawback pursuant to 19 U.S.C. § 1313(p).
LAW AND ANALYSIS:
Timeliness
Under 19 U.S.C. § 1514(a), "decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the liquidation or reliquidation of an entry . . . shall be final and conclusive . . . unless a protest is filed in accordance with this section." For merchandise entered after December 18, 2004, a protest of a liquidation is timely if it is filed within 180 days after the date of liquidation. 19 U.S.C. § 1514(c)(3) (2004). Here, the drawback claims at issue were liquidated on January 11, 2008, and the protest was timely filed on June 10, 2008, within the 180 day time period after the date of liquidation.
Requirements of the “Exported Article” in 19 U.S.C. § 1313(p)
Generally, 19 U.S.C. § 1313(p) provides for drawback for certain petroleum derivatives. Under section 1313(p)(1), notwithstanding any other provision in section 1313, drawback is allowed if: (A) an article (the "exported article") of the same kind and quality as a qualified article (as specifically defined in section 1313(p)(3)(A)) is exported; (B) the requirements set forth in section 1313(p)(2) are met; and (C) a drawback claim is filed regarding the exported article. See also 19 C.F.R. § 191.171 et seq.
The requirements in section 1313(p)(2), compliance with which is a condition precedent to drawback under section 1313(p), are that the exporter must have: (1) manufactured the qualified article; or (2) purchased/exchanged the qualified article from the manufacturer; or (3) imported a qualified article; or (4) purchased/exchanged an imported qualified article from the importer. Further, the exportation must occur within 180 days after the
date of entry of the imported qualified merchandise or during the manufacturing period or within 180 days after the close of such period. 19 U.S.C. § 1313(p)(2) and 19 C.F.R. § 191.174. And finally, pursuant to 19 U.S.C. 1313(p)(2)(D) when a company manufactures the qualified article it must identify the production facility that made the qualified article. See 19 U.S.C. § 1313(p)(2)(D) and 19 C.F.R. § 191.174(d). At issue in this case, are exported articles that were manufactured pursuant to 19 U.S.C. § 1313(p)(2)(A)(i) and (C).
In order to be a “qualified article” the article must be described in specific headings of the HTSUS and be “manufactured or produced as described in subsection (a) or (b) from crude petroleum or a petroleum derivative or imported duty-paid.” 19 U.S.C. § 1313(p)(3)(A). The “exported article” could be manufactured, purchased, exchanged or be an imported qualified article as long as it is of the “same kind and quality” as the qualified article. 19 U.S.C. § 1313(p)(3).
In the instant case, the engine oil additive listed on the relevant CM that was produced between January 1, 2005, to December 31, 2005, is the “qualified article.” A qualified article per 19 U.S.C. § 1313(p)(3)(A)(i)(I) includes an article described in “heading 3811.21.00” of the HTSUS (among other headings), and which is manufactured as described in 19 U.S.C. § 1313(a) or (b) from petroleum derivatives per 19 U.S.C. § 1313(p)(3)(A)(ii)(I). Here, the engine oil additive is classified under subheading 3811.21.00, HTSUS, and was manufactured by Chevron, as evidenced by CM 200375, from the imported article, AL 304 Alkylbezene Mixed Linear, 3817.00.10 HTSUS.
The five subject exports at issue show production and exportation occurring in January, 2006, well within the 180 days after the close of the manufacturing period. And even though these articles are not “qualified,” they may be used as the basis for drawback because they were exported within 180 days after the close of the manufacturing period, pursuant to 19 U.S.C. § 1313(p)(2)(C). There is no requirement in 19 U.S.C. § 1313(p) that the substituted exported article be produced in the same manufacturing period as the qualified article.
In fact, the "notwithstanding" clause found in 19 U.S.C. 1313(p)(1) was included in order to overcome the requirements in 19 U.S.C. §§ 1313(a) and (b) that the export article made by the petroleum refiner be the article that is actually exported, and that it be commercially interchangeable for purposes of § 1313(j). See, e.g., HQ 227826 (October 20, 1998); HQ 229305 (August 27, 2002); and HQ 230305 (April 13, 2004). This is the precise situation at issue in this case. Chevron wanted to substitute the five oil lube exports manufactured outside of the CM period for the qualified articles, i.e. those articles it manufactured during the CM period. Chevron substituted the five exported articles because they were of the same kind and quality as the qualified articles as per 19 U.S.C. § 1313(p)(2)(A)(i) and (3)(B). We know that the exported articles that were substituted are the “same kind and quality” because they are classified under the same eight-digit heading 3811.21.00 HTSUS, as required by 19 U.S.C. § 1313(p)(3)(B). These exported articles were also exported within 180 days after the close of the CM period. Therefore, the exported articles at issue in this AFR may be used in Chevron’s drawback claim.
Additionally, we note that the drawback statute includes a provision that precludes claimants from double-dipping on their drawback claims. Title 19 U.S.C. § 1313(v) states that:
Merchandise that is exported or destroyed to satisfy any claim for drawback shall not be the basis of any other claim for drawback; except that appropriate credit and deductions for claims covering components or ingredients of such merchandise shall be made in computing drawback payments.
Chevron is therefore, precluded from using another CM that could possibly include the five subject exports to make a separate drawback claim. Such an action would be subject to penalties. See 19 U.S.C. § 1593a and 19 C.F.R. § 191.62.
HOLDING:
Under the facts described, and in response to the request for further review, you are directed to grant the protest. The decision will result in the refund of duties, and reliquidation of the subject entries. This must be accomplished prior to mailing of the decision, in accordance with Section IV of the Customs Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21). You are to mail this decision, together with CBP Form 19, to the protestant no later than 60 days from the date of this letter.
No later than 60 days from the date of this letter, Regulations and Rulings of the Office of International Trade 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 by other means of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division