OT:RR:CTF:EPDR H329090 IPW
Center Director Petroleum, Natural Gas and Minerals CEE
1100 Raymond Blvd. Newark, NJ 07102 Attn.: Suzana Simoes, Drawback Specialist
RE: Protest No. 4601-19-107229; Sufficiency of Documents Submitted to Receive Drawback of Oil Spill Liability Trust Fund Tax; 19 U.S.C. § 1313(p); petroleum derivatives.
Dear Center Director,
This decision is in reference to an Application for Further Review of Protest Number 4601-19-107229 filed by World Fuel Services Inc. (“WFS” or “protestant”) that contests Customs and Border Protection’s (“CBP”) denial of their drawback claim for Oil Spill Liability Trust Fund Tax (“spill tax”).
FACTS:
On December 27, 2017, WFS filed drawback claim BER-xxxx9774 that covered the following three entries of petroleum oil: BER-xxxx6355, entered on August 18, 2016, BER-xxxx5853, entered on November 10, 2016, and BER-xxxx4952, entered on December 24, 2016. The claim was made pursuant to 19 U.S.C. § 1313(p) to receive drawback for the duties, fees, and spill tax paid on the imported petroleum derivatives.
As proof of the spill tax paid for entry BER-xxx6355, the importer provided an IRS Form 6627 (“Environmental Taxes”) and an IRS Form 720 (“Quarterly Federal Excise Tax Return”) for the two quarters relevant to the entries. Form 6627 declares $23,223.92 on line 6 for spill tax. However, the protestant claims that when carrying the number from Form 720 to 6627, the amount of $23,223.92 was erroneously placed on line 19 for Ozone Depleting Chemicals (“ODC”) tax, and no tax liability was listed on line 21 for the spill tax.
On May 28, 2019, CBP informed WFS that the portion of the drawback claim for entry BER-xxxx6355 would be denied and no drawback of the spill tax would be allowed. According to the CBP drawback specialist, the denial was due to line 21 of the Form 720 being blank. On June 7, 2019, CBP liquidated the drawback entry without drawback of the spill tax for BER-xxxx6355. On June 12, 2019, WFP emailed CBP stating that they would send a copy of the Form 720 with handwritten corrections. On June 20, 2019, CBP replied that they would not accept a handwritten corrected Form 720 and instead recommended WFS to file a 720-amendment Form (“720-X”) with the IRS, protest the liquidation of the drawback entry, and submit the Form 720-X with the protest.
On December 3, 2019, WFS protested on the grounds that the drawback claim satisfied all legal requirements and therefore should have been liquidated with a refund on the spill tax for each import entry. WFS did not submit a Form 720-X and argued that the Form 720-X is “not the proper form for correcting a clerical error of this kind.” Instead, WFS attached the original IRS Form 720 with “23,223.92” handwritten in the “Imported petroleum products oil spill tax” block and a strike through the “23,223.92” originally reported under “ODC tax on imported products” along with the protest.
ISSUE:
Whether CBP properly liquidated the drawback entry without refund for the spill tax?
LAW AND ANALYSIS:
We note initially that the refusal to pay a claim for drawback is protestable pursuant to 19 U.S.C. § 1514(a)(6). Protests regarding the liquidation of drawback entries must be made within 180 days of the date of liquidation. 19 U.S.C. § 1514(c)(3)(A). The protested drawback claim was liquidated on June 7, 2019, and therefore the instant protest was timely filed within 180 days on December 3, 2019. We also note that the drawback entry was filed prior to when the implementing regulations for the Trade Facilitation and Trade Enforcement Act were in effect. As such, 19 C.F.R. § 191 controls our analysis.
Section 4611(b) of Title 26, U.S.C. imposes the spill tax on crude oil and petroleum products imported and entered into the United States for consumption, use, or warehousing. To pay the spill tax, filers use IRS Form 6627 to calculate the total environmental tax liability and IRS Form 720 to report the total excise tax liability and file the return. The spill tax is reported on line 6 of Form 6627 and line 21 of Form 720. Spill tax paid on imported petroleum derivatives is eligible for drawback.
Drawback “means the refund or remission, in whole or in part, of a customs duty, fee or internal revenue tax which was imposed on imported merchandise under Federal law because of its importation.” 19 C.F.R. § 191.2(i). Under 19 U.S.C. 1313(p), drawback can be claimed on spill tax paid on imported petroleum derivatives through substitution with exported petroleum derivatives of the same kind and quality. To complete a drawback claim, a claimant must include “the drawback entry and related documents required by regulation which together constitute the request for drawback payment." 19 C.F.R. § 191.2(j); see also 19 U.S.C. 1313(p)(2)(F). Drawback is a privilege that is only secured by strict compliance with the prescribed rules and regulations. See 19 U.S.C. 1313(l); see also Shell Oil Co. v. United States, 688 F.3d 1376, 1382 (Fed. Cir. 2012). CBP will reject drawback claims that are determined to be incomplete. 19 C.F.R. § 191.52(a). A drawback claim is incomplete if its related documents are missing or contain “major inaccuracies and inconsistencies.” HQ 228780 (January 15, 2002); see also HQ 228093 (Aug. 31, 1999) (holding that a drawback claim is properly denied where the supporting documents contain numerical inconsistencies and provide no ability to determine which document supports the asserted information).
To receive drawback on spill tax, the following conditions must be met:
The claim meets all other statutory and regulatory requirements, including timeliness of the claim under 19 U.S.C. 1313(r).
The claimant submits a copy of the tax return that includes IRS Forms 720 and 6627, and the tax worksheet that lists the petroleum products on which the tax that is the basis for drawback was paid. The claimant must certify, in writing, the documents to be true copies of the return on the petroleum products that are the subject of the drawback claim.
The claimant certifies, in writing, that it has not and will not claim a refund, credit, or adjustment and will not enable any other person to claim any refund, credit, or adjustment of the tax.
The Memorandum from the Executive Director, Trade Policy and Programs Office of Trade, INFO: Drawback of Federal Excise Tax Paid on Petroleum Products – Revised Claim Documentation (Sep. 2, 2008) (Available at https://www.cbp.gov/trade/entry-summary/drawback/petroleum/drawback-tax).
The copy of the protestant’s Form 720 in this case fails to prove that the importer paid the spill tax required to receive drawback. Line 21 of the form, where the spill tax is reported, is blank. Even though the Form 6627 listed the spill tax, the major inconsistency between the Form 720 and the Form 6627 renders the drawback claim incomplete. See HQ 228780; HQ 228093. Therefore, the spill tax refund request for BER-xxxx6355 was properly denied.
Instead of attaching a 720-X that corrected the original Form 720 along with the protest, as recommended by the CBP drawback specialist, the protestant attached the mistaken Form 720 with handwritten alterations. The altered copy does not complete the claim. Handwritten notations cannot be proffered as evidence for these purposes. See HQ W230788 (Sep. 12, 2008). In HQ W230788, an importer submitted airway bills as proof of exportation for drawback purposes. To match quantities with corresponding invoices, the importer handwrote notations on the airway bills. CBP held that the handwriting could not be used as evidence to establish exportation. Likewise, the alterations made on the Form 720 submitted with the protest does not alter what was filed with the IRS and therefore cannot be used to prove spill tax was paid. The protestant argues that they could not have filed a 720-X because, according to them, it cannot be used to correct a clerical mistake where there would be no change in total liability. The Form 720-X allows a filer to adjust the liability declared for multiple taxes in a prior Form 720. WFS could have adjusted the ODC tax to $0 and the spill tax to $23,223.92. There is no requirement stated on the Form 720-X that it must result in a change in total liability.
HOLDING:
CBP properly liquidated the drawback entry without drawback of the spill tax. The protest is therefore DENIED IN FULL.
You are instructed to notify the Protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
For Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division