DRA-1-06-RR:CR:DR 227421 SAJ

Port Director of Customs
U.S. Customs Service
Houston Drawback Center
2350 Sam Houston Pkwy, Ste. 900
Houston, TX 77032

RE: Application for further review of Protest No. 5301-96-100471; 19 C.F.R. 191.141; 19 C.F.R. 191.52; 19 U.S.C. 1514; 19 U.S.C. 1313(j)(1); Unused merchandise drawback; C.S.D. 82-38; HQ 222431

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We have considered the facts and issues raised, and our decision follows.

FACTS:

According to the documentation in the file, Capro, Inc. (protestant) filed a claim for unused merchandise drawback under 19 U.S.C. 1313(j) for cable. The subject protest was timely filed against the denial of drawback for drawback entry number 2503293-8, on the grounds that the original pedimento number 1200-5006483, dated May 4, 1995, submitted as proof of export for the claim, did not contain cable with specifications to match the entry documents. The asserted export shipment reflected on Customs Form (CF) 7539 is 8 REELS of JP PART # 10-3062 galvanized cable with the dimensions of 1.5mm 1x19+8x7, weighing 1016 kilograms. The subject export shipment was stated to have occurred on April 17, 1995. The pedimento originally submitted with protestant's drawback claim, pedimento number 1200-5006483, has an entry summary date of May 4, 1995. This pedimento contains 5 lines of merchandise. Line number 3 describes the merchandise as "CARRETES DE CABLE GALVANIZADO, MEDIDAS: 1.5mm.1x9+8x9", which are "Reels of Galvanized Cable" measuring 1.5mm.1x9+8x9. We note that there are no matching part numbers to the CF 7539 on this pedimento for this merchandise.

Protestant's drawback claim on drawback entry number 027-2503293-8 was denied on September 7, 1996, due to the discrepancy reflected on pedimento number 1200-5006483, which showed that the imported merchandise was not the same as the exported merchandise, as required under the regulations. Specifically, the import invoice shows cable with dimensions "1.5 mm 1x19+8x7", and the pedimento number 1200-5006483 shows cable with dimensions "1.5 mm 1x9+8x9".

Customs Form (CF) 7501, which has an export date of December 15, 1994 and an import date of December 31, 1994, reveals that under entry number 601-0xxxx93-7 (93-7), protestant entered 10,160 kg of "ROPES, CBLS, CRDG, OTH:OTH, GALVAN" under 7312.10.9030/4% of the Harmonized Tariff System of the United States.

Invoice Number AC94-1212, dated December 12, 1994, reflects that 500,000 m of "GT Cable Capro" Parts No. 10-3064, 1.5mm1x19+8x7 "GT" (10 Pallets, 40 Reels), and 500,000 m of "GO Cable Capro" Parts No. 10-3062,, 1.5mm1x19+8x7 "GO" (10 Pallets, 40 Reels), were imported from Japan.

Protestant filed the subject drawback entry with Customs on Customs Form (CF) 7539. Block 44 of the CF 7539 contains a check mark and the inspector's initials indicating that "Customs has decided not to examine the merchandise and it may now be exported." Drawback entry number 2503293-8 has a drawback entry date of April 17, 1995, and describes the merchandise as "CABLE". Blocks 15 and 16 list the imported part numbers as "JP PART #10-3064" "40 REELS 5080 KG" and "JP PART #10-3062" "40 REELS 5080 KG". The merchandise described on the exported portion is listed as "JP PART #10-3062" "8 REELS 1016 KG".

The broker submitted a new pedimento number 1200-5005659, dated April 18, 1995, with this protest on October 17, 1996. We note that there is no explanation from the broker as to why the original pedimento was submitted with the drawback claim.

This second pedimento, which was submitted in conjunction with the subject protest, pedimento number 1200-5005659, has an entry summary date of April 18, 1995. This pedimento has 14 line items of merchandise. Line item number 6 describes the merchandise as "CARRETES DE CABLE GALVANIZADO C/CA PA E/ESTANO, 1.5mm.1x19+8x7", which are "Reels of Galvanized Cable" measuring 1.5mm.1x19+8x7. The value for line item number 6 is $237,617 Dollars. Line item number 7 describes the merchandise as "CARRETES DE CABLE GALVANIZADO, MEDIDAS: 1.5mm.1x9+8x9, which are "Reels of Galvanized Cable" measuring 1.5mm.1x9+8x9. The value for line item number 7 is $19,637 Dollars. Only line item number 6 matches the measurements claimed on the drawback claim. The value of protestant's claim is $26,971.12.

However, line item number 6 on pedimento number 1200-5005659 describes the cable, but not the amount (i.e, it does not state the number of reels nor weight). In other words, item number 6 on pedimento Number 1200-5005659 does not show that there were 8 reels weighing 1,016 kg as asserted on protestant's drawback claim. Moreover, a comparison of the dollar amount on line item number 6 on pedimento number 1200-5005659 fails to provide a link to the asserted export. Drawback entry number 027-25032938 was liquidated on October 4, 1996. The subject protest, with application for further review was filed on October 17, 1996.

As a side issue, you state that there may be negligent inaction in this case on the part of the broker. You state that despite the fact that the broker has acknowledged the problem regarding pedimentos with cable descriptions that do not match the entry documents, the broker has not taken any steps to correct the pedimentos in many instances. In the case at hand, the broker timely submitted a pedimento that matched the import invoice with the subject protest.

ISSUE:

Whether unused merchandise drawback may be denied for failing to match the identity, quantity, and value of the merchandise imported and exported.

LAW AND ANALYSIS:

We note initially that the refusal to pay a claim for drawback is a protestable issue pursuant to 19 U.S.C. 1514(a)(6). Drawback for entry 93-7 was denied on September 7, 1996. This protest was timely filed against the denial of drawback for the subject entries on October 17, 1996, since the 90-day statutory and regulatory filing deadline was met under 19 U.S.C. 1514 and 19 C.F.R. Part 174.

The applicable law is found in section 632, title VI - Customs Modernization, Public Law 103-182, the North American Free Trade Implementation Act (107 Stat. 2057), enacted December 8, 1993. Title VI of that Act amended 19 U.S.C. 1313(j). Section 692 of the Act provides that Title VI provisions take effect on the date of enactment.

Section 632 of the new Act changes same condition direct identification drawback by providing that imported merchandise for which duty was paid and is, before the close of the 3-year period beginning on the date of importation, exported or destroyed under Customs supervision and is not used within the United States before such exportation or destruction is eligible

for "unused merchandise drawback." The law no longer requires that the merchandise be in the same condition as when imported.

In the instant case, the protestant asserts that the merchandise was exported. The Customs Regulations issued under the authority of this provision are found in 19 C.F.R. 191.141. Under paragraph (b) of 19 C.F.R. 191.141, an exporter who desires to export merchandise with drawback under 19 U.S.C. 1313(j) is required to file a completed CF 7439 at least 5 working days prior to the date of intended exportation unless a shorter filing period is approved.

The exporter-claimant may request, in writing, waiver of this advance notice. Customs may grant such a waiver or, in certain circumstances, is required to grant it. Within 3 working days after the CF 7539 is filed, Customs is required to notify the exporter-claimant whether the merchandise will be examined. If the exporter-claimant is not so notified, he or she is required to export the merchandise without delay. Under paragraph (c) of 19 C.F.R. 191.141, within 3 years after exportation of merchandise under 19 C.F.R. 191.141(b), an exporter-claimant is required to complete his or her drawback claim by filing with the same Customs official who received the CF 7539 evidence of exportation under the procedures described in 19 C.F.R. 191.52 or 191.54. Under paragraph (e) of 19 C.F.R. 191.141, the provisions relating to direct identification drawback apply to claims for drawback, insofar as applicable and not inconsistent with 19 C.F.R. 191.141-191.142.

One of the provisions relating to drawback claims is that drawback claim "shall be subject to verification by the director at whose port the claim is filed. 19 C.F.R. 191.10(a). Such verification means "the examination of any and all records ... maintained by the claimant ... which are required by the regulatory auditor to render a meaningful recommendation concerning the drawback claimant's conformity to the law and regulations and the determination of supportability, correctness, and validity of the specific claim or groups of claims being verified." 19 C.F.R. 191.2(o). It is specifically provided that verification includes "an examination of ... all the accounting and financial records relating to the transaction(s)." 19 C.F.R. 191.10(c)).

Under 191.51, exportation of articles for drawback purposes shall be established by one of the procedures listed in that section, one of which is 19 C.F.R. 191.52. Under section 191.52, a drawback claimant may support the drawback claim with a notice of exportation on CF 7511 which is required to show the information listed in paragraph (b) of section 191.52. Under paragraph (c) of section 191.52, the notice of exportation may be certified or uncertified. If uncertified, it must be supported by documentary evidence of exportation, such as "the bill of lading, air waybill, freight waybill, ... cargo manifest, or certified copies thereof, issued by the exporting carrier."

In Customs Service Decision (C.S.D.) 82-38, we held that a claimant must make available records which prima facie evidence show importation, manufacture, and exportation for purposes of the drawback law. Headquarters ruling (HQ) 222431 (January 30, 1991), provided that although C.S.D. 82-38 concerned manufacturing drawback, there is no reason why C.S.D. 82-38 should not be applicable to "same condition drawback" (currently referred to as unused merchandise drawback).

C.S.D. 82-38 was modified to hold that the claimant must make available records which prima facie show, with regard to the merchandise for which drawback is sought, importation, exportation or destruction of the imported merchandise within 3 years from importation, and non-use in the United States. Thus, the provisions relating to direct identification drawback apply to claims for unused merchandise drawback insofar as applicable and not inconsistent with 19 C.F.R. 191.141 - 191.142.

Protestant filed the subject drawback entry with Customs on CF 7539, which contains a drawback entry date of April 17, 1995. Block 44 of the CF 7539 contains a check mark and the Customs inspector's initials indicating that "Customs has decided not to examine the merchandise and it may now be exported." In this case, there is prima facie evidence of importation (i.e., entry summaries and detailed invoices). Although there are no matching part numbers to the CF 7539 on pedimento number 1200-5006483, which was originally submitted to claim drawback for the subject merchandise, another pedimento number 1200-5005659 was submitted by protestant's broker in conjunction with the subject protest.

With respect to the submission of new evidence to support an existing claim, a claimant may submit evidence to show entitlement to drawback so long as the liquidation of the drawback claim has not become final. If a claimant abandons its original claim and makes a new claim, through the use of a new import shipment or new export shipment, the filing for such a new claim must meet the time limit set by 19 U.S.C. 1313(r). Section 1313(r) provides that a complete drawback claim shall be filed within 3 years after the date of exportation or destruction of the articles on which drawback is claimed.

In the instant case, the protestant appears to be trying to submit evidence to prove the eligibility of the asserted export shipment reflected on CF 7539, which consists of 8 reels of JP PART # 10-3062 galvanized cable with the dimensions of 1.5mm 1x19+8x7, weighing 1,016 kilograms. The subject export shipment was stated to have occurred on April 17, 1995.

If the imported merchandise matches pedimento number 1200-5005659, drawback would be authorized. However, the evidence on pedimento number 1200-5005659 is also inadequate to support the asserted export of the subject merchandise. Pedimento number 1200-5005659 fails to list the quantity of the reels and the weight. Therefore, there is no link with the imported part number JP PART # 10-3062 to the merchandise covered. Moreover, the entrance date of pedimento number 1200-5005659 of April 18, 1995, does not match the date on the drawback claim of April 17, 1995. Also, there is no attempt on protestant's behalf, nor is there any evidence offered to explain that discrepancy.

The Customs Court has held that right to recover drawback arises only when all of the provisions of the statute and the applicable and lawful regulations prescribed under its authority have been completed. Romar Trading Co. v. United States, 27 Cust. Ct. 34, C.D. 1344 (1951), followed in 718 Fifth Avenue Corp. v. United States, 741 F. Supp. 1579, CIT slip op. 90-59 (1990). Thus, the regulations must be adhered to before the exporter is eligible for drawback. Customs reserves the right to examine merchandise before exportation to verify that the exported goods were the imported goods and that those goods bear no evidence of a change in condition or of use. In the case at hand, Customs waived the opportunity to examine the exported merchandise. It is important to emphasize that substitution of merchandise is not allowed under NAFTA. It is therefore crucial that protestant show, through documentation, that the same cable imported was exported.

As stated in the FACTS portion of this ruling, you express concern that there may be negligent inaction in this case on the part of the broker. You state that despite the fact that the broker has acknowledged the problem regarding pedimentos with cable descriptions that do not match the entry documents, the broker, in many instances, has not taken any steps to correct the pedimentos. However, negligent prior attempts are irrelevant for purposes of this protest. The subject protest has been evaluated on its own merits and although it is timely, it is not supported by evidence. As for other drawback claims, negligent preparation on the part of the broker may be the subject of action under 19 U.S.C. 1641, which pertains to Customs brokers, or 19 U.S.C. 1593a, which covers penalties for false drawback claims.

Although there are no matching part numbers to the CF 7539 on pedimento number 1200-5006483, which was originally submitted to claim drawback for the subject merchandise, another pedimento number 1200-5005659 was timely submitted by protestant's broker with the subject protest. However, pedimento number 1200-5005659 also fails to match the identity and the quantity of the cable imported and exported. In the instant case, drawback is denied.

HOLDING:

In view of the fact that protestant has failed to provide a pedimento matching the imported merchandise with the exported merchandise, this protest is DENIED.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision of the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,


Director,
Commercial Rulings Division