RR:CR:DR 230738 EMS
U.S. Customs and Border Protection
Houston Service Port
2350 N. Sam Houston Parkway East
Houston, TX 77032
ATTN: Ms. Christina D. Brooks
Re: Protest No. 5301-03-100667; 19 U.S.C. § 1313(p); petroleum derivatives; qualified articles; 180-day requirement; 19 C.F.R. § 191.174(e)(2); discrete manufacturing operations; intermediate drawback product
Dear Ms. Brooks:
This is in reply to your correspondence dated October 8, 2004, requesting a further review of Protest No. 5301-03-100667. AEI Drawback Services, Inc. filed this protest on behalf of the drawback claimant, Eastman Chemical Company.
The protest concerns eight claims for which U.S. Customs and Border Protection (CBP) disallowed drawback. The Houston Service Port (the port) denied these claims for various reasons, but this decision is limited in scope to the protestant’s compliance with the 180-day time frame required by 19 U.S.C. § 1313(p)(2)(c).
Eastman Chemical Company filed eight drawback entries covering the exportation of polyester pellets between May 27, 1998 and July 20, 2001. The port liquidated all of these entries without the benefit of drawback on June 13, 2003, and the protestant challenged those liquidations by filing a CBP Form 19 (Protest) on September 10, 2003. The port granted the application for further review only with respect to the issue of whether the exportations of the polyester pellets occurred during or within 180 days of the close of manufacture of the qualified article.
The port has designated a lead drawback entry for purposes of further review. That entry, AA6-xxxxxx4-3, was filed on a CBP Form 7551 (Drawback Entry) on May 27, 1998 and, according to the amended CBP Form 7551 filed on February 19, 1991, the exported polyester pellets were manufactured pursuant to a specific manufacturing drawback ruling, 44-xxxx5-000.
This ruling authorized the Eastman to claim drawback, pursuant to 19 U.S.C. § 1313(b), for the exportation of polyester pellets, and designate imported merchandise or drawback products identified as paraxylene, ethylene glycol, and terephthalic acid as the basis of its claims. HQ 228083 dated May 24, 1999. The drawback entry at issue designated a specified quantity of paraxylene that was identified against a Certificate of Manufacture, numbered CM500550. Chevron U.S.A. Inc. (Chevron) filed a CBP Form 331 (Manufacturing Drawback Entry and/or Certificate) covering CM500550 on December 1, 1998. The CBP Form 331 indicated that the drawback products covered by CM500550 were manufactured pursuant to a general manufacturing drawback ruling, T.D. 84-49 dated February 24, 1984, for the manufacture of seventeen specific categories of petroleum and petroleum derivatives.
This ruling authorized Chevron to manufacture petroleum products and petrochemicals, including paraxylene, pursuant to 19 U.S.C. § 1313(b), and designate imported crude oil as the basis of its drawback claims covering these manufactured petroleum derivatives. The crude oil (Class III) designated on CM500550 as the basis of drawback for paraxylene was imported between February 1, 1993 and March 19, 1993, according to the Automated Commercial System (ACS). The CBP Form 331 was accompanied by certain documentation that described Chevron’s manufacturing operations that were germane to CM500550. The “Abstract of Manufacturing Records” identified the production period for the designated crude oil as January 1-31, 1996. The “Abstract of Production” and corresponding “Inventory Control Sheet” also identified products that were manufactured during the same time period. According to the port, Eastman claimed that the paraxylene transferred to it under CM500550 was from the seventeenth category of products authorized by T.D. 84-49, i.e., “All Other Petrochemical Products.”
According to the CBP Form 7551, the paraxylene covered by CM500550 was received at the Eastman’s factory in January 1996 and used in its manufacturing operations in February 1996. The entry also shows that the paraxylene is classifiable under subheading 2902.43.00 of the Harmonized Tariff Schedule of the United States (HTSUS). The “Exporter’s Chronological Summary,” attached to the CBP Form 7551, shows that the exported polyester pellets were manufactured during the time period between June 8, 1997 and September 1, 1997, from paraxylene and other merchandise. The summary also indicates that these manufactured polyester pellets, classifiable under subheading 3907.60.00, HTSUS, were exported between July 8, 1997 and October 1, 1997.
Whether the close of manufacture of the paraxylene triggered the 180-day time period for the exportation of the polyester pellets under 19 U.S.C. § 1313(p)(2)(C)?
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed within 90 days of the refusal to pay the drawback claim. See 19 U.S.C. § 1514(c)(3)(B)(2003). CBP liquidated the eight of the subject entries on June 13, 2003. Under 19 U.S.C. § 1514(a)(6), "decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the refusal to pay a claim for drawback . . . shall be final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed in accordance with this section. Hence, the refusal to pay the drawback claims in the instant case is subject to protest under 19 U.S.C. § 1514.
The criteria for granting an application for further review of a protest are set forth in 19 C.F.R. § 174.24, which states, in part, that further review will be accorded to the party filing an application which meets at least one of the criteria enumerated therein. Here, further review is justified because Eastman has alleged the refusal of its drawback claim to be inconsistent with a CBP ruling. See 19 C.F.R. § 174.24(a). The protestant has identified C.S.D. 85-7, dated August 9, 1984. In that ruling, CBP held that a party may claim drawback on the basis of a drawback product used in further manufacturing operations under 19 U.S.C. § 1313(b). In this case, the port has denied a claim based on an intermediate drawback product.
We note that the time limit at issue in this case was not specifically addressed in C.S.D. 85-7. The drawback claim in C.S.D. 85-7 was filed under 19 U.S.C. § 1313(b), and, Eastman filed its claim under 19 U.S.C. § 1313(p). This specific provision authorizes drawback on certain finished petroleum derivatives, notwithstanding any other provision of § 1313, if, inter alia, “an article…of the same kind and quality as a qualified article is exported” and the requirements set forth in 19 U.S.C. § 1313(p)(2) are satisfied. 19 U.S.C. § 1313(p)(1). The time limit under 19 U.S.C. § 1313(p)(2)(C) requires that, in cases where the exporter is the manufacturer of the qualified article, per 19 U.S.C. § 1313(p)(2)(A)(i), “the exported article is exported during the period that the qualified article . . . is manufactured or produced, or within 180 days after the close of such period."
The polyester pellets are the qualified articles. A "qualified article" per 19 U.S.C. § 1313(p)(3)(A)(i)(II), includes an article described in "headings 3901 through 3914," HTSUS (among other headings), which is manufactured as described in 19 U.S.C. § 1313(b) from petroleum derivatives, per 19 U.S.C. § 1313(p)(3)(A)(ii)(I). The polyester pellets are classified under subheading 3907.60.00, HTSUS, and were manufactured by the Eastman under 19 U.S.C. § 1313(b) from, inter alia, the petroleum derivative paraxylene. The exportation dates for the polyester pellets demonstrate compliance with 19 U.S.C. § 1313(p)(2)(C) because the latest date of exportation, October 1, 1997, is well within 180 days of June 8, 1997, the earliest date of manufacture of the polyester pellets, and within five years of the earliest importation, on February 1, 1993, as required by 19 U.S.C. 1313(i).
It is the port’s position that 19 U.S.C. § 1313(p)(2)(C) required the exportation of the polyester pellets within 180 days of the date of manufacture identified on CM500550 for the paraxylene. However, the close of the manufacture period for the paraxylene would not trigger the 180-day time limit to export the polyester pellets. That export requirement applies to the final product that was manufactured under 19 U.S.C. § 1313(b), per 19 U.S.C. § 1313(p)(3)(B). The paraxylene under CM500550 is an intermediate drawback product for which Eastman substituted paraxylene of the same kind and quality that was used in the manufacture of the polyester pellets, per 19 U.S.C. § 1313(b). It is the close of manufacture of the polyester pellets that triggers event for the 180-day requirement for export.
Here, in addition to the export time limits imposed by 19 U.S.C. §§ 1313(i) and (p), each of the discrete manufacturing operations performed by Chevron and Eastman was required to comply with the separate three-year time limit under 19 U.S.C. § 1313(b), which requires that the imported merchandise or drawback product must be used in manufacture within three years of receipt by the manufacturer. With respect to the Chevron’s manufacture of the paraxylene covered by CM500550, the earliest importation of the designated crude oil was February 1, 1993, which was within three years of its use in the manufacture of the paraxylene during January 1-31, 1996. Additionally, Eastman’s manufacture of the polyester pellets using paraxylene, including that covered by CM500550, between February 1996 and September 1997, is within three years of Eastman’s receipt of the paraxylene under CM500550 in January 1996. This three-year time limitation applicable to the use of the paraxylene was triggered by Eastman’s receipt of the paraxylene covered by CM500550, rather than the receipt of any imported merchandise. Because the paraxylene covered by CM500550 was a drawback product, as defined in 19 C.F.R. § 191.2(l), Eastman was entitled to designate it as though it was imported merchandise, as authorized by 19 C.F.R. §§ 191.22(c) and 191.24(b)(3), and it was the basis of the manufacture of the polyester pellets under 19 U.S.C. § 1313(b).
We note that the CBP regulations provide that when the basis for drawback under 19 U.S.C. § 1313(p) is petroleum derivatives manufactured under 19 U.S.C. § 1313(b), the merchandise that is the basis for drawback under this provision must be a “qualified article.” 19 C.F.R. 191.174(a). Therefore, in this case, the intermediate drawback product paraxylene must also be a “qualified article,” even though it is not the exported article. The paraxylene, classifiable under subheading 2902.43.00, HTSUS, was manufactured by the Chevron under 19 U.S.C. § 1313(b) from crude oil, and is also a qualified article for purposes of 19 U.S.C. § 1313(p)(3)(A)(i). The paraxylene transferred under CM500550 has been designated as the basis of drawback in this case and, consequently, the imported, duty-paid crude that is designated for the paraxylene on CM500550 represents duties attributable to the polyester pellets.
The protest should be GRANTED. The manufacturing operations in which Chevron discretely produced the paraxylene covered by CM500550 are not relevant when calculating the 180-day time frame under 19 U.S.C. § 1313(p)(2)(C) for the exportation of the polyester pellets. This decision is limited to the issue of the timeliness of the exportations identified on the subject drawback entries.
In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, 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 of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings 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 other methods of public distribution.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division