U.S. Customs and Border Protection
New York/Newark Service Port
1100 Raymond Boulevard
Newark, NJ 07102
Attn: Stacy Mark, Supervisory Drawback Specialist
RE: Application for Further Review of Protest No: 4601-11-100942 concerning a claim for unused merchandise drawback
Dear Port Director,
The above-referenced protest has been forwarded to our office for further review. We have considered the points raised by MV Mark, Inc., (“MV Mark”) regarding your denial of the drawback claim related to a 1990 Chevrolet Truck (“truck”). Our decision follows.
On March 18, 2008, “a 1990 Chevrolet Truck…with one winch, six nitrogen bottles and one heat exchanger” was imported into the United States from Canada. The truck was entered under subheading 8704.31.0000, HTSUS, which provides for “Motor vehicles for the transport of goods: Other, with spark-ignition internal combustion piston engine: G.V.W. not exceeding 5 metric tons.” The truck was driven under its own power into the United States to Massachusetts. On July 21, 2008, the truck was driven back to Canada under its own power. On September 18, 2009, an application for a one time waiver of prior notice of intent to export unused drawback merchandise was filed on behalf of MV Mark regarding the truck. On January 8, 2010, MV Mark sought drawback.
On February 23, 2011, the application for a one time waiver of prior notice to export unused drawback merchandise was denied because the exported merchandise did not meet the requirements. On March 3, 2011, CBP denied the claim for drawback. As part of our follow up correspondence, on June 2, 2014, the Drawback office clarified that the reason for the denial was that the truck was driven under its own power and was considered “used.” Therefore, it could not qualify under unused merchandise drawback.
On May 26, 2011, MV Mark protested the refusal to pay drawback. MV Mark claimed that the truck was unused upon exportation because there was no operation or combination of operations amounting to manufacture or production performed on it. Further, MV Mark provided a letter, dated June 9, 2009, by W. A. Chester, LLC, which states the following:
This truck was parked in our yard and placed on standby. This truck and associated equipment were never used by W.A. Chester, LLC. We (W.A. Chester, LLC) used our own equipment. This truck was transported back to Canada by M.V. Mark, INC. on July 21, 2008.
As such, MV Mark argues that the truck is eligible for unused merchandise drawback under 19 U.S.C. § 1313(j)(1) because the truck and equipment were not put to use at the intended job site in Massachusetts. Further, MV Mark claims that the value and condition of the truck was unchanged from the time of importation because it was undamaged and driven only a short distance from Canada into the United States and back. Therefore, MV Mark argues that the characteristics of the truck were not materially altered and as such, it was in the same condition when exported to Canada and the NAFTA lesser of duty rule should not apply.
Whether the truck is eligible for drawback under 19 U.S.C. § 1313(j)(1).
LAW AND ANALYSIS:
We note initially that the instant protest was timely filed, within 180 days from the date of liquidation. See 19 U.S.C. § 1514(c)(3)(A). CBP denied MV Mark’s drawback claim on March 3, 2011, and this protest was filed on March 26, 2011, within 180 days. Further, the protestant requests further review per 19 CFR § 174.24. CBP’s regulations provide for further review of a protest when, inter alia, the decision against which the protest was filed:
(b) Is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts19 C.F.R. § 174.24(b).
Upon review of the application for further review, we find that these facts have not been the subject of a Headquarters ruling. See 19 CFR § 174.24(b) and 19 CFR § 174.26(b)(1)(iv). Accordingly, further review is warranted.
Under 19 U.S.C. § 1313(j)(1), drawback is authorized if imported merchandise on which was paid any duty, tax, or fee imposed under Federal law because of its importation is, within three years of the date of importation, exported or destroyed under CBP supervision and was not used in the United States before such exportation or destruction. Therefore, merchandise that was used prior to exportation is ineligible for drawback under 19 U.S.C. § 1313(j)(1).
CBP has addressed a conveyance’s use and the impact on eligibility for drawback under 19 U.S.C. § 1313(j)(1) in prior rulings. In HQ 223076, dated May 27, 1991, we held that a short duration demonstration cruise contained within the Honolulu Harbor for a prospective buyer and a subsequent short duration cruise in the Honolulu Harbor during which a short documentary was filmed in connection to the sale of a yacht was not a use because the activities constituted advertising. In that case, the yacht was already in Hawaii, i.e., it was not sailed to Hawaii under its own power, and, with the exception of the two short duration cruises, it was not physically moved from its berth except as was necessary for its maintenance. Additionally, in HQ 223076, we discussed C.S.D. 83-17, dated November 30, 1982, in which we held that offering merchandise for sale, i.e., advertising, does not negate the provisions of 1313(j), nor does demonstration connected with such offers render the merchandise ineligible for drawback unless the merchandise becomes significantly deteriorated.
However, in HQ 230037, dated November 4, 2003, we held that the Eclipse, a yacht, was ineligible for drawback under 19 U.S.C. § 1313(j)(1) because it was sailed under its own power within the United States. In that case, the yacht was imported to be sold and the protestant argued that it was unused because sailing the yacht under its own power was incidental to the intended reason for importation. We disagreed, stating that the “sailing of the Eclipse from Ft. Lauderdale, Florida to Nantucket, Massachusetts was a prohibited use within the meaning of 1313(j)(1)… the Eclipse, manned by the crew, was put to the exact use for which a yacht is built.” Thus, CBP has held that an article is used when it is employed for the purpose for which it was built, which, regarding a conveyance, includes a transportation.
Here, the truck was driven under its own power and transported equipment from Canada to the customer’s facilities in Massachusetts. The truck was then driven back to Canada under its own power. Here, as in HQ 230037, it is argued that the conveyance moving under its own power was incidental to the intended purpose for importation, i.e., being put to work at the intended job site. And here, just as in HQ 230037, we disagree because driving the truck from Canada to Massachusetts is a transportation, the purpose for which it was built, and therefore, a “use.” Unlike HQ 223076, the distance traveled was hundreds of miles, not a short duration cruise contained in a single location, and it was not done for purposes related to advertising the sale of the truck. The fact that the equipment on the truck was not used at the intended job site has no impact on our analysis. As such, this truck was used prior to exportation and is therefore, ineligible for drawback under 19 U.S.C. § 1313(j)(1).
MV Mark claims that because the truck had no operation or combination of operations amounting to a manufacture or production performed on it, it should be eligible for drawback under 19 U.S.C. § 1313(j)(1). However, a manufacture or production would be only one type of “use.” As explained above, CBP has held that an article is “used” when it is employed for the purpose for which it was built, which, in this case, includes driving a truck for transportation. As such, focusing on the term “use” in terms of a possible manufacture or production is inappropriate.
MV Mark asserts that the characteristics of the truck were not “materially altered” and therefore, the truck was in the same condition pursuant to NAFTA when exported to Canada. For exportations to Canada or Mexico, section 203 of the North American Free Trade Agreement (NAFTA) Implementation Act (Public law 103-182; 107 Stat. 2057, 2086; 19 U.S.C. § 3333), provides for the treatment of goods subject to NAFTA drawback, i.e., the lesser of duty rule. The lesser of duty rule holds that drawback may be granted only on the lesser of the total duties paid or owed on the importation into the United States or the total amount of duties paid on the exported good on its subsequent importation into Canada or Mexico. However, full drawback is provided for claims under 19 U.S.C. § 1313(j)(1) for goods exported to Canada or Mexico in the “same condition” as when imported into the United States. See 19 U.S.C. § 3333(a)(2) and 19 CFR § 181.45(b). Subsection (b)(1) of § 181.45 of CBP’s regulations, provides that for purposes of this subpart:
. . . a reference to a good in the "same condition" includes a good that has been subjected to any of the following operations provided that no such operation materially alters the characteristics of the good…
(Emphasis added). Therefore, provided that nothing occurs that materially alters the characteristics of a good, it would be exported in the same condition and would not be subject to the limitations of the lesser of duty rule. However, as stated above, the truck is ineligible for drawback under 19 U.S.C. § 1313(j)(1). As such, further analysis regarding whether is qualifies as being in the “same condition” is not required.
Based on the information submitted, we find that the truck is ineligible for drawback under 19 U.S.C. § 1313(j)(1). Accordingly, Protest Number 4601-11-100942 should be DENIED IN FULL for the reasons set forth in this decision.
In accordance with the Protest/Petition Processing Handbook, you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision 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