DRA-2-02-DRA-4-RR:IT:EC 227559 IOR
Debbie Clune
Consulting Services Department
PBB Group
434 Delaware Ave
Buffalo NY 14202
RE: Ruling request; orange juice; NAFTA drawback; drawback;
manufacture; concentrate; reconstituted; 19 U.S.C.
1313(j)(1); 19 U.S.C. 1313(a); 19 U.S.C. 1313(b); CF
7511; shrinkage; loss of product; waste
Dear Ms. Clune:
This is in response to Joseph Giumentaro's (it is our
understanding that Mr. Giumentaro is no longer with your office)
letter of May 7, 1997, on behalf of Jansen Blyth Enterprises
(Jansen), regarding drawback under unused merchandise for
imported orange juice concentrate.
FACTS:
In your submission you state the following:
Orange juice concentrate (66 degree Brix) is purchased
and exported to the U.S. in drums. The concentrate,
product of Brazil, is blended with water and the
reconstituted juice (10 degree Brix) is packaged into
five liter bag-in-a-box containers. These containers
are of the type ready to serve for retail customers.
Losses or shrinkage of orange juice and packaging will
occur during the reprocessing and packaging operations.
These losses, due to drawing, pumping into the
pasteurizer, spillage, etc. are limited to 2% during
the conversion process. Once the reconstituted juice
is packaged, it is sent to Canada for sale to the
Canadian market.
To date, PBB USA, Inc. has been preparing CF7511 Forms
prior to exporting the reconstituted juice to Canada.
A sample form is provided. These are presented to U.S.
Customs prior to exportation and remain in the
possession of the carrier until after importation into
Canada.
(Note: however, some of these forms are not being
returned to PBB USA, Inc.) [F]irst, is this procedure
acceptable for drawback purposes and secondly, would
Canadian import documentation be acceptable in lieu of
the CF7511?
You ask whether the Brazilian orange juice concentrate,
reconstituted in the U.S. and exported to Canada is eligible for
full drawback as unused merchandise, whether duties previously
paid are recoverable based on completion and submission of
CF7511, and what effect will the "shrinkage" or loss of product
during the conversion process have on any potential claim for
duty drawback. In response to requests for additional
information regarding the imported and exported product, we were
provided with an entry summary and accompanying invoice for
Brazilian frozen concentrated orange juice, and a copy of a
Canadian B3 electronic entry summary for reconstituted orange
juice. The CF 7511 submitted with the ruling request is blank.
ISSUE:
Whether the orange juice concentrate is eligible for full
drawback upon exportation of the reconstituted juice to Canada.
LAW AND ANALYSIS:
The drawback law was substantively amended by section 632,
title VI- Customs Modernization, Public Law 103-182, the North
American Free Trade Agreement Implementation Act (107 Stat.
2057), enacted December 8, 1993. Section 692 of the Act provides
that titleVI provisions take effect on the date of enactment.
Section 632 of the act changes same condition direct
identification drawback under 19 U.S.C. 1313(j)(1), by providing
that imported merchandise on which was paid any duty, tax, or fee
imposed under Federal law because of its importation, and is
within 3 years of the date of importation, exported or destroyed
under Customs supervision and was not used in 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.
Regarding the use of articles under section 1313(j)(1), 19
U.S.C. 1313(j)(3) provides as follows:
The performing of any operation or combination of
operations (including, but not limited to, testing,
cleaning, repacking, inspecting, sorting, refurbishing,
freezing, blending, repairing, reworking, cutting,
slitting, adjusting, replacing components, relabeling,
disassembling, and unpacking), not amounting to
manufacture or production for drawback purposes under
the preceding provisions of this section on--
(A) the imported merchandise itself in cases
to which paragraph (1) applies...
shall not be treated as a use of that merchandise for
purposes of applying paragraph (1)(B)....
In HQ 225985, dated November 30, 1995, based on the language
of 1313(j), Customs stated that either an operation results in a
manufacture for drawback purposes or the operation does not
amount to a use for the purposes of 19 U.S.C. 1313(j). Customs
concluded that the listed operations in 1313(j)(3), do not impose
a limitation on the qualifying operations, but are illustrative
of operations that, may, but do not always, result in a new
article being manufactured for drawback purposes. In HQ 225985
it was determined that attaching watch straps to a watch head is
an assembly which does not amount to a manufacture or production,
and that the assembly does not amount to a "use" for the purposes
of 1313(j).
It is Customs position in T.D. 85-110, which provides for
drawback for orange juice products, that the blending of water
with concentrated orange juice for manufacturing (of not less
than 55ΓΈ Brix) and heat treatment of the blend to reduce the
enzymatic activity and the number of viable microorganisms, to
make orange juice from concentrate (reconstituted juice) is a
production for purposes of 19 U.S.C. 1313(b). Pasteurization is
the process of heat treatment to reduce substantially enzymatic
activity and the number of viable microorganisms. Therefore, as
the process described amounts to a manufacture or production for
drawback purposes, it is a use under 19 U.S.C. 1313(j), as
provided by (j)(3), and the merchandise would not qualify for
drawback as unused merchandise. However, it could qualify for
manufacturing drawback under 19 U.S.C. 1313(a) or (b), provided
all statutory and regulatory requirements are met.
Regarding exportations to Canada and 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.
Under 19 U.S.C. 3333(a) (section 203(a) of the NAFTA), such
goods mean any imported good other than, among other things, "a
citrus product that is exported to Canada." The term "citrus
product" is not defined in the NAFTA specifically with respect to
section 3333. For ordinary usage, the term "citrus" is defined
as "of or pertaining to trees or shrubs of the genus Citrus, many
of which bear edible fruit such as the orange, lemon, lime, and
grapefruit." American Heritage Dictionary, second college
edition, 1982, p.276. The term "product" is defined as
"something produced by human or mechanical effort or by a natural
process." Id., at 988. The foregoing definitions would include
orange juice concentrate and reconstituted orange juice within
the definition of "citrus product." In addition, section 202(d)
of the Trade Act of 1974 (19 U.S.C. 2252(d)) was amended by the
NAFTA Implementation Act by the addition of "citrus product" to
the coverage of relief authority, and by inserting a new
subparagraph (A) in paragraph (5) to read as follows:
"(A) The term 'citrus product' means any processed
oranges or grapefruit, or any orange or grapefruit
juice, including concentrate.".
Based on the foregoing, we conclude that the subject merchandise
constitutes a "citrus product," within the meaning of 19 U.S.C.
3333(a).
The Customs regulations issued under the authority of the
NAFTA Implementation Act specifically provide for the
availability of drawback on the exportation of merchandise to a
NAFTA country. Customs Regulations 181.43 (19 CFR 181.43)
provides that, except as otherwise provided, drawback is
authorized under 19 U.S.C. 1313(a) and (b) for goods exported
to Canada or Mexico. It is provided in 19 CFR 181.44(c) and (d),
that drawback under section 1313(a) and (b) must be claimed based
on the drawback limitation set forth in 19 CFR 181.44(a) (i.e.,
that such drawback may be granted only on the lesser of the total
duties paid or owed on the importation into the U.S. or the total
amount of duties paid on the exported good on its subsequent
importation into Canada or Mexico). However, under 19 CFR
181.45(d), a good identified in Annex 303.6 of the NAFTA and in
sections 203(a)(7) and (8) of the North American Free Trade
agreement Implementation Act, if exported to Canada, is eligible
for drawback without regard to the limitation on drawback. Annex
303.6 identifies imported citrus products and section 203(a)(7)
provides for a citrus product that is exported to Canada.
Accordingly, the imported orange juice concentrate, pursuant
to 19 U.S.C. 3333(a) and 19 CFR 181.45(d), as a citrus product
exported to Canada, is not subject to the NAFTA drawback
limitation. The reconstituted juice exported to Canada is
eligible for full drawback of the duty paid on the imported
concentrate, under 19 U.S.C. 1313(a) or (b), provided that all
statutory and regulatory drawback requirements are met.
The available procedures for establishment of exportation of
articles for drawback purposes are set forth in 19 CFR 191.51(a)
through (e). One of the procedures is (a) "Notice of
exportation," the requirements of which are set forth in 19 CFR
191.52.
Under 19 CFR 191.52(a), it is stated that a drawback claim
may be supported with a "notice of exportation" on Customs Form
(CF) 7511. Section 191.52(b) provides for the information that
must be included on the CF 7511. Under 19 CFR 191.52(c), two
forms of the CF 7511 are accepted for compliance with the notice
of exportation procedure. Section 191.52(c)(1) provides for
Customs certification of the CF 7511 upon verification of the
facts of exportation upon receipt of the outbound manifest. The
CF 7511 must be submitted to Customs with the shipper's export
declaration or the ocean/airway export bill of lading. Upon
verification, after receipt of the outbound manifest, a certified
copy of the CF 7511 and one uncertified copy of the CF 7511 are
to be returned to the exporter-claimant. Section 191.52(c)(2)
provides for uncertified notice of exportation. The CF 7511 is
to be supported by "documentary evidence of exportation, such as
the bill of lading, air waybill, freight waybill, Canadian
Customs manifest, cargo manifest, or certified copies thereof,
issued by the exporting carrier." Section 191.52(c)(2) requires
that the supporting documentary evidence "shall establish fully
the time and fact of exportation and the identity of the
exporter."
Based on the documents submitted, we cannot determine
whether the CF 7511 being submitted to Customs is acceptable, as
the CF 7511 submitted was not completed and was not accompanied
with the shipper's export declaration or the ocean/airway export
bill of lading, and an outbound manifest. Provided the correct
documents are submitted to Customs under 19 CFR 191.52(c)(1), the
procedure is acceptable for drawback purposes. Under 19 CFR
191.52(c)(2), a completed CF 7511 is still required, but does not
need to be certified by Customs. The uncertified CF 7511 must be
supported by documentary evidence of exportation as described in
19 CFR 191.52(c)(2). The Canadian B3 Entry Summary submitted is
sufficient documentary evidence to support the CF 7511, as it is
a Canadian customs manifest.
With respect to the issue of loss of product due to drawing,
pumping into the pasteurizer, and spillage, the described loss of
product constitutes irrecoverable and valueless waste, and does
not reduce the drawback if the basis of the drawback claim is the
duty paid on the quantity of imported material used in
manufacture. However, if the basis of the drawback claim is the
quantity of imported merchandise appearing in the exported
articles, the quantity of waste incurred, whether it is valueless
or valuable, will reduce the drawback paid.
HOLDING:
The orange juice concentrate is not eligible for unused
merchandise drawback under 19 U.S.C. 1313(j)(1), but is eligible
for drawback under 19 U.S.C. 1313(a) or (b), and is not subject
to the limitation of drawback under 19 U.S.C. 3333.
Sincerely,
Director, Commercial
Rulings Division