DRA-4 RR:CR:DR 229230DR
Mr. Joe Criscione
UTI Duty Drawback Branch
745 Dillon Drive
Wood Dale, IL 60191
Re: Successorship application of Spalding Sports Worldwide
Dear Mr. Criscione:
This is in reference to your request on behalf of Spalding Sports Worldwide, Inc., for the “right of successorship on Etonic imports.” The purpose of this review is to determine the applicability of title 19, United States Code, section 1313(s).
FACTS:
Drawback has been claimed by Spalding Sports Worldwide (“Spalding Sports”) under 19 U.S.C. §1313(j)(2) on the exportation of merchandise substituted for duty-paid merchandise imported by predecessor Etonic Lisco, Inc. The claimant has submitted a copy of its pending drawback claim, along with import summaries that allegedly show the importation of several pairs of golf shoes between October 13, 1997, and April 27, 1999. According to the export summaries submitted with the claim, several pairs of those golf shoes, or commercially interchangeable merchandise, were exported between January 20, 1999, and August 1, 1999.
Other documentation shows that on September 18, 1998, the boards of Etonic Lisco, Inc., and Etonic Worldwide Corporation authorized by resolution the merger of the two entities, which became effective on September 29, 1998. All of Etonic Lisco’s “property, rights, privileges, and other miscellaneous assets” were transferred to Etonic Worldwide. The surviving corporation was still known as Etonic Worldwide Corporation (“Etonic Worldwide”). Copies of the board resolutions of the respective corporations are included with the ruling request. A copy of the Certificate of Ownership and Merger for that merger is also included with the request and was filed with the Office of the Secretary of State of Delaware on September 30, 1998.
Also, the boards of Etonic Worldwide and Spalding Sports authorized by resolution the merger of the two entities on September 18, 1998. The merger became effective on September 30, 1998. Etonic Worldwide was a wholly owned subsidiary of Spalding Sports prior to the merger. All of Etonic Worldwide’s “property, rights, privileges, and other miscellaneous assets” were transferred to Spalding Sports, along with all of its obligations and liabilities, including 100% of Etonic Worldwide’s outstanding stock subscriptions. There are currently no outstanding shares of Etonic Worldwide stock and Etonic Worldwide dissolved effective September 30, 1998. The surviving corporation is still known as Spalding Sports Worldwide, Inc. Copies of the board resolutions of the respective corporations which describe the above transactions are included with the ruling request. A copy of the Certificate of Ownership and Merger for the merger was included with the request and was filed with the Office of the Secretary of State of Delaware on September 30, 1998.
Spalding Sports has now claimed, under §1313(j)(2), drawback on 99% of the duties paid for the designated importations made by Etonic Lisco, Inc. However, an initial analysis of the documentation included with the request reveals that a portion of the designated merchandise was in fact imported by Spalding Sports. See “Imported Duty Paid Merchandise Sorted by 7501 Number.” Spalding Sports has calculated the amount of drawback available to be equal to $9100.46, a figure that is apparently derived by calculating 99% of the duty paid on all of designated imports, regardless of the importer.
LAW AND ANALYSIS:
The statute, 19 U.S.C. §1313(s)(2) , provides that for purposes of §1313(j)(2), a drawback successor may designate (1) imported merchandise which the predecessor, before the date of succession, imported; or (2) imported merchandise, commercially interchangeable merchandise, or any combination of imported and commercially interchangeable merchandise for which the predecessor received, before the date of succession, from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to the predecessor such merchandise; as the basis for drawback on merchandise possessed by the drawback successor after the date of succession.
In order to claim drawback under 19 U.S.C. §1313(s), there is the requirement that either the predecessor or the drawback successor (who shall also certify that it has the predecessor's records) certifies that the transferred merchandise was not and will not be claimed by the predecessor, and the predecessor did not and will not issue any certificate to any other person that would enable that person to claim drawback. Also, the following regulations interpreting 19 U.S.C. §1313(s) (with respect to 19 U.S.C. §1313(j)(2)) are found in section 19 C.F.R. 191.32(f):
(1) General rule. Upon compliance with the requirements of this section and under 19 U.S.C. 1313(s), a drawback successor as defined in paragraph (f)(2) of this section may designate either of the following as the basis for drawback on merchandise possessed by the successor after the date of succession:
(i) Imported merchandise which the predecessor, before the date of succession, imported; or
(ii) Imported and/or commercially interchangeable merchandise which was transferred to the predecessor and for which the predecessor received, before the date of succession, a certificate of delivery from the person who imported and paid duty on the imported merchandise.
(2) Drawback successor. A ‘‘drawback successor’’ is an entity to which another entity (predecessor) has transferred, by written agreement, merger, or corporate resolution:
(i) All or substantially all of the rights, privileges, immunities, powers, duties, and liabilities of the predecessor; or
(ii) The assets and other business interests of a division, plant, or other business unit of such predecessor, provided that the value of the transferred assets and interests (realty, personality, and intangibles, exclusive of the drawback rights) exceeds the value of such drawback rights, whether vested or contingent.
(3) Certifications and required evidence.
(i) Records of predecessor. The predecessor or successor must certify in an attachment to the drawback claim that the successor is in possession of the predecessor’s records which are necessary to establish the right to drawback under the law and regulations with respect to the imported and/or commercially interchangeable merchandise.
(ii) Merchandise not otherwise designated. The predecessor or successor must certify in an attachment to the drawback claim, that the predecessor has not and will not designate, nor enable any other person to designate, the imported and/or commercially interchangeable merchandise as the basis for drawback.
(iii) Value of transferred property. In instances in which assets and other business interests of a division, plant, or other business unit of a predecessor are transferred, the predecessor or successor must specify, and maintain supporting records to establish, the value of the drawback rights and the value of all other transferred property.
(iv) Review by Customs. The written agreement, merger, or corporate resolution, provided for in paragraph (f)(2) of this section, and the records and evidence provided for in paragraph (f)(3)(i) through (iii) of this section, must be retained by the appropriate party(ies) for 3 years from the date of payment of the related claim and are subject to review by Customs upon request.
Based upon an analysis of the merger documents describing the merger of the predecessor, Etonic Lisco, Inc., into Etonic Worldwide, and the subsequent merger of Etonic Worldwide into Spalding Sports, we find that Spalding Sports has adequately shown that it has succeeded to the drawback rights on merchandise previously exported by Etonic Lisco. Spalding Sports has also certified that (1) it is in possession and has complete control of the records of the predecessor that are necessary to establish the right to drawback under the law and regulations with respect to the imported and/or commercially interchangeable merchandise; (2) the predecessor has not and will not designate, nor will enable any other person to designate, the imported and/or commercially interchangeable merchandise as the basis for drawback; (3) the transferred merchandise was not and will not be claimed by the predecessor; (4) the predecessor has not and will not issue any certificate to any other person that would enable that person to claim drawback. Note that Spalding Sports must attach the first two certifications to each drawback claim filed involving the subject merchandise. See 19 C.F.R. 191.32(f).
This response is limited in two respects. With regard to the amount of drawback, the document entitled “Imported Duty Paid Designated Merchandise Sorted by 7501 Number” shows that a portion of the designated imports were imported by Spalding Sports and not Etonic Lisco. This means that Spalding Sports would not be a “successor” to those imports, and §1313(s) would not apply to those imports, in order for Spalding Sports to meet the terms of §1313(j)(2). Also be aware that this response does not address whether the exported merchandise is commercially interchangeable with the designated imports under 1313(j)(2). That determination would need to be made before the ultimate approval of any drawback claim under 19 U.S.C. §1313(j)(2).
HOLDING:
Spalding Sports Worldwide, Inc., has proven its right of successorship, pursuant to 19 U.S.C. §1313(s), to that designated merchandise which was in fact imported by predecessor Etonic Lisco, Inc. However, before drawback will be paid under 19 U.S.C. §1313(j)(2), Spalding Sports will need to prove the commercial interchangeability of its export with the designated imports.
Sincerely,
John Durant
Director, Commercial Rulings Division