HQ 230805

March 10, 2006

LIQ-9-01

RR:CR:DR 230805 EMS

U.S. Customs and Border Protection

Port Director, San Francisco Service Port

555 Battery Street

San Francisco, CA 94111

ATTN: Thomas Valenzuela

Re: Application for Further Review of Protest No. 2809-04-100534; 19
U.S.C. §

> 1313(b); substitution manufacturing drawback; sufficiency of
> procedures for establishing exportation that are not specifically
> enumerated in 19 C.F.R. § 191.72; business records maintained by the
> buyer and the seller

Dear Mr. Valenzuela:

This is in response to your correspondence dated October 14, 2004,
requesting further review of Protest No. 2809-04-100534. AEI Drawback
Services, Inc. filed this protest on behalf the drawback claimant,
Harvey Titanium Ltd.

U.S. Customs and Border Protection (CBP) liquidated the claimant's entry
and disallowed drawback because the claimant failed to fully establish
the fact of exportation. The claimant protests the disallowance of
drawback on this basis, alleging that the documentation submitted to the
San Francisco Service Port (the port) establishes that the subject
merchandise was exported for purposes of 19 C.F.R. § 191.72. Our
decision follows.

**FACTS:**

The claimant filed the subject entry on August 1, 2001, under 19 U.S.C.
§ 1313(b), as authorized by a specific manufacturing drawback
application, for the manufacture of certain articles of titanium bar,
billet, rectangle, etc. Attached to the entry was an undated waiver
signed by the Assistant Traffic Manager of Israel Aircraft Industries
(IAI), which assigns drawback rights to the claimant for merchandise
that it provides to IAI. The only proof of exportation submitted by the
claimant when it filed the subject entry on August 1, 2001 was a
Chronological Summary of Exports, as authorized by 19 C.F.R. § 191.73.
The Chronological Summary of Exports identified eighteen dates of
exportation between August 31, 1998 and September 30, 1999. Pursuant to
a statistical review of the subject entry, the port requested additional
documentary evidence for six of the exportations, allegedly made between
June 4, 1999 and September 30, 1999.

In response, the claimant submitted the following documents for the
subject exportations: commercial invoices, routing/inspection traveler
invoices, and the claimant's computer records of proof of payment. The
claimant also submitted a list that identifies the month and year in
which the purchaser received the eighteen exportations and a printout of
a screen allegedly maintained as part of the purchaser's business
records. All of the aforementioned documents are described below.

The claimant's commercial invoices identify IAI, located in Israel, as
the purchaser of the subject merchandise. Five of the invoices identify
the shipping address as IAI c/o certain shipping companies located in
New York. The sixth invoice identifies the shipping address as IAI c/o
an airport in Israel. The invoices contain the following statement:
"These commodities are licensed by the U.S. for final destination
Israel. Any re-export must be authorized by the U.S. Government.
Diversion is prohibited." Each invoice shows an invoice date and a
shipping date and, on each, the invoice date is the same as the shipping
date. Each invoice also shows an order number, which can be
cross-referenced to a routing/ inspection traveler form. These traveler
forms show what appears to be a series of operational reviews conducted
for the subject merchandise, all of which are stamped by the claimant
and dated prior to the shipping date shown on the corresponding
invoices.

The proof of payment submitted for each invoice is a copy of a computer
screen printout that is alleged to be a document kept in the ordinary
course of business by the claimant. There is nothing on the printout to
show ownership of the document. The printout identifies the customer as
IAI and shows an "Option R" which identifies an airport in Israel. The
printout identifies the claimant's commercial invoice number, the date
of issuance, and the amount charged. Directly underneath this
information is what appears to be the date and amount of payment, which
is always subsequent to the date of issuance, occurring between two and
eight months thereafter. The amount of payment is consistent with the
amount assessed for each invoice.

The list of the dates of receipt of the exportations of the subject
merchandise consists of a single page divided into columns showing the
claimant's invoice number, the date of that invoice, and the month and
year that IAI received the merchandise identified on the invoice at its
location in Israel. The claimant states that "the signed listings of
export is not a document kept in the ordinary course of business," and
there is a declaration that reads as follows: "We, Israel Aircraft,
doing business in Lod, Israel, do hereby declare that we received goods
as indicated below. These goods were sold to us by Harvey Titanium,
doing business...\[in the United States of America\]." The list includes
all of the invoices identified on the Chronological Summary of Exports
and the alleged dates of receipt are within the same month or the month
following the date of issuance of the invoice.[^1] At the bottom of the
page, there is a certification of the truthfulness and correctness of
the information contained therein. The certification is dated May 9,
2004 and signed by both the Deputy Director of Purchasing and Logistics
for IAI and the Deputy Director for Subcontracting for IAI.

Accompanying this list is a one-page printout of a computer screen.
According to the claimant, this document is a record maintained in the
ordinary course of business by IAI and "it is the only screen print
\[that the claimant\] could obtain concerning the list of exports."
There is nothing on the printout to show ownership of the document.
Among the information provided on the printout is the following: the
purchase order number, the house airway bill number, the master airway
bill, the invoice number, the location from which the merchandise was
shipped, the date of shipping, and the exact date of receipt.[^2] The
printout identifies IAI as the purchaser and the claimant as the seller.
The printout does not identify the location to which the merchandise
covered by the invoice was shipped.

Based on the foregoing documentation, the port liquidated the entry on
August 13, 2004 and disallowed drawback because the claimant failed to
fully establish the fact of exportation. The claimant filed a Protest
(CBP Form 19) on October 13, 2004. In its attachment to the Protest, the
claimant stated that IAI was the exporter of the subject merchandise and
that it declined to provide the claimant with ordinary documentation of
exportation. It is the claimant's position that the documentation
submitted to the port was nonetheless sufficient evidence of
exportation.

**ISSUE:**

Whether the documentation provided by the claimant constitutes
sufficient proof of exportation pursuant to 19 C.F.R. § 191.72?

LAW AND ANALYSIS:

Initially, we note that the refusal to pay a claim for drawback is a
protestable issue under 19 U.S.C. § 1514(a)(6). The port denied drawback
when it liquidated the subject entry on August 13, 2004. The protest was
timely filed on October 13, 2004, which is within the 90-day filing
deadline set forth under 19 U.S.C. § 1514(3) (1999). The alleged basis
for further review is that the denial of drawback is inconsistent with
certain decisions of CBP, per 19 C.F.R. § 174.24(a). The request for
further review is granted, and these decisions are addressed in the
analysis below.

Substitution manufacturing drawback, per 19 U.S.C. § 1313(b), provides
that if imported duty-paid merchandise and any other merchandise
(whether imported or domestic) of the same kind and quality are used
within three years of the receipt of the imported merchandise in the
manufacture or production of articles and the articles manufactured or
produced are exported or destroyed under CBP supervision, then 99
percent of the duties on the imported duty-paid merchandise shall be
refunded as drawback, provided that none of the articles were used prior
to the exportation or destruction, and even if none of the imported
merchandise was actually used in the manufacture or production of the
exported or destroyed articles.

The controversy in this case involves the exportation requirement of 19
U.S.C. § 1313(b). In general, proof of exportation requires evidence of
an intent for the merchandise at issue to unite with the mass of things
belonging to that of another country, and evidence that the merchandise
left the United States. 19 C.F.R. § 101.1. The methods of establishing
compliance with the exportation requirement are set forth in Part 191 of
the CBP regulations, which was promulgated under the authority of 19
U.S.C. § 1313(l). Specifically, 19 C.F.R. § 191.72 requires that
"\[s\]upporting documentary evidence shall establish fully the date and
fact of exportation and the identity of the exporter."

With respect to the subject entry, the applicable procedures for
establishing exportation, which are enumerated under 19 C.F.R. § 191.72,
include actual evidence of exportation and the Chronological Summary of
Exports. Actual evidence of exportation is the primary proof of
exportation for drawback purposes, per 19 C.F.R. § 191.73(c), and
consists of "documentary evidence, such as an originally signed bill of
lading, air waybill, freight waybill, Canadian Customs manifest, and/or
cargo manifest, or certified copies thereof, issued by the exporting
carrier." 19 C.F.R. § 191.72(a). In this case, the claimant's position
is that IAI, the alleged exporter of the subject merchandise, declined
to provide actual evidence of exportation to the claimant. Instead, the
claimant submitted its entry with a Chronological Summary of Exports,
which is a table of specific data that "may be submitted in lieu of
actual documentary evidence of exportation," per 19 C.F.R. § 191.73(a).

We note that a claimant that submits a Chronological Summary of Exports
must maintain "additional evidence of exportation required by Customs to
establish fully ... the fact of exportation." 19 C.F.R. § 191.73(c)(1).
The CBP regulations also provide for examination of these records, 19
C.F.R. § 191.2(o), and verification of drawback claims by CBP, 19 C.F.R.
§ 191.61. Compliance with the drawback regulations is mandatory and a
condition precedent for payment of drawback. [Chrysler Motors Corp. v.
United States]{.underline}, 14 Ct. Int'l Trade 807, 816 (1990), aff\'d,
945 F.2d 1187 (Fed. Cir. 1991). [See also]{.underline} [United States v.
W.C. Hardesty Co., Inc.]{.underline}, 36 C.C.P.A. 47, 52 (1949); [Guess?
Inc. v. United States]{.underline}, 944 F.2d 855, 858 (1991) (\"We are
dealing \[in discussing drawback\] instead with an exemption from duty,
a statutory privilege due only when the enumerated conditions are
met.\").

The claimant's submission, which was intended to establish the fact of
exportation, did not consist of any actual evidence of exportation. It
is the claimant's position that the supplemental documentation described
in 19 C.F.R. § 191.72 as "actual proof of exportation" is not the
exclusive procedure for establishing exportation for purposes of
claiming drawback. Indeed, the language of the regulation states that
the procedures for establishing exportation "include but are not limited
to" those which are enumerated in 19 C.F.R. § 191.72. Our determination
of whether evidence other than actual proof of exportation establishes
fully the fact of exportation is contingent on the reliability of the
documentation provided by the claimant, which is the focus of our
analysis in this case.

We begin with the claimant's own documents, which consist of commercial
invoices, travelers, and proof of payment. Alone, the invoices and the
travelers are insufficient proof of exportation. Five of the six
commercial invoices show that the shipping address is a location in New
York.[^3] CBP will not presume that exportation occurred merely because
the subject merchandise was inspected and designated for delivery to a
shipper in New York. We note that the claimant did not provide proof of
shipment to New York. The statement on the invoices which directs that
the merchandise is licensed for exportation to Israel manifests, at
best, an intent to unite the subject merchandise with the mass of things
belonging to that of another country, but it is not evidence that the
subject merchandise left the United States.

The claimant contends that proof of payment consistent with the amount
assessed on the invoices constitutes proof of exportation, and it relies
on C.S.D. 79-42 (May 1, 1979) and C.S.D. 82-38 (Oct. 5, 1981). These CBP
decisions evaluated the extent to which the drawback regulations
authorized CBP auditors to examine a claimant's financial records for
the verification of drawback claims. The claimant did not provide any
analysis of these decisions other than the statement that the decisions
demonstrate that "the use of financial records may be used as proof of
exportation." In C.S.D. 79-402, CBP determined that the drawback law
does not require a claimant to demonstrate proof of payment for
merchandise, but CBP may examine such records for the purpose of
"verifying the reliability of the records presented to establish ...
exportation" when, for instance, the manufacturing or shipping records
are insufficient or unavailable. In C.S.D. 82-38, CBP determined that
auditors are not entitled to examine a claimant's financial records when
the claimant submitted other records to CBP that were sufficient to
establish exportation. CBP's decisions in these two cases broadly
indicate that proof of payment is a tool for verification, under 19
C.F.R. § 191.61, but proof of payment does not create an independent
presumption of exportation of the merchandise.

Here, the commercial invoices and travelers are not reliable in
establishing that the subject merchandise left the United States, and
thus we must determine whether the proof of payment is sufficient to
demonstrate that an exportation occurred. We note our previous decision,
in HQ 228736 (Feb. 6, 2002), that evidence of payment did not establish
exportation because the payment was made prior to the invoice and
shipment dates. In that case, CBP evaluated the totality of the
documents submitted as proof of exportation and concluded that, at best,
proof of payment that was dated prior to the invoice and shipment dates
established an intent for the subject merchandise to unite with the mass
of things belonging to Costa Rica. Nowhere in its reasoning did CBP
suggest that, proof of payment that occurs after the date of issuance of
the invoice is de facto proof of exportation.

The proof of payment proffered by the claimant is insufficient evidence
that the merchandise left the United States, even though it shows that
payment was made after the date of issuance of the invoice. The computer
screen printouts, presumably generated in the ordinary course of
business, show that IAI, at a location in Israel, was the buyer.
However, the fact that these records show payment occurred within two to
eight months after the date that the claimant issued invoices to the IAI
does not support the presumption that the subject merchandise,
designated for delivery to a shipper in New York, subsequently left the
United States or was received at IAI's location in Israel. While the
subject merchandise may have been licensed for export to Israel, the
claimant did not provided a single commercial or shipping document that
shows that the subject merchandise was even shipped to the designated
locations in New York, much less any location in Israel. IAI is a
transnational corporation, with locations in the United States and
numerous countries abroad, and we cannot conclude that proof of purchase
by IAI's location in Israel means that the subject merchandise was
shipped to that location. The proof payment, even when cross-referenced
with the invoices and travelers, does not verify the reliability of the
Chronological Summary of Exports, nor does it establish the exact dates
of exportation identified therein.

Given the claimant's position that IAI declined to provide it with
documentation of the dates of exportation, it is puzzling that the
claimant had somehow pinpointed those dates in the Chronological Summary
of Exports. There is no supporting documentation for the specific dates
of exportation. In fact, the claimant relies on a signed list of
exportations submitted by IAI in Israel, which shows only the month and
year that IAI claims it received the subject merchandise, presumably in
Israel. The claimant relies on our decision in HQ 229941 (Oct. 14,
2003), where we advised the identification of the exact date of
exportation was unnecessary under the totality of the circumstances. In
that case, CBP was able to ascertain that, at the latest, the exported
merchandise entered the commerce of Canada on a specific date. This
specific date was reflected on a Canadian Customs Coding Form attesting
to the release date, and CBP presumed that an exportation had occurred
in the absence of actual evidence, as specified under 19 U.S.C. §
191.72. The Canadian broker signed the coding form and CBP added the
caveat that the form must also be certified by a U.S. entity.

The signed list of exports submitted to CBP in this case simply does not
carry the same evidentiary weight as the coding forms described in HQ
229941. The coding forms were government documents maintained by the
broker in the ordinary course of business and were to be certified by a
U.S. entity. The signed list of exports is neither an official
government document, nor has it been certified by a U.S. entity.
Additonally, the signed list of exports is not a document kept in the
ordinary course of business and it was not signed by IAI until May 2004,
more than four years after the most recent receipt of merchandise that
IAI indicated for September 1999. The signed list of exports is,
therefore, inadmissible hearsay testimony under Federal Rules of
Evidence, HQ 228736, and is insufficient support for a drawback claim,
per HQ 229566 (Sept. 17, 2002) (citing [United States v. Baar & Beards,
Inc.]{.underline}, 46 C.C.P.A. 92, 96 (1959) (holding that an affidavit
more than two years after the event to which it related, not supported
by any records, is insufficient to support the basis for the claim at
issue)).

The computer screen printout, which is allegedly from IAI's business
records, references documents that would be considered actual evidence
of exportation under 19 C.F.R. § 191.72. This record may even be
admissible hearsay under the Federal Rules of Evidence, but there is no
affidavit from IAI that demonstrates ownership of the record or attests
to the fact that it is maintained by IAI in the ordinary course of
business. Additionally, the claimant stated that this record was
available for only one of the exportations reviewed by the port and
there is no presumption that such documentation exists for the other
five exportations.

For all of the aforementioned reasons, the documentation provided by the
claimant does not fully establish the fact of exportation because there
is insufficient evidence that the subject merchandise left the United
States. There is no legal authority to compel a IAI to disclose
confidential business information to the assignee of its drawback rights
under 19 C.F.R. 191.28, but the claimant is nonetheless responsible for
maintaining proof of exportation in accordance with 19 C.F.R. §§
191.72-73. [See]{.underline} 19 C.F.R. § 191.15, which states that, per
19 U.S.C. § 1508(c)(3), a claimant is required to maintain records in
support of its drawback claim under 19 U.S.C. § 1313.

DECISION:

The protest should be DENIED. The documentation submitted by the
claimant does not establish that the merchandise, which was covered by
the six exportations subject to the statistical review, left the United
States.

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](http://www.cbp.gov/), by means of the Freedom of
Information Act, and other methods of public distribution.

> Sincerely,
>
> Myles B. Harmon, Director
>
> Commercial and Trade Facilitation Division

[^1]: It appears that the invoice dated June 17, 1999 is a revision of a
    previous invoice dated April 16, 1999. The earlier invoice was
    attached to the more recent invoice and the earlier invoice shows
    the same order number as the more recent invoice. The list of
    exports shows that IAI received the merchandise in May 1999, the
    month before the issuance of the second invoice. This inconsistency
    undermines the credibility of the June 17, 1999 date of exportation
    shown on the Chronological Summary of Exports.

[^2]: The printout identifies the invoice dated June 4, 1999, for which
    the Chronological Summary of Exports shows that the merchandise was
    exported on the same date. However, the printout identifies the date
    of receipt as June 9, 1999 and the ship date as June 11, 1999. The
    claimant does not explain the significance of either of these dates
    on the printout. The reliability of the export date identified on
    the Chronological Summary of Exports is suspect, given the second
    ship date on the printout.

[^3]: The remaining invoice, which identifies the shipping address as an
    airport in Israel, would not establish proof of export, but merely a
    clear intention to unite the subject merchandise with the mass of
    things belonging to that of another country. In the Protest,
    however, the claimant represents that it was not the exporter for
    any of the subject merchandise covered by the six invoices.
    Therefore, we presume that the claimant did not ship the merchandise
    covered by this invoice to Israel.