HQ 228270

January 3, 2002

DRA-2-02/ FOR2-03

RR:CR:DR 228270 IOR

CATEGORY: Entry

Director, Trade Agreements

U.S. Customs Service

1300 Pennsylvania Ave., NW

Washington, D.C. 20229

## Attn: Joyce Metzger

RE: Request for Internal Advice on Toyota Motor Manufacturing, Kentucky,
Inc.; NAFTA Duty Deferral; Foreign Trade Zones; Export Claims; 19 U.S.C.
§81c(a); 19 U.S.C. §1313; 19 U.S.C. §1558; 19 U.S.C. §1515(a); 19 CFR
§181.53

Dear Madam:

This is in reply to your memorandum of November 2, 1998, on behalf of
the Port Director, Cleveland, Ohio, seeking internal advice regarding
the liquidation of certain NAFTA duty deferral export entries submitted
on behalf of Toyota Motor Manufacturing, Kentucky, Inc. ("TMMK"). The
following is based on our review of submissions from TMMK and
documentation received from your office and follows two meetings with
counsel for and representatives of TMMK, on January 7, 1999, and July
11, 2001. The entries are the subject of Protest no. 4115-98-100002.

**FACTS:**

Toyota Motor Manufacturing, Kentucky, Inc., ("TMMK"), imports foreign
parts into a U.S. foreign trade zone ("FTZ") to manufacture motor
vehicles. The vehicles are then withdrawn from the FTZ for export to
Canada under the North American Free Trade Agreement ("NAFTA") duty
deferral program.

According to the file, the Port of Cleveland liquidated and issued duty
bills on TMMK entries, where TMMK did not provide satisfactory evidence
of Canadian duties paid within the regulatory period of 60 calendar
days, to qualify for the waiver or reduction of duties provided for
under 19 CFR 181.53(a)(3). TMMK protested the duty bills and claimed
that they partially submitted satisfactory evidence within the 60-day
period. TMMK wants the opportunity to perfect and present any missing
satisfactory evidence in order to waive any U.S. duties owed on these
entries. According to the Port, prior to the liquidation of the entries,
Customs staff met with TMMK staff on several occasions to describe and
explain what is required for a duty deferral claim and several letters
were sent by TMMK attempting to explain the subject protest.

According to the record, Customs Forms (CF) 7501 were timely filed. The
Port has taken the following position with respect to the protest:

> 1\. It does not dispute that TMMK did pay the Canadian duties.
> However, TMMK did not, in all cases, present its claims to Customs
> within the 60-calendar-day time frame.
>
> 2\. The protested entries did not have the required information that
> is to be reported in Part II of the CF 7501. In some instances,
> incomplete summary sheets were submitted within 60 days, others were
> submitted incomplete and after 60 days had passed, and other entries
> were never followed-up with a Part II submission before a substantial
> amount of time had passed.
>
> 3\. The information provided by protestant does not contain accurate
> Canadian entry numbers, tariff classification numbers, rate of duty or
> amount of Canadian duties paid.

Your memorandum indicates that TMMK submitted complete claims subsequent
to the receipt of duty bills, which was after the expiration of the
60-day period, and the port has now concluded that TMMK did pay Canadian
duties. However, it is your position that the 60-calendar-day period is
a date certain for submitting satisfactory evidence in support of the
claim and that a claim cannot (or should not) be perfected thereafter.

The port concludes that TMMK has not met all of the essential procedural
requirements with respect to the NAFTA duty deferral entries in question
as required by 19 C.F.R. §181.53(a)(3)(ii), because the information
initially provided was insufficient to fulfill the requirements of the
regulations.

Reference to a "Part I", is to the CF 7501 NAFTA duty deferral entry
("08" type entry) that contains the U.S. import/export information
setting forth the exporter's obligation of U.S. duties due and payable.
Reference to a "Part II", is to the Canadian entry information and
amount of duty paid to Canada, required to be submitted to Customs
within 60 days after the date of exportation to Canada, on a CF 7501,
under 19 CFR 181.53(a)(3). Reference to an "initially-filed Part II" is
to a document filed with Customs by TMMK prior to the submission of a
Part II. The submission provided by the port to this office, divided the
entries into different groups, depending upon the filing date of the
initially-filed Part II or just the Part II, in relation to the filing
date of the Part I.

In determining whether the initially-filed Part II or Part II was filed
within 60 days from the export date, the port relied on the entry date
on the Part I. According to the applicable regulations, 19 CFR
181.53(a)(2)(iii)(B), "for purposes of completing \[the CF\] 7501...,
any reference on the form to the entry date shall be taken to refer to
the date of exportation of the good or the date the goods are entered
into a duty-deferral program in Canada...." The regulations further
require that the CF 7501 be filed "no later than 10 working days after
the date of exportation to Canada...or 10 working days after being
entered into a duty-deferral program in Canada...." According to TMMK,
the export date of the merchandise is not the date given in the entry
date space on the CF 7501, but is the date in the "entry date" column on
the initially-filed Part II or Part II. Most of the initially-filed Part
II's have several dates in the column for "entry date". For purposes of
this decision, we are using the earliest date on the initially-filed
Part II as the export date for purposes of determining what documents
were filed within 60 days of the exportation of the merchandise. We do
not have the initially-filed Part II's for all of the entries which are
a subject of the protest and internal advice request, therefore this
decision cannot specifically address all of the entries. Three examples
are addressed below.

### Entry BG9-xxxx030-7

Entry BG9-xxxx030-7 was initially included in Attachment F of the port's
submission, in the group of "incorrect summaries filed untimely". The
Part I is date-stamped as having been filed on August 9, 1996, and is
broken down into 9 line items of vehicles and parts, including the
quantity, value, duty rate and duty for each line item. Attached to the
Part I is a spreadsheet of "Canadian Vehicles" for the week of July 29,
1996 to August 4, 1996. The spreadsheet breaks down the information on
the Part I as to the day each vehicle was produced, with the value,
weight, and duty attributable to the items used each day in production,
and is broken down into 10 different classification numbers, each of
which correspond to all but one of the classification numbers on the
Part I. One of the classification numbers on the spreadsheet is not on
the Part I. The spreadsheet shows the use of all of the entered
merchandise, in the production of 81 vehicles. On the Part I the entry
date is identified as "8.8.96". The import date is identified as
"072996". Customs Automated Commercial System (ACS) indicates an entry
date of July 29, 1996. According to the port's Attachment F summary, the
export date was July 29, 1996. July 29, 1996 is the date in Block 27 of
the CF 7501, for the "import" date. TMMK, at the meeting of July 11,
2001, explained that on the Part I, the "import date" represents the
date the vehicles physically crossed the border from the U.S. into
Canada, and the "entry date" on the initially-filed Part II represents
the date of entry into Canada, and is the same as the date of entry on
the Canadian Customs form.

The initially-filed Part II for entry BG9-xxxx030-7, contains the
following information:

+------------------------+---+------------------------+-------------------+
| Customs Entry \#       |   | Date Range:            | 60^th^ Day:       |
|                        |   |                        |                   |
| BG9-xxxx030-7          |   | 7-29-96 -- 8-4-96      | 9-28-96           |
+------------------------+---+------------------------+-------------------+
| Exit \#                | B |                        | Entry Date        |
|                        | r |                        |                   |
|                        | o |                        |                   |
|                        | k |                        |                   |
|                        | e |                        |                   |
|                        | r |                        |                   |
|                        | ' |                        |                   |
|                        | s |                        |                   |
|                        | r |                        |                   |
|                        | e |                        |                   |
|                        | f |                        |                   |
|                        | . |                        |                   |
|                        | \ |                        |                   |
|                        | # |                        |                   |
+------------------------+---+------------------------+-------------------+
| 50784                  | 4 |                        | 8-16-96           |
|                        | 1 |                        |                   |
|                        | 1 |                        |                   |
|                        | - |                        |                   |
|                        | 9 |                        |                   |
|                        | 8 |                        |                   |
|                        | 1 |                        |                   |
|                        | 4 |                        |                   |
|                        | 1 |                        |                   |
|                        | 8 |                        |                   |
+------------------------+---+------------------------+-------------------+
| 50773                  | 4 |                        | 8-9-96            |
|                        | 1 |                        |                   |
|                        | 1 |                        |                   |
|                        | - |                        |                   |
|                        | 9 |                        |                   |
|                        | 7 |                        |                   |
|                        | 5 |                        |                   |
|                        | 2 |                        |                   |
|                        | 5 |                        |                   |
|                        | 6 |                        |                   |
+------------------------+---+------------------------+-------------------+
| 03225                  | 3 |                        | 8-15-96           |
|                        | 1 |                        |                   |
|                        | 0 |                        |                   |
|                        | - |                        |                   |
|                        | 3 |                        |                   |
|                        | 4 |                        |                   |
|                        | 3 |                        |                   |
|                        | 8 |                        |                   |
|                        | 3 |                        |                   |
|                        | 9 |                        |                   |
+------------------------+---+------------------------+-------------------+
| 32974                  | 8 |                        | 8-21-96           |
|                        | 1 |                        |                   |
|                        | 5 |                        |                   |
|                        | - |                        |                   |
|                        | 9 |                        |                   |
|                        | 3 |                        |                   |
|                        | 2 |                        |                   |
|                        | 0 |                        |                   |
|                        | 4 |                        |                   |
|                        | 3 |                        |                   |
+------------------------+---+------------------------+-------------------+
| 03224                  | 4 |                        | 8-21-96           |
|                        | 1 |                        |                   |
|                        | 1 |                        |                   |
|                        | - |                        |                   |
|                        | 9 |                        |                   |
|                        | 8 |                        |                   |
|                        | 3 |                        |                   |
|                        | 0 |                        |                   |
|                        | 8 |                        |                   |
|                        | 2 |                        |                   |
+------------------------+---+------------------------+-------------------+
| 03228                  | 3 |                        | 8-27-96           |
|                        | 1 |                        |                   |
|                        | 0 |                        |                   |
|                        | - |                        |                   |
|                        | 3 |                        |                   |
|                        | 4 |                        |                   |
|                        | 7 |                        |                   |
|                        | 8 |                        |                   |
|                        | 6 |                        |                   |
|                        | 9 |                        |                   |
+------------------------+---+------------------------+-------------------+

The initially-filed Part II is date-stamped October 4, 1996, and is not
on a CF 7501. This document is identified as a "NAFTA Duty Deferral"
pertaining to "Canadian Export Vehicles". According to TMMK's submission
of May 9, 2001, the "exit number" refers to a small group of vehicles
that were exported to Canada together on one Canadian entry**.** The
"Broker's Ref. #" refers to a number on the bottom of each Canadian
B-3.[^1] The "entry date" refers to the date of entry, of a group of
vehicles, into Canada. Therefore the earliest "export date" for entry
BG9-xxxx030-7, was August 9, 1996. According to this information, the 60
day time period in which a claim for a waiver of duties must be filed,
ended on October 8, 1996. Therefore, the initially-filed Part II was
filed within 60 days of the export of the merchandise, whether the entry
date is considered the "entry" date on the Part I, or the "entry" date
on the initially-filed Part II. At the top of the document the Customs
entry number of the Part I is referenced. According to TMMK, the "date
range" of "7-29-96 to 8-4-96" shows the dates the vehicles were
completed at the subzone. There is a "60^th^ day" identified as
"9-28-96", which according to TMMK, was TMMK's internal deadline for
filing a duty waiver claim, and is based on the date range and not the
export date. We note that some of the Exit #'s on the initially-filed
Part II correspond to the last five digits of the 14-digit Canadian
entry number on the Part II. However, Customs had no knowledge of what
the Exit number represented, and even TMMK in its subsequent submissions
has never indicated that the Exit number had any relation to the
Canadian entry number. In the other representative entries, there does
not appear to be any consistent correspondence between the Exit numbers
and the Canadian entry numbers.

There is a third document, referred to as the "Part II". This document
is not date-stamped. This document is on a CF 7501, contains 11 line
items of vehicles, each having a 14-digit Canadian entry number, the
date of import into Canada, a classification number, rate of duty, and
two different amounts of duty[^2], one being in parentheses. The duty
shown is that paid upon entry into Canada, and the amount in parentheses
is the amount of duty paid in Canadian Dollars. There is a Block 37
summary, which shows three lines of duty. The first is the amount of
duty owed for the entry of the merchandise under the Part I, the second
is the total amount paid in Canadian duty (in U.S. dollars) on the
merchandise shown on the CF 7501, and the third is the difference
between the first amount and the second amount. For this entry the
amount of Canadian duty paid is greater than the U.S. duty owed
according to the CF 7501. With respect to the 11 line items, each
represents motor vehicles. None of the line items identify a quantity of
vehicles. With respect to the Canadian entry numbers, none correspond to
the Broker Ref. #'s on the initially-filed Part II. As stated above, the
last five digits of the Canadian entry numbers correspond to three of
six of the Exit numbers on the initially-filed Part II. With respect to
the dates of import into Canada, the different dates, varying by the
line items, are August 1, August 9, August 13, and August 16, 1996. We
note that only the August 9 and 16 dates correspond to the entry dates
listed on the initially-filed Part II. According to the port, all of the
Part II's were submitted to Customs in September and October, 1997,
including this one.

There is a fourth document, referred to as the "Amended Part II".
According to a summary prepared by the port, the Amended Part II was
submitted to Customs on September 28, 1998. The Amended Part II consists
of 12 line items of vehicles, each with a 14-digit Canadian entry
number, tariff classification, Canadian entry date, duty rate, and
amount of Canadian duty paid. Four of the line items were not on the
Part II. Three line items from the Part II are not on the Amended Part
II. Relating to the Amended Part II, the file has lists of Vehicle
Identification Numbers (VIN), shipment notifications which list the VIN,
description and unit price of each vehicle on a Canadian entry form
(B3), and the completed B3 forms. It is not clear whether the VIN lists,
shipment notifications and B3 forms were submitted with the Amended Part
II or afterwards. A comparison between the Part II and Amended Part II
shows that the Canadian duty amounts on the Amended Part II were
changed. The quantity of vehicles which are the subject of the Amended
Part II, can be determined by reference to the B3 and comparison of the
tariff classification numbers, and amount of duty paid. As to the export
dates, on the Amended Part II, they are August 1, August 13, August 15,
August 16, and August 21. We note that only the August 15, 16 and 21
dates correspond to the entry dates on the initially-filed Part II. We
also note that if August 1, 1996 was in fact an export date of the
merchandise, the initially-filed Part II, filed on October 4, 1996,
would not have been filed within 60 days of the export of the
merchandise to Canada.

There are several inconsistencies and questions that arise from a review
of the supporting documentation (VIN lists, shipment notifications and
B3 forms). First, not all of the 81 VINs on the VIN list appear on the
shipment notifications. Second, in TMMK's submissions of November 13,
2001 and May 9, 2001, TMMK stated that the typical exit number refers to
15 vehicles in a single rail car load. However, there are 15 vehicles
identified on each shipment notification, and with respect to Entry
BG9-xxxx030-7, four different shipment notifications, with a total of 60
vehicles, all contained references to the same exit number, 50784. The
number 50784 also appears to correspond to a Canadian entry number.

# **Entry BG9-xxxx827-7**

Entry BG9-xxxx827-7 was initially included in Attachment E of the Port's
submission, in the group of "Part II summaries not initially provided".
The Part I is date-stamped as having been filed on April 26, 1996, and
is broken down into 10 line items of vehicles and parts, including the
quantity, value, duty rate and duty for each item. Attached to the Part
I is a spreadsheet of "Canadian Vehicles" for the week of April 15, 1996
to April 21, 1996. The spreadsheet breaks down the information on the
Part I as to the day each vehicle was produced with the value, weight
and duty attributable to the items used each day in production. The
classification numbers on the spreadsheet correspond to those on the CF
7501. On the Part I the entry date is written in as "4-25-96". The
import date is identified as "041596". ACS indicates an entry date of
April 15, 1996. On the first page are written the words "Canadian Duty
Deferral" (written by TMMK).

The initially-filed Part II for entry BG9-xxxx827-7, contains the
following type of information, of which we provide two rows as an
example:

+---------------+-------------------+-------------+---------+--------+
| TMM Entry \#  | Date:             | 60^th^ Day: | Canada  | 60^th^ |
|               |                   |             |         |        |
| BG9-xxxx827-7 | 4/15/96 --        | 6-17-96     | Import  | Day    |
|               | 4/21/96           |             |         |        |
|               |                   |             | Date    |        |
+---------------+-------------------+-------------+---------+--------+
| Reference \#  | Canadian Entry \# | Entry Date  |         |        |
+---------------+-------------------+-------------+---------+--------+
| 02552         | 411-900930        | 96/04/24    | 4/15/96 | 6      |
|               |                   |             |         | /14/96 |
+---------------+-------------------+-------------+---------+--------+
| 02593         | 411-905962        | 96/05/02    | 4/24/96 | 6      |
|               |                   |             |         | /23/96 |
+---------------+-------------------+-------------+---------+--------+

This initially-filed Part II is date-stamped by Customs on June 17,
1996. The information in this initially-filed Part II is similar to that
for entry BG9-xxxx030-7, except the term "reference #" is used instead
of "exit #", and the 9-digit reference number is under a column headed
"Canadian Entry #" instead of "Broker's ref. #". In this document a
distinction is made between the entry date and Canadian import date,
although there is no indication of what that distinction is. In its May
9, 2001 submission, TMMK described the "entry" dates used on the
initially-filed Part II as the date of importation into Canada. Using
the later date of April 24, 1996, described as the "entry" date, the
document was filed within 60 days of entry into Canada. The remaining
"entry" dates are through June 13, 1996.

There is a third document, referred to as the Part II. The Part II is
not date- stamped. This document is on a CF 7501, contains 54 line items
consisting of vehicles, each having a Canadian entry number, the date of
import into Canada, a classification number, rate of duty, and the
amount of Canadian duty owed, both in Canadian and U.S. dollars. The
Part II includes a "Block 37 summary" which shows three lines of
amounts. The first is the amount of duty owed for the entry of the
merchandise under the Part I, the second is the total amount paid in
Canadian duty (in U.S. dollars) on the merchandise shown on the Part II,
and the third is the difference between the first amount and the second
amount. For this entry, the amount of Canadian duty paid is greater than
the U.S. duty owed according to the CF 7501. With respect to the
14-digit Canadian entry numbers on the Part II, none correspond in any
way to the 9-digit "entry numbers" or the 5-digit "reference numbers" on
the initially-filed Part II. With respect to the dates of entry into
Canada, on the Part II, they range from April 15, 1996 through May 10,
1996. According to the Port, all of the Part II's were filed in
September and October, 1997, including this one.

There is a fourth document, referred to as the "Amended Part II". The
Amended Part II is date-stamped September 17, 1998. The Amended Part II
consists of 72 line items of vehicles, each with a 14-digit Canadian
entry number, tariff classification, Canadian entry date, duty rate, and
amount of Canadian duty paid. At least 13 of the line items were not on
the Part II at all. At least 11 of the described items on the Amended
Part II have the same Canadian entry number and tariff classification as
on the Part II, but have different entry dates. The last five digits of
one of the Canadian entry numbers on this document correspond to one of
the \"reference #'s" on the initially-filed Part II.

# 

# There are two entries, BG9-xxxx662-7, and BG9 -xxxx296-4, for which the initially-filed Part II's provided to Customs are not date-stamped at all. Therefore for those entries, there is no evidence that the initially-filed Part II's were filed within 60 days of the export of the merchandise.

Entry BG9-xxxx662-7 is also an example of different information provided
in the initially-filed Part II. The Part I information is essentially
the same as that described for the entries above. The type of
information on the initially-filed Part II for entry BG9-xxxx662-7
consists of the following, of which we provide two rows as an example:

+------------------------+---+--------------------------+-----------------+
| Customs Entry \#       |   | Date Range:              | 60^th^ Day:     |
|                        |   |                          |                 |
| BG9-xxxx662-7          |   | 6-25-97 -- 6-29-97       | 8-22-97         |
+------------------------+---+--------------------------+-----------------+
| Exit \#                | T |                          | Entry Date      |
|                        | r |                          |                 |
|                        | a |                          |                 |
|                        | n |                          |                 |
|                        | s |                          |                 |
|                        | a |                          |                 |
|                        | c |                          |                 |
|                        | t |                          |                 |
|                        | i |                          |                 |
|                        | o |                          |                 |
|                        | n |                          |                 |
|                        | \ |                          |                 |
|                        | # |                          |                 |
+------------------------+---+--------------------------+-----------------+
| 4821                   | 5 |                          | 7-4-97          |
|                        | 6 |                          |                 |
|                        | 7 |                          |                 |
|                        | x |                          |                 |
|                        | x |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 7 |                          |                 |
|                        | 1 |                          |                 |
|                        | 1 |                          |                 |
|                        | 4 |                          |                 |
|                        | 2 |                          |                 |
+------------------------+---+--------------------------+-----------------+
| 4823                   | 5 |                          | 7-9-97          |
|                        | 6 |                          |                 |
|                        | 7 |                          |                 |
|                        | x |                          |                 |
|                        | x |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 0 |                          |                 |
|                        | 1 |                          |                 |
|                        | 3 |                          |                 |
|                        | 8 |                          |                 |
|                        | 3 |                          |                 |
|                        | 5 |                          |                 |
+------------------------+---+--------------------------+-----------------+

The difference in information on the initially-filed Part II, from the
examples above, is that the "Transaction #" provided is a 14-digit
Canadian entry number. The Part II consists of twelve line items of
vehicles, each having a 14-digit Canadian entry number, the date of
entry into Canada, a classification number, rate of duty, and the amount
of Canadian duty paid. There is also the Block 37 summary as with the
above two entries. According to the Port, all of the Part II's were
filed in September and October, 1997, including this one.

Of the twenty-four 14-digit "Transaction #'s" on the initially-filed
Part II, fourteen correspond to the Canadian entry numbers on the Part
II. The remaining transaction numbers do not correspond to any of the
Canadian entry numbers on the Part II. The entry dates on the
initially-filed Part II do not correspond to any of the entry dates on
the Part II. For example, line items 10,11, and 12 each reference
Canadian entry number 567xx000071142, and each indicates an entry date
of June 30, 1997, as opposed to the entry date of July 4, 1997 as
indicated on the initially-filed Part II.

TMMK acknowledged in its May 9, 2001 submission, with respect to the
initially-filed Part II's, that "the part II submissions, as *initially*
filed, did not contain all the information specified in 19 C.F.R.
§181.53(a)(3)(ii) (emphasis supplied)." With respect to the Part II's,
TMMK acknowledged that "the submissions were not, in all cases, filed
within the applicable 60-day period." Despite the incomplete and
untimely filing of information, TMMK takes the position that 1) it is
entitled to a waiver of duties for the exported merchandise under 19
U.S.C. §81c(a), *seventh proviso*; 2) TMMK has met all procedural
requirements for such waiver of duties; 3) prior to liquidation of the
entries Customs should have considered the information provided by TMMK
in verification of the duty waiver claims; 4) verification issues of the
duty waiver claims can be resolved in the protest procedure; and 5) the
assessment of Customs duties on the exported merchandise is contrary to
the prohibition of Article I, §9, clause 5 of the U.S. Constitution.

In general we note other discrepancies. In its submission of November
13, 2001, TMMK admits that for Entry BG9-xxxx710-5, the initially-filed
Part II was over-inclusive. According to TMMK the first three exit
numbers listed on the initially-filed Part II pertained to vehicles that
were included on another duty deferral export entry, BG9-xxxx700-6. Also
with respect to entry BG9-xxxx710-5, the initially-filed Part II
referred to an incorrect broker's reference number for exit number
02265.

ISSUE:

Whether the protestant met the requirements of 19 U.S.C. §81c(a) and 19
CFR 181.53(a) for waiver of duties on merchandise withdrawn from an FTZ
and exported to Canada?

LAW AND ANALYSIS:

Section 203(b)(5) of the NAFTA Implementation Act amended 19 U.S.C.
§81c(a) to apply the "NAFTA drawback" formula (set forth in Article
303(1) of the NAFTA) to goods that are exported from a foreign trade
zone to Canada. *See* Pub. L. 103-182; 107 Stat. 2057, 2086; 19 U.S.C.
§3333. Pursuant to the NAFTA Implementation Act, U.S. duties assessed on
merchandise exported from a foreign trade zone to Canada are waived or
reduced to the extent of duties paid to Canada on that merchandise.
Where the duties paid to Canada exceed U.S. duties that would have been
payable on that merchandise, the exporter is entitled to a waiver of all
U.S. duties. Satisfactory evidence of the payment of duties to Canada
must be presented before the 61^st^ day after the date of exportation.
The specific language of 19 U.S.C. §81c(a), *seventh proviso*, provides
with respect to foreign merchandise withdrawn from a Foreign Trade Zone
(FTZ) as follows:

> That no merchandise that consists of goods subject to NAFTA drawback,
> as defined in section 3333(a) of this title, that is manufactured or
> otherwise changed in condition shall be exported to a NAFTA
> country...*without an assessment of a duty on the merchandise*...and
> the *payment of the assessed duty before the 61^st^ day* after the
> *date of exportation* of the article, *except* that upon the
> *presentation, before such 61^st^ day,* of satisfactory evidence of
> the amount of any customs duties paid or owed to the NAFTA country on
> the article, the customs duty may be waived or reduced...in an amount
> that does not exceed the lesser of (1) the total amount of customs
> duties paid or owed on the merchandise on importation into the United
> States, or (2) the total amount of customs duties paid on the article
> to the NAFTA country\[.\]

(Emphasis added). The Customs Regulations implementing the NAFTA
Implementation Act are set forth in 19 C.F.R. Part 181. More
specifically, 19 C.F.R. §181.53(a) sets forth the procedures to be
followed for the collection and waiver or reduction of duty under the
NAFTA duty-deferral programs. Under subsection 181.53(a)(3), Customs
shall waive or reduce the duties paid or owed provided a claim is filed
with Customs within a 60-calendar-day time frame. In the case of
merchandise exported from a foreign trade zone, the 60-calendar-day
period runs from the date of exportation of the good or the date of
entry into a duty-deferral program in Canada. 19 C.F.R. §181.53(b)(4). A
claim for a waiver or reduction of duties shall be made on a Customs
Form (CF) 7501 and must set forth a description of the goods, the
Canadian import entry number, date of importation, tariff
classification, rate of duty and amount of duties paid. 19 C.F.R.
§181.53(a)(3)(ii). After the expiration of the 60-calendar-day period,
if no claim for waiver or reduction of duties is filed, Customs shall
determine the final duties due and liquidate the entry. 19 C.F.R.
§181.53(a)(4)(i).

As to the time of filing of the initially-filed Part II's, it appears
that the documents that were believed to have been filed after the
required 60 day time period, may in fact have been filed within 60 days.
In some instances, Customs calculated the 60 days on which the Part II
was due, from the "import" date in Block 27 of the CF 7501, as opposed
to the "entry" date in Block 4 of the CF 7501. This was done in entry
BG9-xxxx030-7. In other instances, such as in entry BG9-xxxx662-7, the
60 day time period was calculated from the "entry" date in Block 4 of
the CF 7501. To add further confusion regarding the 60^th^ day,
according to TMMK, the "entry" date in Block 4 of the CF 7501, was not
necessarily the export date of the merchandise, as defined in 19 CFR
181.53(a)(1)(i). Instead the "export" date for purposes of 19 CFR
181.53(a) was the "entry" date on the initially-filed Part II. In some
instances, this date is different from the date in Block 4 of the CF
7501. For example in entry BG9-xxxx662-7, the "entry" date in Block 4 of
the CF 7501 is June 25, 1997, and the earliest "entry" date on the
initially-filed Part II is July 4, 1997. If the timeliness of the filing
of the initially-filed Part II were to determine the outcome of the
issues presented, given the different dates provided, Customs would be
required to firmly establish for each entry the date of export of the
merchandise, as defined in 19 CFR 181.53(a)(1)(i). Generally however, if
no other dates were provided or the issue were not raised, Customs would
be correct in relying on the date in Block 4 of the CF 7501.

We now turn to the information required for a duty waiver or reduction
claim, and what in fact was and was not submitted. As cited above, the
statute, 19 U.S.C. 81c(a), requires "satisfactory evidence of the amount
of any customs duties paid or owed to the NAFTA country on the article."
The regulations, 19 CFR 181.53(a)(3)(ii), require the claim to set forth
"a description of the good exported to Canada or Mexico and the Canadian
or Mexican import entry number, date of importation, tariff
classification number, rate of duty and amount of duty paid." Thus, six
elements are required to be set forth in the claim.

Using entry BG9-xxxx030-7, as an example, we can describe the
information missing from the initially-filed Part II, which was required
by statute and regulation. Specifically missing from the initially-filed
Part II was 1) a description of the merchandise, 2) the Canadian import
entry number, 3) the tariff classification number, 4) the rate of duty,
and 5) the amount of duty paid. The only information actually provided
for this entry, and many others, was the date of importation of the
merchandise into Canada, the dates of entry in this case. We do not even
know whether those dates are accurate as they differ between the
initially-filed Part II and the Part II. In the case of some other
entries, such as BG9-xxxx662-7, the Canadian entry number was provided
on the initially-filed Part II.

We conclude that the information filed in the form of the
initially-filed Part II's was insufficient for a duty waiver or
reduction claim under 19 CFR 181.53. The amount of duty paid,
specifically the amount of duty paid or owed to the NAFTA country, as
expressly required by the statute was missing. In addition, at least
three other elements were missing from every one of the initially-filed
Part II's. Those are a description of the merchandise, the tariff
classification number and the rate of duty. The information provided in
the examples above simply does not amount to a claim for waiver or
reduction of duty. Too much information is missing and unexplained. For
example if the "exit number" or "reference number" is a cross reference
to the required information, an explanation of the cross reference would
be required. Apparently there is no cross-reference, but the
initially-filed Part II leaves Customs being required to guess at the
meaning of the information. As another example, according to TMMK the
9-digit "Broker's reference numbers" (also referred to as "Canadian
Entry numbers" on some initially-filed Part II's) on the initially-filed
Part II's apparently do relate to the Canadian Entry numbers. That
should have been explained. Customs should not have to compare numbers
and make guesses as to what they may represent, and have to search for
correspondence which may in fact just amount to a coincidence. In any
event, at the time the initially-filed Part II's were filed, the Part
II's with the complete Canadian Entry numbers were not filed yet and
Customs did not have anything to compare with the other numbers. More
importantly, even for the initially-filed Part II's which did contain a
14-digit Canadian entry number, the information provided gives no
indication that any duty was paid in Canada, and thus there is no
indication that in fact a reduction or waiver is sought. TMMK's protest
suggests that Customs should have known from TMMK's course of conduct,
including filing the entries without payment of duties, that a complete
waiver of U.S. duties was sought. Customs does not have the authority to
make such assumptions, nor is it reasonable to expect Customs to examine
an importer's course of conduct in determining how to proceed in terms
of liquidation of an entry.

TMMK maintains that, although its claims may not have been in the proper
form, the essential procedural requirements for a waiver were met and
liquidation should have been extended to allow TMMK to perfect the
claims. While we agree with TMMK that form over substance should not be
determinative of whether a valid claim has been filed, we disagree with
the proposition that the submission of any one piece of document that
does not even attempt to provide the required information will suffice
to stop the 60-calendar-day clock from running. Once a timely claim is
filed, the regulations do provide, in 19 CFR 181.53(a)(4)(ii), for an
automatic extension of liquidation in order to allow Customs to verify
any claim.[^3] It is reasonable for a claimant to expect that during
this verification period it would be allowed to cure a defect in the
claim which is discovered through the verification process (such as the
defects described in the FACTS section, where the amount of Canadian
duty paid needs to be corrected, removal of incorrect Canadian entry
numbers, correction of entry dates, or correction of line items).
However, there is no basis in the statutory or regulatory provisions for
the proposition that, once any document subsequently asserted to be a
claim is filed, a claimant then has four years (before the entry is
liquidated) to get its documentation in order and submit a complete
claim. Likewise, there is no support in the statute or regulations for
the proposition that a claimant can file a stack of papers with Customs
and ask Customs to sort the information out.[^4]

With regard to most of the Part II's, there is no evidence or assertion
that they were submitted to Customs within 60 days of the exportation of
the subject merchandise. However, if as set forth in a summary prepared
by Customs officers, all of the Part II's were submitted in September
and October, 1997, it is likely that for the entries for merchandise
exported in July and August, 1997, the Part II's were submitted within
the required 60-day time period. The Part II's met the requirements of
the statute and regulations, in that they set forth a description of the
good exported to Canada, the Canadian import entry number, date of
importation, tariff classification number, rate of duty and amount of
duty paid. Prior to deciding the protest, the Port would be required to
determine when it received the Part II's, and if timely received, verify
the information therein. If the waiver of duties is warranted, the
protest can be granted with respect to those entries.

With respect to the entries determined to have been timely filed, if
any, upon verification of the information therein, the Port should
include in its consideration the types of discrepancies and errors noted
in the FACTS section. The discrepancies and errors consisted of: 1)
claim for exported vehicles which had also been claimed on another duty
deferral entry; 2) incorrect broker's reference numbers; 3)
discrepancies between the VIN lists and vehicles shipped according to
the shipment notifications; and 4) exit numbers that refer to more than
15 vehicles and/or correspond to Canadian entry numbers.

In support of its position, that the 60-day time limit does not preclude
TMMK from obtaining a refund of the duties paid to Customs upon the
liquidation of the entries, in this protest procedure, TMMK relies upon
the following language in Article 303,

of the NAFTA, specifically that in paragraph 5(b):

3.  Where a good is imported into the territory of a Party pursuant to a
    duty deferral program and is subsequently exported to the territory
    of another Party, or is used as a material in the production of
    another good that is subsequently exported to the territory of
    another Party...the Party from whose territory the good is exported:

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(a) shall assess the customs duties as if the exported good had been
    withdrawn for domestic consumption; and

(b) may waive or reduce customs duties to the extent permitted under
    paragraph 1 \[lesser of rule\].

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4.  In determining the amount of customs duties that may be refunded,
    waived or reduced pursuant to paragraph 1 on a good imported into
    its territory, each Party shall require presentation of satisfactory
    evidence of the amount of customs duties paid to another Party on
    the good that has been subsequently exported to the territory of
    that other Party.

5.  Where satisfactory evidence of the customs duties paid to the Party
    to which a good is subsequently exported under a duty deferral
    program described in paragraph 3 is not presented within 60 days
    after the date of exportation, the Party from whose territory the
    good was exported:

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```
(a) shall collect customs duties as if the exported good had been
    withdrawn for domestic consumption; and

(b) may refund such customs duties to the extent permitted under
    paragraph 1 on the timely presentation of such evidence under its
    laws and regulations.

(Emphasis added)

The protestant relies on the highlighted language in paragraph 5(b), to
support its position that upon the presentation of evidence of the
duties paid to Canada, it is entitled to a refund of the duties paid to
the U.S. Customs through the protest procedure. The protestant argues
that while the seventh proviso of the FTZ statute provides for the
collection and waiver of duties allowed by Article 303, it is silent as
to the refund of duties allowed in paragraph 5(b) of Article 303. The
protestant further asserts that neither the seventh proviso, nor any
other provision of the NAFTA Implementation Act preclude Customs from
refunding the subject duty upon a valid protest. The protestant relies
on the language in 19 U.S.C. §1515(a), which provides that after a
decision to allow or deny a protest is made, "any duties, charge, or
exaction found to have been assessed or collected in excess shall be
remitted or refunded."

First, the duties collected were not in excess. There is no error
asserted with respect to the classification, rate or amount of duties
assessed. The duties were assessed and collected in accordance with the
seventh proviso of the FTZ Act, because satisfactory evidence of the
amount of customs duties paid or owed to Canada, was not presented
before the 61^st^ day after the date of exportation of the articles.

Second, 19 U.S.C. §1558(a), specifically prohibits refunds of liquidated
duties because of the exportation of merchandise, after its release from
the custody of the Government. An exception is "when articles are
exported with respect to which a drawback of duties is expressly
provided for by law." 19 U.S.C. §1558(a)(1). Drawback is expressly
provided for by 19 U.S.C. §1313, and within that section, paragraph (n)
incorporates the drawback limitations set forth in Article 303. The only
means for the protestant to obtain a refund of the money it paid to the
U.S. in duties, which was not collected in excess or error, and not
exacted, is through a drawback claim in accordance with 19 U.S.C. §1313.
The drawback statute provides specifically for "refunds", provided that
the statutory requirements are met. The refund procedure of Article
303.5(b) is implemented by section 1313, and is therefore not
disregarded as the protestant asserts.

The protestant also relies on 19 CFR 10.112, as another basis for the
refund of the U.S. duties paid. Section 10.112 provides:

> Whenever a free entry or a reduced duty document, form, or statement
> required to be filed in connection with the entry is not filed at the
> time of the entry or within the period for which a bond was filed for
> its production, but failure to file it was not due to willful
> negligence or fraudulent intent, such document, form, or statement may
> be filed at any time prior to liquidation of the entry or, if the
> entry was liquidated, before the liquidation becomes final. See §
> 113.43(c) of this chapter for satisfaction of the bond and
> cancellation of the bond charge.

The foregoing is a regulatory provision, and cannot expand a statutory
provision. Under section 81c(a), *seventh proviso*, as stated above, a
waiver or reduction of duties requires the presentation of satisfactory
evidence of customs duties paid or owed to the other NAFTA country
before the 61^st^ day after the date of exportation. The regulatory
language cannot expand the 60-day requirement of the FTZ statute, and it
cannot create an exception to section 1558 to allow for a refund. The
cases cited by the protestant in support of the application of section
10.112 in this instance, all pertain to requirements established by
regulation, as opposed to statute.

The protestant asserts that Customs failure to view the initially-filed
Part II's as "claims", elevates form over substance. The protestant
cites to instances where protests have been determined to be valid even
in the absence of procedural sufficiency, and cases where courts, faced
with defective pleadings and notices of appeal, allow "relation back" of
amendments and treat other timely documents as effective notices of
appeal. In the cases cited, the inadequacies would have resulted in
denial of jurisdiction, whether for a protest, right to hearing or
appeal. In the instant case, the protestant has an alternative remedy to
the failure to file a sufficient claim, that of drawback.

Finally, TMMK takes the position that the subject duties assessed on the
merchandise, under 19 U.S.C. §81c(a), *seventh proviso*, are in
violation of the Export Clause of the U.S. Constitution. Specifically,
the Export Clause, Article I, section 9, clause 5, states: "No Tax or
Duty shall be laid on Articles exported from any State." TMMK relies on
the decision in [United States Shoe Corp. v. United States]{.underline},
114 F.3d 1564 (Fed. Cir. 1997), which was affirmed by the Supreme Court,
in [United States v. United States Shoe Corporation]{.underline}, 523
U.S. 360 (1998), in which it was held that the Harbor Maintenance Tax
(HMT) is not a permissible user fee but a tax imposed on cargo being
exported.

Customs disagrees that the statutory provision violates the Export
Clause of the U.S. Constitution which prohibits the levy of a tax or
duty on exports. While such duties have never before been applied to
foreign trade zones, the change is the result of the three NAFTA Parties
having agreed to restrict the benefits of drawback and other
duty-deferral programs such as foreign trade zones. With respect to
duty-deferral programs, Article 303(5) of the NAFTA requires the Party
from whose territory the good was exported to collect customs duties as
if the exported good had been withdrawn for domestic consumption and to
refund such duties only to the extent permitted under paragraph 1 of
Article 303 on timely presentation of the required evidence to carry out
the "lesser of" formula.

That policy was implemented with respect to U.S. foreign trade zones by
an amendment to 19 U.S.C. 81c(a) made by section 203(b)(5) of the NAFTA
Implementation Act. Goods in a zone that are "subject to NAFTA
drawback", as defined in 19 U.S.C. §3333(a), are controlled by that
statutory restriction.

Under the terms of the NAFTA as implemented by the NAFTA Implementation
Act, no tax or duty is imposed based on the shipment from a
duty-deferral program. Instead, the statutory amendments simply provide
for the end of the duty-deferral program after their importation into
the U.S.

It is the importation which triggers the liability for duties, and
Section 8, Clause 3, of Article I of the Constitution gives Congress the
exclusive jurisdiction to provide for the assessment, deferment and
refund of those duties. Under General Note 1, HTSUS (19 U.S.C. §1202),
all goods imported into the customs territory of the U.S. are subject to
duty or exempt therefrom, as prescribed by the other General Notes of
the HTSUS. Under 19 U.S.C. §1315, the amount and rate of duties is
generally fixed when the imported good is entered.

The liability for those duties accrue when the good is imported. [United
States v. Estate of Boshell]{.underline}, 14 Ct. Cust. Apples. 273, 275
T.D. 41884 (1926) involved a case in which rifles were imported for
experimental purposes under a bond which guaranteed that they would be
exported within six months from importation. Although the rifles were
exported, they were exported outside the six-month period. Customs
assessed duty and the court upheld that assessment by reversing the
Board of General Appraisers decision which had sustained the importer's
protest against the assessment of duty. The courts have long held that
the right of the Government to exact import duties accrues when imported
goods reach the port of destination. *See* [United States v.
Cordero]{.underline}, 1 Ct. Cust. Appls. 108. In the case of [Headley
Asphalt Division et al. V. United States]{.underline}, 24 CCPA 427, T.D.
48873 (1937), the court held that all of the crude oil manufactured on a
tanker as cargo, including the portion that was never landed, was
imported. The portion that was not landed, but instead was pumped from
the Norwegian tanker's cargo tanks into its bunker tank, was imported
merchandise and subject to duty notwithstanding the fact that that
portion was to be used on its outward voyage. The court held that the
oil having been imported was subject to duty as a result of its
importation. *See also* [Art Craft Jewelry Co. v. United
States]{.underline}, 64 Cust. Ct. 414 (1970); [United States v.
Goodman]{.underline}, 6 CIT 132 (1983); and [Henry Mast Greenhouses,
Inc. v. United States]{.underline}, 966 F. Supp. 1226 (CIT, 1995), which
held that the liability for the payment of import duties falls on the
importer and is tied to the fact of importation. Even with respect to
foreign trade zones, there is no blanket exclusion from the liability
for duty imposed as a result of importation. *See* [Nissan Motor Mfg.
Corp., U.S.A. v. United States]{.underline}, 884 F.2d 1375, (Fed. Cir.
1989).

The case of [U.S. Shoe Corp. v. United States]{.underline}, *supra*, is
distinguishable both on the facts and on the law from the situation
covered by the statute and regulations at issue. First, even with
respect to the harbor maintenance fee imposed under 26 U.S.C.
§§4461-4462, the Court of International Trade noted the liability
distinction between an importation and an exportation. In the case of
[Carnival Cruise Lines v. United States]{.underline}, 927 F. Supp. 1570
(CIT, 1996), the court held that while section 4461(c)(1)(B) imposed
liability on exports, the liability imposed under section 4461(c)(1)(A)
was a separate and distinct category and applied only to imports.
Second, if the statutes which provide for the remission or refund of
import duties based on exportation are controlled by the proscription of
the Export Clause, those statutes would be unconstitutional because they
set time limits for eligibility. For example, under 19 U.S.C. §1557,
merchandise must be removed from the warehouse and exported within a
period not to exceed five years from the date of importation.
Temporarily imported merchandise under subchapter XIII, Chapter 98,
HTSUS, must be exported within three years from the date of importation.
Under 19 U.S.C. §1313(j), merchandise must be exported within three
years of importation to be eligible for drawback. Other drawback
eligibility is controlled generally by 19 U.S.C. §1313(i) which sets a
five-year period. Under 19 U.S.C. §1313(p), the export period is 180
days. If those provisions related to an export tax, those time limits
would be of questionable constitutionality. Courts have observed that
the Export Clause contains flat prohibitory language which is to be
given broad construction. [International Business Machines Corp. v.
United States]{.underline}, 59 F.3d 1234, 1236, 1238-1239 (Fed. Cir.
1995).

The failure to refund or remit the import duties upon exportation of the
imported good, or its lawful substitute, in accordance with 19 U.S.C.
§1558, does not amount to a tax or duty on the exportation. A review of
the court decisions on the export Clause supports Customs position.

The first case, [Aquirre v. Maxwell]{.underline}, 1 Fed. Cases 212 (No.
101)(CC.SD. NY 1853), involved the imposition of a special tonnage duty
on Spanish vessels coming to the U.S. from Cuba or Puerto Rico, then
Spanish possessions. The payment was due before the vessel cleared for a
return voyage to either island. The court held that the Export Clause
has no application to the imposition of a tax on a foreign vessel
arriving in the U.S. The court found that requiring the payment before
departure did not turn the import duty into an export tax or duty.

The Supreme Court, in [Dooley v. United States]{.underline}, 183 U.S.
151, 156 (1901), noted the difference between duties on imports and
duties on exports. A duty due as a consequence of importation need not
be refunded on exportation in order to avoid violating the Export
Clause.

The Supreme Court, in [Cornell v. Coyne]{.underline}, 192 U.S. 418
(1904), considered a tax imposed on the manufacture of filled cheese and
on the importation of such cheese. The plaintiffs asserted that the
failure of the tax law to provide for a remission of either tax if the
cheese was made for exportation and was exported constituted a violation
of the Export Clause. The court disagreed. At page 426, the court stated
its understanding of the scope of the Export Clause:

> But this means that no burden shall be placed on exportation and does
> not require that any bounty be given therefor.

Again, at page 427, the court construed the Clause:

> ...The true construction of the Constitutional provision is that no
> burden by way of tax or duty can be cast upon the exportation of
> articles, and does not mean that articles exported are relieved from
> the prior ordinary burdens of taxation which rest upon all property
> similarly situated. The exemption attaches to the export, and not to
> the article before its exportation....

In [Turpin v. Burgess]{.underline}, 117 U.S. 504 (1886) a tax that
became due before the goods left the factory was found to not violate
the Export Clause. It is clear from the discussion at pages 507-508 that
while Congress could remit a portion of the tax when the goods were to
be exported, the Court did not conclude the provision of such an
exemption was required by the Export Clause.

In [A.G. Spaulding & Bros. V. Edwards]{.underline}, 262 U.S. 66 (1923) a
tax that became due on a sale for exportation was held to be an
unconstitutional tax. But the Court made it clear that a tax on the
manufacture would have been constitutional.

In [William E. Peck & Co. v. Lowe]{.underline}, 247 U.S. 165 (1918) the
Court held constitutional a tax on income derived from prior years
export sales. A similar conclusion was reached in [Liggett & Myers
Tobacco Co. v. United States]{.underline}, 77 F.2d 65 (3^rd^ Cir. 1935),
in [Moon v. Freeman]{.underline}, 379 F.2d 382, 388, 390 (9^th^ Cir.
1967), and in [International Business machines Corp. v. United
States]{.underline}, *supra* (noting the distinction between [Cornell v.
Coyne]{.underline}, *supra*, and [United States v. Hvoslef]{.underline},
237 U.S. 1 (1915)).

Consequently, the congressional modification of the Foreign trade Zone
Act concerning the assessment of duties of merchandise withdrawn from
the FTZ does not amount to a tax or duty on the exportation in violation
of the Export Clause.

HOLDING:

The requirements of 19 U.S.C. §81c(a) and 19 CFR 181.53(a), for waiver
of duties on merchandise withdrawn from an FTZ and exported to Canada

were not met for those entries where only the initially-filed Part II
was filed within 60 days of the exportation of the merchandise.

You are to mail this decision to the internal advice applicant no later
than 60 days from the date of this letter. On that date, the Office of
Regulations and Rulings will make the decision available to Customs
personnel, and to the public on the

Customs Home Page on the World Wide Web at www.customs.gov, by means of
the Freedom of Information Act, and other methods of public
distribution.

Sincerely,

> John Durant, Director
>
> Commercial Rulings Division

[^1]: For entry BG9-xxxx710-5, on the initially filed Part II, the first
    column containing the same type of 5-digit number is headed
    "reference #", and the middle column containing the same type of
    9-digit reference number is headed "Canadian Entry #". For entry
    BG9-xxxx662-7, on the Part II, that same column is headed
    "Transaction #", and contains a 14-digit Canadian entry number. In a
    nine page submission dated November 13, 2001, TMMK explained that
    the 9-digit broker's reference number is a number on the bottom of
    each Canadian entry. In that same submission, TMMK pointed out that
    of the 86 protested entries, 55 initially-filed Part II's listed
    9-digit broker's reference numbers, and the remaining 31
    initially-filed Part II's listed 14-digit Canadian entry numbers.

[^2]: According to Customs field officers, the amount of duty on the
    Part II's included Canadian GST, and the Part II's were later
    amended to reflect the duty only, without GST.

[^3]: We note that there is no evidence in the record, nor does the
    claimant contend, that an extension of liquidation was sought by
    TMMK. Rather, TMMK implies that it is Customs responsibility to
    extend liquidation in order to allow a claimant time to develop
    procedures for filing timely and accurate claims.

[^4]: TMMK contends that the Port Director should examine all relevant
    facts and circumstances when determining whether a proper claim for
    duty waiver has been filed.