HQ 226413

January 6, 1997

DRA-4-RR:IT:EC 226413 PH

CATEGORY: Drawback

Area Director of Customs

10 Causeway Street

Boston, Massachusetts 02222-1059

ATTN: Mr. Dave Goguen

RE: Protest 0401-95-100566; Unused Merchandise Drawback; Waiver

of Prior Notice of Intent to Export; C.S.D. 88-14; C.S.D.

86-25; C.S.D. 85-35; C.S.D. 83-68; C.S.D. 83-1; 19 CFR

191.141(b)(2)(ii); 19 U.S.C. 1313(j)

Dear Sir:

The above-referenced protest was forwarded to this office for

further review. Our decision follows.

\[The decision in the HOLDING of this ruling grants the protest,

subject to the conditions stated in the LAW AND ANALYSIS and

HOLDING sections of the ruling (i.e., in summary, that the

protestant, within the time period given in this ruling, submits

a written request for waiver of prior notice of intent to export,

that the request contains sufficient information (as described in

the ruling) to enable your office to act on the request with a

reasonable exercise of discretion, that your office grants the

request, and that the protestant satisfactorily establishes

compliance with the requirements for drawback in 19 U.S.C.

1313(j)). The protestant should be given written notice of these

conditions (a draft letter providing such notice is enclosed and

is being electronically forwarded to the preparer of the Customs

Form 6445 for this protest). If the protestant fails to meet any

of these conditions (i.e., if the protestant fails to submit a

written request for the waiver within 45 days of the written

notice, if the request for the waiver does not contain sufficient

information, if your office does not approve the request for the

waiver, or if the protestant fails to satisfactorily establish

compliance with the requirements in section 1313(j)), the protest

should be DENIED.\]

FACTS:

The protest is of the liquidation, without drawback, of a

drawback entry/claim for drawback under 19 U.S.C. 1313(j)(1)

(unused merchandise drawback). The amount of drawback claimed

was \$77,668.53. Sixteen consumption entries, for entries between

March 25 and August 31, 1994, were designated as the basis for

drawback. The total amount of duties for the merchandise under

consideration for these entries was \$78,452.98 (the slight

discrepancy between 99% of this figure and the amount claimed is

apparently due to the manner in which the claimant \"rounded off\"

subtotals; of course no more than 99% of the duty paid may be

granted as drawback under 19 U.S.C. 1313(j)). According to the

entry documents and Customs records, the merchandise entered on

these consumption entries was dental cement, classifiable under

subheading 3006.40.0000, Harmonized Tariff Schedule of the United

States (HTSUS). One pro-forma invoice for \"Dyract Bulk\",

\"Compules \...\", and \"PE barrels dark\" is provided.

On June 20, 1995, according to Customs records, the protestant

filed a drawback claim on Customs Form (CF) 7539 for drawback in

the amount of \$77,668.53. The imported merchandise designated

for drawback was that described above, described in the drawback

claim as 1015.405 kilograms of \"Dyract bulk\". The exported

merchandise is described in the drawback claim as 1015.405

kilograms of \"Dyract\". In block 31 of the CF 7539, the date

given is November 30, 1994, and there is a signature stated to be

by a person described as attorney in fact for the protestant. In

block 43 through 45 of the CF 7539, the box indicating \"Customs

has decided not to examine the merchandise and it may now be

exported\" is checked and there is a signature with the date

December 5, 1994.

There is a document titled \"\[PROTESTANT\] CHRON. EXPORTS\" (we

assume this is meant to be the chronological summary of exports

provided for in 19 CFR 191.53) providing the information required

in the format provided for in section 191.53 for a chronological

summary of exports. According to this document, the exports were

in 42 shipments between April 9 and October 7, 1994, and the

exports consisted of 2778.6210 net kilograms of \"Dyract\". There

is an air waybill and invoice, both of which can be correlated to

one of the exports listed in the chronological summary. The

invoice describes the merchandise as \"FLD DYRACT COMPULE DG\".

(The air waybill and invoice are inconsistent with the data on

the chronological summary of exports, in that Switzerland is

shown as the country of export and the date of export appears to

be October 9, 1994 (instead of, respectively, Germany and October

7, 1994, as shown on the chronological summary of exports.)

There is a Notice of Action (CF 29), dated June 22, 1995,

advising the protestant that the drawback claim was denied

because \"\[t\]he merchandise was exported prior to filing the

claim.\" There is a notation on the CF 7539 that the claim is

\"\[d\]enied - mdse was exported prior to filing the claim.\"

According to Customs records, the drawback entry was liquidated,

with no drawback, on July 7, 1995.

The drawback claimant filed the protest under consideration on

July 14, 1995. In the protest, the protestant concedes that the

merchandise \"was indeed exported prior to filing \[its\] claim

\....\" The protestant contends, on the basis of Customs Service

Decision (C.S.D.) 85-35, that your office has authority to waive

the requirement for prior notice \"at any time.\" The protestant

contends that a waiver of prior notice should be granted in this

case. The protestant describes the operation in this case as

follows:

The merchandise that is the basis for this \[d\]rawback entry

is dental cement that was imported by \[the protestant\] from

their sister division in Germany. It was put into capsules

and immediately shipped back to Germany for sale in the

European market. None of the cement remained in the U.S.

\...

Further review was requested and granted.

ISSUE:

Is there authority to grant the protest of denial of drawback in

this case?

LAW AND ANALYSIS:

Initially, we note that the protest was timely filed under the

statutory and regulatory provisions for protests (see 19 U.S.C.

1514 and 19 CFR Part 174). We note that the refusal to pay a

claim for drawback is a protestable issue (see 19 U.S.C.

1514(a)(6)).

Under 19 U.S.C. 1313(j)(1), as amended by section 632, title VI -

Customs Modernization, Public Law 103-182, the North American

Free Trade Agreement Implementation Act (107 Stat. 2057), enacted

December 8, 1993, drawback may be granted if imported duty-paid

merchandise is exported or destroyed under Customs supervision

within 3 years from the date of importation. The imported duty-paid
merchandise may not have been used in the United States.

The exporter (or destroyer) of the merchandise may claim

drawback, or may endorse the right to claim drawback to the

importer or any intermediate party. Substitution for the

imported merchandise is provided for under 19 U.S.C. 1313(j)(2),

subject to the conditions therein. Under 19 U.S.C. 1313(j)(3),

the performing of any operation or combination of operations,

including, among others, repacking, not amounting to manufacture

or production for drawback purposes on the imported merchandise

(or the substituted merchandise, if substitution is involved) is

not treated as a \"use\" of that merchandise.

The Customs Regulations pertaining to drawback under 19 U.S.C.

1313(j) are found in 19 CFR 191.141. Section 191.141(b) provides

that a person who desires to export merchandise with drawback

under section 1313(j) is required to file with the drawback

office a completed CF 7539 at least 5 working days prior to the

date of intended exportation, unless Customs approves a shorter

filing period.

Subsection 191.141(b)(2)(ii) provides a procedure for waiver of

prior notice of intent to export. A request for such a waiver is

required to be in writing to the drawback office and \"\[t\]he

appropriate Customs officer may waive prior notice at any time

\....\" Subsection 191.141(b)(2)(ii) provides that a waiver shall

be granted after the person requesting the waiver files with the

appropriate Customs official six consecutive claims free of

substantial error, provided that the person has operated under

the same condition (now unused) program for a minimum of six

months.

Section 191.141 was added, as a new provision, to the Customs

Regulations when the drawback regulations were revised by T.D.

83-212 in 1983 (formerly, the drawback regulations were found in

19 CFR Part 22). The requirement for prior notice of intent to

export was the subject of considerable comment and consideration,

resulting in evolution of the original proposal in the rulemaking

process (see August 26, 1982, Federal Register notice (47 F.R.

37563, 37567, 37583-37584), and 1983 bound edition of the Customs

Bulletin and Decisions, 465, 496-499).

The requirement for prior notice of intent to export, with the

provision for waiver of that requirement, has been the subject of

several published administrative rulings. Customs Service

Decision (C.S.D.) 83-1, concerned the applicability of same

condition drawback on medicinals under interim operating

instructions (i.e., instructions used before issuance of

regulations), one of which required a claimant to notify Customs

prior to exportation so that Customs could examine the

merchandise in its discretion. The instructions also provided

that if the goods were not examined, Customs could allow the

claim if Customs was satisfied that the conditions of law had

been met. Customs field office disallowed the same condition

drawback claim involved on the basis that examination was

required. We agreed with that decision, stating:

Unless it is evident a Customs officer has acted in an

arbitrary or capricious manner we will not substitute our

judgment for his. We will not do so here. The very nature

of the merchandise involved, medicinals, would indicate an

examination was in order if only to determine if they had

deteriorated. \[Note that under the amended 19 U.S.C.

1313(j), no longer requiring same condition, deterioration

would no longer be relevant.\]

In C.S.D. 83-68, also involving the interim operating

instructions used before promulgation of 19 CFR 191.141, Customs

noted that under these instructions, a CF 7539 is required to be

filed with Customs at least 12 working days prior to exportation.

Similar to the decision in C.S.D. 83-1, Customs stated in this

C.S.D. that:

\... Customs can waive this requirement, either before or

after exportation, if it is satisfied that the merchandise

was exported in the same condition as when imported.

Headquarters does not review a decision in this regard made

by a field office unless there is an allegation that the

official acted arbitrarily or capriciously.

C.S.D. 85-35 concerned the current regulatory provision (19 CFR

191.141(b)(2)(ii)). According to this ruling:

Inasmuch as the appropriate Customs officer, by virtue of

\[section\] 191.141(b)(2)(ii), can waive the prior notice \"at

any time,\" this language is broad enough to allow the

officer to waive the requirement in cases where the

merchandise has already been exported. The burden on the

claimant of proving same condition in these cases is

naturally greater, as such proof of same condition must be

based on secondary evidence.

The holding in C.S.D. 85-35, in part, was that:

\... Written permission for a waiver of the prior notice

requirement must be made and permission granted to allow the

retroactive claims.

The most recent published ruling on this matter is C.S.D. 88-14.

In that ruling, Customs stated:

The requirement of prior notice in same condition

drawback may, however, by waived by the appropriate Customs

office in the reasonable exercise of its discretion \"at any

time for any exporter-claimant\" (emphasis added) (§

191.141(b)(2)(ii)). This would include retroactive waivers

as provided in C.S.D. 85-35. To this end, in the absence of

a clear abuse of discretion, Customs Headquarters will not

substitute its judgment for that of the appropriate field

office (see C.S.D. 83-1; C.S.D. 83-68). \[C.S.D. 88-14 also

modified C.S.D. 86-25, which was stated to appear to

preclude retroactive waivers of the prior notice

requirement.\]

Thus, Customs current position in this regard, under the current

Customs Regulations, is that the requirement for prior notice of

intent to export may be waived at any time, including after the

exportation. When the requirement for prior notice of intent to

export is waived after export, the burden on the claimant of

proving compliance with the requirement of the law is greater. A

waiver of prior notice of intent to export must be requested in

writing. When such a request is filed, the appropriate Customs

field office must act on the request, using \"the reasonable

exercise of its discretion.\" Absent a clear abuse of discretion,

Customs Headquarters will not substitute its judgement for that

of the appropriate Customs field office.

In this case, although the protest included the statement that

\"\... we respectfully request this one-time waiver of the prior

notice requirement\", no request for waiver of prior notice of

intent to export was submitted in writing such that the

appropriate Customs office could act on the request, using \"the

reasonable exercise of its discretion.\" That is, this \"request\"

does not provide enough information for Customs to reasonably

exercise discretion in granting or denying the request. In this

regard, we note that the applicable Customs Regulation (19 CFR

191.141(b)(2)(ii)) provides that reliability, insofar as drawback

is concerned, is a criterion for approval of a request for waiver

of prior notice of intent to export. Therefore, a request for

such a waiver should include such evidence. Such evidence should

include identifying evidence such as that described in Customs

Directive (C.D.) 099 3740-007, April 21, 1992, \"EXPORTER\'S

SUMMARY PROCEDURES FOR MANUFACTURING AND SAME CONDITION DRAWBACK\"

(note that this C.D. refers to retroactive approval of Exporter\'s

Summary Procedures in regard to waiver of prior notice of intent

to export for drawback under 19 U.S.C. 1313(j) (page 5)). The

evidence should also include evidence as to the claimant\'s

drawback history with any Customs office, as well as the amount

of potential drawback (in dollars) which could be claimed under

the request for a waiver. The evidence, for a drawback claim

under 19 U.S.C. 1313(j)(1) (as is involved in this case), should

show how (e.g., by sample records) the claimant will establish

that duty was paid on the imported merchandise upon which

drawback is claimed, that the merchandise was not used in the

United States, and that the merchandise was exported within 3

years of the date of importation.

As stated above, in this case no such request (as described

above) for waiver of prior notice of intent to export has been

filed with Customs by the claimant. In view of the several

published rulings (described above) permitting a claimant to

request a waiver of prior notice of intent to export at any time,

including before or after export, we are granting the protest,

subject to each of the following conditions:

\(1\) The protestant must file a written request for waiver of

prior notice of intent to export with your office within the

time stated below;

\(2\) The request for waiver of prior notice of intent to

export must include sufficient information to enable your

office to reasonably exercise its discretion in acting on

the request (see above, for a description of the sort of

evidence that should be included);

\(3\) Your office, in a reasonable exercise of discretion

(based on the information submitted and your past action in

regard to requests for such waivers), must act on the

request (either granting or denying it) (only if the request

is granted, may the protest be granted (subject to the

fourth condition, below)); and

\(4\) The claimant must satisfactorily establish compliance

with the requirements for drawback in 19 U.S.C. 1313(j)(1)

(see above), bearing in mind the \"greater burden\" for a

claimant to establish compliance, since Customs had no

opportunity to inspect the merchandise prior to export and

proof of compliance must be based on secondary evidence

(C.S.D. 85-35).

Only if each of the above conditions is met, may the protest be

granted. A satisfactory written request for waiver of prior

notice of intent to export must be filed with your office within

45 days of the date written notice is provided to the protestant

of the above conditions (a draft letter providing such notice is

enclosed).

HOLDING:

The protest is GRANTED, subject to the following conditions:

\(1\) The protestant must file a written request for waiver

of prior notice of intent to export with your office within

45 days of the date written notice is provided to the

protestant of these conditions, as provided for in this

ruling;

\(2\) The request for waiver of prior notice of intent to

export must include sufficient information to enable your

office to reasonably exercise its discretion in acting on

the request;

\(3\) Your office, in a reasonable exercise of discretion

(based on the information submitted and your past action in

regard to requests for such waivers), must act on the

request (only if the request is granted, may the protest be

granted (subject to the fourth condition, below)); and

\(4\) The claimant must satisfactorily establish compliance

with the requirements for drawback in 19 U.S.C. 1313(j)(1)

(see LAW AND ANALYSIS section of this ruling).

If any one of these conditions is not met, the protest is DENIED

(for failure to provide prior notice of intent to export under 19

CFR 191.141(b), in the absence of an approved waiver of prior

notice of intent to export under 19 CFR 191.141(b)(2)(ii), or for

failure to satisfactorily establish compliance with the

requirements for drawback in 19 U.S.C. 1313(j)(1)).

After action in accordance with this ruling is taken to resolve

this matter, this decision should be mailed, with the Customs

Form 19, by your office to the protestant no later than 60 days

from the date of such resolution. Any reliquidation of the entry

in accordance with the decision must be accomplished prior to

mailing of the decision. Please advise this office of your

action in this matter so that the Office of Regulations and

Rulings may take steps to make the decision available to Customs

personnel via the Customs Rulings Module in ACS and the public

via the Diskette Subscription Service, Freedom of Information

Act, and other public access channels.

Sincerely,

Director, International

Trade Compliance Division

Enclosure