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HQ 223701


May 28, 1992

DRA-2-02-CO:R:C:E 223701 PH

CATEGORY: DRAWBACK

District Director of Customs
One Virginia Avenue
Wilmington, North Carolina 28401

RE: Same Condition Drawback; Exportation; Protest 1503-91- 100025

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We have considered the points raised by your office, the protestant, and the materials in the file. Our decision follows.

FACTS:

The protest is of the reliquidation of a same condition drawback entry. According to the file, on January 15, 1991, the protestant imported 1,648 kilograms (quantity: 3,943,876) of certain digestive preparations in the forms of tablets, valued at $907,091. Duty in the amount of $57,146.73 was paid on the merchandise. By a drawback entry dated April 24, 1991, the protestant claimed drawback on 1,972,686 of the tablets, valued at $453,718, on which duty in the amount of $28,584.23 was stated to have been paid. Examination was waived by Customs and, according to the Notice of Exportation of Articles with Benefit of Drawback (CF 7511), the merchandise was exported to Canada on April 26, 1991.

In Canada, the merchandise and packaging materials were transported to a packaging facility. In the packaging facility, the merchandise was placed in bottles of 30 tablets each, the bottles were sealed with caps and a label was attached to each bottle. The bottles were then placed into individual cartons with a product information sheet. The individual cartons were placed in a tray, 24 cartons to a tray, and shrink-wrapped. Two of the shrink-wrapped trays were placed into a shipping case to complete the packaging operations.

The packaged merchandise was then shipped back to the protestant in the United States. The protestant paid full duty on the value of the merchandise and the cost of the packaging. In the United States, according to the protestant, the merchandise is distributed to physicians free of charge for the purpose of soliciting future orders of the merchandise.

The drawback claim was liquidated on June 21, 1991, with drawback in the amount of $28,298.38 granted. On September 17, 1991, the entry was reliquidated, with no drawback. The bulletin notice of the reliquidation was posted on the same date. The protest was filed on December 13, 1991.

ISSUE:

Was the merchandise in this case exported, for drawback purposes, when it was sent abroad for packaging and, as intended when it was sent abroad, returned in its packaged form to the United States?

LAW AND ANALYSIS:

Initially, we note that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR Part 174) and is protestable (see 19 U.S.C. 1514(a)(6)).

Basically, 19 U.S.C. 1313(j)(1), which is the authority for the drawback claim in this case, provides that if imported merchandise on which was paid any duty, tax, or fee imposed under Federal law because of its importation is, within 3 years beginning on the date of importation, exported in the same condition as when imported or destroyed under Customs supervision and is not used in the United States before its exportation or destruction, then on its exportation or destruction 99 percent of the duty, tax, or fee shall be refunded as drawback. The Customs Regulations pertaining to drawback are found in 19 CFR Part 191.

The principal issue in this case is whether the merchandise upon which drawback was claimed was exported. The merchandise was sent to Canada for packaging with the intent that it be returned, in its packaged form, to the United States and it was so returned.

"Exportation" is defined in the Customs Regulations (19 CFR 101.1(k)) as "a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country." This provision also provides that "[t]he shipment of merchandise abroad with the intention of returning it to the United States with a design to circumvent provisions of restriction or limitation in the tariff laws or to secure a benefit accruing to imported merchandise is not an exportation." This definition is consistent with the decision of the Supreme Court in the leading case of Swan v. Finch v. United States, 190 U.S. 143 (1903) (see also, 17 Op. Att'y Gen. 579 (1883)).

Customs has issued a number of rulings interpreting this definition. In Customs Service Decision (C.S.D.) 82-154, we ruled that an exportation occurred, for drawback purposes, when finished watches were shipped to a distribution center in Canada for sale and shipment, even though some of watches may have been returned to the United States. In C.S.D. 82-155, we ruled that an exportation did not occur when the owner of an imported truck sent the trucks to Canada for disassembly and re-entry into the United States. In this latter case, the duty on the original importation was 25 percent and the duty on the disassembled truck would have been less than 5 percent. The sole purpose of shipping the truck abroad was to obtain drawback and to take advantage of the difference in duty. In an unpublished ruling (File: DRA-1-CO:R:CD:D 212451 RB, February 13, 1981), we held that sugar refined in the United States was exported, for drawback purposes, when it was sent to Canada for packaging and thereafter returned to the United States for consumption.

On the basis of the February 13, 1981, ruling cited above, we conclude that an exportation occurred in this case. We note that, in contrast to C.S.D. 82-155, the merchandise in this case was shipped abroad for a legitimate commercial purpose independent of obtaining drawback. There is no evidence in the file that the merchandise was shipped abroad "with the intention of returning it to the United States with a design to circumvent provisions of restriction or limitation in the tariff laws or to secure a benefit accruing to imported merchandise", as proscribed in 19 CFR 101.1(k), quoted above. In this regard, we note that full duty was paid on the merchandise and packaging on its return to the United States. Accordingly, the protest is GRANTED.

HOLDING:

The merchandise in this case, which was sent abroad for packaging and, as intended when it was sent abroad, returned in its packaged form to the United States, is considered to have been exported, for drawback purposes (note that upon return to the United States, full duty was paid on the merchandise and packaging).

The protest is GRANTED. A copy of this decision should be attached to the Form 19 and provided to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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