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HQ 227026

January 27, 1997

DRA-4/DRA-2-02-RR:IT:EC 227026 PH


Port Director
U.S. Customs Service
610 South Canal Street
Chicago, Illinois 60607-4523
ATTN: Protest Section

RE: Protest 3901-96-100877; Unused Merchandise Drawback; Destruction in Lieu of Exportation; 19 U.S.C. 1313(j)

Dear Madame or Sir:

The above-referenced protest was forwarded to this office for further review. Our decision on the protest follows.


The protest is of the liquidation of a drawback entry (or claim) (No. 23...5062) in which the amount of drawback claimed was $727.41. No accelerated drawback was requested or granted. The drawback entry was liquidated on March 1, 1996, with no (zero) drawback.

According to documents in the file, the imported merchandise upon which drawback is claimed was 40 kilograms of the pharmaceutical "Captopril". The consumption entry for the imported merchandise was liquidated on December 23, 1994, with duty in the amount of $734.75 on the merchandise upon which drawback is claimed.

According to the protest, the imported merchandise was found, after importation, not to meet specification, in that impurities were too high. As stated above, a drawback entry on Customs Form (CF 7439), dated December 19, 1994, was filed for the merchandise. In block 31 of the CF 7539, it is stated:

The subject merchandise will be destroyed under Customs supervision at PCI of INDIANA INC. EAST CHICAGO, IN.

Block 44 of the CF 7539 ("Customs has decided not to examine the merchandise and it may now be exported") is checked. Block 53 ("Signature of Examining Officer and Date") is signed and dated

In the file there is a CF 3499 (Application and Approval to Manipulate, Examine, Sample or Transfer Goods) for one drum of Captopril, citing the consumption entry designated in the drawback entry, and stating the location of the goods to be PCI OF INDIANA in East Chicago, Indiana. On this form there is the notation: "Please Destroy: Chemical must be disposed at above location because it does not meet state and federal regulations for safety purposes." In the "APPROVED" section of the CF 3499, blocks 13 (date) and 14 (signature and title of approving Customs officer) are completed, with the date indicated to be January 27, 1995, and the signature of the Customs officer appearing to be the same as that in Block 53 of the CF 7539 (see above).

In the file there is a January 27, 1995, memorandum from a Customs broker to Customs referencing the protested drawback entry. According to this memorandum:

The item for destruction to claim same condition [now unused merchandise] drawback had to be sent to a special hazardous material company for disposal.

We are told by that company that they accept the hazardous material or in this case a pharmaceutical, Captopril, and record it on a hazardous waste manifest so that it can no longer be used for human consumption. It is then com[m]ingled with other waste and sent to another facility for destruction.

Can you please contact them in order to set up an appointment to supervise or allow destruction.

In the file there is a February 17, 1995, "Certificate of Material Recycling" under the letterhead of PCI (Pollution Control Industries), of East Chicago, Indiana, stating that "This is to certify that the hazardous waste manifested to Pollution Control Industries of Indiana on manifest # NJA 1990719 was recycled in accordance with 40 CFR 226 as of 2/95." The protestant/drawback claimant is listed as the "generator."

There is a January 16, 1996, letter on the letterhead of PCI of East Chicago, Indiana, stated to be in regard to the protestant/drawback claimant, purporting to be "... a brief description of [PCI's] function as a hazardous waste management company." According to this letter, "PCI's main function at [the] [facility] in Indiana is to prepare waste ... as a secondary energy source for cement kilns." The procedures for such preparation are described as including sampling and testing of shipments received, blending of liquids, shredding of sludges and solids, and commingling. The resultant material is fed into a kiln and burned or, for waste streams not meeting the criteria for fuel blending, incinerated. According to a handwritten notation on this letter, citing as source for the information a sales coordinator for the protestant/drawback claimant, "the chemicals are burned & this burning/fire is used as fuel for P.C.I.'s cement kilns. After kilns are heated they have ash left which is buried."

There is a CF 29 (Notice of Action) in the file, referencing the protested drawback entry and stating that "the drawback claim listed above has been liquidated at $0.00 due to the fact that this merchandise has been recycled (used by P.C.I. to fuel their cement kilns) rather than destroyed as required by 19 CFR 191.141."

As stated above, the drawback entry under consideration was liquidated on March 1, 1996, with no drawback. The drawback claimant filed the protest under consideration on April 10, 1996. In the protest, the protestant contends that the merchandise was destroyed in accordance with Customs Regulations and, therefore, that drawback should have been granted. The protestant states that the importer (the protestant/drawback claimant) did not gain anything from the disposition of the merchandise and that the company which disposed of the merchandise (PCI of East Chicago, Indiana) did not pay the importer.

Further review was requested and granted.


Is there authority to grant the protest of denial of drawback in this case?


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.

This protest involves drawback under 19 U.S.C. 1313(j). Basically, under 19 U.S.C. 1313(j)(1), drawback is authorized if imported merchandise on which was paid any duty, tax, or fee imposed under Federal law because of its importation is, within 3 years of the date of importation, exported or destroyed under Customs supervision and was not used in the United States before such exportation or destruction. Substitution of commercially interchangeable merchandise, subject to certain conditions, is authorized under 19 U.S.C. 1313(j)(2) (substitution, under section 1313(j)(2), is not involved in this case).

In interpreting the term destruction, as used in the drawback law when merchandise or articles are alleged to be destroyed in lieu of exportation, Customs has followed the Customs Court case American Gas Accumulator Co. v. United States, Treasury Decision (T.D.) 43642 (Cust. Ct., 3rd Div. 1929) (see also H.A. Johnson Co. v. United States, 21 Cust. Ct. 56, 61, C.D. 1127 (1948), following the American Gas Accumulator case and stating that it is in line with Lawder v. Stone, 187 U.S. 281, 23 S. Ct. 79 (1902), United States v. Pastene, 3 Ct. Cust. App. 164, T.D. 32458, (1912), and Poole Co. v. United States, 9 Ct. Cust. App. 271, T.D. 38216 (1919)). In American Gas Accumulator, involving the applicability of a temporary importation under bond (T.I.B.) provision (now in chapter 98, subchapter XIII, Harmonized Tariff Schedule of the United States (HTSUS)) of certain cylindrical tubular tanks which were imported for testing after which the drums were sold as scrap or salvaged, the Court defined destruction as follows:

Destruction in this connection means destruction as an article of commerce. In other words, if articles were destroyed to such an extent that they were only valuable in commerce as old scrap they still would be articles of commerce to which duty attached upon importation, and therefore could not be said to have been destroyed. [56 T.D. 368, 370]

In ruling HQ 222975, September 4, 1991, following American Gas Accumulator, supra, we held that an operation consisting of striking machine parts with a heavy, solid metal ball and then dismantling the parts for scrap iron, did not amount to a destruction for purposes of drawback under 19 U.S.C. 1313(j) because "... destruction means destruction as an article of commerce, and valuable scrap iron is an article of commerce."

In ruling HQ 222742, December 11, 1991, we considered the applicability of drawback under 19 U.S.C. 1313(j) to the destruction of beer and malt liquor. The destruction left a residue of crushed cardboard containers, crushed bottles, and salvaged alcohol content. State law was said to proscribe the disposition of liquid wastes without a permit from the state, and the protestant in that case stated it was unaware of any landfill in the state that was allowed to accept such waste. The salvaged alcohol was sold as scrap rather than dumped as waste. The value of the residue was less than the cost of salvaging the residue. On the basis of "an economic infeasability claim as delineated in C.S.D. 79-419", the ruling held that drawback could be allowed "because the merchandise has been destroyed as required under statute and existing law."

Customs Service Decision (C.S.D.) 79-419, cited in ruling HQ 222742, supra, held that scrap metal so buried in a public landfill that its recovery would be economically infeasible was considered destroyed, for purposes of the provision in 19 U.S.C. 1557(c) providing for the destruction under Customs supervision, in lieu of exportation, of merchandise entered under bond (the merchandise had been entered under a Temporary Importation under Bond provision (item 864.30, Tariff Schedules of the United States (TSUS); predecessor to subheading 9813.00.30, HTSUS)).

See, in addition to the above cases, Treasury Decision (T.D.) 54899(1); C.S.D. 80-24; C.S.D. 80-67; C.S.D. 81-100; ruling 221571, February 4, 1991; and ruling HQ 224110, March 17, 1993.

In this case, prior to the alleged destruction of the merchandise, a drawback entry was filed on a CF 7539, upon which it is stated that the merchandise will be destroyed under Customs supervision at the PCI facility, and the CF 7539 is checked to indicate that Customs had decided not to examine the merchandise and it could be exported. Also prior to this processing of the merchandise, a CF 3499 was filed for the merchandise. The Customs officer's signature in the "APPROVED" section of the CF 3499 appears to be the same as the signature appearing in the "STATEMENT OF EXAMINING OFFICER" section of the CF 7539. In view of the foregoing, and because the only reason given for denial of drawback was Customs position that the merchandise was recycled rather than destroyed (in that it was used as fuel to heat kilns), we assume that all other requirements for drawback have been met and that your office is satisfied that the imported merchandise was actually processed, as described, by CPI in its East Chicago, Indiana, facility.

The alleged destruction in this case consists of blending, shredding, and commingling the imported merchandise with other waste materials and then the use in a kiln of the materials as fuel for kiln. After burning in the kiln, only ash is left and the ash is buried. Thus, the end result of the alleged destruction is that the merchandise is completely destroyed as an article of commerce (there is only ash left, which is buried). However, before the merchandise reaches this end result, it is processed with other waste materials to burn in kilns. The protestant states that it (the importer/drawback claimant/protestant) did not gain anything from the disposition of the merchandise and was not paid for the merchandise by the company which disposed of the merchandise. (Further, in this regard, we have been informally advised by Customs technical office that although any material with organic bonds can burn and give off BTU's, the value of the merchandise under consideration as fuel would be de minimis.) In our opinion, rather than being a recycling operation (see, e.g., ruling 222975, supra), the processing with other waste materials, the burning in kilns, and the burying of the residue ash are each steps in the process of destruction (see ruling 224110, supra, "[d]estruction, however, need not take place in one step", and C.S.D.'s 80-67 and 81-100 (in the latter C.S.D., it is noted that "... if the destruction consists of multiple steps, each step should carry forward the destruction of the articles")).

In the case under consideration, "each step [does] carry forward the destruction of the articles". Furthermore, there is no article of commerce after completion of the "multiple steps" of destruction (compare to American Gas Accumulator, C.S.D. 79-419, and ruling 222742, supra).

Accordingly, the protest is GRANTED, subject to the following condition. As stated above, the protestant, in the protest, states that it (the importer/drawback claimant/protestant) did not gain anything from the disposition of the merchandise and was not paid for the merchandise by the company which disposed of the merchandise. To confirm this, the protestant should provide a written declaration, signed by a knowledgeable, responsible official of the protestant, confirming that this is so (i.e., that the protestant received no reimbursement or payment for the merchandise upon which drawback was claimed in the protested drawback entry). The protestant may be given 45 days to provide this written declaration, said 45-day period to begin on the date that you provide written notice that protestant must provide such a declaration before the protest can be approved. If the protestant does not provide such a written declaration within this 45-day period, the protest is DENIED.


There is authority to grant drawback (in the amount of $727.40 ($734.75 X .99)) in the protested drawback claim (because the merchandise is considered "destroyed", on the basis of the authorities analyzed in the LAW AND ANALYSIS portion of this ruling), provided, that within the 45-day period described in the LAW AND ANALYSIS portion of this ruling the protestant provides a written declaration, signed by a knowledgeable, responsible official of the protestant stating that the protestant (the importer/drawback claimant) did not gain anything from the disposition of the merchandise and was not paid for the merchandise by the company which disposed of the merchandise. If the protestant does not provide such a written declaration within this 45-day period, the protest is denied.

The protest is GRANTED, subject to the above condition; if the condition is not met, the protest is DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, 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 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 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.


Director, International

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