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HQ 228900





April 19, 2002

DRA-4-RR:CR:DR 228900

CATEGORY: DRAWBACK

Chief, Drawback Branch
Anti-Smuggling Division
U.S. Customs Service
301 E. Ocean Blvd.
Long Beach, CA 90802

RE: Internal advice; regulatory audit; Vans, Inc.; 19 U.S.C. 1313(j)(2);19 U.S.C. 1313(j)(4); 19 U.S.C. 3333(a); 19 CFR 181.42(d); NAFTA; HQ 228209

Dear Sir:

This is in response to your request for internal advice pursuant to an audit of certain drawback entries filed by Vans, Inc. (“Vans”). We have considered the points raised by Vans and your office. Our decision follows.

FACTS:

Vans imports footwear and wearing apparel (“merchandise”) purchased from manufacturers in China, Hong Kong, Korea, Macau and the Philippines. After importation, the merchandise is placed in inventory at Vans, held until sold, and then shipped to its customers in the U.S., Canada, Mexico, and other countries.

When imported from China, Hong Kong, Korea, Macau and the Philippines, all of the merchandise is inventoried by reorder number, which identifies the style, gender, color and size of each item of merchandise. The imported merchandise is not commingled in inventory or otherwise with any domestic merchandise or merchandise of Canadian or Mexican origin. Vans’ records of the import entry number, purchase order number, and reorder number, are the basis for the preparation of their drawback claims upon exportation to customers outside the U.S.

The request for internal advice discusses the method of preparation of unused merchandise substitution drawback claims filed in connection with exportation of the merchandise to Canada and Mexico after January 1, 1994. The claims for drawback are based upon the exportation of imported products substituted for the commercially interchangeable products imported under cover of the entries designated in their drawback claims. It is Vans’ position that the claims are within the intended scope of 19 U.S.C. §1313(j)(2). In support of its position, Vans’ internal advice request raises issues that were presented to Customs in a ruling request, which was decided by HQ 228209, dated April 12, 2002.

Following the audit of certain drawback entries filed by Vans, Regulatory Audit, Long Beach Field Office, forwarded Vans’ request for internal advice to the Drawback Branch Chief, Los Angeles-Long Beach Seaport, by memorandum, dated June 6, 2000. In the memorandum it was asserted that any claims on exports to Canada are ineligible under substitution drawback requirements, in accordance with 19 CFR 181.42(d).

ISSUE:

Whether under the facts described, the law provides for drawback under 19 U.S.C. §1313(j)(2), on exports to Canada.

LAW AND ANALYSIS:

The foregoing issue and the facts raised in this internal advice request are substantially similar to those addressed recently in HQ 228209 (April 12, 2002). As explained in the LAW and ANALYSIS section of that ruling, the goods exported to Canada and Mexico are not the imported goods upon which the drawback claim is based, but are the substitute goods. The designated imported merchandise, which is not exported, is the basis for the drawback claim. As it is not exported, it is not merchandise described in paragraph (2) of section 3333(a), which describes an exported good, and cannot be the basis for a claim under section 1313(j)(2). We have enclosed a copy for your reference.

HOLDING:

Under the facts described, the law does not provide for drawback under 19 U.S.C. § 1313(j)(2), on exports of substituted goods to Canada and Mexico, unless the imported goods on which the drawback claim is based are described in paragraphs (1) through (8) of 19 U.S.C. § 3333(a). Insofar as the subject imported goods on which the drawback claims are based are not described in paragraphs (1) through (8) of 19 U.S.C. § 3333(a), the law does not provide for drawback on the subject exports of substitute goods to Canada or Mexico.

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

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