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HQ 229512

August 5, 2002

229512 IOR


Port Director
U.S. Customs Service
Port of Newark, New York
C/o Residual Liquidation and Protest Branch 1210 Corbin St.
Elizabeth NJ 07201

RE: AFR protest no. 4601-01-100378; 19 U.S.C. 1313(j)(1); importer number; notice of intent to export; waiver of notice of intent to export; failure to file notice of intent to export; 19 CFR 191.35; 19 CFR 191.36; 19 CFR 191.91

Dear Madam:

The above-referenced protest was forwarded to this office for further review. We have considerd the facts and issues raised and our decision follows.


The protest is against the denial of 16 drawback entries, filed under 19 U.S.C. §1313(j)(1). The protestant, Schneider Automation Inc. (“Schneider”) filed the drawback claims, using importer number 04-32xx09500.

The file does not contain any copies of any of the drawback entries. The subject drawback entries in Customs possession were destroyed in the New York Drawback Office due to the events occurring on September 11, 2001. As of the date of this decision, the protestant has failed to provide copies of any of the drawback entries to Customs. The information regarding the filing of the claims is obtained from Customs Automated Commercial System (ACS). The claims were filed from May 17, 1995 through November 20, 1996. According to the protest, the company, Modicon, Inc. (“Modicon”), changed its name to Schneider, in 1994, and notified Customs of such change in 1995:

On January 13, 1995 Customs was advised that the company’s name had been changed from Modicon, Inc. to AEG Schneider Automation, Inc. Such change being effective as of October 14, 1994. Attachment C. Attachment C is the September 6, 1994 letter discussed infra. The letter does not mention any name change, Schneider, or change in importer number. The name change was the result of a series of corporate reorganizations which began in 1993. The new entity was the recipient of all the rights, claims, title, interest in all assets and liabilities of its predecessor. We believe that AEG Schneider Automation meets the requirements to be considered a ‘drawback successor’ as defined in 191.34.

In a submission dated June 10, 2002, counsel for the protestant forwarded a copy of a letter dated February 25, 1997 from Schneider to the New York Drawback Office, describing and documenting the name change of Modicon to Schneider. The described history of Modicon and Schneider is as follows:

Modicon, Inc. (Federal identification no. 22-28xx748) was incorporated on June 6, 1988. This piece of the corporate history is not documented. New Modicon (Federal identification no. 04-32xx095) was incorporated on November 19, 1993. New Modicon (04-xxxx095) and Modicon (22-28xx748) enter into an assignment and assumption agreement on December 16, 1993, whereby Modicon (22-28xx748) assigned its assets to New Modicon (04-32xx095), and New Modicon (04-32xx095) assumed the liabilities of Modicon (22-28xx748) for stock. Modicon (22-28xx748) changed its name to Old Modicon, Inc. (22-28xx748) on January 3, 1994. This piece of the corporate history is not documented. New Modicon (04-32xx095) changed its name to Modicon, Inc. (04-32xx095), on December 31, 1993. According to the submission the Certificate of Amendment is dated January 3, 1994, however the copy of the Certificate of Amendment in our file only has the signature date of December 31, 1993. On January 3, 1994, Daimler-Benz Capital, Inc. was merged into Old Modicon, Inc. (22-28xx748). According to the submission the Certificate of Merger is dated January 11, 1994, however the copy of the Certificate of Merger in our file only has the signature date of January 3, 1994. The name of the surviving corporation was Old Modicon, Inc. (22-28xx748) which changed its name upon the completion of the effectiveness of the merger to Daimler-Benz Capital, Inc. (22-28xx748). Modicon, Inc. (04-32xx095) changed its name to AEG Schneider Automation Inc. (04-32xx095), on October 14, 1994. AEG Schneider Automation Inc. (04-32xx095) changed its name to Schneider Automation Inc. (04-32xx095) on August 6, 1996.

The February 25, 1997 letter from Schneider states that it is in response to a February 5, 1997 letter from the New York Drawback Office, concerning the history of the “name changes”. The February 25, 1997 states as follows:

I understand that you will review this documentation in order to determine whether or not Schneider Automation Inc. should re-apply for exporter’s summary and accelerated payment procedures. Please note that while Schneider Automation Inc. (EIN 04-32[xx]095) is not the Modicon, Inc. entity (EIN 22-28[xx]748) which originally registered with the U.S. Customs Service, it has continuously operated the same business that the original entity started. The original registrant, Modicon, Inc. (EIN 22-28[xx]748) which is now named Daimler-Benz Capital, Inc. is operating in an entirely new line of business.

With respect to the privileges which are the subject of this protest, by letter dated May 1, 1989 to the Customs Drawback Office in New York, Modicon requested permission to file drawback under 19 U.S.C. §1313(j)(1) using the Exporter’s Summary Procedure, waiver of prior notice of intent to export, and accelerated payment procedure. By letter dated June 8, 1989, the New York Drawback Office responded to Modicon’s broker, identifying Modicon in the letter, granting use of the Exporter Summary Procedure and the accelerated payment procedure. With respect to the Exporter Summary Procedure, the letter stated that “[r]etroactive approval for the use of this procedure is granted to include articles exported within three years from the date of importation.” In 1989, the only Modicon in existence was Modicon (22-28xx748), therefore, the privilege of Exporter Summary Procedure and accelerated payment procedure were requested by and granted to Modicon (22-28xx748).

By letter dated September 6, 1994, on Modicon letterhead, the New York Customs Drawback Office was sent copies of Modicon’s Customs bonds. The letter identified Modicon’s importer number as 04-32xx095. The difference between Modicon’s importer number and the number under which Schneider filed the drawback claim is the “00” suffix on Schneider’s number. According to the letter, the bonds and importer number were provided to “clear up any discrepancies with our old bond.”

According to Customs Automated Commercial System (“ACS”), Modicon’s importer record with the number 22-28xx74800, was added on September 1, 1988. Another record was added for Modicon on August 2, 1996, with the importer number 34-32xx40500.

A CF 29, Notice of Action was issued on June 7, 2001, notifying Schneider that 25 drawback entries have been liquidated with no drawback for the following reason:

Even though AEG Schneider Automation, Inc. does not have approval for Waiver of Prior Notice, all merchandise was exported without exam. Therefore, the following drawbacks will be liquidated for No Drawback.

The 16 entries which are protested are those, out of the 25 liquidated entries, for which accelerated drawback payment was allowed. The remaining nine entries were filed in 1997, and accelerated drawback was not allowed for those. The protestant states that two additional drawback entries were filed in 1995, and liquidated in 1996. We were only able to verify one of the asserted entries in ACS. With respect to that entry, 110-xxxx182-3, the entry was liquidated with drawback. All 26 entries were filed under the same importer number, 04-32xx09500.

According to the New York Drawback office, the privileges of Exporter’s Summary procedure, with implicit waiver of prior notice, and accelerated payment, were issued to Modicon, Inc., under importer number 22-28xx74800. Drawback claims using importer no. 22-28xx74800 were filed between July 28, 1989 and May 20, 1993. Subsequently, drawback claims were filed under importer no. 04-32xx09500. According to the New York Drawback office, accelerated payment was allowed in error for 18 claims, including the 16 protested claims, before Customs realized that the claims were filed by Schneider and not Modicon.


Whether Schneider has met its requirements for notice of exportation.


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 C.F.R. Part 174). We note that the refusal to pay a claim for drawback is a protestable issue under 19 U.S.C. §1514(a)(6). This protest involves the denial of drawback under 19 U.S.C. §1313(j)(1).

Section 313(j)(1) of the Tariff Act of 1930, as amended (19 U.S.C. §1313(j)(1)), provides for a refund of duties on imported merchandise, exported or destroyed under Customs’ supervision, within three years from the date of importation, and not used within the U.S. before such exportation or destruction. Prior to the amendment of the drawback statute by section 632, title VI  Customs Modernization, Pub. L. No. 103182, the North American Free Trade Agreement Implementation (“NAFTA”) Act (107 Stat. 2057), enacted December 8, 1993, an additional requirement under section 1313(j) was that the merchandise be in the same condition as when it was imported.

At the time the drawback entries were filed, the requirements for filing and documentation prior to exportation were set forth in 19 C.F.R. §191.141(b):

(b) Filing and documentation prior to exportation  (1) Filing. An exporterclaimant who desires to export merchandise with drawback under 19 U.S.C. 1313(j) shall file with the drawback office a completed Customs Form 7539. The exporterclaimant also shall furnish a copy of the import entry or identify the import entry, date of entry, and port of entry under which the merchandise was imported into the United States. It shall certify that the merchandise is in the same condition as when imported and not used within the United States before such exportation. Transfers shall be documented by certificates of delivery (see §191.65).

(2)(i) Time of filing. The completed Customs Form 7539 shall be filed with the drawback office at least 5 working days prior to the date of intended exportation of the merchandise, unless the Customs officer approves a shorter filing period.

(ii) Waiver of prior notice of intent to export. A request for a waiver of prior notice by an exporterclaimant shall be in writing to the drawback office. The appropriate Customs officer may waive prior notice at any time for any exporterclaimant. An exporterclaimant shall be granted this waiver after filing with the appropriate Customs official six consecutive claims free of substantial error, provided that such exporterclaimant has operated under the same condition program for a minimum of six months. An exporterclaimant who repeatedly files inaccurate claims may have the privilege (of filing without prior notice) revoked. Customs will so notify the exporterclaimant in writing of the revocation as soon as possible.

(3) Examination  (i) Decision to examine. Within 3 working days after Customs Form 7539 is filed, the exporterclaimant shall be notified whether Customs will examine the merchandise. If the exporterclaimant is not notified within the 3day period, the exporterclaimant shall export the merchandise without delay.

The Customs Regulations pertaining to drawback were revised (the proposed revised regulations were published in the Federal Register (62 FR 3082), on January 21, 1997, and were the subject of considerable comment and consideration, and responses to the comments were published with the final rule document) (63 FR 10970), on March 5, 1998. The current regulations set forth the requirements for filing and documentation prior to exportation, in section 191.35 as follows:

(a) Notice. A notice of intent to export merchandise which may be the subject of an unused merchandise drawback claim (19 U.S.C. 1313(j)) must be provided to the Customs Service to give Customs the opportunity to examine the merchandise. The claimant, or the exporter, must file at the port of intended examination a Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback on Customs Form 7553 at least 2 working days prior to the date of intended exportation unless Customs approves another filing period or the claimant has been granted a waiver of prior notice (see §191.91 of this part).

(b) Required Information. The notice shall certify that the merchandise has not been used in the United States before exportation. In addition, the notice shall provide the bill of lading number, if known, the name and telephone number, mailing address, and, if available, fax number and email address of a contact person, and the location of the merchandise.

The failure to file the proper notice, deprives the Government of the ability to verify the identity of the merchandise being exported, and the condition of the merchandise (i.e. that it has not been used), for purposes of the drawback statute. See e.g. Swan Tricot Mills Corp. v. U.S., 63 Cust. Ct. 530, C.D. 3948 (1969); C.S.D. 86-25, citing U.S. v. Lockheed Petroleum Services, 1 Ct. Appls. Fed. Cir. 63, 709 F.2d 1472 (1983); HQ 224133, dated April 19, 1993; HQ 220099, dated September 1, 1988.

It is well established that drawback laws confer a privilege, not a right. Swan & Finch Company v. United States, 190 U.S. 143, 23 Sup. Ct. 702 (1903). When merchandise is imported and a drawback statute may potentially be applicable, an accruing or inchoate right may be said to arise. However, the right to recover drawback ripens only when all provisions of the statute and applicable regulations prescribed under its authority have been met. Guess? Incorporated v. United States, 944 F.2d 855 (Fed. Cir. 1991); Romar Trading Co., Inc. v. United States, 27 Cust. Ct. 34 (1951); General Motors Corporation v. United States, 32 Cust. Ct. 94 (1954). Drawback claimants must strictly adhere to the requirements set forth in the statutes and applicable regulations, and the. United States v. W. C. Hardesty Co, Inc., 36 CCPA 47, C.A.D. 396 (1949); Spencer, Kellogg & Sons (Inc.) v. United States, 13 CCPA 612 (1926). The regulations requiring notice of intent to export are mandatory, and compliance with the regulations is a condition precedent to the right to recover drawback. See id., and W.R. Grace & Co. v. United States, 15 Cust. Ct. 105, C.D. 953 (1937).

In section, 191.36, the regulations provide for the failure to file notice of intent to export for purposes of drawback. The regulation requires the claimant that failed to file the requisite notice of intent to apply for eligibility for drawback. In summary, the application must be written and is required to include the following:

(A)Name, address, and Internal Revenue Service (IRS) number (with suffix) of applicant; (B) Name, address, and Internal Revenue Service (IRS) number(s) (with suffix) of exporter(s), if applicant is not the exporter; (C) Export period covered by this application; (D) Commodity/product lines of imported and exported merchandise covered in this application; (E) The origin of the above merchandise;
(F) Estimated number of export transactions covered in this application; (G) Estimated number of drawback claims and estimated time of filing those claims to be covered in this application; (H) The port(s) of exportation;
(I) Estimated dollar value of potential drawback to be covered in this application; and (J) The relationship between the parties involved in the import and export transactions

The application must also include written declarations regarding:

(A) The reason(s) that Customs was not notified of the intent to export; and (B) Whether the applicant, to the best of its knowledge, will have future exportations on which unused merchandise drawback might be claimed

Finally the application must also include a certification that documentation that the requirements of section 1313(j) specifically and drawback generally have been met will be made available for Customs review upon request. The regulations also provide that this application procedure may be used by a claimant only once, unless good cause is shown (for example, successorship). In making its decision to approve or deny the application under this section, Customs will consider factors such as the information provided by the claimant in the written application and the information in the written certifications, and the applicant's prior record with Customs.

Under both the current regulations, and the regulations in effect at the time the drawback entries were filed, if notice of intent to export has been neither provided nor waived, the drawback requirements have not been met either in form or substance. Under the current regulations, however, a claimant may apply for eligibility for drawback under 19 CFR 191.36, as described above.

According to the New York Drawback office, from 1989 to 1993, Modicon filed drawback entries under importer no. 22-28xx74800. Then according to the September 6, 1994 letter, the name Modicon was still being used, however with a different importer number. The new importer number is the same one under which the subject entries were filed. Based on the submission of Schneider regarding the corporate history, it is clear that the Modicon (22-28xx74800) to which the subject privileges, including waiver of prior notice of right to export, is a different corporate entity than the protestant.

At the time the subject drawback claims were filed, there was no provision for assumption of the right to accelerated payment of drawback, export summary or waiver of prior notice of exportation. Assumption was not provided for due to Customs interest in ensuring reasonable assurance against losses to the revenue. Upon the amendment of the drawback regulations on March 5, 1998, provision was made for the limited, temporary assumption by a successor of waiver of prior notice and accelerated payment approvals. The current regulations, 19 CFR 191.91 provide that a successor to a claimant approved for waiver of prior notice is a successor of that approval for one year after the succession, however subsequent to that one year period, the successor must apply for its own waiver of prior notice. The successor must meet the definition in 19 U.S.C. §1313(s)(3). Assumption of waiver of prior notice and accelerated payment approvals is not provided for in 19 U.S.C. §1313(s). Under the amended drawback regulations, use of the exporter’s summary procedure was available to all claimants of drawback under 19 U.S.C. §1313(a), (b), (c), (j) or (p), and there is no need to provide for any assumption of the privilege.

The September 6, 1994 letter from Modicon, gives notice of Modicon’s new importer number (04-32xx095), and according to ACS, on January 7, 1994, Schneider was added to ACS under that same importer number. However, notice of a different importer number was not sufficient in this case, as the corporate entity changed, and Modicon (04-32xx095) did not apply for any privileges. We do acknowledge that by letter dated February 25, 1997, Schneider (04-32xx095) submitted information regarding its corporate history, and asked Customs whether it was required to apply for the privileges, although they had been granted to Modicon (22-28xx74800). There is no information whether or not the letter was received by Customs. In any event, the letter was written subsequent to the filing of the subject drawback claims, and was not a request for a waiver of prior notice of intent to export. The letter also did not consist of an application for drawback eligibility under 19 CFR 191.36, because that regulation was not in effect at the time of the letter.

From our review of the protest, much of the information required in the application for drawback eligibility upon failure to file a notice of intent to export, is not included in the protest, and the subject protest has not been considered as an application for such eligibility under the regulation in section 191.36, by the appropriate Customs offices. Moreover, Customs is of the position that no compliance short of actual compliance can be regarded as sufficient compliance, and substantial compliance is not sufficient where full compliance is required. See HQ 221489, dated February 20, 1990, citing Swan Tricot Mills Corp. v. U.S., 63 Cust. Ct. 530, C.D. 3948 (1969), and Swift and Co. v. U.S., 10 Cust. Ct. 198, C.D. 753 (1943), reh. den. 11 Cust. Ct. 321, abs. 49029 (1943).

Under the regulations prior to their revision, under 19 CFR 191.141, the appropriate Customs office could waive the requirement of prior notice of intent to export at any time, including retroactive waivers. See C.S.D. 88-14. In the absence of a clear abuse of discretion, Customs Headquarters would not substitute its judgment for that of the appropriate field office. Id. See also, HQ 222609, dated November 7, 1990. In HQ 226413, dated January 6, 1997, Customs stated that the request for a waiver must be in writing. In this case, there is no evidence that a request for waiver was made in writing or otherwise, by Schneider (04-32xx095) or Modicon (04-32xx095).

Further, as the protestant has not even provided a drawback claim for our review, we cannot determine whether the protestant qualifies for drawback. For example we have no basis upon which to determine what the identified merchandise was and whether it in fact was exported. In conclusion, we find that the protestant neither requested nor was granted any waiver of prior notice of exportation, did not apply for drawback eligibility under 19 CFR 191.36, and did not assume the privilege of waiver of prior notice of export from its predecessor, and therefore did not meet the requirement for notice of exportation for purposes of 19 U.S.C. §1313(j)(1), and furthermore has not provided any evidence of exportation.


For purposes of 19 U.S.C. §1313(j)(1), the protestant did not meet the requirement for notice of exportation, and has not established that any exportation occurred.

The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, 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.


Myles B. Harmon

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