HQ 222810: Manufacturing Drawback Claims; Protests 2704-90-000647; 2704-90-000649; 2704-90-000648; 2704-90-000013; 2704-90- 000062; 2704-90-000063; 2704-90-000011 Dear Sir:

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 222810

                         January 7, 1992

DRA-2-01-CO:R:C:E 222810 PH

CATEGORY:  Drawback

Regional Director of Customs
Commercial Operations Division
Pacific Region
One World Trade Center, Suite 705
Long Beach, California 90831-0700

RE:  Manufacturing Drawback Claims; Protests 2704-90-000647;
     2704-90-000649; 2704-90-000648; 2704-90-000013; 2704-90-
     000062; 2704-90-000063; 2704-90-000011
 
Dear Sir:

     The above-referenced protests were 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:

     Protest 2704-90-000647 (hereafter, in referring to protests,
only the last six digits will be used) is of the liquidation of
six drawback entries (or claims), five dated April 11, 1986, and
one dated December 15, 1986.  The entries covered by the protest
were the subject of a Customs audit and, after the audit (Report
7-88-DRO-016, dated September 30, 1988), the claimant was given
the opportunity to recompute the drawback on the basis of the
audit and submit amended claims which were to be addressed in a
follow-up to the September 30, 1988, Audit Report (as is true of
the entries covered by all of the protests addressed in this
ruling).  In four of the entries covered by this protest, for
which it was recommended in the Audit Report that drawback be
denied on the basis of failure by the claimant to receive or use
the designated merchandise (crude oil) or failure to meet the
regulatory requirements for "trade-off" (see 19 CFR 191.27), the
non-qualifying designated oil was not deleted from the initial
entries, and therefore all of the amended drawback computations
were determined to be in error (hereafter this discrepancy is
described as "Discrepancy 2", see the Notes to Exhibits in the
follow-up to the Audit Report).  In the remaining two entries,
new designations of crude oil were made but they were stated to
be untimely because they were submitted in excess of three years
after the date of export and therefore all of the amended
drawback computations were determined to be in error
("Discrepancy 3").  The entries, totalling $315,275.16 in
drawback claims for which accelerated drawback had been given,
were liquidated, with the denial of all drawback, on November 13,
1989.  All entries covered by this protest were liquidated
consistently with the follow-up to the Audit Report.

     Protest 000649 is of the liquidation of seven drawback
entries, each dated August 26, 1986.  In two of the entries
covered by this protest both Discrepancy 2 and 3 were noted.  In
the remaining five entries Discrepancy 3 was noted.  The entries,
totalling $257,391.02 in drawback claims for which accelerated
drawback had been given, were liquidated, with the denial of all
drawback, on November 13, 1989.  All entries covered by this
protest were liquidated consistently with the follow-up to the
Audit Report.

     Protest 000648 is of the liquidation of thirteen drawback
entries, twelve dated August 8, 1986, and one dated November 13,
1986.  Deficiencies were noted in the Audit Report with regard to
all of these entries in the accounting method ("Discrepancy 1")
and in claims for downstream drawback (drawback deliveries) (with
regard to these latter deficiencies, it was also noted that these
errors could not be timely corrected by the submission of proper
documents) ("Discrepancy 8").  Partial relief was recommended in
the follow-up to the Audit Report on the basis of the use of the
acceptable accounting method and the correction of minor
arithmetic errors (where such errors had occurred).  The entries,
totalling $384,230.19 in drawback claims for which accelerated
drawback had been given, were liquidated, with the granting of
$148,419.63 in drawback, on November 13, 1989.  All entries
covered by this protest were liquidated consistently with the
follow-up to the Audit Report.  There is one discrepancy in the
entries covered by this protest, in that the 12th entry in the
package, in which $41,359.11 was originally claimed as drawback
and the liquidation was with $9,716.11 in drawback, is missing
the digit "1" at the end of the entry number.

     Protest 000013 is of the liquidation of five drawback
entries, each dated December 18, 1986.  Because there are some
mis-transcriptions in the entries covered by this protest in the
follow-up to the Audit Report, we are analyzing the entries
separately.

     In the first of these entries, $27,486.04 in drawback
     was initially claimed and deficiencies were noted.  New
     designations of crude oil were made in the amended
     entry (for $22,886.15 in drawback) but, on the basis of
     Discrepancy 3, denial of all drawback was recommended
     and the entry was so liquidated.

     In the second of these entries, $54,229.58 in drawback
     was initially claimed and deficiencies were noted.  New
     designations of crude oil were made in the amended
     entry (for $55,622.10 in drawback) but, on the basis of
     Discrepancy 3, denial of all drawback was recommended
     and the entry was so liquidated.  Also, other errors
     were noted with regard to the calciner part of the
     claims ("Discrepancy 4").

     In the third of these entries, $46,248.81 in drawback
     was initially claimed and deficiencies were noted.  New
     designations of crude oil were made in the amended
     entry (for $52,881.04 in drawback) but, on the basis of
     Discrepancy 3, denial of all drawback was recommended
     and the entry was so liquidated.  Discrepancy 4 was
     also noted with regard to this entry.

     In the fourth of these entries, $27,259.64 in drawback
     was initially claimed and deficiencies were noted.  New
     designations of crude oil were made in the amended
     entry (for $23,182.72 in drawback) but, on the basis of
     Discrepancy 3, denial of all drawback was recommended
     and the entry was so liquidated.

     In the fifth of these entries, $30,119.93 in drawback
     was initially claimed and only Discrepancy 1 was noted. 
     An amended entry (for $28,555.38) was made, with an
     acceptable accounting method.  The entry was liquidated
     as amended (i.e., with drawback in the amount of
     $28,555.38).

Accordingly, the entries covered by this protest, totalling
$185,344.00 in drawback claims for which accelerated drawback had
been given, were liquidated, with the granting of $28,555.38 in
drawback, on October 6, 1989.  Although, as noted above, there
are mis-transcriptions of these entries in the follow-up of the
Audit Report, a thorough review of the recommendations therein
confirms that all entries covered by this protest were liquidated
consistently with the follow-up to the Audit Report.

     Protest 000062 is of the liquidation of four drawback
entries, each dated December 18, 1986.  Discrepancies 2, 3, and 4
were noted for these entries (not all of these deficiencies were
applicable to each entry; only some are applicable to each).  The
entries, totalling $158,392.57 in drawback claims for which
accelerated drawback had been given, were liquidated, with the
denial of all drawback, on October 13, 1989.  All entries covered
by this protest were liquidated consistently with the follow-up
to the Audit Report.

     Protest 000063 is of the liquidation of nine drawback
entries, four dated November 13, 1986, three dated November 6,
1986, and two dated November 5, 1986.  Discrepancy 8 was noted in
the Audit Report with regard to each of these entries.  In
addition, in five of these entries Discrepancy 2 was noted and in
the other four entries Discrepancy 1 was noted.  The entries,
totalling $278,266.28 in drawback claims for which accelerated
drawback had been given, were liquidated, with the granting of
$28,551.12 in drawback, on October 13, 1989.  All entries covered
by this protest were liquidated consistently with the follow-up
to the Audit Report.

     Protest 000011 is of the liquidation of one drawback entry,
dated November 13, 1986.  In this entry Discrepancies 1 and 8
were noted.  The entry was for $18,587.92 in drawback, for which
accelerated drawback had given.  It was liquidated, with the
granting of $1,196.67 in drawback, on October 6, 1989.  The entry
covered by this protest was liquidated consistently with the
follow-up to the Audit Report.

     Protests 000647 and 000649 were filed on February 9, 1990. 
In each protest, the protestant claims that the liquidation was
"erroneous and illegal", that the claim for drawback is
authorized by 19 U.S.C. 1313(a), and that the merchandise in
question is subject to a valid drawback contract approved by
Customs in Treasury Decisions (T.D.'s) 66-247-(1) and 73-124-
(3).  The protestant also claims that the liquidation of the
entries is inconsistent with the findings of the Regulatory Audit
Division.

     Protest 000648 was filed on February 9, 1990, protests
000013 and 000011 on January 2, 1990, and protests 000062 and
000063 on January 5, 1990.  In each protest, the protestant
claims that the liquidation was "erroneous and illegal", that the
claim for drawback is authorized by 19 U.S.C. 1313(a), and that
the merchandise in question is subject to a valid drawback
contract approved by Customs in T.D.'s 66-247-(1) and 73-124-
(3).  The protestant also claims that on November 10, 1988 (with
regard to protests 000648, 000063, and 000011), and November 7,
1988 (with regard to protests 000013 and 000062), it filed
amendments of its drawback "claims" pursuant to 19 CFR 191.64 and
191.141(g)(2) and, therefore, the protest should be given further
review under 19 CFR 174.24.

ISSUE:

     Is there authority to grant the Protests/Applications for
Further Review of denial of drawback described in the FACTS
portion of this ruling?

LAW AND ANALYSIS:

     Initially, we note that each of the protests, with
applications for further review, were 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)).

     We also note that the drawback entries which are protested
are for drawback under 19 U.S.C. 1313(b), not section 1313(a) as
the protestant states.  Basically, section 1313(b), often called
the manufacturing substitution drawback law, provides that if
imported duty-paid merchandise and duty-free or domestic
merchandise of the same kind and quality are used within three
years of the receipt of the imported merchandise in the
manufacture or production of articles by the manufacturer or
producer of the articles and the articles manufactured or
produced from the duty-free or domestic merchandise are exported,
99 percent of the duties on the imported duty-paid merchandise
shall be refunded as drawback, even if none of the imported
merchandise was actually used in the manufacture or production of
the exported articles.  The Customs Regulations pertaining to
drawback are found in 19 CFR Part 191.

     In the case of five of the protests (000648, 000013, 000011,
000062, and 000063), the protestant claims that it filed
amendments to its drawback claims under 19 CFR 191.64 and
191.141(g)(2) (this latter provision is not applicable in this
case, since it deals with same condition drawback, under 19
U.S.C. 1313(j)), and it gives the dates on which it claims to
have filed these amendments.  Section 191.64 does permit the
amendment or correction of a drawback claim or the filing of a
supplemental entry, with the permission of the regional
commissioner.  We note that in this case Customs did give the
protestant the opportunity to file amended claims and the
protestant did so.  Even though the amended claims were filed
after the time period Customs gave for filing them, Customs
accepted and processed them.

     We believe, with regard to the immediately preceding
paragraph, that instead of contending that it filed amendments to
its drawback claims, the protestant means that it filed
amendments to its drawback contracts (see 19 CFR 191.25, for the
Customs Regulations pertaining to the modification or amendment
of drawback contracts).  The protestant did send letters, with
the dates cited in these protests, purporting to request the
amendment of its drawback contract.  Because these proposals did
not meet the statutory and regulatory requirements as submitted,
we requested further information from the protestant.  The
protestant did provide further information but there were still
numerous legal deficiencies in the proposals.  By letters of
February 20, 1990 (in each case), we advised the protestant of
the deficiencies in the proposals, adding that upon receipt of
new proposals we would give consideration to the operations the
protestant sought for drawback.  No such new proposals have been
received by Customs and no such new drawback contracts exist,
although we note that on June 18, 1991, a drawback contract (T.D.
91-72-4) was approved for a corporation which operates two of the
factories formerly operated by the protestant.  However, in view
of the time requirements in section 1313(b) and Customs position
on successorship (see C.S.D. 89-1), we fail to see any way in
which approval of this latter drawback contract can have any
effect on the protests under consideration.  The protests are
DENIED with regard to this issue.

     In the case of protests 000647 and 000649, the protestant
claims that the liquidation of the entries covered by the
protests was inconsistent with the findings of the Regulatory
Audit Division.  Although we have noted (in the FACTS portion of
this ruling) that there were mis-transcriptions in the recommen-
dations in the follow-up to the Audit Report with regard to
protest 000013, a thorough review of all of the protests revealed
no inconsistencies with the findings and recommendations of the
Regulatory Audit Division.  The protestant does not explain its
contention in this regard, nor does it provide any specifics on
this issue.  As the Courts have stated, "[d]etermination of
issues in customs litigation may not be based on supposition"
(United States v. Lineiro, 37 CCPA 5, 10, C.A.D. 410 (1949); see
also, with regard to the burden of evidence in protests, United
States v. Holt, 17 CCPA 385, T.D. 43822 (1930), and United States
v. Morris European & American Express Co., 3 Ct. Cust. App. 146,
T.D. 32386 (1912), the former involving the protest of the
disallowance of a drawback claim).  The protests are DENIED with
regard to this issue.

     Another issue which is raised by these protests, although
not addressed by the protestant, is that of the time within which
a drawback entry must be completed.  Under 19 CFR 191.61, a
drawback entry and all documents necessary to complete a drawback
claim must be filed within three years after the date of
exportation of the articles on which drawback is claimed, with an
exception not applicable in this case.  Also under section
191.61, no extension of this time may be granted unless it is
established that a Customs officer was responsible for the
untimely filing.  There is no evidence in the file in this case
justifying an extension under this latter provision.

     According to the follow-up to the Audit Report, in a number
of entries all of the amended drawback computations were
determined to be in error because new designations of crude oil
were not timely filed under 19 CFR 191.61 (Discrepancy 3).  This
is true of entries in protests 000647, 000649, 000013, and
000062.  Pursuant to 19 CFR 191.61, all designations of crude oil
which were not timely filed under that section will result in
denial of the drawback for the quantity of exported articles
produced from those designations.  However, if there are
designations of crude oil within the entry which were timely
filed, drawback may (and should) be granted against those
designations (although not against the untimely filed
designations), assuming the qualifying and non-qualifying
designations can be segregated and, provided that all applicable
statutory and regulatory requirements are complied with.  For
example, in the fourth entry covered by protest 000013 (described
in the FACTS portion of this ruling), initially drawback in the
amount of $27,259.64 was claimed and the initial Audit Report
found discrepancies in the accounting method in the amount of
$4,077.02.  The follow-up to the Audit Report recommended denial
of all drawback, and the entry was so liquidated, because new
designations not on the original drawback claim were untimely
submitted and "the inclusion of erroneous designations causes all
amended drawback computations to be in error."  (See also, the
sixth entry covered by protest 000647, in which $60,657.22 in
drawback was initially claimed, $153.01 in accounting method
discrepancies were noted, the amended claim was for $61,486.96 in
drawback, and the follow-up to the Audit Report recommended
denial of all drawback, and the entry was so liquidated, for the
same reason.)

     In regard to this issue, see United States v. Boyle Mfg.
Co., Inc., 31 CCPA 1, C.A.D. 240 (1943), in which part of a
drawback claim was allowed even though the time requirements
applicable in the case were not met with the remainder of the
claim, for which drawback was denied (note also, that in the
Boyle case the Court approved a system which allowed what it
called a "fair inference" for use in determining the quantity of
exports meeting the time requirement).  To the extent that there
are designations of crude oil within an entry which were timely
filed, provided that the timely and untimely filed designations
can be segregated and that all applicable statutory and
regulatory requirements are complied with, the protests are
GRANTED, with regard to the timely designations (but not the
untimely designations).

     Similarly, we note that according to the follow-up to the
Audit Report, in a number of the entries all of the amended
drawback computations were determined to be in error because the
claimant did not delete from the initial entries non-qualifying
designated oil (not meeting the "trade-off" requirements)
(Discrepancy 2).  This is true of entries in protests 000647,
000649, 000062, and 000063.  On the same basis as that stated in
the immediately preceding paragraph, if qualifying and non-
qualifying designations of crude oil in the entries in which this
deficiency exists can be segregated, drawback may (and should) be
granted, provided that all applicable statutory and regulatory
requirements are complied with.  To the extent that the entries
covered by these protests include qualifying (insofar as this
issue is concerned) designations of crude oil, provided that the
qualifying and non-qualifying designations of crude oil can be
segregated and that all applicable statutory and regulatory
requirements are complied with, the protests are GRANTED, with
regard to the qualifying designations (but not the non-qualifying
designations).


HOLDING:

     The disposition of the Protests/Applications for Further
Review of denial of drawback described in the FACTS portion of
this ruling is as follows:

     1.  The protests are DENIED with regard to the contention of
     the protestant that the drawback entries covered by the
     protests may be subject to new drawback contracts.

     2.  The protests are DENIED with regard to the contention of
     the protestant that liquidation of the entries covered by
     the protests was inconsistent with the findings of the
     Regulatory Audit Division.

     3.  To the extent that there are designations of crude oil
     within the entries covered by these protests which were
     timely filed (with regard to Discrepancy 3), provided that
     the timely and untimely filed designations can be segregated
     and that all applicable statutory and regulatory require-
     ments are complied with, the protests are GRANTED, with
     regard to the timely designations (but not the untimely
     designations).

     4.  To the extent that the entries covered by these protests
     include qualifying (with regard to Discrepancy 2) designa-
     tions of crude oil, provided that the qualifying and non-
     qualifying designations of crude oil can be segregated and
     that all applicable statutory and regulatory requirements
     are complied with, the protests are GRANTED, with regard to
     the qualifying designations (but not the non-qualifying
     designations).

     The protest is DENIED, in part, and GRANTED, in part.  A
copy of this decision should be attached to the Form 19, Notice
of Action, to be sent to the Protestant.

                               Sincerely,




                               John Durant, Director