HQ 223847: Internal Advice request concerning the destruction ofdefective goods to receive drawback, and waiver of the noticerequirement before destruction; 19 U.S.C. 1313(c); 19 U.S.C.1313(j); 19 CFR 146.52

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 223847
                          June 26, 1992


DRA-2-02-CO:R:C:E   223847  SR

CATEGORY:  Entry/Drawback

Regional Director
Commercial Operations
Suite 801
10 Causeway Street
Boston, MA 02222-1056

RE:  Internal Advice request concerning the destruction of
defective goods to receive drawback, and waiver of the notice
requirement before destruction; 19 U.S.C. 1313(c); 19 U.S.C.
1313(j); 19 CFR 146.52

Dear Sir:

     This request for internal advice was initiated by a letter
dated March 27, 1992, from the Regional Director, Commercial
Operations, of the Northeast Region of Customs.

FACTS:

     Robert Bosch Corporation manufactures and exports various
automotive components.  Bosch receives manufacturing drawback
under TD 81-300.  Bosch performs quality control tests throughout
the manufacturing process.  Articles that do not pass these tests
are moved to a segregated area of inventory for destruction. 
Bosch wishes to destroy the articles that do not work to receive
drawback.  19 U.S.C. 1313(c) provides drawback for merchandise
not conforming to sample or specifications.  This includes
merchandise with latent defects that are not discovered until
they are used.  Because little factual information was provided,
for the sake of this ruling we will assume that the reason that
the merchandise does not pass quality control is because of
latent defects that were not discovered at the time of
importation.

     Bosch also has duty-paid components and/or raw materials
which have become obsolete within three years of the date of
import, which have never been used, and are in the same condition
as when imported.  These articles are taken to a Bosch factory
where they are destroyed by crushing.  They wish to destroy these
articles in order to receive same condition drawback without
giving prior notice to Customs.



                               -2-


ISSUES:

     (1)  Whether imported articles that do not conform to the
importer's specifications can be destroyed in order to receive
drawback.

     (2)  Whether articles in storage may be destroyed on the
company's premises without notification to Customs.

LAW AND ANALYSIS:

                             ISSUE 1

     Title 19 United States Code, section 1313(c), provides as
follows:

       Upon the exportation of merchandise not conforming to
     sample or specifications or shipped without the consent of
     the consignee upon which the duties have been paid and which
     have been entered or withdrawn for consumption and, within
     ninety days after release from Customs custody, unless the
     Secretary authorizes in writing a longer time, returned to
     Customs custody for exportation, the full amount of the
     duties paid upon such merchandise shall be refunded as
     drawback, less 1 per centum of such duties.

     The statute requires that in order for non-conforming goods
to receive drawback they must be returned to Customs custody for
exportation.  However, merchandise may be considered exported
without an actual exportation if it is entered into a Foreign
Trade Zone (FTZ) in zone restricted status to be destroyed.    

     The importer requests that the requirement of entrance of
the goods into a zone to be destroyed be waived.  Destruction
outside of the zone is allowed, as provided in 19 CFR 146.52(e),
however, this is only for cases in which destruction cannot be
accomplished within the zone.  Bosch has not provided any
evidence that their merchandise cannot be safely destroyed within
the zone.
     
                             ISSUE 2
     
     Bosch also wishes to receive drawback on outdated
merchandise that is in the same condition as when imported. 
Bosch wishes to destroy this outdated merchandise at any time
without having to give notice to Customs.  19 U.S.C. 1313(j) 





                               -3-

provides for same condition drawback as follows:

     (1) If imported merchandise, on which was paid any duty,
     tax, or fee imposed under Federal law because of its
     importation-

          (A) is, before the close of the three-year period
          beginning on the date of importation-

          (i) exported in the same condition as when imported, or
          (ii) destroyed under Customs supervision . . .

     C.S.D. 82-128 states that "destroyed under Customs
supervision" does not require on site observation of the
destruction by Customs but does require the opportunity to
observe the destruction.  However, if the Customs District
Director in Boston is willing, the company should be able to set
up a regular schedule, such as every Wednesday at 3:00, to
destroy the articles.  If Customs agreed to a specific schedule
then the Customs office would have notice and would have the
opportunity to observe the destruction when they feel it
necessary.

     In order to receive drawback, of any type, it is important
that all legal requirements are followed.  The court in Carl
Matuzel Shipping Co., Inc. et al. v. United States, C.D. 2406, 51
Cust. Ct. 8 (1963), states that " . . . compliance with the
provisions of the statute and of the Customs Regulations is
essential before refunds can be allowed as drawback."

HOLDING:

                             ISSUE 1

     Merchandise may be considered to be exported by entrance
into a Foreign Trade Zone in zone restricted status, however, the
requirement of entrance into a Foreign Trade Zone cannot be
waived.  

                             ISSUE 2

     Customs must be given notice of destruction of merchandise  


                               -4-

in order to have the opportunity to observe the destruction.

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division

Enclosures