HQ 222808: Internal Advice Request on Protest of Drawback Denial; 19 U.S.C. 1313(a); 19 U.S.C. 81c(a), Fourth Proviso; Detrimental Reliance; Protest 1001-88-006740

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 222808

                        February 4, 1991

PRO-4/DRA-1-02-CO:R:C:E 222808 PH

CATEGORY:  Drawback

Area Director
New York Seaport Area
ATTN:  Mr. Joseph DiSalvo


RE:  Internal Advice Request on Protest of Drawback Denial; 19
     U.S.C. 1313(a); 19 U.S.C. 81c(a), Fourth Proviso;
     Detrimental Reliance; Protest 1001-88-006740

Dear Sir:

     With its October 31, 1990, (File:  PRO-2-05-O:C:R JAD),
memorandum, the Protest and Control Section in your Area forward-
ed the subject protest file.  As is pointed out in the materials
in the file, the protest does not appear to meet the requirements
for further review (see 19 CFR 174.24 and 174.25).  In view of
the special circumstances in this case, and because no action has
thus far been taken on the protest (i.e., Block 13 of the protest
form has not been completed), we are treating the memorandum from
your Protest and Control Section as a request for internal advice
(see 19 CFR 177.11).  We are returning the protest files for
action as indicated in this letter.  Our advice follows.

FACTS:

     This protest concerns the denial of drawback under 19 U.S.C.
1313(a).  According to the file (this statement of facts is based
on uncontradicted information in the file), imported pharmaceuti-
cal merchandise was used in the manufacture of pharmaceutical
tablets under a drawback contract submitted by the protestant on
March 24, 1987, and approved by Customs on April 10, 1987.  The
dates of the entries for the imported merchandise are April 4 and
September 10, 1985, and July 11, 1986.

     The tablets were manufactured pending approval by the Food
and Drug Administration (FDA).  The protestant states that
because of a delay in FDA approval, the protestant decided to
destroy the tablets.  The protestant was unable to find a foreign
trade zone (FTZ) with an environmentally acceptable facility in
which to destroy the tablets and learned that the only such
facility in the area was Rollins Environmental Service in
Bridgeport, New Jersey (Rollins).  On September 30, 1987, the
protestant wrote to Customs in Philadelphia, Pennsylvania,
seeking permission to file a FTZ entry and for a FTZ operator to
file a Notice of Destruction with Customs for direct in-bond
transportation to Rollins.  In this letter the protestant stated
that the reason for its request was that "it is not possible to
properly incinerate the [tablets] in a FTZ."

     The Customs official to whom the protestant wrote its
September 30, 1987, letter advised the protestant that the
tablets did not need to be transferred to a FTZ for destruction
in order to claim drawback under 19 U.S.C. 1313(a).  The Customs
official approved the destruction of the tablets at Rollins and
they were there destroyed on or about November 16, 1987.  In a
letter dated August 3, 1988, the Customs official confirmed the
above actions.

     A drawback entry was filed by the protestant on January 20,
1988.  The drawback entry was liquidated on May 27, 1988, with
drawback denied.  The subject protest/application for further
review was filed on August 16, 1988.

ISSUE:

     May a protest of the denial of drawback under 19 U.S.C.
1313(a) be granted when the articles manufactured from the
imported merchandise were destroyed outside a FTZ without having
been actually taken into the FTZ, but the destruction outside the
FTZ was approved by a Customs official who advised the protestant
that the articles did not need to be transferred to a FTZ for
destruction in order to claim drawback under 19 U.S.C. 1313(a)?

LAW AND ANALYSIS:

     Drawback under section 313(a), Tariff Act of 1930, as
amended (19 U.S.C. 1313(a)) is authorized "[u]pon the exportation
of articles manufactured or produced in the United States with
the use of imported merchandise", upon compliance with the
provisions in 19 U.S.C. 1313 and the Customs Regulations issued
thereunder (19 CFR Part 191).  Pursuant to the fourth proviso of
section 3 of the Foreign Trade Zone Act of 1934, as amended (19
U.S.C. 81c), under rules and regulations of the appropriate
Federal agencies, articles which have been taken into a FTZ for
"the sole purpose of exportation, destruction ..., or storage"
shall be considered to be exported for the purpose of drawback
and certain other provisions.  The Customs Regulations with
regard to FTZ's are found in 19 CFR Part 146 (see, in particular,
19 CFR 146.44; see also 19 CFR 191.161 et seq.).

     The only authority for permitting the destruction of
merchandise outside a FTZ to qualify for exportation of the
merchandise for purposes of drawback under the fourth proviso of
19 U.S.C. 81c is found in 19 CFR 146.52(e) and 146.70(a).  These
regulations provide that Customs may permit the destruction of
merchandise covered by this provision to be transferred from a
FTZ to Customs territory and there destroyed under certain
circumstances.  However, the merchandise must actually have been
taken into the FTZ.

     In this case, the merchandise was not actually taken into
the FTZ and, therefore, in the normal course of events, drawback
should not be granted.  However, the protestant has provided
clear evidence that it acted with the approval of an appropriate
Customs official.  That Customs official has verified that he
advised the protestant that the merchandise did not need to be
transferred to a FTZ for destruction in order to claim drawback
under 19 U.S.C. 1313(a).  In a recent ruling (File:  DRA-4
CO:R:C:E 221245 GG, dated October 19, 1990, copy enclosed) we
concluded that in such an instance an otherwise eligible drawback
claimant should not be penalized for its failure to follow the
correct procedure (see first paragraph on page 8 of the refer-
enced ruling).  Accordingly, we conclude that the protest should
be granted in this case, assuming that the protestant otherwise
qualifies for drawback.

HOLDING:

     Normally, drawback under 19 U.S.C. 1313(a) may not be
granted when the articles manufactured from the imported merchan-
dise were destroyed outside a FTZ without having been actually
taken into the FTZ.  When, as in this case, the destruction
outside the FTZ was approved by an appropriate Customs official
who advised the protestant that the articles did not need to be
transferred to a FTZ for destruction in order to claim drawback
under 19 U.S.C. 1313(a), an otherwise eligible drawback claimant
should not be penalized for its failure to follow the correct
procedure (Ruling 221245).  

     You are directed to grant the protest under consideration,
provided that the protestant otherwise qualifies for drawback.

                              Sincerely,




                              John Durant, Director
                              Commercial Rulings Division