[Federal Register Volume 67, Number 67 (Monday, April 8, 2002)]
[Rules and Regulations]
[Pages 16634-16638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8217]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR PART 191
[T.D. 02-16]
RIN 1515-AD00
Drawback; Conforming Amendments
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document amends the Customs Regulations relating to
drawback in order to conform with changes that were made to the
drawback law by the Miscellaneous Trade and Technical Corrections Act
of 1999. The amendments concern drawback on packaging material and
drawback in connection with the substitution of finished petroleum
derivatives.
Also, a minor clarification is made to the general manufacturing
drawback rulings for piece goods and woven piece goods that appear in
an appendix to the Customs drawback regulations in order to conform
these general rulings with the regulations.
EFFECTIVE DATE: April 8, 2002.
FOR FURTHER INFORMATION CONTACT:
[[Page 16635]]
William G. Rosoff, Duty and Refund Determination Branch, (202-927-
2077).
SUPPLEMENTARY INFORMATION:
Background
Drawback is a refund or remission, in whole or in part, of a
Customs duty, internal revenue tax, or fee. There are a number of
different kinds of drawback authorized under law. The statute providing
for specific types of drawback is 19 U.S.C. 1313. Some specific types
include drawback on manufactured articles, and on rejected or unused
merchandise (19 U.S.C. 1313(a), (b), (c), or (j)), as well as drawback
on packaging materials (19 U.S.C. 1313(q)), and in connection with the
substitution of certain finished petroleum derivatives (19 U.S.C.
1313(p)). The implementing regulations for drawback are contained in
part 191 of the Customs Regulations (19 CFR part 191).
The Miscellaneous Trade and Technical Corrections Act of 1999,
Public Law 106-36, 113 Stat. 127 (June 25, 1999) (the MTTCA), amended a
number of Customs laws, including two provisions of the drawback law.
In this latter regard, section 2404 of the MTTCA amended the drawback
provision dealing with packaging materials, 19 U.S.C. 1313(q). Also,
sections 2419 and 2420 of the MTTCA amended the drawback provision
dealing with the substitution of certain finished petroleum
derivatives, 19 U.S.C. 1313(p).
Packaging Material; Prior Law
Under 19 U.S.C. 1313(q), drawback was previously payable on
packaging material only when the packaging material was imported
material that was used to package or repackage merchandise or articles
that were exported or destroyed under Customs supervision and that were
eligible for drawback under either the manufacturing, rejected or
unused merchandise drawback provisions (19 U.S.C. 1313(a), (b), (c), or
(j)). Drawback was payable on the imported packaging material under the
particular drawback provision to which the packaged goods themselves
were subject, either section 1313(a), (b), (c), or (j). The drawback
was 99% of the duty that was paid on the imported packaging material.
Section 191.13, Customs Regulations (19 CFR 191.13), implemented
the provision for drawback on packaging material under 19 U.S.C.
1313(q).
Packaging Material; Amended Law
As amended by section 2404 of the MTTCA, 19 U.S.C. 1313(q) is
redesignated as 19 U.S.C. 1313(q)(1), and a new section 1313(q)(2) is
added to provide for drawback as well on packaging material that is
manufactured or produced in the United States and used to package or
repackage articles that are exported or destroyed under the
manufacturing drawback law, 19 U.S.C. 1313(a) or (b). Drawback is
payable on the packaging material pursuant to the particular
manufacturing drawback provision to which the packaged articles
themselves are subject, either section 1313(a) or (b). The drawback is
99% of the duty paid on the imported material that was used in the
manufacture or production of the packaging material.
Accordingly, Sec. 191.13 is amended in conformance with the
enhanced eligibility of packaging material for drawback under 19 U.S.C.
1313(q), as amended by section 2404 of the MTTCA.
Substitution of Finished Petroleum Derivatives; Prior Law
Under 19 U.S.C. 1313(p), which concerns the substitution of certain
finished petroleum derivatives, drawback was payable upon the timely
exportation of an article which was of the same kind and quality as a
qualified article. A qualified article was either an imported, duty-
paid article, or a manufactured article that would be eligible for
drawback under 19 U.S.C. 1313(a) or (b), should the qualified article
itself be exported. Moreover, the qualified article had to be described
in headings 2707, 2708, 2710-2715, 2901, and 2902, or in headings 3901-
3914 of the Harmonized Tariff Schedule of the United States (HTSUS).
However, in the case of headings 3901 through 3914, the qualified
articles were limited to liquids, pastes, powders, granules and flakes.
Also, for drawback to have accrued under section 1313(p), the
exporter must have imported the qualified article or have manufactured
it under section 1313(a) or (b); or have purchased or exchanged the
qualified article, either directly or indirectly, from an importer, or
from a refinery or facility which produced the article under section
1313(a) or (b). In any event, the qualified article must have been
manufactured, imported, or acquired by the exporter in the
aforementioned manner, in a quantity at least as great as the quantity
of the exported article.
To be of the same kind and quality as the qualified article (solely
for the purpose of section 1313(p)), the exported article had to fall
within the same 8-digit HTSUS tariff classification as, or be
commercially interchangeable with, the qualified article.
Furthermore, the manufacturer, producer, importer, exporter, and
drawback claimant were all required to maintain their appropriate
records as required by regulation in order for a right to drawback to
arise under 19 U.S.C. 1313(p). If a right did arise, the claimant for
drawback under section 1313(p) had to be the exporter of the exported
article, or the refiner, producer, or importer of that article.
The drawback payable under section 1313(p) was 99% of the duty
attributable to the qualified article when the qualified article was a
manufactured article that would be eligible for drawback under 19
U.S.C. 1313(a) or (b), and 100% of the duty attributable to the
qualified article when the qualified article was an imported, duty-paid
article.
Subpart Q of the Customs Regulations (19 CFR subpart Q), consisting
of Secs. 191.171-191.176 (19 CFR 191.171-191.176), implemented the
provisions providing for drawback in connection with the substitution
of finished petroleum derivatives under 19 U.S.C. 1313(p).
Substitution of Finished Petroleum Derivatives; Amended Law
Sections 2419 and 2420 of the MTTCA have made a number of
amendments to 19 U.S.C. 1313(p).
Section 2419 of the MTTCA revises the list of qualified articles
which may serve as a basis for drawback under section 1313(p) by adding
to this list articles that are described in HTSUS subheading
2909.19.14. This subheading covers methyl tertiary-butyl ether (MTBE),
a fuel additive used in gasoline. The inclusion of MTBE in the list of
articles eligible for drawback under Sec. 191.172 of the Customs
Regulations is intended to carry out the statutory requirement in the
MTTCA.
Section 2420 of the MTTCA amends 19 U.S.C. 1313(p) primarily by
allowing a party to transfer to the exporter or to an intermediate
party another article in place of the qualified article provided that
the transferred article is of the same kind and quality as the
qualified article. As indicated above, under the prior law, the
exporter, if not also the importer or refiner of the qualified article,
must in fact have received the qualified article from the importer,
refiner or an intermediate transferor, following which the exporter
could then timely export a substituted article of the same kind and
quality as the qualified article.
However, because the chain of commerce involved in petroleum
transactions may frequently include a number of different commercial
entities, such as importers, refiners, and various intermediaries, who
store their products in common tanks and ship them
[[Page 16636]]
through pipelines carrying other petroleum products, it becomes
impracticable or impossible under these circumstances for drawback
claimants to trace and account for the specific products that are
received and delivered from one entity to another. This situation
unduly restricts the flexibility of claimants and associated parties in
petroleum transactions.
Accordingly, as already noted, section 2420 of the MTTCA amends 19
U.S.C. 1313(p) by allowing an importer, refiner or producer of a
qualified article to transfer to the exporter or to an intermediate
party, in place of the qualified article, an article of the same kind
and quality as the qualified article. Also, any intermediate party in
the chain of commerce leading from the importer, refiner or producer to
the exporter may transfer to the exporter or to another intermediate
party an article of the same kind and quality as the article that it
purchased or exchanged from the prior transferring party (i.e., the
refiner, producer, importer, or another intermediate transferor). Each
transferred article, regardless of its origin (whether imported,
manufactured, substituted, or any combination thereof) would then
become the qualified article eligible for drawback for purposes of
section 1313(p).
Under the foregoing circumstances, however, the importer, refiner,
producer, or any intermediate transferor must certify on a certificate
of delivery documenting the transfer (or on a certificate of
manufacture and delivery, in the case of the manufacturer or producer
of a qualified article under section 1313(a) or (b)) that it has not,
and will not, designate on any such certificates issued a quantity
greater than the amount of the article eligible for drawback. Each
transferor must also agree to maintain appropriate records to establish
this fact.
In addition, section 2420 amends 19 U.S.C. 1313(p) as follows: (1)
Where drawback on an exported article is based on a qualified article
that is imported, duty-paid, drawback is limited to that attributable
to the qualified article under the unused merchandise drawback law, 19
U.S.C. 1313(j) (i.e., 99%, as opposed to 100%, of the duty paid on the
article); (2) the list of potential drawback claimants is broadened to
include the refiner, producer or importer of the qualified article, in
addition to the exporter, refiner, producer or importer of the exported
article; and (3) the qualified articles defined by HTSUS subheadings
3901 through 3914 are expanded to include the articles in their primary
forms as provided in Note 6 to chapter 39 of the HTSUS (i.e., in
addition to liquids, pastes, powders, granules, and flakes, this
includes dispersions (emulsions and suspensions) and solutions, as well
as blocks of irregular shape, lumps and similar bulk forms of the
articles).
Subpart Q, Customs Regulations (Secs. 191.171 through 191.176) is
amended as necessary to implement the foregoing statutory changes to 19
U.S.C. 1313(p) enacted under sections 2419 and 2420 of the MTTCA.
Appendix A to Part 191; General Manufacturing Drawback Rulings for
Piece Goods and Woven Piece Goods
In Appendix A to part 191, the general manufacturing drawback
rulings for piece goods and woven piece goods, numbered ``X.'' and
``XIV.'', respectively, state under paragraph ``G.'' concerning
``Shrinkage, Gain, and Spoilage'' that unless the claim for drawback is
based on the quantity of merchandise appearing in the exported
articles, the records of the manufacturer or producer must show the
yardage lost by shrinkage or gained by stretching during manufacture,
and the quantity of remnants resulting and of spoilage incurred, if
any. Hence, as indicated under paragraph ``G.'' in each of these
general rulings, the described records do not need to be kept if the
claim for drawback on the exported articles is to be determined on the
``appearing in'' basis.
It is noted that under Sec. 191.23(b), Customs Regulations (19 CFR
191.23(b)), drawback is allowable on the ``appearing in'' method based
only on the amount of imported or substituted merchandise that appears
in (or is contained in) the exported articles. In this context,
however, Sec. 191.23(e)(2) requires that waste records (which would
include records of shrinkage, gain and spoilage incurred in the
processing of piece goods) must be kept under the ``appearing in''
basis if such records are required to establish the quantity of
drawback-eligible merchandise or product that appears in the articles
that are claimed for drawback.
Moreover, in the final rule document amending the drawback
regulations that was published in the Federal Register (63 FR 10970) on
March 5, 1998, as T.D. 98-16, the issue was raised as to what records
under the ``appearing in'' basis were needed for waste and for
shrinkage, gain, and spoilage in relation to general manufacturing
drawback ruling ``X.'' concerning piece goods manufactured under 19
U.S.C. 1313(b). Specifically, it was stated that paragraphs ``F.'' as
well as ``G.'' in this general ruling pertaining, respectively, to
``Waste'' and ``Shrinkage, Gain, and Spoilage'' seemed to be in
conflict with the regulatory requirements for claiming drawback on the
``appearing in'' method. Customs, in response to this issue, agreed
that both paragraphs ``F.'' and ``G.'' in the general ruling would be
revised consistent with the regulatory provision (Sec. 191.23(e)(2))
that records for waste and for shrinkage, gain, and spoilage would need
to be kept if they were necessary to establish the quantity of
merchandise (eligible piece goods) that appeared in the exported
articles (63 FR at 10998). However, T.D. 98-16 did not in fact make the
corresponding changes to the actual text of this general ruling in
appendix A to part 191.
Accordingly, paragraphs ``F.'' and ``G.'' of general manufacturing
drawback ruling ``X.'' dealing with ``Waste'' and ``Shrinkage, Gain,
and Spoilage'', respectively, for piece goods manufactured under 19
U.S.C. 1313(b) will now be revised consistent with Sec. 191.23(e)(2).
Also, inasmuch as the same principle applies to general manufacturing
drawback ruling ``XIV.'' for woven piece goods manufactured under 19
U.S.C. 1313(a), as discussed above, paragraphs ``F.'' and ``G.'' of
this general ruling will be revised as well.
Executive Order 12866 and Inapplicability of Public Notice and
Comment and Delayed Effective Date Requirements and the Regulatory
Flexibility Act
Because the amendments to the drawback regulations in this final
rule are intended merely to conform with statutory law, notice and
public procedure are inapplicable and unnecessary pursuant to 5 U.S.C.
553(b)(B), and, pursuant to 5 U.S.C. 553(d)(3), a delayed effective
date is not required. Because this document is not subject to the
requirements of 5 U.S.C. 553, as noted, it is not subject to the
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Nor do the amendments result in a ``significant regulatory action''
under E.O. 12866.
Paperwork Reduction Act
The collection of information involved in this final rule has
previously been reviewed and approved by the Office of Management and
Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507) and assigned OMB Control Number 1515-0213. This rule does
not substantively change the existing approved information collection.
An agency may not conduct or sponsor, and a person is not required
to
[[Page 16637]]
respond to, a collection of information unless the collection of
information displays a valid control number assigned by OMB.
List of Subjects in 19 CFR Part 191
Claims, Commerce, Customs duties and inspection, Drawback, Exports,
Reporting and recordkeeping requirements.
Amendments to the Regulations
Part 191, Customs Regulations (19 CFR part 191), is amended as set
forth below.
PART 191--DRAWBACK
1. The general authority citation for part 191 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 22,
Harmonized Tariff Schedule of the United States), 1313, 1624.
* * * * *
2. Section 191.13 is amended by designating its existing text as
paragraph (a), adding a heading to newly designated paragraph (a), and
revising its first sentence, and by adding a new paragraph (b), to read
as follows:
Sec. 191.13 Packaging materials.
(a) Imported packaging material. Drawback of duties is provided in
Sec. 313(q)(1) of the Act, as amended (19 U.S.C. 1313(q)(1)), on
imported packaging material when used to package or repackage
merchandise or articles exported or destroyed pursuant to Sec. 313(a),
(b), (c), or (j) of the Act, as amended (19 U.S.C. 1313(a), (b), (c),
or (j)).* * *
(b) Packaging material manufactured in United States from imported
materials. Drawback of duties is provided in Sec. 313(q)(2) of the Act,
as amended (19 U.S.C. 1313(q)(2)), on packaging material that is
manufactured or produced in the United States from imported materials
and used to package or repackage articles that are exported or
destroyed under Sec. 313(a) or (b) of the Act, as amended (19 U.S.C.
1313(a) or (b)). Drawback is payable on the packaging material under
the particular manufacturing drawback provision to which the packaged
articles themselves are subject, either 19 U.S.C. 1313(a) or (b), as
applicable. The drawback will be based on the duty, tax, or fee that is
paid on the imported merchandise used to manufacture or produce the
packaging material. The packaging material and the imported merchandise
used in its manufacture or production must be separately identified on
the claim, and all other information and documents required for the
particular drawback provision under which the claim is made must be
provided for the packaging material as well as the imported merchandise
used in its manufacture or production, for purposes of determining the
applicable drawback payable.
3. Section 191.171 is amended by revising paragraph (a) to read as
follows:
Sec. 191.171 General; drawback allowance.
(a) General. Section 313(p) of the Act, as amended (19 U.S.C.
1313(p)), provides for drawback on the basis of qualified articles
which consist of either petroleum derivatives that are imported, duty-
paid, and qualified for drawback under the unused merchandise drawback
law (19 U.S.C. 1313(j)(1)), or petroleum derivatives that are
manufactured or produced in the United States, and qualified for
drawback under the manufacturing drawback law (19 U.S.C. 1313(a) or
(b)).
* * * * *
4. Section 191.172 is amended by revising paragraph (a) to read as
follows:
Sec. 191.172 Definitions.
* * * * *
(a) Qualified article. ``Qualified article'' means an article
described in headings 2707, 2708, 2710 through 2715, 2901, 2902,
2909.19.14, or 3901 through 3914 of the Harmonized Tariff Schedule of
the United States (HTSUS). In the case of an article described in
headings 3901 through 3914, the definition covers the article in its
primary forms as provided in Note 6 to chapter 39 of the HTSUS.
* * * * *
5. Section 191.173 is amended by revising paragraph (e) to read as
follows:
Sec. 191.173 Imported duty-paid derivatives (no manufacture).
* * * * *
(e) Amount of drawback. The amount of drawback payable may not
exceed the amount of drawback which would be attributable to the
imported qualified article under 19 U.S.C. 1313(j)(1) which serves as
the basis for drawback.
6. Section 191.175 is amended by revising the first sentence of
paragraph (a); by redesignating the existing text of paragraph (b) as
paragraph (b)(1), and adding a heading to newly redesignated paragraph
(b)(1); by adding a new paragraph (b)(2); and by revising paragraph
(c), to read as follows:
Sec. 191.175 Drawback claimant; maintenance of records.
(a) Drawback claimant. A drawback claimant under 19 U.S.C. 1313(p)
must be the exporter of the exported article, or the refiner, producer,
or importer of either the qualified article or the exported article. *
* *
(b) Certificate of manufacture and delivery or delivery. (1)
General. * * *
(2) Article substituted for the qualified article. (i) Subject to
paragraph (b)(2)(iii) of this section, the manufacturer, producer, or
importer of a qualified article may transfer to the exporter an article
of the same kind and quality as the qualified article, as so certified,
respectively, in a certificate of manufacture and delivery or a
certificate of delivery, in a quantity not greater than the quantity of
the qualified article.
(ii) Subject to paragraph (b)(2)(iii) of this section, any
intermediate party in the chain of commerce leading to the exporter
from the manufacturer, producer, or importer of a qualified article may
also transfer to the exporter or to another intermediate party an
article of the same kind and quality as the article purchased or
exchanged from the prior transferor (whether the manufacturer,
producer, importer, or another intermediate transferor), as so
certified in a certificate of delivery, in a quantity not greater than
the quantity of the article purchased or exchanged.
(iii) Under either paragraph (b)(2)(i) or (b)(2)(ii) of this
section, the article transferred, regardless of its origin (imported,
manufactured, substituted, or any combination thereof), so designated
on a certificate of delivery or, in the case of the manufacturer or
producer of a qualified article under 19 U.S.C. 1313(a) or (b), on a
certificate of manufacture and delivery, will be the qualified article
eligible for drawback for purposes of section 1313(p), provided that
the following conditions are met:
(A) The party who issues the applicable certificate for the
transferred article must expressly state on the certificate that the
certificate is prepared pursuant to 19 U.S.C. 1313(p) (the article may
not be designated for any other drawback purposes);
(B) The party must certify to the Commissioner of Customs on the
certificate or an attachment that it has not, and will not, designate
on that certificate and on any other such certificates issued a
quantity of the article greater than the amount eligible for drawback;
and
(C) The party must certify to the Commissioner of Customs on the
applicable certificate or on an attachment that it will maintain
appropriate records which establish that it has not designated on any
such certificates issued a greater quantity than the amount eligible
for drawback.
(c) Maintenance of records. The manufacturer, producer, importer,
transferor, exporter and drawback
[[Page 16638]]
claimant of the qualified article and the exported article must all
maintain their appropriate records required by this part.
7. In appendix A to part 191, general manufacturing drawback
rulings ``X.'' and ``XIV.'', respectively, are amended by adding a
sentence after the third sentence of paragraph ``F.'', and by adding a
sentence at the end of paragraph ``G.'', to read as follows:
Appendix to Part 191--General Manufacturing Drawback Rulings
* * * * *
X. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for
Piece Goods (T.D. 83-73)
* * * * *
F. Waste
* * * If necessary to establish the quantity of merchandise
(eligible piece goods) appearing in the exported articles, such
waste records will also be kept. * * *
G. Shrinkage, Gain, and Spoilage
* * * If necessary to establish the quantity of merchandise
(eligible piece goods) appearing in the exported articles, such
records for shrinkage, gain and spoilage will also be kept.
* * * * *
XIV. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) for
Woven Piece Goods (T.D. 83-84)
* * * * *
F. Waste
* * * If necessary to establish the quantity of merchandise
(eligible piece goods) appearing in the exported articles, such
waste records will also be kept. * * *
G. Shrinkage, Gain, and Spoilage
* * * If necessary to establish the quantity of merchandise
(eligible piece goods) appearing in the exported articles, such
records for shrinkage, gain, and spoilage will also be kept.
* * * * *
Robert C. Bonner,
Commissioner of Customs.
Approved: April 1, 2002.
Timothy E. Skud,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 02-8217 Filed 4-5-02; 8:45 am]
BILLING CODE 4820-02-P