Restrictions on Drawback and Duty-Deferral Programs

[Title 19 CFR E]
[Code of Federal Regulations (annual edition) - April 1, 2002 Edition]
[Title 19 - CUSTOMS DUTIES]
[Chapter I - UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY]
[Part 181 - NORTH AMERICAN FREE TRADE AGREEMENT]
[Subpart E - Restrictions on Drawback and Duty-Deferral Programs]
[From the U.S. Government Printing Office]

19CUSTOMS DUTIES22002-04-012002-04-01falseRestrictions on Drawback and Duty-Deferral ProgramsESubpart ECUSTOMS DUTIESUNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURYNORTH AMERICAN FREE TRADE AGREEMENT
Subpart E--Restrictions on Drawback and Duty-Deferral Programs

Sec. 181.41 Applicability.

This subpart sets forth the provisions regarding drawback claims and
duty-deferral programs under Article 303 of the NAFTA and applies to any
good that is a ``good subject to NAFTA drawback'' within the meaning of
19 U.S.C. 3333. Except in the case of Sec. 181.42(d), the provisions of
this subpart apply to goods which are imported into the United States
and then subsequently exported from the United States to Canada on or
after January 1, 1996, or to Mexico on or after January 1, 2001. The
requirements and procedures set forth in this subpart for NAFTA drawback
are in addition to the general definitions, requirements and procedures
for all drawback claims set forth in part 191 of this chapter, unless
otherwise specifically provided in this subpart. Also, the requirements
and procedures set forth in this subpart for NAFTA duty-deferral
programs are in addition to the requirements and procedures for
manipulation, manufacturing and smelting and refining warehouses
contained in part 19 and part 144 of this chapter, for foreign trade
zones under part 146 of this chapter, and for temporary importations
under bond contained in part 10 of this chapter.

Sec. 181.42 Duties and fees not subject to drawback.

The following duties or fees which may be applicable to a good
entered for consumption in the Customs territory of the United States
are not subject to drawback under this subpart:
(a) Antidumping and countervailing duties;
(b) A premium offered or collected on a good with respect to
quantitative import restrictions, tariff rate quotas or tariff
preference levels;
(c) Fees applied under section 22 of the U.S. Agricultural
Adjustment Act; and
(d) Customs duties paid or owed under unused merchandise
substitution drawback. There shall be no payment of such drawback under
19 U.S.C. 1313(j)(2) on goods exported to Canada or Mexico on or after
January 1, 1994.

Sec. 181.43 Eligible goods subject to drawback.

Except as otherwise provided in this subpart, drawback is authorized
for an imported good that is entered for consumption and is:
(a) Subsequently exported to Canada or Mexico (see 19 U.S.C.
1313(j)(1));
(b) Used as a material in the production of another good that is
subsequently exported to Canada or Mexico (see 19 U.S.C. 1313(a)); or
(c) Substituted by a good of the same kind and quality as defined in
Sec. 181.44(c) of this subpart and used as a material in the production
of another good that is subsequently exported to Canada or Mexico (see
19 U.S.C. 1313(b)).

Sec. 181.44 Calculation of drawback.

(a) General. Except in the case of goods specified in Sec. 181.45 of
this part, drawback of the duties previously paid upon importation of a
good into the United States may be granted by the United States, upon
presentation of a NAFTA drawback claim under this subpart, on the lower
amount of:
(1) The total duties paid or owed on the good in the United States;
or
(2) The total amount of duties paid on the exported good upon
subsequent importation into Canada or Mexico.
(b) Individual relative value and duty comparison principle. For
purposes of this section, relative value shall be determined, and the
comparison between the duties referred to in paragraph (a)(1) of this
section and the duties referred to in paragraph (a)(2) of this section
shall be made, separately with reference to each individual exported
good, including where two components or materials are used to produce
one exported good or one component or material is divided among multiple
exported goods.

Example. Upon importation of Chemical X into the United States,
Company A entered Chemical X and paid $2.00 in duties. Company A
processed Chemical X into Products Y and Z, each having the same
relative value; that is, $1.00 in duty is attributable to Product Y and
$1.00 in duty is attributable to Product Z. Company A exported Product Y
to Canada and Canada assessed a free rate of duty. Company A exported
Product Z to Mexico and Mexico assessed the equivalent of US$2.00 in
duty. There is no entitlement to drawback on the export of Product Y to

[[Page 359]]

Canada because zero is the lesser amount when compared to the $1.00 in
duty attributable to Product Y as a result of the separation of Chemical
X into Products Y and Z. There would be entitlement to drawback on the
export to Mexico, consisting of the $1.00 duty attributable to Product
Z, because that amount is the lesser amount when comparing the duty paid
to the United States and the US$ equivalent duty paid to Mexico.

(c) Direct identification manufacturing drawback under 19 U.S.C.
1313(a). Upon presentation of the NAFTA drawback claim under 19 U.S.C.
1313(a), in which the amount of drawback payable is based on the lesser
amount of the customs duties paid on the good either to the United
States or to Canada or Mexico, the amount of drawback refunded shall not
exceed 99 percent of the duty paid on such imported merchandise into the
United States.

Example 1. Upon the importation of Product X to the United States
from Japan, Company A paid $2.00 in duties. Company A manufactured the
imported Product X into Product Y, and subsequently exported it to
Mexico. Mexico assessed the equivalent of US$11.00 in duties upon
importation of Product Y. Upon presenting a drawback claim in the United
States, in accordance with 19 U.S.C. 1313(a), Company A would be
entitled to a refund of 99 percent of the $2.00, or $1.98. The $2.00
paid by Company A (less 1 percent) on the importation of Product X into
the United States is a lesser amount of duties than the total amount of
customs duties paid to Mexico (the equivalent of US$11.00) on Product Y.
Example 2. Upon the importation of Product X into the United States
from Hong Kong, Company A entered Product X and paid $5.00 in duties.
Company A manufactured Product X into Product Y, sold it to Company B in
Mexico and subsequently exported it to Mexico. Company A reserved its
right to drawback. Upon Product Y's importation, Company B was assessed
a free rate of duty. Company A's claim for drawback will be denied
because Company A is entitled to zero drawback for the reason that, as
between the duty paid in the United States and the duty paid in Mexico,
the duty in Mexico was zero.

(d) Substitution manufacturing drawback under 19 U.S.C. 1313(b).
Upon presentation of a NAFTA drawback claim under 19 U.S.C. 1313(b), on
which the amount of drawback payable is based on the lesser amount of
the customs duties paid on the good either to the United States or to
Canada or Mexico, the amount of drawback is the same as that which would
have been allowed had the substituted merchandise used in manufacture
been itself imported. For purposes of drawback under this subpart, the
term ``same kind and quality'' used in Sec. 1313(b) (see
Sec. 191.2(x)(1) of this chapter) shall have the same meaning as the
term ``identical or similar good'' used in Article 303 of the NAFTA
except that there shall be no requirement that the good be manufactured
in the same country.

Example 1. Upon importation of Product X from Japan to the United
States, Company A paid $5.00 in duties. Company A substituted a same
kind and quality domestic Product X for the Japanese Product X in its
production of Product Y under its 19 U.S.C. 1313(b) drawback contract.
Company A sold Product Y to Company B which subsequently exported it to
Canada. On the importation of Product Y by Company B, Company B paid the
equivalent of US$2.00 in duties assessed by Revenue Canada and waived
its right to drawback to Company A. Company A is entitled to obtain
drawback under 19 U.S.C. 1313(b) in the United States in the amount of
$1.98 (or 99 percent of the US$2.00 equivalent Company B paid in duty to
Canada) since that $2.00 was the lesser of the total amount of customs
duties paid on the product to either Canada or the United States.
Example 2. Same facts as above example, but Company B paid the
equivalent of US$5.00 to Revenue Canada. Company A is entitled to obtain
$4.95 in drawback (a refund of 99 percent of $5.00 paid to the United
States). Since the same amount of duty was assessed by each country,
drawback is allowable because the drawback paid does not exceed the
lesser amount paid.

(e) Meats cured with imported salt. Meats, whether packed or smoked,
which have been cured with imported salt may be eligible for drawback in
aggregate amounts of not less than $100 in duties paid on the imported
salt upon exportation of the meats to Canada or Mexico (see 19 U.S.C.
1313(f)).

Example. Company Z produced Virginia smoked ham on its Smithfield,
Virginia farm, using 4,000 pounds of imported salt in curing the meat.
The salt was imported from an HTSUS Column 2 country, with a duty of
$200. Upon exportation of the hams to Mexico, Company Z pays the
equivalent of US$250.00 in duties to Mexico. Company Z is entitled to
drawback of the full 100 percent of the $200.00 in duties it paid on the
importation of the salt into the United States because that $200.00 is a
lesser amount than the

[[Page 360]]

total amount of customs duties paid to Mexico on the exported meat.

(f) Jet aircraft engines. A foreign-built jet aircraft engine that
has been overhauled, repaired, rebuilt, or reconditioned in the United
States with the use of imported merchandise, including parts, may be
eligible for drawback of duties paid on the imported merchandise in
aggregate amounts of not less than $100 upon exportation of the engine
to Canada or Mexico (19 U.S.C. 1313(h)).

Example. A Swedish-made jet aircraft engine is repaired in the
United States using imported parts from Korea on which $160.00 in duties
have been paid by Company W. The engine is subsequently exported to
Canada by Company W and Company W pays the equivalent of US$260.00 in
duties to Canada. Upon showing the country in which the engine was
manufactured and a description of the processing performed thereon in
the United States on Customs Form 7551, appropriately modified, Company
W is entitled to the full refund of the duties paid to the United States
since that $160.00 was a lesser amount than the duties paid on the
engine to Canada.

(g) Unused goods under 19 U.S.C. 1313(j)(1) that have changed in
condition. An imported good that is unused in the United States under 19
U.S.C. 1313(j)(1) and that is shipped to Canada or Mexico not in the
same condition within the meaning of Sec. 181.45(b)(1) may be eligible
for drawback under this section, except when the shipment to Canada or
Mexico does not constitute an exportation under 19 U.S.C. 1313(j)(4).

Example. Upon importation of Product X from Spain to the United
States, the U.S. importer pays $10.00 in duties. While in the original
package in the importer's warehouse, Product X becomes damaged. A
Canadian purchaser buys Product X and imports it into Canada and pays
the equivalent of US$5.00 in duties assessed by Revenue Canada. The
Canadian purchaser who exported Product X from the United States to
Canada and who otherwise qualifies for drawback is entitled to drawback
under 19 U.S.C. 1313(j)(1) in the amount of $4.95 (99 percent of the
US$5.00 equivalent in duties paid to Canada). Eligibility for full
drawback of the $10.00 in U.S. duties under Sec. 181.45(b) would be
precluded because Product X, although unused, was not exported to Canada
in the same condition as when imported into the United States within the
meaning of Sec. 181.45(b)(1).

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11005, Mar. 5, 1998]

Sec. 181.45 Goods eligible for full drawback.

(a) Goods originating in Canada or Mexico. A Canadian or Mexican
originating good that is dutiable and is imported into the United States
is eligible for drawback without regard to the limitation on drawback
set forth in Sec. 181.44 of this part if that originating good is:
(1) Subsequently exported to Canada or Mexico;
(2) Used as a material in the production of another good that is
subsequently exported to Canada or Mexico; or
(3) Substituted by a good of the same kind and quality and used as a
material in the production of another good that is subsequently exported
to Canada or Mexico.

Example. Company A imports a dutiable (3 percent rate) Canadian
originating good. During Company A's manufacturing process, Company A
substitutes a German good of the same kind and quality (on which duty
was paid at a 2.5 percent rate) in the production of another good that
is subsequently exported to Canada. Company A may designate the dutiable
Canadian entry and claim full drawback (99 percent) on the 3 percent
duty paid under 19 U.S.C. 1313(b). (Note: NAFTA originating goods will
continue to receive full drawback as they cross NAFTA borders for
successive stages of production until NAFTA tariffs are fully phased
out.)

(b) Claims under 19 U.S.C 1313(j)(1) for goods in same condition. A
good imported into the United States and subsequently exported to Canada
or Mexico in the same condition is eligible for drawback under 19 U.S.C.
1313(j)(1) without regard to the limitation on drawback set forth in
Sec. 181.44 of this part.

Example. X imports a desk into the United States from England and
pays $25.00 in duty. X immediately exports the desk to Z in Mexico and Z
pays the equivalent of US$10.00 in Mexican duties. X can obtain a refund
of 99 percent of the $25.00 paid upon importation of the desk into the
United States.

(1) Same condition defined. For purposes of this subpart, a
reference to a

[[Page 361]]

good in the ``same condition'' includes a good that has been subjected
to any of the following operations provided that no such operation
materially alters the characteristics of the good:
(i) Mere dilution with water or another substance;
(ii) Cleaning, including removal of rust, grease, paint or other
coatings;
(iii) Application of preservative, including lubricants, protective
encapsulation, or preservation paint;
(iv) Trimming, filing, slitting or cutting;
(v) Putting up in measured doses, or packing, repacking, packaging
or repackaging; or
(vi) Testing, marking, labelling, sorting or grading.
(2) Commingling of fungible goods-- (i) General--(A) Inventory of
other than all non-originating goods. Commingling of fungible
originating and non-originating goods in inventory is permissable
provided that the origin of the goods and the identification of entries
for designation for same condition drawback are on the basis of an
approved inventory method set forth in the appendix to this part.
(B) Inventory of the non-originating goods. If all goods in a
particular inventory are non-originating goods, identification of
entries for designation for same condition drawback shall be on the
basis of one of the accounting methods in Sec. 191.14 of this chapter,
as provided therein.
(ii) Exception. Agricultural goods imported from Mexico may not be
commingled with fungible agricultural goods in the United States for
purposes of same condition drawback under this subpart.
(c) Goods not conforming to sample or specifications or shipped
without consent of consignee under 19 U.S.C. 1313(c). An imported good
exported to Canada or Mexico by reason of failure of the good to conform
to sample or specification or by reason of shipment of the good without
the consent of the consignee is eligible for drawback under 19 U.S.C.
1313(c) without regard to the limitation on drawback set forth in
Sec. 181.44 of this part. Such a good must be returned to Customs
custody for exportation under Customs supervision within three years
after the release from Customs custody.

Example. X orders, after seeing a sample in the ABC Company's
catalog, a certain quantity of 2-by-4 lumber from ABC Company located in
Honduras. ABC Company, having run out of the specific lumber, ships
instead a different kind of lumber. X rejects the lumber because it did
not conform to the sample and is asked to send it to a customer of ABC
in Canada. X exports it within 90 days of its release from Customs
custody. X may recover 99 percent of the $500 duties it paid to U.S.
Customs upon the exportation of the lumber, or $495.00.

(d) Certain goods exported to Canada. Goods identified in Annex
303.6 of the NAFTA and in sections 203(a) (7) and (8) of the North
American Free Trade Agreement Implementation Act, if exported to Canada,
are eligible for drawback without regard to the limitation on drawback
set forth in Sec. 181.44 of this part.

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11005, Mar. 5, 1998]

Sec. 181.46 Time and place for filing drawback claim.

(a) Time of filing. A drawback claim under this subpart shall be
filed or applied for, as applicable, within 3 years after the date of
exportation of the goods on which drawback is claimed. No extension will
be granted unless it is established that a Customs officer was
responsible for the untimely filing. Drawback shall be allowed only if
the completed good is exported within 5 years after importation of the
merchandise identified or designated to support the claim. A good
subject to a claim for same condition drawback must be exported before
the close of the 3-year period beginning on the date of importation of
the good into the United States.
(b) Place of filing. A drawback claim must be filed at the drawback
office(s) where the manufacturing drawback contract is on file, whether
a general rate or specific rate, but exportation need not occur from
that port. To facilitate expedited processing of claims, claimants
should file same condition drawback claims in the port where the
examination would take place (see

[[Page 362]]

Sec. 191.141(b)(3) (ii) and (iii) of this chapter). Customs must be
notified at least 2 working days in advance of the intended date of
exportation in order to have the opportunity to examine the goods.

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11005, Mar. 5, 1998]

Sec. 181.47 Completion of claim for drawback.

(a) General. A claim for drawback shall be granted, upon the
submission of appropriate documentation to substantiate compliance with
the drawback laws and regulations of the United States, evidence of
exportation to Canada or Mexico, and satisfactory evidence of the
payment of duties to Canada or Mexico. Unless otherwise provided in this
subpart, the documentation, filing procedures, time and place
requirements and other applicable procedures required to determine
whether a good qualifies for drawback shall be in accordance with the
provisions of part 191 of this chapter; however, a drawback claim
subject to the provisions of this subpart shall be filed separately from
any part 191 drawback claim (that is, a claim that involves goods
exported to countries other than Canada or Mexico). Claims
inappropriately filed or otherwise not completed within the 3-year
period specified in Sec. 181.46 of this part shall be considered
abandoned.
(b) Complete drawback claim--(1) General. A complete drawback claim
under this subpart shall consist of the filing of the appropriate
completed drawback entry form, evidence of exportation (a copy of the
Canadian or Mexican customs entry showing the amount of duty paid to
Canada or Mexico) and its supporting documents, certificate(s) of
delivery, when necessary, or certificate(s) of manufacture and delivery,
and a certification from the Canadian or Mexican importer as to the
amount of duties paid. Each drawback entry form filed under this subpart
shall be conspicuously marked at the top with the word ``NAFTA''.
(2) Specific claims. The following documentation, for the drawback
claims specified below, must be submitted to Customs in order for a
drawback claim to be processed under this subpart. Missing documentation
or incorrect or incomplete information on required customs forms or
supporting documentation will result in an incomplete drawback claim.
(i) Manufacturing drawback claim. The following shall be submitted
in connection with a claim for direct identification manufacturing
drawback or substitution manufacturing drawback:
(A) A completed Customs Form 331, to establish the manufacture of
goods made with imported merchandise and, if applicable, the identity of
substituted domestic, duty-paid or duty-free merchandise, and including
the tariff classification number of the imported merchandise;
(B) Customs Form 7501 or the import entry number;
(C) Exporter summary procedure, if applicable. For purposes of this
subpart, the exporter summary procedure must include the Canadian or
Mexican customs entry number and the amount of duty paid to Canada or
Mexico;
(D) Evidence of exportation and satisfactory evidence of the payment
of duties in Canada or Mexico, as provided in paragraph (c) of this
section;
(E) Waiver of right to drawback. If the person exporting to Canada
or Mexico was not the importer or the manufacturer, written waivers
executed by the importer or manufacturer and by any intervening person
to whom the good was transferred shall be submitted in order for the
claim to be considered complete; and
(F) An affidavit of the party claiming drawback stating that no
other drawback claim has been made on the designated goods, that such
party has not provided an exporter's Certificate of Origin pertaining to
the exported goods to another party except as stated on the drawback
claim, and that the party agrees to notify Customs if he subsequently
provides such an exporter's Certificate of Origin to any person.
(ii) Same condition drawback claim under 19 U.S.C. 1313(j)(1). The
following shall be submitted in connection with a drawback claim
covering a good in the same condition:
(A) A completed Customs Form 7551. In addition, the tariff
classification

[[Page 363]]

number of the imported goods shall be recorded on the form;
(B) Customs Form 7501. The form must show the entry number, date of
entry, port of importation, date of importation, importing carrier, and
importer of record or ultimate consignee name and Customs or taxpayer
identification number. Explicit line item information shall be clearly
noted on the Customs Form 7501 so that the subject goods are easily
discernible;
(C) Customs Form 7505, if applicable, to trace the movement of the
imported goods after importation;
(D) A certificate of delivery on Customs Form 7552, if applicable,
for purposes of tracing the transfer of ownership of the imported goods
from the importer to the claimant. This is required if the drawback
claimant is not the original importer of the merchandise which is the
subject of a same condition claim;
(E) Customs Form 7512, if applicable. This is required for
merchandise which is examined at one port but exported through border
points outside of that port. Such goods must travel in bond from the
location where they were examined to the point of the border crossing
(exportation). If examination is waived, in-bond transportation is not
required;
(F) Notification of intent to export or waiver of prior notice;
(G) Evidence of exportation. Acceptable documentary evidence of
exportation to Canada or Mexico shall include a bill of lading, air
waybill, freight waybill, export ocean bill of lading, Canadian customs
manifest, cargo manifest, or certified copies thereof, issued by the
exporting carrier. Supporting documentary evidence shall establish fully
the time and fact of exportation, the identity of the exporter, and the
identity and location of the ultimate consignee of the exported goods;
(H) Waiver of right to drawback. If the party exporting to Canada or
Mexico was not the importer, a written waiver from the importer and from
each intermediate person to whom the goods were transferred shall be
required in order for the claim to be considered complete; and
(I) An affidavit of the party claiming drawback stating that no
other drawback claim has been made on the designated goods.
(iii) Nonconforming or improperly shipped goods drawback claim. The
following shall be submitted in the case of goods not conforming to
sample or specifications or shipped without the consent of the consignee
and subject to a drawback claim under 19 U.S.C. 1313(c):
(A) Customs Form 7551, completed and submitted at the time the goods
are returned to Customs custody;
(B) Customs Form 7501 to establish the fact of importation, the
receipt of the imported goods and the identity of the party to whom
drawback is payable (see Sec. 181.48(c) of this part);
(C) Documentary evidence to support the claim that the goods did not
conform to sample or specifications or were shipped without the consent
of the consignee. In the case of nonconforming goods, such documentation
may include a copy of a purchase order and any related documents such as
a specification sheet, catalogue or advertising brochure from the
supplier, the basis for which the order was placed, and copy of a letter
or telex or credit memo from the supplier indicating acceptance of the
returned merchandise. This documentation is necessary to establish that
the goods are, in fact, being returned to the party from which they were
procured or that they are being sent to the supplier's other customer
directly;
(D) Customs Form 7512, if applicable; and
(E) Evidence of exportation, as provided in paragraph (b)(2)(ii)(G)
of this section.
(iv) Meats cured with imported salt. The provisions of paragraph
(b)(2)(i) of this section relating to direct identification
manufacturing drawback shall apply to claims for drawback on meats cured
with imported salt filed under this subpart insofar as applicable to and
not inconsistent with the provisions of this subpart, and the forms
referred to in that paragraph shall be modified to show that the claim
is being made for refund of duties paid on salt used in curing meats.

[[Page 364]]

(v) Jet aircraft engines. The provisions of paragraph (b)(2)(i) of
this section relating to direct identification manufacturing drawback
shall apply to claims for drawback on foreign-built jet aircraft engines
repaired or reconditioned in the United States filed under this subpart
insofar as applicable to and not inconsistent with the provisions of
this subpart and the provisions of subpart N of part 191 of this
chapter.
(c) Evidence of exportation and of duties paid in Canada or Mexico.
For purposes of this subpart, evidence of exportation and satisfactory
evidence of payment of duties in Canada or Mexico shall consist of one
of the following types of documentation, provided that, for purposes of
evidence of duties paid, such documentation includes the import entry
number, the date of importation, the tariff classification number, the
rate of duty and the amount of duties paid:
(1) In the case of Canada, the Canadian entry document, referred to
as the Canada Customs Invoice or B-3, presented with either the K-84
Statement or the Detailed Coding Statement. A Canadian customs document
that is not accompanied by a valid receipt is not adequate evidence of
exportation and payment of duty in Canada;
(2) In the case of Mexico, the Mexican entry document (the
``pedimento'');
(3) The final customs duty determination of Canada or Mexico, or a
copy thereof, respecting the relevant entry; or
(4) An affidavit, from the person claiming drawback, which is based
on information received from the importer of the good in Canada or
Mexico.

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11005, Mar. 5, 1998]

Sec. 181.48 Person entitled to receive drawback.

(a) Manufacturing drawback. The person named as exporter on the
notice of exportation or on the bill of lading, air waybill, freight
waybill, Canadian or Mexican customs manifest, cargo manifest, or
certified copies of these documents, shall be considered the exporter
and entitled to manufacturing drawback, unless the manufacturer or
producer shall reserve the right to claim drawback. The manufacturer or
producer who reserves this right may claim drawback, and he shall
receive payment upon production of satisfactory evidence that the
reservation was made with the knowledge and consent of the exporter.
Drawback also may be granted to the agent of the manufacturer, producer,
or exporter, or to the person the manufacturer, producer, exporter, or
agent directs in writing to receive the drawback of duties.
(b) Nonconforming or improperly shipped goods drawback. Only the
importer of record or the actual owner of the merchandise or its agent
may claim drawback under 19 U.S.C. 1313(c).
(c) Same condition drawback. The importer of record on the
consumption entry is entitled to claim same condition drawback under 19
U.S.C. 1313(j)(1) unless he has in writing waived his right to claim
drawback.

Sec. 181.49 Retention of records.

All records required to be kept by the exporter, importer,
manufacturer or producer under this subpart with respect to
manufacturing drawback claims, and all records kept by others which
complement the records of the importer, exporter, manufacturer or
producer (see Sec. 191.15 (see also Secs. 191.26(f), 191.38, 191.175(c))
of this chapter) shall be retained for at least three years after
payment of such claims. However, any person who issues a drawback
certificate that enables another person to make or perfect a drawback
claim shall keep records in support of that certificate commencing on
the date that the certificate is issued and shall retain those records
for three years following the date of payment of the claim.

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11006, Mar. 5, 1998]

Sec. 181.50 Liquidation and payment of drawback claims.

(a) General. When the drawback claim has been fully completed by the
filing of all required documents, and exportation of the articles has
been established and the amount of duties paid to Canada or Mexico has
been established, the entry will be liquidated to determine the proper
amount of drawback

[[Page 365]]

due either in accordance with the limitation on drawback set forth in
Sec. 181.44 of this part or in accordance with the regular drawback
calculation. The liquidation procedures of subpart G of part 191 of this
chapter shall control for purposes of this subpart.
(b) Time for liquidation. A drawback claim shall not be liquidated
until either a written waiver of the right to protest under 19 U.S.C.
1514 is filed with Customs or the liquidation of the import entry has
become final under U.S. law. In addition, except in the case of goods
covered by Sec. 181.45 of this part, a drawback claim shall not be
liquidated for a period of 3 years after the date of entry of the goods
in Canada or Mexico. A drawback claim may be adjusted pursuant to 19
U.S.C. 1508(b)(2)(B)(iii) even after liquidation of the U.S. import
entry has become final.
(c) Accelerated payment. Accelerated drawback payment procedures
shall apply as set forth in Sec. 191.92 of this chapter. However, a
person who receives drawback of duties under this procedure shall repay
the duties paid if a NAFTA drawback claim is adversely affected
thereafter by administrative or court action.

[T.D. 95-68, 60 FR 46364, Sept. 6, 1995, as amended by T.D. 98-16, 63 FR
11006, Mar. 5, 1998]

Sec. 181.51 Prevention of improper payment of claims.

(a) Double payment of claim. The drawback claimant shall certify to
Customs that he has not earlier received payment on the same import
entry for the same designation of goods. If, notwithstanding such a
certification, such an earlier payment was in fact made to the claimant,
the claimant shall repay any amount paid on the second claim.
(b) Preparation of Certificate of Origin. The drawback claimant
shall, within 30 calendar days after the filing of the drawback claim
under this subpart, submit to Customs a written statement as to whether
he has prepared, or has knowledge that another person has prepared, a
Certificate of Origin provided for under Sec. 181.11(a) of this part and
pertaining to the goods which are covered by the claim. If, following
such 30-day period, the claimant prepares, or otherwise learns of the
existence of, any such Certificate of Origin, the claimant shall, within
30 calendar days thereafter, disclose that fact to Customs.

Sec. 181.52 Subsequent claims for preferential tariff treatment.

If a claim for a refund of duties is allowed by the Canadian or
Mexican customs administration under Article 502(3) of the NAFTA (post-
importation claim) or under any other circumstance after drawback has
been granted under this subpart, the appropriate Customs officer shall
reliquidate the drawback claim and obtain a refund of the amount paid in
drawback in excess of the amount permitted to be paid under Sec. 181.44
of this part.

Sec. 181.53 Collection and waiver or reduction of duty under duty-deferral programs.

(a) General--(1) Definitions. The following definitions shall apply
for purposes of this section:
(i) Date of exportation. ``Date of exportation'' means the date of
importation into Canada or Mexico as reflected on the applicable
Canadian or Mexican entry document (see Sec. 181.47(c) (1) and (2)).
(ii) Duty-deferral program. A ``duty-deferral program'' means any
measure which postpones duty payment upon arrival of a good in the
United States until withdrawn or removed for exportation to Canada or
Mexico or for entry into a Canadian or Mexican duty-deferral program.
Such measures govern manipulation warehouses, manufacturing warehouses,
smelting and refining warehouses, foreign trade zones, and those
temporary importations under bond that are specified in paragraph (b)(5)
of this section.
(2) Treatment as entered or withdrawn for consumption--(i) General.
(A) Where a good is imported into the United States pursuant to a duty-
deferral program and is subsequently withdrawn from the duty-deferral
program for exportation to Canada or Mexico or is used as a material in
the production of another good that is subsequently withdrawn from the
duty-deferral program for exportation to Canada or Mexico, and provided
that the good is a ``good subject to NAFTA drawback''

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within the meaning of 19 U.S.C. 3333 and is not described in Sec. 181.45
of this part, the documentation required to be filed under this section
in connection with the exportation of the good shall, for purposes of
this chapter, constitute an entry or withdrawal for consumption and the
exported good shall be subject to duty which shall be assessed in
accordance with paragraph (b) of this section.
(B) Where a good is imported into the United States pursuant to a
duty-deferral program and is subsequently withdrawn from the duty-
deferral program and entered into a duty-deferral program in Canada or
Mexico or is used as a material in the production of another good that
is subsequently withdrawn from the duty-deferral program and entered
into a duty-deferral program in Canada or Mexico, and provided that the
good is a ``good subject to NAFTA drawback'' within the meaning of 19
U.S.C. 3333 and is not described in Sec. 181.45, the documentation
required to be filed under this section in connection with the
withdrawal of the good from the U.S. duty-deferral program shall, for
purposes of this chapter, constitute an entry or withdrawal for
consumption and the withdrawn good shall be subject to duty which shall
be assessed in accordance with paragraph (b) of this section.
(C) Any assessment of duty under this section shall include the
duties and fees referred to in Sec. 181.42 (a) through (c) and the fees
provided for in Sec. 24.23 of this chapter; these inclusions shall not
be subject to refund, waiver, reduction or drawback.
(ii) Bond requirements. The provisions of Sec. 142.4 of this chapter
shall apply to each withdrawal and exportation transaction described in
paragraph (a)(2)(i) of this section. However, in applying the provisions
of Sec. 142.4 of this chapter in the context of this section, any
reference to release from Customs custody in Sec. 142.4 of this chapter
shall be taken to mean exportation to Canada or Mexico.
(iii) Documentation filing and duty payment procedures.
(A) Persons required to file. In the circumstances described in
paragraph (a)(2)(i) of this section, the documentation described in
paragraph (a)(2)(iii)(B) of this section must be filed by one of the
following persons:
(1) In the case of a withdrawal of the goods from a warehouse, the
person who has the right to withdraw the goods;
(2) In the case of a temporary importation under bond (TIB)
specified in paragraph (b)(5) of this section, the TIB importer whether
or not he sells the goods for export to Canada or Mexico unless
Sec. 10.31(h) of this chapter applies; or
(3) In the case of a withdrawal from a foreign trade zone, the
person who has the right to make entry. However, if a zone operator is
not the person with the right to make entry of the good, the zone
operator shall be responsible for the payment of any duty due in the
event the zone operator permits such other person to remove the goods
from the zone and such other person fails to comply with Secs. 146.67
and 146.68 of this chapter.
(B) Documentation required to be filed and required filing date. The
person required to file shall file Customs Form 7501 no later than 10
working days after the date of exportation to Canada or Mexico or 10
working days after being entered into a duty-deferral program in Canada
or Mexico. Except where the context otherwise requires and except as
otherwise specifically provided in this paragraph, the procedures for
completing and filing Customs Form 7501 in connection with the entry of
merchandise under this chapter shall apply for purposes of this
paragraph. For purposes of completing Customs Form 7501 under this
paragraph, any reference on the form to the entry date shall be taken to
refer to the date of exportation of the good or the date the goods are
entered into a duty-deferral program in Canada or Mexico. The Customs
Form 7501 required under this paragraph may be transmitted
electronically.
(C) Duty payment. The duty estimated to be due under paragraph (b)
of this section shall be deposited with Customs 60 calendar days after
the date of exportation of the good. If a good is entered into a duty-
deferral program in Canada or Mexico, the duty estimated to be due under
paragraph (b) of this

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section, but without any waiver or reduction provided for in that
paragraph, shall be deposited with Customs 60 calendar days after the
date the good is entered into such duty-deferral program. Nothing shall
preclude the deposit of such estimated duty at the time of filing the
Customs Form 7501 under paragraph (a)(2)(iii)(B) of this section or at
any other time within the 60-day period prescribed in this paragraph.
However, any interest calculation shall run from the date the duties are
required to be deposited.
(3) Waiver or reduction of duties--(i) General. Except in the case
of duties and fees referred to in Secs. 181.42(a) through (c) and fees
provided for in Sec. 24.23 of this chapter, Customs shall waive or
reduce the duties paid or owed under paragraph (a)(2) of this section by
the person who is required to file the Customs Form 7501 (see paragraph
(a)(2)(iii)(A) of this section) in accordance with paragraph (b) of this
section, provided that a claim for waiver or reduction of the duties is
filed with Customs within the appropriate 60-day time frame. The claim
shall be based on evidence of exportation or entry into a Canadian or
Mexican duty-deferral program and satisfactory evidence of duties paid
in Canada or Mexico (see Sec. 181.47(c)).
(ii) Filing of claim and payment of reduced duties. A claim for a
waiver or reduction of duties under paragraph (a)(3)(i) of this section
shall be made on Customs Form 7501 which shall set forth, in addition to
the information required under paragraph (a)(2)(iii)(B) of this section,
a description of the good exported to Canada or Mexico and the Canadian
or Mexican import entry number, date of importation, tariff
classification number, rate of duty and amount of duty paid. If a claim
for reduction of duties is filed under this paragraph, the reduced
duties shall be deposited with Customs when the claim is filed.
(iii) Drawback on goods entered into a duty-deferral program in
Canada or Mexico. After goods in a duty-deferral program in the United
States which have been sent from the United States and entered into a
duty-deferral program in Canada or Mexico are then withdrawn from that
Canadian or Mexican duty-deferral program either for entry into Canada
or Mexico or for export to a non-NAFTA country, the person who filed the
Customs Form 7501 (see paragraph (a)(2)(iii)(A) of this section) may
file a claim for drawback if the goods are withdrawn within 5 years from
the date of the original importation of the good into the United States.
If the goods are entered for consumption in Canada or Mexico, drawback
will be calculated in accordance with Sec. 181.44 of this part.
(4) Liquidation of entry--(i) If no claim is filed. If no claim for
a waiver or reduction of duties is filed in accordance with paragraph
(a)(3) of this section, Customs shall determine the final duties due
under paragraph (a)(2)(i) of this section and shall post a bulletin
notice of liquidation of the entry filed under this section in
accordance with Sec. 159.9 of this chapter. Where no claim was filed in
accordance with this section and Customs fails to liquidate, or extend
liquidation of, the entry filed under this section within 1 year from
the date of the entry, upon the date of expiration of that 1-year period
the entry shall be deemed liquidated by operation of law in the amount
asserted by the exporter on the Customs Form 7501 filed under paragraph
(a)(2)(iii)(A) of this section. A protest under section 514, Tariff Act
of 1930, as amended (19 U.S.C. 1514), and part 174 of this chapter shall
be filed within 90 days from the date of posting of the notice of
liquidation under this section.
(ii) If a claim is filed. If a claim for a waiver or reduction of
duties is filed in accordance with paragraph (a)(3) of this section, an
extension of liquidation of the entry filed under this section shall
take effect for a period not to exceed 3 years from the date the entry
was filed. Before the close of the extension period, Customs shall
liquidate the entry filed under this section and shall post a bulletin
notice of liquidation in accordance with Sec. 159.9 of this chapter. If
Customs fails to liquidate the entry filed under this section within 4
years from the date of the entry, upon the date of expiration of that 4-
year period the entry shall be deemed liquidated by operation of law in
the amount asserted by the exporter on the Customs Form 7501 filed under

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paragraph (a)(3)(ii) of this section. A protest under section 514,
Tariff Act of 1930, as amended (19 U.S.C. 1514), and part 174 of this
chapter shall be filed within 90 days from the date of posting of the
notice of liquidation under this section.
(b) Assessment and waiver or reduction of duty--(1) Manipulation in
warehouse. Where a good subject to NAFTA drawback under this subpart is
withdrawn from a bonded warehouse (19 U.S.C. 1562) after manipulation
for exportation to Canada or Mexico or for entry into a duty-deferral
program in Canada or Mexico, duty shall be assessed on the good in its
condition and quantity, and at its weight, at the time of such
withdrawal from the warehouse and with such additions to, or deductions
from, the final appraised value as may be necessary by reason of its
change in condition. Such duty shall be paid no later than 60 calendar
days after the date of exportation or of entry into the duty-deferral
program of Canada or Mexico, except that, upon filing of a proper claim
under paragraph (a)(3) of this section, the duty shall be waived or
reduced in an amount that does not exceed the lesser of the total amount
of duty payable on the good under this section or the total amount of
customs duties paid to Canada or Mexico.
(2) Bonded manufacturing warehouse. Where a good is manufactured in
a bonded warehouse (19 U.S.C. 1311) with imported materials and is then
withdrawn for exportation to Canada or Mexico or for entry into a duty-
deferral program in Canada or Mexico, duty shall be assessed on the
materials in their condition and quantity, and at their weight, at the
time of their importation into the United States. Such duty shall be
paid no later than 60 calendar days after either the date of exportation
or of entry into a duty-deferral program of Canada or Mexico, except
that, upon filing of a proper claim under paragraph (a)(3) of this
section, the duty shall be waived or reduced in an amount that does not
exceed the lesser of the total amount of duty payable on the materials
under this section or the total amount of customs duties paid to Canada
or Mexico.

Example Company N imports tea into the United States and makes a
Class 6 warehouse entry. Company N manufactures sweetened ice tea mix by
combining the imported tea with refined cane sugar and other flavorings
and packaging it in retail size canisters. Upon withdrawal of the ice
tea mix from the warehouse for exportation to Canada, a Customs Form
7501 is filed showing $900 in estimated U.S. duties on the basis of the
unmanufactured tea. Upon entry into Canada, the equivalent of US$800 is
assessed on the exported ice tea mix. Company N submits to Customs a
proper claim under paragraph (a)(3) of this section showing payment of
the US$800 equivalent in duties to Canada. Company N will only be
required to pay $100 in U.S. duties out of the $900 amount reflected on
the Customs Form 7501.

(3) Bonded smelting or refining warehouse. For any qualifying
imported metal-bearing materials (19 U.S.C. 1312), duty shall be
assessed on the imported materials and the charges against the bond
canceled no later than 60 calendar days after either the date of
exportation of the treated materials to Canada or Mexico or the date of
entry of the treated materials into a duty-deferral program of Canada or
Mexico, either from the bonded smelting or refining warehouse or from
such other customs bonded warehouse after the transfer of the same
quantity of material from a bonded smelting or refining warehouse.
However, upon filing of a proper claim under paragraph (a)(3) of this
section, the duty on the imported materials shall be waived or reduced
in an amount that does not exceed the lesser of the total amount of duty
payable on the imported materials under this section or the total amount
of customs duties paid to Canada or Mexico.

Example Company Z imports 47 million pounds of electrolytic zinc
which is entered into a bonded smelting and refining warehouse (Class 7)
for processing. Thereafter, Company Z withdraws the merchandise for
exportation to Canada and files a Customs Form 7501 showing $90,000 in
estimated U.S. duty on the dutiable quantity of metal contained in the
imported metal-bearing materials. Upon entry of the processed zinc into
Canada, the equivalent of US$50,000 in duties are assessed. Within 60
days of exportation Company Z files a proper claim under paragraph
(a)(3) of this section and Customs liquidates the entry with duty due in
the amount of $40,000.

(4) Foreign trade zone. For a good that is manufactured or otherwise
changed

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in condition in a foreign trade zone (19 U.S.C. 81c(a)) and then
withdrawn from the zone for exportation to Canada or Mexico or for entry
into a Canadian or Mexican duty-deferral program, the duty assessed, as
calculated under paragraph (b)(4)(i) or (b)(4)(ii) of this section,
shall be paid no later than 60 calendar days after either the date of
exportation of the good to Canada or Mexico or the date of entry of the
good into a duty-deferral program of Canada or Mexico, except that, upon
filing of a proper claim under paragraph (a)(3) of this section, the
duty shall be waived or reduced in an amount that does not exceed the
lesser of the total amount of duty payable on the good under this
section or the total amount of customs duties paid to Canada or Mexico.
(i) Nonprivileged foreign status. In the case of a nonprivileged
foreign status good, duty is assessed on the good in its condition and
quantity, and at its weight, at the time of its exportation from the
zone to Canada or Mexico or its entry into a duty-deferral program of
Canada or Mexico.

Example CMG imports $1,000,000 worth of auto parts from Korea and
admits them into Foreign-Trade Subzone number 00, claiming nonprivileged
foreign status. (If the auto parts had been regularly entered they would
have been dutiable at 4 percent, or $40,000.) CMG manufactures
subcompact automobiles. Automobiles are dutiable at 2.5 percent
($25,000) if entered for consumption in the United States. CMG withdraws
the automobiles from the zone and exports them to Mexico. Upon entry of
the automobiles in Mexico, CMG pays the equivalent of US$20,000 in duty.
Before the expiration of 60 calendar days from the date of exportation,
CMG files a proper claim under paragraph (a)(3) of this section and pays
$5,000 in duty to Customs representing the difference between the
$25,000 which would have been paid if the automobiles had been entered
for consumption from the zone and the US$20,000 equivalent paid to
Mexico.

(ii) Privileged foreign status. In the case of a privileged foreign
status good, duty is assessed on the good in its condition and quantity,
and at its weight, at the time privileged status is granted in the zone.

Example O&G, Inc. admits Kuwaiti crude petroleum into its zone and
requests, one month later, privileged foreign status on the crude before
refining the crude into motor gasoline and kerosene. Upon withdrawal of
the refined goods from the zone by O&G, Inc. for exportation to Canada,
a Customs Form 7501 is filed showing $700 in estimated duties on the
imported crude petroleum (rather than on the refined goods which would
have been assessed $1,200). D&O is the consignee in Canada and pays the
Canadian customs duty assessment of the equivalent of US$1,500 on the
goods. O&G, Inc. is entitled to a waiver of the full $700 in duties upon
filing of a proper claim under paragraph (a)(3) of this section.

(5) Temporary importation under bond. Except in the case of a good
imported from Canada or Mexico for repair or alteration, where a good,
regardless of its origin, was imported temporarily free of duty for
repair, alteration or processing (subheading 9813.00.05, Harmonized
Tariff Schedule of the United States) and is subsequently exported to
Canada or Mexico, duty shall be assessed on the good on the basis of its
condition at the time of its importation into the United States. Such
duty shall be paid no later than 60 calendar days after either the date
of exportation or the date of entry into a duty-deferral program of
Canada or Mexico, except that, upon filing of a proper claim under
paragraph (a)(3) of this section, the duty shall be waived or reduced in
an amount that does not exceed the lesser of the total amount of duty
payable on the good under this section or the total amount of customs
duties paid to Canada or Mexico.

Example Company A imports glassware under subheading 9813.00.05,
HTSUS. The glassware is from France and would be dutiable under a
regular consumption entry at $6,000. Company A alters the glassware by
etching hotel logos on the glassware. Two weeks later, Company A sells
the glassware to Company B, a Mexican company, and ships the glassware
to Mexico. Company B enters the glassware and is assessed duties in an
amount equivalent to US$6,200 and claims NAFTA preferential tariff
treatment. Company B provides a copy of the Mexican landing certificate
to Company A showing that the US$6,200 equivalent in duties was assessed
but not yet paid to Mexico. If Mexico ultimately denies Company B's
NAFTA claim and the Mexican duty payment becomes final, Company A, upon
submission to Customs of a proper claim under paragraph (a)(3) of this
section, is entitled to a waiver of the full $6,000 in U.S. duty.

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section, that person shall maintain records concerning the value of all
involved goods or materials at the time of their importation into the
United States and concerning the value of the goods at the time of their
exportation to Canada or Mexico or entry into a duty-deferral program of
Canada or Mexico, and if a person files a claim under this section for a
waiver or reduction of duty on goods exported to Canada or Mexico or
entered into a Canadian or Mexican duty-deferral program, that person
shall maintain evidence of exportation or entry into a Canadian or
Mexican duty-deferral program and satisfactory evidence of the amount of
any customs duties paid to Canada or Mexico on the good (see
Sec. 181.47(c)). Failure to maintain adequate records will result in
denial of the claim for waiver or reduction of duty.
(d) Failure to file proper claim. If the person identified in
paragraph (a)(2)(iii)(A) of this section fails to file a proper claim
within the 60-day period specified in this section, that person, or the
FTZ operator pursuant to paragraph (a)(2)(iii)(A)(3) of this section,
will be liable for payment of the full duties assessed under this
section and without any waiver or reduction thereof.
(e) Subsequent claims for preferential tariff treatment. If a claim
for a refund of duties is allowed by the Canadian or Mexican customs
administration under Article 502(3) of the NAFTA or under any other
circumstance after duties have been waived or reduced under this
section, Customs may reliquidate the entry filed under this section
pursuant to 19 U.S.C. 1508(b)(2)(B)(iii) even after liquidation of the
entry has become final.

[T.D. 96-14, 61 FR 2911, Jan. 30, 1996; T.D. 96-14, 61 FR 6111, Feb. 16,
1996]

Sec. 181.54 Verification of claim for drawback, waiver or reduction of duties.

The allowance of a claim for drawback, waiver or reduction of duties
submitted under this subpart shall be subject to such verification,
including verification with the Canadian or Mexican customs
administration of any documentation obtained in Canada or Mexico and
submitted in connection with the claim, as Customs may deem necessary.