[Federal Register Volume 68, Number 191 (Thursday, October 2, 2003)]
[Rules and Regulations]
[Pages 56804-56805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24856]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Part 191

RIN 1515-AD32


Merchandise Processing Fees Eligible To Be Claimed as Certain 
Types of Drawback Based on Substitution of Finished Petroleum 
Derivatives

AGENCY: Customs and Border Protection, Homeland Security; Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Customs Regulations to 
provide that merchandise processing fees are eligible to be claimed, in 
limited circumstances, as drawback based on substitution of finished 
petroleum derivatives. The proposed amendments are consistent with a 
court decision in which merchandise processing fees were found to be 
eligible to be claimed as unused merchandise drawback. As drawback 
based on substitution of finished petroleum derivatives is, in limited 
circumstances, treated in the same manner as unused merchandise 
drawback, the amendments to the Customs Regulations proposed in this 
document reflect that merchandise processing fees are also eligible to 
be claimed as drawback in these circumstances.

DATES: Comments must be received on or before December 1, 2003.

ADDRESSES: Written comments may be submitted to Bureau of Customs and 
Border Protection, Office of Regulations & Rulings, Attention: 
Regulations Branch, 1300 Pennsylvania Avenue NW., Washington, DC 20229. 
Submitted comments may be inspected at Bureau of Customs and Border 
Protection, 799 9th Street, NW., Washington, DC, during regular 
business hours. Arrangements to inspect submitted comments should be 
made in advance by calling Mr. Joseph Clark at (202) 572-8768.

FOR FURTHER INFORMATION CONTACT: William G. Rosoff, Chief, Duty and 
Refund Determinations Branch, Office of Regulations and Rulings, Bureau 
of Customs and Border Protection, Tel. (202) 572-8807.

SUPPLEMENTARY INFORMATION:

Background

Merchandise Processing Fees

    Merchandise processing fees are fees charged and collected for the 
processing of merchandise that is formally entered or released into the 
United States. See 19 U.S.C. 58c(a)(9)(A). Merchandise processing fees 
are assessed as a percentage of the value of the imported merchandise, 
as determined under 19 U.S.C. 1401a.

Merchandise Processing Fees Eligible To Be Claimed as Drawback

    Section 313 of the Tariff Act of 1930, as amended, (19 U.S.C. 
1313), concerns drawback and refunds. Drawback is a refund of certain 
duties, taxes and fees paid by the importer of record and granted to a 
drawback claimant under specific conditions.
    In Texport Oil v. United States, 185 F.3d 1291 (Fed. Cir. 1999), 
the Court of Appeals for the Federal Circuit (CAFC) held that 
merchandise processing fees were assessed under Federal law and imposed 
by reason of importation and therefore eligible to be claimed as unused 
merchandise drawback pursuant to 19 U.S.C. 1313(j).
    Subsection (p) of 19 U.S.C. 1313 authorizes drawback that is based 
on ``substitution of finished petroleum derivatives.'' Subsection 
(p)(4)(B) of 19 U.S.C. 1313, in pertinent part, limits the amount of 
drawback payable under this subsection to the amount of drawback that 
would be attributable to the article ``if imported under [subsection 
1313(p)(2)(A)(iii) or (iv)] had the claim qualified for drawback under 
subsection (j).'' [emphasis added]
    Subsection 1313(p)(2)(A)(iii) requires that the exporter of the 
exported article had imported the qualified article in a quantity equal 
to or greater than the quantity of the exported article. Subsection 
1313(p)(2)(A)(iv) requires that the exporter of the exported article 
had purchased or had exchanged, directly or indirectly, an imported 
qualified article from an importer in a quantity equal to or greater 
than the quantity of the exported article.
    The language ``had the claim qualified for drawback under 
subsection (j)'' reflects that drawback is payable under 
1313(p)(2)(A)(iii) or (iv) pursuant to the same formula set forth in 
subsection 1313(j), i.e., the amount of drawback payable under 19 
U.S.C. 1313(j) is not to exceed 99 percent of any duty, tax, or fee 
imposed under Federal law because of the imported article's 
importation. It is noted that ``drawback payable'' pursuant to 19 
U.S.C. 1313(p)(2)(A)(iii) or (iv) includes merchandise processing fees.
    It follows, therefore, that as the CAFC has determined that 
merchandise processing fees are eligible to be claimed as drawback 
pursuant to 19 U.S.C. 1313(j), such fees are also eligible to be 
claimed as drawback when drawback is based on substitution of finished 
petroleum derivatives pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) or (iv).

Proposed Amendments to the Customs Regulations

    The Texport Oil decision is reflected in the Customs Regulations at 
Sec. Sec.  191.3 and 191.51. See 67 FR 48547 (July 25, 2002), in which 
a final rule was published amending the Customs Regulations to reflect 
that merchandise processing fees are eligible to be claimed as unused 
merchandise drawback pursuant to 19 U.S.C. 1313(j).
    In order to reflect that the court's holding is applicable, in 
limited circumstances, to drawback based on substitution of finished 
petroleum derivatives, this document proposes to further amend the 
Customs Regulations.

Explanation of Amendments

    It is proposed to amend Sec. Sec.  191.3(a)(4), 191.3(b)(2), 
191.51(b)(2) and 191.171 of the Customs Regulations (19 CFR 191.3, 
191.51 and 191.171) to provide that merchandise processing fees are 
eligible to be claimed as drawback when the basis for drawback is the 
substitution of finished petroleum derivatives pursuant to 19 U.S.C. 
1313(p)(2)(A)(iii) or (iv). A more detailed explanation of the proposed 
amendments is set forth below.

Amendment to Sec.  191.3 of the Customs Regulations

    Section 191.3(a)(4) of the Customs Regulations provides that 
merchandise processing fees for unused merchandise drawback pursuant to 
19 U.S.C. 1313(j) are subject to drawback. As merchandise processing 
fees are eligible to be claimed as drawback for substitution of 
finished petroleum derivatives pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) 
or (iv), it is proposed to amend Sec.  191.3(a)(4) accordingly.
    Conversely, Sec.  191.3(b)(2) of the Customs Regulations lists the 
types of duties and fees that are not subject to

[[Page 56805]]

drawback, and specifically excepts merchandise processing fees where 
unused merchandise drawback is claimed.
    For the reasons stated above, it is proposed that this provision be 
amended to include an exception for merchandise processing fees where 
drawback is claimed for substitution of finished petroleum derivatives 
pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) or (iv).

Amendment to Sec.  191.51

    Section Sec.  191.51(b)(2) of the Customs Regulations sets forth 
the apportionment calculation to be used when determining the amount of 
merchandise processing fee eligible for drawback. It is proposed to 
amend Sec.  191.51(b)(2) to include reference to drawback for 
substitution of finished petroleum derivatives pursuant to 19 U.S.C. 
1313(p)(2)(A)(iii) or (iv).

Amendment to Sec.  191.171

    Finally, it is proposed to amend Sec.  191.171 of the Customs 
Regulations, which describes the drawback allowance for substitution of 
finished petroleum derivatives, to add a new subsection (c) which sets 
forth the conditions when merchandise processing fees will be eligible 
for drawback pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) or (iv).

Comments

    Before adopting this proposal as a final rule, consideration will 
be given to any written comments timely submitted to CBP, including 
comments on the clarity of this proposed rule and how it may be made 
easier to understand. Comments submitted will be available for public 
inspection in accordance with the Freedom of Information Act (5 U.S.C. 
552) and Sec.  103.11(b) of the Customs Regulations (19 CFR Sec.  
103.11(b)), on regular business days between the hours of 9 a.m. and 
4:30 p.m. at the Regulations Branch, Office of Regulations and Rulings, 
Bureau of Customs and Border Protection, 799 9th St., NW., Washington, 
DC. Arrangements to inspect submitted comments should be made in 
advance by calling Mr. Joseph Clark at (202) 572-8768.

The Regulatory Flexibility Act and Executive Order 12866

    Because these proposed regulatory changes conform the Customs 
Regulations to reflect the full scope of a recent decision by the Court 
of Appeals for the Federal Circuit, pursuant to the provisions of the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq., it is certified that, 
if adopted, the proposed amendments will not have a significant impact 
on a substantial number of small entities. Further, these proposed 
amendments do not meet the criteria for a ``significant regulatory 
action'' as specified in Executive Order 12866.

Drafting Information

    The principal author of this document was Ms. Suzanne Kingsbury, 
Office of Regulations and Rulings, Bureau of Customs and Border 
Protection. However, personnel from other offices participated in its 
development.

List of Subjects in 19 CFR Part 191

    Claims, Commerce, Customs duties and inspection, Drawback.

Proposed Amendments to the Regulations

    For the reasons stated above, it is proposed to amend part 191 of 
the Customs Regulations (19 CFR part 191) as follows:

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 23, 
Harmonized Tariff Schedule of the United States), 1313, 1624.

    2. Section 191.3(a)(4) and (b)(2) are revised, and the introductory 
texts of paragraphs (a) and (b) are republished to read as follows:


Sec.  191.3  Duties and fees subject or not subject to drawback.

    (a) Duties and fees subject to drawback include:
* * * * *
    (4) Merchandise processing fees (see Sec.  24.23 of this chapter) 
for merchandise subject to unused merchandise drawback pursuant to 19 
U.S.C. 1313(j), or merchandise subject to drawback for substitution of 
finished petroleum derivatives pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) 
or (iv).
    (b) Duties and fees not subject to drawback include:
* * * * *
    (2) Merchandise processing fees (see Sec.  24.23 of this chapter), 
except where unused merchandise drawback pursuant to 19 U.S.C. 1313(j) 
or drawback for substitution of finished petroleum derivatives pursuant 
to 19 U.S.C. 1313(p)(2)(A)(iii) or (iv) is claimed; and
* * * * *
    3. In Sec.  191.51, paragraph (b)(2) is revised to read as follows:


Sec.  191.51  Completion of drawback claims.

* * * * *
    (b) Drawback due.
* * * * *
    (2) Merchandise processing fee apportionment calculation. Where a 
drawback claimant seeks unused merchandise drawback pursuant to 19 
U.S.C. 1313(j), or drawback for substitution of finished petroleum 
derivatives pursuant to 19 U.S.C. 1313(p)(2)(A)(iii) or (iv), for a 
merchandise processing fee paid pursuant to 19 U.S.C. 58c(a)(9)(A), the 
claimant is required to correctly apportion the fee to that merchandise 
that provides the basis for drawback when calculating the amount of 
drawback requested on the drawback entry. This is determined as 
follows:
* * * * *
    4. In Sec.  191.171, a new paragraph (c) is added to read as 
follows:


Sec.  191.171  General; Drawback allowance.

* * * * *
    (c) Merchandise processing fees. In cases where the requirements of 
paragraph (b)(1) of this section have been met, merchandise processing 
fees will be eligible for drawback.

Robert C. Bonner,
Commissioner, Customs and Border Protection.
    Approved: September 26, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-24856 Filed 10-1-03; 8:45 am]
BILLING CODE 4820-02-P