[Federal Register Volume 83, Number 242 (Tuesday, December 18, 2018)]
[Rules and Regulations]
[Pages 64942-65067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26793]



[[Page 64941]]

Vol. 83

Tuesday,

No. 242

December 18, 2018

Part II





Department of Homeland Security





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U.S. Customs and Border Protection





Department of the Treasury





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19 CFR Parts 181, 190, and 191





 Modernized Drawback; Final Rule

  Federal Register / Vol. 83 , No. 242 / Tuesday, December 18, 2018 / 
Rules and Regulations  

[[Page 64942]]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 181, 190, and 191

[CBP Dec. 18-15; USCBP-2018-0029]
RIN 1515-AE23


Modernized Drawback

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document adopts as final, with changes, proposed 
amendments to the U.S. Customs and Border Protection (CBP) regulations 
implementing changes to the drawback regulations, as directed by the 
Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). These 
regulations establish new processes for drawback pursuant to TFTEA, 
which liberalize the merchandise substitution standard, simplify 
recordkeeping requirements, extend and standardize timelines for filing 
drawback claims, and require the electronic filing of drawback claims. 
This document also provides details with respect to the process 
required to perfect TFTEA-based claims filed under CBP's Interim 
Guidance procedures. Further, this document also finalizes regulations 
clarifying the prohibition on the filing of a substitution drawback 
claim for internal revenue excise tax in situations where no excise tax 
was paid upon the substituted merchandise or where the substituted 
merchandise is the subject of a different claim for refund or drawback 
of tax.

DATES: This final rule, with the exception discussed below, is 
effective on December 17, 2018. The effective date for amendments 
regarding the drawback of excise taxes (Sec. Sec.  190.22(a)(1)(ii)(C), 
190.32(b)(3), 190.171(c)(3), 191.22(a), 191.32(b)(4), and 191.171(d)) 
is February 19, 2019.

FOR FURTHER INFORMATION CONTACT: Randy Mitchell, CBP Office of Trade, 
Trade Policy and Programs, 202-863-6532, [email protected].

SUPPLEMENTARY INFORMATION: 

Background

Table of Contents

I. TFTEA-Drawback \1\
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    \1\ For purposes of this document, ``TFTEA-Drawback'' is the 
term generally used to refer to drawback under section 313 of the 
Tariff Act of 1930, as amended by the Trade Facilitation and Trade 
Enforcement Act of 2015.
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    A. Section 906 of the Trade Facilitation and Trade Enforcement 
Act
    B. Transition Period and Interim Guidance
    C. Proposed Rulemaking
    D. Difference Between the Interim Guidance and the NPRM
    E. Perfection of Previously Filed Claims
II. Discussion of Comments
    A. General Matters
    1. Proposed Regulations
    2. TFTEA-Drawback Definitions
    3. Economic Analysis
    B. Filing Requirements
    1. Complete Claim
    2. Filing Deadline
    3. Recordkeeping
    4. Protests
    5. Proof of Export
    C. Refund Amount
    1. Refund Methodology
    2. Valuation
    3. First Filed and Mixed Claims
    D. Specific Claims
    1. Unused Merchandise
    2. Rejected Merchandise
    3. Manufacturing Rulings
    4. Packaging Materials
    5. North American Free Trade Agreement
    E. Bonding
    1. Bond Type
    2. Joint and Several Liability
    F. Federal Excise Tax and Substitution Drawback Claims
    1. Double Drawback Generally
    2. Harbor Maintenance and Oil Spill Liability Taxes
    3. Statutory Prohibition on Double Drawback and Legislative 
Intent
    4. Trade Trends and Economic Effects of Double Drawback
    5. Revenue Loss Estimates of Double Drawback
    G. Miscellaneous
    1. Assignment of Drawback Rights
    2. Successorship
    3. CBP Form 7553 Notice of Intent
    4. Privileges
III. Technical Corrections
IV. Conclusion
V. Statutory and Regulatory Requirements
    A. Inapplicability of Delayed Effective Date
    B. Executive Order 13563 (Improving Regulation and Regulatory 
Review) and Executive Order 12866 (Regulatory Planning and Review)
    C. Executive Order 13771 (Reducing Regulation and Controlling 
Regulatory Costs)
    D. Regulatory Flexibility Act
    E. Paperwork Reduction Act
VI. Signing Authority
    List of Subjects
    Regulatory Amendments

I. TFTEA-Drawback

A. Section 906 and the Trade Facilitation and Trade Enforcement Act

    Section 313 of the Tariff Act of 1930, as amended (19 U.S.C. 1313), 
authorizes U.S. Customs and Border Protection (CBP) to refund, in whole 
or in part, duties, taxes, and fees imposed under Federal law upon 
entry or importation of merchandise (and paid on the imported 
merchandise), and to refund or remit internal revenue tax paid on 
domestic alcohol, as prescribed in 19 U.S.C. 1313(d), as drawback. 
Drawback more broadly includes the refund or remission of excise taxes 
pursuant to other provisions of law. Drawback for payment by CBP is a 
privilege, not a right, subject to compliance with prescribed rules and 
regulations administered by CBP. See 19 U.S.C. 1313(l).
    On February 24, 2016, the Trade Facilitation and Trade Enforcement 
Act of 2015 (TFTEA) (Pub. L. 114-125, 130 Stat. 122, February 24, 2016) 
was signed into law. Section 906 of TFTEA, Drawback and Refunds, made 
significant changes to the drawback laws, which generally liberalize 
the standards for substituting merchandise, ease documentation 
requirements, extend and standardize timelines for filing drawback 
claims, and require electronic filing.

B. Transition Period and Interim Guidance

    Section 906(q)(3) of TFTEA provided for a one-year transition 
period, to begin on February 24, 2018, wherein drawback claimants would 
have the choice between filing claims under pre-TFTEA law and the 
existing process detailed in the current regulations (part 191) or 
filing TFTEA-Drawback claims under the amended statute. However, 
because the implementing regulations were not going to be in place in 
time for the beginning of the transition period, CBP developed interim 
procedures for accepting TFTEA-Drawback claims. Specifically, to enable 
the Automated Commercial Environment (ACE) to recognize and accept 
TFTEA-Drawback claims, ACE was programmed with provisional placeholder 
requirements, modeled on the draft regulatory package then under 
development. Corresponding provisional Customs and Trade Automated 
Interface Requirements (CATAIR) Guidelines were provided by CBP to 
enable claimants to program their systems to interface with these 
provisional placeholder requirements in ACE. On February 9, 2018, CBP 
posted these provisional guidelines on CBP's website in a document 
entitled Drawback: Interim Guidance for Filing TFTEA Drawback Claims 
(Interim Guidance).\2\ CBP has been accepting TFTEA-Drawback claims 
submitted

[[Page 64943]]

under the Interim Guidance since February 24, 2018. The Interim 
Guidance is effective until the Final Rule is in effect and official 
guidance will be provided consistent with the TFTEA-Drawback 
regulations.
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    \2\ The document is available at: https://www.cbp.gov/document/guidance/ace-drawback-guidance. Since initially publishing the 
Interim Guidance, CBP has published two subsequent versions, with 
Version 3 being the current version. These versions clarify the 
guidance set forth in the original document, and do not reflect any 
substantive changes to CBP's policy or systems.
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C. Proposed Rulemaking

    On August 2, 2018, CBP published a notice of proposed rulemaking 
(NPRM) in the Federal Register (83 FR 37886) announcing proposed 
regulations to implement TFTEA-Drawback. The proposal also included 
such things as clarifying the prohibition on double drawback with 
respect to Federal excise taxes \3\ and making technical corrections 
and conforming changes to parts 113 (dealing with bonds), 181 (dealing 
with the North American Free Trade Agreement (NAFTA)) and 191 (dealing 
with drawback for non-TFTEA-Drawback claims during the transition 
year). The NPRM provided for a 45-day comment period, through September 
17, 2018. On August 20, 2018, CBP published a correction document in 
the Federal Register (83 FR 42062) that clarified the references in 
proposed section 190.32(d). Specifically, the reference in paragraph 
(d) should have been only to paragraphs (b)(1) and (b)(2), the specific 
paragraphs regarding the ``lesser of'' rule, rather than to the 
entirety of paragraph (b), which included the prohibition on double 
drawback in paragraph (b)(3). As evidenced by reading the entire 
preamble of the proposed rule, it is clear that the prohibition on 
double drawback applies to all drawback claims, including those for 
wine.
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    \3\ The Internal Revenue Code (IRC) of 1986, as amended, 
codified as title 26 of the United States Code (26 U.S.C.), is the 
main body of domestic statutory tax law of the United States and 
includes, inter alia, laws covering Federal excise taxes. Federal 
excise taxes are imposed on the manufacture, importation, and/or 
distribution of certain consumer goods, such as distilled spirits, 
wines, beer, tobacco products, imported taxable fuel, and petroleum 
products.
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D. Difference Between the Interim Guidance and the NPRM

    Although the Interim Guidance allowed for ``mixed'' claims--i.e., 
making a substitution-based drawback claim under the new law as amended 
by TFTEA for imported merchandise associated with an entry summary 
where the entry summary had previously been designated as the basis of 
a claim under the old law--to be submitted without receiving a 
rejection message in ACE, the August 2, 2018 notice of proposed 
rulemaking expressly prohibited such claims. See 83 FR 37886 at 37888. 
Upon further consideration, and as detailed in the Discussion of 
Comments section below pertaining to mixed claims, CBP has decided not 
to adopt in this final rule the proposed restriction in the NPRM 
concerning mixed claims; rather, CBP has decided in this final rule to 
permit the filing of mixed claims.

E. Perfection of Previously Filed Claims

    As also explained in the proposed rule, the Interim Guidance 
provided provisional placeholder requirements for electronically-filed 
TFTEA-Drawback claims, as reflected in the provisional CATAIR. These 
requirements were designed to be placeholders only, and were never 
intended to be used to process TFTEA-Drawback claims beyond initial 
acceptance in ACE. The procedures outlined and explained in the Interim 
Guidance remain in place until this final rule is implemented and 
effective.
    Members of the trade should direct questions related to the process 
of perfecting TFTEA-Drawback claims filed prior to this final rule's 
effective date to one of the drawback offices listed here: https://www.cbp.gov/trade/entry-summary/drawback/locations. Electronic mailbox 
information for each of the drawback offices (also called drawback 
centers) is provided in the Interim Guidance. In addition, questions 
related to the Interim Guidance may be sent to the Drawback and Revenue 
Branch in the Commercial Operations Division by emailing: 
[email protected]. Members of the trade should notify CBP of their 
request to perfect a claim in writing via mail or email. The 
notification should be sent directly to the appropriate drawback office 
for further guidance on processing the claim. Contact information for 
each drawback office is provided in the Interim Guidance and found 
here: https://www.cbp.gov/document/guidance/ace-drawback-guidance.

II. Discussion of Comments

    CBP received 92 documents in response to the notice of proposed 
rulemaking.\4\ For the most part, the documents received contained 
comments on multiple topics. The majority of comments received focused 
on specific regulations in proposed new part 190. Multiple comments 
were received regarding the proposed amendments to part 113 dealing 
with bonds, as well as on the technical corrections and conforming 
changes proposed to parts 181 and 191.
    Multiple comments were also received regarding the economic 
analysis included with the notice of proposed rulemaking. The comments 
have been grouped together below based on the general topic of the 
comment.
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    \4\ While many commenters distinguished CBP from the Department 
of the Treasury (Treasury) in their submissions, the responses 
throughout this section, as with the entirety of this rulemaking, 
are the result of collaboration between CBP and Treasury.
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A. General Matters

1. Proposed Regulations
    Comment: One commenter stated that moving forward with the proposed 
regulations in part 190 will put an extreme hardship on drawback 
claimants. Another commenter stated that, as an alternative to the 
proposed document requirements, the submission and approval process 
from the NPRM should be revised to require first-time drawback 
claimants to submit a letter of certification with their first drawback 
claim through the CBP portal. The commenter stated that document 
submissions could include a certification of commercial records being 
maintained to support drawback and acknowledgement of the recordkeeping 
requirements of part 190. The commenter stated that this alternative 
procedure would still provide CBP with visibility regarding drawback 
claims, claimants, and records but would eliminate the excessive 
paperwork and approval process that are time consuming and duplicative 
of the statutory requirements. The commenter stated that, as proposed, 
part 190 imposes more administrative, time-consuming requirements on 
all parties and should be eliminated or substantially modified to 
streamline and simplify the drawback process as TFTEA requires.
    Response: CBP disagrees with these comments. In some cases, TFTEA 
imposed additional requirements on both CBP and the trade. CBP has 
endeavored to provide guidance to the public through the CATAIR, public 
policy, and the proposed regulations, to facilitate compliance. 
Additionally, CBP has conducted many outreach efforts to alleviate the 
hardships for the trade with respect to the transition to TFTEA-
Drawback. CBP notes that the modernization of drawback, which results 
from TFTEA, ultimately streamlines claims and creates significant 
efficiencies for both the trade and CBP.
    Comment: Multiple commenters noted that CBP neglected to add 
section 190.29 to the table of contents in subpart B.
    Response: CBP will correct this oversight in this final rule by 
adding section 190.29 to the Table of Contents

[[Page 64944]]

for Part 190. Additionally, CBP has made additional technical 
corrections to ensure that the title of the regulation in the Table of 
Contents for Part 190 matches the actual regulation itself for sections 
190.26, 190.38, and 190.72.
    Comment: One commenter noted that the proposed 60-day delayed 
effective dates for the regulations to prohibit double drawback 
contained a drafting error of omission. Specifically, the commenter 
identified the omission as section 190.171(c)(3), which implements the 
prohibition on double drawback for finished petroleum derivatives for 
which substitution drawback is claimed pursuant to 19 U.S.C. 1313(p).
    Response: CBP agrees that the 60-day delayed effective date for the 
prohibition on double drawback should apply to double drawback for 
finished petroleum derivatives for which substitution drawback is 
claimed pursuant to 19 U.S.C. 1313(p). Accordingly, the 60-day delayed 
effective date is modified to include section 190.171(c)(3).
    Comment: CBP received multiple requests to extend the comment 
period for the proposed rule.
    Response: Since the passage of TFTEA, CBP has worked aggressively 
towards modernizing the regulatory process for the drawback program to 
have final regulations in place by February 23, 2019. CBP has engaged 
extensively with stakeholders during this time period so as to receive 
input parallel in time to CBP's regulatory drafting. Further, the 
Interim Guidance, which has been in place since February 24, 2018, 
provided drawback claimants with actual experience in filing TFTEA-
Drawback claims and with the opportunity to work with CBP in perfecting 
the filing process. CBP determined that the 45-day comment period 
struck a balance between allowing for substantive public comments while 
ensuring adequate time for CBP to publish a final rule so that 
claimants may obtain the benefits associated with modernized drawback. 
Based on the volume of insightful comments received, CBP disagrees that 
the comment period should be extended.
2. TFTEA-Drawback Definitions
    In developing a list of terms and their definitions in section 
190.2, CBP proposed definitions for new terms relating to TFTEA-
Drawback (e.g., document and sought chemical element), as well as 
incorporating definitions for terms already in part 191 (e.g., 
abstract, manufacture or production, specific manufacturing drawback 
ruling, and substituted merchandise or articles). CBP received many 
comments requesting modifications to the definitions in part 190.
    Comment: Multiple commenters asked that a reference allowing 
records kept in the normal course of business be added to the 
definition for abstract in section 190.2. Another commenter asked that 
the phrase ``records kept in the normal course of business'' be added 
to the definition.
    Response: CBP disagrees with the commenters regarding the need for 
edits to the term abstract. The term means that the actual production 
records of the manufacturer are required. The abstract should be 
supported by records kept in the normal course of business, but the 
abstract itself may be documentation that is generated specifically to 
support the drawback claim and the manufacturer or producer agrees to 
maintain this record (or, alternately, a schedule) when applying for a 
general or specific manufacturing ruling. Accordingly, the term 
abstract will remain as proposed.
    Comment: CBP proposed definitions for the terms bill of materials 
and formula in section 190.2. One commenter suggested adding language 
to the definitions to include components that are used but drop out of 
the manufacturing process or are consumed in the process without 
becoming a part of the manufactured article.
    Response: CBP agrees with this comment. The definitions for bill of 
materials and formula in section 190.2 have been clarified accordingly 
in this final rule.
    Comment: In section 190.2, CBP proposed a definition of document. 
Multiple comments were received. One comment, noting that many records 
are not produced, endorsed, or maintained electronically, asked that 
CBP replace a term used in the originally proposed definition (``normal 
meaning'') with suggested language (``written, printed, or electronic 
matter''). Other comments asked that a reference to records kept in the 
normal course of business be added to the definition.
    Response: CBP disagrees with the comments regarding the term 
document. The suggestion to add the reference to records kept in the 
normal course is unnecessary precisely because the term ``normal 
meaning'' is useful and appropriate. Accordingly, the definition will 
remain as proposed.
    Comment: One commenter requested that CBP modify the term drawback 
in section 190.2 to better match the statute.
    Response: CBP notes that the statute provides no definition of 
drawback, per se. CBP has defined drawback, in regulations in the 
context of its authority to pay, as the refund or remission, in whole 
or in part, of the duties, taxes, and/or fees paid on merchandise which 
were imposed under Federal law, and the definition specifically 
provides that this includes drawback paid upon the entry or importation 
of the imported merchandise, and the refund or remission of internal 
revenue tax paid on domestic alcohol as prescribed in 19 U.S.C. 
1313(d). The definition cross-references section 190.3, which speaks 
more broadly to the types of duties, taxes, and fees that are 
refundable as drawback. CBP disagrees with the commenter, and finds 
that the definition is consistent with the statutory requirements in 19 
U.S.C. 1313, which identify for each type of drawback identified 
thereunder, the types of duties, taxes, and fees that are eligible for 
refund. CBP has, however, changed the text of the definition of 
drawback in section 190.2 to clarify that this regulatory definition is 
limited to CBP's payment of drawback and does not purport to define 
drawback for all purposes of 19 U.S.C. 1313, such as 19 U.S.C. 
1313(v)'s broad prohibition of multiple drawback claims, including 
those pursuant to the Internal Revenue Code.
    Comment: CBP proposed a definition for the term drawback product in 
section 190.2. One commenter suggested adding language to section 190.2 
to provide more clarity.
    Response: CBP disagrees with the comment. The definition for 
drawback product in section 190.2 mirrors the definition provided under 
19 CFR 191.2 and this term was not affected by TFTEA. Accordingly, the 
definition will remain as it was proposed in the NPRM.
    Comment: One commenter requested that CBP modify the definition for 
intermediate party in section 190.2 to note that a party can also 
receive and possess substituted merchandise. This commenter provided 
suggested language.
    Response: CBP agrees with the comment. CBP is amending the 
definition of intermediate party in section 190.2 to clarify that the 
intermediate party may also be in possession of substituted 
merchandise, subject to the applicable statutory limitations. 
Relatedly, CBP has also amended the definition to clarify that there 
may be destruction (in lieu of exportation) to qualify merchandise for 
drawback in certain cases.

[[Page 64945]]

    Comment: One commenter asked CBP to remove the more flexible phrase 
in section 190.2 regarding what is a manufacture or production, 
``including, but not limited to, an assembly, . . .'' and replace it 
with suggested language (``a process, whether mechanical, chemical, or 
otherwise stated whether from the direct action of the human hand, from 
chemical processes devised and directed by human skill, or by the 
employment of machinery . . .'').
    Response: CBP disagrees with the commenter's suggestions to amend 
the definition of manufacture or production, which was taken from 
current 19 CFR 191.2. This definition has proven flexible and useful as 
written, providing adequate guidance while still allowing for claimants 
to request rulings regarding whether a process amounts to a manufacture 
or production.
    Comment: Regarding the definition of per unit averaging, one 
commenter stated that the last sentence referencing the applicability 
of the ``lesser of'' rules does not belong in this definition. This 
commenter stated that the regulation incorrectly states that the value 
of the imported merchandise may not exceed the total value of the 
exported merchandise and recommends removing the last sentence from the 
definition.
    Response: CBP agrees, in part, with the comment. The definition of 
per unit averaging in section 190.2 is modified by removing the phrase 
regarding the value upon which the refund is calculated not being able 
to exceed the value of the imported merchandise and making minor edits 
regarding the ``lesser of'' rule. The ``lesser of'' rule is applicable 
to certain substitution drawback claims and so the per unit averaging 
claim calculations are subject to this limitation, except where 
specifically exempted therefrom.
    Comment: In section 190.2, CBP proposed a definition of sought 
chemical element. Multiple commenters suggested that the definition in 
the regulations should restate the definition provided in the statute 
at 19 U.S.C. 1313(b)(4)(B) and that the parenthetical phrase should be 
removed, and one commenter suggested adding ``isotopes'' to the 
definition.
    Response: CBP disagrees with the commenters' suggestions regarding 
the term sought chemical element. The term is defined consistently with 
19 U.S.C. 1313(b)(4)(b), except that a parenthetical clarification is 
included to specify that a ``compound'' is considered ``a distinct 
substance formed by a chemical union of two or more elements in 
definite proportion by weight.'' The commenters did not disagree with 
the correctness of the parenthetical clarification, which will remain 
as proposed because it provides additional specificity for members of 
the public who may not have the same level of familiarity as the 
commenters do with respect to sought chemical elements. As the 
definition is drafted consistently with the statute, except for the 
parenthetical clarification, the suggestion to add isotopes is not 
accepted. Accordingly, the definition for sought chemical elements will 
remain as it was proposed.
    Comment: In section 190.2, CBP proposed a definition of specific 
manufacturing drawback rulings. One commenter requested that CBP remove 
the requirement that a synopsis of approved specific manufacturing 
drawback rulings will be published in the Customs Bulletin.
    Response: CBP agrees with this commenter. Based upon comments 
received and its own internal review, CBP has determined that there is 
no longer sufficient benefit to the trade or to CBP to support the 
publication of synopses of specific manufacturing rulings. As such, the 
definition is modified accordingly in this final rule.
    Comment: Multiple commenters suggested edits for the definition of 
substituted merchandise or articles, noting that, in paragraphs (2) and 
(3), the term ``direct identification'' should be replaced with the 
term ``unused merchandise'' and requested that CBP modify paragraph (3) 
by inserting a reference to Schedule B.
    Response: Regarding the term substituted merchandise or articles, 
CBP is accepting the recommendations to remove the term ``direct 
identification'' in paragraph (3) of the definition and replaced with 
the term ``unused merchandise'' for drawback under 19 U.S.C. 
1313(j)(2); and, CBP is also accepting the recommendation to include a 
reference to the allowance in 19 U.S.C. 1313(j)(6) for the use of 
Schedule B numbers for substitution in paragraph (3). However, 
regarding substitution under 19 U.S.C. 1313(c)(2), CBP is accepting the 
recommendation to remove the term ``direct identification'' from the 
definition for substituted merchandise or articles but is not accepting 
the recommendation to replace the term with ``unused merchandise'' 
because 19 U.S.C. 1313(c) more specifically deals with merchandise not 
conforming to sample or specifications, i.e., rejected merchandise. 
Accordingly, CBP is replacing the term ``direct identification'' with 
the term ``rejected merchandise'' in section 190.2 of the final rule 
describing 19 U.S.C. 1313(c)(2).
    Comment: For substitution of finished petroleum derivatives claims, 
CBP proposed a definition for qualified article in section 190.172(a). 
Multiple commenters noted that not all HTSUS numbers which were 
provided in the definition for qualified article in 19 U.S.C. 
1313(p)(3)(A)(i)(I) were listed in proposed section 190.172(a).
    Response: CBP agrees with the commenters and section 190.172(a) is 
modified accordingly in the final rule.
    Comment: CBP proposed a definition for wine in section 190.2 
requiring an alcoholic content not in excess of 14 percent by volume 
with reference to the relevant Alcohol and Tobacco Tax and Trade Bureau 
(TTB) regulations (27 CFR 4.21(a)(1) and (2)). One commenter requested 
that the specific percentage be removed so that the section include 
only the citation to the authority for the percentage of alcohol to 
avoid issues related to percentage changes, such as those contained in 
section 13805 of the Tax Cuts and Jobs Act (Pub. L. 115-97, 131 Stat. 
2054, December 22, 2017), which amended 26 U.S.C. 5041(b) by adjusting 
the alcohol content level for application of excise tax rates on wine 
from 14% to 16% (in the case of wine removed after December 31, 2017 
and before January 1, 2020). The commenter also requested that a 
similar change be made at section 190.32(d)(3)(b).
    Response: CBP disagrees with this commenter's suggestion. While 
section 13805 of the Tax Cuts and Jobs Act, contained in part IX, 
subpart A, Craft Beverage Modernization and Tax Reform (CBMTRA), 
changed the wine tax classification cut-off from 14% to 16%, it did not 
amend the Federal Alcohol Administration (FAA) Act and thus CBMTRA does 
not require the Alcohol and Tobacco Tax and Trade Bureau to change its 
regulatory interpretation of which wines are considered ``table wine'' 
under the FAA Act, in 27 CFR 4.21(a)(1) and (2). Accordingly, CBP will 
continue to interpret the alternative rule for wine substitution for 19 
U.S.C. 1313(j)(2) standard in light of its past practice, providing for 
substitution unused merchandise drawback for ``table wine'' containing 
not more than 14% alcohol.
3. Economic Analysis
    Comment: One commenter questioned the estimated economic impact of 
the rule cited in the NPRM's Regulatory Impact Analysis (RIA). The 
commenter stated that the RIA understated the cost of implementation of 
drawback filing by all parties involved with the drawback process, 
including importers,

[[Page 64946]]

manufacturers, exporters and brokers. Additionally, the commenter 
claimed that the rule's costs to small entities are significantly 
understated in the NPRM's Regulatory Flexibility Act (RFA) analysis. 
The commenter asserted that CBP's analysis underestimated the costs of 
ACE drawback system modification, add-on drawback software, and broker 
fees to trade members due to recent changes in ACE programming and new 
regulatory requirements.
    Response: Unfortunately, the commenter did not include any data to 
support the claims or propose alternative costs that CBP could 
incorporate into the analysis. CBP based its estimates on the best data 
available. Therefore, CBP has no basis for changing its estimates.
    Comment: One commenter stated that CBP understated the costs of 
added recordkeeping in the NPRM's RIA, arguing that the rule's costs to 
trade members are higher than estimated due to the variety of 
documentation that CBP could require for drawback verification under 
the rule and increased record retention periods.
    Response: CBP disagrees with this comment. TFTEA, and the 
corresponding drawback regulations proposed in 19 CFR part 190, largely 
reduce the recordkeeping burden for trade members by allowing them to 
verify claims using records maintained in the normal course of 
business. For example, TFTEA and the proposed drawback regulations in 
19 CFR part 190 will completely eliminate CBP Form 7552: Delivery 
Certificate for Purposes of Drawback, allowing trade members to instead 
keep evidence of transfers in their records kept in the normal course 
of business, and provide such evidence to CBP upon request. This change 
will result in savings to trade members rather than costs. In regards 
to TFTEA and the rule's longer record retention period, CBP captured 
the cost of extended recordkeeping in the Major Amendment 9 section of 
the NPRM's RIA and in this document. CBP developed the extended 
recordkeeping cost estimates in consultation with various members of 
the trade community and subject matter experts. Unfortunately, the 
commenter did not include any data to support the claims that CBP 
understated recordkeeping costs, and the commenter did not propose 
alternative costs that CBP could incorporate into the analysis. For 
this reason, CBP chooses to maintain its recordkeeping estimates.
    Comment: One commenter questioned CBP's RFA conclusion that the 
agency cannot determine whether the (negative) economic impact of the 
rule on small entities may be considered significant under the RFA. The 
commenter claimed that CBP did not adequately evaluate the new 
electronic filing costs and data element submissions of TFTEA and the 
expanded recordkeeping and data retention requirements of the statute. 
The commenter also suggested that CBP should acknowledge the 
``significant cost impact to small business of the NPRM and work to 
simplify the operation requirements of Part 190 to minimize the impact 
of TFTEA on small business.''
    Response: CBP disagrees with these statements. CBP developed a 
comprehensive analysis examining the impacts of TFTEA and the proposed 
Modernized Drawback rule. The analysis evaluates new filing costs and 
data element submissions under the Major Amendment 1 section of the RIA 
as well as Major Amendment 7. The RIA also includes an assessment of 
the costs of TFTEA's expanded recordkeeping and data retention 
requirements in the Major Amendment 9 section of the RIA. The RFA 
accounts for these costs, analyzing their impacts on small entities. 
This document continues to include a full assessment of TFTEA's 
drawback amendments and the Modernized Drawback rule's corresponding 
changes. CBP worked in consultation with various members of the trade 
community representing a wide range of industries involved in drawback 
and subject matter experts to inform many of the estimates in the RIA 
and RFA, as cited throughout the document. Moreover, CBP has worked to 
craft a regulation to minimize the impact on small entities while still 
meeting TFTEA and other legal requirements and protecting U.S. 
Government revenue. For instance, CBP eliminated the proposed 
requirement in section 190.26(d) for trade members to maintain 
manufacturing or production records for articles purchased from a 
manufacturer or producer and claimed for drawback. CBP made this change 
based on a public comment explaining that the requirement could harm 
businesses. Unfortunately, the commenter did not include any data or 
justification to support the claims that the RIA and RFA did not 
adequately evaluate the impact of the rule on trade members, including 
those considered small under the RFA. The commenter also did not 
provide evidence to support its statement that CBP should certify that 
this rule has a significant economic impact on a substantial number of 
small entities. To further assess the impacts of the rule on small 
entities, CBP has expanded its RFA sample from 100 entities to 375 
entities, leading to a 95 percent confidence level with a 5 percent 
margin of error. For these reasons, CBP continues to conclude that the 
agency cannot determine whether the economic impact of the rule on 
small entities may be considered significant under the RFA.

B. Filing Requirements

1. Complete Claim
    CBP proposed procedures in subpart E, which provides for completion 
of drawback claims, in sections 190.51, 190.52, and 190.53, and 
provides guidance on the requirements to submit a drawback claim, 
electronically, to CBP. These provisions are similar to the provisions 
in current part 191, except where it was necessary to outline all of 
the data elements for a complete claim (previously contained on the CBP 
Form 7551, Drawback Entry) and modify those requirements to comply with 
TFTEA-Drawback. CBP received several comments described below involving 
the parameters on what should be included in a complete claim and 
concerns over the submission and processing of those claims.
    Comment: One commenter requested clarification on how to file 
certain documents, for which the commenter is unaware of a way to file 
electronically, citing as an example the requirement to file the notice 
of intent to export at the port of intended examination in section 
190.35.
    Response: CBP appreciates the opportunity to clarify. There are 
certain forms and documents which may be originally filed in forms that 
are not electronic (and not as part of drawback claims), and it is 
possible that such forms will later be filed as supporting 
documentation for drawback claims for upload through the Document 
Imaging Service (DIS) or manual submission. Please see the CATAIR 
guidance on programming as well as the Interim Guidance on how to file 
TFTEA-Drawback claims. Accordingly, CBP will not be amending the 
definition for filing in section 190.2.
    Comment: Regarding section 190.51(e)(1)(i), official date of 
filing, several commenters requested that this section be revised to 
clarify the deficiencies, computer errors, and unresolved filing issues 
involved with ACE electronic drawback claim filings that occurred at 
the beginning of the TFTEA filing period on February 24, 2018. One 
commenter stated that drawback claimants and brokers should not be 
penalized for the inadequate electronic environment for filing of 
drawback claims when CBP's

[[Page 64947]]

programming deficiencies and issues raised by claimants and brokers 
remain unresolved beyond the filing timeline deadlines of the statute.
    Response: CBP disagrees with the commenters' request. CBP 
understood that system issues could occur during deployment and the 
transition year, therefore, CBP published procedures to account for 
such issues in the Interim Guidance. The guidance establishes 
procedures that protect the original claim date, and inform claimants 
and brokers to whom questions should be directed for additional 
assistance.
    Comment: Several commenters requested clarification for section 
190.51(e)(1) regarding the date of filing and the impact on this date 
of subsequent required document uploads (which are not always completed 
on the date of filing).
    Response: Regarding the submission of supporting documentation, 
while CBP will not be amending section 190.51(e)(1), to have the date 
of claim submission be the official date of filing, the claimant has a 
24-hour window from the time of claim submission to upload required 
documentation via the Document Image System (DIS) in ACE. This 24-hour 
window is part of the certification contained in section 
190.51(a)(2)(xvi). Otherwise, for required documentation uploaded 
beyond this 24-hour window, the official date of filing is the date 
that the DIS upload is complete.
    Comment: Regarding section 190.51(e)(1)(ii), abandonment, one 
commenter stated that this section should be modified to account for 
CBP deficiencies in the ACE electronic drawback environment and no 
claim can be considered abandoned until all electronic filing issues 
have been resolved. The commenter stated that drawback claimants and 
brokers should not be denied recovery of legally authorized refunds 
under the statute because of CBP errors or electronic filing 
deficiencies.
    Response: CBP disagrees with the comment. Pursuant to 19 U.S.C. 
1313(r)(1), a drawback entry shall be filed or applied for, as 
applicable, not later than five years after the date on which 
merchandise on which drawback is claimed was imported. Claims not 
completed within the five-year period shall be considered abandoned. No 
extension will be granted unless it is established that U.S. Customs 
and Border Protection was responsible for the untimely filing. The 
statute clearly does not provide CBP with the authority to extend the 
time period for abandonment in this context, although there is a 
singular exception carved out for an event declared by the President to 
be a major disaster (see 19 U.S.C. 1313(r)(3)).
    Comment: Regarding section 190.52(a), regarding the rejection of 
incomplete drawback claims, one commenter stated that this section must 
be modified to prohibit CBP's ability to reject a claim within five 
years of the date of importation when the reason for the untimely 
completion of a claim is the result of deficiencies in CBP's electronic 
filing environment for drawback and issues raised in filing rejections 
remain unresolved and/or uncorrected by CBP.
    Response: CBP disagrees with the commenter. Section 190.52(a) 
specifically identifies the reasons for which CBP may reject a claim, 
which must be complete (pursuant to section 190.51(a)(1)) and timely 
(pursuant to 190.52(e)). CBP's automated validations facilitate the 
prompt acceptance or rejection of claims and a filer will be aware if 
there is a known issue immediately after the attempted filing of a 
claim. This efficiency reduces the administrative burden on CBP and 
enables the filer to immediately take remedial steps. Further, and 
pursuant to policy, CBP collaborates with filers who encounter 
electronic filing issues to timely resolve them. However, CBP has 
clarified in section 190.52 that, subsequent to claim acceptance in 
ACE, if it is determined by CBP that the claim was incomplete or 
untimely, then it may be denied.
    Comment: Several commenters stated that CBP failed to provide for 
situations where HTSUS classification changes after importation, such 
as when an incorrect HTSUS number was provided on entry and 
subsequently corrected. One commenter expressed concern that erroneous 
HTSUS classifications could be granted drawback. Another commenter 
stated that it was essential that ACE account for situations where a 
change in HTSUS occurs, where the correct classification is in dispute, 
or when the ACE record does not match the proper classification. Some 
commenters noted that working with a CBP Import Specialist to correct 
an import entry is cumbersome and requested that CBP establish a 
process for situations involving a mismatch of HTSUS classification 
numbers. Similarly, one commenter requested that CBP establish a 
process for situations involving reconciliation and adjusted fees or 
values. Another commenter requested a clear policy and guidance in 
situations where ACE rejects drawback claims for rounding errors and 
the claimant does not have to manually adjust until the system accepts 
the claim.
    Response: While CBP agrees with the commenters that situations may 
arise where the HTSUS classification changes after importation, CBP 
does not agree that any changes to the regulations are necessary. The 
commenters appear to be seeking policy guidance in specific situations, 
which is outside the scope of this rulemaking. Instead, a drawback 
claimant should coordinate with importers to ensure that import entries 
are properly and timely corrected such that ACE will reflect the 
correct import data. Drawback policy guidance issued by CBP provides 
additional instructions on how to facilitate the correction of import 
data in the other scenarios raised by the commenters, and claimants are 
encouraged to coordinate with CBP Drawback Specialists and other CBP 
personnel to ensure the correctness of their claims.
    Comment: One commenter observed that proposed Sec.  190.51(a)(2) 
covering drawback entry requirements would require a surety code, bond 
type, and amount of bond for all drawback entries. The commenter noted 
that the bond requirement only applies when a claimant is requesting 
accelerated payment of drawback. The commenter referenced the ``31-
Record'' of the ACE ABI CATAIR for drawback and stated that the NPRM 
does not accurately reflect the ``31-Record'' requirements. The 
commenter suggested that Sec.  190.51(a)(2)(iii) be modified.
    Response: CBP agrees that proposed section 190.51(a)(2)(iii) needs 
clarification. Accordingly, CBP has amended section 190.51(a)(2)(iii) 
to require the following information, only if the claimant is 
requesting accelerated payment of drawback under section 190.92: Surety 
code and bond type for all bonds and, additionally, the bond number and 
amount of bond for single transaction bonds.
    Comment: Several commenters suggested removing the requirement to 
provide ``factory location'' in section 190.51(a)(2)(ix) for 
manufacturing drawback claims.
    Response: CBP disagrees with the commenter's suggestion regarding 
factory location. The ``factory location'' in section 190.51(a)(2)(ix) 
is necessary to verify compliance with the terms of the manufacturing 
ruling to ensure that the party identified as the manufacturer or 
producer is, in fact, the manufacturer or producer who obtained the 
manufacturing drawback ruling. The ``factory location'' is also part of 
the tracing of the imported merchandise or other substituted 
merchandise through the manufacturing or production

[[Page 64948]]

operations to ensure that the finished article is eligible for drawback 
upon exportation or destruction.
    Comment: Several commenters suggested amending section 
190.51(a)(2)(x) to state that the certification that the imported or 
designated merchandise is unused applies to 19 U.S.C. 1313(j)(1) only.
    Response: The ``certification'' referred to in section 
190.51(a)(2)(x) ensures that the merchandise that was exported or 
destroyed was unused per the requirements of 19 U.S.C 1313(j). However, 
CBP agrees that clarification is needed to reflect that this is not a 
reference to the imported merchandise, which would too narrowly limit 
the certification to claims under 19 U.S.C. 1313(j)(1). With this 
clarification, it is now evident that the certification applies to both 
claims under 19 U.S.C. 1313(j)(1) and (j)(2) .
    Comment: One commenter suggested that the certification in section 
190.51(a)(2)(xii), regarding the correctness of the drawback claim, is 
gratuitous and should be removed because it is included in the 
electronic signature requirements under the CATAIR, for the electronic 
submission of drawback claims.
    Response: CBP disagrees with the comment. The reason why the 
certification is included in the electronic signature is because it is 
required as part of a drawback claim. This certification was also 
required for drawback claims filed manually before TFTEA-Drawback, as 
it was contained on the CBP Form 7551, Drawback Entry.
    Comment: One commenter suggested that the certification in section 
190.51(a)(2)(xiii), regarding the proper calculation of the drawback 
claim amounts when a destruction is incomplete, pursuant to 19 U.S.C. 
1313(x), is gratuitous and should be removed because it is included in 
the electronic signature requirements under the CATAIR, for the 
electronic submission of drawback claims.
    Response: CBP disagrees with the comment. The reason why the 
certification is included in the electronic signature is because it is 
required as part of a drawback claim. This certification is important 
because TFTEA further expanded the types of drawback claims for which 
exported merchandise could be the basis when the destruction was 
incomplete and requiring the certification safeguards the revenue, 
given that the failure to make the proper deductions for recovered 
merchandise would result in excessive drawback refunds.
    Comment: One commenter suggested that the certification in section 
190.51(a)(2)(xiv), regarding the possession of the merchandise that is 
the basis for a substitution manufacturing drawback claim, pursuant to 
19 U.S.C. 1313(j)(2), is gratuitous and should be removed because it is 
included in the electronic signature requirements under the CATAIR, for 
the electronic submission of drawback claims.
    Response: CBP disagrees with the comment. The reason why the 
certification is included in the electronic signature is because it is 
required as part of a drawback claim. This certification was also 
required for drawback claims filed manually before TFTEA-Drawback, as 
it was contained on the CBP Form 7551, Drawback Entry.
2. Filing Deadline
    Comment: In section 190.27(a), CBP proposed that manufacturing 
drawback claims will be allowed within five years after importation of 
the merchandise used to manufacture or produce articles. One commenter 
requested that this section be clarified to state that the five-year 
period to file claims runs to the date of filing.
    Response: CBP disagrees with the commenter's suggestion to amend 
section 190.27(a). The deadline for filing drawback claims, as set 
forth in 19 U.S.C. 1313(r), is provided for, in general, in section 
190.51(e), regarding the time of filing. Section 190.51 is the 
provision on completion of drawback claims, and it is critical for all 
drawback claims. Accordingly, CBP believes that specification of the 
timeframe for filing in paragraph (e) clearly puts potential drawback 
claimants on notice of the statutory filing deadline.
    Comment: CBP proposed that drawback claims under subpart J, titled 
Internal Revenue Tax on Flavoring Extracts and Medicinal or Toilet 
Preparations (Including Perfumery) Manufactured From Domestic Tax-Paid 
Alcohol, must be completed within three years after the date of 
exportation of the articles upon which drawback is claimed in section 
190.102(e). One commenter suggested part 190.102(e) should be amended 
to provide for five years after the date of exportation.
    Response: CBP disagrees with this comment. Claims subject to 19 
U.S.C. 1313(d), for internal revenue tax refunds on flavoring extracts 
and medicinal or toilet preparations (including perfumery) manufactured 
from domestic tax-paid alcohol, do not designate imported merchandise 
because there is no imported merchandise involved in the manufacturing 
operations. Accordingly, the new timeframe for the filing of drawback 
claims for TFTEA, which is triggered by the date of importation, does 
not apply to these claims. In the absence of any explicit statutory 
language regarding these filing deadlines, it will remain three years 
from the date of exportation, as was previously allowed prior to TFTEA.
3. Recordkeeping
    Comment: In several places, CBP proposed to require the maintenance 
of records involving, for example, bills of materials or formulas, 
exportations, and transfers of merchandise. Two commenters stated, with 
respect to proposed sections 190.9(a), 190.10, 190.23, and 190.26, that 
CBP failed to add the phrase ``kept in the normal course of business'' 
in all relevant locations and requested that this phrase be added for 
consistency.
    Response: CBP disagrees with the commenters' suggestion. It may be 
that records kept in the normal course are suitable for the purposes 
referred to in the comment. However, in some cases, as the records must 
establish certain dates and facts, it is not always the case that 
records kept in the normal course will meet the burden required for 
drawback purposes. Therefore, rather than create the impression that 
records kept in the normal course would be suitable in all situations, 
CBP will maintain the proposed language in these regulations to require 
the necessary information, whether or not the particular record is kept 
in the normal course of business in all cases.
    Comment: CBP proposed in section 190.10(b)(2), the requirement that 
a record of the date of physical delivery of merchandise in a transfer 
be maintained. One commenter noted this requirement was not in the 
statute and requested that this section be modified to allow for 
evidence through the normal course of business without providing the 
specific date.
    Response: CBP disagrees with the comment. Transfers involve 
physical delivery and a date is necessary to support transfers from and 
into inventories. The date of physical delivery must be documented in 
the records that support the transfer. These may be records that are 
kept in the normal course of business, but the specific date must be 
identifiable in order for CBP to verify that merchandise can be traced 
through any transfers between parties.
    Comment: CBP proposed certain requirements regarding recordkeeping 
involving transfers of merchandise, including maintaining the record of 
the person from whom the transfer was received in proposed section

[[Page 64949]]

190.10(b)(8). One commenter suggested removing this requirement.
    Response: CBP disagrees with the commenter to remove the 
requirement that those records specifically identify the person from 
whom transferred, as provided in section 190.10(b)(8), as it is 
necessary to establish the parties to the transfer of merchandise and 
the person from whom the merchandise was received is the transferor.
    Comment: In section 190.10(c), CBP proposed requirements on the 
transferor of merchandise to notify the transferee(s) when the transfer 
does not cover the entire quantity of merchandise reported on a 
specific line item from an entry summary. One commenter claimed that 
CBP's requirement to evidence transfers by notification amounts to a 
new certification requirement (which the commenter claims is contrary 
to the statutory mandate that eliminated certificates of delivery). The 
commenter suggests that the transferor or transferee should be allowed 
to prove this information through business records kept in the normal 
course of business as required by the statute.
    Response: CBP agrees with the comment. CBP has revised section 
190.10(c) in this final rule to indicate that while parties to a 
transfer are required to maintain documentation sufficient to 
demonstrate their drawback eligibility, the first filed claim will 
determine the eligibility of merchandise for specific types of drawback 
regardless of what may be indicated in any notice shared between the 
transferor and transferee. CBP declines to police the nature of the 
notice shared between the parties. However, CBP cautions that parties 
who do not share sufficient and accurate information may not be 
exercising their due diligence in transfers, which creates potential 
liability not just for the importer and drawback claimant pursuant to 
19 U.S.C. 1313(k), but also for all parties in intermediate transfers 
pursuant to 19 U.S.C. 1593a.
    Comment: CBP proposed regulations regarding submission of documents 
and records on transfers of merchandise in proposed section 190.10(e). 
One commenter stated that this section should specifically state that 
submission of transfer documentation shall only be made upon specific 
request by CBP. The statute clearly states that transfer of drawback 
rights is a private transaction between parties. The NPRM should 
clearly state that fact and not present a possible regulatory delay in 
drawback refunds not contemplated by the statute.
    Response: CBP agrees with the commenter and section 190.10(e) is 
clarified in this final rule to indicate that the required records must 
be provided upon request by CBP.
    Comment: CBP proposed requirements that manufacturing drawback 
claimants must maintain records regarding the transfer of goods. In 
situations where the claimant purchased the articles, CBP proposed in 
section 190.26(d) that the claimant must maintain records regarding the 
manufacture of the articles received from the manufacturer or producer. 
One commenter explained how this could prove difficult, as in some 
situations the claimant and the manufacturer or producer could be 
competitors, so sharing manufacturing records would not be feasible. 
The commenter suggested changing the wording to provide that the 
manufacturer or producer be required to maintain records (kept in the 
normal course of business) documenting the manufacture or production of 
articles, and that the claimant must maintain records supporting the 
transfer.
    Response: CBP agrees with this commenter. Understanding that the 
certificate of manufacture and delivery was the document establishing 
the record of manufacture under the old law, each party should maintain 
its own records under TFTEA. The manufacturer or producer is 
responsible for maintaining the documentation to support the actual 
manufacture or production. However, a claimant who is not a 
manufacturer or producer will not have access to these records in many 
instances. Accordingly, CBP has revised section 190.26(d) in the final 
rule to reflect that the claimant who purchases the articles is 
responsible for maintaining records to document the transfer of 
articles received. CBP has also further clarified that section 
190.26(d) applies not just to transferred merchandise purchased for 
exportation, but also for destruction. Moreover, CBP notes that the 
limitations on who may claim manufacturing drawback under section 
190.28 remain applicable notwithstanding the liberalization of this 
provision to remove the requirement for the certificate of manufacture 
and delivery.
4. Protests
    Comment: CBP received multiple comments regarding drawback and the 
right to protest. One commenter stated that there was no way to 
officially protest a rejected or incomplete claim because it is not a 
successful electronic transmission. The commenter requested that CBP 
address this situation in the final rule, suggesting a mechanism to 
allow a claim that might otherwise be rejected to be filed in order to 
permit a protest. Another commenter, citing the joint and several 
liability provisions of TFTEA, stated that 19 CFR 174.12(a), the 
provision regarding who may file a protest, should be amended to permit 
the importer of the merchandise and its import bond surety the right to 
file a protest with respect to drawback entries that give rise to their 
liability.
    Response: CBP disagrees with these comments. The requirements for a 
valid protest, which were not modified by TFTEA in any way, are set 
forth in 19 U.S.C. 1514. Consistent with that section, a protest may be 
filed, with respect to any of the decisions listed in 19 U.S.C. 
1514(a), by any person specified in 19 U.S.C. 1514(c)(2), consistent 
with the overall requirements of 19 U.S.C. 1514 generally, and 19 
U.S.C. 1514(c) in particular. Because TFTEA did not amend or otherwise 
speak to the statutory requirements governing the protestability of 
CBP's drawback decisions, CBP will not be modifying the regulations in 
part 174.
5. Proof of Export
    Comment: CBP proposed requirements regarding proof of export in 
drawback claims and provided a list of documents that could be 
submitted as proof of export in proposed section 190.72. Multiples 
commenters, citing similar language in 19 CFR 191.72 regarding proof of 
exportation, suggested that proposed section 190.72(b) be modified to 
include the phrases ``in the normal course of business'' and 
``including, but not limited to'' to provide flexibility in situations 
where the normal course of business (and the associated records) may 
include other methods than those currently provided for in proposed 
section 190.72(b). Several commenters also provided suggested language 
to be added to section 190.72(b)(1) to specifically include tracking 
identification statements for express consignment as proof of export.
    Response: CBP agrees in part with the commenters. CBP reviews the 
totality of evidence presented when determining proof of export for 
drawback purposes. Accordingly, in the final rule, CBP is amending 
section 190.72(b) by including the phrase ``including, but not limited 
to'' to better align with the language in the corresponding regulation 
in part 191. Regarding the requests to add the phrase ``in the normal 
course of business'' to section 190.72(b), CBP also agrees with the 
commenters. The statute as amended by TFTEA allows, in 19 U.S.C. 
1313(i)(2), for the possibility that drawback claimants may rely on 
records kept in

[[Page 64950]]

the normal course of business. However, CBP notes that, pursuant to 19 
U.S.C. 1313(i)(1), such records must also establish fully the date and 
fact of exportation and the identity of the exporter. CBP therefore 
disagrees with the commenters' recommendations to insert tracking 
identification statements for express consignment in the list of 
specific supporting documentary evidence for proof of export in section 
190.72(b)(1). It is not apparent that tracking identification 
statements for express consignment would constitute proof of export for 
drawback purposes in every case. A claimant would need to demonstrate 
how these statements fully establish the date and fact of exportation 
on their own and, if not, then the totality of the evidence would 
include these documents along with other supporting documents.
    Comment: One commenter noted that bills of lading, while useful for 
supporting proof of exportation, should not be considered by CBP as the 
only source of such proof. The commenter requested that CBP modify 
section 190.52(b)(1) to state that letters of endorsement could be 
attached to export records kept in the normal course of business, 
rather than be attached to only bills of ladings.
    Response: CBP disagrees, in part, with this commenter's suggestion. 
Records kept in the normal course of business may not always establish 
the date and fact of export and the identity of the exporter. However, 
while the commenter's suggested language is not accepted, CBP will 
modify section 190.52(b)(1) to state that letters of endorsement from 
the exporter may be attached to records or other documentary evidence 
of exportation, as provided for in section 190.72.
    Comment: CBP proposed section 190.73, which states that an 
electronic export system of the United States Government may be actual 
proof of exportation only if CBP has officially approved the use of 
that electronic export system as proof of compliance for drawback 
claims. One commenter requested that this regulation be modified so 
that the records kept through the electronic export system may be 
``presented as sole proof'' (rather than ``considered as actual 
proof''). The commenter notes that the records will be business records 
and can offer proof of some portion of the requirements for proving 
export as provided for in section 190.72(a). Another commenter 
requested that CBP indicate when an electronic export system will be 
approved and requested an explanation as to why no electronic system, 
such as the Automated Export System, can be approved currently. That 
commenter also noted that approving an electronic export system 
concurrently with or prior to eliminating export summary procedure from 
drawback regulations would be beneficial.
    Response: CBP agrees with the commenters, in part, and section 
190.73 is revised to state that the records may be presented as actual 
proof of export. However, CBP notes that section 190.73 provides that 
electronic proof of export will be allowed when CBP officially approves 
an electronic export system for this purpose and that notice of this 
approval will be published in the Customs Bulletin. At this time, CBP 
has determined that there is not an electronic export system that 
establishes the date and fact of exportation, as well as the identity 
of the exporter, which can be relied upon to demonstrate drawback 
eligibility. CBP also notes that the current export system, Automated 
Export System (AES), is largely a pre-departure filing system and 
therefore does not necessarily provide proof of exportation.
    Comment: CBP proposed requirements regarding proof of export for 
drawback claims in section 190.72 and required that a notice of lading 
be filed under section 190.112. One commenter, noting that notice of 
lading is not a document that is kept in the normal course of business, 
requested that the requirement to file the notice of lading be 
eliminated and that the requirements of section 190.72 regarding proof 
of export be those required in section 190.112.
    Response: CBP disagrees with this comment. The notice of lading 
certifies that merchandise was indeed laden, and lists the class of the 
vessel and nationality, as this information is essential to establish 
drawback eligibility under 19 U.S.C. 1309(b). CBP allows for a 
composite notice for repetitive shipments, which alleviates the burden 
to some extent. Section 190.72 is limited to documents that establish 
proof of an actual exportation for drawback claims in general. While 19 
U.S.C. 1309(b) states that lading upon a vessel or aircraft may be 
considered an exportation under certain limited circumstances, such 
lading does not generally constitute proof of exportation for drawback 
claims and, accordingly, notice of lading is not listed as proof of 
exportation in section 190.72.
    Comment: CBP proposed in section 190.112(e) to require the 
submission of notices of lading to support drawback claims made 
pursuant to 19 U.S.C. 1309(b). One commenter proposed that section 
190.112(e) be modified to require a certification of possession of all 
required notices of lading and other supporting documents, rather than 
the actual submission of the documents.
    Response: CBP disagrees with the comment. It is the act of lading 
on a qualified vessel or aircraft that constitutes the deemed 
exportation under 19 U.S.C. 1309(b). Because deemed exportation is a 
limited exception to the ordinary standard for proof of exportation, 
the documentation in support of eligibility is required for submission 
at the time of filing of the claim in order to protect the revenue.
    Comment: For drawback claims for articles laden as supplies 
pursuant to 19 U.S.C. 1309(b), a notice of lading is required. 
Specifically, for fuel laden on vessels or aircraft as supplies, a 
composite notice of lading is authorized under section 190.112(h), 
which covers all deliveries of fuel during one calendar month at a 
single port or airport to all vessels or airplanes of one vessel owner 
or operator or airline. One commenter proposed that this composite 
notice of lading should not be restricted to a single port or airport.
    Response: CBP disagrees with this comment. When reviewing the 
correctness of these claims, CBP evaluates them by analyzing their 
lading data based on specific ports. Accordingly, notices of lading 
should remain as is for purposes of administrative efficiency.

C. Refund Amount

1. Refund Methodology
    Comment: CBP proposed the per unit average methodology for the 
calculation of claims for TFTEA-Drawback claims involving substitution. 
Several commenters expressed support for the per unit average method as 
a means of simplifying drawback claims under TFTEA.
    Response: CBP appreciates the commenters' support. CBP has 
determined, based on the rationale set forth in the NPRM, that this 
method of calculation simplifies the calculation of substitution 
drawback claims, enabling validation of their correctness in ACE.
    Comment: CBP proposed a regulation stating which duties, taxes, and 
fees are subject or not subject to drawback in section 190.3. One 
commenter requested that the regulations explicitly state which fees 
are drawback eligible, specifically citing agricultural fees as a point 
of past contention. A second commenter noted a typographical error and 
suggested taking the word ``of'' out of section 190.3(a).
    Response: CBP agrees with the comment regarding the clerical error

[[Page 64951]]

and corrected section 190.3(a) in the final rule. However, CBP 
disagrees with the suggestion of explicitly stating what fees are 
eligible for drawback. The list of duties, taxes, and fees eligible for 
drawback in section 190.3(a) is not exhaustive. The fees that are 
eligible for refund are those that were imposed under Federal law, upon 
entry or importation, and paid on the imported merchandise. 
Agricultural fees that satisfy the legal requirements for drawback 
eligibility could be refunded, assuming that the claimant can trace 
them to the specific import entries upon which they were paid. However, 
not all agricultural fees will be eligible for drawback and CBP 
declines to list them as generally eligible in section 190.3(a). If a 
claimant needs to clarify whether a particular agricultural fee is 
eligible for drawback, a ruling could be requested under 19 CFR part 
177.
    Comment: CBP proposed that the amount of drawback allowable would 
``not exceed'' 99 percent in multiple locations throughout the 
regulations such as in sections 190.22 and 190.32. Multiple comments 
were received on this language, and some comments requested that these 
references be amended to better align with the statutory language from 
19 U.S.C. 1313(l) and state that the amount of drawback allowable ``be 
equal to'' 99 percent. One commenter questioned the justification for 
the ``lesser of'' rule, stating that the scenarios CBP cites where 
manufacturers manipulate drawback and lower their taxes by 
manufacturing cheaper products for the sole purpose of destroying them 
or re-routing them are not realistic.
    Response: CBP disagrees with the comments suggesting that changes 
be made to the regulations for the purpose of selective alignment with 
the statutory language. For substitution manufacturing and substitution 
unused merchandise drawback claims, in section 190.22(a)(1)(ii) (in 
paragraphs (A) and (B)) and in section 190.32(b) (in paragraphs (1) and 
(2)), respectively, the regulations state that the drawback allowable, 
which is calculated using per unit averaging, will not exceed 99 
percent of the lesser of the duties, taxes, and fees paid on the 
imported or substituted merchandise (i.e., the ``lesser of'' rule). 
While the statutory language in 19 U.S.C. 1313(l) states that refunds 
will be equal to 99 percent of the duties, taxes, and fees paid on the 
imported merchandise, this language is subject to an explicit 
limitation. The limitation is expressed, for both substitution 
manufacturing and substitution unused merchandise drawback claims, by 
an exception for the ``lesser of'' rule, as indicated by the statutory 
language in 19 U.S.C. 1313(l), which provides that where merchandise is 
substituted for the imported merchandise, drawback is limited to the 
``lesser of'' the amount of duties, taxes, and fees paid on the 
imported merchandise and the amount that would apply to the subtituted 
merchandise if the substituted merchandise were imported. Moreover, 
there are other limitations on the amounts of both types of drawback 
claims, including the statutory language in 19 U.S.C. 1313(x), which 
effectively precludes the payment of a refund equal to 99 percent of 
the duties, taxes, and fees paid on the imported merchandise in 
situations involving recovered materials. Accordingly, it would be 
inaccurate for the regulations to state, categorically, that drawback 
claimants are entitled to a refund equal to 99% of the duties, taxes, 
and fees paid on the imported merchandise. Relatedly, CBP has made 
conforming changes in this final rule to section 190.32(d)(2) (as wine 
claims under the alternate rule in 19 U.S.C. 1313(j)(2) are also 
subject to certain limitations that could impact the amount of the 
allowable refund, including 19 U.S.C. 1313(x)) and to 19 CFR 191.45(c) 
(as rejected merchandise drawback claims are also subject to the 
limitation in 19 U.S.C. 1313(x)). CBP has also added a new paragraph 
(d) to section 190.71 restating the statutory requirements for 
deductions for the value of recovered materials when drawback eligible 
merchandise is destroyed. Regarding the justification for the ``lesser 
of'' rule, CBP recognizes that the vast majority of drawback claimants 
do not attempt to manipulate the drawback program. However, there are 
reasonable concerns regarding the protection of the revenue given the 
significant expansion of the substitution standards, and the statutory 
language in 19 U.S.C. 1313(l) clearly directs that the ``lesser of'' 
rule shall be applied to substitution manufacturing and substitution 
unused merchandise drawback claims (except where specifically 
exempted).
    Comment: CBP provided examples regarding the ad valorem duty rate 
in section 190.51(b)(ii)(3)(ii)(1). One commenter stated that these 
calculations did not properly address scenarios where the imported 
merchandise was classified under both a 10-digit HTSUS subheading 
number from Chapters 1-97 of the HTSUS and a separate subheading from 
Chapter 98, specifically within heading 9802, which provides for 
articles exported or returned and advanced or improved abroad.
    Response: CBP agrees with the commenter that the value of the goods 
that is relevant for calculation of the drawback refund is not the 
value that is associated with the 10-digit HTSUS subheading within 
heading 9802 (the non-dutiable value); but, rather, it is the value 
that is associated with the 10-digit HTSUS subheading number from 
chapters 1-97 of the HTSUS (the dutiable value). CBP confirms that 
while these values are required to be reported for purposes of 
Subchapter II to Chapter 98 of the HTSUS (which applies to heading 9802 
and the subheadings thereunder), the applicable dutiable value for 
drawback purposes is the value upon which the duties, taxes, and fees 
were assessed (i.e., the value that is associated with the 10-digit 
HTSUS subheading number from chapters 1-97 of the HTSUS). Prior to the 
publication of the NPRM, CBP had issued both policy and programming 
guidance to clarify these issues for the trade. CBP also notes that, in 
contrast to the commenter's scenario, and as also addressed in CBP's 
guidance, there will be other instances where multiple HTSUS provisions 
and associated values may be required to be reported to CBP for 
drawback claims in order to obtain all refunds associated with specific 
imported merchandise (e.g., the 8-digit HTSUS provisions from Chapter 
99 of the HTSUS, which provide for temporary duties, that would need to 
be reported in addition to the 10-digit HTSUS subheading number from 
chapters 1-97 of the HTSUS, which provides for general customs, duties, 
taxes, and fees).
2. Valuation
    Comment: CBP proposed regulations on the valuation of merchandise 
for direct identification claims in section 190.11(a)(1) by providing 
two options for valuing imported merchandise. One commenter stated that 
the language after the semicolon, regarding merchandise identified 
pursuant to an approved accounting method, is unnecessary, redundant, 
and confusing and provided suggested language for proposed section 
190.11(a).
    Response: CBP disagrees with the comment. This language provides 
claimants greater flexibility by allowing claimants the option of 
declaring the value of imported merchandise by one of two methods--
either the value of the merchandise upon entry (invoice value) or if 
the merchandise is identified by an approved accounting method.
    Comment: CBP proposed a new regulation, section 190.11(c), 
regarding

[[Page 64952]]

the valuation of destroyed merchandise to be the value of the 
merchandise at the time of destruction, determined as if the 
merchandise had been exported in its condition at the time of 
destruction and an Electronic Export Information (EEI) had been 
required. One commenter noted that it can take significant time before 
a manufacturer determines merchandise is defective (sometimes after a 
portion of the merchandise has been used in the manufacturing process 
or when performing quality control on finished articles) and that the 
value at the time of destruction can be significantly less than the 
amount paid for the merchandise. This commenter requested that CBP 
change proposed section 190.11(c), regarding the valuation of the 
destroyed merchandise or articles, to provide for the use of the fair 
market value for the merchandise rather than the value at the time of 
destruction.
    Response: CBP disagrees with this comment. The value of the unused 
merchandise, determined as if it had been exported in its condition at 
the time of destruction, is the appropriate value to be used when the 
``lesser of'' rule is applied to substitution unused merchandise 
drawback claims pursuant to 19 U.S.C. 1313(j)(2). This timeframe is 
consistent with how the ``lesser of'' rule is applied to merchandise 
that is exported for such claims. This timeframe also serves to protect 
the revenue, as intended by the ``lesser of'' rule in 19 U.S.C. 
1313(l)(2)(B), by preventing claimants from importing expensive 
merchandise and destroying significantly less expensive merchandise 
(classified under the same HTSUS subheading) in order to manipulate 
their drawback claim refunds to the detriment of the revenue of the 
United States. Alternatively, claimants whose merchandise is destroyed 
may seek refunds calculated based on the value of the imported 
merchandise (without the application of the ``lesser of'' rule), by 
filing claims for either direct identification unused merchandise 
drawback (19 U.S.C. 1313(j)(1)) or rejected merchandise drawback (19 
U.S.C. 1313(c)). Prior to TFTEA-Drawback, the commenter would have had 
to file under these provisions (as opposed to 19 U.S.C. 1313(j)(2)) in 
order to recover a refund based on the value of the imported 
merchandise. This is because destroyed merchandise that would have been 
significantly depreciated in value (relative to its value at the time 
of importation) could not have qualified for substitution under the 
much more stringent commercial interchangeability standard applicable 
to unused merchandise drawback claims under the pre-TFTEA drawback law. 
Moreover, adopting the suggestion of the commenter would turn the 
drawback program into an insurance program, and the drawback laws were 
not designed for the purpose of protecting against profit loss in every 
instance where imported merchandise is not able to be used as intended 
or sold.
    Comment: CBP proposed a regulation regarding the valuation of 
substituted merchandise in manufacturing drawback claims at section 
190.11(d), including the requirement that the value of substituted 
merchandise be the cost of acquisition. Several commenters stated that 
it is both impractical and infeasible to require all manufacturers to 
ascertain and record the acquisition value of merchandise used to 
manufacture a specific exported item, citing, among other things, bulk, 
commingled, and non-serialized merchandise inventory practices. As 
acquisition cost is not always a cost kept in the normal course of 
business, the commenters believe that this regulatory requirement is in 
direct violation of the statute's provisions on ``records kept in the 
normal course of business'' as well as the National Customs Automation 
Program (NCAP) goals set forth in 19 U.S.C. 1412(2). As an alternative, 
the commenters requested that other values be used to calculate the 
value of substituted merchandise. Specifically, the commenters 
suggested that those values could be calculated based upon generally 
accepted accounting principles, and suggested specific values that may 
be used for such a calculation should be listed, including standard 
costs, industry average costs, average inventory values in a specified 
turnover period, weighted average duty cost, and lowest valued 
merchandise acquired during a fixed time period.
    Response: CBP agrees, in part, with the commenters. Claimants must 
be able to determine the value of the substituted merchandise (and 
support this determination) when filing substitution manufacturing 
drawback claims pursuant to the ``lesser of'' rule, which is set forth 
in 19 U.S.C. 1313(l)(2)(C). CBP has modified the definition of 
substituted merchandise in section 190.11(d) to reflect that 
substituted values for manufacturing drawback claims, which is to be 
calculated based on either the cost of acquisition or the cost of 
production, may be determined based upon generally accepted accounting 
principles. Certain of the commenters' other specific methods of 
inventory valuation may also be allowable, but only if they are 
permitted under generally accepted accounting principles. Accordingly, 
CBP disagrees with the suggestions to specifically list additional 
methods of calculating the value of the substituted merchandise. If a 
party requires further clarification regarding its method of 
calculating the cost of acquisition or production, then the claimant 
may request an administrative ruling (see 19 CFR part 177). More 
generally, CBP notes that the accuracy of the substituted values is 
critical to the proper application of the ``lesser of'' rule in 19 
U.S.C. 1313(l)(2)(C), which requires an actual comparison between the 
values of the imported and substituted merchandise to arrive at the 
amount of the allowable refund for substitution drawback claims. The 
``lesser of'' rule does not contain a provision for reliance on records 
kept in the normal course of business, nor does it otherwise entitle 
claimants to such reliance, for purposes of establishing the value of 
substituted merchandise. Finally, the drawback program is outside the 
scope of the NCAP program goals set forth in 19 U.S.C. 1412(2).
    Comment: One commenter referred to its specific manufacturing 
ruling on sought chemical elements for tungsten powders and 
semifinished components and expressed concern that it would no longer 
be valid under TFTEA. The commenter also urged that CBP modify the 
definition of the value of substituted merchandise in section 190.11(d) 
to allow for certain types of costs tracked in the commenter's 
continuous manufacturing operations.
    Response: A decision with respect to the validity of a specific 
manufacturing ruling is outside the scope of this final rule. As 
provided for in section 190.8(g)(2)(iv), a limited modification may be 
requested in order to comply with TFTEA-Drawback requirements. More 
generally, a ruling may be requested under 19 CFR part 177 if 
clarification is required. However, CBP notes that section 190.11(d) 
includes the cost of production and, as modified, will allow for the 
use of accounting methods under generally accepted accounting 
principles, which should enable the commenter to properly value its 
substituted merchandise.
    Comment: CBP proposed regulations regarding accounting methods with 
certain conditions and criteria in section 190.14. One commenter 
provided suggested language regarding the requirement that all inputs 
and withdrawals, domestic and foreign, be kept as required under each 
accounting method for the five-year period from the date of filing a 
claim. The commenter also suggested adding the phrase ``for the five-
year period from the import

[[Page 64953]]

date to the date of filing the claim'' in multiple places in section 
190.14.
    Response: CBP disagrees with the suggestion. Adding this timeframe 
is not necessary, as section 190.14 is largely the same as 19 CFR 
191.14, with respect to the approved methods. Claims remain subject to 
their filing deadlines, as provided for in 19 U.S.C. 1313(r), and the 
accounting methods are only applicable to the inventories maintained 
within the timeframe for filing the claims.
3. First Filed and Mixed Claims
    CBP proposed certain limitations on claims known as the first filed 
rule and the prohibition on mixed claims. These limitations were 
intended for two purposes, to safeguard the revenue and to ensure that 
drawback claimants would be paid the entirety of the refund amounts 
available under the drawback laws. The propensity for conflict between 
these purposes exists when an importer or another party to whom the 
importer has assigned its drawback rights splits the merchandise from a 
single import entry summary line to be designated as the basis for a 
refund on more than one drawback claim. Accordingly, such drawback 
claims must use the same method of refund calculation (either per unit 
averaging or invoice-based) to avoid a conflict. CBP received several 
comments described below involving concerns over the effects of these 
limitations on the availability of drawback.
    Comment: In the NPRM, CBP proposed the first filed rule (whereby 
the first claim that is filed with respect to merchandise designated on 
a given entry summary line limits the type of claim (direct or 
substitution drawback, which ever was claimed first with respect any 
merchandise on that line) that may be filed with respect to any of the 
remaining merchandise designated on that same entry summary line). 
Multiple commenters urged CBP to reconsider this position and requested 
that CBP not implement the first filed rule.
    Response: CBP disagrees with these comments. The first filed rule 
creates an essential bright line rule for simplification of drawback. 
It is necessary to limit a single import entry summary line to a single 
method of calculation of refund amounts. If invoice-based and per unit 
averaging calculations were to be used to calculate drawback for 
merchandise designated on the same import entry summary line, it is 
entirely possible that the last-in-line claimant would not be able to 
receive the full amount of the refund to which it would be entitled by 
law because the maximum aggregate amount of the refund available for 
merchandise designated on a single entry summary line cannot exceed 99% 
of the total duties, taxes, and/or fees paid on all of the merchandise 
on that line (however that total is distributed among the individual 
units of merchandise--whether by per unit averaging for substitution 
claims or by actual respective amounts for direct claims). For example, 
if a substitution claim were made with respect to low value merchandise 
designated on a line that contains both high value and low value goods, 
the high value goods would increase that line's overall per unit 
average value, thereby increasing the drawback amount paid on the 
substitution claim. However, if a direct identification claim were 
subsequently made with respect to the high value goods on that same 
entry summary line, the total amount of drawback remaining for that 
entry summary line may not be sufficient to pay the amount of drawback 
that would otherwise be associated with those high value goods. When an 
importer envisions that its merchandise might be the basis for multiple 
drawback claims calculated based upon different methods, it is a 
prudent business decision to split that merchandise among multiple 
entry summary lines to maximize drawback refund opportunities. In 
short, the first filed rule creates a predictable legal framework in 
which claimants and other parties to transactions can, with certainty, 
engage in import transactions as well as transfers of merchandise so as 
to ensure the full availability of the drawback refund that will be 
claimed. CBP notes that Section 906(g) provided CBP with the authority 
to determine how drawback refunds would be calculated, but there is no 
authority to grant less than what would properly be paid based upon a 
given method of calculation, or to exceed the aggregate amount of 
drawback available for merchandise on a given entry summary line, nor 
is there a legal basis to allow a claimant to modify the method of 
calculation to maximize its drawback refunds. Accordingly, to ensure 
that no inappropriate underpayments or overpayments are made, CBP had 
to build protections into the calculation methodologies.
    Comment: A few commenters stated that CBP did not study and 
quantify the impact of the first filed rule on revenue or on drawback 
provided. Some commenters also asserted that the first filed rule would 
substantially reduce the amount of drawback available to trade members.
    Response: CBP disagrees with the claims that CBP did not study and 
quantify the impact of the first filed rule. CBP analyzed and 
quantified the impact of the first filed rule under the ``Major 
Amendment 3--Generally require per-unit averaging calculation for 
substitution drawback'' section of the RIA accompanying the NPRM. CBP 
agrees that the first filed rule could result in reduced drawback for 
some claimants, including U.S. manufacturers and producers. While this 
amendment could result in lost drawback to trade members, trade members 
could mitigate, or even completely avoid, these losses through 
operational or business decisions such as, for example, breaking up, or 
requiring importers to break up, the various products included in a 
single entry into as many distinct entry summary lines as possible to 
ensure that the claim filing limitations do not arise.
    Comment: One commenter stated that CBP did not satisfy any link 
between per unit averaging and the first filed rule.
    Response: CBP disagrees with this commenter. The first filed rule 
is required to institute the per unit averaging amendments proposed in 
TFTEA. As previously stated, if invoice-based and per unit averaging 
calculations were to be used to calculate drawback for merchandise 
designated on the same import entry summary line, it is entirely 
possible that the last-in-line claimant would not be able to receive 
the full amount of the refund to which it would be entitled by law 
because the maximum amount of the aggregate refund available for 
merchandise designated on a single entry summary line cannot exceed 99 
percent of the total duties, taxes, and/or fees paid on all of the 
merchandise on that line (however that total is distributed among the 
individual units of merchandise- whether by per unit averaging for 
substitution claims or by actual respective amounts for direct claims). 
The first filed rule limits a single import entry summary line to a 
single method of calculation of refund amounts to avoid such a 
discrepancy.
    Comment: One commenter stated that CBP ``did not fulfill their 
obligations under TFTEA in examining the use of per-unit averaging.'' 
The commenter stated that the first filed rule should be withdrawn from 
the Modernized Drawback rule until CBP completes the study on per unit 
averaging mandated by Congress and issue a report on the results of 
that study. The commenter further stated that the RIA does not satisfy 
the expectations of the Congressional report because the per unit 
averaging drawback transfers cited

[[Page 64954]]

in the RIA are ``rough estimates'' and range from $23.6 million to 
$94.4 million over the period of analysis.
    Response: CBP disagrees with this comment for several reasons. 
First, Congress did not specify any requirements for the way in which 
CBP must conduct the per unit averaging study. Congress only indicated 
that it expects CBP ``to study the potential impact of such line item 
averaging in drafting regulations.'' Second, CBP based the per unit 
averaging estimates in the RIA on the best data available. While CBP 
notes that they are rough estimates, the per unit averaging impacts 
cited were developed in consultation with various members of the trade 
community and subject matter experts. CBP chose to use a range of 
estimated transfer impacts given the unavailability of data, but this 
range purposely uses conservatively low and high endpoints. Finally, 
for further reference, CBP included an appendix in the NPRM's 
Regulatory Impact Analysis comparing the impacts of per unit averaging 
to the current invoice-based drawback calculation method.
    Comment: One commenter requested that CBP allow a single line on an 
import entry summary to be designated as the basis for both direct 
identification claims (calculated using invoice values) and 
substitution claims (calculated using per unit averaging). The 
commenter claimed that CBP could impose a customized ``lesser of'' rule 
in situations where a line has already been claimed against using the 
per unit average calculation method for substitution claims, by 
comparing the per unit average amount and the invoice amount for the 
direct identification claim, with the lesser amount being the amount 
payable.
    Response: CBP disagrees with this comment. There is no statutory 
authority under 19 U.S.C. 1313(l) to allow for the implementation of a 
customized ``lesser of'' rule that would effectively result in an award 
of less than the full 99% of the duties, taxes, and fees to which a 
claimant was entitled for its refund by application of the method of 
refund calculation required by CBP. Moreover, such a rule would prevent 
drawback claimants who received partial transfers of merchandise from 
an import entry line item from being in a position to calculate the 
amount of their drawback refunds, which they are required to do as part 
of their complete claim.
    Comment: One commenter suggested adding an exception to the first 
filed rule for situations where merchandise on a line item is subject 
to duties and taxes based on a specific rate (as opposed to an ad 
valorem or compound duty rate) for sections 190.51(a)(3) and 
190.51(a)(4).
    Response: CBP disagrees with this comment. While customs duties 
assessed at a specific rate may not be affected by the type of 
calcuation method used (because they are based on quantity, not value), 
CBP notes that the same mechandise subject to customs duties at a 
specific rate may also be subject to other duties, taxes, and/or fees 
assessed at ad valorem rates. For consistency and ease of 
administration, CBP has determined that a transparent and brightline 
method of applying per unit averaging is the most reasonable approach.
    Comment: In the NPRM, CBP proposed not to allow mixed claims (i.e., 
TFTEA-Drawback substitution claims cannot designate imported 
merchandise if the associated entry summary was already designated on a 
drawback claim filed under the law in effect prior to February 24, 
2016). However, these mixed claims were allowed to be submitted 
pursuant to the Interim Guidance (and were not rejected by the system) 
to enable the filing of TFTEA-Drawback claims as of February 24, 2018. 
Multiple commenters urged CBP to reconsider this prohibition on mixed 
claims. Some commenters suggested that CBP should clarify that the 
prohibition on mixed claims should only be for any merchandise on a 
particular entry summary line that has been designated as the basis of 
a claim under part 191 (as opposed to any merchandise covered by the 
same entry summary).
    Response: CBP agrees with this comment. The issue of mixed claims 
exists because the drawback claims filed under the pre-TFTEA law did 
not identify the specific import entry line items upon which imported 
merchandise was entered. As a result, ACE cannot determine, in an 
automated manner, whether the imported merchandise for a particular 
drawback claim was previously entered on a specific line item. Because 
substitution drawback claims under TFTEA are calculated based on per 
unit averaging, they cannot designate merchandise that was previously 
designated on any drawback claim with an invoice-based calculation, 
which means all pre-TFTEA claims. Accordingly, if a substitution 
drawback claim is filed under TFTEA that designated imported 
merchandise on an entry summary that also contains merchandise that was 
previously designated as the basis for a pre-TFTEA drawback claim, it 
is necessary to determine whether the merchandise that was the basis of 
the pre-TFTEA claim is on the same entry line as the merchandise that 
is now being designated as the basis for a TFTEA substitution claim 
(because if so, then the same concerns that necessitate the first filed 
rule, discussed above, are also implicated in these circumstances). 
Since ACE cannot make this determination in an automated manner, it 
must be done manually. Nevertheless, CBP agrees that drawback should be 
allowed for a claimant who can provide evidence to prove that a TFTEA-
Drawback substitution claim does not designate merchandise that is 
covered by an entry summary line that also contains merchandise that 
was previously claimed on a drawback claim under the pre-TFTEA drawback 
law. CBP has modified section 190.51(a)(4) accordingly. A related 
modification was made to 19 CFR 191.51(a)(3). CBP notes that mixed 
claims may be filed so long as supporting documentation, as defined in 
the regulations, is submitted to CBP within 30 days of the date of 
filing of the drawback claims. Also, in contrast to the Interim 
Guidance, in the final rule, there is no time limit on the filing of 
the mixed claims (although this transitional issue will no longer exist 
after 2024).

D. Specific Claims

1. Unused Merchandise
    Comment: CBP proposed to not allow multiple substitutions in 
section 190.33(b)(1)(iii) in situations involving transferred 
merchandise and unused merchandise drawback claims. Multiple commenters 
requested that the prohibition on multiple substitutions be removed. 
One commenter claimed that section 190.33(b)(1)(iii) improperly 
continued to apply this prohibition on multiple substitutions contrary 
to TFTEA. Specifically, the commenter alleged that the definitions set 
forth by TFTEA in 19 U.S.C. 1313(z)(1) and (3) for the terms 
``directly'' and ``indirectly'' preclude a prohibition on multiple 
substitutions for unused merchandise drawback claims.
    Response: CBP disagrees with this recommendation. TFTEA did not 
modify the language in 19 U.S.C. 1313(j)(2) with respect to the 
prohibition on multiple substitutions. The party entitled to claim 
drawback must either be the importer of the imported merchandise, or 
must have received, directly or indirectly, from the importer, the 
imported merchandise, properly substituted merchandise, or some 
combination thereof. The proposed regulations continue to allow for 
multiple transfers of imported or substituted merchandise, but do not

[[Page 64955]]

permit multiple substitutions (see 19 U.S.C. 1313(j)(2)(C)(ii)). CBP 
notes that the definitions of directly and indirectly, as set forth by 
TFTEA in 19 U.S.C. 1313(z)(1) and (3), respectively, do not affect this 
interpretation. The definitions pertain to transfers of merchandise 
between importers, intermediate parties, and claimants, but they do not 
authorize multiple substitutions within the context of those transfers. 
Notwithstanding the lack of a statutory basis for multiple 
substitutions, as an administrative matter, they would be extremely 
burdensome to CBP and would pose a risk to the revenue given the 
numerous additional opportunities for impermissible substitutions that 
would exist, and which could only be monitored through manual 
verifications. Allowing multiple substitutions would also significantly 
impede CBP's ability to enforce the drawback laws by significantly 
complicating verifications of the correctness of substitutions, thereby 
jeopardizing the revenue of the United States.
    Comment: CBP proposed regulations regarding which party may claim 
drawback in situations regarding unused merchandise drawback at section 
190.33(b). One commenter noted instances of related but separate 
entities, which are precluded from claiming drawback under the proposed 
regulations (for example, an importer and a closely related exporter). 
The commenter provided hypothetical examples and requested that CBP 
amend section 190.33(b) to provide for related parties (as defined at 
19 U.S.C. 1401a(g)) to the importer.
    Response: CBP disagrees with the comment. There is a statutory 
requirement that the drawback claimant have had possession of the 
imported or substituted merchandise under 19 U.S.C. 1313(j)(2)(c)(ii), 
and CBP does not have the authority to permit substitution unused 
merchandise claims that do not comply with this requirement. A party 
that does not take possession of the imported or substituted 
merchandise is not eligible to claim drawback (through assignment of 
that right by the exporter or destroyer), regardless of the 
relationship as between the related party and the importer, any 
intermediate parties, or the exporter/destroyer.
    Comment: In section 190.31(c), CBP proposed language stating that 
performing an operation or combination of operations on imported 
merchandise not amounting to a manufacture or production is not a 
``use'' for purposes of 19 U.S.C. 1313(j), regarding unused merchandise 
drawback. One commenter requested that the phrase ``under the 
provisions of the manufacturing drawback law'' be removed as there is a 
reference to the specific statutory provision in the same sentence.
    Response: CBP disagrees with this comment. The phrase ``under the 
provisions of the manufacturing drawback law'' will remain in section 
190.31(c) because it is necessary to clarify that, under no 
circumstances, will a drawback claimant qualify for unused merchandise 
drawback if any operation or combination of operations rises to the 
level of a manufacture or production, regardless of whether those 
operations are listed in 19 U.S.C. 1313(j)(3). However, based on the 
review of this section, CBP has corrected in the final rule the 
citation in section 190.31(c) to properly reference 19 U.S.C. 
1313(j)(3) (and not 19 U.S.C. 1313(j)(3)(A)).
    Comment: CBP proposed section 190.183, regarding Foreign Trade 
Zones (FTZ) and articles manufactured or produced in the United States. 
One commenter suggested that section 190.183(a) be modified to also 
include references to unused merchandise drawback. The commenter also 
requested that section 190.183(b) should include a reference to the 
electronic equivalent of the CBP Form 214, Application for Foreign-
Trade Zone Admission and/or Status Designation.
    Response: CBP disagrees with the commenter. Section 190.183 is 
limited to a description of eligibility for FTZ merchandise for 
manufacturing drawback claims and so CBP declines to modify section 
190.183(a) to include a reference to unused merchandise drawback 
claims. However, CBP notes that eligibility for FTZ merchandise for 
unused merchandise drawback claims is separately provided for in 
section 190.185. CBP also declines to modify section 190.183(b) to 
include a reference to the electronic equivalent of the CBP Form 214, 
as such a reference is unnecessary and implicitly accepted by CBP by 
virtue of reference to the actual form itself.
2. Rejected Merchandise
    CBP proposed a new regulation in section 190.45 regarding the 
special rule for substitution for returned retail merchandise that is a 
subset of rejected merchandise provided for in 19 U.S.C. 1313(c). 
Several comments were received on this matter and are addressed below.
    Comment: One commenter requested that CBP modify section 190.45 by 
adding a new paragraph regarding returned retail merchandise and the 
lack of use.
    Response: CBP disagrees with this comment. The language in 19 
U.S.C. 1313(c)(1)(C)(ii) is sufficiently clear as it provides for 
drawback on merchandise ultimately sold at retail by the importer, or 
the person who received the merchandise from the importer, and for any 
reason returned to and accepted by the importer, or the person who 
received the merchandise from the importer. This specific language is 
already provided for in section 190.41, which is the subpart of part 
190 that pertains to rejected merchandise drawback claims. Accordingly, 
CBP will not be amending proposed section 190.45 in response to this 
comment.
    Comment: Regarding eligibility requirements for returned retail 
merchandise in section 190.45(b), one commenter stated that the section 
is vague and subject to different interpretations based on the CBP 
personnel and office reviewing the claim. In the view of this 
commenter, the section should be modified/clarified to include a 
certification of non-use by the claimant and the returned merchandise 
subject to the written return policy of the claimant or person who 
received the imported merchandise from the claimant. These 
certifications of return could then be submitted to CBP upon request by 
CBP. The return policy and records of refund supporting the return 
could be required as part of the recordkeeping requirements for 
drawback payment under this section.
    Response: Pursuant to 19 U.S.C. 1313(c)(1)(C)(ii), returned retail 
merchandise is merchandise that is ultimately sold at retail by the 
importer, or the person who received the merchandise from the importer, 
and for any reason returned to and accepted by the importer, or the 
person who received the merchandise from the importer. A certification 
of non-use is not required under the statute and CBP disagrees with the 
commenter's suggestion to impose such an additional burden on drawback 
claimants.
    Comment: One commenter, discussing a specific ruling regarding 
retail operations and what constitutes use of merchandise, stated that 
there are significant barriers to retailers participating in drawback.
    Response: CBP understands that certain inventory practices may 
prevent drawback claimants from maximizing drawback opportunities under 
both the unused merchandise drawback provision in 19 U.S.C. 1313(j)(1) 
and (2) along with the returned retail merchandise provision in 19 
U.S.C. 1313(c). However, these statutory bases for drawback are subject 
to different legal requirements. The commenter

[[Page 64956]]

raised concerns over a particular ruling, HQ H263493, which addressed 
the scope of ``use,'' and criticized its application more generally to 
retailers. This is outside the scope of the final rule, but the 
commenter's concerns may be addressed through the request of a ruling 
pursuant to 19 CFR part 177.
3. Manufacturing Rulings
    CBP proposed certain requirements in the regulations relating to 
manufacturing drawback in subpart B of part 190. Appendix A to Part 190 
contains general manufacturing drawback rulings, under which 
manufacturers may operate, and Appendix B to Part 190 contains sample 
formats for applications for specific manufacturing drawback rulings, 
which provide templates for applicants. CBP received multiple 
manufacturing drawback-related comments.
    Comment: CBP proposed regulations for specific manufacturing 
drawback rulings, including procedures for limited modifications to 
specific manufacturing rulings granted under part 191 in section 
190.8(g)(2)(iv). One commenter stated that this section is not required 
in general due to the statutory clarity of TFTEA. Multiple commenters 
stated the regulation should include a requirement of prompt review and 
approval by CBP. Related, some comments were received indicating that 
CBP should provide adequate personnel and resources to timely approve 
the limited modifications, claiming that the current timeframe for 
review and approval takes close to two years for approval.
    Response: CBP disagrees with the comment. The statutory clarity, 
alone, is not sufficient to be considered a deemed modification for all 
manufacturing rulings issued under part 191. In fact, those 
manufacturing rulings are limited, by their own terms, only to drawback 
claims filed under part 191. Unless a limited modification is filed, in 
accordance with the regulations, to modify the terms to comply with 
part 190, a manufacturing ruling issued under part 191 will become moot 
as of February 24, 2019, when TFTEA-Drawback (under part 190) becomes 
the sole statutory authority under which drawback claims may be 
approved. CBP will manage its workload with respect to the processing 
of drawback ruling applications and limited modifications thereto based 
on the available resources, but notes that most approvals do not take 
two years.
    Comment: One commenter noted that the Interim Guidance referenced a 
``representative bill of materials'' and requested that section 
190.8(g)(2)(iv), which requires a supplemental application for a 
limited modification to file a claim under part 190 based on a ruling 
approved under part 191, be amended in paragraph (B) to also include 
this reference.
    Response: CBP disagrees with this comment. An actual bill of 
materials must be provided as part of the application for a limited 
modification to bring a manufacturing ruling issued under 19 CFR part 
190 into compliance with TFTEA. The use of the description for a 
representative bill of materials in the Interim Guidance was intended 
to further clarify that each drawback claim will have an actual bill of 
materials associated with it.
    Comment: CBP proposed regulations that set out the procedures on 
how the public submits general manufacturing drawback rulings in 
section 190.7. Regarding section 190.7(b)(2), one commenter stated that 
the requirements are reasonable for new claimants only. One commenter 
noted that CBP did not provide a specific timeframe in proposed section 
190.7(c) regarding when it would acknowledge receipt of letters of 
intent to operate under a general manufacturing ruling promptly. Some 
commenters requested that CBP respond within a specified timeframe, 
suggesting a 90-day timeframe be added to proposed section 190.7(c), 
noting that failing to include a timeframe could result in delays.
    Response: CBP appreciates these comments but disagrees that changes 
are needed to the proposed regulations involved. The requirements in 
part 190 will be applied to all drawback claims filed for TFTEA-
Drawback, both during the transition year and, exclusively, on or after 
February 24, 2019. Drawback claimants, for the most part, receive 
acknowledgment of letters of intent to operate under general 
manufacturing rulings well within 90 days. However, as delays may 
occur, retaining flexibility is essential. Further, as provided for in 
proposed section 190.7(b)(2), claimants may file claims at the same 
time as submitting the letter of intent to operate, and therefore 
filing timeframes will not be jeopardized.
    Comment: CBP proposed a process on how CBP will review applications 
for specific manufacturing drawback rulings promptly and laid out the 
steps CBP would take for approvals and disapprovals in proposed section 
190.8(e), without providing a specific timeframe as to when CBP would 
make its decision. Some commenters requested that CBP respond within a 
specified timeframe, suggesting a 90-day timeframe be added to section 
190.8(e), noting that failing to include a timeframe could result in 
delays.
    Response: CBP disagrees with this comment. Drawback claimants, for 
the most part, receive appropriately prompt responses regarding the 
approval or disapproval of specific manufacturing drawback applications 
(appropriate to the level of complexity and the thoroughness of the 
application). However, in many cases, the applications are incomplete 
when first submitted and require a significant amount of cooperative 
discussions between CBP and the applicant just to enable CBP to make a 
proper determination. If the regulations were to require a response 
within 90 days (or some other similar timeframe), many applications 
would simply be denied. As the process is now, the applicants are 
afforded the opportunity to correct and augment the application without 
an artificial deadline looming.
    Comment: CBP proposed Appendix A to Part 190, which, like Appendix 
A in current part 191, sets forth the general manufacturing drawback 
rulings along with instructions for how to submit a letter of 
notification to operate under a general manufacturing drawback ruling. 
Multiple comments were received requesting that ``III. General 
Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) or 1313(b) for 
Agents (T.D. 81-181)'' be removed from Appendix A because transfers of 
merchandise are now documented by recordkeeping, and a manufacturing 
ruling is not something kept in the normal course of business.
    Response: CBP disagrees with this commenter and the general ruling 
will not be removed from Appendix A to Part 190. Agents operating under 
a principal's general manufacturing ruling(s) must continue to follow 
the instructions outlined in T.D. 81-181. Any party that seeks to 
perform manufacturing or production for the ultimate purpose of making 
a drawback claim must be compliant with the manufacturing drawback 
laws, as established under this particular T.D. Records kept in the 
normal course of business, alone, do not demonstrate such compliance, 
and each transfer of imported merchandise or drawback products for 
manufacture or production must be supported by a manufacturing ruling, 
even if the party performing the operations is an agent of a principal, 
who is separately authorized to perform a particular manufacturing or 
production operation.
    Comment: CBP proposed certain requirements in the regulations 
relating to general and specific manufacturing rulings. One commenter 
stated that,

[[Page 64957]]

beyond some very basic requirements from the statute, the requirements 
related to providing information to CBP could be replaced with a 
certification of manufacturing (and a promise to adhere to all 
regulatory requirements). Multiple commenters suggested edits to the 
appendices with a few recommending removing the appendices to part 190 
altogether.
    Response: Except for the changes required under TFTEA, most of the 
underlying processes involved in manufacturing drawback claims, 
including manufacturing rulings, remain unchanged. CBP maintains the 
authority to fully vet, prior to submission, the basis for any 
manufacturing claim, through the well-established ruling process, in 
order to ensure compliance and protect the revenue. Historically, the 
requirement for manufacturing drawback rulings dates back several 
decades, to when these rulings were considered to be contracts. In 
practice, CBP provided sample proposal contracts upon request, to help 
facilitate the mandatory submission of information regarding a 
manufacturing process. To reduce the burden on the trade for the 
development of such contracts specific to their manufacturing and 
production operations, in 1988, CBP published extensive guidance on how 
to submit these contracts, converting them to rulings, as provided for 
in the appendices to part 191. The continuation of the requirement for 
the submission of these applications, under the appendices to part 190, 
places no further burden on the trade, outside of the changes required 
by TFTEA. Moreover, these rulings facilitate the vetting of the 
manufacturing or production operations and the merchandise to be 
imported/substituted and the exported article. Any proprietary data 
provided to support these requirements is maintained by CBP and is not 
released to the public. A mere certification regarding these 
requirements, to be supported by a bill of materials/formula, as 
suggested by the commenter, does not enable CBP to fully assess whether 
a manufacture or production has taken place, which is integral to a 
proper manufacturing drawback claim.
    Comment: One commenter stated that a new general ruling for 
manufacturing operations under 19 U.S.C. 1313(b) should be developed, 
where the claimant agrees to follow the substitution requirements 
identified in the statute. This commenter stated that there is no 
longer a need for specific ruling applications, review, or approval 
because the statute clearly defines the substitution criteria for 
TFTEA-Drawback claims. The commenter stated that a simple certification 
letter would insure compliance with the statute given the statutory 
requirements for substitution at the 8-digit HTSUS level. The commenter 
stated that implementation of a general manufacturing ruling would 
result in effective and efficient implementation of a manufacturing 
substitution drawback program under 19 U.S.C. 1313(b) given the limited 
resources the commenter stated that CBP has to review specific 
manufacturing drawback rulings.
    Response: CBP disagrees with the request to create a new general 
manufacturing ruling based on commercial interchangeability 
requirements, which do not apply under TFTEA-Drawback. CBP notes more 
generally that the specific manufacturing rulings required in Appendix 
B to Part 190 require more extensive review than the general 
manufacturing rulings, so that CBP can ensure compliance with the 
applicable requirements.
    Comment: CBP proposed to require the description of the merchandise 
and articles and the applicable HTSUS number in section 190.7(b)(3)(v). 
One commenter noted that in complex manufacturing situations, capturing 
this data will be difficult as components to be claimed could change 
frequently and stated that this could result in the need for frequent 
modification letters. This commenter also requested that the reference 
to the requirement that the IRS number be provided as part of the 
application for a general manufacturing drawback ruling be changed to a 
requirement for the Importer of Record number, in section 
190.7(b)(3)(viii).
    Response: CBP agrees, in part, with this comment. The manufacturer 
or producer who operates under a drawback ruling is responsible for the 
accuracy of the bill of materials data. Because the HTSUS 
classification constitutes the basis for substitution, this data must 
necessarily be identified for imported merchandise that will be 
designated for substitution drawback claims. However, claimants who do 
not wish to identify HTSUS subheadings for imported components used in 
manufacture or production for direct identification claims will not be 
required to do so as the merchandise will be directly traceable from 
importation through exportation or destruction. Accordingly, section 
190.7(b)(3)(v) is revised to indicate that the applicable 8-digit HTSUS 
subheading number(s) must only be provided for imported merchandise 
that will be designated for substitution manufacturing drawback claims. 
However, CBP declines to revise section 190.7(b)(3)(viii) because the 
requirement for the IRS number remains relevant as not all applicants 
for general manufacturing ruling are importers. Moreover, the IRS 
number also effectively delineates between entities with separate legal 
status, which can be significant (e.g., in cases where successorship is 
an issue).
    Comment: CBP proposed to require the HTSUS number and quantity of 
merchandise in Appendix A to Part 190. One commenter suggested these 
requirements be removed and replaced with a description of the 
articles, unless specifically described in the general manufacturing 
ruling.
    Response: CBP disagrees with this suggestion. A producer or 
manufacturer who seeks to qualify its imported merchandise for drawback 
should know the classification under the HTSUS. Given that this 
information is critical to confirm the nature of the merchandise and 
the propriety of the substitution, and it should be known to the 
drawback claimant, CBP maintains that its being provided as part of the 
general ruling request's merchandise description is important to ensure 
the enforcement of the ruling in a verification context.
    Comment: CBP proposed section 190.7, providing information on 
general manufacturing drawback rulings. One commenter suggested that 
section 190.7(a) be edited to state that unincorporated business units 
with separate IOR numbers from a parent corporation can operate under a 
letter of notification submitted by the parent corporation.
    Response: CBP disagrees with the comment. Section 190.7(a) 
specifically requires that a separately incorporated subsidiary must 
submit its own letter of notification and is precluded from operating 
under a letter submitted by the parent. This language specifically does 
not apply to an unincorporated subsidiary and no further clarification 
is needed.
    Comment: CBP proposed to allow for the designation of any eligible 
imported merchandise or drawback product (which was used in manufacture 
or production) in substitution manufacturing drawback claims under 19 
U.S.C. 1313(b). One commenter noted that some drawback products 
received through transfer are not always subject to further operations 
and noted that there is no provision that allows for a claimant to 
designate or substitute an export back to a drawback product. This 
commenter stated that drawback products are not unused merchandise

[[Page 64958]]

and that the ``other; other'' HTSUS limitation for residual (or basket) 
provisions, as provided for in 19 U.S.C. 1313(j)(5), did not apply and 
requested an allowance for substitution designation of exported 
articles and the drawback products received via transfer. This 
commenter also stated that the ``lesser of'' rule should not apply in 
this scenario.
    Response: CBP disagrees with this comment. Substitution of finished 
manufactured articles is not authorized under 19 U.S.C. 1313(a) and 
(b). Only imported merchandise may be designated as the basis for a 
manufacturing drawback claim under 19 U.S.C. 1313(b). Intermediate 
drawback products may exist, but the imported merchandise and any other 
merchandise substituted for it, must be traceable through the 
exportation or destruction. There is no statutory authority for the 
substitution of the exported or destroyed merchandise, nor is there any 
statutory authority to circumvent the application of the ``lesser of'' 
rule for substitution manufacturing drawback claims, absent a statutory 
exemption.
4. Packaging Materials
    Comment: Regarding section 190.13, one commenter requested 
revisions to better align with the language from 19 U.S.C. 1313(q) to 
reflect that packaging is drawback-eligible under 19 U.S.C. 1313(q), 
regardless of whether drawback is (or is not) claimed on its contents 
so long as the packaging otherwise qualifies under the other applicable 
drawback provisions.
    Response: CBP agrees with the comment and section 190.13 is 
modified accordingly in this final rule.
5. North American Free Trade Agreement
    Comment: Regarding same condition and NAFTA, one commenter 
requested that CBP amend 19 CFR 181.45(b)(1) to include the phrase 
``including, but not limited to'' in order to provide flexibility 
regarding which operations could be undergone without materially 
altering the characteristic of the good and still be considered to be 
in the same condition for purposes of drawback under NAFTA.
    Response: CBP does not agree with the comment. Unused merchandise 
drawback claims for NAFTA drawback, which applies to goods exported to 
Canada and Mexico, is more limited than under TFTEA-Drawback. Only 
direct identification claims are permitted pursuant to 19 U.S.C. 
1313(j)(1) and, in addition, the goods must be in the same condition. 
The term same condition is more restrictive than the term unused, as it 
is defined in 19 U.S.C. 1313(j)(3). The term same condition is 
specifically defined in 19 CFR 181.45(b)(1) to be restricted to certain 
operations in order to comply with the limitations set forth in section 
203 of the NAFTA. The commenter did not identify any specific 
operations that it believes to be improperly excluded under the current 
regulatory language and, accordingly, CBP declines to modify the 
language of the regulation to provide for a more expansive 
interpretation of same condition. However, in order to further clarify 
within the regulations, CBP is adding a new definition of unused 
merchandise to section 190.2, which incorporates that statutory 
limitations on the allowable operations for unused merchandise. This 
new definition will also further distinguish between unused merchandise 
within the meaning of 19 U.S.C. 1313(j), as implemented in part 190, 
and the more stringent same condition standard applicable to NAFTA 
claims under this provision pursuant to 19 CFR 184.45(b)(1).
    Comment: Regarding inventory methods for commingled goods and 
NAFTA, 19 CFR 181.45(b)(2)(i) provides for the use of approved 
inventory methods as set forth in the appendix to part 181. One 
commenter requested that CBP change the reference from the appendix in 
part 181 to section 190.14, which provides for the identification of 
merchandise by accounting method for direct identification drawback 
claims. The commenter claimed that section 190.14 should strictly 
control for purposes of inventory accounting for commingled fungible 
goods to be identified for NAFTA same condition drawback claims filed 
under 19 U.S.C. 1313(j)(1).
    Response: CBP does not agree with the comment. The provision in 19 
CFR 181.45(b)(i), which provides for accounting for fungible goods 
commingled in inventory, applies to unused merchandise exported to 
Canada or Mexico in the same condition as imported and for which 
drawback is claimed under 19 U.S.C 1313(j)(1). The provision 
distinguishes between inventories limited to only non-originating 
merchandise and inventories that are not limited to only non-
originating merchandise. For the former, in 19 CFR 181.45(b)(2)(i)(B), 
CBP requires the use of section 190.14 for the identification of the 
imported merchandise. However, for the latter, in 19 CFR 
181.45(b)(2)(i)(A), CBP requires the use of the accounting methods in 
the appendix to part 181. The accounting methods in section 190.14, and 
the appendix in part 181 are not the same, and CBP intentionally 
distinguished the circumstances in which each would be allowed for 
purposes of the identification of merchandise for NAFTA same condition 
drawback claims under 19 U.S.C. 1313(j)(1). The reason that the 
accounting methods in section 190.14 may not be used for inventories 
that are not limited to only non-originating merchandise, in 19 CFR 
181.45(b)(2)(i)(A), is because the outcome would be so complex--in 
terms of the tracing of merchandise--that verification by CBP would be 
an extreme administrative burden. As a result, CBP will not adopt the 
commenter's suggestion.

E. Bonding

1. Bond Type
    Comment: CBP proposed in section 190.92(e)(3) to require a single 
transaction bond for claims involving accelerated payment filed before 
CBP provided written notification of approval. Multiple comments were 
received stating that this requirement (for a single transaction bond) 
was too restrictive, and suggested that the regulation provide 
flexibility of permitting claims under a continuous bond if there was 
sufficient balance for the amount of accelerated payment claimed.
    Response: CBP agrees with the comments and section 190.92(e)(3) is 
modified in this final rule by removing the language limiting the 
bonding type to single transaction bonds, which will allow for an 
active continuous bond or a single transaction bond (with sufficient 
balance in place) to cover the amount of accelerated drawback to be 
paid on the claim.
    Comment: One commenter stated that CBP is not carrying forward the 
existing drawback regulation in 19 CFR 191.73, which provides for 
requirements of the Export Summary Procedure (ESP), to proposed part 
190. Instead, CBP will ultimately approve an electronic export system 
of the U.S. Government for use in verifying actual proof of 
exportation. The text in 19 CFR 113.65(a) creates obligations triggered 
by the use of the ESP and the commenter recommended that this paragraph 
be amended in order to establish a sunset date of February 23, 2019.
    Response: CBP disagrees with the comment. ESP is only required in 
19 CFR part 191, and so the terms of this agreement do not apply to 
claims filed under part 190 with a bond posted for accelerated payment. 
Accordingly, the de facto date is when part 191 is no longer allowed 
for drawback claims,

[[Page 64959]]

which is as of February 24, 2019, as provided for in 19 CFR 191.0.
2. Joint and Several Liability
    Comment: Several commenters questioned whether CBP intends to 
pursue importers to recoup payment of erroneous drawback claims.
    Response: Any person making a drawback claim is liable for the 
claim. See TFTEA 906(f)(1). In addition, TFTEA expressly states that 
importers are also liable for any drawback claim made by another person 
with respect to merchandise imported by the importer. TFTEA 906(f)(2) 
(amending 19 U.S.C. 1313(k)). Pursuant to TFTEA, CBP reserves the right 
to recoup from the importer payment of erroneous drawback claims based 
on merchandise imported by the importer. The importer and the claimant 
are ``jointly and severally'' liable pursuant to section 906(f)(3). 
Further, 19 U.S.C. 1593a, the drawback claim penalty statute, is not 
limited to the actions of the claimant. 19 U.S.C. 1593a provides that 
no person, by fraud or negligence, may seek, induce or affect, or 
attempt to seek, induce, or affect, the payment or credit to that 
person or others of any drawback claim by means of any document, 
written or oral statement, or electronically transmitted data or 
information, or act which is material and false, or any omission which 
is material. 19 U.S.C. 1593a also covers aiding or abetting any other 
person to violate the drawback statute. Section 190.62 reiterates the 
criminal and civil penalties related to drawback and section 190.63 
incorporates the joint and several liability into the new drawback 
regulatory regime.
    Comment: CBP proposed an additional import bond condition contained 
in section 113.62(a)(4), establishing that, with respect to merchandise 
imported by the principal, the principal and surety are liable to pay 
erroneous drawback payments made to a drawback claimant who is not the 
principal. Several commenters stated that such an import bond 
requirement was misplaced. The commenters noted that drawback is not 
part of the import transaction and therefore it is inappropriate for a 
bond condition to require the importer and its surety to maintain 
liability for the actions of a future assignee, who is unknown at the 
time the import bond is written. Some commenters suggested that any 
importer drawback bond requirement should be separate from the import 
bond conditions and pointed to amending section 113.65, which covers 
bonds for repayment of erroneous drawback payments.
    Response: After careful consideration of the comments, CBP is 
withdrawing proposed section 113.62(a)(4). CBP agrees that there are 
several ways to address the importer's liability to pay erroneous 
drawback payments claimed for merchandise imported by the importer. CBP 
may take appropriate action in the future to require, for completion of 
a drawback claim, a bond from an importer whose imported merchandise is 
subject of a drawback claim. CBP also notes that, currently, only 
accelerated payment claims require a bond, as provided for in sections 
190.51 (Completion of Drawback Claims) and 190.92 (Accelerated 
Payment). CBP may propose, in the future, that all drawback claims be 
bonded.
    Comment: CBP also proposed an additional import bond condition 
regarding claims involving internal revenue tax imposed under the 
Internal Revenue Code of 1986 (IRC), as amended, in proposed section 
113.62(m). Several commenters expressed concerns regarding this 
additional bond condition. One commenter pointed out that the provision 
would extend to all provisions of the IRC as drafted, not just the 
excise taxes contemplated by the NPRM. Other commenters stated that a 
bond covenant not to file, or transfer the right to file, a claim, puts 
the importer in the untenable position of having to violate a bond 
condition in order to file a protective claim so as to thereafter be 
able to contest in court the application of the excise tax refund 
language in this final rule. Some commenters also discussed the 
proposed changes to section 113.62 extending the liquidated damages to 
a violation of proposed section 113.62(m) and asserted that this 
proposed change creates a punitive, not compensatory situation, with 
the liquidated damages likely exceeding the maximum drawback penalties.
    Response: After careful consideration of the comments, CBP is 
withdrawing proposed section 113.62(m) and the conforming changes to 
section 113.62. As stated in the response to the comment on proposed 
section 113.62(a)(4) above, CBP may in the future take action to 
require a bond covering an importer's joint and several liability for 
drawback claims based on the importer's imported merchandise.

F. Federal Excise Tax and Substitution Drawback Claims

    CBP proposed to add text clarifying the prohibition on double 
drawback: Drawback of certain excise taxes pursuant to 19 U.S.C. 1313 
is allowed only to the extent that tax has been paid and not refunded 
or remitted on the export or destruction that is the basis for the 
drawback claim.
1. Double Drawback Generally
    Comment: One commenter stated that essentially all domestically 
produced wine would no longer be available for substitution unused 
merchandise drawback under the NPRM, even though Congress has supported 
substitution and enacted special rules for wine producers providing 
drawback based on color and value. Several other commenters expressed 
opposition to limits on duty drawback or substitution drawback.
    Response: CBP disagrees that the rule would prohibit export of 
domestically produced wine from being the basis for substitution 
drawback. Many of these commenters appear to have conflated double 
drawback of excise taxes with drawback of duties, or substitution 
drawback generally. The statute does not prevent substitution drawback, 
but it does prevent claiming two drawbacks of excise tax, one on the 
export and one on the import, on the basis of a single export. The 
proposed rule, as required by statute, would continue to allow for the 
drawback of duties and fees on imported products, and it would also 
allow drawback of excise tax on imported product, when that claim is 
based on an exported product for which the tax has been paid and not 
refunded.
    CBP agrees that Congress has supported substitution drawback. In 
fact, the rule and statute expand the availability of substitution for 
drawback claims. Currently, substitution unused merchandise drawback 
claims for wine are permitted within the same color where price 
variation does not exceed 50 percent. This practice continues under 
TFTEA, which also allows for substitution unused merchandise drawback 
claims when the imported and substituted merchandise are classifiable 
under the same 8-digit (or, in some cases, 10-digit) HTSUS subheading 
number, as provided for in 19 U.S.C. 1313(j)(2) and (5).
    The prohibition on double drawback of excise taxes does not 
preclude drawback of excise tax on exported goods when that export is 
not the basis for a second claim of drawback of excise taxes on an 
import. The excise tax regime already encourages U.S. exports of goods 
subject to excise taxes by virtue of Internal Revenue Code provisions 
that refund or remit excise tax on goods that are exported and not 
consumed domestically.
    Comment: One commenter stated that drawback of excise taxes based 
on domestically produced exports on which no tax has been paid is no 
more

[[Page 64960]]

a double drawback than would be a producer exporting its product and 
claiming drawback against duty paid for imported products. Other 
commenters similarly stated that there is no distinction between 
drawing back excise tax when no tax has been paid on the export and the 
drawback of duties.
    Response: CBP disagrees with these commenters. Not all goods are 
subject to excise taxes. Generally, under the excise tax regime, goods 
consumed domestically are taxed, regardless whether they are of foreign 
or domestic origin. The import duty regime levies tariffs only on 
imported products, an important difference. When a domestic product is 
exported, no duty is refunded, remitted, or otherwise extinguished 
because, unlike most excise taxes, no duty is imposed on domestically 
made products. Because no import duty is imposed on the domestic 
substituted product, and thus no duty liability is remitted upon its 
export, there is no double drawback of duties in the commenter's 
example. When there is, however, an excise tax liability associated 
with the substituted domestic product that has been either refunded or 
remitted upon export, and that export is also used as the basis for an 
additional refund or remission of tax on an import, then there are two 
drawbacks--a double drawback that 19 U.S.C. 1313(v) prohibits.
    Comment: One commenter stated that the NPRM's assertion, that 
double drawback results in imported product being introduced into 
commerce with no net payment of excise tax, is false because the import 
is tax-paid and consumed before drawback has been claimed. The comment 
states that the reality of claiming drawback is that designated 
imported merchandise for drawback generally comes from the oldest 
consumption entry or warehouse withdrawal under the retroactive 
drawback time period, which can be up to five years prior to 
exportation of substituted merchandise.
    Response: CBP disagrees that the drawback of taxes after their 
payment, even if this follows the sale of the imported merchandise in 
the United States, materially changes the NPRM's explanation or 
analysis, even if an importer were to receive the payment five years 
after importation. To reflect the actual incidence of the tax, one must 
look at the transaction as a whole--the import, export, and 
corresponding drawbacks. Although the excise taxes on the imports are 
paid initially at entry in this example, the eventual drawback of 99 
percent of these taxes indeed results in the imported product being 
introduced into commerce and consumed domestically with a net tax of 
only one percent of the excise tax that is applied to domestic goods. 
In the example provided, there would be no excise tax paid on the 
substituted merchandise that is exported, or if there was such a tax 
paid, it could be refunded. Such provisions in the tax code continue to 
encourage exports.
    Comment: Several commenters stated that 19 U.S.C. 1313(v) operates 
only to prevent multiple drawback claims filed under Title 19 or with 
CBP based on the same exported merchandise. The commenters stated that 
the language of 19 U.S.C. 1313 makes it clear that it has no 
relationship to drawback under the Internal Revenue Code and that 
section 1313(v)'s ``claim for drawback'' language has the same meaning 
as the term ``drawback claim'', defined in section 190.2 and 19 CFR 
191.2(j), which relate to an entry filed with CBP.
    Response: CBP disagrees that the scope of 19 U.S.C. 1313(v) is so 
limited as to prevent only multiple drawbacks processed by CBP based on 
the same exported or destroyed merchandise. Congress adopted no such 
limitation on the language of section 1313(v). The language of section 
1313(v) is broad by its terms, stating that merchandise used to satisfy 
``any claim for drawback'' cannot be the basis for ``any other claim 
for drawback.'' This expansive language contrasts with the language 
used elsewhere in section 1313 to refer to particular kinds of 
drawback. See 19 U.S.C. 1313(j), (k)(1), and (1)(2)(A), (B), and (C) 
(referring to ``drawback under this section'') (emphasis added); 
1313(n)(2) (referring to ``NAFTA drawback''); and 1313(n)(4) (referring 
to ``Chile FTA drawback''). CBP further disagrees that the regulatory 
definition of ``drawback claim'' used by CBP to administer its drawback 
payments under the customs law forecloses a broader definition of 
``claim for drawback'' for the purpose of 19 U.S.C. 1313(v). While the 
CBP regulatory definition was focused only on the actual payments CBP 
makes pursuant to the customs law, the language of section 1313(v) is 
not so narrow. Further, a request for a payment is satisfied by a 
payment, not by exporting or destroying merchandise. If Congress had 
intended ``any claim for drawback'' to mean only the specific written 
request for drawback payment, it is unlikely that it would have 
referred to ``[m]erchandise that is exported or destroyed to satisfy 
any claim for drawback.'' Instead, CBP believes that Congress used 
``any claim for drawback'' more broadly, in the sense of a legal claim 
or entitlement, the elements of which may be satisfied (in part) by the 
exportation or destruction of merchandise. To clarify its scope, and 
its use in these two different contexts, CBP is amending its definition 
of ``drawback claim'' in 19 CFR 190.2.
    Comment: One commenter claimed that there is a long-established 
precedent for paying double drawback of excise taxes on wine.
    Response: A CBP field office first paid double drawback of excise 
tax on wine claims inadvertently and these payments have continued 
since that time. This grant of double drawback was not effectuated or 
ratified by any CBP rule, guidance document, or other action of general 
applicability, and CBP is unaware of any approval of this 
administrative treatment beyond the responsible field office. Customs 
law generally requires a notice and comment process to change a 
practice that has become an established ``treatment previously accorded 
by the Customs Service,'' 19 U.S.C. 1625(c), and many private parties 
may regard their receipt of double drawback as an established 
treatment. However, CBP is not aware of granting double drawback claims 
for commodities other than wine. The proposed drawback regulations 
clarify that the prohibition on double drawback applies to wine just as 
it applies to other commodities subject to excise taxes. For all such 
commodities, drawback claims for excise taxes on imports are only 
allowed to the extent that tax has been paid and not refunded on the 
export or destruction that is the basis for the drawback claim.
    CBP believes the best reading of 19 U.S.C. 1313(v) precludes such a 
double drawback, but to the extent section 1313(v) may be considered 
ambiguous, CBP has adopted a reasonable construction of the prohibition 
on double drawback that appropriately advances the policies of the 
excise tax regime. That regime provides, on net, for the collection of 
an excise tax on goods that are consumed domestically. It would 
undermine the policy of this regime if certain imported goods could be 
consumed domestically free of excise tax, due to double drawback.
    Comment: Several commenters asserted that ``drawback'' does not 
include an exemption from tax, and specifically that the statutory 
schemes allowing the export of alcohol beverages from bond without 
payment of tax cannot be a drawback because no tax obligation exists. 
They state there is neither a refund nor a remission. One commenter 
asserted that exporting from a TTB-bonded facility is a tax exemption 
and not a drawback or claim for drawback. The commenter stated that 
there is no taxable event because

[[Page 64961]]

that tax is never assessed on alcohol beverage exports.
    Response: CBP disagrees that the export of alcohol beverages 
without payment of excise taxes is not remission of tax and therefore 
not a drawback for the purposes of 19 U.S.C. 1313(v). Alcohol taxes on 
domestic product are imposed, by operation of law, before or upon 
removal from bond. Those products may be allowed to be removed 
``without payment of tax,'' but that is not synonymous with ``free of 
tax.'' See, e.g., 26 U.S.C. 5214. The tax liability is extinguished 
only upon export. See, e.g., 26 U.S.C. 5062(b). Drawback encompasses 
both refunds and remission of unpaid tax liabilities that were 
determined or otherwise imposed by Federal law. The understanding that 
drawback includes export from a TTB-bonded facility is consistent with 
Congress's use of the term ``drawback'' in 19 U.S.C. 1313(d), which 
refers to export of domestic products on which tax has been paid or 
determined (i.e., not yet paid), and in 26 U.S.C. 5062(b), which 
describes the extinguishment of a product's tax liability upon export 
as a ``drawback.'' Moreover, it would be anomalous for 19 U.S.C. 
1313(v) to prevent revenue loss only when it arose in the form of a 
refund of amounts already paid and not because it arose from withdrawal 
without payment of tax, where the unpaid tax liability is remitted.
    Comment: One commenter asserted that the NPRM interprets the 
statutory language too broadly in defining drawback, stating that the 
NPRM attempts to redefine the terms ``drawback'' and ``claim for 
drawback'' as used in 19 U.S.C. 1313(v) to include any tax-free 
exportation of domestically produced goods to which an excise tax might 
otherwise apply and that this is inconsistent with statutory language 
and congressional intent. The commenter stated that only three of at 
least seven different Internal Revenue Code provisions governing the 
excise tax status of exported beer, wine, spirits, tobacco, and 
petroleum products use the term drawback and that, in these cases, they 
specifically refer to refund of a tax already paid or extinguishment of 
a previously determined tax liability. The commenter explained that the 
statutory framework, including the ``parallel statutory schemes'' for 
beer, wine, and spirits, notwithstanding bond requirements, never 
requires determination of the tax on these products bound for export 
and that the possibility that a tax liability would be incurred if the 
goods were not exported is not sufficient to create an obligation that 
requires remission.
    Response: CBP recognizes that not every IRC provision concerning 
remission of excise tax liability expressly uses the term drawback, but 
disagrees that the rule's interpretation of the prohibition in 19 
U.S.C. 1313(v) is too expansive. Rather, for reasons described in the 
NPRM, 19 U.S.C. 1313(v)'s prohibition on multiple drawback claims is 
best read to mean that excise taxes may not effectively be drawn back 
twice on the basis of a single export--once for the export of the 
substituted merchandise and then again with respect to the imported 
merchandise for which the exported merchandise is being substituted. 
This is the case even if the excise tax statute does not use the term 
``drawback'' to describe refund or remission, because such statutes 
create the same economic effect and operate, as a commenter explained, 
parallel to statutes that do use the term. Section 1313(v) broadly 
refers to ``any claim for drawback,'' and Congress's inconsistent use 
of the term ``drawback'' in the Internal Revenue Code does not preclude 
CBP from construing that term--particularly its use in combination with 
the term ``any''--to encompass transactions that are identical in 
economic substance to transactions that Congress has expressly label a 
``drawback.'' Compare 26 U.S.C. 5062(b) (which uses the term drawback 
to describe remission upon export of a tax liability determined but not 
yet paid for wine and distilled spirits) with 26 U.S.C. 5704(b), 27 CFR 
44.61, 44.66 (the similar process for tobacco taxes that also provides 
for remission of a tax liability upon export but does not use the term 
drawback) and with 26 U.S.C. 5051(a)(1)(A), 5053(a), 5054(a)(1), 27 CFR 
25.93, 27 CFR Subpart G (the similar process for beer taxes that 
provides for remission of tax liability imposed on removal upon 
export). As explained previously, the language in 19 U.S.C. 1313(v) is 
broad and does not suggest an intent for ``any claim for drawback'' to 
be interpreted narrowly.
    Comment: One commenter stated that, contrary to the NPRM text, 
federal excise taxes are not imposed on all tobacco products and 
cigarette papers and tubes manufactured in or imported into the United 
States. The commenter reproduced 26 U.S.C. 5703 and 5704 and stated 
that section 5704 provides for exemption from excise taxes for tobacco 
products removed in bond from domestic factories and for products 
exported. The commenter stated that an exemption from excise tax is not 
an extinguishment of liability from tax but rather there is no excise 
tax imposed on tobacco products removed in bond from domestic factories 
and for products exported.
    Response: IRC section 5701 (26 U.S.C. 5701) imposes an excise tax 
on tobacco products manufactured in or imported into the United States. 
IRC section 5704(b) (26 U.S.C. 5704(b)) provides permission to remove 
from bond without payment of tax in accordance with such regulations 
and under such bonds as the Secretary shall prescribe. This statute 
does not provide permission to remove free of tax. The tax liability of 
the product to be exported is only extinguished upon proof of export. 
See 27 CFR 44.66. Consequently, CBP disagrees with the argument that 
this is not a drawback for purposes of 19 U.S.C. 1313(v).
    Comment: Several commenters refer to the TTB's use of ``drawback'' 
in a more narrow way than in the NPRM. These commenters distinguish 
TTB's drawback process on TTB's Forms 5130.6, 5120.24, and 5110.30 from 
withdrawal for exportation on TTB's Forms F 5100.11 and 5130.12. One 
commenter also cites an online TTB forms tutorial glossary that defines 
drawback as a return or rebate of excise taxes previously paid.
    Response: CBP disagrees that TTB's use of the term ``drawback'' in 
different, narrower ways in some contexts precludes the interpretation 
of 19 U.S.C. 1313(v) reflected in the rule. TTB does not interpret or 
administer 19 U.S.C. 1313(v) or other customs laws, and must 
distinguish between taxes that have been paid and those that have been 
forgiven for purposes of determining whether a refund of tax should be 
paid.
    Comment: Two commenters asserted that the rule's changes to 19 CFR 
191.22, 191.23, and 191.171, provisions for drawback under the pre-
TFTEA law, reflect an impermissible attempt to circumvent the 
statutorily-mandated one-year transition period and should be withdrawn 
in their entirety.
    Response: CBP disagrees that prohibiting double drawback implicates 
TFTEA's transition period. The statutory prohibition on double 
drawback, 19 U.S.C. 1313(v), predates TFTEA. Double drawback was 
contrary to law before TFTEA, and TFTEA did nothing to alter this. 
Accordingly, the rule correctly prohibits double drawback for all 
claims without regard to the transition period provided for TFTEA 
changes. However, as noted above, CBP is providing a 60-day delayed 
effective date for regulations regarding the drawback of excise taxes 
and clarifying the prohibition on double drawback. Other sections of 
the regulation will go into effect immediately.

[[Page 64962]]

    Comment: Two commenters stated that under the definition of 
drawback in 19 CFR 191.2(i), domestically-produced wine exported exempt 
from tax cannot create a drawback, because it is not an importation. 
The commenters further note that Congress quoted this customs 
definition when enacting TFTEA.
    Response: The existing regulatory definition was adopted when, at 
least as a practical matter, the drawback of excise taxes was not 
available on imported goods. The commenter cites the Senate Finance 
Committee's quotation of the definition in its general description of 
drawback. This recent legislative history did not speak to Congress's 
understanding of the phrase in section 1313(v), much less Congress's 
intent when it enacted that provision in 1993. Moreover, the existing 
CBP regulations contain no provision implementing section 1313(v) and 
therefore do not control the agency interpretation of the phrase ``any 
claim for drawback'' as used in that section. CBP is amending the 19 
CFR 190.2 definition of drawback in the final rule, however, to further 
clarify that it is only for purposes of CBP's authority to pay claims. 
As revised, the definition explicitly recognizes that the term 
``drawback'' has a broader meaning outside the specific context of 
customs payment of drawback, such as the drawback associated with 
exporting merchandise subject to an excise tax. CBP is also deleting 
the cross reference to 19 CFR 101.1 that was proposed at 190.3(a)(3). 
It had been included to provide for drawback of internal revenue taxes 
in manufacturing drawback, but it is no longer necessary because TFTEA 
makes explicit when tax is subject to drawback.
    Comment: Two commenters proposed that the potential abuse of double 
drawback through destruction be addressed directly rather than by 
prohibiting all double drawback. One of these commenters suggested 
regulations under Internal Revenue Code section 5008 may be an avenue 
for doing so, or else by deleting the words ``export or'' from the 
proposed regulatory text in sections 190.22, 190.32, and in 19 CFR 
191.22 and 191.32.
    Response: Section 1313(j) makes plain that both exportation and 
destruction are valid bases for substitution drawback, available on 
equal terms, and section 1313(v) similarly makes no distinction between 
export-based drawbacks and destruction-based drawbacks. CBP does not 
believe that section 1313(v) should be read so narrowly as to invite 
widespread abuse that would thwart its purpose, on the assurance that 
section 5008 could be used to curb some of the abuse.
    Comment: Two commenters stated that excise tax drawback provides a 
WTO legal export promotion incentive that makes the U.S. wine industry 
competitive in world markets or helps offset the risk of developing 
foreign markets.
    Response: Drawback of excise taxes not in excess of the amounts 
that have accrued for the product can be acceptable under WTO rules. 
The proposal will continue to allow drawback of excise taxes on 
imports, as long as the export on which the drawback claim is based is 
in taxpaid status. Trading partners have complained that double 
drawback, or drawback granted on the basis of exports for which a 
drawback has already been granted, amounts to a disguised export 
subsidy prohibited under WTO rules. In addition, for reasons explained 
in the NPRM and below, CBP believes that the practice of double 
drawback is inefficient in promoting the competitiveness of exports and 
disadvantages some U.S. domestic producers.
2. Harbor Maintenance and Oil Spill Liability Taxes
    Comment: Several commenters stated that the prohibition on double 
drawback would change the treatment of drawback of harbor maintenance 
taxes (HMT) and oil spill liability trust fund taxes (OSLTF). Some 
commenters stated that the NPRM's interpretation of 19 U.S.C. 1313(v) 
would limit drawback claims to only one claim across all types of 
duties, taxes, and fees. They state that if exportation without payment 
of tax constitutes a claim for drawback, then this would bar drawback 
not only of excise taxes but also of duties, fees, and taxes such as 
HMT and OSLTF. One commenter stated that OSLTF is never imposed on 
petroleum products refined in the United States and suggested that this 
lack of taxation cannot be characterized as a drawback. This commenter 
further stated that Chapter 38 of the Internal Revenue Code should not 
have been included in the proposed regulatory text designed to prevent 
double drawback because there is no chance of a double drawback arising 
under OSLTF imposed by that chapter.
    Response: CBP proposed no changes with regard to HMT or OSLTF in 
the NPRM. CBP has neither adopted nor proposed an interpretation that 
would limit a claimant to only one duty, tax, or fee upon which to 
claim drawback. A single claim for drawback on a particular product can 
(and often does) cover multiple types of liabilities, while still 
remaining a single, consolidated claim. Nothing about CBP's 
interpretation of section 1313(v) implies that the prohibition on 
double drawback should be applied across all types of taxes, duties, 
and fees rather than within each class. That issue is distinct from the 
question whether drawback encompasses remission of tax liabilities not 
yet determined.
    In any event, it is not CBP's intent to limit drawback in the 
manner the commenters suggest. With respect to pre-TFTEA drawback law, 
CBP believes such an interpretation is inconsistent with the statutory 
language of 19 U.S.C. 1313(j), which provides that each duty, tax, or 
fee imposed under federal law upon entry or importation can be eligible 
for drawback. With respect to post-TFTEA drawback law, CBP believes 
that section 1313(l) (which is cross-referenced in (j)(1) and (j)(2)) 
provides conjunctively for refunds of ``99 percent of the duties, 
taxes, and fees paid'' (emphasis added). CBP's position is that 
merchandise exported or destroyed to satisfy a claim for drawback 
cannot be the basis for any other claim for drawback of the same tax.
    CBP also disagrees that the 19 U.S.C. 1313(v) prohibition on 
multiple drawback claims limits CBP's current practice with regard to 
HMT or OSLTF. HMT does not apply to exports. See 26 U.S.C. 4462(d). 
Finally, 26 U.S.C. 4461, in Chapter 36, imposes the HMT, while the 
proposed section 190.171(c)(3) only addresses taxes imposed under 
Chapters 32 and 38. Therefore, it is clear drawback of HMT based on the 
exported U.S.-refined fuels would remain available, even though the 
section 4081 taxes were never paid on the export.
    Similarly, it is not possible for double drawback of excise tax to 
arise with respect to OSLTF as it has with wine. A U.S. refiner is 
responsible for paying OSLTF on the inputs for domestic fuel 
production. That tax attaches, inter alia, per 26 U.S.C. 4611(a)(1), 
when crude oil is received at a United States refinery. Consequently, 
and as explained above, all exports of substituted domestic petroleum 
products are subject to the OSLTF, but at an earlier stage in the 
production chain. The proposed amendments to sections 190.171(c)(3) and 
19 CFR 191.171(d) are not intended to limit drawback of the OSLTF. 
Under the OSLTF regime, the tax is always paid, whether on imported 
product or domestically produced product. There is no provision in the 
Internal Revenue Code for drawback of OSLTF upon export. The tax is 
never deferred, remitted, or refunded under a statutory provision other 
than Title 19 drawback.

[[Page 64963]]

Thus, this situation is distinct from the double drawback scenarios 
that can arise with excise taxes that may be remitted or refunded. CBP 
considers the tax to be paid even though it was paid on the inputs for 
exported substituted product and not on the product itself. To avoid 
any potential confusion about the continued availability of OSLTF 
drawback, CBP is changing the regulatory text in the final rule to 
exclude Subchapter A of Chapter 38 from the scope of the restrictions 
in 19 CFR 190.22(a)(1)(ii)(C), 190.32(b)(3), 190.171(c)(3), 
191.32(b)(4), and 191.171(d).
3. Statutory Prohibition on Double Drawback and Legislative Intent
    Comment: Several commenters stated that ending double drawback on 
wine and declining to extend the practice to other commodities is 
contrary to the language of the statute and to legislative intent. One 
commenter stated that the rule disallows excise tax drawback provided 
for by TFTEA and does not further Congress's purposes.
    Response: CBP does not agree that Congress intended to permit 
double drawback when it enacted TFTEA. TFTEA did not amend 19 U.S.C. 
1313(v), which expressly prohibits double drawback, or make any other 
statutory changes that indicate approval of double drawback.
    While TFTEA expands eligibility for substitution drawback, 
eligibility for substitution drawback and double drawback are separate 
issues. The more liberalized substitution standard provided for by 
TFTEA and these regulations does not require allowing double drawback. 
Section 1313(v) continues to prohibit double drawback.
    Comment: Several commenters stated that TFTEA's ``lesser of'' rule 
clarifies that double drawback is permitted and makes no exception for 
substituted merchandise that was subject to a tax exemption or refund.
    Response: CBP disagrees that TFTEA allows double drawback. The 
commenter refers to TFTEA's ``lesser of'' rule, which is a safeguard 
that limits drawback claims to the lesser of the duties, taxes, and 
fees paid on imported merchandise or the duties, taxes, and fees that 
would have been paid on the substituted merchandise if it were 
imported. It applies independently of any double drawback, and 
therefore does not indicate whether Congress intended to allow such a 
practice. The ``lesser of'' rule does not override the 19 U.S.C. 
1313(v) prohibition on double drawback, but rather, sections 19 U.S.C. 
1313(j)(2) and (l) are both subject to that prohibition. As addressed 
above, drawback in the form of a remission of an excise tax that occurs 
upon exportation is a drawback for purposes of 19 U.S.C. 1313(v).
    Comment: Several commenters argued that the withdrawal of a 2009 
NPRM that proposed a similar clarification with respect to the 
prohibition on double drawback demonstrates that this rule is not sound 
or backed by statute. These commenters claimed that there was 
significant opposition to the 2009 NPRM, including from Members of 
Congress. Several commenters asserted that because Congress was aware 
of the withdrawn 2009 NPRM and did not subsequently address the issue 
in TFTEA in 2016, Congress ratified CBP's payment of excise tax 
drawback claims without regard to whether excise taxes were in fact 
paid on the substituted merchandise.
    Response: CBP disagrees with this comment. CBP's policy decision to 
withdraw the 2009 NPRM is not probative of legislative intent under any 
accepted methods of statutory construction. Withdrawing the 2009 NPRM 
provided Congress with an opportunity to consider double drawback 
legislation. Congress ultimately decided against authorizing double 
drawback in TFTEA and left section 1313(v) in place. Although CBP has 
paid double drawback of excise taxes on wine since 2004, the 
clarification on double drawback contained in this rule will ensure 
that double drawback of excise taxes on wine is prohibited in the same 
way as it has always been for all other commodities subject to excise 
tax. Congress took no steps in TFTEA to authorize double drawback, 
despite knowing that CBP was not granting double drawback to distilled 
spirits, tobacco, beer, and fuel--all of which are governed by 
substantially similar drawback regimes as wine.
    Comment: Several commenters stated that the ``notwithstanding any 
other provision of law'' language in 19 U.S.C. 1313(j)(2) was added 
specifically to overturn court decisions that upheld the denial of 
claims for HMT drawback. The commenters stated that this not only 
changed the HMT treatment but also means that no other provision of law 
can restrict drawback eligibility; they state any excise tax is 
recoverable notwithstanding any other provision of law--even if doing 
so conflicts with other legal provisions. One commenter also cited case 
law for the proposition that ``notwithstanding'' clauses such as this 
are clear and should be interpreted strictly. Another commenter 
described the history of the ``notwithstanding'' language in 19 U.S.C. 
1313(j)(2), stating that it reflects Congress's overturning of CBP's 
practice of rejecting excise drawback claims under the customs laws on 
the basis that the Internal Revenue Code was the exclusive means of 
drawing back those taxes. The commenters also noted that 19 U.S.C. 
1313(j)(2) delineates precise conditions under which substitution 
drawback claims must be allowed, and paying tax on the substituted 
exported merchandise is not among them. The commenters stated that the 
NPRM is, for these reasons, inconsistent with 19 U.S.C. 1313(j)(2).
    Response: CBP agrees that the legislative history indicates that 
Congress intended the ``notwithstanding any other section of law'' 
language to clarify that drawback of HMT is permitted. CBP disagrees, 
however, that this language was intended to limit the operation of 19 
U.S.C. 1313(v)'s prohibition on double drawback. Courts have cautioned 
against literal constructions of ``notwithstanding any other provision 
of law'' clauses that ``narrow so dramatically an important provision 
that it inserted in the same statute.'' Ministry of Def. & Support for 
the Armed Forces of the Islamic Republic of Iran v. Elahi, 556 U.S. 
366, 386 (2009); see also Oregon Natural Resources Council v. Thomas, 
92 F.3d 792, 796 (9th Cir. 1996) (noting that the court had 
``repeatedly held that the phrase `notwithstanding any other law' is 
not always construed literally''). If 19 U.S.C. 1313(j)(2)'s 
``notwithstanding'' language applied to the crucial prohibition set 
forth in section 1313(v), then nothing in section 1313 would prevent 
the same export or destruction from being used to claim drawback from 
the actual importation of that merchandise (direct identification 
drawback under 19 U.S.C. 1313(j)(1)) and from the importation of other 
merchandise for which the exported or destroyed merchandise is 
substituted (substitution drawback under 19 U.S.C. 1313(j)(2)). 
Likewise, if section 1313(j)(2)'s ``notwithstanding'' language applied 
to section 1313(v), then nothing in section 1313 would prohibit 
multiple claims under (j)(2) where there are multiple imports of 
commercially interchangeable merchandise but only one export. Section 
1313(v) prohibits these duplicative claims. If 19 U.S.C. 1313(j)(2) 
applied its ``notwithstanding'' language to section 1313(v), a firm 
could export a single item every five years, for example, and never pay 
duty on any import of any commercially interchangeable item. Congress 
could not have intended such results. Rather, as the commenter notes, 
the legislative

[[Page 64964]]

history shows that Congress intended the ``notwithstanding'' language 
in section 1313(j)(2) for the purpose of changing the law to allow 
drawback of HMT. See S.Rep. No. 108-28, at 173 (2003). The rule 
continues to provide for HMT drawback as Congress provided, while also 
preventing double drawback that Congress prohibited.
    Comment: Several commenters stated that Congress intended to allow 
drawback of excise taxes regardless of whether excise taxes were paid 
on the substituted exported or destroyed merchandise. They described 
the long history of drawback, noting that its presence in U.S. law 
dates to the ``first substantive legislation in this government's 
history'' signed into law by George Washington in 1789. The commenters 
noted that Alexander Hamilton and Adam Smith exalted the good economic 
sense of customs drawback, with the commenters suggesting that drawback 
of excise taxes when no excise taxes were paid on substituted exports 
also makes good economic sense.
    Response: CBP agrees that drawback has a long history in the United 
States, dating to the Second Act of Congress on July 4, 1789, but part 
of that long history has been Congress's efforts to prevent abuses. In 
fact, in his ``Sketch of the Finances of the United States,'' Secretary 
of the Treasury Albert Gallatin noted that Congress suspended a 
drawback law that drained the Treasury instead of yielding revenue. 
Albert Gallatin, Sketch of the Finances of the United States, 43 
(1796). Nothing in the NPRM is in tension with this history.
    Comment: One commenter stated that the NPRM argued that 
restrictions on duty drawback were intended to prevent revenue loss 
even though there is no evidence that Congress intended this when 
passing TFTEA. Another commenter stated that CBP has taken the position 
that following the statute would result in undue revenue loss and has 
found ambiguity in the drawback law where none exists in order to 
substitute its judgment on double drawback for that of Congress.
    Response: CBP disagrees that the rule is inconsistent with the 
statutory framework for drawback. TFTEA is silent on double drawback, 
and CBP, to the best of its knowledge, has not been allowing double 
drawback claims on commodities other than wine. The prohibition on 
multiple claims in section 1313(v) continues to prohibit double 
drawback, as it did before TFTEA's enactment, and the NPRM corrects an 
aberration in CBP's practice with respect to wine.
    Comment: One commenter asserted that the revenue loss estimates 
described in the NPRM are a minor share of total federal revenue, 
stating that foregone excise tax revenue never truly belonged to the 
federal government as the product was never sold in the United States.
    Response: CBP disagrees that the size of the revenue loss relative 
to the entire federal budget relieves it of a responsibility to carry 
out Congress's intent to levy excise taxes on products consumed 
domestically. CBP also disagrees that the potential revenue loss is 
minor, for reasons described in the NPRM.
    Comment: Several commenters stated that the U.S. Constitution 
prohibits the imposition of any tax on exports and that the NPRM's 
rationale would require that a tax on exports be paid for substitution 
drawback eligibility. One commenter noted the Declaration of 
Independence and Articles of Confederation signer Elbridge Gerry's 
observation that Congress could not be trusted to tax exports.
    Response: The Constitutional prohibition on export taxes does not 
apply to generally applicable taxes that are imposed at the time of 
production. See, e.g., Nufarm America's, Inc. v. United States, 477 
F.Supp. 2d 1290, 1296 (Ct. Int'l Trade 2007), quoting Cornell v. Coyne, 
192 U.S. 418, 427 (1904). Accordingly, CBP disagrees that the 
Constitutional prohibition on export taxes affects the application of 
drawback on generally applicable excise taxes. Whether the Constitution 
permits these taxes to apply to products destined for export is 
immaterial to CBP's decision here, however, insofar as Congress has 
specifically allowed drawback of excise taxes that ultimately is 
exported, consistent with a framework that levies the excise tax on 
goods consumed in the United States. Even if the Constitution were 
understood to prohibit levying excise taxes on goods that are exported, 
however, it certainly does not require Congress to forgive excise tax 
paid on a corresponding import. This would result in the domestic 
consumption that has not been taxed, a problem not compelled by the 
Constitution and one that Congress prevented through 19 U.S.C. 1313(v).
    Comment: One commenter supported the regulatory text originally 
proposed in section 190.32(d), stating that it recognizes the statutory 
history of wine drawback, preserves an important export incentive, and 
is consistent with a TFTEA conference report (H. Rept. 114-376), which 
states that the Conferees further clarify that the existing treatment 
of wine under section 313(j)(2) of the Tariff Act of 1930 is preserved, 
and that the amendments to the statute do not change this treatment.
    Response: On August 20, 2018, CBP published a technical correction 
of proposed section 190.32(d) in the Federal Register (83 FR 42062), 
which clarified the references in that provision. As is evident from 
the detailed discussion of wine in the preamble of the proposed rule, 
the statutory prohibition on double drawback applies to excise taxes on 
wine just as it applies to other products. The technical correction 
document fixed an inadvertent error in a cross-reference in the 
proposed regulation, which the commenter requested that CBP adopt. The 
uncorrected proposed text in section 190.32(d)(2) had an exemption for 
drawback claims for wine that included an imprecise reference to the 
entirety of section 190.32(b). The reference should have been only to 
paragraphs (b)(1) and (b)(2), the specific paragraphs regarding the 
``lesser of'' rule, and not to all of section 190.32(b), and the 
oversight was corrected.
    With respect to the TFTEA conference report cited in this comment, 
CBP disagrees that it addresses double drawback. The only mention of 
wine in 19 U.S.C. 1313(j)(2) does no more than clarify that the unique 
alternative substitution standard that has been applied to wine will 
continue to be available along with the new HTSUS-based substitution 
standard TFTEA created. Eligibility for substitution and double 
drawback are separate issues. The more liberalized substitution 
standard provided for by TFTEA and these regulations does not equate to 
allowing the double drawback prohibited by 19 U.S.C. 1313(v).
    Comment: One commenter stated that several legislators tried to 
amend 19 U.S.C. 1313 in 2007, proposing a subsection (z) that would 
have reduced the drawback claims allowed under subsections 1313(b), 
(j)(2), and (p) by the amount of any Federal tax credit or refund of 
any Federal tax paid on the merchandise. Because this language is 
consistent with the NPRM's clarification regarding the prohibition on 
double drawback but was never enacted into law, the comment states the 
Congress must have intentionally omitted the proposed restriction. The 
comment also states that the proposal to add a subsection (z) rather 
than amend subsection (v) demonstrates that Congress did not interpret 
section 1313(v) the way the NPRM does.
    Response: The comment refers to text contained in a provision to 
limit or reduce drawback on certain imported ethanol that was part of 
two 2007 energy

[[Page 64965]]

tax amendments to major legislation that were not adopted. CBP 
disagrees that the failure of these broad energy tax proposals to 
become law can be seen as Congressional support for double drawback. 
There is no indication that Congress debated or voted on double 
drawback in 2007. More broadly, the fact that Congress might have 
considered specifically mandating a change to CBP's application of 
section 1313(v) through clarifying legislation would not establish that 
CBP lacked the authority to make such a clarification on its own.
    Comment: One commenter stated that Treasury cannot rely on an 
economic impact rationale to eliminate the eligibility of excise taxes 
for drawback when Congress intends to continue and expand this type of 
drawback.
    Response: CBP disagrees that Congress allowed, much less expanded, 
double drawback through TFTEA, or that this rule would eliminate the 
eligibility of excise taxes for drawback. On the contrary, 19 U.S.C. 
1313(v), which TFTEA did not change, prohibits ``double drawback'' of 
excise taxes. CBP included the economic analysis to explain to the 
public the effects of an arcane practice not well understood by many, 
and to explain the policy considerations that informed its resolution 
of any statutory ambiguity on this issue.
4. Trade Trends and Economic Effects of Double Drawback
    To explain the economic and trade impact of double drawback, CBP 
presented trade statistics during the period in which CBP has allowed 
for the double drawback of excise taxes on wine, and a discussion of 
potential effects from double drawback.
    Comment: One commenter stated that, contrary to the analysis in the 
NPRM and in large part due to the availability of excise tax drawback, 
U.S. wine exports have substantially increased during the period from 
2001 to 2017, exceeding $1.53 billion in 2017.
    Response: CBP disagrees that the available trade data demonstrate 
that wine exports have increased because of the availability of double 
drawback. CBP believes that it began paying claims that resulted in 
double drawback of excise taxes for wine in 2004. Therefore, 2004 (and 
not 2001) is the more instructive starting point for analysis. While 
exports increased in value from $682 million to $1.255 billion from 
2004 to 2016, exports by volume only increased from 327 million liters 
in 2004 to 345 million liters in 2016, a 5.5 percent increase. In 
evaluating the impact of double drawback, the volume of exports is more 
relevant than the value of exports because excise taxes are assessed by 
volume. On balance, the data submitted by commenters and considered by 
CBP do not demonstrate that double drawback was a significant driver of 
the increase in wine exports. The large increase in value of wine 
exports was not from an increase in volume,\5\ but rather was due to an 
increase in the average value per liter of bottled wine exports from 
$2.32 to $6.14 during that period.
---------------------------------------------------------------------------

    \5\ The volume of bottled wine exports decreased from 2004 to 
2016, from 259 to 171 million liters. See Table B, NPRM, 83 FR at 
37900.
---------------------------------------------------------------------------

    Comment: One commenter described the adverse effects of double 
drawback and stated that double drawback has caused market distortion 
and significantly disrupted the U.S. import wine market, with those 
importers benefiting from a drawback credit earned from non-tax paid 
exports enjoying a significant cost of goods advantage. One commenter 
concluded that the expansion of substitution drawback eligibility under 
TFTEA created an urgency to fix the double drawback problem before its 
effects broaden.
    Response: CBP agrees that double drawback has market distorting 
effects that likely most benefit firms that both import and export, 
typically larger firms. CBP believes these observations provide 
additional support for clarifying the prohibition on double drawback, 
as proposed in the NPRM.
    Comment: One commenter stated that the NPRM's double drawback 
clarification discriminates against certain industries by choosing who 
should be eligible for tax and trade programs instead of making sure 
that tax and trade policy is economically neutral and promotes 
efficient allocation of resources by affording the same benefits to all 
businesses.
    Response: CBP disagrees that the proposed rule discriminates 
against specific industries. To the contrary, it corrects a practice 
that inadvertently afforded imported wine special treatment for certain 
claimants, as applicable--allowing drawback for wine on the basis of an 
export already subject to drawback, in effect a double drawback. 
Although a CBP field office has allowed double drawback of excise taxes 
for wine, CBP does not believe it has done so for other commodities 
subject to excise tax (e.g., distilled spirits, beer, taxable fuel). 
Far from discriminating against particular industries as the commenter 
suggests, this rule restores parity by clarifying that double drawback 
is prohibited by statute for each product class. The rule changes a 
practice that allowed for special treatment of wine for certain 
claimants, as applicable, and thereby treats the wine industry in the 
same manner as all other industries that have not collected double 
drawback. Even within the wine industry, double drawback does not 
benefit firms evenly, but rather advantages U.S.-based firms that 
import while putting solely domestic U.S. producers at a competitive 
disadvantage.
    Comment: Several commenters stated that ending double drawback of 
excise taxes on wine or not extending double drawback to all industries 
subject to relevant excise taxes would cause economic harm, including a 
loss of U.S. jobs. These commenters suggested that double drawback 
helps U.S. wine compete internationally, including in markets where 
foreign products may receive government subsidies and benefit from more 
favorable foreign trade agreements. Multiple commenters stated that 
increasing U.S. production depends on double drawback. Several 
commenters also said that ending double drawback for wine would harm 
many businesses supporting the wine industry or that failing to extend 
double drawback to other industries would present a lost economic 
opportunity for U.S. manufacturing.
    Response: The rule fully preserves the ability to export wine 
without payment of tax, which will continue to help promote exports. 
The rule would, however, limit a practice that nearly eliminates excise 
taxes on imported wine and therefore encourages imports. Double 
drawback allows imported products to be sold 99 percent free of excise 
tax in the United States, while domestic products are fully taxed. 
Thus, while double drawback may provide a tax advantage for those U.S.-
based firms that both import and export, CBP does not believe that this 
policy, on balance, provides a competitive advantage to U.S. production 
as a whole. The practice of double drawback, which reduces taxes on 
imports, does not appear to be an effective measure for promoting 
exports and domestic production. As described in the NPRM, trade 
statistics indicate that the U.S. trade deficit for wine by volume 
increased during the time that CBP has allowed the drawback of excise 
taxes for wine without regard to whether excise tax was paid on the 
substituted merchandise. Import volumes of wine grew over 50 percent 
while export volume grew only five percent from 2004 to 2016.
    Comment: One commenter from a distilled spirits firm stated that it 
is

[[Page 64966]]

moving a portion of its Canadian production to the United States due 
solely to the ability to claim drawback for a distilled spirits product 
through February 24, 2019. It referred to its alleged recent approval 
from CBP for substitution unused merchandise drawback claims on 
internal revenue taxes paid upon whiskey under 19 CFR part 191 and 
expressed concern that it would no longer be valid under TFTEA pursuant 
to the new part 190.
    Response: CBP acknowledges that double drawback is an attractive 
tax benefit for some firms and may play a role in production decisions. 
These firm-level incentives, however, do not mean that the market-wide 
effect is positive for U.S. production. In the particular case of the 
commenter, CBP has not, to the best of its knowledge, allowed double 
drawback of excise taxes on distilled spirits. Insofar as the drawback 
eligibility of domestically manufactured product is concerned, there 
should not be an impact as a result of TFTEA because, as indicated 
elsewhere in the responses to the comments, double drawback is not 
allowable for pre-TFTEA or TFTEA-drawback claims in light of the 
general applicability of 19 U.S.C. 1313(v) to both.
    Comment: One commenter states that the view in the NPRM that double 
drawback results in excise tax-free foreign products competing with 
domestic products that are fully taxed improperly assumes that drawback 
funds will be used to reduce U.S. domestic prices instead of being used 
to add new employees, build new bottling lines, and reduce export 
pricing.
    Response: CBP recognizes that a reduction in taxes applicable to a 
particular imported product will result in lower prices and/or 
increased profits for the seller, and that those profits could be 
applied in any number of ways more or less beneficial to the U.S. 
economy. This observation, however, does not alter CBP's and Treasury's 
duty to collect the taxes imposed by Congress, or change the fact that 
failure to correctly apply the tax to certain sellers will provide a 
competitive advantage to those sellers. Furthermore, we note that this 
benefit accrues only to certain firms and does not appear to be 
effective as an export promotion measure. The commenter provides no 
evidence to assert that the tax reduction on imports has resulted in a 
meaningful increase in employment or investment in the United States, 
nor does the commenter present evidence that undercuts CBP's reasonable 
expectation that lower excise taxes on imports will result, on balance, 
in lower priced imports (inclusive of tax). We also note that contrary 
to the commenter's suggestion that double drawback of excise taxes 
reduces export prices, the average export price of bottled wine 
increased 250 percent during the period of double drawback.
    Comment: One commenter stated that the NPRM's clarification with 
respect to drawback of excise taxes would benefit California's wine 
grape growers. The commenter observed that double drawback subsidizes 
both imports and exports, hurting wineries that use only California 
wine grapes, as these wineries are forced to compete against subsidized 
wineries who benefit from imported bulk wine.
    Response: CBP agrees that double drawback can have an effect on 
both imports and exports, that it can reduce the price of imports, and 
that it affects the wine industry in uneven ways--providing a tax break 
on imported wine for firms that both import and export, but providing 
no benefits for firms that only serve the domestic market.
    Comment: One commenter observed that the economic arguments and 
reasoning contained in the NPRM lack the evidence and rigor required to 
establish its conclusions.
    Response: CBP has used the best data available to inform its 
conclusions and has reviewed and considered all data submitted by 
commenters. CBP acknowledges that its analysis (like any economic 
analysis) is not without uncertainty and limitations. CBP does not 
believe that the available trade data provide persuasive evidence that 
double drawback is effective as a tool for promoting exports of U.S. 
product. During the period in which double drawback was paid, import 
growth was significantly greater than export growth.
    Comment: One commenter stated that the trade statistics described 
in the NPRM are incomplete in that they only extend back to 2004, even 
though the U.S. wine industry began claiming substitution unused 
merchandise drawback in 2001. This commenter also describes as 
``baseless'' the conclusion that drawback promotes imports but not 
exports, considering the refund of taxes on the import is only possible 
when there is an export.
    Response: CBP disagrees that the NPRM's economic analysis concluded 
that double drawback exclusively promotes imports, not exports. CBP 
acknowledges that double drawback may promote exports for some firms. 
To be clear, to the extent that double drawback promotes exports, it 
does so by giving firms that export an entitlement to import a similar 
product 99 percent excise tax-free into the U.S. market. The analysis 
in the NPRM concluded that the observed economic effects of double 
drawback do not support the view that it is effective in promoting 
exports. CBP underscores that the NPRM fully preserves the ability of 
U.S. firms to export domestic product with the benefit of drawback of 
excise taxes. They may not, however, use such an export as the basis 
for a claim of drawback of excise taxes on an import.
    The proposed regulations do not restrict the wine substitution 
standards. The prohibition is on double drawback, and CBP believes that 
it began paying claims for wine that resulted in double drawback of 
excise taxes in 2004, not 2001. Therefore, CBP believes that 2004 (and 
not 2001) was the appropriate starting date for its analysis. The 
commenter may have been confusing the impact of the application in 
2001, by the San Francisco drawback office of a commercial 
interchangeability standard that was inconsistent with, and more 
liberal than, that applied by CBP Headquarters. That more liberal 
standard for substitution may have led to expanded approval of 
substitution unused merchandise drawback claims and also more exports. 
See ``Commercial Interchangeability of Table Wine; Drawback; Food, 
Conservation, and Energy Act of 2008,'' CBP Ruling HQ H036362 (Mar. 27, 
2009).
    Comment: Two commenters stated that ``flexitanks,'' a technological 
innovation for transporting wine, rather than double drawback, caused 
the increase in bulk wine imports described in the NPRM. Another 
commenter stated that many reasons may explain why imports of bulk wine 
into the United States have increased so significantly since 2004.
    Response: CBP acknowledges that technological innovation and other 
factors potentially contributed to the growth in bulk wine shipments, 
but these factors do not change the incentive for vintners to import 
bulk wine provided by the availability of double drawback of excise 
taxes. In fact, the advent of flexitanks, which made bulk shipments 
cheaper, may have amplified the impact of the incentive to import 
provided by double drawback. This is because the reduction of the cost 
in the wine means that the value of the drawback, which is by volume 
and constant, has increased relative to the cost of bulk wine, which is 
lower when imported in flexitanks. Thus, CBP disagrees with the 
statement that the increase in bulk wine shipments has nothing to do 
with excise tax. It is more likely that both flexitanks and double

[[Page 64967]]

drawback contributed to rising trade shares in bulk wines.
    Comment: One commenter presented the following hypothetical as an 
illustration of double drawback's subsidy of bulk wine imports: If a 
U.S. winery is choosing between a lot of California grapes and one that 
is imported, and assuming both are equivalent in cost and quality, the 
potential for double drawback makes the foreign import a better choice. 
The comment notes that there is no subsidy if the winery chooses the 
U.S. product, but the imported bulk wine has the potential of returning 
the equivalent of $0.2827 in federal excise tax per liter of wine to 
the imported winery, provided the winery can find a qualifying export.
    Response: CBP agrees that double drawback provides an advantage to 
and may encourage imports, as explained in the NPRM.
    Comment: One commenter stated that the NPRM does not explain how 
the ratio of excise tax to product value matters in the context of 
incentives to seek double drawback.
    Response: The ratio of excise tax to product value in the context 
of double drawback matters because economic decisions are made in part 
because of relative costs. The larger the drawback of excise tax 
relative to the purchase price of the imported product, the more likely 
one is to purchase that product. For example, if the excise tax on a 
product is $1 and imported product A costs $2 and imported product B 
costs $3, the purchaser is more likely to choose product A, with all 
else being constant, because its net cost (with drawback) is half that 
of product B. If product A, however, costs $10 and product B costs $11, 
the difference in net value ($9 and $10) would only be about 10 percent 
and less likely to affect a purchasing decision. This is why the ratio 
of product value to excise tax means that drawback that is constant by 
volume is more likely to have an impact on decisions to purchase less 
expensive products such as bulk wine.
    Comment: One commenter stated that the NPRM incorrectly concludes 
that double drawback uniquely promotes imports without having an effect 
on exports. The commenter provided a ``difference-in-difference'' 
analysis to support his view that the practice of double drawback 
promoted exports.
    Response: In the NPRM, CBP concluded that trade data are consistent 
with the view that double drawback may have promoted wine imports but 
that it has not been effective as an export promotion measure. CBP 
disagrees that the difference-in-difference model presented 
persuasively establishes otherwise. To support the critique, the 
commenter provided analysis showing a relative growth in bulk wine 
exports to the European Union (EU) compared to Canada beginning around 
2004, the year CBP inadvertently began allowing double drawback on 
substituted wine. CBP has some concerns with this approach, which are 
discussed below.
    First, the analysis focuses narrowly on bulk wine exports to the 
EU, while double drawback has affected both bottled and bulk wine 
exports to all non-NAFTA countries. The reason for this narrow focus 
appears to be, as the analysis in the NPRM indicated, that an analysis 
of bottled wine (or bulk and bottled wine combined) would find a 
negative effect on exports. While the commenter argued that the NPRM's 
analysis is flawed because it does not extend far enough into the past, 
if one were to take at face value the bulk wine analysis figure, the 
effect on exports operates with a strong lag, so starting a comparison 
in 2004 would have little effect on the findings in the NPRM.
    Second, the commenter notes that careful economic analysis controls 
for variables not being studied. CBP acknowledges that it lacks 
sufficient data to control for these variables in its analysis. 
Instead, CBP produced a qualitative examination of trends in aggregate 
trade data. CBP did not make categorical causal statements, but rather 
explained that the low growth rate in export volume did not suggest a 
large export response to double drawback. CBP agrees that strong causal 
statements would require considerably more data and exhaustive economic 
analysis as the commenter describes, controlling for a wide range of 
economic factors affecting supply and demand for wine. Unfortunately, 
the commenter's analysis also fails to control for these variables. 
Instead, the commenter's analysis hinges entirely on the assumption 
that exports of bulk wine to Canada and the EU would have behaved 
identically over the period in question in the absence of double 
drawback. There are, however, many factors that may affect the EU but 
not Canada over this sample period. Bulk wine shipping costs, for 
example, decreased significantly around the time CBP began paying 
double drawback claims, which would have a much bigger effect on 
shipments to the EU than to Canada.
    To more carefully evaluate the fundamental assumption underlying 
the commenter's analysis, CBP examined total EU imports of bulk wine, 
both from the United States and other origins, from 2000 to 2016. Using 
United Nations (UN) Comtrade import data for bulk wine, CBP is able to 
recreate the commenter's findings that the U.S. exports to the EU grew 
substantially beginning around 2004 while U.S. exports to Canada 
remained relatively flat. Figure 1 shows the volume of U.S. bulk wine 
imports for Canada and the EU from 2000 to 2016. Much like Figure 1 in 
the commenter's analysis, EU imports diverge from Canadian imports 
around the time of the introduction of substitution drawback.
BILLING CODE 9111-14-P

[[Page 64968]]

[GRAPHIC] [TIFF OMITTED] TR18DE18.000

    However, during this time period, EU imports of bulk wine from non-
U.S. countries increased dramatically while imports to Canada from 
other non-U.S. countries remained relatively flat. See Figure 2.

[[Page 64969]]

[GRAPHIC] [TIFF OMITTED] TR18DE18.001

BILLING CODE 9111-14-C
    This analysis shows that Canada and the EU experienced very 
different trends in bulk wine imports unrelated to double drawback in 
the United States, making Canada a poor control group for this 
analysis. In short, because the fundamental assumption underlying the 
model is unrealistic in this context, the results are not useful in 
evaluating the effects of double drawback.
    The commenter then claims that the NPRM ``ignores the fundamental 
economic logic of substitution drawback,'' namely, that it ``requires a 
firm to match its imports with corresponding exports'' (emphasis 
added), and then cites that in the period between 2004 and 2016, the 
United States imported about three times as many liters as it exported. 
The commenter argues that therefore the limiting factor was not imports 
but exports, and, as such, double drawback incentivized exports, not 
imports.
    The effect of double drawback as an incentive to boost exports or 
imports depends not just on the amount of importing and exporting a 
firm does but also on many other factors that affect the profitability 
of importing and exporting (e.g., production costs, supply chain costs, 
demand for products, transaction costs associated with double 
drawback). CBP also notes that many firms that do business in the 
United States will export more than they import, such that they would 
have an incentive to increase imports. The relative effect of double 
drawback on importing versus exporting is theoretically ambiguous and 
varies from firm to firm, but by the commenter's rationale, exports 
should have increased during this time period while actual trends tend 
to show more of an increase in imports than exports during the time CBP 
has paid double drawback claims.
    Finally, the commenter takes the volume of bottled wine exports 
from 2016, the tax to value ratio, and an elasticity of export supply 
to estimate a possible effect of substitution drawback on bottled wine 
exports. While the commenter asserts that the ``calculation 
demonstrates how substitution drawback has in fact increased exports of 
wine relative to what would have otherwise occurred,'' this is an 
unsubstantiated claim. The exercise merely simulates what, under key 
and somewhat arbitrary assumptions, may be considered a plausible 
effect.
    Whether this is a plausible effect depends in particular on the 
size of the elasticity of export supply used, with larger elasticities 
predicting a larger effect on exports. The commenter used an elasticity 
of 9, which is arguably quite large. Further, the commenter provides no 
direct evidence that it is a reasonable elasticity. Instead, it is 
indirectly backed out using price elasticities of supply and demand 
from the literature and a set of structural assumptions. These 
assumptions ignore many important margins along which behavior might 
change, and assume producers only respond to double drawback by 
increasing exports of bottled wine. The commenter dismisses effects on 
imports without justification, and he does the same with respect to 
benefits that would accrue to firms that would not need to change their 
investment, production, exporting, or importing to take advantage of 
tax reduction. He also dismisses benefits that accrue to mergers 
between importers and exporters that occur for

[[Page 64970]]

the sole purpose of capturing the subsidy. In fact, those responses 
involve no actual change in production, and it is plausible that those 
represent the largest potential uses of double drawback. Further, the 
exercise does not take into account possible offsetting negative 
effects on U.S. production for domestic consumption, nor does it take 
into consideration potential shifting of production between bottled and 
bulk wine.
    Comment: One commenter stated that the analysis is overly narrow 
and overlooks potential economic benefits of double drawback to the 
U.S. economy.
    Response: Double drawback serves as a subsidy for the joint 
importation and exportation of wine and likely distorts the decisions 
of consumers and firms, leading to deadweight loss. A reduction in 
excise taxes on wine would be made up by higher taxes or increased 
borrowing and would produce a change to overall economic output that 
varies from modestly negative to minimal. Double drawback no doubt 
benefits its beneficiaries, but CBP does not believe it benefits the 
overall economy, and notes that double drawback advantages imported 
product in the domestic market over domestically produced goods.
5. Revenue Loss Estimates of Double Drawback
    Comment: One commenter stated that the Congressional Budget Office 
(CBO) assessed the loss of revenue resulting from TFTEA-Drawback 
changes and concluded that the ten-year impact of the drawback changes 
was only a revenue reduction of $24 million. The commenter argued that 
the Administration should not replace the CBO analysis. The commenter 
stated, based on the CBO figures, that the potential impact of TFTEA-
Drawback changes is minor and that double drawback should be allowed.
    Response: CBP disagrees that the CBO assessment reflected an 
expansion of double drawback. Because nothing in TFTEA changes the law 
on double drawback, there is no reason to believe CBO would have 
assumed a change in its analysis. The disparity between the CBO score 
and the revenue loss estimates in the NPRM tends to, if anything, 
support CBP's conclusion that TFTEA was not intended to expand the 
availability of double drawback. CBO's estimates predicted the revenue 
loss due to the more liberal 8-digit HTSUS substitution standard 
introduced in TFTEA. The analysis in the NPRM estimated $674 million to 
$3.3 billion in annual lost revenue if double drawback were expanded.
    Comment: One commenter stated that the NPRM should not have 
included motor fuels taxes (IRC Chapter 32) in any estimate of revenue 
loss attributable to drawback, because it is not legally possible to 
claim drawback of these taxes under the Tariff Act of 1930, as amended.
    Response: While the framework for collecting motor fuels taxes 
makes double drawback less likely than it is for other commodities, 
such as wine and distilled spirits, there are import procedures that 
may be used for motor fuels that could result in a claim for drawback 
of these taxes under the Tariff Act of 1930, as amended. Internal 
Revenue Code sections 6421(c) and 6427(l) provide for the refund of 
motor fuels taxes paid on exported gasoline and diesel, respectively. 
The NPRM estimate uses a small takeup rate of one to five percent that 
would result in only a $20 million to $98 million annual revenue loss, 
recognizing that use of those procedures is less likely. But, even 
assuming zero takeup of double drawback for motor fuels, it does not 
change the larger finding that double drawback would lead to 
substantial revenue loss, a loss that CBP believes Congress did not 
intend.
    Comment: One comment sought clarification of the exact methodology 
behind the $54.9 million estimate of disbursed substitution unused 
merchandise drawback claims for wine included in the NPRM.
    Response: CBP appreciates the opportunity to clarify. The estimate 
is based on two separate sources of data: (1) Transaction level data on 
all excise tax refunds for the top 20 importers of wine, and (2) data 
on substitution drawback claims. For 2015, CBP processed $51.393 
million in excise refunds for substitution drawback claims for the top 
20 importers. The figure of $54.9 million comes from a second analysis 
by CBP not limited to the top importers, but based on a comprehensive 
analysis of all substitution drawback claims for HTS codes 2204, 2205, 
and 2206. These two figures are in close alignment, suggesting that 
2015 drawback claims for wine were greater than $50 million and that 
the vast majority of these claims were attributable to the top 20 
importers.
    Comment: One commenter questioned the assumption that the tax 
refunds reflect drawback on wine as opposed to drawback on other 
excise-taxable goods like taxable fuel and tobacco.
    Response: CBP only examined the claims for wine categories because 
CBP does not believe it has paid double drawback claims on other excise 
taxable goods. Wine is the only product that CBP knows has received 
this treatment for certain claimants, and therefore any drawback claim 
is highly unlikely to be attributed to another source.
    Comment: One commenter questioned the assumption that these refunds 
reflect double drawback claims at all, asking whether these refunds 
could be for other excise taxes.
    Response: The analysis carefully focuses on drawback claims for 
excise tax on wine. Other forms of drawback, such as manufacturing 
drawback, are identified using a different code, and excluded from the 
analysis. Given the limits of the data, however, these claims could 
contain related claims for refunds of other taxes, namely refunds of 
harbor maintenance taxes. Those fees, however, are trivial in 
comparison to the excise tax on wine, and therefore would not have a 
significant effect on the analysis.
    Comment: One commenter stated that the NPRM's tax-to-value 
discussion is mistaken.
    Response: This critique demonstrates some confusion about the tax-
to-value ratios reported in the NPRM, specifically the claim that the 
tax-to-value ratio for spirits is five to eight times higher than it is 
for wine. These figures are constructed using 2015 United States 
International Trade Commission (USITC) trade data as follows. Wine 
imports have a value per gallon of $18.40 and face a maximum tax of 
$1.07 per gallon. The tax-to-value ratio is $1.07/$18.40, or 0.058. 
Spirits imports, including grain alcohol, have an average value of 
$36.37 per proof gallon and face a maximum tax of $13.50 per proof 
gallon, for a tax-to-value ratio of $13.50/$36.37, or 0.371. The tax-
to-value ratio for spirits is therefore 538 percent larger. Wine 
exports have a value per gallon of $13.70 for a tax-to-value ratio of 
0.078. Distilled spirits exports, including grain alcohol, have an 
average value of $19.50 per proof gallon for a tax-to-value ratio of 
0.692. The tax-to-value ratio for distilled spirits is therefore 786 
percent larger. The values of five and eight times higher for spirits 
refer to these calculations based on import and export values.
    The commenter correctly notes that these averages hide substantial 
variation in value across individual products. CBP largely agrees with 
the commenter in that CBP estimates that only 34 percent of spirits 
imports fall into the high tax-to-value category. The only point of 
disagreement concerns vodka. It is true that most vodka imports are of 
relatively high value. The vast majority of vodka imports are in 
subheading 2208.60.20, HTSUS, which is defined as

[[Page 64971]]

vodka valued over $2.05 per liter. On average, these imports have a 
tax-to-value ratio similar to that of bulk wine. Under the TFTEA 8-
digit HTSUS substitution standard, however, this vodka can be 
substituted with much cheaper domestic vodka. Assuming most vodka 
imports are 80 proof and converting into proof gallons, $2.05 per liter 
corresponds to a minimum value of $9.69 per proof gallon. The tax is 
$13.50 per proof gallon, or 139 percent of the minimum value. 
Therefore, even expensive vodka imports could be matched profitably 
with cheap vodka exports or destroyed domestic product, which can be 
obtained at even lower prices.
    Comment: One commenter argued that the NPRM failed to consider 
adequately that taking advantage of double drawback requires matching 
an import to an export.
    Response: CBP disagrees that the NPRM did not consider the 
necessity of matching imports to exports to claim drawback. The 
commenter correctly notes that beer exports are much lower than beer 
imports, and CBP agrees that matching imports and exports would be an 
important constraint for beer producers. That is a reason the revenue 
loss estimates for beer are relatively low as a fraction of total 
excise liability on imported beer. Currently, non-NAFTA exports as a 
share of imports is only 7.7 percent. Through a combination of matching 
pre-existing imports and exports, and increasing exports, the lower 
bound estimate in the NPRM is that only 1.5 percent of imports are 
matched with an export and therefore eligible for a drawback claim. In 
the NPRM's upper bound estimate, 4.6 percent of imports are matched 
with an export. This is much lower than the observed value of 15.5 
percent for wine imports because of the constraint of matching exports.
    For spirits, the analysis in the NPRM considered two kinds of 
goods. For relatively expensive spirits, those with a low tax-to-value 
ratio, the analysis recognized that matching exports is an important 
constraint. The focus therefore was limited to 8-digit HTSUS provision 
products that are both imported and exported in non-trivial quantities, 
namely brandy, liqueurs, and cordials. For these products, the analysis 
assumed that only current exports and imports can be matched and apply 
the takeup rate to the minimum of imports or exports. With respect to 
high tax-to-value products, namely vodka, gin, and grain alcohol, the 
analysis in the NPRM did not view current exports as an important 
constraint because of the potential to destroy domestic production 
profitably without the need to find an export market.
    In the case of tobacco, currently, the vast majority of cigarettes 
sold in the United States are produced domestically. There is, however, 
a large international market for similar cigarettes, and they are 
produced in many foreign countries. Many of the largest cigarette 
companies are multinational, producing and selling cigarettes all over 
the world. Therefore, given the availability of foreign produced goods 
and the strong incentive double drawback would provide, CBP would 
expect a gradual shift in the composition of the U.S. market as more 
U.S. production is exported and more U.S. consumption is imported. 
Eventually, were double drawback allowed, most excise tax on cigarettes 
could disappear as more packaging is shifted overseas and U.S.-packaged 
cigarettes are exported to foreign markets.
    Comment: One commenter stated that the NPRM is incorrect in its 
assertion that double drawback would create a significant incentive to 
shift the production of tobacco products overseas. It asserts that 
federal regulatory requirements applicable to tobacco imports are 
significant and that the potential for drawback to change at any time 
also disincentivizes undertaking the expense of offshoring production 
until there is, among other things, more history of drawback refunds 
and assessment by outside attorneys. Another commenter similarly 
expressed skepticism that tobacco producers would shift packaging 
facilities overseas to take advantage of double drawback.
    Response: CBP disagrees that double drawback would not incentivize 
shifting the production of tobacco products overseas. Although 
uncertainty over availability of double drawback may initially depress 
the takeup rate, CBP believes that if double drawback became settled 
law (as many commenters insist it should be), there would be a powerful 
economic incentive for outsourcing the production of tobacco products 
overseas for consumption in the United States, as at least one comment 
anticipates.
    These comments correctly note that CBP predicts strong responses, 
including shifting packaging facilities overseas, by cigarette 
manufacturers in response to double drawback. This is a much more cost-
intensive response than any behavior observed for wine producers. The 
incentives to serve the domestic market with foreign-packaged 
cigarettes would be extremely strong, however. The pre-tax wholesale 
price of cigarettes is approximately $2.50 per carton. The federal 
excise tax is approximately $10 per carton. This means that cigarettes 
packaged abroad and eligible for double drawback would be 80 percent 
cheaper than domestic cigarettes. Unless shipping costs were close to 
400 percent of the wholesale price, tobacco companies would find it 
profitable to serve the U.S. market with foreign cigarettes. It is 
worth noting that only the packaging would need to be overseas to 
qualify as an import. The foreign-packaged cigarettes could still 
contain U.S. grown tobacco, so this scenario does not require a change 
in tobacco production. CBP acknowledges that other regulatory 
considerations would affect the industry response, but CBP is unaware 
of any insurmountable barriers to widespread off-shoring of cigarette 
packaging.
    CBP predicts that such a process would take several years. CBP 
acknowledges substantial uncertainty in the timing of this shift to 
overseas packaging, and this uncertainty is reflected in the large 
difference between the upper and lower bound estimates of the revenue 
loss for tobacco were double drawback to be expanded. In the long run, 
were double drawback allowed, substantively all excise tax on 
cigarettes could disappear as more packaging is shifted overseas and 
U.S.-packaged cigarettes are exported to foreign markets.
    Comment: One commenter expressed skepticism that distilled spirits 
producers would destroy cheaply made goods to claim drawback.
    Response: CBP agrees that the destruction of goods is an unusual 
act. It could, however, be a profitable one for importers and claimants 
of drawback for distilled spirits and tobacco products. Take vodka as 
an example. The vast majority of vodka imports are in the subheading 
2208.60.20, which is defined as vodka valued over $2.05 per liter. 
Assuming most vodka imports are 80 proof and converting into proof 
gallons, that corresponds to a minimum value of $9.69 per proof gallon. 
The tax is $13.50 per proof gallon, or 139 percent of the minimum 
value. A vodka importer could buy the cheapest wholesale vodka above 
the $9.69 per proof gallon threshold, and destroy it, earning a net 
profit of $3.81 per proof gallon after submitting a drawback claim. 
That same vodka importer could earn an even higher profit by producing 
cheap vodka in the United States and using its discretion to assign a 
subjective value of $9.69 to it, and then destroying it. The profit 
would be the difference between $13.50 and the cost of production. 
Given that bulk vodka

[[Page 64972]]

has a 2016 wholesale price of approximately $3 per proof gallon, there 
is reason to believe the profit margin on destruction could be over $10 
per proof gallon. The incentive is even stronger for grain alcohol 
importers. The 2016 wholesale price of grain alcohol is $2.37 per proof 
gallon, suggesting the cost of production is even lower than that of 
cheap vodka. The USDA figures cited in the NPRM indicate that 
production costs for grain alcohol are between 50 cents and $1 per 
proof gallon.
    Comment: Two commenters stated that two scenarios in the NPRM 
involving drawback of excise tax on distilled spirits imported into and 
exported from bond are incorrect in that they are already expressly 
prohibited under current and proposed drawback regulations. The 
commenters stated that imported merchandise must be regularly entered 
or withdrawn from consumption to be available for drawback. See 19 
U.S.C. 1313(u); 19 CFR 191.151(a)(2). One commenter stated that there 
is no evidence that the re-routing hypotheticals are based on real 
examples, and another similarly states that re-routing is unprecedented 
and implausible.
    Response: CBP disagrees that these scenarios are not realistic. 
While 19 U.S.C. 1313(u) and related regulations would disqualify goods 
entered into a customs warehouse but not withdrawn for consumption, 
alcohol regularly entered, but entered into a TTB warehouse, would not 
pay tax and could still be the basis for a claim for drawback.
    CBP also disagrees that trade re-routing is unprecedented. The 
USITC defines re-exports as ``foreign-origin goods that have previously 
entered the U.S. customs territory, a Customs bonded warehouse, or a 
U.S. FTZ, and, at the time of exportation, have undergone no change in 
form or condition or enhancement in value by further manufacturing in 
the U.S. customs territory or U.S. FTZs.'' For 2015, re-exports 
represented 41 percent of total U.S. exports of spirits by volume and 
22 percent by value.
    CBP recognizes that transportation costs and other logistical 
difficulties would make foreign trade re-routing impractical in many 
circumstances. For instance, Japanese exports to Korea would make a 
poor candidate for trade re-routing through the United States. CBP, 
therefore, limited the NPRM's analysis to exports from Canada and 
Mexico to non-NAFTA countries. An analysis of UN Comtrade data suggests 
that non-NAFTA exports from Canada and Mexico would amount to 
approximately 8 percent of U.S. imports. CBP treats this as the 
feasible amount of re-routing and apply the upper and lower bound 
takeup rates of 25 percent and 75 percent, respectively, to this amount 
in the analysis.
    The commenter also questions why foreign manufacturers would give 
permission to have their products re-routed through the United States. 
All multinational spirits producers that sell imports in the United 
States would have an incentive to re-route trade. The largest distilled 
spirits producers and suppliers in the United States are multinational 
firms. Even smaller foreign producers with production in only one 
country would have incentive to route their exports bound for other 
countries through the United States in order to receive drawback on 
their exports that are destined for the United States. Other importers 
could sell imports to exporters that wish to claim substitution 
drawback.
    Comment: One commenter stated that CBP estimated the amount of 
double drawback paid rather than calculating exact figures by 
tabulating paper claim forms.
    Response: CBP agrees that the analysis of the paper forms, 
approximately 12,000 annually, should provide the exact amount of the 
excise taxes refunded under existing practice. CBP disagrees, however, 
that undertaking such an analysis would be useful or necessary. CBP 
based the wine double drawback estimates on two separate sources of 
data: (1) Transaction level data on all excise tax refunds for the top 
20 importers of wine, and (2) data on substitution drawback claims. 
Furthermore, as the comment itself explains, ``the majority, if not 
all, of the taxes refunded under the existing drawback law are excise 
tax refunds on wine.'' Therefore, CBP believes its conclusions were 
reasonable.
    Comment: One commenter stated that the NPRM's estimates of 
potential revenue loss associated with double drawback of tobacco 
excise taxes are not based on any facts, figures, or statistics. It 
notes that from 2013 to 2017, the total actual excise taxes paid on 
cigarettes has averaged only $401.8 million, and therefore the $322 
million to $2.2 billion estimated range is ``certainly arbitrary and 
capricious and must be disregarded,'' with the higher end of the 
estimate exceeding the entire cumulative taxes paid on cigarettes in 
the past five years.
    Response: CBP disagrees with this comment because the total excise 
tax collections on tobacco averaged $14 billion per year during the 
years cited. See, e.g., TTB Tax Collection Activities by Fiscal Year, 
available at https://www.ttb.gov/tax_audit/tax_collections.shtml. CBP's 
revenue loss estimates are based on the best data available to the 
Federal government, and CBP acknowledges a degree of uncertainty in any 
forecast premised on behavioral responses to a change in policy. 
Commenters have not produced evidence that supports the conclusion 
CBP's estimates are unreasonable.

G. Miscellaneous

1. Assignment of Drawback Rights
    Comment: When multiple parties will have an interest in the 
exported merchandise, CBP proposed that drawback claimants submit, as 
part of a complete claim, a letter describing the component article on 
the export bill of lading to which a particular claim is related. One 
commenter stated that this requirement, in section 190.26(e)(2)(i), is 
unnecessary because the electronic signature on a drawback claim 
includes a general certification as to the accuracy of the drawback 
claim.
    Response: CBP disagrees with the commenter's statement that the 
letter required in proposed section 190.26(e)(2)(i) is unnecessary due 
to the electronic signature requirement. This letter, which is endorsed 
by the exporter, is necessary to demonstrate compliance with the 
limitation set forth in 19 U.S.C. 1313(v) regarding the prohibition on 
using merchandise that was exported or destroyed as the basis for 
multiple drawback claims. A general statement as to the accuracy of a 
drawback claim does not specifically indicate that it is a 
manufacturing drawback claim involving merchandise that will be 
designated by multiple claimants, nor does it contain the endorsement 
of the exporter regarding these respective interests (noting that the 
exporter is not always the drawback claimant).
    Comment: Regarding blanket waivers and assignments of drawback 
rights for manufacturing drawback claims, CBP proposed to allow 
exporters to waive and assign their drawback rights for all, or any 
portion, of their exportations with respect to a particular commodity 
for a given period of time to any other party who has the right to be a 
drawback claimant. One commenter requested that CBP amend this 
restriction in proposed section 190.26(e)(2)(ii) to allow waivers for 
all future exports without specifying a given period.
    Response: CBP disagrees with the suggestion and section 
190.26(e)(2)(ii) will remain as it was proposed. Waivers for indefinite 
periods of time regarding assignment of drawback rights could create a 
significant risk to the revenue

[[Page 64973]]

because these waivers do not require renewals. Absent an expiration 
date, there is a serious compliance risk. Specifically, an exporter or 
destroyer might decide, for business reasons, to cease the assignment 
of drawback rights to a party to whom it has already issued a waiver 
and elect to either claim the drawback itself or assign the rights to a 
separate party. The regulations do not require the exporter or 
destroyer to notify CBP of such a change in business practices, and so 
the expiration date for the waivers acts as a check to ensure that 
there will not be multiple waivers in perpetuity to different parties 
for rights to the same exported or destroyed merchandise (which would 
be contrary to 19 U.S.C. 1313(v)). Accordingly, the identification of 
the specified period of time is necessary to ensure waiver validity and 
enable verification.
    Comment: Regarding waivers and assignments of drawback rights for 
unused merchandise drawback claims, CBP proposed to allow exporters to 
waive the right to claim drawback and assign such right by executing a 
certification waiving the right to claim drawback. One commenter stated 
that there was an inconsistency in proposed section 190.33(b), stating 
that the waiver had to be filed at the time of or prior to filing a 
drawback claim, and proposed section 190.52(b), stating that this 
waiver needed only to be on file and made available to CBP on request. 
This commenter requested that CBP address this inconsistency.
    Response: CBP agrees with the comment and has amended section 
190.33(b)(2) to clarify this certification requirement as it applies to 
electronic claim filing by indicating that certifications must 
accompany each claim. Similarly, the certification requirement for 
manufacturing drawback claims in section 190.28 is also modified in 
this final rule.
    Comment: Regarding the assignment of rights for unused merchandise 
drawback claims, CBP proposed in the NPRM to require claimants to file 
a certification that is signed by the exporter or destroyer waiving the 
right to claim drawback. As proposed in section 190.33, the 
certification is required to be filed at the time of filing the claim 
or prior to filing the claim and can be a single or blanket 
certification. One commenter, noting the general recordkeeping 
requirements regarding records kept in the normal course of business in 
some provisions of 19 U.S.C. 1313, requested that CBP amend proposed 
sections 190.33(a)(2) and (b)(2) to state that the claimant must retain 
such certification or other business record and provide such evidence 
of waiver and assignment upon request by CBP, rather than at the time 
of or prior to filing the claim.
    Response: CBP disagrees with this comment. TFTEA specifically 
eliminated certain certification requirements for drawback claims, but 
not with respect to the documentation of the claimant's actual right to 
claim drawback. Because the right to claim drawback belongs exclusively 
to the exporter or destroyer, parties other than the exporter or 
destroyer must be able to demonstrate that such rights have been 
assigned to them in order to maintain the integrity of the drawback 
claims process and to ensure compliance with 19 U.S.C. 1313(v), which 
explicitly prohibits multiple drawback claims from being filed on the 
same exported or destroyed merchandise.
2. Successorship
    CBP largely kept the same language used in the corresponding 
sections in part 191 regarding drawback successorship in proposed 
sections 190.22(d) and 190.32(f). A ``drawback successor'' is an entity 
to whom the predecessor has transferred, by written agreement, merger, 
or corporate resolution, certain rights and assets, including the right 
to claim drawback. CBP received multiple comments on the topic.
    Comment: One commenter requested that CBP modify the language in 
proposed sections 190.22(d)(2) and 190.32(f)(2) to better align with 
the statutory text of 19 U.S.C. 1313(s) and requested related edits to 
sections 190.91(a)(3), regarding waiver of prior notice, and 
190.92(a)(3), regarding accelerated payment.
    Response: CBP agrees, in part, with the commenter. CBP modified the 
language in sections 190.22(d)(2) and 190.32(f)(2) to properly align 
with the statutory text of 19 U.S.C. 1313(s). However, CBP disagrees 
with the commenter's proposal to modify the provisions on limited 
successorship in section 190.91(a)(3), regarding waiver of prior 
notice, and section 190.92(a)(3), regarding accelerated payment. These 
provisions are specifically intended to be more narrow than the general 
successorship provisions in 19 U.S.C. 1313(s), which are intended to 
allow for successorship with respect to substitution manufacturing 
claims under 19 U.S.C. 1313(b) and substitution unused merchandise 
drawback claims under 19 U.S.C. 1313(j)(2). The limited succession for 
the privileges in sections 190.91(a)(3) and 190.92(a)(3) is intended to 
be more narrow because the standards for compliance with their 
requirements are higher and unlikely to be adhered to during a mere 
asset transfer, which is allowable for succession under 19 U.S.C. 
1313(s). Instead, the limited succession for privileges is allowed only 
when there is a complete corporate consolidation as opposed to an asset 
transfer, in order to ensure a sufficient level of knowledge of the 
drawback claims process will be transferred from the predecessor 
company.
    Comment: One commenter stated that CBP failed to account for all 
successor scenarios in section 190.22(d)(1) and proposed suggested 
language regarding explicitly stating that a successor can claim where 
the predecessor imports and uses merchandise and then manufactures a 
finished article where either the successor or the predecessor exports 
the finished article, so long as the merger agreement provides for this 
situation.
    Response: CBP disagrees with this comment. The successor provision 
for drawback in 19 U.S.C. 1313(s)(1) is limited to an authorization for 
the designation of imported merchandise used by the predecessor before 
the date of succession as the basis for drawback on articles 
manufactured or produced by the drawback successor after the date of 
succession. There is no allowance in the statute for the scenario 
proposed by the commenter and CBP lacks the authority to further expand 
the scope of what constitutes a succession with respect to 
manufacturing drawback claims.
    Comment: Regarding designations by successors and section 
190.22(d)(3)(i), one commenter stated that clarifications are needed to 
indicate that the certifications required under this section do not 
require prior approval by CBP and can be made at the time of filing a 
drawback claim. This commenter stated that this clarification would be 
consistent with section 190.22(d)(3)(iv), which states that records 
supporting the evidence of a successor's right to a predecessor's 
drawback need only be submitted to CBP upon request.
    Response: CBP agrees with the commenter and section 
190.22(d)(3)(ii) is amended to indicate that the certification of the 
predecessor that has not been otherwise designated is now required to 
be kept in the claimant's records, but not provided as part of a 
complete claim for a substitution manufacturing drawback claim. 
Relatedly, a corresponding change has been made to the requirement for 
the same certification in section 190.32(f)(3)(i) and (ii) for 
successorship

[[Page 64974]]

for substitution unused merchandise drawback claims.
3. CBP Form 7553 Notice of Intent
    Comment: CBP received multiple comments requesting the elimination 
of CBP Form 7553, Notice of Intent to Export, Destroy or Return 
Merchandise for Purposes of Drawback. One commenter requested that CBP 
eliminate the form to comply with the goals of the Paperwork Reduction 
Act and TFTEA in reducing the number of forms to be filled out. Another 
commenter, citing section 190.166, dealing with destruction of 
merchandise in subpart P, which deals with distilled spirits, wine, or 
beer, requested that CBP Form 7553 be eliminated because the elements 
are already transmitted electronically. This commenter also requests a 
process be established to electronically notify if a shipment will be 
reviewed.
    Response: CBP disagrees with these commenters. CBP must have the 
opportunity to inspect merchandise prior to export or destruction to 
ensure the specific requirements for drawback eligibility are 
satisfied. Additionally, claimants who wish to avoid the filing of this 
form, which is authorized in compliance with the Paperwork Reduction 
Act, may apply for the privilege to waive this requirement, which is 
specifically provided for in section 190.91. Return to CBP custody is 
mandatory for drawback internal revenue tax to be allowed pursuant to 
26 U.S.C. 5062(c), for distilled spirits, wines, or beer which are 
unmerchantable or do not conform to sample or specifications. Without 
the submission of the CBP Form 7553, there would be no proof that such 
return was properly made to CBP. Regarding the commenter's request to 
make notification of CBP's intent to examine be electronic, at this 
time, the current manual process will remain in effect.
4. Privileges
    CBP proposed procedures in sections 190.91, 190.92, and 190.93 
regarding the ability to apply for and obtain the privilege of: Waiver 
of prior notice of intent to export; accelerated payment in which 
payment of drawback claims may be obtained prior to liquidation; or a 
combination of both types of privileges separately or in a combined 
application. These provisions are similar to the provisions dealing 
with privileges in current part 191, except where modification was 
necessary to implement the terms of TFTEA such as the need to meet the 
standard for substitution rather than using the term commercially 
interchangeable. These sections are cross-referenced in other sections 
such as section 190.36 dealing with failure to file notice of intent to 
export, destroy, or return merchandise for purposes of drawback and 
section 190.42 dealing with procedures and supporting documentation. 
CBP received several comments described below involving the 
applications and the privileges of waiving prior notice or accelerated 
payment.
    Comment: Several commenters stated that accelerated payment should 
be paid on TFTEA-Drawback claims prior to the implementation of the 
regulations, so long as those claims were filed in compliance with the 
Interim Guidance. The commenters noted that because the claims are 100% 
bonded, there is no risk to the revenue.
    Response: CBP disagrees with the commenters. As indicated in the 
Interim Guidance, accelerated payment privileges will not be allowed 
for TFTEA-Drawback claims under part 190 until the regulations become 
effective. While the claims may be 100% bonded, the methods of claim 
calculation could not be considered final until the regulations are 
implemented (and claims are perfected to fully comply, if necessary). 
Further, despite claims being 100% bonded, the potential recovery of 
any overpayments could entail significant administrative burdens that 
should not be incurred given the absence of legal certainty on the 
correct claim amounts. Finally, CBP notes that the Interim Guidance 
also provides that drawback claimants may provide bonding information 
when TFTEA-Drawback claims are filed or after part 190 becomes 
effective in order to obtain accelerated payments.
    Comment: CBP proposed certain regulations regarding the 
applications and requirements for obtaining privileges for the waiver 
of prior notice and accelerated payment. One commenter requested that 
CBP eliminate the applications altogether, and if not, that the 
applications be modified to be a registration to use the privileges 
rather than an application requiring CBP approval.
    Response: CBP disagrees with the comment. The purpose of these 
applications is to ensure that the drawback claimant maintains records 
sufficient to support eligibility for these privileges, including the 
necessary trace documents and other details (e.g., the structure of the 
claimant's drawback program and structure of future claims). The 
processing of these applications also provides CBP the opportunity to 
address questions regarding the claimant's drawback program, to ensure 
compliance. It should be noted that claimants may consolidate privilege 
applications pursuant to section 190.93.
    Comment: CBP proposed regulations regarding applications for 
obtaining privileges and the Interim Guidance also had instructions. 
Multiple commenters stated that the NPRM did not contain information on 
what to do in the case of an application that is pending CBP review and 
points out that most of the information provided presumed applications 
had been granted. This commenter asked for clarification regarding 
these unresolved applications and asked that CBP modify the regulations 
to state that privileges granted for 19 U.S.C. 1313(j)(1) claims be 
extended to 1313(j)(2) claims, as stated in the Interim Guidance.
    Response: CBP disagrees with the request to modify the regulations. 
However, to clarify, as provided for under the Interim Guidance, 
privileges granted under part 191 may be used for claims under part 190 
in addition to being available for claims under part 191 through 
February 23, 2019. Regarding pending privilege applications, CBP will 
address applications submitted under the applicable part (part 190 or 
part 191, which is available through February 23, 2019). CBP notes that 
both the proposed and final regulations, in sections 190.91(a)(2) and 
190.92(a)(2), specifically provide that, for privilege applications 
approved before the end of the transition period for claims under 19 
U.S.C. 1313(j)(1), the privilege will also be applicable to claims for 
the same type of merchandise if made under 19 U.S.C. 1313(j)(2).
    Comment: One commenter requested that CBP amend section 190.42(c), 
regarding the procedures required for rejected merchandise under 19 
U.S.C. 1313(c), to allow for waiver of prior notice of exportation 
pursuant to proposed section 190.91.
    Response: CBP agrees with the commenter's request to amend proposed 
section 190.42(c) to allow for the waiver of prior notice, and CBP will 
also modify sections 190.91(a) and (b) in this final rule to provide 
for waiver of prior notice for rejected merchandise claims under 19 
U.S.C. 1313(c). Changes to 19 U.S.C. 1313(c) made in the Miscellaneous 
Trade and Technical Corrections Act of 2004 removed the requirement for 
merchandise to be returned to CBP custody, and replaced it with the 
requirement for exportation or destruction under CBP supervision. While 
the statutory change preceded TFTEA, the regulations were not 
previously amended to reflect its implementation. Now, the regulations 
have been amended to remove the

[[Page 64975]]

requirement for return to CBP custody and, consistent with this 
comment, to also allow for the privilege of waiver of prior notice, 
which has already been allowed in practice. Related to this, CBP has 
made similar changes to 19 CFR 191.42(c) and has also modified the 
provision in section 190.36(a) for one-time waiver of prior notice, 
which originally applied only to drawback claims under 19 U.S.C. 
1313(j), to also include drawback claims under section 1313(c), which 
has already been allowed in practice.
    Comment: CBP proposed procedures in section 190.92 regarding the 
ability to apply for and obtain the privilege of accelerated payment. 
The proposed regulation did not state a deadline as to when CBP will 
certify the drawback claim for payment. One commenter stated that the 
proposed regulation should contain a three-week deadline by which CBP 
must certify the claim for payment. The commenter also stated that 
section 190.92(i) failed to provide for a timeframe in which bills or 
refunds (as a result of liquidation) would be issued by CBP and stated 
that the lack of a timeframe removes accountability from CBP.
    Response: CBP disagrees with this commenter's suggestion to add 
timeframes for certifying accelerated payment claims. This is not 
necessary because ACE automation ensures that accelerated payment 
requests for claims that pass validation (including sufficient bonding) 
will be paid on a regular, periodic basis within a relatively short 
timeframe. Typically, such payment will be made within one month. 
Regarding the commenter's suggestion to provide a timeframe for issuing 
bills or refunds because of liquidation, drawback claims are subject to 
the standard billing and refund cycles administered in ACE and adding a 
specified timeframe in this regulation is unnecessary.
    Comment: Regarding section 190.92(a)(1), dealing with accelerated 
payment, one commenter stated that the NPRM specifically states 
accelerated payment of drawback is only available when CBP's review of 
the request for accelerated payment of drawback does not find omissions 
from, or inconsistencies with the requirements of the drawback law and 
part 190. The commenter stated that the regulation as drafted would 
require that drawback claimants must then exclude from accelerated 
payment requests any duties, taxes or fees where certain rules, such as 
the first filed rule, would apply. The commenter stated that this 
section of the NPRM should be eliminated as CBP's arbitrary and 
capricious attempt to restrict prompt payment of eligible drawback 
under accelerated payment provisions of this part.
    Response: CBP disagrees with the commenter. TFTEA-Drawback claims 
must be filed in accordance with the applicable drawback laws and part 
190, regardless of whether the claimant requests the benefit of the 
accelerated payment privilege.
    Comment: Regarding section 190.92(a)(2), one commenter stated that 
the NPRM limits the types of drawback covered by an existing approval 
of accelerated payment by type of drawback claimed except that 
approvals under 19 U.S.C. 1313(j)(1) may also be applied to claims 
under 19 U.S.C. 1313(j)(2). The commenter stated that a limitation on 
types of drawback covered is administratively inefficient and not 
effective in the administration of accelerated payment of drawback. The 
commenter stated that a simple certification by a claimant that it 
maintains records to support drawback coupled with a drawback bond to 
cover the drawback payment is sufficient for CBP to protect the revenue 
yet administratively result in an efficient operation of the 
accelerated payment program. The commenter stated that requiring 
claimants to submit multiple applications to cover multiple types of 
drawback to which a claimant may be eligible is a waste of CBP's 
limited resources in the administration of drawback.
    Response: CBP disagrees with the commenter regarding the 
specification of the basis for the drawback claims. Different types of 
drawback claims have different regulatory requirements and the 
documentation required to support the claims will vary. In order to 
ensure that a privilege should be granted, CBP must review the 
supporting documentation that the claimant would provide for its claims 
upon request from CBP and determine that it is sufficient. CBP notes 
that the kind of documentation needed for a substitution unused 
merchandise drawback claim is significantly different from that which 
would be required for a direct identification manufacturing drawback 
claim and declines to do as the commenter has suggested, which would be 
to accept documentation to support the former as being acceptable to 
support the latter.
    Comment: As part of an application for accelerated payment, CBP 
proposed in section 190.92(b)(1)(iv) to require applicants to provide a 
description of the bond coverage that the applicant intends to use to 
cover the accelerated payment of the drawback. One commenter stated 
that ACE will only approve advance payment if sufficient bond coverage 
exists and stated this system requirement applies for both single 
transaction bonds and continuous bonds. The commenter suggested that 
requiring an accelerated payment privilege application to describe the 
claimant's bond coverage is no longer necessary because of the eBond 
filing capabilities in ACE. This commenter stated that CBP should 
remove the requirement from section 190.92(b)(1)(iv). Related to eBond, 
one commenter requested that CBP modify section 190.92(d) to better 
reflect the electronic environment for bonds.
    Response: CBP disagrees with this comment. The required information 
for the application for accelerated payment of drawback is separate 
from the processing of claims for accelerated payment. By providing a 
description of the anticipated bond coverage, the applicant is 
demonstrating its preparation for compliance with the requirements 
necessary to qualify for the privilege of accelerated payment. 
Accordingly, the application requirement for a description of the 
anticipated bonding will remain in place. Regarding the request to 
modify section 190.92(d), CBP disagrees because this section continues 
to reflect the applicable requirements even though some aspects may be 
automated in eBond.
    Comment: CBP proposed regulations regarding destruction in section 
190.71. One commenter also requested that CBP provide for waiver of 
prior notice in situations regarding destruction in section 190.71 and 
requested related edits to provide for destruction in section 190.92, 
regarding eligibility for accelerated payment.
    Response: CBP agrees with the comment. Waiver of prior notice for 
intent to export should be expanded to include destruction, although 
only an ongoing program of destruction would likely satisfy the 
requirements to qualify for the privilege. Accordingly, changes have 
been made in the relevant provisions of sections 190.71 and 190.92 in 
this final rule to account for the eligibility of destruction for 
waiver of prior notice, which has already been allowed in practice. 
Relatedly, CBP has also modified section 190.36, the provision for one-
time waiver of prior notice, which originally applied only to 
exportations, to also include destruction. CBP has determined that this 
allowance for destruction, which has already been allowed in practice, 
enables the trade to more efficiently file drawback claims and eases 
the administrative burden on CBP, while facilitating compliance through 
the

[[Page 64976]]

advance vetting of destruction programs and supporting documentation 
prior to approval of the privilege application. Relatedly, CBP has made 
clarifying edits throughout section 190.35 to provide for destruction 
for unused merchandise drawback, which has already been allowed in 
practice.

III. Technical Corrections

    In the August 2, 2018 NPRM, certain drafting errors had been made, 
such as the numbering of lines within the same example (e.g., errors 
made in the examples regarding the amount of merchandise processing fee 
eligible for drawback in certain scenarios in section 190.51(b)(2)). 
These and other technical or grammatical errors have also been 
corrected throughout. As noted below, the final rule contains the 
following changes:
    In section 190.6, CBP is amending paragraph (b)(3) by removing the 
phrase ``of exporters on bills of lading or evidence of exportation'' 
and replacing it with the phrase ``to assign the right to claim 
drawback''. This change creates consistency with the liberalization of 
documentary evidence for proof of export as provided for in 19 CFR 
181.47, 191.72, and 191.74. Bills of lading and other general types of 
exportation no longer require such certifications; however, the 
certifications to assign the right to claim drawback continue to be 
required as noted in the parenthetical for sections 190.28 and 190.82. 
In section 190.6, CBP is also amending paragraph (c)(3) to include a 
citation to section 190.36 for one-time waivers along with the 
reference to waiver of prior notice under section 190.91.
    In section 190.8, CBP is amending paragraph (e)(1) as CBP 
Headquarters will no longer forward a copy of the application for the 
specific manufacturing drawback ruling to the appropriate drawback 
office(s) with a copy of the approval letter. Rather, with the 
transition to the electronic filing environment under TFTEA, CBP 
Headquarters will upload approved specific manufacturing ruling 
requests via DIS into ACE.
    In section 190.14(b)(4), CBP is amending the section by removing 
the phrase ``Generally Acceptable Accounting Procedures (GAAP)'', an 
incorrect reference, and replacing it with ``generally acceptable 
accounting procedures'', which is the phrase used in 19 CFR 191.14.
    In sections 190.22(a) and 190.32(b), CBP is amending each section 
by adding the following clarifying phrase: The amount of duties, taxes, 
and fees eligible for drawback is determined by per unit averaging, as 
defined in section 190.2, for any drawback claim based on 19 U.S.C. 
1313(b).
    In sections 190.28, 190.33(a)(2) and 190.33(b)(2), CBP is amending 
each section to clarify the certification requirement as it applies to 
electronic claim filing by indicating that certifications should 
accompany each claim. Similarly, the certification requirement for 
manufacturing drawback claims in section 190.28 is also modified in 
this final rule.
    In sections 190.35(a), to be consistent with sections 190.42 and 
190.71, CBP is amending the section to state that CBP Form 7553 must be 
filed five working days prior to the date of intended exportation.
    In section 190.51(a)(2)(iv), CBP is amending this section to 
require the port code for the drawback office ``where the claim is 
being filed'' where it previously required the port code for the 
drawback office ``that will review the claim''.
    In section 190.51(a)(2)(ix), CBP has made edits to clarify that, in 
some scenarios, multiple manufacturing rulings may be involved in a 
single drawback claim, as well as clarifying the applicable information 
required for each ruling involved.
    In section 190.51, regarding the completion of drawback claims, CBP 
is correcting an error where two paragraphs were listed as (b). The 
first, and accurate, paragraph (b) is concerning drawback due. The 
second paragraph (b), limitation, is now correctly labelled as 
paragraph (b)(4).
    In section 190.193, CBP is amending paragraph (c)(3) by removing 
the reference to certificates of manufacture and delivery as these 
certificates were eliminated in TFTEA. CBP also added a reference to 
destruction in paragraph (d)(4) to clarify that destruction is also a 
basis for drawback eligibility and, when applicable, the application 
package for the drawback compliance program would require supporting 
documentation for recordkeeping for destruction.
    In reviewing the Appendices to Part 190, CBP has made a number of 
non-material or conforming changes in order to further align the 
appendices with the requirements of TFTEA and aid in simplifying the 
contents of the appendices. CBP has made certain technical corrections 
or clarifying edits throughout (such as minor grammatical edits, 
replacing outdated references to kind and quality with references to 
identity, and removing references to the physical location of CBP 
locations where drawback claims will be filed due to electronic 
filing).

IV. Conclusion

    Based on the analysis of the comments and further consideration, 
CBP has decided to adopt as final the proposed rule published in the 
Federal Register (82 FR 37886) on August 2, 2018, as modified by the 
changes noted in the discussion of comments and the noted technical 
corrections.

V. Statutory and Regulatory Requirements

A. Inapplicability of Delayed Effective Date

    Under section 553(d) of the Administrative Procedure Act (APA) (5 
U.S.C. 553), substantive rulemaking generally requires a 30-day delayed 
effective date, subject to specified exceptions. Among the statutory 
exceptions to this general rule is the situation presented here, with 
respect to most sections of the final TFTEA-Drawback rule, where good 
cause is found and the reasons establishing good cause are published 
with the rule. 5 U.S.C. 553(d)(3).
    With the exception of certain sections (addressed below), this 
rulemaking generally eases burdens through modernization of the 
drawback program and will provide extensive benefits to the public, 
such as liberalizing the standards for substituting merchandise, easing 
documentation requirements, and providing for electronic filing; 
finalization of the rule also will enable accelerated payment as to 
claims made under the new drawback law. Delaying the final 
implementation of this rule would result in further delays for 
claimants in receiving the refund payments that Congress mandated. Due 
to the strict statutory timelines for filing drawback claims, and given 
the extensive stakeholder engagement with respect to this regulatory 
package to date, including in the context of five months of experience 
with the Interim Guidance prior to publication of the NPRM, as well as 
the robust comments received after publication of the NPRM, CBP 
believes that there is good cause for most sections of this rule to 
become effective immediately upon publication, so as to not further 
delay payments to claimants. For these reasons, pursuant to 5 U.S.C. 
553(d)(3), CBP finds that there is good cause for dispensing with a 
delayed effective date.
    Section 808 of the Congressional Review Act (5 U.S.C. 808) provides 
that any rule as to which an agency for good cause finds (and 
incorporates the finding and a brief statement of reasons therefor in 
the rule issued) that notice and public procedure thereon are 
impracticable, unnecessary, or contrary

[[Page 64977]]

to the public interest, shall take effect at such time as the Federal 
agency promulgating the rule determines. For the same reasons that CBP 
finds there is good cause for dispensing with a delayed effective date 
under the Administrative Procedure Act, CBP believes that, under 
section 808 of the Congressional Review Act, notwithstanding section 
801 of that act (which would essentially result in a 60-day delay in 
effective date), and even though there was notice and public procedure 
as to the NPRM, good cause exists for the final rule to become 
effective without further public procedure and immediately upon its 
filing for publication (44 U.S.C. 1503), as delaying the effective date 
would be contrary to the public interest. Additionally, on October 12, 
2018, the United States Court of International Trade ordered the 
regulations, with certain exceptions noted below, to be filed with the 
Office of Federal Register on or before December 17, 2018, and to 
become effective on the date of filing with the Office Federal 
Register. See Tabacos de Wilson, v. United States, No. 18-00059 (Ct. 
Int'l Trade 2018).
    As proposed in the NPRM, there is an exception to the immediate 
effective date as to claims of a specific type, with respect to which 
additional considerations, involving a possible change in prior 
treatment for certain claimants, as applicable, are present. 
Specifically, for the regulatory sections regarding the drawback of 
excise taxes at Sec. Sec.  190.22(a)(1)(C), 190.32(b)(3), 
190.171(c)(3), 191.22(a), 191.32(b)(4), and 191.171(d), the effective 
date will be 60 days after publication. This effective date is also in 
compliance with the October 12, 2018 order from the United States Court 
of International Trade.

B. Executive Order 13563 (Improving Regulation and Regulatory Review) 
and Executive Order 12866 (Regulatory Planning and Review)

    Executive Orders 13563 and 12866 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying costs, benefits, and 
transfers, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is an ``economically significant regulatory 
action'' under section 3(f) of Executive Order 12866. Accordingly, this 
rule has been reviewed by the Office of Management and Budget 
(``OMB''). CBP prepared an economic analysis of the estimated impacts 
of this rule for public awareness, which CBP summarizes below. The 
complete analysis can be found in the public docket for this rulemaking 
at www.regulations.gov.
    To fulfill a mandate in the Trade Facilitation and Trade 
Enforcement Act of 2015 (Pub. L. 114-125), U.S. Customs and Border 
Protection and the Department of the Treasury published the Modernized 
Drawback Notice of Proposed Rulemaking in the Federal Register on 
August 2, 2018.\6\ The Modernized Drawback NPRM proposed to create new 
drawback regulations that would make the current regulations generally 
obsolete for claims filed on or after February 24, 2019. These 
regulations would (1) require the electronic filing of drawback claims; 
(2) liberalize the standard for substituting merchandise for drawback; 
(3) generally require per unit averaging calculation for substitution 
drawback; (4) generally require substitution drawback claims to be 
calculated on a ``lesser of'' basis; (5) expand the scope of drawback 
refunds; (6) establish joint and several liability for drawback claims; 
(7) modify the rulings process; (8) standardize the timeframe for 
eligibility to claim drawback; and (9) modify recordkeeping 
requirements. These regulations would also (10) eliminate ``double 
drawback'' of excise taxes. These changes are referred to subsequently 
as ``Major Amendment'' and the corresponding number, 1 through 10. The 
Modernized Drawback NPRM also included minor amendments that mostly 
clarify current practice and policy, restructure the regulations, and 
eliminate outdated regulations. After much consideration of the public 
comments on the Modernized Drawback NPRM, CBP adopts most of the 
regulatory amendments specified in the NPRM without change in the 
Modernized Drawback Final Rule, except CBP will allow mixed TFTEA and 
non-TFTEA substitution drawback claims (``mixed claims''). 
Additionally, CBP will make minor changes to the NPRM, which the final 
rule will reflect, to: (1) Remove the proposed requirement for joint 
and several liability bonds; (2) codify existing CBP drawback 
practices, such as allowing waivers of prior notice for rejected 
merchandise and accepting continuous bonds for drawback claims with 
pending accelerated payment approval; (3) ease documentation 
requirements for transferred merchandise; (4) standardize document 
submission timelines; (5) reduce drawback claim data submission 
requirements; (6) clarify regulations; and (7) make technical 
corrections. With the adoption of most of the proposed regulatory 
amendments, CBP has largely used the Modernized Drawback NPRM's 
regulatory impact analysis template for this final rule analysis.\7\ 
However, some changes to the analysis were necessary to capture the 
regulatory changes from the NPRM just described, OMB suggestions, and 
data updates, as discussed later in this analysis.
---------------------------------------------------------------------------

    \6\ See 83 FR 37886 (August 2, 2018).
    \7\ The Regulatory Impact Analysis of the Modernized Drawback 
Notice of Proposed Rulemaking is available at https://www.regulations.gov/docket?D=USCBP-2018-0029.
---------------------------------------------------------------------------

    The Modernized Drawback Final Rule will affect trade members 
involved in the drawback process, including those engaged in the U.S. 
import, export, and destruction processes, and the U.S. Government 
(particularly CBP) over a 10-year period of analysis spanning from 2018 
to 2027. The largest impact of this rule will be in the form of 
monetary transfers from the U.S. Government to trade members. Under 
CBP's primary estimation method, the U.S. Government (or, in turn, 
taxpayers) will transfer $763.3 million in present value revenue, or 
$101.6 million when annualized, to trade members as a result of Major 
Amendment 2's eased substitution drawback standard and Major Amendment 
5's expanded scope of drawback refunds (using a 7 percent discount 
rate; see Summary Table). Alternatively, trade members will transfer 
between $494.0 million and $525.7 million in present value revenue, or 
$65.7 million to $70.0 million on an annualized basis, to the U.S. 
Government due to Major Amendment 2's limitation of substitution unused 
merchandise drawback, Major Amendment 3's per unit averaging 
calculation, Major Amendment 4's ``lesser of'' calculation, and Major 
Amendment 10's elimination of ``double drawback'' (using a 7 percent 
discount rate; see Summary Table). Though these transfers are not to 
and from the same private entities (i.e., some entities may experience 
only a monetary transfer from the U.S. Government and others may only 
experience a monetary transfer to the U.S. Government), on net, over 
the 10-year period of analysis the U.S. Government will transfer $237.6 
million to $269.3 million in present value revenue to trade members as 
a direct result of this rule. These net transfers will equal $31.6 
million to $35.8 million when annualized (using a 7 percent discount 
rate; see Summary Table).

[[Page 64978]]

    This rule will also produce costs and benefits to trade members and 
CBP. Trade members affected by this rule will sustain costs related to 
Major Amendment 1's electronic filing requirement, Major Amendment 3's 
mixed claim \8\ requirements, Major Amendment 7's modified rulings 
process, and Major Amendment 9's expanded recordkeeping requirements. 
These costs will total $57.2 million in present value and $7.6 million 
at an annualized rate under CBP's primary estimation method from 2018 
to 2027 (using 7 percent discount rate; see Summary Table). Trade 
members will also incur non-monetized, non-quantified costs from this 
rule. Major Amendment 3's per unit averaging calculation requirement 
and claim limitations may make it less attractive for trade members to 
use the United States as a home base for a distribution facility when 
coupled with other considerations and offer drawback rights to parties 
to whom they sell merchandise (i.e., third-party drawback), though the 
extent of these costs is unknown. Major Amendment 6's establishment of 
joint and several liability for drawback claims will impose a new 
liability on importers that may deter some drawback claims. Lastly, 
Major Amendment 8's standardized drawback eligibility timeframe and a 
new CBP amendment will offer some trade members less time to file 
drawback claims and documentation as compared to the current process. 
Based on CBP subject matter expertise, CBP does not believe that these 
non-monetized, non-quantified costs will be large when considering the 
additional drawback opportunities presented with this rule.\9\
---------------------------------------------------------------------------

    \8\ This rule will allow trade members to file TFTEA drawback 
claims that designate unused line items from import entry summaries 
previously designated on non-TFTEA claims, but only if trade members 
submit documentation proving that the line items in issue were 
unused via DIS upload within 30 days of submitting their drawback 
claim.
    \9\ Source: Email correspondence with CBP's Office of Trade on 
July 12, 2018.
---------------------------------------------------------------------------

    CBP will sustain costs from Major Amendment 1's electronic filing 
requirement, Major Amendment 2's eased substitution drawback standard, 
and Major Amendment 7's modified rulings process. These costs will 
total $5.1 million in present value, or $0.7 million when annualized, 
under the primary estimation method from 2018 to 2027 (using a 7 
percent discount rate; see Summary Table).
    Over the period of analysis, trade members will experience cost 
savings from Major Amendment 1's electronic filings and Major Amendment 
2's eased substitution. These cost savings will measure $5.4 million in 
present value and $0.7 million when annualized under the primary 
estimation method over the period of analysis (using a 7 percent 
discount rate; see Summary Table). Trade members will also enjoy non-
monetized, non-quantified benefits from this rule's streamlined claim 
submissions and processing, increased time to claim drawback, 
simplified understanding of the drawback process, added reassurance 
that rulings with potentially business-sensitive information will not 
be available for public consumption, and decreased business costs.
    CBP will enjoy cost savings from Major Amendment 1's electronic 
filings, Major Amendment 2's eased substitution drawback standard, and 
Major Amendment 3's per unit averaging calculation. These benefits will 
equal $4.2 million in present value and $0.6 million on an annualized 
basis under the primary estimation method (using a 7 percent discount 
rate; see Summary Table). In addition to these monetized savings, CBP 
will experience non-monetized, non-quantified benefits from this rule, 
including an eased work process, strengthened ability to validate 
drawback claims and recoup inaccurately over-claimed drawback, added 
administrative review time, and simplified implementation of drawback 
filing rules. These changes will result in major benefits to CBP.\10\
---------------------------------------------------------------------------

    \10\ Source: Email correspondence with CBP's Office of Trade on 
July 12, 2018.
---------------------------------------------------------------------------

    The Summary Table outlines the total impact of the Modernized 
Drawback Final Rule under CBP's primary estimation method. As shown, 
the U.S. Government will transfer $237.6 million to $269.3 million in 
present value net revenue to trade members as a direct result of this 
rule, which will equal $31.6 million to $35.8 million when annualized 
(using a 7 percent discount rate). In total, this rule will generate 
$62.3 million to $62.4 million in monetized present value costs and 
$9.6 million in monetized present value cost savings under the primary 
estimation method (using a 7 percent discount rate). When annualized, 
the monetized cost of this rule equals $8.3 million and its monetized 
cost saving will measure $1.3 million (using a 7 percent discount 
rate). Altogether, the total monetized present value net benefit of 
this rule under the primary estimation method is between -$52.7 million 
and -$52.8 million (i.e., a net cost), while its annualized net benefit 
totals -$7.0 million (using a 7 percent discount rate). Furthermore, 
this rule will introduce non-monetized, non-quantified costs and 
benefits. Some aspects of this rule will make it potentially less 
attractive for some trade members to use the United States as a home 
base for a distribution facility and offer drawback rights to other 
parties, impose a new liability for importers, and offer less time for 
trade members to file drawback claims and documentation. Nonetheless, 
these costs will likely be minor when considering the rule's additional 
drawback opportunities. In contrast, the rule will introduce major non-
monetized, non-quantified benefits to trade members and CBP. The rule 
will provide streamlined claim submissions and processing for trade 
members and CBP, increased time for trade members to claim drawback, 
added administrative review time for CBP, a strengthened ability for 
CBP to validate drawback claims and recoup inaccurately over-claimed 
drawback, a simplified drawback process for trade members and CBP, 
added reassurance for trade members that rulings with potentially 
business-sensitive information will not be available for public 
consumption, and decreased business costs for trade members. CBP 
believes that this rule's non-monetized, non-quantified benefits will 
be much greater than this rule's non-monetized, non-quantified costs.
    Because CBP has previously granted ``double drawback'' for wine 
(granting drawback of excise taxes paid on imported wine upon the 
export of substituted non-taxpaid wine under section 1313(j)(2)), some 
firms dealing in other products subject to Federal excise tax that is 
imposed upon entry or importation have asked whether they could also 
pursue substitution drawback claims similar to those that have been 
made for wine. Therefore, CBP has also included a Supplementary Summary 
Table showing the impact of this rule under an alternate analysis where 
it is assumed, solely for analytical and informational purposes, that 
double drawback had been extended to other commodities prior to this 
rule taking effect. As shown in the Supplementary Summary Table, if it 
is assumed that double drawback had been expanded to other goods 
subject to excise taxes collected upon entry, then the effect of 
eliminating the revenue loss under the hypothetical extension of double 
drawback would be a transfer of $13.5 billion in present value net 
revenue to the U.S. Government under the alternate analysis from 2018 
to 2027, which would equal $1.8 billion when annualized (using a 7 
percent discount rate). The actual estimated range of the

[[Page 64979]]

transfer or revenue loss would average $674 million to $3.3 billion 
annually over the next 10 years (undiscounted). The quantified costs 
and benefits of the rule would be the same as under the primary 
analysis.
    Although this analysis includes CBP's best estimates of the costs, 
benefits, and transfers resulting from this rule, the exact impact of 
this rule is unknown due to data limitations and indefinite reactions 
from the trade community. Accordingly, the actual costs, benefits, and 
transfers resulting from this rule could be higher or lower than CBP 
has estimated in this analysis.

                                     Summary Table--Total Impact of Rule Under Primary Estimation Method, 2018-2027
                                                    [Monetized values in millions; 2018 U.S. dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         3% Discount rate                                7% Discount rate
                                     Undiscounted       ------------------------------------------------------------------------------------------------
                                                               Present value             Annualized             Present value            Annualized
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 1--Require
 the Electronic Filing of
 Drawback Claims:
    Total Cost...............  $70.3...................  $65.7...................  $7.5.................  $60.9...................  $8.1.
    Total Benefit............  $10.5...................  $9.1....................  $1.0.................  $7.7....................  $1.0
                              --------------------------------------------------------------------------------------------------------------------------
                               Streamlined claim submissions and processing and strengthened ability for CBP to validate claims and recoup inaccurately
                                over-claimed drawback.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 2--Liberalize
 the Standard for
 Substituting Merchandise for
 Drawback:
    Total Cost...............  $0.03...................  $0.03...................  $0.003...............  $0.02...................  $0.003.
    Total Benefit............  $0.7....................  $0.6....................  $0.1.................  $0.5....................  $0.1.
    Total Transfer to Trade    $1,000.5................  $876.9..................  $99.8................  $747.7..................  $99.5.
     Members.
    Total Transfer to U.S.     $11.0...................  $9.6....................  $1.1.................  $8.2....................  $1.1.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 3--Generally
 Require Per Unit Averaging
 Calculation for Substitution
 Drawback:
    Total Cost...............  $0.01 to $0.03..........  $0.01 to $0.03..........  $0.001 to $0.004.....  $0.01 to $0.03..........  $0.001 to $0.004.
                              --------------------------------------------------------------------------------------------------------------------------
                               Potentially less attractive for trade members to use the United States as a home base for a distribution facility and
                                offer drawback rights to parties to whom they sell merchandise (i.e., third-party drawback).
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  $1.8....................  $1.6....................  $0.2.................  $1.4k...................  $0.2.
                              --------------------------------------------------------------------------------------------------------------------------
                               Strengthened ability for CBP to validate claims and recoup inaccurately over-claimed drawback.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.     $14.2 to $56.7..........  $12.4 to $49.6..........  $1.4 to $5.6.........  $10.6 to $42.3..........  $1.4 to $5.6.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 4--Generally
 Require Substitution
 Drawback Claims to be
 Calculated on a ``Lesser
 of'' Basis:
    Total Cost...............
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  Strengthened ability for CBP to validate claims and recoup inaccurately over-claimed drawback.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.     $20.1...................  $17.6...................  $2.0.................  $15.0...................  $2.0.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 5--Expand the
 Scope of Drawback Refunds:
    Total Cost...............
    Total Benefit............
    Total Transfer to Trade    $20.9...................  $18.3...................  $2.1.................  $15.6...................  $2.1.
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 6--Establish
 Joint and Several Liability
 for Drawback Claims:
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Cost...............  New liability for importers.
                              --------------------------------------------------------------------------------------------------------------------------

[[Page 64980]]

 
    Total Benefit............  Improved accuracy of the documentation surrounding the transfer of drawback rights for some trade members claiming
                                drawback and expanded opportunities for CBP to recoup inaccurately over-claimed drawback.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 7--Modify the
 Rulings Process:
    Total Cost...............  $1.1....................  $1.1....................  $0.1.................  $1.1....................  $0.1.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  Strengthened ability for CBP to validate claims and recoup inaccurately over-claimed drawback.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 8--
 Standardize the Timeframe
 for Eligibility to Claim
 Drawback:
                              --------------------------------------------------------------------------------------------------------------------------
    Total Cost...............  Less time for trade members to file drawback claims.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  Additional time for trade members to use merchandise for drawback; simplified understanding of the drawback process for
                                trade members; simplified implementation of drawback filing rules for CBP.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 9--Modify
 Recordkeeping Requirements:
    Total Cost...............  $0.4....................  $0.3....................  $0.04................  $0.3....................  $0.04.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  Strengthened ability for CBP to validate claims and recoup inaccurately over-claimed drawback.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major Amendment 10--Eliminate
 ``Double Drawback'' of
 Excise Taxes:
    Total Cost...............
    Total Benefit............
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.     $622.6..................  $543.1..................  $61.8................  $460.3..................  $61.2.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minor Amendments:
    Total Cost...............
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  Additional opportunity for trade members to recover materials rather than destroy entire shipments when claiming unused
                                merchandise drawback; enhanced understanding of the drawback process.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Amendments to NPRM:
                              --------------------------------------------------------------------------------------------------------------------------
    Total Cost...............                               Less time for trade members to file drawback claim documentation
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefit............
                              --------------------------------------------------------------------------------------------------------------------------
                               Streamlined claim submissions and processing; simplified drawback process for trade members and CBP; added reassurance
                                for trade members that rulings with potentially business-sensitive information will not be available for public
                                consumption; decreased business costs; added administrative review time for CBP.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade
     Members.

[[Page 64981]]

 
    Total Transfer to U.S.
     Government.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Overall Rule:
    Total Cost...............  $71.9 to $71.9..........  $67.2 to $67.2..........  $7.6 to $7.7.........  $62.3 to $62.4..........  $8.3 to $8.3.
                              --------------------------------------------------------------------------------------------------------------------------
                               Potentially less attractive for trade members to use the United States as a home base for a distribution facility and
                                offer drawback rights to other parties; new liability for importers; less time for trade members to file drawback claims
                                and documentation.
                              --------------------------------------------------------------------------------------------------------------------------
    Total Benefit............  $13.0...................  $11.3...................  $1.3.................  $9.6....................  $1.3.
                              --------------------------------------------------------------------------------------------------------------------------
                               Streamlined claim submissions and processing; improved accuracy of the drawback rights transfer documentation; additional
                                time for trade members to use merchandise for drawback; additional opportunity for trade members to recover materials
                                rather than destroy entire shipments when claiming unused merchandise drawback; simplified drawback process for trade
                                members and CBP; strengthened ability for CBP to validate claims and recoup inaccurately over-claimed drawback; added
                                reassurance for trade members that rulings with potentially business-sensitive information will not be available for
                                public consumption; decreased business costs; added administrative review time for CBP.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Transfer to Trade    $1,021.3................  $895.2..................  $101.9...............  $763.3..................  $101.6.
     Members.
    Total Transfer to U.S.     $667.8 to $710.3........  $582.7 to $619.9........  $66.3 to $70.6.......  $494.0 to $525.7........  $65.7 to $70.0.
     Government.
        Net Transfer (from     $311.0 to $353.5........  $275.2 to $312.4........  $31.3 to $35.6.......  $237.6 to $269.3........  $31.6 to $35.8.
         U.S. Government to
         Trade Members).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: The estimates in this table are contingent upon CBP's expectations of the population affected by the rule and the discount rates applied. The net
  transfers to trade members shown in this table are also not necessarily to and from the same private entities (i.e., some entities may experience only
  a monetary transfer from the U.S. Government and others may only experience a monetary transfer to the U.S. Government). Estimates may not sum to
  total due to rounding.

C. Executive Order 13771 (Reducing Regulation and Controlling 
Regulatory Costs)

    Executive Order 13771 directs agencies to reduce regulation and 
control regulatory costs, and provides that ``for every one new 
regulation issued, at least two prior regulations be identified for 
elimination, and that the cost of planned regulations be prudently 
managed and controlled through a budgeting process.'' \11\ These 
requirements only apply to rules designated as ``significant regulatory 
actions'' under section 3(f) of Executive Order 12866. OMB's 
implementation guidance explains that ``Federal spending regulatory 
actions that cause only income transfers between taxpayers and program 
beneficiaries . . . are considered `transfer rules' and are not covered 
by E.O. [Executive Order] 13771 . . . However . . . such regulatory 
actions may impose requirements apart from transfers . . . In those 
cases, the actions would need to be offset to the extent they impose 
more than de minimis costs.'' \12\
---------------------------------------------------------------------------

    \11\ See 82 FR 9339 (February 3, 2017).
    \12\ See OMB's memorandum titled, ``Guidance Implementing 
Executive Order 13771, Titled `Reducing Regulation and Controlling 
Regulatory Costs' '' (April 5, 2017).
---------------------------------------------------------------------------

    This rule is a significant regulatory action under section 3(f) of 
Executive Order 12866, and is hence subject to the requirements of 
Executive Order 13771. Most of the regulatory amendments in this rule 
are the result of the Trade Facilitation and Trade Enforcement Act of 
2015 (Pub. L. 114-125), which amended 19 U.S.C. 1313, the statute 
guiding CBP drawback regulations, and required CBP to promulgate 
regulations implementing these changes by February 24, 2018. This rule 
includes both a regulatory action and a deregulatory action that 
implement TFTEA's requirements. Because these actions are related to 
drawback, CBP chose to include both actions in this rule instead of 
promulgating two separate rules. On net, this rule imposes a regulatory 
burden (and is thus a regulatory action) because its regulatory impacts 
exceed its deregulatory impacts. This rule's regulatory impacts (i.e., 
costs) will measure $8.3 million on an annualized basis,\13\ while its 
deregulatory impacts (i.e., cost savings) will measure $1.3 million on 
an annualized basis (in 2016 U.S. dollars, using a 7 percent discount 
rate). Together, these impacts will introduce an annualized net 
regulatory cost of $7.0 million.
---------------------------------------------------------------------------

    \13\ This estimate includes the high value of CBP's estimated 
range of costs of Major Amendment 3's mixed substitution drawback 
claim requirements. See Regulatory Impact Analysis of the Modernized 
Drawback Final Rule.
---------------------------------------------------------------------------

D. Regulatory Flexibility Act

    This section examines the impact of the Modernized Drawback Final 
Rule on small entities per the requirements of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). A small 
entity may be a small business (defined as any independently owned and 
operated business not dominant in its field that qualifies as a small 
business per the Small Business Act); a small not-for-profit 
organization; or a small governmental jurisdiction (locality with fewer 
than 50,000 people).
    Under the RFA and SBREFA, if an agency can certify (typically 
through a screening analysis) that a rule will not have a ``significant 
economic impact on a substantial number of small entities,'' a detailed 
assessment of the rule's impact on small entities is not required. 
Otherwise, an agency must complete an initial regulatory flexibility 
analysis (IRFA) exploring the impact of the rulemaking on small 
entities. If at the final rule stage an agency still cannot certify 
that the rule will not have a ``significant economic impact on a

[[Page 64982]]

substantial number of small entities,'' a final regulatory flexibility 
analysis (FRFA) assessing the final rule's impact on small entities is 
required. CBP published a screening analysis and IRFA of the Modernized 
Drawback Notice of Proposed Rulemaking in the Federal Register on 
August 2, 2018.\14\ For the final rule, CBP has updated the initial 
screening analysis to reflect information on additional entities and 
new costs, benefits, and transfers data. CBP has also prepared a FRFA.
---------------------------------------------------------------------------

    \14\ See 83 FR 37886 (August 2, 2018).
---------------------------------------------------------------------------

Screening Analysis
    The Modernized Drawback rule will fundamentally change the drawback 
process and consequently affect all trade members eligible for drawback 
(i.e., drawback claimants). These trade members can include importers, 
exporters, manufacturers, producers, and intermediate parties 
representing a diverse array of industries. CBP does not assess the 
rule's impact on customs brokers who file claims for trade members 
eligible for drawback in this RFA analysis because they will presumably 
charge their clients a fee for any costs introduced with the rule (and 
thus not be affected themselves).
    Because the Small Business Administration's (SBA) guidelines on 
small businesses under the RFA do not explicitly define small business 
standards for the importers, exporters, manufacturers, producers, and 
intermediate parties potentially affected by the rule, CBP used data on 
the industries in which these parties operate to determine the number 
of small entities potentially affected by this rule. CBP began by 
compiling a list of all 9,017 unique drawback claimants who filed 
claims between 2007 and 2016 and matching the claimant identification 
number (``claimant ID'') to the operator/owner name and address listed 
in internal CBP databases. Next, CBP assigned a random number to each 
of the claimants in that list and sorted the data in ascending order by 
the random number assigned. Using public and proprietary databases, CBP 
then pulled information like the entity type (subsidiary or parent 
company), primary line of business, employee size, and revenue on the 
claimants in ascending order until the agency had market data for 375 
unique entities.\15\
---------------------------------------------------------------------------

    \15\ Out of a total population of 9,017 unique drawback 
claimants who filed claims between 2007 and 2016, CBP used a sample 
of 375 claimants with market data to inform this screening analysis 
due to the extensive time burden to gather and analyze business 
information. This sample size resulted in a statistically valid 
sample using a 95 percent confidence level with a 5 percent margin 
of error.
---------------------------------------------------------------------------

    Table 1 shows the industries, according to their North American 
Industrial Classification System (NAICS) code, in the sample of 
entities affected by this rule and the SBA's small business size 
standards for these industries. For the most part, the SBA's size 
standards are the average annual receipts or the average employment of 
a firm.\16\ As shown, CBP finds that 71 percent (268) of the drawback 
claimants sampled are considered ``small businesses'' according to the 
SBA's size standards or are a small non-profit organization, of which 
there was one in the sample. CBP did not identify any small 
governmental jurisdictions affected by the rule in this sample. 
According to these findings, CBP assumes that the rule will affect a 
substantial number of small entities. CBP recognizes that this 
screening analysis may have excluded some less established, potentially 
small entities due to market data availability. To the extent that 
those excluded are small, the portion of small entities affected by the 
rule will be higher than estimated.
---------------------------------------------------------------------------

    \16\ The SBA's calculation methods for average annual receipts 
and average employment of a firm can be found in 13 CFR 121.104 and 
13 CFR 121.106, respectively.
---------------------------------------------------------------------------

    Of the small drawback claimants sampled and included in Table 1, 
the average number of employees at these entities ranged from 1 to 
1,200 and their annual revenue measured from less than $0.5 million to 
$751.8 million (see Table 2). Table 2 shows the average number of 
employees and annual revenue corresponding to the small entities 
sampled in each NAICS industry using the low ranges of data available 
(as only ranges of employees and revenue are available for some 
entities).

                                      Table 1--Statistics of Small Entities Affected by Rule From the Random Sample
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Number of      Percent of                                  Number of      Percent of
          NAICS code                  NAICS description         entities  in    entities  in       SBA size  standard     small entities  small entities
                                                                   sample          sample                                    in sample       in sample
--------------------------------------------------------------------------------------------------------------------------------------------------------
113210.......................  Forest Nurseries and Gathering               1             0.3  $11.0 Million............               0             0.0
                                of Forest Products.
113310.......................  Logging.......................               1             0.3  500 Employees............               0             0.0
212391.......................  Potash, Soda, and Borate                     1             0.3  750 Employees............               1             0.3
                                Mineral Mining.
221118.......................  Other Electric Power                         1             0.3  250 Employees............               1             0.3
                                Generation.
311211.......................  Flour Milling.................               1             0.3  1,000 Employees..........               1             0.3
311224.......................  Soybean and Other Oilseed                    1             0.3  1,000 Employees..........               0             0.0
                                Processing.
311421.......................  Fruit and Vegetable Canning...               2             0.5  1,000 Employees..........               1             0.3
311930.......................  Flavoring Syrup and                          1             0.3  1,000 Employees..........               1             0.3
                                Concentrate Manufacturing.
312130.......................  Wineries......................               1             0.3  1,000 Employees..........               1             0.3
312140.......................  Distilleries..................               1             0.3  1,000 Employees..........               1             0.3
313210.......................  Broadwoven Fabric Mills.......               3             0.8  1,000 Employees..........               2             0.5
314994.......................  Rope, Cordage, Twine, Tire                   1             0.3  1,000 Employees..........               1             0.3
                                Cord, and Tire Fabric Mills.
314999.......................  All Other Miscellaneous                      2             0.5  500 Employees............               2             0.5
                                Textile Product Mills.
315190.......................  Other Apparel Knitting Mills..               1             0.3  750 Employees............               1             0.3
315220.......................  Men's and Boys' Cut and Sew                  5             1.3  750 Employees............               4             1.1
                                Apparel Manufacturing.
315240.......................  Women's, Girls', and Infants'                6             1.6  750 Employees............               5             1.3
                                Cut and Sew Apparel
                                Manufacturing.
315280.......................  Other Cut and Sew Apparel                    1             0.3  750 Employees............               1             0.3
                                Manufacturing.

[[Page 64983]]

 
315990.......................  Apparel Accessories and Other                2             0.5  500 Employees............               1             0.3
                                Apparel Manufacturing.
316210.......................  Footwear Manufacturing........               1             0.3  1,000 Employees..........               0             0.0
321911.......................  Wood Window and Door                         1             0.3  1,000 Employees..........               1             0.3
                                Manufacturing.
321918.......................  Other Millwork (including                    1             0.3  500 Employees............               1             0.3
                                Flooring).
325180.......................  Other Basic Inorganic Chemical               7             1.9  1,000 Employees..........               5             1.3
                                Manufacturing.
325194.......................  Cyclic Crude, Intermediate,                  1             0.3  1,250 Employees..........               1             0.3
                                and Gum and Wood Chemical
                                Manufacturing.
325199.......................  All Other Basic Organic                      2             0.5  1,250 Employees..........               0             0.0
                                Chemical Manufacturing.
325211.......................  Plastics Material and Resin                  4             1.1  1,250 Employees..........               3             0.8
                                Manufacturing.
325220.......................  Artificial and Synthetic                     1             0.3  1,000 Employees..........               1             0.3
                                Fibers and Filaments
                                Manufacturing.
325412.......................  Pharmaceutical Preparation                   2             0.5  1,250 Employees..........               2             0.5
                                Manufacturing.
325612.......................  Polish and Other Sanitation                  1             0.3  750 Employees............               1             0.3
                                Good Manufacturing.
325620.......................  Toilet Preparation                           1             0.3  1,250 Employees..........               1             0.3
                                Manufacturing.
325998.......................  All Other Miscellaneous                      2             0.5  500 Employees............               1             0.3
                                Chemical Product and
                                Preparation Manufacturing.
326113.......................  Unlaminated Plastics Film and                1             0.3  750 Employees............               1             0.3
                                Sheet (except Packaging)
                                Manufacturing.
326199.......................  All Other Plastics Product                   3             0.8  750 Employees............               3             0.8
                                Manufacturing.
326299.......................  All Other Rubber Product                     1             0.3  500 Employees............               1             0.3
                                Manufacturing.
327110.......................  Pottery, Ceramics, and                       1             0.3  1,000 Employees..........               1             0.3
                                Plumbing Fixture
                                Manufacturing.
327120.......................  Clay Building Material and                   2             0.5  750 Employees............               2             0.5
                                Refractories Manufacturing.
327390.......................  Other Concrete Product                       1             0.3  500 Employees............               1             0.3
                                Manufacturing.
327420.......................  Gypsum Product Manufacturing..               1             0.3  1,500 Employees..........               1             0.3
327910.......................  Abrasive Product Manufacturing               1             0.3  750 Employees............               0             0.0
331110.......................  Iron and Steel Mills and                     2             0.5  1,500 Employees..........               0             0.0
                                Ferroalloy Manufacturing.
331410.......................  Nonferrous Metal (except                     2             0.5  1,000 Employees..........               2             0.5
                                Aluminum) Smelting and
                                Refining.
331491.......................  Nonferrous Metal (except                     1             0.3  750 Employees............               1             0.3
                                Copper and Aluminum) Rolling,
                                Drawing, and Extruding.
332323.......................  Ornamental and Architectural                 1             0.3  500 Employees............               1             0.3
                                Metal Work Manufacturing.
332510.......................  Hardware Manufacturing........               1             0.3  750 Employees............               0             0.0
332813.......................  Electroplating, Plating,                     1             0.3  500 Employees............               1             0.3
                                Polishing, Anodizing, and
                                Coloring.
332911.......................  Industrial Valve Manufacturing               1             0.3  750 Employees............               0             0.0
332996.......................  Fabricated Pipe and Pipe                     1             0.3  500 Employees............               1             0.3
                                Fitting Manufacturing.
332999.......................  All Other Miscellaneous                      1             0.3  750 Employees............               1             0.3
                                Fabricated Metal Product
                                Manufacturing.
333111.......................  Farm Machinery and Equipment                 1             0.3  1,250 Employees..........               1             0.3
                                Manufacturing.
333244.......................  Printing Machinery and                       1             0.3  750 Employees............               1             0.3
                                Equipment Manufacturing.
333249.......................  Other Industrial Machinery                   1             0.3  500 Employees............               1             0.3
                                Manufacturing.
333415.......................  Air-Conditioning and Warm Air                1             0.3  1,250 Employees..........               0             0.0
                                Heating Equipment and
                                Commercial and Industrial
                                Refrigeration Equipment
                                Manufacturing.
333613.......................  Mechanical Power Transmission                1             0.3  750 Employees............               1             0.3
                                Equipment Manufacturing.
333997.......................  Scale and Balance                            1             0.3  500 Employees............               0             0.0
                                Manufacturing.

[[Page 64984]]

 
334118.......................  Computer Terminal and Other                  1             0.3  1,000 Employees..........               0             0.0
                                Computer Peripheral Equipment
                                Manufacturing.
334310.......................  Audio and Video Equipment                    2             0.5  750 Employees............               1             0.3
                                Manufacturing.
334419.......................  Other Electronic Component                   1             0.3  750 Employees............               0             0.0
                                Manufacturing.
334510.......................  Electromedical and                           1             0.3  1,250 Employees..........               1             0.3
                                Electrotherapeutic Apparatus
                                Manufacturing.
334513.......................  Instruments and Related                      1             0.3  750 Employees............               0             0.0
                                Products Manufacturing for
                                Measuring, Displaying, and
                                Controlling Industrial
                                Process Variables.
334516.......................  Analytical Laboratory                        1             0.3  1,000 Employees..........               1             0.3
                                Instrument Manufacturing.
335121.......................  Residential Electric Lighting                1             0.3  750 Employees............               1             0.3
                                Fixture Manufacturing.
335122.......................  Commercial, Industrial, and                  1             0.3  500 Employees............               1             0.3
                                Institutional Electric
                                Lighting Fixture
                                Manufacturing.
335129.......................  Other Lighting Equipment                     1             0.3  500 Employees............               1             0.3
                                Manufacturing.
335220.......................  Major Household Appliance                    1             0.3  1,500 Employees..........               1             0.3
                                Manufacturing.
336213.......................  Motor Home Manufacturing......               1             0.3  1,250 Employees..........               1             0.3
336330.......................  Motor Vehicle Steering and                   1             0.3  1,000 Employees..........               1             0.3
                                Suspension Components (except
                                Spring) Manufacturing.
336510.......................  Railroad Rolling Stock                       1             0.3  1,500 Employees..........               1             0.3
                                Manufacturing.
337214.......................  Office Furniture (except Wood)               1             0.3  1,000 Employees..........               1             0.3
                                Manufacturing.
337920.......................  Blind and Shade Manufacturing.               1             0.3  1,000 Employees..........               0             0.0
339112.......................  Surgical and Medical                         3             0.8  1,000 Employees..........               2             0.5
                                Instrument Manufacturing.
339113.......................  Surgical Appliance and                       1             0.3  750 Employees............               1             0.3
                                Supplies Manufacturing.
339115.......................  Ophthalmic Goods Manufacturing               1             0.3  1,000 Employees..........               1             0.3
339910.......................  Jewelry and Silverware                       1             0.3  500 Employees............               1             0.3
                                Manufacturing.
339920.......................  Sporting and Athletic Goods                  2             0.5  750 Employees............               1             0.3
                                Manufacturing.
339930.......................  Doll, Toy, and Game                          1             0.3  500 Employees............               1             0.3
                                Manufacturing.
339991.......................  Gasket, Packing, and Sealing                 1             0.3  500 Employees............               0             0.0
                                Device Manufacturing.
339992.......................  Musical Instrument                           1             0.3  1,000 Employees..........               1             0.3
                                Manufacturing.
339999.......................  All Other Miscellaneous                      3             0.8  500 Employees............               3             0.8
                                Manufacturing.
423120.......................  Motor Vehicle Supplies and New               2             0.5  200 Employees............               2             0.5
                                Parts Merchant Wholesalers.
423220.......................  Home Furnishing Merchant                     9             2.4  100 Employees............               6             1.6
                                Wholesalers.
423330.......................  Roofing, Siding, and                         1             0.3  200 Employees............               1             0.3
                                Insulation Material Merchant
                                Wholesalers.
423430.......................  Computer and Computer                        1             0.3  250 Employees............               1             0.3
                                Peripheral Equipment and
                                Software Merchant Wholesalers.
423440.......................  Other Commercial Equipment                   3             0.8  100 Employees............               3             0.8
                                Merchant Wholesalers.
423460.......................  Ophthalmic Goods Merchant                    1             0.3  150 Employees............               1             0.3
                                Wholesalers.
423510.......................  Metal Service Centers and                    3             0.8  200 Employees............               2             0.5
                                Other Metal Merchant
                                Wholesalers.
423620.......................  Household Appliances, Electric               3             0.8  200 Employees............               3             0.8
                                Housewares, and Consumer
                                Electronics Merchant
                                Wholesalers.
423690.......................  Other Electronic Parts and                   5             1.3  250 Employees............               2             0.5
                                Equipment Merchant
                                Wholesalers.
423710.......................  Hardware Merchant Wholesalers.               4             1.1  150 Employees............               3             0.8

[[Page 64985]]

 
423810.......................  Construction and Mining                      2             0.5  250 Employees............               2             0.5
                                (except Oil Well) Machinery
                                and Equipment Merchant
                                Wholesalers.
423830.......................  Industrial Machinery and                    13             3.5  100 Employees............              12             3.2
                                Equipment Merchant
                                Wholesalers.
423840.......................  Industrial Supplies Merchant                 4             1.1  100 Employees............               3             0.8
                                Wholesalers.
423850.......................  Service Establishment                        1             0.3  100 Employees............               0             0.0
                                Equipment and Supplies
                                Merchant Wholesalers.
423860.......................  Transportation Equipment and                 1             0.3  150 Employees............               1             0.3
                                Supplies (except Motor
                                Vehicle) Merchant Wholesalers.
423910.......................  Sporting and Recreational                   13             3.5  100 Employees............              11             2.9
                                Goods and Supplies Merchant
                                Wholesalers.
423920.......................  Toy and Hobby Goods and                      2             0.5  150 Employees............               2             0.5
                                Supplies Merchant Wholesalers.
423940.......................  Jewelry, Watch, Precious                    13             3.5  100 Employees............              13             3.5
                                Stone, and Precious Metal
                                Merchant Wholesalers.
423990.......................  Other Miscellaneous Durable                  5             1.3  100 Employees............               5             1.3
                                Goods Merchant Wholesalers.
424130.......................  Industrial and Personal                      1             0.3  150 Employees............               1             0.3
                                Service Paper Merchant
                                Wholesalers.
424310.......................  Piece Goods, Notions, and                    6             1.6  100 Employees............               6             1.6
                                Other Dry Goods Merchant
                                Wholesalers.
424320.......................  Men's and Boys' Clothing and                 5             1.3  150 Employees............               4             1.1
                                Furnishings Merchant
                                Wholesalers.
424330.......................  Women's, Children's, and                    17             4.5  100 Employees............              14             3.7
                                Infants' Clothing and
                                Accessories Merchant
                                Wholesalers.
424340.......................  Footwear Merchant Wholesalers.               7             1.9  200 Employees............               6             1.6
424410.......................  General Line Grocery Merchant                2             0.5  250 Employees............               2             0.5
                                Wholesalers.
424490.......................  Other Grocery and Related                    4             1.1  250 Employees............               4             1.1
                                Products Merchant Wholesalers.
424610.......................  Plastics Materials and Basic                 5             1.3  150 Employees............               5             1.3
                                Forms and Shapes Merchant
                                Wholesalers.
424690.......................  Other Chemical and Allied                    7             1.9  150 Employees............               7             1.9
                                Products Merchant Wholesalers.
424720.......................  Petroleum and Petroleum                      3             0.8  200 Employees............               3             0.8
                                Products Merchant Wholesalers
                                (except Bulk Stations and
                                Terminals).
424820.......................  Wine and Distilled Alcoholic                 3             0.8  250 Employees............               2             0.5
                                Beverage Merchant Wholesalers.
424910.......................  Farm Supplies Merchant                       3             0.8  200 Employees............               3             0.8
                                Wholesalers.
424940.......................  Tobacco and Tobacco Product                  1             0.3  250 Employees............               1             0.3
                                Merchant Wholesalers.
424990.......................  Other Miscellaneous Nondurable               5             1.3  100 Employees............               5             1.3
                                Goods Merchant Wholesalers.
441120.......................  Used Car Dealers..............               1             0.3  $25.0 Million............               1             0.3
441222.......................  Boat Dealers..................               2             0.5  $32.5 Million............               1             0.3
441228.......................  Motorcycle, ATV, and All Other               1             0.3  $32.5 Million............               0             0.0
                                Motor Vehicle Dealers.
442210.......................  Floor Covering Stores.........               1             0.3  $7.5 Million.............               0             0.0
443142.......................  Electronics Stores............               2             0.5  $32.5 Million............               2             0.5
446130.......................  Optical Goods Stores..........               1             0.3  $20.5 Million............               0             0.0
448110.......................  Men's Clothing Stores.........               1             0.3  $11.0 Million............               0             0.0
448120.......................  Women's Clothing Stores.......               4             1.1  $27.5 Million............               4             1.1
448130.......................  Children's and Infants'                      2             0.5  $32.5 Million............               2             0.5
                                Clothing Stores.
448140.......................  Family Clothing Stores........               2             0.5  $38.5 Million............               2             0.5
448190.......................  Other Clothing Stores.........               3             0.8  $20.5 Million............               2             0.5
448210.......................  Shoe Stores...................               1             0.3  $27.5 Million............               1             0.3
448310.......................  Jewelry Stores................               1             0.3  $15.0 Million............               1             0.3
451110.......................  Sporting Goods Stores.........               3             0.8  $15.0 Million............               3             0.8

[[Page 64986]]

 
451140.......................  Musical Instrument and                       1             0.3  $11.0 Million............               0             0.0
                                Supplies Stores.
452210.......................  General Merchandise Stores....               1             0.3  $32.5 Million............               1             0.3
453930.......................  Manufactured (Mobile) Home                   1             0.3  $15.0 Million............               1             0.3
                                Dealers.
453998.......................  All Other Miscellaneous Store                1             0.3  $7.5 Million.............               1             0.3
                                Retailers (except Tobacco
                                Stores).
454110.......................  Electronic Shopping and Mail-                4             1.1  $38.5 Million............               0             0.0
                                Order Houses.
483112.......................  Deep Sea Passenger                           1             0.3  1,500 Employees..........               0             0.0
                                Transportation.
486210.......................  Pipeline Transportation of                   1             0.3  $27.5 Million............               0             0.0
                                Natural Gas.
488510.......................  Freight Transportation                       1             0.3  $15.0 Million............               0             0.0
                                Arrangement.
492110.......................  Couriers and Express Delivery                1             0.3  1,500 Employees..........               1             0.3
                                Services.
493110.......................  General Warehousing and                      1             0.3  $27.5 Million............               1             0.3
                                Storage.
493130.......................  Farm Product Warehousing and                 1             0.3  $27.5 Million............               1             0.3
                                Storage.
512250.......................  Record Production and                        1             0.3  250 Employees............               1             0.3
                                Distribution.
522110.......................  Commercial Banking............               1             0.3  $550.0 Million in Assets.               0             0.0
522390.......................  Other Activities Related to                  1             0.3  $20.5 Million............               1             0.3
                                Credit Intermediation.
525990.......................  Other Financial Vehicles......               1             0.3  $32.5 Million............               1             0.3
533110.......................  Lessors of Nonfinancial                      1             0.3  $38.5 Million............               1             0.3
                                Intangible Assets (except
                                Copyrighted Works).
541330.......................  Engineering Services..........               1             0.3  $15.0 Million............               0             0.0
541380.......................  Testing Laboratories..........               1             0.3  $15.0 Million............               0             0.0
541611.......................  Administrative Management and                1             0.3  $15.0 Million............               1             0.3
                                General Management Consulting
                                Services.
541618.......................  Other Management Consulting                  1             0.3  $15.0 Million............               1             0.3
                                Services.
541690.......................  Other Scientific and Technical               1             0.3  $15.0 Million............               0             0.0
                                Consulting Services.
541990.......................  All Other Professional,                      2             0.5  $15.0 Million............               2             0.5
                                Scientific, and Technical
                                Services.
551112.......................  Offices of Other Holding                     1             0.3  $20.5 Million............               1             0.3
                                Companies.
561499.......................  All Other Business Support                   3             0.8  $15.0 Million............               3             0.8
                                Services.
561621.......................  Security Systems Services                    1             0.3  $20.5 Million............               0             0.0
                                (except Locksmiths).
561990.......................  All Other Support Services....               4             1.1  $11.0 Million............               4             1.1
624110.......................  Child and Youth Services *....               1             0.3  $11.0 Million............               1             0.3
711410.......................  Agents and Managers for                      1             0.3  $11.0 Million............               1             0.3
                                Artists, Athletes,
                                Entertainers, and Other
                                Public Figures.
711510.......................  Independent Artists, Writers,                1             0.3  $7.5 Million.............               1             0.3
                                and Performers.
712110.......................  Museums.......................               1             0.3  $27.5 Million............               1             0.3
713940.......................  Fitness and Recreational                     1             0.3  $7.5 Million.............               1             0.3
                                Sports Centers.
811310.......................  Commercial and Industrial                    1             0.3  $7.5 Million.............               0             0.0
                                Machinery and Equipment
                                (except Automotive and
                                Electronic) Repair and
                                Maintenance.
811490.......................  Other Personal and Household                 1             0.3  $7.5 Million.............               1             0.3
                                Goods Repair and Maintenance.
812332.......................  Industrial Launderers.........               1             0.3  $38.5 Million............               0             0.0
813910.......................  Business Associations.........               1             0.3  $7.5 Million.............               1             0.3
                               Foreign Entity................              37             9.9  N/A......................
                                                              ------------------------------------------------------------------------------------------
    Total....................  ..............................             375             100  .........................             268              71
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This sample corresponds to a non-profit organization.
Note: Estimates may not sum to total due to rounding.
Source of drawback claimants sample: Internal CBP database; gathered through email correspondence with CBP's Office of Trade on March 2, 2017.
Source of descriptive entity information: Hoover's. Online company reports. Available at http://www.hoovers.com/. Accessed August 31, 2018 through
  September 12, 2018; Manta. Online company reports. Available at http://www.manta.com/. Accessed August 31, 2018 through September 12, 2018.

[[Page 64987]]

 
Source of SBA size standard information: U.S. Small Business Administration, ``Table of Small Business Size Standards Matched to North American Industry
  Classification System Codes.'' October 1, 2017. Available at https://www.sba.gov/sites/default/files/2018-07/NAICS%202017%20Table%20of%20Size%20Standards.pdf. Accessed September 6, 2018.


  Table 2--Average Employment and Revenue Statistics of Small Entities Affected by Rule From the Random Sample
----------------------------------------------------------------------------------------------------------------
                                                                                                      Average
                                                                                      Average         annual
                                                                                     number of      revenue of
                                                                     Number of     employees at   small entities
          NAICS code                    NAICS description         small entities  small entities    in sample--
                                                                     in sample      in sample--      low range
                                                                                     low range       value (in
                                                                                       value         millions)
----------------------------------------------------------------------------------------------------------------
212391........................  Potash, Soda, and Borate Mineral               1             680          $751.8
                                 Mining.
221118........................  Other Electric Power Generation.               1              14             2.0
311211........................  Flour Milling...................               1              20             2.9
311421........................  Fruit and Vegetable Canning.....               1             540           178.1
311930........................  Flavoring Syrup and Concentrate                1              70            14.7
                                 Manufacturing.
312130........................  Wineries........................               1              50            10.7
312140........................  Distilleries....................               1             985           392.7
313210........................  Broadwoven Fabric Mills.........               2              15             2.1
314994........................  Rope, Cordage, Twine, Tire Cord,               1             375           116.7
                                 and Tire Fabric Mills.
314999........................  All Other Miscellaneous Textile                2              90             6.0
                                 Product Mills.
315190........................  Other Apparel Knitting Mills....               1             138            17.4
315220........................  Men's and Boys' Cut and Sew                    4             127            15.4
                                 Apparel Manufacturing.
315240........................  Women's, Girls', and Infants'                  5              69            10.6
                                 Cut and Sew Apparel
                                 Manufacturing.
315280........................  Other Cut and Sew Apparel                      1               2             0.2
                                 Manufacturing.
315990........................  Apparel Accessories and Other                  1               1             0.1
                                 Apparel Manufacturing.
321911........................  Wood Window and Door                           1             250            56.3
                                 Manufacturing.
321918........................  Other Millwork (including                      1              18             4.5
                                 Flooring).
325180........................  Other Basic Inorganic Chemical                 5             447           190.8
                                 Manufacturing.
325194........................  Cyclic Crude, Intermediate, and                1           1,000           269.6
                                 Gum and Wood Chemical
                                 Manufacturing.
325211........................  Plastics Material and Resin                    3             227            79.2
                                 Manufacturing.
325220........................  Artificial and Synthetic Fibers                1             740           230.6
                                 and Filaments Manufacturing.
325412........................  Pharmaceutical Preparation                     2             332            61.7
                                 Manufacturing.
325612........................  Polish and Other Sanitation Good               1              98            30.0
                                 Manufacturing.
325620........................  Toilet Preparation Manufacturing               1             350           169.4
325998........................  All Other Miscellaneous Chemical               1              34             9.7
                                 Product and Preparation
                                 Manufacturing.
326113........................  Unlaminated Plastics Film and                  1             275            46.7
                                 Sheet (except Packaging)
                                 Manufacturing.
326199........................  All Other Plastics Product                     3             221            55.7
                                 Manufacturing.
326299........................  All Other Rubber Product                       1               1             0.1
                                 Manufacturing.
327110........................  Pottery, Ceramics, and Plumbing                1               5             0.2
                                 Fixture Manufacturing.
327120........................  Clay Building Material and                     2             201            73.9
                                 Refractories Manufacturing.
327390........................  Other Concrete Product                         1              97            24.4
                                 Manufacturing.
327420........................  Gypsum Product Manufacturing....               1              10             0.1
331410........................  Nonferrous Metal (except                       2             358           116.1
                                 Aluminum) Smelting and Refining.
331491........................  Nonferrous Metal (except Copper                1              20             9.7
                                 and Aluminum) Rolling, Drawing,
                                 and Extruding.
332323........................  Ornamental and Architectural                   1              47            16.0
                                 Metal Work Manufacturing.
332813........................  Electroplating, Plating,                       1              25             2.4
                                 Polishing, Anodizing, and
                                 Coloring.
332996........................  Fabricated Pipe and Pipe Fitting               1             100            38.4
                                 Manufacturing.
332999........................  All Other Miscellaneous                        1              65            13.5
                                 Fabricated Metal Product
                                 Manufacturing.
333111........................  Farm Machinery and Equipment                   1           1,200           675.0
                                 Manufacturing.
333244........................  Printing Machinery and Equipment               1             110            39.8
                                 Manufacturing.
333249........................  Other Industrial Machinery                     1             256            87.8
                                 Manufacturing.
333613........................  Mechanical Power Transmission                  1              38            10.5
                                 Equipment Manufacturing.
334310........................  Audio and Video Equipment                      1              13             1.2
                                 Manufacturing.
334510........................  Electromedical and                             1              15             0.3
                                 Electrotherapeutic Apparatus
                                 Manufacturing.
334516........................  Analytical Laboratory Instrument               1             430           121.8
                                 Manufacturing.
335121........................  Residential Electric Lighting                  1              11             1.5
                                 Fixture Manufacturing.
335122........................  Commercial, Industrial, and                    1             410           201.5
                                 Institutional Electric Lighting
                                 Fixture Manufacturing.
335129........................  Other Lighting Equipment                       1             300           137.7
                                 Manufacturing.
335220........................  Major Household Appliance                      1              89            12.1
                                 Manufacturing.
336213........................  Motor Home Manufacturing........               1             275           138.1
336330........................  Motor Vehicle Steering and                     1             215            54.6
                                 Suspension Components (except
                                 Spring) Manufacturing.
336510........................  Railroad Rolling Stock                         1             100            42.6
                                 Manufacturing.
337214........................  Office Furniture (except Wood)                 1              45             7.0
                                 Manufacturing.
339112........................  Surgical and Medical Instrument                2             126            11.5
                                 Manufacturing.
339113........................  Surgical Appliance and Supplies                1             110            73.2
                                 Manufacturing.
339115........................  Ophthalmic Goods Manufacturing..               1             660           329.6
339910........................  Jewelry and Silverware                         1               1             0.2
                                 Manufacturing.
339920........................  Sporting and Athletic Goods                    1              40             4.6
                                 Manufacturing.

[[Page 64988]]

 
339930........................  Doll, Toy, and Game                            1               7             1.0
                                 Manufacturing.
339992........................  Musical Instrument Manufacturing               1             625           126.1
339999........................  All Other Miscellaneous                        3              45            10.4
                                 Manufacturing.
423120........................  Motor Vehicle Supplies and New                 2              15            13.5
                                 Parts Merchant Wholesalers.
423220........................  Home Furnishing Merchant                       6              31            23.6
                                 Wholesalers.
423330........................  Roofing, Siding, and Insulation                1               1             2.6
                                 Material Merchant Wholesalers.
423430........................  Computer and Computer Peripheral               1              60            24.0
                                 Equipment and Software Merchant
                                 Wholesalers.
423440........................  Other Commercial Equipment                     3              41            29.3
                                 Merchant Wholesalers.
423460........................  Ophthalmic Goods Merchant                      1               7             1.6
                                 Wholesalers.
423510........................  Metal Service Centers and Other                2               3             0.7
                                 Metal Merchant Wholesalers.
423620........................  Household Appliances, Electric                 3              49         ** 13.6
                                 Housewares, and Consumer
                                 Electronics Merchant
                                 Wholesalers.
423690........................  Other Electronic Parts and                     2              60            15.7
                                 Equipment Merchant Wholesalers.
423710........................  Hardware Merchant Wholesalers...               3              83         ** 28.5
423810........................  Construction and Mining (except                2              26            14.3
                                 Oil Well) Machinery and
                                 Equipment Merchant Wholesalers.
423830........................  Industrial Machinery and                      12              29            26.7
                                 Equipment Merchant Wholesalers.
423840........................  Industrial Supplies Merchant                   3               9            11.4
                                 Wholesalers.
423860........................  Transportation Equipment and                   1              12             3.2
                                 Supplies (except Motor Vehicle)
                                 Merchant Wholesalers.
423910........................  Sporting and Recreational Goods               11              23            11.3
                                 and Supplies Merchant
                                 Wholesalers.
423920........................  Toy and Hobby Goods and Supplies               2              59            21.7
                                 Merchant Wholesalers.
423940........................  Jewelry, Watch, Precious Stone,               13              14            16.0
                                 and Precious Metal Merchant
                                 Wholesalers.
423990........................  Other Miscellaneous Durable                    5              23            23.0
                                 Goods Merchant Wholesalers.
424130........................  Industrial and Personal Service                1              23             0.1
                                 Paper Merchant Wholesalers.
424310........................  Piece Goods, Notions, and Other                6              11          ** 3.8
                                 Dry Goods Merchant Wholesalers.
424320........................  Men's and Boys' Clothing and                   4              16         ** 10.0
                                 Furnishings Merchant
                                 Wholesalers.
424330........................  Women's, Children's, and                      14               8          ** 4.4
                                 Infants' Clothing and
                                 Accessories Merchant
                                 Wholesalers.
424340........................  Footwear Merchant Wholesalers...               6              10             6.2
424410........................  General Line Grocery Merchant                  2              11             6.7
                                 Wholesalers.
424490........................  Other Grocery and Related                      4              16            11.1
                                 Products Merchant Wholesalers.
424610........................  Plastics Materials and Basic                   5              23            12.9
                                 Forms and Shapes Merchant
                                 Wholesalers.
424690........................  Other Chemical and Allied                      7              14            21.6
                                 Products Merchant Wholesalers.
424720........................  Petroleum and Petroleum Products               3              15            29.9
                                 Merchant Wholesalers (except
                                 Bulk Stations and Terminals).
424820........................  Wine and Distilled Alcoholic                   2               6             2.2
                                 Beverage Merchant Wholesalers.
424910........................  Farm Supplies Merchant                         3              26            49.9
                                 Wholesalers.
424940........................  Tobacco and Tobacco Product                    1              70            15.5
                                 Merchant Wholesalers.
424990........................  Other Miscellaneous Nondurable                 5              26            10.9
                                 Goods Merchant Wholesalers.
441120........................  Used Car Dealers................               1               1             0.1
441222........................  Boat Dealers....................               1              33            12.1
443142........................  Electronics Stores..............               2              19             2.7
448120........................  Women's Clothing Stores.........               4              24             3.1
448130........................  Children's and Infants' Clothing               2              72            16.3
                                 Stores.
448140........................  Family Clothing Stores..........               2              24             3.5
448190........................  Other Clothing Stores...........               2              23             6.8
448210........................  Shoe Stores.....................               1              17             2.5
448310........................  Jewelry Stores..................               1               1             0.1
451110........................  Sporting Goods Stores...........               3              13             1.9
452210........................  General Merchandise Stores......               1              20             2.5
453930........................  Manufactured (Mobile) Home                     1              91            13.0
                                 Dealers.
453998........................  All Other Miscellaneous Store                  1               5             0.5
                                 Retailers (except Tobacco
                                 Stores).
492110........................  Couriers and Express Delivery                  1               6             1.7
                                 Services.
493110........................  General Warehousing and Storage.               1              20             0.5
493130........................  Farm Product Warehousing and                   1              14             1.7
                                 Storage.
512250........................  Record Production and                          1              55             8.0
                                 Distribution.
522390........................  Other Activities Related to                    1               4            0.03
                                 Credit Intermediation.
525990........................  Other Financial Vehicles........               1               2             0.2
533110........................  Lessors of Nonfinancial                        1              11             3.4
                                 Intangible Assets (except
                                 Copyrighted Works).
541611........................  Administrative Management and                  1               2             0.1
                                 General Management Consulting
                                 Services.
541618........................  Other Management Consulting                    1               1             0.1
                                 Services.
541990........................  All Other Professional,                        2               3             0.2
                                 Scientific, and Technical
                                 Services.

[[Page 64989]]

 
551112........................  Offices of Other Holding                       1               1             1.6
                                 Companies.
561499........................  All Other Business Support                     3               1             0.9
                                 Services.
561990........................  All Other Support Services......               4               5             0.3
624110........................  Child and Youth Services *......               1              21             3.9
711410........................  Agents and Managers for Artists,               1              15             3.2
                                 Athletes, Entertainers, and
                                 Other Public Figures.
711510........................  Independent Artists, Writers,                  1               2             0.3
                                 and Performers.
712110........................  Museums.........................               1               4             0.2
713940........................  Fitness and Recreational Sports                1               4             0.1
                                 Centers.
811490........................  Other Personal and Household                   1              18             1.8
                                 Goods Repair and Maintenance.
813910........................  Business Associations...........               1               4             0.8
----------------------------------------------------------------------------------------------------------------
* This sample corresponds to a non-profit organization.
** The number of small entities forming this average excludes an entity missing revenue information. That entity
  had employment information, which the average employee figure includes.
Source of drawback claimants sample: Internal CBP database; gathered through email correspondence with CBP's
  Office of Trade on March 2, 2017.
Source of small entity employment information: Hoover's. Online company reports. Available at http://www.hoovers.com/. Accessed August 31, 2018 through September 12, 2018; Manta. Online company reports.
  Available at http://www.manta.com/. Accessed August 31, 2018 through September 12, 2018.

    Based on the share of drawback claimants sampled, CBP assumes that 
71 percent of drawback claimants affected by this rule over the 2018 to 
2027 period of analysis, or 7,042 claimants, will be small entities. 
These drawback claimants will incur costs related to ACE system 
modifications, electronic claim submission requirements, expanded 
recordkeeping requirements, mixed substitution drawback claim 
requirements, and additional full desk reviews; however, these costs 
will differ depending on their filing preferences and claim review.
    Each unique drawback claimant will need to either modify its 
existing drawback system, acquire add-on drawback software, or hire a 
customs broker to comply with this rule's new drawback regulations 
outlined in 19 CFR part 190. CBP estimates that approximately 206 small 
entity drawback claimants (71 percent of the estimated 290 total 
claimants) will modify their ACE filing systems in 2018 to comply with 
all of the new drawback regulations outlined in 19 CFR part 190.\17\ 
These claimants could incur an estimated one-time cost of $90,000 that 
will translate to $9,000 per year of the analysis.\18\ However, because 
of the high cost of ACE system modifications, these small claimants are 
more likely to choose a lower-cost option like purchasing add-on 
drawback software or hiring a customs broker to meet this rule's 
requirements while lessening its impact on their revenue. CBP projects 
that an additional 3,905 small drawback claimants (71 percent of the 
estimated 5,500 total claimants) will acquire add-on drawback software 
consistent with all of this rule's requirements for a one-time cost of 
$1,500, or $150 over the 10-year period of analysis. CBP presumes that 
rather than acquire and learn the software necessary to file a drawback 
claim electronically and meet the other submission requirements of this 
rule, an estimated 2,932 small paper-based drawback claimants (71 
percent of the estimated 4,129 total claimants) will hire a customs 
broker to file their claims as a result of the rule. These claimants 
will likely file an average of 3 drawback claims per year, at an annual 
cost of $921 according to the $307 customs broker filing fee.\19\ These 
estimates are based on the assumption that all small drawback claimants 
will continue to file drawback claims in spite of these electronic 
filing costs. CBP received public comments on these assumptions, which 
the agency discusses later in section 2 of the IRFA.
---------------------------------------------------------------------------

    \17\ CBP based the estimate of drawback claimants required to 
modify their ACE drawback systems consistent with this rule's 
changes on the projected number of unique drawback claimants with 
this rule in 2018 (9,919) minus the 4,129 drawback claimants 
estimated to file by paper under the current 19 CFR part 191 
regulations in 2018 (and thus exempt from an ACE drawback system 
modification cost), multiplied by the 5 percent share of claimants 
anticipated to modify their ACE drawback systems consistent with 
this rule's changes: (9,919 unique drawback claimants in 2018 - 
4,129 paper-based filers in 2018) x 5 percent anticipated to modify 
their ACE drawback systems = 290 (rounded) drawback claimants.
    \18\ Such regulatory changes will include providing line-item 
drawback claim data at the 10-digit HTSUS subheading level; 
consistent units of measurement for claimed imports, exports, and 
destructions (matching the HTSUS code to the designated imported 
merchandise for substitution drawback claims); exported, destroyed, 
or substituted merchandise values for substitution claims filed 
under 19 U.S.C. 1313(b) and 19 U.S.C. 1313(j)(2); accounting 
methodologies used for direct identification drawback claims (if 
applicable); unique identifiers linking imports to exports or 
destructions on each drawback claim; per unit averages for 
substitution claims; and ``lesser of'' rule calculations for 
substitution claims.
    \19\ From 2018 to 2027, CBP projects under its primary 
estimation method that 4,129 unique drawback claimants will file 
101,642 drawback claims electronically instead of by paper as a 
result of this rule (see Regulatory Impact Analysis of the 
Modernized Drawback Final Rule), averaging about 3 claims per unique 
drawback claimant each year over the 10-year period: 101,642 
drawback claims filed electronically instead of by paper over 10-
year period/4,129 unique drawback claimants = 25 (rounded) claims 
per unique drawback claimant over the 10-year period; 25 claims over 
10-year period/10 years = 3 (rounded) claims per unique drawback 
claimant each year.
---------------------------------------------------------------------------

    All drawback claimants must also retain drawback records for an 
extended period of time with this rule. CBP finds that all 7,042 small 
drawback claimants will sustain $59.99 in expenses between 2021 and 
2027, or approximately $4 each year over the 10-year period of 
analysis, to electronically store drawback claim documentation.\20\

[[Page 64990]]

Furthermore, some drawback claimants may be subject to this rule's 
mixed substitution drawback claim requirements and additional full desk 
reviews. CBP estimates that this rule's mixed substitution drawback 
claim requirements will affect up to 141 small drawback claimants each 
year between 2018 and 2023 (71 percent of an estimated 198 total 
claimants).\21\ CBP also estimates that each affected claimant will 
file an average of two mixed substitution drawback claims subject to 
this rule's supporting documentation requirements each year between 
2018 and 2023, at a cost of $15 per claim or $30 total each year from 
2018 to 2023.\22\ Over the 10-year period of analysis, CBP estimates 
that each small drawback claimant affected by this rule's mixed 
substitution drawback claim requirements would sustain an average cost 
of $18 per year over the 10-year period of analysis.\23\ CBP estimates 
that this rule's additional full desk reviews will affect 366 small 
drawback claimants (71 percent of the estimated 515 total claimants) 
over the 10-year period of analysis, introducing an average cost of $18 
per year to these claimants. CBP assumes that these 366 claimants will 
each complete one full desk review over the 10-year period, at a cost 
of $179 per review (or $18 over 10 years). Besides these monetized 
costs, this rule will introduce non-monetized, non-quantified costs to 
trade members, including the possibility of decreased use of the United 
States as a home base for a distribution facility when coupled with 
other considerations, less third-party drawback, and less time to file 
drawback claims and documentation as compared to the current process.
---------------------------------------------------------------------------

    \20\ $59.99 electronic recordkeeping cost per year x 7-year 
period of recordkeeping = $419 (rounded) total electronic 
recordkeeping cost over 7-year period; $419 storage cost over 7-year 
period of recordkeeping/10-year period of analysis = $42 (rounded) 
electronic recordkeeping cost per year of the 10-year period of 
analysis; $42 (rounded) storage cost per year x 10 percent of unique 
drawback claimants incurring electronic recordkeeping cost per year 
= $4 (rounded) electronic recordkeeping cost per unique drawback 
claimant each year.
    \21\ For the purposes of this analysis, CBP assumes that the 
percentage of unique drawback claimants affected by this rule's 
mixed substitution drawback claim requirements is equal to the high 
value of the estimated range of substitution drawback claims 
affected by Major Amendment 3's mixed substitution drawback claim 
requirements--2 percent. As such, CBP estimates that 2 percent of 
the assumed 9,919 unique drawback claimants would be affected by 
this rule's mixed substitution rule, for a total of 198 drawback 
claimants. Of these claimants, CBP finds that 71 percent, or 141, 
would be affected by this requirement over the period of analysis.
    \22\ CBP bases the average number of mixed substitution drawback 
claims subject to this rule's supporting documentation requirements 
each year on the high value of estimated mixed substitution drawback 
claims filed during the period of analysis under CBP's primary 
estimation method (2,210; see Regulatory Impact Analysis of the 
Modernized Drawback Final Rule) divided by the 6-year period of 
mixed substitution drawback claim submissions and then divided by 
the number of drawback claimants affected by this rule's mixed 
substitution drawback claim requirements: 2,210 total mixed 
substitution drawback claims filed/6-year submission period = 368 
(rounded) mixed substitution drawback claims filed per year between 
2018 and 2023; 368 (rounded) mixed substitution drawback claims 
filed per year between 2018 and 2023/198 drawback claimants affected 
by the mixed substitution drawback claim requirements = 2 (rounded) 
mixed substitution drawback claims filed each year per affected 
drawback claimant.
    \23\ $30 mixed substitution drawback claim supporting document 
submission cost per year x 6-year period of recordkeeping = $180 
(rounded) total mixed substitution drawback claim supporting 
document submission cost over 6-year period; $180 mixed substitution 
drawback claim supporting document submission cost over 6-year 
period/10-year period of analysis = $18 (rounded) mixed substitution 
drawback claim supporting document submission cost per year of the 
10-year period of analysis.
---------------------------------------------------------------------------

    Table 3 outlines the rule's different costs to small entities, 
while Table 4 shows this rule's potential range of costs to small 
entities. As shown, small entities could incur undiscounted annual 
costs from this rule as low as $154 if a small claimant only incurs an 
added recordkeeping cost and add-on drawback software cost (Cost B + 
Cost D in Table 4) and up to $9,040 if a small claimant experiences the 
rule's high ACE drawback system modification cost, added recordkeeping 
cost, mixed substitution drawback claim requirements cost, and full 
desk review cost (once over the 10-year analysis) (Cost A + Cost D + 
Cost E + Cost F in Table 4). About 96 percent of small drawback 
claimants will likely sustain a cost of $943 (Cost C + Cost D + Cost F 
in Table 4) or less per year from this rule, while the remaining 4 
percent could incur higher annual costs measuring up to $9,040.

                                     Table 3--Cost of Rule to Small Entities
                                        [Undiscounted 2018 U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                               Number of small   Share of small  Annual cost per
                        Cost category                              entities         entities         claimant
                                                                   affected       affected (%)    (undiscounted)
----------------------------------------------------------------------------------------------------------------
A. ACE Drawback System Modification..........................              206                3           $9,000
B. Add-On Drawback Software..................................            3,905               55              150
C. Customs Broker Claim Filing...............................            2,932               42              921
D. Added Recordkeeping.......................................            7,042              100                4
E. Mixed Substitution Claim Requirements.....................              141                2               18
F. Full Desk Review..........................................              366                5               18
----------------------------------------------------------------------------------------------------------------
Note: Estimates may not sum to total due to rounding.


                                                Table 4--Range of Annual Costs of Rule to Small Entities
                                             [Undiscounted 2018 U.S. dollars--cost per claimant by category]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Mixed
                                           ACE drawback       Add-on      Customs broker       Added       substitution      Full desk
               Cost range                     system         drawback      claim filing    recordkeeping       claim          review           Total
                                           modification      software                                      requirements
                                                     [A]             [B]             [C]             [D]             [E]             [F]  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.....................................  ..............            $150  ..............              $4  ..............  ..............            $154
Medium..................................  ..............  ..............            $921               4  ..............             $18             943

[[Page 64991]]

 
High....................................          $9,000  ..............  ..............               4             $18              18           9,040
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Estimates may not sum to total due to rounding.

    CBP compares the rule's low ($154), medium ($943), and high 
($9,040) range of monetized costs per year to the annual revenue of the 
small drawback claimants sampled. At the low range, this rule's $154 
monetized cost will represent less than 1 percent of annual revenue for 
100 percent (263) of the small entities sampled with revenue data 
available,\24\ as shown in Table 5. At the medium range, this rule's 
$943 monetized cost will represent less than 1 percent of annual 
revenue for 96 percent (252) of the small entities sampled with revenue 
data available. This rule's $943 monetized cost will represent between 
1 percent and 3 percent of annual revenue for the remaining 4 percent 
(11) of the small entities, as Table 6 illustrates. Finally, at the 
high range, this rule's $9,040 monetized cost will represent less than 
1 percent of the annual revenue for 74 percent (195) of the small 
entities sampled with revenue data available (see Table 7). The share 
of this rule's $9,040 monetized cost on annual revenue will measure 
between: 1 percent and 3 percent for about 10 percent (27) of the 
remaining small entities, 3 percent and 5 percent for 6 percent (17) of 
the small entities sampled, 5 percent and 10 percent for 5 percent (14) 
percent of small entities sampled, and 10 percent or more for 4 percent 
(10) of the small entities sampled (see Table 7). Note that because of 
the high cost of ACE system modifications included in the high range 
cost estimate, only a nominal number of small claimants will likely 
incur this rule's high annual cost of $9,040. Instead, most claimants 
will probably choose lower-cost options like purchasing add-on drawback 
software or hiring a customs broker to meet this rule's requirements 
that will have minimal impacts on their annual revenue, as assumed 
under the low- and medium-cost scenarios shown in Table 5 and Table 6.
---------------------------------------------------------------------------

    \24\ Five of the small entities sampled did not have revenue 
data available, so CBP excluded these entities from the revenue 
impact calculation.
---------------------------------------------------------------------------

    Under all three ranges, the share of this rule's costs on the 
annual revenue of small entities is less than 1 percent for the vast 
majority of entities sampled. Small entities will experience an impact 
of 5 percent or more only under the high cost range of $9,040. Assuming 
that the share of this rule's total annualized cost to small entities 
is equal to the estimated share of drawback claimants affected by this 
rule over the 2018 to 2027 period of analysis (71 percent), the total 
annualized cost of this rule to all small entities will equal $5.4 
million under the primary estimation method and assuming that Major 
Amendment 3 affects 2 percent of substitution drawback claims. CBP did 
not receive any public comments on whether these costs would deter 
small entities from filing drawback claims, though CBP did receive a 
comment stating that these costs are understated. Unfortunately, the 
commenter did not include any data to support this claim or propose 
alternative costs that CBP could incorporate into the analysis. CBP 
based its estimates on the best data available. Therefore, CBP has no 
basis for changing its estimates. To the extent that small entities 
incur greater (fewer) costs from this rule, the costs of this rule will 
be higher (lower) than estimated.

 Table 5--Cost Impacts as a Share of Revenue for Small Entities Affected
 by Rule From the Random Sample--Assuming Annual Cost of $154 per Unique
                            Drawback Claimant
------------------------------------------------------------------------
                                             Number of      Percent of
    Cost as a share of revenue range      small entities  small entities
                                             affected        affected
------------------------------------------------------------------------
0% <= Impact < 1%.......................             263             100
1% <= Impact < 3%.......................               0               0
3% <= Impact < 5%.......................               0               0
5% <= Impact < 10%......................               0               0
10% or More.............................               0               0
                                         -------------------------------
    Total...............................             263             100
------------------------------------------------------------------------
Note: Estimates may not sum to total due to rounding.


 Table 6--Cost Impacts as a Share of Revenue for Small Entities Affected
  by Rule From the Random Sample--Assuming Annualized Cost of $943 per
                        Unique Drawback Claimant
------------------------------------------------------------------------
                                             Number of      Percent of
    Cost as a share of revenue range      small entities  small entities
                                             affected        affected
------------------------------------------------------------------------
0% <= Impact < 1%.......................             252              96

[[Page 64992]]

 
1% <= Impact < 3%.......................               7               3
3% <= Impact < 5%.......................               4               2
5% <= Impact < 10%......................               0               0
10% or More.............................               0               0
                                         -------------------------------
    Total...............................             263             100
------------------------------------------------------------------------
Note: Estimates may not sum to total due to rounding.


 Table 7--Cost Impacts as a Share of Revenue for Small Entities Affected
 by Rule From the Random Sample--Assuming Annualized Cost of $9,040 per
                        Unique Drawback Claimant
------------------------------------------------------------------------
                                             Number of      Percent of
    Cost as a share of revenue range      small entities  small entities
                                             affected        affected
------------------------------------------------------------------------
0% <= Impact < 1%.......................             195              74
1% <= Impact < 3%.......................              27              10
3% <= Impact < 5%.......................              17               6
5% <= Impact < 10%......................              14               5
10% or More.............................              10               4
                                         -------------------------------
    Total...............................             263             100
------------------------------------------------------------------------
Note: Estimates may not sum to total due to rounding.

    This rule will also result in benefits as well as net monetary 
transfers to drawback claimants. This rule will provide time and 
resource savings from forgone paper-based drawback claims, form 
submissions, and ruling and predetermination requests that offset some 
of the rule's costs to small entities. CBP estimates that 2,932 small 
paper-based drawback claimants (71 percent of the estimated 4,129 total 
claimants) will enjoy $9 in cost savings for each paper claim avoided. 
These claimants will likely file an average of 3 drawback claims per 
year, at an annual cost saving of $27.\25\ CBP finds that all 7,042 
small drawback claimants will save $16 in printing and mailing costs 
related to forgone CBP Form 7552 submissions beginning in 2019. Before 
2019, the estimated 2,932 small paper-based claimants will not gain 
this benefit because they will still submit paper CBP Form 7552s. Based 
on the total number of CBP Form 7552s avoided over the period of 
analysis and the total number of unique drawback claimants, CBP 
estimates that each claimant will forgo about 4 CBP Form 7552 
submissions each year of the analysis, saving a total of $64 per 
year.\26\ Lastly, only a small number of claimants will sustain 
benefits from forgone ruling and predetermination requests. CBP 
estimates that 645 requests will be avoided during the period of 
analysis due to the rule and assumes that each forgone request 
corresponds to a unique drawback claimant. By applying the previously 
discussed assumption that 71 percent of drawback claimants affected by 
this rule over the 2018 to 2027 period of analysis are small entities, 
CBP finds that 458 small drawback claimants will each save $188 in 
costs related to ruling and predetermination requests. This will 
translate to about $19 per year over the 10-year period of analysis. 
Small drawback claimants will also enjoy non-monetized, non-quantified 
benefits from this rule, including streamlined claim submissions and 
processing, increased time to claim drawback, simplified understanding 
of the drawback process, added reassurance that business-sensitive 
information is not available for public consumption, and decreased 
business costs.
---------------------------------------------------------------------------

    \25\ From 2018 to 2027, CBP projects under its primary 
estimation method that 4,129 unique drawback claimants will file 
101,642 drawback claims electronically instead of by paper as a 
result of this rule (see Regulatory Impact Analysis of the 
Modernized Drawback Final Rule), averaging about 3 claims per unique 
drawback claimant each year over the 10-year period: 101,642 
drawback claims filed electronically instead of by paper over 10-
year period/4,129 unique drawback claimants = 25 (rounded) claims 
per unique drawback claimant over the 10-year period; 25 claims over 
10-year period/10 years = 3 (rounded) claims per unique drawback 
claimant each year.
    \26\ From 2018 to 2027, CBP projects under its primary 
estimation method that 9,919 unique drawback claimants will forgo 
392,000 CBP Form 7552 submissions as a result of this rule (see 
Regulatory Impact Analysis of the Modernized Drawback Final Rule), 
averaging about 4 forms per unique drawback claimant each year over 
the 10-year period: 392,000 CBP Form 7552 submissions forgone over 
10-year period/9,919 unique drawback claimants = 40 (rounded) forms 
per unique drawback claimant over the 10-year period; 40 claims over 
10-year period/10 years = 4 (rounded) forms per unique drawback 
claimant each year.
---------------------------------------------------------------------------

    This rule's share of net monetary transfers to small entities is 
unknown. This rule will introduce $31.6 million to $35.8 million in 
annualized net transfers from the U.S. Government to drawback claimants 
(using a 7 percent discount rate). These transfers will average between 
$3,200 and $3,600 per claimant based on the projected 9,919 unique 
drawback claimants affected by this rule. Some small entities may 
receive more or less than this average, and potentially even negative 
net transfers if they make net payments to the U.S. Government.
    Similar to the notice of proposed rulemaking and corresponding 
IRFA, CBP believes that a substantial number of trade members who could 
be considered ``small'' may be affected by this final rule based on the 
results from this screening analysis.\27\ CBP cannot determine whether 
the economic impact on these entities may be considered

[[Page 64993]]

significant under the RFA. For these reasons, CBP cannot certify that 
the rule will not have a significant economic impact on a substantial 
number of small entities. CBP has prepared the following FRFA assessing 
the final rule's potential effect on small entities.
---------------------------------------------------------------------------

    \27\ SBA publishes small business size standards for a variety 
of, though not all, economic activities and industries. SBA does not 
explicitly define size standards for the importers, exporters, 
manufacturers, producers, and intermediate parties potentially 
affected by this rule. See 13 CFR 121.101-13 CFR 121.201 for 
information on SBA's size standards.
---------------------------------------------------------------------------

Final Regulatory Flexibility Analysis
    This FRFA includes the following:
    1. A succinct statement of the need for, and objectives of, the 
rule;
    2. A summary of the significant issues raised by the public 
comments in response to the IRFA, a summary of the assessment of the 
agency of such issues, and a statement of any changes made in the 
proposed rule as a result of such comments;
    3. A description and an estimate of the number of small entities to 
which the rule will apply or an explanation of why no such estimate is 
available;
    4. A description of the projected reporting, recordkeeping, and 
other compliance requirements of the rule, including an estimate of the 
classes of small entities that will be subject to the requirement and 
the types of professional skills necessary for preparation of the 
report or record; and
    5. A description of the steps the agency has taken to minimize the 
significant adverse economic impact on small entities consistent with 
the stated objectives of applicable statutes, including a statement of 
the factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each of the other significant 
alternatives to the rule considered by the agency was rejected.
    1. A succinct statement of the need for, and objectives of, the 
rule.
    Section 906 of the Trade Facilitation and Trade Enforcement Act of 
2015 (Pub. L. 114-125) (TFTEA), signed into law on February 24, 2016, 
seeks to simplify and modernize the current drawback procedures through 
amendments to 19 U.S.C. 1313, the statute guiding CBP drawback 
regulations. TFTEA requires CBP to promulgate regulations in accordance 
with the new statute and allows for a one-year transition period in 
which trade members can follow either the old drawback statute and 
corresponding regulations as written prior to TFTEA or the amended 
statute through February 23, 2019. This rule will implement new 
drawback regulations consistent with TFTEA and the protection of U.S. 
Government revenue, and thereby modernize the current drawback process.
    2. A summary of the significant issues raised by the public 
comments in response to the IRFA, a summary of the assessment of the 
agency of such issues, and a statement of any changes made in the 
proposed rule as a result of such comments.
    CBP received some comments specifically addressing the Modernized 
Drawback rule's potential impacts on small entities. One commenter 
claimed that the rule's costs to small entities are significantly 
understated in the Regulatory Flexibility Act (RFA) analysis in the 
NPRM. The commenter asserted that CBP's analysis underestimates the 
costs of ACE drawback system modifications, add-on drawback software, 
and broker fees to trade members due to recent changes in ACE 
programming and new regulatory requirements. Unfortunately, the 
commenter did not include any data to support the claims or propose 
alternative costs that CBP could incorporate into the analysis. CBP 
based its estimates on the best data available. Therefore, CBP has no 
basis for changing its estimates. To the extent that small entities 
incur greater (fewer) costs from this rule, the costs of this rule will 
be higher (lower) than estimated.
    The same commenter said that CBP understated the costs of added 
recordkeeping, arguing that the rule's costs to trade members are 
higher than estimated due to the variety of documentation that CBP 
could require for drawback verification under the rule and increased 
retention periods. CBP disagrees with this comment. TFTEA, and the 
corresponding drawback regulations proposed in 19 CFR part 190, largely 
reduce the recordkeeping burden for members by allowing them to verify 
claims using records maintained in the normal course of business. For 
example, TFTEA and the proposed drawback regulations in 19 CFR part 190 
will completely eliminate CBP Form 7552: Delivery Certificate for 
Purposes of Drawback, allowing trade members to instead keep evidence 
of transfers in their records kept in the normal course of business, 
and provide such evidence to CBP upon request. This transition will 
result in savings to trade members rather than costs. In regards to 
TFTEA and the rule's longer record retention period, CBP captured the 
cost of extended recordkeeping in the Major Amendment 9 section of the 
NPRM's RIA and in this document. CBP developed the extended 
recordkeeping cost estimates in consultation with various members of 
the trade community and subject matter experts. Unfortunately, the 
commenter did not include any data to support the claim that CBP 
understated recordkeeping costs, and the commenter did not propose 
alternative costs that CBP could incorporate into the analysis. For 
this reason, CBP chose to maintain its recordkeeping estimates.
    Furthermore, the commenter questioned CBP's RFA conclusion that the 
agency cannot determine whether the (negative) economic impact of the 
rule on small entities may be considered significant under the RFA. The 
commenter claimed that CBP did not adequately evaluate the new 
electronic filing costs and data element submissions of TFTEA and the 
expanded recordkeeping and data retention requirements of the statute. 
The commenter also suggested that CBP should acknowledge the 
``significant cost impact to small business of the NPRM and work to 
simplify the operation requirements of Part 190 to minimize the impact 
of TFTEA on small business.'' CBP disagrees with these statements. CBP 
developed a comprehensive analysis examining the impacts of TFTEA and 
the proposed Modernized Drawback rule. The analysis evaluates new 
filing costs and data element submissions under the Major Amendment 1 
section of the RIA as well as the Major Amendment 7 section. The RIA 
also includes an assessment of the costs of TFTEA's expanded 
recordkeeping and data retention requirements in the Major Amendment 9 
section of the RIA. The RFA analysis accounts for these costs, 
analyzing their impacts on small entities. This document continues to 
include a full assessment of TFTEA's drawback amendments and the 
Modernized Drawback rule's corresponding changes. CBP worked in 
consultation with various members of the trade community representing a 
wide range of industries involved in drawback and subject matter 
experts to inform many of the estimates of the RIA and RFA analysis, as 
cited throughout the document. Moreover, CBP has worked to craft a 
regulation to minimize the impact on small entities while still meeting 
TFTEA and other legal requirements and protecting U.S. Government 
revenue. For instance, CBP has eased the proposed requirement in 19 CFR 
190.26(d) for drawback claimants to maintain manufacturing or 
production records for articles purchased from a manufacturer or 
producer and claimed for drawback. CBP made this change based on a 
public comment explaining that the requirement could harm businesses. 
The commenter questioning the RFA analysis did not include any data or 
justification to support the claims that the RIA and RFA did not 
adequately evaluate the impact of the rule on trade

[[Page 64994]]

members, including those considered small under the RFA. The commenter 
also did not provide evidence to support its statement that CBP should 
certify that this rule has a significant economic impact on a 
substantial number of small entities. To further assess the impacts of 
the rule on small entities, CBP has expanded its RFA sample from 100 
entities to 375 entities, leading to a 95 percent confidence level with 
a 5 percent margin of error. For these reasons, CBP continues to 
conclude that the agency cannot determine whether the economic impact 
of the rule on small entities may be considered significant under the 
RFA.
    3. A description and an estimate of the number of small entities to 
which the rule will apply or an explanation of why no such estimate is 
available.
    As discussed in the screening analysis above, the Modernized 
Drawback rule will fundamentally change the drawback process and 
consequently affect all trade members eligible for drawback (i.e., 
drawback claimants). These trade members can include importers, 
exporters, manufacturers, producers, and intermediate parties 
representing a diverse array of industries. CBP estimates that 71 
percent of drawback claimants affected by this rule over the 2018 to 
2027 period of analysis, or 7,042 claimants, will be small entities.
    4. A description of the projected reporting, recordkeeping, and 
other compliance requirements of the rule, including an estimate of the 
classes of small entities that will be subject to the requirement and 
the types of professional skills necessary for preparation of the 
report or record.
    This rule will implement several new reporting, recordkeeping, and 
other compliance requirements for all drawback claimants, including 
those considered small. Among these changes, CBP will require drawback 
claimants filing under the new drawback regulations outlined in 19 CFR 
part 190 to:
     Submit new data elements with their claims, including Form 
7551: Drawback Entry summary data at the line, rather than header, 
level; claimed merchandise data at the 10-digit HTSUS subheading level; 
line designations; and consistent units of measurement for claimed 
import, export, or destruction data (matching the HTSUS code to the 
designated imported merchandise for substitution drawback claims).
     File their complete drawback claims electronically using 
ACE and DIS, thus not allowing for manual, paper-based claims.\28\
---------------------------------------------------------------------------

    \28\ Some drawback documentation, such as privilege and ruling 
applications, will remain paper-based.
---------------------------------------------------------------------------

     Submit additional data, including exported, destroyed, or 
substituted merchandise values for substitution claims filed under 19 
U.S.C. 1313(b) and 19 U.S.C. 1313(j)(2); accounting methodologies used 
for direct identification drawback claims (if applicable); unique 
identifiers linking imports to exports or destructions; per unit 
averages for substitution claims; and ``lesser of'' rule calculations 
for substitution claims.
    Along with these reporting requirements, CBP will change the 
recordkeeping standards for all drawback claimants filing under the new 
regulations in 19 CFR part 190. Consistent with TFTEA, this rule will 
change the drawback recordkeeping timeframe for all drawback claimants 
from three years from CBP's date of payment of the drawback claim to 
three years from the liquidation of the claim. CBP estimates that 
drawback claimants will generally have to retain records for one extra 
year with this rule's new recordkeeping requirement rather than under 
the current three-year recordkeeping period, though some trade members 
may need to retain records for up to four more years under this 
rule.\29\
---------------------------------------------------------------------------

    \29\ Based on input from CBP and trade community representative. 
Sources: Email correspondence with CBP's Office of Field Operations 
on April 5, 2017 and email correspondence with trade community 
representative on February 22, 2017.
---------------------------------------------------------------------------

    This rule will also encourage parties that split entry summary line 
items when transferring merchandise (transferors) to provide 
notification to the recipients (transferees) as to whether that 
merchandise is eligible for substitution or direct identification 
drawback. Notification of this designation from the transferor to the 
transferee should be documented in records, which may include records 
kept in the normal course of business.
    Furthermore, this rule will require all drawback claimants filing 
manufacturing drawback claims under the new regulations in 19 CFR part 
190 (which will account for about 20 percent of all claims filed with 
this rule) to maintain applicable bills of materials and/or formula 
records \30\ identifying the imported and/or substituted merchandise 
and the exported or destroyed article(s) in their normal course of 
business. When filing a manufacturing drawback claim, trade members 
must also certify that they have these bills of materials and/or 
formula records by checking a box on their electronic drawback claim, 
and provide the documentation to CBP upon request.
---------------------------------------------------------------------------

    \30\ See 19 CFR 190.2.
---------------------------------------------------------------------------

    CBP will also now require trade members to submit CBP Form 7553: 
Notice(s) of Intent to Export, Destroy, or Return Merchandise for 
Purposes of Drawback to CBP five working days prior to the date of 
intended exportation with this rule. The current regulations in 19 CFR 
part 191 require trade members to file CBP Form 7553 only two working 
days prior to the date of intended exportation. This change will give 
trade members less time to submit CBP Form 7553, but it will give CBP 
more time to review the form.
    Under the current and proposed drawback regulations, a trade member 
filing a substitution unused merchandise or manufacturing drawback 
claim that is not the exporter or destroyer must submit an assignment 
letter certifying the drawback rights to CBP at the time of, or prior 
to the filing of the claim(s) covered by the certification. This rule 
will require trade members to file the certification only at the time 
of filing the claim(s) covered by the certification. Eliminating the 
ability to file the certifications prior to submitting a claim will 
have little to no effect as most trade members already submit the 
certifications at the time of filing their claims, and trade members 
must currently possess these certifications at the time of filing a 
drawback claim as a matter of law.\31\
---------------------------------------------------------------------------

    \31\ Email correspondence with CBP's Office of Trade on 
September 27, 2018.
---------------------------------------------------------------------------

    Drawback claimants must follow these new reporting, recordkeeping, 
and compliance requirements of the rule. Other than obtaining the 
software or broker necessary to file drawback claims electronically in 
ACE, CBP does not believe that drawback claimants need any additional 
professional skills or resources to satisfy the rule's reporting, 
recordkeeping, and compliance requirements. CBP believes that the 
benefits of filing a drawback claim will outweigh the reporting, 
recordkeeping, and other compliance requirements of this rule, and thus 
not discourage drawback claimants from filing claims.
    5. A description of the steps the agency has taken to minimize the 
significant adverse economic impact on small entities consistent with 
the stated objectives of applicable statutes, including a statement of 
the factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each of the other significant

[[Page 64995]]

alternatives to the rule considered by the agency was rejected.
    Section 906 of the Trade Facilitation and Trade Enforcement Act of 
2015 (Pub. L. 114-125) seeks to modernize the current drawback 
procedures through amendments to 19 U.S.C. 1313, the statute guiding 
CBP drawback regulations. Section 906(q) of TFTEA requires CBP to 
promulgate regulations implementing these changes and allows for a one-
year transition period (February 24, 2018-February 23, 2019) in which 
trade members can follow either the old drawback statute and 
corresponding regulations as written prior to TFTEA or the amended 
statute. This rule will implement new drawback regulations consistent 
with TFTEA and the protection of U.S. Government revenue.
    Due to the nature of TFTEA's mandate, CBP could not establish 
different requirements for small entities while still following the 
statute. Nonetheless, CBP conducted outreach with various members of 
the trade community representing a wide range of industries involved in 
drawback. CBP also considered two other alternatives to the rule that 
would have different impacts on drawback claimants, including those 
considered small. A detailed discussion of these alternatives is in the 
Regulatory Impact Analysis of the Modernized Drawback Final Rule, which 
can be found in the public docket for this rulemaking at 
www.regulations.gov. As previously mentioned, CBP further modified the 
new drawback regulations in 19 CFR part 190 in response to public 
comments to minimize certain impacts on trade members, including those 
considered small.
a. Alternative 1
    The first regulatory alternative CBP considered will implement all 
of the rule's changes in 2018 rather than in 2019, offering no 
transition year. With this alternative, paper-based filers must begin 
filing their drawback claims electronically in 2018, but they will 
receive the benefits of drawback modernization in 2018 and beyond. With 
this alternative, paper-based filers, including those considered small, 
will begin to incur electronic filing costs in 2018 rather than 2019 
like under the rule. This alternative will also lead to relatively more 
full desk reviews for claimants, including those considered small, than 
under the rule. Drawback claimants, including those considered small, 
will sustain an annualized cost of $8.1 million from this alternative 
under the primary estimation method, which is slightly higher than the 
rule's $7.6 million annualized cost to drawback claimants (using a 7 
percent discount rate; see Regulatory Impact Analysis of the Modernized 
Drawback Final Rule). On a per-claimant basis, Alternative 1 will cost 
$810 annually over the period of analysis compared to the rule's nearly 
$770 cost per unique claimant.\32\ Alternative 1 will also result in an 
annualized net transfer measuring between $39.1 million and $43.3 
million from the U.S. Government to drawback claimants, which will 
average from $3,900 to $4,400 per unique claimant based on the 9,919 
unique drawback claimants projected under this alternative (using a 7 
percent discount rate; see Regulatory Impact Analysis of the Modernized 
Drawback Final Rule). Like the rule, Alternative 1 will introduce 
benefits to drawback claimants that the Regulatory Impact Analysis of 
the Modernized Drawback Final Rule discusses in further detail. These 
benefits to claimants, including those considered small, will be 
greater than the rule's cost savings due to the relatively higher 
number of CBP Form 7552s (and corresponding time, printing, and mailing 
costs) avoided. CBP did not choose Alternative 1 because TFTEA 
statutorily allows a one-year transition period (February 24, 2018-
February 23, 2019) in which drawback claimants can follow either the 
old drawback statute and corresponding regulations in 19 CFR part 191 
as written prior to TFTEA or the amended statute.\33\
---------------------------------------------------------------------------

    \32\ $8,100,000/9,919 unique drawback claimants = $810 
(rounded); $7,600,000/9,919 unique drawback claimants = $770 
(rounded).
    \33\ See Section 906 of the Trade Facilitation and Trade 
Enforcement Act of 2015 (Pub. L. 114-125).
---------------------------------------------------------------------------

b. Alternative 2
    The second regulatory alternative CBP considered will implement all 
of the rule's changes, except it will not change the current regulatory 
standard for substituting merchandise for drawback (i.e., no 
implementation of Major Amendment 2 of the Regulatory Impact Analysis 
of the Modernized Drawback Final Rule). Under this alternative, CBP 
estimates that the number of substitution drawback claim submissions 
and the number of drawback claimants will be lower than under the rule 
over the period of analysis because this alternative will offer 
relatively fewer new opportunities to claim drawback (see Regulatory 
Impact Analysis of the Modernized Drawback Final Rule). In fact, 
drawback claims will measure about 548,000 from 2018 to 2027 under 
Alternative 2's primary estimation method and the number of unique 
drawback claimants will equal approximately 9,017. Because of its 
narrower scope, Alternative 2 will introduce slightly lower overall 
costs to drawback claimants, including those considered small, than the 
rule's cost. In particular, claimants will incur relatively fewer full 
desk reviews and associated costs with this alternative. Drawback 
claimants, including those considered small, will incur an annualized 
cost of $7.6 million from this alternative under the primary estimation 
method, compared to the rule's annualized cost of $7.6 million (using a 
7 percent discount rate; see Regulatory Impact Analysis of the 
Modernized Drawback Final Rule). On a per-claimant basis, Alternative 2 
will cost nearly $840 annually over the period of analysis, while the 
rule will introduce an average cost of almost $770 cost per unique 
claimant.\34\ Alternative 2 will also result in annualized net 
transfers between $62.9 million and $67.1 million from drawback 
claimants to the U.S. Government, which will average $7,000 to $7,400 
per unique claimant based on the 9,017 unique drawback claimants 
projected under this alternative (using a 7 percent discount rate; see 
Regulatory Impact Analysis of the Modernized Drawback Final Rule). Like 
the rule, Alternative 2 will introduce benefits to drawback claimants 
that the Regulatory Impact Analysis of the Modernized Drawback Final 
Rule discusses in further detail. These benefits will be slightly lower 
than the rule's benefits because drawback claimants will continue to 
submit ruling and predetermination requests for substitution drawback 
claims with this alternative. CBP did not choose this Alternative 2 
because TFTEA statutorily requires CBP to liberalize the standard for 
substituting merchandise for drawback by generally basing it on goods 
classifiable under the same 8-digit HTSUS (or Schedule B) 
subheading.\35\
---------------------------------------------------------------------------

    \34\ $7,600,000/9,017 unique drawback claimants = $840 
(rounded); $7,600,000/9,919 unique drawback claimants = $770 
(rounded).
    \35\ See Section 906 of the Trade Facilitation and Trade 
Enforcement Act of 2015 (Pub. L. 114-125).
---------------------------------------------------------------------------

Conclusion
    In conclusion, because the Modernized Drawback rule will presumably 
affect all drawback claimants, it will likely affect a substantial 
number of small entities in each industry submitting such claims. CBP 
cannot determine whether the rule's economic impact on these entities 
may be considered significant under the RFA due to data limitations. 
Therefore,

[[Page 64996]]

CBP cannot certify that this final rule will not have a significant 
economic impact on a substantial number of small entities. As a result, 
CBP has conducted a FRFA of the final rule.

E. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507), an agency may not conduct, and a person is not required to 
respond to, a collection of information unless the collection of 
information displays a valid control number assigned by OMB. The 
collections of information for this rulemaking are included in an 
existing collection for CBP Forms 7551, 7552, and 7553 (OMB control 
number 1651-0075).
    This rule will, among other things, eliminate the submission 
requirement for CBP Form 7552 for drawback claimants who file 
electronically under the new drawback regulations in 19 CFR part 190. 
Drawback claimants filing by paper under the current drawback 
regulations in 19 CFR part 191 will still be required to submit the 
paper CBP Form 7552 until this rule's requirements become mandatory in 
2019. Based on this change, CBP estimates a decrease in CBP Form 7552 
responses and burden hours. Additionally, CBP Form 7551 has a decrease 
in burden hours based on changes in the agency estimate. CBP will 
submit to OMB for review the following adjustments to the previously 
approved Information Collection under OMB control number 1651-0075 to 
account for this rule's changes. Furthermore, CBP expects to submit a 
request to eliminate CBP Form 7552 to OMB in 2019 prior to this rule's 
mandatory requirement date.

CBP Form 7551, Drawback Entry (reduction in burden hours due to change 
in agency estimate)
    Estimated Number of Respondents: 2,516
    Estimated Number of Responses per Respondent: 22.2
    Estimated Number of Total Annual Responses: 55,772
    Estimated Time per Response: 35 minutes
    Estimated Total Annual Burden Hours: 32,532
CBP Form 7552, Delivery Certificate for Drawback (reduction in burden 
hours due to regulation)
    Estimated Number of Respondents: 400
    Estimated Number of Responses per Respondent: 20
    Estimated Number of Total Annual Responses: 8,000
    Estimated Time per Response: 33 minutes
    Estimated Total Annual Burden Hours: 4,400
CBP Form 7553, Notice of Intent to Export, Destroy or Return 
Merchandise for Purposes of Drawback (no change)
    Estimated Number of Respondents: 150
    Estimated Number of Responses per Respondent: 20
    Estimated Number of Total Annual Responses: 3,000
    Estimated Time per Response: 33 minutes
    Estimated Total Annual Burden Hours: 1,650

VI. Signing Authority

    This regulation is being issued in accordance with 19 CFR 0.1(a)(1) 
pertaining to the authority of the Secretary of the Treasury (or that 
of his or her delegate) to approve regulations pertaining to certain 
customs revenue functions.

List of Subjects

19 CFR Part 181

    Administrative practice and procedure, Canada, Customs duties and 
inspection, Exports, Mexico, Reporting and recordkeeping requirements, 
Trade agreements.

19 CFR Part 190

    Alcohol and alcoholic beverages, Claims, Customs duties and 
inspection, Exports, Foreign trade zones, Guantanamo Bay Naval Station, 
Cuba, Packaging and containers, Reporting and recordkeeping 
requirements, Trade agreements.

19 CFR Part 191

    Alcohol and alcoholic beverages, Claims, Customs duties and 
inspection, Exports, Foreign trade zones, Guantanamo Bay Naval Station, 
Cuba, Packaging and containers, Reporting and recordkeeping 
requirements, Trade agreements.

Regulatory Amendments

    For the reasons given above, 19 CFR chapter I is amended as set 
forth below:

PART 181--NORTH AMERICAN FREE TRADE AGREEMENT

0
1. The general authority citation for part 181 continues to read as 
follows:

    Authority:  19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1624, 3314;
* * * * *


Sec.  Sec.  181.45, 181.46, 181.47, 181.49, and 181.50   [Amended]

0
 2. In the table below, for each section indicated in the left column, 
remove the words indicated in the middle column, and add, in their 
place, the words indicated in the right column.

------------------------------------------------------------------------
           Section                   Remove                  Add
------------------------------------------------------------------------
181.45(b)(2)(i)(B)..........  Sec.   191.14 of      Sec.   190.14 or
                               this chapter, as      Sec.   191.14 of
                               provided therein.     this chapter, as
                                                     appropriate.
181.45(c)...................  Such a good must be   Such a good must be
                               returned to Customs   exported or
                               custody for           destroyed within
                               exportation under     the statutory 5-
                               Customs supervision   year time period
                               within three years    and in compliance
                               after the release     with the
                               from Customs          requirements set
                               custody.              forth in subpart D
                                                     of part 190 of this
                                                     chapter or within
                                                     the 3-year time
                                                     period and in
                                                     compliance with the
                                                     requirements set
                                                     forth in subpart D
                                                     of part 191 of this
                                                     chapter, as
                                                     applicable.
181.46(b)...................  (see Sec.             (see Sec.   190.35
                               191.141(b)(3) (ii)    or Sec.   191.35 of
                               and (iii) of this     this chapter, as
                               chapter).             appropriate).
181.47(a)...................  part 191 of this      part 190 or 191 of
                               chapter;.             this chapter, as
                                                     appropriate.
181.49......................  (see Sec.   191.15    (see Sec.   190.15
                               (see also Sec.        (see also Sec.
                               Sec.   191.26(f),     Sec.   190.26(f),
                               191.38, 191.175(c))   190.38, 190.175(c))
                               of this chapter).     or Sec.   191.15
                                                     (see also Sec.
                                                     Sec.   191.26(f),
                                                     191.38, 191.175(c))
                                                     of this chapter, as
                                                     appropriate).
181.50(a)...................  subpart G of part     subpart H of part
                               191 of this chapter.  190 or subpart H of
                                                     part 191 of this
                                                     chapter, as
                                                     appropriate.
181.50(c)...................  Sec.   191.92 of      Sec.   190.92 or
                               this chapter.         Sec.   191.92 of
                                                     this chapter, as
                                                     appropriate.
------------------------------------------------------------------------


[[Page 64997]]


0
3. Add part 190 to read as follows:

PART 190--MODERNIZED DRAWBACK

Sec.
190.0 Scope.
190.0a Claims filed under NAFTA.
Subpart A--General Provisions
190.1 Authority of the Commissioner of CBP.
190.2 Definitions.
190.3 Duties, taxes, and fees subject or not subject to drawback.
190.4 Merchandise in which a U.S. Government interest exists.
190.5 Guantanamo Bay, insular possessions, trust territories.
190.6 Authority to sign or electronically certify drawback 
documents.
190.7 General manufacturing drawback ruling.
190.8 Specific manufacturing drawback ruling.
190.9 Agency.
190.10 Transfer of merchandise.
190.11 Valuation of merchandise.
190.12 Claim filed under incorrect provision.
190.13 Packaging materials.
190.14 Identification of merchandise or articles by accounting 
method.
190.15 Recordkeeping.
Subpart B--Manufacturing Drawback
190.21 Direct identification manufacturing drawback.
190.22 Substitution drawback.
190.23 Methods and requirements for claiming drawback.
190.24 Transfer of merchandise.
190.25 Destruction under CBP supervision.
190.26 Recordkeeping.
190.27 Time limitations.
190.28 Person entitled to claim manufacturing drawback.
190.29 Certification of bill of materials or formula.
Subpart C--Unused Merchandise Drawback
190.31 Direct identification unused merchandise drawback.
190.32 Substitution unused merchandise drawback.
190.33 Person entitled to claim unused merchandise drawback.
190.34 Transfer of merchandise.
190.35 Notice of intent to export or destroy; examination of 
merchandise.
190.36 Failure to file Notice of Intent to Export, Destroy, or 
Return Merchandise for Purposes of Drawback.
190.37 Destruction under CBP supervision.
190.38 Recordkeeping.
Subpart D--Rejected Merchandise
190.41 Rejected merchandise drawback.
190.42 Procedures and supporting documentation.
190.43 Unused merchandise claim.
190.44 [Reserved]
190.45 Returned retail merchandise.
Subpart E--Completion of Drawback Claims
190.51 Completion of drawback claims.
190.52 Rejecting, perfecting or amending claims.
190.53 Restructuring of claims.
Subpart F--Verification of Claims
190.61 Verification of drawback claims.
190.62 Penalties.
190.63 Liability for drawback claims.
Subpart G--Exportation and Destruction
190.71 Drawback on articles destroyed under CBP supervision.
190.72 Proof of exportation.
190.73 Electronic proof of exportation.
190.74 Exportation by mail.
190.75 Exportation by the Government.
190.76 [Reserved]
Subpart H--Liquidation and Protest of Drawback Entries
190.81 Liquidation.
190.82 Person entitled to claim drawback.
190.83 Person entitled to receive payment.
190.84 Protests.
Subpart I--Waiver of Prior Notice of Intent to Export or Destroy; 
Accelerated Payment of Drawback
190.91 Waiver of prior notice of intent to export or destroy.
190.92 Accelerated payment.
190.93 Combined applications.
Subpart J--Internal Revenue Tax on Flavoring Extracts and Medicinal or 
Toilet Preparations (Including Perfumery) Manufactured From Domestic 
Tax-Paid Alcohol
190.101 Drawback allowance.
190.102 Procedure.
190.103 Additional requirements.
190.104 Alcohol and Tobacco Tax and Trade Bureau (TTB) certificates.
190.105 Liquidation.
190.106 Amount of drawback.
Subpart K--Supplies for Certain Vessels and Aircraft
190.111 Drawback allowance.
190.112 Procedure.
Subpart L--Meats Cured With Imported Salt
190.121 Drawback allowance.
190.122 Procedure.
190.123 Refund of duties.
Subpart M--Materials for Construction and Equipment of Vessels and 
Aircraft Built for Foreign Account and Ownership
190.131 Drawback allowance.
190.132 Procedure.
190.133 Explanation of terms.
Subpart N--Foreign-Built Jet Aircraft Engines Processed in the United 
States
190.141 Drawback allowance.
190.142 Procedure.
190.143 Drawback entry.
190.144 Refund of duties.
Subpart O--Merchandise Exported From Continuous CBP Custody
190.151 Drawback allowance.
190.152 Merchandise released from CBP custody.
190.153 Continuous CBP custody.
190.154 Filing the entry.
190.155 Merchandise withdrawn from warehouse for exportation.
190.156 Bill of lading.
190.157 [Reserved]
190.158 Procedures.
190.159 Amount of drawback.
Subpart P--Distilled Spirits, Wines, or Beer Which Are Unmerchantable 
or Do Not Conform to Sample or Specifications
190.161 Refund of taxes.
190.162 Procedure.
190.163 Documentation.
190.164 Return to CBP custody.
190.165 No exportation by mail.
190.166 Destruction of merchandise.
190.167 Liquidation.
190.168 [Reserved]
Subpart Q--Substitution of Finished Petroleum Derivatives
190.171 General; drawback allowance.
190.172 Definitions.
190.173 Imported duty-paid derivatives (no manufacture).
190.174 Derivatives manufactured under 19 U.S.C. 1313(a) or (b).
190.175 Drawback claimant; maintenance of records.
190.176 Procedures for claims filed under 19 U.S.C. 1313(p).
Subpart R--Merchandise Transferred to a Foreign Trade Zone From Customs 
Territory
190.181 Drawback allowance.
190.182 Zone-restricted merchandise.
190.183 Articles manufactured or produced in the United States.
190.184 Merchandise transferred from continuous CBP custody.
190.185 Unused merchandise drawback and merchandise not conforming 
to sample or specification, shipped without consent of the 
consignee, found to be defective as of the time of importation, or 
returned after retail sale.
190.186 Person entitled to claim drawback.
Subpart S--Drawback Compliance Program
190.191 Purpose.
190.192 Certification for compliance program.
190.193 Application procedure for compliance program.
190.194 Action on application to participate in compliance program.
190.195 Combined application for certification in drawback 
compliance program and waiver of prior notice and/or approval of 
accelerated payment of drawback.
Appendix A to Part 190--General Manufacturing Drawback Rulings
Appendix B to Part 190--Sample Formats for Applications for Specific 
Manufacturing Drawback Rulings

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 3(i), 
Harmonized Tariff Schedule of the United States), 1313, 1624;
    Sec. Sec.  190.2, 190.10, 190.15, 190.23, 190.38, 190.51 issued 
under 19 U.S.C. 1508;
    Sec.  190.84 also issued under 19 U.S.C. 1514;
    Sec. Sec.  190.111, 190.112 also issued under 19 U.S.C. 1309;
    Sec. Sec.  190.151(a)(1), 190.153, 190.157, 190.159 also issued 
under 19 U.S.C. 1557;
    Sec. Sec.  190.182-190.186 also issued under 19 U.S.C. 81c;

[[Page 64998]]

    Sec. Sec.  190.191-190.195 also issued under 19 U.S.C. 1593a.


Sec.  190.0  Scope.

    This part sets forth general provisions applicable to all drawback 
claims and specialized provisions applicable to specific types of 
drawback claims filed under 19 U.S.C. 1313, as amended. For drawback 
claims and specialized provisions applicable to specific types of 
drawback claims filed pursuant to 19 U.S.C. 1313, as it was in effect 
on or before February 24, 2016, please see part 191 of this chapter. 
Additional drawback provisions relating to the North American Free 
Trade Agreement (NAFTA) are contained in subpart E of part 181 of this 
chapter.


Sec.  190.0a   Claims filed under NAFTA.

    Claims for drawback filed under the provisions of part 181 of this 
chapter must be filed separately from claims filed under the provisions 
of this part.

Subpart A--General Provisions


Sec.  190.1   Authority of the Commissioner of CBP.

    Pursuant to DHS Delegation number 7010.3, the Commissioner of CBP 
has the authority to prescribe, and pursuant to Treasury Order No. 100-
16 (set forth in the appendix to part 0 of this chapter), the Secretary 
of the Treasury has the sole authority to approve, rules and 
regulations regarding drawback.


Sec.  190.2   Definitions.

    For the purposes of this part:
    Abstract. Abstract means the summary of the actual production 
records of the manufacturer.
    Act. Act, unless indicated otherwise, means the Tariff Act of 1930, 
as amended.
    Bill of materials. Bill of materials refers to a record that 
identifies each component incorporated into a manufactured or produced 
article (and includes components used in the manufacturing or 
production process). This may include a record kept in the normal 
course of business.
    Designated merchandise. Designated merchandise means either 
eligible imported duty-paid merchandise or drawback products selected 
by the drawback claimant as the basis for a drawback claim under 19 
U.S.C. 1313(b) or (j)(2), as applicable, or qualified articles selected 
by the claimant as the basis for drawback under 19 U.S.C. 1313(p).
    Destruction. Destruction means the destruction of articles or 
merchandise to the extent that they have no commercial value. For 
purposes of 19 U.S.C. 1313(a), (b), (c), and (j), destruction also 
includes a process by which materials are recovered from imported 
merchandise or from an article manufactured from imported merchandise, 
as provided for in 19 U.S.C. 1313(x).
    Direct identification drawback. Direct identification drawback 
includes drawback authorized pursuant to section 313(j)(1) of the Act, 
as amended (19 U.S.C. 1313(j)(1)), on imported merchandise exported, or 
destroyed under CBP supervision, without having been used in the United 
States (see also sections 313(c), (e), (f), (g), (h), and (q)). Direct 
identification is involved in manufacturing drawback pursuant to 
section 313(a) of the Act, as amended (19 U.S.C. 1313(a)), on imported 
merchandise used to manufacture or produce an article which is either 
exported or destroyed. Merchandise or articles may be identified for 
purposes of direct identification drawback by use of the accounting 
methods provided for in Sec.  190.14.
    Document. In this part, document has its normal meaning and 
includes information input into and contained within an electronic data 
field, and electronic versions of hard-copy documents.
    Drawback. Drawback, as authorized for payment by CBP, means the 
refund, in whole or in part, of the duties, taxes, and/or fees paid on 
imported merchandise, which were imposed under Federal law upon entry 
or importation, and the refund of internal revenue taxes paid on 
domestic alcohol as prescribed in 19 U.S.C. 1313(d). More broadly, 
drawback also includes the refund or remission of other excise taxes 
pursuant to other provisions of law.
    Drawback claim. Drawback claim, as authorized for payment by CBP, 
means the drawback entry and related documents required by regulation 
which together constitute the request for drawback payment. All 
drawback claims must be filed electronically through a CBP-authorized 
Electronic Data Interchange system. More broadly, drawback claim also 
includes claims for refund or remission of other excise taxes pursuant 
to other provisions of law.
    Drawback entry. Drawback entry means the document containing a 
description of, and other required information concerning, the exported 
or destroyed article upon which a drawback claim is based and the 
designated imported merchandise for which drawback of the duties, 
taxes, and fees paid upon importation is claimed. Drawback entries must 
be filed electronically.
    Drawback office. Drawback office means any of the locations where 
drawback claims and related applications or requests may be submitted. 
CBP may, in its discretion, transfer or share work between the 
different drawback offices even though the submission may have been to 
a particular office.
    Drawback product. A drawback product means a finished or partially 
finished product manufactured in the United States under the procedures 
in this part for manufacturing drawback. A drawback product may be 
exported, or destroyed under CBP supervision with a claim for drawback, 
or it may be used in the further manufacture of other drawback products 
by manufacturers or producers operating under the procedures in this 
part for manufacturing drawback, in which case drawback may be claimed 
upon exportation or destruction of the ultimate product. Products 
manufactured or produced from substituted merchandise (imported or 
domestic) also become ``drawback products'' when applicable 
substitution requirements of the Act are met. For purposes of section 
313(b) of the Act, as amended (19 U.S.C. 1313(b)), drawback products 
may be designated as the basis for drawback or deemed to be substituted 
merchandise (see 19 U.S.C. 1313(b)). For a drawback product to be 
designated as the basis for a drawback claim, any transfer of the 
product must be properly documented (see Sec.  190.24).
    Exportation. Exportation means the severance of goods from the mass 
of goods belonging to this country, with the intention of uniting them 
with the mass of goods belonging to some foreign country. An 
exportation may be deemed to have occurred when goods subject to 
drawback are admitted into a foreign trade zone in zone-restricted 
status, or are laden upon qualifying aircraft or vessels as aircraft or 
vessel supplies in accordance with section 309(b) of the Act, as 
amended (19 U.S.C. 1309(b)) (see Sec. Sec.  10.59 through 10.65 of this 
chapter).
    Exporter. Exporter means that person who, as the principal party in 
interest in the export transaction, has the power and responsibility 
for determining and controlling the sending of the items out of the 
United States. In the case of ``deemed exportations'' (see definition 
of exportation in this section), exporter means that person who, as the 
principal party in interest in the transaction deemed to be an 
exportation, has the power and responsibility for determining and 
controlling the transaction. In the case of aircraft or vessel supplies 
under 19 U.S.C. 1309(b), exporter means the party who has the power and 
responsibility for lading

[[Page 64999]]

supplies on the qualifying aircraft or vessel.
    Filing. Filing means the electronic delivery to CBP of any document 
or documentation, as provided for in this part.
    Formula. Formula refers to records that identify the quantity of 
each element, material, chemical, mixture, or other substance 
incorporated into a manufactured article (and includes those used in 
the manufacturing or production process). This includes records kept in 
the normal course of business.
    Fungible merchandise or articles. Fungible merchandise or articles 
means merchandise or articles which for commercial purposes are 
identical and interchangeable in all situations.
    General manufacturing drawback ruling. A general manufacturing 
drawback ruling means a description of a manufacturing or production 
operation for drawback and the regulatory requirements and 
interpretations applicable to that operation (see Sec.  190.7).
    Intermediate party. Intermediate party means any party in the chain 
of commerce leading to the exporter (or destroyer) from the importer 
and who has acquired, purchased, or possessed the imported or 
substituted merchandise (or any intermediate or finished article, in 
the case of manufacturing drawback) as allowed under the applicable 
regulations for the type of drawback claimed, which authorize the 
transfer of the imported or other drawback eligible merchandise by that 
intermediate party to another party.
    Manufacture or production. Manufacture or production means a 
process, including, but not limited to, an assembly, by which 
merchandise is either made into a new and different article having a 
distinctive name, character or use; or is made fit for a particular use 
even though it is not made into a new and different article.
    Multiple products. Multiple products mean two or more products 
produced concurrently by a manufacture or production operation or 
operations.
    Per unit averaging. Per unit averaging means the equal 
apportionment of the amount of duties, taxes, and fees eligible for 
drawback for all units covered by a single line item on an entry 
summary to each unit of merchandise. This method of refund calculation 
is required for certain substitution drawback claims (see Sec.  
190.51(b)(ii)), which may also be subject to additional limitations 
under the ``lesser of'' rules, if applicable (see Sec.  
190.22(a)(1)(ii) and 190.32(b)).
    Possession. Possession, for purposes of substitution unused 
merchandise drawback (19 U.S.C. 1313(j)(2)), means physical or 
operational control of the merchandise, including ownership while in 
bailment, in leased facilities, in transit to, or in any other manner 
under the operational control of, the party claiming drawback.
    Records. Records include, but are not limited to, written or 
electronic business records, statements, declarations, documents and 
electronically generated or machine readable data which pertain to a 
drawback claim or to the information contained in the records required 
by Chapter 4 of Title 19, United States Code, in connection with the 
filing of a drawback claim and which may include records normally kept 
in the ordinary course of business (see 19 U.S.C. 1508).
    Relative value. Relative value means, except for purposes of Sec.  
190.51(b), the value of a product divided by the total value of all 
products which are necessarily manufactured or produced concurrently in 
the same operation. Relative value is based on the market value, or 
other value approved by CBP, of each such product determined as of the 
time it is first separated in the manufacturing or production process. 
Market value is generally measured by the selling price, not including 
any packaging, transportation, or other identifiable costs, which 
accrue after the product itself is processed. Drawback must be 
apportioned to each such product based on its relative value at the 
time of separation.
    Schedule. A schedule means a document filed by a drawback claimant, 
under section 313(a) or (b), as amended (19 U.S.C. 1313(a) or (b)), 
showing the quantity of imported or substituted merchandise used in or 
appearing in each article exported or destroyed that justifies a claim 
for drawback.
    Schedule B. Schedule B means the Department of Commerce Schedule B, 
Statistical Classification of Domestic and Foreign Commodities Exported 
from the United States.
    Sought chemical element. A sought chemical element, under section 
313(b), means an element listed in the Periodic Table of Elements that 
is imported into the United States or a chemical compound (a distinct 
substance formed by a chemical union of two or more elements in 
definite proportion by weight) consisting of those elements, either 
separately in elemental form or contained in source material.
    Specific manufacturing drawback ruling. A specific manufacturing 
drawback ruling means a letter of approval (or its electronic 
equivalent) issued by CBP Headquarters in response to an application 
filed by a manufacturer or producer for a ruling on a specific 
manufacturing or production operation for drawback, as described in the 
format in Appendix B of this part. Specific manufacturing drawback 
rulings are subject to the provisions in part 177 of this chapter.
    Substituted merchandise or articles. Substituted merchandise or 
articles means merchandise or articles that may be substituted as 
follows:
    (1) For manufacturing drawback pursuant to section 1313(b), 
substituted merchandise must be classifiable under the same 8-digit 
HTSUS subheading number as the designated imported merchandise;
    (2) For rejected merchandise drawback pursuant to section 
1313(c)(2), substituted merchandise must be classifiable under the same 
8-digit HTSUS subheading number and have the same specific product 
identifier (such as part number, SKU, or product code) as the 
designated imported merchandise;
    (3) For unused merchandise drawback pursuant to section 1313(j)(2), 
substituted merchandise must be classifiable under the same 8-digit 
HTSUS subheading number as the designated imported merchandise except 
for wine which may also qualify pursuant to Sec.  190.32(d), but when 
the 8-digit HTSUS subheading number under which the imported 
merchandise is classified begins with the term ``other,'' then the 
other merchandise may be substituted for imported merchandise for 
drawback purposes if the other merchandise and such imported 
merchandise are classifiable under the same 10-digit HTSUS statistical 
reporting number and the article description for that 10-digit HTSUS 
statistical reporting number does not begin with the term ``other''; 
but when the first 8 digits of the 10-digit Schedule B number 
applicable to the exported merchandise are the same as the first 8 
digits of the HTSUS subheading number under which the imported 
merchandise is classified, the merchandise may be substituted (without 
regard to whether the Schedule B number corresponds to more than one 8-
digit HTSUS subheading number); and
    (4) For substitution drawback of finished petroleum derivatives 
pursuant to section 1313(p), a substituted article must be of the same 
kind and quality as the qualified article for which it is substituted, 
that is, the articles must be commercially interchangeable or described 
in the same 8-digit HTSUS subheading number (see Sec.  190.172(b)).
    Unused merchandise. Unused merchandise means, for purposes of 
unused merchandise drawback claims,

[[Page 65000]]

imported merchandise or other merchandise upon which either no 
operations have been performed or upon which any operation or 
combination of operations has been performed (including, but not 
limited to, testing, cleaning, repacking, inspecting, sorting, 
refurbishing, freezing, blending, repairing, reworking, cutting, 
slitting, adjusting, replacing components, relabeling, disassembling, 
and unpacking), but which does not amount to a manufacture or 
production for drawback purposes under 19 U.S.C. 1313(a) or (b).
    Verification. Verification means the examination of any and all 
records, maintained by the claimant, or any party involved in the 
drawback process, which are required by the appropriate CBP officer to 
render a meaningful recommendation concerning the drawback claimant's 
conformity to the law and regulations and the determination of 
supportability, correctness, and validity of the specific claim or 
groups of claims being verified.
    Wine. Wine, for purposes of substitution unused merchandise 
drawback under 19 U.S.C. 1313(j)(2) and pursuant to the alternative 
standard for substitution (see 19 CFR 190.32(d)), refers to table wine. 
Consistent with Alcohol and Tobacco Tax and Trade Bureau (TTB) 
regulations, table wine is a ``Class 1 grape wine'' that satisfies the 
requirements of 27 CFR 4.21(a)(1) and having an alcoholic content not 
in excess of 14 percent by volume pursuant to 27 CFR 4.21(a)(2)).


Sec.  190.3   Duties, taxes, and fees subject or not subject to 
drawback.

    (a) Drawback is allowable pursuant to 19 U.S.C. 1313 on duties, 
taxes, and fees paid on imported merchandise which were imposed under 
Federal law upon entry or importation, including:
    (1) Ordinary customs duties, including:
    (i) Duties paid on an entry, or withdrawal from warehouse, for 
consumption for which liquidation has become final;
    (ii) Estimated duties paid on an entry, or withdrawal from 
warehouse, for consumption, for which liquidation has not become final, 
subject to the conditions and requirements of Sec.  190.81(b); and
    (iii) Tenders of duties after liquidation of the entry, or 
withdrawal from warehouse, for consumption for which the duties are 
paid, subject to the conditions and requirements of Sec.  190.81(c), 
including:
    (A) Voluntary tenders (for purposes of this section, a ``voluntary 
tender'' is a payment of duties on imported merchandise in excess of 
duties included in the liquidation of the entry, or withdrawal from 
warehouse, for consumption, provided that the liquidation has become 
final and that the other conditions of this section and Sec.  190.81 
are met);
    (B) Tenders of duties in connection with notices of prior 
disclosure under 19 U.S.C. 1592(c)(4); and
    (C) Duties restored under 19 U.S.C. 1592(d).
    (2) Marking duties assessed under section 304(c), Tariff Act of 
1930, as amended (19 U.S.C. 1304(c));
    (3) Internal revenue taxes which attach upon importation;
    (4) Merchandise processing fees (see Sec.  24.23 of this chapter); 
and
    (5) Harbor maintenance taxes (see Sec.  24.24 of this chapter).
    (b) Drawback is not allowable on antidumping and countervailing 
duties which were imposed on any merchandise entered, or withdrawn from 
warehouse, for consumption (see 19 U.S.C. 1677h).
    (c) Drawback is not allowed when the identified merchandise, the 
designated imported merchandise, or the substituted merchandise (when 
applicable), consists of an agricultural product which is duty-paid at 
the over-quota rate of duty established under a tariff-rate quota, 
except that:
    (1) Agricultural products as described in this paragraph are 
eligible for drawback under 19 U.S.C. 1313(j)(1); and
    (2) Tobacco otherwise meeting the description of agricultural 
products in this paragraph is eligible for drawback under 19 U.S.C. 
1313(j)(1) or 19 U.S.C. 1313(a).


Sec.  190.4   Merchandise in which a U.S. Government interest exists.

    (a) Restricted meaning of Government. A U.S. Government 
instrumentality operating with nonappropriated funds is considered a 
Government entity within the meaning of this section.
    (b) Allowance of drawback. If the merchandise is sold to the U.S. 
Government, drawback will be available only to the:
    (1) Department, branch, agency, or instrumentality of the U.S. 
Government which purchased it; or
    (2) Supplier, or any of the parties specified in Sec.  190.82, 
provided the claim is supported by documentation signed by a proper 
officer of the department, branch, agency, or instrumentality concerned 
certifying that the right to drawback was reserved by the supplier or 
other parties with the knowledge and consent of the department, branch, 
agency, or instrumentality.
    (c) Bond. No bond will be required when a U.S. Government entity 
claims drawback.


Sec.  190.5   Guantanamo Bay, insular possessions, trust territories.

    Guantanamo Bay Naval Station is considered foreign territory for 
drawback purposes and, accordingly, drawback may be permitted on 
articles shipped there from the customs territory of the United States. 
Drawback is not allowed, except on claims made under 19 U.S.C. 
1313(j)(1), on articles shipped from the customs territory of the 
United States to the U.S. Virgin Islands, American Samoa, Wake Island, 
Midway Islands, Kingman Reef, Guam, Canton Island, Enderbury Island, 
Johnston Island, or Palmyra Island. See 19 U.S.C. 1313(y). Puerto Rico, 
which is part of the customs territory of the United States, is not 
considered foreign territory for drawback purposes and, accordingly, 
drawback may not be permitted on articles shipped there from elsewhere 
in the customs territory of the United States.


Sec.  190.6   Authority to sign or electronically certify drawback 
documents.

    (a) Documents listed in paragraph (b) of this section must be 
signed or electronically certified only by one of the following:
    (1) The president, a vice president, secretary, treasurer, or any 
other employee legally authorized to bind the corporation;
    (2) A full partner of a partnership;
    (3) The owner of a sole proprietorship;
    (4) Any employee of the business entity with a power of attorney;
    (5) An individual acting on his or her own behalf; or
    (6) A licensed customs broker with a power of attorney to sign the 
applicable drawback document.
    (b) The following documents require execution in accordance with 
paragraph (a) of this section:
    (1) Drawback entries;
    (2) Notices of Intent to Export, Destroy, or Return Merchandise for 
Purposes of Drawback;
    (3) Certifications to assign the right to claim drawback (see 
Sec. Sec.  190.28 and 190.82); and
    (4) Abstracts, schedules and extracts from monthly abstracts, and 
bills of materials and formulas, if not included as part of a drawback 
claim.
    (c) The following documents (see also part 177 of this chapter) may 
be executed by one of the persons described in paragraph (a) of this 
section or by any other individual legally authorized to bind the 
person (or

[[Page 65001]]

entity) for whom the document is executed:
    (1) A letter of notification of intent to operate under a general 
manufacturing drawback ruling under Sec.  190.7;
    (2) An application for a specific manufacturing drawback ruling 
under Sec.  190.8;
    (3) An application for waiver of prior notice under Sec.  190.91 or 
a 1-time waiver of prior notice under Sec.  190.36;
    (4) An application for approval of accelerated payment of drawback 
under Sec.  190.92; and
    (5) An application for certification in the Drawback Compliance 
Program under Sec.  190.193.


Sec.  190.7   General manufacturing drawback ruling.

    (a) Purpose; eligibility. General manufacturing drawback rulings 
are designed to simplify drawback for certain common manufacturing 
operations but do not preclude or limit the use of applications for 
specific manufacturing drawback rulings (see Sec.  190.8). A 
manufacturer or producer engaged in an operation that falls within a 
published general manufacturing drawback ruling may submit a letter of 
notification of intent to operate under that general ruling. Where a 
separately-incorporated subsidiary of a parent corporation is engaged 
in manufacture or production for drawback, the subsidiary is the proper 
party to submit the letter of notification, and cannot operate under a 
letter of notification submitted by the parent corporation.
    (b) Procedures--(1) Publication. General manufacturing drawback 
rulings are contained in Appendix A to this part. As deemed necessary 
by CBP, new general manufacturing drawback rulings will be issued as 
CBP Decisions and added to the appendix thereafter.
    (2) Submission. Letters of notification of intent to operate under 
a general manufacturing drawback ruling must be submitted to any 
drawback office where drawback entries will be filed, concurrent with 
or prior to filing a claim, provided that the general manufacturing 
drawback ruling will be followed without variation. If there is any 
variation from the general manufacturing drawback ruling, the 
manufacturer or producer must apply for a specific manufacturing 
drawback ruling under Sec.  190.8.
    (3) Information required. Each manufacturer or producer submitting 
a letter of notification of intent to operate under a general 
manufacturing drawback ruling under this section must provide the 
following specific detailed information:
    (i) Name and address of manufacturer or producer (if the 
manufacturer or producer is a separately-incorporated subsidiary of a 
corporation, the subsidiary corporation must submit a letter of 
notification in its own name);
    (ii) In the case of a business entity, the names of the persons 
listed in Sec.  190.6(a)(1) through (6) who will sign drawback 
documents;
    (iii) Locations of the factories which will operate under the 
letter of notification;
    (iv) Identity (by T.D. or CBP Decision number and title) of the 
general manufacturing drawback ruling under which the manufacturer or 
producer will operate;
    (v) Description of the merchandise and articles, unless 
specifically described in the general manufacturing drawback ruling, 
and the applicable 8-digit HTSUS subheading number(s) for imported 
merchandise that will be designated as part of substitution 
manufacturing drawback claims;
    (vi) Description of the manufacturing or production process, unless 
specifically described in the general manufacturing drawback ruling;
    (vii) Basis of claim used for calculating drawback; and
    (viii) IRS (Internal Revenue Service) number (with suffix) of the 
manufacturer or producer.
    (c) Review and action by CBP. The drawback office to which the 
letter of notification of intent to operate under a general 
manufacturing drawback ruling was submitted will review the letter of 
notification of intent.
    (1) Acknowledgment. The drawback office will promptly issue a 
letter acknowledging receipt of the letter of intent and authorizing 
the person to operate under the identified general manufacturing 
drawback ruling, subject to the requirements and conditions of that 
general manufacturing drawback ruling and the law and regulations, to 
the person who submitted the letter of notification if:
    (i) The letter of notification is complete (i.e., contains the 
information required in paragraph (b)(3) of this section);
    (ii) The general manufacturing drawback ruling identified by the 
manufacturer or producer is applicable to the manufacturing or 
production process;
    (iii) The general manufacturing drawback ruling identified by the 
manufacturer or producer will be followed without variation; and
    (iv) The described manufacturing or production process is a 
manufacture or production as defined in Sec.  190.2.
    (2) Computer-generated number. With the letter of acknowledgment 
the drawback office will include the unique computer-generated number 
assigned to the acknowledgment of the letter of notification of intent 
to operate. This number must be stated when the person files 
manufacturing drawback claims with CBP under the general manufacturing 
drawback ruling.
    (3) Non-conforming letters of notification of intent. If the letter 
of notification of intent to operate does not meet the requirements of 
paragraph (c)(1) of this section in any respect, the drawback office 
will promptly and in writing specifically advise the person of this 
fact and why this is so. A letter of notification of intent to operate 
which is not acknowledged may be resubmitted to the drawback office to 
which it was initially submitted with modifications and/or explanations 
addressing the reasons CBP may have given for non-acknowledgment, or 
the matter may be referred (by letter from the manufacturer or 
producer) to CBP Headquarters (Attention: Entry Process and Duty 
Refunds Branch, Regulations and Rulings, Office of Trade).
    (d) Procedure to modify a general manufacturing drawback ruling. 
Modifications are allowed under the same procedure terms as provided 
for in Sec.  190.8(g) for specific manufacturing drawback rulings.
    (e) Duration. Acknowledged letters of notification under this 
section will remain in effect under the same terms as provided for in 
Sec.  190.8(h) for specific manufacturing drawback rulings.


Sec.  190.8   Specific manufacturing drawback ruling.

    (a) Applicant. Unless operating under a general manufacturing 
drawback ruling (see Sec.  190.7), each manufacturer or producer of 
articles intended to be claimed for drawback must apply for a specific 
manufacturing drawback ruling. Where a separately-incorporated 
subsidiary of a parent corporation is engaged in manufacture or 
production for drawback, the subsidiary is the proper party to apply 
for a specific manufacturing drawback ruling, and cannot operate under 
any specific manufacturing drawback ruling approved in favor of the 
parent corporation.
    (b) Sample application. Sample formats for applications for 
specific manufacturing drawback rulings are contained in Appendix B to 
this part.
    (c) Content of application. The application of each manufacturer or 
producer must include the following information as applicable:

[[Page 65002]]

    (1) Name and address of the applicant;
    (2) Internal Revenue Service (IRS) number (with suffix) of the 
applicant;
    (3) Description of the type of business in which engaged;
    (4) Description of the manufacturing or production process, which 
shows how the designated and substituted merchandise is used to make 
the article that is to be exported or destroyed;
    (5) In the case of a business entity, the names of persons listed 
in Sec.  190.6(a)(1) through (6) who will sign drawback documents;
    (6) Description of the imported merchandise including 
specifications and applicable 8-digit HTSUS subheading(s);
    (7) Description of the exported article and applicable 8-digit 
HTSUS subheadings;
    (8) How manufacturing drawback is calculated;
    (9) Summary of the records kept to support claims for drawback; and
    (10) Identity and address of the recordkeeper if other than the 
claimant.
    (d) Submission of application. An application for a specific 
manufacturing drawback ruling must be submitted to CBP Headquarters 
(Attention: Entry Process and Duty Refunds Branch, Regulations and 
Rulings, Office of Trade). Applications may be physically delivered (in 
triplicate) or submitted via email. Claimants must indicate if drawback 
claims are to be filed under the ruling at more than one drawback 
office.
    (e) Review and action by CBP. CBP Headquarters will review each 
application for a specific manufacturing drawback ruling.
    (1) Approval. If the application is consistent with the drawback 
law and regulations, CBP Headquarters will issue a letter of approval 
to the applicant and will upload a copy of the application for the 
specific manufacturing drawback ruling to the Automated Commercial 
Environment (ACE) along with a copy of the letter of approval. Each 
specific manufacturing drawback ruling will be assigned a unique 
manufacturing number which will be included in the letter of approval 
to the applicant from CBP Headquarters, which must be used when filing 
manufacturing drawback claims.
    (2) Disapproval. If the application is not consistent with the 
drawback law and regulations, CBP Headquarters will promptly and in 
writing inform the applicant that the application cannot be approved 
and will specifically advise the applicant why this is so. A 
disapproved application may be resubmitted with modifications and/or 
explanations addressing the reasons given for disapproval; a 
disapproval may be appealed to CBP Headquarters (Attention: Entry 
Process and Duty Refunds Branch, Regulations and Rulings, Office of 
Trade).
    (f) Schedules and supplemental schedules. When an application for a 
specific manufacturing drawback ruling states that drawback is to be 
based upon a schedule, as defined in Sec.  190.2, filed by the 
manufacturer or producer, the schedule will be reviewed by CBP 
Headquarters. The application may include a request for authorization 
for the filing of supplemental schedules with the drawback office where 
claims are filed.
    (g) Procedure to modify a specific manufacturing drawback ruling--
(1) Supplemental application. Except as provided for limited 
modifications in paragraph (g)(2) of this section, a manufacturer or 
producer desiring to modify an existing specific manufacturing drawback 
ruling may submit a supplemental application for such modification to 
CBP Headquarters (Attention: Entry Process and Duty Refunds Branch, 
Regulations and Rulings, Office of Trade). Such a supplemental 
application may, at the discretion of the manufacturer or producer, be 
in the form of the original application, or it may identify the 
specific manufacturing drawback ruling to be modified (by T.D. or CBP 
Decision number, if applicable, and unique computer-generated number) 
and include only those paragraphs of the application that are to be 
modified, with a statement that all other paragraphs are unchanged and 
are incorporated by reference in the supplemental application.
    (2) Limited modifications. (i) A supplemental application for a 
specific manufacturing drawback ruling must be submitted to the 
drawback office where the original claim(s) was filed if the 
modifications are limited to:
    (A) The location of a factory, or the addition of one or more 
factories where the methods followed and records maintained are the 
same as those at another factory operating under the existing specific 
manufacturing drawback ruling of the manufacturer or producer;
    (B) The succession of a sole proprietorship, partnership or 
corporation to the operations of a manufacturer or producer;
    (C) A change in name of the manufacturer or producer;
    (D) A change in the persons who will sign drawback documents in the 
case of a business entity;
    (E) A change in the basis of claim used for calculating drawback;
    (F) A change in the decision to use or not to use an agent under 
Sec.  190.9, or a change in the identity of an agent under that 
section;
    (G) A change in the drawback office where claims will be filed 
under the ruling (see paragraph (g)(2)(iii) of this section);
    (H) An authorization to continue operating under a ruling approved 
under 19 CFR part 191 (see paragraph (g)(2)(iv) of this section); or
    (I) Any combination of the foregoing changes.
    (ii) A limited modification, as provided for in this paragraph 
(g)(2), must contain only the modifications to be made, in addition to 
identifying the specific manufacturing drawback ruling and being signed 
by an authorized person. To effect a limited modification, the 
manufacturer or producer must file with the drawback office(s) where 
claims were originally filed a letter stating the modifications to be 
made. The drawback office will promptly acknowledge acceptance of the 
limited modifications.
    (iii) To transfer a claim to another drawback office, the 
manufacturer or producer must file with the second drawback office 
where claims will be filed, a written application to file claims at 
that office, with a copy of the application and approval letter under 
which claims are currently filed. The manufacturer or producer must 
provide a copy of the written application to file claims at the new 
drawback office to the drawback office where claims are currently 
filed.
    (iv) To file a claim under this part based on a ruling approved 
under 19 CFR part 191, the manufacturer or producer must file a 
supplemental application for a limited modification no later than 
February 23, 2019, which provides the following:
    (A) Revised parallel columns with the required annotations for the 
applicable 8-digit HTSUS subheading number(s);
    (B) Revised bill of materials or formula with the required 
annotations for the applicable 8-digit HTSUS subheading number(s); and
    (C) A certification of continued compliance, which states: ``The 
undersigned acknowledges the current statutory requirements under 19 
U.S.C. 1313 and the regulatory requirements in 19 CFR part 190, and 
hereby certifies its continuing eligibility for operating under the 
manufacturing drawback ruling in compliance therewith.''
    (h) Duration. Subject to 19 U.S.C. 1625 and part 177 of this 
chapter, a specific manufacturing drawback ruling

[[Page 65003]]

under this section will remain in effect indefinitely unless:
    (1) No drawback claim is filed under the ruling for a period of 5 
years and notice of termination is published in the Customs Bulletin; 
or
    (2) The manufacturer or producer to whom approval of the ruling was 
issued files a request to terminate the ruling, in writing, with CBP 
Headquarters (Attention: Entry Process and Duty Refunds Branch, 
Regulations and Rulings, Office of Trade).


Sec.  190.9   Agency.

    (a) General. An owner of the identified merchandise, the designated 
imported merchandise and/or the substituted merchandise that is used to 
produce the exported articles may employ another person to do part, or 
all, of the manufacture or production under 19 U.S.C. 1313(a) or (b) 
and as defined in Sec.  190.2. For purposes of this section, such owner 
is the principal and such other person is the agent. Under 19 U.S.C. 
1313(b), the principal will be treated as the manufacturer or producer 
of merchandise used in manufacture or production by the agent. The 
principal must be able to establish by its manufacturing records, the 
manufacturing records of its agent(s), or the manufacturing records of 
both (or all) parties, compliance with all requirements of this part 
(see, in particular, Sec.  190.26).
    (b) Requirements--(1) Contract. The manufacturer must establish 
that it is the principal in a contract between it and its agent who 
actually does the work on either the designated or substituted 
merchandise, or both, for the principal. The contract must include:
    (i) Terms of compensation to show that the relationship is an 
agency rather than a sale;
    (ii) How transfers of merchandise and articles will be recorded by 
the principal and its agent;
    (iii) The work to be performed on the merchandise by the agent for 
the principal;
    (iv) The degree of control that is to be exercised by the principal 
over the agent's performance of work;
    (v) The party who is to bear the risk of loss on the merchandise 
while it is in the agent's custody; and
    (vi) The period that the contract is in effect.
    (2) Ownership of the merchandise by the principal. The records of 
the principal and/or the agent must establish that the principal had 
legal and equitable title to the merchandise before receipt by the 
agent. The right of the agent to assert a lien on the merchandise for 
work performed does not derogate the principal's ownership interest 
under this section.
    (3) Sales prohibited. The relationship between the principal and 
agent must not be that of a seller and buyer. If the parties' records 
show that, with respect to the merchandise that is the subject of the 
principal-agent contract, the merchandise is sold to the agent by the 
principal, or the articles manufactured by the agent are sold to the 
principal by the agent, those records are inadequate to establish 
existence of a principal-agency relationship under this section.
    (c) Specific manufacturing drawback rulings; general manufacturing 
drawback rulings--(1) Owner. An owner who intends to operate under the 
principal-agent procedures of this section must state that intent in 
any letter of notification of intent to operate under a general 
manufacturing drawback ruling filed under Sec.  190.7 or in any 
application for a specific manufacturing drawback ruling filed under 
Sec.  190.8.
    (2) Agent. Each agent operating under this section must have filed 
a letter of notification of intent to operate under a general 
manufacturing drawback ruling (see Sec.  190.7), for an agent, covering 
the articles manufactured or produced, or have obtained a specific 
manufacturing drawback ruling (see Sec.  190.8), as appropriate.
    (d) Certificate--(1) Contents of certificate. The principal for 
whom processing is conducted under this section must file, with any 
drawback claim, a certificate, subject to the recordkeeping 
requirements of Sec. Sec.  190.15 and 190.26, certifying that upon 
request by CBP it can establish the following:
    (i) Quantity of merchandise transferred from the principal to the 
agent;
    (ii) Date of transfer of the merchandise from the principal to the 
agent;
    (iii) Date of manufacturing or production operations performed by 
the agent;
    (iv) Total quantity, description, and 10-digit HTSUS classification 
of merchandise appearing in or used in manufacturing or production 
operations performed by the agent;
    (v) Total quantity, description, and 10-digit HTSUS classification 
of articles produced in manufacturing or production operations 
performed by the agent;
    (vi) Quantity and 10-digit HTSUS classification of articles 
transferred from the agent to the principal; and
    (vii) Date of transfer of the articles from the agent to the 
principal.
    (2) Blanket certificate. The certificate required under paragraph 
(d)(1) of this section may be a blanket certificate for a stated 
period.


Sec.  190.10   Transfer of merchandise.

    (a) Ability to transfer merchandise. (1) A party may transfer 
drawback eligible merchandise or articles to another party, provided 
that the transferring party:
    (i) Imports and pays duties, taxes, and/or fees on such imported 
merchandise;
    (ii) Receives such imported merchandise;
    (iii) In the case of 19 U.S.C. 1313(j)(2), receives such imported 
merchandise, substituted merchandise, or any combination of such 
imported and substituted merchandise; or
    (iv) Receives an article manufactured or produced under 19 U.S.C. 
1313(a) and/or (b).
    (2) The transferring party must maintain records that:
    (i) Document the transfer of that merchandise or article;
    (ii) Identify such merchandise or article as being that to which a 
potential right to drawback exists; and
    (iii) Assign such right to the transferee (see Sec.  190.82).
    (b) Required records. The records that support the transfer must 
include the following information:
    (1) The party to whom the merchandise or articles are delivered;
    (2) Date of physical delivery;
    (3) Import entry number and entry line item number;
    (4) Quantity delivered and, for substitution claims, total quantity 
attributable to the relevant import entry line item number;
    (5) Total duties, taxes, and fees paid on, or attributable to, the 
delivered merchandise, and, for substitution claims, total duties, 
taxes, and fees paid on, or attributable to, the relevant import entry 
line item number;
    (6) Date of importation;
    (7) Port where import entry filed;
    (8) Person from whom received;
    (9) Description of the merchandise delivered;
    (10) The 10-digit HTSUS classification for the designated imported 
merchandise (such HTSUS number must be from the entry summary line item 
and other entry documentation for the merchandise); and
    (11) If the merchandise transferred is substituted for the 
designated imported merchandise under 19 U.S.C. 1313(j)(2), the 10-
digit HTSUS classification of the substituted merchandise (as if it had 
been imported).
    (c) Line item designation for partial transfers of merchandise. 
Regardless of any agreement between the transferor

[[Page 65004]]

and the transferee, the method used for the first filed claim relating 
to merchandise reported on that entry summary line item will be the 
exclusive basis for the calculation of refunds (either using per unit 
averaging or not) for any subsequent claims for any other merchandise 
reported on that same entry summary line item. See Sec.  190.51(a)(3).
    (d) Retention period. The records listed in paragraph (b) of this 
section must be retained by the issuing party for 3 years from the date 
of liquidation of the related claim or longer period if required by law 
(see 19 U.S.C. 1508(c)(3)).
    (e) Submission to CBP. If the records required under paragraph (b) 
of this section or additional records requested by CBP are not provided 
by the claimant upon request by CBP, the part of the drawback claim 
dependent on those records will be denied.
    (f) Warehouse transfer and withdrawals. The person in whose name 
merchandise is withdrawn from a bonded warehouse will be considered the 
importer for drawback purposes. No records are required to document 
prior transfers of merchandise while in a bonded warehouse.


Sec.  190.11   Valuation of merchandise.

    The values declared to CBP as part of a complete drawback claim 
pursuant to Sec.  190.51 must be established as provided below. If the 
drawback eligible merchandise or articles are destroyed, then the value 
of the imported merchandise and any substituted merchandise must be 
reduced by the value of materials recovered during destruction in 
accordance with 19 U.S.C. 1313(x).
    (a) Designated imported merchandise. The value of the imported 
merchandise is determined as follows:
    (1) Direct identification claims. The value of the imported 
merchandise is the customs value of the imported merchandise upon entry 
into the United States (see subpart E of part 152 of this chapter); or, 
if the merchandise is identified pursuant to an approved accounting 
method, then the value of the imported merchandise is the customs value 
that is properly attributable to the imported merchandise as identified 
by the appropriate recordkeeping (see Sec.  190.14, varies by 
accounting method).
    (2) Substitution claims. The value of the designated imported 
merchandise is the per unit average value, which is the entered value 
for the applicable entry summary line item apportioned equally over 
each unit covered by the line item.
    (b) Exported merchandise or articles. The value of the exported 
merchandise or articles eligible for drawback is the selling price as 
declared for the Electronic Export Information (EEI), including any 
adjustments and exclusions required by 15 CFR 30.6(a). If there is no 
selling price for the EEI, then the value is the other value as 
declared for the EEI including any adjustments and exclusions required 
by 15 CFR 30.6(a) (e.g., the market price, if the goods are shipped on 
consignment). (For special types of transactions where certain unusual 
conditions are involved, the value for the EEI is determined pursuant 
to 15 CFR part 30 subpart C.) If no EEI is required (see, 15 CFR part 
30 subpart D for a complete list of exemptions), then the claimant must 
provide the value that would have been set forth on the EEI when the 
exportation took place, but for the exemption from the requirement for 
an EEI.
    (c) Destroyed merchandise or articles. The value of the destroyed 
merchandise or articles eligible for drawback is the value at the time 
of destruction, determined as if the merchandise had been exported in 
its condition at the time of its destruction and an EEI had been 
required.
    (d) Substituted merchandise for manufacturing drawback claims. The 
value of the substituted merchandise for manufacturing drawback claims 
pursuant to 19 U.S.C. 1313(b) is the cost of acquisition or production 
for the manufacturer or producer who used the substituted merchandise 
in manufacturing or production. These costs must be based on records 
kept in the ordinary course of business and may be determined on the 
basis of any of the inventory accounting methods recognized in the 
Generally Accepted Accounting Principles. Any inventory management 
method which is used by a manufacturer or producer for valuation of the 
substituted merchandise for manufacturing drawback claims under 19 
U.S.C. 1313(b) must be used without variation with other methods for a 
period of at least 1 year.


Sec.  190.12   Claim filed under incorrect provision.

    A drawback claim filed under this part and pursuant to any 
provision of section 313 of the Act, as amended (19 U.S.C. 1313), may 
be deemed filed pursuant to any other provision thereof should the 
drawback office determine that drawback is not allowable under the 
provision as originally filed, but that it is allowable under such 
other provision. To be allowable under such other provision, the claim 
must meet each of the requirements of such provision. The claimant may 
raise alternative provisions prior to liquidation and by protest (see 
part 174 of this chapter).


Sec.  190.13   Packaging materials.

    (a) Imported packaging material. Drawback is provided for in 
section 313(q)(1) of the Act, as amended (19 U.S.C. 1313(q)(1)), on 
imported packaging material used to package or repackage merchandise or 
articles exported or destroyed pursuant to section 313(a), (b), (c), or 
(j) of the Act, as amended (19 U.S.C. 1313(a), (b), (c), or (j)). The 
amount of drawback payable on the packaging material is determined 
pursuant to the particular drawback provision to which the packaged 
goods themselves are subject. The packaging material 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.
    (b) Packaging material manufactured in United States from imported 
materials. Drawback is provided for in section 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 section 313(a) or (b) of the Act, as amended (19 U.S.C. 
1313(a) or (b)). The packaging material and the imported merchandise 
used in the manufacture or production of the packaging material 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. Drawback under 
19 U.S.C. 1313(q)(2) is allowed, regardless of whether or not any of 
the articles or merchandise the packaging contains are actually 
eligible for drawback.


Sec.  190.14   Identification of merchandise or articles by accounting 
method.

    (a) General. This section provides for the identification of 
merchandise or articles for drawback purposes by the use of accounting 
methods. This section applies to identification of merchandise or 
articles in inventory or storage, as well as identification of 
merchandise used in manufacture or production, as defined in Sec.  
190.2. This section is not applicable to situations in which the

[[Page 65005]]

drawback law authorizes substitution (substitution is allowed in 
specified situations under 19 U.S.C. 1313(b), 1313(j)(2), 1313(k), and 
1313(p); this section does apply to situations in these subsections in 
which substitution is not allowed, as well as to the subsections of the 
drawback law under which no substitution is allowed). When substitution 
is authorized, merchandise or articles may be substituted without 
reference to this section, under the criteria and conditions 
specifically authorized in the statutory and regulatory provisions 
providing for the substitution.
    (b) Conditions and criteria for identification by accounting 
method. Manufacturers, producers, claimants, or other appropriate 
persons may identify for drawback purposes lots of merchandise or 
articles under this section, subject to each of the following 
conditions and criteria:
    (1) The lots of merchandise or articles to be so identified must be 
fungible as defined in Sec.  190.2;
    (2) The person using the identification method must be able to 
establish that inventory records (for example, material control 
records), prepared and used in the ordinary course of business, account 
for the lots of merchandise or articles to be identified as being 
received into and withdrawn from the same inventory. Even if 
merchandise or articles are received or withdrawn at different 
geographical locations, if such inventory records treat receipts or 
withdrawals as being from the same inventory, those inventory records 
may be used to identify the merchandise or articles under this section, 
subject to the conditions of this section. If any such inventory 
records (that is, inventory records prepared and used in the ordinary 
course of business) treat receipts and withdrawals as being from 
different inventories, those inventory records must be used and 
receipts into or withdrawals from the different inventories may not be 
accounted for together. If units of merchandise or articles can be 
specifically identified (for example, by serial number), the 
merchandise or articles must be specifically identified and may not be 
identified by accounting method, unless it is established that 
inventory records, prepared and used in the ordinary course of 
business, treat the merchandise or articles to be identified as being 
received into and withdrawn from the same inventory (subject to the 
above conditions);
    (3) Unless otherwise provided in this section or specifically 
approved by CBP (by a binding ruling under part 177 of this chapter), 
all receipts (or inputs) into and all withdrawals from the inventory 
must be recorded in the accounting record;
    (4) The records which support any identification method under this 
section are subject to verification by CBP (see Sec.  190.61). If CBP 
requests such verification, the person using the identification method 
must be able to demonstrate how, under generally accepted accounting 
procedures, the records which support the identification method used 
account for all merchandise or articles in, and all receipts into and 
withdrawals from, the inventory, and the drawback per unit for each 
receipt and withdrawal; and
    (5) Any accounting method which is used by a person for drawback 
purposes under this section must be used exclusively, without using 
other methods for a period of at least 1 year, unless approval is given 
by CBP for a shorter period.
    (c) Approved accounting methods. The following accounting methods 
are approved for use in the identification of merchandise or articles 
for drawback purposes under this section. If a claim is eligible for 
the use of any accounting method, the claimant must indicate on the 
drawback entry whether an accounting method was used, and if so, which 
accounting method was used, to identify the merchandise as part of the 
complete claim (see Sec.  190.51).
    (1) First-in, first-out (FIFO)--(i) General. The FIFO method is the 
method by which fungible merchandise or articles are identified by 
recordkeeping on the basis of the first merchandise or articles 
received into the inventory. Under this method, withdrawals are from 
the oldest (first-in) merchandise or articles in the inventory at the 
time of withdrawal.
    (ii) Example. If the beginning inventory is zero, 100 units with $1 
drawback attributable per unit are received in inventory on the 2nd of 
the month, 50 units with no drawback attributable per unit are received 
into inventory on the 5th of the month, 75 units are withdrawn for 
domestic (non-export) shipment on the 10th of the month, 75 units with 
$2 drawback attributable per unit are received in inventory on the 15th 
of the month, 100 units are withdrawn for export on the 20th of the 
month, and no other receipts or withdrawals occurred in the month, the 
drawback attributable to the 100 units withdrawn for export on the 20th 
is a total of $75 (25 units from the receipt on the 2nd with $1 
drawback attributable per unit, 50 units from the receipt on the 5th 
with no drawback attributable per unit, and 25 units from the receipt 
on the 15th with $2 drawback attributable per unit). The basis of the 
foregoing and the effects on the inventory of the receipts and 
withdrawals, and balance in the inventory thereafter are as follows: On 
the 2nd of the month the receipt of 100 units ($1 drawback/unit) 
results in a balance of that amount; the receipt of 50 units ($0 
drawback/unit) on the 5th results in a balance of 150 units (100 with 
$1 drawback/unit and 50 with $0 drawback/unit); the withdrawal on the 
10th of 75 units ($1 drawback/unit) results in a balance of 75 units 
(25 with $1 drawback/unit and 50 with $0 drawback/unit); the receipt of 
75 units ($2 drawback/unit) on the 15th results in a balance of 150 
units (25 with $1 drawback/unit, 50 with $0 drawback/unit, and 75 with 
$2 drawback/unit); the withdrawal on the 20th of 100 units (25 with $1 
drawback/unit, 50 with $0 drawback/unit, and 25 with $2 drawback unit) 
results in a balance of 50 units (all 50 with $2 drawback/unit).
    (2) Last-in, first out (LIFO)--(i) General. The LIFO method is the 
method by which fungible merchandise or articles are identified by 
recordkeeping on the basis of the last merchandise or articles received 
into the inventory. Under this method, withdrawals are from the newest 
(last-in) merchandise or articles in the inventory at the time of 
withdrawal.
    (ii) Example. In the example in paragraph (c)(1)(ii) of this 
section, the drawback attributable to the 100 units withdrawn for 
export on the 20th is a total of $175 (75 units from the receipt on the 
15th with $2 drawback attributable per unit and 25 units from the 
receipt on the 2nd with $1 drawback attributable per unit). The basis 
of the foregoing and the effects on the inventory of the receipts and 
withdrawals, and balance in the inventory thereafter are as follows: On 
the 2nd of the month the receipt of 100 units ($1 drawback/unit) 
results in a balance of that amount; the receipt of 50 units ($0 
drawback/unit) on the 5th results in a balance of 150 units (100 with 
$1 drawback/unit and 50 with $0 drawback/unit); the withdrawal on the 
10th of 75 units (50 with $0 drawback/unit and 25 with $1 drawback/
unit) results in a balance of 75 units (all with $1 drawback/unit); the 
receipt of 75 units ($2 drawback/unit) on the 15th results in a balance 
of 150 units (75 with $1 drawback/unit and 75 with $2 drawback/unit); 
the withdrawal on the 20th of 100 units (75 with $2 drawback/unit and 
25 with $1 drawback/unit) results in a balance of 50 units (all 50 with 
$1 drawback/unit).
    (3) Low-to-high--(i) General. The low-to-high method is the method 
by which

[[Page 65006]]

fungible merchandise or articles are identified by recordkeeping on the 
basis of the lowest drawback amount per unit of the merchandise or 
articles in inventory. Merchandise or articles with no drawback 
attributable to them (for example, domestic merchandise or duty-free 
merchandise) must be accounted for and are treated as having the lowest 
drawback attributable to them. Under this method, withdrawals are from 
the merchandise or articles with the least amount of drawback 
attributable to them, then those with the next higher amount, and so 
forth. If the same amount of drawback is attributable to more than one 
lot of merchandise or articles, withdrawals are from the oldest (first-
in) merchandise or articles among those lots with the same amount of 
drawback attributable. Drawback requirements are applicable to 
withdrawn merchandise or articles as identified (for example, if the 
merchandise or articles identified were attributable to an import more 
than 5 years before the claimed export, no drawback could be granted).
    (ii) Ordinary low-to-high--(A) Method. Under the ordinary low-to-
high method, all receipts into and all withdrawals from the inventory 
are recorded in the accounting record and accounted for so that each 
withdrawal, whether for export or domestic shipment, is identified by 
recordkeeping on the basis of the lowest drawback amount per unit of 
the merchandise or articles available in the inventory.
    (B) Example. In this example, the beginning inventory is zero, and 
receipts into and withdrawals from the inventory are as follows:

------------------------------------------------------------------------
         Date            Receipt ($ per unit)          Withdrawals
------------------------------------------------------------------------
Jan. 2...............  100 (zero)..............
Jan. 5...............  50 ($1.00)..............
Jan. 15..............  ........................  50 (export).
Jan. 20..............  50 ($1.01)..............
Jan. 25..............  50 ($1.02)..............
Jan. 28..............  ........................  50 (domestic).
Jan. 31..............  50 ($1.03)..............
Feb. 5...............  ........................  100 (export).
Feb. 10..............  50 ($.95)...............
Feb. 15..............  ........................  50 (export).
Feb. 20..............  50 (zero)...............
Feb. 23..............  ........................  50 (domestic).
Feb. 25..............  50 ($1.05)..............
Feb. 28..............  ........................  100 (export).
Mar. 5...............  50 ($1.06)..............
Mar. 10..............  50 ($.85)...............
Mar. 15..............  ........................  50 (export).
Mar. 21..............  ........................  50 (domestic).
Mar. 20..............  50 ($1.08)..............
Mar. 25..............  50 ($.90)...............
Mar. 31..............  ........................  100 (export).
------------------------------------------------------------------------


    Note to paragraph (c)(3)(ii)(B):  The drawback attributable to 
the January 15 withdrawal for export is zero (the available receipt 
with the lowest drawback amount per unit is the January 2 receipt), 
the drawback attributable to the January 28 withdrawal for domestic 
shipment (no drawback) is zero (the remainder of the January 2 
receipt), the drawback attributable to the February 5 withdrawal for 
export is $100.50 (the January 5 and January 20 receipts), the 
drawback attributable to the February 15 withdrawal for export is 
$47.50 (the February 10 receipt), the drawback attributable to the 
February 23 withdrawal for domestic shipment (no drawback) is zero 
(the February 20 receipt), the drawback attributable to the February 
28 withdrawal for export is $102.50 (the January 25 and January 31 
receipts), the drawback attributable to the March 15 withdrawal for 
export is $42.50 (the March 10 receipt), the drawback attributable 
to the March 21 withdrawal for domestic shipment (no drawback) is 
$52.50 (the February 25 receipt), and the drawback attributable to 
the March 31 withdrawal for export is $98.00 (the March 25 and March 
5 receipts). Remaining in inventory is the March 20 receipt of 50 
units ($1.08 drawback/unit). Total drawback attributable to 
withdrawals for export in this example would be $391.00.

    (iii) Low-to-high method with established average inventory turn-
over period--(A) Method. Under the low-to-high method with established 
average inventory turn-over period, all receipts into and all 
withdrawals for export are recorded in the accounting record and 
accounted for so that each withdrawal is identified by recordkeeping on 
the basis of the lowest drawback amount per available unit of the 
merchandise or articles received into the inventory in the established 
average inventory turn-over period preceding the withdrawal.
    (B) Accounting for withdrawals (for domestic shipments and for 
export). Under the low-to-high method with established average 
inventory turn-over period, domestic withdrawals (withdrawals for 
domestic shipment) are not accounted for and do not affect the 
available units of merchandise or articles. All withdrawals for export 
must be accounted for whether or not drawback is available or claimed 
on the withdrawals. Once a withdrawal for export is made and accounted 
for under this method, the merchandise or articles withdrawn are no 
longer available for identification.
    (C) Establishment of inventory turn-over period. For purposes of 
the low-to-high method with established average inventory turn-over 
period, the average inventory turn-over period is based on the rate of 
withdrawal from inventory and represents the time in which all of the 
merchandise or articles in the inventory at a given time must have been 
withdrawn based on that rate. To establish an average of this time, at 
least 1 year, or 3 turn-over periods (if inventory turns over fewer 
than 3 times per year), must be averaged. The inventory turn-over 
period must be that for the merchandise or articles to be identified, 
except that if the person using the method has more than one kind of 
merchandise or articles with different inventory turn-over periods, the 
longest average turn-over period established under this section may be 
used (instead of using a different inventory turn-over period for each 
kind of merchandise or article).
    (D) Example. In the example in paragraph (c)(3)(ii)(B) of this 
section (but, as required for this method, without accounting for 
domestic withdrawals, and with an established average inventory turn-
over period of 30 days), the drawback attributable to the January 15 
withdrawal for export is zero (the available receipt in the preceding 
30 days with the lowest amount of drawback is the January 2 receipt, of 
which 50 units will remain after the withdrawal), the drawback 
attributable to the February 5 withdrawal for export is $101.50 (the 
January 20 and January 25 receipts), the drawback attributable to the 
February 15 withdrawal for export is $47.50 (the February 10 receipt), 
the drawback attributable to the February 28 withdrawal for export is 
$51.50 (the February 20 and January 31 receipts), the drawback 
attributable to the March 15 withdrawal for export is $42.50 (the March 
10 receipt), and the drawback attributable to the March 31 withdrawal 
for export is $98.00 (the March 25 and March 5 receipts). No drawback 
may be claimed on the basis of the January 5 receipt or the February 25 
receipt because in the case of each, there were insufficient 
withdrawals for export within the established average inventory turn-
over period; the 50 units remaining from the January 2 receipt after 
the January 15 withdrawal are not identified for a withdrawal for 
export because there is no other withdrawal for export (other than the 
January 15 withdrawal) within the established average inventory turn-
over period; the March 20 receipt (50 units at $1.08) is not yet 
attributed to withdrawals for export. Total drawback attributable to 
withdrawals for export in this example would be $341.00.
    (iv) Low-to-high blanket method--(A) Method. Under the low-to-high 
blanket method, all receipts into and all withdrawals for export are 
recorded in the accounting record and accounted for. Each withdrawal is 
identified on the basis of the lowest drawback amount per available 
unit of the merchandise or articles received into inventory in the 
applicable statutory period for export preceding the withdrawal (e.g., 
180 days

[[Page 65007]]

under 19 U.S.C. 1313(p) and 5 years for other types of drawback claims 
pursuant to 19 U.S.C. 1313(r)). Drawback requirements are applicable to 
withdrawn merchandise or articles as identified (for example, no 
drawback could be granted generally if the merchandise or articles 
identified were attributable to an import made more than 5 years before 
the claimed export; and, for claims pursuant to 19 U.S.C. 1313(p), no 
drawback could be granted if the merchandise or articles identified 
were attributable to an import that was entered more than 180 days 
after the date of the claimed export or if the claimed export was more 
than 180 days after the close of the manufacturing period attributable 
to an import).
    (B) Accounting for withdrawals (for domestic shipments and for 
export). Under the low-to-high blanket method, domestic withdrawals 
(withdrawals for domestic shipment) are not accounted for and do not 
affect the available units of merchandise or articles. All withdrawals 
for export must be accounted for whether or not drawback is available 
or claimed on the withdrawals. Once a withdrawal for export is made and 
accounted for under this method, the merchandise or articles withdrawn 
are no longer available for identification.
    (C) Example. In the example in paragraph (c)(3)(ii)(B) of this 
section (but, as required for this method, without accounting for 
domestic withdrawals), the drawback attributable to the January 15 
withdrawal for export is zero (the available receipt in the inventory 
with the lowest amount of drawback is the January 2 receipt, of which 
50 units will remain after the withdrawal), the drawback attributable 
to the February 5 withdrawal for export is $50.00 (the remainder of the 
January 2 receipt and the January 5 receipt), the drawback attributable 
to the February 15 withdrawal for export is $47.50 (the February 10 
receipt), the drawback attributable to the February 28 withdrawal for 
export is $50.50 (the February 20 and January 20 receipts), the 
drawback attributable to the March 15 withdrawal for export is $42.50 
(the March 10 receipt), and the drawback attributable to the March 31 
withdrawal for export is $96.00 (the March 25 and January 25 receipts). 
Receipts not attributed to withdrawals for export are the January 31 
(50 units at $1.03), February 25 (50 units at $1.05), March 5 (50 units 
at $1.06), and March 20 (50 units at $1.08) receipts. Total drawback 
attributable to withdrawals for export in this example would be 
$286.50.
    (4) Average--(i) General. The average method is the method by which 
fungible merchandise or articles are identified on the basis of the 
calculation by recordkeeping of the amount of drawback that may be 
attributed to each unit of merchandise or articles in the inventory. In 
this method, the ratio of:
    (A) The total units of a particular receipt of the fungible 
merchandise in the inventory at the time of a withdrawal to;
    (B) The total units of all receipts of the fungible merchandise 
(including each receipt into inventory) at the time of the withdrawal;
    (C) Is applied to the withdrawal, so that the withdrawal consists 
of a proportionate quantity of units from each particular receipt and 
each receipt is correspondingly decreased. Withdrawals and 
corresponding decreases to receipts are rounded to the nearest whole 
number.
    (ii) Example. In the example in paragraph (c)(1)(ii) of this 
section, the drawback attributable to the 100 units withdrawn for 
export on the 20th is a total of $133 (50 units from the receipt on the 
15th with $2 drawback attributable per unit, 33 units from the receipt 
on the 2nd with $1 drawback attributable per unit, and 17 units from 
the receipt on the 5th with $0 drawback attributable per unit). The 
basis of the foregoing and the effects on the inventory of the receipts 
and withdrawals, and balance in the inventory thereafter are as 
follows: On the 2nd of the month the receipt of 100 units ($1 drawback/
unit) results in a balance of that amount; the receipt of 50 units ($0 
drawback/unit) on the 5th results in a balance of 150 units (100 with 
$1 drawback/unit and 50 with $0 drawback/unit); the withdrawal on the 
10th of 75 units (50 with $1 drawback/unit (applying the ratio of 100 
units from the receipt on the 2nd to the total of 150 units at the time 
of withdrawal) and 25 with $0 drawback/unit (applying the ratio of 50 
units from the receipt on the 5th to the total of 150 units at the time 
of withdrawal)) results in a balance of 75 units (with 50 with $1 
drawback/unit and 25 with $0 drawback/unit, on the basis of the same 
ratios); the receipt of 75 units ($2 drawback/unit) on the 15th results 
in a balance of 150 units (50 with $1 drawback/unit, 25 with $0 
drawback/unit, and 75 with $2 drawback/unit); the withdrawal on the 
20th of 100 units (50 with $2 drawback/unit (applying the ratio of the 
75 units from the receipt on the 15th to the total of 150 units at the 
time of withdrawal), 33 with $1 drawback/unit (applying the ratio of 
the 50 units remaining from the receipt on the 2nd to the total of 150 
units at the time of withdrawal, and 17 with $0 drawback/unit (applying 
the ratio of the 25 units remaining from the receipt on the 5th to the 
total of 150 units at the time of withdrawal)) results in a balance of 
50 units (25 with $2 drawback/unit, 17 with $1 drawback/unit, and 8 
with $0 drawback/unit, on the basis of the same ratios).
    (5) Inventory turn-over for limited purposes. A properly 
established average inventory turn-over period, as provided for in 
paragraph (c)(3)(iii)(C) of this section, may be used to determine:
    (i) The fact and date(s) of use in manufacture or production of the 
designated imported merchandise and other (substituted) merchandise 
(see 19 U.S.C. 1313(b)); or
    (ii) The fact and date(s) of manufacture or production of the 
exported or destroyed articles (see 19 U.S.C. 1313(a) and (b)).
    (d) Approval of other accounting methods. (1) Persons proposing to 
use an accounting method for identification of merchandise or articles 
for drawback purposes which has not been previously approved for such 
use (see paragraph (c) of this section), or which includes 
modifications from the methods listed in paragraph (c) of this section, 
may seek approval by CBP of the proposed accounting method under the 
provisions for obtaining an administrative ruling (see part 177 of this 
chapter). The conditions applied and the criteria used by CBP in 
approving such an alternative accounting method, or a modification of 
one of the approved accounting methods, will be the criteria in 
paragraph (b) of this section, as well as those in paragraph (d)(2) of 
this section.
    (2) In order for a proposed accounting method to be approved by CBP 
for purposes of this section, it must meet the following criteria:
    (i) For purposes of calculations of drawback, the proposed 
accounting method must be either revenue neutral or favorable to the 
Government; and
    (ii) The proposed accounting method should be:
    (A) Generally consistent with commercial accounting procedures, as 
applicable for purposes of drawback;
    (B) Consistent with inventory or material control records used in 
the ordinary course of business by the person proposing the method; and
    (C) Easily administered by CBP.


Sec.  190.15   Recordkeeping.

    Pursuant to 19 U.S.C. 1508(c)(3), all records which pertain to the 
filing of a drawback claim or to the information contained in the 
records required by 19 U.S.C. 1313 in connection with the filing of a 
drawback claim must be retained for 3 years after liquidation of such 
claims or longer period if required

[[Page 65008]]

by law (under 19 U.S.C. 1508, the same records may be subject to a 
different period for different purposes).

Subpart B--Manufacturing Drawback


Sec.  190.21   Direct identification manufacturing drawback.

    Section 313(a) of the Act, as amended (19 U.S.C. 1313(a)), provides 
for drawback upon the exportation, or destruction under CBP 
supervision, of articles manufactured or produced in the United States 
with the use of imported merchandise, provided that those articles have 
not been used in the United States prior to such exportation or 
destruction. The amount of drawback allowable will not exceed 99 
percent of the amount of duties, taxes, and fees paid with respect to 
the imported merchandise. However, duties may not be refunded upon the 
exportation or destruction of flour or by-products produced from 
imported wheat. Where two or more products result, drawback must be 
distributed among the products in accordance with their relative 
values, as defined in Sec.  190.2, at the time of separation. 
Merchandise may be identified for drawback purposes under 19 U.S.C. 
1313(a) in the manner provided for and prescribed in Sec.  190.14.


Sec.  190.22   Substitution drawback.

    (a)(1) General--(i) Substitution standard. If imported, duty-paid 
merchandise or merchandise classifiable under the same 8-digit HTSUS 
subheading number as the imported merchandise is used in the 
manufacture or production of articles within a period not to exceed 5 
years from the date of importation of such imported merchandise, then 
upon the exportation, or destruction under CBP supervision, of any such 
articles, without their having been used in the United States prior to 
such exportation or destruction, drawback is provided for in section 
313(b) of the Act, as amended (19 U.S.C. 1313(b)). Drawback is 
allowable even though none of the imported, duty-paid merchandise may 
actually have been used in the manufacture or production of the 
exported or destroyed articles. The amount of duties, taxes, and fees 
eligible for drawback is determined by per unit averaging, as defined 
in Sec.  190.2, for any drawback claim based on 19 U.S.C. 1313(b).
    (ii) Allowable refund--(A) Exportation. In the case of an article 
that is exported, the amount of drawback allowable will not exceed 99 
percent of the lesser of:
    (1) The amount of duties, taxes, and fees paid with respect to the 
imported merchandise; or
    (2) The amount of duties, taxes, and fees that would apply to the 
substituted merchandise if the substituted merchandise were imported.
    (B) Destruction. In the case of an article that is destroyed, the 
amount of drawback allowable will not exceed 99 percent of the lesser 
of:
    (1) The amount of duties, taxes, and fees paid with respect to the 
imported merchandise (after the value of the imported merchandise has 
been reduced by the value of materials recovered during destruction as 
provided in 19 U.S.C. 1313(x)); or
    (2) The amount of duties, taxes, and fees that would apply to the 
substituted merchandise if the substituted merchandise were imported 
(after the value of the imported merchandise has been reduced by the 
value of materials recovered during destruction as provided in 19 
U.S.C. 1313(x)).
    (C) Federal excise tax. For purposes of drawback of internal 
revenue tax imposed under Chapters 32, 38 (with the exception of 
Subchapter A of Chapter 38), 51, and 52 of the Internal Revenue Code of 
1986, as amended (IRC), drawback granted on the export or destruction 
of substituted merchandise will be limited to the amount of taxes paid 
(and not returned by refund, credit, or drawback) on the substituted 
merchandise.
    (2) Special rule for sought chemical elements--(i) Substitution 
standard. A sought chemical element, as defined in Sec.  190.2, may be 
considered imported merchandise, or merchandise classifiable under the 
same 8-digit HTSUS subheading number as such imported merchandise, used 
in the manufacture or production of an article as described in 
paragraph (a)(1)(i) of this section, and it may be substituted for 
source material containing that sought chemical element, without regard 
to whether the sought chemical element and the source material are 
classifiable under the same 8-digit HTSUS subheading number, and 
apportioned quantitatively, as appropriate (see Sec.  190.26(b)(4)).
    (ii) Allowable refund. The amount of drawback allowable will be 
determined in accordance with paragraph (a)(1)(ii) of this section. The 
value of the substituted source material must be determined based on 
the quantity of the sought chemical element present in the source 
material, as calculated per Sec.  190.26(b)(4).
    (b) Use by same manufacturer or producer at different factory. 
Duty-paid merchandise or drawback products used at one factory of a 
manufacturer or producer within 5 years after the date on which the 
material was imported may be designated as the basis for drawback on 
articles manufactured or produced in accordance with these regulations 
at other factories of the same manufacturer or producer.
    (c) Designation. A manufacturer or producer may designate any 
eligible imported merchandise or drawback product which it has used in 
manufacture or production.
    (d) Designation by successor--(1) General rule. Upon compliance 
with the requirements in this section and under 19 U.S.C. 1313(s), a 
drawback successor as defined in paragraph (d)(2) of this section may 
designate merchandise or drawback product used by a predecessor before 
the date of succession as the basis for drawback on articles 
manufactured or produced by the successor after the date of succession.
    (2) Drawback successor. A ``drawback successor'' is a manufacturer 
or producer to whom another entity (predecessor) has transferred, by 
written agreement, merger, or corporate resolution:
    (i) All or substantially all of the rights, privileges, immunities, 
powers, duties, and liabilities of the predecessor; or
    (ii) The assets and other business interests of a division, plant, 
or other business unit of such predecessor, but only if in such 
transfer the value of the transferred realty, personalty, and 
intangibles (other than drawback rights, inchoate or otherwise) exceeds 
the value of all transferred drawback rights, inchoate or otherwise.
    (3) Certifications and required evidence--(i) Records of 
predecessor. The predecessor or successor must certify that the 
successor is in possession of the predecessor's records which are 
necessary to establish the right to drawback under the law and 
regulations with respect to the merchandise or drawback product.
    (ii) Merchandise not otherwise designated. The predecessor or 
successor must certify that the predecessor has not designated and will 
not designate, nor enable any other person to designate, such 
merchandise or product as the basis for drawback.
    (iii) Value of transferred property. In instances in which assets 
and other business interests of a division, plant, or other business 
unit of a predecessor are transferred, the predecessor or successor 
must specify, and maintain supporting records to establish, the value 
of the drawback rights and the value of all other transferred property.
    (iv) Review by CBP. The written agreement, merger, or corporate

[[Page 65009]]

resolution, provided for in paragraph (d)(2) of this section, and the 
records and evidence provided for in paragraph (d)(3)(i) through (iii) 
of this section, must be retained by the appropriate party(s) for 3 
years from the date of liquidation of the related claim and are subject 
to review by CBP upon request.
    (e) Multiple products--(1) General. Where two or more products are 
produced concurrently in a substitution manufacturing operation, 
drawback will be distributed to each product in accordance with its 
relative value (see Sec.  190.2) at the time of separation.
    (2) Claims covering a manufacturing period. Where the claim covers 
a manufacturing period rather than a manufacturing lot, the entire 
period covered by the claim is the time of separation of the products 
and the value per unit of product is the market value for the period 
(as provided for in the definition of relative value in Sec.  190.2). 
Manufacturing periods in excess of one month may not be used without 
specific approval of CBP.
    (3) Recordkeeping. Records must be maintained showing the relative 
value of each product at the time of separation.


Sec.  190.23   Methods and requirements for claiming drawback.

    Claims must be based on one or more of the methods specified in 
paragraph (a) of this section and comply with all other requirements 
specified in this section.
    (a) Method of claiming drawback.--(1) Used in. Drawback may be paid 
based on the amount of the imported or substituted merchandise used in 
the manufacture of the exported article, where there is no waste or the 
waste is valueless or unrecoverable. This method must be used when 
multiple products also necessarily and concurrently result from the 
manufacturing process, and there is no valuable waste (see paragraph 
(a)(2) of this section).
    (2) Used in less valuable waste. Drawback is allowable under this 
method based on the quantity of merchandise or drawback products used 
to manufacture the exported or destroyed article, reduced by an amount 
equal to the quantity of this merchandise that the value of the waste 
would replace. This method must be used when multiple products also 
necessarily and concurrently result from the manufacturing process, and 
there is valuable waste.
    (3) Relative value. Drawback is also allowable under this method 
when two or more products result from manufacturing or production. The 
relative value method must be used when multiple products also 
necessarily and concurrently result from the manufacturing process, and 
drawback must be distributed among the products in accordance with 
their relative values (as defined in Sec.  190.2) at the time of 
separation.
    (4) Appearing in. Drawback is allowable under this method based 
only on the amount of imported or substituted merchandise that appears 
in (is contained in) the exported articles. The appearing in method may 
not be used if there are multiple products also necessarily and 
concurrently resulting from the manufacturing process.
    (b) Abstract or schedule. A drawback claimant may use either the 
abstract or schedule method to show the quantity of material used or 
appearing in the exported or destroyed article. An abstract is the 
summary of records which shows the total quantity used in or appearing 
in all articles produced during the period covered by the abstract. A 
schedule shows the quantity of material actually used in producing, or 
appearing in, each unit of product. Manufacturers or producers 
submitting letters of notification of intent to operate under a general 
manufacturing drawback ruling (see Sec.  190.7) and applicants for 
approval of specific manufacturing drawback rulings (see Sec.  190.8) 
must state whether the abstract or schedule method is used; if no such 
statement is made, drawback claims must be based upon the abstract 
method.
    (c) Claim for waste.--(1) Valuable waste. When the waste has a 
value and the drawback claim is not limited to the quantity of imported 
or substituted merchandise or drawback products appearing in the 
exported or destroyed articles claimed for drawback, the manufacturer 
or producer must keep records to show the market value of the 
merchandise or drawback products used to manufacture or produce the 
exported or destroyed articles, as well as the market value of the 
resulting waste, under the used in less valuable waste method (as 
provided for in the definition of relative value in Sec.  190.2).
    (2) If claim for waste is waived. If claim for waste is waived, 
only the ``appearing in'' basis may be used (see paragraph (a)(4) of 
this section). Waste records need not be kept unless required to 
establish the quantity of imported duty-paid merchandise or drawback 
products appearing in the exported or destroyed articles claimed for 
drawback.


Sec.  190.24  Transfer of merchandise.

    Evidence of any transfers of merchandise (see Sec.  190.10) must be 
evidenced by records, as defined in Sec.  190.2.


Sec.  190.25   Destruction under CBP supervision.

    A claimant may destroy merchandise and obtain drawback by complying 
with the procedures set forth in Sec.  190.71 relating to destruction.


Sec.  190.26   Recordkeeping.

    (a) Direct identification. (1) Records required. Each manufacturer 
or producer under 19 U.S.C. 1313(a) must keep records to allow the 
verifying CBP official to trace all articles manufactured or produced 
for exportation or destruction with drawback, from importation, through 
manufacture or production, to exportation or destruction. To this end, 
these records must specifically establish:
    (i) The date or inclusive dates of manufacture or production;
    (ii) The quantity, identity, and 8-digit HTSUS subheading number(s) 
of the imported duty-paid merchandise or drawback products used in or 
appearing in (see Sec.  190.23) the articles manufactured or produced;
    (iii) The quantity, if any, of the non-drawback merchandise used, 
when these records are necessary to determine the quantity of imported 
duty-paid merchandise or drawback product used in the manufacture or 
production of the exported or destroyed articles or appearing in them;
    (iv) The quantity and description of the articles manufactured or 
produced;
    (v) The quantity of waste incurred, if applicable; and
    (vi) That the articles on which drawback is claimed were exported 
or destroyed within 5 years after the importation of the duty-paid 
merchandise, without having been used in the United States prior to 
such exportation or destruction. (If the articles were commingled after 
manufacture or production, their identity may be maintained in the 
manner prescribed in Sec.  190.14.)
    (2) Accounting. The merchandise and articles to be exported or 
destroyed will be accounted for in a manner which will enable the 
manufacturer, producer, or claimant:
    (i) To determine, and the CBP official to verify, the applicable 
import entry and any transfers of the merchandise associated with the 
claim; and
    (ii) To identify with respect to that import entry, and any 
transfers of the merchandise, the imported merchandise or drawback 
products used in manufacture or production.
    (b) Substitution. The records of the manufacturer or producer of 
articles

[[Page 65010]]

manufactured or produced in accordance with 19 U.S.C. 1313(b) must 
establish the facts in paragraph (a)(1)(i), (iv) through (vi) of this 
section, and:
    (1) The quantity, identity, and specifications of the merchandise 
designated (imported duty-paid, or drawback product);
    (2) The quantity, identity, and specifications of the substituted 
merchandise before its use to manufacture or produce (or appearing in) 
the exported or destroyed articles;
    (3) That, within 5 years after the date of importation of the 
imported duty-paid merchandise, the manufacturer or producer used the 
designated merchandise in manufacturing or production and that during 
the same 5-year period it manufactured or produced the exported or 
destroyed articles; and
    (4) If the designated merchandise is a sought chemical element, as 
defined in Sec.  190.2, that was contained in imported material and a 
substitution drawback claim is made based on that chemical element:
    (i) The duties, taxes, and fees paid on the imported material must 
be apportioned among its constituent components. The claim on the 
chemical element that is the designated merchandise must be limited to 
the duty apportioned to that element on a unit-for-unit attribution 
using the unit of measure set forth in the HTSUS that is applicable to 
the imported material. If the material is a compound with other 
constituents, including impurities, and the purity of the compound in 
the imported material is shown by satisfactory analysis, that purity, 
converted to a decimal equivalent of the percentage, is multiplied 
against the entered amount of the material to establish the amount of 
pure compound. The amount of the element in the pure compound is to be 
determined by use of the atomic weights of the constituent elements and 
converting to the decimal equivalent of their respective percentages 
and multiplying that decimal equivalent against the above-determined 
amount of pure compound.
    (ii) The amount claimed as drawback based on the sought chemical 
element must be deducted from the amounts paid on the imported material 
that may be claimed on any other drawback claim.
    Example to paragraph (b)(4): Synthetic rutile that is shown by 
appropriate analysis in the entry papers to be 91.7% pure titanium 
dioxide is imported and dutiable at a 5% ad valorem duty rate. The 
amount of imported synthetic rutile is 30,000 pounds with an entered 
value of $12,000. The total duty paid is $600. Titanium in the 
synthetic rutile is designated as the basis for a drawback claim under 
19 U.S.C. 1313(b). The amount of titanium dioxide in the synthetic 
rutile is determined by converting the purity percentage (91.7%) to its 
decimal equivalent (.917) and multiplying the entered amount of 
synthetic rutile (30,000 pounds) by that decimal equivalent (.917 x 
30,000 = 27,510 pounds of titanium dioxide contained in the 30,000 
pounds of imported synthetic rutile). The titanium, based on atomic 
weight, represents 59.93% of the constituents in titanium dioxide. 
Multiplying that percentage, converted to its decimal equivalent, by 
the amount of titanium dioxide determines the titanium content of the 
imported synthetic rutile (.5993 x 27,510 pounds of titanium dioxide = 
16,486.7 pounds of titanium contained in the imported synthetic 
rutile). Therefore, up to 16,486.7 pounds of titanium is available to 
be designated as the basis for drawback. As the per unit duty paid on 
the synthetic rutile is calculated by dividing the duty paid ($600) by 
the amount of imported synthetic rutile (30,000 pounds), the per unit 
duty is two cents of duty per pound of the imported synthetic rutile 
($600 / 30,000 = $0.02). The duty on the titanium is calculated by 
multiplying the amount of titanium contained in the imported synthetic 
rutile by two cents of duty per pound (16,486.7 x $0.02 = $329.73 duty 
apportioned to the titanium). The product is then multiplied by 99% to 
determine the maximum amount of drawback available ($329.73 x .99 = 
$326.44). If an exported titanium alloy ingot weighs 17,000 pounds, in 
which 16,000 pounds of titanium was used to make the ingot, drawback is 
determined by multiplying the duty per pound ($0.02) by the weight of 
the titanium contained in the ingot (16,000 pounds) to calculate the 
duty available for drawback ($0.02 x 16,000 = $320.00). Because only 
99% of the duty can be claimed, drawback is determined by multiplying 
this available duty amount by 99% (.99 x $320.00 = $316.80). As the 
oxygen content of the titanium dioxide is 45% of the synthetic rutile, 
if oxygen is the designated merchandise on another drawback claim, 45% 
of the duty claimed on the synthetic rutile would be available for 
drawback based on the substitution of oxygen.
    (c) Valuable waste records. When waste has a value and the 
manufacturer, producer, or claimant, has not limited the claims based 
on the quantity of imported or substituted merchandise appearing in the 
articles exported or destroyed, the manufacturer or producer must keep 
records to show the market value of the merchandise used to manufacture 
or produce the exported or destroyed article, as well as the quantity 
and market value of the waste incurred (as provided for in the 
definition of relative value in Sec.  190.2). In such records, the 
quantity of merchandise identified or designated for drawback, under 19 
U.S.C. 1313(a) or 1313(b), respectively, must be based on the quantity 
of merchandise actually used to manufacture or produce the exported or 
destroyed articles. The waste replacement reduction will be determined 
by reducing from the quantity of merchandise actually used by the 
amount of merchandise which the value of the waste would replace.
    (d) Purchase of manufactured or produced articles for exportation 
or destruction. Where the claimant purchases articles from the 
manufacturer or producer and exports or destroys them, the claimant 
must maintain records to document the transfer of articles received.
    (e) Multiple claimants--(1) General. Multiple claimants may file 
for drawback with respect to the same export or destruction (for 
example, if an automobile is exported, where different parts of the 
automobile have been produced by different manufacturers under drawback 
conditions and the exporter waives the right to claim drawback and 
assigns such right to the manufacturers under Sec.  190.82).
    (2) Procedures--(i) Submission of letter. Each drawback claimant 
must file a separate letter, as part of the claim, describing the 
component article to which each claim will relate. Each letter must 
show the name of the claimant and bear a statement that the claim will 
be limited to its respective component article. The exporter or 
destroyer must endorse the letters, as required, to show the respective 
interests of the claimants.
    (ii) Blanket waivers and assignments of drawback rights. Exporters 
may waive and assign their drawback rights for all, or any portion, of 
their exportations with respect to a particular commodity for a given 
period to a drawback claimant.
    (f) Retention of records. Pursuant to 19 U.S.C. 1508(c)(3), all 
records required to be kept by the manufacturer, producer, or claimant 
with respect to drawback claims, and records kept by others to 
complement the records of the manufacturer, producer, or claimant with 
respect to drawback claims must be retained for 3 years after the date 
of liquidation of the related claims (under 19 U.S.C. 1508, the same 
records may be

[[Page 65011]]

subject to a different retention period for different purposes).


Sec.  190.27  Time limitations for manufacturing drawback.

    (a) Direct identification. Drawback will be allowed on imported 
merchandise used to manufacture or produce articles that are exported 
or destroyed under CBP supervision within 5 years after importation of 
the merchandise identified to support the claim.
    (b) Substitution. Drawback will be allowed on the imported 
merchandise if the following conditions are met:
    (1) The designated merchandise is used in manufacture or production 
within 5 years after importation;
    (2) Within the 5-year period described in paragraph (b)(1) of this 
section, the exported or destroyed articles, or drawback products, were 
manufactured or produced; and
    (3) The completed articles must be exported or destroyed under CBP 
supervision within 5 years of the date of importation of the designated 
merchandise, or within 5 years of the earliest date of importation 
associated with a drawback product.
    (c) Drawback claims filed before specific or general manufacturing 
drawback ruling approved or acknowledged. Drawback claims may be filed 
before the letter of notification of intent to operate under a general 
manufacturing drawback ruling covering the claims is acknowledged 
(Sec.  190.7), or before the specific manufacturing drawback ruling 
covering the claims is approved (Sec.  190.8), but no drawback will be 
paid until such acknowledgement or approval, as appropriate.


Sec.  190.28   Person entitled to claim manufacturing drawback.

    The exporter (or destroyer) will be entitled to claim drawback, 
unless the exporter (or destroyer), by means of a certification, 
assigns the right to claim drawback to the manufacturer, producer, 
importer, or intermediate party. Such certification must accompany each 
claim and also affirm that the exporter (or destroyer) has not claimed 
and will not itself claim drawback or assign the right to claim 
drawback on the particular exportation or destruction to any other 
party. The certification provided for under this section may be a 
blanket certification for a stated period. Drawback is paid to the 
claimant, who may be the manufacturer, producer, intermediate party, 
importer, or exporter (or destroyer).


Sec.  190.29  Certification of bill of materials or formula.

    At the time of filing a claim under 19 U.S.C. 1313(a) or (b), the 
claimant must certify the following:
    (a) The claimant is in possession of the applicable bill of 
materials or formula for the exported or destroyed article(s), which 
will be promptly provided upon request;
    (b) The bill of materials or formula identifies the imported and/or 
substituted merchandise and the exported or destroyed article(s) by 
their 8-digit HTSUS subheading numbers; and
    (c) The bill of materials or formula identifies the manufactured 
quantities of the imported and/or substituted merchandise and the 
exported or destroyed article(s).

Subpart C--Unused Merchandise Drawback


Sec.  190.31  Direct identification unused merchandise drawback.

    (a) General. Section 313(j)(1) of the Act, as amended (19 U.S.C. 
1313(j)(1)), provides for drawback upon the exportation or destruction 
under CBP supervision of imported merchandise upon which was paid any 
duty, tax, or fee imposed under Federal law upon entry or importation, 
if the merchandise has not been used within the United States before 
such exportation or destruction. The total amount of drawback allowable 
will not exceed 99 percent of the amount of duties, taxes, and fees 
paid with respect to the imported merchandise.
    (b) Time of exportation or destruction. Drawback will be allowable 
on imported merchandise if, before the close of the 5-year period 
beginning on the date of importation and before the drawback claim is 
filed, the merchandise is exported from the United States or destroyed 
under CBP supervision.
    (c) Operations performed on imported merchandise. The performing of 
any operation or combination of operations, not amounting to 
manufacture or production under the provisions of the manufacturing 
drawback law as provided for in 19 U.S.C. 1313(j)(3), on imported 
merchandise is not a use of that merchandise for purposes of this 
section.


Sec.  190.32   Substitution unused merchandise drawback.

    (a) General. Section 313(j)(2) of the Act, as amended (19 U.S.C. 
1313(j)(2)), provides for drawback of duties, taxes, and fees paid on 
imported merchandise based on the export or destruction under CBP 
supervision of substituted merchandise (as defined in Sec.  190.2, 
pursuant to 19 U.S.C. 1313(j)(2)), before the close of the 5-year 
period beginning on the date of importation of the imported merchandise 
and before the drawback claim is filed, and before such exportation or 
destruction the substituted merchandise is not used in the United 
States (see paragraph (e) of this section) and is in the possession of 
the party claiming drawback. The amount of duties, taxes, and fees 
eligible for drawback is determined by per unit averaging, as defined 
in 19 CFR 190.2, for any drawback claim based on 19 U.S.C. 1313(j)(2).
    (b) Allowable refund--(1) Exportation. In the case of an article 
that is exported, subject to paragraph (b)(3) of this section, the 
total amount of drawback allowable will not exceed 99 percent of the 
lesser of:
    (i) The amount of duties, taxes, and fees paid with respect to the 
imported merchandise; or
    (ii) The amount of duties, taxes, and fees that would apply to the 
exported article if the exported article were imported.
    (2) Destruction. In the case of an article that is destroyed, 
subject to paragraph (b)(3) of this section, the total amount of 
drawback allowable will not exceed 99 percent of the lesser of:
    (i) The amount of duties, taxes, and fees paid with respect to the 
imported merchandise (after the value of the imported merchandise has 
been reduced by the value of materials recovered during destruction as 
provided in 19 U.S.C. 1313(x)); or
    (ii) The amount of duties, taxes, and fees that would apply to the 
destroyed article if the destroyed article had been imported (after the 
value of the imported merchandise has been reduced by the value of 
materials recovered during destruction as provided in 19 U.S.C. 
1313(x)).
    (3) Federal excise tax. For purposes of drawback of internal 
revenue tax imposed under Chapters 32, 38 (with the exception of 
Subchapter A of Chapter 38), 51, and 52 of the Internal Revenue Code of 
1986, as amended (IRC), drawback granted on the export or destruction 
of substituted merchandise will be limited to the amount of taxes paid 
(and not returned by refund, credit, or drawback) on the substituted 
merchandise.
    (c) Determination of HTSUS classification for substituted 
merchandise. Requests for binding rulings on the classification of 
imported, substituted, or exported merchandise may be submitted to CBP 
pursuant to the procedures set forth in part 177.

[[Page 65012]]

    (d) Claims for wine--(1) Alternative substitution standard. In 
addition to the 8-digit HTSUS substitution standard in Sec.  190.2, 
drawback of duties, taxes, and fees, paid on imported wine as defined 
in Sec.  190.2 may be allowable under 19 U.S.C. 1313(j)(2) with respect 
to wine if the imported wine and the exported wine are of the same 
color and the price variation between the imported wine and the 
exported wine does not exceed 50 percent.
    (2) Allowable refund. For any drawback claim for wine (as defined 
in Sec.  190.2) based on 19 U.S.C. 1313(j)(2), the total amount of 
drawback allowable will not exceed 99 percent of the duties, taxes, and 
fees paid with respect to the imported merchandise, without regard to 
the limitations in paragraph (b)(1) or (b)(2) of this section.
    (3) Required certification. When the basis for substitution for 
wine drawback claims under 19 U.S.C. 1313(j)(2) is the alternative 
substitution standard rule set forth in (d)(1), claims under this 
subpart may be paid and liquidated if:
    (i) The claimant specifies on the drawback entry that the basis for 
substitution is the alternative substitution standard for wine; and
    (ii) The claimant provides a certification, as part of the complete 
claim (see 190.51(a)), stating that:
    (A) The imported wine and the exported wine are a Class 1 grape 
wine (as defined in 27 CFR 4.21(a)(1)) of the same color (i.e., red, 
white, or ros[eacute]);
    (B) The imported wine and the exported wine are table wines (as 
defined in 27 CFR 4.21(a)(2)) and the alcoholic content does not exceed 
14 percent by volume; and
    (C) The price variation between the imported wine and the exported 
wine does not exceed 50 percent.
    (e) Operations performed on substituted merchandise. The performing 
of any operation or combination of operations, not amounting to 
manufacture or production as provided for in 19 U.S.C. 1313(j)(3)(B), 
on the substituted merchandise is not a use of that merchandise for 
purposes of this section.
    (f) Designation by successor; 19 U.S.C. 1313(s)--(1) General rule. 
Upon compliance with the requirements of this section and under 19 
U.S.C. 1313(s), a drawback successor as defined in paragraph (f)(2) of 
this section may designate either of the following as the basis for 
drawback on merchandise possessed by the successor after the date of 
succession:
    (i) Imported merchandise which the predecessor, before the date of 
succession, imported; or
    (ii) Imported and/or substituted merchandise that was transferred 
to the predecessor from the person who imported and paid duty on the 
imported merchandise.
    (2) Drawback successor. A ``drawback successor'' is an entity to 
which another entity (predecessor) has transferred, by written 
agreement, merger, or corporate resolution:
    (i) All or substantially all of the rights, privileges, immunities, 
powers, duties, and liabilities of the predecessor; or
    (ii) The assets and other business interests of a division, plant, 
or other business unit of such predecessor, but only if in such 
transfer the value of the transferred realty, personalty, and 
intangibles (other than drawback rights, inchoate or otherwise) exceeds 
the value of all transferred drawback rights, inchoate or otherwise.
    (3) Certifications and required evidence--(i) Records of 
predecessor. The predecessor or successor must certify that the 
successor is in possession of the predecessor's records which are 
necessary to establish the right to drawback under the law and 
regulations with respect to the imported and/or substituted 
merchandise.
    (ii) Merchandise not otherwise designated. The predecessor or 
successor must certify that the predecessor has not designated and will 
not designate, nor enable any other person to designate, the imported 
and/or substituted merchandise as the basis for drawback.
    (iii) Value of transferred property. In instances in which assets 
and other business interests of a division, plant, or other business 
unit of a predecessor are transferred, the predecessor or successor 
must specify, and maintain supporting records to establish, the value 
of the drawback rights and the value of all other transferred property.
    (iv) Review by CBP. The written agreement, merger, or corporate 
resolution, provided for in paragraph (f)(2) of this section, and the 
records and evidence provided for in paragraph (f)(3)(i) through (iii) 
of this section, must be retained by the appropriate party(s) for 3 
years from the date of liquidation of the related claim and are subject 
to review by CBP upon request.


Sec.  190.33   Person entitled to claim unused merchandise drawback.

    (a) Direct identification. (1) Under 19 U.S.C. 1313(j)(1), as 
amended, the exporter or destroyer will be entitled to claim drawback.
    (2) The exporter or destroyer may waive the right to claim drawback 
and assign such right to the importer or any intermediate party. A 
drawback claimant under 19 U.S.C. 1313(j)(1) other than the exporter or 
destroyer must secure and retain a certification signed by the exporter 
or destroyer waiving the right to claim drawback, and stating that it 
did not and will not authorize any other party to claim the exportation 
or destruction for drawback (see Sec.  190.82). The certification 
provided for under this section may be a blanket certification for a 
stated period. The claimant must file such certification with each 
claim.
    (b) Substitution. (1) Under 19 U.S.C. 1313(j)(2), as amended, the 
following parties may claim drawback:
    (i) In situations where the exporter or destroyer of the 
substituted merchandise is also the importer of the imported 
merchandise, that party will be entitled to claim drawback.
    (ii) In situations where the person who imported and paid the duty 
on the imported merchandise transfers the imported merchandise, 
substituted merchandise, or any combination of imported and substituted 
merchandise to the person who exports or destroys that merchandise, the 
exporter or destroyer will be entitled to claim drawback. (Any such 
transferred merchandise, regardless of its origin, will be treated as 
imported merchandise for purposes of drawback under 19 U.S.C. 
1313(j)(2), and any retained merchandise will be treated as domestic 
merchandise.)
    (iii) In situations where the transferred merchandise described in 
paragraph (b)(1)(ii) of this section is the subject of further 
transfer(s), such transfer(s) must be documented by records, including 
records kept in the normal course of business, and the exporter or 
destroyer will be entitled to claim drawback (multiple substitutions 
are not permitted).
    (2) The exporter or destroyer may waive the right to claim drawback 
and assign such right to the importer or to any intermediate party, 
provided that the claimant had possession of the substituted 
merchandise prior to its exportation or destruction. A drawback 
claimant under 19 U.S.C. 1313(j)(2) other than the exporter or 
destroyer must secure and retain a certification signed by the exporter 
or destroyer that such party waived the right to claim drawback, and 
stating that it did not and will not authorize any other party to claim 
the exportation or destruction for drawback (see Sec.  190.82). The 
certification provided for under this section may be a blanket 
certification for a stated period. The claimant must file such 
certification with each claim.

[[Page 65013]]

Sec.  190.34   Transfer of merchandise.

    Any transfer of merchandise (see Sec.  190.10) must be recorded in 
records, which may include records kept in the normal course of 
business, as defined in Sec.  190.2.


Sec.  190.35   Notice of intent to export or destroy; examination of 
merchandise.

    (a) Notice. A notice of intent to export or destroy merchandise 
which may be the subject of an unused merchandise drawback claim (19 
U.S.C. 1313(j)) must be provided to CBP to give CBP the opportunity to 
examine the merchandise. The claimant or the exporter (for destruction 
under CBP supervision, see Sec.  190.71) must file at the port of 
intended examination a Notice of Intent to Export, Destroy, or Return 
Merchandise for Purposes of Drawback on CBP Form 7553 at least 5 
working days prior to the date of intended exportation unless CBP 
approves another filing period or the claimant has been granted a 
waiver of prior notice (see Sec.  190.91).
    (b) Required information. The notice must certify that the 
merchandise has not been used in the United States before exportation 
or destruction. In addition, if applicable, the notice must provide the 
bill of lading number, if known, the name and telephone number, mailing 
address, and, if available, fax number and email address of a contact 
person, and the location of the merchandise.
    (c) Decision to examine or to waive examination. Within 2 working 
days after receipt of the Notice of Intent to Export, Destroy, or 
Return Merchandise for Purposes of Drawback (see paragraph (a) of this 
section), CBP will notify the party designated on the Notice in writing 
of CBP's decision to either examine the merchandise to be exported, or 
to waive examination. If CBP timely notifies the designated party, in 
writing, of its decision to examine the merchandise (see paragraph (d) 
of this section), but the merchandise is exported without having been 
presented to CBP for examination, any drawback claim, or part thereof, 
based on the Notice will be denied. If CBP notifies the designated 
party, in writing, of its decision to waive examination of the 
merchandise, or, if timely notification of a decision by CBP to examine 
or to waive examination has not been received, the merchandise may be 
exported without delay.
    (d) Time and place of examination. If CBP gives timely notice of 
its decision to examine the exported merchandise, the merchandise to be 
examined must be promptly presented to CBP. CBP must examine the 
merchandise within 5 working days after presentation of the 
merchandise. The merchandise may be exported without examination if CBP 
fails to timely examine the merchandise after presentation to CBP. If 
the examination is to be completed at a port other than the port of 
actual exportation or destruction, the merchandise must be transported 
in-bond to the port of exportation or destruction.
    (e) Extent of examination. The appropriate CBP office may permit 
release of merchandise without examination, or may examine, to the 
extent determined to be necessary, the items to be exported or 
destroyed.


Sec.  190.36   Failure to file Notice of Intent to Export, Destroy, or 
Return Merchandise for Purposes of Drawback.

    (a) General; application. Merchandise which has been exported or 
destroyed without complying with the requirements of Sec.  190.35(a), 
Sec.  190.42(a), Sec.  190.71(a), or Sec.  190.91 may be eligible for 
unused merchandise drawback under 19 U.S.C. 1313(j) or under 19 U.S.C. 
1313(c) subject to the following conditions:
    (1) Application. The claimant must file a written application with 
the drawback office where the drawback claims will be filed. Such 
application must include the following:
    (i) Required information.
    (A) Name, address, and Internal Revenue Service (IRS) number (with 
suffix) of applicant;
    (B) Name, address, and IRS number(s) (with suffix(es)) of 
exporter(s), if applicant is not the exporter;
    (C) Export period covered by this application;
    (D) Commodity/product lines of imported and exported merchandise 
covered in this application (and the applicable HTSUS numbers);
    (E) The origin of the above merchandise;
    (F) Estimated number of export transactions covered in this 
application;
    (G) Estimated number of drawback claims and estimated time of 
filing those claims to be covered in this application;
    (H) The port(s) of exportation;
    (I) Estimated dollar value of potential drawback claims to be 
covered in this application;
    (J) The relationship between the parties involved in the import and 
export transactions; and
    (K) Provision(s) of drawback covered under the application;
    (ii) Written declarations regarding:
    (A) The reason(s) that CBP was not notified of the intent to 
export; and
    (B) Whether the applicant, to the best of its knowledge, will have 
future exportations or destructions on which unused merchandise 
drawback might be claimed; and
    (iii) A certification that the following documentary evidence will 
be made available for CBP to review upon request:
    (A) For the purpose of establishing that the imported merchandise 
was not used in the United States (for purposes of drawback under 19 
U.S.C. 1313(j)(1)) or that the exported or destroyed merchandise was 
not used in the United States and satisfied the requirements for 
substitution with the imported merchandise (for purposes of drawback 
under 19 U.S.C. 1313(j)(2)), and, as applicable:
    (1) Records;
    (2) Any laboratory records prepared in the ordinary course of 
business; and/or
    (3) Inventory records prepared in the ordinary course of business 
tracing all relevant movements and storage of the imported merchandise, 
substituted merchandise, and/or exported merchandise; and
    (B) Evidence establishing compliance with all other applicable 
drawback requirements.
    (2) One-time use. The procedure provided for in this section may be 
used by a claimant only once, unless good cause is shown (for example, 
successorship).
    (3) Claims filed pending disposition of application. Drawback 
claims may be filed under this section pending disposition of the 
application. However, those drawback claims will not be processed or 
paid until the application is approved by CBP.
    (b) CBP action. In order for CBP to evaluate the application under 
this section, CBP may request, and the applicant must provide, any of 
the information listed in paragraph (a)(1)(iii)(A)(1) through (3) of 
this section. In making its decision to approve or deny the application 
under this section, CBP will consider factors such as, but not limited 
to, the following:
    (1) Information provided by the claimant in the written 
application;
    (2) Any of the information listed in paragraphs (a)(1)(iii)(A)(1) 
through (3) of this section and requested by CBP under paragraph (b); 
and
    (3) The applicant's prior record with CBP.
    (c) Time for CBP action. CBP will notify the applicant in writing 
within 90 days after receipt of the application of its decision to 
approve or deny the application, or of CBP's inability to approve, deny 
or act on the application and the reason therefor.
    (d) Appeal of denial of application. If CBP denies the application, 
the

[[Page 65014]]

applicant may file a written appeal with the drawback office which 
issued the denial, provided that the applicant files this appeal within 
30 days of the date of denial. If CBP denies this initial appeal, the 
applicant may file a further written appeal with CBP Headquarters, 
Office of Trade, Trade Policy and Programs, provided that the applicant 
files this further appeal within 30 days of the denial date of the 
initial appeal. CBP may extend the 30-day period for appeal to the 
drawback office or to CBP Headquarters, for good cause, if the 
applicant applies in writing for such extension within the appropriate 
30-day period above.
    (e) Future intent to export or destroy unused merchandise. If an 
applicant states it will have future exportations or destructions on 
which unused merchandise drawback may be claimed (see paragraph 
(a)(1)(ii)(B) of this section), the applicant will be informed of the 
procedures for waiver of prior notice (see Sec.  190.91). If the 
applicant seeks waiver of prior notice under Sec.  190.91, any 
documentation submitted to CBP to comply with this section will be 
included in the request under Sec.  190.91. An applicant that states 
that it will have future exportations or destructions on which unused 
merchandise drawback may be claimed (see paragraph (a)(1)(ii)(B) of 
this section) and which does not obtain waiver of prior notice must 
notify CBP of its intent to export or destroy prior to each such 
exportation or destruction, in accordance with Sec.  190.35.


Sec.  190.37   Destruction under CBP supervision.

    A claimant may destroy merchandise and obtain unused merchandise 
drawback by complying with the procedures set forth in Sec.  190.71 
relating to destruction.


Sec.  190.38   Recordkeeping.

    (a) Maintained by claimant; by others. Pursuant to 19 U.S.C. 
1508(c)(3), all records which are necessary to be maintained by the 
claimant under this part with respect to drawback claims, and records 
kept by others to complement the records of the claimant, which are 
essential to establish compliance with the legal requirements of 19 
U.S.C. 1313(j)(1) or (j)(2), as applicable, and this part with respect 
to drawback claims, must be retained for 3 years after liquidation of 
such claims (under 19 U.S.C. 1508, the same records may be subject to a 
different retention period for different purposes).
    (b) Accounting for the merchandise. Merchandise subject to drawback 
under 19 U.S.C. 1313(j)(1) and (j)(2) must be accounted for in a manner 
which will enable the claimant:
    (1) To determine, and CBP to verify, the applicable import entry or 
transfer(s) of drawback-eligible merchandise;
    (2) To determine, and CBP to verify, the applicable exportation or 
destruction; and
    (3) To identify, with respect to the import entry or any 
transfer(s) of drawback-eligible merchandise, the imported merchandise 
designated as the basis for the drawback claim.

Subpart D--Rejected Merchandise


Sec.  190.41   Rejected merchandise drawback.

    Section 313(c) of the Act, as amended (19 U.S.C. 1313(c)), provides 
for drawback upon the exportation or destruction under CBP supervision 
of imported merchandise which has been entered, or withdrawn from 
warehouse, for consumption, duty-paid, and which: Does not conform to 
sample or specifications; has been shipped without the consent of the 
consignee; or has been determined to be defective as of the time of 
importation; or ultimately sold at retail by the importer or the person 
who received the merchandise from the importer, and for any reason 
returned to and accepted by the importer or the person who received the 
merchandise from the importer. The total amount of drawback allowable 
will be 99 percent of the amount of duties paid with respect to the 
imported, duty-paid merchandise. See subpart P of this part for 
drawback of internal revenue taxes for unmerchantable or nonconforming 
distilled spirits, wines, or beer.


Sec.  190.42   Procedures and supporting documentation.

    (a) Time limit for exportation or destruction. Drawback will be 
denied on merchandise that is exported or destroyed after the statutory 
5-year time period.
    (b) Required documentation. The claimant must submit documentation 
to CBP as part of the complete drawback claim (see Sec.  190.51) to 
establish that the merchandise did not conform to sample or 
specification, was shipped without the consent of the consignee, or was 
defective as of the time of importation (see Sec.  190.45 for 
additional requirements for claims made on rejected retail merchandise 
under 19 U.S.C. 1313(c)(1)(C)(ii)). If the claimant was not the 
importer, the claimant must also:
    (1) Submit a statement signed by the importer and every other 
person, other than the ultimate purchaser, that owned the goods, that 
no other claim for drawback was made on the goods by any other person; 
and
    (2) Certify that records are available to support the statement 
required in paragraph (b)(1) of this section.
    (c) Notice. A notice of intent to export or destroy merchandise 
which may be the subject of a rejected merchandise drawback claim (19 
U.S.C. 1313(c)) must be provided to CBP to give CBP the opportunity to 
examine the merchandise. The claimant, or the exporter (for destruction 
under CBP supervision, see Sec.  190.71), must file at the port of 
intended redelivery to CBP custody a Notice of Intent to Export, 
Destroy, or Return Merchandise for Purposes of Drawback on CBP Form 
7553 at least 5 working days prior to the date of intended return to 
CBP custody, unless the claimant has been granted a waiver of prior 
notice (see Sec.  190.91) or complies with the procedures for 1-time 
waiver in Sec.  190.36.
    (d) Required information. The notice must provide the bill of 
lading number, if known, the name and telephone number, mailing 
address, and, if available, fax number and email address of a contact 
person, and the location of the merchandise.
    (e) Decision to waive examination. Within 2 working days after 
receipt of the Notice of Intent to Export, Destroy, or Return 
Merchandise for Purposes of Drawback (see paragraph (c) of this 
section), CBP will notify, in writing, the party designated on the 
Notice of CBP's decision to either examine the merchandise to be 
exported or destroyed, or to waive examination. If CBP timely notifies 
the designated party, in writing, of its decision to examine the 
merchandise (see paragraph (f) of this section), but the merchandise is 
exported or destroyed without having been presented to CBP for such 
examination, any drawback claim, or part thereof, based on the Notice 
of Intent to Export, Destroy, or Return Merchandise for Purposes of 
Drawback, must be denied. If CBP notifies the designated party, in 
writing, of its decision to waive examination of the merchandise, or, 
if timely notification of a decision by CBP to examine or to waive 
examination is absent, the merchandise may be exported or destroyed 
without delay and will be deemed to have been returned to CBP custody.
    (f) Time and place of examination. If CBP gives timely notice of 
its decision to examine the merchandise to be exported or destroyed, 
the merchandise to be examined must be promptly presented to CBP. CBP 
must examine the merchandise within 5 working days after presentation 
of the merchandise.

[[Page 65015]]

The merchandise may be exported or destroyed without examination if CBP 
fails to timely examine the merchandise after presentation to CBP, and 
in such case the merchandise will be deemed to have been returned to 
CBP custody. If the examination is to be completed at a port other than 
the port of actual exportation or destruction, the merchandise must be 
transported in-bond to the port of exportation or destruction.
    (g) Extent of examination. The appropriate CBP office may permit 
release of merchandise without examination, or may examine, to the 
extent determined to be necessary, the items exported or destroyed.
    (h) Drawback claim. When filing the drawback claim, the drawback 
claimant must correctly calculate the amount of drawback due (see Sec.  
190.51(b)). The procedures for restructuring a claim (see Sec.  190.53) 
apply to rejected merchandise drawback if the claimant has an ongoing 
export program which qualifies for this type of drawback.
    (i) Exportation. Claimants must provide documentary evidence of 
exportation (see subpart G of this part). The claimant may establish 
exportation by mail as set out in Sec.  190.74.


Sec.  190.43   Unused merchandise drawback claim.

    Rejected merchandise may be the subject of an unused merchandise 
drawback claim under 19 U.S.C. 1313(j)(1), in accordance with subpart C 
of this part, to the extent that the merchandise qualifies therefor.


Sec.  190.44   [Reserved]


Sec.  190.45   Returned retail merchandise.

    (a) Special rule for substitution. Section 313(c)(1)(C)(ii) of the 
Tariff Act of 1930, as amended (19 U.S.C. 1313(c)(1)(C)(ii)), provides 
for drawback upon the exportation or destruction under CBP supervision 
of imported merchandise which has been entered, or withdrawn from 
warehouse, for consumption, duty-paid and ultimately sold at retail by 
the importer, or the person who received the merchandise from the 
importer, and for any reason returned to and accepted by the importer, 
or the person who received the merchandise from the importer.
    (b) Eligibility requirements. (1) Drawback is allowable pursuant to 
compliance with all requirements set forth in this subpart; and
    (2) The claimant must also show by evidence satisfactory to CBP 
that drawback may be claimed by--
    (i) Designating an entry of merchandise that was imported within 1 
year before the date of exportation or destruction of the merchandise 
described in paragraph (a) under CBP supervision.
    (ii) Certifying that the same 8-digit HTSUS subheading number and 
specific product identifier (such as part number, SKU, or product code) 
apply to both the merchandise designated for drawback (in the import 
documentation) and the returned merchandise.
    (c) Allowable refund. The total amount of drawback allowable will 
not exceed 99 percent of the amount of duties paid with respect to the 
imported merchandise.
    (d) Denial of claims. No drawback will be refunded if CBP is not 
satisfied that the claimant has provided, upon request, the 
documentation necessary to support the certification required in 
paragraph (b)(2)(ii) of this section.

Subpart E--Completion of Drawback Claims


Sec.  190.51   Completion of drawback claims.

    (a) General--(1) Complete claim. Unless otherwise specified, a 
complete drawback claim under this part will consist of the successful 
electronic transmission to CBP of the drawback entry (as described in 
paragraph (a)(2) of this section), applicable Notice(s) of Intent to 
Export, Destroy, or Return Merchandise for Purposes of Drawback on CBP 
Form 7553, applicable import entry data, and evidence of exportation or 
destruction as provided for under subpart G of this part.
    (2) Drawback entry. The drawback entry is to be filed through a 
CBP-authorized electronic system and must include the following:
    (i) Claimant identification number;
    (ii) Broker identification number (if applicable);
    (iii) If requesting accelerated payment under Sec.  190.92, surety 
code and bond type (and, for single transaction bonds, also the bond 
number and amount of bond);
    (iv) Port code for the drawback office where the claim is being 
filed;
    (v) Drawback entry number and provision(s) under which drawback is 
claimed;
    (vi) Statement of eligibility for applicable privileges (as 
provided for in subpart I of this part);
    (vii) Amount of refund claimed for each of relevant duties, taxes, 
and fees (calculated to two decimal places);
    (viii) For each designated import entry line item, the entry number 
and the line item number designating the merchandise, a description of 
the merchandise, a unique import tracing identification number(s) 
(ITIN) (used to associate the imported merchandise and any substituted 
merchandise with any intermediate products (if applicable) and the 
drawback-eligible exported or destroyed merchandise or finished 
article(s)), as well as the following information for the merchandise 
designated as the basis for the drawback claim: The 10-digit HTSUS 
classification, amount of duties paid, applicable entered value (see 19 
CFR 190.11(a)), quantity, and unit of measure (using the unit(s) of 
measure required under the HTSUS for substitution manufacturing and 
substitution unused merchandise drawback claims), as well as the types 
and amounts of any other duties, taxes, or fees for which a refund is 
requested;
    (ix) For manufacturing claims under 19 U.S.C. 1313(a) or (b), each 
associated ruling number, along with the following information: 
Corresponding information for the factory location, the basis of the 
claim (as provided for in Sec.  190.23), the date(s) of use of the 
imported and/or substituted merchandise in manufacturing or processing 
(or drawback product containing the imported or substituted 
merchandise), a description of and the 10-digit HTSUS classification 
for the drawback product or finished article that is manufactured or 
produced, the quantity and unit of measure for the drawback product or 
finished article that is manufactured or produced, the disposition of 
the drawback product or finished article that is manufactured or 
produced (transferred, exported, or destroyed), unique manufacture 
tracing identification number(s) (MTIN) (used to associate the 
manufactured merchandise, including any intermediate products, with the 
drawback-eligible exported or destroyed finished article(s)), and a 
certification from the claimant that provides as follows: ``The 
article(s) described above were manufactured or produced and disposed 
of as stated herein in accordance with the drawback ruling on file with 
CBP and in compliance with applicable laws and regulations.'';
    (x) Indicate whether the designated imported merchandise, other 
substituted merchandise, or finished article (for manufacturing claims) 
was transferred to the drawback claimant prior to the exportation or 
destruction of the eligible merchandise, and for unused merchandise 
drawback claims under 19 U.S.C. 1313(j), provide a certification from 
the client that provides as follows: ``The undersigned hereby certifies 
that the exported or destroyed merchandise herein described is unused 
in the United States and further certifies that this merchandise was 
not subjected to any process of

[[Page 65016]]

manufacture or other operation except the allowable operations as 
provided for by regulation.'';
    (xi) Indicate whether the eligible merchandise was exported or 
destroyed and provide the applicable 10-digit HTSUS or Department of 
Commerce Schedule B classification, quantity, and unit of measure (the 
unit of measure specified must be the same as that which was required 
under the HTSUS for the designated imported merchandise in paragraph 
(viii) for substitution unused merchandise drawback claims) and, for 
claims under 19 U.S.C. 1313(c), specify the basis as one of the 
following:
    (A) Merchandise does not conform to sample or specifications;
    (B) Merchandise was defective at time of importation;
    (C) Merchandise was shipped without consent of the consignee; or
    (D) Merchandise sold at retail and returned to the importer or the 
person who received the merchandise from the importer;
    (xii) For eligible merchandise that was exported, the unique export 
identifier (the number used to associate the export transaction with 
the appropriate documentary evidence of exportation), export 
destination, name of exporter, the applicable comparative value 
pursuant to Sec.  190.11(b) (see Sec.  190.22(a)(1)(ii), Sec.  
190.22(a)(2)(ii), or Sec.  190.32(b)) for substitution claims, and a 
certification from the claimant that provides as follows: ``I declare, 
to the best of my knowledge and belief, that all of the statements in 
this document are correct and that the exported article is not to be 
relanded in the United States or any of its possessions without paying 
duty.'';
    (xiii) For eligible merchandise that was destroyed, the name of the 
destroyer and, if substituted, the applicable comparative value 
pursuant to Sec.  190.11(c) (see Sec.  190.22(a)(1)(ii), Sec.  
190.22(a)(2)(ii), or Sec.  190.32(b)), and a certification from the 
claimant, if applicable, that provides as follows: ``The undersigned 
hereby certifies that, for the destroyed merchandise herein described, 
the value of recovered materials (including the value of any tax 
benefit or royalty payment) that accrues to the drawback claimant has 
been deducted from the value of the imported (or substituted) 
merchandise designated by the claimant, in accordance with 19 U.S.C. 
1313(x).'';
    (xiv) For substitution unused merchandise drawback claims under 19 
U.S.C. 1313(j)(2), a certification from the claimant that provides as 
follows: ``The undersigned hereby certifies that the substituted 
merchandise is unused in the United States and that the substituted 
merchandise was in our possession prior to exportation or 
destruction.'';
    (xv) For NAFTA drawback claims provided for in subpart E of part 
181, the foreign entry number and date of entry, the HTSUS 
classification for the foreign entry, the amount of duties paid for the 
foreign entry and the applicable exchange rate, and, if applicable, a 
certification from the claimant that provides as follows: ``Same 
condition to NAFTA countries--The undersigned certifies that the 
merchandise herein described is in the same condition as when it was 
imported under the above import entry(s) and further certifies that 
this merchandise was not subjected to any process of manufacture or 
other operation except the allowable operations as provided for by 
regulation.''; and
    (xvi) All certifications required in this part and as otherwise 
deemed necessary by CBP to establish compliance with the applicable 
laws and regulations, as well as the following declaration: ``The 
undersigned acknowledges statutory requirements that all records 
supporting the information on this document are to be retained by the 
issuing party for a period of 3 years from the date of liquidation of 
the drawback claim. All required documentation that must be uploaded in 
accordance with 19 CFR 190.51 will be provided to CBP within 24 hours 
of the filing of the drawback claim. The undersigned acknowledges that 
a false certification of the foregoing renders the drawback claim 
incomplete and subject to denial. The undersigned is fully aware of the 
sanctions provided in 18 U.S.C. 1001, and 18 U.S.C. 550, and 19 U.S.C. 
1593a.''
    (3) Election of line item designation for imported merchandise. 
Merchandise on a specific line on an entry summary may be designated 
for either direct identification or substitution claims but a single 
line on an entry summary may not be split for purposes of claiming 
drawback under both direct identification and substitution claims. The 
first complete drawback claim accepted by CBP which designates 
merchandise on a line on an entry summary establishes this designation 
for any remaining merchandise on that same line.
    (4) Limitation on line item eligibility for imported merchandise. 
Claimants filing substitution drawback claims under part 190 for 
imported merchandise associated with a line item on an entry summary if 
any other merchandise covered on that entry summary has been designated 
as the basis of a claim under part 191 must provide additional 
information enabling CBP to verify the availability of drawback for the 
indicated merchandise and associated line item within 30 days of claim 
submission. The information to be provided will include, but is not 
limited to: summary document specifying the lines used and unused on 
the import entry; the import entry summary, corresponding commercial 
invoices, and copies of all drawback claims that previously designated 
the import entry summary; and post summary/liquidation changes (for 
imports or drawback claims, if applicable).
    (b) Drawback due--(1) Claimant required to calculate drawback. 
Drawback claimants are required to correctly calculate the amount of 
drawback due. The amount of drawback requested on the drawback entry is 
generally to be 99 percent of the duties, taxes, and fees eligible for 
drawback. (For example, if $1,000 in import duties are eligible for 
drawback less 1 percent ($10), the amount claimed on the drawback entry 
should be for $990.) Claims exceeding 99 percent (or 100% when 100% of 
the duty is available for drawback) will not be paid until the 
calculations have been corrected by the claimant. Claims for less than 
99 percent (or 100% when 100% of the duty is available for drawback) 
will be paid as filed, unless the claimant amends the claim in 
accordance with Sec.  190.52(c). The amount of duties, taxes, and fees 
eligible for drawback is determined by whether a claim is based upon 
direct identification or substitution, as provided for below:
    (i) Direct identification. The amounts eligible for drawback for a 
unit of merchandise consists of those duties, taxes, and fees that were 
paid for that unit of the designated imported merchandise. This may be 
the amount of duties, taxes, and fees actually tendered on that unit or 
those attributable to that unit, if identified pursuant to an approved 
accounting method (see 19 CFR 190.14).
    (ii) Substitution. The amount of duties, taxes, and fees eligible 
for drawback pursuant to 19 U.S.C. 1313(b) or 19 U.S.C. 1313(j)(2) is 
determined by per unit averaging, as defined in Sec.  190.2. The amount 
that may be refunded is also subject to the limitations set forth in 
Sec.  190.22(a)(1)(ii) (manufacturing claims) and Sec.  190.32(b) 
(unused merchandise claims), as applicable.
    (2) Merchandise processing fee apportionment calculation. Where a 
drawback claimant requests a refund of a merchandise processing fee 
paid pursuant to 19 U.S.C. 58c(a)(9)(A), the claimant is required to 
correctly

[[Page 65017]]

apportion the fee to that imported merchandise for which drawback is 
claimed when calculating the amount of drawback requested on the 
drawback entry. This is determined as follows:
    (i) Relative value ratio for each line item. The value of each line 
item of entered merchandise subject to a merchandise processing fee is 
calculated (to four decimal places) by dividing the value of the line 
item subject to the fee by the total value of entered merchandise 
subject to the fee. The result is the relative value ratio.
    (ii) Merchandise processing fee apportioned to each line item. To 
apportion the merchandise processing fee to each line item, the 
relative value ratio for each line item is multiplied by the 
merchandise processing fee paid.
    (iii) Amount of merchandise processing fee eligible for drawback 
per line item. The amount of merchandise processing fee apportioned to 
each line item is multiplied by 99 percent to calculate that portion of 
the fee attributable to each line item that is eligible for drawback.
    (iv) Amount of merchandise processing fee eligible for drawback per 
unit of merchandise. To calculate the amount of a merchandise 
processing fee eligible for drawback per unit of merchandise, the line 
item amount that is eligible for drawback is divided by the number of 
units covered by that line item (to two decimal places).
    (v) Limitation on amount of merchandise processing fee eligible for 
drawback for substitution claims. The amount of a merchandise 
processing fee eligible for drawback per unit of merchandise for 
drawback claims based upon substitution is subject to the limitations 
set forth in Sec. Sec.  190.22(a)(1)(ii) (manufacturing claims) and 
190.32(b) (unused merchandise claims), as applicable.

    Example 1: 
Line item 1--5,000 articles valued at $10 each total $50,000
Line item 2--6,000 articles valued at $15 each total $90,000
Line item 3--10,000 articles valued at $20 each total $200,000
Total units = 21,000
Total value = $340,000
Merchandise processing fee = $485 (for purposes of this example, the 
fee cap of $485 is assumed; see 19 CFR 24.23 for the current amount 
consistent with 19 U.S.C. 58c(a)(9)(B)(i)).

    Line item relative value ratios. The relative value ratio for 
line item 1 is calculated by dividing the value of that line item by 
the total value ($50,000 / 340,000 = .1471). The relative value 
ratio for line item 2 is .2647. The relative value ratio for line 
item 3 is .5882.
    Merchandise processing fee apportioned to each line item. The 
amount of fee attributable to each line item is calculated by 
multiplying $485 by the applicable relative value ratio. The amount 
of the $485 fee attributable to line item 1 is $71.3435 (.1471 x 
$485 = $71.3435). The amount of the fee attributable to line item 2 
is $128.3795 (.2647 x $485 = $128.3795). The amount of the fee 
attributable to line item 3 is $285.2770 (.5882 x $485 = $285.2770).
    Amount of merchandise processing fee eligible for drawback per 
line item. The amount of merchandise processing fee eligible for 
drawback for line item 1 is $70.6301 (.99 x $71.3435). The amount of 
fee eligible for drawback for line item 2 is $127.0957 (.99 x 
$128.3795). The amount of fee eligible for drawback for line item 3 
is $282.4242 (.99 x $285.2770).
    Amount of merchandise processing fee eligible for drawback per 
unit of merchandise. The amount of merchandise processing fee 
eligible for drawback per unit of merchandise is calculated by 
dividing the amount of fee eligible for drawback for the line item 
by the number of units in the line item. For line item 1, the amount 
of merchandise processing fee eligible for drawback per unit is 
$.0141 ($70.6301 / 5,000 = $.0141). If 1,000 widgets form the basis 
of a claim for drawback under 19 U.S.C. 1313(j), the total amount of 
drawback attributable to the merchandise processing fee is $14.10 
(1,000 x .0141 = $14.10). For line item 2, the amount of fee 
eligible for drawback per unit is $.0212 ($127.0957 / 6,000 = 
$.0212). For line item 3, the amount of fee eligible for drawback 
per unit is $.0282 ($282.4242 / 10,000 = $.0282).
    Example 2.  This example illustrates the treatment of dutiable 
merchandise that is exempt from the merchandise processing fee and 
duty-free merchandise that is subject to the merchandise processing 
fee.

Line item 1--700 meters of printed cloth valued at $10 per meter 
(total value $7,000) that is exempt from the merchandise processing 
fee under 19 U.S.C. 58c(b)(8)(B)(iii)
Line item 2--15,000 articles valued at $100 each (total value 
$1,500,000)
Line item 3--10,000 duty-free articles valued at $50 each (total 
value $500,000)

    The relative value ratios are calculated using line items 2 and 
3 only, as there is no merchandise processing fee imposed by reason 
of importation on line item 1.

Line item 2--1,500,000 / 2,000,000 = .75 (line items 2 and 3 form 
the total value of the merchandise subject to the merchandise 
processing fee).
Line item 3--500,000 / 2,000,000 = .25.

    If the total merchandise processing fee paid was $485, the 
amount of the fee attributable to line item 2 is $363.75 (.75 x $485 
= $363.75). The amount of the fee attributable to line item 3 is 
$121.25 (.25 x $485 = $121.25).
    The amount of merchandise processing fee eligible for drawback 
for line item 2 is $360.1125 (.99 x $363.75). The amount of fee 
eligible for line item 3 is $120.0375 (.99 x $121.25).
    The amount of drawback on the merchandise processing fee 
attributable to each unit of line item 2 is $.0240 ($360.1125 / 
15,000 = $.0240). The amount of drawback on the merchandise 
processing fee attributable to each unit of line item 3 is $.0120 
($120.0375 / 10,000 = $.0120).
    If 1,000 units of line item 2 were exported, the drawback 
attributable to the merchandise processing fee is $24.00 ($.0240 x 
1,000 = $24.00).

    (3) Calculations for all other duties, taxes, and fees--(i) 
General. Where a drawback claimant requests a refund of any other 
duties, taxes, and fees allowable in accordance with Sec.  190.3, the 
claimant is required to accurately calculate (including apportionment 
using per unit averaging or inventory management methods, as 
appropriate) the duties, taxes, and fees attributable to the designated 
imported merchandise for which drawback is being claimed when 
calculating the amount of drawback requested on the drawback entry 
(generally 99% of the duties, taxes, and fees paid on the imported 
merchandise).
    (ii) Examples. As illustrated in the examples in this paragraph, in 
the case of customs duties, the type of calculation required to 
determine the amount of duties available for refund (generally 99% of 
the duties paid on the imported merchandise) will vary depending on 
whether the duty involved is ad valorem, specific, or compound.

    Example 1: Ad valorem duty rate. Apportionment of the duties 
paid (and available for refund) will be based on the application of 
the duty rates to the per unit values of the imported merchandise. 
The per unit values are based on the invoice values unless the 
method of refund calculation is per unit averaging, which would 
require equal apportionment of the duties paid over the quantity of 
imported merchandise covered by the line item upon which the 
imported merchandise was reported on the import entry summary. As a 
result, the amount of duties available for refund will vary 
depending on the method used to calculate refunds.
    Example 2: Specific duty rate. No apportionment of the duties 
paid is required to determine the amount available for refund. A 
fixed duty rate is applicable to each unit of the imported 
merchandise based on quantity. This fixed rate will not vary based 
on the per unit values of the imported merchandise and, as a result, 
there is no impact on the amount of duties available for refunds 
(regardless of whether the refunds are calculated based on invoice 
values or per unit averaging).
    Example 3: Compound duty rate. A compound duty rate is a 
combination of an ad valorem duty rate and a specific duty rate, 
with both rates applied to the same imported merchandise. As a 
result, a combination of the calculations discussed in paragraphs 
(a)

[[Page 65018]]

and (b) of this section will apply when calculating the amount of 
duties paid that are available for refund.

    (4) Limitation. The amount of duties, taxes, and fees eligible for 
drawback per unit of merchandise for drawback claims based upon 
substituted merchandise is subject to the limitations set forth in 
Sec.  190.22(a)(1)(ii) (manufacturing claims) and Sec.  190.32(b) 
(unused merchandise claims), as applicable.
    (c) HTSUS classification or Schedule B commodity number(s)--(1) 
General. Drawback claimants are required to provide, on all drawback 
claims they submit, the 10-digit HTSUS classification or the Schedule B 
commodity number(s), for the following:
    (i) Designated imported merchandise. For imported merchandise 
designated on drawback claims, the HTSUS classification applicable at 
the time of entry (e.g., as required to be reported on the applicable 
entry summary(s) and other entry documentation).
    (ii) Substituted merchandise on manufacturing claims. For 
merchandise substituted on manufacturing drawback claims, and 
consistent with the applicable general manufacturing drawback ruling or 
the specific manufacturing drawback ruling, the applicable HTSUS 
classification numbers must be the same as either--
    (A) If the substituted merchandise was imported, the HTSUS 
classification applicable at the time of entry (e.g., as required to be 
reported on the applicable entry summary(s) and other entry 
documentation); or,
    (B) If the substituted merchandise was not imported, the HTSUS 
classification that would have been reported to CBP for the applicable 
entry summary(s) and other entry documentation, for the domestically 
produced substituted merchandise, at the time of entry of the 
designated imported merchandise.
    (iii) Exported merchandise or articles. For exported merchandise or 
articles, the HTSUS classification or Schedule B commodity number(s) 
must be from the Electronic Export Information (EEI), when required. If 
no EEI is required (see, 15 CFR part 30 subpart D for a complete list 
of exemptions), then the claimant must provide the Schedule B commodity 
number(s) or HTSUS number(s) that the exporter would have set forth on 
the EEI when the exportation took place, but for the exemption from the 
requirement for an EEI.
    (iv) Destroyed merchandise or articles. For destroyed merchandise 
or articles, the HTSUS classification or Schedule B commodity number(s) 
must be reported, subject to the following:
    (A) if the HTSUS classification is reported, then it must be the 
HTSUS classification that would have been applicable to the destroyed 
merchandise or articles if they had been entered for consumption at the 
time of destruction; or
    (B) if the Schedule B commodity number is reported, then it must be 
the Schedule B commodity number that would have been reported for the 
destroyed merchandise or articles if the EEI had been required for an 
exportation at the time of destruction.
    (2) Changes to classification. If the 10-digit HTSUS classification 
or the Schedule B commodity number(s) reported to CBP for the drawback 
claim are determined to be incorrect or otherwise in controversy after 
the filing of the drawback entry, then the claimant must notify the 
drawback office where the drawback claim was filed of the correct HTSUS 
classification or Schedule B commodity number or the nature of the 
controversy before the liquidation of the drawback entry.
    (d) Method of filing. All drawback claims must be submitted through 
a CBP-authorized system.
    (e) Time of filing--(1) General. A complete drawback claim is 
timely filed if it is successfully transmitted not later than 5 years 
after the date on which the merchandise designated as the basis for the 
drawback claim was imported and in compliance with all other applicable 
deadlines under this part.
    (i) Official date of filing. The official date of filing is the 
date upon which CBP receives a complete claim, as provided in paragraph 
(a) of this section, via transmission through a CBP-authorized system, 
including the uploading of all required supporting documentation.
    (ii) Abandonment. Claims not completed within the 5-year period 
after the date on which the merchandise designated as the basis for the 
drawback claim was imported will be considered abandoned. Except as 
provided in paragraph (e)(2) of this section, no extension will be 
granted unless it is established that CBP was responsible for the 
untimely filing.
    (iii) Special timeframes. For substitution claims, the exportation 
or destruction of merchandise shall not have preceded the date of 
importation of the designated imported merchandise, and/or the 
exportation or destruction of merchandise shall not otherwise be 
outside of the timeframes specified in 19 U.S.C. 1313(c)(2)(C) and 19 
U.S.C. 1313(p)(2), if applicable.
    (2) Major disaster. The 5-year period for filing a complete 
drawback claim provided for in paragraph (e)(1) of this section may be 
extended for a period not to exceed 18 months if:
    (i) The claimant establishes to the satisfaction of CBP that the 
claimant was unable to file the drawback claim because of an event 
declared by the President to be a major disaster, within the meaning 
given to that term in 42 U.S.C. 5122(2), on or after January 1, 1994; 
and
    (ii) The claimant files a request for such extension with CBP no 
later than 1 year from the last day of the 5-year period referred to in 
paragraph (e)(1) of this section.
    (3) Record retention. If an extension is granted with respect to a 
request filed under paragraph (e)(2)(ii) of this section, the periods 
of time for retaining records under 19 U.S.C. 1508(c)(3) will be 
extended for an additional 18 months.


Sec.  190.52  Rejecting, perfecting or amending claims.

    (a) Rejecting the claim. Upon review of a drawback claim when 
transmitted in ACE, if the claim is determined to be incomplete (see 
Sec.  190.51(a)(1)) or untimely (see Sec.  190.51(e)), the claim will 
be rejected and CBP will notify the filer. The filer will then have the 
opportunity to complete the claim subject to the requirement for filing 
a complete claim within 5 years of the date of importation of the 
merchandise designated as the basis for the drawback claim (or within 3 
years after the date of exportation of the articles upon which drawback 
is claimed for drawback pursuant to 19 U.S.C. 1313(d)). If it is later 
determined by CBP, subsequent to acceptance of the claim and upon 
further review, that the claim was incomplete or untimely, then it may 
be denied.
    (b) Perfecting the claim; additional evidence required. If CBP 
determines that the claim is complete according to the requirements of 
Sec.  190.51(a)(1), but that additional evidence or information is 
required, CBP will notify the filer. The claimant must furnish, or have 
the appropriate party furnish, the evidence or information requested 
within 30 days of the date of notification by CBP. CBP may extend this 
30-day period if the claimant files a written request for such 
extension within the 30-day period and provides good cause. The 
evidence or information required under this paragraph may be filed more 
than 5 years after the date of importation of the merchandise 
designated as the basis for the drawback claim (or within 3 years after 
the date of exportation of the articles upon which drawback is claimed 
for drawback pursuant to 19 U.S.C. 1313(d)). Such additional

[[Page 65019]]

evidence or information may include, but is not limited to:
    (1) Records or other documentary evidence of exportation, as 
provided for in Sec.  190.72, which shows that the articles were 
shipped by the person filing the drawback entry, or a letter of 
endorsement from the exporter which must be attached to such records or 
other documentary evidence, showing that the party filing the entry is 
authorized to claim drawback and receive payment (the claimant must 
have on file and make available to CBP upon request, the endorsement 
from the exporter assigning the right to claim drawback);
    (2) A copy of the import entry and invoice annotated for the 
merchandise identified or designated;
    (3) A copy of the export invoice annotated to indicate the items on 
which drawback is being claimed; and
    (4) Records documenting the transfer of the merchandise including 
records kept in the normal course of business upon which the claim is 
based (see Sec.  190.10).
    (c) Amending the claim; supplemental filing. Amendments to claims 
for which the drawback entries have not been liquidated must be made 
within 5 years of the date of importation of the merchandise designated 
as the basis for the drawback claim. Liquidated drawback entries may 
not be amended; however, they may be protested as provided for in Sec.  
190.84 and part 174 of this chapter.


Sec.  190.53  Restructuring of claims.

    (a) General. CBP may require claimants to restructure their 
drawback claims in such a manner as to foster administrative 
efficiency. In making this determination, CBP will consider the 
following factors:
    (1) The number of transactions of the claimant (imports and 
exports);
    (2) The value of the claims;
    (3) The frequency of claims;
    (4) The product or products being claimed; and
    (5) For 19 U.S.C. 1313(a) and 1313(b) claims, the provisions, as 
applicable, of the general manufacturing drawback ruling or the 
specific manufacturing drawback ruling.
    (b) Exemption from restructuring; criteria. In order to be exempt 
from a restructuring, a claimant must demonstrate an inability or 
impracticability in restructuring its claims as required by CBP and 
must provide a mutually acceptable alternative. Criteria used in such 
determination will include a demonstration by the claimant of one or 
more of the following:
    (1) Complexities caused by multiple commodities or the applicable 
general manufacturing drawback ruling or the specific manufacturing 
drawback ruling;
    (2) Variable and conflicting manufacturing and inventory periods 
(for example, financial, accounting and manufacturing records 
maintained are significantly different);
    (3) Complexities caused by multiple manufacturing locations;
    (4) Complexities caused by difficulty in adjusting accounting and 
inventory records (for example, records maintained--financial or 
accounting--are significantly different); and/or
    (5) Complexities caused by significantly different methods of 
operation.

Subpart F--Verification of Claims


Sec.  190.61  Verification of drawback claims.

    (a) Authority. All claims are subject to verification by CBP.
    (b) Method. CBP personnel will verify compliance with the law and 
this part, the accuracy of the related general manufacturing drawback 
ruling or specific manufacturing drawback ruling (as applicable), and 
the selected drawback claims. Verification may include an examination 
of all records relating to the transaction(s).
    (c) Liquidation. When a claim has been selected for verification, 
liquidation will be postponed only on the drawback entry for the claim 
selected for verification. Postponement will continue in effect until 
the verification has been completed and a report is issued, subject to 
the limitation in 19 CFR 159.12(f). In the event that a substantial 
error is revealed during the verification, CBP may postpone liquidation 
of all related product line claims, or, in CBP's discretion, all claims 
made by that claimant.
    (d) Errors in specific or general manufacturing drawback rulings--
(1) Specific manufacturing drawback ruling; action by CBP. If 
verification of a drawback claim filed under a specific manufacturing 
drawback ruling (see Sec.  190.8) reveals errors or deficiencies in the 
drawback ruling or application therefor, the verifying CBP official 
will promptly inform CBP Headquarters (Attention: Entry Process and 
Duty Refunds Branch, Regulations and Rulings, Office of Trade).
    (2) General manufacturing drawback ruling. If verification of a 
drawback claim filed under a general manufacturing drawback ruling (see 
Sec.  190.7) reveals errors or deficiencies in a general manufacturing 
drawback ruling, the letter of notification of intent to operate under 
the general manufacturing drawback ruling, or the acknowledgment of the 
letter of notification of intent, the verifying CBP official will 
promptly inform CBP Headquarters (Attention: Entry Process and Duty 
Refunds Branch, Regulations and Rulings, Office of Trade).
    (3) Action by CBP Headquarters. CBP Headquarters will review the 
stated errors or deficiencies and take appropriate action (see 19 
U.S.C. 1625; 19 CFR part 177).


Sec.  190.62  Penalties.

    (a) Criminal penalty. Any person who knowingly and willfully files 
any false or fraudulent entry or claim for the payment of drawback upon 
the exportation or destruction of merchandise or knowingly or willfully 
makes or files any false document for the purpose of securing the 
payment to himself or others of any drawback on the exportation or 
destruction of merchandise greater than that legally due, will be 
subject to the criminal provisions of 18 U.S.C. 550, 1001, or any other 
appropriate criminal sanctions.
    (b) Civil penalty. Any person who seeks, induces or affects the 
payment of drawback, by fraud or negligence, or attempts to do so, is 
subject to civil penalties, as provided under 19 U.S.C. 1593a. A 
fraudulent violation is subject to a maximum administrative penalty of 
3 times the total actual or potential loss of revenue. Repetitive 
negligent violations are subject to a maximum penalty equal to the 
actual or potential loss of revenue.


Sec.  190.63  Liability for drawback claims.

    (a) Liability of claimants. Any person making a claim for drawback 
will be liable for the full amount of the drawback claimed.
    (b) Liability of importers. An importer will be liable for any 
drawback claim made by another person with respect to merchandise 
imported by the importer in an amount equal to the lesser of:
    (1) The amount of duties, taxes, and fees that the person claimed 
with respect to the imported merchandise; or
    (2) The amount of duties, taxes, and fees that the importer 
authorized the other person to claim with respect to the imported 
merchandise.
    (c) Joint and several liability. Persons described in paragraphs 
(a) and (b) of this section will be jointly and severally liable for 
the amount described in paragraph (b).

[[Page 65020]]

Subpart G--Exportation and Destruction


Sec.  190.71  Drawback on articles destroyed under CBP supervision.

    (a) Procedure. At least 7 working days before the intended date of 
destruction of merchandise or articles upon which drawback is intended 
to be claimed, a Notice of Intent to Export, Destroy, or Return 
Merchandise for Purposes of Drawback on CBP Form 7553 must be filed by 
the claimant with the CBP port where the destruction is to take place, 
giving notification of the date and specific location where the 
destruction is to occur. Within 4 working days after receipt of the CBP 
Form 7553, CBP will advise the filer in writing of its determination to 
witness or not to witness the destruction. If the filer of the notice 
is not so notified within 4 working days, the merchandise may be 
destroyed without delay and will be deemed to have been destroyed under 
CBP supervision. Unless CBP determines to witness the destruction, the 
destruction of the articles following timely notification on CBP Form 
7553 will be deemed to have occurred under CBP supervision. If CBP 
attends the destruction, CBP will certify on CBP Form 7553.
    (b) Evidence of destruction. When CBP does not attend the 
destruction, the claimant must submit evidence that destruction took 
place in accordance with the Notice of Intent to Export, Destroy, or 
Return Merchandise for Purposes of Drawback on CBP Form 7553. The 
evidence must be issued by a disinterested third party (for example, a 
landfill operator). The type of evidence depends on the method and 
place of destruction, but must establish that the merchandise was, in 
fact, destroyed within the meaning of ``destruction'' in Sec.  190.2.
    (c) Completion of drawback entry. After destruction, the claimant 
must provide CBP Form 7553, certified by the CBP official witnessing 
the destruction in accordance with paragraph (a) of this section, to 
CBP as part of the complete drawback claim based on the destruction 
(see Sec.  190.51(a)). If CBP has not attended the destruction, the 
claimant must provide the evidence that destruction took place in 
accordance with the approved CBP Form 7553, as provided for in 
paragraph (b) of this section, as part of the complete drawback claim 
based on the destruction (see Sec.  190.51(a)).
    (d) Deduction for value of recovered materials. Under 19 U.S.C. 
1313(x), a destruction may include a process by which materials are 
recovered from imported merchandise or from an article manufactured 
from imported merchandise for drawback claims made pursuant to 19 
U.S.C. 1313(a), (b), (c), and (j). In determining the amount of duties 
to be refunded as drawback to a claimant, the value of recovered 
materials (including the value of any tax benefit or royalty payment) 
that accrues to the drawback claimant must be deducted from the value 
of the imported merchandise that is destroyed, or from the value of the 
merchandise used, or designated as used, in the manufacture of the 
article.


Sec.  190.72  Proof of exportation.

    (a) Required export data. Proof of exportation of articles for 
drawback purposes must establish fully the date and fact of exportation 
and the identity of the exporter by providing the following summary 
data as part of a complete claim (see Sec.  190.51) (in addition to 
providing prior notice of intent to export if applicable):
    (1) Date of export;
    (2) Name of exporter;
    (3) Description of the goods;
    (4) Quantity and unit of measure;
    (5) Schedule B number or HTSUS number; and
    (6) Country of ultimate destination.
    (b) Supporting documentary evidence. The documents for establishing 
exportation (which may be records kept in the normal course of 
business) include, but are not limited to:
    (1) Records or other documentary evidence of exportation (originals 
or copies) issued by the exporting carrier, such as a bill of lading, 
air waybill, freight waybill, Canadian Customs manifest, and/or cargo 
manifest;
    (2) Records from a CBP-approved electronic export system of the 
United States Government (Sec.  190.73);
    (3) Official postal records (originals or copies) which evidence 
exportation by mail (Sec.  190.74);
    (4) Notice of lading for supplies on certain vessels or aircraft 
(Sec.  190.112); or
    (5) Notice of transfer for articles manufactured or produced in the 
United States which are transferred to a foreign trade zone (Sec.  
190.183).


Sec.  190.73  Electronic proof of exportation.

    Records kept through an electronic export system of the United 
States Government may be presented as actual proof of exportation only 
if CBP has officially approved the use of that electronic export system 
as proof of compliance for drawback claims. Official approval will be 
published as a general notice in the Customs Bulletin.


Sec.  190.74  Exportation by mail.

    If the merchandise on which drawback is to be claimed is exported 
by mail or parcel post, the official postal records (original or 
copies) which describe the mail shipment will be sufficient to prove 
exportation. The postal record must be identified on the drawback 
entry, and must be retained by the claimant in their records and made 
available to CBP upon request (see Sec.  190.51(a)).


Sec.  190.75  Exportation by the Government.

    (a) Claim by U.S. Government. When a department, branch, agency, or 
instrumentality of the U.S. Government exports products with the 
intention of claiming drawback, it may establish the exportation in the 
manner provided in Sec.  190.72 (see Sec.  190.4).
    (b) Claim by supplier. When a supplier of merchandise to the 
Government or any of the parties specified in Sec.  190.82 claims 
drawback, exportation must be established under Sec.  190.72.


Sec.  190.76  [Reserved]

Subpart H--Liquidation and Protest of Drawback Entries


Sec.  190.81  Liquidation.

    (a) Time of liquidation. Drawback entries may be liquidated after:
    (1) Liquidation of the designated import entry or entries becomes 
final pursuant to paragraph (e) of this section; or
    (2) Deposit of estimated duties on the imported merchandise and 
before liquidation of the designated import entry or entries.
    (b) Claims based on estimated duties. (1) Drawback may be paid upon 
liquidation of a claim based on estimated duties if one or more of the 
designated import entries have not been liquidated, or the liquidation 
has not become final (because of a protest being filed) (see also Sec.  
173.4(c) of this chapter), only if the drawback claimant and any other 
party responsible for the payment of liquidated import duties each 
files a written request for payment of each drawback claim, waiving any 
right to payment or refund under other provisions of law, to the extent 
that the estimated duties on the unliquidated import entry are included 
in the drawback claim for which drawback on estimated duties is 
requested under this paragraph. The drawback claimant must, to the best 
of its knowledge, identify each import entry that has been protested 
and that is included in the drawback claim. A drawback entry, once 
finally liquidated on the basis of estimated duties pursuant to 
paragraph (e)(2) of this section, will not be adjusted by reason of a 
subsequent final liquidation of the import entry.

[[Page 65021]]

    (2) However, if final liquidation of the import entry discloses 
that the total amount of import duty is different from the total 
estimated duties deposited, except in those cases when drawback is 100% 
of the duty, the party responsible for the payment of liquidated 
duties, as applicable, will:
    (i) Be liable for 1 percent of all increased duties found to be due 
on that portion of merchandise recorded on the drawback entry; or
    (ii) Be entitled to a refund of 1 percent of all excess duties 
found to have been paid as estimated duties on that portion of the 
merchandise recorded on the drawback entry.
    (c) Claims based on voluntary tenders or other payments of duties--
(1) General. Subject to the requirements in paragraph (2) of this 
section, drawback may be paid upon liquidation of a claim based on 
voluntary tenders of the unpaid amount of lawful ordinary customs 
duties or any other payment of lawful ordinary customs duties for an 
entry, or withdrawal from warehouse, for consumption (see Sec.  
190.3(a)(1)(iii)), provided that:
    (i) The tender or payment is specifically identified as duty on a 
specifically identified entry, or withdrawal from warehouse, for 
consumption;
    (ii) Liquidation of the specifically identified entry, or 
withdrawal from warehouse, for consumption became final prior to such 
tender or payment; and
    (iii) Liquidation of the drawback entry in which that specifically 
identified import entry, or withdrawal from warehouse, for consumption 
is designated has not become final.
    (2) Written request and waiver. Drawback may be paid on claims 
based on voluntary tenders or other payments of duties under this 
subsection only if the drawback claimant and any other party 
responsible for the payment of the voluntary tenders or other payments 
of duties each files a written request for payment of each drawback 
claim based on such voluntary tenders or other payments of duties, 
waiving any claim to payment or refund under other provisions of law, 
to the extent that the voluntary tenders or other payment of duties 
under this paragraph are included in the drawback claim for which 
drawback on the voluntary tenders or other payment of duties is 
requested under this paragraph.
    (d) Claims based on liquidated duties. Drawback will be based on 
the final liquidated duties paid that have been made final by operation 
of law (except in the case of the written request for payment of 
drawback on the basis of estimated duties, voluntary tender of duties, 
and other payments of duty, and waiver, provided for in paragraphs (b) 
and (c) of this section).
    (e) Liquidation procedure. (1) General. When the drawback claim has 
been completed by the filing of the entry and other required documents, 
and exportation (or destruction) of the merchandise or articles has 
been established, CBP will determine drawback due on the basis of the 
complete drawback claim, the applicable general manufacturing drawback 
ruling or specific manufacturing drawback ruling, and any other 
relevant evidence or information. Notice of liquidation will be given 
electronically as provided in Sec. Sec.  159.9 and 159.10(c)(3) of this 
chapter.
    (2) Liquidation by operation of law. (i) Liquidated import entries. 
A drawback claim that satisfies the requirements of paragraph (d) that 
is not liquidated within 1 year from the date of the drawback claim 
(see Sec.  190.51(e)(1)(i)) will be deemed liquidated for the purpose 
of the drawback claim at the drawback amount asserted by the claimant 
or claim, unless the time for liquidation is extended in accordance 
with Sec.  159.12 or if liquidation is suspended as required by statute 
or court order.
    (ii) Unliquidated import entries. A drawback claim that satisfies 
the requirements of paragraphs (b) or (c) of this section will be 
deemed liquidated upon the deposit of estimated duties on the 
unliquidated imported merchandise (see Sec.  190.81(b)).
    (f) Relative value; multiple products--(1) Distribution. Where two 
or more products result from the manufacture or production of 
merchandise, drawback will be distributed to the several products in 
accordance with their relative values at the time of separation.
    (2) Values. The values to be used in computing the distribution of 
drawback where two or more products result from the manufacture or 
production of merchandise under drawback conditions must be the market 
value (as provided for in the definition of relative value in Sec.  
190.2), unless other values are approved by CBP.
    (g) Payment. CBP will authorize the amount of the refund due as 
drawback to the claimant.


Sec.  190.82  Person entitled to claim drawback.

    Unless otherwise provided in this part (see Sec. Sec.  190.42(b), 
190.162, 190.175(a), 190.186), the exporter (or destroyer) will be 
entitled to claim drawback, unless the exporter (or destroyer), by 
means of a certification, waives the right to claim drawback and 
assigns such right to the manufacturer, producer, importer, or 
intermediate party (in the case of drawback under 19 U.S.C. 1313(j)(1) 
and (2), see Sec.  190.33(a) and (b)). Such certification must also 
affirm that the exporter (or destroyer) has not assigned and will not 
assign the right to claim drawback on the particular exportation or 
destruction to any other party. The certification provided for in this 
section may be a blanket certification for a stated period.


Sec.  190.83  Person entitled to receive payment.

    Drawback is paid to the claimant (see Sec.  190.82).


Sec.  190.84  Protests.

    Procedures to protest the denial, in whole or in part, of a 
drawback entry must be in accordance with part 174 of this chapter (19 
CFR part 174).

Subpart I--Waiver of Prior Notice of Intent To Export or Destroy; 
Accelerated Payment of Drawback


Sec.  190.91  Waiver of prior notice of intent to export or destroy.

    (a) General--(1) Scope. The requirement in Sec.  190.35 for prior 
notice of intent to export or destroy merchandise which may be the 
subject of an unused merchandise drawback claim under section 313(j) of 
the Act, as amended (19 U.S.C. 1313(j)), or a rejected merchandise 
drawback claim under section 313(c), as amended (19 U.S.C. 1313(c)), 
may be waived under the provisions of this section.
    (2) Effective date for claimants with existing approval. For 
claimants approved for waiver of prior notice before February 24, 2019, 
and under 19 CFR part 191, such approval of waiver of prior notice will 
remain in effect, but only if the claimant provides the following 
certification as part of each complete claim filed on or after that 
date, pursuant to Sec.  190.51(a)(2)(xvi): ``The undersigned 
acknowledges the current statutory requirements under 19 U.S.C. 1313 
and the regulatory requirements in 19 CFR part 190, and hereby 
certifies continuing eligibility for the waiver of prior notice 
(granted prior to February 24, 2019) in compliance therewith.'' This 
certification may only be made for waiver of prior notice for the 
specific type of drawback claim for which the application was 
previously approved under 19 CFR 191, except that applications approved 
under 19 U.S.C. 1313(j)(1) will also be applicable to claims for the 
same type of merchandise if made under 19 U.S.C. 1313(j)(2).
    (3) Limited successorship for waiver of prior notice. When a 
claimant

[[Page 65022]]

(predecessor) is approved for waiver of prior notice under this section 
and all of the rights, privileges, immunities, powers, duties and 
liabilities of the claimant are transferred by written agreement, 
merger, or corporate resolution to a successor, such approval of waiver 
of prior notice will remain in effect for a period of 1 year after such 
transfer. The approval of waiver of prior notice will terminate at the 
end of such 1-year period unless the successor applies for waiver of 
prior notice under this section. If such successor applies for waiver 
of prior notice under this section within such 1-year period, the 
successor may continue to operate under the predecessor's waiver of 
prior notice until CBP approves or denies the successor's application 
for waiver of prior notice under this section, subject to the 
provisions in this section (see, in particular, paragraphs (d) and (e) 
of this section).
    (b) Application--(1) Who may apply. A claimant for unused 
merchandise drawback under 19 U.S.C. 1313(j) or rejected merchandise 
drawback under 19 U.S.C. 1313(c) may apply for a waiver of prior notice 
of intent to export or destroy merchandise under this section.
    (2) Contents of application. An applicant for a waiver of prior 
notice under this section must file a written application (which may be 
physically delivered or delivered via email) with the drawback office 
where the claims will be filed. Such application must include the 
following:
    (i) Required information:
    (A) Name, address, and Internal Revenue Service (IRS) number (with 
suffix) of applicant;
    (B) Name, address, and Internal Revenue Service (IRS) number (with 
suffix) of current exporter(s) or destroyer(s) (if more than 3 
exporters or destroyers, such information is required only for the 3 
most frequently used exporters or destroyers), if applicant is not the 
exporter or destroyer;
    (C) Export or destruction period covered by this application;
    (D) Commodity/product lines of imported and exported or destroyed 
merchandise covered by this application;
    (E) Origin of merchandise covered by this application;
    (F) Estimated number of export transactions or destructions during 
the next calendar year covered by this application;
    (G) Port(s) of exportation or location of destruction facilities to 
be used during the next calendar year covered by this application;
    (H) Estimated dollar value of potential drawback during the next 
calendar year covered by this application;
    (I) The relationship between the parties involved in the import and 
export transactions or destructions; and
    (J) Provision(s) of drawback covered by the application.
    (ii) A written declaration whether or not the applicant has 
previously been denied a waiver request, or had an approval of a waiver 
revoked, by any other drawback office, and whether the applicant has 
previously requested a 1-time waiver of prior notice under Sec.  
190.36, and whether such request was approved or denied; and
    (iii) A certification that the following documentary evidence will 
be made available for CBP review upon request:
    (A) For the purpose of establishing that the imported merchandise 
was not used in the United States (for purposes of drawback under 19 
U.S.C. 1313(j)(1)) or that the exported or destroyed merchandise was 
not used in the United States and satisfies the requirements for 
substitution with the imported merchandise (for purposes of drawback 
under 19 U.S.C. 1313(j)(2)) or that the rejected merchandise that was 
exported or destroyed satisfies the relevant requirements (for purposes 
of drawback under 19 U.S.C. 1313(c)), and, as applicable:
    (1) Records;
    (2) Laboratory records prepared in the ordinary course of business; 
and/or
    (3) Inventory records prepared in the ordinary course of business 
tracing all relevant movements and storage of the imported merchandise, 
substituted merchandise, and/or exported or destroyed merchandise; and
    (B) Any other evidence establishing compliance with other 
applicable drawback requirements, upon CBP's request under paragraph 
(b)(2)(iii) of this section.
    (3) Samples of records to accompany application. To expedite the 
processing of applications under this section, the application should 
contain at least one sample of each of the records to be used to 
establish compliance with the applicable requirements (that is, sample 
of import document (for example, CBP Form 7501, or its electronic 
equivalent), sample of export document (for example, bill of lading) or 
sample of evidence of destruction, and samples of business, laboratory, 
and inventory records certified, under paragraph (b)(2)(iii)(A)(1) 
through (3) of this section, to be available to CBP upon request).
    (c) Action on application--(1) CBP review. The drawback office will 
review and verify the information submitted on and with the 
application. CBP will notify the applicant in writing within 90 days of 
receipt of the application of its decision to approve or deny the 
application, or of CBP's inability to approve, deny, or act on the 
application and the reason therefor. In order for CBP to evaluate the 
application, CBP may request any of the information listed in paragraph 
(b)(2)(iii)(A)(1) through (3) of this section. Based on the information 
submitted on and with the application and any information so requested, 
and based on the applicant's record of transactions with CBP, the 
drawback office will approve or deny the application. The criteria to 
be considered in reviewing the applicant's record with CBP include, but 
are not limited to:
    (i) The presence or absence of unresolved CBP charges (duties, 
taxes, or other debts owed CBP);
    (ii) The accuracy of the claimant's past drawback claims;
    (iii) Whether waiver of prior notice was previously revoked or 
suspended; and
    (iv) The presence or absence of any failure to present merchandise 
to CBP for examination after CBP had timely notified the party filing a 
Notice of Intent to Export, Destroy, or Return Merchandise for Purposes 
of Drawback on CBP Form 7553 of CBP's intent to examine the merchandise 
(see Sec.  190.35).
    (2) Approval. The approval of an application for waiver of prior 
notice of intent to export or destroy, under this section, will operate 
prospectively, applying only to those export shipments or destructions 
occurring after the date of the waiver. It will be subject to a stay, 
as provided in paragraph (d) of this section.
    (3) Denial. If an application for waiver of prior notice of intent 
to export or destroy, under this section, is denied, the applicant will 
be given written notice, specifying the grounds therefor, together with 
what corrective action may be taken, and informing the applicant that 
the denial may be appealed in the manner prescribed in paragraph (g) of 
this section. The applicant may not reapply for a waiver until the 
reason for the denial is resolved.
    (d) Stay. An approval of waiver of prior notice may be stayed, for 
a specified reasonable period, should CBP desire for any reason to 
examine the merchandise being exported or destroyed with drawback prior 
to its exportation or destruction for purposes of verification. CBP 
will provide written notice, by registered or certified mail, of such a 
stay to the person for whom waiver of prior notice was approved.

[[Page 65023]]

CBP will specify the reason(s) for the stay in such written notice. The 
stay will take effect 2 working days after the date the person signs 
the return post office receipt for the registered or certified mail. 
The stay will remain in effect for the period specified in the written 
notice, or until such earlier date as CBP notifies the person for whom 
waiver of prior notice was approved in writing that the reason for the 
stay has been satisfied. After the stay is lifted, operation under the 
waiver of prior notice procedure may resume for exports on or after the 
date the stay is lifted.
    (e) Proposed revocation. CBP may propose to revoke the approval of 
an application for waiver of prior notice of intent to export or 
destroy, under this section, for good cause (such as, noncompliance 
with the drawback law and/or regulations). CBP will give written notice 
of the proposed revocation of a waiver of prior notice of intent to 
export or destroy. The notice will specify the reasons for CBP's 
proposed action and provide information regarding the procedures for 
challenging CBP's proposed revocation action as prescribed in paragraph 
(g) of this section. The written notice of proposed revocation may be 
included with a notice of stay of approval of waiver of prior notice as 
provided under paragraph (d) of this section. The revocation of the 
approval of waiver of prior notice will take effect 30 days after the 
date of the proposed revocation if not timely challenged under 
paragraph (g) of this section. If timely challenged, the revocation 
will take effect after completion of the challenge procedures in 
paragraph (g) of this section unless the challenge is successful.
    (f) Action by drawback office controlling. Action by the drawback 
office to approve, deny, stay, or revoke waiver of prior notice of 
intent to export or destroy, unless reversed by CBP Headquarters, will 
govern the applicant's eligibility for this procedure in all CBP 
drawback offices. If the application for waiver of prior notice of 
intent to export or destroy is approved, the claimant must refer to 
such approval in the first drawback claim filed after such approval in 
the drawback office approving waiver of prior notice and must submit a 
copy of the approval letter with the first drawback claim filed in any 
drawback office other than the approving office, when the export or 
destruction upon which the claim is based was without prior notice, 
under this section.
    (g) Appeal of denial or challenge to proposed revocation. An appeal 
of a denial of an application under this section, or challenge to the 
proposed revocation of an approved application under this section, may 
be made by letter to the drawback office issuing the denial or proposed 
revocation and must be filed within 30 days of the date of denial or 
proposed revocation. A denial of an appeal or challenge made to the 
drawback office may itself be appealed to CBP Headquarters, Office of 
Trade, Trade Policy and Programs, and must be filed within 30 days of 
the denial date of the initial appeal or challenge. The 30-day period 
for appeal or challenge to the drawback office or to CBP Headquarters 
may be extended for good cause, upon written request by the applicant 
or holder for such extension filed with the appropriate office within 
the 30-day period.


Sec.  190.92  Accelerated payment.

    (a) General--(1) Scope. Accelerated payment of drawback is 
available under this section on drawback claims under this part, unless 
specifically excepted from such accelerated payment. Accelerated 
payment of drawback consists of the payment of estimated drawback 
before liquidation of the drawback entry. Accelerated payment of 
drawback is only available when CBP's review of the request for 
accelerated payment of drawback does not find omissions from, or 
inconsistencies with the requirements of the drawback law and part 190 
(see, especially, subpart E of this part). Accelerated payment of a 
drawback claim does not constitute liquidation of the drawback entry.
    (2) Effective date for claimants with existing approval. For 
claimants approved for accelerated payment of drawback before February 
24, 2019, and under 19 CFR part 191, such approval of accelerated 
payment will remain in effect, but only if the claimant provides the 
following certification as part of each complete claim filed after that 
date, pursuant to Sec.  190.51(a)(2)(xvi): ``The undersigned 
acknowledges the current statutory requirements under 19 U.S.C. 1313 
and the regulatory requirements in 19 CFR part 190, and hereby 
certifies continuing eligibility for accelerated payment (granted prior 
to February 24, 2019) in compliance therewith.'' This certification may 
only be made for accelerated payment for the specific type of drawback 
claim for which the application was previously approved under 19 CFR 
191, except that applications approved under 19 U.S.C. 1313(j)(1) will 
also be applicable to claims for the same type of merchandise if made 
under 19 U.S.C. 1313(j)(2).
    (3) Limited successorship for approval of accelerated payment. When 
a claimant (predecessor) is approved for accelerated payment of 
drawback under this section and all of the rights, privileges, 
immunities, powers, duties and liabilities of the claimant are 
transferred by written agreement, merger, or corporate resolution to a 
successor, such approval of accelerated payment will remain in effect 
for a period of 1 year after such transfer. The approval of accelerated 
payment of drawback will terminate at the end of such 1-year period 
unless the successor applies for accelerated payment of drawback under 
this section. If such successor applies for accelerated payment of 
drawback under this section within such 1-year period, the successor 
may continue to operate under the predecessor's approval of accelerated 
payment until CBP approves or denies the successor's application for 
accelerated payment under this section, subject to the provisions in 
this section (see, in particular, paragraph (f) of this section).
    (b) Application for approval; contents. A person who wishes to 
apply for accelerated payment of drawback must file a written 
application (which may be physically delivered or delivered via email) 
with the drawback office where claims will be filed.
    (1) Required information. The application must contain:
    (i) Company name and address;
    (ii) Internal Revenue Service (IRS) number (with suffix);
    (iii) Identity (by name and title) of the person in claimant's 
organization who will be responsible for the drawback program;
    (iv) Description of the bond coverage the applicant intends to use 
to cover accelerated payments of drawback (see paragraph (d) of this 
section), including:
    (A) Identity of the surety to be used;
    (B) Dollar amount of bond coverage for the first year under the 
accelerated payment procedure; and
    (C) Procedures to ensure that bond coverage remains adequate (that 
is, procedures to alert the applicant when and if its accelerated 
payment potential liability exceeds its bond coverage);
    (v) Description of merchandise and/or articles covered by the 
application;
    (vi) Provision(s) of drawback covered by the application; and
    (vii) Estimated dollar value of potential drawback during the next 
12-month period covered by the application.
    (2) Previous applications. In the application, the applicant must 
state whether or not the applicant has previously been denied an 
application for accelerated payment of drawback, or

[[Page 65024]]

had an approval of such an application revoked by any drawback office.
    (3) Certification of compliance. In or with the application, the 
applicant must also submit a certification, signed by the applicant, 
that all applicable statutory and regulatory requirements for drawback 
will be met.
    (4) Description of claimant's drawback program. With the 
application, the applicant must submit a description (with sample 
documents) of how the applicant will ensure compliance with its 
certification that the statutory and regulatory drawback requirements 
will be met. This description may be in the form of a booklet. The 
detail contained in this description should vary depending on the size 
and complexity of the applicant's accelerated drawback program (for 
example, if the dollar amount is great and there are several kinds of 
drawback involved, with differing inventory, manufacturing, and 
shipping methods, greater detail in the description will be required). 
The description must include at least:
    (i) The name of the official in the claimant's organization who is 
responsible for oversight of the claimant's drawback program;
    (ii) The procedures and controls demonstrating compliance with the 
statutory and regulatory drawback requirements;
    (iii) The parameters of claimant's drawback recordkeeping program, 
including the retention period and method (for example, paper, 
electronic, etc.);
    (iv) A list of the records that will be maintained, including at 
least sample import documents, sample export documents or evidence of 
destruction, sample inventory and transportation documents (if 
applicable), sample laboratory or other documents establishing the 
qualification of merchandise or articles for substitution under the 
drawback law (if applicable), and sample manufacturing documents (if 
applicable);
    (v) The procedures that will be used to notify CBP of changes to 
the claimant's drawback program, variances from the procedures 
described in this application, and violations of the statutory and 
regulatory drawback requirements; and
    (vi) The procedures for an annual review by the claimant to ensure 
that its drawback program complies with the statutory and regulatory 
drawback requirements and that CBP is notified of any modifications 
from the procedures described in this application.
    (c) Sample application. The drawback office, upon request, will 
provide applicants for accelerated payment with a sample letter format 
to assist them in preparing their submissions.
    (d) Bond required. If approved for accelerated payment, the 
claimant must furnish a properly executed bond in an amount sufficient 
to cover the estimated amount of drawback to be claimed during the term 
of the bond. If outstanding accelerated drawback claims exceed the 
amount of the bond, the drawback office will require additional bond 
coverage as necessary before additional accelerated payments are made.
    (e) Action on application--(1) CBP review. The drawback office will 
review and verify the information submitted in and with the 
application. In order for CBP to evaluate the application, CBP may 
request additional information (including additional sample documents) 
and/or explanations of any of the information provided for in paragraph 
(b)(4) of this section. Based on the information submitted on and with 
the application and any information so requested, and based on the 
applicant's record of transactions with CBP, the drawback office will 
approve or deny the application. The criteria to be considered in 
reviewing the applicant's record with CBP include, but are not limited 
to (as applicable):
    (i) The presence or absence of unresolved CBP charges (duties, 
taxes, fees, or other debts owed CBP);
    (ii) The accuracy of the claimant's past drawback claims; and
    (iii) Whether accelerated payment of drawback or waiver of prior 
notice of intent to export was previously revoked or suspended.
    (2) Notification to applicant. CBP will notify the applicant in 
writing within 90 days of receipt of the application of its decision to 
approve or deny the application, or of CBP's inability to approve, 
deny, or act on the application and the reason therefor.
    (3) Approval. The approval of an application for accelerated 
payment, under this section, will be effective as of the date of CBP's 
written notification of approval under paragraph (e)(2) of this 
section. Accelerated payment of drawback will be available under this 
section to unliquidated drawback claims filed before and after such 
date. For claims filed before such date, accelerated payment of 
drawback will be paid only if the claimant furnishes a properly 
executed bond covering the claim, in an amount sufficient to cover the 
amount of accelerated drawback to be paid on the claim.
    (4) Denial. If an application for accelerated payment of drawback 
under this section is denied, the applicant will be given written 
notice, specifying the grounds therefor, together with what corrective 
action may be taken, and informing the applicant that the denial may be 
appealed in the manner prescribed in paragraph (i) of this section. The 
applicant may not reapply for accelerated payment of drawback until the 
reason for the denial is resolved.
    (f) Revocation. CBP may propose to revoke the approval of an 
application for accelerated payment of drawback under this section, for 
good cause (such as, noncompliance with the drawback law and/or 
regulations). In case of such proposed revocation, CBP will give 
written notice, by registered or certified mail, of the proposed 
revocation of the approval of accelerated payment. The notice will 
specify the reasons for CBP's proposed action and the procedures for 
challenging CBP's proposed revocation action as prescribed in paragraph 
(h) of this section. The revocation will take effect 30 days after the 
date of the proposed revocation if not timely challenged under 
paragraph (h) of this section. If timely challenged, the revocation 
will take effect after completion of the challenge procedures in 
paragraph (h) of this section unless the challenge is successful.
    (g) Action by drawback office controlling. Action by the drawback 
office to approve, deny, or revoke accelerated payment of drawback will 
govern the applicant's eligibility for this procedure in all CBP 
drawback offices. If the application for accelerated payment of 
drawback is approved, the claimant must refer to such approval in the 
first drawback claim filed after such approval in the drawback office 
approving accelerated payment of drawback and must submit a copy of the 
approval letter with the first drawback claim filed in a drawback 
office other than the approving office.
    (h) Appeal of denial or challenge to proposed revocation. An appeal 
of a denial of an application under this section, or challenge to the 
proposed revocation of an approved application under this section, may 
be made in writing to the drawback office issuing the denial or 
proposed revocation and must be filed within 30 days of the date of 
denial or proposed revocation. A denial of an appeal or challenge made 
to the drawback office may itself be appealed to CBP Headquarters, 
Office of Trade, Trade Policy and Programs, and must be filed within 30 
days. The 30-day period for appeal or challenge to the drawback office 
or to CBP Headquarters may be extended for good cause, upon written 
request by the applicant or holder for such extension filed with the

[[Page 65025]]

appropriate office within the 30-day period.
    (i) Payment. The drawback office approving a drawback claim in 
which accelerated payment of drawback was requested will certify the 
drawback claim for payment. After liquidation, the drawback office will 
certify the claim for payment of any amount due or demand a refund of 
any excess amount paid. Any excess amount of duty the subject of 
accelerated payment that is not repaid to CBP within 30 days after the 
date of liquidation of the related drawback entry will be considered 
delinquent (see Sec. Sec.  24.3a and 113.65(b) of this chapter).


Sec.  190.93   Combined applications.

    An applicant for the procedures provided for in Sec. Sec.  190.91 
and 190.92 may apply for only one procedure, both procedures 
separately, or both procedures in one application package (see also 
Sec.  190.195 regarding combined applications for certification in the 
drawback compliance program and waiver of prior notice and/or approval 
of accelerated payment of drawback). In the latter instance, the intent 
to apply for both procedures must be clearly stated. In all instances, 
all of the requirements for the procedure(s) applied for must be met 
(for example, in a combined application for both procedures, all of the 
information required for each procedure, all required sample documents 
for each procedure, and all required certifications must be included in 
and with the application).

Subpart J--Internal Revenue Tax on Flavoring Extracts and Medicinal 
or Toilet Preparations (Including Perfumery) Manufactured From 
Domestic Tax-Paid Alcohol


Sec.  190.101   Drawback allowance.

    (a) Drawback. Section 313(d) of the Act, as amended (19 U.S.C. 
1313(d)), provides for drawback of internal revenue tax upon the 
exportation of flavoring extracts and medicinal or toilet preparations 
(including perfumery) manufactured or produced in the United States in 
part from domestic tax-paid alcohol.
    (b) Shipment to Puerto Rico, the Virgin Islands, Guam, and American 
Samoa. Drawback of internal revenue tax on articles manufactured or 
produced under this subpart and shipped to Puerto Rico, the Virgin 
Islands, Guam, or American Samoa will be allowed in accordance with 
section 7653(c) of the Internal Revenue Code (26 U.S.C. 7653(c)). 
However, there is no authority of law for the allowance of drawback of 
internal revenue tax on flavoring extracts or medicinal or toilet 
preparations (including perfumery) manufactured or produced in the 
United States and shipped to Wake Island, Midway Islands, Kingman Reef, 
Canton Island, Enderbury Island, Johnston Island, or Palmyra Island.


Sec.  190.102   Procedure.

    (a) General. Other provisions of this part relating to direct 
identification drawback (see subpart B of this part) will apply to 
claims for drawback filed under this subpart insofar as applicable to 
and not inconsistent with the provisions of this subpart.
    (b) Manufacturing record. The manufacturer of flavoring extracts or 
medicinal or toilet preparations on which drawback is claimed will 
record the products manufactured, the quantity of waste, if any, and a 
full description of the alcohol. These records must be available at all 
times for inspection by CBP officers.
    (c) Additional information required on the manufacturer's 
application for a specific manufacturing drawback ruling. The 
manufacturer's application for a specific manufacturing drawback 
ruling, under Sec.  190.8, must state the quantity of domestic tax-paid 
alcohol contained in each product on which drawback is claimed.
    (d) Variance in alcohol content--(1) Variance of more than 5 
percent. If the percentage of alcohol contained in an exported 
medicinal preparation, flavoring extract or toilet preparation varies 
by more than 5 percent from the percentage of alcohol in the total 
volume of the product as stated in a previously approved application 
for a specific manufacturing drawback ruling, the manufacturer must 
apply for a new specific manufacturing drawback ruling pursuant to 
Sec.  190.8. If the variation differs from a previously filed schedule, 
the manufacturer must file a new schedule incorporating the change.
    (2) Variance of 5 percent or less. Variances of 5 percent or less 
of the volume of the product must be reported to the drawback office 
where the drawback entries are liquidated. In such cases, the drawback 
office may allow drawback without specific authorization from CBP 
Headquarters.
    (e) Time period for completing claims. Drawback claims under this 
subpart must be completed within 3 years after the date of exportation 
of the articles upon which drawback is claimed.
    (f) Filing of drawback entries on duty-paid imported merchandise 
and tax-paid alcohol. When the drawback claim covers duty-paid imported 
merchandise in addition to tax-paid alcohol, the claimant must file one 
set of entries for drawback of customs duty and another set for 
drawback of internal revenue tax.
    (g) Description of the alcohol. The description of the alcohol that 
is the subject of the drawback entry may be obtained from the 
description on the package containing the tax-paid alcohol.


Sec.  190.103   Additional requirements.

    (a) Manufacturer claims domestic drawback. In the case of medicinal 
preparations and flavoring extracts, the claimant must file with the 
drawback entry, a declaration of the manufacturer stating whether a 
claim has been or will be filed by the manufacturer with the Alcohol 
and Tobacco Tax and Trade Bureau (TTB) for domestic drawback on alcohol 
under sections 5111, 5112, 5113, and 5114, Internal Revenue Code, as 
amended (26 U.S.C. 5111, 5112, 5113, and 5114).
    (b) Manufacturer does not claim domestic drawback--(1) Submission 
of statement. If no claim has been or will be filed with TTB for 
domestic drawback on medicinal preparations or flavoring extracts, the 
manufacturer must submit a statement, in duplicate, setting forth that 
fact to the Director, National Revenue Center, TTB.
    (2) Contents of the statement. The statement must show the:
    (i) Quantity and description of the exported products;
    (ii) Identity of the alcohol used by serial number of package or 
tank car;
    (iii) Name and registry number of the distilled spirits plant from 
which the alcohol was withdrawn;
    (iv) Date of withdrawal;
    (v) Serial number of the applicable record of tax determination 
(see 27 CFR 17.163(a) and 27 CFR 19.626(c)(7)); and
    (vi) Drawback office where the claim will be filed.
    (3) Verification of receipt of the statement. The Director, 
National Revenue Center, TTB, will verify receipt of this statement, 
and transmit a verification of receipt of the statement with a copy of 
that document to the drawback office designated.


Sec.  190.104   Alcohol and Tobacco Tax and Trade Bureau (TTB) 
certificates.

    (a) Request. The drawback claimant or manufacturer must request 
that the Director, National Revenue Center, TTB, provide the CBP office 
where the drawback claim will be processed with a tax-paid certificate 
on TTB Form 5100.4 (Certificate of Tax-Paid Alcohol).
    (b) Contents. The request must state the:
    (1) Quantity of alcohol in proof gallons;
    (2) Serial number of each package;
    (3) Amount of tax paid on the alcohol;

[[Page 65026]]

    (4) Name, registry number, and location of the distilled spirits 
plant;
    (5) Date of withdrawal;
    (6) Name of the manufacturer using the alcohol in producing the 
exported articles;
    (7) Address of the manufacturer and its manufacturing plant; and
    (8) Customs drawback office where the drawback claim will be 
processed.
    (c) Extract of TTB certificate. If a certification of any portion 
of the alcohol described in the TTB Form 5100.4 is required for 
liquidation of drawback entries processed in another drawback office, 
the drawback office, on written application of the person who requested 
its issuance, will transmit a copy of the extract from the certificate 
for use at that drawback office. The drawback office will note that the 
copy of the extract was prepared and transmitted.


Sec.  190.105   Liquidation.

    The drawback office will ascertain the final amount of drawback due 
by reference to the specific manufacturing drawback ruling under which 
the drawback claimed is allowable.


Sec.  190.106   Amount of drawback.

    (a) Claim filed with TTB. If the declaration required by Sec.  
190.103(a) shows that a claim has been or will be filed with TTB for 
domestic drawback, drawback under Sec.  313(d) of the Act, as amended 
(19 U.S.C. 1313(d)), will be limited to the difference between the 
amount of tax paid and the amount of domestic drawback claimed.
    (b) Claim not filed with TTB. If the declaration and statement 
required by Sec.  190.103(a) and (b) show that no claim has been or 
will be filed by the manufacturer with TTB for domestic drawback, the 
drawback will be the full amount of the tax on the alcohol used. 
Drawback under this provision may not be granted absent receipt from 
TTB of a copy of TTB Form 5100.4 (Certificate of Tax-Paid Alcohol) 
indicating that taxes have been paid on the exported product for which 
drawback is claimed.
    (c) No deduction of 1 percent. No deduction of 1 percent may be 
made in drawback claims under Sec.  313(d) of the Act, as amended (19 
U.S.C. 1313(d)).
    (d) Payment. The drawback due will be paid in accordance with Sec.  
190.81(f).

Subpart K--Supplies for Certain Vessels and Aircraft


Sec.  190.111   Drawback allowance.

    Section 309 of the Act, as amended (19 U.S.C. 1309), provides for 
drawback on articles laden as supplies on certain vessels or aircraft 
of the United States or as supplies including equipment upon, or used 
in the maintenance or repair of, certain foreign vessels or aircraft.


Sec.  190.112   Procedure.

    (a) General. The provisions of this subpart will override 
conflicting provisions of this part, such as the export procedures in 
Sec.  190.72.
    (b) Notice of lading. The drawback claimant must file with the 
drawback office a notice of lading.
    (c) Notice of lading. In the case of drawback in connection with 19 
U.S.C. 1309(b), the notice of lading must be filed within 5 years after 
the date of importation of the imported merchandise.
    (d) Contents of notice. The notice of lading must show:
    (1) The name of the vessel or identity of the aircraft on which 
articles were or are to be laden;
    (2) The number and kind of packages and their marks and numbers;
    (3) A description of the articles and their weight (net), gauge, 
measure, or number; and
    (4) The name of the exporter.
    (e) Declaration of Master or other officer--(1) Requirement. The 
master or an authorized representative of the vessel or aircraft having 
knowledge of the facts must provide the following declaration on the 
notice of lading ``I declare that the information given above is true 
and correct to the best of my knowledge and belief; that I have 
knowledge of the facts set forth herein; that the articles described in 
this notice of lading were received in the quantities stated, from the 
person, and on the date, indicated above; that said articles were laden 
on the vessel (or aircraft) named above for use on said vessel (or 
aircraft) as supplies (or equipment), except as noted below; and that 
at the time of lading of the articles, the said vessel (or aircraft) 
was engaged in the business or trade checked below: (It is not 
necessary for a foreign vessel to show its class of trade.).''
    (2) Filing. The drawback claimant must file with the drawback 
office both the drawback entry and the notice of lading or separate 
document containing the declaration of the master or other officer or 
representative.
    (f) Information concerning class or trade. Information about the 
class of business or trade of a vessel or aircraft is required to be 
furnished in support of the drawback entry if the vessel or aircraft is 
American.
    (g) Articles laden or installed on aircraft as equipment or used in 
the maintenance or repair of aircraft. The drawback office where the 
drawback claim is filed will require a declaration or other evidence 
showing to its satisfaction that articles have been laden or installed 
on aircraft as equipment or used in the maintenance or repair of 
aircraft.
    (h) Fuel laden on vessels or aircraft as supplies--(1) Composite 
notice of lading. In the case of fuel laden on vessels or aircraft as 
supplies, the drawback claimant may file with the drawback office a 
composite notice of lading for each calendar month. The composite 
notice of lading must describe all of the drawback claimant's 
deliveries of fuel supplies during the one calendar month at a single 
port or airport to all vessels or airplanes of one vessel owner or 
operator or airline. This includes fuel laden for flights or voyages 
between the contiguous United States and Hawaii, Alaska, or any U.S. 
possessions (see Sec.  10.59 of this chapter).
    (2) Contents of composite notice. Composite notice must show for 
each voyage or flight:
    (i) The identity of the vessel or aircraft;
    (ii) A description of the fuel supplies laden;
    (iii) The quantity laden; and
    (iv) The date of lading.
    (3) Declaration of owner or operator. An authorized vessel or 
airline representative having knowledge of the facts must complete the 
``Declaration of Master or other officer'' (see paragraph (e) of this 
section).
    (i) Desire to land articles covered by notice of lading. The master 
of the vessel or commander of the aircraft desiring to land in the 
United States articles covered by a notice of lading must apply for a 
permit to land those articles under CBP supervision. All articles 
landed, except those transferred under the original notice of lading to 
another vessel or aircraft entitled to drawback, will be considered 
imported merchandise for the purpose of Sec.  309(c) of the Act, as 
amended (19 U.S.C. 1309(c)).

Subpart L--Meats Cured With Imported Salt


Sec.  190.121   Drawback allowance.

    Section 313(f) of the Act, as amended (19 U.S.C. 1313(f)), provides 
for the allowance of drawback upon the exportation of meats cured with 
imported salt.


Sec.  190.122   Procedure.

    Other provisions of this part relating to direct identification 
manufacturing drawback will apply to claims for drawback under this 
subpart insofar as applicable to and not inconsistent with the 
provisions of this subpart.

[[Page 65027]]

Sec.  190.123   Refund of duties.

    Drawback allowed under this subpart will be refunded in aggregate 
amounts of not less than $100 and will not be subject to the retention 
of 1 percent of duties paid.

Subpart M--Materials for Construction and Equipment of Vessels and 
Aircraft Built for Foreign Account and Ownership


Sec.  190.131   Drawback allowance.

    Section 313(g) of the Act, as amended (19 U.S.C. 1313(g)), provides 
for drawback on imported materials used in the construction and 
equipment of vessels and aircraft built for foreign account and 
ownership, or for the government of any foreign country, 
notwithstanding that these vessels or aircraft may not be exported 
within the strict meaning of the term.


Sec.  190.132   Procedure.

    Other provisions of this part relating to direct identification 
manufacturing drawback will apply to claims for drawback filed under 
this subpart insofar as applicable to and not inconsistent with the 
provisions of this subpart.


Sec.  190.133   Explanation of terms.

    (a) Materials. Section 313(g) of the Act, as amended (19 U.S.C. 
1313(g)), applies only to materials used in the original construction 
and equipment of vessels and aircraft, or to materials used in a 
``major conversion,'' as defined in this section, of a vessel or 
aircraft. Section 313(g) does not apply to materials used for 
alteration or repair, or to materials not required for safe operation 
of the vessel or aircraft.
    (b) Foreign account and ownership. Foreign account and ownership, 
as used in section 313(g) of the Act, as amended (19 U.S.C. 1313(g)), 
means only vessels or aircraft built or equipped for the account of an 
owner or owners residing in a foreign country and having a bona fide 
intention that the vessel or aircraft, when completed, will be owned 
and operated under the flag of a foreign country.
    (c) Major conversion. For purposes of this subpart, a ``major 
conversion'' means a conversion that substantially changes the 
dimensions or carrying capacity of the vessel or aircraft, changes the 
type of the vessel or aircraft, substantially prolongs the life of the 
vessel or aircraft, or otherwise so changes the vessel or aircraft that 
it is essentially a new vessel or aircraft, as determined by CBP (see 
46 U.S.C. 2101(14a)).

Subpart N--Foreign-Built Jet Aircraft Engines Processed in the 
United States


Sec.  190.141   Drawback allowance.

    Section 313(h) of the Act, as amended (19 U.S.C. 1313(h)), provides 
for drawback on the exportation of jet aircraft engines manufactured or 
produced abroad that have been overhauled, repaired, rebuilt, or 
reconditioned in the United States with the use of imported 
merchandise, including parts.


Sec.  190.142   Procedure.

    Other provisions of this part will apply to claims for drawback 
filed under this subpart insofar as applicable to and not inconsistent 
with the provisions of this subpart.


Sec.  190.143   Drawback entry.

    (a) Filing of entry. Drawback entries covering these foreign-built 
jet aircraft engines must show that the entry covers jet aircraft 
engines processed under section 313(h) of the Act, as amended (19 
U.S.C. 1313(h)).
    (b) Contents of entry. The drawback entry must indicate the country 
in which each engine was manufactured and describe the processing 
performed thereon in the United States.


Sec.  190.144   Refund of duties.

    Drawback allowed under this subpart will be refunded in aggregate 
amounts of not less than $100, and will not be subject to the deduction 
of 1 percent of duties paid.

Subpart O--Merchandise Exported From Continuous CBP Custody


Sec.  190.151   Drawback allowance.

    (a) Eligibility of entered or withdrawn merchandise--(1) Under 19 
U.S.C. 1557(a). Section 557(a) of the Act, as amended (19 U.S.C. 
1557(a)), provides for drawback on the exportation to a foreign 
country, or the shipment to the Virgin Islands, American Samoa, Wake 
Island, Midway Islands, Kingman Reef, Johnston Island, or Guam, of 
merchandise upon which duties have been paid which has remained 
continuously in bonded warehouse or otherwise in CBP custody for a 
period not to exceed 5 years from the date of importation.
    (2) Under 19 U.S.C. 1313. Imported merchandise that has not been 
regularly entered or withdrawn for consumption, will not satisfy any 
requirement for use, importation, exportation or destruction, and will 
not be available for drawback, under section 313 of the Act, as amended 
(19 U.S.C. 1313) (see 19 U.S.C. 1313(u)).
    (b) Guantanamo Bay. Guantanamo Bay Naval Station will be considered 
foreign territory for drawback purposes under this subpart and 
merchandise shipped there is eligible for drawback. Imported 
merchandise which has remained continuously in bonded warehouse or 
otherwise in CBP custody since importation is not entitled to drawback 
of duty when shipped to Puerto Rico, Canton Island, Enderbury Island, 
or Palmyra Island.


Sec.  190.152   Merchandise released from CBP custody.

    No remission, refund, abatement, or drawback of duty will be 
allowed under this subpart because of the exportation or destruction of 
any merchandise after its release from Government custody, except in 
the following cases:
    (a) When articles are exported or destroyed on which drawback is 
expressly provided for by law;
    (b) When prohibited articles have been regularly entered in good 
faith and are subsequently exported or destroyed pursuant to statute 
and regulations prescribed by the Secretary of the Treasury; or
    (c) When articles entered under bond are destroyed within the 
bonded period, as provided in 19 U.S.C. 1557(c), or destroyed within 
the bonded period by death, accidental fire, or other casualty, and 
satisfactory evidence of destruction is furnished to CBP (see Sec.  
190.71), in which case any accrued duties will be remitted or refunded 
and any condition in the bond that the articles must be exported will 
be deemed satisfied (see 19 U.S.C. 1558).


Sec.  190.153   Continuous CBP custody.

    (a) Merchandise released under an importer's bond and returned. 
Merchandise released to an importer under a bond prescribed by Sec.  
142.4 of this chapter and later returned to the public stores upon 
requisition of the appropriate CBP office will not be deemed to be in 
the continuous custody of CBP officers.
    (b) Merchandise released under Chapter 98, Subchapter XIII, 
Harmonized Tariff Schedule of the United States (HTSUS). Merchandise 
released as provided for in Chapter 98, Subchapter XIII, HTSUS (19 
U.S.C. 1202), will not be deemed to be in the continuous custody of CBP 
officers.
    (c) Merchandise released from warehouse. For the purpose of this 
subpart, in the case of merchandise entered for warehouse, CBP custody 
will be deemed to cease when estimated duty has been deposited and the 
appropriate CBP office has authorized the withdrawal of the 
merchandise.

[[Page 65028]]

    (d) Merchandise not warehoused, examined elsewhere than in public 
stores--(1) General rule. Except as stated in paragraph (d)(2) of this 
section, merchandise examined elsewhere than at the public stores, in 
accordance with the provisions of Sec.  151.7 of this chapter, will be 
considered released from CBP custody upon completion of final 
examination for appraisement.
    (2) Merchandise upon the wharf. Merchandise which remains on the 
wharf by permission of the appropriate CBP office will be considered to 
be in CBP custody, but this custody will be deemed to cease when the 
CBP officer in charge accepts the permit and has no other duties to 
perform relating to the merchandise, such as measuring, weighing, or 
gauging.


Sec.  190.154   Filing the entry.

    (a) Direct export. At least 6 working hours before lading the 
merchandise on which drawback is claimed under this subpart, the 
importer or the agent designated by him or her in writing must file a 
direct export drawback entry.
    (b) Merchandise transported to another port for exportation. The 
importer of merchandise to be transported to another port for 
exportation must file an entry naming the transporting conveyance, 
route, and port of exit. The drawback office will certify one copy and 
forward it to the CBP office at the port of exit. A bonded carrier must 
transport the merchandise in accordance with the applicable 
regulations. Manifests must be prepared and filed in the manner 
prescribed in Sec.  144.37 of this chapter.


Sec.  190.155   Merchandise withdrawn from warehouse for exportation.

    The regulations in part 18 of this chapter concerning the 
supervision of lading and certification of exportation of merchandise 
withdrawn from warehouse for exportation without payment of duty will 
be followed to the extent applicable.


Sec.  190.156   Bill of lading.

    (a) Filing. In order to complete the claim for drawback under this 
subpart, a bill of lading covering the merchandise described in the 
drawback entry must be filed within 2 years after the merchandise is 
exported.
    (b) Contents. The bill of lading must either show that the 
merchandise was shipped by the person making the claim or bear an 
endorsement of the person in whose name the merchandise was shipped 
showing that the person making the claim is authorized to do so.
    (c) Limitation of the bill of lading. The terms of the bill of 
lading may limit and define its use by stating that it is for customs 
purposes only and not negotiable.
    (d) Inability to produce bill of lading. When a required bill of 
lading cannot be produced, the person making the drawback entry may 
request the drawback office, within the time required for the filing of 
the bill of lading, to accept a statement setting forth the cause of 
failure to produce the bill of lading and such evidence of exportation 
and of that person's right to make the drawback entry as may be 
available. The request will be granted if the drawback office is 
satisfied by the evidence submitted that the failure to produce the 
bill of lading is justified, that the merchandise has been exported, 
and that the person making the drawback entry has the right to do so. 
If the drawback office is not so satisfied, such office will transmit 
the request and its accompanying evidence to the Office of Trade, CBP 
Headquarters, for final determination.
    (e) Extracts of bills of lading. Drawback offices may issue 
extracts of bills of lading filed with drawback claims.


Sec.  190.157   [Reserved]


Sec.  190.158   Procedures.

    When the drawback claim has been completed and the bill of lading 
filed, the reports of inspection and lading made, and the clearance of 
the exporting conveyance established by the record of clearance in the 
case of direct exportation or by certificate in the case of 
transportation and exportation, the drawback office will verify the 
importation by referring to the import records to ascertain the amount 
of duty paid on the merchandise exported. To the extent appropriate and 
not inconsistent with the provisions of this subpart, drawback entries 
will be liquidated in accordance with the provisions of Sec.  190.81.


Sec.  190.159   Amount of drawback.

    Drawback due under this subpart will not be subject to the 
deduction of 1 percent.

Subpart P--Distilled Spirits, Wines, or Beer Which Are 
Unmerchantable or Do Not Conform to Sample or Specifications


Sec.  190.161   Refund of taxes.

    Section 5062(c), Internal Revenue Code, as amended (26 U.S.C. 
5062(c)), provides for the refund, remission, abatement or credit to 
the importer of internal revenue taxes paid or determined incident to 
importation, upon the exportation, or destruction under CBP 
supervision, of imported distilled spirits, wines, or beer found after 
entry to be unmerchantable or not to conform to sample or 
specifications and which are returned to CBP custody.


Sec.  190.162   Procedure.

    The export procedure will be the same as that provided in Sec.  
190.42 for rejected merchandise, except that the claimant must be the 
importer and must comply with all other provisions in this subpart.


Sec.  190.163   Documentation.

    (a) Entry. A drawback entry must be filed to claim drawback under 
this subpart.
    (b) Documentation. The drawback entry for unmerchantable 
merchandise must be accompanied by a certificate of the importer 
setting forth in detail the facts which cause the merchandise to be 
unmerchantable and any additional evidence that the drawback office 
requires to establish that the merchandise is unmerchantable.


Sec.  190.164   Return to CBP custody.

    There is no time limit for the return to CBP custody of distilled 
spirits, wine, or beer subject to refund of taxes under the provisions 
of this subpart. The claimant must return the merchandise to CBP 
custody prior to exportation or destruction and claims are subject to 
the filing deadline set forth in 19 U.S.C. 1313(r)(1).


Sec.  190.165   No exportation by mail.

    Merchandise covered by this subpart must not be exported by mail.


Sec.  190.166   Destruction of merchandise.

    (a) Action by the importer. A drawback claimant who proposes to 
destroy rather than export the distilled spirits, wine, or beer must 
state that fact on the drawback entry.
    (b) Action by CBP. Distilled spirits, wine, or beer returned to CBP 
custody at the place approved by the drawback office where the drawback 
entry was filed must be destroyed under the supervision of the CBP 
officer who will certify the destruction on CBP Form 7553.


Sec.  190.167   Liquidation.

    No deduction of 1 percent of the internal revenue taxes paid or 
determined will be made in allowing entries under section 5062(c), 
Internal Revenue Code, as amended (26 U.S.C. 5062(c)).

[[Page 65029]]

Sec.  190.168   [Reserved]

Subpart Q--Substitution of Finished Petroleum Derivatives


Sec.  190.171   General; drawback allowance.

    (a) General. Section 313(p) of the Act, as amended (19 U.S.C. 
1313(p)), provides for drawback for duties, taxes, and fees paid on 
qualified articles (see definition below) 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)).
    (b) Allowance of drawback. Drawback may be granted under 19 U.S.C. 
1313(p):
    (1) In cases where there is no manufacture, upon exportation of the 
imported article, an article of the same kind and quality, or any 
combination thereof; or
    (2) In cases where there is a manufacture or production, upon 
exportation of the manufactured or produced article, an article of the 
same kind and quality, or any combination thereof.
    (c) Calculation of drawback. For drawback of finished petroleum 
derivatives pursuant to section 1313(p), the claimant is required to 
calculate the total amount of drawback due, for purposes of Sec.  
190.51(b), which will not exceed 99 percent of the allowable duties, 
taxes, and fees, subject to the following:
    (1) Per unit averaging calculation. The amount of duties, taxes, 
and fees eligible for drawback is determined by per unit averaging, as 
defined in Sec.  190.2, for any drawback claim based on 19 U.S.C. 
1313(p) pursuant to the standards set forth in Sec.  190.172(b) and 
without respect to the limitations set forth in subparagraphs (B) and 
(C) of 19 U.S.C. 1313(l).
    (2) Limitations. The amount of duties, taxes, and fees eligible for 
drawback is not subject to the limitations set out in 19 U.S.C. 
1313(p)(4) for unused merchandise claims (no manufacture) and 
manufacturing claims (see 190.173(e) and 190.174(f)).
    (3) Federal excise tax. For purposes of drawback of internal 
revenue tax imposed under Chapters 32 and 38 (with the exception of 
Subchapter A of Chapter 38) of the Internal Revenue Code of 1986, as 
amended (IRC), drawback granted on the export of substituted 
merchandise will be limited to the amount of taxes paid (and not 
returned by refund, credit, or drawback) on the substituted 
merchandise.


Sec.  190.172   Definitions.

    The following are definitions for purposes of this subpart only:
    (a) Qualified article. Qualified article means an article described 
in headings 2707, 2708, 2709.00, 2710, 2711, 2712, 2713, 2714, 2715, 
2901, and 2902, and subheadings 2903.21.00, 2909.19.14, 2917.36, 
2917.39.04, 2917.39.15, 2926.10.00, 3811.21.00, and 3811.90.00, 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.
    (b) Same kind and quality article. Same kind and quality article 
means an article which is referred to under the same 8-digit 
classification of the HTSUS as the article to which it is compared.
    (c) Exported article. Exported article means an article which has 
been exported and is a qualified article, an article of the same kind 
and quality as the qualified article, or any combination thereof.


Sec.  190.173   Imported duty-paid derivatives (no manufacture).

    When the basis for drawback under 19 U.S.C. 1313(p) is imported 
duty-paid petroleum derivatives (that is, not articles manufactured 
under 19 U.S.C. 1313(a) or (b)), the requirements for drawback are as 
follows:
    (a) Imported duty-paid merchandise. The imported duty-paid 
merchandise designated for drawback must be a ``qualified article'' as 
defined in Sec.  190.172(a);
    (b) Exported article. The exported article on which drawback is 
claimed must be an ``exported article'' as defined in Sec.  190.172(c);
    (c) Exporter. The exporter of the exported article must have 
either:
    (1) Imported the qualified article in at least the quantity of the 
exported article; or
    (2) Purchased or exchanged (directly or indirectly) from an 
importer an imported qualified article in at least the quantity of the 
exported article;
    (d) Time of export. The exported article must be exported within 
180 days after the date of entry of the designated imported duty-paid 
merchandise; and
    (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.


Sec.  190.174   Derivatives manufactured under 19 U.S.C. 1313(a) or 
(b).

    When the exported article which is the basis for a drawback claim 
under 19 U.S.C. 1313(p) is petroleum derivatives which were 
manufactured or produced in the United States and qualify for drawback 
under the manufacturing drawback law (19 U.S.C. 1313(a) or (b)), the 
requirements for drawback are as follows:
    (a) Merchandise. The merchandise which is the basis for drawback 
under 19 U.S.C. 1313(p) must:
    (1) Have been manufactured or produced as described in 19 U.S.C. 
1313(a) or (b) from crude petroleum or a petroleum derivative; and
    (2) Be a ``qualified article'' as defined in Sec.  190.172(a);
    (b) Exported article. The exported article on which drawback is 
claimed must be an ``exported article'' as defined in Sec.  190.172(c);
    (c) Exporter. The exporter of the exported article must have 
either:
    (1) Manufactured or produced the qualified article in at least the 
quantity of the exported article; or
    (2) Purchased or exchanged (directly or indirectly) from a 
manufacturer or producer described in 19 U.S.C. 1313(a) or (b) the 
qualified article in at least the quantity of the exported article;
    (d) Manufacture in specific facility. The qualified article must 
have been manufactured or produced in a specific petroleum refinery or 
production facility which must be identified;
    (e) Time of export. The exported article must be exported either:
    (1) During the period provided for in the manufacturer's or 
producer's specific manufacturing drawback ruling (see Sec.  190.8) in 
which the qualified article is manufactured or produced; or
    (2) Within 180 days after the close of the period in which the 
qualified article is manufactured or produced; and
    (f) Amount of drawback. The amount of drawback payable may not 
exceed the amount of drawback which would be attributable to the 
article manufactured or produced under 19 U.S.C. 1313(a) or (b) which 
serves as the basis for drawback.


Sec.  190.175   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. 
Any of these persons may designate another person to file the drawback 
claim.
    (b) Transfer of merchandise--(1) General. A drawback claimant under 
19

[[Page 65030]]

U.S.C. 1313(p) must maintain records (which may be records kept in the 
normal cause of business) to support the receipt of transferred 
merchandise and the party transferring the merchandise must maintain 
records to demonstrate the transfer.
    (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 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) 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), will be the 
qualified article eligible for drawback for purposes of section 
1313(p).
    (c) Maintenance of records. The manufacturer, producer, importer, 
transferor, exporter and drawback claimant of the qualified article and 
the exported article must all maintain their appropriate records 
required by this part.


Sec.  190.176   Procedures for claims filed under 19 U.S.C. 1313(p).

    (a) Applicability. The general procedures for filing drawback 
claims will be applicable to claims filed under 19 U.S.C. 1313(p) 
unless otherwise specifically provided for in this section.
    (b) Administrative efficiency, frequency of claims, and 
restructuring of claims. The procedures regarding administrative 
efficiency, frequency of claims, and restructuring of claims (as 
applicable, see Sec.  190.53) will apply to claims filed under this 
subpart.
    (c) Imported duty-paid derivatives (no manufacture). When the basis 
for drawback under 19 U.S.C. 1313(p) is imported duty-paid petroleum 
(not articles manufactured under 19 U.S.C. 1313(a) or (b)), claims 
under this subpart may be paid and liquidated if:
    (1) The claim is filed on the drawback entry; and
    (2) The claimant provides a certification stating the basis (such 
as company records, or customer's written certification), for the 
information contained therein and certifying that:
    (i) The exported merchandise was exported within 180 days of entry 
of the designated, imported merchandise;
    (ii) The qualified article and the exported article are 
commercially interchangeable or both articles are subject to the same 
8-digit HTSUS subheading number;
    (iii) To the best of the claimant's knowledge, the designated 
imported merchandise, the qualified article and the exported article 
have not served and will not serve as the basis of any other drawback 
claim;
    (iv) Evidence in support of the certification will be retained by 
the person providing the certification for 3 years after liquidation of 
the claim; and
    (v) Such evidence will be available for verification by CBP.
    (d) Derivatives manufactured under 19 U.S.C. 1313(a) or (b). When 
the basis for a claim for drawback under 19 U.S.C. 1313(p) is articles 
manufactured under 19 U.S.C. 1313(a) or (b), claims under this section 
may be paid and liquidated if:
    (1) The claim is filed on the drawback entry;
    (2) All documents required to be filed with a manufacturing claim 
under 19 U.S.C. 1313(a) or (b) are filed with the claim;
    (3) The claim identifies the specific refinery or production 
facility at which the derivatives were manufactured or produced;
    (4) The claim states the period of manufacture for the derivatives; 
and
    (5) The claimant provides a certification stating the basis (such 
as company records or a customer's written certification), for the 
information contained therein and certifying that:
    (i) The exported merchandise was exported during the manufacturing 
period for the qualified article or within 180 days after the close of 
that period;
    (ii) The qualified article and the exported article are 
commercially interchangeable or both articles are classifiable under 
the same 8-digit HTSUS subheading number;
    (iii) To the best of the claimant's knowledge, the designated 
imported merchandise, the qualified article and the exported article 
have not served and will not serve as the basis of any other drawback 
claim;
    (iv) Evidence in support of the certification will be retained by 
the person providing the certification for 3 years after liquidation of 
the claim; and
    (v) Such evidence will be available for verification by CBP.

Subpart R--Merchandise Transferred to a Foreign Trade Zone From 
Customs Territory


Sec.  190.181   Drawback allowance.

    The fourth proviso of section 3 of the Foreign Trade Zones Act of 
June 18, 1934, as amended (19 U.S.C. 81c), provides that merchandise 
transferred to a foreign trade zone for the sole purpose of 
exportation, storage or destruction (except destruction of distilled 
spirits, wines, and fermented malt liquors), will be considered to be 
exported for the purpose of drawback, provided there is compliance with 
the regulations of this subpart.


Sec.  190.182   Zone-restricted merchandise.

    Merchandise in a foreign trade zone for the purposes specified in 
Sec.  190.181 will be given status as zone-restricted merchandise on 
proper application (see Sec.  146.44 of this chapter).


Sec.  190.183   Articles manufactured or produced in the United States.

    (a) Procedure for filing documents. Except as otherwise provided, 
the drawback procedures prescribed in this part must be followed when 
claiming drawback under this subpart on articles manufactured or 
produced in the United States with the use of imported or substituted 
merchandise, and on flavoring extracts or medicinal or toilet 
preparations (including perfumery) manufactured or produced with the 
use of domestic tax-paid alcohol.
    (b) Notice of transfer--(1) Evidence of export. The notice of zone 
transfer on CBP Form 214 (Application for Foreign-Trade Zone Admission 
and/or Status Designation) or its electronic equivalent will be in 
place of the documents under subpart G of this part to establish the 
exportation.
    (2) Filing procedures. The notice of transfer (CBP Form 214) will 
be filed not later than 3 years after the transfer of the articles to 
the zone. A notice filed after the transfer will state the foreign 
trade zone lot number.
    (3) Contents of notice. Each notice of transfer must show the:
    (i) Number and location of the foreign trade zone;
    (ii) Number and kind of packages and their marks and numbers;
    (iii) Description of the articles, including weight (gross and 
net), gauge, measure, or number; and
    (iv) Name of the transferor.
    (c) Action of foreign trade zone operator. After articles have been 
received in the zone, the zone operator must certify on a copy of the 
notice of

[[Page 65031]]

transfer (CBP Form 214) the receipt of the articles (see Sec.  
190.184(d)(2)) and forward the notice to the transferor or the person 
designated by the transferor. The transferor must verify that the 
notice has been certified before filing it with the drawback claim.
    (d) Drawback entries. Drawback entries must indicate that the 
merchandise was transferred to a foreign trade zone. The ``Declaration 
of Exportation'' must be modified as follows:

Declaration of Transfer to a Foreign Trade Zone

    I,____ ____(member of firm, officer representing corporation, 
agent, or attorney), of ____, declare that, to the best of my 
knowledge and belief, the particulars of transfer stated in this 
entry, the notices of transfer, and receipts are correct, and that 
the merchandise was transferred to a foreign trade zone for the sole 
purpose of exportation, destruction, or storage, not to be removed 
from the foreign trade zone for domestic consumption.

Dated:-----------------------------------------------------------------
-----------------------------------------------------------------------

Transferor or agent

Sec.  190.184   Merchandise transferred from continuous CBP custody.

    (a) Procedure for filing claims. The procedure described in subpart 
O of this part will be followed as applicable, for drawback on 
merchandise transferred to a foreign trade zone from continuous CBP 
custody.
    (b) Drawback entry. Before the transfer of merchandise from 
continuous CBP custody to a foreign trade zone, the importer or a 
person designated in writing by the importer for that purpose must file 
with the drawback office a direct export drawback entry. CBP will 
notify the zone operator at the zone.
    (c) Certification by zone operator. After the merchandise has been 
received in the zone, the zone operator must certify the receipt of the 
merchandise (see paragraph (d)(2) of this section) and notify the 
transferor or the person designated by the transferor. After executing 
the declaration provided for in paragraph (d)(3) of this section, the 
transferor must resubmit the drawback entry to the drawback office in 
place of the bill of lading required by Sec.  190.156.
    (d) Modification of drawback entry--(1) Indication of transfer. The 
drawback entry must include a certification to indicate that the 
merchandise is to be transferred to a foreign trade zone.
    (2) Endorsement. The transferor or person designated by the 
transferor and the foreign trade zone operator must certify transfer to 
the foreign trade zone, with respect to the drawback entry, as follows:

Certification by Foreign Trade Zone Operator

    The merchandise described in the entry was received from ____ on 
____, 20__ in Foreign Trade Zone No. __, (City and State)

Exceptions-------------------------------------------------------------

(Name and title)

By---------------------------------------------------------------------

(Name of operator)

    (3) Transferor's declaration. The transferor must declare, with 
respect to the drawback entry, as follows:

Transferor's Declaration

    I, ____ ____, of the firm of ____, declare that the merchandise 
described in this entry was duly entered at the customhouse on 
arrival at this port; that the duties thereon have been paid as 
specified in this entry; and that it was transferred to Foreign 
Trade Zone No. __, located at __, (City and State) for the sole 
purpose of exportation, destruction, or storage, not to be removed 
from the foreign trade zone for domestic consumption. I further 
declare that to the best of my knowledge and belief, this 
merchandise is in the same quantity, quality, value, and package, 
unavoidable wastage and damage excepted, as it was at the time of 
importation; that no allowance nor reduction of duties has been made 
for damage or other cause except as specified in this entry; and 
that no part of the duties paid has been refunded by drawback or 
otherwise.

Dated:-----------------------------------------------------------------

Transferor


Sec.  190.185  Unused merchandise drawback and merchandise not 
conforming to sample or specification, shipped without consent of the 
consignee, found to be defective as of the time of importation, or 
returned after retail sale.

    (a) Procedure for filing claims. The procedures described in 
subpart C of this part relating to unused merchandise drawback, and in 
subpart D of this part relating to rejected merchandise, must be 
followed with respect to drawback under this subpart for unused 
merchandise drawback and merchandise that does not conform to sample or 
specification, is shipped without consent of the consignee, or is found 
to be defective as of the time of importation.
    (b) Drawback entry. Before transfer of the merchandise to a foreign 
trade zone, the importer or a person designated in writing by the 
importer for that purpose must file the drawback entry. CBP will notify 
the zone operator at the zone.
    (c) Certification by zone operator. After the merchandise has been 
received in the zone, the zone operator at the zone must certify, with 
respect to the drawback entry, the receipt of the merchandise and 
notify the transferor or the person designated by the transferor. After 
executing the declaration provided for in paragraph (d)(3) of this 
section, the transferor must resubmit the drawback entry in place of 
the bill of lading required by Sec.  190.156.
    (d) Modification of drawback entry--(1) Indication of transfer. The 
drawback entry must indicate that the merchandise is to be transferred 
to a foreign trade zone.
    (2) Endorsement. The transferor or person designated by the 
transferor and the foreign trade zone operator must certify transfer to 
the foreign trade zone, with respect to the drawback entry, as follows:

Certification by Foreign Trade Zone Operator

    The merchandise described in this entry was received from ____ 
on ____, 20 __, in Foreign Trade Zone No. __, __ (City and State).

Exceptions:------------------------------------------------------------

-----------------------------------------------------------------------

(Name of operator)

By---------------------------------------------------------------------

(Name and title)

    (3) Transferor's declaration. The transferor must certify, with 
respect to the drawback entry, as follows:

Transferor's Declaration

    I, ____ of the firm of ____, declare that the merchandise 
described in the within entry was duly entered at the customhouse on 
arrival at this port; that the duties thereon have been paid as 
specified in this entry; and that it was transferred to Foreign 
Trade Zone No. __, located at ___ (City and State) for the sole 
purpose of exportation, destruction, or storage, not to be removed 
from the foreign trade zone for domestic consumption. I further 
declare that to the best of my knowledge and belief, said 
merchandise is the same in quantity, quality, value, and package as 
specified in this entry; that no allowance nor reduction in duties 
has been made; and that no part of the duties paid has been refunded 
by drawback or otherwise.

Dated:-----------------------------------------------------------------

Transferor


Sec.  190.186  Person entitled to claim drawback.

    The person named in the foreign trade zone operator's certification 
on the notice of transfer or the drawback entry, as applicable, will be 
considered to be the transferor. Drawback may be claimed by, and paid 
to, the transferor.

Subpart S--Drawback Compliance Program


Sec.  190.191   Purpose.

    This subpart sets forth the requirements for the drawback 
compliance program in which claimants and other parties in interest, 
including customs brokers, may participate after being certified by 
CBP. Participation in the program is voluntary. Under the

[[Page 65032]]

program, CBP is required to inform potential drawback claimants and 
related parties clearly about their rights and obligations under the 
drawback law and regulations. Reduced penalties and/or warning letters 
may be issued once a party has been certified for the program, and is 
in general compliance with the appropriate procedures and requirements 
thereof.


Sec.  190.192   Certification for compliance program.

    (a) General. A party may be certified as a participant in the 
drawback compliance program after meeting the core requirements 
established under the program, or after negotiating an alternative 
drawback compliance program suited to the needs of both the party and 
CBP. Certification requirements will take into account the size and 
nature of the party's drawback program, the type of drawback claims 
filed, and the volume of claims filed. Whether the party is a drawback 
claimant, a broker, or one that provides data and documentation on 
which a drawback claim is based, will also be considered.
    (b) Core requirements of program. In order to be certified as a 
participant in the drawback compliance program or negotiated 
alternative drawback compliance program, the party must demonstrate 
that it:
    (1) Understands the legal requirements for filing claims, including 
the nature of the records that are required to be maintained and 
produced and the time periods involved;
    (2) Has in place procedures that explain the CBP requirements to 
those employees involved in the preparation of claims, and the 
maintenance and production of required records;
    (3) Has in place procedures regarding the preparation of claims and 
maintenance of required records, and the production of such records to 
CBP;
    (4) Has designated a dependable individual or individuals who will 
be responsible for compliance under the program, and maintenance and 
production of required records;
    (5) Has in place a record maintenance program approved by CBP 
regarding original records, or if approved by CBP, alternative records 
or recordkeeping formats for other than the original records; and
    (6) Has procedures for notifying CBP of variances in, or violations 
of, the drawback compliance program or other alternative negotiated 
drawback compliance program, and for taking corrective action when 
notified by CBP of violations and problems regarding such program.
    (c) Broker certification. A customs broker may be certified as a 
participant in the drawback compliance program only on behalf of a 
given claimant (see Sec.  190.194(b)). To do so, a customs broker who 
assists a claimant in filing for drawback must be able to demonstrate, 
for and on behalf of such claimant, conformity with the core 
requirements of the drawback compliance program as set forth in 
paragraph (b) of this section. The broker must ensure that the claimant 
has the necessary documentation and records to support the drawback 
compliance program established on its behalf, and that claims to be 
filed under the program are reviewed by the broker for accuracy and 
completeness.


Sec.  190.193   Application procedure for compliance program.

    (a) Who may apply. Claimants and other parties in interest may 
apply for participation in the drawback compliance program. This 
includes any person, corporation or business entity that provides 
supporting information or documentation to one who files drawback 
claims, as well as customs brokers who assist claimants in filing for 
drawback. Program participants may further consist of importers, 
manufacturers or producers, agent-manufacturers, complementary 
recordkeepers, subcontractors, intermediate parties, and exporters.
    (b) Place of filing. An application in letter format containing the 
information as prescribed in paragraphs (c) and (d) of this section may 
be submitted to any drawback office.
    (c) Letter of application; contents. A party requesting 
certification to become a participant in the drawback compliance 
program must file with the drawback office a written application, 
signed by an authorized individual (see Sec.  190.6(c)). The detail 
required in the application must take into account the size and nature 
of the applicant's drawback program, the type of drawback claims filed, 
and the dollar value and volume of claims filed. However, the 
application must contain at least the following information:
    (1) Name of applicant, address, IRS number (with suffix), and the 
type of business in which engaged, as well as the name(s) of the 
individual(s) designated by the applicant to be responsible for 
compliance under the program;
    (2) A description of the nature of the applicant's drawback 
program, including the type of drawback in which involved (such as, 
manufacturing, or unused or rejected merchandise), and the applicant's 
particular role(s) in the drawback claims process (such as claimant 
and/or importer, manufacturer or producer, agent-manufacturer, 
complementary recordkeeper, subcontractor, intermediate party 
(possessor or purchaser), or exporter (or destroyer)); and
    (3) Size of applicant's drawback program. For example, if the 
applicant is a claimant, the number of claims filed over the previous 
12-month period should be included, along with the number estimated to 
be filed over the next 12-month period, and the estimated amount of 
drawback to be claimed annually. Other parties should describe the 
extent to which they are involved in drawback activity, based upon 
their particular role(s) in the drawback process; for example, 
manufacturers should explain how much manufacturing they are engaged in 
for drawback, such as the quantity of drawback product produced on an 
annual basis.
    (d) Application package. Along with the letter of application as 
prescribed in paragraph (c) of this section, the application package 
must include a description of how the applicant will ensure compliance 
with statutory and regulatory drawback requirements. This description 
may be in the form of a booklet or set forth otherwise. The description 
must include at least the following:
    (1) The name and title of the official in the applicant's 
organization who is responsible for oversight of the applicant's 
drawback program, and the name and title, with mailing address and, if 
available, fax number and email address, of the person(s) in the 
applicant's organization responsible for the actual maintenance of the 
applicant's drawback program;
    (2) If the applicant is a manufacturer and the drawback involved is 
manufacturing drawback, a copy of the letter of notification of intent 
to operate under a general manufacturing drawback ruling or the 
application for a specific manufacturing drawback ruling (see 
Sec. Sec.  190.7 and 190.8), as appropriate;
    (3) A description of the applicant's drawback recordkeeping 
program, including the retention period and method (for example, paper, 
and electronic);
    (4) A list of the records that will be maintained, including at 
least sample import documents, sample export or destruction documents, 
sample inventory and transportation documents (if applicable), sample 
laboratory or other documents establishing the qualification of 
merchandise or articles for substitution under the drawback law

[[Page 65033]]

(if applicable), and sample manufacturing documents (if applicable);
    (5) A description of the applicant's specific procedures for:
    (i) How drawback claims are prepared (if the applicant is a 
claimant); and
    (ii) How the applicant will fulfill any requirements under the 
drawback law and regulations applicable to its role in the drawback 
program;
    (6) A description of the applicant's procedures for notifying CBP 
of variances in, or violations of, its drawback compliance program or 
negotiated alternative drawback compliance program, and procedures for 
taking corrective action when notified by CBP of violations or other 
problems in such program; and
    (7) A description of the applicant's procedures for annual review 
to ensure that its drawback compliance program meets the statutory and 
regulatory drawback requirements and that CBP is notified of any 
modifications from the procedures described in this application.


Sec.  190.194   Action on application to participate in compliance 
program.

    (a) Review by drawback office--(1) General. It is the 
responsibility of the drawback office to coordinate its decision making 
on the package with CBP Headquarters and other CBP offices as 
appropriate. CBP processing of the package will consist of the review 
of the information contained therein as well as any additional 
information requested (see paragraph (a)(2) of this section).
    (2) Criteria for CBP review. The drawback office will review and 
verify the information submitted in and with the application. In order 
for CBP to evaluate the application, CBP may request additional 
information (including additional sample documents) and/or explanations 
of any of the information provided for in Sec.  190.193(c) and (d). 
Based on the information submitted on and with the application and any 
information so requested, and based on the applicant's record of 
transactions with CBP, the drawback office will approve or deny the 
application. The criteria to be considered in reviewing the applicant's 
record with CBP will include (as applicable):
    (i) The presence or absence of unresolved customs charges (duties, 
taxes, fees, or other debts owed CBP);
    (ii) The accuracy of the claimant's past drawback claims; and
    (iii) Whether accelerated payment of drawback or waiver of prior 
notice of intent to export was previously revoked or suspended.
    (b) Approval. Certification as a participant in the drawback 
compliance program will be given to applicants whose applications are 
approved under the criteria in paragraph (a)(2) of this section. The 
drawback office will give written notification to an applicant of its 
certification as a participant in the drawback compliance program. A 
customs broker obtaining certification for a drawback claimant will be 
sent written notification on behalf of such claimant, with a copy of 
the notification also being sent to the claimant.
    (c) Benefits of participation in program. When a party that has 
been certified as a participant in the drawback compliance program and 
is generally in compliance with the appropriate procedures and 
requirements of the program commits a violation of 19 U.S.C. 1593a(a) 
(see Sec.  190.62(b)), CBP will, in the absence of fraud or repeated 
violations, and in lieu of a monetary penalty as otherwise provided 
under section 1593a, issue a written notice of the violation to the 
party. Repeated violations by a participant, including a customs 
broker, may result in the issuance of penalties and the removal of 
certification under the program until corrective action, satisfactory 
to CBP, is taken.
    (d) Denial. If certification as a participant in the drawback 
compliance program is denied, the applicant will be given written 
notice by the drawback office, specifying the grounds for such denial, 
together with any action that may be taken to correct the perceived 
deficiencies, and informing the applicant that such denial may be 
appealed to the drawback office that issued the notice of denial and 
then appealed to CBP Headquarters.
    (e) Certification removal--(1) Grounds for removal. The 
certification for participation in the drawback compliance program by a 
party may be removed when any of the following conditions are 
discovered:
    (i) The certification privilege was obtained through fraud or 
mistake of fact;
    (ii) The program participant is no longer in compliance with the 
customs laws and CBP regulations, including the requirements set forth 
in Sec.  190.192;
    (iii) The program participant has repeatedly filed false drawback 
claims or false or misleading documentation or other information 
relating to such claims; or
    (iv) The program participant is convicted of any felony or has 
committed acts which would constitute a misdemeanor or felony involving 
theft, smuggling, or any theft-connected crime.
    (2) Removal procedure. If CBP determines that the certification of 
a program participant should be removed, the drawback office will send 
the program participant a written notice of the removal. Such notice 
will inform the program participant of the grounds for the removal and 
will advise the program participant of its right to file an appeal of 
the removal in accordance with paragraph (f) of this section.
    (3) Effect of removal. The removal of certification will be 
effective immediately in cases of willfulness on the part of the 
program participant or when required by public health, interest, or 
safety. In all other cases, the removal of certification will be 
effective when the program participant has received notice under 
paragraph (e)(2) of this section and either no appeal has been filed 
within the time limit prescribed in paragraph (f)(2) of this section or 
all appeal procedures have been concluded by a decision that upholds 
the removal action. Removal of certification may subject the affected 
person to penalties.
    (f) Appeal of certification denial or removal--(1) Appeal of 
certification denial. A party may challenge a denial of an application 
for certification as a participant in the drawback compliance program 
by filing a written appeal, within 30 days of issuance of the notice of 
denial, with the drawback office. A denial of an appeal may itself be 
appealed to CBP Headquarters, Trade Policy and Programs, Office of 
Trade, within 30 days after issuance of the drawback office's appeal 
decision. This office will review the appeal and will respond with a 
written decision within 30 days after receipt of the appeal unless 
circumstances require a delay in issuance of the decision. If the 
decision cannot be issued within the 30-day period, the office will 
advise the appellant of the reasons for the delay and of any further 
actions which will be carried out to complete the appeal review and of 
the anticipated date for issuance of the appeal decision.
    (2) Appeal of certification removal. A party who has received a CBP 
notice of removal of certification for participation in the drawback 
compliance program may challenge the removal by filing a written 
appeal, within 30 days after issuance of the notice of removal, with 
the drawback office. A denial of an appeal may itself be appealed to 
CBP Headquarters, Trade Policy and Programs, Office of Trade, within 30 
days after issuance of the drawback office's appeal decision. This 
office will consider the allegations upon which the removal was based 
and the responses made to those allegations by the

[[Page 65034]]

appellant and will render a written decision on the appeal within 30 
days after receipt of the appeal.


Sec.  190.195   Combined application for certification in drawback 
compliance program and waiver of prior notice and/or approval of 
accelerated payment of drawback.

    An applicant for certification in the drawback compliance program 
may also, in the same application, apply for waiver of prior notice of 
intent to export or destroy and accelerated payment of drawback, under 
subpart I of this part. Alternatively, an applicant may separately 
apply for certification in the drawback compliance program and either 
or both waiver of prior notice and accelerated payment of drawback. In 
the former instance, the intent to apply for certification and waiver 
of prior notice and/or approval of accelerated payment of drawback must 
be clearly stated. In all instances, all of the requirements for 
certification and the procedure applied for must be met (for example, 
in a combined application for certification in the drawback compliance 
program and both procedures, all of the information required for 
certification and each procedure, all required sample documents for 
certification and each procedure, and all required certifications must 
be included with the application).

Appendix A to Part 190--General Manufacturing Drawback Rulings

Table of Contents

I. General Instructions
II. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
(T.D. 81-234; T.D. 83-123)
III. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
or 1313(b) for Agents (T.D. 81-181)
IV. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
for Burlap or Other Textile Material (T.D. 83-53)
V. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Component Parts (T.D. 81-300)
VI. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
for Flaxseed (T.D. 83-80)
VII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
for Fur Skins or Fur Skin Articles (T.D. 83-77)
VIII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Orange Juice (T.D. 85-110)
IX. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Petroleum or Petroleum Derivatives (T.D. 84-49)
X. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Piece Goods (T.D. 83-73)
XI. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Raw Sugar (T.D. 83-59)
XII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Steel (T.D. 81-74)
XIII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Sugar (T.D. 81-92)
XIV. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) 
for Woven Piece Goods (T.D. 83-84)

I. General Instructions

    A. There follow various general manufacturing drawback rulings 
which have been designed to simplify drawback procedures. Any person 
that can comply with the conditions of any one of these rulings may 
notify a CBP drawback office of its intention to operate under the 
ruling (see Sec.  190.7). The letter of notification must be sent, 
electronically, to the drawback offices at the below listed email 
accounts:

[email protected]
[email protected]
[email protected]
[email protected].

    Such letter of notification must include the following 
information:
    1. Name and address of manufacturer or producer;
    2. IRS (Internal Revenue Service) number (with suffix) of 
manufacturer or producer;
    3. Location[s] of factory[ies] which will operate under the 
general ruling;
    4. If a business entity, names of persons who will sign drawback 
documents (see Sec.  190.6);
    5. Identity (by T.D. number and title, as stated in this 
Appendix) of general manufacturing drawback ruling under which the 
manufacturer or producer intends to operate;
    6. Description of the merchandise and articles, unless 
specifically described in the general manufacturing drawback ruling, 
and 8-digit HTSUS subheading number, and the quantity of the 
merchandise;
    7. Only for General Manufacturing Drawback Ruling Under 19 
U.S.C. 1313(b) for Petroleum or Petroleum Derivatives, the name of 
each article to be exported or, if the identity of the product is 
not clearly evident by its name, what the product is, and the 
abstract period to be used for each refinery (monthly or other 
specified period (not to exceed 1 year)), subject to the conditions 
in the General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) 
for Petroleum or Petroleum Derivatives, I. Procedures and Records 
Maintained, 4(a) or (b);
    8. Basis of claim used for calculating drawback; and
    9. Description of the manufacturing or production process, 
unless specifically described in the general manufacturing drawback 
ruling.
    For the General Manufacturing Drawback Ruling under Sec.  
1313(a), the General Manufacturing Drawback Ruling Under 19 U.S.C. 
1313(b) for Component Parts, and the General Manufacturing Drawback 
Ruling Under 19 U.S.C. 1313(a) or 1313(b) for Agents, if the 
drawback office has doubts as to whether there is a manufacture or 
production, as defined in Sec.  190.2, the manufacturer or producer 
will be asked to provide details of the operation purported to be a 
manufacture or production.
    10. For the General Manufacturing Drawback Ruling where 
substituted merchandise will be used, include the bill of materials, 
and/or formulas annotated with the 8-digit HTSUS classifications.
    B. These general manufacturing drawback rulings supersede 
general ``contracts'' previously published under the following 
Treasury Decisions (T.D.s): 81-74, 81-92, 81-181, 81-234, 81-300, 
83-53, 83-59, 83-73, 83-77, 83-80, 83-84, 83-123, 84-49, and 85-110.
    Anyone currently operating under any of the above-listed 
Treasury Decisions will automatically be covered by the superseding 
general ruling, including all privileges of the previous 
``contract''.

II. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) (T.D. 
81-234; T.D. 83-123)

A. Imported Merchandise or Drawback Products 1 Used
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations.
---------------------------------------------------------------------------

    Imported merchandise or drawback products are used in the 
manufacture of the exported articles upon which drawback claims will 
be based.

B. Exported Articles on Which Drawback Will Be Claimed

    Exported articles on which drawback will be claimed must be 
manufactured in the United States using imported merchandise or 
drawback products.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The imported merchandise or drawback products will be used to 
manufacture or produce articles in accordance with Sec.  190.2.

E. Multiple Products

1. Relative Values

    Drawback law mandates the assignment of relative values when two 
or more products necessarily are produced concurrently in the same 
operation. If multiple products are produced records, which may 
include records kept in the normal course of business, will be 
maintained of the market value of each product at the time it is 
first separated in the manufacturing process.

2. Appearing-In Method

    The appearing-in basis may not be used if multiple products are 
produced.

F. Loss or Gain

    Records, which may include records kept in the normal course of 
business, will be maintained showing the extent of any loss or

[[Page 65035]]

gain in net weight or measurement of the imported merchandise, 
caused by atmospheric conditions, chemical reactions, or other 
factors.

G. [Reserved]

H. Stock in Process

    Stock in process does not result; or if it does result, details 
will be given in claims as filed, and it will not be included in the 
computation of the merchandise used to manufacture the finished 
articles on which drawback is claimed.

I. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of merchandise appearing in the exported articles, 
records will be maintained to establish the value, quantity, and 
disposition of any waste that results from manufacturing the 
exported articles. If no waste results, records will be maintained 
to establish that fact.

J. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise, and
    2. The quantity of imported merchandise \2\ used in producing 
the exported articles.
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles.''
---------------------------------------------------------------------------

    (To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after importation of 
the imported merchandise. Records establishing compliance with these 
requirements must be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance).

K. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(a) and part 190 of the CBP Regulations will be met, as 
discussed under the heading Procedures and Records Maintained. If 
those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.

L. Basis of Claim for Drawback

    Drawback will be claimed on the full quantity of merchandise 
used in producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. A 
drawback claim may be based on the quantity of eligible merchandise 
that appears in the exported articles, regardless of whether there 
is waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible material used to 
produce the exported articles less the amount of that merchandise 
which the value of the waste would replace.

M. General Requirements

    The manufacturer or producer must:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

III. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) or 
1313(b) for Agents (T.D. 81-181)

    Manufacturers or producers operating under this general 
manufacturing drawback ruling must comply with T.D.s 55027(2) and 
55207(1), and 19 U.S.C. 1313(b), if applicable, as well as 19 CFR 
part 190 (see particularly, Sec.  190.9).

A. Name and Address of Principal

B. Process of Manufacture or Production

    The imported merchandise or drawback products or other 
substituted merchandise will be used to manufacture or produce 
articles in accordance with Sec.  190.2.

C. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. Quantity, identity, and 8-digit HTSUS subheading number of 
merchandise transferred from the principal to the agent;
    2. Date of transfer of the merchandise from the principal to the 
agent;
    3. Date of manufacturing or production operations performed by 
the agent;
    4. Total quantity and description of merchandise (including 8-
digit HTSUS subheading number) appearing in or used in manufacturing 
or production operations performed by the agent;
    5. Total quantity and description of articles (including 8-digit 
HTSUS subheading number) produced in manufacturing or production 
operations performed by the agent;
    6. Quantity, identity, and 8-digit HTSUS subheading number of 
articles transferred from the agent to the principal; and
    7. Date of transfer of the articles from the agent to the 
principal.

D. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
manufacturing or producing articles for account of the principal 
under the principal's general manufacturing drawback ruling or 
specific manufacturing drawback ruling, as appropriate;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates the claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to help ensure proper compliance with 
title 19, United States Code, section 1313, part 190 of the CBP 
Regulations and this general ruling.

IV. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) for 
Burlap or Other Textile Material (T.D. 83-53)

    Drawback may be allowed under 19 U.S.C. 1313(a) upon the 
exportation of bags or meat wrappers manufactured with the use of 
imported burlap or other textile material, subject to the following 
special requirements:

A. Imported Merchandise or Drawback Products 1 Used
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations.
---------------------------------------------------------------------------

    Imported merchandise or drawback products (burlap or other 
textile material) are used in the manufacture of the exported 
articles upon which drawback claims will be based.

B. Exported Articles on Which Drawback Will Be Claimed

    Exported articles on which drawback will be claimed must be 
manufactured in the United States using imported merchandise or 
drawback products.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another, or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

[[Page 65036]]

D. Process of Manufacture or Production

    The imported merchandise or drawback products will be used to 
manufacture or produce articles in accordance with Sec.  190.2.

E. Multiple Products

    Not applicable.

F. Loss or Gain

    Not applicable.

G. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of merchandise appearing in the exported articles, 
records will be maintained to establish the value, quantity, and 
disposition of any waste that results from manufacturing the 
exported articles. If no waste results, records will be maintained 
to establish that fact.

H. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise; and
    2. The quantity of imported merchandise \2\ used in producing 
the exported articles.
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles.''
---------------------------------------------------------------------------

    To obtain drawback, the claimant must establish that the 
completed articles were exported within 5 years after importation of 
the imported merchandise. Records establishing compliance with these 
requirements will be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance.

I. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(a) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish compliance with all legal 
requirements, drawback cannot be paid. Each lot of imported material 
received by a manufacturer or producer must be given a lot number 
and kept separate from other lots until used. The records of the 
manufacturer or producer must show, as to each manufacturing lot or 
period of manufacture, the 8-digit HTSUS classification, the 
quantity of material used from each imported lot, and the number of 
each kind and size of bags or meat wrappers obtained.
    All bags or meat wrappers manufactured or produced for the 
account of the same exporter during a specified period may be 
designated as one manufacturing lot. All exported bags or meat 
wrappers must be identified by the exporter.

J. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of merchandise used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible merchandise that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation, and 
records are kept which establish the quantity and value of the 
waste, drawback may be claimed on the quantity of eligible material 
used to produce the exported articles, less the amount of that 
merchandise which the value of the waste would replace.

K. General Requirements

    The manufacturer or producer must:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation.
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to help ensure proper compliance with 19, 
United States Code, Sec.  1313, part 190 of the CBP Regulations and 
this general ruling.

V. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Component Parts (T.D. 81-300)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback         Duty-paid, duty-free, or
 products \1\ to be designated as the     domestic merchandise
 basis for drawback on the exported       classifiable under the same 8-
 products.                                digit HTSUS subheading number
                                          as that designated which will
                                          be used in the production of
                                          the exported products.
Component parts identified by            Component parts classifiable
 individual part numbers and 8-digit      under the same 8-digit HTSUS
 HTSUS subheading number.                 subheading number and
                                          identified with the same
                                          individual part numbers as
                                          those in the column
                                          immediately to the left.
------------------------------------------------------------------------

    The designated components must be manufactured in accordance 
with the same specifications and from the same materials, and must 
be identified by the same 8-digit HTSUS classification and part 
number as the substituted components. Further, the designated and 
substituted components are used interchangeably in the manufacture 
of the exported articles upon which drawback will be claimed. 
Specifications or drawings will be maintained and made available for 
review by CBP Officials.
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

B. Exported Articles on Which Drawback Will Be Claimed

    The exported articles will have been manufactured in the United 
States using components described in the Parallel Columns above.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The components described in the Parallel Columns will be used to 
manufacture or produce articles in accordance with Sec.  190.2.

E. Multiple Products

    Not applicable.

F. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of components appearing in the exported articles, 
records will be maintained to establish the value (or the lack of 
value), quantity, and disposition of any waste that results from 
manufacturing the exported articles. If no waste results, records 
will be maintained to establish that fact.

G. [Reserved]

H. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity and 8-digit HTSUS classification of the 
designated merchandise;

[[Page 65037]]

    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise \2\ used to 
produce the exported articles;
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years after the date of importation of the 
designated merchandise, the manufacturer or producer used the 
merchandise to produce articles. During the same 5-year period, the 
manufacturer or producer produced \3\ the exported articles. To 
obtain drawback the claimant must establish that the completed 
articles were exported within 5 years after the importation of the 
imported merchandise. Records establishing compliance with these 
requirements will be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance.
---------------------------------------------------------------------------

    \3\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

I. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(b) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.

J. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of eligible components 
used in producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible components that 
appear in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible components used 
to produce the exported articles less the amount of those components 
which the value of the waste would replace.

K. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

VI. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) for 
Flaxseed (T.D. 83-80)

    Drawback may be allowed under the provision of 19 U.S.C. 1313(a) 
upon the exportation of linseed oil, linseed oil cake, and linseed 
oil meal, manufactured or produced with the use of imported 
flaxseed, subject to the following special requirements:

A. Imported Merchandise or Drawback Products 1 Used
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations.
---------------------------------------------------------------------------

    Imported merchandise or drawback products (flaxseed) are used in 
the manufacture of the exported articles upon which drawback claims 
will be based.

B. Exported Articles on Which Drawback Will Be Claimed

    Exported articles on which drawback will be claimed must be 
manufactured in the United States using imported merchandise or 
drawback products.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The imported merchandise or drawback products will be used to 
manufacture or produce articles in accordance with Sec.  190.2.

E. Multiple Products

    Drawback law mandates the assignment of relative values when two 
or more products necessarily are produced concurrently in the same 
operation. If multiple products are produced records will be 
maintained of the market value of each product at the time it is 
first separated in the manufacturing process (when a claim covers a 
manufacturing period, the entire period covered by the claim is the 
time of separation of the products and the value per unit of product 
is the market value for the period (see Sec. Sec.  190.2, 
190.22(e)). The ``appearing in'' basis may not be used if multiple 
products are produced.

F. Loss or Gain

    Records will be maintained showing the extent of any loss or 
gain in net weight or measurement of the imported merchandise, 
caused by atmospheric conditions, chemical reactions, or other 
factors.

G. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of merchandise appearing in the exported articles, 
records will be maintained to establish the value, quantity, and 
disposition of any waste that results from manufacturing the 
exported articles. If no waste results, records will be maintained 
to establish that fact.

H. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise; and
    2. The quantity of imported merchandise \2\ used in producing 
the exported articles.
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles.''
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after importation of 
the imported merchandise. Records establishing compliance with these 
requirements will be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance.

I. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(a) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.
    The inventory records of the manufacturer or producer will show: 
The inclusive dates of manufacture; the quantity, identity, value, 
and 8-digit HTSUS classification of the imported flaxseed or 
screenings, scalpings, chaff, or scourings used; the quantity by 
actual weight and value, if any, of the material removed from the 
foregoing by screening prior to crushing; the quantity and kind of 
domestic merchandise added, if any; the quantity by actual weight or 
gauge and value of the oil, cake, and meal obtained; and the 
quantity and value, if any, of the waste incurred. The quantity of 
imported flaxseed, screenings, scalpings, chaff, or scourings used 
or of material removed will not be estimated nor computed on the 
basis of the quantity of finished products obtained, but will be 
determined by actually weighing the said flaxseed, screenings, 
scalpings, chaff, scourings, or other material; or, at the option of 
the crusher, the quantities of imported materials used may be 
determined from CBP weights, as shown by the import entry covering 
such imported materials, and the Government weight certificate of 
analysis issued at the time of entry. The entire period covered by 
an abstract will be deemed the time of separation of the oil and 
cake covered thereby.
    If the records of the manufacturer or producer do not show the 
quantity of oil cake

[[Page 65038]]

used in the manufacture or production of the exported oil meal, and 
the quantity of oil meal obtained, the net weight of the oil meal 
exported will be regarded as the weight of the oil cake used in the 
manufacture thereof.
    If various tanks are used for the storage of imported flaxseed, 
the mill records must establish the tank or tanks in which each lot 
or cargo is stored. If raw or processed oil manufactured or produced 
during different periods of manufacture is intermixed in storage, a 
record must be maintained showing the quantity, identity, and 8-
digit HTSUS classification of oil so intermixed. The identity of the 
merchandise or articles in either instance must be in accordance 
with Sec.  190.14.

J. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of merchandise used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible merchandise that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible material used to 
produce the exported articles, less the amount of that merchandise 
which the value of the waste would replace.

K. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation.
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with 19, 
United States Code, Sec.  1313, part 190 of the CBP Regulations and 
this general ruling.

VII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) for 
Fur Skins or Fur Skin Articles (T.D. 83-77)

    Drawback may be allowed under 19 U.S.C. 1313(a) upon the 
exportation of dressed, redressed, dyed, redyed, bleached, blended, 
or striped fur skins or fur skin articles manufactured or produced 
by any one, or a combination, of the foregoing processes, with the 
use of fur skins or fur skin articles, such as plates, mats, sacs, 
strips, and crosses, imported in a raw, dressed, or dyed condition, 
subject to the following special requirements:

A. Imported Merchandise or Drawback Products 1 Used
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations.
---------------------------------------------------------------------------

    Imported merchandise or drawback products (fur skins or fur skin 
articles) are used in the manufacture of the exported articles upon 
which drawback claims will be based.

B. Exported Articles on Which Drawback Will Be Claimed

    Exported articles on which drawback will be claimed must be 
manufactured in the United States using imported merchandise or 
drawback products.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The imported merchandise or drawback products will be used to 
manufacture or produce articles in accordance with Sec.  190.2.
    Drawback will not be allowed under this general manufacturing 
drawback ruling when the process performed results only in the 
restoration of the merchandise to its condition at the time of 
importation.

E. Multiple Products

    Not applicable.

F. Loss or Gain

    Records will be maintained showing the extent of any loss or 
gain in net weight or measurement of the imported merchandise, 
caused by atmospheric conditions, chemical reactions, or other 
factors.

G. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of merchandise appearing in the exported articles, 
records will be maintained to establish the value, quantity, and 
disposition of any waste that results from manufacturing the 
exported articles. If no waste results, records will be maintained 
to establish that fact.

H. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise; and
    2. The quantity of imported merchandise \2\ used in producing 
the exported articles.
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles.''
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after importation of 
the imported merchandise. Records establishing compliance with these 
requirements will be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance.

I. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(a) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.
    The records of the manufacturer or producer must show, as to 
each lot of fur skins and/or fur skin articles used in the 
manufacture or production of articles for exportation with benefit 
of drawback, the lot number and date or inclusive dates of 
manufacture or production, the quantity, identity, description, and 
8-digit HTSUS classification of the imported merchandise used, the 
condition in which imported, the process or processes applied 
thereto, the quantity, description, and 8-digit HTSUS classification 
of the finished articles obtained, and the quantity of imported 
pieces rejected, if any, or spoiled in manufacture or production.

J. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of merchandise used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible merchandise that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible material used to 
produce the exported articles, less the amount of that merchandise 
which the value of the waste would replace. (If rejects and/or 
spoilage are incurred, the quantity of imported merchandise used 
will be determined by deducting from the quantity of fur skins or 
fur skin articles put into manufacture or production the quantity of 
such rejects and/or spoilage.)

K. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim

[[Page 65039]]

predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation.
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with 19, 
United States Code, Sec.  1313, part 190 of the CBP Regulations and 
this general ruling.

VIII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Orange Juice (T.D. 85-110)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback         Duty-paid, duty-free, or
 products \1\ to be designated as the     domestic merchandise,
 basis for drawback on the exported       classifiable under the same 8-
 products.                                digit HTSUS subheading number
                                          as that designated which will
                                          be used in the production of
                                          the exported products.
Concentrated orange juice for            Concentrated orange juice for
 manufacturing (of not less than          manufacturing as described in
 55[deg] Brix), as defined in the         the left-hand parallel column.
 standard of identity of the Food and
 Drug Administration (21 CFR 146.53),
 which meets the Grade A standard of
 the U.S. Dept. of Agriculture (7 CFR
 52.1557, Table IV).
------------------------------------------------------------------------

    The imported merchandise designated on drawback claims must be 
classifiable under the same 8-digit HTSUS classification as the 
merchandise used in producing the exported articles on which 
drawback is claimed.
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

B. Exported Articles on Which Drawback Will Be Claimed

    1. Orange juice from concentrate (reconstituted juice).
    2. Frozen concentrated orange juice.
    3. Bulk concentrated orange juice.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    1. Orange juice from concentrate (reconstituted juice). 
Concentrated orange juice for manufacturing is reduced to a desired 
11.8[deg] Brix by a blending process to produce orange juice from 
concentrate. The following optional blending processes may be used:
    i. The concentrate is blended with fresh orange juice (single 
strength juice); or
    ii. The concentrate is blended with essential oils, flavoring 
components, and water; or
    iii. The concentrate is blended with water and is heat treated 
to reduce the enzymatic activity and the number of viable 
microorganisms.
    2. Frozen concentrated orange juice. Concentrated orange juice 
for manufacturing is reduced to a desired degree Brix of not less 
than 41.8[deg] Brix by the following optional blending processes:
    i. The concentrate is blended with fresh orange juice (single 
strength juice); or
    ii. The concentrate is blended with essential oils and flavoring 
components and water.
    3. Bulk concentrated orange juice. Concentrated orange juice for 
manufacturing is blended with essential oils and flavoring 
components which would enable another processor such as a dairy to 
prepare finished frozen concentrated orange juice or orange juice 
from concentrate by merely adding water to the (intermediate) bulk 
concentrated orange juice.

E. Multiple Products, Waste, Loss or Gain

    Not applicable.

F. [Reserved]

G. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The 8-digit HTSUS classification and identity of the 
designated merchandise;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise \2\ used to 
produce the exported articles;
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years after the date of importation of the 
designated merchandise, the manufacturer or producer used the 
designated merchandise to produce articles. During the same 5-year 
period, the manufacturer or producer produced \3\ the exported 
articles.
---------------------------------------------------------------------------

    \3\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    To obtain drawback it must be established that the completed 
articles were exported within 5 years after the importation of the 
imported merchandise. Records establishing compliance with these 
requirements must be available for audit by CBP during business 
hours. No drawback is payable without proof of compliance.

H. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(b) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained'', 
and will show what components were blended with the concentrated 
orange juice for manufacturing. If those records do not establish 
satisfaction of all legal requirements drawback cannot be paid.

I. Basis of Claim for Drawback

    The basis of claim for drawback will be the quantity of 
concentrated orange juice for manufacturing used in the production 
of the exported articles. It is understood that when fresh orange 
juice is used as ``cutback'', it will not be included in the ``pound 
solids'' when computing the drawback due.

J. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

IX. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Petroleum or Petroleum Derivatives (T.D. 84-49)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

[[Page 65040]]



------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback         Duty-paid, duty-free, or
 products \1\ to be designated as the     domestic merchandise,
 basis for drawback on the exported       classifiable under the same 8-
 products.                                digit HTSUS subheading number
                                          as that designated which will
                                          be used in the production of
                                          the exported products.
------------------------------------------------------------------------

B. Exported Articles Produced From Fractionation
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

1. Motor Gasoline
2. Aviation Gasoline
3. Special Naphthas
4. Jet Fuel
5. Kerosene & Range Oils
6. Distillate Oils
7. Residual Oils
8. Lubricating Oils
9. Paraffin Wax
10. Petroleum Coke
11. Asphalt
12. Road Oil
13. Still Gas
14. Liquified Petroleum Gas
15. Petrochemical Synthetic Rubber
16. Petrochemical Plastics & Resins
17. All Other Petrochemical Products

C. Exported Articles on Which Drawback Will Be Claimed

    See the General Instructions, I.A.7., for this general drawback 
ruling. Each article to be exported must be named. When the identity 
of the product is not clearly evident by its name, there must be a 
statement as to what the product is, e.g., a herbicide.

D. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

E. Process of Manufacture or Production

    Heated crude oil is charged to an atmospheric distillation tower 
where it is subjected to fractionation. The charge to the 
distillation tower consists of a single crude oil, or of commingled 
crudes which are fed to the tower simultaneously or after blending 
in a tank. During fractionation, components of different boiling 
ranges are separated.

F. Multiple Products

1. Relative Values

    Fractionation results in 17 products. In order to insure proper 
distribution of drawback to each of these products, the manufacturer 
or producer agrees to record the relative values at the time of 
separation. The entire period covered by an abstract is to be 
treated as the time of separation. The value per unit of each 
product will be the average market value for the abstract period.

2. Producibility

    The manufacturer or producer can vary the proportionate quantity 
of each product. The manufacturer or producer understands that 
drawback is payable on exported products only to the extent that 
these products could have been produced from the designated 
merchandise. The records of the manufacturer or producer must show 
that all of the products exported, for which drawback will be 
claimed under this general manufacturing drawback ruling could, have 
been produced concurrently on a practical operating basis from the 
designated merchandise.
    The manufacturer or producer agrees to establish the amount to 
be designated by reference to the Industry Standards of Potential 
Production published in T.D. 66-16.\2\
---------------------------------------------------------------------------

    \2\ A manufacturer who proposes to use standards other than 
those in T.D. 66-16 must state the proposed standards and provide 
sufficient information to CBP in order for those proposed standards 
to be verified in accordance with T.D. 84-49.
---------------------------------------------------------------------------

    There are no valuable wastes as a result of the processing.

G. Loss or Gain

    Because the manufacturer or producer keeps records on a volume 
basis rather than a weight basis, it is anticipated that the 
material balance will show a volume gain. For the same reason, it is 
possible that occasionally the material balance will show a volume 
loss. Fluctuations in type of crude used, together with the type of 
finished product desired make an estimate of an average volume gain 
meaningless. However, records will be kept to show the amount of 
loss or gain with respect to the production of export products.

H. Exchange

    The use of any domestic merchandise acquired in exchange for 
imported merchandise that meets the same kind and quality 
specifications contained in the Parallel Columns of this general 
ruling shall be treated as use of the imported merchandise.

I. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity, and 8-digit HTSUS classification of the 
merchandise designated;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise used to 
produce the exported articles.
    3. That, within 5 years after importation, the manufacturer or 
producer used the designated merchandise to produce articles. During 
the same 5-year period, the manufacturer or producer produced the 
exported articles.
    4(a). The manufacturer or producer agrees to use a 28-31 day 
period (monthly) abstract period for each refinery covered by this 
general manufacturing drawback ruling, or
    (b). The manufacturer or producer agrees to use an abstract 
period (not to exceed 1 year) for each refinery covered by this 
general manufacturing drawback ruling. The manufacturer or producer 
certifies that if it were to file abstracts covering each 
manufacturing period, of not less than 28 days and not more than 31 
days (monthly) within the longer period, in no such monthly abstract 
would the quantity of designated merchandise exceed the material 
introduced into the manufacturing process during that monthly 
period. (Select (a) or (b), and state which is selected in the 
application, and, if (b) is selected, specify the length of the 
particular abstract period chosen (not to exceed 1 year (see General 
Instruction I.A.7.)).)
    5. On each abstract of production the manufacturer or producer 
agrees to show the value per barrel to five decimal places.
    6. The manufacturer or producer agrees to file claims in the 
format set forth in exhibits A through F which are attached to this 
general manufacturing drawback ruling. The manufacturer or producer 
realizes that to obtain drawback the claimant must establish that 
the completed articles were exported within 5 years after 
importation of the imported merchandise. Records establishing 
compliance with these requirements will be available for audit by 
CBP during business hours. It is understood that drawback is not 
payable without proof of compliance. Records will be kept in 
accordance with T.D. 84-49, as amended by T.D. 95-61.

J. Residual Rights

    It is understood that the refiner can reserve as the basis for 
future payment the right to drawback only on the number of barrels 
of raw material computed by subtracting from Line E the larger of 
Lines A or B, of a given Exhibit E. It is further understood that 
this right to future payment can be claimed only against products 
concurrently producible with the products listed in Column 21, in 
the quantities shown in Column 22 of such Exhibit E. Such residual 
right can be transferred to another refinery of the same refiner 
only when Line B of Exhibit E is larger than Line A. Unless the 
number of residual barrels is specifically computed, and rights 
thereto are expressly reserved on Exhibit E, such residual rights 
will be deemed waived. The procedure the manufacturer or producer 
must follow in preparing drawback entries claiming this residual 
right is illustrated in the attached sample Exhibit E-1. It is 
understood that claims involving residual rights must be filed only 
at the port where the Exhibit E reserving such right was filed.

K. Inventory Procedures

    The manufacturer or producer realizes that inventory control is 
of major importance. In

[[Page 65041]]

accordance with the normal accounting procedures of the manufacturer 
or producer, each refinery prepares a monthly stock and yield 
report, which accounts for inventories, production, and disposals, 
from time of receipt to time of disposition. This provides an audit 
trail of all products.
    The above-noted records will provide the required audit trail 
from the initial source documents to the drawback claims of the 
manufacturer or producer and will support adherence with the 
requirements discussed under the heading Procedures and Records 
Maintained.

L. Basis of Claim for Drawback

    The amount of raw material on which drawback may be based will 
be computed by multiplying the quantity of each product exported by 
the drawback factor for that product. The amount of raw material 
which may be designated as the basis for drawback on the exported 
products produced at a given refinery and covered by a drawback 
entry must not exceed the quantity of such raw material used at the 
refinery during the abstract period or periods from which the 
exported products were produced. The quantity of raw material to be 
designated as the basis for drawback on exported products must be at 
least as great as the quantity of raw material which would be 
required to produce the exported products in the quantities 
exported.

M. Agreements

    The manufacturer or producer specifically agrees that it will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its refinery and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this application;
    4. Keep this application current by reporting promptly to the 
drawback office which liquidates its claims any changes in the 
information required by the General Instructions of this Appendix 
(I. General Instructions, 1 through 10), the corporate name, or 
corporate organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.
BILLING CODE 9111-14-P
[GRAPHIC] [TIFF OMITTED] TR18DE18.002


[[Page 65042]]


[GRAPHIC] [TIFF OMITTED] TR18DE18.003

BILLING CODE 9111-14-C

                                    Exhibit C--Inventory Control Sheet: ABC Oil Co., Inc.; Beaumont, Texas Refinery,
                                                     Period From January 1, 2019 to January 31, 2019
                                                    [All quantities exclude non-petroleum additives]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Aviation gasoline           Residual oils           Lubricating oils         Petrochemicals, all
                                                 ------------------------------------------------------------------------------           other
                                                                                                                               -------------------------
                                                     Bbls.       Drawback      Bbls.       Drawback      Bbls.       Drawback                  Drawback
                                                                  factor                    factor                    factor       Bbls.        factor
--------------------------------------------------------------------------------------------------------------------------------------------------------
(10) Opening Inventory..........................       11,218      1.00126       21,221       .45962        9,242      4.52178          891      1.00244
(11) Production.................................      108,269      1.01300      308,002       .43642      292,492      4.64041        7,996      1.07895
(11-A) Receipts.................................
(12) Exports....................................       11,218      1.00126       21,221       .45962        8,774      4.52178          195      1.00244
                                                          176      1.01300      104,397       .43642
(13) Drawback Deliveries........................  ...........  ...........  ...........  ...........  ...........  ...........          696      1.00244
                                                                                                                                        319      1.07895
(14) Domestic Shipments.........................       97,863      1.01300      180,957       .43642          468      4.52178        6,867      1.07895
                                                                                                          278,286      4.64041
(15) Closing Inventory..........................       10,230      1.01300       22,648       .43642       14,206      4.64041          810      1.07895
--------------------------------------------------------------------------------------------------------------------------------------------------------
Line (10)--Opening inventory from previous period's closing inventory.
Line (11)--From production period under consideration.
Line (11-A)--Product received from other sources.
Line (12)--From earliest on hand (inventory or production). Totals from drawback entry or entries recapitulated (see column 18).
Line (13)--Deliveries for export or for designation against further manufacture--earliest on hand after exports are deducted.
Line (14)--From earliest on hand after lines (12) and (13) are deducted.

[[Page 65043]]

 
Line (15)--Balance on hand.

BILLING CODE 9111-14-P
[GRAPHIC] [TIFF OMITTED] TR18DE18.004


[[Page 65044]]


[GRAPHIC] [TIFF OMITTED] TR18DE18.005


[[Page 65045]]


[GRAPHIC] [TIFF OMITTED] TR18DE18.006

BILLING CODE 9111-14-C

[[Page 65046]]



  Exhibit E (Combination)--Producibility Test for Products Exported (Including Drawback Deliveries) ABC Oil Co., Inc.; Beaumont, Texas Refinery, Period
                                                        from January 1, 2019 to January 31, 2019
                                              [Type and class of raw material designated--Crude, Class III]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Quantity of raw
                                                                                                   material of type and
                            Product                                Quantity in      Industry     class designated needed     Drawback      Crude allowed
                                                                     barrels      standard (%)    to produce product per      factor       for drawback
                                                                                                          barrel
(21)                                                                       (22)            (23)                     (24)            (19)            (20)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aviation Gasoline \1\..........................................      \1\ 11,218              40                   28,045         1.00126          11,232
                                                                         \1\176              40                      440         1.01300             178
Residual Oils \1\..............................................      \1\ 21,221              83                   25,567          .45962           9,754
                                                                    \1\ 104,397              83                  125,780          .43642          45,561
Lubricating Oils \1\...........................................       \1\ 8,774              50                   17,548         4.52178          39,674
Petrochemicals, Other \1\......................................         \1\ 195              29                      672         1.00244             195
Petrochemicals, Other \2\......................................         \2\ 696              29                    2,400         1.00244             698
Petrochemicals, Other \2\......................................         \2\ 319              29                    1,100         1.07895             344
                                                                ----------------------------------------------------------------------------------------
    Total......................................................         146,996  ..............  .......................  ..............         107,636
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Exports.
\2\ Drawback deliveries.
A--Crude allowed (column 20: 107,636 bbls. (106,594 for export, plus 1,042 for drawback deliveries)).
B--Total quantity exported (including drawback deliveries) (column 22): 146,996.
C--Largest quantity of raw material needed to produce an individual exported product (see column 24): 151,347.
D--The excess of raw material over the largest of lines A, B, or C, required to produce concurrently on a practical operating basis, using the most
  efficient processing equipment existing within the domestic industry, the exported articles (including drawback deliveries) in the quantities exported
  (or delivered): None.
E--Minimum quantity of raw material required to be designated (which is A, B, or C, whichever is largest, plus D, if applicable): 151,347 bbs.
I hereby certify that all the above drawback deliveries and products exported by the Beaumont refinery of ABC Oil Co., Inc. during the period from
  January 1, 2019 to January 31, 2019, could have been produced concurrently on a practical operating basis from 151,347 barrels of imported Class III
  crude against which drawback is claimed.

BILLING CODE 9111-14-P

[[Page 65047]]

[GRAPHIC] [TIFF OMITTED] TR18DE18.007

BILLING CODE 9111-14-C

                                 Exhibit F--Designations for Drawback Claim, ABC Oil Co., Inc.; Beaumont, Texas Refinery
                                                    [Period from January 1, 2019 to January 31, 2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Quantity of
           Entry No.                Date of          Kind of materials        materials in    Date received         Date consumed          Rate of duty
                                  importation                                    barrels
--------------------------------------------------------------------------------------------------------------------------------------------------------
26192.........................        04/13/17  Class III Crude............          75,125        04/13/17  May 2017...................          $.1050
23990.........................        08/04/18  ......do...................          37,240        08/04/18  Oct. 2018..................           .1050
22517.........................        10/05/18  ......do...................          38,982        10/05/18  Nov. 2018..................           .1050
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 65048]]

X. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Piece Goods (T.D. 83-73)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback products   Duty-paid, duty-free or
 \1\ to be designated as the basis for       domestic merchandise
 drawback on the exported products.          classifiable under the same
                                             8-digit HTSUS subheading
                                             number as that designated
                                             which will be used in the
                                             production of the exported
                                             products.
Piece goods.                                Piece goods.
------------------------------------------------------------------------

    The piece goods used in manufacture will be classifiable under 
the same 8-digit HTSUS classification as the piece goods designated 
as the basis of claim for drawback, and are used interchangeably 
without change in manufacturing processes or resultant products 
(including, if applicable, multiple products), or wastes. Some 
tolerances between imported-designated piece goods and the used-
exported piece goods will be permitted to accommodate variations 
which are normally found in piece goods. These tolerances are no 
greater than the tolerances generally allowed in the industry for 
piece goods classifiable under the same 8-digit HTSUS classification 
as follows:
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under 19 U.S.C. 1313(b). They may be designated as 
the basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

    1. A 4% weight tolerance so that the piece goods used in 
manufacture will be not more than 4% lighter or heavier than the 
imported piece goods which will be designated;
    2. A tolerance of 4% in the aggregate thread count per square 
inch so that the piece goods used in manufacture will have an 
aggregate thread count within 4%, more or less of the aggregate 
thread count of the imported piece goods which will be designated. 
In each case, the average yarn number of the domestic piece goods 
will be the same or greater than the average yarn number of the 
imported piece goods designated, and in each case, the substitution 
and tolerance will be employed only within the same family of 
fabrics, i.e., print cloth for print cloth, gingham for gingham, 
greige for greige, dyed for dyed, bleached for bleached, etc. The 
piece goods used in manufacture of the exported articles will be 
designated as containing the identical percentage of identical 
fibers as the piece goods designated as the basis for allowance of 
drawback; for example, piece goods containing 65% cotton and 35% 
dacron will be designated against the use of piece goods shown to 
contain 65% cotton and 35% dacron. The actual fiber composition may 
vary slightly from that described on the invoice or other acceptance 
of the fabric as having the composition described on documents in 
accordance with trade practices.

B. Exported Articles on Which Drawback Will Be Claimed

    Finished piece goods.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s. 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    Piece goods are subject to any one of the following finishing 
productions:
    1. Bleaching,
    2. Mercerizing,
    3. Dyeing,
    4. Printing,
    5. A combination of the above, or
    6. Any additional finishing processes.

E. Multiple Products

    Not applicable.

F. Waste

    Rag waste may be incurred. No drawback is payable on any waste 
which results from the manufacturing operation. 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 quantity of rag waste, if any, and its value. In instances 
where rag waste occurs and it is impractical to account for the 
actual quantity of rag waste incurred, it may be assumed that such 
rag waste constituted 2% of the piece goods put into the finishing 
processes. If necessary to establish the quantity of merchandise 
(eligible piece goods) appearing in the exported articles, such 
waste records must also be kept.

G. Shrinkage, Gain, and Spoilage

    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 or production, and the 
quantity of remnants resulting and of spoilage incurred, if any. 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.

H. [Reserved]

I. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity and 8-digit HTSUS classification of the 
designated merchandise;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise \2\ used to 
produce the exported articles;
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years after the date of importation of the 
designated merchandise, the manufacturer or producer used the 
merchandise to produce articles. During the same 5-year period, the 
manufacturer or producer produced \3\ the exported articles.
---------------------------------------------------------------------------

    \3\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after the 
importation of the imported merchandise. Records establishing 
compliance with these requirements will be available for audit by 
CBP during business hours. Drawback is not payable without proof of 
compliance.

J. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(b) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.

K. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of eligible piece goods 
used in producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible piece goods that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste from 
each lot of piece goods, drawback may be claimed on the quantity of 
eligible piece goods used to produce the exported articles less the 
amount of piece goods which the value of the waste would replace.

L. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the

[[Page 65049]]

date of liquidation of any drawback claim predicated in whole or in 
part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

XI. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Raw Sugar (T.D. 83-59)

    Drawback may be allowed under 19 U.S.C. 1313(b) upon the 
exportation of hard or soft refined sugars and sirups manufactured 
from raw sugar, subject to the following special requirements:
    A. The drawback allowance must not exceed an amount calculated 
pursuant to regulations prescribed by the Secretary of the Treasury, 
of the duties, taxes, and fees paid on a quantity of raw sugar 
designated by the refiner which contains a quantity of sucrose not 
in excess of the quantity required to manufacture the exported sugar 
or sirup, ascertained as provided in this general rule.
    B. The refined sugars and sirups must have been manufactured 
with the use of duty-paid, duty-free, or domestic sugar, or 
combinations thereof, within 5 years after the date of importation, 
and must have been exported within 5 years from the date of 
importation of the designated sugar.
    C. All granulated sugar testing by the polariscope 99.5 
[degrees] and over will be deemed hard refined sugar. All refined 
sugar testing by the polariscope less than 99.5 [degrees] will be 
deemed soft refined sugar. All ``blackstrap,'' ``unfiltered sirup,'' 
and ``final molasses'' will be deemed sirup.
    D. The imported duty-paid sugar selected by the refiner as the 
basis for the drawback claim (designated sugar) must be classifiable 
under the same 8-digit HTSUS classification as that used in the 
manufacture of the exported refined sugar or sirup and must have 
been used within 5 years after the date of importation. Duty-paid 
sugar which has been used at a plant of a refiner within 5 years 
after the date on which it was imported by such refiner may be 
designated as the basis for the allowance of drawback on refined 
sugars or sirups manufactured at another plant of the same refiner.
    E. For the purpose of distributing the drawback, relative values 
must be established between hard refined (granulated) sugar, soft 
refined (various grades) sugar, and sirups at the time of 
separation. The entire period covered by an abstract will be deemed 
the time of separation of the sugars and sirups covered by such 
abstract.
    F. The sucrose allowance per pound on hard refined (granulated) 
sugar established by an abstract, as provided for in this general 
ruling, will be applied to hard refined sugar commercially known as 
loaf, cut loaf, cube, pressed, crushed, or powdered sugar 
manufactured from the granulated sugar covered by the abstract.
    G. The sucrose allowance per gallon on sirup established by an 
abstract, as provided for in this general ruling, will be applied to 
sirup further advanced in value by filtration or otherwise, unless 
such sirup is the subject of a special manufacturing drawback 
ruling.
    H. As to each lot of imported or domestic sugar used in the 
manufacture of refined sugar or sirup on which drawback is to be 
claimed, the raw stock records must show the refiner's raw lot 
number, the number and character of the packages, the settlement 
weight in pounds, the settlement polarization, and the 8-digit HTSUS 
classification. Such records covering imported sugar must show, in 
addition to the foregoing, the import entry number, date of 
importation, name of importing carrier, country of origin, the 
Government weight, and the Government polarization.
    I. The melt records must show the date of melting, the number of 
pounds of each lot of raw sugar melted, and the full analysis at 
melting.
    J. There must be kept a daily record of final products boiled 
showing the date of the melt, the date of boiling, the magma filling 
serial number, the number of the vacuum pan or crystallizer filling, 
the date worked off, and the sirup filling serial number.
    K. The sirup manufacture records must show the date of boiling, 
the period of the melt, the sirup filling serial number, the number 
of barrels in the filling, the magma filling serial number, the 
quantity of sirup, its disposition in tanks or barrels and the 
refinery serial manufacture number.
    L. The refined sugar stock records must show the refinery serial 
manufacture number, the period of the melt, the date of manufacture, 
the grade of sugar produced, its polarization, the number and kind 
of packages, and the net weight. When soft sugars are manufactured, 
the commercial grade number and quantity of each must be shown.
    M. Each lot of hard or soft refined sugar and each lot of sirup 
manufactured, regardless of the character of the containers or 
vessels in which it is packed or stored, must be marked immediately 
with the date of manufacture and the refinery manufacture number 
applied to it in the refinery records provided for and shown in the 
abstract, as provided for in this general ruling, from such records. 
If all the sugar or sirup contained in any lot manufactured is not 
intended for exportation, only such of the packages as are intended 
for exportation need be marked as prescribed above, provided there 
is filed with the drawback office immediately after such marking a 
statement showing the date of manufacture, the refinery manufacture 
number, the number of packages marked, and the quantity of sugar or 
sirup contained therein. No drawback will be allowed in such case on 
any sugar or sirup in excess of the quantity shown on the statement 
as having been marked. If any packages of sugar or sirup so marked 
are repacked into other containers, the new containers must be 
marked with the marks which appeared on the original containers and 
a revised statement covering such repacking and remarking must be 
filed with the drawback office. If sirups from more than one lot are 
stored in the same tank, the refinery records must show the refinery 
manufacture number and the quantity of sirup from each lot contained 
in such tank.
    N. An abstract from the foregoing records covering manufacturing 
periods of not less than 1 month nor more than 3 months, unless a 
different period will have been authorized, must be filed when 
drawback is to be claimed on any part of the refined sugar or sirup 
manufactured during such period. Such abstract must be filed by each 
refiner with the drawback office where drawback claims are filed on 
the basis of this general ruling. Such abstract must consist of: (1) 
A raw stock record (accounting for Refiner's raw lot No., Import 
entry No., Packages No. and kind, Pounds, Polarization, By whom 
imported or withdrawn, Date of importation, Date of receipt by 
refiner, Date of melt, Importing carrier, Country of origin); (2) A 
melt record [number of pounds in each lot melted] (accounting for 
Lot No. Pounds, and Polarization degrees and pounds sucrose); (3) 
Sirup stock records (accounting for Date of boiling, Refinery serial 
manufacture No., Quantity of sirup in gallons, and Pounds sucrose 
contained therein); (4) Refined sugar stock record (accounting for 
Refinery serial production No., Date of manufacture, Hard or soft 
refined, Polarization and No., Net weight in pounds); (5) 
Recapitulation (consisting of (in pounds): (a) Sucrose in process at 
beginning of period, (b) sucrose melted during period, (c) sucrose 
in process at end of period, (d) sucrose used in manufacture, and 
(e) sucrose contained in manufacture, in which item (a) plus item 
(b), minus item (c), should equal item (d)); and (6) A statement as 
follows:
    I, ____, the ____ refiner at the ____ refinery of ____, located 
at ____, do solemnly and truly declare that each of the statements 
contained in the foregoing abstract is true to the best of my 
knowledge and belief and can be verified by the refinery records, 
which have been kept in accordance with Treasury Decision 83-59 and 
Appendix A of 19 CFR part 190 and which are at all times open to the 
inspection of CBP.

Date-------------------------------------------------------------------

Signature--------------------------------------------------------------

    O. The refiner must file with each abstract a statement, showing 
the average market values of the products specified in the abstract 
and including a statement as follows: I, ____, (Official capacity) 
of the ____ (Refinery), do solemnly and truly declare that the 
values shown above are true to the best of my knowledge and belief, 
and can be verified by our records.

Date-------------------------------------------------------------------

Signature--------------------------------------------------------------

    P. At the end of each calendar month the refiner must furnish to 
the drawback office a statement showing the actual sales of sirup 
and the average market values of refined sugars for the calendar 
month.
    Q. The sucrose allowance to be applied to the various products 
based on the abstract

[[Page 65050]]

and statement provided for in this general ruling will be in 
accordance with the example set forth in Treasury Decision 83-59.
    R. [Reserved]
    S. Drawback entries under this general ruling must state the 
polarization in degrees and the sucrose in pounds for the designated 
imported sugar. Drawback claims under this general ruling must 
include a statement as follows:
    I, ____, the ____ of ____, located at ____ declare that the 
sugar (or sirup) described in this entry, was manufactured by said 
company at its refinery at ____ and is part of the sugar (or sirup) 
covered by abstract No. __, filed at the port of ____; that, subject 
to 19 U.S.C. 1508 and 1313(t), the refinery and other records of the 
company verifying the statements contained in said abstract are now 
and at all times hereafter will be open to inspection by CBP. I 
further declare that the above-designated imported sugar (upon which 
the duties have been paid) was received by said company on ____ and 
was used in the manufacture of sugar and sirup during the period 
covered by abstract No. __, CBP No. __, on file with the port 
director at ____. I further declare that the sugar or sirup 
specified therein was exported as stated in the entry.

Date-------------------------------------------------------------------

Signature--------------------------------------------------------------

    T. General Statement. The refiner manufactures or produces for 
its own account. The refiner may manufacture or produce articles for 
the account of another or another manufacturer or producer may 
manufacture or produce for the refiner's account under contract 
within the principal and agency relationship outlined in T.D.s 
55027(2) and 55207(1) (see Sec.  190.9).
    U. Waste. No drawback is payable on any waste which results from 
the manufacturing operation. Unless drawback claims are based on the 
``appearing in'' method, records will be maintained to establish the 
value (or the lack of value), quantity, and disposition of any waste 
that results from manufacturing the exported articles. If no waste 
results, records to establish that fact will be maintained.
    V. Loss or Gain. The refiner will maintain records showing the 
extent of any loss or gain in net weight or measurement of the sugar 
caused by atmospheric conditions, chemical reactions, or other 
factors.
    W. [Reserved]
    X. Procedures and Records Maintained.
    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity and 8-digit HTSUS classification of the 
designated merchandise;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise \1\ used to 
produce the exported articles; and
---------------------------------------------------------------------------

    \1\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years of the date of importation of the 
designated merchandise, the refiner used the designated merchandise 
to produce articles. During the same 5-year period, the refiner 
produced \2\ the exported articles.
---------------------------------------------------------------------------

    \2\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after the 
importation of the imported merchandise. Records establishing 
compliance with these requirements will be available for audit by 
CBP during business hours. Drawback is not payable without proof of 
compliance.
    Y. General requirements. The refiner will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

XII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Steel (T.D. 81-74)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback products   Duty-paid, duty-free or
 \1\ to be designated as the basis for       domestic merchandise
 drawback on the exported products.          classifiable under the same
                                             8-digit HTSUS subheading
                                             number as that designated
                                             which will be used in the
                                             production of the exported
                                             products.
Steel of one general class, e.g., an        Steel of the same general
 ingot, falling within on SAE, AISI, or      class, specification, and
 ASTM \2\ specification and, if the          grade as the steel in the
 specification contains one or more          column immediately to the
 grades, falling within one grade of the     left hereof.
 specification.
------------------------------------------------------------------------

    1. The duty-paid, duty-free, or domestic steel used instead of 
the imported, duty-paid steel (or drawback products) will be 
interchangeable for manufacturing purposes with the duty-paid steel. 
To be interchangeable a steel must be able to be used in place of 
the substituted steel without any additional processing step in the 
manufacture of the article on which drawback is to be claimed.
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
    \2\ Standards set by the Society of Automotive Engineers (SAE), 
the American Iron and Steel Institute (AISI), or the American 
Society for Testing and Materials (ASTM).
---------------------------------------------------------------------------

    2. Because the duty-paid steel (or drawback products) that is to 
be designated as the basis for drawback is dutiable according to its 
value, the amount of duty can vary with its size (gauge, width, or 
length) or composition (e.g., chrome content). If such variances 
occur, designation will be by ``price extra,'' and in no case will 
drawback be claimed in a greater amount than that which would have 
accrued to that steel used in manufacture of or appearing in the 
exported articles. Price extra is not available for coated or plated 
steel, covered in paragraph 4, infra, insofar as the coating or 
plating is concerned.
    3. If the steel is coated or plated with a base metal, in 
addition to meeting the requirements for uncoated or unplated steel 
set forth in the Parallel Columns, the base-metal coating or plating 
on the duty-paid, duty-free, or domestic steel used in place of the 
duty-paid steel (or drawback products) will have the same 
composition and thickness as the coating or plating on the duty-paid 
steel. If the coated or plated duty-paid steel is within an SAE, 
AISI, ASTM specification, then any duty-paid, duty-free, or domestic 
coated or plated steel must be covered by the same specification and 
grade (if two or more grades are in the specification).

B. Exported Articles on Which Drawback Will Be Claimed

    The exported articles will have been manufactured in the United 
States using steels described in the Parallel Columns above.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account.
    The manufacturer or producer may manufacture or produce articles 
for the account of another or another manufacturer or producer may 
manufacture or produce for the account of the manufacturer or 
producer under contract within the principal and agency relationship 
outlined in T.D.s 55027(2) and 55207(1) (see Sec.  190.9).

[[Page 65051]]

D. Process of Manufacture or Production

    The steel described in the Parallel Columns will be used to 
manufacture or produce articles in accordance with Sec.  190.2.

E. Multiple Products

    Not applicable.

F. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of steel appearing in the exported articles, records 
will be maintained to establish the value (or the lack of value), 
quantity, and disposition of any waste that results from 
manufacturing the exported articles. If no waste results, records to 
establish that fact will be maintained.

G. Loss or Gain

    The manufacturer or producer will maintain records showing the 
extent of any loss or gain in net weight or measurement of the steel 
caused by atmospheric conditions, chemical reactions, or other 
factors.

H. [Reserved]

I. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity and 8-digit HTSUS classification of the 
designated merchandise;
    2. The quantity of merchandise of the designated merchandise \3\ 
used to produce the exported articles;
---------------------------------------------------------------------------

    \3\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years of the date of importation of the 
designated merchandise, the manufacturer or producer used the 
merchandise to produce articles. During the same 5-year period, the 
manufacturer or producer produced \4\ the exported articles.
---------------------------------------------------------------------------

    \4\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after the 
importation of the imported merchandise. Records establishing 
compliance with these requirements will be available for audit by 
CBP during business hours. Drawback is not payable without proof of 
compliance.

J. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(b) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained.'' 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.

K. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of steel used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible steel that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste from 
each lot of steel, drawback may be claimed on the quantity of 
eligible steel used to produce the exported articles less the amount 
of that steel which the value of the waste would replace.

L. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification to operate under this general 
ruling current by reporting promptly to the drawback office which 
liquidates its claims any changes in the information required by the 
General Instructions of this Appendix (I. General Instructions, 1 
through 10), the corporate name, or corporate organization by 
succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

XIII. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(b) for 
Sugar (T.D. 81-92)

A. Same 8-Digit HTSUS Classification (Parallel Columns)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback products   Duty-paid, duty-free or
 \1\ to be designated as the basis for       domestic merchandise
 drawback on the exported products.          classifiable under the same
                                             8-digit HTSUS subheading
                                             number as that designated
                                             which will be used in the
                                             production of the exported
                                             products.
1. Granulated or liquid sugar for           1. Granulated or liquid
 manufacturing, containing sugar solids of   sugar for manufacturing,
 not less than 99.5 sugar degrees.           containing sugar solids of
                                             less than 99.5 sugar
                                             degrees.
2. Granulated or liquid sugar for           2. Granulated or liquid
 manufacturing, containing sugar solids of   sugar for manufacturing,
 not less than 99.5 sugar degrees.           containing sugar solids of
                                             less than 99.5 sugar
                                             degrees.
------------------------------------------------------------------------

    The sugars listed above test within three-tenths of a degree on 
the polariscope. Sugars in each column are completely 
interchangeable with the sugars directly opposite and designation 
will be made on this basis only. The designated sugar on which 
claims for drawback will be based will be classifiable under the 
same 8-digit HTSUS classification.
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

B. Exported Articles on Which Drawback Will Be Claimed

    Edible substances (including confectionery) and/or beverages 
and/or ingredients therefor.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The sugars are subjected to one or more of the following 
operations to form the desired product(s):
    1. Mixing with other substances,
    2. Cooking with other substances,
    3. Boiling with other substances,
    4. Baking with other substances,
    5. Additional similar processes.

E. Multiple Products

    Not applicable.

F. Waste

    No drawback is payable on any waste which results from the 
manufacturing operation. Unless the claim for drawback is based on 
the quantity of sugar appearing in the exported articles, records 
will be maintained to establish the value (or the lack of value), 
quantity, disposition of any waste that results from manufacturing 
the exported articles. If no waste results, records to establish 
that fact will be maintained.

G. Loss or Gain

    The manufacturer or producer will maintain records showing the 
extent of any loss or gain in net weight or measurement of the sugar 
caused by atmospheric conditions, chemical reactions, or other 
factors.

[[Page 65052]]

H. [Reserved]

I. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. The identity and 8-digit HTSUS classification of the 
designated merchandise;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS classification as the designated merchandise \2\ used to 
produce the exported articles;
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles produced.''
---------------------------------------------------------------------------

    3. That, within 5 years of the date of importation of the 
designated merchandise, the manufacturer or producer used the 
merchandise to produce articles. During the same 5-year period, the 
manufacturer or producer produced \3\ the exported articles.
---------------------------------------------------------------------------

    \3\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after the 
importation of the imported merchandise. Records establishing 
compliance with these requirements will be available for audit by 
CBP during business hours. Drawback is not payable without proof of 
compliance.

J. Inventory Procedures

    The inventory records of the manufacturer or producer, will show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(b) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained.'' 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.

K. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of sugar used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible sugar that 
appears in the exported articles regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible material used to 
produce the exported articles less the amount of that sugar which 
the value of the waste would replace.

L. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation;
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this general ruling.

XIV. General Manufacturing Drawback Ruling Under 19 U.S.C. 1313(a) for 
Woven Piece Goods (T.D. 83-84)

    Drawback may be allowed under 19 U.S.C. 1313(a) upon the 
exportation of bleached, mercerized, printed, dyed, or redyed piece 
goods manufactured or produced by any one or a combination of the 
foregoing processes with the use of imported woven piece goods, 
subject to the following special requirements:

A. Imported Merchandise or Drawback Products 1 Used
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations.
---------------------------------------------------------------------------

    Imported merchandise or drawback products (woven piece goods) 
are used in the manufacture of the exported articles upon which 
drawback claims will be based.

B. Exported Articles on Which Drawback Will Be Claimed

    Exported articles on which drawback will be claimed must be 
manufactured in the United States using imported merchandise or 
drawback products.

C. General Statement

    The manufacturer or producer manufactures or produces for its 
own account. The manufacturer or producer may manufacture or produce 
articles for the account of another or another manufacturer or 
producer may manufacture or produce for the account of the 
manufacturer or producer under contract within the principal and 
agency relationship outlined in T.D.s 55027(2) and 55207(1) (see 
Sec.  190.9).

D. Process of Manufacture or Production

    The imported merchandise or drawback products will be used to 
manufacture or produce articles in accordance with Sec.  190.2.
    The piece goods used in manufacture or production under this 
general manufacturing drawback ruling may also be subjected to one 
or more finishing processes. Drawback will not be allowed under this 
general manufacturing drawback ruling when the process performed 
results only in the restoration of the merchandise to its condition 
at the time of importation.

E. Multiple Products

    Not applicable.

F. Waste

    Rag waste may be incurred. No drawback is payable on any waste 
which results from the manufacturing operation. 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 quantity of rag waste, if any, its value, and its 
disposition. If no waste results, records will be maintained to 
establish that fact. In instances where rag waste occurs and it is 
impractical to account for the actual quantity of rag waste 
incurred, it may be assumed that such rag waste constituted 2% of 
the woven piece goods put into process. 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

    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. 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.

H. Procedures and Records Maintained

    Records, which may include records kept in the normal course of 
business, will be maintained to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise; and
    2. The quantity of imported merchandise \2\ used in producing 
the exported articles.
---------------------------------------------------------------------------

    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles.''
---------------------------------------------------------------------------

    To obtain drawback the claimant must establish that the 
completed articles were exported within 5 years after importation of 
the imported merchandise. Records establishing compliance with these 
requirements will be available for audit by CBP during business 
hours. Drawback is not payable without proof of compliance.

I. Inventory Procedures

    The inventory records of the manufacturer or producer must show 
how the drawback recordkeeping requirements set forth in 19 U.S.C. 
1313(a) and part 190 of the CBP Regulations will be met, as 
discussed under the heading ``Procedures and Records Maintained''. 
If those records do not establish satisfaction of all legal 
requirements, drawback cannot be paid.
    The records of the manufacturer or producer must show, as to 
each lot of piece goods manufactured or produced for exportation 
with benefit of drawback, the lot number and the date or inclusive 
dates of manufacture or production, the quantity, identity, value, 
and 8-digit HTSUS classification of the imported (or drawback 
product) piece goods used, the condition in which imported or 
received (whether in the gray, bleached, dyed, or mercerized), the 
working allowance specified in the contract under which they are 
received, the process

[[Page 65053]]

or processes applied thereto, and the quantity and description of 
the piece goods obtained. The records must also show the yardage 
lost by shrinkage or gained by stretching during manufacture or 
production, and the quantity of remnants resulting and of spoilage 
incurred.

J. Basis of Claim for Drawback

    Drawback will be claimed on the quantity of merchandise used in 
producing the exported articles only if there is no waste or 
valueless or unrecovered waste in the manufacturing operation. 
Drawback may be claimed on the quantity of eligible merchandise that 
appears in the exported articles, regardless of whether there is 
waste, and no records of waste need be maintained. If there is 
valuable waste recovered from the manufacturing operation and 
records are kept which show the quantity and value of the waste, 
drawback may be claimed on the quantity of eligible material used to 
produce the exported articles, less the amount of that merchandise 
which the value of the waste would replace. (If remnants and/or 
spoilage occur during manufacture or production, the quantity of 
imported merchandise used will be determined by deducting from the 
quantity of piece goods received and put into manufacture or 
production the quantity of such remnants and/or spoilage. The 
remaining quantity will be reduced by the quantity thereof which the 
value of the rag waste, if any, would replace.)

K. General Requirements

    The manufacturer or producer will:
    1. Comply fully with the terms of this general ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this general ruling;
    4. Keep its letter of notification of intent to operate under 
this general ruling current by reporting promptly to the drawback 
office which liquidates its claims any changes in the information 
required by the General Instructions of this Appendix (I. General 
Instructions, 1 through 10), the corporate name, or corporate 
organization by succession or reincorporation.
    5. Keep a copy of this general ruling on file for ready 
reference by employees and require all officials and employees 
concerned to familiarize themselves with the provisions of this 
general ruling; and
    6. Issue instructions to insure proper compliance with 19 U.S.C. 
1313, part 190 of the CBP Regulations and this general ruling.

Appendix B to Part 190--Sample Formats for Applications for Specific 
Manufacturing Drawback Rulings

Table of Contents

I. General
II. Format for Application for Specific Manufacturing Drawback 
Ruling Under 19 U.S.C. 1313(a) and 1313(b) (Combination)
III. Format for Application for Specific Manufacturing Drawback 
Ruling Under 19 U.S.C. 1313(b)
IV. Format for Application for Specific Manufacturing Drawback 
Ruling Under 19 U.S.C. 1313(d)
V. Format for Application for Specific Manufacturing Drawback Ruling 
Under 19 U.S.C. 1313(g)

I. General

    Applications for specific manufacturing drawback rulings using 
these sample formats must be submitted to, reviewed, and approved by 
CBP Headquarters. See 19 CFR 190.8(d). Applications must be 
submitted electronically to [email protected]. In these 
application formats, remarks in parentheses and footnotes are for 
explanatory purposes only and should not be copied. Other material 
should be quoted directly in the applications.

II. Format for Application for Specific Manufacturing Drawback Ruling 
Under 19 U.S.C. 1313(a) and 1313(b) (Combination).

COMPANY LETTERHEAD (Optional)

    U.S. Customs and Border Protection, Entry Process and Duty 
Refunds, Regulations and Rulings, Office of Trade, 90 K Street NE--
10th Floor (Mail Stop 1177), Washington, DC 20229-1177.
    Dear Sir or Madam: We, (Applicant's Name), a (State, e.g., 
Delaware) corporation (or other described entity) submit this 
application for a specific manufacturing drawback ruling that our 
manufacturing operations qualify for drawback under title 19, United 
States Code, Sec. Sec.  1313(a) & (b), and part 190 of the CBP 
Regulations. We request that CBP authorize drawback on the basis of 
this application.

NAME AND ADDRESS AND IRS NUMBER (WITH SUFFIX) OF APPLICANT

    (Section 190.8(a) of the CBP Regulations provides that each 
manufacturer or producer of articles intended for exportation with 
the benefit of drawback must apply for a specific manufacturing 
drawback ruling, unless operating under a general manufacturing 
drawback ruling under Sec.  190.7 of the CBP Regulations. CBP will 
not approve an application which shows an unincorporated division or 
company as the applicant (see Sec.  190.8(a)).)

LOCATION OF FACTORY

    (Provide the address of the factory(s) where the process of 
manufacture or production will take place. Indicate if the factory 
is a different legal entity from the applicant, and indicate if 
operating under an Agent's general manufacturing drawback ruling.)

PERSONS WHO WILL SIGN DRAWBACK DOCUMENTS

    (List persons legally authorized to bind the corporation who 
will sign drawback documents. Section 190.6 of the CBP Regulations 
permits only the president, vice president, secretary, treasurer, 
and any employee legally authorized to bind the corporation to sign 
for a corporation. In addition, a person within a business entity 
with a customs power of attorney for the company may sign. A customs 
power of attorney may also be given to a licensed customs broker. 
This heading should be changed to Names of Partners or Proprietor in 
the case of a partnership or sole proprietorship, respectively (see 
footnote at end of this sample format for persons who may sign 
applications for specific manufacturing drawback rulings).)

GENERAL STATEMENT

    (The following questions must be answered:)
    1. Who will be the importer of the designated merchandise?
    (If the applicant will not always be the importer of the 
designated merchandise, specify that the applicant understand its 
obligations to maintain records to support the transfer under Sec.  
190.10, and its liability under Sec.  190.63.)
    2. Will an agent be used to process the designated or the 
substituted merchandise into articles?
    (If an agent is to be used, the applicant must state it will 
comply with T.D.s 55027(2) and 55207(1) and Sec.  190.9, as 
applicable, and that its agent will submit a letter of notification 
of intent to operate under the general manufacturing drawback ruling 
for agents (see Sec.  190.7 and Appendix A) or an application for a 
specific manufacturing drawback ruling (see Sec.  190.8 and this 
Appendix B).)
    3. Will the applicant be the exporter? (If the applicant will 
not be the exporter in every case, but will be the claimant, the 
manufacturer must state that it will reserve the right to claim 
drawback with the knowledge and written consent of the exporter (19 
CFR 190.82).)

PROCEDURES UNDER SECTION 1313(b) (PARALLEL COLUMNS--SAME 8-DIGIT 
CLASSIFICATION)

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback products   Duty-paid, duty-free, or
 \1\ to be designated as the basis for       domestic merchandise, of
 drawback on the exported products.          the same 8-digit HTSUS
                                             subheading number as that
                                             designated which will be
                                             used in the production of
                                             the exported products.
1.                                          1.
------------------------------------------------------------------------
2.                                          2.
------------------------------------------------------------------------
3.                                          3.
------------------------------------------------------------------------


[[Page 65054]]

    (Following the items listed in the Parallel Columns, the 
applicant must make a statement affirming the same 8-digit HTSUS 
classification of the merchandise. This statement should be included 
in the application exactly as it is stated below:)
---------------------------------------------------------------------------

    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
---------------------------------------------------------------------------

    The imported merchandise designated in our claims will be 
classifiable under the same 8-digit HTSUS classification as the 
merchandise used in producing the exported articles on which we 
claim drawback.
    (In order to successfully claim drawback it is necessary to 
prove that the duty-paid, duty-free, or domestic merchandise, which 
is to be substituted for the imported merchandise, is classifiable 
under the same 8-digit HTSUS classification. To enable CBP to rule 
on the same 8-digit HTSUS classification, the application must 
include a detailed description of the designated imported 
merchandise and of the substituted duty-paid, duty-free, or domestic 
merchandise to be used to produce the exported articles. The 
application must also include the Bill of Materials and/or formulas 
annotated with the HTSUS classifications.)
    (It is essential that all the characteristics which determine 
the identity of the merchandise are specified in the application in 
order to substantiate that the merchandise meets the the same 8-
digit HTSUS classification statutory requirement. These 
characteristics should clearly distinguish merchandise of different 
identities.)
    (The descriptions should be sufficient to classify the 
merchandise in the same 8-digit HTSUS subheading number included in 
the Parallel Columns. The left-hand column will consist of the name 
and the 8-digit HTSUS subheading number of the imported merchandise. 
The right-hand column will consist of the name and the 8-digit HTSUS 
subheading number for the duty-paid, duty-free, or domestic 
designated merchandise. Amendments to rulings will be required if 
any changes to the HTSUS classifications occur.)

EXPORTED ARTICLES ON WHICH DRAWBACK WILL BE CLAIMED

    (Name each article to be exported. When the identity of the 
product is not clearly evident by its name, state what the product 
is (e.g., a herbicide). There must be a match between each article 
described under the PROCESS OF MANUFACTURE OR PRODUCTION section 
below and each article listed here.)

PROCESS OF MANUFACTURE OR PRODUCTION

    (Drawback under Sec.  1313(b) is not allowable except where a 
manufacture or production exists. Manufacture or production is 
defined, for drawback purposes, in Sec.  190.2. In order to obtain 
drawback under Sec.  1313(b), it is essential for the applicant to 
show use in manufacture or production by providing a thorough 
description of the manufacturing process. This description should 
include the name and exact condition of the merchandise listed in 
the Parallel Columns, a complete explanation of the processes to 
which it is subjected in this country, the effect of such processes, 
the name and exact description of the finished article, and the use 
for which the finished article is intended. When applicable, include 
equations of any chemical reactions. Including a flow chart in the 
description of the manufacturing process is an excellent means of 
illustrating how a manufacture or production occurs. Flow charts can 
clearly illustrate if and at what point during the manufacturing 
process by-products and wastes are generated.)
    (This section should contain a description of the process by 
which each item of merchandise listed in the Parallel Columns above 
is used to make or produce every article that is to be exported.)

MULTIPLE PRODUCTS

1. Relative Values

    (Some processes result in the separation of the merchandise into 
two or more products. If applicable, list all of the products. State 
that you will record the market value of each product at the time it 
is first separated in the manufacturing process. If this section is 
not applicable to you, then state so.)
    (Drawback law mandates the assignment of relative values when 
two or more products are necessarily produced in the same operation. 
For instance, the refining of flaxseed necessarily produces linseed 
oil and linseed husks (animal feed), and drawback must be 
distributed to each product in accordance with its relative value. 
However, the voluntary election of a steel fabricator, for instance, 
to use part of a lot of imported steel to produce automobile doors, 
and part of the lot to produce automobile fenders, does not call for 
relative value distribution.)
    (The relative value of a product is its value divided by the 
total value of all products, whether or not exported. For example, 
100 gallons of drawback merchandise are used to produce 100 gallons 
of products, including 60 gallons of product A, 20 gallons of 
product B, and 20 gallons of product C. At the time of separation, 
the unit values of products A, B, and C are $5, $10, and $50 
respectively. The relative value of product A is $300 divided by 
$1,500 or \1/5\. The relative value of B is \2/15\ and of product C 
is \2/3\, calculated in the same manner. This means that \1/5\ of 
the drawback product payments will be distributed to product A, \2/
15\ to product B, and \2/3\ to product C.)
    (Drawback is allowable on exports of any of multiple products, 
but is not permitted on exports of valuable waste. In making this 
distinction between a product and valuable waste, the applicant 
should address the following significant elements: (1) The nature of 
the material of which the residue is composed; (2) the value of the 
residue as compared to the value of the principal manufactured 
product and the raw material; (3) the use to which it is put; (4) 
its status under the tariff laws, if imported; (5) whether it is a 
commodity recognized in commerce; (6) whether it must be subjected 
to some process to make it saleable.)

2. Producibility

    (Some processes result in the separation of fixed proportions of 
each product, while other processes afford the opportunity to 
increase or decrease the proportion of each product. An example of 
the latter is petroleum refining, where the refiner has the option 
to increase or decrease the production of one or more products 
relative to the others. State under this heading whether you can or 
cannot vary the proportionate quantity of each product.)
    (The MULTIPLE PRODUCTS section consists of two sub-sections: 
Relative Values and Producibility. If multiple products do not 
result from your operation state ``Not Applicable'' for the entire 
section. If multiple products do result from your operation Relative 
Values will always apply. However, Producibility may or may not 
apply. If Producibility does not apply to your multiple product 
operation state ``Not Applicable'' for this sub-section.)

WASTE

    (Many processes result in residue materials which, for drawback 
purposes, are treated as wastes. Describe any residue materials 
which you believe should be so treated. If no waste results, include 
a statement to that effect.)
    (If waste occurs, state: (1) Whether or not it is recovered, (2) 
whether or not it is valueless, and (3) what you do with it. This 
information is required whether claims are made on a ``used in'' or 
``appearing in'' basis and regardless of the amount of waste 
incurred.)
    (Irrecoverable wastes are those consisting of materials which 
are lost in the process. Valueless wastes are those which may be 
recovered but have no value. These irrecoverable and valueless 
wastes do not reduce the drawback claim provided the claim is based 
on the quantity of imported material used in manufacturing. If the 
claim is based upon the quantity of imported merchandise appearing 
in the exported article, irrecoverable and valueless waste will 
cause a reduction in the amount of drawback.)
    (Valuable wastes are those recovered wastes which have a value 
either for sale or for use in a different manufacturing process. 
However, it should be noted that this standard applies to the entire 
industry and is not a selection on your part. An option by you not 
to choose to sell or use the waste in some different operation does 
not make it valueless if another manufacturer can use the waste. 
State what you do with the waste. If you have to pay someone to get 
rid of it, or if you have buyers for the waste, you must state so in 
your application regardless of what basis you are using.)
    (If you recover valuable waste and you choose to claim on the 
basis of the quantity of merchandise used in producing the exported 
articles (less any valuable waste), state that you will keep records 
to establish the quantity and value of the waste recovered. See 
``Basis of Claim for Drawback'' section below.)

STOCK IN PROCESS

    (Some processes result in another type of residual material, 
namely, stock in process, which affects the allowance of drawback.

[[Page 65055]]

Stock in process may exist when residual material resulting from a 
manufacturing or processing operation is reintroduced into a 
subsequent manufacturing or processing operation; e.g., trim pieces 
from a cast article. The effect of stock in process on a drawback 
claim is that the amount of drawback for the period in which the 
stock in process was withdrawn from the manufacturing or processing 
operation (or the manufactured article, if manufacturing or 
processing periods are not used) is reduced by the quantity of 
merchandise or drawback products used to produce the stock in 
process if the ``used in'' or ``used in less valuable waste'' 
methods are used (if the ``appearing in'' method is used, there will 
be no effect on the amount of drawback), and the quantity of 
merchandise or drawback products used to produce the stock in 
process is added to the merchandise or drawback products used in the 
subsequent manufacturing or production period (or the subsequently 
produced article)).
    (If stock in process occurs and claims are to be based on stock 
in process, the application must include a statement to that effect. 
The application must also include a statement that merchandise is 
considered to be used in manufacture at the time it was originally 
processed, so that the stock in process will not be included twice 
in the computation of the merchandise used to manufacture the 
finished articles on which drawback is claimed.)

LOSS OR GAIN (Separate and distinct from WASTE)

    (Some manufacturing processes result in an intangible loss or 
gain of the net weight or measurement of the merchandise used. This 
loss or gain is caused by atmospheric conditions, chemical 
reactions, or other factors. If applicable, state the approximate 
usual percentage or quantity of such loss or gain. Note that 
percentage values will be considered to be measured by weight unless 
otherwise specified. Loss or gain does not occur during all 
manufacturing processes. If loss or gain does not apply to your 
manufacturing process, state ``Not Applicable.'')

PROCEDURES AND RECORDS MAINTAINED

    We will maintain records to establish:
    1. The identity and 8-digit HTSUS subheading number of the 
merchandise we designate;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS subheading number as the designated merchandise \2\ we 
used to produce the exported articles;
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    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles we produce.''
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    3. That, within 5 years after the date of importation, we used 
the designated merchandise to produce articles. During the same 5-
year period, we produced \3\ the exported articles.
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    \3\ The date of production is the date an article is completed.
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    We realize that to obtain drawback the claimant must establish 
that the completed articles were exported within 5 years after the 
importation of the imported merchandise. Our records establishing 
our compliance with these requirements will be available for audit 
by CBP during business hours. We understand that drawback is not 
payable without proof of compliance.

INVENTORY PROCEDURES

    (Describe your inventory records and state how those records 
will meet the drawback recordkeeping requirements set forth in 19 
U.S.C. 1313(b) and part 190 of the CBP Regulations as discussed 
under the heading ``PROCEDURES AND RECORDS MAINTAINED''. To insure 
compliance the following areas, as applicable, should be included in 
your discussion:)

RECEIPT AND STORAGE OF DESIGNATED MERCHANDISE

RECORDS OF USE OF DESIGNATED MERCHANDISE

BILLS OF MATERIALS

MANUFACTURING RECORDS

WASTE RECORDS

RECORDS OF USE OF DUTY-PAID, DUTY-FREE OR DOMESTIC MERCHANDISE OF THE 
REQUIRED SAME 8-DIGIT HTSUS SUBHEADING NUMBER WITHIN 5 YEARS AFTER THE 
DATE OF IMPORTATION

FINISHED STOCK STORAGE RECORDS

SHIPPING RECORDS

    (Proof of time frames may be specific or inclusive, e.g., within 
120 days, but specific proof is preferable. Separate storage and 
identification of each article or lot of merchandise usually will 
permit specific proof of exact dates. Proof of inclusive dates of 
use, production or export may be acceptable, but in such cases it is 
best to describe very specifically the data you intend to use to 
establish each legal requirement, thereby avoiding misunderstandings 
at the time of audit.) (If you do not describe the inventory records 
that you will use, you must state: ``All legal requirements will be 
met by our inventory procedures.'' However, it should be noted that 
without a detailed description of the inventory procedures set forth 
in the application, a judgment as to the adequacy of such a 
statement cannot be made until a drawback claim is verified. 
Approval of this application for a specific manufacturing drawback 
ruling merely constitutes approval of the ruling application as 
submitted; it does not constitute approval of the applicant's 
recordkeeping procedures if those procedures are solely described as 
meeting the legal requirements, without specifically stating how the 
requirements will be met. Drawback is not payable without proof of 
compliance.)

BASIS OF CLAIM FOR DRAWBACK

    (There are three different bases that may be used to claim 
drawback: (1) Used in; (2) appearing in; and (3) used in less 
valuable waste.)
    (The ``used in'' basis may be employed only if there is either 
no waste, or the waste is valueless or unrecovered. Irrecoverable or 
valueless waste does not reduce the amount of drawback when claims 
are based on the ``used in'' basis. Drawback is payable in the 
amount of 99 percent of the duties, taxes, and fees, paid on the 
quantity of imported material designated as the basis for the 
allowance of drawback on the exported articles. The designated 
quantity may not exceed the quantity of material actually used in 
the manufacture of the exported articles.) (For example, if 100 
pounds of material, valued at $1.00 per pound, were used in 
manufacture resulting in 10 pounds of irrecoverable or valueless 
waste, the 10 pounds of irrecoverable or valueless waste would not 
reduce the drawback. In this case drawback would be payable on 99% 
of the duties, taxes, and fees paid on the 100 pounds of designated 
material used to produce the exported articles.)
    (The ``appearing in'' basis may be used regardless of whether 
there is waste. If the ``appearing in'' basis is used, the claimant 
does not need to keep records of waste and its value. However, the 
manufacturer must establish the identity and quantity of the 
merchandise appearing in the exported product and provide this 
information. Waste reduces the amount of drawback when claims are 
made on the ``appearing in'' basis. Drawback is payable on 99 
percent of the duties, taxes, and fees paid on the quantity of 
material designated, which may not exceed the quantity of eligible 
material that appears in the exported articles. ``Appearing in'' may 
not be used if multiple products are involved.)
    (Based on the previous example, drawback would be payable on the 
90 pounds of merchandise which actually went into the exported 
product (appearing in) rather than the 100 pounds used in as set 
forth previously.)
    (The ``used in less valuable waste'' basis may be employed when 
the manufacturer recovers valuable waste, and keeps records of the 
quantity and value of waste from each lot of merchandise. The value 
of the waste reduces the amount of drawback when claims are based on 
the ``used in less valuable waste'' basis. When valuable waste is 
incurred, the drawback allowance on the exported article is based on 
the duties, taxes, and fees, paid on the quantity of merchandise 
used in the manufacture, as reduced by the quantity of such 
merchandise which the value of the waste would replace. In such a 
case, drawback is claimed on the quantity of eligible material 
actually used to produce the exported product, less the amount of 
such material which the value of the waste would replace. Note 
section 190.26(c) of the CBP Regulations.)
    (Based on the previous examples, if the 10 pounds of waste had a 
value of $.50 per pound, then the 10 pounds of waste, having a total 
value of $5.00, would be equivalent in value to 5 pounds of the 
designated material. Thus the value of the waste would replace 5 
pounds of the merchandise used, and drawback is payable on 99 
percent of the duties, taxes, and fees paid on the 95 pounds of 
imported material designated as the basis for the allowance of 
drawback on the exported article rather than on the 100 pounds 
``used in'' or the 90 pounds ``appearing in'' as set forth in the 
above examples.)

[[Page 65056]]

    (Two methods exist for the manufacturer to show the quantity of 
material used or appearing in the exported article: (1) Schedule or 
(2) Abstract.)
    (A ``schedule'' shows the quantity of material used in producing 
each unit of product. The schedule method is usually employed when a 
standard line of merchandise is being produced according to fixed 
formulas. Some schedules will show the quantity of merchandise used 
to manufacture or produce each article and others will show the 
quantity appearing in each finished article. Schedules may be 
prepared to show the quantity of merchandise either on the basis of 
percentages or by actual weights and measurements. A schedule 
determines the amount of material that is needed to produce a unit 
of product before the material is actually used in production.)
    (An ``abstract'' is the summary of the records which shows the 
total quantity of merchandise used in producing all articles during 
the period covered by the abstract. The abstract looks at a period 
of time, for instance 3 months, in which the quantity of material 
has been used. An abstract looks back at how much material was 
actually used after a production period has been completed.)
    (An applicant who fails to indicate a ``schedule'' choice must 
base its claims on the ``abstract'' method. State which Basis and 
Method you will use. An example of Used In by Schedule follows:)
    We will claim drawback on the quantity of (specify material) 
used in manufacturing (exported article) according to the schedule 
set forth below.
    (Section 190.8(f) of the CBP Regulations requires submission of 
the schedule with the application for a specific manufacturing 
drawback ruling. An applicant who desires to file supplemental 
schedules with the drawback office whenever there is a change in the 
quantity or material used should state:)
    We request permission to file supplemental schedules with the 
drawback office covering changes in the quantities of material used 
to produce the exported articles, or different styles or capacities 
of containers of such exported merchandise.
    (Neither the ``appearing in'' basis nor the ``schedule'' method 
for claiming drawback may be used where the relative value procedure 
is required.)

PROCEDURES UNDER SECTION 1313(a)

IMPORTED MERCHANDISE OR DRAWBACK PRODUCTS USED UNDER 1313(a)

    (List the imported merchandise or drawback products.)

EXPORTED ARTICLES ON WHICH DRAWBACK WILL BE CLAIMED

    (Name each article to be exported. When the identity of the 
product is not clearly evident by its name state what the product 
is, e.g., a herbicide. There must be a match between each article 
described under the PROCESS OF MANUFACTURE AND PRODUCTION section 
below and each article listed here.)
    (If the merchandise used under Sec.  1313(a) is not also used 
under Sec.  1313(b), the sections entitled PROCESS OF MANUFACTURE OR 
PRODUCTION, BY-PRODUCTS, LOSS OR GAIN, and STOCK IN PROCESS should 
be included here to cover merchandise used under Sec.  1313(a). 
However, if the merchandise used under Sec.  1313(a) is also used 
under Sec.  1313(b) these sections need not be repeated unless they 
differ in some way from the Sec.  1313(b) descriptions.)

PROCEDURES AND RECORDS MAINTAINED

    We will maintain records to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of the imported merchandise, and
    2. The quantity of imported merchandise \4\ we used in producing 
the exported articles.
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    \4\ If claims are to be made on an ``appearing in'' basis, the 
remainder of the sentence should read ``appearing in the exported 
articles we produce.''
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    We realize that to obtain drawback the claimant must establish 
that the completed articles were exported within 5 years after 
importation of the imported merchandise. We understand that drawback 
is not payable without proof of compliance.

INVENTORY PROCEDURES

    (This section must be completed separately from that set forth 
under the Sec.  1313(b) portion of your application. The legal 
requirements under Sec.  1313(a) differ from those under Sec.  
1313(b).) (Describe your inventory procedures and state how you will 
identify the imported merchandise from date of importation until it 
is incorporated in the articles to be exported. Also describe how 
you will identify the finished articles from the time of manufacture 
until shipment.)

BASIS OF CLAIM FOR DRAWBACK

    (See section with this title for procedures under Sec.  1313(b). 
Either repeat the same basis of claim or use a different basis of 
claim, as described above, specifically for drawback claimed under 
Sec.  1313(a).)

AGREEMENTS

    The Applicant specifically agrees that it will:
    1. Operate in full conformance with the terms of this 
application for a specific manufacturing drawback ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this application;
    4. Keep this application current by reporting promptly to the 
drawback office which liquidates its claims any changes in the 
number or locations of its offices or factories, the corporate name, 
the persons who will sign drawback documents, the basis of claim 
used for calculating drawback, the decision to use or not to use an 
agent under Sec.  190.9 or the identity of an agent under that 
section, or the corporate organization by succession or 
reincorporation;
    5. Keep this application current by reporting promptly to CBP 
Headquarters all other changes affecting information contained in 
this application;
    6. Keep a copy of this application and the letter of approval by 
CBP Headquarters on file for ready reference by employees and 
require all officials and employees concerned to familiarize 
themselves with the provisions of this application and that letter 
of approval; and
    7. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this application and letter of approval.

DECLARATION OF OFFICIAL

    I declare that I have read this application for a specific 
manufacturing drawback ruling; that I know the averments and 
agreements contained herein are true and correct; and that my 
signature on this __ day of ____ 20__, makes this application 
binding on
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(Name of Applicant Corporation, Partnership, or Sole Proprietorship)

By \5\-----------------------------------------------------------------
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    \5\ Section 190.6(a) requires that applications for specific 
manufacturing drawback rulings be signed or electronically certified 
by any individual legally authorized to bind the person (or entity) 
for whom the application is signed or the owner of a sole 
proprietorship, a full partner in a partnership, an individual 
acting on his or her own behalf, or, if a corporation, the 
president, a vice president, secretary, treasurer or employee 
legally authorized to bind the corporation. In addition, any 
employee of a business entity with a customs power of attorney may 
sign such an application, as may a licensed customs broker with a 
customs power of attorney.
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(Signature and Title)

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(Print Name)

III. Format for Application for Specific Manufacturing Drawback Ruling 
Under 19 U.S.C. 1313(b)

COMPANY LETTERHEAD (Optional)

    U.S. Customs and Border Protection, Entry Process and Duty 
Refunds Branch, Commercial and Trade Facilitation Division, 
Regulations and Rulings, Office of Trade, 90 K Street NE--10th Floor 
(Mail Stop 1177), Washington, DC 20229-1177.
    Dear Sir or Madam: We, (Applicant's Name), a (State, e.g., 
Delaware) corporation (or other described entity) submit this 
application for a specific manufacturing drawback ruling that our 
manufacturing operations qualify for drawback under title 19, United 
States Code, section 1313(b), and part 190 of the CBP Regulations. 
We request that CBP authorize drawback on the basis of this 
application.

NAME AND ADDRESS AND IRS NUMBER (WITH SUFFIX) OF APPLICANT

    (Section 190.8(a) of the CBP Regulations provides that each 
manufacturer or producer of articles intended for exportation with 
the benefit of drawback will apply for a specific manufacturing 
drawback ruling, unless operating under a general manufacturing 
drawback ruling under Sec.  190.7 of the CBP Regulations. CBP will 
not approve an application which shows an unincorporated

[[Page 65057]]

division or company as the applicant (see Sec.  190.8(a)).)

LOCATION OF FACTORY

    (Provide the address of the factory(s) where the process of 
manufacture or production will take place. Indicate if the factory 
is a different legal entity from the applicant, and indicate if the 
applicant is operating under an Agent's general manufacturing 
drawback ruling.)

PERSONS WHO WILL SIGN DRAWBACK DOCUMENTS

    (List persons legally authorized to bind the corporation who 
will sign drawback documents. Section 190.6 of the CBP Regulations 
permits only the president, vice president, secretary, treasurer, 
and any employee legally authorized to bind the corporation to sign 
for a corporation. In addition, a person within a business entity 
with a customs power of attorney for the company may sign. A customs 
power of attorney may also be given to a licensed customs broker. 
This heading should be changed to NAMES OF PARTNERS or PROPRIETOR in 
the case of a partnership or sole proprietorship, respectively (see 
footnote at end of this sample format for persons who may sign 
applications for specific manufacturing drawback rulings).)

GENERAL STATEMENT

    (The following questions must be answered:)
    1. Who will be the importer of the designated merchandise?
    (If the applicant will not always be the importer of the 
designated merchandise, specify that the applicant understand its 
obligations to maintain records to support the transfer under Sec.  
190.10, and its liability under Sec.  190.63.)
    2. Will an agent be used to process the designated or the 
substituted merchandise into articles?
    (If an agent is to be used, the applicant must state it will 
comply with T.D.s 55027(2) and 55207(1), and Sec.  190.9, as 
applicable, and that its agent will submit a letter of notification 
of intent to operate under the general manufacturing drawback ruling 
for agents (see Sec.  190.7 and Appendix A), or an application for a 
specific manufacturing drawback ruling (see Sec.  190.8 and this 
Appendix B).)
    3. Will the applicant be the exporter?
    (If the applicant will not be the exporter in every case, but 
will be the claimant, the manufacturer must state that it will 
reserve the right to claim drawback with the knowledge and written 
consent of the exporter (19 CFR 190.82).)

PARALLEL COLUMNS--``SAME 8-DIGIT HTSUS CLASSIFICATION''

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Imported merchandise or drawback products   Duty-paid, duty-free or
 \1\ to be designated as the basis for       domestic merchandise of the
 drawback on the exported products.          Same 8-digit HTSUS
                                             subheading number as that
                                             designated which will be
                                             used in the production of
                                             the exported products.
1.                                          1.
                                           -----------------------------
2.                                          2.
                                           -----------------------------
3.                                          3.
------------------------------------------------------------------------

    (Following the items listed in the Parallel Columns, the 
applicant must make a statement affirming the same 8-digit HTSUS 
subheading numberof the merchandise. This statement should be 
included in the application exactly as it is stated below:)
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    \1\ Drawback products are those produced in the United States in 
accordance with the drawback law and regulations. Such products have 
``dual status'' under section 1313(b). They may be designated as the 
basis for drawback and also may be deemed to be domestic 
merchandise.
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    The imported merchandise designated in our claims will be 
classifiable under the same 8-digit HTSUS subheading number as the 
merchandise used in producing the exported articles on which we 
claim drawback, such that the merchandise used would, if imported, 
be subject to the same rate of duty as the designated merchandise.
    (In order to successfully claim drawback it is necessary to 
prove that the duty-paid, duty-free, or domestic merchandise, which 
is to be substituted for the imported merchandise, is ``classifiable 
under the same 8-digit HTSUS subheading number.'' To enable CBP to 
rule on the proper ``same 8-digit HTSUS subheading number,'' the 
application must include a detailed description of the designated 
imported merchandise, and of the substituted duty-paid, duty-free, 
or domestic merchandise used to produce the exported articles. The 
application must also include the Bill of Materials and/or formulas 
annotated with the HTSUS classification.)
    (It is essential that all the characteristics which determine 
the identity of the merchandise are provided in the application in 
order to substantiate that the merchandise meets the ``same 8-digit 
HTSUS subheading number'' statutory requirement. These 
characteristics should clearly distinguish merchandise of different 
identities.
    (The descriptions of the ``same 8-digit HTSUS subheading 
number'' merchandise should be included in the Parallel Columns. The 
left-hand column will consist of the name and 8-digit HTSUS 
subheading number of the imported merchandise. The right-hand column 
will consist of the name and 8-digit HTSUS subheading number for the 
duty-paid, duty-free, or domestic designated merchandise. Amendments 
to the ruling will be required if any changes to the HTSUS 
classifications occur.)

EXPORTED ARTICLES ON WHICH DRAWBACK WILL BE CLAIMED

    (Name each article to be exported. When the identity of the 
product is not clearly evident by its name state what the product 
is, e.g., a herbicide. There must be a match between each article 
described under the PROCESS OF MANUFACTURE AND PRODUCTION section 
below and each article listed here.)

PROCESS OF MANUFACTURE OR PRODUCTION

    (Drawback under Sec.  1313(b) is not allowable except where a 
manufacture or production exists. Manufacture or production is 
defined, for drawback purposes, in Sec.  190.2. In order to obtain 
drawback under Sec.  1313(b), it is essential for the applicant to 
show use in manufacture or production by providing a thorough 
description of the manufacturing process. This description should 
include the name and exact condition of the merchandise listed in 
the Parallel Columns, a complete explanation of the processes to 
which it is subjected in this country, the effect of such processes, 
the name and exact description of the finished article, and the use 
for which the finished article is intended. When applicable, include 
equations of any chemical reactions. Including a flow chart in the 
description of the manufacturing process is an excellent means of 
illustrating how manufacture or production occurs. Flow charts can 
clearly illustrate if and at what point during the manufacturing 
process by-products and wastes are generated.)
    (This section should contain a description of the process by 
which each item of merchandise listed in the Parallel Columns above 
is used to make or produce every article that is to be exported.)

MULTIPLE PRODUCTS

1. Relative Values

    (Some processes result in the separation of the merchandise into 
two or more products. If applicable, list all of the products. State 
that you will record the market value of each product or by-product 
at the time it is first separated in the manufacturing process. If 
this section is not applicable to you, then state so.)
    (Drawback law mandates the assignment of relative values when 
two or more products are necessarily produced in the same operation. 
For instance, the refining of flaxseed necessarily produces linseed 
oil and linseed husks (animal feed), and drawback must be 
distributed to each product in accordance with its relative value. 
However, the voluntary election of a steel fabricator, for instance, 
to use part of a lot of imported steel to produce automobile doors, 
and part of the lot to produce automobile fenders, does not call for 
relative value distribution.)

[[Page 65058]]

    (The relative value of a product is its value divided by the 
total value of all products, whether or not exported. For example, 
100 gallons of drawback merchandise are used to produce 100 gallons 
of products, including 60 gallons of product A, 20 gallons of 
product B, and 20 gallons of product C. At the time of separation, 
the unit values of products A, B, and C are $5, $10, and $50 
respectively. The relative value of product A is $300 divided by 
$1,500 or \1/5\. The relative value of B is \2/15\ and of product C 
is \2/3\, calculated in the same manner. This means that \1/5\ of 
the drawback product payments will be distributed to product A, \2/
15\ to product B, and \2/3\ to product C.)
    (Drawback is allowable on exports of any of multiple products, 
but is not permitted on exports of valuable waste. In making this 
distinction between a product and valuable waste, the applicant 
should address the following significant elements: (1) The nature of 
the material of which the residue is composed; (2) the value of the 
residue as compared to the value of the principal manufactured 
product and the raw material; (3) the use to which it is put; (4) 
its status under the tariff laws, if imported; (5) whether it is a 
commodity recognized in commerce; (6) whether it must be subjected 
to some process to make it saleable.)

2. Producibility

    (Some processes result in the separation of fixed proportions of 
each product, while other processes afford the opportunity to 
increase or decrease the proportion of each product. An example of 
the latter is petroleum refining, where the refiner has the option 
to increase or decrease the production of one or more products 
relative to the others. State under this heading whether you can or 
cannot vary the proportionate quantity of each product.)
    (The MULTIPLE PRODUCTS section consists of two sub-sections: 
Relative Values and Producibility. If multiple products do not 
result from your operation state ``Not Applicable'' for the entire 
section. If multiple products do result from your operation Relative 
Values will always apply. However, Producibility may or may not 
apply. If Producibility does not apply to your multiple product 
operation, then state ``Not Applicable'' for this sub-section.)

WASTE

    (Many processes result in residue materials which, for drawback 
purposes, are treated as waste. Describe any residue materials which 
you believe should be so treated. If no waste results, include a 
statement to that effect.)
    (If waste occurs, state: (1) Whether or not it is recovered, (2) 
whether or not it is valueless, and (3) what you do with it. This 
information is required whether claims are made on a ``used in'' or 
``appearing in'' basis, and regardless of the amount of waste 
incurred.)
    (Irrecoverable wastes are those consisting of materials which 
are lost in the process. Valueless wastes are those which may be 
recovered, but have no value. These irrecoverable and valueless 
wastes do not reduce the drawback claim provided the claim is based 
on the quantity of imported material used in manufacturing. If the 
claim is based upon the quantity of imported merchandise appearing 
in the exported article, irrecoverable and valueless waste will 
cause a reduction in the amount of drawback.)
    (Valuable wastes are those recovered wastes which have a value 
either for sale or for use in a different manufacturing process. 
However, it should be noted that this standard applies to the entire 
industry and is not a selection on your part. An option by you not 
to choose to sell or use the waste in some different operation does 
not make it valueless if another manufacturer can use the waste. 
State what you do with the waste. If you have to pay someone to get 
rid of it, or if you have buyers for the waste, you must state so in 
your application regardless of what basis you are using.)
    (If you recover valuable waste and if you choose to claim on the 
basis of the quantity of merchandise used in producing the exported 
articles less any valuable waste, state that you will keep records 
to establish the quantity and value of the waste recovered. See 
``Basis of Claim for Drawback'' section below.)

STOCK IN PROCESS

    (Some processes result in another type of residual material, 
namely, stock in process, which affects the allowance of drawback. 
Stock in process may exist when residual material resulting from a 
manufacturing or processing operation is reintroduced into a 
subsequent manufacturing or processing operation; e.g., trim pieces 
from a cast article. The effect of stock in process on a drawback 
claim is that the amount of drawback for the period in which the 
stock in process was withdrawn from the manufacturing or processing 
operation (or the manufactured article, if manufacturing or 
processing periods are not used) is reduced by the quantity of 
merchandise or drawback products used to produce the stock in 
process if the ``used in'' or ``used in less valuable waste'' 
methods are used (if the ``appearing in'' method is used, there will 
be no effect on the amount of drawback), and the quantity of 
merchandise or drawback products used to produce the stock in 
process is added to the merchandise or drawback products used in the 
subsequent manufacturing or production period (or the subsequently 
produced article)).
    (If stock in process occurs and claims are to be based on stock 
in process, the application must include a statement to that effect. 
The application must also include a statement that merchandise is 
considered to be used in manufacture at the time it was originally 
processed, so that the stock in process will not be included twice 
in the computation of the merchandise used to manufacture the 
finished articles on which drawback is claimed.)

LOSS OR GAIN (Separate and distinct from WASTE)

    (Some manufacturing processes result in an intangible loss or 
gain of the net weight or measurement of the merchandise used. This 
loss or gain is caused by atmospheric conditions, chemical 
reactions, or other factors. If applicable, state the approximate 
usual percentage or quantity of such loss or gain. Note that 
percentage values will be considered to be measured ``by weight'' 
unless otherwise specified. Loss or gain does not occur during all 
manufacturing processes. If loss or gain does not apply to your 
manufacturing process, state ``Not Applicable.'')

PROCEDURES AND RECORDS MAINTAINED

    We will maintain records to establish:
    1. The identity and 8-digit HTSUS subheading number of the 
merchandise we designate;
    2. The quantity of merchandise classifiable under the same 8-
digit HTSUS subheading number as the designated merchandise \2\ we 
used to produce the exported articles;
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    \2\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles we produce.''
---------------------------------------------------------------------------

    3. That, within 5 years after the date of importation, we used 
the designated merchandise to produce articles. During the same 5-
year period, we produced \3\ the exported articles;
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    \3\ The date of production is the date an article is completed.
---------------------------------------------------------------------------

    We realize that to obtain drawback the claimant must establish 
that the completed articles were exported within 5 years after the 
importation of the imported merchandise. Our records establishing 
our compliance with these requirements will be available for audit 
by CBP during business hours. We understand that drawback is not 
payable without proof of compliance.

INVENTORY PROCEDURES

    (Describe your inventory records and state how those records 
will meet the drawback recordkeeping requirements set forth in 19 
U.S.C. 1313(b) and part 190 of the CBP Regulations as discussed 
under the heading PROCEDURES AND RECORDS MAINTAINED. To help ensure 
compliance the following areas, as applicable, should be included in 
your discussion:)

RECEIPT AND STORAGE OF DESIGNATED MERCHANDISE

RECORDS OF USE OF DESIGNATED MERCHANDISE

BILLS OF MATERIALS

MANUFACTURING RECORDS

WASTE RECORDS

RECORDS OF USE OF DUTY-PAID, DUTY-FREE OR DOMESTIC MERCHANDISE OF THE 
REQUIRED SAME 8-DIGIT HTSUS SUBHEADING WITHIN 5 YEARS AFTER IMPORTATION 
OF THE DESIGNATED MERCHANDISE

FINISHED STOCK STORAGE RECORDS

SHIPPING RECORDS

    (Proof of time frames may be specific or inclusive, e.g., within 
120 days, but specific proof is preferable. Separate storage and 
identification of each article or lot of merchandise usually will 
permit specific proof of exact dates. Proof of inclusive dates of 
use, production or export may be acceptable, but in such cases it is 
better to describe very specifically the data you intend

[[Page 65059]]

to use to establish each legal requirement, thereby avoiding 
misunderstandings at the time of audit.)
    (If you do not describe the inventory records that you will use, 
you must state: ``All legal requirements will be met by our 
inventory procedures.'' However, it should be noted that without a 
detailed description of the inventory procedures set forth in the 
application, a judgment as to the adequacy of such a statement 
cannot be made until a drawback claim is verified. Approval of this 
application for a specific manufacturing drawback ruling merely 
constitutes approval of the ruling application as submitted; it does 
not constitute approval of the applicant's recordkeeping procedures 
if those procedures are solely described as meeting the legal 
requirements, without specifically stating how the requirements will 
be met. Drawback is not payable without proof of compliance.)

BASIS OF CLAIM FOR DRAWBACK

    (There are three different bases that may be used to claim 
drawback: (1) Used in; (2) appearing in; and (3) used in less 
valuable waste.)
    (The ``used in'' basis may be employed only if there is either 
no waste, or the waste is valueless or unrecovered. Irrecoverable or 
valueless waste does not reduce the amount of drawback when claims 
are based on the ``used in'' basis. Drawback is payable in the 
amount of 99 percent of the duties, taxes, and fees, paid on the 
quantity of imported material designated as the basis for the 
allowance of drawback on the exported articles. The designated 
quantity may not exceed the quantity of material actually used in 
the manufacture of the exported articles.)
    (For example, if 100 pounds of material, valued at $1.00 per 
pound, were used in manufacture resulting in 10 pounds of 
irrecoverable or valueless waste, the 10 pounds of irrecoverable or 
valueless waste would not reduce the drawback. In this case drawback 
would be payable on 99% of the duties, taxes, and fees, paid on the 
100 pounds of designated material used to produce the exported 
articles.)
    (The ``appearing in'' basis may be used regardless of whether 
there is waste. If the ``appearing in'' basis is used, the claimant 
does not need to keep records of waste and its value. However, the 
manufacturer must establish the identity and quantity of the 
merchandise appearing in the exported product and provide this 
information. Waste reduces the amount of drawback when claims are 
made on the ``appearing in'' basis. Drawback is payable on 99 
percent of the duties, taxes, and fees paid on the quantity of 
material designated, which may not exceed the quantity of eligible 
material that appears in the exported articles. ``Appearing in'' may 
not be used if multiple products are involved.)
    (Based on the previous example, drawback would be payable on the 
90 pounds of merchandise which actually went into the exported 
product (appearing in) rather than the 100 pounds used in as set 
forth previously.)
    (The ``used in less valuable waste'' basis may be employed when 
the manufacturer recovers valuable waste, and keeps records of the 
quantity and value of waste from each lot of merchandise. The value 
of the waste reduces the amount of drawback when claims are based on 
the ``used in less valuable waste'' basis. When valuable waste is 
incurred, the drawback allowance on the exported article is based on 
the duties, taxes, and fees paid on the quantity of merchandise used 
in the manufacture, as reduced by the quantity of such merchandise 
which the value of the waste would replace. In such a case, drawback 
is claimed on the quantity of eligible material actually used to 
produce the exported product, less the amount of such material which 
the value of the waste would replace. Note section 190.26(c) of the 
CBP Regulations.)
    (Based on the previous examples, if the 10 pounds of waste had a 
value of $.50 per pound, then the 10 pounds of waste, having a total 
value of $5.00, would be equivalent in value to 5 pounds of the 
designated material. Thus the value of the waste would replace 5 
pounds of the merchandise used, and drawback is payable on 99 
percent of the duties, taxes, and fees paid on the 95 pounds of 
imported material designated as the basis for the allowance of 
drawback on the exported article rather than on the 100 pounds 
``used in'' or the 90 pounds ``appearing in'' as set forth in the 
above examples.)
    (Two methods exist for the manufacturer to show the quantity of 
material used or appearing in the exported article: (1) Schedule or 
(2) Abstract.)
    (A ``schedule'' shows the quantity of material used in producing 
each unit of product. The schedule method is usually employed when a 
standard line of merchandise is being produced according to fixed 
formulas. Some schedules will show the quantity of merchandise used 
to manufacture or produce each article and others will show the 
quantity appearing in each finished article. Schedules may be 
prepared to show the quantity of merchandise either on the basis of 
percentages, or by actual weights and measurements. A schedule 
determines the amount of material that is needed to produce a unit 
of product, before the material is actually used in production.)
    (An ``abstract'' is the summary of the records which shows the 
total quantity of merchandise used in producing all articles during 
the period covered by the abstract. The abstract looks at a period 
of time, for instance 3 months, in which the quantity of material 
has been used. An abstract looks back at how much material was 
actually used after a production period has been completed.)
    (An applicant who fails to indicate the ``schedule'' choice must 
base its claims on the ``abstract'' method. State which Basis and 
Method you will use. An example of Used In by Schedule would read:)
    We will claim drawback on the quantity of (specify material) 
used in manufacturing (exported article) according to the schedule 
set forth below.
    (Section 190.8(f) of the CBP Regulations requires submission of 
the schedule with the application for a specific manufacturing 
drawback ruling. An applicant who desires to file supplemental 
schedules with the drawback office whenever there is a change in the 
quantity or material used should state:)
    We request permission to file supplemental schedules with the 
drawback office covering changes in the quantities of material used 
to produce the exported articles, or different styles or capacities 
of containers of such exported merchandise.
    (Neither the ``appearing in'' basis nor the ``schedule'' method 
for claiming drawback may be used where the relative value procedure 
is required.)

AGREEMENTS

    The Applicant specifically agrees that it will:
    1. Operate in full conformance with the terms of this 
application for a specific manufacturing drawback ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this application;
    4. Keep this application current by reporting promptly to the 
drawback office which liquidates its claims any changes in the 
number or locations of its offices or factories, the corporate name, 
the persons who will sign drawback documents, the basis of claim 
used for calculating drawback, the decision to use or not to use an 
agent under Sec.  190.9 or the identity of an agent under that 
section, or the corporate organization by succession or 
reincorporation;
    5. Keep this application current by reporting promptly to CBP 
Headquarters, all other changes affecting information contained in 
this application;
    6. Keep a copy of this application and the letter of approval by 
CBP Headquarters on file for ready reference by employees and 
require all officials and employees concerned to familiarize 
themselves with the provisions of this application and that letter 
of approval; and
    7. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this application and letter of approval.

Declaration of Official

    I declare that I have read this application for a specific 
manufacturing drawback ruling; that I know the averments and 
agreements contained herein are true and correct; and that my 
signature on this __ day of ____ 20 __, makes this application 
binding on
-----------------------------------------------------------------------
(Name of Applicant Corporation, Partnership, or Sole Proprietorship)

By \4\-----------------------------------------------------------------
---------------------------------------------------------------------------

    \4\ Section 190.6(a) requires that applications for specific 
manufacturing drawback rulings be signed or electronically certified 
by any individual legally authorized to bind the person (or entity) 
for whom the application is signed or the owner of a sole 
proprietorship, a full partner in a partnership, an individual 
acting on his or her own behalf, or, if a corporation, the 
president, a vice president, secretary, treasurer or employee 
legally authorized to bind the corporation. In addition, any 
employee of a business entity with a customs power of attorney filed 
may sign such an application, as may a licensed customs broker with 
a customs power of attorney.

---------------------------------------------------------------------------

[[Page 65060]]

---------------------------------------------------------------------------
(Signature and Title)

-----------------------------------------------------------------------
(Print Name)

IV. Format for Application for Specific Manufacturing Drawback Ruling 
Under 19 U.S.C. 1313(d)

COMPANY LETTERHEAD (Optional)

    U.S. Customs and Border Protection, Entry Process and Duty 
Refunds Branch, Commercial and Trade Facilitation Division, 
Regulations and Rulings, Office of Trade, 90 K Street NE--10th Floor 
(Mail Stop 1177), Washington, DC 20229-1177.
    Dear Sir or Madam: We, (Applicant's Name), a (State, e.g., 
Delaware) corporation (or other described entity) submit this 
application for a specific manufacturing drawback ruling that our 
manufacturing operations qualify for drawback under title 19, United 
States Code, section 1313(d), and part 190 of the CBP Regulations. 
We request that CBP authorize drawback on the basis of this 
application.

NAME AND ADDRESS AND IRS NUMBER (WITH SUFFIX) OF APPLICANT

    (Section 190.8(a) of the CBP Regulations provides that each 
manufacturer or producer of articles intended for exportation with 
the benefit of drawback must apply for a specific manufacturing 
drawback ruling, unless operating under a general manufacturing 
drawback ruling under Sec.  190.7 of the CBP Regulations. CBP will 
not approve an application which shows an unincorporated division or 
company as the applicant (see Sec.  190.8(a)).)

LOCATION OF FACTORY

    (Provide the address of the factory(s) where the process of 
manufacture or production will take place. Indicate if the factory 
is a different legal entity from the applicant, and indicate if the 
applicant is operating under an Agent's general manufacturing 
drawback ruling.)

PERSONS WHO WILL SIGN DRAWBACK DOCUMENTS

    (List persons legally authorized to bind the corporation who 
will sign drawback documents. Section 190.6 of the CBP Regulations 
permits only the president, vice president, secretary, treasurer, 
and any employee legally authorized to bind the corporation to sign 
for a corporation. In addition, a person within a business entity 
with a customs power of attorney for the company may sign. A customs 
power of attorney may also be given to a licensed customs broker. 
This heading should be changed to NAMES OF PARTNERS or PROPRIETOR in 
the case of a partnership or sole proprietorship, respectively (see 
footnote at end of this sample format for persons who may sign 
applications for specific manufacturing drawback rulings).)

GENERAL STATEMENT

    (The exact material placed under this heading in individual 
cases will vary, but it should include such information as the type 
of business in which the manufacturer is engaged, whether the 
manufacturer is manufacturing for its own account or is performing 
the operation on a toll basis (including commission or conversion 
basis) for the account of others, whether the manufacturer is a 
direct exporter of its products or sells or delivers them to others 
for export, and whether drawback will be claimed by the manufacturer 
or by others.)
    (If an agent is to be used, the applicant must state it will 
comply with T.D.s 55027(2) and 55207(1), and Sec.  190.9, as 
applicable, and that its agent will submit a letter of notification 
of intent to operate under the general manufacturing drawback ruling 
for agents (see Sec.  190.7 and Appendix A), or an application for a 
specific manufacturing drawback ruling (see Sec.  190.8 and this 
Appendix B).)
    (Regarding drawback operations conducted under Sec.  1313(d), 
the data may describe the flavoring extracts, medicinal, or toilet 
preparations (including perfumery) manufactured with the use of 
domestic tax-paid alcohol; and where such alcohol is obtained or 
purchased.)

TAX-PAID MATERIAL USED UNDER SECTION 1313(d)

    (Describe or list the tax-paid material)

EXPORTED ARTICLES ON WHICH DRAWBACK WILL BE CLAIMED

    (Name each article to be exported)

PROCESS OF MANUFACTURE OR PRODUCTION

    (Drawback under Sec.  1313(d) is not allowable except where a 
manufacture or production exists. ``Manufacture or production'' is 
defined, for drawback purposes, in Sec.  190.2. In order to obtain 
drawback under Sec.  1313(d), it is essential for the applicant to 
show use in manufacture or production by providing a thorough 
description of the manufacturing process. Describe how the tax-paid 
material is processed into the export article.)

WASTE

    (Many processes result in residue materials which, for drawback 
purposes, are treated as wastes. Describe any residue materials 
which you believe should be so treated. If no waste results, include 
a statement to that effect.)
    (If waste occurs, state: (1) Whether or not it is recovered, (2) 
whether or not it is valueless, and (3) what you do with it. This 
information is required whether claims are made on a ``used in'' or 
``appearing in'' basis and regardless of the amount of waste 
incurred.)
    (Irrecoverable wastes are those consisting of materials which 
are lost in the process. Valueless wastes are those which may be 
recovered, but have no value. These irrecoverable and valueless 
wastes do not reduce the drawback claim provided the claim is based 
on the quantity of domestic tax-paid alcohol used in manufacturing. 
If the claim is based upon the quantity of domestic tax-paid alcohol 
appearing in the exported article, irrecoverable and valueless waste 
will cause a reduction in the amount of drawback.)
    (Valuable wastes are those recovered wastes which have a value 
either for sale or for use in a different manufacturing process. 
However, it should be noted that this standard applies to the entire 
industry and is not a selection on your part. An option by you not 
to choose to sell or use the waste in some different operation, does 
not make it valueless if another manufacturer can use the waste. 
State what you do with the waste. If you have to pay someone to get 
rid of it, or if you have buyers for the waste, you must state so in 
your application regardless of what basis you are using.)
    (If you recover valuable waste and if you choose to claim on the 
basis of the quantity of domestic tax-paid alcohol used in producing 
the exported articles (less any valuable waste), state that you will 
keep records to establish the quantity and value of the waste 
recovered. See ``Basis of Claim for Drawback'' section below.)

STOCK IN PROCESS

    (Some processes result in another type of residual material, 
namely, stock in process, which affects the allowance of drawback. 
Stock in process may exist when residual material resulting from a 
manufacturing or processing operation is reintroduced into a 
subsequent manufacturing or processing operation; e.g., trim pieces 
from a cast article. The effect of stock in process on a drawback 
claim is that the amount of drawback for the period in which the 
stock in process was withdrawn from the manufacturing or processing 
operation (or the manufactured article, if manufacturing or 
processing periods are not used) is reduced by the quantity of 
merchandise or drawback products used to produce the stock in 
process if the ``used in'' or ``used in less valuable waste'' 
methods are used (if the ``appearing in'' method is used, there will 
be no effect on the amount of drawback), and the quantity of 
merchandise or drawback products used to produce the stock in 
process is added to the merchandise or drawback products used in the 
subsequent manufacturing or production period (or the subsequently 
produced article)).
    (If stock in process occurs and claims are to be based on stock 
in process, the application must include a statement to that effect. 
The application must also include a statement that the domestic tax-
paid alcohol is considered to be used in manufacture at the time it 
was originally processed, so that the stock in process will not be 
included twice in the computation of the domestic tax-paid alcohol 
used to manufacture the finished articles on which drawback is 
claimed.)

LOSS OR GAIN (Separate and distinct from WASTE)

    (Some manufacturing processes result in an intangible loss or 
gain of the net weight or measurement of the merchandise used. This 
loss or gain is caused by atmospheric conditions, chemical 
reactions, or other factors. If applicable, state the approximate 
usual percentage or quantity of such loss or gain. Note that 
percentage values will be considered to be measured ``by weight''

[[Page 65061]]

unless otherwise specified. Loss or gain does not occur during all 
manufacturing processes. If loss or gain does not apply to your 
manufacturing process, state ``Not Applicable.'')

PROCEDURES AND RECORDS MAINTAINED

    We will maintain records to establish:
    1. That the exported articles on which drawback is claimed were 
produced with the use of a particular lot (or lots) of domestic tax-
paid alcohol, and
    2. The quantity of domestic tax-paid alcohol \1\ we used in 
producing the exported articles.
---------------------------------------------------------------------------

    \1\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles we produce.''
---------------------------------------------------------------------------

    We realize that to obtain drawback the claimant must establish 
that the completed articles were exported within 5 years after the 
tax has been paid on the domestic alcohol. Our records establishing 
our compliance with these requirements will be available for audit 
by CBP during business hours. We understand that drawback is not 
payable without proof of compliance.

INVENTORY PROCEDURES

    (Describe your inventory records and state how those records 
will meet the drawback recordkeeping requirements set forth in 19 
U.S.C. 1313(d) and part 190 of the CBP Regulations as discussed 
under the heading PROCEDURES AND RECORDS MAINTAINED. To help ensure 
compliance the following areas should be included in your 
discussion:)

RECEIPT AND RAW STOCK STORAGE RECORDS

MANUFACTURING RECORDS

FINISHED STOCK STORAGE RECORDS

BASIS OF CLAIM FOR DRAWBACK

    (There are three different bases that may be used to claim 
drawback: (1) Used in; (2) appearing in; and (3) used in less 
valuable waste.)
    (The ``used in'' basis may be employed only if there is either 
no waste or valueless or unrecovered waste in the operation. 
Irrecoverable or valueless waste does not reduce the amount of 
drawback when claims are based on the ``used in'' basis. Drawback is 
payable in the amount of 100% of the tax paid on the quantity of 
domestic alcohol used in the manufacture of flavoring extracts and 
medicinal or toilet preparation (including perfumery).)
    (For example, if 100 gallons of alcohol, valued at $1.00 per 
gallon, were used in manufacture resulting in 10 gallons of 
irrecoverable or valueless waste, the 10 gallons of irrecoverable or 
valueless waste would not reduce the drawback. In this case drawback 
would be payable on 100% of the tax paid on the 100 gallons of 
domestic alcohol used to produce the exported articles.)
    The ``appearing in'' basis may be used regardless of whether 
there is waste. If the ``appearing in'' basis is used, the claimant 
does not need to keep records of waste and its value. However, the 
manufacturer must establish the identity and quantity of the 
merchandise appearing in the exported product and provide this 
information. Waste reduces the amount of drawback when claims are 
made on the ``appearing in'' basis. Drawback is payable on 100% of 
the tax paid on the quantity of domestic alcohol which appears in 
the exported articles.
    (Based on the previous example, drawback would be payable on the 
90 gallons of domestic alcohol which actually went into the exported 
product (appearing in) rather than the 100 gallons used in as set 
forth previously.)
    (The ``used in less valuable waste'' basis may be employed when 
the manufacturer recovers valuable waste, and keeps records of the 
quantity and value of waste from each lot of domestic tax-paid 
alcohol. The value of the waste reduces the amount of drawback when 
claims are based on the ``used in less valuable waste'' basis. When 
valuable waste is incurred, the drawback allowance on the exported 
article is based on the quantity of tax-paid alcohol used to 
manufacture the exported articles, as reduced by the quantity of 
such alcohol which the value of the waste would replace.)
    (Based on the previous examples, if the 10 gallons of waste had 
a value of $.50 per gallon, then the 10 gallons of waste, having a 
total value of $5.00, would be equivalent in value to 5 gallons of 
the tax-paid alcohol. Thus the value of the waste would replace 5 
gallons of the alcohol used, and drawback is payable on 100% of the 
tax paid on 95 gallons of alcohol rather than on the 100 gallons 
``used in'' or the 90 gallons ``appearing in'' as set forth in the 
above examples.)
    (Two methods exist for the manufacturer to show the quantity of 
material used or appearing in the exported article: (1) Schedule or 
(2) Abstract.)
    (A ``schedule'' shows the quantity of material used in producing 
each unit of product. The schedule method is usually employed when a 
standard line of merchandise is being produced according to fixed 
formulas. Some schedules will show the quantity of merchandise used 
to manufacture or produce each article and others will show the 
quantity appearing in each finished article. Schedules may be 
prepared to show the quantity of merchandise either on the basis of 
percentages or by actual weights and measurements. A schedule 
determines the amount that will be needed to produce a unit of 
product before the material is actually used in production.)
    (An ``abstract'' is the summary of the records which shows the 
total quantity used in producing all products during the period 
covered by the abstract. The abstract looks at a period of time, for 
instance 3 months, in which the quantity of material has been used. 
An abstract looks back at how much material was actually used after 
a production period has been completed.)
    (An applicant who fails to indicate the ``schedule'' choice must 
base its claims on the ``abstract'' method. State which Basis and 
Method you will use. An example of Used In by schedule follows:)
    We will claim drawback on the quantity of (specify material) 
used in manufacturing (exported article) according to the schedule 
set forth below.
    (Section 190.8(f) of the CBP Regulations requires submission of 
the schedule with the application for a specific manufacturing 
drawback ruling. An applicant who desires to file supplemental 
schedules with the drawback office whenever there is a change in the 
quantity or material used should state:)
    We request permission to file supplemental schedules with the 
drawback office covering changes in the quantities of material used 
to produce the exported articles, or different styles or capacities 
of containers of such exported merchandise.
    (Neither the ``appearing in'' basis nor the ``schedule'' method 
for claiming drawback may be used where the relative value procedure 
is required.)

AGREEMENTS

    The Applicant specifically agrees that it will:
    1. Operate in full conformance with the terms of this 
application for a specific manufacturing drawback ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this application;
    4. Keep this application current by reporting promptly to the 
drawback office which liquidates its claims any changes in the 
number or locations of its offices or factories, the corporate name, 
the persons who will sign drawback documents, the basis of claim 
used for calculating drawback, the decision to use or not to use an 
agent under Sec.  190.9 or the identity of an agent under that 
section, the drawback office where claims will be filed under the 
ruling, or the corporate organization by succession or 
reincorporation;
    5. Keep this application current by reporting promptly to CBP 
Headquarters, all other changes affecting information contained in 
this application;
    6. Keep a copy of this application and the letter of approval by 
CBP Headquarters on file for ready reference by employees and 
require all officials and employees concerned to familiarize 
themselves with the provisions of this application and that letter 
of approval; and
    7. Issue instructions to insure proper compliance with title 19, 
United States Code, section 1313, part 190 of the CBP Regulations 
and this application and letter of approval.

DECLARATION OF OFFICIAL

    I declare that I have read this application for a specific 
manufacturing drawback ruling; that I know the averments and 
agreements contained herein are true and correct; and that my 
signature on this __ day of ____ 20 __, makes this application 
binding on
-----------------------------------------------------------------------
(Name of Applicant Corporation, Partnership, or Sole Proprietorship)


[[Page 65062]]


By \2\-----------------------------------------------------------------
---------------------------------------------------------------------------

    \2\ Section 190.6(a) requires that applications for specific 
manufacturing drawback rulings be signed or electronically certified 
by any individual legally authorized to bind the person (or entity) 
for whom the application is signed or the owner of a sole 
proprietorship, a full partner in a partnership, an individual 
acting on his or her own behalf, or, if a corporation, the 
president, a vice president, secretary, treasurer or employee 
legally authorized to bind the corporation. In addition, any 
employee of a business entity with a customs power of attorney may 
sign such an application, as may a licensed customs broker with a 
customs power of attorney.
---------------------------------------------------------------------------

(Signature and Title)

-----------------------------------------------------------------------
(Print Name)

V. Format for Application for Specific Manufacturing Drawback Ruling 
Under 19 U.S.C. 1313(g).

COMPANY LETTERHEAD (Optional)

    U.S. Customs and Border Protection, Entry Process and Duty 
Refunds Branch, Commercial and Trade Facilitation Division, 
Regulations and Rulings, Office of Trade, 90 K Street NE--10th Floor 
(Mail Stop 1177), Washington, DC 20229-1177.
    Dear Sir or Madam: We, (Applicant's Name), a (State, e.g., 
Delaware) corporation (or other described entity) submit this 
application for a specific manufacturing drawback ruling that our 
manufacturing operations qualify for drawback under title 19, United 
States Code, section 1313(g), and part 190 of the CBP Regulations. 
We request that CBP authorize drawback on the basis of this 
application.

NAME AND ADDRESS AND IRS NUMBER (WITH SUFFIX) OF APPLICANT

    (Section 190.8(a) of the CBP Regulations provides that each 
manufacturer or producer of articles intended for exportation with 
the benefit of drawback must apply for a specific manufacturing 
drawback ruling, unless operating under a general manufacturing 
drawback ruling under Sec.  190.7 of the CBP Regulations. CBP will 
not approve an application which shows an unincorporated division or 
company as the applicant (see Sec.  190.8(a)).)

LOCATION OF FACTORY OR SHIPYARD

    (Provide the address of the factory(s) or shipyard(s) at which 
the construction and equipment will take place. Indicate if the 
factory or shipyard is a different legal entity from the applicant, 
and indicate if the applicant is operating under an Agent's general 
manufacturing drawback ruling.)

PERSONS WHO WILL SIGN DRAWBACK DOCUMENTS

    (List persons legally authorized to bind the corporation who 
will sign drawback documents. Section 190.6 of the CBP Regulations 
permits only the president, vice president, secretary, treasurer, 
and any employee legally authorized to bind the corporation to sign 
for a corporation. In addition, a person within a business entity 
with a customs power of attorney for the company may sign. A customs 
power of attorney may also be given to a licensed customs broker. 
This heading should be changed to NAMES OF PARTNERS or PROPRIETOR in 
the case of a partnership or sole proprietorship, respectively (see 
footnote at end of this sample format for persons who may sign 
applications for specific manufacturing drawback rulings).)

GENERAL STATEMENT

    (The following questions must be answered:)
    1. Who will be the importer of the merchandise? (If the 
applicant will not always be the importer, specify that the 
applicant understands its obligations to maintain records to support 
the transfer under 19 CFR 190.10, and its liability under 19 CFR 
190.63.)
    2. Who is the manufacturer?
    (Is the applicant constructing and equipping for his own account 
or merely performing the operation on a toll basis for others?)
    (If an agent is to be used, the applicant must state it will 
comply with T.D.s 55027(2) and 55207(1), and Sec.  190.9, as 
applicable, and that its agent will submit a letter of notification 
of intent to operate under the general manufacturing drawback ruling 
for agents (see Sec.  190.7 and Appendix A), or an application for a 
specific manufacturing drawback ruling (see Sec.  190.8 and this 
Appendix B).)
    3. Will the applicant be the drawback claimant? (State how the 
vessel will qualify for drawback under 19 U.S.C. 1313(g). Who is the 
foreign person or government for whom the vessel is being made or 
equipped?) (There must be included under this heading the following 
statement:
    We are particularly aware of the terms of Sec.  190.76(a)(1), 
and subpart M of part 190 of the CBP Regulations, and will comply 
with these sections where appropriate.)

IMPORTED MERCHANDISE OR DRAWBACK PRODUCTS USED

    (Describe the imported merchandise or drawback products.)

ARTICLES CONSTRUCTED AND EQUIPPED FOR EXPORT

    (Name the vessel or vessels to be made with imported merchandise 
or drawback products.)

PROCESS OF CONSTRUCTION AND EQUIPMENT

    (Provide a clear and concise description of the process of 
construction and equipment involved. The description should trace 
the flow of materials through the manufacturing process for the 
purpose of establishing physical identification of the imported 
merchandise or drawback products and of the articles resulting from 
the processing.)

WASTE

    (Many processes result in residue materials which, for drawback 
purposes, are treated as wastes. Describe any residue materials 
which you believe should be so treated. If no waste results, include 
a statement to that effect.)
    (If waste occurs, state: (1) Whether or not it is recovered, (2) 
whether or not it is valueless, and (3) what you do with it. This 
information is required whether claims are made on a ``used in'' or 
``appearing in'' basis and regardless of the amount of waste 
incurred.)
    (Irrecoverable wastes are those consisting of materials which 
are lost in the process. Valueless wastes are those which may be 
recovered, but have no value. These irrecoverable and valueless 
wastes do not reduce the drawback claim provided the claim is based 
on the quantity of imported material used in manufacturing. If the 
claim is based upon the quantity of imported merchandise appearing 
in the exported article, irrecoverable and valueless waste will 
cause a reduction in the amount of drawback.)
    (Valuable wastes are those recovered wastes which have a value 
either for sale or for use in a different manufacturing process. 
However, it should be noted that this standard applies to the entire 
industry and is not a selection on your part. An option by you not 
to choose to sell or use the waste in some different operation does 
not make it valueless if another manufacturer can use the waste. 
State what you do with the waste. If you have to pay someone to get 
rid of it, or if you have buyers for the waste, you must state so in 
your application regardless of what basis you are using.)
    (If you recover valuable waste, and you choose to claim on the 
basis of the quantity of merchandise used in producing the exported 
articles (less any valuable waste), state that you will keep records 
to establish the quantity and value of the waste recovered. See 
``Basis of Claim for Drawback'' section below.)

LOSS OR GAIN (Separate and distinct from WASTE)

    (Some manufacturing processes result in an intangible loss or 
gain of the net weight or measurement of the merchandise used. This 
loss or gain is caused by atmospheric conditions, chemical 
reactions, or other factors. If applicable, state the approximate 
usual percentage or quantity of such loss or gain. Note that 
percentage values will be considered to be measured ``by weight'' 
unless otherwise specified. Loss or gain does not occur during all 
manufacturing processes. If loss or gain does not apply to your 
manufacturing process, state ``Not Applicable.'')

PROCEDURES AND RECORDS MAINTAINED

    We will maintain records to establish:
    1. That the exported article on which drawback is claimed was 
constructed and equipped with the use of a particular lot (or lots) 
of imported material; and
    2. The quantity of imported merchandise \1\ we used in producing 
the exported article.
---------------------------------------------------------------------------

    \1\ If claims are to be made on an ``appearing in'' basis, the 
remainder of this sentence should read ``appearing in the exported 
articles we produce.''
---------------------------------------------------------------------------

    We realize that to obtain drawback the claimant must establish 
that the completed articles were exported within 5 years after the 
importation of the imported merchandise. Our records establishing 
our compliance with these requirements will be available for audit 
by CBP during business hours. We understand that drawback is not 
payable without proof of compliance.

[[Page 65063]]

INVENTORY PROCEDURES

    (Describe your inventory records and state how those records 
will meet the drawback recordkeeping requirements set forth in 19 
U.S.C. 1313 and part 190 of the CBP Regulations as discussed under 
the heading ``PROCEDURES AND RECORDS MAINTAINED''. To help ensure 
compliance the following should be included in your discussion:)

RECEIPT AND RAW STOCK STORAGE RECORDS

CONSTRUCTION AND EQUIPMENT RECORDS

FINISHED STOCK STORAGE RECORDS

SHIPPING RECORDS

BASIS OF CLAIM FOR DRAWBACK

    (There are three different bases that may be used to claim 
drawback: (1) Used in; (2) appearing in; and (3) used in less 
valuable waste.)
    (The ``used in'' basis may be employed only if there is either 
no waste or valueless or unrecovered waste in the operation. 
Irrecoverable or valueless waste does not reduce the amount of 
drawback when claims are based on the ``used in'' basis. Drawback is 
payable in the amount of 99 percent of the duties, taxes, and fees, 
paid on the quantity of imported material used to construct and 
equip the exported article.)
    (For example, if 100 pounds of material, valued at $1.00 per 
pound, were used in manufacture resulting in 10 pounds of 
irrecoverable or valueless waste, the 10 pounds of irrecoverable or 
valueless waste would not reduce the drawback. In this case drawback 
would be payable on 99% of the duties, taxes, and fees, paid on the 
100 pounds of imported material used in constructing and equipping 
the exported articles.)
    (The ``appearing in'' basis may be used regardless of whether 
there is waste. If the ``appearing in'' basis is used, the claimant 
does not need to keep records of waste and its value. However, the 
manufacturer must establish the identity and quantity of the 
merchandise appearing in the exported product and provide this 
information. Waste reduces the amount of drawback when claims are 
made on the ``appearing in'' basis. Drawback is payable on 99 
percent of the duties, taxes, and fees, paid on the quantity of 
imported material which appears in the exported articles. 
``Appearing in'' may not be used if multiple products are involved.)
    (Based on the previous example, drawback would be payable on the 
90 pounds of imported material which actually went into the exported 
product (appearing in) rather than the 100 pounds used in as set 
forth previously.)
    (The ``used in less valuable waste'' basis may be employed when 
the manufacturer recovers valuable waste, and keeps records of the 
quantity and value of waste from each lot of merchandise. The value 
of the waste reduces the amount of drawback when claims are based on 
the ``used in less valuable waste'' basis. When valuable waste is 
incurred, the drawback allowance on the exported article is based on 
the duties, taxes, and fees, paid on the quantity of imported 
material used to construct and equip the exported product, as 
reduced by the quantity of such material which the value of the 
waste would replace. In such a case, drawback is claimed on the 
quantity of eligible material actually used to produce the exported 
product, less the amount of such material which the value of the 
waste would replace. Note section 190.26(c) of the CBP Regulations.)
    (Based on the previous examples, if the 10 pounds of waste had a 
value of $.50 per pound, then the 10 pounds of waste, having a total 
value of $5.00, would be equivalent in value to 5 pounds of the 
imported material. Thus the value of the waste would replace 5 
pounds of the merchandise used, and drawback is payable on 99 
percent of the duties, taxes, and fees, paid on the 95 pounds of 
imported material rather than on the 100 pounds ``used in'' or the 
90 pounds ``appearing in'' as set forth in the above examples.)
    (Two methods exist for the manufacturer to show the quantity of 
material used or appearing in the exported article: (1) Schedule or 
(2) Abstract.)
    (A ``schedule'' shows the quantity of material used in producing 
each unit of product. The schedule method is usually employed when a 
standard line of merchandise is being produced according to fixed 
formulas. Some schedules will show the quantity of merchandise used 
to manufacture or produce each article and others will show the 
quantity appearing in each finished article. Schedules may be 
prepared to show the quantity of merchandise either on the basis of 
percentages or by actual weights and measurements. A schedule 
determines the amount of material that is needed to produce a unit 
of product before the material is actually used in production.)
    (An ``abstract' is the summary of the records which shows the 
total quantity of merchandise used in producing all articles during 
the period covered by the abstract. The abstract looks at a period 
of time, for instance 3 months, in which the quantity of material 
has been used. An abstract looks back at how much material was 
actually used after a production period has been completed.)
    (An applicant who fails to indicate the ``schedule'' choice must 
base its claims on the ``abstract' method. State which Basis and 
Method you will use. An example of Used In by Schedule would read:)
    We will claim drawback on the quantity of (specify material) 
used in manufacturing (exported article) according to the schedule 
set forth below.
    (Section 190.8(f) of the CBP Regulations requires submission of 
the schedule with the application for a specific manufacturing 
drawback ruling. An applicant who desires to file supplemental 
schedules with the drawback office whenever there is a change in the 
quantity or material used should state:)
    We request permission to file supplemental schedules with the 
drawback office covering changes in the quantities of material used 
to produce the exported articles, or different styles or capacities 
of containers of such exported merchandise.
    (Neither the ``appearing in'' basis nor the ``schedule method 
for claiming drawback may be used where the relative value procedure 
is required.)

AGREEMENTS

    The Applicant specifically agrees that it will:
    1. Operate in full conformance with the terms of this 
application for a specific manufacturing drawback ruling when 
claiming drawback;
    2. Open its factory and records for examination at all 
reasonable hours by authorized Government officers;
    3. Keep its drawback related records and supporting data for at 
least 3 years from the date of liquidation of any drawback claim 
predicated in whole or in part upon this application;
    4. Keep this application current by reporting promptly to the 
drawback office which liquidates its claims any changes in the 
number or locations of its offices or factories, the corporate name, 
the persons who will sign drawback documents, the basis of claim 
used for calculating drawback, the decision to use or not to use an 
agent under Sec.  190.9 or the identity of an agent under that 
section, the drawback office where claims will be filed under the 
ruling, or the corporate organization by succession or 
reincorporation;
    5. Keep this application current by reporting promptly to CBP 
Headquarters, all other changes affecting information contained in 
this application;
    6. Keep a copy of this application and the letter of approval by 
CBP Headquarters on file for ready reference by employees and 
require all officials and employees concerned to familiarize 
themselves with the provisions of this application and that letter 
of approval; and
    7. Issue instructions to help ensure proper compliance with 
title 19, United States Code, section 1313, part 190 of the CBP 
Regulations and this application and letter of approval.

DECLARATION OF OFFICIAL

    I declare that I have read this application for a specific 
manufacturing drawback ruling; that I know the averments and 
agreements contained herein are true and correct; and that my 
signature on this ____ day of ____ 20 __, makes this application 
binding on
-----------------------------------------------------------------------

(Name of Applicant Corporation, Partnership, or Sole Proprietorship)

By \2\
-----------------------------------------------------------------------

(Signature and Title)


[[Page 65064]]


-----------------------------------------------------------------------
---------------------------------------------------------------------------

    \2\ Section 190.6(a) requires that applications for specific 
manufacturing drawback rulings be signed or electronically certified 
by any individual legally authorized to bind the person (or entity) 
for whom the application is signed or the owner of a sole 
proprietorship, a full partner in a partnership, an individual 
acting on his or her own behalf, or, if a corporation, the 
president, a vice president, secretary, treasurer or employee 
legally authorized to bind the corporation. In addition, any 
employee of a business entity with a customs power of attorney may 
sign such an application, as may a licensed customs broker with a 
customs power of attorney.
---------------------------------------------------------------------------

PART 191--DRAWBACK

0
4. 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 3(i), 
Harmonized Tariff Schedule of the United States), 1313, 1624;
* * * * *

0
 5. Revise Sec.  191.0 to read as follows:


Sec.  191.0  Scope.

    This part sets forth general provisions applicable to drawback 
claims and specialized provisions applicable to specific types of 
drawback claims filed under 19 U.S.C. 1313, prior to the February 24, 
2016, amendments to the U.S. drawback law. Drawback claims may not be 
filed under this part after February 23, 2019. For drawback claims 
filed under 19 U.S.C. 1313, as amended, see part 190. Additional 
drawback provisions relating to the North American Free Trade Agreement 
(NAFTA) are contained in subpart E of part 181 of this chapter.

0
6. Revise Sec.  191.1 to read as follows:


Sec.  191.1   Authority of the Commissioner of CBP.

    Pursuant to DHS Delegation number 7010.3, the Commissioner of CBP 
has the authority to prescribe, and pursuant to Treasury Department 
Order No. 100-16 (set forth in the appendix to part 0 of this chapter), 
the Secretary of the Treasury has the sole authority to approve, rules 
and regulations regarding drawback.

0
7. In Sec.  191.3:
0
a. Revise the section heading;
0
b. Amend paragraph (a)(3) by removing the word ``and'' at the end of 
the paragraph;
0
c. Amend paragraph (a)(4) by removing the ``(iv).'' and adding in its 
place the words ``(iv); and'';
0
d. Add paragraph (a)(5).
0
e. Revise paragraph (b).
    The revisions and additions read as follows:


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

    (a) * * *
    (5) Harbor maintenance taxes (see Sec.  24.24 of this chapter) for 
unused merchandise drawback pursuant to 19 U.S.C. 1313(j), and 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:
    (1) Harbor maintenance taxes (see Sec.  24.24 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;
    (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) Antidumping and countervailing duties on merchandise entered, 
or withdrawn from warehouse, for consumption on or after August 23, 
1988.
* * * * *

0
8. Section 191.5 is revised to read as follows:


Sec.  191.5   Guantanamo Bay, insular possessions, trust territories.

    Guantanamo Bay Naval Station is considered foreign territory for 
drawback purposes and, accordingly, drawback may be permitted on 
articles shipped there. Drawback is not allowed, except on claims made 
under 19 U.S.C. 1313(j)(1), on articles shipped to the U.S. Virgin 
Islands, American Samoa, Wake Island, Midway Islands, Kingman Reef, 
Guam, Canton Island, Enderbury Island, Johnston Island, or Palmyra 
Island. Puerto Rico is not considered foreign territory for drawback 
purposes and, accordingly, drawback may not be permitted on articles 
shipped there from elsewhere in the customs territory of the United 
States.

0
9. In Sec.  191.22, paragraph (a) is amended by adding a sentence to 
the end of the paragraph to read as follows:


Sec.  191.22   Substitution drawback.

    (a) * * * For purposes of drawback of internal revenue tax imposed 
under Chapters 32, 38, 51, and 52 of the Internal Revenue Code of 1986, 
as amended (IRC), drawback granted on the export or destruction of 
substituted merchandise will be limited to the amount of taxes paid 
(and not returned by refund, credit, or drawback) on the substituted 
merchandise.
* * * * *

0
10. In Sec.  191.32:
0
a. Remove the word ``and'' at the end of paragraph (b)(2);
0
b. Remove ``.'' and add, in its place, ``; and''; at the end of 
paragraph (b)(3); and
0
c. Add paragraph (b)(4) to read as follows:


Sec.  191.32   Substitution drawback.

* * * * *
    (b) * * *
    (4) For purposes of drawback of internal revenue tax imposed under 
Chapters 32, 38 (with the exception of Subchapter A of Chapter 38), 51, 
and 52 of the Internal Revenue Code of 1986, as amended (IRC), drawback 
granted on the export or destruction of substituted merchandise will be 
limited to the amount of taxes paid (and not returned by refund, 
credit, or drawback) on the substituted merchandise.
* * * * *

0
11. Section 191.42 is revised to read as follows:


Sec.  191.42   Procedures and supporting documentation.

    (a) Time limit for exportation or destruction. Drawback will be 
denied on merchandise that is exported or destroyed after the statutory 
3-year time period.
    (b) Required documentation. The claimant must submit documentation 
to CBP as part of the complete drawback claim (see Sec.  191.51) to 
establish that the merchandise did not conform to sample or 
specification, was shipped without the consent of the consignee, or was 
defective as of the time of importation (see Sec.  191.45 for 
additional requirements for claims made with respect to rejected retail 
merchandise under 19 U.S.C. 1313(c)(1)(C)(ii)). If the claimant was not 
the importer, the claimant must also:
    (1) Submit a statement signed by the importer and every other 
person, other than the ultimate purchaser, that owned the goods that no 
other claim for drawback was made on the goods by any other person; and
    (2) Certify that records are available to support the statement 
required in paragraph (b)(1) of this section.
    (c) Notice. A notice of intent to export or destroy merchandise 
which may be the subject of a rejected merchandise drawback claim (19 
U.S.C. 1313(c)) must be provided to CBP to give CBP the opportunity to 
examine the merchandise. The claimant, or the exporter (for destruction 
under CBP supervision, see Sec.  191.71), must file at the port of 
intended redelivery to CBP custody a Notice of Intent to Export, 
Destroy, or Return Merchandise for Purposes of Drawback on CBP Form 
7553 at least 5 working days prior to the date of intended return to 
CBP custody.
    (d) Required information. The notice must provide the bill of 
lading number, if known, the name and telephone number, mailing 
address, and, if available, fax number and email address of a contact 
person, and the location of the merchandise.
    (e) Decision to waive examination. Within 2 working days after 
receipt of the Notice of Intent to Export, Destroy, or Return 
Merchandise for Purposes of

[[Page 65065]]

Drawback (see paragraph (c) of this section), CBP will notify, in 
writing, the party designated on the Notice of CBP's decision to either 
examine the merchandise to be exported or destroyed, or to waive 
examination. If CBP timely notifies the designated party, in writing, 
of its decision to examine the merchandise (see paragraph (f) of this 
section), but the merchandise is exported or destroyed without having 
been presented to CBP for such examination, any drawback claim, or part 
thereof, based on the Notice of Intent to Export, Destroy, or Return 
Merchandise for Purposes of Drawback, must be denied. If CBP notifies 
the designated party, in writing, of its decision to waive examination 
of the merchandise, or, if timely notification of a decision by CBP to 
examine or to waive examination is absent, the merchandise may be 
exported or destroyed without delay and will be deemed to have been 
returned to CBP custody.
    (f) Time and place of examination. If CBP gives timely notice of 
its decision to examine the merchandise to be exported or destroyed, 
the merchandise to be examined must be promptly presented to CBP. CBP 
must examine the merchandise within 5 working days after presentation 
of the merchandise. The merchandise may be exported or destroyed 
without examination if CBP fails to timely examine the merchandise 
after presentation to CBP, and in such case the merchandise will be 
deemed to have been returned to CBP custody. If the examination is to 
be completed at a port other than the port of actual exportation or 
destruction, the merchandise must be transported in-bond to the port of 
exportation or destruction.
    (g) Extent of examination. The appropriate CBP office may permit 
release of merchandise without examination, or may examine, to the 
extent determined to be necessary, the items exported or destroyed.
    (h) Drawback claim. When filing the drawback claim, the drawback 
claimant must correctly calculate the amount of drawback due (see Sec.  
191.51(b)). The procedures for restructuring a claim (see Sec.  191.53) 
apply to rejected merchandise drawback if the claimant has an ongoing 
export program which qualifies for this type of drawback.
    (i) Exportation. Claimants must provide documentary evidence of 
exportation (see subpart G of this part). The claimant may establish 
exportation by mail as set out in Sec.  191.74.

0
12. Section 191.45 is added to subpart D to read as follows:


Sec.  191.45   Returned retail merchandise.

    (a) Special rule for substitution. Section 313(c)(1)(C)(ii) of the 
Tariff Act of 1930, as amended (19 U.S.C. 1313(c)(1)(C)(ii)), provides 
for drawback upon the exportation or destruction under CBP supervision 
of imported merchandise which has been entered, or withdrawn from 
warehouse, for consumption, duty-paid and ultimately sold at retail by 
the importer, or the person who received the merchandise from the 
importer, and for any reason returned to and accepted by the importer, 
or the person who received the merchandise from the importer.
    (b) Eligibility requirements. (1) Drawback is allowable, subject to 
compliance with all requirements set forth in this subpart; and
    (2) The claimant must also show by evidence satisfactory to CBP 
that drawback may be claimed by--
    (i) Designating an entry of merchandise that was imported within 1 
year before the date of exportation or destruction of the merchandise 
described in paragraph (a) of this section under CBP supervision.
    (ii) Certifying that the same 8-digit HTSUS subheading number and 
specific product identifier (such as part number, SKU, or product code) 
apply to both the merchandise designated for drawback (in the import 
documentation) and the returned merchandise.
    (c) Allowable refund. The amount of drawback allowable will not 
exceed 99 percent of the amount of duties, taxes, and fees paid with 
respect to the imported merchandise.
    (d) Denial of claims. No drawback will be refunded if CBP is not 
satisfied that the claimant has provided, upon request, the 
documentation necessary to support the certification required in 
paragraph (b)(2)(ii) of this section.

0
13. Amend Sec.  191.51 by adding paragraph (a)(3) to read as follows:


Sec.  191.51   Completion of drawback claims.

    (a) * * *
    (3) Limitation on eligibility for imported merchandise. Claimants 
filing any drawback claims under this part for imported merchandise 
associated with an entry summary if any other merchandise covered on 
that entry summary has been designated as the basis of a drawback 
substitution claim under part 190 of this chapter must provide 
additional information enabling CBP to verify the availability of 
drawback for the indicated merchandise and associated line item within 
30 days of claim submission. The information to be provided will 
include, but is not limited to: Summary document specifying the lines 
used and unused on the import entry; the import entry summary, 
corresponding commercial invoices, and copies of all drawback claims 
that previously designated the import entry summary; and post summary/
liquidation changes (for imports or drawback claims, if applicable).
* * * * *

0
14. Section 191.81 is revised to read as follows:


Sec.  191.81   Liquidation.

    (a) Time of liquidation. Drawback entries may be liquidated after:
    (1) Liquidation of the designated import entry or entries becomes 
final pursuant to paragraph (e) of this section; or
    (2) Deposit of estimated duties on the imported merchandise and 
before liquidation of the designated import entry or entries.
    (b) Claims based on estimated duties. (1) Drawback may be paid upon 
liquidation of a claim based on estimated duties if one or more of the 
designated import entries have not been liquidated, or the liquidation 
has not become final (because of a protest being filed) (see also Sec.  
173.4(c) of this chapter), only if the drawback claimant and any other 
party responsible for the payment of liquidated import duties each 
files a written request for payment of each drawback claim, waiving any 
right to payment or refund under other provisions of law, to the extent 
that the estimated duties on the unliquidated import entry are included 
in the drawback claim for which drawback on estimated duties is 
requested under this paragraph. The drawback claimant must, to the best 
of its knowledge, identify each import entry that has been protested 
and that is included in the drawback claim. A drawback entry, once 
finally liquidated on the basis of estimated duties pursuant to 
paragraph (e)(2) of this section, will not be adjusted by reason of a 
subsequent final liquidation of the import entry.
    (2) However, if final liquidation of the import entry discloses 
that the total amount of import duty is different from the total 
estimated duties deposited, except in those cases when drawback is 100% 
of the duty, the party responsible for the payment of liquidated 
duties, as applicable, will:
    (i) Be liable for 1 percent of all increased duties found to be due 
on that portion of merchandise recorded on the drawback entry; or
    (ii) Be entitled to a refund of 1 percent of all excess duties 
found to have been paid as estimated duties on that portion of the 
merchandise recorded on the drawback entry.

[[Page 65066]]

    (c) Claims based on voluntary tenders or other payments of duties--
(1) General. Subject to the requirements in paragraph (c)(2) of this 
section, drawback may be paid upon liquidation of a claim based on 
voluntary tenders of the unpaid amount of lawful ordinary customs 
duties or any other payment of lawful ordinary customs duties for an 
entry, or withdrawal from warehouse, for consumption (see Sec.  
191.3(a)(1)(iii)), provided that:
    (i) The tender or payment is specifically identified as duty on a 
specifically identified entry, or withdrawal from warehouse, for 
consumption;
    (ii) Liquidation of the specifically identified entry, or 
withdrawal from warehouse, for consumption became final prior to such 
tender or payment; and
    (iii) Liquidation of the drawback entry in which that specifically 
identified import entry, or withdrawal from warehouse, for consumption 
is designated has not become final.
    (2) Written request and waiver. Drawback may be paid on claims 
based on voluntary tenders or other payments of duties under this 
subsection only if the drawback claimant and any other party 
responsible for the payment of the voluntary tenders or other payments 
of duties each files a written request for payment of each drawback 
claim based on such voluntary tenders or other payments of duties, 
waiving any claim to payment or refund under other provisions of law, 
to the extent that the voluntary tenders or other payment of duties 
under this paragraph are included in the drawback claim for which 
drawback on the voluntary tenders or other payment of duties is 
requested under this paragraph.
    (d) Claims based on liquidated duties. Drawback will be based on 
the final liquidated duties paid that have been made final by operation 
of law (except in the case of the written request for payment of 
drawback on the basis of estimated duties, voluntary tender of duties, 
and other payments of duty, and waiver, provided for in paragraphs (b) 
and (c) of this section).
    (e) Liquidation procedure. (1) General. When the drawback claim has 
been completed by the filing of the entry and other required documents, 
and exportation (or destruction) of the merchandise or articles has 
been established, CBP will determine drawback due on the basis of the 
complete drawback claim, the applicable general manufacturing drawback 
ruling or specific manufacturing drawback ruling, and any other 
relevant evidence or information. Notice of liquidation will be given 
electronically as provided in Sec. Sec.  159.9 and 159.10(c)(3) of this 
chapter.
    (2) Liquidation by operation of law. (i) Liquidated import entries. 
A drawback claim that satisfies the requirements of paragraph (d) that 
is not liquidated within 1 year from the date of the drawback claim 
(see Sec.  190.51(e)(1)(i) of this chapter) will be deemed liquidated 
for the purposes of the drawback claim at the drawback amount asserted 
by the claimant or claim, unless the time for liquidation is extended 
in accordance with Sec.  159.12 of this chapter or if liquidation is 
suspended as required by statute or court order.
    (ii) Unliquidated import entries. A drawback claim that satisfies 
the requirements of paragraphs (b) or (c) of this section will be 
deemed liquidated upon the deposit of estimated duties on the 
unliquidated imported merchandise (see paragraph (b) of this section).
    (iii) Applicability. The provisions of paragraphs (e)(2)(i) of this 
section will apply to drawback entries made on or after December 3, 
2004. An entry or claim for drawback filed before December 3, 2004, the 
liquidation of which was not final as of December 3, 2004, will be 
deemed liquidated on the date that is 1 year after December 3, 2004, at 
the drawback amount asserted by the claimant at the time of the entry 
or claim.
    (f) Relative value; multiple products--(1) Distribution. Where two 
or more products result from the manufacture or production of 
merchandise, drawback will be distributed to the several products in 
accordance with their relative values at the time of separation.
    (2) Values. The values to be used in computing the distribution of 
drawback where two or more products result from the manufacture or 
production of merchandise under drawback conditions must be the market 
value (as provided for in the definition of relative value in Sec.  
191.2(u)), unless other values are approved by CBP.
    (g) Payment. CBP will authorize payment of the amount of the refund 
due as drawback to the claimant.

0
15. Section 191.103 is revised to read as follows:


Sec.  191.103   Additional requirements.

    (a) Manufacturer claims domestic drawback. In the case of medicinal 
preparations and flavoring extracts, the claimant must file with the 
drawback entry, a declaration of the manufacturer showing whether a 
claim has been or will be filed by the manufacturer with the Alcohol 
and Tobacco Tax and Trade Bureau (TTB) for domestic drawback on alcohol 
under sections 5111, 5112, 5113, and 5114, Internal Revenue Code, as 
amended (26 U.S.C. 5111, 5112, 5113, and 5114).
    (b) Manufacturer does not claim domestic drawback--(1) Submission 
of statement. If no claim has been or will be filed with TTB for 
domestic drawback on medicinal preparations or flavoring extracts, the 
manufacturer must submit a statement setting forth that fact to the 
Director, National Revenue Center, TTB.
    (2) Contents of the statement. The statement must show the:
    (i) Quantity and description of the exported products;
    (ii) Identity of the alcohol used by serial number of package or 
tank car;
    (iii) Name and registry number of the distilled spirits plant from 
which the alcohol was withdrawn;
    (iv) Date of withdrawal;
    (v) Serial number of the applicable record of tax determination 
(see 27 CFR 17.163(a) and 27 CFR 19.626(c)(7)); and
    (vi) CBP office where the claim will be filed.
    (3) Verification of the statement. The Director, National Revenue 
Center, TTB, will verify receipt of this statement, forward the 
original of the document to the drawback office designated, and retain 
the copy.

0
16. Section 191.104 is revised to read as follows:


Sec.  191.104   Alcohol and Tobacco Tax and Trade Bureau (TTB) 
certificates.

    (a) Request. The drawback claimant or manufacturer must request 
that the Director, National Revenue Center, TTB, provide the CBP office 
where the drawback claim will be processed with a tax-paid certificate 
on TTB Form 5100.4 (Certificate of Tax-Paid Alcohol).
    (b) Contents. The request must state the:
    (1) Quantity of alcohol in proof gallons;
    (2) Serial number of each package;
    (3) Amount of tax paid on the alcohol;
    (4) Name, registry number, and location of the distilled spirits 
plant;
    (5) Date of withdrawal;
    (6) Name of the manufacturer using the alcohol in producing the 
exported articles;
    (7) Address of the manufacturer and its manufacturing plant; and
    (8) CBP drawback office where the drawback claim will be processed.
    (c) Extract of TTB certificate. If a certification of any portion 
of the alcohol described in the TTB Form 5100.4 is required for 
liquidation of drawback entries processed in another drawback office, 
the drawback office, on written application of the person who requested 
its issuance, will transmit a

[[Page 65067]]

copy of the extract from the certificate for use at that drawback 
office. The drawback office will note that the copy of the extract was 
prepared and transmitted.

0
17. Section 191.106 is revised to read as follows:


Sec.  191.106   Amount of drawback.

    (a) Claim filed with TTB. If the declaration required by Sec.  
191.103 shows that a claim has been or will be filed with TTB for 
domestic drawback, drawback under section 313(d) of the Act, as amended 
(19 U.S.C. 1313(d)), will be limited to the difference between the 
amount of tax paid and the amount of domestic drawback claimed.
    (b) Claim not filed with TTB. If the declaration and verified 
statement required by Sec.  191.103 show that no claim has been or will 
be filed by the manufacturer with TTB for domestic drawback, the 
drawback will be the full amount of the tax on the alcohol used. 
Drawback under this provision may not be granted absent receipt from 
TTB of a copy of TTB Form 5100.4 (Certificate of Tax-Paid Alcohol) 
indicating that taxes have been paid on the exported product for which 
drawback is claimed.
    (c) No deduction of 1 percent. No deduction of 1 percent will be 
made in drawback claims under section 313(d) of the Act, as amended (19 
U.S.C. 1313(d)).
    (d) Payment. The drawback due will be paid in accordance with Sec.  
191.81(f).

0
18. In Sec.  191.171, add paragraph (d) to read as follows:


Sec.  191.171   General; drawback allowance.

* * * * *
    (d) Federal excise tax. For purposes of drawback of internal 
revenue tax imposed under Chapters 32 and 38 (with the exception of 
Subchapter A of Chapter 38) of the Internal Revenue Code of 1986, as 
amended (IRC), drawback granted on the export of substituted 
merchandise will be limited to the amount of taxes paid (and not 
returned by refund, credit, or drawback) on the substituted 
merchandise.

 Kevin K. McAleenan,
 Commissioner, U.S. Customs and Border Protection.
    Approved: December 6, 2018.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2018-26793 Filed 12-17-18; 8:45 am]
 BILLING CODE 9111-14-P