Supporting Law and Regulation

[Code of Federal Regulations]

[Title 19, Volume 2]

[Revised as of April 1, 2004]

From the U.S. Government Printing Office via GPO Access

[CITE: 19CFR181.53]

[Page 369-374]

TITLE 19--CUSTOMS DUTIES

CHAPTER I--BUREAU OF CUSTOMS AND BORDER PROTECTION, DEPARTMENT OF

HOMELAND SECURITY; DEPARTMENT OF THE TREASURY (CONTINUED)

PART 181_NORTH AMERICAN FREE TRADE AGREEMENT--Table of Contents

Subpart E_Restrictions on Drawback and Duty-Deferral Programs

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

programs.

(a) General--(1) Definitions. The following definitions shall apply

for purposes of this section:

(i) Date of exportation. ``Date of exportation'' means the date of

importation into Canada or Mexico as reflected on the applicable

Canadian or Mexican

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entry document (see Sec. 181.47(c) (1) and (2)).

(ii) Duty-deferral program. A ``duty-deferral program'' means any

measure which postpones duty payment upon arrival of a good in the

United States until withdrawn or removed for exportation to Canada or

Mexico or for entry into a Canadian or Mexican duty-deferral program.

Such measures govern manipulation warehouses, manufacturing warehouses,

smelting and refining warehouses, foreign trade zones, and those

temporary importations under bond that are specified in paragraph (b)(5)

of this section.

(2) Treatment as entered or withdrawn for consumption--(i) General.

(A) Where a good is imported into the United States pursuant to a duty-

deferral program and is subsequently withdrawn from the duty-deferral

program for exportation to Canada or Mexico or is used as a material in

the production of another good that is subsequently withdrawn from the

duty-deferral program for exportation to Canada or Mexico, and provided

that the good is a ``good subject to NAFTA drawback'' within the meaning

of 19 U.S.C. 3333 and is not described in Sec. 181.45 of this part, the

documentation required to be filed under this section in connection with

the exportation of the good shall, for purposes of this chapter,

constitute an entry or withdrawal for consumption and the exported good

shall be subject to duty which shall be assessed in accordance with

paragraph (b) of this section.

(B) Where a good is imported into the United States pursuant to a

duty-deferral program and is subsequently withdrawn from the duty-

deferral program and entered into a duty-deferral program in Canada or

Mexico or is used as a material in the production of another good that

is subsequently withdrawn from the duty-deferral program and entered

into a duty-deferral program in Canada or Mexico, and provided that the

good is a ``good subject to NAFTA drawback'' within the meaning of 19

U.S.C. 3333 and is not described in Sec. 181.45, the documentation

required to be filed under this section in connection with the

withdrawal of the good from the U.S. duty-deferral program shall, for

purposes of this chapter, constitute an entry or withdrawal for

consumption and the withdrawn good shall be subject to duty which shall

be assessed in accordance with paragraph (b) of this section.

(C) Any assessment of duty under this section shall include the

duties and fees referred to in Sec. 181.42 (a) through (c) and the fees

provided for in Sec. 24.23 of this chapter; these inclusions shall not

be subject to refund, waiver, reduction or drawback.

(ii) Bond requirements. The provisions of Sec. 142.4 of this

chapter shall apply to each withdrawal and exportation transaction

described in paragraph (a)(2)(i) of this section. However, in applying

the provisions of Sec. 142.4 of this chapter in the context of this

section, any reference to release from Customs custody in Sec. 142.4 of

this chapter shall be taken to mean exportation to Canada or Mexico.

(iii) Documentation filing and duty payment procedures.

(A) Persons required to file. In the circumstances described in

paragraph (a)(2)(i) of this section, the documentation described in

paragraph (a)(2)(iii)(B) of this section must be filed by one of the

following persons:

(1) In the case of a withdrawal of the goods from a warehouse, the

person who has the right to withdraw the goods;

(2) In the case of a temporary importation under bond (TIB)

specified in paragraph (b)(5) of this section, the TIB importer whether

or not he sells the goods for export to Canada or Mexico unless Sec.

10.31(h) of this chapter applies; or

(3) In the case of a withdrawal from a foreign trade zone, the

person who has the right to make entry. However, if a zone operator is

not the person with the right to make entry of the good, the zone

operator shall be responsible for the payment of any duty due in the

event the zone operator permits such other person to remove the goods

from the zone and such other person fails to comply with Sec. Sec.

146.67 and 146.68 of this chapter.

(B) Documentation required to be filed and required filing date. The

person required to file shall file Customs Form 7501 no later than 10

working days after the date of exportation to Canada or

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Mexico or 10 working days after being entered into a duty-deferral

program in Canada or Mexico. Except where the context otherwise requires

and except as otherwise specifically provided in this paragraph, the

procedures for completing and filing Customs Form 7501 in connection

with the entry of merchandise under this chapter shall apply for

purposes of this paragraph. For purposes of completing Customs Form 7501

under this paragraph, any reference on the form to the entry date shall

be taken to refer to the date of exportation of the good or the date the

goods are entered into a duty-deferral program in Canada or Mexico. The

Customs Form 7501 required under this paragraph may be transmitted

electronically.

(C) Duty payment. The duty estimated to be due under paragraph (b)

of this section shall be deposited with Customs 60 calendar days after

the date of exportation of the good. If a good is entered into a duty-

deferral program in Canada or Mexico, the duty estimated to be due under

paragraph (b) of this section, but without any waiver or reduction

provided for in that paragraph, shall be deposited with Customs 60

calendar days after the date the good is entered into such duty-deferral

program. Nothing shall preclude the deposit of such estimated duty at

the time of filing the Customs Form 7501 under paragraph (a)(2)(iii)(B)

of this section or at any other time within the 60-day period prescribed

in this paragraph. However, any interest calculation shall run from the

date the duties are required to be deposited.

(3) Waiver or reduction of duties--(i) General. Except in the case

of duties and fees referred to in Sec. Sec. 181.42(a) through (c) and

fees provided for in Sec. 24.23 of this chapter, Customs shall waive or

reduce the duties paid or owed under paragraph (a)(2) of this section by

the person who is required to file the Customs Form 7501 (see paragraph

(a)(2)(iii)(A) of this section) in accordance with paragraph (b) of this

section, provided that a claim for waiver or reduction of the duties is

filed with Customs within the appropriate 60-day time frame. The claim

shall be based on evidence of exportation or entry into a Canadian or

Mexican duty-deferral program and satisfactory evidence of duties paid

in Canada or Mexico (see Sec. 181.47(c)).

(ii) Filing of claim and payment of reduced duties. A claim for a

waiver or reduction of duties under paragraph (a)(3)(i) of this section

shall be made on Customs Form 7501 which shall set forth, in addition to

the information required under paragraph (a)(2)(iii)(B) of this section,

a description of the good exported to Canada or Mexico and the Canadian

or Mexican import entry number, date of importation, tariff

classification number, rate of duty and amount of duty paid. If a claim

for reduction of duties is filed under this paragraph, the reduced

duties shall be deposited with Customs when the claim is filed.

(iii) Drawback on goods entered into a duty-deferral program in

Canada or Mexico. After goods in a duty-deferral program in the United

States which have been sent from the United States and entered into a

duty-deferral program in Canada or Mexico are then withdrawn from that

Canadian or Mexican duty-deferral program either for entry into Canada

or Mexico or for export to a non-NAFTA country, the person who filed the

Customs Form 7501 (see paragraph (a)(2)(iii)(A) of this section) may

file a claim for drawback if the goods are withdrawn within 5 years from

the date of the original importation of the good into the United States.

If the goods are entered for consumption in Canada or Mexico, drawback

will be calculated in accordance with Sec. 181.44 of this part.

(4) Liquidation of entry--(i) If no claim is filed. If no claim for

a waiver or reduction of duties is filed in accordance with paragraph

(a)(3) of this section, Customs shall determine the final duties due

under paragraph (a)(2)(i) of this section and shall post a bulletin

notice of liquidation of the entry filed under this section in

accordance with Sec. 159.9 of this chapter. Where no claim was filed in

accordance with this section and Customs fails to liquidate, or extend

liquidation of, the entry filed under this section within 1 year from

the date of the entry, upon the date of expiration of that 1-year period

the entry shall be deemed liquidated by operation of law in the amount

asserted

[[Page 372]]

by the exporter on the Customs Form 7501 filed under paragraph

(a)(2)(iii)(A) of this section. A protest under section 514, Tariff Act

of 1930, as amended (19 U.S.C. 1514), and part 174 of this chapter shall

be filed within 90 days from the date of posting of the notice of

liquidation under this section.

(ii) If a claim is filed. If a claim for a waiver or reduction of

duties is filed in accordance with paragraph (a)(3) of this section, an

extension of liquidation of the entry filed under this section shall

take effect for a period not to exceed 3 years from the date the entry

was filed. Before the close of the extension period, Customs shall

liquidate the entry filed under this section and shall post a bulletin

notice of liquidation in accordance with Sec. 159.9 of this chapter. If

Customs fails to liquidate the entry filed under this section within 4

years from the date of the entry, upon the date of expiration of that 4-

year period the entry shall be deemed liquidated by operation of law in

the amount asserted by the exporter on the Customs Form 7501 filed under

paragraph (a)(3)(ii) of this section. A protest under section 514,

Tariff Act of 1930, as amended (19 U.S.C. 1514), and part 174 of this

chapter shall be filed within 90 days from the date of posting of the

notice of liquidation under this section.

(b) Assessment and waiver or reduction of duty--(1) Manipulation in

warehouse. Where a good subject to NAFTA drawback under this subpart is

withdrawn from a bonded warehouse (19 U.S.C. 1562) after manipulation

for exportation to Canada or Mexico or for entry into a duty-deferral

program in Canada or Mexico, duty shall be assessed on the good in its

condition and quantity, and at its weight, at the time of such

withdrawal from the warehouse and with such additions to, or deductions

from, the final appraised value as may be necessary by reason of its

change in condition. Such duty shall be paid no later than 60 calendar

days after the date of exportation or of entry into the duty-deferral

program of Canada or Mexico, except that, upon filing of a proper claim

under paragraph (a)(3) of this section, the duty shall be waived or

reduced in an amount that does not exceed the lesser of the total amount

of duty payable on the good under this section or the total amount of

customs duties paid to Canada or Mexico.

(2) Bonded manufacturing warehouse. Where a good is manufactured in

a bonded warehouse (19 U.S.C. 1311) with imported materials and is then

withdrawn for exportation to Canada or Mexico or for entry into a duty-

deferral program in Canada or Mexico, duty shall be assessed on the

materials in their condition and quantity, and at their weight, at the

time of their importation into the United States. Such duty shall be

paid no later than 60 calendar days after either the date of exportation

or of entry into a duty-deferral program of Canada or Mexico, except

that, upon filing of a proper claim under paragraph (a)(3) of this

section, the duty shall be waived or reduced in an amount that does not

exceed the lesser of the total amount of duty payable on the materials

under this section or the total amount of customs duties paid to Canada

or Mexico.

Example Company N imports tea into the United States and makes a

Class 6 warehouse entry. Company N manufactures sweetened ice tea mix by

combining the imported tea with refined cane sugar and other flavorings

and packaging it in retail size canisters. Upon withdrawal of the ice

tea mix from the warehouse for exportation to Canada, a Customs Form

7501 is filed showing $900 in estimated U.S. duties on the basis of the

unmanufactured tea. Upon entry into Canada, the equivalent of US$800 is

assessed on the exported ice tea mix. Company N submits to Customs a

proper claim under paragraph (a)(3) of this section showing payment of

the US$800 equivalent in duties to Canada. Company N will only be

required to pay $100 in U.S. duties out of the $900 amount reflected on

the Customs Form 7501.

(3) Bonded smelting or refining warehouse. For any qualifying

imported metal-bearing materials (19 U.S.C. 1312), duty shall be

assessed on the imported materials and the charges against the bond

canceled no later than 60 calendar days after either the date of

exportation of the treated materials to Canada or Mexico or the date of

entry of the treated materials into a duty-deferral program of Canada or

Mexico, either from the bonded smelting or refining warehouse or from

such other customs bonded warehouse after the transfer of the same

quantity of

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material from a bonded smelting or refining warehouse. However, upon

filing of a proper claim under paragraph (a)(3) of this section, the

duty on the imported materials shall be waived or reduced in an amount

that does not exceed the lesser of the total amount of duty payable on

the imported materials under this section or the total amount of customs

duties paid to Canada or Mexico.

Example Company Z imports 47 million pounds of electrolytic zinc

which is entered into a bonded smelting and refining warehouse (Class 7)

for processing. Thereafter, Company Z withdraws the merchandise for

exportation to Canada and files a Customs Form 7501 showing $90,000 in

estimated U.S. duty on the dutiable quantity of metal contained in the

imported metal-bearing materials. Upon entry of the processed zinc into

Canada, the equivalent of US$50,000 in duties are assessed. Within 60

days of exportation Company Z files a proper claim under paragraph

(a)(3) of this section and Customs liquidates the entry with duty due in

the amount of $40,000.

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

changed in condition in a foreign trade zone (19 U.S.C. 81c(a)) and then

withdrawn from the zone for exportation to Canada or Mexico or for entry

into a Canadian or Mexican duty-deferral program, the duty assessed, as

calculated under paragraph (b)(4)(i) or (b)(4)(ii) of this section,

shall be paid no later than 60 calendar days after either the date of

exportation of the good to Canada or Mexico or the date of entry of the

good into a duty-deferral program of Canada or Mexico, except that, upon

filing of a proper claim under paragraph (a)(3) of this section, the

duty shall be waived or reduced in an amount that does not exceed the

lesser of the total amount of duty payable on the good under this

section or the total amount of customs duties paid to Canada or Mexico.

(i) Nonprivileged foreign status. In the case of a nonprivileged

foreign status good, duty is assessed on the good in its condition and

quantity, and at its weight, at the time of its exportation from the

zone to Canada or Mexico or its entry into a duty-deferral program of

Canada or Mexico.

Example CMG imports $1,000,000 worth of auto parts from Korea and

admits them into Foreign-Trade Subzone number 00, claiming nonprivileged

foreign status. (If the auto parts had been regularly entered they would

have been dutiable at 4 percent, or $40,000.) CMG manufactures

subcompact automobiles. Automobiles are dutiable at 2.5 percent

($25,000) if entered for consumption in the United States. CMG withdraws

the automobiles from the zone and exports them to Mexico. Upon entry of

the automobiles in Mexico, CMG pays the equivalent of US$20,000 in duty.

Before the expiration of 60 calendar days from the date of exportation,

CMG files a proper claim under paragraph (a)(3) of this section and pays

$5,000 in duty to Customs representing the difference between the

$25,000 which would have been paid if the automobiles had been entered

for consumption from the zone and the US$20,000 equivalent paid to

Mexico.

(ii) Privileged foreign status. In the case of a privileged foreign

status good, duty is assessed on the good in its condition and quantity,

and at its weight, at the time privileged status is granted in the zone.

Example O&G, Inc. admits Kuwaiti crude petroleum into its zone and

requests, one month later, privileged foreign status on the crude before

refining the crude into motor gasoline and kerosene. Upon withdrawal of

the refined goods from the zone by O&G, Inc. for exportation to Canada,

a Customs Form 7501 is filed showing $700 in estimated duties on the

imported crude petroleum (rather than on the refined goods which would

have been assessed $1,200). D&O is the consignee in Canada and pays the

Canadian customs duty assessment of the equivalent of US$1,500 on the

goods. O&G, Inc. is entitled to a waiver of the full $700 in duties upon

filing of a proper claim under paragraph (a)(3) of this section.

(5) Temporary importation under bond. Except in the case of a good

imported from Canada or Mexico for repair or alteration, where a good,

regardless of its origin, was imported temporarily free of duty for

repair, alteration or processing (subheading 9813.00.05, Harmonized

Tariff Schedule of the United States) and is subsequently exported to

Canada or Mexico, duty shall be assessed on the good on the basis of its

condition at the time of its importation into the United States. Such

duty shall be paid no later than 60 calendar days after either the date

of exportation or the date of entry into a duty-deferral program of

Canada or Mexico, except that, upon filing of a proper claim under

paragraph (a)(3) of this

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section, the duty shall be waived or reduced in an amount that does not

exceed the lesser of the total amount of duty payable on the good under

this section or the total amount of customs duties paid to Canada or

Mexico.

Example Company A imports glassware under subheading 9813.00.05,

HTSUS. The glassware is from France and would be dutiable under a

regular consumption entry at $6,000. Company A alters the glassware by

etching hotel logos on the glassware. Two weeks later, Company A sells

the glassware to Company B, a Mexican company, and ships the glassware

to Mexico. Company B enters the glassware and is assessed duties in an

amount equivalent to US$6,200 and claims NAFTA preferential tariff

treatment. Company B provides a copy of the Mexican landing certificate

to Company A showing that the US$6,200 equivalent in duties was assessed

but not yet paid to Mexico. If Mexico ultimately denies Company B's

NAFTA claim and the Mexican duty payment becomes final, Company A, upon

submission to Customs of a proper claim under paragraph (a)(3) of this

section, is entitled to a waiver of the full $6,000 in U.S. duty.

(c) Recordkeeping requirements. If a person intends to claim a

waiver or reduction of duty on goods under this section, that person

shall maintain records concerning the value of all involved goods or

materials at the time of their importation into the United States and

concerning the value of the goods at the time of their exportation to

Canada or Mexico or entry into a duty-deferral program of Canada or

Mexico, and if a person files a claim under this section for a waiver or

reduction of duty on goods exported to Canada or Mexico or entered into

a Canadian or Mexican duty-deferral program, that person shall maintain

evidence of exportation or entry into a Canadian or Mexican duty-

deferral program and satisfactory evidence of the amount of any customs

duties paid to Canada or Mexico on the good (see Sec. 181.47(c)).

Failure to maintain adequate records will result in denial of the claim

for waiver or reduction of duty.

(d) Failure to file proper claim. If the person identified in

paragraph (a)(2)(iii)(A) of this section fails to file a proper claim

within the 60-day period specified in this section, that person, or the

FTZ operator pursuant to paragraph (a)(2)(iii)(A)(3) of this section,

will be liable for payment of the full duties assessed under this

section and without any waiver or reduction thereof.

(e) Subsequent claims for preferential tariff treatment. If a claim

for a refund of duties is allowed by the Canadian or Mexican customs

administration under Article 502(3) of the NAFTA or under any other

circumstance after duties have been waived or reduced under this

section, Customs may reliquidate the entry filed under this section

pursuant to 19 U.S.C. 1508(b)(2)(B)(iii) even after liquidation of the

entry has become final.

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

1996]