[Code of Federal Regulations]
[Title 19, Volume 2]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 19CFR181.45]

[Page 364-365]
 
                        TITLE 19--CUSTOMS DUTIES
 
  CHAPTER I--UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY
 
PART 181--NORTH AMERICAN FREE TRADE AGREEMENT--Table of Contents
 
     Subpart E--Restrictions on Drawback and Duty-Deferral Programs
 
Sec. 181.45  Goods eligible for full drawback.

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

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

[[Page 365]]

for successive stages of production until NAFTA tariffs are fully phased 
out.)

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

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

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

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

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

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