[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: 19CFR191.26]

[Page 540-543]
 
                        TITLE 19--CUSTOMS DUTIES
 
  CHAPTER I--UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY
 
PART 191--DRAWBACK--Table of Contents
 
                    Subpart B--Manufacturing Drawback
 
Sec. 191.26  Recordkeeping for manufacturing drawback.

    (a) Direct identification manufacturing. (1) Records required. Each 
manufacturer or producer under 19 U.S.C. 1313(a) shall keep records to 
allow the verifying Customs official to trace all articles manufactured 
or produced for exportation or destruction with drawback, from 
importation, through production, to exportation or destruction. To this 
end, these records shall specifically establish:
    (i) The date or inclusive dates of manufacture or production;
    (ii) The quantity and identity of the imported duty-paid merchandise 
or drawback products used in or appearing in (see Sec. 191.23) the 
articles manufactured or produced;
    (iii) The quantity, if any, of the nondrawback merchandise used, 
when

[[Page 541]]

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 finished 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 completed articles were 
commingled after manufacture, their identity may be maintained in the 
manner prescribed in Sec. 191.14 of this part.)
    (2) Accounting. The merchandise and articles to be exported or 
destroyed shall be accounted for in a manner which will enable the 
manufacturer, producer, or claimant:
    (i) To determine, and the Customs official to verify, the applicable 
import entry, certificate of delivery, and/or certificate of manufacture 
and delivery associated with the claim; and
    (ii) To identify with respect to that import entry, certificate of 
delivery, and/or certificate of manufacture and delivery, the imported 
duty-paid merchandise or drawback products used in manufacture or 
production.
    (b) Substitution manufacturing. The records of the manufacturer or 
producer of articles manufactured or produced in accordance with 19 
U.S.C. 1313(b) shall 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 merchandise of the 
same kind and quality as the designated merchandise before its use to 
manufacture or produce (or appearing in) the exported or destroyed 
articles;
    (3) That, within 3 years after receiving the designated merchandise 
at its plant, the manufacturer or producer used it in manufacturing or 
production and that during the same 3-year period it manufactured or 
produced the exported or destroyed articles; and
    (4) If the designated merchandise is a chemical element that was 
contained in imported material that was subject to an ad valorem rate of 
duty, and a substitution drawback claim is made based on that chemical 
element:
    (i) The duty 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 Harmonized Tariff Schedule of the United States (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 chemical element 
must be deducted from the duty 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 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

[[Page 542]]

pounds of titanium dioxide). 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 = 16,486.7 pounds). Therefore, 
up to 16,486.7 pounds of titanium is available to be designated as the 
basis for drawback. The ratio between the amount of titanium and the 
total amount of imported synthetic rutile is determined by dividing the 
weight of the titanium by the weight of the synthetic rutile (16,486.7 / 
30,000 = .550) or 55%. Accordingly, 55% of the duty is apportioned to 
the titanium content which is the designated merchandise of the imported 
synthetic rutile. As the per-unit duty paid on the synthetic rutile is 
calculated by dividing the duty ($600) by the amount of the imported 
synthetic rutile (30,000), the per-unit duty is two cents of duty per 
pound ($600 / 30,000 = $0.02). The per pound duty on the titanium is 
calculated by multiplying the factor of 55% (.55 x $0.02 = $0.011 per 
pound). 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 factor ($0.011 per pound) 
by the weight of the titanium contained in the ingot (16,000 pounds) to 
calculate the duty available for drawback ($0.011 x 16,000 = $176). 
Because only 99% of the duty can be claimed, drawback is determined by 
multiplying the available duty amount by 99% (.99 x $176 = $174.24). As 
the oxygen content of the titanium dioxide is 45% of the synthetic 
rutile, if oxygen is the designated merchandise on another drawback 
claim, that factor would be used to determine the duty 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 shall 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 (see Sec. 191.2(u) of this part). 
In such records, the quantity of merchandise identified or designated 
for drawback, under 19 U.S.C. 1313(a) or 1313(b), respectively, shall 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 the amount of merchandise which the value of 
the waste would replace.
    (d) Purchase of manufactured articles for exportation. Where the 
claimant purchases articles from the manufacturer and exports them, the 
claimant shall file the related certificate of manufacture and delivery 
as part of the claim (see Sec. 191.51(a)(1) of this part).
    (e) Multiple claimants. (1) General. Multiple claimants may file for 
drawback with respect to the same export (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. 191.82 of this part).
    (2) Procedures. (i) Submission of letter. Each drawback claimant 
shall file a separate letter, as part of the claim, describing the 
component article on the export bill of lading to which each claim will 
relate. Each letter shall show the name of the claimant and bear a 
statement that the claim shall be limited to its respective component 
article. The exporter shall 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.
    (iii) Use of export summary procedure. If the parties elect to use 
the export summary procedure (Sec. 191.73 of this part) each drawback 
claimant shall complete a chronological summary of exports for the 
respective component

[[Page 543]]

product to which each claim will relate. Each claimant shall identify in 
the chronological summary the name of the other claimant(s) and the 
component product for which each will independently claim drawback, if 
known at the time the drawback claim is filed. The exporter shall 
endorse the summaries, as required, to show the respective interests of 
the claimants. Each claimant shall have on file and make available to 
Customs upon request, the endorsement from the exporter assigning the 
right to claim drawback.
    (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 shall be retained for 3 years after the date 
of payment of the related claims (under 19 U.S.C. 1508, the same records 
may be subject to a different retention period for different purposes).

[T.D. 98-16, 63 FR 11006, Mar. 5, 1998, as amended by T.D. 02-38, 67 FR 
48370, July 24, 2002]