[Code of Federal Regulations]

[Title 19, Volume 2]

[Revised as of April 1, 2006]

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

[CITE: 19CFR181.53]



[Page 370-375]

 

                        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 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United States until withdrawn or removed for exportation to Canada or 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    (2) Treatment as entered or withdrawn for consumption--(i) General.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deferral program and is subsequently withdrawn from the duty-deferral 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the production of another good that is subsequently withdrawn from the 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duty-deferral program and is subsequently withdrawn from the duty-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.



[[Page 371]]



    (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 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



[[Page 372]]



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 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



[[Page 373]]



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 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



[[Page 374]]



(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 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



[[Page 375]]



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]