H282725

HQ H282725 August 23, 2024 OT:RR:CTF:EPDR H282725 ABH David Shaw Assistant Center Director Agriculture and Prepared Products Center for Excellence and Expertise Re: Internal Advice Request; Clarification on the Ability to Refund Duties and Fees on Possibly Adulterated Food under 19 U.S.C. § 1558, and Modification Request of HQ H240986 under 19 U.S.C. § 1625 Dear Assistant Center Director: This is in response to the Port of JFK International Airport’s (“Port”) request for internal advice (“IA”), in which clarification was sought regarding whether U.S. Customs and Border Protection (“CBP”) may refund duties and fees imposed on potentially adulterated foods refused admission by the U.S. Food and Drug Administration (“FDA”). Our analysis and decision is below. FACTS: On December 24, 2015, an importer of frozen shrimp filed a post entry amendment (“PEA”) requesting a refund of antidumping duties (“ADD”) on the frozen shrimp it exported/destroyed under CBP supervision after being refused admission by the FDA, and as instructed in a Notice of Redelivery (“NOR”). The FDA initially refused admission of the entry because its analysis determined the product contained nitrofurans in violation of Sections 402(a)(2)(C)(i)-(ii) & 801(a)(3)) of the Federal Food, Drug & Cosmetic Act, as amended 21 U.S.C. § 301 et. seq. (“FDCA”). The NOR issued to the importer instructed that, [t]he merchandise described below is in violation of statute(s)/regulation(s) as indicated, and cannot be entered into the commerce of the United States until brought into conformity as noted below in Section II. If it is not brought into conformity, redelivered, exported, or destroyed under U.S. Customs and Border Protection supervision within 30 days from the date of this Notice or the time specified by another government agency having jurisdiction over the importation, liquidated damages and or criminal/civil penalties shall apply. The Port did not act on the PEA because of perceived contradictions between Headquarters Ruling Letter (“HQ”) H240986, dated January 8, 2014, and CBP Directive (“C.D.”) No. 5610-006A, dated June 10, 2011. Subsequently, on January 19, 2016, the Port filed this internal advice request, seeking guidance on the importer’s request for a refund. Specifically, the Port enumerated three issues. ISSUES: Whether duty refunds are permissible if a refused food item may not be “absolutely prohibited” entry, but “possibly” could be reconditioned to satisfy the FDA for admission into the United States. Whether CBP may deny a refund request based on an importer’s decision not to submit a reconditioning proposal to the FDA and to export or destroy the merchandise under CBP supervision. Whether there is a contradiction in requiring a determination that the merchandise constituted a prohibited article before approving a refund request in light of HQ H240986 and C.D. 5610-006A. LAW AND ANALYSIS: Whether duty refunds are permissible if a refused food item may not be “absolutely prohibited” entry, but “possibly” could be reconditioned to satisfy the FDA for admission into the United States. Generally, “[n]o remission, abatement, refund, or drawback of estimated or liquidated duty shall be allowed because of exportation or destruction of any merchandise after its release from the custody of the Government . . . .” 19 U.S.C. § 1558. Section 1558, however, provides for three exceptions to the general rule. Two of the exceptions relate to drawback and bonded articles. See 19 U.S.C. §§1558(a)(1) & (a)(3). The third exception states that a refund can be appropriate “[w]hen prohibited articles have been regularly entered in good faith and are subsequently exported or destroyed pursuant to a law of the United States and under such regulations as the Secretary of Treasury may prescribe.” 19 U.S.C. § 1558(a)(2). For starters, if, as the Port indicated, the merchandise at issue underlying this IA never left CBP custody, then 19 U.S.C. § 1558 and analysis of whether the merchandise constituted “prohibited articles” is irrelevant. The implementing regulations state that if merchandise does not leave the continuous custody of CBP, then any duties paid may be refunded. 19 C.F.R. § 158.45(a). Specifically, 19 C.F.R. § 158.45, “Exportation of merchandise,” states as follows: (a) From continuous Customs custody. Merchandise in Customs custody for which entry has not been completed and merchandise which has remained in continuous Customs custody that is covered by a liquidated or unliquidated consumption entry may be exported under Customs supervision in accordance with §§ 18.25 through 18.27 of this chapter, with refund of any duties that have been paid. (b) After release from Customs custody. Except as provided for in paragraphs (c) and (d) of this section, no refund or other allowance in duties shall be made because of the exportation of merchandise after its release from Customs custody unless a drawback of duties is expressly provided for by law (see part 191 of this chapter). (c) Prohibited merchandise. If merchandise has been regularly entered or withdrawn for consumption in good faith and is thereafter found to be prohibited entry under any law of the United States, it may be exported under Customs supervision in accordance with §§ 18.25 through 18.27 of this chapter, with refund of any duties that have been paid. In lieu of exportation, the merchandise may be destroyed in accordance with § 158.41. The regulations cited above state that if the merchandise is in “continuous Customs custody” and is then exported then duties can be refunded. Id. If, however, the merchandise leaves “continuous Customs custody,” duty refunds are not appropriate, 19 C.F.R. § 158.45(b), unless the merchandise was entered in good faith and thereafter found to be prohibited, 19 C.F.R. § 158.45(c). Thus, the plain language of the relevant statute and regulation dictate that the initial inquiry necessarily relates to custody. For purposes of clarity, we note that in the Automated Commercial Environment (“ACE”), importers can receive a “CBP Release” message. Pursuant to the ACE Cargo Release/PGA Message Set Glossary, the “CBP Release message indicates that CBP has determined that the merchandise may be released from CBP custody.” (emphasis added). The relevant inquiry for purposes of 19 U.S.C. § 1558 will be whether the merchandise has actually been released from CBP’s physical custody - whether or not the merchandise has received an ACE “CBP Release” message indicating that it “may” be released. To the extent merchandise leaves CBP’s custody, the 19 U.S.C. § 1558 inquiry of whether merchandise is “prohibited” can become relevant. If the merchandise has left CBP’s custody, the Port inquired about the means “to identify an ‘absolute’ prohibition versus a possibly prohibited food item.” The FDA, pursuant to § 801(b) of the FDCA, as amended, 21 U.S.C. § 381(b), provides that an importer may submit to the FDA a written application (Form FDA-766) requesting permission to bring into compliance an adulterated article. Under 21 C.F.R. §§ 1.95 and 1.96, the FDA will approve applications when it appears that the “action will be successful and result in an acceptable product.” FDA Regulatory Procedures Manual, Chapter 9, Import Operations and Actions, at p. 9-60, 59 (Dec. 2017), (https://www.fda.gov/iceci/compliancemanuals/regulatoryproceduresmanual/default.htm (Dec. 2017), last visited August 15, 2024). The FDA does not keep a list of what violations can be reconditioned or how such reconditioning can occur. The inquiry necessarily requires a case-by-case analysis. For example, in HQ H240986, dated January 8, 2014, imported shrimp were entered, released, and left CBP’s custody before the FDA determined that the shrimp were contaminated with salmonella. Accordingly, 19 U.S.C. § 1558 and 19 C.F.R. § 158.45(c) applied, which denied the refund of duties unless one of the three enumerated exceptions of 19 C.F.R. § 158.45 applied. It is th

Whether duty refunds are permissible if a refused food item may not be “absolutely prohibited” entry, but “possibly” could be reconditioned to satisfy the FDA for admission into the United States. Generally, “[n]o remission, abatement, refund, or drawback of estimated or liquidated duty shall be allowed because of exportation or destruction of any merchandise after its release from the custody of the Government . . . .” 19 U.S.C. § 1558. Section 1558, however, provides for three exceptions to the general rule. Two of the exceptions relate to drawback and bonded articles. See 19 U.S.C. §§1558(a)(1) & (a)(3). The third exception states that a refund can be appropriate “[w]hen prohibited articles have been regularly entered in good faith and are subsequently exported or destroyed pursuant to a law of the United States and under such regulations as the Secretary of Treasury may prescribe.” 19 U.S.C. § 1558(a)(2). For starters, if, as the Port indicated, the merchandise at issue underlying this IA never left CBP custody, then 19 U.S.C. § 1558 and analysis of whether the merchandise constituted “prohibited articles” is irrelevant. The implementing regulations state that if merchandise does not leave the continuous custody of CBP, then any duties paid may be refunded. 19 C.F.R. § 158.45(a). Specifically, 19 C.F.R. § 158.45, “Exportation of merchandise,” states as follows:(a) From continuous Customs custody. Merchandise in Customs custody for which entry has not been completed and merchandise which has remained in continuous Customs custody that is covered by a liquidated or unliquidated consumption entry may be exported under Customs supervision in accordance with §§ 18.25 through 18.27 of this chapter, with refund of any duties that have been paid. (b) After release from Customs custody. Except as provided for in paragraphs (c) and (d) of this section, no refund or other allowance in duties shall be made because of the exportation of merchandise after its release from Cus