H326296

H326296 April 8, 2026 OT:RR:CTF:EPDR H326296 MY CATEGORY: Entry David McGurk, Center Director Petroleum, Natural Gas, and Minerals Center of Excellence & Expertise 2323 S. Shepherd #1300 Houston, TX 77019 RE: Substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2); Temporary Importation under Bond (TIB); manufacture of tobacco entered under a TIB. Dear Center Director, This is in response to your request for a ruling on behalf of Japan Tobacco International, Inc. (JTI), submitted on July 11, 2021, to determine whether JTI can claim substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2) on certain cigarettes. JTI intended to claim drawback on cigarettes manufactured with raw tobacco that was entered as a Temporary Importation under Bond (TIB). On July 10, 2025, JTI revised its request to seek internal advice pertaining to the disposition of pending drawback claims in lieu of a prospective ruling. We have considered the facts and issues raised, and our decision follows. FACTS: JTI imports cigarettes from the Republic of Türkiye under subheading 2402.20.80, Harmonized Tariff Schedule of the United States (HTSUS). Cigarettes imported under this classification are subject to Internal Revenue Code (IRC) federal excise taxes. JTI proposes to substitute the imported cigarettes with domestically produced cigarettes classified under the same 8-digit HTSUS subheading and thereafter export the substituted cigarettes to foreign countries. JTI states that the substituted cigarettes it intends to export, and upon which it seeks to claim drawback, are manufactured in the United States from domestic components and imported raw tobacco entered under TIB subheading 9813.00.05, HTSUS. The imported tobacco entered under a TIB is never entered for consumption, and duties are never paid, prior to its manufacture and exportation. 2 JTI has requested a ruling addressing whether it may claim substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2) on domestically produced cigarettes that were manufactured with imported raw tobacco that was accorded duty-free treatment due to entry under TIB subheading 9813.00.05, HTSUS. We note that JTI submitted two duplicate ruling requests to our office on September 1, 2021, and December 22, 2022. JTI later submitted a supplement, on January 11, 2023, raising additional arguments in support of its position. In a subsequent letter, dated July 10, 2025, JTI asked our office to convert the request for a binding ruling pursuant to 19 C.F.R. § 177.2 to a request for internal advice pursuant to 19 C.F.R. § 177.11, because the request now concerns pending drawback claims rather than a prospective transaction. JTI’s position is that exported merchandise that was manufactured with articles accorded duty-free treatment due to entry under a TIB are eligible for drawback without regard to the limitation in 19 U.S.C. § 1313(u). JTI argues that eligibility for substitution unused merchandise drawback is contingent solely on compliance with the requirements enumerated under 19 U.S.C. § 1313(j)(2). Specifically, JTI asserts that 19 U.S.C. § 1313(u), which states that imported merchandise not regularly entered or withdrawn for consumption cannot satisfy any requirement for use, exportation, or destruction for purposes of 19 U.S.C. § 1313, is inapplicable to claims filed under §1313(j)(2). JTI maintains that the amendment to §1313(j)(2) by the Miscellaneous Trade and Technical Correction Act of 2004, Pub. Law. 108-429, 18 Stat. 2585 (Dec. 3, 2004), rendered § 1313(u) inapplicable to § 1313(j)(2) through the addition of the phrase “notwithstanding any other provision of law.” JTI posits that this phrase places § 1313(j)(2) in a “special place” such that “[i]f with respect to imported designated merchandise, there is any other merchandise, whether foreign or domestic, and which is substitutable, then upon exportation of that other merchandise, drawback shall be granted[.] No other provision of law[] may defeat the right to such drawback.” JTI cites to National Association of Manufacturers v. United States, 10 F.4th 1279 (Fed. Cir. 2021) (NAM) in support of its position. JTI alleges that in NAM the Court of Appeals for the Federal Circuit (CAFC) held that the “notwithstanding” clause in § 1313(j)(2) signifies that no other provision of the drawback statute applies to substitution unused merchandise drawback. Accordingly, JTI claims that U.S. Customs and Border Protection (CBP) Headquarters Ruling (HQ) H305251, dated December 10, 2021, was incorrect in holding that pursuant to § 1313(u) when vehicles are produced within an FTZ from domestic and foreign status components and exported without being entered for consumption, only the domestic status components are eligible for drawback under §1313(j)(2). In the alternative, JTI argues that § 1313(u) only covers “imported merchandise” and is therefore inapplicable to merchandise produced in the United States in whole or in part from components entered under a TIB. In order to address the issues raised as part of a request for internal advice pursuant to 19 C.F.R. § 177.11, we contacted the New York drawback office where JTI has filed drawback claims implicated in this decision. The office concurred in JTI’s request for internal advice with respect to the pending claims. The office maintains that 19 U.S.C. § 1313(u) precludes drawback on exported merchandise manufactured from materials entered under a TIB that have not been entered for consumption. The office cites to 19 C.F.R. § 190.151(a)(2) in support of its position, which states that: “[i]mported merchandise that has not been regularly entered or withdrawn for 3 consumption, will not satisfy any requirement for use, importation, exportation or destruction, and will not be available for drawback, under section 313 of the Act, as amended (19 U.S.C. 1313) (see 19 U.S.C. 1313(u)).” ISSUE: Whether exported cigarettes manufactured from imported tobacco entered under a TIB, and domestic components, are eligible for drawback under 19 U.S.C. § 1313(j)(2). LAW AND ANALYSIS: General Note 1, HTSUS, dictates that all merchandise imported into the United States is subject to duty unless specifically exempted. Such an exemption is accorded to merchandise temporarily imported under bond that is not imported for sale, on the condition that it is exported or destroyed within a year of importation. See e.g. Notes 1-2 of Subchapter XIII, Chapter 98, HTSUS; 19 C.F.R. § 10.31. Eligibility for entry under a TIB is further conditioned on the imported merchandise satisfying the criteria for a specific subheading listed in Subchapter XIII, Chapter 98. Subheading 9813.00.05, HTSUS, is applicable to articles imported to be “repaired, altered, or processed (including processes which result in articles manufactured or produced in the United States).” Merchandise entered under a TIB is not entered for consumption. See e.g. HQ 223491 (March 30, 1992) (“Customs has consistently held that a TIB entry is not an entry for consumption”); HQ 225700 (June 16, 1995) (“a TIB entry is not an entry for consumption”). Pursuant to 19 C.F.R. § 190.151(a)(2), “[i]mported merchandise that has not been regularly entered . . . for consumption, will not satisfy any requirement for use, importation, exportation or destruction, and will not be available for drawback.” Drawback “means the refund, in whole or in part, of the duties, taxes, and/or fees paid on imported merchandise.” 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(2), drawback may be claimed on exported or destroyed merchandise which is substituted for imported and duty-paid merchandise “notwithstanding any other provision of law.” Among the requirements for claiming drawback under 19 U.S.C. § 1313(j)(2), the substituted merchandise must be: classifiable under the same 8-digit HTS subheading as the imported merchandise; exported or destroyed under CBP supervision within 5-years of the importation da

General Note 1, HTSUS, dictates that all merchandise imported into the United States is subject to duty unless specifically exempted. Such an exemption is accorded to merchandise temporarily imported under bond that is not imported for sale, on the condition that it is exported or destroyed within a year of importation. See e.g. Notes 1-2 of Subchapter XIII, Chapter 98, HTSUS; 19 C.F.R. § 10.31. Eligibility for entry under a TIB is further conditioned on the imported merchandise satisfying the criteria for a specific subheading listed in Subchapter XIII, Chapter 98. Subheading 9813.00.05, HTSUS, is applicable to articles imported to be “repaired, altered, or processed (including processes which result in articles manufactured or produced in the United States).” Merchandise entered under a TIB is not entered for consumption. See e.g. HQ 223491 (March 30, 1992) (“Customs has consistently held that a TIB entry is not an entry for consumption”); HQ 225700 (June 16, 1995) (“a TIB entry is not an entry for consumption”). Pursuant to 19 C.F.R. § 190.151(a)(2), “[i]mported merchandise that has not been regularly entered . . . for consumption, will not satisfy any requirement for use, importation, exportation or destruction, and will not be available for drawback.” Drawback “means the refund, in whole or in part, of the duties, taxes, and/or fees paid on imported merchandise.” 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(2), drawback may be claimed on exported or destroyed merchandise which is substituted for imported and duty-paid merchandise “notwithstanding any other provision of law.” Among the requirements for claiming drawback under 19 U.S.C. § 1313(j)(2), the substituted merchandise must be: classifiable under the same 8-digit HTS subheading as the imported merchandise; exported or destroyed under CBP supervision within 5-years of the importation date; remain unused; and be in the possession of the drawback claimant prior to its exportation or destruction. Addit