CSMS Message: 96-000050

TO : ALL ABI BROKERS.

FROM : JAMES HALPIN

SUBJECT : NAFTA DRAWBACK INFORMATION PACKAGE

DATE : 01/23/96

THE INFORMATION PROVIDED BELOW ON NAFTA DRAWBACK CLAIM SUBMISSIONS
IS INTENDED TO GIVE CLARIFICATION AND INSTRUCTION FOR THE
PROPER SUBMISSION OF NAFTA DRAWBACK CLAIM DATA VIA ABI, DISKETTE
SUBMISSION, AND HARD COPY. THIS INFORMATION SHOULD BE USED IN
CONJUNCTION WITH ADMINISTRATIVE MESSAGE 95-1087, DATED
NOVEMBER 11, 1995. THAT MESSAGE PROVIDED THE ABI RECORD LAYOUTS
FOR THE 'JJ' DRAWBACK APPLICATION, INCLUDING THE NEW 'D50' RECORD
FOR THE SUBMISSION OF CANADIAN IMPORT ENTRY DATA IN SUPPORT OF
NAFTA CLAIMS.

IN ADDITION TO THE INFORMATION BELOW, PLEASE NOTE THAT YOU WILL
BE ADVISED SHORTLY AS TO WHEN YOU MAY BEGIN TO SUBMIT NAFTA CLAIM
DATA VIA ABI OR DISKETTE. WE ANTICIPATE THAT THIS WILL BE
AVAILABLE WITHIN THE NEXT TWO WEEKS.

THE FOLLOWING NAFTA DRAWBACK INSTRUCTIONS DOCUMENT CONTAINS
REFERENCES TO ATTACHMENTS WHICH, UNFORTUNATELY, CANNOT BE
TRANSMITTED VIA ABI. PLEASE NOTE THAT AN ENTIRE INFORMATION
PACKAGE INCLUDING THIS DOCUMENT AND ANY REFERENCED ATTACHMENTS
WILL BE MADE AVAILABLE FROM ANY OF THE EIGHT DRAWBACK FIELD
OFFICES AND WILL ALSO BE DISTRIBUTED SHORTLY TO THOSE PARTIES
CURRENTLY ON OUR DRAWBACK AUTOMATION MAILING LIST.

NAFTA DRAWBACK INSTRUCTIONS

I. PURPOSE:

THIS DOCUMENT IS TO PROVIDE INFORMATION AND INSTRUCTIONS FOR
IMPLEMENTING THE NAFTA DRAWBACK PROVISIONS. IT IS TO BE USED IN
CONJUNCTION WITH THE APPLICABLE SECTIONS OF PART 181 OF THE
CUSTOMS REGULATIONS, AND WITH ACS ADMINISTRATIVE MESSAGE 95-1087
(SEE ATTACHMENT B).

II. BACKGROUND AND EFFECTIVE DATES:

ARTICLE 303 OF NAFTA HAS A SIGNIFICANT IMPACT ON THE WAY DRAWBACK
WILL BE ADMINISTERED ON GOODS EXPORTED TO CANADA AND MEXICO. THE
NAFTA DRAWBACK PROVISIONS ARE APPLICABLE TO GOODS EXPORTED TO
CANADA ON OR AFTER JANUARY 1, 1996, AND TO GOODS EXPORTED TO
MEXICO ON OR AFTER JANUARY 1, 2001. THIS INFORMATION NOTICE WILL
FOCUS ON DRAWBACK CLAIMS DESIGNATING EXPORTS TO CANADA BECAUSE OF
THE JANUARY 1, 1996 EFFECTIVE DATE.

III. CALCULATION OF DRAWBACK -
THE "LESSER OF THE TWO" RULE

A. DEFINITION

NAFTA PROVIDES THAT DRAWBACK MAY BE GRANTED ON THE LOWER AMOUNT
OF:

(1) THE TOTAL DUTIES PAID OR OWED IN THE U.S.; OR

(2) THE TOTAL DUTIES PAID ON THE GOOD UPON SUBSEQUENT
IMPORTATION INTO CANADA.

THIS IS KNOWN AS THE "LESSER OF THE TWO" RULE. THE FOLLOWING
EXAMPLES ILLUSTRATE THIS RULE:

EXAMPLE 1:

UPON IMPORTATION OF PRODUCT X INTO THE UNITED STATES FROM
JAPAN, COMPANY "A" PAID $11.00 IN DUTIES. COMPANY "A"
MANUFACTURED THE IMPORTED PRODUCT INTO PRODUCT Y AND
EXPORTED IT TO CANADA. CANADA ASSESSED THE EQUIVALENT OF
US$2.00 IN DUTIES UPON IMPORTATION OF PRODUCT Y.
COMPANY "A" IS ENTITLED TO 99% OF $2.00 IN DRAWBACK FROM THE
U.S. BECAUSE $2.00 IS THE LESSER OF THE TWO DUTIES.

EXAMPLE 2:

UPON IMPORTATION OF PRODUCT X INTO THE UNITED STATES FROM
GERMANY, COMPANY "A" PAID $5.00 IN DUTIES. COMPANY "A"
MANUFACTURED THE IMPORTED PRODUCT INTO PRODUCT Y AND
EXPORTEDIT TO CANADA. CANADA ASSESSED THE EQUIVALENT OF
US$6.00 IN DUTIES UPON IMPORTATION OF PRODUCT Y. COMPANY
"A" IS ENTITLED TO 99% OF $5.00 IN DRAWBACK FROM THE U.S.
BECAUSE $5.00 IS THE LESSER OF THE TWO DUTY AMOUNTS.

EXAMPLE 3:

UPON IMPORTATION OF PRODUCT X INTO THE UNITED STATES FROM
JAPAN, COMPANY "A" PAID $5.00 IN DUTIES. COMPANY "A"
MANUFACTURED THE IMPORTED PRODUCT INTO PRODUCT Y AND
EXPORTED IT TO CANADA. CANADA ASSESSED A FREE RATE OF DUTY
UPON IMPORTATION OF PRODUCT Y. THERE IS NO ENTITLEMENT TO
DRAWBACK ON PRODUCT X BECAUSE ZERO IS THE LESSER OF THE TWO
DUTY AMOUNTS.

B. HOW IS THE COMPARISON MADE?

IN MAKING THE "LESSER OF THE TWO" COMPARISON, THE FOLLOWING
RULES APPLY:

FOR CLAIMS DESIGNATING MULTIPLE IMPORTS AND A SINGLE EXPORT,
THE DUTY PAID ON THE IMPORTS SHOULD BE AGGREGATED BEFORE MAKING
THE COMPARISON WITH THE CANADIAN DUTY PAID ON THE IMPORTATION OF
THE EXPORTED GOODS INTO CANADA. THIS IS ILLUSTRATED IN THE
FOLLOWING EXAMPLE:

COMPANY "A" IMPORTS TWO ITEMS INTO THE UNITED STATES AND
PAYS DUTY ON BOTH OF THOSE ITEMS: 1 PUMP - $10 IN DUTIES;
AND 1 ENGINE - $20 IN DUTIES. COMPANY "A" MANUFACTURES AN
AUTOMOBILE USING BOTH OF THESE ITEMS, AND EXPORTS THE
AUTOMOBILE TO CANADA PAYING THE EQUIVALENT OF US$25 IN
DUTIES. COMPANY "A" IS ENTITLED TO 99% OF $25 IN DRAWBACK
FROM THE U.S. THIS IS BECAUSE THE "LESSER OF THE TWO"
COMPARISON WAS MADE USING US$25 IN CANADIAN DUTIES AND $30
IN U.S. DUTIES, WHICH IS THE AGGREGATE OF THE DUTIES ON THE
PARTS IMPORTED INTO THE U.S.

ONCE A DRAWBACK CLAIM IS MADE BASED ON A DUTY COMPARISON
BETWEEN THE AGGREGATE OF THE U.S. DUTIES PAID ON THE IMPORTED
GOODS AND THE CANADIAN DUTIES PAID ON THE EXPORTED GOOD, NO OTHER
CLAIMS SHOULD BE MADE DESIGNATING THAT EXPORTED GOOD. THE ONLY
EXCEPTIONS TO THIS ARE DRAWBACK CLAIMS THAT INVOLVE A COMBINATION
OF GOODS THAT ARE SUBJECT TO THE "LESSER OF THE TWO" CALCULATION
AND GOODS SUBJECT TO FULL DRAWBACK (SEE SECTION VII.E. OF THESE
INSTRUCTIONS).

FOR DRAWBACK CLAIMS DESIGNATING A SINGLE IMPORT AND MULTIPLE
EXPORTS, A RELATIVE VALUE CALCULATION SHOULD BE MADE, AND THE
"LESSER OF THE TWO" COMPARISON SHOULD BE MADE SEPARATELY, FOR
EACH INDIVIDUAL EXPORTED GOOD.

THIS IS THE SAME RELATIVE VALUE CALCULATION THAT IS REQUIRED
UNDER PART 191.22 OF THE REGULATIONS (PRIOR TO NAFTA).
SPECIFICALLY, THE VALUE OF THE EXPORTED PRODUCT DESIGNATED ON THE
DRAWBACK CLAIM IS DIVIDED BY THE TOTAL VALUE OF ALL PRODUCTS
PRODUCED. THAT NUMBER IS MULTIPLIED BY THE DUTY WHICH RESULTS IN
THE ALLOWABLE DUTY FOR THE EXPORTED PRODUCT. THE RELATIVE VALUE
SHOULD BE DETERMINED BEFORE THE "LESSER OF THE TWO" COMPARISON IS
MADE. THIS IS ILLUSTRATED IN THE FOLLOWING EXAMPLE:

COMPANY "A" IMPORTS CHEMICAL X INTO THE UNITED STATES AND
PAYS $5.00 IN DUTIES. COMPANY "A" PRODUCES FOUR DIFFERENT
PRODUCTS FROM CHEMICAL X. THE VALUE OF THESE FOUR PRODUCTS
IS AS FOLLOWS:

PRODUCT VALUE

PRODUCT 1 $2.00
PRODUCT 2 $3.00
PRODUCT 3 $4.00
PRODUCT 4 $1.00

TOTAL VALUE OF 4 PRODUCTS: $10.00

THE VALUE OF EACH OF THE 4 PRODUCTS MUST BE DIVIDED BY THE
TOTAL VALUE ($10.00) TO CALCULATE A DRAWBACK FACTOR FOR EACH
PRODUCT. THIS YIELDS THE FOLLOWING:

PRODUCT DRAWBACK FACTOR

PRODUCT 1 20%
PRODUCT 2 30%
PRODUCT 3 40%
PRODUCT 4 10%

ONLY PRODUCT 1 IS EXPORTED WITH BENEFIT OF DRAWBACK. THE
DUTY PAID ON PRODUCT 1 UPON IMPORTATION INTO CANADA IS THE
EQUIVALENT OF US$2.00. COMPANY "A" MUST MULTIPLY THE
ORIGINAL AMOUNT OF DUTY PAID ON CHEMICAL X UPON IMPORTATION
INTO THE U.S. - ($5.00) TIMES THE DRAWBACK FACTOR FOR
PRODUCT 1 (20%) WHICH RESULTS IN $1.00 IN DUTY. FOR NAFTA
PURPOSES, THE RESULTANT $1.00 IS COMPARED TO THE US$2.00 IN
DUTY PAID TO CANADA. BECAUSE THE U.S. DUTY OF $1.00 IS THE
"LESSER OF THE TWO", COMPANY "A" IS ENTITLED TO 99 PERCENT
OF $1.00 IN DRAWBACK.

C. WHEN IS THE "LESSER OF THE TWO" RULE USED?

THE LESSER OF THE TWO CALCULATION SHOULD BE USED FOR THE
FOLLOWING TYPES OF CLAIMS:

1) MANUFACTURING DRAWBACK CLAIMS: (BOTH DIRECT
IDENTIFICATION AND SUBSTITUTION) INVOLVING EXPORTS TO CANADA
MADE ON OR AFTER JANUARY 1, 1996, UNLESS THE CLAIM QUALIFIES
FOR ONE OF THE EXCEPTIONS DESCRIBED IN SECTION IV BELOW.

2) UNUSED MERCHANDISE NOT IN THE SAME CONDITION: UNUSED
MERCHANDISE THAT IS ENTITLED TO DRAWBACK UNDER 19 U.S.C.
1313(J)(1), BUT IS NOT IN THE SAME CONDITION IS SUBJECT TO
THE "LESSER OF THE TWO" CALCULATION. THIS APPLIES ONLY TO
CLAIMS DESIGNATING EXPORTS TO CANADA ON OR AFTER JANUARY 1,
1996. THIS IS NOT A LARGE CATEGORY OF MERCHANDISE BECAUSE
MOST UNUSED MERCHANDISE CLAIMED UNDER 1313(J)(1) WILL BE IN
THE SAME CONDITION. ONE EXAMPLE, HOWEVER, OF 1313(J)(1)
MERCHANDISE THAT IS NOT IN THE SAME CONDITION IS IMPORTED
MERCHANDISE THAT BECOMES DETERIORATED PRIOR TO EXPORTATION.

IV. EXCEPTIONS TO THE "LESSER OF THE TWO" RULE -
GOODS ELIGIBLE
FOR FULL DRAWBACK

ALL MERCHANDISE COVERED BY THE FOLLOWING EXEMPTIONS ARE
ELIGIBLE FOR FULL DRAWBACK. CLAIMS SUBMITTED UNDER THESE
PROVISIONS ARE NOT CONSIDERED NAFTA DRAWBACK CLAIMS, AND DO NOT
REQUIRE THE DOCUMENTATION LISTED UNDER SECTION VI. ("SATISFACTORY
EVIDENCE") AND SECTION VII. ("HOW ARE NAFTA DRAWBACK CLAIMS
SUBMITTED?") OF THESE INSTRUCTIONS:

A. GOODS CLAIMED UNDER 1313(J)(1) THAT ARE IN THE SAME
CONDITION.

1) ALLOWABLE INCIDENTAL OPERATIONS: THE FOLLOWING OPERATIONS
ARE ALLOWED PROVIDED THAT SUCH OPERATIONS DO NOT MATERIALLY
ALTER THE CHARACTERISTICS OF THE GOOD:

* MERE DILUTION WITH WATER OR ANOTHER SUBSTANCE;

* CLEANING, INCLUDING REMOVAL OF RUST, GREASE, PAINT OR
OTHER COATINGS;

* APPLICATION OF PRESERVATIVE, INCLUDING LUBRICANTS,
PROTECTIVE ENCAPSULATION, OR PRESERVATION PAINT;

* TRIMMING, FILING, SLITTING OR CUTTING;

* PUTTING UP IN MEASURED DOSES, OR PACKING, REPACKING,
PACKAGING OR REPACKAGING; OR

* TESTING, MARKING, LABELLING, SORTING OR GRADING.

2) COMMINGLED FUNGIBLE GOODS: CLAIMANTS THAT HAVE
COMMINGLED FUNGIBLE GOODS IN INVENTORY, SUCH AS PARTS, CAN
USE AN INVENTORY MANAGEMENT SYSTEM TO DETERMINE ORIGIN OF
GOODS FOR DRAWBACK PURPOSES. THIS ALLOWS CLAIMANTS TO
OBTAIN FULL DRAWBACK UNDER 1313(J)(1). THE ALLOWABLE
INVENTORY METHODS ARE SET FORTH IN SCHEDULE X, WHICH IS AN
APPENDIX TO PART 181 OF THE CUSTOMS REGULATIONS. THESE
INVENTORY METHODS INCLUDE FIFO, LIFO, AND AVERAGING. NO
OTHER INVENTORY METHODS HAVE BEEN APPROVED.

B. GOODS CLAIMED UNDER 1313(C): AS NOT CONFORMING TO
SAMPLE OR SPECIFICATION OR SHIPPED WITHOUT CONSENT OF THE
CONSIGNEE.

C. GOODS ORIGINATING IN CANADA OR MEXICO:

1) DEFINITION: THIS EXEMPTION IS FOR GOODS THAT ORIGINATE
IN CANADA OR MEXICO, AND ARE IMPORTED INTO THE U.S. AND
SUBSEQUENTLY EXPORTED TO CANADA ON OR AFTER JANUARY 1, 1996.
GOODS THAT ARE MERELY EXPORTED FROM CANADA OR MEXICO TO THE
UNITED STATES DO NOT NECESSARILY QUALIFY AS NAFTA
ORIGINATING GOODS. IN ORDER TO QUALIFY, THE GOODS MUST MEET
THE NAFTA RULES OF ORIGIN. AN EXAMPLE OF HOW DRAWBACK IS
CLAIMED UNDER THIS EXEMPTION IS AS FOLLOWS:

COMPANY "A" IMPORTS A MEXICAN ORIGINATING GOOD AND PAYS
$10 IN DUTIES. DURING COMPANY "A'S" MANUFACTURING
PROCESS, COMPANY "A" SUBSTITUTES A GERMAN GOOD OF THE
SAME KIND AND QUALITY (ON WHICH $6.00 IN DUTIES WAS
PAID) IN THE PRODUCTION OF ANOTHER GOOD THAT IS
SUBSEQUENTLY EXPORTED TO CANADA WHERE $5.00 IN DUTIES
ARE ASSESSED. COMPANY "A" IS ENTITLED TO 99% OF $10.00
IN DRAWBACK BECAUSE OF THE ORIGINATING GOODS EXEMPTION.

2) HOW ARE ORIGINATING GOODS DOCUMENTED?: IN ORDER TO USE
THIS EXEMPTION, CLAIMANTS MUST PROVIDE EVIDENCE THAT THE
DESIGNATED IMPORTED PRODUCT WAS ENTERED AS A CANADIAN OR
MEXICAN ORIGINATING GOOD. THIS EVIDENCE SHOULD CONSIST OF A
COPY OF THE CF 7501 ON WHICH THE GOODS WERE ENTERED
INDICATING A CA OR MX BESIDE THE TARIFF NUMBER. ONCE THE
CUSTOMS DRAWBACK STAFF RECEIVES THIS INFORMATION, THEY WILL
QUERY ACS TO VERIFY THAT THE GOODS WERE LIQUIDATED AS
ENTERED (NO CHANGE).

CLAIMANTS MUST SUBMIT THIS DOCUMENTATION ALONG WITH
THEIR CLAIMS INVOLVING NAFTA ORIGINATING GOODS. WHEN THE
CUSTOMS DRAWBACK STAFF HANDLING THEIR CLAIMS IS SATISFIED
THAT THE CLAIMANT IS IN COMPLIANCE WITH THE ORIGINATING
GOODS PROVISION, THEY MAY INSTRUCT THE CLAIMANT TO KEEP THE
DOCUMENTATION IN THEIR FILES.

D. ADDITIONAL EXEMPTIONS TO THE "LESSER OF THE
TWO" RULE:

THE FOLLOWING EXEMPTIONS TO THE "LESSER OF THE TWO" RULE ARE
INCLUDED IN ANNEX 303.6 OF THE NAFTA AGREEMENT:

1) A GOOD PROVIDED FOR IN TARIFF ITEM 1701.11.02 THAT IS
IMPORTED INTO THE TERRITORY OF THE UNITED STATES AND USED AS
A MATERIAL IN THE PRODUCTION OF, OR SUBSTITUTED BY AN
IDENTICAL OR SIMILAR GOOD USED AS A MATERIAL IN THE
PRODUCTION OF, A GOOD PROVIDED FOR IN CANADIAN TARIFF ITEM
1701.99.00 OR MEXICAN TARIFF ITEMS 1701.99.01 AND 1701.99.99
(REFINED SUGAR).

2) FOR TRADE BETWEEN CANADA AND THE UNITED STATES:

(A) IMPORTED CITRUS PRODUCTS;

(B) AN IMPORTED GOOD USED AS A MATERIAL IN THE
PRODUCTION OF, OR SUBSTITUTED BY AN IDENTICAL OR
SIMILAR GOOD USED AS A MATERIAL IN THE PRODUCTION
OF, A GOOD PROVIDED FOR IN U.S. ITEMS 5811.00.20
(QUILTED COTTON PIECE GOODS), 5811.00.30 (QUILTED
MAN-MADE PIECE GOODS) OR 6307.90.99 (FURNITURE
MOVING PADS), OR CANADIAN ITEMS 5811.00.10
(QUILTED COTTON PIECE GOODS) 5811.00.20 (QUILTED
MAN-MADE PIECE GOODS) OR 6307.90.30 (FURNITURE
MOVING PADS), THAT ARE SUBJECT TO THE MOST-FAVORED
NATION RATE OF DUTY WHEN EXPORTED TO THE TERRITORY
OF THE OTHER PARTY, AND

(C) AN IMPORTED GOOD USED AS A MATERIAL IN THE
PRODUCTION OF, OR SUBSTITUTED BY AN IDENTICAL OR
SIMILAR GOOD USED AS A MATERIAL IN THE PRODUCTION
OF, APPAREL THAT IS SUBJECT TO THE MOST-FAVORED-NATION
RATE OF DUTY WHEN EXPORTED TO THE TERRITORY OF THE
OTHER PARTY.

V. EXCEPTIONS TO THE "LESSER OF THE TWO" RULE -
GOODS NOT ELIGIBLE FOR DRAWBACK

ALL GOODS COVERED BY 1313(J)(2) UNUSED MERCHANDISE
SUBSTITUTION DRAWBACK, ARE NOT ELIGIBLE FOR DRAWBACK IF THEY
INVOLVE EXPORTS TO CANADA OR MEXICO. THIS PROVISION HAS BEEN IN
EFFECT SINCE JANUARY 1, 1994.

VI. SATISFACTORY EVIDENCE

SATISFACTORY EVIDENCE IS REQUIRED TO SUPPORT ALL NAFTA
DRAWBACK CLAIMS. THE PURPOSE OF "SATISFACTORY EVIDENCE" IS TO
PROVIDE EVIDENCE OF DUTIES PAID ON THE DESIGNATED EXPORTED GOODS
UPON IMPORTATION INTO CANADA WHEN A CLAIM INVOLVES THE "LESSER OF
THE TWO" CALCULATION.

A. DOCUMENTS REQUIRED

THERE ARE SEVERAL DOCUMENTS THAT MAY BE USED AS SATISFACTORY
EVIDENCE. CLAIMANTS MUST PROVIDE ONE OF THE FOLLOWING
INCLUDING:

1) THE CANADIAN CUSTOMS INVOICE (FORM B3): THIS DOCUMENT
MUST INCLUDE EVIDENCE THAT IT HAS BEEN PROCESSED BY THE
CANADIAN GOVERNMENT SUCH AS A STAMP, OR A RECEIPT SUCH
AS THE K-84 STATEMENT OR THE DETAILED CODING STATEMENT;
OR

2) AN AFFIDAVIT FROM THE DRAWBACK CLAIMANT WHICH IS BASED
ON INFORMATION RECEIVED FROM THE IMPORTER OF THE GOODS
INTO CANADA. THE INFORMATION TO BE INCLUDED IN THIS
AFFIDAVIT IS DESCRIBED BELOW IN SECTION VI.B ("5 DATA
ELEMENTS") OF THESE INSTRUCTIONS.

THESE DOCUMENTS PROVIDING SATISFACTORY EVIDENCE MUST BE
SUBMITTED ALONG WITH ALL NAFTA DRAWBACK CLAIMS. WHEN THE CUSTOMS
DRAWBACK STAFF IS SATISFIED THAT THE CLAIMANT IS IN COMPLIANCE
WITH THE NAFTA DRAWBACK PROVISIONS, THEY MAY INSTRUCT THE
CLAIMANT TO KEEP THE DOCUMENTATION IN THEIR FILES.

B. 5 DATA ELEMENTS

THE DOCUMENTS LISTED ABOVE MUST CONTAIN ALL OF THE FOLLOWING
FIVE DATA ELEMENTS:

1) CANADIAN ENTRY NUMBER

2) DATE OF IMPORTATION INTO CANADA. THE DATE OF
IMPORTATION IS DEFINED AS THE "DATE OF ACCOUNTING",
WHICH IS THE DATE THE DUTIES ARE PAID TO CANADA.

3) CANADIAN HARMONIZED TARIFF SCHEDULE NUMBER(S)

4) CANADIAN RATE OF DUTY

5) AMOUNT OF DUTIES PAID TO CANADA. FOR THE PURPOSE OF
SATISFACTORY EVIDENCE, THIS AMOUNT MUST BE PROVIDED IN
CANADIAN DOLLARS. IT SHOULD BE NOTED, HOWEVER, THAT
FOR THE PURPOSE OF MAKING THE "LESSER OF THE TWO"
CALCULATION, THIS AMOUNT MUST ALSO BE STATED IN U.S.
DOLLARS AS DESCRIBED IN SECTION VII.C. ("HOW ARE NAFTA
DRAWBACK CLAIMS SUBMITTED?") OF THESE INSTRUCTIONS.

VII. HOW ARE "NAFTA DRAWBACK CLAIMS" SUBMITTED?

A. DEFINITION OF "NAFTA DRAWBACK CLAIMS"

A "NAFTA DRAWBACK CLAIM" IS DEFINED AS A CLAIM INVOLVING A
"LESSER OF THE TWO" CALCULATION. CLAIMS INVOLVING EXPORTS TO
CANADA OR MEXICO THAT DO NOT INVOLVE A "LESSER OF THE TWO"
CALCULATION (INCLUDING THOSE CLAIMS SUBMITTED UNDER SECTION IV.
"GOODS SUBJECT TO FULL DRAWBACK", AND UNDER SECTION V. "GOODS NOT
ELIGIBLE FOR DRAWBACK" OF THESE INSTRUCTIONS) ARE NOT CONSIDERED
"NAFTA DRAWBACK CLAIMS". IT SHOULD BE NOTED THAT THERE WILL BE
NO "NAFTA DRAWBACK CLAIMS" INVOLVING EXPORTS TO MEXICO UNTIL THE
YEAR 2001.

NAFTA DRAWBACK CLAIMS MUST BE SUBMITTED SEPARATELY FROM ALL
OTHER TYPES OF CLAIMS. ALSO, A SEPARATE NAFTA DRAWBACK CLAIM
MUST BE SUBMITTED FOR EACH EXPORTED PRODUCT. ONCE AN EXPORTED
PRODUCT IS DESIGNATED IN A NAFTA DRAWBACK CLAIM, IT MAY NOT BE
DESIGNATED AGAIN IN A SUBSEQUENT CLAIM. THE ONLY EXCEPTION TO
THIS IS DESCRIBED IN SECTION VII.E. ("EXPORTED PRODUCTS
INCORPORATING NAFTA DRAWBACK GOODS AND GOODS ELIGIBLE FOR FULL
DRAWBACK") OF THESE INSTRUCTIONS.

B. "INDICATORS" REQUIRED

CLAIMANTS SUBMITTING DRAWBACK CLAIMS ON DISKETTES MUST USE
A "Y" INDICATOR IF IT IS A NAFTA CLAIM, OR A "N" INDICATOR IF IT
IS NOT A NAFTA CLAIM. CLAIMANTS SUBMITTING DRAWBACK CLAIMS
THROUGH ABI MUST USE A "1" INDICATOR IF IT IS A NAFTA CLAIM, OR A
"0" INDICATOR IF IT IS NOT A NAFTA CLAIM.

FOR THOSE SUBMITTING DRAWBACK CLAIMS THROUGH ABI, SEE
ADMINISTRATIVE MESSAGE 95-1087, DATED NOVEMBER 11, 1995,
(ATTACHMENT B) FOR SPECIFICATIONS ON SUBMISSION OF CLAIMS.

FOR THOSE SUBMITTING DRAWBACK CLAIMS ON DISKETTES,
SPECIFICATIONS FOR SUBMISSION OF NAFTA CLAIMS ON DISKETTES AND
ADMINISTRATIVE MESSAGE 95-1087 (FOR ABI FILERS) WERE AVAILABLE
THROUGH ABI; POSTED ON THE CUSTOMS ELECTRONIC BULLETIN BOARD;
PROVIDED IN HARD COPY ALONG WITH REVISED DISKETTE REQUIREMENTS;
INCLUDED IN THE ERROR DICTIONARY WHICH WAS MAILED ON NOVEMBER 15,
1995; AND PROVIDED TO ALL FILERS ON THE AUTOMATED FILER MAILING
LIST.

FOR THOSE SUBMITTING CLAIMS ON HARD COPY, THE CLAIM SHOULD
BE MARKED WITH THE WORD "NAFTA" AT THE TOP OF THE FIRST PAGE IN
CONSPICUOUS LETTERS.

C. SUBMISSION OF "LESSER OF THE TWO" DUTY INFORMATION

CLAIMANTS SUBMITTING NAFTA CLAIMS SHOULD NOT MAKE THE ACTUAL
"LESSER OF THE TWO" CALCULATION. INSTEAD, CLAIMANTS SHOULD
SPECIFY THE FULL AMOUNT OF U.S. DUTY PAID ON THE IMPORTED GOODS
DESIGNATED FOR DRAWBACK, AND THE FULL AMOUNT OF CANADIAN DUTY
PAID ON THE EXPORTED GOODS CONVERTED TO U.S. DOLLARS, AND THE
CUSTOMS COMPUTER SYSTEM (ACS) WILL MAKE THE ACTUAL "LESSER OF THE
TWO" CALCULATION. CLAIMANTS SUBMITTING DRAWBACK CLAIMS THROUGH
ABI SHOULD REFER TO ADMINISTRATIVE MESSAGE 95-1087 (ATTACHMENT B)
FOR SPECIFICATIONS. CLAIMANTS SUBMITTING DRAWBACK CLAIMS ON
DISKETTES SHOULD REFER TO THE SPECIFICATIONS THAT WERE
DISTRIBUTED AS DESCRIBED IN SECTION VII.B. OF THESE INSTRUCTIONS.
CLAIMANTS SUBMITTING HARD COPY DRAWBACK CLAIMS MUST SUBMIT THIS
DUTY INFORMATION, ALONG WITH THEIR CLAIMS, IN THE FORMAT PROVIDED
ON THE ATTACHED CODING SHEET (SEE ATTACHMENT A).

THE CURRENCY CONVERSION SHOULD BE BASED ON THE RATE OF
EXCHANGE PUBLISHED BY CUSTOMS, WHICH IS BASED UPON THE FEDERAL
RESERVE RATE. THESE RATES OF EXCHANGE ARE AVAILABLE: ON-LINE IN
ACS; THROUGH ABI; ON THE CUSTOMS ELECTRONIC BULLETIN BOARD; AND
THROUGH THE CUSTOMS INFORMATION EXCHANGE (CIE) IN NEW YORK. THE
DATE OF CURRENCY CONVERSION THAT SHOULD BE USED IS THE
"ACCOUNTING DATE" WHICH IS THE DATE THAT THE DUTIES WERE PAID TO
CANADA.

D. SUBMISSION OF 5 DATA ELEMENTS

CLAIMANTS SUBMITTING DRAWBACK CLAIMS THROUGH ABI SHOULD
FOLLOW THE INSTRUCTIONS PROVIDED IN ADMINISTRATIVE MESSAGE 95-1087
(ATTACHMENT B). CLAIMANTS SUBMITTING DRAWBACK CLAIMS ON
DISKETTES SHOULD REFER TO THE SPECIFICATIONS THAT WERE
DISTRIBUTED AS DESCRIBED IN SECTION VII.B. OF THESE INSTRUCTIONS.
CLAIMANTS SUBMITTING HARD COPY DRAWBACK CLAIMS MUST SUBMIT THIS
INFORMATION USING THE FORMAT PROVIDED ON THE ATTACHED CODING
SHEET (ATTACHMENT A).

E. EXPORTED PRODUCTS INCORPORATING "NAFTA DRAWBACK"
GOODS AND GOODS ELIGIBLE FOR FULL DRAWBACK

IN CASES WHERE AN EXPORTED PRODUCT INCORPORATES BOTH GOODS
SUBJECT TO THE "LESSER OF THE TWO" CALCULATION AND GOODS ELIGIBLE
FOR FULL DRAWBACK, IN ORDER FOR CUSTOMS TO DETERMINE WHICH OF THE
DESIGNATED IMPORTED GOODS ARE ENTITLED TO FULL DRAWBACK, TWO
SEPARATE CLAIMS MUST BE FILED: ONE FOR THE GOODS SUBJECT TO THE
"LESSER OF THE TWO", AND ONE FOR THE GOODS THAT ARE ELIGIBLE FOR
FULL DRAWBACK. BOTH OF THESE CLAIMS SHOULD DESIGNATE THE SAME
EXPORTED PRODUCT. THIS INSTRUCTION IS INTENDED PRIMARILY FOR
MANUFACTURED ARTICLES THAT INCORPORATE BOTH ORIGINATING AND
NON-ORIGINATING GOODS, BUT IT MAY ALSO APPLY TO GOODS EXEMPTED UNDER
SECTION IV.D ("ADDITIONAL EXEMPTIONS TO THE "LESSER OF THE TWO"
RULE) COMBINED WITH GOODS SUBJECT TO THE "LESSER OF THE TWO".

VIII. PREVENTION OF IMPROPER PAYMENT

IN ORDER TO IDENTIFY ANY POTENTIAL OVERPAYMENTS THAT COULD
RESULT FROM A DRAWBACK REFUND AND A SUBSEQUENT REDUCTION IN DUTY
DUE TO A LATE CLAIM FOR A NAFTA RATE, CLAIMANTS MUST SUBMIT A
WRITTEN STATEMENT AS TO WHETHER THE CLAIMANT HAS PREPARED, OR HAS
KNOWLEDGE THAT ANOTHER PERSON HAS PREPARED, A CERTIFICATE OF
ORIGIN PERTAINING TO THE GOODS WHICH ARE COVERED BY THE DRAWBACK
CLAIM. THIS STATEMENT MUST BE SUBMITTED EITHER WITH THE CLAIM OR
WITHIN 30 CALENDAR DAYS OF THE FILING OF THE DRAWBACK CLAIM.
SUBMISSION OF THIS STATEMENT IS REQUIRED EVEN IF IT IS A NEGATIVE
RESPONSE.

IF THE CLAIMANT LEARNS OF THE EXISTENCE OF A CERTIFICATE OF
ORIGIN, THE CLAIMANT HAS 30 DAYS THEREAFTER TO DISCLOSE THIS
INFORMATION TO CUSTOMS.

IX. LIQUIDATION OF CLAIMS

DUE TO POTENTIAL CHANGES TO CANADIAN IMPORT ENTRIES THAT
HAVE BEEN USED TO CALCULATE U.S. DRAWBACK CLAIMS, LIQUIDATION OF
NAFTA DRAWBACK CLAIMS MAY NOT OCCUR UNTIL 3 YEARS FROM THE DATE
OF IMPORTATION INTO CANADA. IF CANADA NOTIFIES US OF A DECREASE
IN THE CANADIAN IMPORT DUTY PAID, WE WILL ADJUST THE DRAWBACK
CLAIM AND ISSUE A BILL FOR THE EXCESS DRAWBACK PAID. THE 3-YEAR
LIQUIDATION PERIOD IS TO ALLOW US TO MAKE THESE ADJUSTMENTS IF
NECESSARY. HOWEVER, ACCELERATED PAYMENT MAY BE PAID ON NAFTA
DRAWBACK CLAIMS.

QUESTIONS REGARDING THESE INSTRUCTIONS MAY BE DIRECTED TO
TRACEY DENNING, FIELD OPERATIONS, AT 202-927-0197. QUESTIONS
REGARDING THE ABI OR DISKETTE PROCESSING MAY BE ADDRESSED TO
ME AT 202-927-0299.

JIM HALPIN
DRAWBACK PROJECT LEADER
FIELD SYSTEMS DIVISION, HEADQUARTERS