8. Proposal: Repeal section 151.

Explanation: The manipulation or garbanzo peas in a bonded warehouse can be performed under the general provisions of section 1562. Section 151 is surplusage.

9. Proposal: Amend section 1309 by deleting subparagraph (b). Explanation: Such an amendment would be made as a conforming amendment only if proposal 1(a) were adopted.

10. Proposal: Repeal section 1311.

Explanation: Section 1311 is not used, because of the
requirement of this section that goods manufactured in
bonded warehouse be exported.

11. Proposal: Repeal section 1312.

Explanation: The provision now serves almost exclusively
to delay payment of duty on imported ores until the
metal refined there from is sold and ready to go into
consumption, a benefit not afforded to other processors
of imported crude materials. Exports are rarely made
from the warehouses. It is not believed there would
be a noticeable difference in international trade were
the section to be repealed.

12. Proposal: No change in section 1317.

Explanation: No conforming amendment is necessary in
connection with any proposal discussed herein.

13. Proposal: No change in section 1557.

Explanation: The provisions for deferring payment of
duties while goods are in bonded storage and for avoid-
ing duties on exports continue to serve the purposes
for which they were enacted.

14. Proposal: Amend provisions of section 1562 (a) to
provide that goods may be exhibited in bonded warehouses
and (b) to limit the manipulation of goods in a bonded
warehouse to those articles which are subsequently
exported.

Explanation: Proposal (a) is contingent upon the demon-
stration of a need for such a procedure--see proposal
7, par 4. Proposal (b) is advanced because manipulation
before withdrawal for consumption appears to serve only
one purpose, the avoidance of duty.

Release under bond provisions

Items 864.05 through 864.75 of section 1202, relating to condi

tions under which goods may be entered temporarily withcut the payment

of duty:

15(a). 1/

(b)..

Proposal: Repeal that portion of item 864.05 which
allows articles to be entered for purposes of process-
ing, but retain provisions permitting articles to be
repaired or altered.

Explanation: The provision, which dates from 1958, is
little used. The provision for repairs or alterations
would be retained because duties on the value of the
imports in many cases would equal or exceed the costs
of repairs or alterations and would preclude the con-
tinuance of such operations.

Proposal (alternate to (a)): Amend item 864.05 to
permit substitution of domestic goods for imported goods
in the same manner as is now permitted under the draw-
back procedure, or with the substitution of the concept
of "fungibility" for the present concept of "some kind
and quality".

Explanation: If entry under bond is broadened in scope to permit the substitution of domestic goods, it is believed that many users of the drawback provision would switch to this procedure as it is generally less costly.

16. Proposal:

Consolidate items 864.10, -.15, -.20, -.25, -.30, and -.75 into a single provision to read as follows:

Articles solely for use as models, samples, exhibits,
or for testing, experimental, or review purposes;
and motion picture advertising films.

Explanation: The six items are closely related. The proposed description covers the cited items and possibly others of a kindred nature.

Note proposals 1(a) and (b) which are interrelated with proposals 15(a) and (b).

17. Proposal: Consolidate items 864.35 and -.50 into a single provision to read as follows:

Vehicles and craft of all kinds, professional
equipment, tools of trade, camping equipment,
and usual equipment and repair components for
such articles; all the foregoing imported by or
for nonresidents sojourning temporarily in the
United States and for the use of such nonresi-
dents for taking part in contests, for pursuing
a profession, or for camping.

Explanation:

As all of these items relate to classes of articles for the use of nonresidents sojourning temporarily in the United States consolidation is in order.

18. Proposal:

Amend item 864.45 to read as follows:

The usual or ordinary types of shipping or trans-
portation containers and holders, if designed
for, or capable of, reuse, whether filled or
empty; or if not designed for, or capable of,
reuse, if empty and to be exported filled.

Explanation: Items 800.00 and 808.00 now permit vir-
tually all reusable containers and holders of U.S. ori-
gin, filled or unfilled, to clear customs without entry
or duty charge. Item 808.00, also permits such con-
tainers and holders of foreign origin, filled or unfilled,
on which duties have once been paid, to clear customs
without entry or duty charge. Moreover, it permits
reusable containers and holders filled or unfilled,
which are deemed by the Secretary of the Treasury to be
used as "instruments of international traffic", to clear
customs without entry or duty charge irrespective of origin.
Such articles are deemed to be used solely in interna-
tional traffic even though they may be used in the United
States in local traffic as an incident of the travel
between the port of entry and its destination or vice

versa.

In light of the foregoing, it seems anomalous that
item 864.45 now only permits the temporary duty-free
entry of containers for compressed gases, filled or
empty, and containers or other articles in use for
covering or holding imported articles during transpor-
tation to their destination in the United States. Such

reusable containers and holders--because they are not of domestic origin, have never been assessed with duty, and have not been designated as "instruments of international traffic" --are denied the more liberal treatment afforded under item 800.00 and 808.00. The cost of containers and holders, particularly in packaged retail goods where the container and holder are destroyed by the ultimate consumer, can have a significant bearing on the total cost of exported articles. It is anticipated that the proposed provision would cover all containers and holders of the types described in general headnote 6(a) and (b) of the Tariff Schedules of the United States. While reusable containers and holders could be imported and exported full or empty, the privilege on the non-reusable ones would be limited to those imported empty and exported filled with merchandise.

19. Proposal: No changes in items 864.40, -.55, -.60, -.65, and -.70.

Explanation: Except for proposals 15(a) and (b), the only proposals being made under the item 864.--series are consolidations. No changes are now contemplated with respect to the above cited items because they are not of a kindred nature which permits further consolidation.

20. Proposal: Make amendments to headnotes affected by proposals 15 through 18 as necessary for purposes of conformity.

General description

THE DRAWBACK PROCEDURE

The word "drawback" is used in the statutes to describe duties and internal revenue taxes that are refunded upon removal of the goods from the customs territory of the United States. With certain minor exceptions, such a removal contemplates that the goods will enter international commerce.

Section 1313 is the provision containing the basic criteria for the payment of drawback on an exported article. Sections 81c (foreign trade zones) and 1309(b) (supplies for vessels and aircraft) relate to exceptional situations in which drawback may be paid even though there has been no technical "exportation". Section 1557 relates to a special situation permitting drawback to be paid on the re-exportation of a duty-paid article that has remained in a customs bonded warehouse since its importation.

Payments of drawback are made on (1) articles manufactured or produced from imported duty-paid (or tax-paid) materials or parts and (2) imported duty-paid (or tax-paid) articles exported without change 1/ The two classes of articles and their subdivisions,

in condition.

with the provisions of law pertaining thereto, are identified below:

(a) Articles manufactured or produced in whole or in part from imported duty-paid merchandise (sec. 1313(a)).

Under the drawback provisions, articles furnished as supplies to vessels and aircraft in international commerce are considered as exported (sec. 1309(b)).