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HQ 223643


March 12, 1992

DRA-2-01/DRA-4-CO:R:C:E 223643 PH

CATEGORY: DRAWBACK

Regional Commissioner of Customs
North Central Region
ATTN: Chief, Drawback Branch

RE: Drawback; Assembly of Writing Pen; Manufacturing Operation; 19 U.S.C. 1313(a); 19 U.S.C. 1313(j)

Dear Sir:

In a memorandum dated December 31, 1991 (File: DRA-4-O:CO:D A.R.), the Chief of the Drawback Branch in your Region requested our advice on the applicability of drawback to the assembly of a pen. Our advice follows.

FACTS:

You have received an inquiry about the applicability of the same condition drawback law to certain pens. The pens are imported into the United States in two pieces, a barrel and a taper. In the United States, a domestically purchased ink cartridge and spring is inserted into the barrel and the taper is screwed on. According to the inquiry, the ink cartridge is added just prior to shipment due to the limited shelf life of the ink cartridge. Background materials included with your memorandum indicate that the ink cartridge referred to in this case is a "ballpoint refill". The inquirer asked whether this operation would qualify for same condition drawback and you request our advice.

ISSUES:

(1) Is a completely assembled pen, consisting of a barrel and a taper imported into the United States and a domestically purchased ballpoint ink cartridge and spring inserted into the barrel in the United States, in the same condition as the barrel and taper of the pen, imported in two pieces, so that same condition drawback could be obtained on the exportation of the completely assembled pen?

(2) If same condition drawback could not be obtained on the exportation of the completely assembled pen, is the operation described in the FACTS portion of this ruling a "manufacture or production" within the meaning of 19 U.S.C. 1313(a) so that manufacturing drawback could be obtained under that provision?

LAW AND ANALYSIS:

Under the same condition drawback law (19 U.S.C. 1313(j)), drawback may be paid on merchandise which is exported within 3 years of importation in the same condition as it was when it was imported and which was not used in the United States. Instead of being exported, the merchandise may be destroyed under Customs supervision in the United States, but the same requirements (i.e., as to being in the same condition as when imported and not having been used in the United States) apply. Under sub- paragraph (4) of section 1313(j), the performing of certain incidental operations (including, but not limited to, testing, cleaning, repacking, and inspecting) which do not amount to manufacture or production for drawback purposes are not treated as a "use" of the merchandise for purposes of section 1313(j).

In this case, two unassembled parts of a pen are imported, an essential component is added, and the parts of the pen and the added component are assembled into a completed pen. In such a case, if the completed pen were exported, it would not be in the same condition as the imported merchandise (i.e., a disassembled pen without an essential component was imported and a completely assembled pen, ready to be used for its intended purpose, would be exported). Such an operation would not qualify for same condition drawback (see, e.g., C.S.D.'s 84-52, 89-73, 90-33, and 91-18).

You also ask whether the described operation could qualify for manufacturing drawback under 19 U.S.C. 1313(a). Under that provision, of course, drawback may be granted upon the exportation of articles manufactured or produced in the United States with the use of imported merchandise. As you are no doubt aware, these provisions are not necessarily complementary (i.e., an operation which results in merchandise not being considered to be in the same condition or which is more than an incidental operation under section 1313(j) is not necessarily a manufacture or production for purposes of section 1313(a) or (b)) (see, e.g., C.S.D.'s 89-13, 89-72, and 91-18).

Generally, in determining whether there has been a manufacture or production for drawback purposes, Customs has long used the criteria in the Anheuser-Busch v. U.S., 207 U.S. 556 (1908), case. Under that case, a manufacture or production is considered to have occurred when the merchandise under consideration is changed or transformed into a new and different article having a distinctive character or use. A Court case somewhat analogous to the case under consideration is C. J. Holt & Co., Inc. v. United States, 27 Cust. Ct. 88, C.D. 1352 (1951). In that case, tires and tubes were imported into the United States and the tires and tubes were mounted on domestic wheels which were either affixed to the axles of domestic automobiles or mounted on some of the automobiles as "spare" wheels and tires. The Court held that all of the tires and tubes were subject to a manufacture or production for drawback purposes.

In rulings on the issue of whether a manufacture or production has occurred for drawback purposes, we have ruled that partial disassembly of watch cases, certain testing and adjustment, reassembly and sealing of the cases, fitting with a metal bracelet, and boxing with instructions and guarantee papers was a manufacture or production, on the basis that "the end product is a watch, whereas the imported articles were watch parts" (C.S.D. 79-40) (but see T.D. 77-126, holding that the attachment of a watch head to a wrist watch bracelet or strap was not a manufacture or production because the operation "did not produce a product with a distinctive name, character, or use"). We have held that the insertion of sunglass lenses into eyeglass frames constituted a manufacture or production for drawback pur- poses, on the basis that "the frames are not suited for commer- cial use when imported whereas the sunglasses are so suited when exported" (C.S.D. 80-58). We have held that the installation of disc drives in impact printers by "non-complex" means (i.e., by "being placed on tracks and having three hookups plugged into them") was a manufacture or production for drawback purposes, on the basis that "[i]t is not so much the non[-]complex nature of assemblies or installation and similar processes which control cases such as this, but the purpose and result of such processes [citing the decision in C. J. Holt, supra]" (C.S.D. 84-52). (See also T.D. 54782(3), assembly, by use of electrical or hand- operated machines or by hand pressure, of a sapphire ball into the seat of a brass point to form a ball point held to be a manufacture or production for other purposes.)

As stated above, in this case, two unassembled parts of a pen are imported, an essential component is added, and the parts of the pen and the added component are assembled into a completed pen. Although this operation may be described as "non-complex" (see C.S.D. 84-52), clearly the unassembled barrel and taper of the pen are not suitable for commercial use as imported and after insertion of the ballpoint ink cartridge and spring and assembly, they are so suited (see C.S.D. 80-58). On the basis of the pre- cedents described above, we conclude that this is a manufacture or production for drawback purposes. Upon exportation of the completely assembled pen, drawback could be obtained under 19 U.S.C. 1313(a), provided that the applicable requirements are complied with (see 19 CFR Part 191 and T.D. 81-234).

HOLDINGS:

(1) A completely assembled pen, consisting of a barrel and a taper imported into the United States and a domestically purchased ballpoint ink cartridge and spring inserted into the barrel in the United States, is not in the same condition as the barrel and taper of the pen, imported in two pieces. Same condition drawback may not be obtained on the exportation of the completely assembled pen.

(2) The pen assembly operation described in the FACTS portion of this ruling (i.e., insertion of a domestically purchased ballpoint ink cartridge and spring into the imported barrel and screwing the imported taper onto the barrel) is a "manufacture or production" within the meaning of 19 U.S.C. 1313(a). Upon exportation of the assembled pen, drawback could be obtained under 19 U.S.C. 1313(a), upon compliance with the applicable requirements.

Sincerely,

John Durant, Director

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