HQ 0224148 - Manufacture, What Is; Manufacturing Drawback; Reconditioning of Antimony Pentachloride; 19 U.S.C. 1313(a) and (b) - United States International Trade Commision Rulings

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HQ 224148

December 7, 1992

DRA-2-01-CO:R:C:E 224148 PH

CATEGORY: DRAWBACK

Mr. Jerry K. Lamb
Drawback Manager
Panalpina Inc.
Post Office Box 60164 AMF
Houston, Texas 77205

RE: Manufacture, What Is; Manufacturing Drawback; Reconditioning of Antimony Pentachloride; 19 U.S.C. 1313(a) and (b)

Dear Mr. Lamb:

In your letter of August 20, 1992, you request a ruling on whether a process your client in this matter uses with antimony pentachloride is a manufacture for purposes of the manufacturing drawback law (19 U.S.C. 1313(a) and (b)). Due to confidentiality concerns, the FACTS portion of this ruling is abbreviated, as agreed in the letter from your client which you forwarded with your November 23, 1992, letter, and as agreed between Mr. Jack Reese of your client and Mr. Paul Hegland of my staff. Our ruling follows.

FACTS:

In the enclosure you provided with your request and in the enclosure provided with your November 23, 1992, letter and the telephone conversation referred to above, your client's operation is described as follows:

Spent antimony pentachloride catalyst is reprocessed into fresh antimony pentachloride catalyst of over 99 percent purity in a multi- step operation involving reaction with antimony metal (producing antimony trichloride), distillation of intermediate products followed by crystallization (both distillation and crystallization purify the antimony trichloride), and chlorination (to produce the antimony pentachloride).

The above description is generally consistent with the "textbook" descriptions of the production of antimony pentachloride (see Kirk-Othmer, Encyclopedia of Chemical Technology (4th Ed. 1992) vol 3, p. 391, "Antimony pentachloride is usually prepared by chlorination of molten SbCl3"; see also Ullmann's Encyclopedia of Industrial Chemistry (5th Ed. 1985), vol. A3, p. 68, "[Antimony pentachloride] can be produced by saturating molten antimony trichloride with chlorine, followed by vacuum distillation"). (A copy of the Kirk-Othmer definition is enclosed to be forwarded to your client in this matter, per the request of your client's representative in his discussion with my staff.)

Antimony pentachloride is described in the above-cited texts as "a colorless, hygroscopic, oily liquid that is frequently yellow because of the pressure of dissolved chlorine [which is] a useful chlorine carrier" (Kirk-Othmer, supra) or "a pale yellow fuming liquid of unpleasant odor [which] acts as a chlorine donor in the chlorination of organic compounds [and] is also used as a polymerization catalyst" (Ullmann's, supra). Antimony trichloride is described as "a colorless, crystalline solid, readily soluble in hydrochloric acid [which is] used as a catalyst or as a component or catalysts to effect polymerization [and for other uses]" (Kirk-Othmer, supra, at pp. 387-389) or as being "soft, crystalline, colorless, and very hygroscopic" (Ullmann's, supra).

ISSUE:

Is the process described in the FACTS portion of this ruling a manufacture or production for purposes of the manufacturing provisions of the drawback law (19 U.S.C. 1313(a) and (b))?

LAW AND ANALYSIS:

Under section 19 U.S.C. 1313(a), drawback is authorized "[u]pon the exportation of articles manufactured or produced in the United States with the use of imported merchandise", upon compliance with the provisions in 19 U.S.C. 1313 and the Customs Regulations issued thereunder (19 CFR Part 191). Under 19 U.S.C. 1313(b), "[i]f imported duty-paid merchandise and duty-free or domestic merchandise of the same kind and quality are used in the manufacture or production of articles within a period not to exceed three years from the receipt of such imported merchandise by the manufacturer or producer of such article, there shall be allowed upon the exportation of any such articles [drawback]." Drawback under this provision is also conditioned upon compliance with the provisions in 19 U.S.C. 1313 and the Customs Regulations issued thereunder.

Generally, in determining whether there has been a manufacture or production for drawback purposes, Customs has long used the criteria in the case of Anheuser-Busch v. United States, 207 U.S. 556 (1908). 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. Since then, in the case of United States v. International Paint Co., 35 CCPA 87, C.A.D. 376 (1948), it has been held that the fact that an exported product does not have a distinctive name different from that of the imported product does not preclude there being a manufacture or production for drawback purposes.

In this latter case, the Court found that the process of eliminating mineral acids and metallic salts and adding varnish to a paint substance created a new use for a substance that was known as "paint" before and after the process. The process consisted of pouring out those impurities which naturally separated to the top of the paint, mechanically stirring the remainder to cause a further separation and pouring out those impurities, and then adding varnish to the impurity-free residue to increase viscosity. The critical point for the Court appears to have been the recognition that the paint in its imported condition could not be used to protect steel hulls, but that it could be so used after the processing (see discussion of this case in Customs Service Decision (C.S.D.) 81-235).

The operations in the case under consideration are at least as much of a "manufacture or production" as those in the International Paint Co. case. Here, the imported merchandise would be antimony pentachloride and the article to be exported would also be antimony pentachloride. The imported merchandise would be transformed into a different chemical (antimony trichloride which, according to the definitions of both chemicals referred to in the FACTS portion of this ruling, has substantially different characteristics than the antimony pentachloride) which would be purified by distillation and crystallization before being chlorinated to obtain antimony pentachloride. According to the description in the facts, the imported antimony pentachloride would be spent as a catalyst and the antimony pentachloride which had undergone the described process would be a fresh antimony pentachloride catalyst. On the basis of the International Paint Co. case (see also, our ruling of June 3, 1966 (File: DB 731.1 H), holding that the removal of impurities from imported effluent ethylene glycol by means of distillation and filtration to result in ethylene glycol, antifreeze grade, is a manufacture or production for drawback purposes), we conclude that the process described above and in the FACTS portion of this ruling is a "manufacture or production" for purposes of the drawback law, provided, that the spent antimony pentachloride catalyst could not be used as a catalyst and the fresh antimony pentachloride catalyst could be so used.

Please be aware that this ruling addresses only the issue of whether the process described is a manufacture or production for drawback purposes. Depending on other factors involved in this operation, the process may or may not result in qualification for drawback. For example, the importation of fresh catalyst, use of that catalyst in United States, production of fresh catalyst from the resulting spent catalyst by the described process, and the exportation of the fresh catalyst so produced would not result in drawback on the importation and exportation of the fresh catalyst under 19 U.S.C. 1313(j) (same condition drawback), nor would it result in drawback under 19 U.S.C. 1313(a) or (b) (manufacturing drawback). This is so with regard to same condition drawback because one of the requirements of that law is that the imported merchandise or substituted imported or domestic merchandise may not be used in the United States before exportation). This is so with regard to manufacturing drawback because, as distinguished from the case in which spent catalyst is imported and processed into fresh catalyst, the merchandise in its imported form (i.e., as fresh catalyst) could be used for the same purpose and in the same way as the exported merchandise (see discussion of the "critical point" in the International Paint Co. case).

HOLDING:

The process described in the FACTS portion of this ruling is a manufacture or production for purposes of the manufacturing provisions of the drawback law (19 U.S.C. 1313(a) and (b)), provided, that the spent antimony pentachloride catalyst could not be used as a catalyst and the fresh antimony pentachloride catalyst could be so used. (See United States v. International Paint Co., 35 CCPA 87, C.A.D. 376 (1948).)

Sincerely,

William G. Rosoff

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