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HQ 225570

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January 11, 1995

DRA-4-CO:R:C:E 225570 AJS

CATEGORY: DRAWBACK

Mr. Tom Brady
Pacific Rim Telecommunications, Inc.
1153 East 72nd Avenue
Anchorage AK 99518

RE: Telephone switching system; unused merchandise drawback; 19 U.S.C. 1313(j)(1); 19 U.S.C. 1313(j)(3); checking; repacking; disassembly; "use"; "manufacture or production"; uploading of data base is not use within meaning of section 1313(j)(3).

Dear Sir:

This is in reply to your request of July 19, 1994, concerning same condition drawback.

FACTS:

You intend to import telephone switching systems into the United States. While in the U.S., you intend to perform initial systems checks, upload a database into the systems for the operating parameters in Russia, and repackage the systems for shipment to Russia.

Your licensing agreement with the manufacturer prohibits the selling of these systems in the U.S., and much of the equipment purchased for the Russian market is not suitable for use in the U.S. telephone system. In addition, some of the equipment must be partially disassembled so it can be shipped by the most efficient manner.

ISSUE:

Whether the subject systems qualify for drawback pursuant to 19 U.S.C. 1313(j)(1).

LAW AND ANALYSIS:

19 U.S.C. 1313(j)(1) provides that if imported merchandise, on which was paid any duty, tax, or fee imposed under Federal Law because of it importation is, before the close of the 3-year period
beginning on the date of importation, exported and is not used within the United States before such exportation; then upon such exportation 99 percent of the amount of each duty, tax or fee so paid shall be refunded as drawback. Section 1313(j)(3) provides that the performing of any operation or combination of operations (including, but not limited to, testing, cleaning, repacking, inspecting, sorting, refurbishing, freezing, blending, repairing, reworking, cutting, slitting, adjusting, replacing components, relabeling, disassembling, and unpacking), not amounting to manufacture or production for drawback purposes under the preceding provisions of this section on the imported merchandise itself in cases to which paragraph (1) applies shall not be treated as a use of that merchandise.

You propose to perform system checks, uploading of a database for certain operating parameters, repackaging, and disassembly operations on the subject systems. The checking, repackaging and disassembly operations are specifically included within the exemplars listed in section 1313(j)(3). Section 1313(j)(3) also provides that the permitted operations cannot amount to a "manufacture or production". A "manufacture or production" has been defined as a process which transforms an article into a new and different article with a different name, character or use. Anheuser Busch v. United States, 207 U.S. 556 (1907). The subject checking, repackaging and disassembly operations do not transform the subject systems into a new and different article. Therefore, these operations do not amount to a manufacture or production. Consequently, these operations are not treated as a "use" for purposes of section 1313(j)(1).

Uploading is not specifically listed as one of the permitted exemplars within section 1313(j)(3). Although uploading does appear to be ejusdem generis (i.e., of the same kind, class or nature) to either refurbishing or reworking. The word "refurbish" is described as "to make new: renovate." Webster's Third New International Dictionary, 1910 (1968). The word "rework" is described as "to reprocess for further use". Id at 1945. The subject uploading will make the systems new or reprocess them in a way that will allow the systems to operate in Russia when they could not before. As discussed in the above paragraph, we must also determine whether the uploading is a "manufacture or production". The subject uploading operation allows the system to function within certain operating parameters. Such uploading does not transform the system into a new and different article with a different name, character or use. After the uploading, the telephone switching systems will still be telephone switching systems. Therefore, the subject uploading is not a "manufacture or production" within the meaning of section 1313(j)(3). Consequently, this uploading would not be treated as a "use" for purposes of section 1313(j)(1).

HOLDING:

The subject telephone switching systems qualify for unused merchandise drawback pursuant to 19 U.S.C. 1313(j)(1).

Sincerely,

John Durant, Director
Commercial Rulings Division

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