HQ W229488 - Drawback; Manufacture or Production; 19 U.S.C. 1313(a); Unused Merchandise; 19 U.S.C. 1313(j); HQ 227906; Toner Imported in Bulk; 19 U.S.C. 1625; Ruling Modification under Section 1625(c). - United States International Trade Commision Rulings

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HQ W229488

December 23, 2002

DRA-2-01-RR:CR:DR W229488 MM

CATEGORY: DRAWBACK

Mr. George M. Keller
Customs Advisory Services, Inc.
1003 Virginia Avenue
Suite 200
Atlanta, Georgia 30354

RE: Drawback; Manufacture or Production; 19 U.S.C. 1313(a); Unused Merchandise; 19 U.S.C. 1313(j); HQ 227906; Toner Imported in Bulk; 19 U.S.C. 1625; Ruling Modification under Section 1625(c).

Dear Mr. Keller:

This is in reference to an application for a specific manufacturing drawback ruling filed on behalf of International Trade & Manufacturing Corporation d/b/a ITM, Inc. covering toner cartridges and bottles manufactured under title 19, United States Code, section 1313(b) with the use of dry bulk toner. The application was submitted pursuant to Headquarters Ruling Letter (HQ) 227906 issued to ITM Corporation (ITM) on May 27, 1998 concerning the applicability of drawback under section 1313(a) on toner imported in bulk containers and repackaged into cartridges or bottles.

We held in HQ 227906 that the operation of repackaging imported toner into cartridges and bottles resulted in a commodity or article fit for a use for which it was otherwise not fit, therefore making 19 U.S.C. 1313(a) applicable. Upon review of HQ 227906 Customs has determined that repackaging imported bulk toner into bottles of toner that are not made to fit a particular copy machine but are merely used by the operator to physically pour the toner into the machine does not produce an article fit for a use for which it was otherwise not fit. The ruling is to be modified for the reasons set forth below.

FACTS:

ITM imports bulk toner for use in copy machines. The bulk toner is received by ITM in 60, 80 and 100 kilogram drums or barrels to be conveyed to smaller containers used in specific copy machines. The operation involves machines that take the bulk product and by use of vacuum and screw augers convey the toner to the appropriate container. The toner is vacuumed from barrel or drum and transferred to a holding tank. An auger then screws toner down a tube and deposits it into the proper container.

Various shapes and sizes of toner containers are used in copy machines. The toner containers are known as toner kits, bottles, tubes, cartridges, consumables, containers or starter kits. They all refer to the same product, a container which holds toner which is inserted into the machine to make copies.

There are four main ways of conveying the toner to the machine:

1. A sealed container of toner which when the seal is removed is physically poured into the toner hopper or receptacle in the machine by the operator. The container is then discarded. This material is stored in the machine until it calls for the addition of more toner to be added to the developer section. Bottle type containers are used in this method by the operator to pour the toner into the machine.

2. A sealed container of toner which is snapped in place on the toner receptacle and has a foam rubber insert. The operator then pulls the seal on the toner container and the toner is dumped or gravity fed into the toner hopper or receptacle which is part of the machine. The container is then discarded. Either cartridge or bottle type containers that are specifically engineered to be used with particular model copiers are used in this method to dump the product into the machine receptacle.

3. A container of toner which stays in the copier until empty and dispenses the toner when the machine requires the addition of more toner. These containers usually use a spiral groove on the container to gradually move the toner from container to the toner receptacle when needed. Bottle type containers that are specifically engineered to be used with particular model copiers are used in this method to dispense the toner slowly when the machine requires additional toner.

4. A container of toner which stays in the copier until empty and dispenses the toner through a mechanical action produced by the machine through a gear connection to the toner container which moves a paddle or auger to shove the toner into the machine receptacle. Cartridge type containers that are specifically engineered to be used with particular model copiers are used in this method to dispense the toner when the machine requires additional toner.

ISSUE:

Whether the bottled toner which is physically poured into the machine as described in item 1 above qualifies for manufacturing drawback under 19 U.S.C. 1313(a).

LAW AND ANALYSIS:

Drawback is authorized under the provisions of title 19, United States Code, section 1313(a) upon the exportation of articles manufactured or produced in the United States with the use of imported merchandise. The Customs Regulations 19 CFR 191.2(q), define a manufacture or production as:

1. A process, including, but not limited to, an assembly, by which merchandise is made into a new and different article having a distinctive “name, character or use”; or

2. A process, including, but not limited to, an assembly, by which merchandise is made fit for a particular use even though it does not meet the requirements of paragraph (q)(1) of this section.

Generally, in determining whether there has been a manufacture or production for drawback purposes, Customs has long used the criteria in the Anheuser-Busch Brewing Association v. United States 207 U.S. 566 (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 name, character, or use.

In HQ 227906 we held that the operation of filling various bottles and cartridges with imported bulk toner resulted in a commodity or article fit for a use for which it was otherwise not fit, thereby falling within the “letter and spirit” of “manufacture” for drawback purposes. It was stated that the end user of the bottles of toner would pour the contents from the bottle into the copier while the cartridges were actually placed into the copier allowing the contents to be dumped into the copying machine. This conclusion was based on a previous ruling HQ 207865 dated June 25, 1977 concerning toner imported in 180 liter drums which was rebottled into 600 milliliter bottles and packaged for retail sale. However, the retail bottles in this case were all made to fit commercial copy machines. It was held the rebottling of bulk toner into bottles that were intended to be used as part of the copier rather than as containers resulted in a retail preparation suitable for immediate consumption thus changing the use and character of the merchandise. The operation was said to constitute a manufacture or production within the meaning of the drawback statute.

In determining whether the end product would have been processed into a new and different article with a distinctive name, character or use we can look to the classification of the end use toner bottles and cartridges. In HQ 964351 Customs determined that toner cartridges and bottles like those described in items 2, 3 and 4 under the FACTS section that are made to fit specific copy machines whether they remain in the machines until they were empty of toner or are fitted onto the machine
to refill the machine with toner are to be classified as parts or accessories of copying machines. The bottles of toner described in item 1 are not made to fit into or onto specific machines and would be considered containers of toner.

However, unused merchandise drawback is allowable under title 19, United States Code, section 1313(j) on imported merchandise which has been exported or destroyed under Customs supervision within 3 years of the date of importation and has not been used in the United States before such exportation or destruction. The term “unused merchandise” is not defined in the Customs Regulations. However, it has been determined that an article is used when it is employed for the purpose for which it was manufactured or when it is used in the manufacture or production of another article. Section 1313(j)(3) provides that the performance of certain operations or combination of operations (such as testing, cleaning, repacking, inspecting, sorting, refurbishing, freezing, blending, repairing, reworking, cutting, slitting, adjusting, replacing components, relabeling, disassembling, and unpacking), on the imported item, not amounting to a manufacturing or production for drawback purposes, will not be treated as a “use” of that merchandise. The toner described in item 1 under the FACTS section would qualify as unused merchandise drawback because it is merely bottled which does not amount to a manufacture or production for drawback purposes.

HOLDING:

Upon reconsideration of HQ 227906 we find that the toner in bottles as described in item 1 under the FACTS section which were not made to fit specific copying machines has not been changed in name, character or use and is therefore not eligible for manufacturing drawback under 19 U.S.C. 1313(a). However, we find such bottled toner is eligible for unused merchandise drawback under 19 U.S.C. 1313(j)(1).

HQ 227906, dated May 27, 1998, is hereby modified. In accordance with 19 U.S.C. 1625(c), this ruling will become effective on exports made on or after 60 days after its publication in the CUSTOMS BULLETIN.

Sincerely,

Myles B. Harmon

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