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