DRA-4-CO:R:C:E 224752 AJS
Deputy Regional Director
Commercial Operations
Pacific Region
U.S. Customs Service
One World Trade Center, Ste. 705
Long Beach, CA 90831-0700
RE: Protest for further review number 2809-92-100970; Same
condition drawback; 19 U.S.C. 1313(j)(1); 19 U.S.C. 1313(j)(4);
incidental operations; testing; C.S.D. 82-7; "manufacture or
production"; Anheuser Busch v. U.S.
Dear Sir or Madame:
This is our decision in protest for further review number
2809-92-100970, dated May 27, 1992, concerning the issue of same
condition drawback.
FACTS:
The subject merchandise consists of notebook computers for
which the protestant seeks a refund under the same condition
drawback law. These computer were sold to distributors of
computer peripherals. After this sale, the computers were tested
and evaluated by the distributors. The testing and evaluation
involved the computers compatibility with software applications,
hard disk drive performance, battery depletion rate, and
reliability of the computers over a period of days. The
computers did not perform these operations to the satisfaction or
the specifications of the distributors and were returned to the
protestant for a credit. It is claimed that the condition of the
computers was not changed in any manner by this testing, and that
the computers could be properly used again.
ISSUE:
Whether the subject computers were in the same condition
upon exportation as importation within the meaning of 19 U.S.C.
1313(j)(1). More specifically, whether the subject operations
performed on the computers constitute incidental operations
within the meaning of 19 U.S.C. 1313(j)(4).
-2-
LAW AND ANALYSIS:
19 U.S.C. 1313(j) provides that: (1) if imported
merchandise, on which was paid any duty, tax, or fee imposed
under Federal law because of its importation-
(A) is, before the close of the three-year period beginning
on the date of importation-
(i) exported in the same condition as when
imported, or
(ii) destroyed under Customs supervision; and
(B) is not used within the United States before such
exportation or destruction;
then upon such exportation or destruction 99 per centum of the
amount of each such duty, tax, and fee so paid shall be refunded
as drawback. The specific issue in this case is whether the
subject computers were used in the United States and thus
ineligible for same condition drawback.
19 U.S.C. 1313(j)(4) partially provides that: the performing
of incidental operations (including, but not limited to, testing,
cleaning, repacking, and inspecting) on-
(A) the imported merchandise itself in cases to which
paragraph (1) applies,
that does not amount to manufacture or production for drawback
purposes under the preceding provisions of this section shall not
be treated as a use of that merchandise for purposes of applying
paragraph (1)(B). The protestant argues that because the subject
computers were merely tested by the distributors, that therefore
they were subject to only incidental operations, and thus not
used in the United States. In this case, the computers were
subject to various types of tests to determine if they would
operate to the distributor's satisfaction and specifications.
These tests did not effect a change in the condition of the
computers nor did the tests prevent them from being properly used
again.
In C.S.D 82-7, we ruled that the testing and inspecting of
television sets were incidental operations. Therefore, we
conclude that the described testing of the subject computers is
an incidental operation within the meaning of section 1313(j)(4)
and did not change the condition of the computers in this
instance.
-3-
Section 1313(j)(4) requires that an incidental operation
performed on an article also 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). In this instance, the
testing of the computers did not transform them into a new and
different article. After testing, the computers are still the
same computers. Accordingly, the testing in question does not
amount to a "manufacture or production" of the subject computers
nor does the testing change the condition of the computers.
Consequently, the computers are in the same condition upon
exportation as importation within the meaning of section
1313(j)(1).
HOLDING:
The protest is granted. The subject computers are eligible
for same condition drawback pursuant to 19 U.S.C. 1313(j)(1)
because they were subject to only incidental operations and thus
cannot be considered used within the United States before
exportation.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by your office to the
protestant no later than 60 days from the date of this letter.
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision. Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division