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