DRA-4-RR:CR:DR 227312 CB
David A. Eisen, Esq.
Siegel, Mandell & Davidson
One Astor Place
1515 Broadway
New York, NY 10036-8901
RE: Lipstick mass imported into United States; 19 U.S.C.
1313(j)(1) and (3); 19 U.S.C. 3333(a)(2)(A); Article
303:6(b) of NAFTA; 19 CFR 181.45(b)(1); Drawback
Dear Mr. Eisen:
This is in response to your letter of October 2, 1996, on
behalf of Christian Dior Perfumes, Inc., requesting an advance
binding ruling confirming NAFTA preference eligibility for
certain cosmetic lipstick products. Our response to your request
follows.
FACTS:
Christian Dior Perfumes, Inc. (Dior), contemplates
importing bulk quantities of lipstick mass into the United States
from France. Subsequent to importation, the lipstick bulk will
be heated and bulletized for packaging into lipstick applicator
tubes. Once in its respective immediate packaging, the cosmetic
products will be packed in retail cartons. A portion may be
exported to Canada and/or Mexico for sale.
The bulletizing process involves heating the lipstick mass
to a consistency which can be poured; the mass is then poured
into bullet-shaped molds and cooled to its original consistency.
The bullet-shaped molds are then packaged in lipstick applicator
tubes. You state that upon importation into the United States
the bulk lipstick mass is classifiable under subheading
3824.90.40, Harmonized Tariff Schedule of the United States
(HTSUS). Subsequent to processing in the United States, the
finished lipstick products are classifiable in subheading
3304.10, HTSUS.
ISSUE:
Whether the bulletized and packaged lipstick are in the
"same condition", under section 203 of the NAFTA Implementation
Act and 19 CFR 181.45(b), as the imported lipstick mass, or
doest the process qualify for drawback under 19 U.S.C. 1313(a).
LAW AND ANALYSIS:
Unused Merchandise Drawback:
Section 203 of the NAFTA Implementation Act (Pub. L. 103-182; 107 Stat. 2057, 2086; 19 U.S.C. 3333), provides for the
treatment of goods subject to NAFTA drawback. Under section
3333(a), such goods mean any good other than, among other things--
(2) A good exported to a NAFTA country in the same
condition as when imported into the United States. For
purposes of this paragraph--
(A) processes such as testing, cleaning, repacking, or
inspecting a good, or preserving it in its same
condition, shall not be considered to change the
condition of the good[.] ...
Furthermore, this section provides that "[a] good exported to a
NAFTA country in the same condition as when imported into the
United States" is not a good subject to the NAFTA drawback
limitation. We note, however, that this section applies only to
goods imported into the United States that are subsequently
exported into Canada on or after January 1, 1996, or into Mexico
on or after January 1, 2001. See Annex 303.7, section C, NAFTA;
19 CFR 181.41.
The Customs Regulations issued under the authority of the
NAFTA Implementation Act specifically provide for the
availability of drawback on the exportation of merchandise to a
NAFTA country (for effective dates of the provisions in these
regulations, see 19 CFR 181.41). Under 19 CFR 181.45(b), a good
imported into the United States and subsequently exported to
Canada or Mexico in the same condition is eligible for drawback
under 19 U.S.C. 1313(j)(1) without regard to the limitation on
drawback provided for in 19 CFR 181.44 (i.e., that such drawback
may be granted only on the lesser of the total duties paid or
owed on the importation into the United States or the total
amount of duties paid on the exported good on its subsequent
importation into Canada or Mexico). Subparagraph (b)(1) of
section 181.45 provides in that:
For purposes of this subpart, a reference to a good in the
"same condition" includes a good that has been subjected to
any of the following operations provided that no such
operation materially alters the characteristics of the good:
(i) Mere dilution with water or another substance;
(ii) Cleaning, including removal of rust, grease,
paint or other coatings;
(iii) Application of preservative, including
lubricants, protective encapsulation, or preservation
paint;
(iv) Trimming, filing, slitting, or cutting;
(v) Putting up in measured doses, or packing,
repacking, packaging or repackaging; or
(vi) Testing, marking, labeling, sorting or grading.
Before determining whether the subject lipstick mass is
"used" within the meaning of 19 U.S.C. 1313(j)(1), we must
determine the intended purpose of the subject merchandise. You
have stated that, prior to importation, the merchandise is
dedicated to a specific end use as cosmetic preparations for the
lips. Additionally, you state that (although no evidence has
been provided to confirm this assertion) the mass is commercially
viable and capable of application to the lips. Thus, you contend
that the bulletizing process constitutes a simple repackaging
operation. We conclude otherwise. The bulletizing process
creates a new article of commerce. This conclusion is
substantiated by the fact that the imported mass and the exported
finished product are classifiable under different headings of the
HTSUS. In HQ 734399 (dated December 28, 1992), we held that
(within the context of a subheading 9802, HTSUS) the lipstick
mass is considered to be incomplete for its intended use prior to
the bulletizing process. The ruling went on to find that the
imported lipstick mass is not a completed article and that the
"bulletizing" process is more than a mere packaging process.
"Instead, these operations constitute necessary finishing steps
in the total manufacturing process of the finished article (i.e.,
tube lipstick)...." See HQ 734399, supra. Thus, we conclude
that the bulletizing process described in your ruling request
goes beyond the scope of the types of operations permissible for
unused merchandise drawback.
Likewise, we conclude that the process you describe does not
constitute packaging. The bulletizing process does not qualify
as a packaging operation of the type covered by 19 CFR
181.45(b)(1)(v). As discussed below, the bulletizing process is
a manufacturing process or a finishing operation which goes
beyond the scope of operations permissible under 19 U.S.C.
1313(j)(1).
Manufacturing Drawback:
Under 19 U.S.C. 1313(a), as amended by 632(a)(1) of the
NAFTA Implementation Act, provides that "[u]pon the exportation
... of articles manufactured or produced in the United States
with the use of imported merchandise, provided that those
articles have not been used prior to such exportation or
destruction, the full amount of duties paid upon the merchandise
so used shall be refunded as drawback ...."
The courts have set forth the proposition that "manufacture
or production" implies a change, but every change is not a
manufacture, despite the fact that every change in an article is
the result of a treatment of labor and manipulation. See
generally, Anheuser-Busch Brewing Association v. United States,
207 U.S. 556 (1907). Later, the courts held that if an operation
renders a commodity or article fit for a use for which it was
otherwise not fit, the operation falls within the "letter and
spirit" of "manufacture". See United States v. International
Paint Co., Inc., 35 CCPA 87, C.A.D. 376 (1948). In C.S.D. 84-52
we held that the installation of a necessary component by
noncomplex means in order to complete a larger apparatus
constitutes a manufacture or production for drawback purposes.
This decision was based on the United States Customs Court's
holding in C.J. Holt & Co., Inc. v. United States, 27 Cust.
Ct. 88, C.D. 1352 (1951), that the assembly of a tire onto a
wheel, and the placing of that assembly into an automobile trunk
was a manufacture or production for purposes of the drawback
manufacturing law.
In the instant case, the lipstick mass must be subjected to
the "bulletizing" process before it can be assembled into the
lipstick applicator tubes. The assembly into the tubes is an
additional process. As stated in HQ 734399, the heating of the
mass until it can be poured, forming it into stick or bullet
shapes in molds, cooling the shapes, and inserting them into
individual applicator tubes result in a finished product which
can be put to its intended use. Therefore, based on the
foregoing discussion, the "bulletizing" process constitutes a
"manufacture or production" for drawback purposes.
HOLDING:
The imported lipstick mass does not qualify for unused
merchandise drawback under 19 U.S.C. 1313(j)(1). However, it
does qualify for manufacturing drawback under 19 U.S.C.
1313(a)and is subject to the NAFTA drawback limitations
As to the Canadian and Mexican tariff treatment, it will be
necessary for you to contact the Customs offices of those
countries for their determination as to the eligibility of the
lipstick for NAFTA preference treatment. This agency issues
NAFTA preference rulings only in regard to products imported into
the United States from Canada or Mexico.
Sincerely,
John Durant, Director
Commercial Rulings Division