DRA-2-02:CO:R:C:E 224402 AJS
Mr. Alfred D'Amico
Duty Drawback Services, Inc.
P.O. Box 398
Farmington, MI 48332-0398
RE: Assembly of wooden boxes; 19 U.S.C. 1313(a); "manu- factured
or produced"; C.S.D. 79-40; Anheuser-Busch Brewing Association v.
U.S.; 19 U.S.C. 1313(j)(1); exportation; 19 CFR 101.1(k); U.S. v.
The National Sugar Refining Co.; C.S.D. 81-143; 31 Op. Attys.
Gen. 1.
Dear Mr. D'Amico:
This is in reply to your letter of January 5, 1993,
concerning the drawback eligibility of component parts for wooden
boxes.
FACTS:
A United States manufacturer imports duty paid components of
wooden boxes from Canada. Each component has a specific part
number. These boxes are designed to be assembled to customer
specification for carrying designated automotive parts overseas.
They are also designed to be disassembled as well. Once
imported, these components are assembled into box configurations
for specified automotive parts.
When the boxes of automotive parts are shipped overseas,
they are registered as Instruments of International Traffic
(IITs). As IITs, no duty is paid when the boxes enter a foreign
country. After the boxes are emptied, they are broken down into
their individual component parts and shipped back to the U.S. for
reuse. They reenter the U.S. as IITs and no duty is paid on the
components. The box components may be reused four to five times
during their useful life, and are eventually destroyed overseas
when they are no longer of use. The boxes appear to remain under
the ownership of the U.S. manufacturer during this entire
scenario.
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ISSUE:
Whether the subject box components are eligible for
drawback. More specifically, whether the use of U.S. owned boxes
as IITs is an "exportation" for drawback purposes. Also, whether
the destruction of the box components overseas is an
"exportation".
LAW AND ANALYSIS:
This request does not indicate which specific drawback
provision that you believe is applicable. Therefore, we will
consider the provisions which may be applicable in our view.
19 U.S.C. 1313(a) provides that "[u]pon the exportation of
articles manufactured or produced in the United States with the
use of imported merchandise, the full amount of duties paid upon
the merchandise so used shall be refunded as drawback, less 1 per
centum of such duties . . ." In this case, component parts of
wooden boxes are imported from Canada with duty paid upon them.
These boxes are assembled nonpermanently into specified
configurations for certain automotive parts. This assembly
process raises the question of whether an article has been
"manufactured or produced" in the United States.
In C.S.D. 79-40, Customs stated that "[m]anufacture or
production is defined for drawback as the process or pro- cesses
which, through labor and manipulation, change or transform an
article or articles into a new and different article having a
distinctive name, character or use." See, for example, Anheuser-
Busch Brewing Association v. United States, 207 U.S. 556 (1907).
This definition requires consideration of both the process and
the result. Unless the process itself requires significant
effort, measured in terms of capital, labor, and complexity, the
change is too insignificant to be considered a manufacture or
production. The nonpermanent assembly of wooden box components
into boxes would not appear to require any significant amount of
effort in terms of either capital, labor or complexity. Accord-
ingly, we conclude that the subject assembly is too
insignificant a process to be considered a manufacture or
production. Therefore, the box components are not eligible for
drawback under 19 U.S.C. 1313(a).
19 U.S.C. 1313(j)(1) provides that "[i]f 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-
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(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 box components do not appear to satisfy the
requirements of this provision. First, the components will not
be exported in the same condition as when imported because they
are assembled into boxes prior to exportation. In addition, the
eventual destruction of the components will occur overseas and
thus outside of Customs supervision. Lastly, the components will
be used within the U.S. to assemble boxes. Consequently, the
subject box components are also not eligible for drawback under
19 U.S.C. 1313(j)(1).
Your letter specifically raises the question of whether the
subject box components qualify as an exportation for drawback
purposes. 19 CFR 101.1(k) defines the term "exportation" as "a
severance of goods from the mass of things belonging to this
country with an intention of uniting them with the mass of things
belonging to some foreign country." See also United States v.
The National Sugar Refining Co., 39 C.C.P.A. 96, 100 (1951).
This definition excludes from the term "exportation" merchandise
that is shipped "abroad with the intention of returning it to the
United States with a design to circumvent provisions of
restrictions or limitations in the tariff laws or to secure a
benefit accruing to imported merchandise" such as the drawback
laws. In this case, there does not appear to be any intention of
returning the box components to the U.S. with a design to secure
drawback. This conclusion is based on the fact that the box
components are instead returned to the U.S. for reuse as IITs.
In C.S.D. 81-143, Customs ruled that cargo containers
manufactured in the U.S. with foreign components are eligible for
refunds of duty as drawback when such containers are manufactured
under drawback regulations and exit the U.S. in international
traffic under foreign ownership (emphasis added). In addition,
we stated that the resolution of the exportation issue depends
upon the ownership of the articles at the time they leave the
country. In this instance, the boxes appear to be owned by the
U.S. manufacturer when they leave the country as well as the
remainder of the time that
they are in use. Accordingly, the subject boxes do not
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satisfy the foreign ownership requirement when they exit the U.S.
as IITs. Therefore, the use of U.S. owned boxes as IITs is not
an exportation for drawback purposes.
Your request also raises the issue of whether the box
components are exported when they are destroyed overseas.
Generally, we follow the opinion of the Attorney General that the
shipping of merchandise out of the U.S. simply for destruction
does not constitute an exportation for drawback. 31 OP. Attys.
Gen. 1 (1916) (A.G.). In that case, cigarettes manufactured with
the use of Turkish tobacco were sold for sale in the domestic
market. After they deteriorated and became unsalable, the
cigarettes were sent abroad for destruction. This situation was
held not to be an exportation for drawback purposes. The
Attorney General decision relied on the finding that "the courts
have almost uniformly construed the words 'export' and
'exportation' . . . as embodying the idea of introduction of
merchandise into a country for consumption, use, or sale." A.G.,
p. 7. Clearly in that case, the cigarettes were not sent abroad
for any of these purposes. In this instance, the reason that the
box components are withdrawn from international traffic overseas
is so that they may be destroyed. Like the above discussed
cigarettes, they are also deteriorated and unusable. In
addition, the box components are not introduced into the foreign
country for either consumption, use or sale. Thus, in our view
the destruction of the box components overseas is not an
exportation for drawback purposes.
HOLDING:
The subject box components are not eligible for drawback
under either 19 U.S.C. 1313(a) or (j)(1). Neither the use of
U.S. owned boxes as IITs nor the destruction of the box
components overseas qualifies as an exportation for drawback
purposes.
Sincerely,
John Durant, Director
Commercial Rulings Division