DRA-2-01 CO:R:C:E 224646 CB
Mr. Michael R. Smiszek
International Licensing & Compliance
General Electric Aircraft Engines
1000 Western Avenue, MD-27726
Lynn, MA 01910-0001
RE: Manufacturing drawback; 19 U.S.C. 1313(a); assembly of
engine; HQ 224391
Dear Mr. Smiszek:
This is in response to your letter of April 12, 1993, wherein
you requested a ruling on whether certain operations constitute a
manufacture for drawback purposes.
FACTS:
On your original ruling request (HQ 224391, dated April 6,
1993) Customs held that the installation of numerous connecting
parts and components onto an Accessory Gearbox (AGB) which is then
installed in an engine prior to export constituted a "manufacture
or production" for manufacturing drawback purposes under 19 U.S.C.
1313(a).
Presently, you are requesting an additional ruling on whether
the configuration of the AGB in Lynn, Massachusetts, which is
exported and then assembled onto the engine in foreign soil is a
"manufacture or production" for drawback purposes. The AGBs are
imported from Japan without the connecting hardware which consists
of parts such as nipples, tubes, elbows, nuts, packings, washers,
brackets, chip detectors, plug and bleeders, and oil strainers.
The configured AGB is exported to Canada in the form of a modular
kit for final assembly. The modular kit consists of subassemblies
which, when assembled together becomes a complete engine.
ISSUE:
Whether the above-described process constitutes a manufacture
for drawback purposes?
LAW AND ANALYSIS:
Section 313(a) of the Tariff Act of 1930, as amended (19
U.S.C. 1313(a)), provides that upon the exportation of articles
manufactured or produced in the United States with the use of
imported merchandise, ninety-nine percent of the 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. The
application of labor (and presumably capital) to any article was
not thought by the courts to necessarily result in a manufacture or
production. See Anheuser-Busch Brewing Association v. United
States, 207 U.S. 556 (1907) and Hantranft v. Wiegman, 121 U.S. 609
(1887). Later, the courts held that if an operation renders a
commodity or article fit for use for which it was otherwise not
fit, the operation falls within the "letter and spirit" of
"manufacture". United States v. International Paint Co. Inc., 35
CCPA 87, C.A.D. 376 (1948).
In C.S.D. 84-81 it was held that the programming of blank
magnetic tapes for computer use constitutes a manufacture following
the reasoning that if the "operation involves a special treatment
of the imported merchandise to obtain certain physical properties
required by the person performing the treatment, then the operation
is a manufacture." In C.S.D. 84-52 it was 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 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 AGB must be configured before it can
be attached to an engine. The configuration requires the
installation of numerous parts and components as mentioned above.
Therefore, based on the above discussed Customs Service decisions,
the described configuration process constitutes a "manufacture or
production" for drawback purposes.
HOLDING:
The configuration of the Accessory Gearbox (AGB), dedicating
it to a specific use, constitutes a manufacture or production for
the purposes of 19 U.S.C. 1313(a).
Sincerely.
John Durant, Director
Commercial Rulings Division