DRA-4-CO:R:C:E 225467 SR
Mr. Leonard M. Shayne
Leading Forwarders, Inc.
149-09 183 ST
Springfield Gardens,, NY 11413
RE: Drawback for cosmetic bags; 19 U.S.C. 1313(j)(1); Public Law
103-182 the North American Free Trade Implementation Act 107 Stat
2057), Section 632.
Dear Mr. Shayne:
This is in response to your letter dated June 2, 1994,
concerning drawback on cosmetic bags.
FACTS:
Cosmetic bags will be imported. Some of the bags are made
up of nylon fabric and entered under subheading 4202.92.30,
Harmonized Tariff Schedule of the United States (HTSUS) at a duty
rate of 20% ad valorem. Other bags are chiefly made of ramie and
entered under subheading 4202.92.20, HTSUS, at a duty rate of 6-
1/2% ad valorem. In the United States the importer will assemble
various sample size cosmetic and grooming products and place them
in the bags and then export the filled bags.
ISSUE:
Whether the cosmetic bags may be eligible for drawback under
19 U.S.C. 1313(j)(1).
LAW AND ANALYSIS:
Same condition drawback is provided for under 19 U.S.C.
1313(j)(1), as follows:
(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
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(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.
However, the drawback laws were substantively amended by
section 632, title VI - Customs Modernization, Public Law 103-182
the North American Free Trade Implementation Act (107 Stat 2057)
enacted December 8, 1993. Title VI of that Act amended 19 U.S.C.
1313(j). Section 692 of the Act provides that Title VI
provisions take effect on the date of enactment.
Section 632 of the new act changes same condition direct
identification drawback by providing that imported merchandise
for which duty was paid and is, before the close of the 3-year
period beginning on the date of importation, exported or
destroyed under customs supervision and is not used within the
United States before such exportation or destruction is eligible
for "unused merchandise drawback". The law no longer requires
that the merchandise be in the same condition as when imported.
A Senate Joint Report, Senate Report 103-189, (1993) at p.
82, discusses unused merchandise drawback as follows:
Section 632 renames the same condition drawback provision
"Unused Merchandise Drawback," and amends the provision in
several ways. The provision will allow exporters to claim
drawback on imported merchandise, or other domestic or
imported merchandise that is substituted for the imported
merchandise, that is not used within the United States
before exportation or destruction, while removing the
requirement that the merchandise be in the same condition.
This allows for the possibility that drawback may be claimed
on exported or destroyed unused merchandise that has
physically deteriorated.
A definition of the term used merchandise was not provided
in the language of the new act. However, in C.S.D. 81-222 and
C.S.D. 82-135 it was found that an article is used when it is
employed for the purpose for which it was manufactured and
intended. An article is also considered used when it is used in
the manufacture or production of another article. C.S.D. 81-179.
The performance of certain "incidental operations" (such as
testing cleaning, and inspecting) on the imported item, not
amounting to a manufacture or production, is not treated as a use
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of the merchandise. 19 U.S.C. 1313(j)(3). In this case,
according to the facts provided, the cosmetic bags would merely
be filled with the inserted components would not be used for
their ordinary purposes. This would be considered an incidental
operation. Therefore, the cosmetic bags would be eligible for
drawback under 19 U.S.C. 1313(j)(1).
HOLDING:
The cosmetic bags are merely repackaged and would be
eligible for drawback under 19 U.S.C. 1313(j)(1) as amended by
section 632, title VI - Customs Modernization, Public Law 103-182
the North American Free Trade Implementation Act (107 Stat 2057)
enacted December 8, 1993.
Sincerely,
John Durant, Director
Commercial Rulings Division