HQ 222524: Application for Further Review of Protest No. 0401-90- 000044 under 19 U.S.C. 1313(j)

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 222524

                        December 24, 1990

DRA-4-CO:R:C:E  222524 CB

CATEGORY:  Drawback/Protest

Regional Commissioner
U.S. Customs Service
10 Causeway Street
Suite 801
Boston, MA  02222-1056

RE:  Application for Further Review of Protest No. 0401-90-
     000044 under 19 U.S.C. 1313(j)

Dear Sir:

     The above-referenced protest was forwarded to this office
for further review.  We have considered the points raised and our
decision follows.

FACTS:

     The subject protest concerns certain drawback entries that
were liquidated in October of 1989.  The claims were the subject
of an audit conducted by the Boston Regional Regulatory Division. 
During the course of the audit it was determined by the auditors
that these claims were ineligible for inclusion in a same
condition drawback claim.  The protest rests on the
interpretation of 19 U.S.C 1313(j) and 19 CFR 191.141(a)(3).  

     The merchandise at issue are modules (loaded boards) which
were imported with the intent of being incorporated into a
Central Processing Unit ("CPU").  According to the information
provided by the protestant, after the boards were inserted into a
backplane and tested they failed the test and were removed from
the backplane to be returned to the supplier.  The operations
performed consist of attaching a memory cable to the memory
module and then attaching the memory cable to the backplane
assembly.  The assembler then insures that the cable locks are
secured.  The backplane assembly is then subjected to several
burn-in tests.  It is during these tests that the memory modules
fail.  Subsequent to rejection, the imported merchandise was
disassembled from the subassemblies and memory modules and
exported for repair.

     It is protestant's claim that these loaded boards never
became part of a functional CPU and therefore could not have been
"used" within the meaning of the same-condition drawback law.  
The protestant contends that there are no manufacturing steps
performed on the subject merchandise.  Protestant claims that the -2-



merchandise enters the country fully manufactured and is simply
inserted into the backplane.  Therefore, since nothing is added
to or deleted from the merchandise, the same condition
requirement has been satisfied and protestant is entitled to
drawback upon the exportation of the merchandise.  Protestant
argues that the subject merchandise was not used for its intended
purpose.  According to protestant, the subject modules are
manufactured to compute data and they can only serve their
function in concert with the other components of the CPU.  Each
module is tested to insure that it will perform its intended
function by inserting them into the backplane.  Therefore, since
the modules did not perform as intended, they were not used for
their intended purpose.

     The Regulatory Audit Division took the position that the
subject articles were subjected to a manufacturing operation by
being assembled into a subassembly.  In essence, that the
assembly process constitutes a new unit (the computer backplane
assembly) with different properties and, therefore, use has taken
place within the meaning of the regulations.  Additionally, that
the defect could have developed as a result of subjecting the
merchandise to an assembly process.  The auditors determined
that, at this point in time, it is impossible for Customs to
determine whether the defect was present at time of importation
or developed during the assembly process.  Protestant was
informed that the correct method of obtaining drawback was filing
the claims under rejected merchandise drawback.  However, in the
instant case, the time limitations for rejected merchandise
drawback precluded the filing of such a claim.

ISSUE:

     Whether the subject entries qualify for same-condition
drawback under 19 U.S.C. 1313(j)?

LAW AND ANALYSIS:

     Section 313(j), Tariff Act of 1930, as amended (19
U.S.C. 1313(j)), provides for a refund of duty if a duty-paid
article is exported in the same condition as when imported,
within three years from date of importation, and was not used in
the United States.  The statute provides that the performing of
incidental operations do not constitute a use for drawback
purposes.  Incidental operations include, but are not limited to,
testing, cleaning, repacking, and inspecting.

     The Customs Service administration of the same-condition
drawback law is governed by 19 CFR 191.141.  The regulation
provides that the performing of incidental operations (such as
testing and inspecting) on the imported item, not amounting to -3-


a manufacture or production, shall not be treated as a use of the
merchandise.  The prevailing interpretation of "use" of an
article under 19 U.S.C. 1313(j) and 19 CFR 191.141 is that an
article is used when it is employed for the purpose for which it
was manufactured and intended.  See, e.g., C.S.D. 81-222 and
C.S.D. 82-135.  Articles that have been changed in condition due
to deterioration, accidental destruction or damage are also
usually ineligible for same-condition drawback under 19 
U.S.C. 1313(j).  See, e.g., C.S.D. 83-23, C.S.D. 83-26.

     The question is whether the introduction of the loaded
boards into the manufacturing process constitutes a "use" for
same-condition drawback purposes.  Headquarters has previously
ruled, under similar circumstances, that if a component is
removed after installation and testing, same condition drawback
applies.  In C.S.D. 84-52, a disc drive was placed on a movable
track; then input/output cables were plugged into the unit; and
the power cable was plugged in; finally, the entire printer was
tested as a functional unit.  It was held that if the importer
removed the disc drives after testing and exported them
seperately, the same-condition drawback law would be applicable. 
We see no reason to reach a different conclusion in the instant
case.

HOLDING:

     The installation of the loaded boards for testing purposes
does not constitute a "use" for same-condition drawback purposes. 
Therefore, the subject protest should be Approved.


                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division