HQ 220900: Your memorandum of September 27, 1988 (DRA-1-0-C:L PTH), regarding "manufacturing or production" for drawback purposes.

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 220900

                                   January 3, 1989

          DRA-2-01-CO:R:C:E 220900 BC

          CATEGORY:  drawback

          Chief, Liquidation Branch
          U.S. Customs Service
          Southeast Region
          909 S.E. First Avenue
          Miami, Florida 33131-2595

          RE:  Your memorandum of September 27, 1988 (DRA-1-0-C:L PTH),
               regarding "manufacturing or production" for drawback
               purposes.

          Dear Mr. Hill:

                This responds to the above referenced memorandum concerning
          manufacturing for drawback purposes.  It is the opinion of this
          office, based on the information available, that no
          "manufacturing or production" for drawback purposes is evident.

          FACTS:

                Your office received a general drawback contract submitted
          under TD 83-123, pertaining to situations involving multiple
          products and relative values.  The drawback claimant imports
          stand-alone food processing machines, such as flourers,
          applicators, formers, predusters, batterers, fryers, filters,
          etc.  These are converted into integrated food processing systems
          by a connecting procedure, according to the customer's
          specifications.  In this connecting procedure, the machines are
          attached and, to facilitate the attachment, parts of the machines
          are removed.  Also, air motors are substituted for electric
          motors to permit cleansing with steam.

                The claimant omitted a description of the connecting
          process, the alleged manufacturing process.  Yet, he asserted
          that this procedure is a manufacture for drawback purposes and
          that the removed parts are by-products.  Your referenced
          memorandum rejected these assertions.

          LAW AND ANALYSIS:

                The instant set of facts falls within the category of
          "assembly" cases.  Customs has held that assembly is a
          manufacture for drawback purposes in some situations, depending
          on the facts and circumstances involved.  In CSD 80-58, Customs
          ruled that a "manufacture or production" occurred where imported
          eyeglass frames were fitted with domestic lenses.  The ruling
          referred to the general rule that a manufacture or production










          changes or transforms an article into a new and different article
          having a distinctive character or use (Anheuser-Busch v. U.S.,
          207 U.S. 556).  The ruling then stated the following: "The
          requirements that a manufactured article have a different
          character or use are satisfied when an imported article which is
          not suited for commercial use is further manufactured into one
          that is suited for commercial use." (Emphasis added.)  An
          eyeglass frame has no commercial use apart from becoming part of
          eyeglasses which have a commercial use.

                A similar case, CSD 79-39, involved the importation of
          watch movements in watch casings, the removal of the movements
          from the casings for testing and adjustment, the return of the
          movements to the casings which were then tested for water
          resistance, the attachment of metal bracelets and the boxing of
          the finished products.  On the basis of the general rule, Customs
          ruled that a manufacture took place; that is, a new and different
          article was produced: "The end product is a watch, whereas the
          imported articles were watch parts.  The watch is a new and
          different article.  It has a specific name, character and use
          different from its component parts unassembled or only partly
          assembled."

                The rule of the prior case, CSD 80-58, would also apply to
          the facts of CSD 79-39.  The watch movements and casings, by
          themselves, prior to manufacture, are not suited for commercial
          use.  After the manufacture, they are suited for commercial use
          in the form of watches.  This is essentially what CSD 79-39
          proposes when it states that the finished product has a specific
          character and use different from the unassembled component parts.
          This also is the meaning of the general rule which states that a
          new and different article with a distinctive character and use
          must emerge.

                All three "rules" involve an examination of the
          relationship between the parts and the finished products.  On the
          facts here, the parts are stand-alone, independently functional
          machines which have commercial identities and uses of their own.
          They could be, and may well be, sold as single units.  Their
          identities and uses remain the same after the  assembly
          procedure.  The finished products perform a function which is
          essentially the same as that performed by the parts individually.
          It cannot be said that the finished product has a specific
          character and use different from its component parts unassembled.
          All that has changed is the form of the machines.  For example,
          what was before a former, a batterer and a fryer is, after the
          assembly, a former, batterer and fryer connected together.  The
          United States Court of Customs and Patent Appeals held that a
          change in form alone, where the merchandise before the process is
          the same as that after the process, is not sufficient in some
          circumstances to evidence a "manufacture or production" for
          drawback purposes. United States v. Samuel Dunkel & Co., 33 CCPA
          60, CAD 317.










                Based on the foregoing, it is our belief that there has not
          been a change or transformation into a new and different article
          with a distinctive character and use.  Consequently, there has
          not been a manufacture or production process sufficient to
          qualify this operation for manufacturing drawback.

                The foregoing addresses the alleged manufacturing process
          generally as an assembly.  This pertains to the connecting of the
          various machines together to form an integrated unit.  The
          claimant's letter of June 21, 1988 describes another part of the
          procedure as the deletion of output and input conveyors and the
          substitution of air motors for electric motors.  These specific
          activities are in the nature of disassembly and repair which,
          Customs has held, do not constitute manufacturing for drawback
          purposes.  (CSD 79-79).  Therefore, neither the connection (or
          assembly) nor the specific procedures described above qualify the
          process in question for manufacturing drawback.

                In view of the fact that the machines are altered somewhat
          from their condition upon importation, by the modification and
          deletions required to change their form from stand-alone machines
          to integrated machines, it is concluded that same condition
          drawback under 19 U.S.C. 1313(j) is inapplicable.  Section
          1313(j) requires that the imported merchandise not be used in the
          United States prior to exportation in an other than incidental
          operation (19 U.S.C. 1313(j)(4)).

                Here, CSD 82-7 is instructional.  In that case, television
          sets had to be adjusted prior to exportation, not just tested or
          cleaned, or subjected to any other mere incidental operation.  As
          a consequence of the adjustment, the sets exported were not in
          the same condition as when imported, and same condition drawback
          was inapplicable.

                On the facts of the instant case, it is clear that the
          machines are subjected to more than an incidental operation.
          Because the machines have to be adjusted to accommodate the
          connecting procedure, they are no longer in the same condition as
          when imported.  Consequently, same condition drawback is
          inappropriate.  However, to the extent that the manufacturer can
          show that machines are not subject to this adjustment, and are
          thus in the same condition upon exportation, same condition
          drawback is permissible.

                Regarding the parts that are removed from the machines in
          the connecting procedure, same condition drawback is inapplicable
          because these parts were imported as parts of wholes and would
          presumably be exported as components or as parts of different
          wholes.  In addition, these parts are not by-products because
          such products, for drawback purposes, must result from a
          manufacturing process.  There is no manufacturing here, so there
          are no by-products.  However, even assuming arguendo that there
          is a manufacturing process on these facts, the removed parts
          would probably not qualify as by-products.  (CSD 83-5).










          Therefore, in that scenario, as well as under the instant facts,
          filing a drawback claim under TD 83-123 is not appropriate.

          HOLDING:

                Where various stand-alone, commercially and functionally
          independent machines are merely connected together to form a
          larger unit comprised of these machines operating in concert, and
          where the identity and function of these machines remains the
          same after the connecting procedure and the only change produced
          is in the form of the machines, there has not been a "manufacture
          or production" for manufacturing drawback purposes under 19 USC
          1313(a) and (b), but there has been process sufficient to exceed
          the limits of "incidental operation" under the same condition
          drawback provision of 19 USC 1313(j).

                                              Sincerely,




                                              John Durant, Director
                                              Commercial Rulings Division