HQ 221569: 19 U.S.C. 1313(b); 19 CFR 191.4(a)(1); direct identificationmanufacturing drawback; your March 14, 1989, memorandum (DRA-1-0:RA MAM) requesting internal advice regarding whether or not aprocedure is a "manufacture or production" under drawback law.

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 221569

                         August 21, 1990

DRA-2-01-CO:R:C:E 221569 C

CATEGORY:  Drawback

Regional Director for Regulatory Audit
U.S. Customs Service
Northeast Region
10 Causeway Street
Boston, MA 02222-1056

RE:  19 U.S.C. 1313(b); 19 CFR 191.4(a)(1); direct identification
manufacturing drawback; your March 14, 1989, memorandum (DRA-1-
0:RA MAM) requesting internal advice regarding whether or not a
procedure is a "manufacture or production" under drawback law.

Dear Mr. Battaglioli:

     This responds to the above referenced memorandum submitted
by you under {177.11(b)(2) of the Customs Regulations.  19 CFR
177.11(b)(2).  The response set forth below is issued under
{177.8(b) of the Customs Regulations.  19 CFR 177.8(a).  This
ruling reaffirms the "new and different article" test of
Anheuser-Busch v. United States, 207 U.S. 556 (1907).

FACTS:

     The company making the request for internal advice imports
from Japan various models of finished printers.  As we
understand, these are the LC 800, LC 815, LC 850, LC 860 plus,
and the LC 890, all belonging to the same generic family of
printers.  Most of the printers are exported in the same
condition as imported.  Some, however, must undergo a
modification before exportation.

     The LC printers, being of the same family, have basic
characteristics in common.  Yet, they also exhibit some charac
teristic differences in their capabilities designed to appeal to
customers of varying needs.  All models appear similar, and all
function as printers only.  A pamphlet advertising the
"Silentwriter LC-800 Family" describes them collectively as
follows:

          The Silentwriter 800 family offers 8-page-per
          minute laser class printing for text
          intensive, text-and-graphics, and desktop
          publishing environments. . . .

          The LC 800 family employs LED (light-emitting
          diode) technology to produce output as sharp
          as that produced by laser technology.
          Stationary and self-aligned to the
          photoconductor, the LED array eliminates
          moving parts and reduces operating noise and
          maintenance costs to a minimum.

          Quiet and easy to use, all three LC 800
          models feature a 250-sheet input bin and
          250-sheet output bin for face-down, collated
          output.  They also feature a manual insertion
          slot and front output slot for face-up
          output.

          Easily-read 32 character LCD display panels
          provide operator, status, and error messages
          as well as front panel selection of fonts,
          menus, or printer configurations.  A dual-
          cartridge printing system permits separate
          replacement of toner and photoconductor for
          economical supplies usage.

          [T]he LC 800 family printers handle 5000
          pages a month and are rated for an average
          life of 600,000 pages - or 10 years of
          trouble-free service with normal care and
          operation.  (Repair depot maintenance is
          recommended after 300,000 pages of output.)
          With options and standard features
          appropriate to each model, the LC 800 family
          offers price/performance advantages for every
          application.

     The literature submitted by the company lists specifications
for the three major LC model printers, the LC 850, LC 860 plus,
and the LC 890: print speed, warm-up time, time for first print,
print density, paper capacity, interface, emulations, fonts, and
main memory.  With respect to all models, the first three
specifications are the same.  The 300 dots per inch print density
is the same.  The paper capacity is essentially the same, with
one minor difference: The LC 890 and 860 plus are equipped with a
hopper (250 sheets, 17 lbs.), a stacker (250 sheets, 17 lbs.), a
second hopper (250 sheets, 17 lbs.), and an optional face-up tray
(24 sheets, 17 lbs.), while the second hopper is optional on the
LC 850.

     The major differences among these printers are in the
interface, emulation, font capability, and main memory features.
The LC 850 and LC 860 plus are equipped with the following
interface: Dual I/F - Centronics~ Parallel/RS232C (selection by
dip switch is noted for the LC 850).  The LC 890 lists the
following interface features: Serial RS-232/Parallel Centronics~-
type and Appletalk~ RS-422 (selection from front panel is noted).
The LC 850 has the following emulation feature: NEC Sprintwriter\
3550(IBM) and IBM\ 4201 Proprinter.  The LC 860 plus has the
same, plus HP Laserjet Plus~.  The LC 890 has HP Laserjet 500
Plus, Adobe Postscript\, and Diablo~ 630.  Both the LC 850 and LC
860 plus are equipped with four internal fonts with optional font
cartridges, while the LC 890 has 35 internal font capability and
downloadable fonts.  Main memory for each is as follows: LC 850 -
128K with 1.3 MB option; LC 860 plus - 1.3 MB; and LC 890 - 3
MB.

     Finally, while all models function as printers only, the
company's literature indicates that the LC 850 is suited for
text-intensive use, the LC 860 plus is suited for text, charts,
graphs, line drawings, forms, and spreadsheets, and the LC 890 is
suited for graphics-intensive desktop publishing.  These varying
uses/capabilities directly relate to the varying specifications
set forth above in interface, emulation, font capability, and
main memory features.  (The literature makes no mention of an LC
800 or LC 815 which, according to Customs records, are imported
by the company.)  Another difference is that the LC 800 is
imported without a controller board, distinguishing it from the
other models.

     The various LC 800 family printers which are not exported in
the same condition as imported are modified before exportation by
what is called a "conversion process."  Based on the company's
various submissions, we understand that any given printer can be
converted into a higher model, such as an LC 850 converted into
an LC 860 plus, or an LC 800 into an LC 850.  The company
submitted instructions for the conversion of a lower model into
an LC 890, the most advanced model.


     The instructions for the conversion procedure submitted by
the company are entitled: "Section 4 - Conversion Procedure, LC-
8XX to LC-890."  It would appear that these instructions are for
the conversion of any LC model printer into the LC 890.
Instruction 090 pertains to the removal of screws which secure
the control unit to the frame.  (The instructions are numbered
from 010 through 280 at intervals of ten.)  A parenthetical
indicates that base chassis are only on LC 800 models, and a note
specially instructs the following: "For LC-800 models, slide the
base chassis out and skip to element [instruction] no. 140."  The
next four steps, from 100 through 130, pertain to the removal of
the control unit, something that is unnecessary when converting
an LC 800.  All other instructions appear to apply to the
conversion of any model into the LC 890.  This may explain the
"LC-8XX to LC-890" in the title to section 4.

     There are 28 steps to these instructions.  Upon careful
review, these can be reduced practically to about 17 steps.
These steps are fairly summarized by stating that by the removal
and re-securing of screws and the disconnecting and reconnecting
of three cables, the following acts are accomplished: removal of
the printer's control unit, connection of the LC 890 control PCB
to it, and reinsertion of the control unit.  The steps appear to
be simple mechanical movements using a #2 Phillips screwdriver
and a flat blade screwdriver.  The company submitted that the
procedure takes about twenty minutes and that it takes about one
hour to fully assemble a printer from scratch.

     Regarding conversion of the LC 800, the appropriate
controller board is merely inserted into it without the necessity
of first removing a controller board.  One of the company's
submissions states the following: "The overwhelming majority of
the LC-800['s] . . . are manufactured . . . into more advanced
models by inserting a controller board and following the
conversion procedures for the desired unit."  (June 29, 1989
letter from Sullivan & Lynch, P.C., p. 2)  We presume that those
LC 800's that are not converted are sold as is or exported in the
same condition as imported.  There is no indication that an LC
800, imported without a controller board, is converted into
anything but a higher model; that is, there appears no such thing
as an LC 800 printer that operates with an LC 800 controller
board.

     The company recognizes that the conversion process precludes
application of same condition drawback (19 U.S.C. 1313(j)) for
printers that have been converted.  The company asserts that the
conversion procedure is a "manufacture or production" for
drawback purposes, entitling the converted printers for
manufacturing drawback treatment (19 U.S.C. 1313(a)).  Your
memorandum opposed this assertion, positing that the conversion
of printers of one model type into another is merely a rebuilding
or reconditioning procedure which Customs has held not to be a
manufacture or production.

ISSUE:

     On the facts here presented, has there been a production of
new and different articles from the conversion procedure in
question, such that manufacturing drawback is applicable upon
exportation of advanced model printers that have been imported
as, and then converted from, less advanced model printers, all
such printers being members of the same generic family of
printers?

LAW AND ANALYSIS:

     The drawback law, 19 U.S.C. 1313, permits a refund of duty
paid on imported merchandise that is used in the manufacture or
production of articles in the United States for exportation:
"Upon the exportation of articles manufactured or produced in the
United States with the use of imported merchandise, the full
amount of the duties paid upon the merchandise so used shall be
refunded as drawback, less 1 per centum of such duties . . ."  19
U.S.C. 1313(a).

     The definition of "manufacture or production" is supplied as
follows in Anheuser-Busch v. United States, 207 U.S. 556, 562
(1907):

          Manufacture implies change, but every change
          is not manufacture, and yet every change in
          an article is the result of treatment, labor
          and manipulation.  But something more is
          necessary as set forth and illustrated in
          Hartranft v. Wiegmann (121 U.S. 609)(1887).
          There must be a transformation; a new and
          different article must emerge, 'having a
          different name, character, or use.'

     Although the holdings of many Customs decisions on this
issue are phrased in language that is fact specific to the given
case in question, it is in fact the new and different article
test of Anheuser-Busch that is determinative.  Regardless of the

facts involved - the merchandise used, the procedure involved,
and the finished product - if a new and different article has not
emerged (from the process), there has not been a manufacture or
production for drawback purposes.

     Your memorandum cited CSD 89-13 as authority for the
rejection of manufacturing drawback in this case.  There,
manufacturing drawback was held inapplicable where stand-alone,
commercially and functionally independent machines were merely
connected together to form an integrated unit of machines.
Drawback was denied on the basis of the procedure involved and
the nature of the finished product as compared to the nature of
the imported articles prior to production.  While the holding of
CSD 89-13 was expressed in terms of these two key elements, it
was the new and different article test that was determinative.
The food-processing machines in CSD 89-13 were not manufactured
or produced because a new and different article having a
different name, character, or use did not emerge from the
procedure there involved.

     The facts of the instant case are similar to those of CSD
89-13 in that imported articles having a commercial identity and
use of their own are subjected to a procedure and emerge from
that procedure in essentially, though not exactly, the same form
with essentially, though not precisely, the same character.  A
comparison of the finished product with the imported article in
its condition prior to conversion yields this conclusion.  The LC
850, LC 860 plus, and LC 890 (and probably the LC 815)  are
commercially independent, fully manufactured finished products
that can be, and are, sold and used in the same condition they
exhibit when they are imported.  While the conversion procedure
here involved appears somewhat more involved than the mere
connecting procedure of CSD 89-13, it is nonetheless nothing more
than the reworking, rebuilding, or mechanical adjustment of one
commercially identifiable printer into another.  The article is a
printer before the conversion and a printer afterward.  While the
finished product may have additional capabilities, it is still a
printer, the name, character, and use of which has not been
altered sufficiently to evidence that a manufacture or production
has taken place.

     This is not to suggest that a commercially identifiable,
fully manufactured imported article can never be manufactured or
produced into a new and different article after importation.  The
new and different article test is determinative and, on
appropriate facts, could yield a different conclusion than that
reached here.  (See United States v. International Paint Co., 35
CCPA 87 (1948).)  The before and after comparison is but a means

by which the test is applied, a means which assists in the
determination of whether a different name, character, or use is
evidenced.  That an imported article is commercially
identifiable prior to the alleged production process is merely a
fact to be considered.

     The company itself invokes the new and different article
test and posits that the "different name, character, or use"
aspect of the test favors its assertion that a new and different
article has been produced.  The company emphasizes that the
quoted language is used in the disjunctive, suggesting that a
difference in only one or two of the quoted factors is enough to
evidence the manufacture or production of a new and different
article.

     This assertion is not sustainable.  First, to suggest that
the name change - to the extent there is one on the facts here -
is significant is not worthy of discussion, and is nonetheless
not necessarily conclusive in clearer cases.  Second, to suggest
that the finished product, the converted printer, evidences a
character that it did not possess prior to the conversion is
untenable since the printer remains a printer after the
conversion.  Third, any modifications in use made possible by the
conversion are not so extensive as to indicate the production of
a new and different article.  The phrase "new and different"
cannot be interpreted strictly to mean that any and every change
or difference signifies a new and different article.  It is not
disputed that the LC 890 can be used to perform certain functions
that an LC 850 cannot; it is merely submitted that the process by
which an LC 850 or LC 800 is converted into an LC 890 is not
productive of a new and different article.  The new and different
article test requires a transformation.  On the facts here, there
has not been a sufficient transformation.

     The company cited various Customs rulings to support its
claim for manufacturing drawback.  Most of these are
distinguishable on their facts since they involve the importation
of parts that are then used in a process or procedure by which a
finished article, different from the imported parts, is produced.

     The company cited CSD 84-81 where the programming of blank
tapes into fully functional software was considered a manufacture
or production.  This case rests squarely on the new and different
article test.  The blank tapes as imported were suited for only
limited use.  After the programming operation, the tapes had
become software capable of very complex functions of an entirely

different nature (from that of the blank tapes).  This was not an
adjustment procedure, merely enhancing an article's already
characteristic function, but a procedure productive of a
substantial change in character and use.

     Your memorandum asserted, in addition to the rule of CSD 89-
13, that the conversion procedure in this case is a repairing,
rebuilding, or reconditioning operation.  We agree with this
characterization of the adjustment procedure in the instant case
which starts with a printer, produces a few enhancements (some
admittedly impressive), and ends with a printer as the so-called
finished product.  The conversion procedure does not change the
basic character of the printers which are designed to reproduce
what is entered onto a wordprocessor screen.  The conversion
enables one printer to reproduce text, another to additionally
reproduce graphs and charts, and another to reproduce advanced
text and print embellishments.  We think these additional
features are in the nature of enhancements of one basic product,
rather than evidence of a new and different article with a
distinctive name, character, or use.

     Regarding particularly the conversion of an LC 800 into an
LC 890 or any other model, the company asserts that the
controller board-less character of the LC 800 is significant.  In
short, the company believes that because the LC 800 without the
controller board is not operational, but becomes operational
upon insertion of it, a new and different article emerges.  Given
the prior discussion regarding the conversion of other than LC
800 printers, acceptance of this theory would lead to absurd
results: The conversion procedure that would qualify as a
manufacture or production would be simpler than the conversion
procedure that would not qualify.  This is so because the
conversion of the LC 800 involves fewer steps than the
conversion of any other LC 800 family printer.  This is not to
suggest that the complexity of the operation involved is
conclusive; it is not.  Again, regardless of the complexity of an
operation, or lack thereof, the new and different article test
is conclusive.

     The LC 800 is put to one of two uses after importation.  It
is either sold as is, domestically or for export, or converted
into a higher model.  The use Customs is concerned with is the
latter.  First, there is no manufacture or production of a new
and different article when a controller board is inserted into
the LC 800, making it operational.  The mere fact that a
procedure makes a non-operational article operational is not
conclusive evidence that a new and different article has been
produced.  Any Customs ruling or advisory letter that professes
otherwise, but cannot stand up independently on the basis of the
new and different article test, is erroneous.

     Second, the conversion of an LC 800 into a higher model is
no more a manufacture or production than is the conversion of any
other model.  This conclusion is sound whether the LC 800 is
viewed, upon importation, as having a commercial identity of its
own, which is then upgraded by conversion, or, instead, as an
incomplete article upon importation which merely becomes
completed after importation.  The former rationale places the
conversion of the LC 800 in the same realm as the conversion of
any other printer.  The latter rationale distinguishes the
conversion of the LC 800 from that of other models but leads to
the same conclusion: no manufacture or production has occurred.
A process which begins with nearly completed article X and ends
with completed article X is not a manufacture or production for
drawback.

     Determinations of the instant kind are complex and,
considering the multifarious nature of processes and
manipulations which are visited upon articles in commerce, very
problematic.  Customs rulings tend to be phrased in terms that
reflect the facts of given individual cases.  The facts of these
cases differ dramatically.  Language of reasoning or of holdings
which is appropriate to the case decided can be misapplied to
the fact situations evident in others.  Precedent is applied to
more and more cases with widely varying fact situations and the
concepts become blurred, stretched, and tenuous.  It is
therefore important to focus on solid principles when deciding
cases of this kind, and the long followed (but too often left
unexpressed) new and different article test of Anheuser-Busch
remains the best formulation of the principle at issue.

     Based on the new and different article test, we agree with
your analysis in opposition to the company's appeal for drawback.
The operation in question, the conversion procedure, is held not
to be a manufacture or production for drawback purposes, but is
more in the nature of a mechanical adjustment or rework operation
that enhances the capability of a fully manufactured article
rather than produces a new article so different in character and
use from what it was before (the procedure) that it must be
considered a new and different article under the drawback law.


HOLDING:

     In determining whether or not a manufacture or production
for drawback purposes has taken place, the new and different
article test of Anheuser-Busch is determinative.  Where articles
imported in a fully manufactured condition are, after
importation, mechanically adjusted or reworked to enhance their
capabilities, while their essential nature, character, and
utility remain unchanged, a new and different article having a
distinctive name, character, or use has not been produced.  Such
an operation is not a manufacture or production under the
drawback law.  Likewise, when a nearly fully produced article is
imported, and the procedure applied in the United States merely
completes the production of that article, a manufacture or
production for drawback has not occurred.

EFFECTS ON OTHER RULINGS:

     The new and different article test of Anheuser-Busch v.
United States is not inconsistent with International Paint Co. v.
United States.  The rule of the latter case, therefore, is not
simply that there is a manufacture or production whenever a
procedure renders an imported article fit for a use it was not
fit for before the procedure.  Both cases require a finished
product that is changed, or transformed, in character and use,
and both cases applied that requirement in reaching their
respective conclusions, Anheuser-Busch denying drawback,
International Paint allowing it.

     Consequently, ruling letter 213904, dated January 11, 1982,
is hereby clarified.  The finding of manufacture or production in
that case is based on the fact that the manufacturer used an
imported article in the production of a new and different article
distinct in character and use from that imported part.  Customs
Service Decision (CSD) 82-67 is similarly clarified (16 Cust.
Bull., p. 800 (1982)).  CSD 82-93 is clarified as follows: Most
assembly operations whereby parts are connected to form a
distinct whole are considered a manufacture or production because
an imported part or parts are used in the production of a new and
different article distinct in character and use from the imported
part(s), not because the imported part(s) becomes fit for a use
which it would not be fit for absent the procedure. (See Id. at
855, 856.)


     In addition, CSD 84-52 is clarified to hold that there was a
manufacture or production in that case because an imported part
was used in the production of a new and different article
distinct in character and use from that part, not because the
procedure there involved completed production of the article.
There, the finished product was produced in the United States;
the imported article was installed as a part of the whole.


                              Sincerely,




                               John Durant, Director
                               Commercial Rulings Division