HQ 225096: Drawback for diaper changing bag; 19 U.S.C. 1313(a); 19U.S.C. 1313(j)(1)

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 225096
                           May 6, 1994


DRA-4-CO:R:C:E  225096  SR

CATEGORY:  Drawback

Mr. Richard W. Meade
A.W. Fenton Co., Inc.
6565 Eastland Road
Cleveland, Ohio 44181-0068

RE:  Drawback for diaper changing bag; 19 U.S.C. 1313(a); 19
U.S.C. 1313(j)(1)

Dear Mr. Meade:

     This is in response to your letter dated November 24, 1993,
concerning drawback on diaper changing bags.  

FACTS:

     You wish to import diaper bags, bottom stiffeners for the
bags, changing pads and small plastic bags for dirty diapers in
separate shipments from China.  Upon importation the diaper bag
is essentially a completed bag with shoulder straps, handles,
plastic lining, outside pockets, and inside bottle straps.  After
importation into the United States a bottom stiffener, a dirty
garment bag, and a changing pad will be placed into each diaper
bag then each bag will be stuffed with paper wading to shape the
bag for shelf display and affixing a price sticker or tag.  A
portion of these repacked bags will be exported to Canada, Mexico
and various South American cities.

ISSUE:

     Whether the diaper changing bags are eligible to receive
drawback.

LAW AND ANALYSIS:

     Drawback for articles that are manufactured or produced in
the United States is provided for in 19 U.S.C. 1313(a) which
reads as follows:

     (a)  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 



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     merchandise so used shall be refunded as drawback, less 1
     per centum of such duties.

     In order for a procedure to be considered a manufacture or
production a transformation must occur; a new and different
article must emerge having a distinctive name, character or use
(Anheuser-Busch Brewing Association v. United States, 207 U.S.
556 (1907)).  Articles that are merely repackaged are not
considered to be manufactured under drawback law.  In this case
the merchandise is a diaper bag when it is imported and a diaper
bag when exported.  The bag is functional as a diaper bag even
without the inserted items.  No transformation has occurred,
therefore, the bag does not meet the requirements for drawback
under 19 U.S.C. 1313(a).  

     Same condition drawback allows a refund of duties on
imported merchandise that is exported in the same condition as
when imported.  This is provided for under 19 U.S.C. 1313(j)(1),
which reads 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
               (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.

     In order to qualify for drawback under 19 U.S.C. 1313(j)(1), 
the merchandise which is exported must be the same merchandise in
the same condition as imported.  Certain incidental operations
are exceptions to the "no use" requirement, including, but not
limited to, repacking, cleaning or inspecting.  

     The bag lining, changing pads and dirty diaper bag are not
inserted in a permanent or semi-permanent manner.  The samples
provided show that all 3 inserted items can be quickly and easily
removed from the bag without changing the bag's condition in any
way.  As such, the samples you provided are potent witnesses.  



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(See Ruth F. Sturm's Customs law & Administration, (3rd Edition) 
p. 394 and cases cited therein.)  Based on the samples, the
addition of the lining and changing accessories do not change the
condition of the bag or the accessories and the insertion of
those materials would not under 19 U.S.C. 1313(j)(1) make the
merchandise ineligible for drawback.

     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.

     Same condition direct identification drawback is changed
under the new act.  Section 632 provides 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.

     The term used merchandise was not defined.  Common sense
dictates that it would mean used for its ordinary purpose.  In
this case the diaper bag and the inserted components were not
used for their ordinary purposes; they were merely repacked. 
Therefore, the diaper bag and the components would be eligible
for drawback under 19 U.S.C. 1313(j)(1).

HOLDING:

     The diaper bag, bottom stiffener, changing pad, and dirty
garment bag are only repackaged and would be eligible for 



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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