HQ 223808: Protest and application for further review no. 2809-91-101607; manufacturing or same condition drawback; modification ofthermal array recorder; manufacturing drawback; same conditiondrawback; manufacture or production; incidental operation; 19U.S.C. 1313(a); 19 U.S.C. 1313(j)(1); 19 U.S.C. 1313(j)(4)

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 223808

                          July 24, 1992

DRA-2 CO:R:C:E  223808  C

CATEGORY:  Drawback

District Director of Customs
San Francisco District Office
U.S. Customs Service
555 Battery St.
P.O. Box 2450
San Francisco, CA 94126

RE:  Protest and application for further review no. 2809-91-
101607; manufacturing or same condition drawback; modification of
thermal array recorder; manufacturing drawback; same condition
drawback; manufacture or production; incidental operation; 19
U.S.C. 1313(a); 19 U.S.C. 1313(j)(1); 19 U.S.C. 1313(j)(4)

Dear Sir:

     This responds to the referenced protest and application for
further review, dated September 26, 1991.  We have reviewed all
relevant materials, and our decision follows.

FACTS:

     PROTESTANT is an importer of thermal array recorders.  The
recorder, the TA-2000, is a stand-alone, independently operable
recorder that is sold and usable as is - that is, in its
condition as imported.  PROTESTANT sells the TA-2000 as an in-
facility (e.g. office or laboratory), stationary recorder. 
PROTESTANT also modifies the recorder after entry and sells it as
a portable unit and a rack-mountable unit.  The brochure
submitted by PROTESTANT briefly describes the three recorders as
follows:

     Stand Alone Recorder - The economical TA 2000 Stand
     Alone unit is ideal for desk-top and cart-mount
     applications where preconditioned signals are
     available. The TA 2000 is designed to directly accept
     analog signals up to +/-5V.

     Portable System - The TA 2000 portable system includes
     a 5900 Signal Conditioner Cage, recorder enclosure with
     handles, chart take-up drawer, and interconnecting
     cable. The 5900 cage in conjunction with any of Gould's
     4600 or 5600 Series Signal Conditioners provides
     unparalled [sic] application flexibility to meet your
     specific test and measurement requirements.

     Rack-Mount System - The Rack-Mount System includes a
     5900 Signal Conditioner Cage, recorder enclosure, chart
     take-up drawer, mountable in a standard 19 inch RETMA
     rack. 

     PROTESTANT first filed for drawback under the same condition
drawback provision, 19 U.S.C. 1313(j).  By letter of November 8,
1989, your office informed PROTESTANT that its modification
operation exceeds the limits of "incidental operations" permitted
under 19 U.S.C. 1313(j)(1).

     Subsequently, PROTESTANT requested permission to operate
under the conditions of the general manufacturing drawback
contract, Treasury Decision (T.D.) 81-234.  By letter of
September 25, 1990, your office denied drawback on the grounds
that the modification operation does not constitute a
"manufacture or production" for drawback since it does not
transform the imported merchandise into a new and different
article with a distinctive character or use.  Consequently, on
June 28, 1991, eight entries were liquidated without the benefit
of drawback.  This protest was filed on September 26, 1991,
objecting to these liquidations.

     The protest asserts that a drawback refund should be
approved under either 19 U.S.C. 1313(j)(1) or 19 U.S.C. 1313(a). 
Regarding the same condition drawback provision, PROTESTANT
asserts that the modification operation is an incidental
operation permissible under section 1313(j)(1).  Under the
manufacturing drawback provision, PROTESTANT asserts that a
manufacture or production takes place in modifying the TA-2000
into the portable and rack-mountable units.  Further, the protest
asserts that Customs Service Decision (C.S.D.) 91-18 is
incorrect.  That ruling held that the manufacturing drawback
provision and the same condition drawback provision are not
complementary and contiguous provisions; failure to qualify for
drawback under one provision does not qualify a procedure, by
operation of such failure, for drawback under the other.  In this
latter regard, it is argued that if the procedure involved is not
an incidental operation permissible under the same condition
drawback provision, it must perforce be a manufacture or
production.

ISSUE:

     On the facts of this case, is drawback allowable under
either 19 U.S.C. 1313(j)(1) or 19 U.S.C. 1313(a)?

LAW AND ANALYSIS:

     Initially, we note that PROTESTANT"s protest of the
liquidations in question was timely filed under 19 U.S.C.
1514(c)(2).

Same Condition Drawback - 19 U.S.C. 1313(j)(1)

     Under 19 U.S.C. 1313(j)(1), drawback is allowed upon the
exportation of imported merchandise if that merchandise was not
used in the United States and is in the same condition at
exportation as it was upon importation.  There is an exception to
the use prohibition.  Under section 1313(j)(4), the performing of
an "incidental operation" is not treated as a disqualifying use
of the imported merchandise.  An "incidental operation" is not
defined in the statute, but several explicit examples are
illuminating: testing, cleaning, repacking, and inspecting. 

     We agree with your view that the modification operation
performed by PROTESTANT to make a portable system and a rack-
mountable system from the imported stand-alone TA-2000 does not
qualify as an incidental operation.  This operation is not
remotely similar to the exemplars contained in section
1313(j)(4).  Further, the operation changes the condition of the
imported merchandise.  It is not in the same condition at
exportation and thus does not meet the basic requirement of
section 1313(j)(1)(A)(i).

Manufacturing Drawback - 19 U.S.C. 1313(a)

     Under 19 U.S.C. 1313(a), drawback is allowed upon the
exportation of articles manufactured or produced in the United
States with the use of imported, duty-paid merchandise.  The term
"manufactured or produced" has been defined as the production of
a new and different article having a distinctive name, character,
or use.  Annheuser-Busch Brewing Co. v. United States, 207 U.S.
556 (1907).  PROTESTANT  asserts that the modification operation
here involved produces a new and different article and that
manufacturing drawback should be approved.  The modification
procedure was described by PROTESTANT in a letter dated August
10, 1990, as follows:

     1) Remove recorder housing.
     2) Rewire transformer to 230 volt (input changed from  
        parallel to series wiring)(not applicable to 115V   
        units).
     3) Place recorder into new housing and secure with     
        bolts.
     4) Add a new front panel to the equipment.
     5) Add a new specification plate to unit.

     We agree with your view that the modification operation here
involved is not a manufacture or production for drawback.  There
has not been evidenced a sufficient transformation in character
affecting the imported TA-2000 recorders to support the
conclusion that a new and different article has been produced.  

C.S.D. 91-18

     It is not necessary to revisit the issue considered in
C.S.D. 91-18 in great detail here.  We reaffirm that ruling's
holding, and we submit that it is particularly relevant to the
facts of the instant case.  There are numerous operations
performed on or with imported merchandise that neither produce a
new and different article nor qualify as incidental operations. 
The procedures discussed in C.S.D. 91-18 and the instant case are
good examples.  One need only look at the many rulings that have
denied applicability of manufacturing drawback on the grounds
that the procedure involved did not produce a new and different
article.  In the great majority of these cases, the condition of
the imported merchandise has been changed to a sufficient degree
to preclude the conclusion that what is exported is in the same
condition as was the imported merchandise upon importation.  We
believe that the holding of C.S.D. 91-18 is a sound
interpretation of 19 U.S.C. 1313(j)(1) and properly reconciles
the principle of same condition and the incidental operation
exception.  If it is accepted that any operation that is not a
manufacture or production under the manufacturing drawback
provision qualifies as an incidental operation under the same
condition drawback provision, the concept of "same condition" is
rendered meaningless and the exemplars of incidental operations
in section 1313(j)(4) are stretched beyond recognition. 

HOLDING:

     Neither same condition nor manufacturing drawback is
applicable to the modification procedure in question.  It is not
a "manufacture or production" under 19 U.S.C. 1313(a), nor does
it qualify as an "incidental operation" under 19 U.S.C.
1313(j)(4).  The exported merchandise is neither a new and
different article, nor is it in the same condition as was the
imported merchandise upon importation.

     You are hereby instructed to deny this protest.  Please
attach a copy of this decision to the CF 19 Notice of Action to
be forwarded to PROTESTANT in accordance with 19 C.F.R. 174.30.

                               Sincerely,




                               John Durant, Director
                               Commercial Rulings Division