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HQ 221569

August 21, 1990

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


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).


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.


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?


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.


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.


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.


John Durant, Director

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