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HQ 226778





August 29, 1996

DRA-2-01-RR:IT:EC 226778 LTO

CATEGORY: DRAWBACK

Mr. Patrick Barrett
Arizona Customs Brokers
2602 South 24th Street
Suite 101
Phoenix, Arizona 85034

RE: Drawback; Manufacturing; Assembly of Fishing Rod; C.J. Holt & Co., Inc. v. United States; United States v. International Paint Co., Inc.; Anheuser-Busch Brewing Association v. United States; 19 U.S.C. 1313(a); 19 U.S.C. 1313(j)(1)(3); 19 CFR 191.21(a); 19 CFR 191.65; 19 CFR 191.66; 19 CFR 191.73

Dear Mr. Barrett:

This is in response to your letter of February 14, 1996, requesting, on behalf of Jef International, Inc. ("Jef"), the applicability of the drawback laws to the assembly of a fishing rod.

FACTS:

Pre-shaped cork rod handles are received by Jef in finished condition from a foreign supplier (currently in Taiwan). The handles, which are sent to an assembly and finishing company in Washington state, are assembled with other components to form fishing rods. The rod handles slide onto domestic fishing rod blanks and are glued in place. Jef also purchases a domestic cloth bag in which each finished rod is shipped, and other imported components, such as the rod guides and reel seats, which are sent to the assembly company. The assembly company supplies the fishing rod blank, thread to wrap the rod guides on the rod and the labor to completely assemble and finish the rod.

Once the rod is assembled, Jef purchases it from the assembly company. The price paid includes the fishing rod blank, labor and miscellaneous items, such as glue, thread and the
finish applied over the thread. Jef then exports the finished product directly from the assembly company to Japan.

ISSUE:

Whether the assembly of cork rod handles with other components to form fishing rods constitutes a manufacture or production for purposes of the drawback law.

LAW AND ANALYSIS:

Section 313(a), Tariff Act of 1930 (19 U.S.C. 1313(a)), as amended by section 632(a)(1) of the North American Free Trade Agreement (NAFTA) Implementation Act of 1993, provides that "[u]pon the exportation . . . of articles manufactured or produced in the United States with the use of imported merchandise, provided that those articles have not been used prior to such exportation . . ., the full amount of duties paid upon the merchandise so used shall be refunded as drawback, less 1 per centum of such duties . . ." You have asked whether the cork rod handles are eligible for manufacturing drawback under this provision.

Generally, in determining whether there has been a manufacture or production for drawback purposes, Customs has long used the criteria in the case of Anheuser-Busch v. United States, 207 U.S. 556 (1908). Under Anheuser-Busch, a manufacture or production is considered to have occurred when the merchandise under consideration is changed or transformed into a new and different article having a distinctive name, character and use. Since then, in the case of United States v. International Paint Co., Inc., 35 CCPA 87, C.A.D. 376 (1948), it has been held that the fact that an exported product does not have a distinctive name different from that of the imported product does not preclude there being a manufacture or production for drawback purposes.

In this case, imported cork rod handles are assembled with fishing rod blanks and other components, including rod guides and reel seats, to produce a new and different article, a fishing rod. Accordingly, a manufacture or production has taken place, and the cork rod handles are eligible for drawback pursuant to section 1313(a). See C.J. Holt & Co., Inc. v. United States, 27 Cust. Ct. 88 (1951) (wherein the United States Customs Court held that imported tires and tubes mounted on American-made wheels and furnished as spare tires on an American-made automobile, subsequently exported, were entitled to drawback; the assembly of
the tires and tubes into the automobile constituted a "manufacture or production" in accordance with 19 U.S.C.

You also asked whether the cork rod handles are eligible for "same condition" drawback pursuant to 19 U.S.C. 1313(j). Section 632, title VI - Customs Modernization, Public Law 103-182, the North American Free Trade Implementation Act (107 Stat. 2057), enacted December 8, 1993, changed same condition direct identification drawback by providing that imported merchandise for which duty was paid and which 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. However, as stated above, the cork rod handles have been "used" in the manufacture or production of the exported fishing rods, and therefore, are not entitled to drawback within 19 U.S.C. 1313(j)(1) (see 19 U.S.C. 1313(j)(3)).

Finally, at your request, we have enclosed a copy of an approved drawback contract under 19 U.S.C. 1313(a) (T.D. 81-234). However, we note that in the operation you describe, the manufacturer or producer of the fishing rods appears to be the assembly company, and not Jef. If this is so, the assembly company is the entity which would need a drawback contract (see 19 CFR Part 191, Subparts B and D, and section 191.21(a)). Further, appropriate certificates of delivery and certificates of manufacture and delivery (see 19 CFR 191.65 and 191.66) would be necessary (see also 19 CFR 191.73, regarding the parties who may claim drawback).

HOLDING:

The cork rod handles are eligible for drawback within 19 U.S.C. 1313(a).

Sincerely,

Director, International Trade

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