H331751

HQ H331751 November 20, 2024 CBP:OT:RR:ER H331751 LNF Category: Entry Mr. Ronald Jacobsen Northstar Drawback Consultants, Ltd. On Behalf of Aluflexpack Novi, d.o.o. 505 Hawkins Drive Winnebago, IL 61088 Re: Eligibility for unused merchandise drawback under 19 U.S.C. § 1313(j)(1) and for same condition drawback under the United States-Mexico-Canada Agreement (19 C.F.R. § 182.45(b)). Dear Mr. Jacobsen: This is in response to your ruling request dated April 23, 2023, on behalf of Aluflexpack Novi, d.o.o. (“Aluflexpack”), regarding eligibility for unused merchandise drawback under 19 U.S.C. § 1313(j)(1). Additionally, you request a determination as to whether such unused merchandise, which is imported into the United States and subsequently exported to Canada, is considered to be in the same condition pursuant to 19 C.F.R. § 182.45(b) for the purpose of claiming drawback under the United States-Mexico-Canada Agreement (“USMCA”). FACTS: Aluflexpack plans to import into the United States rolls of aluminum foil, each measuring 25,000 meters in length, 622 millimeters in width, and 11 micrometers in thickness. Ultimately, the imported rolls of aluminum foil will be exported to candy manufacturer Ferrero Rocher North America (Canada) (“Ferrero Rocher”) for use in wrapping confectionary products sold at retail. The imported aluminum foil is comprised of aluminum substrate, with a thin coating of lacquer on the bottom side of the substrate to protect the confectionary product being wrapped for sanitary purposes, and ink on the top side of the substrate to identify the product as Ferrero Rocher confectionary to the ultimate consumer. In the United States, the rolls of aluminum foil will be unwound, trimmed to a specified width, and embossed with a distinctive pattern to identify the candy manufacturer as Ferrero Rocher in Canada. Aluflexpack describes such trimming as slitting to reduce width, and describes embossing as foil stamping. Once trimmed and embossed, the aluminum foil will be respooled to a length of approximately 3,000 meters. Aluflexpack describes respooling as a process of using a machine to spool the embossed foil for purposes of packaging prior to exportation. Each finished spool will have lot/spool identification number that matches the imported foil to the exported foil. Aluflexpack asserts that the processes performed in the United States, specifically, unwinding, trimming, embossing, and respooling, do not constitute a use impeding drawback eligibility under 19 U.S.C. § 1313(j). Aluflexpack also contends that post processing, the merchandise is exported to Canada in the same condition as imported for purposes of USMCA drawback eligibility in accordance with 19 C.F.R. § 182.45(b). Aluflexpack requests a determination as to whether the imported aluminum foil, subject to the above-described operations, is eligible for unused merchandise drawback under 19 U.S.C. § 1313(j)(1) and same condition drawback under the USMCA. ISSUES: Whether the aluminum foil is eligible for unused merchandise drawback under 19 U.S.C. § 1313(j)(1). Whether the aluminum foil is exported in the same condition as imported in accordance with 19 C.F.R. § 182.45(b) for drawback under the USMCA. LAW AND ANALYSIS: Whether the aluminum foil is eligible for unused merchandise drawback under 19 U.S.C. § 1313(j)(1). Drawback is the refund of up to 99 percent of certain duties, taxes, and fees paid on imported merchandise. See 19 U.S.C. § 1313(l)(2)(B); 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(1), drawback is authorized “if imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation” is, within five years of the date of importation, exported or destroyed under CBP supervision and was not used in the United States before such exportation or destruction. See also 19 C.F.R. § 190.31(a). Accordingly, merchandise that was used prior to its exportation or destruction is ineligible for drawback under 19 U.S.C. § 1313(j)(1). Pursuant to 19 U.S.C. § 1313(j)(3), imported merchandise may be subjected to various operations or processes which do not amount to use. Such processes include, but are not limited to: testing, cleaning, repacking, inspecting, sorting, refurbishing, freezing, blending, repairing, reworking, cutting, slitting, adjusting, replacing components, relabeling, disassembling, and unpacking[], [which does] not amount[] to manufacture or production for drawback purposes. Id. For purposes of drawback, 19 C.F.R. § 190.2 defines “manufacture or production” as: a process, including, but not limited to, an assembly, by which merchandise is either made into a new and different article having a distinctive name, character or use; or is made fit for a particular use even though it is not made into a new and different article. Thus, if imported merchandise has been subjected to a process that rendered it fit for a particular use, or yielded a new and different article having a distinctive name, character, or use, then a manufacture or production has occurred and the imported article is thereby used and ineligible for drawback under 19 U.S.C. § 1313(j)(1). See also Headquarters Ruling (“HQ”) H303174 (Sept. 26, 2022). Even if an article is not subjected to a process amounting to a manufacture or production, the article may still be deemed used if it is employed for its intended purpose. See e.g., HQ H290897 (July 28, 2021) (citing C.S.D. 81-222 (May 27, 1981) (defining “use” by its ordinary meaning: “(to) employ [articles in the manner] for which they were manufactured and intended”) (quoting Swalley v. Addressograph Multigraph Corp., 158 F.2d 51, 54 (7th Cir. 1946)); C.S.D. 84-65 (Jan. 6, 1984) (“[i]f a piece of equipment or a tool, etc., is put to its intended use and is found not to perform satisfactorily for any reason, that equipment or tool has nonetheless been used”)); HQ H290868 (Sept. 11, 2019) (“a finished article remains unused if subjected to an operation that does not result in the article being employed for the purpose for which it was intended and manufactured”). Here, Aluflexpack will subject the rolls of aluminum foil to trimming, unwinding, respooling, and embossing. The first three of these four processes are encompassed by a process listed in 19 U.S.C. § 1313(j)(3) which does not amount to use, namely: slitting, unpacking, and repacking. First, Aluflexpack describes trimming as “slitting to reduce width.” We thus find that trimming is encompassed by the process of slitting listed in 19 U.S.C. § 1313(j)(3). Second, the term “unwind” is defined as “to free from . . . a binding or wrapping.” Merriam-Webster Dictionary, Revised Edition (Oct. 25, 2022). “Unpack” is similarly defined as a process of “remov[ing] or undo[ing] from packing or a container.” Id. We thus find that unwinding is encompassed by the process of unpacking listed in 19 U.S.C. § 1313(j)(3). Third, the term “respool” is defined as “wind[ing] (something) on a spool again.” Id. Aluflexpack describes respooling as a process that is used to place the trimmed and embossed foil back onto the spool for purposes of packaging prior to exportation. In other words, via the respooling process, the aluminum foil will be repacked onto the spools for exportation to Ferrero Rocher in Canada. We thus find that respooling is encompassed the process of repacking listed in 19 U.S.C. § 1313(j)(3). In sum, these three processes are encompassed within the processes statutorily listed as not amounting to manufacture or production for drawback purposes, and thus, do not render the foil used. Nor do any of these three processes use the foil for its intended purpose of wrapping confectionary products, because these processes all occur prior to the exportation of the foil to Canada where it will be used by Ferrero Rocher to wrap its confectionary. See HQ H292054 (Sept. 26, 2022) (finding that merchandise is unused for drawback purposes “if utilized in a manner other than

Whether the aluminum foil is eligible for unused merchandise drawback under 19 U.S.C. § 1313(j)(1).Drawback is the refund of up to 99 percent of certain duties, taxes, and fees paid on imported merchandise. See 19 U.S.C. § 1313(l)(2)(B); 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(1), drawback is authorized “if imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation” is, within five years of the date of importation, exported or destroyed under CBP supervision and was not used in the United States before such exportation or destruction. See also 19 C.F.R. § 190.31(a). Accordingly, merchandise that was used prior to its exportation or destruction is ineligible for drawback under 19 U.S.C. § 1313(j)(1).Pursuant to 19 U.S.C. § 1313(j)(3), imported merchandise may be subjected to various operations or processes which do not amount to use. Such processes include, but are not limited to:testing, cleaning, repacking, inspecting, sorting, refurbishing, freezing, blending, repairing, reworking, cutting, slitting, adjusting, replacing components, relabeling, disassembling, and unpacking[], [which does] not amount[] to manufacture or production for drawback purposes.Id. For purposes of drawback, 19 C.F.R. § 190.2 defines “manufacture or production” as:a process, including, but not limited to, an assembly, by which merchandise is either made into a new and different article having a distinctive name, character or use; or is made fit for a particular use even though it is not made into a new and different article.Thus, if imported merchandise has been subjected to a process that rendered it fit for a particular use, or yielded a new and different article having a distinctive name, character, or use, then a manufacture or production has occurred and the imported article is thereby used and ineligible for drawback under 19 U.S.C. § 1313(j)(1). See also Headquarters Ruling (“HQ”) H303174 (Sept. 26, 2022). Even if an ar