OT:RR:CTF:EPDR H341074 SCR
Dallas Airmotive, Inc.
2988 W. Walnut Hill Lane
Irving, TX 75261
RE: Eligibility of airplane engine parts for unused merchandise drawback.
Dear Mr. Dunne:
This is in response to your letter, dated August 2, 2024, requesting a ruling on behalf of
Dallas Airmotive, Inc. (“Dallas Airmotive”), regarding whether certain airplane engine parts are
eligible for unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2). Our decision
follows.
FACTS:
Dallas Airmotive purchases and imports engines and certain aircraft engine repair parts.
At entry, duty-free treatment is claimed for the engine. The repair parts are dutiable, and first
admitted into Dallas Airmotive’s Foreign Trade Zone (FTZ) at importation. Once an engine is
imported, Dallas Airmotive “look[s] into the engine and determine[s] what parts are needed to
overhaul the finished engine.” Dallas Airmotive then withdraws the necessary imported parts
into the customs territory of the United States by filing an entry for consumption, in order to
complete repairs of an aircraft engine. After an engine is repaired using these imported and duty-
paid parts, Dallas Airmotive exports the engine. Dallas Airmotive seeks to claim substitution
unused merchandise drawback under 19 U.S.C. § 1313(j)(2) on the parts used to repair an
engine.
In April of 2021, as part of its intention to seek drawback on repair parts, Dallas
Airmotive submitted an application for accelerated payment under 19 C.F.R. § 190.92 and an
application to waive the requirement of prior notice to U.S. Customs and Border Protection
(“CBP”) of intent to export or destroy merchandise under 19 C.F.R. § 190.91. Both applications
were denied by the Detroit Drawback Office on July 18, 2024, on the grounds that utilizing the
parts, which are designed to refurbish or repair aviation engines, for their intended purpose of
repairing an engine rendered the parts used. The Detroit Drawback Office concluded the parts
were thus ineligible for unused merchandise drawback under 19 U.S.C. § 1313(j). Subsequently,
the Detroit Drawback Office advised Dallas Airmotive to submit a ruling request seeking
clarification as to the drawback eligibility of the engine repair parts.
In its request, Dallas Airmotive posits that their proposed operations do not render the
repair parts used. Dallas Airmotive cites to 19 U.S.C. § 1313(j)(3) in support of its position – this
statutory provision identifies various operations not amounting to a manufacture or production to
which an imported article may be subjected and remain eligible for unused merchandise
drawback under 19 U.S.C. § 1313(j). Specifically, Dallas Airmotive points to “repairing,”
“reworking,” and “replacing components,” as permissible operations that do not render articles
used. Dallas Airmotive seeks confirmation that its proposed operations leave the imported engine
repair parts unused for purposes of claiming substitution unused merchandise drawback under 19
U.S.C. § 1313(j)(2). Dallas Airmotive additionally seeks guidance on whether its proposed
operations would qualify for any other provision of drawback under 19 U.S.C § 1313.
ISSUE:
Whether certain airplane engine parts are eligible for unused merchandise drawback
pursuant to 19 U.S.C. § 1313(j)(2).
LAW AND ANALYSIS:
Drawback “means the refund, in whole or in part, of the duties, taxes, and/or fees paid on
imported merchandise.” 19 C.F.R. § 190.2. Pursuant to 19 U.S.C. § 1313(j)(2), drawback may be
claimed on exported merchandise that is substituted for imported and duty-paid merchandise. See
also 19 C.F.R. § 190.32(a). Drawback eligibility is conditioned on various statutory
requirements, specifically the substituted merchandise: must be classifiable under the same 8-
digit HTSUS subheading as the imported merchandise; must be exported or destroyed under
CBP supervision within five years of the date of importation; must be in the possession of the
party claiming prior to its exportation or destruction; and, must not be used in the United States
before its exportation or destruction. 19 U.S.C. §§ 1313(j)(2)(A)-(C). Accordingly, any
merchandise that is used prior to its exportation or destruction is ineligible for drawback. Thus,
to determine whether the engine parts at issue are eligible for drawback under 19 U.S.C. §
1313(j)(2), we must establish whether are used.
Pursuant to 19 U.S.C. § 1313(j)(3), merchandise is not used if it is subjected to an
operation or combination of operations that do not amount to a manufacture or production for
drawback purposes. See also 19 C.F.R. § 190.32(e). These operations 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. 19 U.S.C. § 1313(j)(3); 19 C.F.R. § 190.2 (defining “unused merchandise”). These
types of listed operations are not considered a “use” for purposes of unused merchandise
drawback, and as such, merchandise may still be eligible for drawback even if it has undergone
operations such as those identified in § 1313(j)(3). Additionally, 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
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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) and 19 U.S.C.
§ 1313(j)(2). See Headquarters Ruling Letter (“HQ”) H303174 (Sept. 26, 2022).
CBP has further defined the term “used” for purposes of drawback as employing an
article for its intended purpose. See e.g., Customs Service Decision (C.S.D.) 84-65 (Jan. 6,
1984); HQ H331751 (Nov. 20, 2024). Accordingly, an “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.” HQ H292054 (Sept. 26, 2022). In HQ H298174, dated May 31,
2024, a company sought to claim unused merchandise drawback on exported rail shipping
brackets that were designed to support wind turbine towers during transportation. The rail
shipping brackets were attached to wind turbine towers during travel to a job site and
subsequently exported. CBP determined that because the intended purpose of the rail shipping
brackets was to hold the wind turbine towers in place, and the brackets had in fact been attached
to the towers during transportation to the job site, the brackets had been employed according to
their exact intended purpose and were therefore used. Accordingly, CBP found that the brackets
were ineligible for unused merchandise drawback under § 1313(j) because they were used prior
to exportation.
Here, Dallas Airmotive’s imported engine parts are intended to serve as repair or
replacement parts for imported aircraft engines. Dallas Airmotive will “determine what parts are
needed” and will withdraw those exact parts from its FTZ for purposes of repairing an engine.
These parts are incorporated into an engine during the repair process, and the repaired engine is
subsequently exported. As Dallas Airmotive notes, “repairing,” “reworking,” and “replacing
[parts],” are among the operations listed in 19 U.S.C. § 1313(j)(3) that do not render articles used
because such operations do not amount to a manufacture or production for drawback purposes.
While a repair does occur as part of Dallas Airmotive’s proposed process, a key distinction is
that the repair is of the engine rather than the engine parts for which Dallas Airmotive seeks to
claim drawback. Dallas Airmotive specifically seeks to claim drawback on parts designed to
serve as repair or replacement parts for aviation engines.
While the physical properties and specific uses of the articles at issue here are
distinguishable from the rail shipping brackets in HQ H298174, in both cases the imported
articles are used for their exact intended purposes. The rail shipping brackets were intended to
support wind turbines during transportation in HQ H292054, and became used when so placed
upon the wind turbines as support during transit. Here, the parts imported by Dallas Airmotive
are intended to repair or replace parts within an engine, and become used when so utilized to
repair or replace parts within an engine. In conducting the engine’s repair, Dallas Airmotive does
not repair, rework, or replace, any of the imported parts on which it seeks to claim drawback.
Rather, these parts are incorporated into an engine which is repaired but on which no drawback
will be claimed because it is entered as duty-free. Once incorporated into an engine, such parts
have been employed for the precise purpose for which they were manufactured and imported.
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These imported parts are thereby employed for their intended purpose and become used prior to
their exportation as part of a repaired engine.
An essential statutory precondition to claiming substitution unused merchandise
drawback under 19 U.S.C. § 1313(j)(2) is that the specific merchandise on which drawback is
claimed must remain unused prior to its exportation or destruction. 19 U.S.C. § 1313(j)(2)(C)(i);
see also 19 C.F.R. § 190.32(a). By utilizing imported parts, designed to repair an engine, for
their intended purpose of repair or replacement engine parts, we find that Dallas Airmotive is
unable to satisfy this statutory precondition. Therefore, these engine parts are ineligible
substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2).
We note that, based on the information provided as part of this request, we are unable to
determine whether Dallas Airmotive is, in the alternative, eligible for manufacturing drawback,
pursuant to 19 U.S.C. §§ 1313(a) or 1313(b). Under 19 U.S.C. § 1313(a), drawback will be paid
upon the exportation of articles manufactured or produced in the United States from imported
and duty-paid merchandise. See also 19 C.F.R. § 190.21. Under 19 U.S.C. § 1313(b), drawback
will be paid upon the exportation of articles manufactured or produced in the United States from
merchandise substituted for imported and duty-paid merchandise. See also 19 C.F.R. §
190.22(a)(1)(i). Generally, manufacture occurs when processing results in a new and different
article with a different name, character, or use. See Anheuser-Busch v. United States, 207 U.S.
556 (1907); C.J. Holt & Co., Inc. v. United States, 27 Cust. Ct. 88 (1951), United States v.
International Paint Co., Inc., 35 CCPA 87 (1948); 19 C.F.R. § 190.2 (defining “manufacture or
production”). Further, replacing a part in a finished article is generally not a manufacture for
purposes of 19 U.S.C. §§ 1313(a) or 1313(b) because it does not yield a new or different article
of commerce. See HQ 225969 (June 16, 1995). To illustrate, in HQ 225969 CBP considered
whether replacing the engine of an imported article constituted a manufacture for drawback
purposes. In that case, a company imported light construction tools and equipment. The company
intended to replace the engines in such tools and equipment. CBP held that replacing the engine
of an article “imported in an entirely complete condition” did not constitute a manufacture
because the “mere[ ] replacement of one engine for another engine . . . is simply an alteration of
a complete article; no new or different article has resulted.” Accordingly, if Dallas Airmotive in
the future seeks a determination as to manufacturing drawback eligibility, information regarding
whether the engines it imports are incomplete absent the addition of parts may be relevant to
CBP’s assessment.
HOLDING:
Based on the above, we find that aircraft engine parts imported by Dallas Airmotive are
used for their intended purpose of repairing engines and are thus not eligible for unused
merchandise drawback under 19 U.S.C. § 1313(j)(2).
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is used on the
assumption that all the information furnished in connection with the ruling request and
incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and
complete in every material respect. The application of a ruling letter by [CBP] to the transaction
to which it is purported to relate is subject to the verification of the facts incorporated in the
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ruling letter, a comparison of the transaction described therein to the actual transaction, and the
satisfaction of any conditions on which the ruling was based.”
Sincerely,
Kristina Frolova, Chief
Entry Process & Duty Refunds Branch
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