Bonded Warehouse; Manipulation; Manufacture; Transfer ticket; Class 8 warehouse; 19 CFR 19.11; 19 U.S.C. 1562

HQ 114399 September 30, 1998 WAR-3-01-RR:IT:EC 114399 LLB CATEGORY: Carriers Ms. Annette Stevens Century Arms, Inc. 5 Lemnah Drive St. Albans, Vermont 05478 RE: Bonded Warehouse; Manipulation; Manufacture; Transfer ticket; Class 8 warehouse; 19 CFR 19.11; 19 U.S.C. 1562 Dear Ms. Stevens: Reference is made to your letter of July 1, 1998, in which you propose to take certain specific actions with regard to firearms currently stored in your bonded warehouse, in order that they might be withdrawn and entered for consumption into the United States. Our ruling follows. FACTS: Century Arms, Inc., of St. Albans, Vermont, operates a Class 8 bonded warehouse in which is stored certain firearms known as Enfield and Webley Revolvers. It is stated that in order for the firearms to be withdrawn for consumption into the United States, it will be necessary that they be fitted with hammer blocks. In order to accomplish this desired end, it is proposed that the firearms, currently held under one of three cited bond numbers, be disassembled in the warehouse into so-called "parts kits." It is then proposed that the revolver frames, stripped of parts, be moved pursuant to a delivery ticket (Customs Form 6043) from the warehouse to a location less that one mile away known as Gleason Brothers. Once at Gleason Brothers, that concern would "machine clearance cut and broach a groove" in each frame in order that each might later be fitted with a hammer block. Another delivery ticket (CF 6043) would then be executed in order to return the frames to the warehouse where the firearms would be reassembled in such fashion that they may be withdrawn for consumption. ISSUE: Whether merchandise stored in a Class 8 bonded warehouse may be manipulated prior to being temporarily transferred to an unbonded facility for manufacturing operations, and thereafter again transferred to the warehouse for further manipulation before being entered for consumption. LAW AND ANALYSIS: Pursuant to section 562, Tariff Act of 1930, as amended (19 U.S.C. 1562), certain limited manipulation of merchandise is permitted to be accomplished in bonded warehouse facilities. The statute provides in pertinent part that: ...upon permission therefor being granted by the Secretary of the Treasury, and under customs supervision, at the expense of the proprietor, merchandise may be cleaned, sorted, repacked, or otherwise changed in condition, but not manufactured, in bonded warehouses established for that purpose... Customs has promulgated regulations by which the statute is administered, which set forth the conditions under which merchandise in bonded warehouse storage may be manipulated. Section 19.1(a) of the Customs Regulations (19 CFR 19.1(a)), establishes the various classes of bonded warehouses and describes Class 8 warehouses, such as is involved in this matter, as being: Bonded warehouses established for the purpose of cleaning, sorting, repacking, or otherwise changing in condition, but not manufacturing, imported merchandise, under Customs supervision and at the expense of the proprietor. The facts as presented indicate that the firearms in their state as imported, may not be entered for consumption without the addition of hammer blocks. The necessary hammer blocks cannot be added without the need for machining operations being performed on the metal frames of the revolvers. This machining operation is clearly a manufacturing process far exceeding any acceptable definition of manipulation. The Customs Regulations do provide for manufacturing operations to be performed in bonded warehouses, which are identified as Class 6 warehouses (see section 19.1(a)(6), Customs Regulations (19 CFR 19.1(a)(6)). The regulations further provide at 19 CFR 19.15(a), however, that: ...no articles or materials received into a bonded manufacturing warehouse or articles manufactured therefrom shall be withdrawn or removed therefrom except for direct exportation or transportation and exportation in bond to a foreign country. The exportation or shipment shall in every case be under the supervision of Customs. In light of the proscription on manufacturing taking place in a Class 8 warehouse, the fact that a manufacturing operation is necessary in order that the firearms in question may be entered for consumption, the requirement that manufacturing take place only in a Class 6 warehouse, and the requirement that articles undergoing manufacturing processes in bonded warehouses be withdrawn only for exportation, the operation as proposed is found to be impermissible. We do not know whether the hammer blocks in question are a requirement of Federal or State law, or are merely required by a prospective purchaser. If the requirement is imposed by law, we are not able to suggest a means within the context of bonded warehouses by which the firearms in question may be made suitable for withdrawal and entry. It may be worthwhile investigating the possibility of transfer of the firearms to a Foreign Trade Zone for manufacturing procedures. Our preliminary inquiries with the office concerned with such matters indicates that the answer may depend upon the status under which the articles are entered into such a Foreign Trade Zone. Inquiries in this regard should be made to the Duty and Refund Determination Branch at Customs Headquarters. That office may be reached telephonically at (202) 927-2077. HOLDING: Following a thorough review of the facts as presented, as well as analysis of the law and regulations, we have determined that the articles in question may not be transferred and subjected to manufacturing processes as proposed in the Facts portion of this ruling. Sincerely, Jerry Laderberg Chief Entry Procedures and Carriers Branch