Manipulation of merchandise in a bonded warehouse; combining twoseparately functioning items; 19 U.S.C. 1562; 19 CFR 19.11.

HQ 223246 December 4, 1991 WAR-3-01-CO:R:C:E 223246 TLS CATEGORY: Entry Richard M. Belanger, Esq. Powell, Goldstein, Frazier & Murphy 1001 Pennsylvania Avenue, N.W. Washington, D.C. 20004 RE: Manipulation of merchandise in a bonded warehouse; combining two separately functioning items; 19 U.S.C. 1562; 19 CFR 19.11. Dear Mr. Belanger: We have received your request for a ruling on the above- referenced matter. The points raised in your submission have been considered and our decision follows. FACTS: Your client operates a bonded warehouse in which it conducts various operations. Among these operations is the attachment of tone wheels to wheel hub units. Tone wheels are toothed metal rings that function as part of an automobile's antilock braking system. Wheel hub units consist of double row angular contact ball bearings housed within flanged outer rings. Each unit directly corresponds with a conventional hub in that during assembly that are combined as one integral part. The wheel hub units are used to attach wheels to an automobile's suspension system. Apparently the wheel hub units can be operated without the tone wheels but the reverse is not true. This is true despite the fact that they serve separate functions and do not operate together. The tone wheel cannot serve its function unless it is first attached to the hub units, however. You request a ruling on whether the attachment procedure is considered a manipulation or a manufacture. ISSUE: Whether the attachment of the tone wheel to the wheel hub unit in a bonded warehouse is a manipulation permitted under 19 U.S.C. 1562 and 19 CFR 19.11 or a manufacture prohibited under those provisions. LAW AND ANALYSIS: The relevant statute, 19 U.S.C. 1562, provides in pertinent part the following: ...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... (emphasis added.) The most prominent court ruling on the issue of manipulation versus manufacture is Anheuser-Busch Brewing Assoc. v. United States, 207 U.S. 556 (1907). The court held that in order for a process to be viewed as a manufacture a new and different article must emerge, having a different name, character, or use. Id. at 562. You cite to this case to support the proposition that because a new and different article having a different use did not emerge from the process at hand, no manufacture can be said to have taken place in the present case. It appears that the tone wheel cannot perform its function if it is not integrated with the vehicle's braking system. It further appears that the tone wheel can only be integrated with the braking system if it is attached to the wheel hub unit. The functions of the two parts evidently do not change after they are joined together. Somewhat analogous to this situation is when a headlight is mounted onto a bicycle. A cable is led from the light housing to a connector that is integrated with the bicycle's front wheel spokes. The connector transfers power generated by the rotation of the wheel to the housing, giving the light its power source. In such a scenario, it is clear that the headlight connector cannot be said to become part of the front wheel unit and it hardly can be argued that the connector functions as a part of the wheel's operation. Their functions remain separate and independent of each other despite the fact they work in conjunction with each other. Such is the case here as well. The wheel hub unit and tone wheel work in conjunction with each other but perform entirely separate and distinct functions. The tone wheel does not become part of the wheel hub system and does not assist the hub in its operation. The reverse is true as well. It is evident that the only purpose for joining these two parts together is one of convenience. Thus, we agree that a new and different article did not emerge from the assemblage of the two items and that their respective uses remained the same after assembly. The names of the two parts are the same as before the assembly, the intended uses are the same, and the characters of the respective parts do not change. Therefore, the integration of the hub wheel and the tone wheel is a manipulation, not a manufacture. HOLDING: The attachment of the tone wheel to the wheel hub unit is a manipulation, not a manufacture as the terms have been defined in Customs law. The assembly operation described above is permitted in a bonded warehouse pursuant to 19 U.S.C. 1562 and 19 CFR 19.11. Sincerely, John Durant, Director