Tide Water Oil Co. v. United States

United States Court of Claims · Federal Courts

Federal Courtsdrawbackcustoms dutiesmanufacturedrawbackRev. Stat. § 3019manufactured in the United Statesimported materials

Facts

The claimant exported boxes and sought a drawback equal to duties paid on the imported materials used to make them. The boxes were made from box shooks imported from Canada on which duties were paid, and nails manufactured in the United States from imported European steel rods. The shooks had been prepared in Canada complete for use as boxes except for being nailed together and trimmed in the United States. The government argued that such shooks were not the kind of "materials" contemplated by the statute and that the boxes were not manufactured in the United States.

Issue

Whether boxes made in the United States by nailing together and trimming imported Canadian box shooks qualify as "articles wholly manufactured" in the United States "of materials imported" under Rev. Stat. § 3019, so as to entitle the exporter to a drawback. More specifically, the question was whether the imported shooks were "materials" within the statute when they had already been prepared abroad in an advanced stage for their final use.

Rule

Under Rev. Stat. § 3019, the phrase "articles wholly manufactured of materials imported, on which duties have been paid" means: (1) the exported articles must have been manufactured in the United States; (2) they must have been wholly manufactured of imported materials on which duties were paid; and (3) the required manufacture includes, as a necessary part, the manufacture or preparation of the materials for the finished article. To constitute manufacture, there must be a transformation of the materials into a new and different article; mere fastening together in the United States of imported materials already prepared abroad for that very use is not enough.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Orchard Supply in Buffalo imports wooden crate panels from Ontario after duties are paid. The panels arrive cut, grooved, and matched so each bundle can only be nailed into a single produce-crate design; in Buffalo, workers nail the panels together and sand rough edges before the crates are exported to Chile.

Is Lakeview most likely entitled to drawback on the exported crates under the governing rule?

Explanation. The majority held that drawback requires articles manufactured in the United States from imported materials on which duties were paid, and that the manufacture includes the necessary preparation of the materials. Where imported components are already prepared abroad for the very use to which they are put, merely fastening them together in the United States is not the required transformation into a new and different article. Here, the crate panels were already advanced and dedicated to crate-making, so the domestic nailing and sanding would likely be treated as only completing manufacture that began abroad.