Plywood Pressure Treatment Is 'Manufacture' or 'Production' for Drawback Purposes, CBP Says
Plywood imported from Uruguay that is subjected to pressure treatment is ineligible for unused merchandise drawback, CBP headquarters said in an Aug. 21 ruling. The ruling followed a 2021 ruling request by International Forest Products (IFP) as to whether certain activities counted as “manufacturing” or “use” of such products under 19 U.S.C. § 1313(j)(1) and 19 CFR § 190.31(c).
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IFP said that it imported plywood from Uruguay and then provided it to Everwood Treatment, which subjects the plywood to pressure treatment with copper azole using a vacuum and pressure process. According to IFP's request, the plywood is loaded into a cylinder, which is then filled with the liquid preservative. The preservative is then pressure forced into the plywood. Although the plywood is typically stored at the treatment facility for one or two weeks, the total process is completed in less than a day. The treated plywood is then transported to the Port of Mobile, Alabama, for export back to Uruguay.
The plywood is intended for outdoor applications and general construction, including for agricultural, commercial and residential uses, IFP said. The treatment is intended to improve the plywood’s resistance to moisture and insects, a quality "particularly valuable" to customers in the Caribbean, IFP said. According to the importer, the treatment "does not otherwise alter the physical characteristics or intended use of the plywood."
CBP noted that drawback can be claimed on imported merchandise that is exported or destroyed within five years from the date of importation and isn't "used" in the U.S. beforehand. Merchandise is deemed to be "unused" if it was not subjected to any operations from the date of importation or if it was subjected to an operation that didn't "amount to a manufacture or production."
There must be a transformation to a new and different article to qualify as "manufacture," CBP said in its analysis. The agency also noted that the Court of Customs and Patent Appeals, in U.S. v. International Paint Co., established the definition of "manufacture" as an operation involving treatment of merchandise to obtain certain properties required for a specific use and involving significant capital and labor expenditure.
IFP argued that the use of the plywood post-treatment “remains identical to the intended use pre-treatment, i.e., for general construction uses.” However, CBP concluded that the treated plywood's resistance to moisture and pests was "a new performance characteristic" that substantially distinguished how treated plywood could be used when compared with untreated plywood. The treatment process was then considered manufacture or production, which rendered the treated plywood unsuitable for unused merchandise drawback, CBP said.