Production-oriented customs classification for pencil-tip fixing machines accepted where the process creates a distinct commercial commodity.

An imported machine used to fix ferrules and rubber tips on pencils was treated as a production machine under Heading 84.59(2) because it brought into existence a commercially distinguishable article in trade parlance, namely a pencil with an eraser tip. The fact that a pencil already existed did not prevent the additional process from creating a distinct commodity, and the distinction between a pencil and a pencil with an eraser was rejected. The production-oriented heading was therefore applied, and the contrary classification under Heading 84.59(1) was not accepted.

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Issues: Whether the imported machine designed to fix ferrules and rubber tips on pencils was classifiable under Heading 84.59(2) of the Customs Tariff Act, 1975 as a machine designed for the production of a commodity, or under Heading 84.59(1) as not elsewhere specified.

Analysis: The machine was found to produce a commercially distinguishable article, namely a pencil with an eraser tip, which was separately valued and sold. The fact that a pencil already existed did not prevent the additional process from bringing into existence a distinct commodity in trade parlance. The distinction drawn by the lower authorities between a pencil and a pencil with an eraser was rejected, and the earlier Tribunal view treating machines used in a production sequence as falling within the production-oriented heading was applied.

Conclusion: The machine was held to fall under Heading 84.59(2), and the refund claim was not liable to rejection on the contrary classification adopted by the lower authorities.

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