DRA-4 CO:R:C:E 221377 C
Bob Grattan
Customs Advisory Services, Inc.
1001 Virginia Avenue
Suite 211
Atlanta, GA 30354
RE: Your ruling request concerning same condition substitution
drawback; fungibility of auto parts by part number; 19 USC
1313(j); 19 CFR 191.2(l); CSD 85-52; CSD 90-36; parts; part code
numbers
Dear Mr. Grattan:
This responds to your letter of April 17, 1989, wherein you
ask for a ruling on the fungibility of automobile parts
manufactured in various countries, imported into the United
States, commingled with domestic parts according to part number,
and distributed both domestically and to foreign firms. Your
client desires to file for drawback under 19 U.S.C. 1313(j)(2),
the same condition substitution drawback provision.
In view of the fact that the issue presented has been
considered previously by Customs, we will not issue a ruling in
response to your inquiry. Instead, this is an information
letter, as provided under 19 CFR 177.1(d)(2), intended to call
attention to an established interpretation of Customs law.
Same condition substitution drawback requires that the
imported designated merchandise and the substituted merchandise
be commercially fungible. Fungibility is defined in the Customs
regulations as "merchandise which for commercial purposes is
identical and interchangeable in all situations." 19 CFR
191.2(l). Customs has interpreted fungibility not to require
that merchandise be precisely identical; identical for
"commercial purposes" allows some slight differences. The key is
complete commercial interchangeability, as stated in Customs
Service Decision 85-52 (CSD 85-52): "The commercial world
consists of buyers, sellers, comminglers, government agencies and
others. If these groups treat articles or merchandise as
fungible or commercially identical, the articles or merchandise
are fungible. . . . When two or more units of apparently
identical properties are treated differently by the commercial
world for any reason, they are not fungible." 19 Cust. Bull.,
605, 607 (1985).
The issue has been considered recently in CSD 90-36. There,
Customs found that tires manufactured in various countries
according to the same specifications and categorized according to
the same international code number are fungible merchandise. In
addition to having the same specifications and code number, the
tires were made of the same material with the same chemical
composition, and shared the same dimensions. Importantly,
Customs found that each tire having the same code number was the
same regardless of the plant or country of origin. Even more
importantly, all tires with the same code number (and thus
specifications, dimensions, etc.) were used and sold
interchangeably in the industry worldwide. 24 Cust. Bull., No.
14, p. 12 (April 4, 1990).
Based on the information you have provided, it appears that
your client's operation is similar to that addressed in CSD 90-
36. A finding of fungibility may be appropriate if the principle
announced in the CSD applies to your client's operation.
You stated that your client imports and purchases
domestically for further distribution nearly 40,000 automobile
parts annually. These parts are used as replacement parts for
nearly all automobile makes and models. The parts are commingled
in inventory according to part number, and sold domestically and
abroad. You state that all parts are completely identical and
interchangeable with parts of the same number. It has been
submitted that parts with the same part number are produced
according to the same specifications and composed of the same
materials.
You have not submitted a description of the numerous parts
in question, nor their specifications. For purposes of this
information letter, such information is not necessary. Your
client will have to establish that a given part, identified by
part number, was manufactured according to the same relevant
specifications, and that, despite any slight differences, the
part is commercially interchangeable with other parts of the same
part number.
In other words, if, for example, part A102-12, a rod
bearing, is produced according to the same specifications
regardless of where produced - Japan, England, or Venezuela - and
if the part with its characteristic specifications is used
interchangeably in the industry, regardless of where produced or
of any slight differences, then all the rod bearings identified
by that unique part number would be fungible for drawback
purposes. If, on the other hand, foreign or domestic firms would
discriminate in their purchase and use of a given part, for any
reason related to the part itself, including its origin, then
fungibility would be defeated. For example, if firms would
choose for use in their operations a rod bearing, part A102-12,
produced in Germany, rather than the same part produced in
another country, because the German part is, for example,
manufactured from a harder, more heat resistant material,
fungibility would be defeated.
Likewise, if domestic or foreign firms preferred, for
example, German manufactured parts for use in their operations,
because throughout the industry German parts had a reputation for
higher quality, and thus there was a clearly recognized customer
preference, whether or not the parts in fact evidenced superior
specifications or materials, this preference would evidence a
commercially recognized difference between German parts and those
produced elsewhere. This would defeat fungibility, as well. See
Guess? Incorporated v. United States, No. 88-09-00707, slip op.
90-121 (CIT, Nov. 26, 1990).
A copy of CSD 90-36 is attached for your reference. Again,
on the basis of the limited information you supplied, we believe
that your client's operation may qualify for drawback under the
principle of CSD 90-36. It is your client's burden to establish
that the CSD is applicable to its operation. If it is, recovery
of drawback will be a matter of submitting the pertinent
documentation to the appropriate Customs office. We suggest that
you contact the district or regional office where your client
will file its claims for further guidance on pursuing drawback.
We suggest that you submit a copy of this letter when you make
your request.
If you have any further questions regarding this matter,
feel free to contact this office (202/566-5856).
Sincerely,
William G. Rosoff
Chief
Entry Rulings Branch