DRA-4 CO:R:C:E 224401 TLS
David N. Bickers
Alimenta (USA), Inc.
Perimeter 400 Center
1100 Johnson Ferry Road Suite 690
Atlanta, Georgia 30342
RE: Request for modification of HQ 223885 (September 22, 1992);
Industry standards to be used to determine peanut oil
fungibility; 19 U.S.C. 1313(j)(2).
Dear Mr. Bickers:
This office has received the above-referenced request for
modification of Customs ruling HQ 223885. We have considered the
points raised and have made the following decision.
FACTS:
This office issued a ruling concerning the above-mentioned
issue on September 22, 1992. Among other things, the ruling held
that " ...shipments of crude peanut (groundnut) oils that contain
2 percent or less of Free Fatty Acid, and in which the
combination of the moisture and insoluble impurities does not
exceed 1 percent, are fungible for purposes of the substitution
same condition drawback law, 19 U.S.C. 1313(j)(2)." Customs
ruling HQ 223885.
You contend that the holding should be modified because it
is inconsistent with industry standards. You state that peanut
oil is traded "basis 2 percent maximum 3 percent FFA moisture and
impurities max. 1 percent" in accordance with the Federation of
Oils, Seeds, and Fats Association (FOSFA) rules of trading. To
support this contention, you have submitted copies of recent
contracts using the criteria you propose.
ISSUE:
Whether Customs ruling HQ 223885 should be modified with
respect to its holding #1.
LAW AND ANALYSIS:
It is generally agreed upon that FOSFA standards should be
followed when determining fungibility of peanut oil. We
recognize that industry trade practices allow for a "basis 2
percent maximum 3 percent" while HQ 223885 held that only oils
that contain "2 percent or less" Free Fatty Acid (FFA) should be
considered fungible. Our findings remain the same with respect
to the interchangeability of oils with less that 2 percent,
however. We have found that it is only at this level that the
oils are freely interchangeable. Between 2 and 3 percent, the
oils are interchangeable only when an adjustment is made in the
price of the oils in inverse proportion to the FFA content. Your
submission on page 3 acknowledges such in the fourth paragraph.
We do find these facts to be consistent with the subject
holding in HQ 223885. The very fact that a price adjustment is
necessary for FFA between 2% and 3% demonstrates that peanut oil
with such content is not freely interchangeable within the
commercial context. Distinctions are being made here and acted
upon, as the sample contracts illustrate. We therefore find no
reason to modify the holding to reflect our original findings.
Thus, we hold that HQ 223885 should not be modified with respect
to holding #1.
HOLDING:
Customs ruling HQ 223885 (September 22, 1992) is hereby
upheld with respect to holding #1 and all other respects.
Sincerely,
John Durant, Director
Commercial Rulings Division