DRA-4 CO:R:C:E 224541 TLS
Deputy Regional Director
Pacific Region-Commercial Operations Division
U.S. Customs Service
One World Trade Center
Long Beach, California 90831-0700
RE: Internal Advice request concerning the fungibility No. 6 fuel
oil within certain sulfur content ranges.
Dear Sir:
This office has received the above-referenced request for
internal advice as provided for under Customs regulations. We
have considered the request and have made the following decision.
FACTS:
A ruling was issued on October 19, 1992 concerning the
possession of No. 6 fuel oil for substitution same condition
drawback purposes. Customs ruling HQ 224103 (October 19, 1992).
The ruling held that the claimant was eligible for drawback under
several different circumstances, except one. The one scenario
involved the need for documentary evidence such as a sub-charter
agreement or contract setting forth the responsibilities and
right of the claimant and the foreign purchaser between the time
the merchandise is loaded in the exporting vessels and the time
the vessels finally depart from the United States.
Internal advice was also requested to resolve the issue of
fungibility of No. 6 fuel oil within different sulfur content
ranges. The claimant contends that No. 6 fuel oil of varying
ranges of sulfur content is interchangeable within the commercial
context. It claims that Customs is applying a narrower standard
for sulfur content than what is accepted in the marketplace.
Customs officials have determined that the No. 6 fuel oil being
exported in this case is not fungible with the imported fuel oil.
ISSUES:
1) Whether the claimant has established possession of the
subject merchandise through documentary evidence such as a sub-
charter agreement or a contract setting forth its
responsibilities and rights and those of the foreign purchaser
between the time the merchandise is loaded in the exporting
vessels and the time the vessels finally depart from the United
States.
2) Whether No. 6 fuel oil is fungible for the purposes of
substitution same condition drawback despite varying ranges of
sulfur content.
LAW AND ANALYSIS:
There is no dispute that the law requires a claimant for
substitution same condition drawback to possess the exported
goods at the time of exportation. B.F. Goodrich v. United
States, CIT slip op. 92-68 (May 12, 1992). In 224103, it was
held that only documentary evidence such as a sub-charter
agreement or contract setting forth the rights and
responsibilities of the claimant and the foreign purchaser would
be sufficient to show that the claimant had possession of the
exported merchandise upon exportation.
In the present case, the claimant has submitted copies of
telex instructions and other communications from the claimant to
the foreign purchaser regarding the shipment of the product.
While these submissions do explain what the claimant's
exportation plans are to some degree, they do not represent any
sort of binding agreement between the claimant and the foreign
purchaser. These communications do not compel the claimant to
maintain possession of the goods until exported, which is the
purpose of providing evidence of such. Thus, just as we found
possession to be lacking under these circumstances in 224103, we
are compelled here to find no evidence of possession upon
exportation based on insufficient documentation.
On the issue of fungibility of fuel oil, we have a recent
Customs ruling to consider. In HQ 223769 (October 20, 1992), it
was held that ASTM standards are controlling as the "best
indicators of fungibility" for fuels. In that case, the claimant
contended that the industry applied different standards for jet
fuel in the commercial context than did the Customs Service. The
ruling found that because ASTM is comprised of both producers and
users in a given industry who appoint technical committees to
formulate and review product standards, these standards have been
recognized as acceptable guidelines in making fungibility
determinations. As a result, the ruling held that the ASTM
standards are controlling despite the claimant's contentions that
the industry made different distinctions in the commercial
context.
In this case, instead of the claimant contending that
different distinctions than those found under ASTM should apply
when determining fungibility, we have Customs officials making
such a claim. Customs laboratory analysts have noted that sulfur
content ranges for ASTM D-396 No. 6 fuel oil are distinguishable.
The claimant correctly points out, however, that the ASTM
standards for No. 6 fuel oil only recognize that "[l]imited
sulfur content of fuel oil can be required for special uses in
connection with heat treament, nonferrous metal, glass, and
ceramic furnaces to meet federal, state, or local legislation or
regulations." (Emphasis added.) Customs has provided no
justification for recognizing the narrower distinctions in this
case. There is no evidence that the exported oil is to be used
in a manner that suggests sulfur content is of importance to the
purchaser or any other party to the subject transaction(s) for
that matter. To the extent that fungibility is defined as
"merchandise which for commercial purposes is identical and
interchangeable in all situations," Customs cannot make a
distinction where there is no evidence of such in the commercial
context. Therefore, we find that the ASTM standards set for ASTM
D-396 No. 6 fuel oil are sufficient to determine fungibility.
HOLDING:
The claimant has failed to provide evidence of a binding
agreement between it and the foreign purchaser sufficient enough
to determine that the claimant possessed the exported merchandise
at the time of exportation in this case. The telex
communications and other documentation do not indicate that the
claimant is bound to maintain possession of the goods until the
time of exportation.
For the purposes of determining fungibility of ASTM D-396
No. 6 fuel oil, the current published ASTM standards are to be
used as guidelines absent evidence that different distinctions
are made within the commercial context.
Sincerely,
John Durant, Director