DRA-4-CO:R:C:E 224740 PH
Regional Director
Commercial Operations
U.S. Customs Service
New Orleans, Louisiana 70130
RE: Internal Advice; "QUAB 188"; Fungibility; Commercial
Interchangeability; Substitution Same Condition Drawback;
Substitution Unused Merchandise Drawback; 19 U.S.C.
1313(j)(2); Public Law 103-182, section 632
Dear Sir:
Enclosed is a May 21, 1993, letter received by this office
from the Degussa Corporation regarding fungibility, for drawback
purposes, of its product QUAB 188. The letter states that
"internal advice" is requested on the issue. Of course, internal
advice requests are required to be sent from Customs field
offices, not directly from an importer or other person in the
private sector (19 CFR 177.11). Nevertheless, because it is
stated that you have a number of unliquidated drawback claims
awaiting resolution of the issues raised, and because a copy of
the May 21, 1993, letter is indicated to have been provided to
you, we are treating this request as an internal advice request
from your Region. We are so advising the Degussa Corporation.
Please provide that company with a copy of this ruling after you
have had an opportunity to review and comment on it.
FACTS:
The inquirer states that it has been advised by your office
that there are questions concerning the fungibility of varying
concentrations of its product QUAB 188 and the absence of data
from an independent laboratory supporting the in-house analytical
testing of Degussa Corporation. The inquirer states that
drawback claims have been for "like concentration products"
(e.g., 65% for 65% or 69% for 69%).
The inquirer states that your office has raised a question
about the absence of independent laboratory test documentation
for the merchandise in question. The documentation is described
as follows:
... In the case of the imported product, the Certificates
of Analysis were prepared by Degussa AG in Knapsack, Germany
for its customer Degussa Corporation. For the QUAB exported
from the US the Certificates of Analysis are generated at
Degussa Corporation's Mobile plant. The same test methods
are used at both locations and were developed by Degussa AG.
The inquirer goes on to state that "[t]he use of independent
laboratories, although occasionally used for corroboration of
results is not a normal part of day to day operations [and]
[s]ince the use of independent laboratories is not common, the
only data available on the subject imported and exported material
is from Degussa analyses." The inquirer provides copies of the
analytical method for the analysis of the active method for the
analysis of the active component in QUAB 188. In addition, we
have obtained copies of the specifications for the imported
merchandise and the exported merchandise (copy enclosed for your
information).
ISSUE:
Is the merchandise in this case commercially
interchangeable, for purposes of the substitution unused
merchandise drawback law (19 U.S.C. 1313(j)(2), as amended by
Public Law 103-182, section 632)?
LAW AND ANALYSIS:
Under 19 U.S.C. 1313(j)(2), as amended, drawback may be
granted if, among other requirements, there is, with respect to
imported duty-paid merchandise, any other merchandise that is
commercially interchangeable with the imported merchandise. To
qualify for drawback, the other merchandise must be exported or
destroyed within 3 years from the date of importation of the
imported merchandise. Also, before the exportation or
destruction the other merchandise may not have been used in the
United States and must have been in the possession of the
drawback claimant. Further, the party claiming drawback must be
either the importer of the imported merchandise or have received
from the person who imported and paid any duty due on the
imported merchandise a certificate of delivery transferring to
that party the imported merchandise, commercially interchangeable
merchandise, or any combination thereof.
The drawback law was substantively amended by section 632,
title VI - Customs Modernization, Public Law 103-182, the North
American Free Trade Agreement Implementation Act (107 Stat.
2057), enacted December 8, 1993. The foregoing summary of
section 1313(j)(2) is based on the law as amended by Public Law
103-182. Title VI of Public Law 103-182 took effect on the date
of enactment of the Act (section 692 of the Act). According to
the applicable legislative history, the amendments to the
drawback law (19 U.S.C. 1313) are applicable to any drawback
entry made on or after the date of enactment as well as to any
drawback entry made before the date of enactment if the
liquidation of the entry is not final on the date of enactment
(H. Report 103-361, 103d Cong., 1st Sess., 132 (1993); see also
provisions in the predecessors to title VI of the Act; H.R. 700,
103d Cong., 1st Sess., section 202(b); S. 106, 103d Cong., 1st
Sess., section 202(b); and H.R. 5100, 102d Cong., 2d Sess.,
section 232(b)).
House Report 103-361, supra, also contains language
explaining the change from fungibility to commercial
interchangeability as a standard for substitution for drawback
under 19 U.S.C. 1313(j)(2). According to the Report (at page
131), the standard was intended to be made less restrictive
(i.e., "the Committee intends to permit the substitution of
merchandise when it is 'commercially interchangeable,' rather
than when it is 'commercially identical'") (the reference to
"commercially identical" derives from the definition of fungible
merchandise in the Customs Regulations (19 CFR 191.2(l))). The
Report (at page 131) also states:
The Committee further intends that in determining whether
two articles were commercially interchangeable, the criteria
to be considered would include, but not be limited to:
Governmental and recognized industrial standards, part
numbers, tariff classification, and relative values.
Before enactment of the above-described changes to 19 U.S.C.
1313(j)(2) by Public Law 103-182, we had requested a Headquarters
laboratory review of the fungibility of this merchandise. In the
advice we received from the Office of Laboratories & Scientific
Services (OL&SS), it was noted that the specifications for
epoxide content, glycol content, DCP content, and pH are slightly
different. Nevertheless, OL&SS advised that merchandise meeting
the provided specifications was fungible, provided, that
substitution should only be allowed between products with the
same purity (e.g., QUAB 188 65% (+/- 1%) could only be
substituted for QUAB 188 65% (+/- 1%)). We note the statement by
the inquirer in its November 2, 1993, communication that "[e]ven
though the specification was changed slightly [i.e., to provide a
standard specification that would encompass production in all
three of the inquirer's plants and reflecting the inquirer's
current knowledge about the reliability and limits of detection
of its analytical methods] the manufacturing process remained the
same and the products from the 3 plants are and were functionally
interchangeable in all applications." Since commercial
interchangeability, the new standard for substitution for
purposes of 19 U.S.C. 1313(j), is less restrictive than
fungibility, and since we have been advised that QUAB 188 meets
the standard for fungibility, we conclude on the basis of the
foregoing that the QUAB 188 is fungible, with the above-described
condition (i.e., substitution is only allowed between products
with the same purity). According to the inquirer, that is true
of its drawback claims.
As to the issue of independent analysis, OL&SS advised that
"[w]hile [it] would prefer to have certificates of analysis from
third party laboratories, we can accept analytical results from
the party claiming drawback. In these instances, if Customs is
not satisfied that the claimed laboratory report is sufficient,
Customs would request a third party laboratory report." The
report language for Public Law 103-182 also casts some light on
this issue. Section 613 of the Public law amends 19 U.S.C. 1499
(providing for examination of merchandise) to authorize Customs
to, among other things, set procedures for the accreditation of
commercial laboratories. House Report 103-361, supra, explicitly
states that: "This section is not intended to preclude Customs
from accepting a company's in-house laboratory report or analyses
pertaining to its own imports." Based on the foregoing, unless
you are not satisfied with the in-house laboratory reports
submitted by the inquirer, those reports may be accepted to
establish commercial interchangeability for purposes of its
drawback claims.
HOLDING:
The merchandise in this case (QUAB 188) is commercially
interchangeable (when substitution is sought between products of
the same purity, e.g., QUAB 188 65% (+/- 1%) for QUAB 188 65%
(+/- 1%)), for purposes of the substitution unused merchandise
drawback law (19 U.S.C. 1313(j)(2), as amended by Public Law 103-
182, section 632). The inquirer's in-house laboratory reports
may be accepted to establish commercial interchangeability unless
Customs is not satisfied with those reports.
The Office of Regulations and Rulings will take steps to
make this decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act and other
public access channels 60 days from the date of this decision.
Sincerely,
John Durant, Director
Commercial Rulings Division