DRA-4-RR:IT:EC 226392 LTO
U.S. Customs Service
Chief, Miami Drawback Office, Room 102
P.O. Box 025280
Miami, Florida 33102-5280
RE: Request for internal advice; Drawback; 19 U.S.C. 1313(j)(2);
Commercial interchangeability; Pistols; HQs 225493, 225882
Dear Madam:
This is in response to your memorandum dated August 24, 1995
[DRA-4-0:C:L JTS], which requested internal advice pursuant to 19
CFR 177.11 with respect to certain pistols imported and exported
by Beretta USA Corp. ("Beretta"). Beretta has provided
additional information by submissions dated June 28 and August
19, 1996.
FACTS:
Beretta manufactures and sells firearms. It also both
imports and exports pistols. Beretta's request for drawback
concerns the importation of model 92FS pistols and the
exportation of model 98FS pistols. The model 98FS pistols are
chambered for a slightly longer 9mm cartridge than the model 92FS
pistols. The standard 9mm cartridge used in the United States
for both commercial and military purposes is a 19mm long casing
(referred to as 9 x 19 or parabellum). In Italy, the 9 x 19
cartridge is restricted to military use while non-military sales
are restricted to a 21mm long casing (referred to as 9 x 21).
Since the subject exports were for non-military sales in Italy
they were manufactured to the approved non-military specification
(i.e., the 9 x 21 cartridge). Beretta contends that the 92FS and
98FS, which are both 9mm caliber, semi-automatic, 15 round
capacity pistols, are identical in all relevant respects but one:
- 2 -
"the 98FS can fire both 9mm x 21mm and 9mm x 19mm ammunition,
while the 92FS can only fire 9mm x 19mm ammunition."
ISSUE:
Whether the exported pistols, the Beretta model 98FS, are
eligible for drawback pursuant to 19 U.S.C. 1313(j)(2).
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. Before its enactment by Public
Law 103-182, the standard for substitution was "fungibility."
House Report 103-361, 103d Cong., 1st Sess., 131 (1993), 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 House Ways and
Means Committee 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 - 3 -
limited to: Governmental and recognized industrial standards, part numbers, tariff classification, and
relative values.
The Senate Report for the NAFTA Act (S.Rep. 103-189, 103d
Cong., 1st Sess., 81-85 (1993)) contains similar language and
states that the same criteria should be considered by Customs in
determining commercial interchangeability.
Governmental and Recognized Industry Standards
Beretta contends that the 92FS and 98FS model pistols are
treated identically within the same classification of 9mm caliber
pistols in various government regulations. For example, for
excise tax purposes, the U.S. Treasury's Bureau of Alcohol,
Tobacco and Firearms (ATF) regulations treat the two models
within the same classification of "pistols" (27 CFR 53.11), while
the U.S. State Department treats the two models as identical for
purposes of the U.S. Munitions Import List (27 CFR 47.21
(Category I(a)).
The ATF regulations define the term "pistols" as follows:
Small projectile firearms which have a short one-hand
stock or butt at an angle to the line of bore and a
short barrel or barrels, and which are designed, made,
and intended to be aimed and fired from one hand. The
term does not include gadget devices, guns altered or
converted to resemble pistols, or small portable guns erroneously referred to as pistols, as, for example,
Nazi belt buckle pistols, glove pistols, or one-hand
stock guns firing fixed shotguns or fixed rifle
ammunition.
Category I(a) of the U.S. Munitions Import List covers the
following: "[n]onautomatic and semiautomatic firearms, to
caliber .50 inclusive, combat shotguns, and shotguns with barrels
less than 18 inches in length, and all components and parts for
such firearms."
We do not find Beretta's argument regarding these
regulations very persuasive. The above-cited regulations cover
such a wide range of firearms that they are too broad to be of
any value. Certainly, Beretta could not argue that all pistols
falling within the ATF's "pistol" definition would be
"commercially interchangeable" with the 92FS. - 4 -
Beretta also contends that recognized industry experts make
no distinction between the 92FS and 98FS models. For example,
with its letter of June 28, 1996, Beretta submitted excerpts from
a book, Modern Beretta Firearms, wherein it provides that "[t]he
current Model 98-type pistols have since 1989 been manufactured
to the Model 92FS standard (i.e., with the slide retention device
added as a result of U.S. military experience). Externally, they
are indistinguishable (except for their caliber markings) from
the more common 9mm Parabellum Model 92 pistols (emphasis
added)." G. Gangarosa (Stoeger Publ. Co., 1994) at 208-212.
Because the significance of the difference in caliber markings is
the issue presently before this office, the value of this
statement is questionable.
Moreover, in Modern Beretta Firearms, it states that, along
with the lengthening of the firing chamber by 2mm, the only other
changes necessary to convert the 92FS to the 98FS was "to stamp
the 9 x 21 designation on the barrel to warn a shooter against
loading the wrong cartridge and thus causing malfunctions." Id.
at 210 (Beretta disputes this claim, arguing that one can
"readily interchange" a 9mm x 19mm cartridge with a 9mm x 21mm
cartridge when using the 98FS--this issue will be discussed in
detail infra). Accordingly, we conclude that the governmental
and recognized industry standards criterion is not supportive of
Beretta's position regarding commercial interchangeability.
Relative Values
Beretta contends that the cost to the end user of a 98FS
pistol is approximately the same as the cost the end-user of a
92FS pistol. Beretta's internal accounting for inter-company
sales (Beretta USA Corp. sells the 98FS directly to Fabbrica
D'Armi Pietro Beretta S.p.A. in Italy) shows that the cost of a
98FS pistol averaged $251.00, while the cost of the 92FS pistol
"varied between $241.00 and $296.00" (the December 18, 1991,
invoice lists the cost at $297.00). Based on these figures, the
cost of the exported merchandise is between 4 percent less than
to 15 percent greater than that of the imported merchandise.
We note that percentage differences greater than that found
in the above-price comparison have not been fatal to a finding of
commercial interchangeability. See HQ 225493, dated July 19,
1995 (discussing the broad range in contract-prices and values of
crude peanut oil); but see HQ 225882, dated July 19, 1996.
However, in the instant case, there is no explanation for the
percentage differences between the imported and exported pistols.
- 5 -
We therefore must conclude that this criterion is not supportive,
or, at best, inconclusive on the issue of commercial
interchangeability.
Tariff Classification
The model 92FS and 98FS Beretta pistols are classifiable
under subheading 9302.00.00, Harmonized Tariff Schedule of the
United States (HTSUS), which provides for revolvers and pistols,
other than those of heading 9303 or 9304, HTSUS. (They are not
classifiable, as claimed by Beretta, under heading 9301, HTSUS,
which provides, in pertinent part, for military weapons, other
than pistols.) This criterion, therefore, supports a finding of
commercial interchangeability.
Part Numbers
The model 92FS and 98FS, along with having different model
numbers, also have different product codes. The materials
submitted by Beretta, including price lists, invoices, sales
literature, catalogs, etc., indicate that the pistols are
marketed and sold on the basis of model number and cartridge
designation.
For example, a 1994 Wholesale Price List provided by Beretta
lists a variety of large frame pistols, including the model 92D,
92F (the predecessor to the 92FS), 96D and 96F. All have, in
addition to different model numbers, different product codes.
Invoices provided by Beretta list the model number of the
pistol in question (the 92FS when imported into the United
States, and the 98FS when exported from the United States).
Beretta does not have invoices that show sales of both the 92FS
and 98FS pistols to the same customer, or invoices showing the
replacement of one of those models for the other to a distributor
or end-user. Beretta argues that "[t]he absence of sales should
not, however, have any impact on whether from an objective
standpoint the two pistols are commercially interchangeable." We
disagree, as such evidence would tend to show that the
merchandise is bought and sold without regard for the given model
numbers.
Purchase orders submitted by Beretta show that they
uniformly describe the pistols by model number and cartridge
designation. For example, the sales invoice of November 17,
1994, describes the pistol invoiced by a product code, model
(98FS) and cartridge designation (9 x 21 IMI). The invoice of - 6 -
December 18, 1991, identifies the pistols by model (92FS) and
cartridge designation (9mm para.).
Beretta's sales literature shows that the pistols are
marketed by model number and cartridge designation. The material
contains a chart that lists the model number, cartridge
designation and other specifications of Beretta pistols.
Beretta has also provided a statement of its counsel dated
August 15, 1996, in which it was stated that the model 98FS
chambered for the 9 x 21 IMI cartridge was fired with 100, 9 x 19
cartridges without mishap. However, such is not a "commercial"
test. In fact, Beretta permanently marks the proper cartridge
designation on each pistol. Beretta does not allege that the
model 98FS chambered for the 9 x 21 IMI cartridge is so marked "9
x 21 IMI" or "9 x 19 para." See Modern Beretta Firearms, page
210 (wherein it states that with respect to the model 98, Beretta
stamps the "9 x 21 designation on the barrel to warn a shooter
against loading the wrong cartridge and thus causing
malfunctions"). Moreover, a review of the literature supplied by
Beretta, fails to demonstrate a single instance stating that the
user of the model 98FS may use the 19mm and 21mm cartridges
interchangeably. In fact, references in this material lead to a
different conclusion.
On page 49 of Beretta's catalog, it states that "[a]ll 92
models are chambered for 9mm Parabellum ammunition . . . . 98
models use 9mm x 21 IMI caliber ammunition . . . ." On pages 22
and 26 of the operating manual, it specifies the differences in
caliber between the model 92 (9mm Parabellum) and model 98 (9mm x
21 IMI), and cautions, on page 20, that "Beretta assumes no
responsibility for product malfunction or for physical injury or
property damage resulting . . . from . . . use of defective,
improper, hand-loaded or reloaded ammunition (emphasis added)."
It also provides, on page 20, that the user should "[b]e sure to
use correct . . . ammunition (emphasis added)."
In Premier Graining Company, Inc., et al. v. United States,
57 Cust. Ct. 32 (1966), the Court stated that commercial paper,
such as, billings, price lists, purchase orders, invoices, bills
of lading, etc., like the people who use them, speak the
"language of commerce." The information contained in Beretta's
price lists, invoices, purchase orders, sales literature and
catalogs, speaks the "language of commerce." This information
corroborates the earlier information discovered by your office in
the form of interviews with licensed firearms dealers that the
model 98FS chambered for the 9 x 21 IMI cartridge is not - 7 -
commercially interchangeable with the model 92FS chambered for
the 9 x 19 para. cartridge.
The evidence shows that firearms are marketed and sold on
the basis of model number and cartridge designation. There is
simply no evidence to show that commercial transactions in
firearms are done solely on the basis of the nominal diameter of
the barrel, as asserted by counsel. Beretta readily admits that
the 92FS is not "commercially interchangeable" with the 98FS. In
other words, they could not claim drawback if they imported the
98FS and exported the 92FS. We conclude that the converse is
also true.
In summary, the criteria listed in the legislative history
to section 632 of the NAFTA Implementation Act to be used in
determining commercial interchangeability do not support a
finding of commercial interchangeability in this case. That is,
although the tariff classification of the imported and exported
merchandise is the same, there was no persuasive evidence
submitted concerning the governmental and recognized industry
standards criterion, there was no evidence in the file accounting
for the disparity in the relative values of the imports and
exports, nor the difference in model numbers and product codes.
Moreover, we are not persuaded by Beretta's argument regarding
the ability of the 98FS to fire both a 19mm and 21mm cartridge.
Accordingly, the exported 98FS pistols are not commercially
interchangeable with the imported 92FS pistols, and are not,
therefore, eligible for drawback pursuant to 19 U.S.C.
1313(j)(2).
HOLDING:
The exported pistols, the Beretta model 98FS, are not
commercially interchangeable with the imported 92FS pistols.
Therefore, the model 98FS pistols are not eligible for drawback
pursuant to 19 U.S.C. 1313(j)(2).
Sincerely,
Director, International Trade
Compliance Division