DRA-4 CO:R:C:E 223109 CB
Kenneth H. Keefe, Esq.
Sandler, Travis & Rosenberg, P.A.
5200 Blue Lagoon Drive
Miami, FL 33126-2022
RE: Request for Ruling on Substitution Same Condition Drawback
Eligibility of Coffee; 19 U.S.C. 1313(j)(2)
Dear Mr. Keefe:
This letter is in response to your letter of March 25, 1991,
wherein you requested a binding ruling on behalf of your client,
the Sara Lee Corporation, and its division, Superior Coffee and
Foods regarding the fungibility of freeze dried vending machine
coffees.
FACTS:
The imported freeze dried coffees, which constitute the
"designated merchandise" for purposes of a claim for substitution
same condition drawback under 19 U.S.C. 1313(j)(2), are shipped
from the Netherlands to the United States in 500 gram bags. You
have stated that the subject freeze dried coffees, which are
classified in the coffee trade as "washed mild Arabica" coffee,
were and are sold domestically, in the same 500 gram packages as
imported, for exclusive use in automatic vending machines.
Your client also exports to Canada certain washed mild
Arabica freeze dried coffees which is imported into the United
States by an unrelated third party. These coffees are imported,
packaged and sold to your client, after which time your client
exports these coffees to Canada. Your client obtains a
certificate of delivery from the importer. You state that the
washed mild Arabica coffees used in the vending machines are
generic. Neither the package labelling of the coffees imported
from the Netherlands, nor the package labelling of the coffees
exported to Canada, indicate any special characteristics of those
coffees. The packages only indicate that the coffees are freeze
dried and dedicated for use in vending machines.
The exported coffees are packaged in 227 gram packages, and
according to you may, in the future, be packaged in packages of
up to 500 grams. According to your submission of June 5, 1991,
the reason for the weight differences "is a factor of the
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respective, traditional packing procedures employed by West
European, metric system based coffee packagers on the one hand,
and the avoirdupois based weighing system employed by United
States coffee packagers on the other."
ISSUE:
Whether freeze dried vending machine coffee imported from
the Netherlands and imported freeze dried vending machine coffee
imported from South America are fungible?
LAW AND ANALYSIS:
Section 313(j)(2) of the Tariff Act of 1930, as amended (19
U.S.C. 1313(j)(2)), provides that for substitution same condition
drawback purposes, the merchandise substituted for exportation
must be fungible with the duty-paid merchandise and in the same
condition as was the imported merchandise at the time of its
importation. Fungibility is defined in the Customs Regulations
as "merchandise which for commercial purposes is identical and
interchangeable in all situations." 19 CFR 191.2(1). Customs
has interpreted fungibilitiy as not requiring that merchandise be
precisely identical; identical for "commercial purposes" allows
some slight differences. The key is complete commercial
interchangeability. As stated in C.S.D. 85-52: "[t]he
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).
Regarding the subject freeze dried coffee, you have stated
that the merchandise is washed mild arabica coffee for generic
use in vending machines. You also state that the coffees are
designated in the trade only as washed mild Arabica. Our
research indicates that the process used in manufacturing freeze
dried coffee is such that it would greatly reduce any taste
differences in the domestic and imported coffees. Therefore, it
is our conclusion that the domestic and imported freeze dried
coffees are fungible for drawback purposes.
The same condition drawback law, 19 U.S.C. 1313(j), sets
forth that drawback is allowed, provided that the merchandise
imported and exported under 19 U.S.C. 1313(j)(1) or the
merchandise substituted for imported designated merchandise under
19 U.S.C. 1313(j)(2) is not used in the United States prior to
exportation or destruction. Consequently, use of the merchandise
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while it is in the United States, prior to exportation or
destruction, disqualifies it for the benefit of same condition
drawback. However, 19 U.S.C. 1313(j)(4) contains an exception to
this "use" disqualifier. Any operation which is determined to be
incidental is not a use under 19 U.S.C. 1313(j)(1) and (2) and
does not disqualify merchandise (so "used") from drawback
eligibility. The provision (19 U.S.C. 1313(j)(4)) cites the
following as examples of incidental operations: testing,
cleaning, repacking, and inspecting. (Emphasis added)
The legislative history for this provision is silent as to
what Congress meant by "repacking". However, statutory language
is presumed to be used in its normal sense. United States v.
Esso Standard Oil Co., 42 CCPA 144, at 151, C.A.D. 587 (1955).
There is no apparent limitation to the word "repacking," that is,
the operation is not limited to wholesale or bulk repackaging.
In the instant case, the imported coffee is packaged in 500 gram
packages, and sold to your client. The exported coffee is
packaged in 227 grams packages. We do not consider this
operation to be a "use" and is therefore allowable under 19
U.S.C. 1313(j)(4). In C.S.D. 83-2 it was held that the repacking
or repackaging of candy from 220 pound containers to 14 and 16
gram containers was permissible. Similarly, in C.S.D. 81-219 it
was concluded that rolls of fabric cut to smaller rolls is a
permitted operation. We see no reason to conclude differently
with respect to the subject coffee.
HOLDING:
The substituted freeze dried coffee and the imported
designated freeze dried coffee are fungible. The repackaging of
the substituted coffee is a permissible incidental operation.
A copy of this decision should be attached to the CF 19,
Notice of Action, and sent to protestant to satisfy the notice
requirement of section 174.30(a), Customs Regulations.
Sincerely,
John A. Durant, Director
Commercial Rulings Division