DRA-4-CO:R:C:E 223885
Regional Director, Commercial Operations
South Central Region
423 Canal Street
New Orleans, Louisiana 70130-2341
RE: Application for Further Review of Protest No. 2002-91-000837;
Fungibility of Crude Peanut Oil for 19 U.S.C. 1313(j)(2)
Dear Sir:
Your memorandum of April 7, 1992, did not include a copy of
the above-referenced protest, however, you adequately described
the issue in order that we may make a decision in this matter.
Our decision follows.
FACTS:
Under the Internal Advice Procedure, we ruled on November 5,
1990 (222000), that two shipments of prime crude peanut oils that
meet the specifications of Rule 175 of the National Cottonseed
Products Association (NCPA) and which are not subject to contract
adjustments provided for in Rule 201, NCPA, are fungible for the
substitution same condition drawback law. The protestant, who was
also the claimant under the Internal Advice Procedure, is unable
to show compliance with Rule 175, NCPA and is of the opinion that
there are other standards that are more appropriate to show
fungibility of the merchandise for purposes of the law. We agree
with the position of the protestant as outlined further in this
document.
ISSUE:
Whether the rules for crude peanut oils of the Federation of
Oils, Seeds, and Fats Association Limited (FOSFA), are acceptable
standards to satisfy the fungibility requirements of the
substitution same condition drawback law.
LAW AND ANALYSIS:
The substitution same condition drawback law, 19 U.S.C.
-2-
1313(j)(2), requires that 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. The term "fungible merchandise" is defined in the
Customs Regulations (19 CFR 191.2(l) as "merchandise which for
commercial purposes is identical and interchangeable in all
situations." In making determinations concerning fungibility, the
Customs Services relies, in part, on government and industry
standards and available technical information.
Thus, we adopted the NCPA quality standards for crude peanut oils
in our ruling of November 5, 1990. However, upon further review,
we note that the NCPA standards are based, at least partially, on
the characteristics of the refined products to be made from the
crude peanut oils rather than on the characteristics of the crude
oils whereas the FOSFA standards are based on the characteristics
of the crude oils.
We understand that under the FOSA rules, two shipments of
crude peanut (groundnut) oils are freely interchangeable if they
contain 2 percent or less of Free Fatty Acid (FFA), and contain
less than 0.5 percent each of moisture and impurities. However,
oils that contain between 2 and 3 percent FFA are subject to price
adjustments and oils that contain more than 3 percent FFA are
subject to rejection by the purchaser.
The FOSA rules are more practicable for purposes of the
substitution same condition law because, as noted above, the
standards are based on the characteristics of the imported duty-
paid designated crude peanut oil and the substituted crude peanut
oil that is exported for drawback rather than on the NCPA rules
based, in part, on what is made after refining the crude oils.
We are satisfied that the FOSFA rules are sufficient for use
as guidelines in determining the fungibility of crude peanut oils
for purposes of the drawback law.
HOLDINGS:
1. Two 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).
2. You are directed to allow or disallow the protest, in whole
or in part, based on Holding # 1.
3. Effect on other rulings: The unpublished ruling of November
5, 1990 (222000) is modified in accordance with this ruling but it
is not revoked. Any claims presented which do comply should be
liquidated with the benefit of drawback.
-3-
A copy of this decision should be furnished to the protestant
with a copy of Customs Form 19.
Sincerely,
John Durant, Director
Commercial Rulings Division