DRA-4-CO:R:C:E 224659 CB
George C. Steuart, Esq.
Steuart & Parker
Suite 300
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
RE: Christopher Ranch request for fungibility of white garlic
and red garlic; 19 U.S.C. 1313(j)(2); substitution same
condition drawback; 7 CFR 51.3880
Dear Mr. Steuart:
This is in response to your letter of April 14, 1993,
transmitting a request on the fungibility of white and red garlic.
Initially, we must point out that the ruling request also requests
approval to file claims under the accelerated drawback payment
program and permission to use the exporter's summary procedure.
Please advise your client that such requests must be directed to
the regional commissioner pursuant to 19 CFR 191.72 and 191.53,
respectively.
FACTS:
According to the incoming letter, your client, Christopher
Ranch, intends to substitute foreign and domestic white and red
garlic. The incoming letter does not state whether the request is
limited to the substitution of fresh garlic. However, we have
assumed that the request pertains solely to fresh garlic and,
therefore, our ruling is limited to the issue of substitution of
fresh garlic.
Additionally, the ruling request is also silent regarding the
issue of packaging. Therefore, for purposes of issuing this ruling
we are assuming that the imported and domestic garlic are packed
in the same manner.
ISSUE:
Whether fresh white and red imported grade U.S. No. 1 garlic
is fungible with domestic grade U.S. No. 1 garlic packed in the
same manner?
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 fungibility as not requiring that merchandise be
precisely identical; identical for "commercial purposes" allows
some slight differences. The key is complete commercial
interchangeability. See C.S.D. 85-52.
The Customs Service has consistently used the standards of
quality grades of the United States Department of Agriculture
(USDA) as guidelines for determining fungibility with respect to
agricultural products. As stated in C.S.D. 89-108, the use of USDA
quality standards are satisfactory for our use as "guidelines" for
determining whether imported designated merchandise and substituted
merchandise are identical for substitution same condition drawback
purposes. Regarding the fungibility requirements for vegetables,
Customs has stated that substitution must be on a grade for grade
basis. See C.S.D. 89-126, HQ 224068 (July 31, 1992), and HQ 224223
(March 6, 1992).
In the instant case, your client has stated that it buys and
sells garlic on the basis of USDA grades and standards. Your
client has also stated that it intends to substitute on a grade for
grade basis, i.e. Grade U.S. No. 1 white garlic for Grade U.S. No.
1 white garlic. Additionally, Christopher Ranch has also stated
that it does not differentiate between domestic grown garlic and
imported garlic when filling an order and that its records will
show this fact. Therefore, the proposed substitution of garlic
meets the fungibility requirement established by Customs for
vegetables, i.e. that substitution be on a grade-for-grade basis.
See C.S.D.s 89-108 and 89-126.
HOLDING:
Imported duty-paid white and red garlic of USDA grade No. 1
are fungible with domestic white and red garlic of USDA grade
No. 1. Substitution must be on a grade for grade, color for color
basis and the merchandise must be similarly packed.
Sincerely,
John Durant, Director
Commercial Rulings Division