DRA-4-RR:IT:EC 226473 GOB
U.S. Customs Service
Chief, Miami Drawback Office, Room 102
P.O. Box 025280
Miami, FL 33102-5280
RE: Request for internal advice; Drawback; 19 USC 1313(j)(1),
(2), and (3); Commercial interchangeability;
Pistols; Magazines
Dear Madam:
FACTS:
This ruling is in response to your memorandum dated October
10, 1995 which requested internal advice pursuant to 19 CFR
177.11 with respect to certain pistols imported and exported by
Beretta USA Corp. ("Beretta"). Your office provided additional
information by memorandum of November 2, 1995. Beretta responded
to Customs request for information by a submission dated February
12, 1996.
You ask the following questions.
19 U.S.C. 1313(j)(1)
A. You ask whether the exported merchandise is eligible for
drawback under 19 U.S.C. 1313(j)(1) in the following situation.
Beretta imports certain different types of pistols.
Subsequently, it removes the magazines from the pistols, and
exports the pistols without the magazines. We assume for the
purpose of this ruling that the magazines which were imported
within the pistols were designed for those pistols. This issue
is not limited to one particular type of pistol, but would apply
to any pistol imported with a magazine which is subsequently
exported without a magazine.
19 U.S.C. 1313(j)(2)
B. You also ask whether, under 19 U.S.C. 1313(j)(2),
drawback is available in the following situation: the imported
and substituted pistols are otherwise commercially
interchangeable; the imported pistol has a magazine; the exported
pistol does not have a magazine.
We note that there is a separate ruling request from your
office dated August 24, 1995 pending in this office (our control
number 226392) with respect to the commercial interchangeability
under 19 U.S.C. 1313(j)(2) of Beretta Model 98FS pistols and
Beretta Model 92FS pistols. That request will be responded to
separately. The information which Beretta provided in the
February 12, 1996 submission will be reviewed in the
consideration of that ruling request.
ISSUE:
Under the stated facts, is the exported merchandise eligible
for drawback pursuant to 19 U.S.C. 1313(j)(1) and 19 U.S.C.
1313(j)(2)?
LAW AND ANALYSIS:
19 U.S.C. 1313(j)(1)
We note initially that pursuant to 19 U.S.C. 1313(j)(3), the
removal of the magazine from the pistol does not constitute a use
of the pistol for the purpose of 19 U.S.C. 1313(j)(1)(B). (If
the pistol were considered to be used, 19 U.S.C. 1313(j)(1) would
be inapplicable.) 19 U.S.C. 1313(j)(3) provides:
(3) The performing of any operation or combination of
operations (including, but not limited to, testing, cleaning,
repacking, inspecting, sorting, refurbishing, freezing,
blending, repairing, reworking, cutting, slitting, adjusting,
replacing components, relabeling, disassembling, and
unpacking), not amounting to manufacture or production for
drawback purposes under the preceding provisions of this
section on-
(A) the imported merchandise itself in cases to which
paragraph (1) applies, or
(B) the commercially interchangeable merchandise in
cases to which paragraph (2) applies,
shall not be treated as a use of that merchandise for
purposes of applying paragraph (1)(B) or (2)(C).
The removal of the magazine would appear to be a
"disassembly." It is not a manufacture or production for
drawback purposes. Thus, we find that 19 U.S.C. 1313(j)(3)
applies, and the eligibility under 19 U.S.C. 1313(j)(1) is not
eliminated merely by reason of removal of the magazine.
When we compare the importation of a pistol with a magazine
with the exportation of the same pistol without a magazine, we
find it to be very significant, and dispositive, that the
exported pistol cannot be used for its normal purpose in its
condition as exported because it does not include a magazine. As
a result of this comparison, and the fact that the exported
pistol cannot be used in the same manner as the imported pistol,
we determine that the imported pistol with a magazine is not the
same merchandise as the exported pistol without a magazine.
Because the exported pistol cannot be used for its normal
purpose, the exported pistol (without magazine) is materially
different from the imported pistol (with magazine). Because the
imported and exported pistols are materially different and are
not the same merchandise, we conclude that the exported pistol
(without magazine) is not eligible for drawback pursuant to 19
U.S.C. 1313(j)(1).
In terms of the specific language of 19 U.S.C. 1313(j)(1),
the "imported merchandise" (a pistol with magazine) is not
"exported." Rather, an item of merchandise (a pistol without
magazine) which is different from the imported merchandise is
exported.
We note additionally that there is no language in 19 U.S.C.
1313 which would permit Customs to make adjustments in the amount
paid, i.e., assuming arguendo that Customs determined that it was
appropriate to pay drawback in this situation, the value of the
exported item is less than the value of the imported item. Thus,
it would seem clear that the payment of "99 percent of the amount
of each duty" would not adequately protect the revenue. 19 U.S.C.
1313(j)(1) is silent with respect to any adjustment of the amount
of drawback payable in a situation where the exported merchandise
is of a lesser value than the imported merchandise. This
reinforces our conclusion that drawback is not payable under 19
U.S.C. 1313(j)(1) in a situation where the exported merchandise
is not the same as the imported merchandise.
In this regard, we note the following judicial authority,
which we believe is supportive of our conclusion.
In Northern Steamship Company, Inc. v. United States, 54
Cust. Ct. 92, 100, C.D. 2514 (1965), which involved the vessel
repair statute, 19 U.S.C. 1466, the court stated in pertinent
part:
...Congress did not make such a provision and we may not
read into the statute words which are not there. United
States v. Marsching, 1 Ct. Cust. Appls. 216, T.D. 31257;
Lang et al. v. United States, 10 Ct. Cust. Appls. 228, T.D.
383563. It is not the province of the court to supply
omissions of the legislative body. Grant & Co. (Inc.) v.
United States, 12 Ct. Cust. Appls. 215, T.D. 40227.
In 718 Fifth Avenue Corp. v. United States, 741 F. Supp.
1577, 14 CIT 403 (1990), which involved the drawback statute, the
court stated in pertinent part:
The starting point, of course, is the governing statute, and
courts have held that
the starting point for interpreting a statute is the
language of the statute itself. Absent a clearly
expressed legislative intention to the contrary, that
language must ordinarily be regarded as conclusive.
Consumer Product Safety Comm'n v. GTE Sylvania, Inc.
447 U.S. 102, 108 (1980).
In Central Soya Co., Inc. v. United States, 761 F.Supp. 133
(CIT 1991), which involved the drawback statute, the court stated
in pertinent part:
In the process of administering a statute, it is clear that
an administrative agency must interpret the statute, and
within the statutory guidelines set by Congress, may set
policy and establish rules. See Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 843,
104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). Hence, in
cases which deal with the interpretation of statutes
administered by an administrative agency, if the court
determines that "Congress has not directly addressed the
precise question at issue, the court does not simply impose
its own construction on the statute..." Id. Rather, the
agency's interpretation is entitled to deference, and the
court must consider whether the interpretation of the
administrative agency "is based on a permissible
construction of the statute." Id.
In B.F. Goodrich Co. v. United States, 794 F. Supp. 1148
(CIT 1992), another case involving the drawback statute, the
court quoted from Chevron, supra:
If, however, the court determines Congress has not directly
addressed the precise question at issue, the court does not
simply impose its own construction on the statute, as would
be necessary in the absence of an administrative
interpretation. Rather, if the statute is silent or
ambiguous with respect to the specific issue, the question
for the court is whether the agency's answer is based on a
permissible construction of the statute.
Chevron U.S.A. v. N.R.D.C., 467 U.S. 837, 842-43, 104 S.Ct.
2778, 2781-82 (1984).
Because the imported pistol (with magazine) is not the same
merchandise as the exported pistol (without magazine), it is our
determination, based upon the language of 19 U.S.C. 1313(j)(1),
that the exported pistol (without magazine) is not eligible for
drawback.
19 U.S.C. 1313(j)(2)
Under 19 U.S.C. 1313(j)(2), as amended, drawback may be
granted if there is, with respect to imported duty-paid
merchandise, any other merchandise that is commercially
interchangeable with the imported merchandise and if the
following requirements are met. The other merchandise must be
exported or destroyed within three years from the date of
importation of the imported merchandise. 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. The party claiming drawback must either be
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.
With respect to the "use" of the pistol, we make the same
finding which we made supra under the 19 U.S.C. 1313(j)(1)
section, i.e., pursuant to 19 U.S.C. 1313(j)(3), the removal of
the magazine from the exported pistol does not constitute a
manufacture or production for drawback purposes. Accordingly,
eligibility under 19 U.S.C. 1313(j)(2) is not eliminated merely
by reason of the removal of the magazine.
The drawback statute was substantively amended by section
632, title VI - Customs Modernization, Pub. L. No. 103-182, the
North American Free Trade Agreement Implementation ("NAFTA") Act
(107 Stat. 2057), enacted December 8, 1993. Before its amendment
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. According to the House Ways
and Means Committee Report, the standard was intended to be made
less restrictive, i.e., "the Committee intends to permit
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 industry standards, part numbers, tariff classification, and relative values.
(Emphasis supplied.)
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
No information has been submitted with respect to this
criterion.
Relative Values
Beretta submitted certain price information in response to
our request. That information will be relevant to our
determination in Ruling 226392, referenced supra.
With respect to the issue of the relative value of a
Beretta pistol with a magazine and a Beretta pistol without a
magazine, we note that the cost to Beretta of a magazine imported
separately is approximately four percent of the cost to Beretta
of one of the pistols for which it has submitted documentation.
Tariff Classification
The Beretta pistols at issue are classified under subheading
9302.00.00, Harmonized Tariff Schedule of the United States
("HTSUS"), whether or not a magazine is in the pistol.
Imported magazines for Beretta pistols entered separately,
i.e., not within the pistols, are classified under subheading
9305.10.20, HTSUS.
Part Numbers
With its submission of February 12, 1996, Beretta has
submitted a catalog. Different types of pistols have different
identifying numbers.
Additional Relevant Factors
We note that the question presented states that the "pistols
are otherwise commercially interchangeable." As stated supra,
this office has pending before it a separate ruling request from
your office with respect to the commercial interchangeability
under 19 U.S.C. 1313(j)(2) of Beretta Model 98FS pistols and
Beretta Model 92FS pistols.
As the excerpt from the House Ways and Means Committee
Report, supra, indicates, the determination with respect to
commercial interchangeability is not limited to the four criteria
discussed supra.
We find that certain of the analysis in the 19 U.S.C.
1313(j)(1) section of this ruling is applicable here.
When we compare a pistol imported with a magazine with
another pistol which is exported without a magazine, we find it
to be very significant, and dispositive, that the exported pistol
cannot be used for its normal purpose in its condition as
exported because it does not include a magazine. There is a
material difference between the pistol imported with magazine and
the pistol exported without magazine. As a result of the fact
that the exported pistol cannot be used in the same manner as the
imported pistol, and the fact that there is a material difference
between the imported and exported pistol, we determine that an
imported pistol with a magazine is not commercially
interchangeable with an exported pistol without a magazine.
We make no determination herein with respect to the issue of
whether one Beretta pistol (with magazine) may be commercially
interchangeable with a second Beretta pistol (with magazine).
HOLDINGS:
1. A pistol which is imported with a magazine and exported
without a magazine is not eligible for drawback pursuant to 19
U.S.C. 1313(j)(1).
2. An imported pistol with a magazine is not commercially
interchangeable for the purpose of 19 U.S.C. 1313(j)(2) with an
exported pistol without a magazine.
This decision should be mailed by your office to the
claimant no later than 60 days from the date of this letter. On
that date the Office of Regulations and Rulings will take steps
to make the decision available to Customs personnel via the
Customs Rulings Module in ACS and to the public via the Diskette
Subscription Service, the Freedom of Information Act and other
public access channels.
Sincerely,
Director,
International Trade Compliance
Division