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HQ 223109


August 26, 1991

DRA-4 CO:R:C:E 223109 CB

CATEGORY: DRAWBACK

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
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
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

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