HQ 223860: Internal Advice; Substitution Same Condition Drawback; 19 U.S.C. 1313(j)(2); Domestic and Imported Substituted Used Like Components; "Used"; "Fungibility"

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                           HQ 223860

                      October 16, 1992

DRA-4-CO:R:C:E 223860 SLR

CATEGORY: Drawback

Deputy Regional Director of Customs
Commercial Operations, Pacific Region
One World Trade Center   
Long Beach, CA  90831-0700

RE:  Internal Advice; Substitution Same Condition Drawback;
     19 U.S.C. 1313(j)(2); Domestic and Imported Substituted 
     Used Like Components; "Used"; "Fungibility"

Dear Sir:

     This is in response to your memorandum dated March 31, 1992,
forwarding for our decision an internal advice request, dated
February 14, 1992, made by Enterprise Computer Services (ECS). 
ECS writes to ask whether used like IBM mainframe computer
components qualify for substitution same condition drawback 
under 19 U.S.C. 1313(j)(2).

FACTS:

     The merchandise in question consists of central processing
units (CPUs), power supplies, and CCE/SCE boards.  All of these
articles are used and are either obtained domestically or
imported into the United States.  In all cases, the merchandise
is placed in inventory at the company's King of Prussia facility. 
Some of these components could then be exported to various
international locations.

     ECS contends that the imported used components and exported
used components are fungible, since they are manufactured to the
same specifications by the same manufacturer, are solid-state and
have no moving parts, do not degrade in function or speed, and
are totally indistinguishable (except for the serial numbers of
those components which are so marked for tracing purposes).  ECS
indicates that the imported and exported components bear
corresponding part numbers and are made of the same materials.
We assume that the facts set out by ECS are true and our response
is based upon them.

     Your office doubts whether the subject components meet the
fungibility requirement of 19 U.S.C. 1313(j)(2).  



                              -2-

ISSUE:

     Whether the used like components obtained domestically or
imported qualify for substitution same condition drawback under
19 U.S.C. 1313(j)(2).

LAW AND ANALYSIS:
     
     Section 313(j)(2) of the Tariff Act, an amended (19 U.S.C.
1313(j)(2)), allows for substitution same condition drawback on
imported merchandise provided that the substituted merchandise
(either domestic or imported) is fungible with the imported
merchandise; is exported before the conclusion of the three-year
period beginning with the date of the importation of the imported
merchandise; is in the possession of the drawback claimant prior
to exportation; and is in the same condition as the imported
merchandise when exported.  The law indicates that the
substituted merchandise can be subject to incidental operations,
such as cleaning and repacking (19 U.S.C. 1313(j)(4)), but 
cannot be used while in the United States prior to exportation
19 U.S.C. 1313(j)(2)(C)(i).  "Used" means "to employ . . . to put
into operation, to cause to function . . . to employ for the 
use which they were manufactured and intended."  Swalley v.
Addressograph Multigraph Corp., 158 F.2d 51, 54 (7th Cir. 1946),
cert. denied, 330 U.S. 429 (1947); see also C.S.D. 81-222 and
C.S.D. 82-135.

     The substituted domestic components cannot qualify for
substitution same condition drawback as, concededly, they have
been used in the United States in IBM mainframe computers prior
to exportation.  Consequently, we will focus our attention on the
substituted imported merchandise and the fungibility issue.

     In your memorandum, you acknowledge that the substituted
imported used components and the imported used components are
manufactured to the same specifications and on that basis may be
interchangeable.  However, you believe that each component is
characteristically unique in terms of its depreciated value,
physical appearance and condition, and that these variations
could substantially affect the fungibilty determination.   

     As you know, fungible merchandise for same condition
drawback is defined in section 191.2(l) of the Customs
Regulations (19 CFR 191.2(l)) as "merchandise which for
commercial purposes is identical and interchangeable in all
situations."  This definition is consistent with the clearly
expressed intent of the Congress when it enacted 19 U.S.C.
1313(j)(2).  (See H.R. Rep. No. 98-1015, 98th Cong., 2nd Sess.,
reprinted in 1984 U.S. Code Cong. & Admin. News 4960, 5023; see
also 129 Cong. Rec. E5339 (daily ed. November 4, 1983) (statement
of Rep. Frenzel).)

                              -3-

     Recently, the Court of International Trade, in applying 
the section 191.2(l) definition for substitution same condition
drawback purposes, indicated that substituted merchandise is
"commercially identical" when it stands in the place of the
imported merchandise, but is not more desirable than, the 
imported merchandise.  Guess? Inc. v. United States, 752 F. Supp
463 (Ct. Int'l Trade 1990), vacated and remanded on other
grounds, 994 F.2d 855 (Fed. Cir. 1991).

     We have learned that the purchasers of the subject used
components consider each component equally desirable and, aside
from specifying a particular part for a particular model, do not
discriminate in their purchases for any reason.  

     In C.S.D. 90-36, Customs found that tires manufactured 
in various countries according to the same specifications,
categorized according to the same international code number, 
made of the same material composition, and used and sold
interchangeably by the industry world wide are fungible.  
24 Cust. B. & Dec. 14 (1990).  Here, the substituted imported
used computer components and the imported used computer
components are solid-state (over time, they do not degrade 
in function or speed), bear corresponding part numbers, 
are made of the same materials, and are treated equally by 
the industry (IBM does not discriminate among used computer
components when meeting replacement orders) as well as the
consumer.  ECS indicates that the substituted and imported
components are manufactured to the same specifications by the
same manufacturer.  The descriptive information submitted by 
ECS, however, is insufficient to ensure substitution same
condition drawback; descriptions such as "SCE," "CCE," "J Engine"
do not adequately identify the goods.  ECS needs to provide
Customs with a physical description of the merchandise.  A  
photograph or engineering drawing/sketch will do.  If your office
is satified with that documentation, then fungibility will have
been met.  

     It is unclear whether the substituted imported used computer
components have been used in the United States prior to
exportation.  Since drawback is a privilege, not a right, ECS
must satisfy Customs that none of the substituted imported
components has undergone a prohibited use while in the United
States.

HOLDING:

     The substituted domestic used components do not qualify for
drawback under 19 U.S.C. 1313(j)(2) as they will have been used
in the United States prior to exportation.  The substituted
imported used components, however, may qualify for substitution 


                              -4-

same condition drawback provided Customs is given detailed
descriptions of the claimed component parts, and your office 
is satisfied with that documentation.  Likewise, your office 
must be satisfied that none of the substituted imported
components has undergone a prohibited use in the United 
States prior to exportation.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division