HQ 224014: Substitution same condition drawback; possession of exportedfungible merchandise; 19 U.S.C. 1313(j)(2); 19 U.S.C.1313(j)(2)(C)(ii)

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 224014

                          July 24, 1992

DRA-4 CO:R:C:E 223014 C

CATEGORY:  Drawback

David N. Simcox
President
COMSTOCK & THEAKSTON, INC.
466 Kinderkamack Rd.
Oradell, NJ  07649

RE:  Substitution same condition drawback; possession of exported
fungible merchandise; 19 U.S.C. 1313(j)(2); 19 U.S.C.
1313(j)(2)(C)(ii)

Dear Mr. Simcox:

     This responds to your letter of June 8, 1992, concerning the
possession requirement of substitution same condition drawback. 
The letter references an earlier letter, dated May 4, 1992,
requesting a ruling on this subject on behalf of your client.  We
have reviewed all relevant materials, and our response follows.

FACTS:

     Generally, your client, Dibrell Brothers, Inc. (Dibrell),
purchases, processes, and sells leaf tobacco and products
produced therefrom.  Dibrell's wholly owned subsidiary, Dibrell
Brothers International S.A. (Dibrell S.A.), located in
Switzerland, purchases and sells tobacco but has no facilities to
process or store it.  On the facts here, Dibrell S.A. purchases
tobacco that is imported into the United States by Dibrell.  The
imported tobacco is sold to U.S. customers, with Dibrell S.A.
issuing the invoice.  Dibrell also exports other tobacco.  You
have asserted that the imported tobacco can be designated for
drawback under 19 U.S.C. 1313(j)(2) upon exportation of the other
tobacco.  You also asserted that Dibrell has physical possession
and control over the imported tobacco.

ISSUE:

     Can the company designate imported tobacco that it either
possesses or not and receive drawback of duties paid thereon upon
exportation of other fungible tobacco that it possesses? 


LAW AND ANALYSIS:

     Under the substitution same condition drawback law, 19
U.S.C. 1313(j)(2), a drawback of duty paid on imported
merchandise can be paid to a claimant who possesses and exports
fungible merchandise.  This formulation differs from the position
taken by Customs prior to the decision by the United States Court
of International Trade in B.F. Goodrich Company v. United States,
Slip op. 92-68, 26 Cust. Bull. No. 24, June 10, 1992, p. 11 (No.
90-05-00228 CIT, May 12, 1992).  Before the decision, Customs
required possession of both the imported and substituted
(exported) merchandise.  In B.F. Goodrich, the court stated the
following regarding possession:  "From this Court's reading of
the statute, it is clear that the possession requirement attaches
only to the exported goods, not to the imported goods.  The
operative portion of [section] 1313(j)(2) with regard to imported
goods mentions only that a duty, tax or fee was paid because of
their importation.  Therefore, [section] 1313(j)(2) requires only
that a drawback claimant have paid the duty, tax or fee for the
privilege of importing goods."  Id. at 13. (Emphasis in
original.)

     Based on the foregoing, we conclude that your client need
not prove that it had possession and control over the imported
tobacco.  On the facts here, Dibrell, the drawback claimant, pays
the duty on the tobacco it imports.  Thus, if it has possession
of the substituted tobacco it exports, it would fulfill the
possession requirement of section 1313(j)(2)(C)(ii).  Of course,
the substituted tobacco would have to be fungible with the
imported designated tobacco for drawback to be approved.

HOLDING:

     The possession requirement of 19 U.S.C. 1313(j)(2)(C)(ii)
does not apply to the imported-designated merchandise; it applies
to the substituted-exported merchandise.  If the drawback
claimant has paid duty on designated merchandise it imports, and
has possessed the substituted fungible merchandise it exports,
drawback under 19 U.S.C. 1313(j)(2) is warranted (provided that
any other pertinent requirements are met).

     If you have any further questions regarding this matter,
please contact this office.

                               Sincerely,




                               John Durant, Director