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