HQ 224541

October 14, 1993

DRA-4 CO:R:C:E 224541 TLS

CATEGORY: Entry

Deputy Regional Director

Pacific Region-Commercial Operations Division

U.S. Customs Service

One World Trade Center

Long Beach, California 90831-0700

RE: Internal Advice request concerning the fungibility No. 6 fuel

oil within certain sulfur content ranges.

Dear Sir:

This office has received the above-referenced request for

internal advice as provided for under Customs regulations. We

have considered the request and have made the following decision.

FACTS:

A ruling was issued on October 19, 1992 concerning the

possession of No. 6 fuel oil for substitution same condition

drawback purposes. Customs ruling HQ 224103 (October 19, 1992).

The ruling held that the claimant was eligible for drawback under

several different circumstances, except one. The one scenario

involved the need for documentary evidence such as a sub-charter

agreement or contract setting forth the responsibilities and

right of the claimant and the foreign purchaser between the time

the merchandise is loaded in the exporting vessels and the time

the vessels finally depart from the United States.

Internal advice was also requested to resolve the issue of

fungibility of No. 6 fuel oil within different sulfur content

ranges. The claimant contends that No. 6 fuel oil of varying

ranges of sulfur content is interchangeable within the commercial

context. It claims that Customs is applying a narrower standard

for sulfur content than what is accepted in the marketplace.

Customs officials have determined that the No. 6 fuel oil being

exported in this case is not fungible with the imported fuel oil.

ISSUES:

1\) Whether the claimant has established possession of the

subject merchandise through documentary evidence such as a sub-

charter agreement or a contract setting forth its

responsibilities and rights and those of the foreign purchaser

between the time the merchandise is loaded in the exporting

vessels and the time the vessels finally depart from the United

States.

2\) Whether No. 6 fuel oil is fungible for the purposes of

substitution same condition drawback despite varying ranges of

sulfur content.

LAW AND ANALYSIS:

There is no dispute that the law requires a claimant for

substitution same condition drawback to possess the exported

goods at the time of exportation. B.F. Goodrich v. United

States, CIT slip op. 92-68 (May 12, 1992). In 224103, it was

held that only documentary evidence such as a sub-charter

agreement or contract setting forth the rights and

responsibilities of the claimant and the foreign purchaser would

be sufficient to show that the claimant had possession of the

exported merchandise upon exportation.

In the present case, the claimant has submitted copies of

telex instructions and other communications from the claimant to

the foreign purchaser regarding the shipment of the product.

While these submissions do explain what the claimant\'s

exportation plans are to some degree, they do not represent any

sort of binding agreement between the claimant and the foreign

purchaser. These communications do not compel the claimant to

maintain possession of the goods until exported, which is the

purpose of providing evidence of such. Thus, just as we found

possession to be lacking under these circumstances in 224103, we

are compelled here to find no evidence of possession upon

exportation based on insufficient documentation.

On the issue of fungibility of fuel oil, we have a recent

Customs ruling to consider. In HQ 223769 (October 20, 1992), it

was held that ASTM standards are controlling as the \"best

indicators of fungibility\" for fuels. In that case, the claimant

contended that the industry applied different standards for jet

fuel in the commercial context than did the Customs Service. The

ruling found that because ASTM is comprised of both producers and

users in a given industry who appoint technical committees to

formulate and review product standards, these standards have been

recognized as acceptable guidelines in making fungibility

determinations. As a result, the ruling held that the ASTM

standards are controlling despite the claimant\'s contentions that

the industry made different distinctions in the commercial

context.

In this case, instead of the claimant contending that

different distinctions than those found under ASTM should apply

when determining fungibility, we have Customs officials making

such a claim. Customs laboratory analysts have noted that sulfur

content ranges for ASTM D-396 No. 6 fuel oil are distinguishable.

The claimant correctly points out, however, that the ASTM

standards for No. 6 fuel oil only recognize that \"\[l\]imited

sulfur content of fuel oil can be required for special uses in

connection with heat treament, nonferrous metal, glass, and

ceramic furnaces to meet federal, state, or local legislation or

regulations.\" (Emphasis added.) Customs has provided no

justification for recognizing the narrower distinctions in this

case. There is no evidence that the exported oil is to be used

in a manner that suggests sulfur content is of importance to the

purchaser or any other party to the subject transaction(s) for

that matter. To the extent that fungibility is defined as

\"merchandise which for commercial purposes is identical and

interchangeable in all situations,\" Customs cannot make a

distinction where there is no evidence of such in the commercial

context. Therefore, we find that the ASTM standards set for ASTM

D-396 No. 6 fuel oil are sufficient to determine fungibility.

HOLDING:

The claimant has failed to provide evidence of a binding

agreement between it and the foreign purchaser sufficient enough

to determine that the claimant possessed the exported merchandise

at the time of exportation in this case. The telex

communications and other documentation do not indicate that the

claimant is bound to maintain possession of the goods until the

time of exportation.

For the purposes of determining fungibility of ASTM D-396

No. 6 fuel oil, the current published ASTM standards are to be

used as guidelines absent evidence that different distinctions

are made within the commercial context.

Sincerely,

John Durant, Director