HQ 221953: Fungibility of Tires For Purposes of Substitution SameCondition Drawback (19 U.S.C. 1313(j)(2))

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 221953
                                 December 28, 1989

CO:R:C:E 221953 TG

CATEGORY:  Drawback (19 U.S.C. 1313(j)(2))

Mr. C.R. Logan
Import/Export Manager
Michelin Tire Corporation
Post Office Box 19001
Greenville, South Carolina 29602-9001

RE:  Fungibility of Tires For Purposes of Substitution Same
Condition Drawback (19 U.S.C. 1313(j)(2))

Dear Mr. Logan:

    This is in response to your letters of July 22, 1988, and
December 1, 1989, in which you requested a determination of
approval to claim substitution same condition drawback for
Michelin tires, inner tubes, and tire flaps, as provided under 19
U.S.C. 1313(j)(2).

FACTS:

     Michelin Tire Corporation is a member of a multinational
group of companies.  All Michelin products, regardless of country
of origin, are identified by a six-digit code called the "Code
Article International" ("CAI").  You state that each CAI number
has a one-to-one correspondence with the tire's commercial name,
product description or designation.  If any element of the
commercial name of the product changes, the CAI number changes.

     In your December 1, 1989 letter, you further explained that
the CAI number is more precise than is the commercial description
because commercial descriptions for a particular tire can vary,
depending upon the language of the country of manufacture or upon
varying notation systems.  On the other hand, CAI numbers are
invariant within the Michelin Group worldwide.  The letters used
in a tire's product description are often abbreviations of words
in the language of the country of origin.  For example, the
abbreviation "WW" tire stands for "white wall" but in French the
translation is "flanc blanc" and it is abbreviated with the
letters "FB."  However, they describe the same product even
though one uses the letters "WW" in the position where the other
contains "FB."  But the CAI numbers are identical because the
products are, for commercial as well as all other purposes,
identical and interchangeable in all situations.  If any one of
the elements of a tire description changes, a different CAI
number is assigned. The elements which determine the CAI number
include: tire type, section width, aspect ratio, rim size, load
index, speed index, tread type, type of sidewall, color and width
of sidewall stripe or letters, number of stars, ply rating, tube
designation, type of compound in earthmover, motorcycle, and
racing tires.

     The Tire & Rim Association, Inc. (TRA) provides for the
maintenance of interchangeability among rims and tires and
publishes standards for tire dimensions.  According to your
letter, Michelin products uniformly meet the published standards.

     Finally, the chemical composition of tires with the same CAI
number is constant, with a manufacturing variation range of
approximately 2% or less.  This variation is normal and is a
direct result of the manufacturing process.  You provided
examples of this variation and stated that the tire manufacturing
industry accepts this variation in chemical composition as
insignificant, because it does not affect the commercial
interchangeability of the tires.

ISSUE:

    The issue in this case is whether tires, without a defect or
blemish, manufactured in two or more countries which meet
material and design specifications, have the same CAI number, are
inventoried and sold interchangeably at the same price, meet the
fungibility requirements under 19 U.S.C. 1313(j)(2)(A).

LAW AND ANALYSIS:

    19 U.S.C. 1313(j)(2), Tariff Act of 1930, as amended,
provides that same condition substitution drawback may be claimed
upon the exportation of imported merchandise or other
merchandise, whether imported or domestic, that is fungible with
the imported merchandise.  This provision specifically authorizes
the substitution of merchandise (whether imported or domestic)
for other imported merchandise, as long as both are fungible.  In
addition, the statute requires other conditions under subsections
1313(j)(2)(B), (C) and (D), which we will presume will be met.
This ruling is limited to the issue of fungibility.

     Fungible merchandise for same condition drawback is defined
in section 191.2(1), Customs Regulations, as "merchandise which
for commercial purposes is identical and interchangeable in all
situations."  As stated in C.S.D. 85-52, "The 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."

     Congress established same condition substitution drawback to
expedite merchandise handling and inventory control.  The
legislative history states that the intention of the substitution
drawback provision was to allow merchandise of an identical
commercial nature to be substituted for the merchandise being
imported, as long as the exported merchandise had not been used
within the United States. (House Report No. 98-1015, reprinted
1984, U.S. Code Cong. and Ad. News, 5023)

     We believe that the importer has met the requirements of
fungibility under 19 U.S.C. 1313(j)(2).  The merchandise is
manufactured according to identical specifications.  Each CAI
number used by Michelin for its tires describes a particular
product which is and remains the same regardless of the plant in
which it is produced at the country of origin.  All articles
having the same CAI number are manufactured in accordance with
the same specifications and from the same material and will be
sold interchangeably with other articles bearing that CAI
number.

HOLDING:

     Therefore, an imported duty-paid designated tire and the
substituted tire both of which already have the same CAI numbers,
are made of the same material, same specifications, same chemical
composition, and same dimensions are fungible merchandise for
same condition drawback purposes under 19 U.S.C. 1313(j)(2).
This ruling is not applicable to blemished or defective tires.  A
blemished or defective tire is not fungible with another tire
regardless of the CAI number equivalency.


                               Sincerely,




                               John Durant, Director
                               Commercial Rulings Division