HQ 224468: Request for ruling on fungibility of cigarette paper;substitution same condition drawback; 19 U.S.C. 1313(j)(1)

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 224468

                          June 24, 1993


DRA-4 CO:R:C:E 224468  TLS

CATEGORY: Entry

Mr. Wesley F. O'Brien
R.J. Reynolds Tobacco Company
Winston-Salem, North Carolina  27102


RE: Request for ruling on fungibility of cigarette paper;
substitution same condition drawback; 19 U.S.C. 1313(j)(1)


Dear Mr. O'Brien:

     This office has received the above-referenced request for a
fungibility determination on cigarette paper.  We have considered
the request and made the following decision.

FACTS:

     Ten different grades of cigarette paper and two different
grades of cigarette plug wrap are manufactured according to R.J.
Reynolds' (RJR) specifications.  The grading system has been
established using RJR's internal standards.

     The importer imports these products through Miami Customs
and proposes to claim drawback on a grade-by-grade basis.

ISSUE:

     Whether these different grades of cigarette paper and
cigarette plug wrap are fungible on a grade-by-grade basis.

LAW AND ANALYSIS:

      The substitution same condition drawback law, 19 U.S.C.
1313(j)(2), requires that the merchandise substituted for
exportation must be fungible with the duty-paid merchandise and
in the same condition as was the imported merchandise at the time
of its importation.  Section 191.2(m) of the Customs Regulations
defines the term "same kind and quality" as merchandise which may
be substituted under substitution [manufacturing] drawback. 
Fungible merchandise is always same kind and quality merchandise;
same kind and quality merchandise is not always fungible,
however.  Section 191.2(l) defines the term "fungible
merchandise" as "merchandise which for commercial purposes is
identical and interchangeable in all situations."  Substituted
merchandise used in a manufacturing process under 19 U.S.C.
1313(b) does not necessarily  have to be identical with the
imported designated merchandise.  Merchandise substituted under
substitution same condition drawback, however, must be
commercially identical with the imported designated merchandise
in all situations.

     Specifications for each grade of paper and plug wrap have
been submitted for consideration.  The importer assures that
claims for substitution same condition drawback will be made only
on a grade-for-grade basis.  The imported paper and plug wrap are
manufactured according to RJR's specifications as determined for
each grade.

     It is well settled that industry-wide standards may be taken
into account when determining fungibility for drawback purposes. 
In this case, however, the standards are set by the importer for
its own purposes.  The exported goods in this case are shipped to
the importer's foreign subsidiaries.  The importer has assured
this office that the subject merchandise is traded and used only
between RJR and its subsidiaries, foreign and domestic. 
Obviously, the various grades of paper and plug wrap are
identical and interchangeable on a grade-for-grade basis in all
commercial situations that they are involved in.

     Given these facts, we find that the subject merchandise is
fungible with the imported merchandise on a grade-for-grade basis
only.  Without having the facts to determine fungibility outside
of the commercial context described above, this ruling is
contingent upon the merchandise being traded and used within the
RJR conglomerate only.

HOLDING:

     The RJR cigarette paper and RJR cigarette plug wrap is
fungible when substituted on a grade-for-grade basis and 








therefore is eligible for drawback under 19 U.S.C. 1313(j)(2). 
The finding of fungibility is valid only between RJR and its
subsidiaries.  This ruling is limited to the facts of this case.

                    Sincerely,




                    John Durant, Director
                    Commercial Rulings Division