Request for modification of HQ 223885 (September 22, 1992);Industry standards to be used to determine peanut oilfungibility; 19 U.S.C. 1313(j)(2).

HQ 224401 May 24, 1993 DRA-4 CO:R:C:E 224401 TLS CATEGORY: Entry; Drawback David N. Bickers Alimenta (USA), Inc. Perimeter 400 Center 1100 Johnson Ferry Road Suite 690 Atlanta, Georgia 30342 RE: Request for modification of HQ 223885 (September 22, 1992); Industry standards to be used to determine peanut oil fungibility; 19 U.S.C. 1313(j)(2). Dear Mr. Bickers: This office has received the above-referenced request for modification of Customs ruling HQ 223885. We have considered the points raised and have made the following decision. FACTS: This office issued a ruling concerning the above-mentioned issue on September 22, 1992. Among other things, the ruling held that " ...shipments of crude peanut (groundnut) oils that contain 2 percent or less of Free Fatty Acid, and in which the combination of the moisture and insoluble impurities does not exceed 1 percent, are fungible for purposes of the substitution same condition drawback law, 19 U.S.C. 1313(j)(2)." Customs ruling HQ 223885. You contend that the holding should be modified because it is inconsistent with industry standards. You state that peanut oil is traded "basis 2 percent maximum 3 percent FFA moisture and impurities max. 1 percent" in accordance with the Federation of Oils, Seeds, and Fats Association (FOSFA) rules of trading. To support this contention, you have submitted copies of recent contracts using the criteria you propose. ISSUE: Whether Customs ruling HQ 223885 should be modified with respect to its holding #1. LAW AND ANALYSIS: It is generally agreed upon that FOSFA standards should be followed when determining fungibility of peanut oil. We recognize that industry trade practices allow for a "basis 2 percent maximum 3 percent" while HQ 223885 held that only oils that contain "2 percent or less" Free Fatty Acid (FFA) should be considered fungible. Our findings remain the same with respect to the interchangeability of oils with less that 2 percent, however. We have found that it is only at this level that the oils are freely interchangeable. Between 2 and 3 percent, the oils are interchangeable only when an adjustment is made in the price of the oils in inverse proportion to the FFA content. Your submission on page 3 acknowledges such in the fourth paragraph. We do find these facts to be consistent with the subject holding in HQ 223885. The very fact that a price adjustment is necessary for FFA between 2% and 3% demonstrates that peanut oil with such content is not freely interchangeable within the commercial context. Distinctions are being made here and acted upon, as the sample contracts illustrate. We therefore find no reason to modify the holding to reflect our original findings. Thus, we hold that HQ 223885 should not be modified with respect to holding #1. HOLDING: Customs ruling HQ 223885 (September 22, 1992) is hereby upheld with respect to holding #1 and all other respects. Sincerely, John Durant, Director Commercial Rulings Division