If you still want the machine, try to press your case with a higher authority than the L1 reps. Nicely. You did your part, and they failed to do theirs; emphasize that it is not a good customer experience. Their legalese gives them the ability to do what they did, but ask them to make an exception (where the "nice" part comes in).
Apple has facilities in the U.S. that handle the Mac CTO configurations and refurbs. My refurb is "Assembled in USA."
It's possible that the replacement ordered was a new machine, and subsequently vetoed as a mistake, according to policy or not. Depends on what the first rep who handled the case did, and if their system allows discrepancies to occur unintentionally.
Also consider having a replacement (bulk) shipped as a store pickup.