DRA-4-RR:IT:EC 226444 GOB
Chief, Drawback
U.S. Customs Service
Room 102
P.O. Box 025280
Miami, FL 33102-5280
RE: Drawback; 19 U.S.C. 1313(j)(2); Commercial
interchangeability; Concentrated orange juice for manufacturing
(COJM)
Dear Madam:
FACTS:
This is in response to your letter dated September 26, 1995,
which asked whether certain Concentrated Orange Juice for
Manufacturing ("COJM") which would be imported by Lykes Pasco,
Inc. ("Lykes") was commercially interchangeable with certain COJM
which would be substituted for the imported merchandise pursuant
to 19 U.S.C. 1313(j)(2).
ISSUE:
Whether certain COJM imported by Lykes is commercially
interchangeable for the purpose of 19 U.S.C. 1313(j)(2) with
certain COJM which would be substituted for the imported COJM and
exported.
LAW AND ANALYSIS:
Under 19 U.S.C. 1313(j)(2), as amended, drawback may be
granted if there is, with respect to imported duty-paid
merchandise, any other merchandise that is commercially
interchangeable with the imported merchandise and if the
following requirements are met. The other merchandise must be
exported or destroyed within three years from the date of
importation of the imported merchandise. Before the exportation
or destruction, the other merchandise may not have been used in
the United States and must have been in the possession of the
drawback claimant. The party claiming drawback must either be
the importer of the imported merchandise or have received from
the person who imported and paid any duty due on the imported
merchandise a certificate of delivery transferring to that party,
the imported merchandise, commercially interchangeable
merchandise, or any combination thereof.
The drawback statute was substantively amended by section
632, title VI - Customs Modernization, Pub. L. No. 103-182, the
North American Free Trade Agreement Implementation ("NAFTA") Act
(107 Stat. 2057), enacted December 8, 1993. Before its amendment
by Public Law 103-182, the standard for substitution was
fungibility. House Report 103-361, 103d Cong., 1st Sess., 131
(1993) contains language explaining the change from fungibility
to commercial interchangeability. According to the House Ways
and Means Committee Report, the standard was intended to be made
less restrictive, i.e., "the Committee intends to permit
substitution of merchandise when it is commercially
interchangeable,' rather than when it is commercially
identical'" (the reference to "commercially identical" derives
from the definition of fungible merchandise in the Customs
Regulations (19 CFR 191.2(l)). The report, at page 131, also
states:
The Committee further intends that in determining whether
two articles were commercially interchangeable, the criteria to
be considered would include, but not be limited to:
Governmental and recognized industry standards, part numbers, tariff classification, and relative values.
The Senate Report for the NAFTA Act (S. Rep. 103-189, 103d Cong.,
1st Sess., 81-85 (1993)) contains similar language and states
that the same criteria should be considered by Customs in
determining commercial interchangeability.
We note that one of the export sales shown by Lykes
indicates that the COJM is exported to Canada. Pursuant to
section 203(a)(7) of NAFTA (19 U.S.C. 3333(a)(7)), a citrus
product that is exported to Canada is not a "good subject to
NAFTA drawback." Accordingly, the issue of commercial
interchangeability pursuant to 19 U.S.C. 1313(j)(2) is
appropriate with respect to an export of COJM to Canada.
Lykes' submissions to your office were dated August 15, 1995
and August 28, 1995. We made two requests for additional
information from Lykes. Lykes' first response was dated October
18, 1995. Lykes' second response was also dated October 18,
1995, but since this letter was in response to our request which
followed receipt of Lykes first response, we will refer to this
as the November submission. In fact, we received this letter in
early or mid-November.
Part Numbers
No information has been provided with respect to part
numbers. There is no evidence to suggest that part numbers is a
pertinent criterion for COJM.
Tariff Classification
We note that COJM may be classified under subheading
2106.90.48, Harmonized Tariff Schedule of the United States
("HTSUSA"), which applies to orange juice which is fortified with
vitamins or minerals or under subheading 2009.11.00, HTSUSA,
which pertains to frozen orange juice, not fortified with
vitamins or minerals.
We have not been provided with information as to whether one
of the two subheadings, supra, is applicable for all of the COJM
to be imported and exported by Lykes.
Governmental and Recognized Industry Standards
The Standards for Grades of Orange Juice for COJM are stated
in 7 CFR 52.1557, Table IV. There are two grades, Grade A and
Grade B. COJM must have a minimum of 90 score points to be
within Grade A.
The scores for Grade A are set out as follows in Table IV of
7 CFR 52.1557.
Reconstitution - Reconstitutes properly. (No Score
Points.)
Color - Good. (Equal to or better than USDA OJ 6.)
Score Points: 36-40.
Defects - Practically free. Score Points: 18-20.
Flavor - Very Good. Score Points: 36-40.
Total Score Points - Minimum - 90.
Lykes' submission dated August 15, 1995 states that the
imported and exported COJM meet "the Grade A standard of the
U.S.D.A. (7 CFR 52.1557, Table IV)."
Lykes' submission dated August 28, 1995 indicates that the
imported and exported COJM are USDA Grade A. This submission
states in part:
The imported article is tested by the USDA in Winter Haven,
who issues an affidavit (see Document "A") stating that the
product meets the requirements of Chapter 20-69 of the Florida
Citrus Code. This is available for all imports into Florida.
The affidavit also shows the results of their analytical tests.
Although the affidavit does not specifically state that the
product is USDA Grade "A", the combined scores for color,
flavor, and defects imply that the article does meet the
minimum standards for USDA Grade "A."
Furthermore, LPI'S purchase product specifications require
that the article meet the minimum standards for USDA Grade
"A." Document B is a LPI internal analysis that indicate
[sic] the product has met our specification, and specifically met the minimum scores for color, flavor, and defects
necessary to meet the USDA Grade "A" standard.
...
The substituted article will also be tested by the USDA when
it is produced. For this article we will request a USDA
Grade Certificate (see Document "C"). This certificate will
attest that the article meets the minimum requirements for Grade "A."
Although we would not use the substituted article in any
fashion, LPI would however perform our own lab tests upon
receipt of the product. Those tests, and the accompanying
documents (see Document "B" again) would attest to the fact
that the product met LPI minimum specification, which includes
the minimum scores for color, flavor, and defects necessary to
meet the USDA Grade "A" standard.
Relative Values
Lykes' November letter states in pertinent part:
Lykes Pasco did not issue, nor sign, any specific purchase
or sales contracts regarding imported or exported orange juice.
We use a purchase order as a purchase contract, however,
agreements made to purchase orange juice from foreign
suppliers are verbal and relate to quantities and qualities of
juice that vary from season to season, depending on the
particular growing conditions for that season. Furthermore,
during the previous year Lykes Pasco sold orange juice without
the need for a specific sales contract.
We note, however, that certain of the documentation
submitted by Lykes does appear to be purchase and sales orders.
In its submission of October 18, 1995, Lykes provided the
following documentation: three invoices with a handwritten
notation "import merchandise" indicating the purchase of frozen
concentrated orange juice at the following unit prices and
shipment dates - $.8066 (November 3, 1992), $.8806 (February 2,
1995), and $.9786 (June 30, 1995); and two invoices with the
handwritten notation "export merchandise" indicating the export
of merchandise at the following unit prices and shipment dates:
$.8400 (October 2, 1995), and $.8400 (September 18, 1995).
Determination
After a review of the evidence of record, we are unable to
conclude that the imported and substituted COJM, as described by
Lykes, are commercially interchangeable for the purpose of 19
U.S.C. 1313(j)(2). There is not enough clear and probative
evidence submitted for us to make such a determination.
HOLDING:
We are unable to conclude that the imported and substituted
COJM, as described by Lykes, are commercially interchangeable for
the purpose of 19 U.S.C. 1313(j)(2).
Sincerely,
Director
International Trade Compliance
Division