OT:RR:CTF:ER H043703 KBR
James W. Brown
AEI Drawback Services, Inc.
22210 Highland Knolls Drive
Katy, TX 77450
RE: Formosa Plastics Corp.; Commercial interchangeability; 19 C.F.R. §191.32(c); 19 U.S.C. §1313(j)(2); High Density Polyethylene (HDPE).
Dear Mr. Brown:
This is in response to your October 31, 2008, ruling request, on behalf of your client, Formosa Plastics Corp. ("Formosa"), regarding the commercial interchangeability of imported and domestic High Density Polyethylene ("HDPE"), for purposes of substitution, unused merchandise drawback under 19 U.S.C. § 1313(j)(2).
You state that Formosa is engaged in the manufacture, import, purchase and resale of HDPE. You state that due to hurricanes Katrina and Rita Formosa imported their HDPE from their parent company headquartered in Taiwan. Formosa exports through their customer Asia Chemical Corp., Inc. and others. The imported HDPE, manufactured in Taiwan, is called "Formolene E9001" or "E9001 a/k/a Taisox 9001." The domestic HDPE is called "Formolene E921" a/k/a "Formolene E924." You state that the specifications for the imported E9001 and the exported E921/E924 are the same. You state that the different designations of the Formolene E9001 and Formolene E921/E924 are only trade names to designate manufacturing origin and have no other connotation.
As evidence of a typical importation to Formosa, you provided an entry summary(Customs Form 7501, Entry BIHXXXX630-2, dated November 23, 2005), invoice dated November 7, 2005 and a packing list. The entry summary shows an amount of HDPE imported by Formosa on 11/23/2005. The HDPE is classified under subheading 3901.20.5000, Harmonized Tariff Schedule of the United States (HTSUS). The invoice and packing list describe the good as HDPE Taisox E9001.
The evidence of the exported HDPE consists of a bill of lading and a commercial invoice. The bill of lading states that an amount of HDPE E924 was laded on 05/06/2006, and destined for Belize City, Belize. The invoice, dated 04/26/2006, states the price paid for the same amount of HDPE E924 as appears on the bill of lading.
You provided a "Technical Data Sheet" for Formolone E9001, Formolone E921 and Formolone E924. The Technical Data Sheets for the Formolene E921 and the Formolene E924 are identical to the Technical Data Sheet for Formolene E9001. However, the test method listed for "Elongation" on the technical data sheets was incorrect. After telephone calls and emails with the manufacturer, Formosa, on March 6, 2009, March 12, 2009, and March 20, 2009, and March 23, 2009, the technical data sheets were amended to correct the error for the test for Elongation. The test previously read "D746", but the corrected test method reads "D882." The test method D882 involves stretching a particular thickness of the HDPE sheet at a certain temperature. The test measures at what psi half the samples will break (for tensile strength) and how long in percent expansion the sample will stretch prior to breaking. The corrected technical data sheet is now available on Formosa's website (www.fpcusa.com/products/PE/pdf/E924.pdf). The corrected Technical Data Sheets for Formolene E921 and Formolene E9001 are not available on the website but were provided and are identical to the Formolene E924 Technical Data Sheet below, since the only difference in the article is the name to indicate a different manufacturing origin.
The "Technical Data Sheet" reads:
T-Shirt Bags; Trash Can Liners; Industrial Liners; Heavy Duty Bags
Melt Index, Condition E,
Condition E, 190°C/2.16kg(MI)
Condition F, 190°C/21.6 kg(HLMI)
Typical Film Properties
Elmendorf Tear Strength
Tensile Strength at Break
Whether the imported HDPE E9001 and domestic HDPE E921 or E924 are commercially interchangeable for purposes of 19 U.S.C. § 1313(j)(2)?
LAW AND ANALYSIS:
Substitution, unused merchandise drawback is provided by 19 U.S.C. §1313(j)(2), but the statute does not define "commercially interchangeable." The CBP Regulations reflect the legislative history that explained the change from fungibility to commercial interchangeability as the standard for substitution. Section 191.32 provides:
In determining commercial interchangeability, Customs shall evaluate the critical properties of the substituted merchandise and in that evaluation factors to be considered include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.
(19 C.F.R. § 191.32(c)). In Texport Oil Co. v. United States, (185 F.3d 1291 (Fed. Cir. 1999)) the Federal Circuit Court of Appeals (CAFC) discussed the meaning of "commercially interchangeable." The CAFC concluded that commercially interchangeable is "an objective, market-based consideration of the primary purpose of the goods in question." (Id.) The CAFC explained:
Therefore, "commercially interchangeable" must be determined objectively from the perspective of a hypothetical reasonable competitor; if a reasonable competitor would accept either the imported or the exported good for its primary commercial purpose, then the goods are "commercially interchangeable" according to 19 U.S.C. § 1313(j)(2).
(Id. at 1295). Thus, per the CAFC in Texport commercial interchangeability is determined using an "objective standard." Accordingly, an exported good is commercially interchangeable with an imported good if a buyer, in an arms'-length transaction, would accept either good at the specified price for the purpose intended. In order to determine if either good at the specified price for the purpose intended the relevant characteristics of the imported good with those characteristics of the specific exported good. Those pertinent characteristics include any governmental or industry standards applicable to the good, the tariff classification, part numbers if any, value, and any other important characteristics, for both the imported and exported good.
With respect to the tariff classification, this HDPE is provided for in subheading 3901.20.5000, HTSUS. Because the import and export are classified under the same subheading, the tariff classification criterion, therefore, has been met. However, CBP previously ruled on the commercial interchangeability of HDPE in HQ H030096 (October 21, 2008). In that ruling CBP found that the imported and the exported HDPE were different articles and not interchangeable. Although the tariff classification of both the imported and the exported HDPE was the same, CBP found that for HDPE having the same tariff classification was not dispositive, as the tariff classification described a broad category and that the articles could have the same classification but be different articles.
In HQ 030096, CBP found that a difference in the part number of the imported and exported article coupled with differences in the use, descriptions and standards of the HDPE indicated that the HDPE was not interchangeable. In the instant case involving Formosa, the imported and exported HDPE have different part numbers. However, the different part numbers only indicate a difference in the source of production of the HDPE and not a difference in the actual content of the HDPE. In this instance the Formolene E9001, Formolene E921 and Formolene E924 are intended for the same uses and meet the same standards.
Standards or grades established by the government or industry consensus standards aid in the determination of commercial interchangeability in that such standards establish markers by which the commodity in issue may be measured. Further, such standards indicate that products meeting a specified standard are used in the same manner, regardless of manufacturer. Typically, commodities that meet the same government-established or industry accepted standard can be used to produce the same products or utilized for the same purposes. In this case there are ASTM test methods that the product must meet. You provide product technical data sheets showing that the imported and exported product are intended for the same uses and that the ASTM tests parameters for HDPE Formolene E9001, E921, and E924 are identical.
Goods that are commercially interchangeable will have generally very similar values when sold at the same place, at the same time, to like buyers from like sellers. When the time or place of the sale or the buyers or sellers vary, goods that are commercially interchangeable may be traded for different prices. Accordingly, when price paid and charged for purportedly commercially interchangeable goods are significantly different, it must be demonstrated that the difference is attributable to market forces or some circumstance other than a material difference between the imported and exported goods.
In this case the foreign HDPE was imported on 11/23/2005; the exported HDPE was exported on 05/05/2006. Based on the approximately six-month time difference, the difference in price of the exported HDPE, as evidenced by the invoice, and the price of the imported HDPE as reflected on the entry summary and export invoice, was approximately $0.025 per pound, which is within an acceptable range. See HQ 226995(June 4, 1997), HQ 227220 (February 10, 1997), HQ 228655 (November 2, 2001) (all holding that there is an allowable difference in value between imported and exported merchandise for drawback purposes). Therefore the imported and exported HDPE are determined to have the same relative value.
Based on the above determinations, we conclude that the imported HDPE E9001 is commercially interchangeable with either HDPE e921 or E924 that is exported for purposes of the substitution, unused merchandise drawback law of 19 U.S.C. §1313(j)(2).
This decision is limited to the specific facts set forth herein. If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on Customs and Border Protection as provided in 19 C.F.R. §177.2(b)(1), (2) and (4) and 177.9(b)(1) and (2).
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch