DRA-4-OT: RR: CTF: ER H048135 BAS
Traxys North America LLC
825 Third Avenue 34th Floors
New York, New York 10022
RE: Unused Merchandise Substitute Drawback Ruling Request
Dear Mr. Hochschild:
This is in response to your letter, dated December 2, 2008, on behalf of Traxys North America LLC("Traxys") regarding the commercial interchangeability of imported zinc metal with a minimum purity of 99.995%.
Please find our office's determination of commercial interchangeability of the subject merchandise below.
Your letter and supplemental information provided indicates that Traxys imports special high grade zinc metal, Zinc B6-06, from China and Korea and exports it to Costa Rica. In addition to the special high grade zinc (SHG) imported from China and Korea, Traxys also procures SHG from Nyrstar, a domestic producer. For zinc metal, the main market is galvanizing, which gives added protection against corrosion to building structures, vehicles, machinery and household equipment.
In a teleconference on March 11, 2009, Mr. Alfred Caffaro, of Traxys, informed us that the zinc will be 'hot dip galvanized'. The hot dip galvanizing process entails steel parts being immersed in molten metal zinc. The coating formed is an alloy between iron in the base metal and zinc which protects the steel against corrosion. The zinc will be imported in ingot form and the exported product is in strip form.
Whether imported zinc metal is commercially interchangeable with domestically produced zinc metal for the purpose of a substitution unused merchandise drawback claim under 19 USC § 1313 (j)(2)?
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 only issue raised here is one of commercial interchangeability.
The Customs Regulations, 19 C.F.R. § 191.32(c), provide that 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.
In order to determine commercial interchangeability, Customs adheres to the Customs Regulations, which implement the language of the legislative history. The best evidence whether those criteria are used in a particular transaction is the claimant's transaction documents. Underlying purchase and sales contracts, purchase invoices, purchase orders, and inventory records show whether a claimant has followed a particular recognized industry standard, or a governmental standard, or any combination of the two, and whether a claimant uses part numbers to buy, sell, and inventory the merchandise in issue. The purchase and sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant's records would show that fact which will enable Customs to follow the Congressional directions.
In Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999), the United States Court of Appeals for the Federal Circuit ("Federal Circuit") determined that: "Commercial interchangeability 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. Emphasis added.
Our analysis of the four factors and critical properties follows.
Government and Recognized Industry Standards
Industry consensus standards ensure that all products meeting a standard are used in the same manner, regardless of manufacture. Under normal circumstances, materials that meet the same industry accepted standard can be used to produce the same products or utilized for the same purposes. These uses are normally stated in the standard.
There is an ASTM standard specification for Zinc B6-06. Zinc metal with minimum purity of 99.990% is also referred to as Special High Grade (SHG). In this case the imported and the substituted zinc both have a minimum purity of 99.990%.
We note that the imported product is in ingot form and the exported product is in strip form. Since both forms of the zinc will be melted for the hot dip galvanization process, the fact that the import and the substituted zinc are not in the same form is immaterial.
The import and export invoices, bills of lading, and the Certificate of Analysis/Packing List show that the material is sold using the name SHG or special high grade zinc which are all linked to a specific chemical composition with a minimum purity of 99.990%. Consequently this criterion would be met.
The Harmonized Tariff classification of zinc metal (both imported and substituted) is 7901.11.1100, HTSUS, which provides for "Unwrought zinc: Zinc not alloyed, Containing by weight 99.99 percent or more of zinc." The fact that the imported and substituted zinc metal are classified under the same ten digit subheading would serve to indicate that the criterion would be met.
The price of the imported and substituted zinc metal is set by the London Metal Exchange. The price per metric ton as of March 11, 2009 is $1216.50 per metric ton for both the imported zinc metal and the substituted zinc metal. The price changes daily according to the market supply and demand.
We have previously held that merchandise may be commercially interchangeable despite fluctuations in value. In Headquarters 230898, dated June 24, 2005, this office held that a 16 percent difference between import and export price still supported commercial interchangeability; we also ruled in Headquarters 227473, dated March 3, 1998, that a 14 percent difference in import and export price was not significant enough to affect commercial interchangeability.
Based on the above determinations, we conclude that imported and substituted zinc metal are commercially interchangeable for the purposes of substitution, unused merchandise drawback law of 19 U.S.C. §1313(j)(2).
William G. Rosoff,
Entry Process and Duty Refunds Branch