DRA-4 RR:CTF:ER H005729 ZMD
J. W. Brown
Attorney-in-Fact
AEI Drawback Services, Inc.
D/b/a DANZAS AEI Drawback Services
22210 Highland Knolls Drive
Katy, TX 77450
Re: Equistar Chemical LP; Ruling request; Commercial interchangeability; 19 C.F.R. §191.32(c); U.S.C. §1313(j)(2); Monoethylene Glycol.
Dear Mr. Brown:
This is in response to your January 22, 2007 ruling request, on behalf of your client, Equistar Chemical LP (Equistar), regarding the commercial interchangeability of imported and exported monoethylene glycol (MEG) under 19 U.S.C. § 1313(j)(2).
Facts
Equistar produces Monoethylene Glycol (MEG), also referred to as Ethylene Glycol (EG), in the United States at its plant in Pasadena, Texas. Equistar also imports MEG. In this case, Equistar is both the importer and exporter of record for the subject MEG. All U.S. importations of MEG by Equistar are discharged and commingled with U.S. domestically produced MEG in Equistar’s dedicated shore tanks currently located at the PetroUnited Terminal, Port of Houston, Texas. Substitution will only be made when the product specifications of the imported and substituted MEG are commercially interchangeable. Equistar has provided the following documents to exemplify a typical import and export transaction.
Import Documents
- Invoice # 0500287-IN, dated May 17, 2006, indicates an amount of MEG was sold and shipped to Equistar from a chemical corporation in Texas.
- CBP Form 7501, containing Entry # E01-xxxxx36-4, shows Equistar’s entry of MEG imported from Venezuela on May 26, 2006, and entered on June 6, 2006, classified under HTSUS subheading 2905.31.0000. As previously stated, the imported MEG was unladed at the PetroUnited terminal at the Port of Houston, Texas.
- A Certificate of Analysis evidencing the testing results performed May 27, 2006, on a sample of the imported MEG after being discharged into the shore tank shows the following values:
Test Item
Method
Result
Specifications
Aspect
Visual
Clear Solution
CFSM
Color, APHA
ASTM D 1209
5 APHA
5 max
Water Content
ASTM E 203
0.017 Wt-%
0.029 max
Chloride
SMA-68-62
<0.1 ppm
0.1 max
Iron content
ASTM E 202a
0.02 ppm
0.05 max
Acidity as acetic acid
ASTM D 1613
0.0006 Wt-%
0.001 max
UV Transmittance %
SMA 1997-82
@220 nm
89.8%
84 min
@275 nm
98.4%
95 min
@350 nm
99.9%
98 min
Ash
ASTM D 482
<0.0010 Wt-%
0.001 max
DEG
GC
<0.01 Wt-%
0.04 max
MEG
E202
99.98 Wt-%
99.9 min
Export Documents
- Equistar Commercial invoices # 91262425 dated July 30, 2006, and # 91264054 dated July 31, 2006, indicate an amount of “polyester” grade MEG was sold and shipped to a purchaser in China.
- The Tanker Bill of Lading # MTMACVG0601403 dated July 30, 2006, shows that Equistar is the shipper of an amount of MEG that was laded aboard the tanker at the Port of Houston and delivered to the Port of Taicang, China.
- A Certificate of Analysis evidencing the testing results performed July 30, 2006, on a sample of the exported MEG after being loaded into the vessel tanks shows the following values:
Test Item
Method
Result
Specifications
Aspect
Visual
Clear Solution
CFSM
Color, APHA
ASTM D 1209
5 APHA
5 max
Water Content
ASTM E 203
0.010 Wt-%
0.029 max
Chloride
SMA-68-62
<0.1 ppm
0.1 max
Iron content
ASTM E 202a
0.01 ppm
0.05 max
Acidity as acetic acid
ASTM D 1613
0.0006 Wt-%
0.001 max
UV Transmittance %
SMA 1997-82
@220 nm
90.3%
84 min
@275 nm
98.2%
95 min
@350 nm
99.8%
98 min
Ash
ASTM D 482
<0.0010 Wt-%
0.001 max
DEG
GC
0.02 Wt-%
0.04 max
MEG
E202
99.97 Wt-%
99.9 min
- Additional documents received on February 23, 2007, were supplied pursuant to a 30-day document request letter to confirm that the imported and exported merchandise are “polyester” grade MEG. These documents include product specifications for Equistar “polyester” grade MEG and records of the above transaction between Equistar and the purchaser. The product specifications for “polyester” grade MEG are listed as follows:
Specifications
Value
Aspect (Appearance)
Essentially free of suspended matter (clear solution)
Color (APHA)
5 max
Water Content
0.05 Wt-% max
Chloride
0.1 ppm max
Iron content
0.07 ppm max
Acidity as acetic acid
0.003 Wt-% max
UV Transmittance %
@220 nm
70% T min
@275 nm
93% T min
@350 nm
98% T min
Ash
0.003 Wt-% max
DEG
0.05 Wt-% max
MEG
99.9 Wt-% min
Issue
Whether the imported and exported Monoethylene Glycol meets the requisite criteria for commercially interchangeable merchandise 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, part numbers if any, the tariff classification, value, and any other important characteristics, for both the imported and exported good.
Our review of the commercial documentation submitted yields the following analysis:
Governmental and Recognized Industry 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. There is no evidence of governmental standards for Monoethylene Glycol (MEG).
Part Numbers
Based on our review of the evidence provided with the entry, Equistar lists four grades of MEG that are available to their customers: polyester, hi-purity, industrial, and antifreeze. These grades have different specifications (see the above listed specifications for “polyester” grade MEG) and are assigned a specified material number. Equistar’s material number for “polyester” grade MEG is 5017. In this case, both the imported and exported MEG were of “polyester” grade according to the evidence of the subject transaction. In comparing the specifications documented on the Certificates of Analysis (import and export) with the specifications of the “polyester” grade MEG that Equistar provided, both the imported and exported MEG met or exceeded the minimum purity of 99.9% by weight. Since both the imported and exported MEG meet the specifications for “polyester” grade purity, this indicates that the exported and imported MEG may be used interchangeably.
Tariff Classification
With respect to tariff classification, the CBP Form 7501 indicates the import classification for the Monoethylene Glycol as HTSUS subheading 2905.31.0000. The invoices for export of the “Polyester” grade MEG also indicate that the HTSUS subheading is 2905.31.0000. Thus, the tariff classification criterion has been met.
Value
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 varies, 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.
Based on the import invoice and entry summary, the price Equistar paid for the MEG was about $800.00/MT. According to the export invoice, Equistar is selling the MEG for about $900.00/MT. There is an import/export price difference of 14.83%. Although the export price is higher than the import price, we have held that such a variance in price does not preclude a finding of commercial interchangeability when evidence shows that the price difference is attributable to the market. See HQ 226995 (June 4, 1997)(holding that the 35% difference in value was supported by the explanation and evidence in support thereto, that the difference was a result of market conditions at the time of import and export); HQ 227220 (February 10, 1997)(holding that although the price difference of the imported and exported merchandise was in excess of 24%, the imported and exported merchandise qualified under the applicable industry standards and thus, relative value did not have as much weight when determining commercial interchangeability); HQ 228655 (November 2, 2001)(holding that although difference of the imported and exported merchandise was in excess of 32%, the merchandise qualified under the critical properties criterion and therefore, value criterion had been met as well). In this case, because there is no material difference between the imported and exported goods, the price difference appears to be within CBP guidelines. Therefore, the difference in the relative value of the imported and domestic MEG would not preclude a finding of commercial interchangeability.
Holding
Based on the above determinations, although the part number criteria are inapplicable, the imported and exported MEG has met the criteria for Government or industry standards, tariff classification, and value. We conclude that the imported MEG and exported MEG that meets the specifications for Equistar’s “polyester” grade are commercially interchangeable 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 the Customs Service as provided in 19 C.F.R. §177.2(b)(1), (2) and (4) and 177.9(b)(1) and (2).
Sincerely,
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch