OT:RR:CTF:ER H042478 KBR
Mr. Steve Johnsen
Director, International Trade & Compliance
Bayer Corporation
100 Bayer Road
Pittsburgh, PA 15205
RE: Bayer MaterialScience LLC.; Commercial interchangeability; 19 C.F.R. §191.32(c); 19 U.S.C. §1313(j)(2); Toluene Diisocyanate T80.
Dear Mr. Johnsen:
This is in response to your October 20, 2008, ruling request, on behalf of your client, Bayer MaterialScience LLC (BMS), regarding the commercial interchangeability of imported and domestic Toluene Diisocyanate T80 ("TDI T80"), for purposes of substitution, unused merchandise drawback under 19 U.S.C. § 1313(j)(2).
FACTS:
BMS states that it is engaged in the manufacture, import, and export of TDI T80. BMS sells and markets TDI T80 under the trade names Desmodur T80 and Mondur T80. BMS uses various material numbers to identify Desondur T80 and Mondur T80, but you state that the material numbers are the same regardless of the source of the TDI T80. The different material numbers only indicate a difference in packaging size. You also state that different material numbers may be used to indicate additional packaging sizes or additional trade names under which the TDI T80 could be marketed. As evidence of a typical importation to BMS, you provided an entry summary, invoice and other commercial documents, including an inspection certificate. The entry summary, dated 01/09/2007, shows an amount of TDI T80 imported by BMS on 12/24/2006. The TDI T80 is classified under subheading 2929.10.1500, Harmonized Tariff Schedule of the United States (HTSUS).
Certificates of quality have been provided for the importation. The Inspection Certificate is dated 12/14/2006. It states the following:
Inspections Results Specification Units
Toluene diisocyanate 99.9 >=99.50 %
2.4-Isomere 80.2 79.5 - 81.5 %
Hydrol Chlorine 0.0017 <=0.0100 %
Acidity 0.0004 <=0.0040 %
The evidence of the exported TDI T80 consists of a tanker bill of lading, certificate of analysis, a computer order page and a commercial invoice. The tanker bill of lading states that an amount in metric tons of TDI T80 was laded on 02/20/2007, and destined for Santos, Brazil. The invoice, dated 02/22/2007, states the price paid for the same amount of TDI T80 as appears on the bill of lading. A certificate of analysis dated 02/22/2007, has been provided. It describes the TDI T80 as:
Test/Test Method Results Specification Units
Assay 99.9 >=99.50 %
Hydrolyzable Chlorides 0.00 <=0.01 %
Acidity 0.000 <=0.0040 %
2.4-Isomer 79.9 79.5 - 81.5 %
2.6 Isomer 20.1 18.5 - 20.5 %
You provide the following product specifications:
Property
Value of Imported Material
Value of Substituted Material
Turbidity at 25°C, PQA Std. (max)
1
1
Assay
99.5% - 100%
99.5% - 100%
Hydrolyzable Chlorides (max)
0% - .012%
0% - .012%
Acidity, Wt. % (max)
0% - .010%
0% - .010%
2,4-Isomer Ratio (CAS# 584-84-9)
79.5% - 81.5%
79.5% - 81.5%
2,6-Isomer Ratio (CAS# 91-08-7)
18.5% - 20.5%
18.5% - 20.5%
APHA Color Value
0 - 15
0 - 15
Total Chlorine (% by weight)
0 - 300 PPM
0 -300 PPM
You provided the ASTM standard specification for TDI, which provide:
CLASS
100 80 65
Isomer ratio, 2,4 isomer, %
97.5 min
80 ± 2
65 ± 2
Purity, min, %
99.5
99.5
99.5
APHA color, max
50
50
50
Total Chlorine, max, %
0.2
0.2
0.2
The ASTM provides for three types of TDI:
Type I or A: Acidity shall be between 0.0015 and 0.0045 determined as percent HCL. Hydrolyzable chloride shall be less than 0.01%.
Type II or B: Acidity shall be between 0.0070 and 0.012 determined as percent HCL. Hydrolyzable chloride shall be less than 0.015%.
Type III or C: Acidity shall be greater than 0.012 as percent HCL. Hydrolyzable chloride limits may be set at the convenience of the supplier.
ISSUE:
Whether the imported and domestic TDI T80 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.
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 is an ASTM standard. You provide product specifications showing that the imported and exported product falls within Type I or A of the ASTM standard for TDI.
With respect to the tariff classification, TDI is provided for in subheading 2929.10.1500, HTSUS. Because the import and export are classified under the same subheading, the tariff classification criterion, therefore, has been met.
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 TDI T80 was imported on 12/24/2006; the exported TDI T80 was exported on 2/20/2007. Based on the approximately two-month time difference, the difference in price of the exported TDI T80, as evidenced by the invoice, and the price of the imported TDI T80 as reflected on the entry summary and export invoice, was approximately $0.01 per kilogram, 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 acetic acid glacial are determined to have the same relative value.
HOLDING:
Based on the above determinations, we conclude that the imported and exported TDI T80 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 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).
Sincerely,
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch
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