DRA-4
OT:RR:CTF:ER H060221 BAS
Nichole Collier, LCB
Marisol International
1300 S. Meridian Ave, Ste. 109
Oklahoma City, OK 73108
RE: Substitution, unused merchandise drawback: commercial interchangeability; 19 U.S.C. § 1313(j)(2); Defective gloves; 19 U.S.C. § 1313 (c)(2).
Dear Ms. Collier:
This is in response to your request, on behalf of Ultra Marketing, Inc. for a formal ruling on the commercial interchangeability of imports and exports of defective leather goat skin gloves for men, from Indonesia.
FACTS:
The cabretta leather goat skin gloves for men were imported from Indonesia under entry numbers ARV24812328, ARV24812872, ARV24813359, ARV24814381, ARV10814338, and ARV10815228. These goods were entered between January 19, 2008 and April 10, 2008.
All of the gloves have the same item number (Plainsman PL-200) and were made in the same factory in Indonesia, and the importer paid the same unit price for each pair. The gloves have not been used or changed in any way since importation. They are all tan in color and range in size from small to extra large. In a phone conversation on August 12, 2009, you stated that the items that will be substituted for the imported merchandise will all be of the same size. That is, batches of small gloves will be substituted for other batches of small sized gloves. There are four (purchase order) PO numbers (2007015, 2007016, 2007021, 200801) which are not used as unique identifiers in this case but are stamped on the inside of the gloves. Although the PO numbers are stamped inside the gloves they are not coordinated to any particular characteristics of the gloves.
Upon receipt at the importer’s designated warehouse it was discovered that some of the gloves from each of the above noted entries weren’t manufactured as per the importer’s specifications. The non-compliant gloves were than consolidated into a single location. The importer has since decided to export some of the defective gloves back to the factory in Indonesia, and plans to pursue duty drawback on these items. However, commingling occurred between import entries when the non-compliant gloves were consolidated in one location and the importer in now unable to determine which gloves were imported under each entry. Ultra Marketing’s purchase orders are repeated within this group of entries and thus there is no viable means to identify which pair of gloves came from which import entry. This situation precludes any claim under 1313 (j)(1).
ISSUES:
Whether the imported and proposed substitution export merchandise meet the criteria for commercially interchangeability for purposes of the substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2)?
LAW AND ANALYSIS:
Generally, under 19 U.S.C. § 1313(j)(2), as amended, drawback may be granted provided there is, with respect to imported, duty-paid merchandise, any other merchandise (i.e., the “substitution merchandise”) that is commercially interchangeable with the imported merchandise provided certain requirements are met. The substitution merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Before the exportation or destruction, the substitution 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 be either 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 issue under consideration is whether the imported merchandise is “commercially interchangeable” with the exported substitution merchandise, for purposes of 19 U.S.C. § 1313(j)(2). The drawback law was substantively amended by § 632, title VI - Customs Modernization Act, Public Law 103-182, The North American Free Trade Agreement (“NAFTA”) Implementation Act (the “NAFTA Implementation Act”), enacted December 8, 1993. Before it was amended, the standard for substitution under section 313(j)(2) was “fungibility.” House Report No. 103-361, 103d Cong., 1st Sess. (1993) contains language explaining the change from fungibility to commercial interchangeability, the latter not having been defined in the statute. According to the House Report, the standard was intended to be made less restrictive (i.e., “the [House Ways and Means] Committee intends to permit the 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 CBP Regulations (19 C.F.R. § 191.2(l)). The House Report also states that in determining whether two articles are commercially interchangeable, the criteria to be considered would include, but not be limited to: Governmental and recognized industrial standards; part numbers; tariff classification; and relative values. The Senate Report for the NAFTA Implementation Act (S. Rep. No. 103-189, 103d Cong., 1st Sess. (1993), pp. 81-85) contains similar language and identifies the same criteria to be used to determine whether imported and exported merchandise is commercial interchangeable.
Governmental and Recognized Industry Standards
There are no government or industry standards that distinguish leather gloves. Accordingly, the first of the above-listed criteria should be considered inapplicable in this case.
Part Numbers
All the gloves in question have the same item number, PL 200. Consequently this criterion is met.
Tariff Classification
For the reviewed transaction, the CBP entry summary (CBP Form 7501) you submitted indicates that the imported merchandise is classified under subheading 4203.29.3010, HTSUS, which provides for “Articles of apparel and clothing accessories, of leather or of composition leather: Gloves, mittens and mitts: Other: Gloves of horsehide or cowhide (except calfskin) leather: Other: Other: Men’s: Not lined.” This subheading is the same one used to describe the proposed substituted merchandise. Consequently, the third criterion is satisfied.
Relative Values
With respect to the relative values of the imported and substituted merchandise, the imported and substituted batches have the same price of $4.24 per pair. Therefore this criterion would be met.
19 USC § 1313 (c)(2)
In addition to being eligible for drawback under 19 USC § 1313(j) (2), those items exported within a year of import, are also eligible for drawback under 19 USC § 1313 (c) (2) (as amended) which concerns merchandise not conforming to sample or specification.
Section 313(c) of the Tariff Act of 1930, as amended (19 U.S.C. §1313(c)), provides for a refund of duties on imported duty-paid merchandise, exported or destroyed under Customs’ supervision, within three years from the date of importation, which was found to not conform to sample or specifications, was shipped without the consent of the consignee, or was determined to be defective as of the time of importation.
19 USC § 1313(C)(2) provides the following:
For purposes of paragraph (1)(C)(ii), drawback may be claimed by designating an entry of merchandise that was imported within one year before the date of exportation or destruction of the merchandise described in paragraph (1)(A) and (B) under the supervision of the Customs Service. The merchandise designated for drawback must be identified in the import documentation with the same eight digit classification numbers a specific product identifier (such as part number, SKU, or product code as the returned merchandise.
In this case the notice of Intent to Export states that the date of intended action (export) is March 20, 2009. Consequently any of the items imported within one year before that date would be eligible for drawback. The items in this case were imported between January 19, 2008 and April 10, 2008 so only those imported between March 20, 2008 and April 10, 2008 would be eligible for drawback pursuant to 19 US.C. § 1313 (c)(2). Although the merchandise was commingled the import and exports can be identified by the same product code and eight digit classification number as required by 19 U.S.C. § 1313 (c)(2).
HOLDING:
Based on the above determinations, we conclude that the imported and the proposed substituted defective gloves are commercially interchangeable for purposes of the substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2). In addition, those gloves imported between March 20, 2008
and April 10, 2008 would be eligible for drawback as merchandise not conforming to sample or specifications pursuant to the 2004 amendment to 19 U.S.C. § 1313 (c)(2).
Sincerely,
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch