DRA 4
H261790 SMS
OT:RR:CTF:ER
Stephen R. Johnson, President
Bayer International Trade Services Corporation
100 Bayer Road
Pittsburgh, PA 15205
RE: Bayer Material Science LLC: Request for a determination of commercial interchangeability under substitution of unused merchandise drawback, 19 U.S.C. § 1313(j)(2), for Aniline; CAS-No 62-53-3
Dear Mr. Johnson:
This is in response to your application, dated January 30, 2015, on behalf of Bayer Material Science LLC (“BMS”), for a formal ruling on the commercial interchangeability of imported and substitute Aniline; CAS-No. 62-53-3, for purposes of substitution of unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2).
FACTS:
BMS, an importer, exporter, and manufacturer of various polymers, copolymers, monomers, and other organic compounds in the United States, is engaged in the import and export of Aniline. BMS explains that Aniline is used primarily as a feedstock for manufacturing methylene diphenyl diisocyanate (MDI). BMS included in its request, a Material Safety Data Sheet for Aniline and Raw Material Product Literature and Specifications. According to BMS, all Aniline imported and substituted/exported by the company for drawback purposes must meet these specifications for assay/purity, nitrobenzene, water, and color/APHA:
Assay: 99.9 -100%
Nitrobenzene: 0-2 parts per million (“ppm”)
Water: 0 – 1000 ppm
Color, APHA: 0-100
As a representative import, you provided a Customs and Border Protection (“CBP”) form 7501, dated March 10, 2014, and a CBP form 3461, dated February 27, 2014, showing the importation of a bulk quantity of “Aromatic Monoamine: Aniline ” classified under subheading 2921.41.1000 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The documentation provided reflects that the Aniline is packaged and sold in bulk, without part numbers. The corresponding invoice, dated February 1, 2014, shows the importation of “Anilin RN”, with subheading 2921.41.1000 of the HTSUS. The February 1, 2014, invoice number is also reflected on CBP Form 7501. The accompanying import Certificates of Analysis (“COA”) identifies Aniline, Batch No. P5MD901202, and includes the following specifications:
Aniline: 99.9886 percent
Nitrobenzene: 0.0002 percent
Water: 0.044 percent
BMS also submitted an Import Purchase Order, dated January 6, 2014, and a Bill of Lading, dated January 16, 2014, for Aniline imported from a BMS subsidiary.
For the export transaction, BMS provided a Bill of Lading for a shipment of Aniline, dated July 22, 2014, an export purchase order, dated July 7, 2014, a commercial invoice, dated July 22, 2014, and an export COA. The invoice indicates that the exported merchandise is classified under subheading 2921.41.1000 of the HTS and describes the merchandise as “Anilin RN.” Additionally, the provided AES Transmission Report demonstrates that the exported merchandise is classified under HTS/Schedule B subheading 2921.41.1000. A comparison of the invoices for the imported and substituted Aniline show that the difference in price is 29 percent. Based on the COA accompanying the export shipment for the Aniline, dated July 23, 2014, the specifications were all within the ranges required by BMS:
Aniline: 99.98 percent
Nitrobenzene: 0.5 ppm
Water: 404 ppm
Color: 87
Furthermore, the specifications and COAs for the imported and substituted Aniline, were sent to CBP’s Laboratories and Scientific Services Directorate (“LSSD”). It is the opinion of the LSSD that the imported and substituted Aniline both had very high purity levels of 99.98 percent, or greater, and this specification sufficiently describes the imported and substituted Aniline.
ISSUE:
Whether the imported Aniline, CAS No. 62-53-3, is commercially interchangeable with the substituted merchandise, for purposes of substitution of unused merchandise drawback pursuant to 19 U.S.C. § 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, 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 be either, the importer of the imported merchandise or must have received from the party that imported and paid duties on the imported merchandise, a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof.
The CBP regulation, 19 C.F.R. § 191.32(c), further provides 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.
The best evidence of whether the above quoted criteria are used in a particular transaction are the claimant’s transaction documents. See, e.g., HQ H048135 (Mar. 25, 2009); and HQ H122535 (Feb. 9, 2011). 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. Id. The purchase and sales documents also provide the best evidence with which to compare relative values. Id.
In Texport Oil Co. v. United States, the United States Court of Appeals for the Federal Circuit determined that: “[c]ommercial 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)).” Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999). Thus, the Federal Circuit sets forth an “objective standard—analyzed from the perspective of a hypothetical reasonable competitor.” Id. Therefore, we analyze commercial interchangeability pursuant to 19 C.F.R. § 191.32(c), for a hypothetical reasonable competitor.
Government and Recognized Industry Standards
One of the factors that CBP considers is whether the imported and exported merchandise adhere to governmental and recognized industry standards. Governmental and recognized industry standards assist in the determination of commercial interchangeability, because those standards “establish markers by which the product is commoditized and measured against like products for use in the same manner, regardless of manufacturer . . . products that meet the same industry accepted standard may be used to produce the same products” or used for the same purposes. See HQ H074002 (Dec. 2, 2009). For Aniline, there are no published government and recognized industry standards.
However, a Chemical Abstract Service (CAS) number is an industry standard we recognize. BMS provided the CAS number for the imported and substituted merchandise. CAS registry number is a unique number used to identify compound product for both the imported and substituted merchandise. According to the American Chemical Society that assigns and maintains the CAS Registry Numbers, the CAS numbers “are unique identifiers for chemical substances.” See www.acs.org; see also HQ H071657 (July 28, 2010). A CAS registry number itself has no inherent chemical significance but provides an unambiguous way to identify a chemical substance or molecular structure when there are many possible systematic, generic, proprietary, or trivial names. CBP has held that the CAS registry number, although not conclusive, may support a finding of commercial interchangeability. See e.g., HQ H095404 (June 29, 2011). The CAS registry number for both the imported and substituted merchandise is CAS-62-53-3. However, the CAS numbers were sent to the LSSD, who advised that the CAS numbers are too broad to be relied upon to determine commercial interchangeability in this case. Therefore, the CAS registry number for Aniline is not sufficient in determining commercial interchangeability.
Nonetheless, CBP considers contractual product specifications, as a critical property, especially when governmental and industry standards are not available. See, e.g., H030097 (Aug. 29, 2008) (determining that where the technical product specifications sufficiently describe the product, this would also support a determination of commercial interchangeability). Product specifications are used to guarantee the uniformity of merchandise. In other words, if product specifications are sufficiently detailed, then any merchandise sharing those specifications will generally be uniform in nature. The Court of International Trade has found that private contract standards may be used to determine commercial interchangeability. See Pillsbury Co. v. United States, 293 F. Supp. 2d 1351, 1356-57 (Ct. Int’l Trade 2003) (explaining that, “[e]vidence of different contract standards would indicate that the designated and substitute [product] are not commercially interchangeable”). Thus, when goods are sold or purchased pursuant to the same detailed product specifications, evidence that the imported and substitute merchandise share the same product specifications tends to support a general finding of commercial interchangeability and thus, satisfies the standards criterion.
BMS provided product specifications and industry standards identifying the physical properties of Aniline, and certificates of analysis of samples of the import and substituted export product. The specifications are as follows:
Assay: 99.9 -100%
Nitrobenzene: 0-2 parts per million (“ppm”)
Water: 0 – 1000 ppm
Color, APHA: 0-100
All Aniline imported and substituted by BMS are required to have the minimum or maximum specifications that fall within the percentages identified above. Upon review of these ranges, LSSD confirmed that it was sufficiently narrow to describe the merchandise. Both the imported and substituted merchandise have high purities levels with low impurities that fell within these required standards. Based on these findings, we conclude that this criterion is satisfied provided that the Aniline falls within the specifications stated above.
Part Numbers
In evaluating the critical properties of the merchandise, CBP also considers the part numbers of the merchandise. If the same part numbers or product identifiers are used in catalogs, and in the import and export documents, it would support finding them to be commercially interchangeable. See, e.g., HQ H074002 (Dec. 2, 2009); HQ H122535 (Feb. 9, 2011). There were no standardized part numbers assigned to the Aniline. BMS explained that it uses material numbers within the Enterprise Resource Planning System, and the numbers are the same regardless of source, but differ depending on the package size and/or end us. However, all purchases and sales of Aniline are identified specifically by name, and the import and export documentation provided reflects that the merchandise is packaged and sold in bulk. In a prior ruling, CBP noted that merchandise sold in bulk may not have part numbers. See HQ H190457 (June 11, 2012). Therefore, part numbers are not applicable to this product and this criterion is not relevant in determining commercial interchangeability.
Tariff Classification
Another factor CBP considers when determining commercial interchangeability is whether the imported and exported goods are classified under the same subheading of the HTSUS. See, e.g., HQ H074002 (December 2, 2009). Based on the CBP forms 7501 and 3461 submitted as a part of the import documentation, the imported merchandise is classified under HTSUS subheading 2921.41.1000. The export invoice description demonstrates that the exported merchandise is classified under HTS subheading 2921.41.1000. Likewise, the provided AES Transmission Report demonstrates that the exported merchandise is classified under HTS/Schedule B subheading 2921.41.1000. Therefore, the fact that the imported and substituted Aniline are both classified under the same HTSUS subheading, indicates that this criterion is satisfied.
Relative Value
Finally, goods that are commercially interchangeable generally have similar values when sold at the same place, at the same time, to like buyers from like sellers. See, e.g., HQ H090065 (Mar. 23, 2010) (finding a price difference of 4.5 percent to be acceptable). CBP has also held that a variance in price does not preclude a finding of commercial interchangeability when there is sufficient evidence to support the material difference in value. See HQ H174276 (July 3, 2012) (finding that a 34 percent price difference was the result of external market factors and, thus, did not preclude a finding that the imported and substituted merchandise were commercially interchangeable); HQ 229838 (May 30, 2003) (holding that a value difference of 8.32 percent, explained by profit mark up and costs, does not preclude a finding of commercial interchangeability); HQ 228580 (August 20, 2002) (holding that a value difference of 27 percent did not preclude a finding of commercial interchangeability when the difference in value is attributable to processing and manufacturing costs). Conversely, see HQ 228519 (June 5, 2002) (holding no commercial interchangeability when no explanation was provided to show why “[e]xport invoices indicate that similar tapes were all sold at costs proportionately higher than at the imported costs.”).
A comparison of the invoices for the imported and substituted Aniline show that the difference in price is a 29 percent difference in value. The import transaction occurred in February of 2014 and in July of 2014 the merchandise was exported. According to BMS the difference in import value and the export value of the substituted merchandise have a broad range, upwards of 300 percent, depending on the prices of the raw materials, country of export, contractual obligations, and the objective of maintaining overall profitability. Additionally, BMS explains that the market forces fluctuate based on supply and demand and other market conditions. However, BMS failed to provide any evidence of these fluctuations. Nor did it provide sales documents to show these transactions with large price discrepancies so that we could evaluate whether any other factors were at play. Therefore, our decision is particular to the facts presented to us, and we determine that for the purposes of commercial interchangeability, imported and substituted Aniline with a comparable or less price, to the above differential of 29 percent, does not preclude a determination of commercial interchangeability. See HQ 227220 (Feb. 10, 1997) (determining that price difference in excess of 24 percent is acceptable because the imported and exported merchandise qualified under the applicable industry standards; therefore, relative value did not have as much weight when determining commercial interchangeability). See also, HQ 228655 (Nov. 2, 2001) (holding that although the difference of the imported and exported merchandise was in excess of 32 percent, the merchandise qualified under the critical properties criterion).
The facts of the case, the precise specifications of the chemical Aniline that define the product to a high degree of exactness and the fact that the imported and substituted Aniline are both classified under the same HTSUS or Schedule B subheadings, allow for a finding of commercial interchangeability, despite the value difference being unsupported by evidence.
HOLDING:
Based on the above findings, we determine that imported and substituted Aniline, that satisfy the specifications listed above and classified under the same HSTUS subheading, with a comparable or less price difference, are commercially interchangeable for the purposes of substitution drawback pursuant to 19 U.S.C. § 1313(j)(2).
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If the activities vary from the facts stipulated to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. § 177.9(b).
Sincerely,
Carrie L. Owens, Chief
Entry Process & Duty Refunds Branch