DRA-4-RR:IT:EC 226625 GEV
Tammie L. Goldstein
Manager
Customs & International Trade
Deloitte & Touche LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, Illinois 60601-6779
RE: Unused merchandise drawback; Commercially interchangeable;
Underwear;
Different colors; 19 U.S.C. 1313(j)(2)
Dear Ms. Goldstein:
This is in response to your letter dated December 11, 1995,
on behalf of your client, Jockey International, Inc. ("Jockey"),
requesting a ruling regarding the unused merchandise drawback
provisions of 19 U.S.C. 1313(j)(2). Our ruling on this matter
is set forth below.
FACTS:
Jockey imports and exports underwear. It claims duty
drawback under the unused merchandise drawback provisions of 19
U.S.C. 1313(j)(2). Jockey substitutes underwear which is the
same stock keeping unit ("SKU") number. The SKU basis means the
garments are the same size, style, color and specification. In
claiming drawback, Jockey would like to substitute underwear
which is the same size, style and specification but different in
color (e.g., substitute light blue underwear for dark blue
underwear).
In response to a request from Customs, by letter dated April
30, 1996, Jockey submitted copies of the following commercial
documentation illustrating the actual transaction processes of
importation to exportation, including Jockey's current
transactions substituting same color for same color of the same
size (Example A) and Jockey's proposal to substitute multiple
colors for one color for drawback purposes (Example B): invoices
evidencing the sale of underwear from Jockey Jamaica, Ltd.
(Lucea, Jamaica, W.I.) to Jockey International, Inc. (Kenosha,
Wisconsin)
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(Attachments A); Customs entry documentation (CF 7501) covering
importations of the aforementioned underwear classified under
subheading 6108.21.0010, HTSUSA (Attachments B); Jockey
Shipping/Receiving Tally sheets showing plant receipt of
underwear shipments (Attachments C); Jockey sales breakdown
sheets (Attachments D); Jockey warehouse withdrawal sheets
(Attachments E); Jockey Summaries of Exported Merchandise
(Attachments F); and Jockey style cross-reference sheets
(Attachments G). Included with this documentation are
certifications from Jockey's Assistant Controller as to its
accuracy and that differences in color of the same style of
underwear have no impact on its value. In addition, Jockey has
submitted four sample retail packages of ladies cotton panties
(Import Style Nos. 1500 and 1503 (corresponding to Export Style
Nos. 7500 and 7503, respectively)) of the same size (42/44),
three of which have the same suggested retail price ($5.50) but
are of differing colors (Nos. 001, 100 and 101), covered by the
aforementioned commercial documentation.
ISSUE:
Whether the Jockey underwear under consideration meets the
requisite criteria for commercially interchangeable merchandise
for purposes of the unused drawback provisions set forth in 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 if there is, with respect to imported,
duty-paid merchandise, any other merchandise that is commercially
interchangeable with the imported merchandise provided certain
requirements are met. The other merchandise must be exported or
destroyed within 3 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 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
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 (107 Stat.
2057), enacted December 8, 1993. Before its amendment by Public
Law 103-182, the standard for substitution under 1313(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 Report (at p. 131), 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
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identical" derives from the definition of fungible merchandise in
the Customs Regulations (19
CFR 191.2(l)). The Report (at p. 131) 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 Act (S. Rep. No. 103-189, 103d Cong., 1st Sess.
(1993), pp. 81-85) contains similar language and states that the
same criteria should be considered by Customs in determining
commercial interchangeability.
Our review of the aforementioned commercial documentation
and samples with respect to the above-referenced criteria yields
the following analysis.
On page 3 of your letter you state, in pertinent part, that
"...there are no government and recognized industrial standards
existing for the subject apparel, underwear,..." Based on your
representation, and in the absence of evidence to the contrary,
it is therefore apparent that the first of the above-listed
criteria to be considered is inapplicable in this case.
In regard to the second criterion listed above (part
numbers), it is your contention that the subject underwear meets
this standard based on the fact that although it may be of
differing colors, it nonetheless has the same style number (e.g.,
1500/7500 and 1503/7503). This position, however, necessitates a
total disregard/separation of the attendant color codes (e.g.,
001, 100, 101) from the aforementioned style numbers, a practice
not reflected in Jockey's commercial documentation (see
Attachments C, E and F wherein separate columns designating
various colors within the same style number are delineated), nor
is it reflected in the four sample retail packages submitted
(each of which is marked with the respective style/color numbers
1500/100, 1503/100, 1503/101 and 1503/001). Consequently, both
Jockey's internal record keeping and retail marketing practices
demonstrate that color is an imperative element in a commercial
transaction involving the purchase of this particular wearing
apparel by the public with the latter particularly evidencing
that the color number is inseparable from the specific style
number involved. Accordingly, we find the subject merchandise to
be distinguishable with respect to this second criterion.
With respect to the third criterion under consideration
(tariff classification), the Customs entry documentation
submitted (Attachments B) indicates that the subject merchandise
is classified under the same tariff provision (subheading
6108.21.0010, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), which provides for "Briefs and panties: Of
cotton...Women's). It is therefore apparent that this third
criterion has been met.
The fourth criterion concerns the relative values of the
merchandise in question which are certified by Jockey's Assistant
Controller to be the same for each style regardless of any
differences in color. In support of this position, reference is
made to internal worksheets from Jockey breaking down sales
prices of the subject underwear to Jockey Canada solely by style
number (see Attachments D). These documents, certified to be
representative of all such Jockey - 4 -
transactions, show the cost per dozen of women's cotton briefs to
be broken down by style without regard to color. Based on this
certification we deem the fourth of the requisite criteria has
been met.
Accordingly, upon a thorough review of the evidence
submitted, and notwithstanding the lack of an applicable
government and recognized industrial standard, it is our position
that although two of the three remaining requisite criteria have
been met, discrepancies with respect to the second criterion
(part numbers) discussed above leads us to conclude that the
subject underwear is not "commercially interchangeable" for
purposes of 19 U.S.C. 1313(j)(2) and therefore any claim by
Jockey for drawback thereunder is barred.
HOLDING:
The Jockey underwear under consideration is not commercially
interchangeable for purposes of the unused drawback provisions
set forth in 19 U.S.C. 1313(j)(2).
Sincerely,
William G. Rosoff
Chief
Entry and Carrier Rulings Branch