DRA-4 RR:CTF:ER 231555RDC
Mr. J. W. Brown
AEI Drawback Services, Inc.
d/b/a DANZAS AEI Drawback Services
1718 Fry Road
Houston, TX 77084
RE: The Dow Chemical Company; Unused merchandise drawback; Commercial interchangeability; 19 C.F.R. §191.32(c); 19 U.S.C. §1313(j)(2); diethylene glycol.
Dear Mr. Brown:
This is in response to your 9/12/2006 ruling request, on behalf of your client, The Dow Chemical Company (Dow), regarding the commercial interchangeability of imported and domestic diethylene glycol (DG), for purposes of substitution, unused merchandise drawback under 19 U.S.C. § 1313(j)(2). No other issue is considered.
The invoice number 042419, dated 11/22/2005, from a chemical corporation in New York shows that an amount of DG was sold to an entity in Michigan. The DG was shipped to Louisiana. The entry summary provided shows an entry of oxydiethanol, exported from Taiwan on 11/22/2005 and entered on 1/9/2006. Research indicates that DG also referred to as “2,2’-Oxydiethanol,” among other synonyms. The DG, was unladed at Houston from the motor tanker (MT) Formosa Eight and was classified under subheading 2909.41.00, Harmonized Tariff System of the United States. The importer of record is the New York company. Two tanker bills of lading with consecutive numbers state that the same amount of DG was shipped by two parties from Mailiao, Taiwan on 11/22/2005, aboard the Formosa Eight, destination Houston. A Certificate of Quality evidencing the testing results performed 11/22 –11/23 2005, on a sample of DG from that shipped aboard the MT Formosa Eight shows the following values:
sulfuric acid color, PT-CO
acidity as acetic acid, wt%
diethylene glycol, wt %
distillation, IBP, C°
distillation, DP C°
ethylene glycol, wt%
iron, ppm wt
PH (1:1 vol dilution)
An invoice dated 03/10/2006, from a company in Michigan to another in Hong Kong, evidences that an amount of bulk DG, “high purity” was purchased. This DG was to be delivered aboard the Chembulk Gibraltar to a seaport in China. The DG was loaded in the United States. A tanker bill of lading evidences that an amount of DG was laded aboard the Chembulk Gibraltar in the US and bound for the People’s Republic of China. This BOL is dated 3/9/2006, and shows that the shipper is the Michigan company that issued the invoice. A certificate of analysis showing the results of tests performed on the DG laded aboard the Chembulk Gibraltar contains the following information:
typical value: ash content less than 50 ppm
typical value: specific gravity at 20/20 deg C: 1.117 to 1.1190
distillation: IBP 242C, min: Dp 250C, max
The CBP Office of Laboratories and Scientific Services (OLSS), based on the specifications for the imported and exported DG shown above, concluded that the characteristics and properties of the imported and exported DG are similar enough so that they may be used interchangeably.
Dow states that all DG, whether imported or domestic and regardless of manufacturer is stored in tanks designated for DG; accordingly, the DG from all sources is commingled.
Whether the imported and domestic diethylene glycol 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. There is no evidence of governmental standards for DG. However, research indicates that that the chemical industry recognizes at least two grades of DG, “industrial” and “polyester” and that the grades have different specifications.
In addition, the website for the seller of the exported DG provides specifications for both DG and DG “high purity.” Each is assigned a “specified material number.” Both the imported and exported DG meet or exceed the specified “high purity” maximum value for purity. We note that the imported and exported DG were tested using different test standards. The imported DG was tested using the ASTM, American Standard Testing Method; the exported was tested, at least in part using DOWM, Dow Chemical Company Method. Since both the imported and exported DG meet the specs for “high purity,” this evidences that the exported and imported DG may be used interchangeably.
With respect to the tariff classification, according to the entry summary the imported DG is classified as “2,2’-Oxydiethanol (diethylene glycol . . . )” subheading 2909.41.00 “Ether-alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives” (HTSUS). Dow states that the exported DG is also classified under subheading 2909.41.00 (HTSUS). 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.
Based on the import invoice and the export and entry summary, the difference in the price per kilogram at the stated quantities is negligible. Therefore the imported and domestic DG are determined to have the same relative value. An additional factor relevant to the commercial interchangeability analysis it that CBP’s OLSS is of the opinion that the imported and exported DG is so similar that a reasonable buyer would accept either for the stated purpose.
Based on the above determinations, we conclude that the imported and domestic diethylene glycol 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).
William G. Rosoff, Chief
Entry Process and Duty Refunds Branch