- Type : HTSUS :
OT:RR:CTF:ER H030097 DCC
Mr. James W. Brown
Danzas AEI Drawback Services
22210 Highland Knolls Drive
Katy, Texas 77450
RE: Unused merchandise drawback; Commercial interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R. § 191.32(c); Butylene glycol
Dear Mr. Brown:
This is in response to your letter, dated May 29, 2008, on behalf of Lyondell Chemical Company of Houston, Texas (“Lyondell”) regarding the commercial interchangeability of imported and domestically produced butylene glycol.
Lyondell manufactures, sells, imports, and exports butylene glycol (2-Methyl-1,3-propanediol), a chemical compound produced through the hydroformylation of allyl alcohol. Lyondell markets butylene glycol under the trade name MPDiol Glycol. Butylene glycol has a variety of industrial uses, including the production of polyesters, polyurethane, coatings, adhesives, and sealants. It is also used as an emulsifier and humectant for the end applications of personal care products.
According to your submission, Lyondell commingles imported and domestically produced butylene glycol in dedicated storage tanks located at the Port of Houston, Texas. Lyondell intends to import duty-paid butylene glycol, and export domestically-produced substitute butylene glycol.
In support of your claim of commercial interchangeability you provided several commercial documents and CBP forms related to representative import and export transactions involving butylene.
For the import transaction, you submitted a copy of the Entry Summary (CBP Form 7501) for Entry No. xxxxxxx047-8, dated March 27, 2007, which describes the imported merchandise as “MPDIOL® GLYCOL, BULK” classified under subheading 2905.39.1000, Harmonized Tariff Schedule of the United States (“HTSUS”). This subheading provides for: “Acyclic alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives: Diols: Other: Butylene glycol.”
You also provided a commercial invoice (Invoice No. 95081804) issued by Lyondell Chemie Nederland B.V. (“Lyondell Netherlands”), dated February 9, 2007, which indicates a sale of butylene glycol to Lyondell USA. The invoice describes the merchandise as 524.817 metric tons of “MPDIOL® GLYCOL, BULK,” Customer Material No. 499177, with an FOB price of $1,084.25 per metric ton.
For the export transaction, you submitted the commercial invoice (Invoice No. 81843650), dated November 29, 2007, which describes the exported merchandise as 509.6960 metric tons of “MPDIOL® GLYCOL, BULK,” with an FOB price of $1,068.00 per metric ton.
You also submitted Certificates of Analysis for the imported and exported merchandise. For the export transaction, four certificates of analysis were provided based on samples taken at the following points: storage tank before loading; during vessel loading; after vessel loading; and dockline sample before loading. According to these certificates, the imported and exported butylene glycol conform to the following specifications:
Imported Butylene Glycol
Certificate of Analysis
Exported Butylene Glycol
Certificates of Analysis
(unit of measure)
Clear and Free
Purity / Assay
Carbonyl as CHO (ppm)
46 – 48.4
Acidity as Acetic Acid (ppm)
0.0004 – 0.0009
Color, Pt-Co (APHA Color)
4 - 13
* Test results for export transaction indicate the range of results for the four analyses conducted.
We note that the Certificate of Analysis based on the dockline sample indicated an exceptionally high American Public Health Association (“APHA”) color test result (13) compared with the other three samples. You state, however, that the high result on the dockline sample is due to use of a long pipeline from the storage tank to the dock that is exposed to direct sunlight. According to the testing agency, as the butylene glycol travels through that pipeline it heats up, which causes the product to undergo a change color, which produced the abnormally high test result. As the product returns to normal temperature upon loading, the color returns to the lower number consistent with the test results from the other samples.
We also reviewed Lyondell’s sale specification bulletins for sales of butylene glycol in the United States and Europe (including the Middle East), which we obtained from the company’s website. According to these bulletins, sales of imported and exported butylene glycol evaluate the following specifications when making decisions regarding batch selection:
Specifications for U.S. Sales
Specifications for European Sales
(unit of measure)
Purity / Assay
Color, Pt-Co (APHA Color)
Carbonyl as CHO (ppm)
Whether imported butylene glycol is commercially interchangeable with butylene glycol, for purposes of substitution unused merchandise drawback pursuant to 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 unused merchandise drawback. 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.” The Texport court explained:
“[C]ommercially 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).
185 F.3d at 1295.
Thus, in accordance with Texport, commercial interchangeability is determined using an “objective standard.” An exported good will be considered 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 would be acceptable for the purpose intended, the relevant characteristics of the imported good are compared with those characteristics of the substituted 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 characteristics relevant to the good.
Government and Recognized Industry Standards
Standards or grades established by the government or industry consensus aid in the determination of commercial interchangeability in that they establish markers by which the product is commoditized and measured against like products for use in the same manner, regardless of manufacturer. Generally, products that meet the same industry accepted standard may be used to produce the same products or utilized for the same purposes. These uses are typically indicated in the standard.
In this case, there are no government or industry standards governing the content of butylene glycol. Lyondell does, however, maintain technical product specifications for use in the sale of butylene glycol. These specification bulletins list the properties Lyondell considers when making batch selection decisions for sales in the United States and Middle East. According to these specification bulletins, sales of butylene glycol to the United States and Middle East provide for the identical terms for purity and 2-Methyl-1,3-Pentanediol; and similar specifications with regard to Color, Pt-Co, water, and Carbonyl as CHO. Furthermore, the product specifications described in the certificates of analysis for the imported and exported merchandise, contain identical terms with regard to the following specifications: Appearance, Purity, 2-Methyl-1,3-Pentanediol, Water, and Carbonyl as CHO. Based on the consistency of the specifications described in the sale specification bulletins and certificates of analysis, we determine that the imported and substitute exported butylene glycol in the representative transactions satisfy the standards criterion.
You state that Lyondell does not use part numbers for butylene glycol. Instead, you state that Lyondell uses a universal product nomenclature system for identifying materials with the same specifications, regardless of whether the product is produced within the United States or abroad. According to your submission, Lyondell uses the product name “MPDIOL” to identify the imported and exported merchandise.
Although Lyondell does not use “part numbers,” the company does use “material numbers” to describe its merchandise. The invoice and the certificate of analysis for the imported butylene glycol, as well as the sales specification bulletin for sale to the United States, identify the imported butylene glycol as “Material Number 499177.” Although this material number is not used in the invoice or certificate of analysis for the export transaction, it is used in the specification bulletin for sales to the Middle East. Based on the use of the same material number, we determine that the part number criterion is satisfied.
You state that the imported and exported butylene glycol shipments are classified under 2905.39.10.00, HTSUS. Because the imported and exported merchandise are classified under the same subheading, we find that the tariff classification criterion is satisfied.
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. Even if the prices are not identical, the goods may still be considered commercially interchangeable if the difference is attributable to market conditions or the difference is immaterial.
According to the invoice for the import transaction, the imported butylene glycol has an FOB sales price of $1,084.25 per metric ton. The corresponding price for the export transaction, indicates an FOB sales price of $1,068.00 per metric ton. The difference in price between the imported and exported merchandise is $16.25 per metric ton, or 1.5%.
CBP has held that merchandise may be commercially interchangeable despite fluctuations in value. In HRL 230898, dated June 24, 2005, we held that a 16 % difference between the imported and exported merchandise was not high enough to prevent a determination that the goods were commercially interchangeable. Therefore, we find that the minimal difference in price between the imported and exported butylene glycol does not preclude a finding of commercial interchangeability.
Based on the above findings, we determine that the imported butylene glycol and the substitute butylene glycol described above are commercially interchangeable for purposes of substitution unused merchandise drawback pursuant to 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 CBP 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 & Duty Refund Branch