Stephen Johnsen
Director, International Trade and Compliance
Bayer Corporate and Business Services LLC
100 Bayer Road
Pittsburgh, PA 15205

RE:     Unused Merchandise Substitute Drawback Ruling Request

Dear Mr. Johnsen: This is in response to your letter, dated August 29, 2008, on behalf of Bayer Material Science LLC (“BMS”) regarding the commercial interchangeability of imported Isophorone Diisocyanate, otherwise known by Bayer’s trade name, Desmodur I. Please find our office’s determination of commercial interchangeability of the subject merchandise below.


Desmodur I, CAS-No. 4098-71-9, the subject merchandise, is used primarily as a reactive building block for the preparation of chemical products, intermediates and polymers. Possible sources for the Desmodur I that BMS wishes to utilized in 1313(j)(2) drawback claims include Germany and the United States. BMS will be both the importer and exporter of the merchandise to be claimed for drawback.

Included in the application are a Material Safety Data Sheet for Desmodur I, Product Literature for Desmodur I, Import Purchase Order, CBP Form 7501 for Entry 110-4045706, CBP Form 3461 for Entry 110-40457906, a Commercial Invoice for Entry 110-40457906, a Bill of Lading for Entry 110-40457906, Certificate of Analysis for Entry 110-40457906, and an Export Purchase Order, Export Commercial Invoice, Certificate of Analysis and Bill of Lading for Export 1716303.


Whether imported Desmodur I, CAS-No. 4098-71-9, is commercially interchangeable with domestically produced Desmodur I, CAS-No. 4098-71-9, for the purpose of a substitution unused merchandise drawback claim under 19 USC § 1313 (j)(2)?


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 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 either be 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 only issue raised here is one of commercial interchangeability. The Customs Regulations, 19 C.F.R. § 191.32(c), provide 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. In order to determine commercial interchangeability, Customs adheres to the Customs Regulations, which implement the language of the legislative history. The best evidence whether those criteria are used in a particular transaction is the claimant’s transaction documents. 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. The purchase and sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant’s records would show that fact which will enable Customs to follow the Congressional directions.

In Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999), the United States Court of Appeals for the Federal Circuit ("Federal Circuit") determined that: “Commercial 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))”. Id. Emphasis added.

Our analysis of the four factors and critical properties follows. Government and Recognized Industry Standards

Industry consensus standards ensure that all products meeting a standard are used in the same manner, regardless of manufacture. Under normal circumstances, materials that meet the same industry accepted standard can be used to produce the same products or utilized for the same purposes. These uses are normally stated in the standard.

The following specifications were provided:


Specifications: Assay (GC) 99.5-100% NCO (GC) Content 37.5-38.5% APHA Color 0-30 Max Hydrolyzable chlorides, ppm 0-200 ppm


Specifications: Assay (GC) 99.5-100% NCO (GC) Content 37.5-38.5% APHA Color 0-30 Max Hydrolyzable chlorides,ppm 0-200 ppm

As the imported merchandise appears to be the same as the substituted merchandise in this case, we forwarded the information to our national laboratory to determine whether the specifications given were sufficient to identify the merchandise and its quality. The laboratory requested that BMS provide an “NCO content” value on the certificate of analysis for the imported product batch # LL48/7-25 and a certificate of analysis for batch # LL44/7-24 (Import Invoice # 8027037394/Container # DCIU024014-4) in order to ensure commercial interchangeability. Subsequently Certificates of Analysis were provided stating that both batches of Desmodur I have an NCO content value of 37.8%. The additional information provided was sufficient for the laboratory to conclude that the imported and exported merchandise would be suitable for the intended purpose as a reactive building block in the manufacture of polyurethane polymers.

Part Numbers

The import and export invoices, import and export bills of lading, and the Material Data Safety Sheet show that the material is sold by its trade name which is linked to a specific chemical composition. Consequently this criterion would be met.

Tariff Classification

The Harmonized Tariff classification of Desmodur I (both imported and substituted) is 2929.10.5500, HTSUS which provides for “Compounds with other nitrogen function: Isocyanates: Other: Products described in additional U.S. note 3 to section VI.” The fact that the imported and substituted Desmodur I are classified under the same ten digit subheading would serve to indicate that the criterion would be met.


According to the applicant, the import value of the imported merchandise is about 10-63% less than the export value. According to the applicant, the range in values and differences in values between imported and substituted merchandise depends on raw material prices, certain contractual obligations and the objective of maintaining overall profitability of the Desmodur I business.

Even though there is a difference in the relative value between the imported and substituted Desmodur I the difference does not preclude a finding of commercial interchangeability.

We have previously held that merchandise may be commercially interchangeable despite fluctuations in value. In Headquarters 230898, dated June 24, 2005, this office held that a 16 percent difference between import and export price still supported commercial interchangeability; we also ruled in Headquarters 227473, dated March 3, 1998, that a 14 percent difference in import and export price was not significant enough to affect commercial interchangeability.


Based on the above determinations, we conclude that imported and substituted Desmodur I are commercially interchangeable for the purposes of substitution, unused merchandise drawback law of 19 U.S.C. §1313(j)(2).


William G. Rosoff,
Entry Process and Duty Refunds Branch