DRA-4 OT:RR:CTF:ER H062357 PTM
Mr. James W. Brown
Danzas AEI Drawback Services
2210 Highland Knolles Drive
Katy, TX 77450
RE: Commercial Interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R § 191.32(c)
Dear Mr. Brown,
This is in response to your letter, dated May 26, 2009 on behalf of Lyondell Chemical Company (hereinafter “Lyondell”) regarding the commercial interchangeability of Tripropylene glycol methyl ether, also known as ARCOSOLV® TPM.
FACTS:
ARCOSOLV® TPM is a colorless, combustible liquid with low toxicity. It has very little odor and is completely soluble in water. It has excellent solvency for many polar and non-polar substances. ARCOSOLV® TPM is a good substitute for slow evaporating ethylene glycol (E- series) ethers. ARCOSOLV® TPM is used in coatings, cleaners, wax strippers as well as in agricultural, electronic, ink, textile and adhesive products.
Lyondell is engaged in the manufacture, import, purchase and resale of ARCOSOLV® TPM. The substituted merchandise is produced in the United States by Lyondell at its plant in Pasadena, Texas. Lyondell also imports ARCOSOLV® TPM to maintain inventory supplies and ensure its ability to meet customer demands. Lyondell is both the importer and exporter of record for the ARCOSOLV® TPM. All U.S. importations of ARCOSOLV® TPM by Lyondell are discharged and commingled with U.S. domestically produced product in Lyondell’s dedicated shore tanks at the Stolt Terminal Deer Park, Port of Houston, Texas.
In support of your claim for interchangeability, you provided specifications for both the imported and exported ARCOSOLV® TPM . You have also provided CBP forms and shipping documents related to the respective import and export transactions involving Lyondell’s ARCOSOLV® TPM products.
For the import entry, you submitted an entry summary (CBP form 7501) for entry no. 035XXXX-9, dated October 23, 2006, which describes the imported merchandise as “ARCOSOLV TPM.” It is listed as HTSUS classification code 2909.49.6000 ETHER-ALCOHOLS, OTHER. Additionally, you state that Lyondell uses material number 499282 for ARCOSOLV® TPM, whether of foreign or domestic manufacture. An examination of the documents submitted reveals that Lyondell uses this number on certificates of analysis as well as invoices.
You have also provided a certificate of analysis for ARCOSOLV® TPM dated September 7, 2006 for product sent to the Lyondell storage tank. It has the following specifications:
Test Description
Minimum Specification
Maximum Specification
Test Result
Unit of measure
Purity
98
99.5
Weight %
Water
0.15
0.03
Weight %
Acidity, as acetic acid
0.0100
0.0070
Weight %
Specific Gravity @25/25C
0.9620
0.9650
0.9650
Distillation IBP @760 mmHg
236
243
Degrees C
Distillation DP @ 760mmHg
251
248
Degrees C
Color, Pt-Co
15
5
APHA Color
For the export transaction, you provide Lyondell Commercial Invoice 91508939, the corresponding export Bill of Lading FA8201164 dated March 25, 2008 indicating the shipment of 80 drums of “ARCOSOLV TPM”, shipping to Lyondell Greater China Ltd. at Taiwan, Port of Kaohsiung.
According to a certificate of analysis for the export transaction, the shipment conforms to the following specifications:
Test Description
Minimum Specification
Maximum Specification
Test Result
Unit of measure
Purity
98
99.50
Weight %
Water
0.00
0.15
0.01
Weight %
Acidity, as acetic acid
0.00
0.0100
0.0023
Weight %
Specific Gravity @25/25C
0.9620
0.9700
0.9650
Distillation IBP @760 mmHg
236
251
242
Degrees C
Distillation DP @760mmHg
236
251
249
Degrees C
Color
0
15
<5
APHA Color
ISSUE:
Whether the imported ARCOSOLV® TPM is commercially interchangeable with the substituted merchandise, for purposes of substitution unused merchandise drawback, pursuant to 19 U.S.C. §1313(j)(2)?
LAW AND ANALYSIS
The statute that provides for substitution, unused merchandise drawback, 19 U.S.C § 1313(j)(2) does not specifically define what constitutes “commercially interchangeable” products. The CBP Regulations concerning substitution drawback, 19 C.F.R. 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.
Case law offers additional insight into the meaning of commercial interchangeability. In Texport Oil Co. v. United States, 185 F.3d 1291 (Fed. Cir. 1999), the Federal Circuit Court of Appeals (the “CAFC”) held that commercial interchangeability is “an objective, market-based consideration of the primary purpose of the goods in question” and that:
“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). Texport Oil Co. v. U.S. at 1295.
Thus, commercial interchangeability is determined using an objective standard. If a hypothetical like-minded buyer would accept either good at the specified price for the purpose intended in an arms length transaction, the goods will be considered commercially interchangeable. In order to determine if either good at the specified price would be acceptable for the purpose intended, the relevant characteristics of the imported goods are compared with those characteristics of the substituted goods. Per the CBP Regulations, the pertinent characteristics include any governmental or industry standards applicable to the good, the tariff classification, part numbers if any, value, an 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.
There are a number of standards contained in the certificate of analysis for the import and export transactions, respectively. Both the designated import and export were tested for the following qualities: purity, water by weight %; acidity, specific gravity, distillation IBP, distillation DP and color. Both the designated import and exported merchandise exceed 99% purity. Regarding water content by weight percentage, the test mandates a maximum amount of 0.15 by weight percentage. The designated import lists a passing score of 0.03, and the exported merchandise shows a passing score of 0.01. The maximum specification for acidity, as acetic acid is 0.0100 by weight percentage. The designated import had a passing score of 0.0070 and the export had a passing score of 0.0023. For specific gravity at 25/25C, the minimum specification is 0.9620 and the maximum is 0.9700. Both the imported and exported ARCOSOLV® TPM showed identical passing scores of 0.9650. For the distillation IBP test, the minimum specification is 236 degrees C. The import had a passing score of 243 and the export had a passing score of 242. For the distillation DP test, the minimum specification is 236 degrees C and the maximum is 251 degrees C. The imported product passed with a score of 248, while the export passed with a score of 249. For the color test, the maximum specification is 15 on the APHA Color scale. The imported product had a passing score of 5, and the exported product shows a passing score of <5.
We do note that the applicable specification is set by LyondellBasell, and is not a standard set by the U.S. Government. It is based on a generally accepted industry standard for this product. This standard is based on the American Chemical Society's Chemical Abstracts Registration Number (CASRN) identification of this chemical and a set of tests and test results that are also generally accepted by the industry. The Court of International Trade has found that it is acceptable to use private contract standards instead of government standards to determine commercial interchangeability. See Pillsbury v. U.S., 27 C.I.T. 1628, 1634 (Ct. Int’l Trade 2003). Additionally, both the imported and exported products were measured against the same standard.
Both the designated import and exported merchandise met or exceeded all the accepted criteria for ARCOSOLV® TPM. Consequently, we find this criterion has been met.
Part numbers
Both the designated import and exported merchandise uses material number 499282 for ARCOSOLV® TPM, as evidenced by both import and export documents. As both the designated imports and exported merchandise use the same part number, we deem this criterion to be met.
Tariff Classification
You state that the HTSUS number for imported and substituted ARCOSOLV® TPM is 2909.49.6000 ETHER-ALCOHOLS, OTHER. Because the imported and exported merchandise is classified under the same subheading, we find that the tariff classification criterion is established.
Relative Values
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. Examples of the value of the imported and substituted ARCOSOLV® TPM per the provided invoices are: $2,263.73/MT on the import and $2,052.94/MT for the export. This translates to a difference of $210.73/MT, or 9.3%.
CBP has ruled that a variance in price does not preclude a finding of commercial interchangeability when other criteria have been met or when there is sufficient evidence provided to support the material difference in value. See HQ 22865 (holding that although the difference of the imported and exported merchandise was in excess of 32%, the merchandise qualified under the critical properties criterion had been met as well). See, also HQ 228580 (holding that a value difference of 27% did not preclude a finding of commercial interchangeability when the difference in value is attributable to processing costs and manufacturing costs when the critical properties criterion had been met).
There is additional CBP precedent that demonstrates that a difference in value may not disqualify a product for substitution, unused merchandise drawback even in the absence of a change in market conditions, provided the difference is within an acceptable range. In HQ 230898, this office held that a 16% difference between import and export price still supported commercial interchangeability. In HQ 227473 this office held that a 14 percent difference in import and export price was not significant enough to affect commercial interchangeability.
In the instant case, the critical properties criterion has been met and the difference in value of 9.3% is considerably less than the difference in value of merchandise in previous rulings where the product is found to be commercially interchangeable. Since the 9.3% difference is within an acceptable range pursuant to CBP precedent, we hold that the value criterion is met for the purposes of 19 U.S.C. §1313(j)(2).
The imported and substituted merchandise meet the critical property criteria set forth in 19 C.F.R. 191.32. Moreover, the fact that the product is commingled is additional evidence that the imported and substituted products are commercially interchangeable.
HOLDING
Based on the above findings, we determine that the imported ARCOSOLV® TPM and the substituted ARCOSOLV® TPM are commercially interchangeable for the purposes of substitution 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 for in 19 C.F.R. § 177(b)(1), (2) and (4), and §177.9(b)(1) and (2).
Sincerely
William G. Rosoff, Chief
Entry Process & Duty Refunds Branch