OT:RR:CTF:ER H064679 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); Methyl Diethanolamine
Dear Mr. Brown:
This is in response to your letter, dated May 20, 2008, on behalf of The Dow Chemical Company (“Dow”) regarding the commercial interchangeability of imported and domestically produced Methyl Diethanolamine.
Dow manufactures, sells, imports, and exports Methyl Diethanolamine (“MDEA”), a chemical compound used as a sweetening agent in oil refining and natural gas processing.
According to your submission, Dow commingles imported and domestically produced MDEA in dedicated storage tanks located at the Port of Houston, Texas. Dow intends to import duty-paid MDEA, and export domestically-produced substitute MDEA.
In support of your claim of commercial interchangeability you provided several documents and CBP forms related to representative import and export transactions involving MDEA.
For the import transaction, you submitted a copy of the Entry Summary (CBP Form 7501) for Entry No. xxxxxxx917-4, dated August 16, 2008, which describes the imported merchandise as “AMINO-ALCOHOL:OTH:ETHYL MI” classified under subheading 2922.19.9520, Harmonized Tariff Schedule of the United States (“HTSUS”). This subheading provides for: “Oxygen-function amino-compounds: Amino-alcohols, other than those containing more than one kind of oxygen function, their ethers and esters; salts thereof: Other: Other: Ethyldiethanolamine and methyldiethanolamine.”
You also provided a commercial invoice issued by Amines & Plasticizers Ltd. (“APL”), dated June 19, 2008, which indicates a sale of MDEA to Dow Agrosciences LLC. The invoice describes the merchandise as 240 metric tons of Methyl Diethanolamine, high purity – gas treatment grade, with a CIF price of $2,660.00 per metric ton. In addition, you provided a certificate of analysis prepared by APL.
For the export transaction, you submitted the commercial invoice, dated November 9, 2008, which describes the exported merchandise as 780,501 pounds of “Methyldiethanolamine High Purity – GT Grade,” with a total FOB price of $1,135,522.26. You provided a certificate of analysis for the exported MDEA prepared by Dow.
According to the certificates of analysis, the imported and exported MDEA conform to the following specifications:
Imported Methyl Diethanolamine
Exported Methyl Diethanolamine
(unit of measure)
APL Certificate of Analysis
APL Technical Specifications
Dow Certificate of Analysis
Dow Sales Specification
Specified material: 00126518-S
(GC using Tenax GC/107 Column)
(KF titer as per ASTM D1744 modified)
50 APHA maximum
(ASTM D 1209)
Clear colorless liquid with no visible impurities
Clear transparent hygroscopic liquid
Specific Gravity at 20/20°C
1.040 – 1.044
242°C - 253°C
240°C - 260°C
101 m Pas at 20°C
26 m Pas at 45°C
Amine like / mildly ammonical
Miscible with water
Standard material as per company’s printed specifications
Whether imported Methyl Diethanolamine is commercially interchangeable with the exported Methyl Diethanolamine, 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.” As explained in Texport,
“[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 Methyl Diethanolamine. Dow does, however, maintain specifications for sales of MDEA. These specifications list the properties Dow’s customers may consider for when making MDEA purchase decisions. In addition, you provided a certificate of analysis of a batch of MDEA sold by APL to Dow. Based on the APL certificate of analysis and Dow sales specification sheet, we note that the analyzed specification of the imported MDEA meets Dow’s sales specifications. Specifically, the tested purity of the imported MDEA is 99.57%, which exceeds Dow’s minimum purity specification of 99.0%. The percentage moisture content of the imported MDEA was 0.2%, which is the same standard contained in the Dow sales specification. The tested color standard was 40 APHA, which was below the maximum color standard in the Dow sales specification. Finally, the tested specific gravity at 20/20°C was 1.043 for the imported MDEA was within the acceptable range (1.040 to 1.044) contained in Dow’s sales specification. 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 MDEA in the representative transactions satisfy the standards criterion.
You state that Dow does not use part numbers for MDEA. Instead, you state that Dow uses a product nomenclature system to identify Dow’s inventory of MDEA from the time of receipt until the time of shipment to Dow’s customers. According to your submission, Dow uses the product name “Methyl Diethanolamine” to identify the imported and exported merchandise.
In addition, we note that the description contained in the APL invoice and certificate of analysis for the imported product describes the MDEA as, “High Purity – Gas Treatment Grade.” This description is consistent with the Dow invoice and certificate of analysis for the exported MDEA which describes the product as, “High Purity – GT [Gas Treatment] Grade.” Based on the use of the same product name and product description, we determine that the part number criterion is satisfied.
You state that the imported and exported butylene glycol shipments are classified under 2918.104.22.168.00, 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 APL invoice for the import transaction, the imported MDEA has a sales price of $2,660 per metric ton, CIF Houston. The corresponding sale price for the export transaction, indicates a sales price of $1.4896 per pound, or $3,284 per metric ton, DES Puerto Cabello, Venezuela. The difference in the delivered price between the imported and exported merchandise is $624 per metric ton, or 19.0%.
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 MDEA and the substitute MDEA 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