DHL Drawback Services
Attorney in Fact
22210 Highland Knolls Drive
Katy Texas, 77450
RE: Unused Merchandise Substitute Drawback Ruling Request
Dear Mr. Brown,
We are writing in response to your letter, dated June 27, 2011, on behalf of 3M Company (“3M”) regarding the commercial interchangeability of filtering facepiece particulate respirators (“respirators.”).
3M is engaged in the manufacture and sale of filtering facepiece respirators. 3M imports and exports respirators as part of its overall business operations. 3M both imports respirators and manufactures its own domestically. The imported and domestically manufactured respirators are maintained in an inventory by 3M to meet market opportunities as the demand arises. This application concerns 3M model 8210 N95 Particulate Respirator.
You state that all of the respirators must comply with the National Institute for Occupational Safety and Health (“NIOSH”) standards. NIOSH is the federal agency responsible for conducting research and making recommendations for the prevention of work-related injury and illness. NIOSH is part of the Centers for Disease Control and Prevention (CDC) within the U.S. Department of Health and Human Services and is responsible for the testing and certification of respiratory protective devices. The NIOSH website states that respirators are considered “fibrous” in nature and are constructed from flat, nonwoven mats of fine fibers.
The NIOSH criteria for respirators are set forth in Title 42, Code of Federal Regulations Part 84. The specifications for non-powered, air-purifying particulate respirators such as the one described in this application are set forth in 42 C.F.R. Part 82, subpart K. Pursuant to 42 C.F.R. Part 84, respiratory protective devices must be approved by NIOSH. As part of the approval process, the manufacturer must submit a quality control plan. NIOSH maintains a list of all approved facepiece respirators in its “Certified Equipment List.” The 8210 N95 respirators were evaluated by NIOSH and approved for the Certified Equipment List under approval number TC-84A-0007, which you provided. The approval calls for the following specifications and requirements:
Minimum Filtration Efficiency: 95%
Maximum Inhalation Pressure Drop: 35 mm H20
Maximum Exhalation Pressure Drop: 25 mm H20
All facepiece respirators constructed under this approval number, either foreign or domestic, must be constructed with the same design and using the same components.
In support for 3M’s claim for commercial interchangeability, you provided documents representing a typical import and export transaction. You submitted a CBP Form 7501 showing the import of respirators from England. The tariff classification is 6307.90.9889. There is an import invoice showing the shipment of respirators from England to the United States. The import invoice describes the merchandise as “8210 Respirators.” The import invoice shows 3M stock number GT50036519, which corresponds to model number 8210 N95 Particulate Respirators made in the United Kingdom. The export invoice shows a shipment of “8210 N95 Particulate Respirators” and shows stock number 70-0708-9244-6, which corresponds to the model 8210 N95 particulate respirators made in the United States. A comparison of the values shown on the export and import invoices shows a difference in value of 33.67%.
Whether the imported respirators are 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:
Under 19 U.S.C. § 1313(j)(2), as amended, drawback may be granted if there is, with respect to imported duty-paid merchandise, 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 be either, the importer of the imported merchandise or must have received from the party that imported and paid duties on the imported merchandise, a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof.
The Customs and Border Protection (“CBP”) regulation, 19 C.F.R. § 191.32(c), further provides 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.
The best evidence of whether the above quoted criteria are used in a particular transaction are the claimant’s transaction documents. See, e.g., HQ H048135 (Mar. 25, 2009); and HQ H122535 (Feb. 9, 2011). 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. Id. The purchase and sales documents also provide the best evidence with which to compare relative values. Id.
In Texport Oil Co. v. United States, the United States Court of Appeals for the Federal Circuit determined that: “[c]ommercial 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)).” 185 F.3d 1291, 1295 (Fed. Cir. 1999). Thus, the Federal Circuit set forth an “objective standard—analyzed from the perspective of a hypothetical reasonable competitor.” Id. Therefore, we analyze commercial interchangeability pursuant to 19 C.F.R. § 191.32(c), for a hypothetical reasonable competitor.
Government and Recognized Industry Standards
One of the factors CBP considers is whether the imported and exported merchandise adhere to government and recognized industry standards. Governmental and recognized industry standards assist in the determination of commercial interchangeability, because such standards “establish markers by which the product is commoditized and measured against like products for use in the same manner, regardless of manufacturer . . . products that meet the same industry standard may be used to produce the same products” or used for the same purposes. HQ H090065 (Mar. 23, 2010).
NIOSH’s N95 designation that is applicable to any non-powered, air purifying particulate respirator is only a performance standard, requiring a 95% filter efficiency level. See 42 C.F.R. §84.179(b)(7). Although NIOSH provides a model-specific approval, it is based on the specification of that particular model and as such, is not a published government standard that is widely relied upon. Therefore, there is no applicable government standard.
In the absence of such government or industry-wide criteria, we have previously held that where the technical product specifications sufficiently describe the product, this would also support a determination of commercial interchangeability. See H030097 (Aug. 29, 2008); see also, Pillsbury v. U.S., 293 F. Supp.2d 1351, 1356-57 (Oct. 27, 2003) (explaining that “[i]nstead of relying on [government] standards, the designated and substitute [merchandise] may be traded on contract standards specific to individual labels”). Here, both the imported and substituted facepiece respirators must meet the same specifications set forth in NIOSH approval TC-84A-0007. The approval requires all model 8210 N95 respirators achieve at least 95% filtration efficiency against solid and liquid aerosols that do not contain oil. The approval also requires that all 8210 N95 respirators must meet the same inhalation and exhalation pressure drops. Additionally, all the model 8210 N95 respirators must be constructed according the same design and using the same components that were approved by NIOSH. Because all imported and substituted model 8210 N95 respirators must conform to the same NIOSH approval specifications, we find that the standards criterion is satisfied.
In evaluating the critical properties of the merchandise, CBP also considers the part numbers of the merchandise. If the same part numbers or product identifiers are used in catalogues, and in the import and export documents, it would support finding them to be commercially interchangeable. See, e.g., HQ H074002 (Dec. 2, 2009); and HQ H122535 (Feb. 9, 2011).
You state that the part number for this product is 8210 N95, which is the model number of the respirator. The export invoice shows this designation and the stock number shown corresponds to model 8210 N95. The import invoice lists the product as “8210 Respirator” and the stock number shown corresponds to model 8210 N95. Because both the imported and substituted facepiece respirators are the same model number, we find the part number criterion is satisfied.
Another factor CBP considers when determining commercial interchangeability is whether the imported and exported goods are classified under the same subheading of the Harmonized Tariff Schedule of the United States (“HTSUS”). See, e.g., HQ H074002 (December 2, 2009). The HTSUS for the imported and substituted respirators is 6307.90.9889, as shown on the import and export documents. Therefore, this criteria 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. See, e.g., HQ H090065 (Mar. 23, 2010) (finding a price difference of 4.5 percent to be acceptable). A comparison of the invoices for the imported and substituted merchandise shows that that the difference in price is 34%.
CBP has held that a variance in price does not preclude a finding of commercial interchangeability when there is sufficient evidence to support the material difference in value. See HQ 228580 (August 20, 2002) (holding that a value difference of 27% did not preclude a finding of commercial interchangeability when the difference in value is attributable to processing and manufacturing costs). See also, HQ H106515 (March 18, 2011) (holding that although there was a difference in value between the sample import and export was 70%, the difference did not preclude a determination of commercial interchangeability because the value difference was the result of market forces rather than a difference in quality of the merchandise).
3M states that the difference in price is the result of variable production costs. Specifically, they state that the U.S. manufactured respirator is a standard product that has significant volumes and is produced every month. The UK produced respirator was last produced in 2010 and the volumes produced at that time were diminished due to a decline in demand attributable to a decreasing concern about the H1N1swine flu pandemic. The decrease in demand resulted in higher unit costs. Further, 3M indicates that when the masks produced in the UK were being produced in a higher volume in 2009, the unit cost of the masks was only 4 cents different than the models manufactured in the United States. Hence, although the value difference is 34%, such a difference does not preclude a determination of commercial interchangeability because the value difference is the result of market factors rather than a difference in the quality of the merchandise.
Based on the above findings, we determine that the imported and substituted facepiece respirators are commercially interchangeable for the purposes of substitution drawback pursuant to 19 U.S.C. §1313(j)(2).
Please note that 19 C.F.R. § 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
Carrie L. Owens, Chief
Entry Process and Duty Refunds Branch