DHL Drawback Services
Attorney in Fact
22210 Highland Knolls Drive
Katy Texas, 77450
RE: Unused Merchandise Substitute Drawback Ruling Request for Diiodomethyl-P-Tolysulfone, also known as DMTS, also known as Amical 48
Dear Mr. Brown,
We are writing in response to your letter, dated June 27, 2011, on behalf of The Dow Chemical Company (“Dow”) regarding the commercial interchangeability of Diiodomethyl-P-Tolysulfone, also known as DMTS, also known as Amical 48 (“Amical 48”).
According to the information provided, Dow is engaged in the manufacture, import, purchase, and resale of Amical 48. Dow both imports Amical 48 and manufactures its own domestically. The imported and domestically manufactured Amical 48 are maintained in inventory by Dow to meet market opportunities and demands. This application concerns Amical 48 in dry form, i.e., powder.
In support of Dow’s claim for commercial interchangeability, you provided sets of documents illustrating both import and export transactions. The import transaction documents contain an Entry Summary (CBP Form 7501) dated March 16, 2010, with attached commercial invoice and certificates of analysis showing the values exceeding the minimum amount or being within the range of acceptability for the corresponding specifications. The export transaction documents contain an export bill of lading, dated January 20, 2011, with attached invoice and certificate of analysis showing the values exceeding the minimum amount or being within the range of acceptability for the corresponding specifications. The tariff classification for the imported Amical 48 is 2930.90.1000, HTSUS, and the tariff classification for the substitute exported Amical 48 is 2930.90.
Additionally, you provided two part numbers for this product: 335767 and 144549. In subsequent correspondence, you explained that the different product numbers indicate a difference in volume (i.e., 100 lb. drum and 1,000 lb. bag) and that they do not indicate two distinct products. And finally, a comparison of the values shown on the export and import invoices shows a difference in value of 10.5%.
Whether the imported Amical 48 is commercially interchangeable with the substituted merchandise within the meaning of the substitution unused merchandise drawback statute, 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 U.S. 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, 185 F.3d 1291, 1295 (Fed. Cir. 1999), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) defined commercially interchangeable, stating the following:
We are convinced that Congress intended “commercially interchangeable” to be an objective, market-based consideration of the primary purpose of the goods in question. Therefore, “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 purpose, then the goods are “commercially interchangeable” according to 19 U.S.C. § 1313(j)(2).
Thus, in accordance with the Texport decision, commercial interchangeability is determined using an “objective standard -- analyzed from the perspective of a hypothetical reasonable competitor.” Id. That is, if a reasonable hypothetical competitor or buyer would accept the imported and substituted merchandise at the specified price for the primary purpose intended, the goods will be considered commercially interchangeable.
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. See HQ H090065 (Mar. 23, 2010).
We are aware of no government or industry standards for Amical 48. In the absence of such government or industry-wide criteria, we have previously held that technical product specifications that sufficiently describe the product could 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”).
The import Certificate of Analysis provided lab results showing all values exceeding the minimum amount or being within the range of acceptability for the Amical 48 product. In particular, the import Certificate of Analysis indicated that the purity of both the imported and substitute exported Amical 48 exceeded the minimum value of 93.5%, the acetone insoluble values were within the specified range, and the form or appearance were both listed as powder. Moreover, CBP’s Office of Laboratories and Scientific Services concurred that the specifications sufficiently described the product and were consistent between the imported and substituted merchandise. Because all imported and substitute exported Amical 48 specifications meet the minimum values or are within the range of acceptability, we find that this criterion is satisfied.
Another factor CBP considers when determining commercial interchangeability is whether the imported and substitute 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). As shown on the entry summary, the imported Amical 48 is classified under 2930.90.1000, HTSUS. Further, the waybill shows the substitute exported Amical 48 is classified under 2930.90. As such, the tariff classification 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).
Your application listed two different part numbers for this product: 335767 and 144549. In subsequent correspondence, you explained that the different part numbers indicated a difference in volume, rather than a difference in product. To this end, you provided additional information illustrating how each of these part numbers were identified as Amical 48, and each contained a difference in volume. Moreover, the sales documents indicate that this product sold in bulk. In a prior ruling CBP observed that merchandise sold in bulk may not have part numbers. See HQ H190457 (June 11, 2012). Because the imported and substituted merchandise are consistently described only as Amical 48 in the provided documentation, we find that this supports a finding that part numbers are not relied upon in the sale of this product. In view of the above, we determine this criterion will not factor into our decision on commercial interchangeability.
CBP considers the relative value of the imported merchandise to the substitute exported merchandise because goods that are commercially interchangeable generally have similar values. See HQ 228519 (June 5, 2002) (holding no commercial interchangeability when no explanation was provided to show why “[e]xport invoices indicate that similar tapes were all sold at costs proportionately higher than at the imported costs.”). CBP has also held, however, that if other critical properties have been met, or there is an explanation for the material difference in value, then a variance in price may not necessarily preclude a finding of commercial interchangeability. See, e.g., HQ 228580 (August 20, 2002) (holding that a value difference of 27% attributed to processing and manufacturing costs did not preclude a finding of commercial interchangeability when the critical properties criterion had been met).
According to the sample import and export documentation provided, the price of the imported Amical 48 and the substitute exported Amical 48 has a little over a 10% difference in value. Moreover, we note that the import sale occurred in late 2009 and the export was in early 2011. As explained above, the other criteria indicating commercial interchangeability have been met. Therefore, a variance in price would not necessarily preclude a finding of commercial interchangeability.
Based on the above findings, that the specifications sufficiently describe the product, they share the same classification, with only a small difference in value, we determine that the imported and substituted Amical 48 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 for in 19 C.F.R. § 177(b)(1), (2) and (4), and §177.9(b)(1) and (2).
Carrie L. Owens, Chief Entry Process & Duty Refunds Branch