DHL Drawback Services
22210 Highland Knolls Drive
Katy, TX 77450
RE: Unused Merchandise Substitute Drawback Ruling Request for Methyl Acrylate
Dear Mr. Brown:
We are writing in response to your letter, dated October 14, 2013, on behalf of Dow Chemical Company (“Dow”) regarding the commercial interchangeability of imported Methyl Acrylate. Please find our office’s determination of commercial interchangeability of the merchandise below.
In the course of its normal business operations, Dow imports Methyl Acrylate under its own name and exports it under its own name to its various foreign customers. In support of Dow’s claim for commercial interchangeability, you provided documents representing a typical import and export transaction. In your letter dated October 14, 2013, you state that Dow’s minimum purity requirement for Methyl Acrylate is 99.5% or greater. As a representative import, you provided a Customs and Border Protection (“CBP”) form 7501 entry summary, which has an entry date of April 3, 2012, and which describes the imported product as “METHYL ACRYLATE, OTHER,” classified under 2916.12.5020 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The corresponding import invoice, dated April 2, 2012, shows the importation of Methyl Acrylate. The accompanying certificate of analysis identifies the specification for Methyl Acrylate with a minimum purity measurement of 99.5%; a water percent by weight as a maximum of 0.05%; a color maximum of 10; an acidity maximum of 0.009% by weight and a MEHQ between 10 ppm to 20 ppm.
For the export transaction, Dow provided a bill of lading showing a shipment of Methyl Acrylate, dated April 4, 2012. Dow also provided the corresponding export invoice, dated April 4, 2012, which shows the same value as the import. The corresponding certificate of analysis for the export identifies the specification for Methyl Acrylate with a minimum purity measurement of 99.5%; a water percent by weight as a maximum of 0.05%; a color maximum of 10; an acidity maximum of 0.009% by weight and a MEHQ between 10 ppm to 20 ppm Furthermore, we contacted CBP’s Laboratories and Scientific Services Division (“LSSD”) and in its opinion, the specifications are sufficiently specific to define the product.
Whether the imported Methyl Acrylate 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:
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.
U.S. Customs and Border Protection (“CBP”) regulation, 19 C.F.R. § 191.32(c), concerning substitution drawback, provides as follows:
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, Government 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 is 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 at 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, in accordance with Texport, commercial interchangeability is determined using 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).
There are no governmental standards for Methyl Acrylate. However, CBP’s LSSD has identified one industry standard for Methyl Acrylate, which is ASTM D4709-07, “Standard Specification for Methyl Acrylate,” covering 99% grade Methyl Acrylate for use in paint, varnish, lacquer, and related products. In accordance with this standard, Methyl Acrylate shall be tested for purity, water content, color, acidity, and MEHQ content, and shall conform to the requirements of this standard. According to Dow, the imported and substituted Methyl Acrylate will have a minimum purity specification of 99.5%. Furthermore, CBP's LSSD has confirmed that when the Methyl Acrylate falls within this industry standard, the imported and substituted Methyl Acrylate can be used interchangeably. Therefore, we determine that this criterion is met.
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). CBP has also determined, however, that the absence of part numbers on commercial import and export documentation does not preclude a finding of commercial interchangeability. See HQ 227106 (September 3, 1997). In HQ 227106, bulk aspartame could be ordered in different types of packaging so that there was no reference to part numbers. CBP concluded that the imported and substituted aspartame was commercially interchangeable even though the part number criterion was not satisfied, stating that "the fact that the part numbers and lot codes are not used on all documents, but are used only in some, supports the view that the part numbers and lot codes do not preclude a finding of commercial interchangeability." See HQ227106 (September 3, 1997).
Dow states that it uses Global Material ID (“GMID”) codes in addition to the branded naming convention for the Methyl Acrylate. The GMID codes are used to build sales orders, purchases, and commercial invoices, but they are not used in catalogs. This nomenclature is used to identify the merchandise in Dow’s computerized inventory from receipt at Dow through shipment to customers. Dow uses different GMID codes for bulk shipments and container shipments of Methyl Acrylate. Dow explains that the difference between the GMID codes depends on the volume being ordered or shipped. Here, both the import and export transaction documents indicate that the Methyl Acrylate shipments consisted of bulk shipments. If Dow buys or sells in bulk volumes, it uses a specific GMID code for bulk shipments. On the other hand, if smaller quantities are purchased, then Dow uses a separate GMID code to identify that merchandise. The goods may be identical, but two different GMID codes are used simply because one shipment is a bulk shipment and the other is a smaller shipment. Therefore, the GMID codes do not identify the product for purposes of commercial interchangeability.
Further, we note that Methyl Acrylate is sold in bulk. In a prior ruling, CBP noted that merchandise sold in bulk may not have part numbers. See HQ H190457 (June 11, 2012). Here, the import and export documentation provided reflects that the merchandise is packaged and sold in bulk. As such, part numbers are not applicable to this product. Therefore, this criterion is not relevant in determining commercial interchangeability.
Another factor CBP considers when determining commercial interchangeability is whether the imported and exported goods are classified under the same subheading of the HTSUS. See, e.g., HQ H074002 (Dec. 2, 2009). The HTSUS classification of the imported Methyl Acrylate, as set forth in the CBP form 7501 that you provided, is 2916.12.5020. Dow has provided a copy of its shipper’s export declaration showing the Methyl Acrylate’s Schedule B number as 2916.12.5020. Thus, both the import and export documents classify the product in the same tariff subheading. Because the imported and exported merchandise is classified under the same subheading, we find that this criterion is established.
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). CBP has held that a variance in price does not preclude a finding of commercial interchangeability where there is sufficient evidence to support the material difference in value. See HQ 228580 (Aug.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). Here, there is no price difference between the imported Methyl Acrylate and the substituted Methyl Acrylate. Since there is no difference in value, we find that this criterion is satisfied for purposes of 19 U.S.C. § 1313(j)(2).
Based on the above findings, we determine that the imported Methyl Acrylate and the substituted Methyl Acrylate are commercially interchangeable for purposes of substitution drawback pursuant to 19 U.S.C. § 1313(j)(2). Drawback is only permissible on Methyl Acrylate that meets the stated specifications as listed above.
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.” 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).
Carrie L. Owens, Chief
Entry Process & Duty Refunds Branch