DRA-4-OT: RR: CTF: ER
HQ H168735 JLG
Mr. Steve Johnson, President
Bayer International Trade Services Corporation
651 Colliers Way, Suite 414
Weirton, WV26062
RE: Unused Merchandise Drawback; Ruling Request for Commercial Interchangeability of Option WG70
Dear Mr. Johnson:
This is in response to your letter dated May 25, 2011, on behalf of your client Bayer CropScience LP (BCS LP), for a binding ruling regarding the commercial interchangeability of imported and substituted Option WG70.
FACTS:
The information provided by you states that BCS LP is an importer, exporter, and manufacturer of chemical and agrochemical products. BCS LP imports and exports Option WG70 for use as an herbicide, and imports this product in its own name. In support of its claim for commercial interchangeability, BCS LP provided product specifications, screen printouts of material numbers used to identify the product, as well as CBP forms and other documentation related to representative import and export transactions involving Option WG70.
According to the application submitted by BSC LP, the product must conform to the following product specifications and physical properties:
Imported Merchandise: Option WG70
Substituted Merchandise: Option WG70
Specifications:
Range
Specifications
Range
Foramsulfuron
33.25% - 36.75%
Foramsulfuron
33.25% - 36.75%
Isoxadifen-Ethyl
33.25% - 36.75%
Isoxadifen-Ethyl
33.25% - 36.75%
pH
5.0 – 7.0
pH
5.0 – 7.0
Wettability
0-20s
Wettability
0-20s
Dispersability
0-30
Dispersability
0-30
Bulk Density
598 - 702 kg/m3
Bulk Density
598 - 702 kg/m3
Dust Content
0- 5
Dust Content
0- 5
As concerns the import transaction, BCS LP provided a copy of the purchase order, commercial invoice, bill of lading, Certificate of Analysis, and Entry Summary (CBP Form 7501) for entry no. XXXX322-0. The entry summary has an entry date of April 5, 2007, with the country of origin and country of export listed as Germany. The merchandise is described as “Option WG70,” and is classified under subheading 3808.93.15 of the Harmonized Tariff Schedule of the United States (HTSUS), which provides for “herbicides, anti-sprouting products and plant-growth regulators” (HTSUS).
The commercial invoice, invoice number 8037012437, which is referenced on the entry summary, reflects the sale of Option WG70 from BCS AG in Germany to BCS LP in the United States. The material number listed on the invoice is “04303406.” The purchase order is dated November 14, 2006 and indicates purchase order number 260156515. It evidences the sale of Option WG70 from BCS AG in Germany to BSC LP in the United States, and lists the “material number” as “04303406.”
Also included is the import Certificate of Analysis for Option WG70. The Certificate of Analysis shows that the merchandise is for BCS LP, and identifies purchase order number “260156515” and material number “04303406.” The Certificate of Analysis shows the same batches of merchandise shown on the commercial invoice and provides the following values:
Description
Specifications
Value
Value
Value
Value
Batch
EFKK000178
EFKK000179
EFKK000180
EFKK000181
Foramsulfuron
33.95-36.05%
35.10%
35.50%
36.00%
35.50%
Isoxadifen-Ethyl
33.95-36.05%
34.30%
34.40%
34.90%
34.70%
For the export transaction, BCS LP submitted purchase orders, a commercial invoice, and several Certificates of Analysis. The purchase order screen print, dated July 25, 2007, identifies purchase order number 610455224. The purchase order describes the product as “Option 70WG IBC US,” with material number “03849922.” The export commercial invoice, invoice number 13008162, is dated October 1, 2007. The invoice describes the exported merchandise as “Option 70WG IBC US,” classified under subheading 3808.93.15, HTSUS, and reflects the sale of merchandise from BCS LP in the United States to BCS AG in Germany.
The Certificates of Analysis for the exported merchandise identify several different batches of the commodity. The Certificates of Analysis indicate the “manufacture/test date” for the batches as March 13, 2006, and March 28, 2006, with the following values: “Formsulfuron” ranged from 35.0% to 35.5%, and “Isoxadifen-ethyl” ranged from 34.5% to 34.7%.
Lastly, BCS LP provided a list of “material numbers” from its internal inventory system that is used to identify Option WG70. This is software that assigns a unique number to each product. These material numbers are assigned based on the packaging size and the type of chemical. In support of this, BCS LP provided a screen print, dated April, 2012, identifying the material numbers for commercial Option WG70 with varying packaging sizes.
ISSUE:
Whether the imported Option WG70 is commercially interchangeable with other imported or domestically produced Option WG70 within the meaning of the substitution unused merchandise drawback statute, 19 U.S.C. 1313(j)(2).
LAW AND ANALYSIS:
Section 1313(j)(2) of the Tariff Act of 1930, as amended (19 U.S.C. § 1313(j)(2)), provides that drawback may be claimed on imported duty-paid merchandise that is substituted for commercially interchangeable and unused imported merchandise if the requirements are satisfied. Specifically, the substituted unused merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Before the exportation or destruction, the substituted unused merchandise must 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) Regulations, 19 C.F.R. § 191.32(c), further provide 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 is the claimant’s transaction documents. See, e.g., HQ H048135 (March 25, 2009). 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. The purchase and sales documents also provide the best evidence with which to compare relative values.
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. The CAFC stated:
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 Texport, 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. 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.
Government and Recognized Industry Standards
One of the factors CBP considers is whether the imported and substituted merchandise adhere to government and recognized industry standards. Governmental and recognized industry standards assist 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…products that meet the same industry standard may be used to produce the same products” or used for the same purposes. See, e.g. HQ H090065 (March 23, 2010); HQ H074002 (December 2, 2009). Where no government or recognized industry standards govern, however, CBP has relied on product specifications. See HQ H103577 (October 12, 2010) (noting that contractual standards and product specifications can be used as evidence of commercial interchangeability rather than governmental or recognized industry standards) (citing Pillsbury v. United States, 27 C.I.T. 1628, 1634-35 (Ct. Int’l Trade 2003)); See also, HQ H064679 (December 18, 2009) (relying on specifications provided by the applicant, as well as certificates of analysis for representative samples of the imported and exported product as an alternative to the government or industry standard criteria since no government or industry standard was available); and HQ H036777 (February 10, 2009) (explaining that because there were no government or industry standards, the product specifications published by the applicant could be used as evidence of commercial interchangeability).
There is no industry standard for Option WG70; however, BCS LP provided specifications for the imported and exported Option WG70 that are identical. Further, the product specifications and Certificates of Analysis for the representative imported and substituted product show that the merchandise conforms to these specifications. In addition, after examining the Certificates of Analysis and product specifications submitted, CBP’s laboratory concluded that both the imported and substituted merchandise are technically equivalent. Accordingly, we determine the imported and substituted Option WG70 satisfy the industry standards criterion.
Part Numbers
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 a finding of commercial interchangeability. See, e.g., H074002 (December 2, 2009). As noted above, BCS LP uses certain “material numbers,” otherwise known as SAP numbers, to identify Option WG70. A screen print of BCS LP’s inventory system shows that the material numbers are assigned according to the size of the container used to package Option WG70.
In this case, the import documents, specifically, the purchase order, commercial invoice, and Certificate of Analysis, list material number 04303406, which is included among the material numbers provided by BCS LP. Similarly, the export commercial invoice and screen prints for the export purchase order reference material number 0384992.Both material numbers are used to identify Option WG70. BCS LP’s inventory system indicates that material number 04303406 is for “Option WG70” for packaging size “6.0 x .8505KG,” while material number 0384992 is for “Option 70 WG” in a flexible bulk container. To the extent that the material numbers identify the imported and substituted product as WG70, it supports commercial interchangeability. We note that the difference in part numbers is because of the varying size of containers used to package the product, which in this instance is not dispositive of a determination of commercial interchangeability. In view of the above, we determine that BCS LP’s use of material numbers to identify “Option WG70” satisfies the part number criterion.
Tariff Classification
Another factor CBP considers when determining commercial interchangeability is whether the imported and substituted goods are classified under the same subheading of the HTSUS. According to the Entry Summary and commercial invoices for both the imported and substituted merchandise, Option WG70 is classified under subheading 3808.93.15, HTSUS, “herbicides, anti-sprouting products and plant-growth regulators” (HTSUS). Because BCS LP classifies both the imported and substituted product under the same subheading, the tariff classification criterion is satisfied.
Relative Values
CBP also considers the relative value of the imported merchandise to the substituted 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.”). Nevertheless, if other critical properties have been met, and if there is an explanation for a 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).
In this instance, the commercial invoice and purchase order for the import transaction has the same per unit price that is indicated on the commercial invoice and purchase order for the substituted product. As such, we find this criterion to be satisfied.
HOLDING:
Based on the weight of the evidence, we conclude that the imported Option WG70 and the substitute Option WG70 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. § 177.2(b)(1), (2) and (4), and §177.9(b)(1).
Sincerely,
Carrie L. Owens, Chief
Entry Process & Duty Refunds Branch