DRA-4
OT:RR:CTF:ER
H252883 RGR
Chris Rittinger
C.J. Holt & Co., Inc.
466 Kinderkamack Road
Oradell, NJ 07649-1529
RE: Unused Merchandise Substitute Drawback Ruling Request for Ally XP
Dear Mr. Rittinger:
We are writing in response to your letter, dated April 16, 2014, on behalf of E.I. DuPont de Nemours and Company (“DuPont”), regarding the commercial interchangeability of imported and substitute Ally XP, for purposes of substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2). Please find our office’s determination of commercial interchangeability of the merchandise below.
FACTS:
In the course of its normal business operations, DuPont is engaged in the manufacture, import, and export of Ally XP, an herbicide paste extruded formulation containing a mixture of 60 percent of the active ingredient, metsulfuron methyl, and 40% inert ingredients. Ally XP is recommended for the control or suppression of certain broadleaf weeds. According to DuPont, Ally XP is manufactured and formulated based on strict adherence to its product recipe to ensure uniform quality standards and to conform to requirements of the Environmental Protection Agency (“EPA”). DuPont currently manufactures Ally XP in both the United States and in Australia. You state that the imported Ally XP from Australia and the exported Ally XP manufactured in the United States must conform to EPA requirements under EPA Registration Number 352-435. You provided official EPA-approved compositions for Ally XP as manufactured in the United States and in Australia, which were identical except for the identification of the country where each good was formulated. In addition, Ally XP is regulated under the Federal Insecticide and Rodenticide Act (“FIFRA”), which is administered by the EPA. Under FIFRA, the production of pesticides must be conducted in a registered pesticide-producing establishment. According to DuPont, the EPA issues pesticide-producing establishment numbers for these facilities, which include foreign establishments from which the United States imports pesticides. Thus, even though the imported Ally XP is produced in a facility in Australia, it is subject to FIFRA. Thus, the production of Ally XP in Australia and in the United States must comply with EPA regulations and standards.
In support of DuPont’s claim for commercial interchangeability, the company provided its EPA-certified product specifications for Ally XP. DuPont provided the following product specifications for Ally XP, including specifications for its active ingredient, metsulfuron methyl:
Metsulfuron methyl (T6376): 62.5% (upper limit) and 57.5% (lower limit)
Moisture: 1.5% (upper limit)
Bulk density, g/cc: 0.67 (upper limit) and 0.56 (lower limit)
Dry screens (+2000 micron): 1% (upper limit)
Dry screens (-2000/+710 micron): 97% (lower limit)
Dry screens (-710 micron): 2% (upper limit)
Dry screens (-106 micron): 2% (upper limit)
Wet screens (+75 micron): 2% (upper limit)
Long tube sedimentation, mL: 0.1 (upper limit)
Further, we contacted CBP’s Laboratories and Scientific Services Division (“LSSD”) and provided them with DuPont’s specifications and certificates of analysis for the imported and substituted Ally XP, and in its opinion, the imported and exported merchandise would be technically interchangeable for its intended use as an herbicide.
In addition, DuPont provided documents representing a typical import and export transaction for Ally XP. As a representative import, the company provided a U.S. Customs and Border Protection (“CBP”) Form 7501 entry summary, which lists an entry date of May 3, 2011, and describes the imported product as “HERBICIDES, AROMATIC OR MOD,” classified under subheading 3808.93.1500 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The corresponding import invoice, dated April 20, 2011, shows the importation of “Ally 60 XP VAR WT S-SAK.” The invoice number on the import commercial invoice matches the invoice number listed on the entry summary, dated May 3, 2011. The import certificate of analysis identifies the same batches of Ally XP shown on the accompanying packing list and provides the following values:
Batch Number
Metsulfuron Methyl (T6376) %
APR11GI313
59.7
APR11GI316
59.3
APR11GI315
60.0
APR11GI314
59.9
APR11GI317
60.6
APR11GI320
60.4
APR11GI319
59.8
APR11GI318
60.0
For the export transaction, DuPont submitted a bill of lading, a commercial invoice, a packing list, a transmission sheet from CBP’s Automated Export System (“AES”) evidencing the exported Ally XP’s Schedule B number, and an export certificate of analysis. The export commercial invoice, dated July 5, 2011, describes the exported merchandise as “DUPONT ALLY® XP, and identifies the same reference number that is listed on the bill of lading, packing list, and certificate of analysis. The export certificate of analysis identifies the same batches of Ally XP that are shown on the accompanying packing list and provides the following values:
Batch Number
Metsulfuron Methyl (T6376) %
JUN11EL002
59.7
JUN11EL003
59.3
Further, DuPont provided a copy of an AES transmission sheet for the exported Ally XP, identifying its Schedule B number as 3808.93.1500.
ISSUE:
Whether the imported Ally XP 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 governmental 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). For Ally XP, there are no specific government or recognized industry standards. We contacted CBP’s LSSD for further guidance regarding EPA requirements for Ally XP. LSSD explained that the EPA does not specify upper and lower limits of the active ingredient, metsulfuron methyl, or the actual formula for Ally XP. Rather, the EPA merely certifies that the Ally XP meets DuPont’s statement of formula based on internal technical specifications determined by DuPont. In other words, DuPont sets the technical specifications for Ally XP, and then, the EPA certifies that DuPont’s requirements meet its laws and regulations.
When there are no applicable government or industry standards, CBP considers contractual product specifications. See, e.g., H030097 (Aug. 29, 2008) (determining that where the technical product specifications sufficiently describe the product, this would also support a determination of commercial interchangeability). Product specifications are used to guarantee the uniformity of merchandise. In other words, if product specifications are sufficiently detailed, than any merchandise sharing those specifications will generally be uniform in nature. The Court of International Trade has found that private contract standards may be used to determine commercial interchangeability. See, e.g., Pillsbury Co. v. United States, 293 F. Supp. 2d 1351, 1356-57 (Ct. Int’l Trade 2003) (explaining that, “[e]vidence of different contract standards would indicate that the designated and substitute [product] are not commercially interchangeable”). Thus, when goods are sold or purchased pursuant to the same detailed product specifications, evidence that the imported and substitute merchandise share the same product specifications tends to support a general finding of commercial interchangeability and thus, satisfies the standards criterion.
As described above, the specifications provided by DuPont identified a specific formulation for Ally XP, including the upper and lower limits for its active ingredient, mestulfuron methyl, and applicable tolerances for other chemicals that make up the final product. Based on LSSD’s analyses, we conclude that if the imported and substituted product fall within the ranges identified above, this criterion is met.
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 finding them to be commercially interchangeable. See, e.g., HQ H074002 (Dec. 2, 2009); and HQ H122535 (Feb. 9, 2011). DuPont asserts that it sells and markets Ally XP under the trade names of ESCORT XP, Cimarron, Ally XP, Ally 60XP, Laren 60XP and Laren Pro as per its provided specification information. The import commercial invoice shows shipments of merchandise described as “ALLY 60 XP” and identified as Product Number D10984759 while the export commercial invoice shows shipments of merchandise described as “DUPONT ALLY®XP” and identified as Product Number D14328604. According to DuPont, it uses multiple “D Codes” for the same product depending on the destination country and package size. The D Code D14328604 is used for Ally XP products exported to Argentina, Colombia, Venezuela, and Brazil, whereas the D Code D10984759 is used for Ally XP that is imported into the United States and has a different package size than the merchandise labeled as D1438604. Thus, even though the D Codes of the imported and exported merchandise are different, they are used to identify the same product according to the specifications provided by DuPont. Therefore, we find that this criterion is established.
Tariff Classification
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 Ally XP, as set forth in the CBP Form 7501, is subheading 3808.93.1500. DuPont has provided a copy of its AES information for the exported merchandise showing the Ally XP’s Schedule B number as 3808.93.1500. Because the imported and exported merchandise are classified under the same subheading, we find that this criterion is established.
Value
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). However, 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., Pillsbury, 293 F.Supp.2d at 1357-58 (concluding that the price difference between the import and export product would not detract from a commercial interchangeability finding since the difference was not based on the quality of the merchandise, but rather on the packing costs and supply of the product in the market); 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); and HQ 228655 (November 2, 2001) (holding that a value differential in excess of 32% is acceptable because the merchandise qualified under the critical properties criterion).
Here, the price difference between the imported Ally XP and the substituted Ally XP is 101%. The import commercial invoice for the Ally XP is dated April 20, 2011, and the export commercial invoice is dated July 5, 2011. DuPont explains this price difference is a result of wide variances in export unit values based on the market prices in destination markets. While the variation in price is considerable, we find that this factor does not preclude a conclusion of interchangeability given that the other criteria were met. Accordingly, taking the totality of information into account, we determine that this fluctuation in price does not preclude a determination of commercial interchangeability.
HOLDING:
Because the applicant has satisfied the four enumerated criteria, we find that the imported Ally XP and the substituted Ally XP are commercially interchangeable for purposes of substitution drawback pursuant to 19 U.S.C. § 1313(j)(2). Drawback is only permissible on Ally XP that satisfies the stated specifications 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).
Sincerely,
Carrie L. Owens, Chief
Entry Process & Duty Refunds Branch