DRA-4-RR:CR:DR 225188 IOR
Port Director
U.S. Customs Service
555 Battery Street
San Francisco, CA 94126
Attn: Drawback Unit
RE: Protest 2809-93-101989; Substitution Unused Merchandise Drawback; Jet Fuel; Unleaded Gasoline; Reformate; Diesel Fuel; Gas Oil; Commercial Interchangeability; 19 U.S.C. 1313(j)(2)
Dear Madam:
The above-referenced protest was forwarded to this office for further review. Our decision follows. Additional documents and argument on behalf of the protestant are contained in supplemental submissions dated November 7, 1996, May 20, 1998 and June 2, 1999. A significant number of specifications were provided with the November 7, 1996 submission that had not been previously provided to Customs.
FACTS:
The protest is of the liquidation of eight drawback entries (or claims) filed on January 11, 1988 (Claim 3, amended January 23, 1989), December 2, 1988 (Claim 4, amended March 14, 1989), December 15, 1988 (Claim 5, amended March 7, 1989), December 16, 1988 (Claims 6 and 7, both amended March 16, 1989), January 9, 1989 (Claims 8, amended March 14, 1989 and 9, amended March 13, 1989) and January 2, 1990 (Claim 10). A ninth drawback entry was originally erroneously included in the above-referenced protest, however it is the subject of Protest 3001-93-100822, which is the subject of Headquarters Letter (HQ) 225202, dated December 5, 1995. The drawback claims were liquidated without benefit of drawback on September 24, 1993, on the basis of HQ 224368, dated August 3, 1988, in which Customs determined that the exported products were not fungible with the imported products, and therefore the requirements of 19 U.S.C. 1313(j)(2) were not met. In support of the protest, the protestant
contends that the claims comply with all drawback requirements, including 19 U.S.C. 1313(j)(2) as in effect when the claims were filed and as recently amended by the North American Free Trade Agreement Implementation Act.
Claims 3 and 6: Unleaded Gasoline/Reformate
According to documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 3 (amended January 23, 1989). The entry summary for the May 11, 1988 importation is for 244,265 barrels of unleaded gasoline, imported on the OLYMPIC DREAM, classifiable under item 475.2528,Tariff Schedules of the United States (TSUS), valued at $5,786,638, with $128,239 in duty; the entry summary for the October 23, 1987 importation is for 22,093 barrels of unleaded gasoline, imported on the BARGE S.O.C.O. #18 (SOCO), classifiable under subheading 475.2528, TSUS, valued at $521,947, with $11,599 in duty. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of merchandise imported (266,358 barrels).
According to the Shipper’s Export Declaration (SED) for Claim 3, the merchandise exported was 238,151.60 barrels of “reformate”, classifiable under Schedule B No. 475.2528, with a value of $4,384,371, exported by a related corporation from San Francisco, California, on December 4, 1988, on the FOSSARINA, destined for Taiwan. The drawback entry is for 238,152 barrels of exported merchandise.
Documents in the file for the May 11, 1988 importation include an April 27, 1988 ullage report showing that 245,406.75 barrels of unleaded gasoline were received on board the OLYMPIC DREAM and a certificate of quality, containing test results, for the composite sample of the OLYMPIC DREAM’S tanks, dated April 27, 1988.
Documentation in the file for the October 23, 1987 importation includes an October 22, 1987 laboratory test report and a December 14, 1987 laboratory analysis. It is not clear from which point of the transaction the October 22, 1987 test was made. It appears that the December 14, 1987 analysis was based on a shore tank test.
There is a copy of a Bill of Lading dated December 4, 1988, which states that 238,151.60 barrels of reformate were loaded on board the FOSSARINA by a party related to the protestant. The merchandise was to be delivered at Keelung, Taiwan. The SED reflects the same information except that the exporter is identified as the protestant and not the related corporation. There are reports of inspection in the file, including a certificate of quantity dated December 4, 1988, stating that 238,151.60 barrels were delivered to the FOSSARINA, based on shore tank gauges. There is a report of analysis (ship composite) dated December 4, 1988 and a report of analysis (shore tank composite) dated December 4, 1988.
The contract for the sale of the exported product between the protestant and a related corporation, is for 250,000 barrels (plus or minus 10% at protestant’s option) of unleaded regular gasoline, at $0.43383 per gallon, and requires that the gasoline meet gasoline ASTM-D 439 standard. The protestant has provided a form of "Waiver and Assignment of Claim to Customs Duty Drawback" ("waiver and assignment"). In the waiver and assignment, the company identified as the shipper on the bill of lading, waives and relinquishes, and assigns to the protestant "any and all rights to customs duty drawback that [it] may have" in the exported merchandise in the subject drawback claim and for which it is identified as the shipper on the bills of lading.
According to documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 6 (amended March 16, 1989). The entry summary for the September 2, 1988 importation is for 240,146 barrels of unleaded gasoline imported on the OLYMPIC DREAM, classifiable under 475.2528 TSUS, and valued at $4,682,213, with $126,076 in duty. The quantity of imported merchandise designated in the drawback entry is 232,347 barrels of merchandise.
According to the SED for Claim 6, the exported merchandise upon which drawback was claimed was 232,346.88 barrels of “rafformate [sic],” classifiable under Schedule B No. 2710.00.15.15-3, with a value of $4,646,938, exported from San Francisco, California, on December 31, 1988, by the protestant, on the CHEMICAL VENTURE, destined for Keelung, Taiwan. The drawback entry is for 232,347 barrels of exported merchandise.
Documents in the file for the September 2, 1988 importation include: a certificate dated September 8, 1988 reporting supervision on September 2-3, 1988 of the discharge of 240,145.90 gallons of regular unleaded gasoline from the OLYMPIC DREAM; analytical report dated September 17, 1988 of a vessel composite sampled on September 2, 1988; quantity certificates dated September 8, 1988, which indicate that a total of 240,145.9 barrels of regular unleaded gasoline were delivered to shore tanks 63, 51, 68, 3, 3407 and 2915 in Portland, Oregon (the quantity certificate certifying delivery to shore tank 63 describes the cargo as regular leaded gasoline, however, because that quantity is included in the total quantity which refers to regular unleaded gasoline only, we conclude that the reference to regular leaded gasoline is in error); and a ullage report showing that prior to discharge the OLYMPIC DREAM was carrying 241,436.95 barrels of regular unleaded gasoline.
There is a Bill of Lading dated December 31, 1988, which states that 232,346.88 barrels of reformate were loaded on board the CHEMICAL VENTURE by the protestant. The merchandise was to be delivered to Keelung, Taiwan. A Certificate of Origin and Cargo Declaration, both dated December 31, 1988, describe the merchandise as 232,346.88 barrels of reformate. There are reports of analysis (shore tank and vessel) in the file, including a summary according to which 232,346.88 barrels of reformate were delivered to the vessel.
The contract for the sale of the exported product between the protestant and another party is for 220,000 barrels (plus or minus 10%, protestant’s option) unleaded regular gasoline at $20.00 per barrel (“approximately” $0.414 per gallon), and requires that the product meet unleaded gasoline ASTM D 439 standards. The contract terms are CIF Keelung, Taiwan.
Claims 4, 5 and 9: Jet Fuel
According to documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 4 (amended March 14, 1989). The entry summary for the October 26, 1987 importation is for 42,880 barrels of jet fuel, kerosene-type, imported on the MOBIL COURAGE, classifiable under item 475.2550, TSUS, and valued at $954,088, with $22,512.20 in duty; the entry summary for the April 10, 1988 importation is for 102,067 barrels of jet fuel, kerosene-type, imported on the SUN PACIFIC, classifiable under item 475.2550, TSUS, and valued at $2,222,706, with $53,585.00 in duty; and the entry summary for the May 30, 1988 importation is for 98,622 barrels of jet fuel, kerosene-type imported on the PROSPER VENTURE L, classifiable under 475.2550, TSUS, and valued at $2,205,683, with $51,776.59 in duty. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of imported merchandise (243,569 barrels).
According to the SED for Claim 4, the exported merchandise upon which drawback was claimed was 225,439.26 barrels of Jet A-1, classifiable under Schedule B No. 475.2550, with a value of $4,970,936, exported from San Francisco, on December 13, 1988, by the protestant on the CROWN CONFIDENCE, destined for Japan. The drawback entry is for 225,439.26 barrels of exported merchandise.
Documents in the file for the October 26, 1987 importation include: a summary indicating an October 26-27, 1987 total out turn of 258,643.95 barrels of jet fuel from the MOBIL COURAGE at Piers 51A and 30, 160,038.03 barrels discharged at Pier 30 and the domestic storage of 42,880.38 barrels by the protestant at Pier 30; a vessel composite quality analysis for jet fuel located at Pier 51A; a laboratory inspection report of a sample from Pier 51A of jet A; and a certificate of quality of a sample taken on September 19, 1987, upon exportation from Saudi Arabia. The contract for the purchase of the imported merchandise dated September 8, 1987, is for the purchase of jet fuel, and the quality specifications are "DERD 2494", with no ASA to be added during blending.
Documents in the file for the April 10, 1988 importation include a certificate of quantity dated April 11-12, 1988 indicating that 159,992.94 barrels of jet fuel were discharged from the SUN PACIFIC, for the protestant’s account at Pier 51A; a movement summary indicating a total of 102,719.50 barrels of jet A discharged for the protestant from the SUN PACIFIC at Pier 30, with a shore receipt of 102,066.67 barrels and 175,397.26 discharged for another party at Pier 51A; two laboratory inspection reports for jet A received from the “PACIFIC SUN” at Pier 51 upon importation; and a certificate of quality of a sample taken March 8, 1988, upon exportation from Saudi Arabia. The contract for the purchase of the imported merchandise, comprised of various telexes of various dates, is for the purchase of "DERD Jet", and the quality specifications are "DERD 2494", without ASA.
Documents in the file for the May 30, 1988 importation include a movement summary indicating a “shore receipt – domestic” of 98,622.07 barrels (4,142,127 US gallons) of Jet A from the PROSPER VENTURE at Pier 51; a laboratory inspection report reflecting a vessel composite of Jet A at the loadport and Pier 51, upon importation; and a certificate of quality of a sample taken April 23, 1988, upon exportation from Saudi Arabia. The contract for the purchase of the imported merchandise dated April 28, 1988, is for the purchase of Jet fuel, and the quality specifications are "DERD 2494", without ASA.
There is a copy of a Bill of Lading dated December 13, 1988 which states that 225,439.26 barrels of Jet A-1 were loaded on board the CROWN CONFIDENCE by a corporation related to the protestant, on behalf of another oil products company, for delivery at one or more safe ports in Japan. A Cargo Declaration indicates that the vessel contained a cargo of 225,439.26 barrels of Jet A-1. The Certificates of Quality for the exported product, identify the product alternatively as Jet (DERD 2494), Jet A (DERD 2494) and Jet-A, and indicate an aromatics content ranging from 20.4% to 21.3% (a vessel composite indicates an aromatics content of 21.3% and a shore tank composite indicates an aromatics content of 21.1%). A report of loading states that 225,489.88 barrels of Jet A (DERD 2494) were delivered and that 225,913.06 barrels were received on the CROWN CONFIDENCE; and an ullage report indicates that the vessel contained a total of 225,913.06 barrels of Jet A (DERD 2494). There is a contract dated November 23, 1988, for the sale of Derd 2494 Jet without ASA, for loading onto the CROWN CONFIDENCE.
According to documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 5 (amended March 7, 1989). The entry summary for the May, 7, 1988 importation is for 53,951 barrels of Jet Fuel, Kerosene-Type, imported on the TEXACO NORGE, at Pier 30, classifiable under item 475.2550, TSUS, and valued at $1,055,287, with $28,324 in duty; and the entry summary for the August 18, 1988 importation is for 71,843 barrels of Jet Fuel, kerosene-Type, imported on the PEACE VENTURE L, at Pier 30, classifiable under 475.2550, TSUS, and valued at $1,372,921, with $37,712.61 in duty. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of imported merchandise (125,794 barrels).
According to the SED for Claim 5, the exported merchandise upon which drawback was claimed was 260,227 barrels of Jet A-1, classifiable under Schedule B No. 2710.00.1530-4, with a value of $5,191,529, exported from San Francisco, California, on December 30, 1988, by the protestant on the PETROBULK PANTHER, destined for Yokohama, Japan. The drawback entry is for 225,000 barrels of merchandise.
Documents in the file for the May 7, 1988 importation include a stock transfer indicating a transfer of 53,951 barrels of Jet Fuel A; a Cargo reconciliation indicating a discharge port shore quantity of 53,951 barrels of Jet; and two laboratory inspection reports based on samples from Pier 51, upon importation, which do not include aromatic content. There is a contract dated April 14, 1988 for the purchase of "Jet fuel, DERD 2494 w/o ASA-3".
Documents in the file for the August 18, 1988 importation include an illegible stock transfer form that refers to Jet Fuel A; tank gauge record and receiving log indicating the receipt of 71,843 barrels of Jet A; and two laboratory inspection reports, (one is based on a sample from Pier 51, upon importation, and the source of the sample for the second one is not identified, by other than a reference to the PEACE VENTURE) which do not include aromatic content.
There is a copy of an undated Bill of lading, which states that 260,227 barrels of “Jet A-1 without ASA 3" were loaded on board the PETROBULK PANTHER by a corporation related to the protestant on behalf of another company. Documents in the file include: a report of loading dated December 29, 1988, stating that on December 28-30, 1988, 260,227.02 barrels of Jet A-1 without ASA 3 were delivered to the PETROBULK PANTHER and that 260,414.68 barrels were received; a Quantity Certificate states that on December 3, 1988 260,227.02 barrels (the cargo is not identified) were on the PETROBULK PANTHER; a final ullage report indicates that the total amount of Jet A-1 without ASA 3 is 260,414.68 barrels; analytical report of sample drawn from shore tank 3133; a certificate of quality based on a sample of Jet A without ASA 3, from shore tank 3133, tested on December 27, 1988, which indicates an aromatics volume of 19.8%.; and an analytical report based on a vessel composite sample of Jet A-1 without ASA 3, sampled on December 30, 1988, which indicates an aromatics volume of 20.0%.
The file contains a contract between the protestant and a related corporation for the sale of 225,000 barrels (plus or minus 10% at buyer’s option) DERD 2494 Jet without ASA at $0.475 per U.S. gallon.
According to the documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 9 (amended March 13, 1989). The entry summary for the November 11, 1986 importation is for 40,119 barrels of Jet Fuel, Kerosene-type, imported on the TAURUS, at Pier 51A, classifiable under item 475.2550, TSUS, and valued at $679,890, with $21,062.25 in duty (the summary of imports states that 27,815 barrels of this shipment is designated for drawback, for a total value of $445,000); and the entry summary for the September 1, 1987 importation is for 59,279 barrels of Jet Fuel, Kerosene-type, imported on the PHILIPPINE OBO 2, at Pier 30, classifiable under 475.2550, TSUS, and valued at $1,425,660 (the value stated on the summary of imports is $1,505,687), with $31,121 in duty. The quantity of imported merchandise designated on the drawback entry is 87,094 barrels of merchandise.
According to the SED for Claim 9, the exported merchandise upon which drawback was claimed was 10,516.672 M/Tons of Jet A-1 (what appears to be 80,272.59 barrels), classifiable under Schedule B No. 2710.00.1530, with a value of $2,021,006, exported from San Francisco, California, by the protestant, on the GULF CURRENT, destined for Muroran, Japan. The SED does not indicate the date of exportation. According to the drawback entry, the merchandise was to be exported on or about January 15, 1989. The amended entry is for 81,211.70 barrels of merchandise.
Documents in the file for the November 11, 1986 importation include: a movement summary for November 11-14, 1986, at Pier 51 A which indicate a total discharge of 235,699.43 barrels, shore receipt-domestic of 40,118.56 barrels and shore receipt-bonded of 195,109.42 barrels, for a total shore receipt of 235,227.98 barrels (the summary does not identify the cargo); a shore tank gauging report indicating a total of 40,118.56 barrels (1,684,979.44 gallons and 5,172.08 Metric Tons) of Jet A, Domestic, in tanks 15 and 18; and certificates of quality dated October 24, 1986, which identify the product as Jet Fuel DERD 2494, and sampled at Amuay Bay, from Tank No. 163 and the ship’s final composite.
Documents in the file for the September 1, 1987 importation include: a shore receipt indicating the September 3-4, 1987 receipt of 78,836.41 barrels (9,912.10 metric tons) of bonded Jet Fuel and 59,279.00 barrels (7,453.15 metric tons) of domestic Jet Fuel (the surveyor characterizes the imported fuel as “domestic”, however, the import documents clearly show that the merchandise was imported from Singapore and that duty was paid on the merchandise; characterization of the merchandise as “domestic” is inconsistent with the entry documents); a summary indicating a total discharge of 138,752. 41 barrels and total shore receipt of 138,115.41 barrels of Jet Fuel A-1 at Pier 30; a sample log indicating that samples were taken from vessel composite tanks and shore tanks 219, 221 and 222; a certificate of quantity indicating 138,115 total observed barrels (5,800,847.16 gallons) of jet fuel in the bonded (221 and 222) and domestic (219) tanks at Pier 30 from the PHILIPPINE OBO 2; a report of analysis based on a vessel composite sample of Jet Fuel at Pier 51A (although the vessel is not identified, the survey report no. is the same as that referenced in the other reports and a cover letter from the testing laboratory); and two reports of analysis, both of which contain data from samples taken at the loadport, and one of which also contains data from a sample at the discharge port.
The Bill of Lading dated January 21, 1989 states that 81,211.70 barrels of Jet A-1 were loaded on the GULF CURRENT by the protestant. The merchandise was to be delivered at Muroran, Japan. A Cargo Declaration describes the merchandise as 81,211.70 barrels (10,474.605 metric tons) of Jet A-1. The Certificate of Quantity indicates that 80,872.59 barrels (10,516.672 metric tons) of Jet A-1 were loaded onboard the GULF CURRENT on January 17-22, 1989, and the Vessel Ullage Report indicates 81,041.97 barrels (10,538.698 metric tons) of Jet A-1 on the GULF CURRENT. There is a certificate of quality for Jet A-1 sampled on January 20, 1989 from shore tank 3133.
The contract of sale of the exported merchandise between the protestant and a related corporation is for 60,000 to 70,000 barrels of Jet Fuel - DERD 2494, without ASA, at $0.595 per gallon.
Claims 7, 8 and 10: Diesel Fuel/Gas Oil
According to documents in the file and Customs records, the protestant was the importer of the designated merchandise in Claim 7 (amended March 16, 1989). The entry summary for the May 10, 1986 importation is for 24,718 barrels of diesel fuel imported on the HAIDA, classifiable under 475.2560, TSUS, and valued at $425,638 (the value stated on the summary of imports is $426,005), with $12,976.7 in duty; the entry summary for the May 13, 1986 importation is for 25,221.6 barrels of diesel fuel imported on the HAIDA, classifiable under 475.2560, TSUS, and valued at $434,317 (the value stated on the summary of imports is $433,573), with a duty of $13,241.3; the entry summary for the September 26, 1986 importation is for 34,358 barrels of diesel fuel imported on the BARGE MLC 283, classifiable under 475.2560, TSUS, and valued at $519,487, with a duty of $18,037; the entry summary for the June 15, 1987 importation is for 45,407 barrels of motor fuels, NSPF imported on the ALKYONIS, classifiable under 475.2560, TSUS, and valued at $ 924,940 (the value stated on the summary of imports is $924,939), with a duty of $23,838.66; and the entry summary for the May 22, 1988 importation is for 100,599 barrels of “lt fuel oil UN45 25 API AOV” imported on the CROWLEY BARGE, classifiable under 475.1015, TSUS, and valued at $1,996,387, with a duty of $10,562. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of imported merchandise (230,304 barrels).
There are two SED’s for Claim 7 and both show the protestant as the exporter. According to one SED, dated December 29, 1988, exported merchandise upon which drawback was claimed was 247,000 barrels of gas oil (another figure on the SED is 221,070.30 barrels), classifiable under Schedule B No. 475.2550, with a value of $2,699,821.00 (the value figure is nearly illegible but appears to be $2,699,821, and it is not clear which quantity that figure corresponds to, nor has that information been provided by the protestant), exported from San Francisco, California, on the GALAHAD, destined for Japan. According to a second SED dated December 31, 1988, exported merchandise upon which drawback was claimed was 26,018 barrels of gas oil, classifiable under Schedule B. No 475.2550, with a value of $458,962, exported from San Francisco, on the GALAHAD, destined for Japan. For the quantity of exported merchandise, the amended drawback claim has a nearly illegible figure of what appears to be 247,090 and that appears to have been written in after the other figure of 225,000. Neither SED shows the date of exportation. The drawback entry states that the merchandise will be exported on or about December 26, 1988. The drawback entry is for 225,000 barrels of merchandise.
Documents in the file for the May 10, 1986 and May 13, 1986 importations include laboratory test reports for diesel fuel, from samples taken prior to importation. Documents in the file for the September 26, 1986 importation include a laboratory inspection report for high pour diesel fuel, from a sample taken prior to importation. Documents in the file for the May 22, 1988 importation include a certificate of quality for No.2 diesel oil, from a sample taken prior to importation. The file does not include any documents pertaining to the June 15, 1987 importation.
A Tanker Bill of Lading indicates that on December 29, 1988, 221,078 barrels of gas oil were laden on the GALAHAD for export to Japan, by the protestant. A report of loading indicates that on December 27-29, 1988, 247,096.58 barrels of gas oil were loaded onto the GALLAHAD. A ullage report dated January 4, 1989 indicates that a total of 247,096.58 barrels of gas oil (which amount includes two parcels) was loaded onto the GALLAHAD from December 27-29,1988. According to the ullage reports, Parcel A consisted of 221,078.30 barrels of gas oil, and Parcel B consisted of 26,018.28 barrels of gas oil. The file includes analytical reports of the export, based on samples from four shore tanks. The exported merchandise is described as diesel and gas oil in the analytical reports.
The contract for the sale of the exported merchandise is between the protestant and another party, and is for 225,000 barrels of gas oil (Diesel #2) (plus or minus 10% buyers option), at $0.42 per gallon, F.O.B.
According to the documents in the file and Customs records, the protestant was the importer of the designated imported merchandise in Claim 8 (amended March 14, 1989). The entry summary for the September 30, 1988 importation is for 320,332 barrels of “#2 Heating Oil” (“diesel fuel” is handwritten on the entry summary) imported on the PROTEUS, classifiable under 475.1035 TSUS, and valued at $4,830,613, with $33,364 in duty. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of imported merchandise (320,332 barrels).
According to the SED for Claim 8, the exported merchandise upon which drawback was claimed was 180,396.14 barrels of gas oil, classifiable under Schedule B No. 2710.00.2020, with a value of $3,485,253, exported from San Francisco, California, on January 21, 1989, on the GULF CURRENT, by the protestant, destined for Kainan, Japan. The drawback entry is for 180,396.14 barrels of merchandise.
Documents in the file for the September 30, 1988 importation include: A summary of quantities dated October 3, 1988 which indicates that the total amount of Algerian gas oil on the ship was 320,289 barrels, and the total number of barrels received on shore was 319,815; and a laboratory analysis report of the import, dated October 3, 1988, describing it as Algerian gas oil.
There is an undated Bill of Lading, which describes the merchandise on the GULF CURRENT as 81,771.29 barrels of gas oil, destined for Kainan, Japan, shipped by the protestant. There is a second undated bill of lading which is partially cut off but describes the merchandise on the GULF CURRENT as what appears to be 98,624.85 barrels of gas oil, destined for Muroran, Japan, shipped by the protestant. According to a Certificate of Origin, a company related to the protestant shipped 81,771.29 barrels of gas oil on the GULF CURRENT on January 22, 1989, to Tokyo, Japan, via the Port of Kainan. A cargo declaration described the goods on the GULF CURRENT as 81,771.29 barrels of gas oil, to be discharged at Kainan, Japan. In a second Certificate of Origin, a division of the protestant declared that 98,624.85 barrels of gas oil were shipped on the GULF CURRENT on January 22, 1989, to Tokyo, Japan, via the Port of Muroran. A second cargo declaration described the goods on the GULF CURRENT as 98,624.85 barrels of gas oil, to be discharged at Muroran, Japan. According to a Certificate of Quantity, 180,396.14 barrels of gas oil were loaded on board the GULF CURRENT on January 17-22, 1989. According to a vessel ullage report, the GULF CURRENT contained 180,019.11 barrels of gas oil. There is a certificate of quality based on a sample from a shore tank composite.
The sales contract in the file is between the protestant and a related company for the sale of 225,000 barrels (revised to 180,000 barrels) of diesel fuel, with a price of $0.46 per gallon. The contract specifies that the quality of diesel fuel No. 2 is to meet ASTM D-975.
According to the documents in the file and Customs records, the protestant was the importer of the designated merchandise in Claim 10. The entry summary for the March 28, 1989 importation is for 116,217 barrels of diesel fuel imported on the PACIFIC, classifiable under 2710.00.15509, HTSUS, and valued at $2,586,994.30, with $61,013.9 in duty. The quantity of imported merchandise designated in the drawback entry is equal to the quantity of imported merchandise (116,217 barrels).
According to the SED for Claim 10, the exported merchandise upon which drawback was claimed was 236,206.02 barrels of gas oil, classifiable under Schedule B No. 2710.00.1010, with a value of $6,566,527.36, exported from San Francisco, California, by the protestant on behalf of another company, on January 9, 1990, by the protestant, on the PACIFIC, destined for Yokohama, Japan. The drawback entry is for 236,206 barrels of merchandise.
Documents in the file for the March 28, 1989 importation include: Shore tank gauging reports which indicate that a total of 115,910.94 barrels of diesel were delivered to shore tanks on March 28 and 29, 1989 from the PACIFIC; and an analytical report on diesel fuel based on a ship composite sample, upon exportation. The delivered barrels are 306.06 barrels less than the quantity stated on the CF 7501 and designated on the drawback entry.
The tanker bill of lading shows that 236,206.02 barrels of gas oil were laden on board the PACIFIC on January 9, 1990, by the protestant on behalf of another company, for delivery to Japan. A certificate of quantity indicates that 236,206.02 barrels of gas oil were laden on the PACIFIC. There is a certificate of analysis, the source of which is a shore tank, which identifies the product as gas oil.
The sales contract in the file is between the protestant and a foreign purchaser, for the sale of 225,000 barrels of "diesel", with a price of $27.80 per barrel. The contract provides specifications and the terms of the sale are CIF.
With respect to all of the claims, the November 7, 1996 submission included copies of “Platt’s Oilgram Price Reports” (“Platt’s”), for the months relevant to the subject claims. Platt’s is an industry publication that shows monthly averages of prices of petroleum products at different locations within the U.S. The November 7, 1996 submission also contains statements from the protestant’s petroleum experts, which are discussed in the Law and Analysis portion of this decision.
ISSUE:
Is there authority to grant the protest of denial of drawback in this case?
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. §1514 and 19 CFR Part 174). We note that the refusal to pay a claim for drawback is a protestable issue (see 19 U.S.C. §1514(a)(6)). In regard to the amendments made to the drawback claims, we note that the amendments were timely made (i.e., within 3 years of the exportations; see 19 U.S.C. §1313(r) and 19 CFR 191.61 and 191.64).
Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if there is, with respect to imported duty paid merchandise, any 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 either be the importer of the imported merchandise or have received from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof. From the evidence submitted in this case, it appears that Chevron had possession of the other, exported or destroyed merchandise, however the issue of possession will not be addressed in this decision.
The drawback statute was substantively amended by section 632, title VI Customs Modernization, Pub. L. No. 103 182, the North American Free Trade Agreement Implementation ("NAFTA") Act (107 Stat. 2057), enacted December 8, 1993. The foregoing summaries of sections 1313(j)(2) and 1313(p) are based on the law as amended by Public Law 103 182. Title VI of Public Law 103 182 took effect on the date of enactment of the Act (section 692 of the Act). Except for subsection (p), according to the applicable legislative history the amendments to the drawback law (19 U.S.C. 1313) are applicable to any drawback entry made on or after the date of enactment as well as to any drawback entry made before the date of enactment if the liquidation of the entry is not final on the date of enactment (H. Report 103 361, 103d Cong., 1st Sess., 132 (1993); see also provisions in the predecessors to title VI of the Act; H.R. 700, 103d Cong., 1st Sess., section 202(b); S. 106, 103d Cong., 1st Sess., section 202(b); and H.R. 5100, 102d Cong., 2d Sess., section 232(b)). The amendments to section 1313(p) apply to claims filed or liquidated on or after January 1, 1988, and claims that are unliquidated, under protest, or in litigation on the date of enactment of Public Law 103 182.
Compliance with the Customs Regulations on drawback is mandatory and a condition of payment of drawback (United States v. Hardesty Co., Inc., 36 CCPA 47, C.A.D. 396 (1949); Lansing Co., Inc. v. United States, 77 Cust. Ct. 92, C.D. 4675; see also, Guess? Inc. v. United States, 944 F.2d 855, 858 (1991) "We are dealing [in discussing drawback] with an exemption from duty, a statutory privilege due only when the enumerated conditions are met" (emphasis added)).
Before its amendment by Public Law 103 182, the standard for substitution was fungibility. House Report 103 361, 103d Cong., 1st Sess., 131 (1993) contains language explaining the change from fungibility to commercial interchangeability. According to the House Ways and Means Committee Report, the standard was intended to be made less restrictive, i.e., "the Committee intends to permit substitution of merchandise when it is ‘commercially interchangeable,' rather than when it is ‘commercially identical'" (the reference to "commercially identical" derives from the definition of fungible merchandise in the Customs Regulations, prior to their amendment in 1998 (19 C.F.R. 191.2(l)). The report, at page 131, also states:
The Committee further intends that in determining whether two articles were commercially interchangeable, the criteria to be considered would include, but not be limited to: Governmental and recognized industry standards, part numbers, tariff classification, and relative values.
The Senate Report for the NAFTA Act (S. Rep. 103 189, 103d Cong., 1st Sess., 81 85 (1993)) contains similar language and states that the same criteria should be considered by Customs in determining commercial interchangeability. The amended Customs Regulations, 19 CFR 191.32(c), 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.
In order to determine commercial interchangeability, Customs adheres to the Customs regulations which implement the operational language of the legislative history. The best evidence whether those criteria are used in a particular transaction are the claimant’s transaction documents. 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 sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant’s records would show that fact which will enable Customs to follow the Congressional directions.
Claims 3 and 6: Unleaded Gasoline/Reformate
In this case, for Claim 3, the tariff classification for the imports and the export Schedule B number, were the same (475.2528 TSUS). The classification numbers on the SED are Schedule B numbers. The Schedule B number is a commodity number from Schedule B, a Statistical Classification of Domestic and Foreign Commodities Exported from the United States, published by the U.S. Department of Commerce, Bureau of the Census. The first six digits of the commodity numbers in chapters 1 through 97 of both the HTSUS and the Schedule B are identical with respect to descriptions and codes. Schedule B, Introduction. For most commodities classified in chapters 1 through 97, including the subject commodity, exporters may report either the HTSUS number or the Schedule B number. Id.; HTSUS General Statistical Note 5. Therefore, for purposes of section 1313(j), in this case Customs will accept the Schedule B number on the SED for the purpose of determining whether the exported merchandise is classified under the same provision as the imported qualified article.
The value of the imported merchandise in Claim 3 is $23.69 per barrel (244,265 barrels valued at $5,786,638, $.5640 per gallon) (May 11, 1988 importation) and $23.62 per barrel (22,093 barrels valued at $521,947, $.5623 per gallon) (October 23, 1987 importation) as compared to $18.41 for the exported merchandise (238,151.60 barrels valued at $4,384,371, $.4383 per gallon). The value of the import is approximately 28% higher than that of the export, which can be considered to be a material difference in value. However, the values of the imports and exports are consistent with the figures provided in Platt’s, and we find that the change in price is due to the time and place of the transactions. Part numbers as a criteria are clearly inapplicable.
There is a recognized industrial standard. Governmental and recognized industry standards are generally considered the most important of the four criteria with respect to the issue of commercial interchangeability. The exports were identified as “reformate” and the imports were identified as “unleaded gasoline.” The contract for the sale of the export identifies the merchandise as “unleaded regular gasoline.” The November 7, 1996 submission includes a memorandum of M.C. Mason of the Chevron Product Engineering Group. According to the memorandum, the term “reformate” was included in the export documentation at the request of the purchaser. We referred the matter at issue to the Office of Laboratories & Scientific Services (“OLSS”) for its comment and determination under this criteria. In a memorandum dated May 5, 1997, that office stated:
As claimed in the new submission both the imported and exported products meet the ASTM specifications for gasoline. We note that the submission gives an adequate explanations as to why the exported products are invoiced as “reformates” though they meet [t]he specifications for gasoline. Further, we note that the information provided regarding the aromatic contents of the products is acceptable and can be applied in this matter.
Based on the additional information provided by [the protestant], we find that both the imported and exported products meet the ASTM specifications for gasoline.
With regard to the identity of the exporter, the protestant is identified as the exporter on the SED, but a related company is identified as the shipper on the bill of lading. The protestant has provided a waiver and assignment in which the related company waives any right it may have to drawback relating to the exported merchandise, and assigns the right to claim drawback to the protestant. The Customs Regulations, section 191.73, applicable at the time the subject drawback claims were
filed, provided:
(a) The person named as exporter on the notice of exportation or in bill of lading,... shall be deemed to be the exporter and entitled to drawback, unless the manufacturer or producer shall reserve the right to claim drawback.
In the current regulations, under 19 CFR 191.82, the person named on the notice of exportation or in the bill of lading is not deemed to be the exporter, and identification of the exporter is in accordance with the definition of "exporter" in 19 CFR 191.2(m)(2).
After a review of the available evidence, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. The protest is granted in regard to Claim 3.
For Claim 6, the tariff classification for the import was 475.2528 TSUS, and according to the SED, the tariff classification for the export in Claim 6 was 2710.00.15.15-3. According to the USITC Publication 2051, January 1988, Annex 1, Cross-Reference Between the TSUSA and the HTSUS (hereinafter referred to as the “USITC Conversion Table”), page 195, 2710.00.15, HTSUS is cross-referenced as 475.2528 TSUS. It is Customs position that the USITC Conversion Table has no legal significance and is not conclusive authority for classification under the HTSUS. See HQ 952702, dated April 9, 1993. As the tariff classification of the import and export is each on the basis of a different tariff schedule, without a classification analysis we cannot conclusively conclude that the tariff classifications are the same. Therefore the tariff classification criteria carries little or no weight in this analysis.
The value of the imported merchandise in Claim 6 is $19.50 per barrel (240,146 barrels valued at $4,682,213, $.46 per gallon), as compared to $20.00 per barrel for the exported merchandise (232,346.88 barrels valued at $4,646,938, $.48/gallon). The value of the exported merchandise is 2% higher than that of the import. These prices are within the same range. Part numbers are clearly inapplicable.
As in Claim 3, above the export was identified as “reformate” and the import was identified as “unleaded gasoline.” The contract for the sale of the export identifies the merchandise as “unleaded regular gasoline.” The November 7, 1996 submission includes a memorandum of M.C. Mason of the Chevron Product Engineering Group. According to the memorandum, the term “reformate” was included in the export documentation at the request of the purchaser. We referred the matter at issue to OLSS for its comment and determination under this criteria. In a memorandum dated
May 5, 1997, that office stated:
As claimed in the new submission both the imported and exported products meet the ASTM specifications for gasoline. Additionally, the questions concerning the usage of the term “reformates” on the export invoices and the aromatic composition of the products have been answered.
Based on the additional information provided by [the protestant], we find that both the
imported and exported products meet the ASTM specifications for gasoline.
In accordance with the regulations in effect at the time this drawback entry was filed, 19 CFR 191.73(a), the protestant is entitled to receive drawback on this claim. The regulations in 191.73 provided that the person named as exporter on the notice of exportation or bill of lading shall be deemed to be the exporter and entitled to drawback (unless the manufacturer or producer shall reserve the right to claim drawback). In this case, the protestant is identified as the exporter on the bill of lading.
After a review of the available evidence, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. The protest is granted in regard to Claim 6. We note that it appeared that the protestant may have been entitled to drawback pursuant to 19 U.S.C. §1313(p), however, as the tariff classification under the HTSUS is a critical factor under section 1313(p), that provision is not applicable because the imported merchandise was only classified under the TSUS.
Claims 4,5 and 9: Jet Fuel
In this case, for Claim 4, the tariff classification for the imports and export, was the same (475.2550, TSUS). The value of the imported merchandise in Claim 4 ranges from $21.77 per barrel (102,067 barrels valued at $2,222,706) (April 10, 1988 importation) to $22.36 per barrel (98,622 barrels valued at $2,205,638) (the May 30, 1988 importation), for an average of $22.10 per barrel, as compared to $22.05 per barrel (225,439.26 barrels valued at $4,970,936) for the exported merchandise. The value of the exported merchandise is within the range of the value of the imported merchandise.
As was stated in HQ 224368, the standard for the jet fuel for these claims is ASTM D 1655. In this case, the merchandise imported had an aromatics content of 19.7% on the MOBIL COURAGE, 19.6% on the PROSPER VENTURE, and 20.1% on the PACIFIC SUN. The exported merchandise had an aromatics content ranging from 20.5% to 21.3%. The purchase and sale contracts for the imported and exported merchandise all however refer to "DERD 2494" without ASA.
With regard to the recognized industrial standard, this matter was referred to OLSS for its comment and determination on both ASTM D-1655 specifications for aviation fuel, and the DERD 2494 specifications for kerosene type aviation gasoline.
With regard to the DERD specifications, in a memorandum dated February 10,
2000, OLSS stated:
Regarding Claim #4, it appears that the specifications for both the imports and exports meet the DERD 2494 specifications for kerosene type aviation gasoline. We note, however, that there is a problem with the density of the product of the shore tank composite of the exports. The SGS report lists the density as “818.96” at 15ºC. This density reading appears to be in error as a result of the incorrect placement of the decimal point. Accordingly, we should request the applicant to re-examine the density specification of the shore tank composite going onto the vessel “Crown Confidence” to determine if it is correct.
The three imports had a density of 0.7908, 0.791_, and 0.7915, at 15ºC, and the individual shore tank reports for the export indicate a density of 0.8204, 0.8189, and 0.8185. The composite does not appear to reflect an average density, therefore the protestant should provide a satisfactory explanation of the composite density reading, before it can be determined that the industrial standard criteria supports a finding of commercial interchangeability.
The industrial standard criteria can also be examined relative to the ASTM specifications. With regard to the ASTM specifications, in a memorandum dated May 5, 1997, OLSS stated:
Review of the specification[s] shows that the imported and exported products meet the ASTM requirements for aviation fuel oil....ASTM D-1655 in force at the time of export [of the substituted merchandise] indicates that the allowable upper range for the aromatics content on aviation fuel oils was 20%. However, upon notification and approval of the purchaser the aromatics content could be more than 20% but no greater than 25%. In 1993 the limit was raised to 22% and in 1996 the limit was raised to 25% with no qualifying factors.
...
...[U]sing both the current ASTM specifications and drawback statutes, both products are commercially interchangeable as an absolute aromatics content is applied. As both products have aromatics contents of less than 25% and meet the specifications for fuel oil, they are considered to be the same product for commercial purposes.
We stated in HQ 224368, that the modification to the ASTM standard cannot operate to change the limit on aromatics to 22% for the merchandise under consideration, because fungibility (the standard applied at the time HQ 224368 was decided), must be determined at the time of substitution. At the time of the substitution in issue, the 20% aromatics limit was in effect (the notification and approval provision for aromatics content above 20%, was contained in footnote "C" of ASTM D1655). In HQ 224368, the significance of the aromatics content limit was thoroughly discussed (at pp. 4 and 5). In HQ 225202, dated December 5, 1995, we determined that an imported product with an aromatics content of 17.5% was not commercially interchangeable with an exported product with an aromatics content of 22.1% (applying the 1993 revised standard although the substitution had taken place in 1987). In 224368, we stated that the 1993 modification of the ASTM standard (which raised the limit on aromatics from 20% to 22%), was “objective evidence that there is a consciously derived differentiation between high and low aromatic-content jet fuel.” However, now, since 224368 and 225202 have been issued, subsequent to the 1996 modification of the ASTM standards, there is no longer the qualification differentiating between high and low aromatic-content jet fuel.
The drawback statute for substitution unused merchandise drawback, 19 U.S.C. §1313(j)(2), does not compel Customs to apply the industry standard in effect at the time of either importation, exportation or the filing of the claim. However, the standards do provide an objective guide as to industry practice. In this particular case, the lifting of the qualification from the standard provides us with objective evidence that there is not a differentiation between high and low aromatic-content jet fuel. This conclusion is also supported by a statement submitted on behalf of the protestant from, Kurt Strauss, a consultant on petroleum fuels. The statement was included with the protestant’s submission of November 7, 1996.
According to Mr. Strauss’ statement, he has been professionally involved in the field of aviation fuel specifications since 1955, with Texaco, Inc. until 1982, as chairman of the ASTM Jet Fuel Specifications Review panel from 1973 to 1991, and as the chairman of the main Jet Fuel Specification Section from 1991 to October, 1996, the date of his statement. In addition, Mr. Strauss was the Government’s expert witness on ASTM D-1655 tests required to determine contamination of jet fuel, in Texport, supra. In his statement regarding Footnote C, Mr. Strauss explained that “fuel company identification of a fuel batch was lost upon product tender to the pipelines and attempting to live up to the reporting requirement had become impossible by the early
1980's.” Mr. Strauss further stated:
The minutes of the ASTM Jet Fuel Specification Section reflect the industry’s inability to meet the reporting requirement. Repeated fuel suppliers’ requests for increases in the maximum aromatic content were presented to avoid not meeting the letter of the specification. However, the engine companies would not agree to such a change, forcing the suppliers to ignore the impossible requirement and creating a de facto limit of 25%, which existed until 1996 when this footnote was formally deleted from D 1655.
...
In conclusion, it is my professional and expert opinion that the commercial practice among refiners, buyers and sellers in the United States since at least 1987 has been to refine, purchase and sell jet fuel with aromatic content up to (but not exceeding) 25% without notice or other procedures to comply with Footnote C of ASTM D 1655.
While we understand that the foregoing statement may reflect the true practice in the industry, we are required by the regulations and the legislative history to apply the recognized industrial standards, as opposed to the underlying industrial practice. We find that based on this factor alone, the merchandise would not meet the requirements of commercial interchangeability. However, given that 1) the tariff classification and relative value criteria are met, 2) that in this case the ASTM standard was not applied by the industry and there is no indication that the notification method was ever employed in the transactions at issue, and 3) that the DERD standard may be met depending on an explanation from the protestant, we find that the difference in aromatic content, under these facts does not preclude commercial interchangeability. However, before drawback can be allowed on this claim, the protestant must provide a satisfactory explanation of the unacceptable shore tank composite density reading for the export, for purposes of the DERD specifications.
With regard to the identity of the exporter, the protestant is identified as the exporter on the SED, but a related company is identified as the shipper on the bill of lading as shipping the merchandise on behalf of yet a third oil products company. The protestant has provided a waiver and assignment from the related company, and the other oil products company identified on the bill of lading in each of which each company waives any right it may have to drawback relating to the exported merchandise, and assigns the right to claim drawback to the protestant. The Customs Regulations, section 191.73, applicable at the time the subject drawback claims were filed, provided:
(a) The person named as exporter on the notice of exportation or in bill of lading,... shall be deemed to be the exporter and entitled to drawback, unless the manufacturer or producer shall reserve the right to claim drawback.
In the current regulations, under section191.82, the person named on the notice of exportation or in the bill of lading is not deemed to be the exporter, and identification of the exporter is in accordance with the definition of "exporter" in 19 CFR 191.2(m)(2).
After a review of the available evidence, based on the above factors, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and that the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met, provided a satisfactory explanation regarding the shore tank composite is given to Customs. The protest is granted in regard to Claim 4, conditioned upon receipt from the protestant of the requested information.
In this case, for Claim 5, the tariff classification for the imported merchandise was in subheading 475.2550, TSUS, and the exported merchandise was classified under Schedule B No. 2710.00.1530-4. In the USITC Conversion Table, page 195, 2710.00.15, HTSUS is cross-referenced as 475.2550, TSUS. It is Customs position that the USITC Conversion Table has no legal significance and is not conclusive authority for classification under the HTSUS. See HQ 952702, dated April 9, 1993. As the tariff classification of the import and export is each on the basis of a different tariff schedule, without a classification analysis we cannot conclusively conclude that the tariff classifications are the same. Therefore the tariff classification criteria carries little or no weight in this analysis.
The value of the imported merchandise in Claim 5 is $19.56 per barrel (53,951 barrels valued at $1,055,287) (May 7, 1988 importation) and $19.11 per barrel (71,843 barrels valued at $1,372,921) (August 18, 1988 importation) as compared to $19.95 per barrel (260,227 barrels valued at $5,191,529) for the exported merchandise. The value of the export is 2% higher than the May 7, 1988 importation and 4% higher than the August 18, 1988 importation. These prices are within the same range. Again, part numbers are clearly inapplicable.
With regard to the industrial standard, this claim was referred to OLSS for comment and determination. In the memorandum dated May 5, 1997, OLSS stated:
These specifications [for aromatic-content and thermal stability submitted by the protestant] fall with the ranges required for aviation gasoline stated in ASTM.
The contracts for the imports and export both identify the merchandise as DERD 2494 jet fuel. OLSS has determined that the imports and the export both meet the DERD 2494 specifications for kerosene type aviation gasoline.
We note that the exported product is referred to as being “without ASA 3". In response to our request, the protestant has provided information regarding the significance of the presence or absence of ASA 3, in the form of the statement from Kurt Strauss, the consultant on petroleum fuels. According to the statement, “jet fuel produced, purchased and sold in the United States does not contain any antistatic additive (“ASA”) unless specifically requested.” On this basis, the statement concludes that a contract or purchase order notation that a cargo refined in the US be without ASA, is unnecessary. The OLSS has confirmed the statement.
With regard to the identity of the exporter, the protestant is identified as the exporter on the SED, but a related company is identified as the shipper on the bill of lading as shipping the merchandise on behalf of yet a third oil products company. The protestant has provided a waiver and assignment from the related company, and the other oil products company identified on the bill of lading in each of which each company waives any right it may have to drawback relating to the exported merchandise, and assigns the right to claim drawback to the protestant. The Customs Regulations, §191.73, applicable at the time the subject drawback claims were filed,
provided:
(a) The person named as exporter on the notice of exportation or in bill of lading, shall be deemed to be the exporter and entitled to drawback, unless the manufacturer or producer shall reserve the right to claim drawback.
In the current regulations, under §191.82, the person named on the notice of exportation or in the bill of lading is not deemed to be the exporter, and identification of the exporter is in accordance with the definition of "exporter" in 19 CFR 191.2(m)(2). After a review of the available evidence, based on the above factors, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and that the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. The protest is granted in regard to Claim 5.
For Claim 9, the tariff classification for the imported merchandise was in 475.2550, TSUS, and the export was classified in subheading 2710.00.15, HTSUS. In the USITC Conversion Table, page 195, 2710.00.15, HTSUS is cross-referenced as 475.2550, TSUS. It is Customs position that the USITC Conversion Table has no legal significance and is not conclusive authority for classification under the HTSUS. See HQ 952702, dated April 9, 1993. As the tariff classification of the import and export is each on the basis of a different tariff schedule, without a classification analysis we cannot conclusively conclude that the tariff classifications are the same. Therefore the tariff classification criteria carries little or no weight in this analysis.
The value of the imported merchandise in Claim 9 is $16.95 per barrel (40,119 barrels valued at $679,890, $.40/gallon) (November 11, 1986 importation) and $24.05 per barrel (59,279 barrels valued at $1,425,660, $.57/gallon) (September 1, 1987 importation) as compared to $24.98 per barrel for the exported merchandise (80,872.59 barrels valued at $2,021,006, $.59/gallon). For determining the value of the export, we are using the number of barrels shown on the Certificate of Quantity, as that has the number of metric tons equal to that on the SED, and presumably the number of barrels is accurately converted. The value of the export is approximately 4% higher than that of the September 1, 1987 importation and 47% higher than that of the November 11, 1986 importation. There is a significant difference between the November 11, 1986 import and export values. The values for the September 1, 1987 import and the export are within the same range. The values however are consistent with the submitted Platt’s price quotations, indicating that the prices are consistent with market values for jet fuel at the times in issue. Again, part numbers are clearly inapplicable.
With regard to the industrial standard, in a memorandum dated May 5, 1997, OLSS concluded that the specifications provided for the export and the imports all meet the requirements for Jet A-1 fuel as stated in ASTM D-1655.
The contract for the export identifies the merchandise as DERD 2494 jet fuel. OLSS has determined that the imports and the export both meet the DERD 2494 specifications for kerosene type aviation gasoline.
In accordance with the regulations in effect at the time this drawback entry was filed, 19 CFR 191.73(a), the protestant is entitled to receive drawback on this claim. The regulations in 191.73 provided that the person named as exporter on the notice of exportation or bill of lading shall be deemed to be the exporter and entitled to drawback (unless the manufacturer or producer shall reserve the right to claim drawback). In this case, the protestant is identified as the exporter on the bill of lading.
After a review of the available evidence, based on the above factors, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and that the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. However, the documents described in the FACTS portion above, show that the quantity of the export varies, and therefore drawback should only be allowed on the smallest export quantity, which is 80,872.59, barrels, as reflected in the SED. The protest is granted in part, subject to the quantity limitation, in regard to Claim 9.
Claims 7, 8 and 10: Diesel Fuel/Gas Oil
As was stated in HQ 224368, the standard for diesel fuel for these claims is ASTM D 975 (the ASTM standard was modified from ASTM D 975-90 to ASTM D 975-92 after the time of substitution, and the applicable standard in this case is that applicable at the time of substitution, ASTM D 975-90, as there is no reason to apply a different standard). All references to the ASTM standard in the documentation only refer to ASTM 975, and do not specify "90" as opposed to "92".
For Claim 7, the tariff classification for all the imports but that of May 22, 1988 (on the CROWLEY), is 475.2560, TSUS, the provision for motor fuel other than gasoline or jet fuel. The tariff classification of the May 22, 1988 import on the CROWLEY, is 475.1015, TSUS, the provision for distillate and residual fuel oils. The export is classified under Schedule B No. 475.2550. According to the protestant’s November 7, 1996 submission, 475.2550, TSUS was the provision for “Motor fuel...Jet fuel, kerosene type,” and use of that subheading on the SED was a mistake. A report from OLSS dated April 13, 1998, confirms that the specifications for the export do not meet the requirements for jet fuel, but that they probably, with a “high degree of certainty” meet the ASTM D975 requirements for No. 2 diesel fuel.
In the November 6, 1996 submission, p. 16, the protestant took the position that the designated imports “meet the ASTM D-975 specifications for diesel fuel oil No. 2-D and classification under item 475.2560 is consistent with the nature of the imported merchandise,” and that the “export cargo is a No. 2 diesel fuel oil and is described in item 475.2560 TSUS.” The protestant took the position that No. 2 diesel fuel has a
dual use, either as motor fuel or as heating oil, and that:
Customs has ruled that under the Additional U.S. Rules of Interpretation to the HTS, Rule 1(a), and under General Note 10(e)(i) of the TSUS, the principal (or chief) use of this class or kind of merchandise is as heating oil. Thus No. 2 diesel fuel is entitled to classification under subheading 2710.00.10 HTS (or its predecessor, item 475.10 TSUS) regardless of use. See rulings 081867 (April 29, 1988) and 830626 (June 21, 1988). Under these rulings all of the designated imported merchandise in this case could have been classified under item 475.10 TSUS. Conversely, the product on [the entry which was classified under item 475.1015 TSUS] is also described in item 475.2560 TSUS.
Subsequently, in the May 20, 1998 submission, the protestant takes a reverse
position:
All of the imported and exported merchandise should have been classified under item 475.1015 TSUS, the provision for distillate fuel oils, rather than item 475.2560 TSUS, as motor fuel.
...
On the basis of the statutory language in the TSUS and Customs Rulings 081867 and 830626, it is clear that the distillate fuel involved on this drawback claim (both the designated imports and the export), was classifiable under item 475.1015 TSUS. (For the subject imports and export, the reported API gravities were more than 25 degrees.) As such, the imported and exported merchandise met the classification criterion for drawback purposes.
In its memorandum of April 13, 1998, OLSS stated that complete specifications are needed to make a classification decision on the imports. As a follow-up, by memorandum dated July 23, 1998, OLSS concluded that due to the lack of sufficient information, it cannot confirm whether the imported merchandise is finished diesel fuel, diesel fuel blendstock or No. 2 heating fuel and therefore there are three possible classifications: distillate fuel, motor fuel or motor fuel blendstock (subsequently, in response to Customs conclusion that the specifications are incomplete, reconstructed values for the merchandise were provided, and are discussed infra).
While it is possible to make a classification determination based on the specifications and documents provided because every import into the U.S. must be classified, the fact that the imported merchandise was entered under a different classification provision than what it “could” have or “should” have been, does not change the classification provision under which it was entered and liquidated. In this case, the May 22, 1988 import on the CROWLEY, was not entered and liquidated as diesel fuel, but was entered and liquidated as distillate and residual fuel oils, under subheading 475.1015, TSUS. The classification of the entry was not protested. For purposes of determining commercial interchangeability, Customs will base its determination on the provision under which the merchandise was actually imported. Therefore the tariff classification for the May 22, 1988 import was not the same as the other imports, or the export.
The protestant takes the position on the classification criteria for claim 7, stated in its November 7, 1996 submission, p. 16, that the imports could all have been classified as a distillate. However, subheading 475.25, TSUS, is a chief use provision by virtue of Headnote 2(b), Part 10, Schedule 4, TSUS, which defines the term “motor fuel” in item 475.25 as “any product derived primarily from petroleum, shale, or natural gas, whether or not containing additives, which is chiefly used as a fuel in internal-combustion or other engines”. Chief use is defined, in part, in General Note 10(e)(i), TSUS, as “the use which exceeds all other uses (if any) combined”. There is only one chief use. As stated under TSUS, the diesel fuel must be chiefly used as motor fuel to be classified in item 475.25, TSUS, and if it is not, then it is classified in items 475.05 or 475.10, TSUS. Likewise, under the HTSUS, if the diesel fuel is principally used as a motor fuel, it is classified as motor fuel in subheading 2710.00.1550, HTSUS, and if it is not, it is classified in subheading 2710.00.10, HTSUS. Therefore, contrary to the protestant’s position, the export and imports could only have been described under one of the provisions, not both. Finally, as stated above, Customs will base its determination on the provision under which the merchandise was actually imported. We also note that the rate of duty for the merchandise imported on the CROWLEY was substantially lower than that for the imports entered under the motor fuel provision.
Compliance with the Customs Regulations on drawback is mandatory and a condition of payment of drawback (Chrysler Motors Corp. v. United States, 14 CIT 807, 816 755 F. Supp. 388, aff’d, 945 F.2d 1187 (Fed. Cir. 1991), in which the Court stated:
The Supreme Court held in Swan & Finch Co. v. United States, 190 U.S. 143, 146 (1903) that the right to drawback is a privilege granted by the government and any doubt as to the construction of the statute must be resolved in favor of the government.... ‘Over the years, the courts have held that the allowance of drawback is a privilege and compliance with the regulation is a prerequisite to securing it where the regulations are authorized and reasonable’.
See also, United States v. Hardesty Co., Inc., 36 CCPA 47, C.A.D. 396 (1949); Lansing Co., Inc. v. United States, 77 Cust. Ct. 92, C.D. 4675 (1976); Guess? Inc. v. United States, 944 F.2d 855, 858 (1991) (“We are dealing [in discussing drawback] instead with an exemption from duty, a statutory privilege due only when the enumerated conditions are met”) (emphasis added). Therefore, for purposes of applying the tariff classification criteria in determining commercial interchangeability, the classification appearing in the entry documents will be used. Under 19 U.S.C. §1514, upon the liquidation of an entry becoming final, the classification of the merchandise becomes final and conclusive, and binds all persons. In this case four of the five imports were classified under subheading 475.2560, TSUS, and the fifth, the May 22, 1988 importation, was classified under subheading 475.1015, TSUS.
For this criteria, the classification of the export is not limited only to the information on the SED. Although the information contained in the SED should be accurate, the exporter is not afforded the same opportunity for correction of the information as for the CF 7501 (i.e. protest under 19 U.S.C. §1514), and the implications of an incorrect classification are not of the same nature (duty rate for import vice statistical information for the export). With regard to the export, in this case, based on the specifications for the export, the laboratory conclusions that the export is not a jet fuel and with a high degree of certainty meets the ASTM standard for No. 2 diesel fuel, and the apparent distinction between jet fuel and diesel fuel, we conclude that for purposes of determining commercial interchangeability, the correct tariff classification of the export was subheading 475.2560, TSUS.
Based on the foregoing, we conclude that the difference in the classification of the import on the CROWLEY (475.1015, TSUS) and both the asserted for purposes of this protest classification of the export (475.2560) and the classification of the export as stated on the SED (475.2550) preclude a finding of commercial interchangeability between the merchandise imported on the CROWLEY and the exported merchandise. The fact that the classification of the other imports (475.2560, TSUS) is the same as the classification asserted for the export for purposes of this protest (475.2560, TSUS), and the lab analysis of the export is consistent with such asserted classification, is favorable to a finding of commercial interchangeability between those imports and the export.
The value of the imported merchandise in Claim 7 ranges from $15.12 per barrel (34,358 barrels valued at $519,487, $.36/gallon, for September 26, 1986 importation) to $20.37 per barrel (45,407 barrels valued at $924,940, $.48/gallon, for June 15, 1987 importation), with an average price of $18.67 per barrel ($.44/gallon). With respect to the value of the exported merchandise, as was stated in the facts section, the total value of the total quantity of exports is not clear from the SED’s. Based on the ullage reports, the quantities on the SED’s and the amount stated on the drawback claim, we conclude that a total of 247,000 barrels of merchandise were exported (although the one bill of lading reflects only 221,078 barrels of merchandise). The value of the export on the SED for 26,018 barrels (the smaller parcel) is $17.64 per barrel (26,018 barrels at $458,962, $.42/gallon). The $17.64 per barrel ($.42/gallon) value is also consistent with the contract for the sale of the merchandise, which states a price of $0.42 per gallon. If the value on the second SED (and if it is the dollar amount it appears to be) is attributed to 221,078.30 barrels of merchandise (247,000 less the 26,018 barrels on the other SED), the larger parcel of the export has a value of $12.21 per barrel (221,078.30 barrels at $2,699,821, $.29/gallon).
In a direct comparison of prices, there is somewhat of a broad range between the various values of the imports and the value of the $17.64/barrel export (the smaller parcel), however, with the exception of the May 22, 1988 import on the CROWLEY ($19.84 per barrel), the price for each import shipment is supported by Platt’s, indicating that the prices are consistent with market values. The $17.64 per barrel ($.42/gallon) price is also equal to that reflected in the contract for the sale of the export. We conclude that the difference in value, supported by Platt’s, between the smaller parcel of exported merchandise and the imported merchandise, is favorable to a finding of commercial interchangeability between that merchandise. With respect to the May 22, 1988 importation, on the CROWLEY, the gallon price is 89% of the Platt’s price, whereas the other imports are all 94% to 99% of the Platt’s price. In a direct comparison of prices between the prices of the imports and the price of the second parcel of export merchandise, 221,078.30 barrels, the second export parcel ($12.21/barrel) is valued significantly lower (19% to 40% less) than the imported merchandise ($15.12 to $20.37/barrel), and this difference is not supported by Platt’s. We find that the difference in value, unsupported by Platt’s, between the larger parcel of exported merchandise and the imported merchandise is unfavorable to a finding of commercial interchangeability of the large parcel of exported merchandise and the imported merchandise, although may not preclude a finding of commercial interchangeability, depending on the other criteria. Part numbers are clearly inapplicable.
Regarding the industrial standard, it was concluded in HQ 224368, that the difference in the commercial names of the imported and exported merchandise did not preclude a finding of fungibility for the merchandise, however, “the distillation temperature for 90% recovery for the imported merchandise described in the laboratory reports dated May 8 and May 12, 1986 [5/10/86 import on the HAIDA and 5/13/86 import on the HAIDA] (650 degrees F and 648 degrees F, respectively) exceeds the maximum in the ASTM D 975 specifications.” With respect to the merchandise imported on June 15, 1987, on the ALKYONIS, the protestant concedes that as no specifications are available for the merchandise, Claim 7 should be reduced by the amount of duties applicable to the imported merchandise designated from import entry 110-xxxx456-4. Unless otherwise specified, the remainder of this analysis does not pertain to the importation on the ALKYONIS.
According to the OLSS report of July 23, 1998, the specifications provided for the imported merchandise are insufficient to fully describe the merchandise. In the April 13, 1998 lab report, OLSS stated:
We note that none of the sets of specifications contained sufficient information to determine as to whether or not the imports were diesel fuel. All of the products were missing the required specifications for viscosity, sediment and water, ash content and Ramsbottom carbon residue. Additionally, the specifications for the product imported on the “Crowley”, did not have a specification for the 90% distillation temperature. We note, however, that the distillation specification for the products, other than “Crowley” [and the two HAIDA importations] are consistent with the distillation specifications for diesel fuel.
It is our opinion that a full set of specifications are needed to determine both the classification and drawback status of these products.
In response to Customs conclusions that the specifications provided are incomplete, the protestant submitted estimates for the viscosity of all of the imports and estimates for the 90% distillation point for the import on the CROWLEY. The submission also asserts that with respect to the 90% distillation temperature which are above 640ºF in the two HAIDA importations, the “distillation values, however, are within or extremely close to the 8.6º reproducibility tolerance allowed by the ASTM D-86 test method for distillation.” The estimates for the viscosity of all the imports and the 90% distillation point for the CROWLEY import are based on the application of the reported values to information in an extract from protestant’s technical publication on diesel fuels, a copy of which was also submitted. The estimates and their bases are described in notes submitted by one of protestant’s product engineers, Zoltan Saary, who has been a product engineer and research chemist for the protestant since 1972. From 1989 to 1996, as a product engineer, Mr. Saary’s work included quality, specifications, and regulatory compliance of diesel and heavy fuels. The application of the reported values to a “related properties” chart was explained by protestant’s technical personnel, in a telephone conference on September 1, 1998. By plotting the reported API gravity on the chart, the viscosity value for all of the imports and the 90% distillation point of the CROWLEY import, can be estimated. The estimates show that the missing values would be within the ASTM D 975 range. Upon review of the extrapolations and the documents upon which the protestant relies, with the exception of the distillation values for the HAIDA imports, Customs concludes that in this case the extrapolated data is reasonable and consistent with the other data presented, and can be considered in determining commercial interchangeability. With respect to the assertion that the 90% distillation temperature for the two HAIDA imports is within the required specifications, given the reproducibility tolerance, Customs does not agree that reliance on reproducibility factors is acceptable for purposes of determining commercial interchangeability.
Therefore, for purposes of the industry standard criterion, the protestant has provided sufficient evidence that the merchandise imported on September 26, 1986, on the BARGE MLC does meet the industry standards for diesel fuel. However, based on the evidence, the merchandise imported on the HAIDA, on May 10, 1986 and May 13, 1986, does not meet the industry standard for diesel fuel. As stated above, with respect to the June 15, 1987 importation on the ALKYONIS, there is insufficient information presented for Customs to make any determination as to the industry standard. With respect to the merchandise imported on May 22, 1988 on the CROWLEY, according to the estimated distillation values, the merchandise may have been diesel fuel, however, as stated above, commercial interchangeability is precluded based on the tariff classification under which the merchandise was entered and liquidated, the liquidation being binding on all persons.
Analysis under the four criteria results in the following conclusions as to commercial interchangeability: 1) Due to the lack of specifications for the import on the ALKYONIS, we are unable to conclude that the evidence supports a finding that the merchandise imported on the ALKYONIS and the exported product are commercially interchangeable; 2) because for the two imports on the HAIDA, the specifications are outside of the industry standards, we are unable to conclude that the evidence supports a finding that the merchandise imported on the HAIDA and the exported product are commercially interchangeable; 3) due to the different classification of the import on the CROWLEY, and the exported merchandise, we are unable to conclude that the evidence supports a finding that the merchandise imported on the CROWLEY and the exported product are commercially interchangeable; and 4) the evidence supports a finding that the merchandise imported on the BARGE MLC is commercially interchangeable with the exported merchandise.
With respect to the exported merchandise, although the value of the larger parcel of the export is unexplained and appears inconsistent with the values of the imports and the contract price, analysis of the criteria of industry standards and tariff classification support a finding of commercial interchangeability between all of the exported merchandise and the import on the BARGE MLC. We also conclude that the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. This protest is therefore denied in part for Claim 7 with respect to the two imports on the HAIDA, and the imports on the CROWLEY and ALKYONIS, and granted in part for Claim 7, with respect to the import on the BARGE MLC.
In accordance with the regulations in effect at the time this drawback entry was filed, 19 CFR 191.73(a), the protestant is entitled to receive drawback on this claim. The regulations in 191.73 provided that the person named as exporter on the notice of exportation or bill of lading shall be deemed to be the exporter and entitled to drawback (unless the manufacturer or producer shall reserve the right to claim drawback). In this case, the protestant is identified as the exporter on the bill of lading.
For Claim 8, the tariff classification for the import is different from that of the export. The import is classified under subheading 475.1035 TSUS, the provision for distillate fuel, and the export is classified under Schedule B No. 2710.00.2020, the provision for kerosene. In the USITC Conversion Table, subheading 2710.00.2020 is not cross referenced with subheading 475.1035, TSUS. In any event, as stated above, the USITC Conversion Table has no legal significance and is not conclusive authority for classification under the HTSUS. As the tariff classification of the import and export is each on the basis of a different tariff schedule, without a classification analysis we cannot conclusively conclude that the tariff classifications are the same. However, we note that unlike the classification of the merchandise in claims 5 and 6, the two tariff provisions are for completely different merchandise.
In the November 7, 1996 submission, the protestant asserted that the classification of the export was a mistake and that the export should have been classified under subheading 2710.00.10, HTSUS, as a petroleum distillate. In a lab report dated May 5, 1997, it was concluded that the exported merchandise does meet the ASTM specifications for No. 2 diesel fuel, which is classified under subheading 2710.00.1550, HTSUS. Subheading 2710.00.1550, HTSUS, is also not cross-referenced with subheading 475.1035, TSUS, in the USITC conversion table, and is different merchandise than distillate fuel. Therefore, based on the information provided, and the laboratory analysis, the import and the export are likely to be classified under different tariff provisions, whether or not the classification provided on the SED is relied upon. We note that eligibility under 19 U.S.C. §1313(p) is not an alternative because it has not been established that both the export and import are classified under subheading 2710.0010, HTSUS. As a result, a further analysis under section 1313(p) is not made herein.
According to the entry documents, the value of the imported merchandise in Claim 8 is $15.08 per barrel (320,332 barrels valued at $4,830,613, $.35/gallon) as compared to $19.32 per barrel for the exported merchandise (180,396.14 barrels valued at $3,485,253, $.46/gallon). In the submission of May 20, 1998, the protestant asserts that the value reported on the import entry did not include freight costs, and submits a notice issued by the protestant that the final price for the import cargo was $.3890 per gallon, and an invoice indicating that the final price is $16.338 per barrel ($.3890/gallon). With regard to the relative value analysis, we disagree with the protestant’s position that the price upon which the relative value determination is based should be adjusted based on the final invoice price. The applicable provision of the drawback statute, 19 U.S.C. §1313(j)(2), requires that the comparison be made between the designated import and the export:
…with respect to imported merchandise on which was paid any duty,...any other merchandise...that is commercially interchangeable with such imported merchandise...is...either exported or destroyed....
Nothing in the statute or legislative history compels the comparison of any values other than the import value shown on the entry documents and the export value which should also be the value reported to Census on the SED, which is used for trade statistics. Based on the entry documents, the value of the export is approximately 28% higher than the value of the import, which is a material difference in value. The Platt’s prices are consistent with that of the export, but the import is 88% of the Platt’s price (the export is 94% of the Platt’s price). Although the difference in value is not entirely consistent with the Platt’s prices, we find that there is support for the difference and they are within an acceptable range. Part numbers are clearly inapplicable.
With regard to the industrial standard, this claim was referred to OLSS for comment and determination. In the memorandum dated May 5, 1997, OLSS stated:
Additional information submitted by [the protestant] shows that the exported material meets the ASTM specifications for No.2 diesel fuel, however, the distillation information on the import is insufficient and we are unable to make a final determination.
With regard to the import specifications, as in Claim 7, the protestant provided reconstructed values for the viscosity and 90% distillation specifications to show that the import meets the industry standard for No. 2 diesel fuel. The reconstructed values were determined to be acceptable in this case, on the same basis as was stated for the reconstructed values for Claim 7.
In accordance with the regulations in effect at the time this drawback entry was filed, 19 CFR 191.73(a), the protestant is entitled to receive drawback on this claim. The regulations in 191.73 provided that the person named as exporter on the notice of exportation or bill of lading shall be deemed to be the exporter and entitled to drawback (unless the manufacturer or producer shall reserve the right to claim drawback). In this case, the protestant is identified as the exporter on the bill of lading. After a review of the available evidence, based on the above factors, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable. We note that the documentation reflects exportation of 180,019.11 barrels of merchandise, as opposed to 180,396.14 barrels as shown on the SED, bill of lading, certificates of origin, cargo declaration, and claimed on the drawback entry. Further, the bills of lading provided do not reflect any signatures or dates. Otherwise, the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including possession have been met. This protest is denied in regard to Claim 8, unless the protestant provides satisfactory evidence of exportation, such as signed and dated bills of lading. Upon receipt of such evidence of exportation, the protest may only be granted in part with respect to Claim 8, as the quantity on which drawback can be allowed is limited to 180,019.11 barrels of exported merchandise.
For Claim 10, the tariff classification for the import and the export are not the same (i.e. the import is classified under subheading 2710.00.15509, HTSUS, as a motor fuel, and the export is classified under Schedule B No. 2710.00.1010, as a petroleum distillate). In a report dated February 13, 1998, OLSS concluded that the exported merchandise could be properly characterized as a motor fuel. The value of the imported merchandise is $22.26 per barrel (116,217 barrels valued at $2,586,994.30, $.53/gallon) as compared to $27.80 per barrel for the exported merchandise (236,206.02 barrels valued at $6,566,527.36, $.66/gallon). The value of the export is approximately 25% higher than that of the import, which is a material difference in value. The Platt’s price for the import is nearly identical, however, for the export, the Platt’s price is 93% of the actual price of the export. We find the relative values to be in an acceptable range. Part numbers as a criteria are clearly inapplicable.
With regard to the industrial standard, this claim was referred to OLSS for comment and determination. In the memorandum dated February 13, 1966, OLSS stated:
Review of the specifications provided for the imported gas oil, landed off of the [PACIFIC], and the gas oil exported also in the [PACIFIC] show that both products meet the ASTM requirements for Grade No. 2d diesel fuel.
For Claim 10, in HQ 224368, Customs found that fungibility is not precluded as a result of the different commercial names for the imported and exported merchandise. The term "gas oil" is generally used to describe distillate type fuel oils and diesel fuel meeting the grade 2 D specifications in ASTM D 975 is a distillate type fuel and may properly be called "gas oil." Although the classification is not the same, the merchandise was found to meet the same industry standards. We also determined that the variation in values does not preclude a finding that the imported and substituted product are commercially interchangeable. We do note that according to the documents submitted, the amount on which drawback is claimed is 120,295.06 barrels more than was actually evidenced as having been imported, and 119,984 barrels more than the amount designated. Thus protestant is entitled to drawback only to the extent commercially interchangeable merchandise was actually imported.
In addition, with regard to the identity of the exporter, the protestant is identified as the exporter on behalf of another company on both the SED and the bill of lading. The protestant has provided a waiver and assignment from the other company identified on the SED and bill of lading in which the other company waives any right it may have to drawback relating to the exported merchandise, and assigns the right to claim drawback to the protestant. The Customs Regulations, section 191.73, applicable at the time the subject drawback claims were filed, provided:
(a) The person named as exporter on the notice of exportation or in bill of lading,... shall be deemed to be the exporter and entitled to drawback, unless the manufacturer or producer shall reserve the right to claim drawback.
In the current regulations, under section 191.82, the person named on the notice of exportation or in the bill of lading is not deemed to be the exporter, and identification of the exporter is in accordance with the definition of "exporter" in 19 CFR 191.2(m)(2). After a review of the available evidence, based on the above factors, we conclude that such evidence supports a finding that the imported and substituted product are commercially interchangeable, and that the evidence suggests that the other requirements for drawback under 19 U.S.C. §1313(j)(2), including evidence of exportation and possession have been met. This protest is granted in part, in regard to Claim 10, with the limitations as to amount, as stated above.
With respect to those claims for which we make a determination, based on the above four criteria (governmental and recognized industry standards, part numbers, tariff classification, and relative values), that commercial interchangeability has not been established (Claims 7 and 8), the protestant relies on the recent decision in Texport Oil Company v. United States, 1 F. Supp. 2d 1393, No.98-21, slip op. (Ct. Int’l. Trade March 5, 1998), to establish commercial interchangeability based on commercial documents. In an appeal of the Texport decision, Texport Oil Company v. United States, 185 F3d 1291, Nos. 98-1352, 98-1353, 98-1373, slip op. (Fed. Cir. July 27, 1999) the appellate court vacated the CIT’s judgments on the commercial interchangeability of the merchandise which was the subject of the drawback claims at issue, and remanded the issue for further development of the facts on which a determination of commercial interchangeability can be made. Therefore, the Texport decision in the CIT with respect to commercial interchangeability is not relevant.
HOLDING:
We find that there is authority to grant the protest of the denial of drawback with respect to Claims 3, 4, 5, 6, 7 (in part) 9 (in part), and 10 (in part) as we find that the imported merchandise which is the subject of those claims is commercially interchangeable with the exported merchandise. The granting of the protest with regard to Claim 4 is conditioned upon receipt of the explanation described in the LAW AND ANALYSIS section on Claim 4. There is no authority to grant the protest of denial of drawback with respect to Claim 8, unless the protestant provides satisfactory evidence of exportation, such as a signed and dated bill of lading, and upon receipt of satisfactory evidence the protest can only be granted in part for the quantity specified in the LAW AND ANALYSIS section on Claim 8. The protest of the denial of drawback of Claim 7 is denied in part, because the evidence does not show that the exported merchandise is commercially interchangeable with all of the imported merchandise. Claims 9 and 10 are granted in part, subject to quantity and monetary amount limitations, as described in the LAW AND ANALYSIS section pertaining to those claims.
The protest is granted in part and denied in part. In accordance with Section
3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings
will make the decision available to Customs personnel, and to the public on the
Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant
Director, Commercial
Rulings Division