DRA-4-RR:CR:DR 228011 IOR
Port Director
U.S. Customs Service
555 Battery St.
San Francisco, CA 94126
Attn: Thomas Valenzuela
Drawback Chief
Re: Application for further review of Protest No. 2809-98-100089; 19 U.S.C. 1313(j)(2); ferrophosphorous
Dear Madam:
The above-referenced protest was forwarded to this office for further review. We have considered the facts and issues raised and our decision follows.
FACTS:
The protest is against the denial of drawback for drawback entry no. 718-xxxx991-9, which was filed on January 21, 1997. The drawback claim designated merchandise imported under eleven consumption entries. The designated merchandise consists of ferrophosphorous. The commercial interchangeability of ferrophosphorous, imported and exported by the drawback claimant, the protestant, has been the subject of several prior Headquarters letters and decisions in response to various submissions made by the protestant.
On September 22, 1994 we received a letter dated September 14, 1994, from the broker for the protestant, requesting a determination on the commercial interchangeability of imported and domestic ferrophosphorous under 19 U.S.C. §1313(j)(2). We responded to that request by letter dated March 13, 1995. Our response consisted of an information letter, our reference number 225701, as the submission did not contain sufficient information on the imported and domestic ferrophosphorous, and on the relative value of the designated imported and the exported merchandise. Our letter of March 13, 1995 pointed out that there are two recognized grades of ferrophosphorous and the evidence showed that a difference in phosphorous and silicon content was important for the end users. As such, we did not agree that the evidence demonstrated all ferrophosphorous was commercially identical as the broker asserted.
On April 4, 1995, we received a letter dated March 28, 1995, from the broker for the protestant, requesting a ruling on the same issue. The information submitted was sufficient to make a determination and issue a ruling that the subject merchandise was not commercially interchangeable. The primary reason for the finding that the merchandise was not commercially interchangeable was the disparity in the relative values of the imported and domestic merchandise. A ruling letter, HQ 226096, was issued by this office on February 14, 1996.
On June 28, 1996, we received a letter from the protestant’s counsel on behalf of the protestant, dated June 25, 1996, requesting a reconsideration of the decision in HQ 226096. By letter dated November 14, 1996, we requested and received additional documents, such as purchase contracts for the imported merchandise, that had not been previously provided. This office concluded that the imported and domestic merchandise were not commercially interchangeable on the basis that the merchandise met neither the government and industry standards criteria, nor the relative value criteria, and issued HQ 227080 on June 4, 1997, to that effect. On the basis of the decision in HQ 227080, drawback entry 718-xxxx991-9, which is the subject of the protest AFR before us, was liquidated with no drawback on December 29, 1997. A protest and AFR were filed on behalf of Continental Resources on March 27, 1998 at the Port of San Francisco.
The exports which were the subject of the above ruling and ruling reconsideration were not the same as those upon which the subject drawback entry was based, and the protested drawback entry involves more consumption entries than were addressed in the ruling request. Therefore the facts described herein are different from those described in the ruling and reconsideration. Specifically, the protested drawback entry designated three imports that had been the subject of the ruling request and reconsideration, and eight imports that had not been the subject of the ruling request. The drawback claim was on the basis of two exports which had not been the subject of the ruling request or reconsideration. As a result, the AFR before this office concerned an entirely new fact situation than had been previously considered.
With respect to the relative value criteria, the documents eventually submitted by the protestant in support of the protest, included the invoice price for the export merchandise. Documentation submitted previously with regard to the export price had been limited to the invoice price paid by the protestant for the domestic merchandise.
The drawback entry was liquidated on December 29, 1997 with no drawback. In a letter dated December 4, 1997, from the Drawback Unit to the protestant’s broker, it was stated that drawback would be denied on the basis of HQ 227080. The instant protest of the denial of drawback, was filed on March 27, 1998 (protest no. 2904-98-100007 on the denial of drawback for drawback entry 718-xxxx411-6, also pertaining to ferrophosphorous was filed in Portland on March 27, 1998, and the facts in that protest are not considered in this decision).
The following shows the import entries and quantities of merchandise designated in the drawback claim, and the exports on which drawback is claimed:
Import entry Date Quan. imp. (mt) Quan. desig.(mt) Export date Vessel
1) 344-xxxx966-5 9/ 6/91 1538.73 62.96 1/17/94 Northern Dawn
2) 344-xxxx825-1 7/27/92 1141.04 237.70 “ “ “ “
3) 344-xxxx354-0 9/13/92 1199.40 314.87 “ “ “ “
4) 344-xxxx249-0 11/25/92 1848.02 1118.46 “ “ “ “
5) 344-xxxx299-0 3/15/93 374.90 336.80 “ “ “ “
6) 558-xxxx417-2 4/25/93 1952.75 1892.12 “ “ “ “
7) 558-xxxx388-1 5/30/93 798.55 780.94 “ “ “ “
8a) 558-xxxx890-6 7/ 5/93 1970.46 1495.82 “ “ “ “ 8b) “ “ “ “ “ “ 269.45 2/19/94 Star Grip
9) 788-xxxx600-1 10/28/93 236.15 236.15 “ “ “ “
10)558-xxxx845-6 11/ 9/93 1996.44 796.97 “ “ “ “
11)N31-xxxx931-3 10/21/91 2002.94 2002.94 “ “ “ “
The protestant was the importer of record on each of the imports. The documentation submitted for each import generally includes an agreement or record of sale between the foreign supplier of the ferrophosphorous and a European company. In a notice to Customs dated November 18, 1993, the protestant explains that the European company is the protestant’s purchase agent for the ferrophosphorous, and also serves as the protestant’s sales agent. The European company will hereafter be referred to as the “agent”. In the notice to Customs, the protestant describes ferrophosphorous as follows:
Ferrophosphorous is an alloy of phosphorous, iron, silicon, and manganese, used by the steel and foundry industries to control the level of phosphorous content of metals to achieve desired results. When added to blast furnaces, it is used to produce high-phosphorous pig iron for special casting applications. In galvanized steel sheet, phosphorous is added to improve the adhesion of the zinc coating to the steel sheet. It is also used in the production of railroad brakeshoes.
Ferrophosphorous is the by-product of the production of elemental phosphorous.
The following describes the pertinent documents and evidence received by Customs on each import entry. Additional invoices have been submitted but are not discussed below, as they do not represent the merchandise that was actually imported, but are in effect interim invoices for bulk shipments purchased by the protestant but not imported in their entirety. All of the invoices to the protestant for the imported merchandise include separate charges for freight, which are not included in the entered value of the merchandise, and are therefore not included in the stated price per metric ton (MT). All of the entered ferrophosphorous was classified under subheading 7202.99.50208, HTSUS.
1) 344-xxxx966-5: There is an agreement dated March 15, 1991 between a Russian seller and the agent pertaining to the purchase and sale, for delivery in the 2nd quarter of 1991, of numerous ferroalloys, including 3000-4500MT of ferrophosphorous with a 20% minimum of phosphorous, at $131/MT. The agreement is titled “Specification No. 52-04/15027-003”. A bill of lading, showing the agent as the buyer, and referencing “contract no. 52-04/15027-003” indicates that 1512.500MT of ferrophosphorous was delivered to Bremen by shipment originating in Ventspils, Latvia, on May 28, 1991. There is an invoice from the agent to the protestant for 1,538.73 MT of ferrophosphorous at $131/MT. According to the CF 7501, 1538.73MT of ferrophosphorous valued at $130.14/MT, was entered. There are two documents of analysis of the ferrophosphorous, one based on a sample taken March 6, 1991, from the delivery from Ventspils to Bremen (loadport), and a second from a sample taken September 4, 1991, in Louisiana. Both analyses pertain to 1539MT of ferrophosphorous. The results are as follows:
Element Sample date 3/6/91 Sample date 9/4/91
(loadport) (U.S.)
Iron No data 67.10%
Phosphorous 25.83% 26.83%
Manganese 3.67% 3.98%
Silicon 1.18% 1.12%
Copper No data 0.12%
Carbon 0.02% No data
2) 344-xxxx825-1: This entry was a subject of the prior ruling and request for reconsideration. There is a contract titled “Contract No. 1958/11349510/01” dated March 26, 1992, between the agent and a Kazakh entity, pursuant to which the agent has purchased from the Kazakh entity, 2000MT of ferrophosphorous, at $140/MT. The contract states that the goods “shall be in conformity to OST 113-25-44-86”, and the following specifications are provided:
Phosphorous 20-25%
Manganese 7.9%
Silicon 2-6%
S 0.3%
Al 4.84%
Ni 0.074%
The contract states that execution will be effected by a Moscow entity. There is an invoice, dated May 21, 1992, from the Moscow entity to the agent for 1990MT of ferrophosphorous at $140/MT, FOB Ventspils, shipped on the “Amur”. The invoice references contract no. 1958/11349510/01. There is an invoice from the agent to the protestant for a July, 1991 shipment of 1141MT of ferrophosphorous at $140/MT. (There is also an invoice from the agent to the protestant, dated May 31, 1992, for 1990MT of ferrophosphorous at $140/MT, that reflects the merchandise in this entry and a portion of the merchandise on the following entry, 344-xxxx354-0. According to the protestant, payment would have been made for the imported merchandise only once.) According to the CF 7501, 1141MT of ferrophosphorous, valued at $140/MT was entered. There are analyses of samples taken on May 5, 1992 from the vessel “Amur”(at the loadport), from 1882.410 MT of ferrophosphorous, and July 30, 1992, from 1,141
MT of ferrophosphorous, in Louisiana, and the results are as follows:
Element Sample dated 5/5/92 Sample dated 7/30/92
(loadport) (U.S.)
Iron No data 65.80%
Phosphorous 24.54% 25.41%
Manganese 3.57% 3.24%
Silicon 1.53% 2.35%
Copper No data 0.25%
Carbon 0.028% 0.021%
Titanium 0.74% 0.66%
3) 344-xxxx354-0: This entry was a subject of the prior ruling and request for reconsideration. There is the same contract No. 1958/11349510/01, dated March 26, 1992, with the same specifications and terms, for the purchase of ferrophosphorous, as pertaining to entry 2) above. There is also the same May 21, 1992 invoice from the Moscow entity to the buying agent for 1990MT of ferrophosphorous at $140/MT, FOB Ventspils, shipped on the “Amur”, as with the above entry, referencing contract no. 1958/11349510/01. There is a “specification no. 52-04/15027-006” dated June 25, 1991, between a Moscow entity and the agent, in which it is agreed that certain ferroalloys have been sold to the agent for delivery in the third quarter of 1991, including 3000-4000MT ferrophosphorous at $125/MT. There are two more invoices from the same Moscow entity named in “specification no. 52-04/15027-006” to the agent, both dated December 4, 1991, one for 1000MT, and a second for 1700MT of ferrophosphorous, each at $125/MT, referencing contract no. 52-04/15027-006, dated June 28, 1991, and 52-04/15027-012, dated October 2, 1991, respectively.
There are two invoices from the agent to the protestant. One invoice is dated August 31, 1992, and is for 742.070MT of ferrophosphorous at $140/MT. The second invoice is for 457.330MT of ferrophosphorous at $125/MT. (There is also an invoice from the agent to the protestant, dated May 31, 1992, for 1990MT of ferrophosphorous at $140/MT, that reflects a portion of the merchandise in this entry and the merchandise on the previous entry, 344-xxxx825-1. According to the protestant, payment would have been made for the imported merchandise only once.) The CF 7501 includes two separate line items of ferrophosphorous. The first line item is for 742.07MT of ferrophosphorous with an entered value of $140/MT and the second line item is for 457.330MT of ferrophosphorous with an entered value of $125/MT. The total quantity of ferrophosphrous imported under this entry is 1199MT.
There are three analyses of the ferrophosphorous, all of samples taken September 21 and 22, 1992, of various quantities in Louisiana. The results of
the analyses are as follows:
Element 742MT 232MT 226MT
(all U.S.)
Iron 65.99% 66.55% 64.68%
Phosphorous 25.19% 24.48% 24.54%
Manganese 3.60% 3.48% 4.99%
Silicon 2.72% 2.63% 2.57%
Copper 0.10% 0.26% 0.10%
Carbon 0.021% 0.018% 0.027%
Titanium No data No data No data
The analysis consisting of 742MT is a composite of barges CG-72 and DSLL-540797; the analysis consisting of 232MT is a composite of barges CG-72 and CGD-21; and the analysis consisting of 226MT is an individual analysis of barge CGD-21.
4) 344-xxxx249-0: This entry was a subject of the prior ruling and request for reconsideration. There is a contract no. 16/2-18 between the agent and a Kazakh entity, dated June 10, 1992. The contract is for the sale and delivery of 2000MT of ferrophosphorous for $142/MT. The specifications are the same as those provided for entry 2), above, said to conform to OST 113-25-44-86. There is an invoice dated October 27, 1992, to the agent, from a foreign entity (different from the one in the contract), for 1850.50MT of ferrophosphorous at $142/MT, referencing contract no. 16/2-18. There is one invoice from the agent to the protestant. The invoice is dated November 18, 1992, and is for 1848.024MT of ferrophosphorous at $142/MT. The CF 7501 is for the entry of 1848.02MT of ferrophosphorous with an entered value of $142/MT. There are two analyses of the ferrophosphorous, one taken in Rotterdam on October 31, 1992 from 1850MT, prior to importation, and one taken in Louisiana on November 30 and December 1, 1992, from 1848MT. The results of the analyses are as follows:
Element Sample dated 10/31/92 Sample dated 11/30 &12/1/92
(loadport) (U.S.)
Iron No data 66.94%
Phosphorous 23.87% 24.76%
Manganese 4.02% 3.85%
Silicon 2.27% 1.82%
Copper No data 0.09%
Carbon 0.16% 0.029%
Titanium 0.87% No data
5) 344-xxxx299-0: There is a contract no. 1958/11349510/02, dated July 20, 1992, between the agent and a Kazakh entity, for the sale and delivery of 2000MT of ferrophosphorous at $142/MT. The specifications are the same as those provided for entry 2), above, said to conform to OST 113-25-44-86. There is an invoice dated March 1, 1993 to the agent from a foreign entity (different from the one in contract no. 1958/11349510/02), for the sale of 523MT of ferrophosphorous at $142/MT. There is an invoice from the agent to the protestant dated February 28, 1993 for 523MT of ferrophophorous at $142/MT. (There is a second invoice from the agent to the protestant. The second invoice is dated March 2, 1993, and is for 374.90MT of ferrophosphorous at $160/MT. According to the protestant, the second invoice represents the ferrophosphorous that was imported, and includes in the $160/MT price, shipping from Ventspils to Rotterdam. According to the protestant, payment to the buying agent would have only been made for the 374.90MT, once, and not twice.) The CF7501 is for the entry of 374.90MT of ferrophosphorous with an entered value of $160/MT. There are two analyses of the imported ferrophosphorous. One is dated February 25, 1993, and is from 574.50MT of ferrophosphorous shipped from Ventspils to Rotterdam, and the other is dated April 2, 1993, and is from a sample taken on March 22, 1993 from 375MT ferrophosphorous discharged in Louisiana. The results of the analyses are as follows:
Element Dated 2/25/93 Dated 4/2/93
(loadport) (U.S.)
Iron No data 65.33%
Phosphorous 25.24% 24.58%
Manganese 4.78% 4.60%
Silicon 2.53% 2.39%
Copper No data 0.12%
Carbon 0.067% 0.027%
Titanium 0.81% No data
6) 558-xxxx417-2: There are two contracts for the sale of ferrophosphorous to the agent, each with a different Kazakh entity. One is contract no. 1958/11349510/02, dated July 20, 1992, and is for the sale and delivery of 2000MT of ferrophosphorous at $142/MT. The specifications for the ferrophosphorous are the same as those provided for entry 2), above, said to conform to OST 113-25-44-86. The second is contract no. 24-PP-1914121-92, dated November 29, 1992, and does not include the quantity of ferrophosphorous, but the price is $142/MT. The contract provides that the delivered merchandise is to be in conformity with the following analysis:
1.) P min 23% 2.) P min 23% 3.) P min 23%
Si max 1.5% Si max 3.0% Si max 7.0%
Mn - 7.9% Mn - 7.9% Mn - 7.9%
S - 0.3% S - 0.3% S - 0.3%
Al - 4.84% Al - 4.84% Al - 4.84%
Ni - 0.074% Ni - 0.074% Ni - 0.074%
This second contract provides that the $142/MT price is for ferrophosphorous “quality point 2 and 3.” Because the entered value of the imported merchandise is $162/MT (see below), it does not appear that these contracts are related to the imports.
There are two invoices to the protestant from the agent, both dated April 13, 1993. One invoice is for 400MT of ferrophosphorous at $162/MT, and the other is for 1552.75MT at $162/MT. (In addition, in the documents provided there are three invoices to the agent from suppliers, and two to the protestant from the agent, that based on the quantities and purchase price of the imports shown therein, do not appear to have any connection to the imported merchandise and are not discussed herein.) The CF 7501 contains two separate line items of ferrophosphorous. The first line item is for 400MT of ferrophosphorous for $162/MT, and the second line item is for 1552.75MT for $162/MT. The total quantity of ferrophosphorous imported under this entry is 1952.75MT. There are five analyses of the ferrophosphorous. One analysis is based on a sample from 2800 MT taken in Holland on July 29, 1992, and a second analysis is based on a sample from 1002.10MT taken in Holland on or about February 11, 1993. The remaining three analyses are based on samples taken from a total of 1394MT of ferrophosphorous “10mm x Down” on April 28, 1993, in Louisiana. The results of
the analyses are as follows:
Element Sample 7/29/92 Sample 2/11/93 Sample 4/28/93 Sample 4/28/93 Sample 4/28/93
(loadport) (loadport) 214MT (U.S.) 380MT (U.S.) 800MT (U.S.)
Iron No data 65.58% 66.10% 65.04% 65.58%
Phosphorous 25.38% 25.06% 24.44% 26.08% 25.70%
Manganese 3.85% 4.62% 3.64% 4.26% 3.80%
Silicon 1.43% 2.47% 2.10% 1.76% 0.95%
Copper No data No data 0.13% 0.10% 0.18%
Carbon 0.035% 0.080% 0.055 0.055% 0.034%
Titanium 0.64% 0.78% No data No data No data
The analysis consisting of 214MT is for barge DSLL-540799; the analysis consisting of 380MT is for barge CG-906; and the analysis consisting of 800MT is a composite for barges WAI-0076 and WAI-0222.
7) 558-xxxx388-1: There is an invoice from the agent to the protestant, dated May 18, 1993, for 798.55MT of ferrophosphorous at $162/MT. The CF 7501 is for the entry of 798.55MT of ferrophosphorous at $161.99/MT. There are two analyses of the merchandise, both taken from a sample on June 2, 1993, in Louisiana. The results of the analyses are as follows:
Element 400MT 398MT
(all U.S.)
Iron 65.56% 64.03%
Phosphorous 27.40% 23.90%
Manganese 4.63% 5.02%
Silicon 0.59% 3.93%
Copper 0.07% 0.10%
Carbon 0.021% 0.024%
8) 558-xxxx890-6: There is a contract no. 25-nn-1914/21-93, dated January 27, 1993, between the agent and a Kazakh entity. The contract provides for the sale and delivery of 6000 tons of ferrophosphorous. The price is $150/ton for Grade 1 ferrophosphorous, and $142/ton for Grades 2,3, and 4 of ferrophosphorous. The contract includes an addendum which provides the following specifications for the four grades of ferrophosphorous:
Grade Code OKII Min. P Max. Si Max Mn Max S
FEP 25-1 08 6511 1000 25 1 6 0.3
FEP 25-2 08 6512 1000 25 2 7.9 0.3
FEP 20-6 086513 1000 20 6 7.9 0.3
FEP 15-15 08 6514 1000 15 6-15 7.9 0.3
Based on the quantity and price in the contract, it is not clear that the contract and its specifications pertains to the imported merchandise.
There is an invoice from the buying agent to the protestant, dated June 22, 1993, for 1970.462MT of ferrophosphorous at $163/MT. The CF 7501 is for the entry of 1979.46MT of ferrophosphorous with a value of $163/MT. There are three analyses of the imported ferrophosphorous from samples taken on July 7 and 8,
1993, in Louisiana. The results of the analyses are as follows:
Element 1172MT 399MT 399MT
(all U.S.)
Iron 64.82% 63.08% 63.12%
Phosphorous 26.03% 25.87% 21.63%
Manganese 3.76% 3.92% 5.57%
Silicon 1.19% 1.89% 5.52%
Copper 0.22% 0.16% 0.08%
Carbon 0.027% 0.10% 0.051%
Titanium 0.82% 0.80% 1.50%
The analysis consisting of 1172MT is a composite of barges WA-1-0237, WA-1-0062 and WA-1-0182; the analysis consisting of 399MT is of barge WA-1-0393; and the second analysis consisting of 399MT is of barge LB-871.
9) 788-xxxx600-1: There is the same contract no. 25-nn-1914/21-93, dated January 27, 1993, between the agent and a Kazakh entity as in the above entry. The terms of the contract are also the same, in that the contract provides for the sale and delivery of 6000 tons of ferrophosphorous, at $150/ton for Grade 1 ferrophosphorous, and $142/ton for Grades 2,3, and 4 of ferrophosphorous. The specifications are also the same as for entry 8), above. There is a second agreement entitled “Specification Nr. 52/04, dated October 12, 1992, and is between the agent and a Moscow entity. The second agreement indicates the agent has purchased 1500MT of ferrophosphorous for $125/MT. There is an invoice from the agent to the protestant dated October 13, 1993, for 236.15MT of ferrophosphorous at $163/MT. Based on the quantity and price of the merchandise, it is not clear that the contract and agreement pertains to the imported merchandise.
The CF 7501 is for the entry of 236.15MT of ferrophosphorous, valued at $163/MT. There are two analyses of the ferrophosphorous, both taken in Holland, one on or about February 11, 1993, and the second on or about May 3, 1993. A cost breakdown shows that the importation is composed of 101.750MT from the February 11, 1993 shipment to Holland and 134.4MT from the May 3, 1993 shipment to Holland. An analysis or certificate of quality representing the merchandise upon importation was requested by letter dated June 14, 2000, but was not provided. The results of the loadport analyses are as follows:
Element 2/11/93 (254.55MT) 5/3/93 (586MT)
(loadport) (loadport)
Iron No data No data
Phosphorous 24.70% 25.45%
Manganese 4.59% 4.10%
Silicon 3.62% 2.06%
Copper No data No data
Carbon 0.044% 0.21%
Titanium 0.78% 0.90%
The cost breakdown also shows that the ferrophosphorous was warehoused for the time between testing in Holland and importation in the U.S., and there is a letter dated October 11, 1993, from the agent to the protestant indicating that the 236.15MT has been shipped, and is comprised of ferrophosphorous from two different shipments to Rotterdam. The documents for the U.S. import reference the twelve containers in which the merchandise was imported. In the October 11, 1993 letter, the same twelve containers are identified and referenced as containing merchandise from the two ships from which the analyses were taken.
10) 558-xxxx845-6: There are two contracts submitted pertaining to this entry. One contract is undated and not named, and is between the agent and a Kazakh entity. This first contract is for the sale to the agent of 8000 tons of ferrophosphorous at $140/ton. The specifications provided are the same as those for entry 6), above (which provided for quality points 1, 2, and 3). The second contract is contract no. 25-nn-1914/21-93, dated January 27, 1993, which is the same as that for entries 8) and 9), above, and provides for the sale and delivery of 6000 tons of ferrophosphorous, at $150/ton for Grade 1 ferrophosphorous, and $142/ton for Grades 2,3, and 4 of ferrophosphorous. The specifications are also the same as for the above entry. Based on the entered value ($163/MT—see below) of the imported merchandise, it does not appear that the contracts pertain to the imported merchandise.
There is an invoice dated October 26, 1993, from the agent to the protestant for 1996.444MT of ferrophosphorous at $163/MT. The CF 7501 is for the entry of 1996.44MT of ferrophosphorous at $163/MT. There are nine analyses of the ferrophophorous. Five of the analyses were from samples taken in Rotterdam on or about October 18, 1993, and four of the analyses are from samples taken in Ohio, one on February 23, 1994, and the remaining three on March 8-12, 1994. The results of the analyses taken in Rotterdam are as follows:
Elements 397.119MT 403.351MT 426.144MT 399.790MT 396.674MT
(all loadport)
Iron No data No data No data No data No data
Phosphorous 22.88% 23.78% 21.50% 21.91% 24.49%
Manganese 3.85% 5.88% 4.55% 4.05% 6.38%
Silicon 4.38% 5.16% 5.86% 5.60% 4.45%
Copper No data No data No data No data No data
Carbon 0.090% 0.062% 0.11% 0.087% 0.057%
Titanium 1.27% 1.05% 1.42% 1.44% 1.05%
The results of the analyses taken in Ohio are as follows:
Elements 363MT 725.6MT 362.8MT 362.8MT
(all U.S.)
Iron 65.49% 62.59% 62.63% 63.56%
Phosphorous 23.12% 23.88% 24.23% 23.00%
Manganese 4.21% 5.50% 5.71% 4.90%
Silicon 4.67% 5.03% 4.78% 5.30%
Copper 0.14% 0.11% 0.14% 0.12%
Carbon 0.022% 0.040% 0.040% 0.052%
Titanium 1.35% 1.20% 1.08% 1.42%
11) N31-xxxx931-3: There is an invoice from the agent dated September 27, 1991, for 2002.93MT of “ferrophosphorous fines” at $130/MT. There are two analyses of the ferrophosphorous. The CF 7501 is for the entry of 2002.944MT of ferrophosphorous valued at $130/MT. One analysis is from a sample of approximately 2000MT of ferrphosphorous fines (size 0mm x 20 mm) taken on August 27, 1991, in Germany, and the second analysis is from a sample of approximately 2002MT of ferrophosphorous fines, taken October 24-25, 1991, in Chicago. The results of the analyses are as follows:
Element 8/27/91 10/24-25/91
(loadport) (U.S.)
Iron No data No data
Phosphorous 26.00% 25.70%
Manganese No data No data
Silicon 1.87% 1.68%
Copper No data No data
Carbon No data No data
Titanium 0.86% 0.84%
Chromium 0.34% 0.45%
Vanadium 0.86% 0.84%
Moisture No data 0.68%
No further information such as agreements between the buyer’s agent and the supplier was provided.
The following describes the pertinent documents and evidence received by Customs with regard to the two exports, on which the drawback claim is based.
Northern Dawn: There is an agreement of October 29, 1993, for the protestant’s purchase of 6500 to 7000 short tons of ferrophosphorous, at $59/short ton ($63/MT) from a domestic supplier, for shipment in December, 1993. The agreed upon specifications for the ferrophosphorous are as follows:
Phosphorous approximately 25%
Silicon approximately 5% (not to exceed 10%)
Vanadium approximately 5%
Chromium maximum 5%
There is also a specification that the size is to be “4' x 2' free of slag, free of fines below 1'.”
There is a document dated November 8, 1993, confirming the protestant’s sale to a German entity, of approximately 6000 tons of ferrophosphorous, for 353 DM/MT, CIF Germany (price converts to $216.50MT based on the quarterly rate for November 8, 1993). The form is in English but the form is completed in German. The terms of the sale include the following specifications for the ferrophosphorous:
Phosphorous minimum 24%
Silicon maximum 10%
Vanadium circa 5%
Chromium circa 4%
Nickel circa 1%
The specifications also include size, requiring 5-150mm with a maximum of 5% under 5mm. There is a “remarks” section on the invoice, and we conclude from a general translation from German of the information placed in the “remarks” section, that the German buyer will be entitled to a credit or price adjustment if the phosphorous falls below 24%, and no adjustment if the phosphorous is above 24%. There is a confirmation, dated November 11, 1993, of the October 29, 1993 agreement between the protestant and the domestic supplier of ferrophosphorous, for the protestant’s purchase of 6,500 to 7000 short tons of ferrophosphorous for $59/short ton ($63/MT), FOB, supplier’s plant, in Idaho. There is a copy of a signed bill of lading, dated January 17, 1994, stating that 6239.67MT of ferrophosphorous lumps, were laden on board the Northern Dawn on January 17, 1994, at Vancouver, Washington, for discharge in Belgium. The shipper is the protestant. There is an analysis, dated December 30, 1993, of the ferrophosphorous shipped in November and December, 1993, from Idaho, as tested in Idaho, with the following results:
Iron 56.76%
Phosphorous 26.15%
Manganese 0.36%
Silicon 1.06%
Titanium 1.58%
Vanadium 6.40%
Chromium 5.75%
Calcium 0.11%
There is an invoice dated January 19, 1994, from the protestant to the German entity, for 6239.67MT of ferrophosphorous lumps at 353DM/MT CIFFO Germany (converts to $202.64MT based on the quarterly rate for January 9, 1994), for shipment from Vancouver, Washington. The invoice provides that payment is to be made within 30 days after the arrival of the vessel at Antwerp. The invoice references the November 8, 1993, agreement between the protestant and the German entity.
Star Grip: There is a letter dated December 6, 1993, confirming an agreement between the protestant and an entity in Luxembourg, for the sale by the protestant of 6000MT of ferrophosphorous at $167/MT CIFFO Belgium. The specifications set forth in the confirmation are as follows:
Phosphorous approximately 25%
Silicon approximately 5% (not to exceed 10%)
Vanadium approximately 5%
Chromium maximum 5%
The specifications also provide for the size of the ferrophosphorous as “lumps 4' x 1' with approximately 30% fines below ½'.”
There is a letter dated December 7, 1993, confirming an agreement between the protestant and a domestic supplier, for the protestant to purchase 7000 short tons of ferrophosphorous at $52.50/short ton ($57.87/MT) FOB supplier’s plant in
Idaho. The specifications in the confirmation are as follows:
Phosphorous approximately 25%
Silicon approximately 5% (not to exceed 10%)
Vanadium approximately 5%
Chromium maximum 5%
The specifications also provide for the size of the ferrophosphorous as “4' x 1' free of slag with maximum 15% fines below 2'.”
There is a copy of a signed bill of lading dated February 19, 1994 , stating that 6304.85MT of ferrophosphorous lumps were laden on board the Star Grip on February 19, 1994, in Vancouver, Washington, for shipment to Belgium. The shipper on the bill of lading is the protestant. There is a letter dated February 22, 1994, to the protestant from the Luxembourg entity, confirming the purchase of approximately 6000 tons of “Western lumpy” ferrophosphorous, at $167/MT, with the following specifications:
Phosphorous approximately 25%
Silicon approximately 5% (not to exceed 10%)
Vanadium approximately 5%
Chromium maximum 5%
The size specifications are for 25-100mm max, with a maximum of 30% fines below 13mm.
There is an invoice dated February 22, 1994, for 6304.85MT of ferrophosphorous lumps at $167/MT CIFFO Antwerp, to the Luxembourg entity. There is an analysis of the ferrophosphorous dated February 23, 1994, for ferrophosphorous shipped in January, 1994 from Idaho. The results of the analysis are as follows:
Iron 56.98%
Phosphorous 26.26%
Manganese 0.22%
Silicon 0.46%
Titanium 1.58%
Vanadium 5.97%
Chromium 5.07%
Calcium 0.10%
In support of the protest, the protestant made a submission that includes the background submissions and decisions, prior Customs OLSS reports, Customs rulings in support of the protest, and a declaration and affidavit of Jacques E. Lennon, president of the protesting company, with attachments of letters from the export customers. The file includes a Customs Office of Laboratories and Scientific Services (OLSS) review of the contract specifications and import and export analyses, dated May 15, 2000, a June 30, 2000 submission from the protestant in response to Customs request for additional information, and a February 1, 2001 OLSS memorandum pertaining to an international industrial standard for ferrophosphorous.
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). The drawback entry was liquidated on December 29, 1997, and the protest was filed on March 27, 1998. We note that the refusal to pay a claim for drawback is a protestable issue (see 19 U.S.C. §1514(a)(6)).
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 the protestant had possession of the other, exported 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 summary of section 1313(j)(2) is 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). 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)).
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.
The protestant relies on the recent decision in Texport Oil Company v. United States, 185 F3d 1291, Nos. 98-1352, 98-1353, 98-1373, slip op. (Fed. Cir. July 27, 1999), which vacated the CIT 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 support the position that the purchase and sale documents are not relevant to a determination of commercial interchangeability and that only the actual merchandise imported and exported is relevant. The CAFC, in Texport, stated that “a firmly objective standard—analyzed from the perspective of a hypothetical reasonable competitor” avoids the concerns of overbroad descriptions of merchandise on transaction documents, prone to manipulation, and the “analysis might also include evidence of arms-length negotiations between commercial actors, the description of the goods on bills of sale or invoices….” Slip op. at 11. The court stated that “’commercially interchangeable’ must be determined objectively from the perspective of a hypothetical reasonable competitor; if a reasonable competitor would accept either the imported or the exported good for its primary commercial purpose, then the goods are ‘commercially interchangeable’”. Id., at 10.
We will examine the imports as they compare to the exportation on the basis of which drawback is claimed. In HQ 226096 and HQ 227080, we determined that the tariff classification is the same for both the imported and exported merchandise, subheading 7202.99.5020, HTSUS, and with respect to part numbers we determined that no evidence had been submitted to suggest that part numbers were applicable. In reviewing the protest, we see no reason to alter our prior findings on the tariff classification and part number criteria.
With respect to the government and industry standard criteria, in HQ 227080 we applied the OST standard specifications, as the imported merchandise was purchased by reference to those standards. The OST specifications were applied as an alternative to the government and industry standard criteria, because no government or industry standard was available. The reliability of the OST standards was in question at the time HQ 227080 was issued. In 227080 we stated, on p. 4:
You have not provided any information as to the use of OST standards such as the organization that developed the standards and Customs scientists were unable to determine the origin of those standards. As stated, the standards appear to be a company specification rather than a government or recognized industry standard. A company standard does not satisfy the criterion of a government or recognized industry standard. However, in absence of a government or recognized industry standard, Customs will consider a match with the company specifications as evidence of commercial interchangeability.
The OST specifications provided for four grades of ferrophosphorous and we concluded that on the basis of the analysis of the exported domestic merchandise, the export merchandise did not fit within any of the four OST grades. For purposes of this subject protest decision, we will not consider the specifications set forth in the purchase contracts for the imports, as the documents 1) refer to several different sets of specifications, 2) it is not established that any one set of specifications provides an industry standard, and 3) it does not appear that all of the contract specifications submitted actually apply to the importations with respect to which they were submitted. We do not question whether the transactions between the protestant and the foreign sellers were arms length transactions, however we do question the relation of the documents to the specific transactions.
In Texport, the CAFC cautioned against reliance on overly broad or vague descriptions in commercial documents. Further, the decision in Texport, supports a decision to rely on the descriptions of the actual merchandise at issue, as opposed to the descriptions in the purchase contracts, which do not clearly control the transactions in this case.
In a further review of the OST standards, the Office of Laboratories and Scientific Services (OLSS) review, dated May 15, 2000, relied on the two grades of ferrophosphorous set forth in Hawley’s Condensed Chemical Dictionary, Twelfth Edition (which were used as a basis for comparison in HQ 226096). According to the OLSS review, the OST standards for ferrophosphorous in the contracts for the purchase of the imported merchandise crossed over different grades. We find that, particularly in light of new information described below, the OST standards have little or no relevance to the determination of commercial interchangeability.
As described infra, an industry standard, an objective standard upon which a commercial interchangeability decision can be based, has been discovered. The availability of an industry standard allows us to make a determination of commercial interchangeability without resort to alternative company standards.
In our decisions prior to HQ 227080, and prior OLSS reviews, the specifications relating to the chemical composition of ferrophosphorous employed were derived from the references Hawley’s Condensed Chemical Dictionary, Twelfth Edition, and Ullman’s Encyclopedia of Industrial Chemistry (5th Ed.). The protestant advocates reliance on the two references, in lieu of the OST specifications. However, according to the OLSS memorandum of February 1, 2001, an intensive investigation by OLSS of the specifications listed therein, showed that the specifications were derived from industry comment and not from a widely acceptable standards source. Accordingly, the composition information in Hawley’s and Ullman’s is less supportable in a court of law than a recognized international standard. OLSS has concluded that only one internationally acceptable standard is available that lists the specification for ferrophophorous to be used mainly as an additive of alloy composition in iron and steel manufacturing:
Japanese Industrial Standard (JIS) G 2310 lists one class of ferrophosphorous as Grade “FP1”. This grade is listed in the specification as containing 20% to 28% phosphorous. Additionally, the specification lists two size classes: general size is considered to be 3 to 100 millimeters and medium size which is considered to be 20 to 80 millimeters. Due to the large overlap in the size classes, it is our opinion that the size specification plays no significant role in the determination of 1313j drawback.
However, it is clear that the phosphorous content is clearly described as an important factor in the determination of whether or not the ferrophosphorous meets the JIS standard for “FP1” ferrophosphorous. Since the JIS standard is the only international standard that is specific for ferrophosphorous we are of the opinion that it should be used by Customs for drawback purposes.
Accordingly, with respect to ferrophosphorous, it is our opinion that the products can be grouped into three categories for 1313j purposes: those products falling in the standard range, those products having a phosphorous content greater than 28% and those products having a phosphorous content less than 20%. With respect to the products having a phosphorous content of less than 20%, we believe less than 10%, the product would no longer be considered a ferrophosphorous. Rather, it would be considered a type of specialty iron or steel product.
The JIS G 2310 was published by the Japanese Standards Association in 1986. OLSS is of the opinion that the assays provided of the imported and exported merchandise can be compared to the JIS G 2310 to determine if the imports and exports are commercially interchangeable. In this case there is no evidence that the merchandise was bought and sold against the JIS G 2310, or that any buyer or seller relied on that standard. However, based on the documentary evidence we can conclude that the shipments were consistent with the standard, and that the commercial documents were not manipulated to include vague or overbroad terms for purposes of drawback.
In this case, the imported merchandise consists of ferrophosphorous, which has a phosphorous content of 21.63% to 27.40%. The exported merchandise consists of ferrophosphorous, which has a phosphorous content of 26.15% and 26.69%. Thus, the imports, and exports were all within the JIS standard of 20% to 28%, are of the same grade, and thus meet the industry standard criteria of commercial interchangeability.
With respect to the import in entry 9), we have not been provided with an analysis of the merchandise upon importation. The only analysis that has been submitted is an analysis from Rotterdam, the loadport. The protestant has provided documentation that the imported merchandise was from the vessels from which the analyses were taken in Rotterdam, Holland. The documentation therefore provides a link between the overseas test and the imported merchandise, indicating that the test results are in fact the test results for the imported merchandise. Furthermore, there is no indication that the test results and thus the merchandise were not found acceptable by the U.S. purchaser, and the test results are consistent with the international standard. Based on the foregoing facts, Customs has no basis upon which to reject the overseas testing of the merchandise.
In addition to the industry standard, the documents raise additional criteria that are relevant under the Texport “reasonable competitor” standard. Exhibit H to the subject protest is a Declaration of Jacques E. Lennon, President of the protestant, dated February 19, 1988. In his declaration, Mr. Lennon states:
Generally speaking, high levels of Phosphorous and low levels of Silicon are the most sought-after qualifications for Ferro Phosphorous. Many consumers list their specifications as minimum 24 per cent Phosphorous, and maximum 1 percent Silicon. Others are more flexible in terms of these, and other specifications, which differ from consumer to consumer, and depend on the particular application of the steel being produced.
…
One of our major customers for the U.S. material from [the U.S. supplier], [the foreign customer], included in their sales agreement with us a requirement calling for a minimum Phosphorous specification of 24 per cent. In the event that the material we provided them had a Phosphorous content of below 24 per cent, the price to them would be adjusted on a pro-rata basis. If the material had a Phosphorous content greater than 24 per cent, the price remained the same.
With respect to silicon content, the imports had silicon contents ranging from 0.59% to 5.30%. The Northern Dawn export had a silicon content of 1.06%, and the Star Grip export had a silicon content of 0.46%. The purchase specifications for both exports are broad enough to include ferrophosphorous with a silicon content of 10% or less. The silicon content was not addressed in our prior decision, as in that decision the government and industrial standard criteria was determined not to be met on the basis of the OST grades in which silicon was a factor, and the vanadium content. The silicon individually was not a factor in the decision. According to Mr. Lenno’s Declaration, the silicon content can be a factor among reasonable competitors. However, in this case the silicon content is within the specifications for the exported merchandise, and is not a factor according to JIS G 2310. We find that the difference in silicon content does not preclude a determination of commercial interchangeability as to the imported and exported merchandise.
The purchase documents for the exported merchandise raise an element precluding commercial interchangeability of the merchandise exported on the Northern Dawn and the 398 MT of merchandise imported on entry 7), and 129.55 MT of merchandise imported on entry 8), a total of 527.55 MT. The 129.55 MT is the difference between the 399MT imported in entry 8) which had a phosphorous content less than 24%, and the 269.45MT designated for export on the Star Grip. The 527.55 MT of ferrophosphorous, while meeting the industry standard, do not meet an element established by the purchaser of the export on the Northern Dawn. The purchase specification for the export on the Northern Dawn entitles the buyer to a price adjustment if the phosphorus content of the merchandise is less than 24%. The specification for the price adjustment indicates that ferrophosphorous with a phosphorous content of less than 24% is not commercially interchangeable with ferrophosphorous with a phosphorous content above 24%, for that particular purchaser. This conclusion is also consistent with the statement of the protestant’s officer, Mr. Lennon, which referred to the requirement of the foreign purchaser, specifically naming the purchaser of the merchandise exported on the Northern Dawn.
A final consideration of additional elements, are the specifications for size of the merchandise. The exports on the Northern Dawn and the Star Grip are described as “lumps”. Except for two instances, the imports are not described by sizes in the analyses. Import 6) is described as “10mm x Down” and import 11) is described as “fines”. The purchase documents for the imports did not specify any particular form or size of the product. The purchase documents for the exports specified the sizes as 5-150mm with a maximum of 5% under 5mm (Northern Dawn) and 25-100mm max, with a maximum of 30% fines below 13mm (Star Grip).
In the submission of June 30, 2000, on behalf of the protestant, the different sizes of ferrophosphrous are described. It is stated that in its raw form, ferrophosphorous coagulates into “chills” which are pieces 3-4’ in diameter and which can be broken down into “lumps”. The material breaks down into lumps naturally with handling such as by transport. Crushing the material can break it down further. Smaller pieces, generally below 1" are known as “fines”. According to the protestant, a briquetting process can be used to coagulate the fines into briquettes which can be used by the steel producer in the same manner as lumps.
In the OLSS review of May 15, 2000, it was stated that “[I]n most instances, the product should be uniform in character to promote uniform crystallization of steel products.” With respect to size preferences, in the submission of June 30, 2000, on behalf of the protestant, it is stated that generally a steel producer may request a general sizing, but it is understood that ferrophosphorous is not precise or uniform in size, and the delivered product is expected to be predominantly, but not precisely, of the desired size. In addition, on behalf of the protestant it is explained that the merchandise as imported is in its original shipping size prior to any crushing or briquetting process, and the export sizes reflect the merchandise after undergoing a sizing process.
Based on the evidence and information provided, we find that for the imports for which the size is identified, and for the exports, there is no indication that the merchandise was not uniform in size, or that out of the sizes of either the imports or exports one is preferable over another.
In HQ 227080, we concluded that commercial interchangeability was precluded due to the high vanadium content of the exported merchandise and the little or no vanadium content of the imported merchandise. Except for import 11), the analyses of the imported merchandise in the subject protest do not indicate the vanadium content. Import 11) has a vanadium content of 0.84%, and the exports have a vanadium content of 6.40% and 5.97%. The OLSS review of May 15, 2000 concluded that whether or not the merchandise at issue is used for vanadium recovery, “discussions with industry appear to show that a product with a high level of Vanadium is more desirable than a product with little or no Vanadium.” In his Declaration of February 19, 1998, Mr. Lennon, the President of the protestant, states that the only plant worldwide used for the production of vanadium pentoxide is in Soda Springs, Idaho, and has provided letters from the two purchasers of the exported merchandise that they have never used ferrophosphorous for any other purpose other than steel production. In fact, each purchaser states that it has never used ferrophosphorous for the purpose of extracting any elements such as vanadium or chromium.
We are satisfied that the exported merchandise is not used for the purpose of vanadium extraction, and find that the difference in vanadium content between import 11) and the export on the Star Grip, does not preclude a finding that the merchandise is commercially interchangeable.
The remaining issue is the value criteria. In HQ 227080, Customs concluded that the 70% to 100% differences in value between the imported and export domestic merchandise precluded a finding of commercial interchangeability, particularly because the government and industry standard criteria had not been met. The sales prices provided to Customs for the domestic exports were those prices paid by the protestant to its domestic supplier. Customs did not agree that it was required to add any relevant freight, stevedoring or inspection costs to the price in order to arrive at the true export price.
The value information provided with respect to the protest is different than that which was presented with respect to the ruling and reconsideration. The protestant has provided copies of its invoices to the foreign purchasers of the merchandise on which it claimed drawback. The invoice for the merchandise exported on the Northern Dawn is for $202.64MT (converted from 353DM based on 1994 first quarter published rate of 1 DM = 0.574053 U.S.$) CIF Germany, and the invoice for the merchandise exported on the Star Grip is for $167MT CIFFO Germany. The export value we are using is that at the time of payment, the first quarter. Nothing in the documents indicates that the conversion rate is to be determined at any time other than that of payment.
The CIF term means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination. Incoterms 2000, p.6. The term CIFFO is defined as “cost, insurance and freight, free out”, which is further defined as the same as CIF, except that the seller must also bear the cost and responsibility of discharging the ship. P. Brodie, Dictionary of Shipping Terms, 26 and 36 (1985). The documents do not provide any further breakdown of the export price therefore the price on the export invoice is used for comparison of the relative values.
The entered value of the imported merchandise designated against the export on the Northern Dawn ranges from $125MT to $163MT. The entered value of the imported merchandise designated against the export on the Star Grip ranges from $130MT to $163MT.
For the export on the Northern Dawn, the value of the export is 24% greater than the value of the highest priced import, and 62% greater than the lowest priced import. For the export on the Star Grip, the value of the export is 2.45% greater than the value of the highest priced import, and 28% greater than the value of the lowest priced import. We find that in light of our findings on the government and industry standards criteria, that this is an acceptable range of difference in values.
In conclusion, on the basis of the evidence provided and the determinations on the government and industry standards, “reasonable competitor” elements and relative value criteria, we conclude that, with the exception of the 398 MT imported on entry 7) and 129.55 MT imported on entry 8), the exported domestic merchandise and the imported merchandise which is the subject of the protest are commercially interchangeable. We emphasize however, that our conclusion strongly relies on the specific merchandise imported and exported and the evidence submitted in this case. This conclusion does not mean that imported and domestic ferrophosphorous is commercially interchangeable in all instances.
From our review of the import documentation and evidence of exportation, it appears that all other requirements of the drawback statute have been met, such as evidence of exportation, timeliness of exportation, as well as possession of the imported merchandise by the drawback claimant.
HOLDING:
We find that there is authority to grant the protest of the denial of drawback, in part, as we find that the imported and exported domestic ferrophosphorous which is the subject of the protest is commercially interchangeable for purposes of the substitution unused merchandise drawback law under 19 U.S.C. §1313(j)(2). The protest is denied in part, because the 398 MT imported on entry 7) and 129.55 MT imported on entry 8), is not commercially interchangeable with the export, due to a specific element set forth by the purchaser in this case.
The protest should be granted, in part. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of 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