DRA-4—RR: CR:DR 228504 IOR
Director, Regulatory Audit Division
U.S. Customs Service
1300 Pennsylvania Ave., NW
Washington, D.C. 20229
RE: Internal advice request; Phibro Inc.; 19 U.S.C. 1313(j)(2); commercial interchangeability; MTBE; methyl tertiary-butyl ether; possession
Dear Madam:
The following is in response to an internal advice request forwarded to this office by your office, from the Regulatory Audit Division, Boston, by memorandum dated July 9, 1999, regarding the application of 19 U.S.C. §1313(j)(2) to importation and sales of methyl tertiary-butyl ether (MTBE), by Phibro, Inc. (“Phibro”). The internal advice request was initiated by Phibro. This decision follows a meeting between this office and representatives of and counsel for Phibro, on November 14, 2000, and receipt of Phibro’s supplemental submission dated January 3, 2001.
FACTS:
In the context of an audit of Phibro, the Regulatory Audit Division, Boston, reviewed several drawback claims of Phibro, for substitution unused merchandise drawback on the exportation of MTBE. In the review, issues arose as to 1) whether the imported and exported MTBE was commercially interchangeable, and 2) whether Phibro had possession of the exported MTBE upon which drawback was claimed. For both issues, we will describe the facts in Drawback entry no. AA6-xxxx602-0. According to the final audit report, no. 121-99-DRO-003, dated September 20, 2001, with respect to Phibro’s drawback claims, the importation of the designated merchandise was verified, the substituted merchandise was not used prior to its exportation, and the exportation of the substituted merchandise, within three years of importation of the designated merchandise was verified.
Commercial Interchangeability
We have in our file representative drawback entry AA6-0301602-0. That entry is based on two import entries and one exportation of MTBE.
Imported Merchandise
The imported merchandise consists of two entries of MTBE, both entered under subheading 2909.19.1010, Harmonized Tariff Schedule of the United States (HTSUS).
Under consumption entry 916-xxxx834-8, filed June 14, 1995, 11,887,434 kg. (11,887.434MT)of MTBE was imported by Phibro on the NCC MADINAH. The MTBE was purchased from a Canadian supplier. The purchase contract, Phibro ref. no. T3321901-P specified that the purchased MTBE be in accordance with the following specifications:
Purity 95 Wt Pct. Min.
Methanol 0.5 Wt Pct. Max.
Water 1,500 PPM Max.
A report of analysis representing a vessel composite taken at the U.S. port on June 12, 1995 shows the following results regarding the imported MTBE:
API Gravity 58.4 @60 degs F
Purity 98.74 Pct Wt
Methanol 0.15 Pct. Wt.
Water 322 PPM
Under consumption entry F87-xxxx640-7, filed December 19, 1994, 2,011,246 kg. (2,011.246 MT) of MTBE was imported by Phibro on the STOLT HAWK. The MTBE was purchased from a Finnish supplier. The purchase contract, Phibro ref. no. T2197701-P specified that the purchased MTBE be in accordance with the following specifications:
Purity 98 Wt Pct. Min.
Methanol 0.5 Wt Pct. Max.
Water 1,000 PPM Max.
A report of analysis representing a vessel composite taken at the U.S. port on November 26, 1994 shows the following results regarding the imported MTBE:
Purity 98.3 % vol
Methanol 0.05 % vol
Water 0.02 % wt
Phibro has also submitted evidence that the merchandise imported under Phibro contract no. T2197701-P, was sold domestically, to a California purchaser, pursuant to Phibro contract no. T2226101-S. The sales contract, no. T2226101-S specified that the MTBE sold will be in accordance with the following
specifications:
Purity 95 Wt Pct. Min.
Methanol 0.5 Wt Pct. Max.
Water 1,500 PPM Max.
Exported Merchandise
Phibro contract no. T4757401-S, dated February 29, 1996, provided for the sale of 4,143.691 MT of MTBE to an Argentinian purchaser. The merchandise was shipped on the STOLT VICTOR from Houston, Texas to La Plata, Argentina. The contract specified that the MTBE sold will be in accordance with the following specifications:
Purity 95 Wt Pct. Min.
Methanol 0.5 Wt Pct. Max.
Water 1,500 PPM Max.
A report of analysis of a shore tank sample of the MTBE, dated March 20, 1996, prior to exportation shows the following results regarding the MTBE sold for export to Argentina:
Purity 96.38
Methanol 0.37 % wt
Water 112 ppm
The export price is 1.07% greater than the price of the import on the NCC MADINAH, and the price of the import on the STOLT HAWK is 5.9% greater than the price of the export.
According to Phibro’s chronological summary of export, the exported merchandise is classified under subheading 2909.19.10, HTSUS.
Possession
The MTBE which was exported on the STOLT VICTOR, was purchased by Phibro pursuant to Phibro contract no. T4758701-P, dated February 29, 1996, from a domestic company. The terms of the contract were “FOB Houston/Texas city, in seller’s option, via buyer’s vessel.” The payment terms required that payment be made within 10 days after the bill of lading date against the presentation of 1) a commercial invoice; 2) certificate of quality at loadport; and 3) a certificate of quantity. With respect to title and risk of loss, the contract provides: “passes from seller to buyer at loadport as material passes the incoming flange of buyer’s vessel.” The confirmation contract, issued by the domestic company, dated March 6, 1996 is consistent with the terms set forth in Phibro’s contract.
Phibro contract no. T4757401-S, dated February 29, 1996, provided for the sale of MTBE to the Argentinian purchaser. The terms of the contract were “FOB Houston/Texas city in seller’s option via buyer’s vessel. Product is for export only. Seller to be exporter of record.” With respect to title and risk of loss, the contract terms were “passes from seller to buyer at loadport as material passes the incoming flange of buyer’s vessel”.
All of the purchase and sales contracts incorporate, in full, by reference the terms and conditions set forth in “Phibro Division of Salomon Inc General Terms and Conditions dated January 3, 1994” (hereinafter referred to as “General Terms and Conditions”). One of the provisions of the General Terms and Conditions is that regarding warranties:
Except for the warranty of title no conditions or warranties, expressed or implied, of merchantability, fitness or suitability of the oil for any particular purpose or otherwise, are made by seller other than that the oil conforms, within any tolerances stated, to the description stated herein.
By a memorandum dated March 20, 1996, Phibro notified the foreign purchaser that the export vessel owner intended to barge the MTBE from the terminal to the mother vessel (STOLT VICTOR) at Houston. A time log submitted indicates that the MTBE was loaded onto the barge on March 20, 1996.
A copy of a non-negotiable bill of lading is dated March 25, 1996, and identifies Phibro as the shipper, and the Argentinian purchaser as the consignee. According to the bill of lading, the merchandise was on board the barges on March 20, 1996, and on board the STOLT VICTOR on March 25, 1996. The bill of lading is “to the order of” the Argentinian purchaser. According to the bill of lading, the merchandise was carried on a vessel pursuant to a charter, in which the Argentinian purchaser was the charterer. The bill of lading is prepared by the freight forwarder, and sent to Phibro for approval. According to a summary of the transaction details, prepared by Phibro’s chartering manager, the subsequent arrangement is as follows:
- Phibro arranges for the original negotiable Bills of Lading to be issued by the Freight Forwarder. The Bills of Lading are sent by the Freight Forwarder to Phibro not [it’s seller or purchaser]. Phibro is shown as Shipper of the cargo.
- The Bill of lading is the contract between the Shipper and the Vessel Owner under which, for example:
(A) The Shipper (Phibro) guarantees to the Vessel Owner the Quantity and the nature of the MTBE placed on board the vessel; if there is a shortage of MTBE or damage to the vessel because of the misrepresentation by the Shipper (Phibro) of the quantity or the nature of the MTBE, then the Vessel Owner can make a claim against the shipper (Phibro)
(B) The Vessel Owner guarantees to the Shipper that the Vessel Owner will make delivery only to the holder of an original negotiable Bill of Lading.
Phibro takes the position that the contract between Phibro and the Argentinian purchaser is not a mirror image of the contract between Phibro and its domestic seller, because the domestic contract did not require that a bill of lading be prepared, issued or provided to Phibro. In contrast, according to Phibro, the contract between Phibro and the Argentinian purchaser, required Phibro to provide bills of lading to the order of the Argentinian purchaser. The documentation submitted includes documentary instructions, which specify that the documents Phibro must provide to the Argentinian purchaser include the bill of lading. The documentary instructions require that the bill of lading along with other documents, be provided to the purchaser prior to the vessel’s arrival at the destination port in Argentina. The documentation submitted includes a notice dated April 1, 1996, from Phibro to the Argentinian purchaser’s agent, that the documents have been sent to the purchaser, on that day, by courier.
Phibro takes the position that from March 20, 1996, when the loading of the MTBE onto the barges was begun and completed, until April 1, 1996 when Phibro sent the original bill of lading to the Argentinian purchaser, Phibro had complete ownership and control, in law and in fact, over the MTBE cargo.
ISSUES:
Whether the imported and substituted MTBE is commercially interchangeable for purposes of 19 U.S.C. §1313(j)(2).
Whether the drawback claimant has satisfied the possession requirement of 19 U.S.C. §1313(j)(2).
LAW AND ANALYSIS:
Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if there is, with respect to imported duty paid merchandise, 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. The issues before us in this case are commercial interchangeability of the imported and substituted merchandise, and possession.
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 statutory provision for substitution unused merchandise drawback, 19 U.S.C. §1313(j)(2)(ii), is the following:
(2) If there is, with respect to imported merchandise on which was paid any duty, tax, or fee imposed under Federal law because of its importation, any other merchandise (whether imported or domestic) that--
(A) is commercially interchangeable with such imported merchandise;
…
(C) before exportation or destruction—
….
(ii) is in the possession of, including ownership while in bailment, in leased facilities, in transit to, or in any other manner under the operational control of, the party claiming drawback under this paragraph, if that party-
(I) is the importer of the imported merchandise,...
Emphasis added.
Commercial Interchangeability
In order to determine whether the MTBE is commercially interchangeable, an analysis of the following factors is required:
Governmental and Recognized Industry Standards
The imported MTBE had a purity above 98%. The purchase contracts specified 95% purity for one import and 98% purity for the other. The exported MTBE had a purity greater than 95% and less than 98%. The sales contract for the export specified a purity of 95%.
In its report dated March 13, 2001, the Office of Laboratory and Scientific Services (“OLSS”), concluded that ASTM standard D 5983-96 (the 1996 edition) and D5983-97 (the 1997 edition), contains the necessary criteria to evaluate the commercial interchangeability of MTBE. OLSS concluded that in order for MTBE to meet the ASTM standard, the MTBE must meet the (ten) parameters set forth in the standard: appearance, color, sulfur, gum, corrosion, purity, methanol, vapor pressure, API and water. The first ASTM standard for MTBE was approved on November 10, 1996 and published in January, 1997. Therefore it was not applicable at the time of the subject imports and exports. Furthermore, the subject imports and exports cannot be compared to the ASTM standard, as the analyses of the MTBE do not provide information on seven of the ten required parameters.
In HQ 226074, dated September 29, 1995, it was concluded, based on data, that although there were no government or industry standards for MTBE at that time, MTBE was marketed as having two different minimum purity values, 95% and 98%, and containing no more than 0.5 wt. % methanol and 1500 ppm water. In that case, it was determined that the imported and substituted exported MTBE met the governmental and recognized industry standard criteria of commercial interchangeability, because it all had a minimum purity value greater than 98%, a methanol content below 0.5 wt.% and a water content below 1500 ppm. The merchandise was found to be commercially interchangeable because all four of the criteria (governmental and recognized industry standards, relative value, tariff classification and part numbers) were met.
As the ASTM standard is not applicable to the subject merchandise, and in light of HQ 226074, we do not agree that the ASTM standard reflects past industry practice, we must apply the commercial practice described in HQ 226074, which was in existence prior to November, 1996. Under that practice, the MTBE entered on June 14, 1995, entry no. 916-xxxx834-8 meets the 98% practice because the MTBE had a purity of 98.74%. However, only 95% purity was contracted for. The exported MTBE had a purity of 96.38%, although 95% purity was required according to the purchase order. Because the MTBE contracted for the export and import was only required to be of 95% purity, the merchandise actually imported and exported met the contract requirement. The MTBE entered on December 19, 1994, entry no. F87-xxxx640-7, by contract was required to be at least of 98% purity, and the imported merchandise met that requirement. However, the 1994 import would not meet the government and recognized industry standard criterion of commercial interchangeability with the export, because the import is of a higher practice standard by contract and analysis.
In HQ 228011, dated November 13, 2001, we specifically did not base the decision on the government and industry criterion for ferrophosphorous on the basis of contract terms because the standards cited in the contracts 1) referred to different sets of specifications, 2) did not provide an industry standard, and 3) did not clearly apply to the imported merchandise. The court in Texport Oil Company v. United States, 185 F3d 1291, Nos. 98-1352, 98-1353, 98-1373, slip op. (Fed. Cir. July 27, 1999), vacating Texport Oil Company v. United States, 1 F. Supp. 2d 1393, No.98-21, slip op. (Ct. Int’l. Trade March 5, 1998), cautioned against reliance on overly broad or vague descriptions in commercial documents. In this case, the specifications for the MTBE are neither overly broad nor vague, and reflect the commercial standard existing at the time of the transactions.
Phibro concedes that the ASTM Standard D 5983-96, does not directly resolve the issue of commercial interchangeability as it was not adopted until after importation and sale of the MTBE at issue. However, Phibro does take the position that the standard is relevant because it reflects the purity criterion incorporated by Phibro and its customers into the contracts under which the MTBE was bought and sold. Phibro further asserts that no published standard was cited in any of the purchase and sale contracts for the MTBE in question. In this case the purchase and sales contracts specified either the 98% purity grade, or the 95% purity grade of MTBE. As the contract for the 1994 import specified a 98% purity, we do not see how the 95% ASTM standard could reflect the practice in effect at the time of the transaction. Phibro asserts in its submission dated January 3, 2001, that Phibro’s “interest in the purity of the purchased material was that it should be such as to be saleable in the United States, i.e., Phibro would only purchase MTBE if it was at least 95% pure”. Nevertheless, at least three of the purchase contracts for the imported merchandise specified MTBE with a purity of 98%.(
With respect to the MTBE entered on December 19, 1994, Phibro argues that because the substituted, exported MTBE (96.38%) met the minimum purity requirements (95%) of the domestic purchasers of the imported MTBE, the substituted merchandise was commercially interchangeable with the imported merchandise (98%). There is no support for such a comparison between the export and a domestic sale of the import. Customs is required to consider the import transaction and the export transaction. Under Phibro’s argument, if the domestic sale had specified a 80% purity, an export of 90% purity would have to be considered commercially interchangeable with an import of 98% purity.
Phibro has provided a page from Platt’s Guide to Petroleum Specifications for the Gulf Coast. The document is not dated, therefore it is not clear when the specifications were applicable. The same information can be obtained on the Internet, however, applicable dates are not provided. The Platt’s Guide refers to MTBE with a minimum purity of 95%. In addition, at the meeting on November 14, 2000, Phibro stated it would provide other standards for MTBE; however, that information was not provided.
Based on the foregoing, we find that this criterion has been met for the import of June 14, 1995, but not for the import of December 19, 1994.
Tariff Classification
According to Phibro’s submissions, both the imported and substituted domestic MTBE is classified in subheading 2909.19.1010, HTSUS. As both the imported and domestic MTBE is classified under the same HTSUS subheading, a finding of commercial interchangeability is supported by this criterion.
Part Numbers
From the documents submitted, it does not appear that any part number, or similar identification of the MTBE was used for either the imported or exported MTBE. We find this criterion to be inconclusive on the issue of commercial interchangeability.
Relative Values
The evidence submitted shows that the value of the exported MTBE is 1.07% greater than the MTBE entered on June 14, 1995, and that the value of the exported MTBE is 5.9% less than the MTBE entered on December 19, 1994. We note that the relative value is higher for the MTBE imported in 1994 than for either the MTBE imported in 1995, or MTBE exported in 1996. It was the MTBE imported in 1994 for which the contract required 98% purity. However, there is no basis upon which to determine the cause of the difference. Because we find the relative value is at an acceptable range, this criterion supports a finding of commercial interchangeability.
On the basis of the foregoing analysis, we find that under the criteria, the 1995 import and the export are commercially interchangeable, and that the 1994 import and the export are not commercially interchangeable, largely on the basis of whether the MTBE met the same commercial practice existing at the time of the transactions.
Possession
Under 19 USC 1313(v), multiple claims based on the same exported merchandise are prohibited. The definition of "exporter" in 19 CFR 191.2(m)(2) provides for only one exporter to exist with respect to drawback claims, in part, to prevent the same merchandise from being identified as the exported merchandise for multiple drawback claims. Unlike the identification or designation of an import entry, which has a unique number, there are multiple ways to identify goods covered by an export shipment. Generally, the bill of lading and the sales documents are used to show that particular merchandise left the US with the intention of being severed from the commerce of the US and being joined to the commerce of another country. However, since the provisions of 19 USC §1313 do not provide for an exclusive means to show exportation, other evidence can be used to satisfy that statutory requirement. See 19 CFR 191.2(m)(1) and subpart G, Part 191. Consequently, the verification of export evidence should focus on whether acceptance of that evidence is able to preclude the possibility of two or more persons being able to identify the same merchandise on two different claims.
We have held in the past that a situation where the possessor of the imported merchandise attempts to export the exported merchandise without actually taking possession constitutes "a sham" and does not satisfy the possession requirement. C.S.D. 87-18; C.S.D. 89-108. In these cases, the claimant never actually took legal possession of the exported merchandise despite an agreement to purchase such in the first case and an arrangement to export the merchandise directly to the foreign buyer from the seller's storage facility without first taking possession.
Customs has defined possession for purposes of drawback, in C.S.D. 85-52, which holds that ownership of a commodity is not necessarily possession of that
commodity for purposes of drawback:
Possession... means complete control over the articles or merchandise on premises or locations where the possessor can put the articles or merchandise to any use chosen. It does not mean that by trading commercial paper, e.g., purchase orders or bills of lading, between brokers or others in a commodity while that commodity winds its way across America by train or truck, possession is somehow created. Transactions made in order to create a climate for drawback will not support drawback.
In HQ 225166, dated April 10, 1996 (also addressed in HQ 224103, dated October 19, 1992, and HQ 224541, dated October 14, 1993) (collectively referred to as “Astra decision”), the facts were similar. In that case title and risk of loss passed to both the claimant (Astra) and foreign purchaser as the merchandise passed the ship’s rail in the port of shipment, the bills of lading identified the claimant as the shipper and were given to the claimant upon issuance, and the exporting vessel upon which the merchandise was delivered directly by the seller of the merchandise to the claimant, was chartered by the foreign purchaser.
The documentation in the Astra decision showed that the shipment of the exported merchandise was for the account of the foreign purchaser. On this basis, in HQ 224541, Customs concluded that the claimant acted as an agent for the foreign purchaser, and there was no evidence that the claimant exercised any control over the merchandise apart from directions provided to it by the foreign purchaser. Therefore, Customs concluded that the claimant had not established that it had possession of the exported merchandise prior to its exportation.
In HQ 224103, Customs concluded that under the above facts, where the exporting vessel was chartered by the foreign purchaser, in the absence of documentary evidence such as a sub-charter agreement or a contract setting forth the responsibilities and rights of the claimant and the foreign purchaser between the time the merchandise is loaded on the exporting vessel and the time the vessel departs the U.S., the claimant had not possessed the exported merchandise within the meaning of 19 U.S.C. §1313(j)(2)(C)(ii). The documentation submitted by the claimant showed that the claimant acted as the foreign purchaser’s agent.
The statutory language applied in HQ 225166, was the same as in the instant case. In HQ 225166, Customs concluded that the claimant did not receive any meaningful title or risk of loss of the merchandise, therefore the claimant did not even have ownership of the merchandise while in bailment to the vessel charterer. Based on the evidence and finding that the claimant was acting as an agent of the foreign purchaser, it was clear that the claimant did not have operational control over the merchandise.
Phibro argues that in this case the foreign purchaser acquired no rights of ownership over the merchandise until it received the original bill of lading from Phibro. Phibro has submitted a letter, dated May 19, 1999, from an attorney representing Phibro in admiralty and maritime matters. In that letter, it is implied that unless a party has physical possession of a bill of lading, it cannot exercise dominion over the merchandise, regardless of the terms of sale, the charterer of the ship, or which party insures against the risk of loss. In the Astra decision, the claimant possessed the bill of lading for a period of time, however, because it was an agent of the purchaser, the claimant did not have operational control over the merchandise.
In C-ART, Ltd. V. Hong Kong Islands Line America, S.A., 940 F.2d 530 (9th Cir. 1991), cert. denied, 503 U.S. 1005 (1992), the court affirmed a judgment in favor of the shipper for misdelivery of the merchandise by the carrier. The party that had received the goods bore the risk of loss for the goods, and argued that it also had title, because the merchandise had been shipped under FOB terms. However, the shipper had possession of the original bill of lading. In that case, the holder of the merchandise had not paid for the merchandise, and the court concluded that the bill of lading was controlling and constituted documentary evidence of title to the goods. See id. 940 F.2d at 533. The court cited Allied Chemical International Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476 (2d Cir. 1985), cert. denied, 475 U.S. 1099 (1986), as authority that the bill of lading controls because possession of it entitles the buyer to possession of the goods and conveys title. In Allied Chemical International Corp., the court stated that “possession of the bill entitles him to possession of the goods; it represents the goods and conveys title to them.” 775 F.2d at 481.
Both cases concern the respective rights of the shipper and the carrier. In both cases, the shipper, who sold the goods to its foreign customer, contracted with the carrier to deliver the goods to the holder of the bill of lading. In both cases, the shipper's foreign customer failed to pay for the goods and was in financial difficulties. In both cases, the carrier delivered the goods to the foreign customer without obtaining the respective bill of lading from the customer. The cases hold that, with respect to the shipper and the carrier, the delivery by the carrier of the goods without obtaining the bill of lading results in a miss-delivery and makes the carrier liable to the shipper for damages. The cases do not address the issue whether the shipper or the foreign customer was the exporter. However, the cases do make it clear that possession of the original bill of lading entitles the holder alone to possession of the goods absent a provision to the contrary.
The reliance on the Astra rulings in which the issue was whether Astra was acting as an agent of its affiliated company, AOT, which was the foreign buyer of the exported merchandise, is misplaced since there is no assertion, or evidence, of an agency relationship among the parties here.
The relevant evidence is the contract of sale between Phibro and its supplier, the contract of sale between Phibro and its customer, the bill of lading issued by the carrier to Phibro, the contract between the freight forwarder and Phibro and the signed Shipper's Export Declaration (7525-V). The contract between Phibro and its supplier consists of the supplier's March 6,1996 confirmation, reference no. S030398-96 and Phibro’s confirmation, reference no. T4758701-P, said to have been sent to the supplier on March 1, 1996, of an agreement entered into on February 29, 1996, and an invoice on contract S030398-96 from Phibro's supplier to Phibro dated March 26,1996. The contract between Phibro and its customer consists of a telex from Phibro's customer dated February 29,1996, confirming the sale from Phibro, a Phibro telex copy said to have been sent on February 29,1996, referencing contract T4757401-S, a copy of Phibro's general petrochemicals contract certified by counsel to be the contract used in this transaction, an exchange of correspondence between Phibro and the customer regarding contract changes and the invoice from Phibro to its customer referencing T4757401-S and the carrier's bill of lading on the merchandise. The contract between Phibro and the freight forwarder shows that the bills of lading were sent to Phibro for signature on March 27,1996. The telex from Phibro to its customer states that Phibro sent its customer the documents by Federal Express on April 1,1996, presumably after receiving payment from its customer on the invoice of March 20,1996. The Shipper's Export Declaration shows Phibro as the exporter. The bill of lading copy identifies Phibro as the shipper and Phibro's customer as the consignee. The documents are consistent as to the merchandise and respective terms of sale. The invoiced price from Phibro's supplier to Phibro exceeded Phibro's invoiced price to its customer by about $10,000, presumably, so that Phibro could claim drawback as the exporter and make the transaction profitable.
Phibro was able to structure the delivery terms so that it would assume the risk of loss from its supplier at the same time that Phibro's customer assumed the risk of loss from Phibro. The question is whether this aspect made the contracts a sham. There is nothing in the evidence to indicate that Phibro's customer had any rights against Phibro's supplier. The terms of the contract between Phibro and its customer made Phibro alone responsible to its customer for the quantity and quality of the merchandise. There is nothing in the contracts to indicate that Phibro's supplier had any right to obtain payment from Phibro's customer. There is nothing in the documentary evidence that indicates that the bill of lading was not required to obtain delivery of the merchandise from the carrier under the legal principles set forth in the court decisions. The contract with its supplier entitled Phibro to receive that merchandise before exportation.
HOLDING:
The imported and substituted MTBE is commercially interchangeable for purposes of 19 U.S.C. §1313(j)(2), provided the contractual specifications for the import and export are within the same industry practice standard (and the actual merchandise meets the required specification) under the governmental and recognized industry standards criterion, and the other criteria do not preclude a finding of commercial interchangeability. In this case the MTBE imported in 1994 is not commercially interchangeable with the substituted MTBE, and the MTBE imported in 1995 is commercially interchangeable with the substituted MTBE.
The drawback claimant has satisfied the possession requirement of 19 U.S.C. §1313(j)(2).
You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, 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,
Myles B. Harmon
Acting Director
Commercial Rulings Division