• HQ H268179
• Oct 11, 2016

• Type : of parts. Part numbers are consistently used by FMC for the purchase, sale, and inventory tracking of merchandise. You state that any FMC part is commercially acceptable to counterparties if the part has the same FMC part number. • HTSUS :
•  Related:   228580; H048135; H122535; H090065; H074002   

DRA-4
OT:RR:CTF:ER
H268179 ABH

Mathew Anderson
Charter Brokerage LLC
22762Westheimer Parkway, Suite 530
Katy, TX 77450

Re: FMC Technologies, Inc.: Request for a determination of commercial interchangeability for substitution unused merchandise drawback, 19 U.S.C. § 1313(j)(2), for oil equipment parts

Dear Mr. Anderson:

This is in response to your letter dated August 18, 2015, on behalf of FMC Technologies, Inc. (hereinafter “FMC”), for a formal ruling on the commercial interchangeability of oil equipment parts, for purposes of substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2).

FACTS:

According to the information provided in your ruling request, FMC is a major manufacturer of oil extraction equipment and technologies in the United States. FMC is engaged in all aspects of the manufacturing, purchase, sale, import, export, marketing, and distribution of oil extraction equipment and technologies. These activities include, but are not limited to, subsea technologies, fluid control equipment, measurement solutions, separation systems, and automation/control solutions. You stated that the designated imported and substituted exported merchandise that is the subject of this ruling request includes parts of FMC’s equipment. FMC intends to import duty-paid parts from various source countries. FMC also intends to import duty-paid parts from various source countries and intends to export domestic substituted parts to customers abroad or to affiliates for use and distribution in foreign markets and to domestic customers who may export. You assert that there are no applicable government or industry standards for the range of FMC’s parts. You indicate that with regard to part number, each one of FMC’s parts is assigned a specific and unique part number. The part number is used to track each part and is typically included as part of the documents supporting imports and exports. For example, the commercial invoice, the export invoice, the packing lists, and FMC’s inventory reports track inventories by part numbers. You state that the integrity of FMC’s part number system is critical to operations and FMC ensures that part numbers are assigned to specific parts and that the part numbers are tracked throughout the system. Part numbers are assigned on a specific basis, for specific part functions, size, shape, or material. You indicate that under no circumstances are the same part numbers assigned to a broad class or category of parts. Part numbers are consistently used by FMC for the purchase, sale, and inventory tracking of merchandise. You state that any FMC part is commercially acceptable to counterparties if the part has the same FMC part number. With regard to classification of FMC’s parts, you state that no part number in FMC’s system is broad enough to encompass more than one 10-digit Harmonized Tariff Schedule of the United States (“HTSUS”) classification. Each FMC part number has a single HTSUS classification number and you indicate that there are no instances where a single part number can have multiple HTSUS classifications. You state that as a result, each import and export will be matched on a part number basis and the underlying import and export classification. With regard to value, you state that the value of imported part numbers and exported part numbers are identical or very similar. The evidence submitted for the imported merchandise consists of a commercial invoice, entry summary, entry/immediate delivery form, a broker instruction letter, and an airway bill. The commercial invoice is numbered Fxxxxx.14 and dated October 2, 2014. The entry summary (Customs and Border Protection (“CBP”) Form 7501) indicates an import date of October 23, 2014, and the broker instructions letter is dated October 24, 2014. Two of the parts are highlighted on the commercial invoice as examples. The first, part number DP-18-3540, is described as a wellhead housing running tool. There are three items of that part number on the invoice and the value of those three add up to the value indicated on the entry summary and broker instructions letter for that part number. There are hand-written notes on the invoice that indicate that part number DP-18-3540 should be classified as 8479.89.9899. That classification is indicated for that part number on the broker instructions letter and on the entry summary (as can be tracked through the value column). The second, part number P114944-0019, is described as a false rotary table tool. There are four items of that part number on the invoice and the value of those four add up to the value indicated on the entry summary and broker instructions for that part number. The hand-written notes on the invoice indicate that part number P114944-0019 should be classified as 7326.90.8588. That classification is indicated for that part number in the broker instructions letter and on the entry summary (as can be tracked through the value column). The airway bill number xxxxxxx8197 references the commercial invoice Fxxxxx.14 and is dated October 17, 2014. The entry/immediate delivery form (CBP Form 3461) is dated October 23, 2014, and references both the entry summary number and the airway bill number. The total value on the entry/immediate delivery form is the total value indicated on the sample commercial invoice provided. The evidence submitted for the exported merchandise consists of an export declaration, a commercial invoice, a packing list, and an Automated Export System (“AES”) detail report. The commercial invoice is identified by number xx16 and dated April 6, 2015. The invoice references the two parts indicated as examples on the import documentation, parts numbered DP-18-3540 and P114944-0019. The same value is indicated for both parts on the commercial invoice as was indicated on the import documentation commercial invoice. The packing list dated April 6, 2015, references the part numbers on commercial invoice xx16. Additionally, AES detail report references the provided house airway bill, xxxxxxx3605, which in-turn references commercial invoice xx16. The AES report indicates that the merchandise was classified as either 8479.89.9899 or 7326.90.8588 – the same classifications used to import the two example parts. ISSUE:

Whether the imported FMC oil equipment parts and the domestically produced oil equipment parts are commercially interchangeable for purposes 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, other merchandise that is commercially interchangeable with the imported merchandise and if the following requirements are met. The other merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Before the exportation or destruction, the other merchandise may not have been used in the United States and must have been in the possession of the drawback claimant. The party claiming drawback must be either, the importer of the imported merchandise or must have received from the party that imported and paid duties on the imported merchandise, a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof.

The CBP regulation, 19 C.F.R. § 191.32(c), further provides that in determining commercial interchangeability:

Customs shall evaluate the critical properties of the substituted merchandise and in that evaluation factors to be considered include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.

The best evidence of whether the above quoted criteria are used in a particular transaction are the claimant’s transaction documents. See e.g., HQ H048135 (March 25, 2009); HQ H122535 (February 9, 2011). Underlying purchase and sales contracts, purchase invoices, purchase orders, and inventory records show whether a claimant has followed a particular recognized industry standard, or a governmental standard, or any combination of the two, and whether a claimant uses part numbers to buy, sell, and inventory the merchandise at issue. Id. The purchase and sale documents also provide the best evidence with which to compare relative values. Id.

In Textport Oil Co. v. United States, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) determined that, “[c]ommercial interchangeability must be determined objectively from the perspective of a hypothetical reasonable competitor; if a reasonable competitor would accept either the imported or the exported good for its primary commercial purpose, then the goods are ‘commercial interchangeable’ according to 19 U.S.C. § 1313(j)(2).” 185 F.3d 1291, 1295 (Fed. Cir. 1999). Thus, the Federal Circuit set forth an “objective standard – analyzed from the perspective of a hypothetical reasonable competitor.” Id. Therefore, we analyze commercial interchangeability pursuant to 19 C.F.R. § 191.32(c), for a hypothetical reasonable competitor.

Government and Recognized Industry Standards One of the factors CBP considers is whether the imported and exported merchandise adhere to government and recognized industry standards. Governmental and recognized industry standards assist in the determination of commercial interchangeability because such standards “establish markers by which the product is commoditized and measured against like products for use in the same manner, regardless of manufacturer . . . products that meet the same industry standard may be used to produce the same products” or used for the same purposes. HQ H090065 (March 23, 2010).

You state that there are no applicable government of industry standards for the range of FMC’s parts. There is no indication that the merchandise is subject to government or industry standards, or is bought or sold in accordance with such standards. Therefore, this criterion is inconclusive for the purposes of a commercial interchangeability determination.

Part Numbers

In evaluating the critical properties of the merchandise, CBP also considers the part numbers of the merchandise. FMC assigns a specific and unique part number to each of the company’s parts. Moreover, part numbers are never assigned to a broad class or category of parts. If the same part numbers or product identifiers are used in import and export documents, it can support finding them to be commercially interchangeable. See e.g., HQ H074002 (December 2, 2009); HQ H122535 (February 9, 2011).

Based on our review of the sample documents provided, part numbers are consistently used for the purchase and sale of the merchandise. The part numbers are used to identify the merchandise on the commercial invoices as well as on broker instructions letters and packing lists. Accordingly, the same part number is used on both import and export documents, which supports the fact that imported and substituted merchandise are identified by part number. Since an imported and substituted part is identified by the same unique part number, we conclude that the part number criterion has been met and supports a finding of commercial interchangeability. Tariff Classification

Another factor CBP considers when determining commercial interchangeability is whether the imported and exported goods are classified under the same subheading of the HTSUS. See e.g., HQ H074002 (December 2, 2009). The sample documents provided by FMC indicate that the HTSUS classification of the imported and substituted oil equipment parts was the same – 8479.89.9899 and 7326.90.8588. For the first sample part, part number DP-18-3540, the import commercial invoice Fxxxxx.14 has a hand-written note indicating the classification should be 8479.89.9899. For the second sample part, part number P114944-0019, the same import commercial invoice Fxxxxx.14 has a hand-written note indicating the classification should be 7326.90.8588. The same classifications are indicated for each corresponding part number on the broker instructions letter referencing commercial invoice Fxxxxx.14. The total value indicated for part number DP-18-3540 and part number P114944-0019 on invoice number Fxxxxx.14 is identical to the total value indicated for each corresponding part on the broker instructions letter. The entry summary referencing the same commercial invoice Fxxxxx.14 also indicates the same classification 8479.89.9899 for the line item 005, which has the same total value for part number DP-18-3540 and the same classification 7326.90.8588 for line item 010, which has the same total value for part number P114944-0019. Accordingly, the commercial documents show that FMC imported part number DP-18-3540 under HTSUS subheading 8479.89.9899 and part number P114944-0019 under HTSUS subheading 7326.90.8588.

With regard to the evidence submitted for the exported merchandise, FMC’s commercial invoice xx16 references the sale of part numbers DP-18-3540 and P114944-0019. The house airway bill, xxxxxxx3605, references commercial invoice xx16. AES detail report references the provided house airway bill, xxxxxxx3605. The AES detail report contemplates only two classification subheadings – 8479.89.9899 and 7326.90.8588. While the AES detail report does not link the exact part number to the particular classification subheading, the sum total of the documentation provided lends support for the conclusion that the imported and substituted merchandise is classified under the same ten digit subheading. Accordingly, this criterion is satisfied.

Value

Goods that are commercially interchangeable generally have similar values when sold at the same place, at the same time, to like buyers from like sellers. See e.g., HQ H090065 (Mar. 23, 2010) (finding a price difference of 4.5 percent to be acceptable). CBP has held that a variance in price does not preclude a finding of commercial interchangeability when there is sufficient evidence to support the material difference in value. See HQ 228580 (August 20, 2002) (holding that a value difference of 27 percent did not preclude a finding of commercial interchangeability when the difference in value is attributable to processing and manufacturing costs).

The sample transactions provided by FMC show that the value of the imported and substituted merchandise is identical. Since there is no difference in value, we find that this criterion is satisfied for purposes of 19 U.S.C. § 1313(j)(2).

HOLDING:

Based upon the findings above, we find that the imported and substituted oil equipment parts are commercially interchangeable for purposes of substitution drawback pursuant to 19 U.S.C. § 1313(j)(2).

The holding set forth above applies only to the specific factual situation and procedures and processes identified in the ruling request. This position is set forth in 19 C.F.R. § 177.9(b)(1), that states that “{e}ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”

Sincerely,

Carrie L. Owens, Chief
Entry Process and Duty Refunds Branch