DRA-4-R:C:E 225601 PH
Regional Director
Commercial Operations
New Orleans, Louisiana 70130
RE: Protest 2002 93 101543; Substitution Unused Merchandise Drawback; Commercial Interchangeability of Crude Degummed Soybean Oil; 19 U.S.C. 1313(j)(2)
Dear Sir:
The above-referenced protest was forwarded to this office for further review. Our decision follows.
FACTS:
The protest is of the demand on surety for the payment of liquidated duties (drawback). The merchandise involved in this case is crude degummed soybean oil (CDSBO). The drawback entry (or claim) which is the subject of this protest was one of two drawback claims initially filed at the same time and claiming exports shipped on the same vessel and imports arriving on the same vessel (two claims were filed because the total amount of drawback claimed exceeded $1,000,000 and Customs procedures for processing drawback did not permit (at the time in question) a drawback claim for that amount). The two drawback claims are dated (by the claimant) August 15, 1989 (according to Customs records, the date of filing of the protested claim was February 5, 1990, and the date of filing of the related claim was August 15, 1989). In the file, there are copies of Customs Bonds for each claim (Activity Code 1a, drawback payment refunds, under section 113.65, Customs Regulations) with the claimant as principal and the protestant as surety, executed on September 12, 1989, stated to secure the protested claim and the related claim, respectively limiting liability to $181,705.10 and $990,000.
As stated above, because of the monetary limits for drawback claims, two claims were filed. The imports and exports (or quantities thereof) used for each claim were not separately attributed (by the claimant) for each claim. That is, the final designation by the claimant consisted of all imports and the total quantity of exports for both claims, without attribution for each claim. Therefore, in order to analyze the protested claim, we are reviewing both claims. That is, since imports and exports were not attributed for the protested claim, we must first establish which imports and exports have already been "used" in regard to drawback, before we can evaluate the protested claim.
The merchandise claimed as the exportations for the two claims was, according to the file, CDSBO exported August 31, 1989, on the TEAM HADA with an ultimate destination of Pakistan. The quantity of CDSBO exported on the TEAM HADA according to documents in the file (commercial invoice, bill of lading, and Shipper's Export Declaration (S.E.D.)) was 60,178,468 pounds (27,296.774 metric tons (MT)). The Customs Form 7511 (Notice of Exportation of Articles with Benefit of Drawback) for these claims is for 34,981,492 pounds (15,867.501 MT), valued at $7,176,553, classifiable under commodity code 1507.10.0000, (the S.E.D. lists the same commodity code). The value stated in the S.E.D. was $12,344,235 for the 60,178,468 pounds. The value stated in the commercial invoice for the 60,178,468 pounds was $13,095,627.32 ($479.75 per MT or $.2176132 per pound), less certain costs resulting in a net amount due the protestant of $13,080,428.93). The commercial invoice provides for strict conformance to "NSPA Rule 103-3A."
According to a notation on the claims, a sample of the exported merchandise was taken on September 22, 1989. There are Customs Laboratory Reports for this merchandise, referring to the protested claim and the related claim, stating that "[t]he sample, [a] yellow oil, has the characteristics of [CDSBO] as defined in rule 103 of the NSPA Handbook". Specifications are given as follows:
Moisture & Volatile Matter 0.08%
Insoluble Impurities 0.01%
Unsaponifiable Matter 0.39% [0.38%]
Free Fatty Acids (Oleic) 0.52% [0.50%]
Flash Point Greater than 250 F
Phosphorous 0.006% [0.007%]
Qualitative Test for Fish Oil Negative
The initial designation of imported merchandise for these claims was modified (the modification was within 3 years of the date of exportation). The merchandise last designated for both claims consisted of a total of 19,937 MT (43,954,059 pounds) imported from Argentina on the IVER HAWK. 9,937 MT (21,908,059 pounds) of the CDSBO were imported by the claimant on July 27, 1988 (with a total of 11 consumption entries), at Newark, New Jersey. The liquidated duty, according to Customs records, for the New Jersey entries was $728,909.35, and the total value, according to the consumption entries, was $3,239,602 ($.1478726 per pound). 10,000 MT (22,046,000 pounds) of the CDSBO were imported by the claimant (the claimant was the ultimate consignee and the importer of record was the protestant's broker) on August 2, 1988 (with a single consumption entry), at Belle Chasse, Louisiana. Copies of contracts of sale appearing to cover the imported merchandise and other merchandise provide for the specifications for the CDSBO to be "[a]s per N.S.P.A. Rule 103-3A". The liquidated duty, according to Customs records, for the Louisiana entry was $733,500, and the value, according to the consumption entry, was $3,260,000 ($.1478726 per pound). According to the consumption entries involved, the merchandise was classified as "soybean oil" under item 176.5200, Tariff Schedules of the United States (TSUS).
According to the consumption entry for the Louisiana importation, 3,000 MT were unloaded at Delta Commodities, Inc., in Harvey, Louisiana, and 7,000 MT were unloaded at GATX in Goodhope, Louisiana. According to records in the file (inventory records and Plant Operating Order of Delta Commodities), 3,000 MT (6,556,285 pounds) were received from the IVER HAWK in tank no. 250-2 of Delta Commodities in Harvey, Louisiana, on August 5, 1988, and the claimant was the "customer". According to a Customer Transaction Register issued by GATX Terminals in Norco, Louisiana, on August 8, 1988, 3,145,911 pounds of crude soybean oil were received from the IVER HAWK into tank 56, 4,850,344 pounds were received from the IVER HAWK into tank 78, and 7,299,067 pounds were received from the IVER HAWK into tank 82.
There is a Report of Analysis dated July 30, 1988, prepared by a private laboratory for a composite sample of CDSBO drawn from tanks 2C, 4C, 5C, 6C, 1P1S of the IVER HAWK in Newark. The specifications listed in this Report of Analysis are:
Color (AOS 1" Col.) 50 Yellow - 1.0 Red
Free Fatty Acid (Oleic) 0.36%
Loss on Drying (M&V) 0.13%
Insoluble Impurities 0.02%
Lecithine as Phosphourus Less than 0.02%
Sediment (Gardner Break) 0.08%
Flash Point Above 250 F
There are Reports of Analysis stated to be for the Louisiana importations (described below).
These and similar drawback claims were the subject of an audit by Customs regional audit office, as well as rulings by this office (see ruling 222500, July 16, 1990, holding that the possession requirements under the then applicable drawback law were met in similar claims, and ruling 223136, August 15, 1991, denying the protest of the denial of drawback in similar claims). Also, Customs regional laboratory reviewed the imported merchandise and the exports for fungibility, under the then applicable drawback law.
The audit report (No. 511-91-DRO-001) reviewed the background to this matter. In regard to the protested claim and the related claim, the audit report states that "our review revealed that the documentation submitted was insufficient to fully support each claim." (Page 9 of Audit Report) According to the audit report, the CDSBO entered in New Jersey "was tested [referring to the above-referenced Certificate of Analysis] and was found to be within the specifications of NSPA Rule 103.3A. Documentation was obtained at [the claimant's office] to support the importation of the oil at Newark." (Page 9 of Audit Report) In regard to the Louisiana entry it was stated:
... [W]e can only verify that 9,538,703 pounds were tested in Louisiana at the time of importation. This amount includes the 6,556,285 pounds which were tested on ... August 5, 1988, and the 2,982,418 pounds which were tested on August 6, 1988. The other certificates of analysis for the remaining 12,507,296 pounds indicate the date of testing to be several days to several months after the oil was unloaded.
The problem associated with the above claims is the timing of the testing. Headquarters Ruling 223136 states that the sampling of the imported merchandise must occur at the time the vessel enters the U.S. port. Therefore, only the 21,908,059 pounds tested at New Jersey and the 9,538,703 pounds tested in Louisiana, a total of 31,446,762 pounds, would qualify for drawback. [Page 10 of Audit Report; emphasis in original]
The Certificate of Analysis for the 6,556,285 pounds stated to have been tested on August 5, 1988 (see above) is not in the file. Based on the conclusion that this lot of CDSBO would qualify for drawback under the then applicable drawback law, we assume that the specifications reported for that lot of CDSBO established fungibility with the exported merchandise (see above). The Certificates of Analysis (there are Certificates of Survey & Weight associated with, and consistent with, each Certificate of Analysis) stated to be for the remaining CDSBO imported on the Louisiana entry are described below.
Certificate of Analysis dated August 6, 1988 (sample representing 2,982,418 pounds of CDSBO from storage tank no. 82 into barge CHEM-208 at GATX) (note that this lot of CDSBO was found to qualify for drawback (see above)):
Unsaponifiable Matter 0.63%
FFA, as Oleic 0.38%
M&V Matter and Insol. Impur. 0.10%
Flash Point Above 250 F
Phosphorus 0.014%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated August 17, 1988 (sample representing 2,490,400 pounds of CDSBO from storage tank no. 82 into barge CHEM-72 at GATX):
Unsaponifiable Matter 0.64%
FFA, as Oleic 0.39%
M&V Matter and Insol. Impur. 0.07%
Flash Point Above 250 F
Phosphorus 0.015%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis indicated to have been typed "8/24/88" but undated (the Survey & Weight Certificate is consistent with sampling on August 23, 1988) (sample representing 2,697,530 pounds of CDSBO from storage tank no. 78 into barge WEB-160 at GATX):
Unsaponifiable Matter 0.63%
FFA, as Oleic 0.36%
M&V Matter and Insol. Impur. 0.10%
Flash Point Above 250 F
Phosphorus 0.010%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated August 30, 1988 (sample representing 2,948,048 pounds of CDSBO from storage tanks 78 and 82 into barge CHEM-231 at GATX):
Unsaponifiable Matter 0.63%
FFA, as Oleic 0.38%
M&V Matter and Insol. Impur. 0.11%
Flash Point Above 250 F
Phosphorus 0.013%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated October 10, 1988 (sample representing 2,898,139 pounds of CDSBO from storage tank no. 82 into barge CHEM-232 at GATX):
Unsaponifiable Matter 0.64%
FFA, as Oleic 0.41%
M&V Matter and Insol. Impur. 0.12%
Flash Point Above 250 F
Phosphorus 0.013%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated October 19, 1988 (sample representing 1,276,427 pounds of CDSBO from storage tank no. 82 into barge CHEM-87 at GATX):
Unsaponifiable Matter 0.63%
FFA, as Oleic 0.41%
M&V Matter and Insol. Impur. 0.10%
Flash Point Above 250 F
Phosphorus 0.013%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated October 20, 1988 (sample representing 1,523,506 pounds of CDSBO from storage tank no. 250-2 into barge CHEM-87 at Delta Commodities):
Unsaponifiable Matter 0.65%
FFA, as Oleic 0.42%
M&V Matter and Insol. Impur. 0.12%
Flash Point Above 250 F
Phosphorus 0.012%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
Certificate of Analysis dated October 27, 1988 (sample representing 3,075,674 pounds of CDSBO from storage tank no. 250-2 into barge CHEM-232 at Delta Commodities):
Unsaponifiable Matter 0.66%
FFA, as Oleic 0.56%
M&V Matter and Insol. Impur. 0.07%
Flash Point Above 250 F
Phosphorus 0.017%
Fish Oil & Marine Animal Oils Negative
The Certificate concluded that "[t]his oil does meet NSPA rule 103, section 3-A".
On April 16, 1993, the protested claim and the related claim were liquidated, with drawback allowed in the respective amounts of $45,823.93 ($181,705 had been claimed and accelerated payment in that amount was made to the claimant on November 16, 1990) and $989,998.42 ($990,000 had been claimed and accelerated payment in the amount of $900,000 had been made to the claimant on November 16, 1990).
According to a July 27, 1994, memorandum from the Regional Director, Commercial Operations, in your region, that office had received notice of bankruptcy proceedings against the drawback claimant in the United States Bankruptcy Court for the Southern District of Florida (Case No. 91-30688 BKC RAM). Because of the bankruptcy proceedings involving the drawback claimant in this matter, the advice of the National Finance Center was sought. After receiving this advice, the bill for the protested claim (in the amount of $135,881.07, representing the overpayment of accelerated payment) was issued to the claimant. In the related claim, issuance and/or payment of the check for $89,998.42 (representing the underpayment of accelerated payment) was requested and stopped.
Formal demand on the surety for payment of the principal amount of $135,881.07 with reference to the protested claim was made on July 2, 1993, according to the file. The demand stated the name and address of the principal, the bill number, the bill date, the billing location, the bond number, the document date, the entry (claim) number, the amount due, the importer number, and has a notation indicating that the principal was involved in bankruptcy proceedings. On September 27, 1993, the surety filed the protest under consideration. The claim was identified and the date of liquidation and the demand date were given, but no statement as to the nature of the protestant's objection and the reasons therefore was made.
According to documents in the file, the protestant requested that Customs delay action in the matter while it sought documents under the Freedom of Information Act (FOIA). According to a February 23, 1994, letter from your region, at the time of that letter the FOIA request "[had] been responded to". In the February 23, 1994, letter, it was requested that the protestant submit evidence to support the protest as soon as possible, but no later than April 5, 1994. As requested by the protestant, a further delay was granted until May 12, 1994. On May 10, 1994, the surety-protestant filed a "[s]upplement" to the initial protest.
In the May 10, 1994, "supplement", the protestant specifically protested:
1. the denial of drawback on all exported merchandise as claimed at the time of exportation;
2. the denial of drawback on 12,507,296 pounds of CDSBO on the grounds of fungibility because the testing of such products was several days to several months after unloading of the imported merchandise; and
3. the "overbilling of drawback refund in the amount of $89,989.65."
In regard to the last issue above, the protestant submitted that "Customs did not take into account the offset of $89,989.65 which it had already applied to the two transactions involving the same merchandise ... [and] [a]ccordingly, surety has been overbilled in the amount of $89,989.65."
In the "Discussion and Argument" section of the "supplemental" protest, the protestant argued that the commercial interchangeability standard for substitution under subsection 1313(j)(2) of the drawback law should be applied to the protested claim instead of the fungibility standard, on the basis of amendments to the drawback law effected by section 632, NAFTA Implementation Act.
In both the initial protest and the supplement, the protestant certified "that surety is filing [the] protest on its own behalf, and is not collusively filing to extend any other authorized person's time to protest."
Further review of the protest was requested (in the initial protest) and granted. On October 13, 1994, this office wrote to the protestant to confirm an October 12, 1994, telephone conversation between the protestant's representative and the case-handler in this office that action on the protest would be suspended pending the protestant's attempt to obtain "evidence as to what happened to the [imported designated] merchandise under consideration between the time of importation and the time that the samples were taken." On December 5, 1994, the protestant submitted evidence related to the transactions involving some of the imported merchandise after importation (the description of the facts in this ruling takes into consideration this evidence). By letter of May 11, 1995, this office advised the protestant that we were willing to suspend action on the protest for an additional 30 days (from May 11, 1995) and that after that time, the protest would be processed on the basis of the information then available.
ISSUE:
Is there authority to grant the protest against the demand on the surety for return of the accelerated payment of drawback in this case?
LAW AND ANALYSIS:
In regard to general protest procedures, because of our decision on the substance of this matter, we are not addressing in depth the timeliness of the "supplemental" protest and the sufficiency of the initial protest. However, we note that the initial protest, which was timely filed (within 90 days of the demand on the surety) did no more than identify the entry (claim) protested, the date of the entry, the date of liquidation, and the demand date and make the non-collusion statement required by the statute for a surety protest. In view of the requirement in the protest statute (19 U.S.C. 1514) that "[a] protest must set forth distinctly and specifically ... each decision described in [19 U.S.C. 1514(a)] as to which protest is made ... [and] the nature of each objection and the reasons therefor ....", the initial protest does not appear to be sufficient. See, in regard to the foregoing, Mattel, Inc. v. United States, 72 Cust. Ct. 257, 262, C.D. 4547, 377 F. Supp. 955 (1974), in which the Court summarized prior Court decisions on this issue as follows: "In short, the court, taking a liberal posture, has held that however cryptic, inartistic, or poorly drawn a communication may be, it is sufficient as a protest for purposes of section 514 if it conveys enough information to apprise knowledgeable officials of the importer's intent and the relief sought". It is difficult to see how the initial protest met even this standard.
As to the "supplemental" protest, we note that under section 1514, "[n]ew grounds in support of objections raised by a valid protest or amendment thereto may be presented for consideration in connection with the review of such protest ... at any time prior to the disposition of the protest ...." Also under section 1514, a protest may be amended only "prior to the expiration of the time in which such protest could have been filed under [section 1514]." Thus, the "supplemental" protest was not timely as an amendment of the initial protest (i.e., it was filed more than 90 days after the demand on the surety) and, accordingly, it could only be considered if it raises new grounds in support of objections raised by a valid protest or amendment. As stated above, the validity of the initial protest is doubtful.
Even the most generous (to the protestant) interpretation of the initial protest would treat the importer's intent and relief sought as limited to the denial of drawback in the identified drawback claim (i.e., because the entry identified in the protest was a drawback claim) (see, e.g., Washington International Insurance Co. v. United States, 16 CIT 600 (1992)). Nowhere in the initial protest is any reference made to "overbilling" or "offset" in a different, unidentified (in the protest) drawback claim. Therefore, it is clear that the "supplemental" protest was untimely as to that issue (as to possible arguments that Customs officials "tolled" the 90-day period for filing a protest, see Old Republic Insurance Co. v. United States, 10 CIT 1, 4, 625 F. Supp. 983 (1986); see also United States v. Reliable Chemical Co., 66 CCPA 123, 128, C.A.D. 1232, 605 F. 2d 1179 (1979), "[s]ince the provisions of that section [referring to a subsection of section 1514] are jurisdictional ..., they cannot be waived by the Customs Service"). Furthermore, even if the "supplemental" protest had been timely in this regard, we doubt that "overbilling" or "offset[ting]" alleged to occur in regard to a drawback claim which is not protested is a protestable issue under 19 U.S.C. 1514 (see, e.g., ITT Semiconductors v. United States, 6 CIT 231, 576 F. Supp. 641 (1983), and cases cited therein). The protest is DENIED in regard to the alleged "overbilling" or "offset".
As indicated above, although there are serious procedural problems with this protest (and the allegation regarding "overbilling" or "offset" in the "supplemental" protest was clearly untimely and, in any case, has not been established to be a protestable issue), we are addressing the substance of issues related to drawback raised in the "supplement[ed]" protest as though the "supplemental" protest was effective to present "[n]ew grounds in support of objections raised by a valid protest".
Generally, 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 3 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 drawback law was substantively amended by section 632, title VI - Customs Modernization, Public Law 103-182, the North American Free Trade Agreement Implementation 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). Except for 19 U.S.C. 1313(p), according to the applicable legislative history, these 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, d Cong., 2d Sass., section 232(b)).
Compliance with the Customs Regulations on drawback is mandatory and a condition of the payment of drawback (Chrysler Motors Corp. v. United States, 14 CIT 807, 816, 755 F. Supp. 388 (aff'd, 945 F.2d 1187 (Fed. Cir. 1991)), in which the Court stated: "The Supreme Court held in Swan & Finch Co. v. United States, 190 U.S. 143, 146 (1903) that the right to drawback is a privilege granted by the government and any doubt as to the construction of the statute must be resolved in favor of the government. ... Over the years, the courts have held that the allowance of drawback is a privilege and compliance with the regulations is a prerequisite to securing it where the regulations are authorized and reasonable"; see also, United States v. Hardesty Co., Inc., 36 CCPA 47, C.A.D. 396 (1949); Lansing Co., Inc. v. United States, 77 Cust. Ct. 92, C.D. 4675 (1976); Guess? Inc. v. United States, 9 Fed. Cir. (T) 111, 115, 944 F.2d 855 (1991) "[w]e are not dealing here with a question of whether a party has satisfied a commercial contract ... [w]e are dealing instead with an exemption from duty, a statutory privilege due only when the enumerated conditions are met" (emphasis added)).
The decisive issue in this case is whether the exported merchandise was commercially interchangeable with the imported merchandise. Before its amendment by Public Law 103-182, the standard for substitution under section 1313(j)(2) was fungibility. House Report 103-361, supra, contains language explaining the change from fungibility to commercial interchangeability. According to the Report (at page 131), the standard was intended to be made less restrictive (i.e., "the Committee intends to permit the 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 (19 CFR 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 industrial standards, part numbers, tariff classification, and relative values.
Before enactment of the above-described changes to 19 U.S.C. 1313(j)(2) by Public Law 103-182, we ruled on the criteria to be used in determining whether imported CDSBO and exported CDSBO were fungible, for purposes of the then existing requirement for fungibility in that statute. In Customs Service Decision (C.S.D) 87-6 we held that:
Two shipments of [CDSBO], which meet the standard specifications of the National Soybean Processors Association [NSPA] (Rule 103, 3A) for [CDSBO], and which are not subject to contract adjustments for deviations in the specifications or subject to additional specifications, are fungible for substitution same condition drawback.
The standard specifications of the NSPA in rule 103, 3A were:
Unsaponifiable Matter 1.5% max.
Free Fatty Acids, as Oleic 0.75% max.
Moisture and Volatile Matter and
Insoluble Impurities 0.3% max.
Flash Point 250 F min.
Phosphorus 0.02% max.
Qualitative Test for Fish Oil and
Marine Animal Oils Negative
Discounts for deviations from the above specifications for free fatty acids and phosphorus were provided in Rule 103, 3A (the discounts provided for are not set out in this ruling because they are inapplicable to any of the merchandise under consideration).
According to ruling 223136 related to similar claims and cited by the protestant:
The NSPA is recognized by traders and users throughout the world. The NSPA rules for soybean oil are the most widely used rules in domestic and international trade under which soybean oil is traded. It thereby, represents the industry's treatment of the merchandise as commercially identical and fungible.
The documents in this file are consistent with this conclusion (see commercial invoice for exported merchandise and contracts for sale of the imported merchandise and other CDSBO, described above).
In this case, there were 3,534,730 pounds of exports meeting the standard specifications of the NSPA (Rule 103, 3A), without discount for deviations (i.e., after deducting the 21,908,059 pounds for which the New Jersey importation was designated and the 9,538,703 pounds which were found to be fungible from the Louisiana entries, there remained 3,534,730 of the 34,981,492 pounds claimed in the TEAM HADA export of 60,178,468 pounds). (In regard to the parenthetical calculation, we note that there are 2,204.62 pounds in a metric ton, so that the calculations in the last designation of the claimant (in which 19,937 MT were equated to 43,954,059 pounds on the import side and 15,867.501 MT were equated with 35,216,648 pounds on the export side) was incorrect.)
The designated imported merchandise for which the above-described exports would be substituted must be from the 7,000 MT (15,432,340 pounds) unloaded from the IVER HAWK at GATX in Goodhope, Louisiana, on August 8, 1988. This is so because drawback has already been granted on the 21,908,059 pounds of imported merchandise designated in the New Jersey importation and the 3,000 MT (6,556,285 pounds) of merchandise unloaded at Delta Commodities in Harvey, Louisiana, on August 5, 1988 (in regard to the latter, we note that the Certificate of Analysis for 6,556,285 pounds found in the Audit Report to establish fungibility was for a test performed on August 5, 1988, before the 7,000 MT were unloaded at GATX on August 8, 1988).
Of the 7,000 MT (15,432,340 pounds) unloaded from the IVER HAWK at GATX, drawback has already been granted on the 2,982,418 pounds from storage tank no. 82, on the basis of the August 6, 1988, Certificate of Analysis. Parenthetically, we note that, based on the records in the file, drawback should not have been granted on this basis because the sampled merchandise could not possibly have been the imported merchandise (i.e., the merchandise unloaded from the IVER HAWK at GATX was unloaded on August 8, 1988 (including the 7,299,067 pounds unloaded into tank 82) but the Certificate of Analysis, representing merchandise delivered from that tank, is dated August 6, 1988, before the merchandise was even delivered into tank 82 from the IVER HAWK). The remaining drawback (i.e., 15,432,340 pounds minus 2,982,418, resulting in 12,449,992 pounds) was claimed to be fungible with the exported merchandise on the basis of the Certificates of Analysis described in the FACTS portion of this ruling.
The specifications in each of the Certificates of Analysis referred to above are within the standard specifications of NSPA Rule 103, 3A. However, what is required for substitution under 19 U.S.C. 1313(j)(2) is that the imported duty-paid merchandise and the exported merchandise must be commercially interchangeable. Therefore, obviously, it is essential that the analysis (as reflected by Certificates of Analysis) be of the imported merchandise. It was on this basis that it was stated in ruling 223136, referred to by the protestant, that "[i]n order to use a certificate of analysis to determine fungibility of the imported merchandise, sampling must occur at the time the vessel enters the port." In a more recent ruling, issued after amendment of the drawback law by section 632 of the NAFTA Implementation Act, we have noted that if commercial interchangeability is based on a sample taken at a time other than the time of importation, there must be documentary evidence establishing that the specifications could not have been affected by the treatment of the merchandise between the time the sample was taken and the time of importation (ruling 224881, March 16, 1994). It was for this reason that the protestant was given the opportunity to obtain and provide such evidence (see this office's October 13, 1994, letter to the protestant, described in the FACTS portion of this ruling).
The evidence available to attempt to trace the 7,000 MT of CDSBO unloaded from the IVER HAWK at GATX to the merchandise sampled is summarized below.
August 8, 1988:
3,145,911 pounds of CDSBO unloaded into tank 56
4,850,344 pounds of CDSBO unloaded into tank 78
7,299,067 pounds of CDSBO unloaded into tank 82
August 17, 1988:
2,490,400 pounds of CDSBO sampled and removed from tank 82 into barge CHEM-72
August 23, 1988:
2,697,530 pounds of CDSBO sampled and removed from tank 78 into barge WEB-160
August 30, 1988:
2,948,048 pounds of CDSBO sampled and removed from tanks 78 and 82 into barge CHEM-231
October 10, 1988:
2,898,139 pounds of CDSBO sampled and removed from tank 82 into barge CHEM-232
October 19, 1988:
1,276,427 pounds of CDSBO sampled and removed from tank 82 into barge CHEM-87
October 20, 1988:
1,523,506 pounds of CDSBO sampled and removed from tank 250-2 (of Delta Commodities) into barge CHEM-87
October 27, 1988:
3,075,674 pounds of CDSBO sampled and removed from tank 250-2 (of Delta Commodities) into barge CHEM-232
Initially, we note that the October 20 and 27 lots of CDSBO consist of merchandise which had already been sampled and upon which drawback has already been paid (i.e., note that this merchandise is CDSBO removed from tank 250-2 and that drawback was granted on the 3,000 MT unloaded from the IVER HAWK at Delta Commodities into tank 250-2 on August 5, 1988). The only evidence purporting to account for the merchandise unloaded from the IVER HAWK into GATX is the Customer Transaction Register, described in the FACTS portion of this ruling. That document states the beginning balance, receipts, deliveries, and balances, as of September 2, 1988, in GATX tanks 56, 78, and 82. However, it does not make clear whether the reported quantities are the only merchandise in the respective tanks (i.e., whether other customers also had merchandise in these tanks). In view of the title of the document "Customer Transaction Register" (emphasis added), the evidence is at least indecisive in this regard and, as the Courts have noted, "[d]etermination of issues in customs litigation may not be based on supposition" (United States v. Lineiro, 37 CCPA 5, 10, C.A.D. 410 (1949)). Furthermore, the reliability of this document is dubious, given that other documents in the file contradict it (i.e., the Customer Transaction Register shows a delivery of 2,982,418 pounds of CDSBO from tank 82 to barge CHEM-208 on August 8, 1988, although, as described above, there are signed Certificates of Analysis and Survey & Weight, prepared by an independent surveying company, showing the delivery of 2,982,418 pounds of CDSBO from tank 82 to barge CHEM-208 on August 6, 1988, and stating the exact time of loading on that date).
Another illustration of the unreliability of this document may be found in comparing the Customer Transaction Register for tank 82 with the other documents in the file for that tank. The Customer Transaction Register for tank 82 shows a beginning balance of 0, receipt on August 8, 1988, of 7,299,067 pounds, deliveries to barges CHEM 208 (2,982,418 pounds on August 8), CHEM 72 (2,490,400 pounds on August 18), and CHEM 231 (1,610,560 pounds on August 30), and a balance of 215,689 pounds. The Certificates of Analysis and Survey and Weight show, in addition to the above, removals from tank 82 to CHEM-232 (2,898,139 pounds on October 10) and CHEM-87 (1,276,427 pounds on October 19). Thus, there is a substantial quantity of CDSBO, some of which is used to claim drawback, unaccounted for (i.e., these records show receipt of 7,299,067 pounds and deliveries of 11,257,944). If accounting for the merchandise in tank 82 were on a first-in, first-out (FIFO) basis (see 19 CFR 191.22(c)), there would not have been sufficient CDSBO in tank 82 when the October 10 and 19 deliveries, upon which drawback was claimed, were made.
Accordingly, we are not satisfied that the protestant has established that the 7,000 MT of CDSBO unloaded from the IVER HAWK on August 8, 1988, at GATX was the merchandise for which Certificates of Analysis were provided. In the case of the October 20 and 27 Certificates of Analysis, the merchandise sampled is merchandise which was already sampled, according to the file, and upon which duty was already paid. In the case of the October 10 and 19 Certificates of Analysis, there is absolutely no evidence tracing the imports into tanks 78 and 82 after September 2, 1988 (the date of the Customer Transaction Register), and the validity and reliability of the evidence tracing the imports from August 8, 1988, until September 2, 1988, is extremely questionable. Even if that evidence were accepted, according to the claimant's records, all but 215,689 pounds of the 4,174,566 pounds delivered and sampled on October 10 and October 19 could not possibly have been from the CDSBO imported on the IVER HAWK and delivered to tank 82. In the case of the August 17, 23, and 30 Certificates of Analysis, the validity and reliability of the evidence tracing the imports from August 8, 1988, until those dates is extremely questionable.
To continue the analysis of the commercial interchangeability of the exported and imported merchandise in this case, as demonstrated above, although the exported merchandise has been established to meet the applicable recognized industrial standards, the imported merchandise has not (i.e., because it cannot be established that the Certificates of Analysis presented are for the imported merchandise). No evidence has been presented to show that part numbers are applicable as a criterion for this merchandise. The tariff classification of the imported merchandise (item 176.5200, TSUS) and that for the substituted exported merchandise (commodity code 1507.10.0000) was the same (see Continuity of Import and Export Trade Statistics After Implementation of the Harmonized Commodity Description and Coding System (USITC Publication 2051, January 1988), Annex I, page 25). The value of the imported merchandise, according to the consumption entries, was $.1478726 per pound and the value of the exported merchandise, according to the commercial invoice, was $.2176132 per pound. Thus, the value of the exported merchandise was 47.2% greater than the value of the imported merchandise.
Accordingly, the criteria listed in the legislative history to section 632 of the NAFTA Implementation Act to be used in determining commercial interchangeability do not support a finding of commercial interchangeability in this case. That is, although the tariff classification of the imported and exported merchandise is the same, the evidence in the file does not establish that the applicable recognized industrial standards are met for the imports and there is a wide disparity in the relative values of the imports and exports. We note that there is persuasive evidence that the merchandise under consideration is traded on the basis of the NSPA standards. In a case such as this, in which there are accepted industry standards and those standards are demonstrated to be used in the trading of the commodity covered by the standards, and there is such a great disparity in the value of the imported and exported merchandise, the standards are of great importance in determining commercial interchangeability. In the absence of evidence establishing that both the exported and the imported merchandise met those standards, we have no choice but to deny drawback. The protest is DENIED in this regard.
HOLDING:
There is no authority to grant the protest against the demand on the surety for return of the accelerated payment of drawback in this case.
The protest is DENIED. 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, with the Customs Form 19, 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 take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division