DRA-4-RR:CR:DR 229907 IOR
Diane Martinez
Danzas AEI Drawback Services
1718 Fry Road
Suite 240
Houston, TX 77084
RE: Commercial interchangeability; 19 U.S.C. 1313(j)(2); polyisobutylene
Dear Ms. Martinez:
The following is in response to your request dated March 25, 2003, for a ruling on the commercial interchangeability under 19 U.S.C. §1313(j)(2) of imported and domestic polyisobutylene, on behalf of Chevron Oronite Company LLC (“Chevron”).
FACTS:
Chevron has provided documentation pertaining to the imported and domestic polyisobutylene.
IMPORTED MERCHANDISE
There is one CF 7501 containing five line items of polyisobutylene. There is one separate invoice for each line item of polyisobutylene. The German supplier of the merchandise is the same with respect to each of the line items. There are certificates of analysis accompanying three of the five invoices. The analyses were performed in The Netherlands. The value and quantity of merchandise on the CF 7501 is consistent with the invoices, however, there is an inconsistency of the name of the importing vessel. According to the CF 7501 the merchandise was imported on the MSC ACAPULCO, while the invoices and certificates of analyses refer to shipment from Antwerp on the MSC SABRINA.
On the CF 7501 the merchandise is described as “polyisobutylene, other” under subheading 3902.20.5000, Harmonized Tariff Schedule of the United States (HTSUS). On the invoices the merchandise is referred to as “Article-No.: 50076968 (PN 2038481)8400734 GLISSOPAL 2300 RM50470”. On the certificates of analysis the merchandise is described as “Product 203848 (08051400) GLISSOPAL 2300 RM50470”. The certificates of analyses include the specifications for the merchandise, as well as the test results, as follows:
Parameter
Specification
Invoice 1
Invoice 2
Invoice 3
Invoice 4
Invoice 5
Molecular weight
2100-2500
2340
2340
-
2332
-
Kin. Viscosity
1400-1800
1604
1604
-
1572
-
Flash Point
> 190
248
248
-
238
-
Vinylidene
> 70.0%
78.4
78.4
-
77.0
-
Appear-ance
Clear, bright
Clear, bright
-
Clear, bright
-
The entry is dated November 6, 1998. All of the invoices are dated October 5, 1998, and the certificates of analyses are dated October 6, 1998. The value of the imported merchandise can be determined from the entered value and the quantity entered.
The importer of record on the CF 7501 is Chevron Chemical Co., Inc, and on the invoices, the purchaser of the merchandise is identified as Chevron Chemical Company. The total quantity imported is 96,240 kg.
EXPORTED DOMESTIC MERCHANDISE
Documentation has been provided with regard to one export sale of the domestic merchandise. The commercial invoice indicates the merchandise has been sold by Chevron to Chevron Oronite PTE, LTD in Singapore. The invoice date is March 9, 2001. The total quantity sold is 599,546 kg. The merchandise sold is described as “RM50470 2300MW PIB NOXIOUS LIQUID, N.O.S.” The customer order number is SPPC670. There is a bill of lading which appears to have an original signature. Chevron is identified as the shipper, and the merchandise is described to be “clean on board” on March 2, 2001, on the STOLT AQUAMARINE. The merchandise is described as “POLY (4+) ISOBUTYLENE RM50470 2300MW PIB”, and the quantity is 599,546 kg.. The destination of the merchandise is Singapore.
There is a Formula Specification Report, and a certificate of analysis. The certificate of analysis is dated March 16, 2001, and the quantity is stated to be 600 MT, but the shipping date is identified as March 6, 2001, the vessel is identified as the STOLT AQUAMARINE, and the customer order number is the same as on the invoice. The product is described as “RM50470 2300MW PIB”. The specifications and results from the Formula Specification Report and the certificate of analysis are as follows:
Parameter
Specification
Export
Vinylidene double bonds
75% min
86
Density
.9068
Molecular weight
2100 – 2500
Flash COC
190 min
266
Viscosity
1400 – 1800
1,507
The value of the exported merchandise can be determined from the invoice. The value of the imported merchandise was 8% greater than the value of the exported merchandise.
According to your submission, the exported polyisobutylene is classified under subheading 3902.20.5000, HTSUS.
***
In your submission you state that “Chevron will be both the importer and export[sic] of record”, and “[t]he specifications of the imported and substituted merchandise will be identical”. The submission refers to the polyisobutylene as “RM 50470”. It is apparent from the import and export documents that the importer and exporter are not the same party. If Chevron is the successor to Chevron Chemical Company, as represented by you upon further discussion, the relationship would have to be clearly established before any drawback would be allowed.
According to the Office of Laboratories and Scientific Services (OLSS), there are no industry, government or military standards for the polyisobutylene. OLSS has advised that the specifications provided in the import and export documentation can be used to establish commercial interchangeability. The critical property of the polyisobutylene was determined by OLSS to be the number of repeating units of the isobutylene. The vinylidine and molecular weight of the polyisobutylene are both indicators of the number of repeating units of the isobutylene. Although the molecular weight is not provided in the certificate of analysis of the exported merchandise, because the specifications for it are the same for both the import and export, and the vinylidene specification is met for the exported merchandise, according to OLSS, it can be concluded that the molecular weight of the export and therefore the number of repeating units of isobutylene would meet the same specifications as the import.
The specifications for the import and export are not identical with respect to the vinylidene parameter. The import specifications require a minimum of 70% and the export specifications require a minimum of 75%. In this case, because both the imported and exported polyisobutylene contain over 75% of vinylidine, the specifications provided are sufficient for a commercial interchangeability decision. However, according to OLSS, any polyisobutylene having vinylidene below 75% could not be found to meet the specifications of the exported merchandise.
ISSUE:
Whether the imported polyisobutylene and substituted polyisobutylene 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, substitution unused merchandise 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 be either 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 statute did not define commercially interchangeable.
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. 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 (19 C.F.R. §191.2(l)), prior to their amendment on March 5, 1998. 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. In addition, the Senate Report states that Customs “should evaluate the critical properties of the substituted merchandise, rather than basing its determination on subjective standards.” Senate Report, at page 83.
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.
In order to determine whether the polyisobutylene is commercially interchangeable, an analysis of the following factors must be done:
1. Governmental and Recognized Industry Standards
It has been concluded that there are no industry, government or military standards for the polyisobutylene. OLSS has advised that although different on the vinylidene parameter, the specifications submitted are sufficient to make a determination on commercial interchangeability. In this case, the three line items of imported merchandise which have certificates of analyses, and the exported merchandise all meet the specifications for the exported merchandise, which are the strictest regarding vinylidene.
In this specific case, we conclude that the certificates of analyses for the three specific line items of the imported polyisobutylene and the domestic polyisobutylene support a finding that the merchandise is commercially interchangeable, because that imported and exported merchandise meets the narrower export specifications. Merchandise not meeting those specifications, or for which the specifications are not known are precluded from meeting this criterion of commercial interchangeability.
2. Tariff Classification
According to your submission, and the CF 7501 for the imported merchandise, both the imported and substituted domestic polyisobutylene is classified in subheading 3902.20.5000, HTSUS. As both the imported and domestic polyisobutylene is classified under the same HTSUS subheading, a finding of commercial interchangeability is supported by this criterion.
3. Part Numbers
According to the documentation submitted, the material number RM 50470 is used with respect to both the imported merchandise and substituted merchandise. We find that because this material number was used with respect to both the imported and substituted polyisobutylene, there is evidence that the polyisobutylene is bought and sold pursuant to this material number. We note that other descriptive terms are not used entirely consistently in all of the documents. For example the imported merchandise is described as “Product 203848 (08051400) GLISSOPAL 2300 RM50470”, and the substituted merchandise is described as “RM50470 2300MW PIB NOXIOUS LIQUID, N.O.S.” Because the specifications are met, as described supra, and the term RM50470 is used in all of the documents, we do not find that the variation in other descriptive terms precludes a finding of commercial interchangeability under this criterion, and in fact the consistent use of the term RM 50470 supports a finding of commercial interchangeability under this criterion.
4. Relative Values
The evidence submitted shows that the value for the imported polyisobutylene is 8% greater than the value of the exported polyisobutylene. This criterion supports a finding of commercial interchangeability, as the difference in relative value is at an acceptable range.
Because we find that the governmental and recognized industry standards criterion, the tariff classification criterion, the part number criterion, and the relative value criterion are met, the imported merchandise for which certificates of analyses were provided and the substituted exported polyisobutylene are commercially interchangeable. Because the critical property of the polyisobutylene is the number of repeating units of isobutylene, and that cannot be determined without an analysis of the merchandise, we find that failure to meet the governmental and recognized industry standards criterion precludes a finding that the merchandise for which no analysis was presented, is commercially interchangeable.
Although they do not have a bearing on this decision on commercial interchangeability, we do make some observations regarding the submission. This decision does not address whether Chevron is entitled to claim drawback as it has not been established that Chevron was either the importer of the merchandise or received a certificate of delivery with respect to the imported merchandise or commercially interchangeable merchandise. Although the name of the importing vessel is inconsistent with the vessel identified on the other import documents, because the dates, values and quantities of merchandise are otherwise consistent, the evidence indicates that the merchandise on the CF 7501 is the same as the merchandise described in the other import documents. We also note that the quantity of the exported merchandise is significantly greater than the quantity of the imported merchandise. Drawback is limited to the quantity of the designated imported merchandise. Finally, we also note that although your submission represented that the specifications for the imported and substituted merchandise are “identical”, they in fact are not, and the specifications in any drawback transactions would have to be reviewed on a case by case basis.
HOLDING:
The imported polyisobutylene and substituted polyisobutylene are commercially interchangeable for purposes of 19 U.S.C. §1313(j)(2), but limited to the facts presented where both the imported and substituted merchandise meet the stricter export specifications.
Sincerely,
Myles Harmon
Director
Commercial Rulings Division