DRA-4
OT:RR:CTF:ER H071657 ECD


Mr. Steve Johnsen
Director, International Trade & Compliance
Bayer Corporation
100 Bayer Road
Pittsburgh, Pennsylvania 15205-9741

RE: Substitution, unused merchandise drawback: commercial interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R § 191.32(c); monomer 1,6-Hexamethylene diisocyanate (“HDI”), Desmodur H, CAS-No. 822-06-0

Dear Mr. Johnsen:

This is in response to your request, on behalf of Bayer MaterialScience LLC (“BMS”), for a formal ruling on the commercial interchangeability of monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, which Bayer markets and sells as Desmodur H. U.S. Customs and Border Protection (“CBP”) received BASF’s request on August 11, 2009.

FACTS:

According to BMS’s submission, BMS is an importer, exporter, and manufacturer of various polymers, copolymers, monomers, and other organic compounds. BMS has requested a binding ruling on whether monomeric 1,6-Hexamethylene diisocyanate is commercially interchangeable with monomeric 1,6-Hexamethylene diisocyanate. BMS states that it markets monomeric 1,6-Hexamethylene diisocyanate under the trade name “Desmodur H,” and that monomeric 1,6-Hexamethylene diisocyanate has the Chemistry Abstracts Service (“CAS”) Registry Number 822-06-0. According to BMS, monomeric 1,6-Hexamethylene diisocyanate is also known as:

Hexane, 1,6-diisocyanato- (TSCA, DSL, AICS, SWISS, PICCS, ASIA-PAC, NZIoC) Diisocyanate d'hexamethylene (French) (DSL, EINECS) hexamethylene diisocyanate (EINECS, ENCS, ECL, PICCS) Hexamethylendiisocyanat (German) (EINECS, SWISS) diisocianato de hexametileno (Spanish) (EINECS) MODIFIED HEXAMETHYL DIISOCYANATE (PICCS) BLOCKED HEXAMETHYL DIISOCYANATE (PICCS) HEXANE-1,6-DIISOCYANATE (PICCS) {…} 1,6-Diisocyanatohexane 1,6-Hexamethylene diisocyanate 1,6-Hexylene diisocyanate GMDI HDI Hexamethylene diisocyanate (HDI) Hexane 1,6-diisocyanate Hexane, 1,6-diisocyanto- HMDI

See attachment to August 12, 2009, e-mail message from Steve Johnsen. Desmodur H is used to produce aliphatic oligomers and prepolymers for industrial coatings.

In support of its claim of commercial interchangeability, BMS provided several documents and CBP forms as representative import and export transactions of Desmodur H. For the import transaction, BMS provided copies of Customs Form 7501 and CBP Form 3461 for Entry No. UPS-xxxxx11-5, which was entered on March 10, 2008, and contained five line items of merchandise classified under subheading 2929.10.3500, Harmonized Tariff Schedule of the United States (“HTSUS”), ranging from 21,860 kg to 22,700 kg, each. BMS provided a bill of lading for five containers of Desmodur H, which correspond to the container numbers listed on the Customs Form 7501, and five sales invoices whose numbers correspond to the invoice numbers listed on the Customs Form 7501. The invoices are all dated February 15, 2008, and were all certified on February 19, 2008. BMS also provided five purchase orders, dated July 12, 2007, for “material number 00538241,” Desmodur H. All five purchase order numbers appear on both the invoices and bill of lading BMS provided. BMS provided five inspection certificates for “product number 00538241,” Desmodur H, each of which had a number corresponding to one of the purchase orders BMS provided. One of the inspection certificates was dated July 31, 2009, and the other four were dated August 3, 2009.

For a sample export of domestically produced merchandise, BMS provided a purchase order, dated February 3, 2009, for 23,000 kg of “material number 02501868,” Desmodur H. BMS also provided an invoice, which listed the same purchase order number as in the provided purchase order, for 22,810 kg of “item number 02501868,” Desmodur H, “HS Number 2929103500”, and the invoice is dated April 22, 2009. There is included a packing list, dated May 6, 2009, for 22,810 kg of “product number 2501868,” Desmodur H, with reference numbers that match the purchase order and the invoice. The container number listed in the packing list matches the container number listed in the copy of the bill of lading provided. The bill of lading for the export, dated April 28, 2009, contains the same purchase order and customer numbers provided in the other documents, as well as the shipment reference number provided in the AES shipment record. BMS provided a certificate of analysis, dated April 22, 2009, for the shipment of Desmodur H, “product code 02501868,” and the certificate of analysis lists the numbers corresponding to the identifying numbers provided in the invoice and the purchase order.

BMS provided a BMS Material Safety Data Sheet for Desmodur H, and a Product Information sheet for Desmodur H. CBP also reviewed BMS’s product indices and descriptions on BMS’s website, http://www.bayermaterialsciencenafta.com/ .

The BMS catalogue, “Product Index, Aliphatic Isocyanates,” includes BMS’s different HDI products, and differentiates Desmodur H from other monomeric aliphatic diisocyanates by having the following properties:

Base Isocyanate HDI  Solids % 100  Solvent ---  NCO % 49.7  Equivalent Weight 84  Viscosity mPa·s* 3  Weight per gal. lbs 8.76  Application Areas Aliphatic oligomers and prepolymers for coatings, adhesives and elastomer applications  Features/Benefits Provides flexibility, weather stability   See “Product Index, Aliphatic Isocyanates” at 2 (BMS July 2006) available under “Aliphatic Isocyanates Product Index” at http://www.bayermaterialsciencenafta.com/resources/index.cfm

BMS states that regardless of its source of Desmodur H, both the imported and the substituted Desmodur H merchandise will conform to the following quality specifications:

CAS-No. 822-06-0  Assay (GC) 99.5 – 100%  NCO (GC) Content 49.7 – 50%  APHA Color 0 – 30 Max  Hydrolyzable chlorides 22.23 – 100 ppm  

The import and export certificates of analysis stated the following specifications and results:

Inspections Specifications Results Import (identical for all five) Results Export  Assay (GC) >= 99.5 99.8 99.8  NCO (GC) Content >= 49.7 49.9 50  APHA Color <= 30 <5 5  Hydrolyzable chlorides <= 100 ppm 15 33   BMS states that it uses the following “material numbers” to identify the Desmodur H, and it states that each number depends on package size or end use:

00479644 00589954 02475964 02475972 02501868 02939197 03079183 03199480 05892023

BMS states that these numbers are the same regardless of the source of Desmodur H.

BMS states that Desmodur H is entered under subheading 2929.10.3500, HTSUS, and provided a range of values for the imported merchandise and the substituted merchandise. The difference in value between the sample import and the export is approximately 24%. BMS explained that the range and differences in values results from “raw material prices, country of export, certain contractual obligations and the objective of maintaining overall profitability for the Desmodur H business” and that the values are “subject to fluctuations based on supply and demand and other market conditions.”

Our office forwarded the ruling request and additional documents to CBP’s Laboratories and Scientific Services for its opinion on whether the HDI category, as BMS described it, was a narrow description for industry purposes. For example, the term HDI could include HDI Trimers, HDI Biurets, pure HDI, and crude HDI. In response to a request for more information, Bayer stated that it sought a ruling for the commercial interchangeability of only monomeric 1,6-Hexamethylene diisocyanate with monomeric 1,6-Hexamethylene diisocyanate. The letter to the lab requested information as to whether the terms Desmodur H, monomeric 1,6-Hexamethylene diisocyanate, or any other names attached to CAS-No. 822-06-0, could refer to a different grade, pure, or crude monomeric 1,6-Hexamethylene diisocyanate.

In response, the Laboratory and Scientific Services issued a report, dated October 6, 2009 (“LSS Report”), which stated:

. . . CAS-No. 822-06-0, as listed in the application and supporting documentation, refers specifically to monomeric 1,6-hexamethylene diisocyanate, and not to any other forms (such as dimers, trimers, etc.). We note that the dimer of HDI, 2,4-dioxo-1,3-diazetidine-1,3-bis(hexamethylene) diisocyanate, has a separate CAS registry number (CAS-No. 23501-81-7). We note that the applicant specifically states CAS-No. 822-06-0 in the “Parallel Columns” section.

Our research does show that there are variations in purity than {sic} can be readily purchased, such as 98%, =98.0% “purum,” and =99.0%. However, we note that the applicant states in the “Parallel Columns” section that the requested purity is =99.5% (very high purity), which matches the purity specifications in the attached Desmodur H product information; further, we note that the attached Certificate of Analysis shows a purity level of 99.8%, above the required 99.5% purity.

(Emphases omitted).

ISSUE:

Whether imported and exported monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, both of which meet BAS’s specifications and are marketed as Desmodur H, are commercially interchangeable with one another, pursuant to 19 U.S.C. § 1313(j)(2).

LAW AND ANALYSIS:

For a drawback claim for substituted unused merchandise, pursuant to 19 U.S.C. § 1313(j)(2), the merchandise must be commercially interchangeable with the imported merchandise. See 19 U.S.C. § 1313(j)(2)(A). The merchandise that is commercially interchangeable with the imported merchandise must not be used within the United States before exportation or destruction. See 19 U.S.C. § 1313(j)(2)(C)(i). To determine commercial interchangeability, CBP evaluates the critical properties of the merchandise. In evaluating the critical properties, CBP considers factors such as the tariff classification of the merchandise, the relative value of the merchandise, the relevant governmental and recognized industrial standards for the product, the merchandise’s part numbers, and any other relevant factors. See 19 C.F.R. § 191.32(c). Commercial interchangeability is determined by an “objective, market-based consideration of the primary purpose of the

goods in question;” and CBP examines the products “from the perspective of a hypothetical reasonable competitor.” See Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999) (citations omitted). In this case, the ultimate question is whether a reasonable competitor would purchase either the imported or the exported monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, both of which meet BAS’s specifications and are marketed as Desmodur H.

One of the factors CBP considers is whether the imported and exported merchandise are classified under the same subheading of the HTSUS. In this case, the tariff classification is 2929.10.3500, HTSUS, “Compounds with other nitrogen function: Isocyanates: 1,6-Hexamethylene diisocyanate.” According to the information BMS provided, the imported and exported merchandise are classified under this subheading. The subheading is specific to monomeric 1,6-hexamethylene diisocyanate, and although it does not specify purity, the category does not include HDI dimers. Because the imported and exported merchandise are both classified under a relatively specific subheading, HTSUS, the subheading supports a finding of commercial interchangeability.

Another factor CBP considers is the relative value of the imported merchandise to the substituted merchandise, because goods that are commercially interchangeable generally have similar values. Nevertheless, if other critical properties have been met, or there is an explanation for the material difference in value, then a variance in price may not necessarily preclude a finding of commercial interchangeability. See HQ 230898 (June 24, 2005); see also HQ H037294 (December 9, 2008) (concluding that a 10-63% price difference does not preclude commercial interchangeability); HQ 227473 (March 3, 1998) (determining that a 65% price difference does not preclude commercial interchangeability, after evidence is provided showing a market reason for the price difference). In this case, the difference in value between the sample import and the export is about 25%, and the export invoice and the import invoice were issued more than one year apart. In its application, BMS explained that there several factors contributed to the fluctuations in value for Desmodur H, such as changes in raw material prices, overall shifts in supply and demand, and contractual obligations. Therefore, because BMS provided reasons for the value fluctuations, and CBP has accepted value differences greater than 25%, in this case, the difference in value does not preclude a finding of commercial interchangeability.

Governmental and recognized industry standards assist in the determination of commercial interchangeability, because those 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. See HQ H074002 (December 2, 2009). Desmodur H, as monomeric 1,6-hexamethylene diisocyanate, has a CAS Registry Number. A CAS Registry Number “is designed to readily identify a chemical substance in the broadest terms, even though it may have various technical names,” and “reflects {the} identity of the chemical substance from a market standpoint.” See HQ 950415 (April 27, 1992). The LSS Report reviewed the CAS Registry Number listed in the application, and found that CAS-No. 822-06-0, expressly listed in the application and supporting documentation as specific to monomeric 1,6-hexamethylene diisocyanate and Desmodur H, “refers specifically to monomeric 1,6-hexamethylene diisocyanate, and not to any other forms (such as dimers, trimers, etc.).” The LSS Report continued, stating that the “dimer of HDI, 2,4-dioxo-1,3-diazetidine-1,3-bis(hexamethylene) diisocyanate, has a separate CAS registry number (CAS-No. 23501-81-7).” Although imported and exported merchandise having the same CAS Registry Number may not necessarily be commercially interchangeable, (see HQ 229070 (May 1, 2002)), in this case, the fact that the imported and exported merchandise are both CAS-No. 822-06-0, supports a finding of commercial interchangeability.

In evaluating the critical properties of the merchandise, CBP also considers the part numbers of the merchandise. If the same part numbers or product identifiers are used in catalogues, and in the import and export documents, it would support finding them to be commercially interchangeable. See, e.g., HQ H074002 (December 2, 2009). In this case, BMS appears to use the terms “item number”, “material number,” “product code” and “product number” synonymously for part number, and for purposes of this discussion, they are referred to as material numbers. The material numbers BMS provides are inconclusive as to whether a hypothetical reasonable competitor would use monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, regardless of its origin. The import documents, specifically the purchase order and the inspection certificate, list material number 00538241, a number not among the numbers BMS provided for Desmodur H. BMS states that its material numbers differ based on end-use and size, but provides no explanation to assist in determining whether a reasonable competitor would use merchandise with different material numbers interchangeably. The export documents, however, specifically the packing list, purchase order, and certificate of analysis, all list material number 02501868, which is included among the material numbers BMS provided for Desmodur H. The presence of the same material number on the export documents, and BMS’s explanation that the material numbers are the same “regardless of origin,” both tend to support a finding of interchangeability. The absence of material number 00538241 in the export documents or in BMS’s narrative, and the absence of an explanation of what the different material numbers mean, both tend to undermine a finding of interchangeability. Therefore, balancing all the evidence surrounding the material numbers, the material numbers BMS provided neither support nor refute a determination of commercial interchangeability.

Other factors to consider are how BMS markets Desmodur H and whether customers would accept monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, regardless of where it was produced. BMS treats Desmodur H as a single product, regardless of origin, in its Product Information Sheet for “Desmodur H” and in its Product Index, provided that the monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, met the specifications BMS outlined for Desmodur H. BMS required that both the imported and the exported monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, meet the same specifications before BMS would sell the merchandise as Desmodur H. The LSS Report noted that there are variations in the market for monomeric HDI, but the specifications BMS provided for Desmodur H are for a “very high purity,” and that BMS required that the same “very high purity” specifications be met for all of the monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, that it markets as Desmodur H. Finally, all of the import and the export documents refer to the monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0 as Desmodur H and as conforming to BMS’s specifications, thus supporting a conclusion that a customer ordering Desmodur H seeks a specific form of “very high purity” monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0. Therefore, BMS’s marketing documents for Desmodur H, and product specifications for Desmodur H, indicate that customers would accept the monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, which BMS sells as Desmodur H, regardless of where it was produced.

The weight of the evidence supports a conclusion that customers could interchangeably use, regardless of source, monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, that meets BMS’s specifications for Desmodur H.

HOLDING:

Based on the weight of the evidence, the imported and substitute monomeric 1,6-hexamethylene diisocyanate, CAS-No. 822-06-0, which also meets BMS’s specifications for Desmodur H, are commercially interchangeable for purposes of substitution unused merchandise drawback, pursuant to 19 U.S.C. § 1313(j)(2).

This decision is limited to the specific facts presented in this ruling. If the terms of the import or export contracts vary from the facts stipulated in this ruling, then this decision shall not be binding on CBP, pursuant to 19 C.F.R. §§ 177.2(b)(1), (2), and (4) and 177.9(b)(1).


Sincerely,

Myles B. Harmon, Director
Commercial and Trade Facilitation Division


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