OT:RR:CTF:ER
H128576 TT
Mr. Stephen R. Johnsen
Director, International Trade & Compliance
Bayer Corporation
100 Bayer Road
Pittsburgh, PA 15205-9741
RE: Substitution, unused merchandise drawback: commercial interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R § 191.32(c); isocyanate mixtures
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 three different types of isocyanate mixtures, Mondur MR, Mondur MR Light and Desmodur 44 V 20 L. U.S. Customs and Border Protection (“CBP”) received BMS’ request on October 21, 2010.
FACTS
According to BMS’ 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 mixtures of isocyanates (polymeric diphenylmethane diisocyanate (p-MDI) and the isomers 4,4’-methylene diphenyl diisocyanate (MDI) and 2,4’-methylene diphenyl diisocyanate) are commercially interchangeable. These isocyanate mixtures are used primarily for the formulation of rigid polyester and polyether urethane foams. BMS stated that it markets these isocyanate mixtures under the trade names of Mondur MR, Mondur MR Light and Desmodur 44 V 20L and it requested this ruling to address the commercial interchangeability of those three items.
In support of its claim of commercial interchangeability, BMS provided several documents and CBP forms as representative import and export transactions. However, these transactions only concerned Desmodur 44 V 20 L. For the import transaction, BMS provided copies of Customs Form 7501 and CBP Form 3461 for Entry No. xxxxx41-1, which was entered on December 21, 2008, and contained merchandise classified under subheading 3909.30.0000, Harmonized Tariff Schedule of the United States (“HTSUS”). BMS provided bills of lading for both imports and exports of containers carrying Desmodur 44 V 20 L. It also provided a November 20, 2008, inspection certificate for “product number 02536181,” Desmodur 44 V 20 L. BMS also included a certificate of analysis, dated May 27, 2009, for the shipment of Desmodur 44 V 20, “product code 02536122.”
BMS provided a BMS Material Safety Data Sheet and a Product Information Sheet for Desmodur 44 V 20 L, Mondur MR, and Mondur MR Light. These materials provide, among other information, the following:
Mondur MR
Mondur MR Light
Desmodur 44 V 20 L
Polymeric Diphenylmethane Diisocyanate
(p-MDI)
CAS-No. 9016-87-9
50 - 60%
50 - 60%
30 - 40%
4, 4’- Diphenylmethane Diisocyanate (MDI)
CAS-No. 101-68-8
35 - 45%
35 - 45%
40 - 50%
2, 4’- Diphenylmethane Diisocyanante (MDI)
CAS-No. 5873-54-1
3 - 7%
1 - 5%
15 - 25%
NCO Content
31.0 - 32.5%
31.0 - 32.5%
30.5 - 32.5%
ISSUE:
Whether imported and exported isocyanate mixtures, Mondur MR, Mondur MR Light and Desmodur 44 V 20 L, 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 isocyanate mixtures of Mondur MR, Mondur MR Light and Desmodur 44 V 20 L.
One of the factors CBP considers is government and recognized industry standards. 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). When analyzing the industry standards BMS provided for these three products, CBP’s Laboratories and Scientific Services (“LSS”) explained that:
The binding ruling request involves products that are not pure materials but mixtures of isocyanates [polymeric diphenylmethane diisocyanate (p-MDI) and the isomers 4, 4’-methylene diphenyl diisocyanate (MDI) and 2, 4’-methylene diphenyl diisocyanate]. The three products each contain different ratios of the isocyanates. In turn, the products will have different chemical properties and would be used for different commercial applications depending on the desired end-product. Isocyanates are generally characterized with respect to NCO content. In the product specifications provided, the NCO content range is given as 30.5% - 32.5%.
LSS further indicated that a 2% difference in NCO content is a significant difference.
BMS failed to provide adequate information on government and industry standards as it only gave information relating only one component of these three products. Specificially, it only provided the CAS No. and specifications for Polymeric Diphenylmethane Diisocyanate (“p-MDI”), yet these products are made up of other isocyanates aside from p-MDI. CBP requested more information of BMS both by phone and email requests dated, January 12, 2011, but BMS did not respond. Additionally, an examination of the applicable government and industry standards through BMS’ Safety Data Sheet and Product Information Sheets reveals that, all three mixtures contain different levels of 2,4’- Diphenylemthane Diisocyanate (“MDI”) CAS No. 5873-54-1 with Mondur MR containing 3-7%, Mondur MR Light 1-5% and Desmodur 44 V 20 L 15-25%. Similarly, the percentage of 4,4’ MDI CAS No. 101-68-8 within the isocyanate mixtures also varies as Mondur MR and Mondur MR Light both contain 35-45%, while Desmodur 44 V 20 L contains 40-50%. Moreover, they also differ in the percent of p-MDI CAS No. 9016-87-9 as Mondur MR and Mondur MR Light contain 50-60% , yet Desmodur 44 V 20 L contains 30-40%. These safety data and product information sheets demonstrate that the industry standards vary across each product. Therefore, government and industry standards do not support 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 of commercially interchangeability. See, e.g., HQ H074002 (December 2, 2009). In this case, BMS appears to use the terms “material number” synonymously for part number, and for purposes of this discussion, they are referred to as material numbers. BMS has provided the following material numbers for Mondur MR, Mondur MR Light and Desmodur 44 V 20L:
Mondur MR
Mondur MR Light
Desmodur 44 V 20 L
01668440
01668971
02536084
01668459
01668998
02536106
02468445
02456382
02536114
02921948
02468399
02536122
03047753
02468402
02536157
03093836
02468410
02536165
03093844
02574679
02536173
05287685
02870421
02536181
80720190
02920801
02783138
80720204
02920828
02803309
80782439
03093879
02864162
80782498
03106660
02906396
03135857
03671511
03332318
04323622
03801792
05596408
03803566
80436387
03818636
81072737
03818644
81680567
03941454
81890987
03952863
81891010
05289122
81906034
80281707
81908185
80281715
82424939
80291087
82726676
80570369
81296945
81296953
82353268
Moreover, the BMS Material Safety Data Sheet provides the following material numbers: Mondur MR 5287685, Mondur MR Light 5289122 and Desmodur 44 V 20 L 82360876. BMS argues that all of thse are commercially interchangeable, yet none of the material numbers are shared between the three different types of isocyanate mixtures. Therefore, as this criterion is not met, it too fails to support 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 prevent a finding of commercial interchangeability. See HQ 230898 (June 24, 2005) (“variance in price… does not preclude a finding of commercial interchangeability, when other critical properties have been met or when sufficient evidence is provided to support the material difference in value”); 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, BMS provided prices for its 2009 imports and exports of Desmodur 44 V 20 L. However, it was unable to provide 2009 or 2010 prices for both imports and exports for all three isocyanate mixtures. The average 2009 price for Desmodur 44 V 20 L imports was $2.00, while its exports were $2.34. This amounts to a 17% difference in price. However, these figures alone do not allow us to compare the three different products to one another to determine commercial interchangeability. Because BMS did not provide pricing data on Mondur MR and Mondur MR Light, it fails to satisfy this criterion for two of the three products.
Last, CBP considers whether the imported and exported merchandise are classified under the same subheading of the Harmonized Tariff Schedule of the United States (“HTSUS”). See 63 Fed. Reg. 10978 (March 5, 1998) (“full tariff classification is required to establish commercial interchangeability under 19 U.S.C. § 1313(j)(2).”). BMS stated that, p-MDI for both its imported and substituted merchandise is classified under HTSUS 3909.30.0000, “Amino-resins, phenolic resins and polyrethanes, in primary forms: Other amino-resins.” However, p-MDI is only one component that makes up these isocyanate mixtures. Therefore, the classification for p-MDI does not conclusively establish the classification of Mondur MR, Mondur MR Light, or Desmodur 44 V 20 L. Thus, the proper analysis would concern the HTS numbers for the three products it wishes to use for drawback claims—Mondur MR, Mondur MR Light, and Desmodur 44 V 20 L. Because BMS failed to provide sufficient evidence and the fact that we determined above based on government and recognized industry standards and part numbers that these products are not commercially interchangeable, we do not reach a conclusion as to the HTS numbers.
HOLDING:
Based on the weight of the evidence, the imported and to be substituted isocyanate mixtures, Mondur MR, Mondur MR Light and Desmodur 44 V 20 L, are not commercially interchangeable for purposes of substitution unused merchandise drawback, pursuant to 19 U.S.C. § 1313(j)(2).
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division