OT:RR:CTF:ER
H194557 CSO
Mr. Richard M. Belanger
Sidley Austin, LLP
1501 K Street, N.W.
Washington, D.C. 20005
Re: Unused Merchandise Drawback; Ruling Request for Commercial Interchangeability of Glyphosate Acid Technical and Glyphosate Technical wetcake.
Dear Mr. Belanger:
This is in response to your request, dated November 11, 2011, and supplemental information submitted on March 2, 2012, behalf of Monsanto Company (Monsanto) for a ruling on the commercial interchangeability of imported Glyphosate Acid Technical and substituted Glyphosate Technical wetcake. Our determination follows. This request is similar to that in HQ H074575.
FACTS:
Monsanto imports Glyphosate Acid Technical (Glyphosate Technical), chemical name N-Phosphonomethyl Glycine. It would like to substitute Glyphosate Technical with Glyphosate Technical wetcake, chemical name N-Phosphonomethyl Glycine. Both the import and the export have the same end use as the active ingredient in agricultural herbicides.
In support of its argument for commercial interchangability it provided this office with Material Safety Data Sheets (MSDS) and certificates of analysis that show that the imported Glyphosate Technical consists of 95 percent active ingredient. Additional MSDSs and the certificates of analysis also show that the export contains 83 percent active ingredient. Monsanto states that the difference is because the import is dried prior to entering the United States and the export article is manufactured in the United States and is not dried prior to export. Monsanto also states that the different water contents in the Glyphosate Technical and Glyphosate Technical wetcake are irrelevant to commercial end users because water has to be added before use.
Monsanto assigns two material numbers (11170749 and 11170796) to the substituted material Glyphosate Technical wetcake. Monsanto states that the material numbers indicate export destinations with different labeling requirements. The material number allows the warehouse to identify which batch is to be pulled for which export shipment. Monsanto also states that it has no specific knowledge of the material or part numbers, if any, currently used by its suppliers for the imported material, Glyphsate Technical.
Monsanto asserts that Glyphosate Technical with CAS registry number CAS-1071-83-6 is classified in 2931.00.9043 of the United States Harmonized Tariff Schedule (HTSUS). Both Glyphosate Techncial and Glyphosate Technical wetcake have the same CAS number CAS-1071-83-6 listed on the Material Safety Data Sheet. Additionally, in the sample import documentation, the entry summary lists that the imported merchandise is classified at 2931.00.9043 HTSUS and the export commercial invoice and packing list references 2931.00.9160 (other) that is a number from the U.S. Schedule B, 2011.
Finally, Monsanto also provided market data from CCM International, a third party reporting service and consultation, that show the average prices for exports of Glyphosate Technical from China to all markets, including the United States. Monsanto also provided data that show the average prices of Monsanto export sales of Glyphosate Technical wetcake. Monsanto’s invoices show pricing for imported merchandise in March 2010 and substituted merchandise sold in April 2011. The difference between the price of the import and the price of the export was 15.2 percent.
LAW AND ANALYSIS:
Section 1313(j)(2) of the Tariff Act of 1930, as amended (19 U.S.C. § 1313(j)(2)), provides that drawback may be claimed on imported duty-paid merchandise that is substituted for commercially interchangeable and unused imported merchandise if certain requirements are satisfied. Specifically, the substituted or unused merchandise must be exported or destroyed within three years from the date of importation of the imported merchandise. Prior to the exportation or destruction, the substituted or unused merchandise must 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 owed duties on the imported merchandise, a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise or any combination thereof.
The U.S. Customs and Border Protection (CBP) regulation, 19 C.F.R. § 191.32(c), concerning substitution drawback, provides as follows:
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 is the claimants transaction documents. See, e.g., HQ H048135 (March 25, 2009). 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 sales documents also provide the best evidence with which to compare relative values. Id.
In Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) defined commercially interchangeable, stating the following:
We are convinced that Congress intended “commercially interchangeable” to be an objective, market-based consideration of the primary purpose of the goods in question. Therefore, “commercially interchangeable” 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 purpose, then the goods are “commercially interchangeable” according to 19 U.S.C. § 1313(j)(2).
Thus, in accordance with Texport, commercial interchangeability is determined using an “objective standard -- analyzed from the perspective of a hypothetical reasonable competitor.” Id. That is, if a reasonable hypothetical competitor or buyer would accept the imported and substituted merchandise at the specified price for the primary purpose intended, the goods will be considered commercially interchangeable.
Government and Recognized Industry Standards
Governmental and recognized industry standards assist in the determination of commercial interchangeability in that they “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); and HQ H074002 (December 2, 2009). For support for this criterion, Monsanto provides the Chemical Abstract Service (CAS) number for the imported and substituted merchandise.
CAS registry number is a unique number used to identify compound product for both the imported and substituted merchandise. According to the American Chemical Society which assigns and maintains the CAS Registry Numbers, the CAS numbers “are unique identifiers for chemical substances.” See www.acs.org; see also, HQ H071657 (July 28, 2010). The CAS registry number for both the imported and substituted merchandise is CAS-1071-83-6. A CAS registry number itself has no inherent chemical significance but provides an unambiguous way to identify a chemical substance or molecular structure when there are many possible systematic, generic, proprietary, or trivial names. CBP has held that the CAS registry number, although not conclusive, supports a finding of commercial interchangeability. See e.g., HQ H095404, June 29, 2011. The Office of Laboratory and Scientific Services reviewed the CAS registry number’s specifications and found it was sufficient to describe the imported and substituted merchandise.
Additionally, the MSDS and certificates of analysis show that the imported Glyphosate Technical consists of 95 percent active ingredient. However, the MSDSs and certificates of analysis provided show that the exported merchandise is approximately 83 percent active ingredient. Monsanto states that the difference is because the import is dried prior to entering the United States and the export article is manufactured in the United States and is not dried prior to export. Because the percentages of active ingredient vary only because one is wet and the other is dry, and that the imported and substituted Glyphosate Technical and Glyphosate Technical wetcake comport to CAS-1071-83-6, the industry standards criterion is satisfied. However, allowances should be made on a pound for pound basis, of the same material (active ingredient), meaning that drawback eligibility is only for the export as it would be in its dry condition only.
Part Numbers
In evaluating the critical properties of the merchandise, CBP also considers whether the imported and substituted product share the same part numbers. If the same part numbers or product identifiers are used in catalogues, and in the import and export documents, it would support a finding of commercial interchangeability. See, e.g., HQ H074002. Monsanto assigns two material numbers (11170749 and 11170796) to the imported and substituted material Glyphosate Technical wetcake. Monsanto states that the differing material numbers indicate export destinations with different labeling requirements. Hence, we do not evaluate whether the part numbers support a finding of commercial interchangability because, based on the information provided, part numbers are not based solely on the underlying characteristic of the product. See, e.g., HQ H095404 (June 29, 2011) (finding that because part numbers were not used to identify the product, part numbers were not a valid criterion and were therefore not applicable and do not factor into the commercial interchangeability determination).
Tariff Classification
Another factor CBP considers when determining commercial interchangeability is whether the imported and substituted goods are classified under the same subheading of the HTSUS. In the sample import documentation, the entry summary lists that the imported Glyphosate Technical is classified at 2931.00.9043 HTSUS, which provides for “[o]ther organo-inorganic compounds: Other. Other: Organo-phosphorus compounds: Other.” The export commercial invoice and packing list references Schedule B number 2931.00.9160. This number provides for “Other organo-inorganic compounds: Other.” This Schedule B, 2931.00.9160 corresponds to 2931.00.9043, HTSUS. Hence, we find that for purposes of commercial interchangeability the tariff classification criterion is met.
Relative Values
CBP also considers the relative value of the imported merchandise to the substituted merchandise because goods that are commercially interchangeable generally have similar values. See HQ 228519 (June 5, 2002) (holding no commercial interchangeability when no explanation was provided to show why “[e]xport invoices indicate that similar tapes were all sold at costs proportionately higher than at the imported costs.”). CBP has also held, however, that 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, e.g., HQ 228580 (August 20, 2002) (holding that a value difference of 27% attributed to processing and manufacturing costs did not preclude a finding of commercial interchangeability when the critical properties criterion had been met).
Monsanto provided invoices that show pricing for imported merchandise in March 2010 and substituted merchandise sold in April 2011. The substituted merchandise was manufactured in the United States and exported to Indonesia. The imported merchandise was from China. The difference between the price of the import and the price of the export was 15.2% and is within market fluctuations acceptable by CBP in price as evidenced by the CCM International data. The CCM International data provided shows the average price of Glyphosate Technical imports into the United States from China from January 2011 to June 2011. A separate data set shows the average price for Monsanto’s exports out of the United States for the same time period. The average price difference of these two data sets is 10.40%. Because the price difference is small and the values are similar, we conclude that this criterion is satisfied.
HOLDING:
Because the government and industry standards, tariff heading and the value criteria all support a finding of commercial interchangeability, we conclude that the imported Glyphosate Technical and the substituted Glyphosate Technical wetcake described above are commercially interchangeable for purposes of substitution unused merchandise drawback pursuant to 19 U.S.C. § 1313(j)(2). Allowances should be made on a pound for pound basis, of the same material (active ingredient), meaning that drawback eligibility is only for the export as it would be in its dry condition only.
This decision is limited to the specific facts set forth herein. If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177(b)(1), (2) and (4), and §177.9(b)(1) and (2).
Sincerely,
Carrie L. Owens, Chief Entry Process & Duty Refunds Branch