OT:RR:CTF:ER
H235712 PTM
Micah McDonald
DHL Drawback Services
22210 Highland Knolls Drive
Katy, TX 77450
Dear Mr. McDonald,
This is in response to your letter, dated November 14, 2012, on behalf of The Dow Chemical Company (herein “Dow”) regarding the commercial interchangeability of Choloroform Technical (“chloroform”). Please find our office’s determination of commercial interchangeability of the subject merchandise below.
FACTS:
Dow purchases imported chloroform in its own name and also exports chloroform to customers overseas. You provided representative import and export documents. You provided a CBP form 7501 showing the importation of chloroform classified under subheading 2903.13.0000 of the Harmonized Tariff Schedule of the United States (HTSUS) from Germany. The associated commercial invoice, dated September 20, 2011, also shows the importation of chloroform technical from Germany. You state that the critical specifications and tolerances for the chloroform are shown on the certificates of analysis for the imported and substituted products. A certificate of analysis for the imported chloroform shows the following critical specifications and approved tolerances for each, and the results for each specification tested:
Property
Specification
Result
Appearance
Free of sediment and suspended matter
Pass
Water
Max 50
11
Color
Max 10
5
Non-Volatile Residue
Max 10
<10
Free Halogen
None detected
Pass
Acidity (as HCL)
Max 5
1.3
Stabilizer
5-15ppm
9
Chloroform Purity
Minimum 99.95%
99.993%
For the export, you provided a tanker bill of lading showing the shipment of chloroform to China. The corresponding invoice, dated October 1, 2012, calls for the sale of chloroform technical and references the tanker bill of lading. A certificate of analysis shows the following readings:
Property
Specification
Result
Appearance
Free of sediment and suspended matter
Pass
Water
Max 50ppm
12
Color, Pt-Co
Max 10 ppm
3
Non volatile residue ppm
Max 10 ppm
1
Free Halogens
None detected
Pass
Acidity (as HCL)
Max 5.0 ppm
1.8
Stabilizer
2-15 ppm
7
Chloroform Purity
99.95%
99.987%
The above information was submitted to CBP’s Office of Laboratories and Scientific Services (OLSS) for review. In a memorandum dated February 14, 2013, OLSS stated that the specifications for purity and other chemical and technical factors were sufficiently detailed to describe both the imported and substituted merchandise. The respective invoices for the imported and substituted chloroform show a difference in price of 15.6%.
ISSUE:
Whether the imported chloroform is commercially interchangeable with the substituted chloroform within the meaning of the substitution unused merchandise drawback statute, 19 U.S.C. § 1313(j)(2).
LAW AND ANALYSIS:
Under 19 U.S.C. § 1313(j)(2), as amended, drawback may be granted if there is, with respect to imported duty-paid merchandise, 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 three 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 must have received from the party that imported and paid 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), further provides that 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 are the claimant’s transaction documents. See, e.g., HQ H048135 (Mar. 25, 2009); and HQ H122535 (Feb. 9, 2011). 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. 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, the United States Court of Appeals for the Federal Circuit determined that: “[c]ommercial interchangeability 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 commercial purpose, then the goods are ‘commercially interchangeable’ according to 19 U.S.C. § 1313(j)(2)).” 185 F.3d 1291, 1295 (Fed. Cir. 1999). Thus, the Federal Circuit set forth an “objective standard—analyzed from the perspective of a hypothetical reasonable competitor.” Id. Therefore, we analyze commercial interchangeability pursuant to 19 C.F.R. § 191.32(c), for a hypothetical reasonable competitor.
Government and Recognized Industry Standards
One of the factors CBP considers is whether the imported and exported merchandise adhere to government and recognized industry standards. Governmental and recognized industry standards assist in the determination of commercial interchangeability, because such 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. HQ H090065 (Mar. 23, 2010). CBP has also relied on product specifications. See HQ H103577 (October 12, 2010) (noting that contractual standards and product specifications can be used as evidence of commercial interchangeability rather than governmental or recognized industry standards) (citing Pillsbury v. United States, 27 C.I.T. 1628, 1634 -35 (Ct. Int’l Trade 2003)); see also, HQ H064679 (December 18, 2009) (relying on specifications provided by the applicant, as well as certificates of analysis for representative samples of the imported and exported product since no government or industry standard criteria was available).
As shown above, the specifications provided show the minimum and maximum levels required for the criteria tested, and the certificates of analysis show that the imported and substituted merchandise conform to the specifications. Furthermore, CBP’s OLSS confirmed that the specifications sufficiently describe the product. We note that the specifications provided for the import and substitute product differ with respect to the acceptable tolerance range for stabilizer. The acceptable tolerance for stabilizer is 2-15 ppm for this application. Thus, provided the imported and substitute exported chloroform fall within the range of specifications identified above, the governmental and recognized industry standards criterion is satisfied.
Part Numbers
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 (Dec. 2, 2009); and HQ H122535 (Feb. 9, 2011).
Chloroform is a bulk commodity. In a prior ruling CBP observed that merchandise sold in bulk may not have part numbers. See HQ H190457 (June 11, 2012). The import and export documentation provided reflects that the merchandise is packaged and sold in bulk. Dow states that it uses product descriptions rather than part numbers to identify it. As such, part numbers are not applicable to this product. Therefore, this is not a useful criterion to evaluate in determining commercial interchangeability.
Tariff Classification
Another factor CBP considers when determining commercial interchangeability is whether the imported and exported goods are classified under the same subheading of the Harmonized Tariff Schedule of the United States (“HTSUS”). See, e.g., HQ H074002 (December 2, 2009). Both the imported and substituted chloroform are classified 2903.13.00 HTSUS. Because the imported and substituted chloroform have the same tariff classification, the criterion is established.
Value
Goods that are commercially interchangeable generally have similar values when sold at the same place, at the same time, to like buyers from like sellers. See, e.g., HQ H090065 (Mar. 23, 2010) (finding a price difference of 4.5 percent to be acceptable).
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) (concluding 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). See also, HQ H106515 (March 18, 2011) (holding that although there was a difference in value between the sample import and export was 70%, the difference did not preclude a determination of commercial interchangeability because the value difference was the result of market forces rather than a difference in quality of the merchandise).
The difference in value between the imported and substituted chloroform is 15.6%. Dow states that the price difference is attributable to market conditions prevailing at the time each transaction was made. The invoices are dated more than 12 months apart. Furthermore, the representative import and substitute chloroform have the same HTSUS numbers, similar descriptions and nearly identical readings on the tested properties. Therefore, we find that for the purposes of commercial interchangeability, the 15.6% difference in price in the imported and substituted merchandise does not preclude a finding of commercial interchangeability.
HOLDING
Based on the findings above, we conclude that the imported and substituted chloroform 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 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