DRA-4
OT: RR: CTF: ER
H240037 PTM
Ms. Helen Merenda
Comstock & Theakston, Inc.
466 Kinderkamack Rd
Oradell, NJ 07649-1536
RE: Unused Merchandise Drawback; Ruling Request for Commercial Interchangeability of Methacrylic Acid.
Dear Ms. Merenda:
This is in response to your request, dated March 5, 2013, submitted on behalf of Lucite International Inc. (“Lucite”), for a ruling on the commercial interchangeability of imported and substituted glacial methacrylic acid. Our determination follows.
FACTS:
As evidence of an importation an entry summary and other import documents are provided. The U.S. Customs and Border Protection (“CBP”) entry summary form 7501 describes the merchandise as methacrylic acid (“MAA”) classified under subheading 2916.13.00, Harmonized Tariff System of the United States (“HTSUS”). The invoice states that the goods are methacrylic acid. From the value on the entry summary and the amount due on the invoice the price per kilogram can be calculated. As evidence of an export a commercial invoice is provided. The invoice price is approximately 16 percent more per kilogram than the price on the import transaction. You state that the price difference is the result of a markup for profit. A bill of lading for the representative export reflects methacrylic acid, and the tariff item number 2916.13.
The specifications for the imported and substituted MAA are identical:
Min Max
Assay % 99 100
Water % 0 0.3
Color 0 25
Inhibitor, ppm 225 275
You state that both the imported and substituted MAA is classified under the Chemical Abstract Service (“CAS”) registry number 79-41-4, and provided the National Institute of Standards and Technology chemical data for MAA. CBP’s Office of Laboratory and Scientific (“OLSS”) services reviewed the identical specifications and product information and concluded that the specification sufficiently defines the product and that the imported and substituted MAA falling within the specified ranges would be technically equivalent.
ISSUE:
Whether the imported methacrylic acid is commercially interchangeable with the substituted methacrylic acid 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 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.
To determine if either good at the specified price would be acceptable for the purpose intended, the relevant characteristics of the imported good are compared with those characteristics of the substituted good. As previously discussed, the pertinent characteristics CBP uses to determine commercial interchangeability include any governmental or industry standards relevant to the product at issue, the tariff classification, value, part numbers, if any, and any other characteristics relevant to the product. See 19 C.F.R. § 191.32(c).
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 (Mar. 23, 2010); and HQ H074002 (Dec. 2, 2009).
Both the imported and substituted MAA are classified under the Chemical Abstract Service (“CAS”) number 79-41-4 and have identical specifications. Furthermore, OLSS reviewed the specifications provided and concluded that MAA with values falling in the ranges set forth above sufficiently describe the product. Therefore, provided that the imported and substituted MAA on which drawback is claimed falls within the specification ranges above, this 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).
In this case there are no part numbers but Lucite has assigned a unique material number to MAA. The invoice and the entry summary reflect material number 10071898 as an identifier for MAA. The unrelated purchase orders identify material number 10071898 as MAA. The certificate of analysis for the export describes the MAA as product number 10071898 and the export invoice also reflects product number 10071898. The material number 10071898 is used consistently in the documents to designate MAA. Consequently, we find this criterion to be satisfied.
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 HTSUS. See, e.g., HQ H074002 (Dec. 2, 2009). The imported and substituted MAA is properly classified under subheading 2916.13.00, HTSUS. The fact that the imported and substituted merchandise is classified under the same subheading indicates that this criterion is satisfied.
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 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., Pillsbury Co. v. United States, 293 F. Supp. 2d 1351, 1357-58 (Ct. Int'l Trade 2003) (concluding that the price difference between the import and export product would not detract from a commercial interchangeability finding since the difference was not based on the quality of the merchandise, but rather on the packing costs and supply of the product in the market); see also, HQ 228580 (Aug. 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); and HQ H106515 (Mar. 18, 2011) (determining that a 70% price difference between the imported and substituted products would not preclude a finding of commercial interchangeability since the difference was demonstrated to be a result of the market forces rather than quality of the merchandise).
In HQ H135555 (Oct. 15, 2012) the commercial documentation for each article showed that the price of the substitute export articles ranges from 11.9% to 69% higher than the price for the imported articles. The claimant explained that the higher price for the exported articles was the markup pricing and that it imported each article in bulk at a wholesale price, repackaged the articles, and sold the articles for export at its full-cost price. In HRL H135555 we said that "because the variance in price is not related to any differences in the quality of the merchandise, we determine that this fluctuation in price does not preclude a determination of commercial interchangeability. See also, HQ H065777 (Sept. 18, 2009) (finding that the higher price for the export was explained by the additional costs incurred for purchasing the merchandise, which include repackaging.). The difference in price between the imported and substituted good in this instance is 16%, which Lucite ascribes to a markup for profit. However, Lucite failed to provide any evidence of this. Because the critical properties of the MAA are the same and the substitute MAA must satisfy the same specification, we determine that this difference in price does not preclude a finding of commercial interchangeability.
HOLDING:
In light of the foregoing, we conclude that the imported methacrylic acid and the substituted methacrylic acid described above 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