RR:CTF:ER W231494 PTM
Ms. Christina D. Brooks
U.S. Customs and Border Protection
2350 N. Sam Houston Parkway East
Suite 1000
Houston, Texas 77032-3126
RE: Protest 5301-05-100205; Tauber Petrochemical Company; Commercial Interchangeability; Sufficiency of Documentation, perfection of claim.
Dear Ms. Brooks,
You have submitted an Application for Further Review (“AFR”) transmittal for the above-referenced protest. Our decision follows.
FACTS
Tauber Petrochemical Company (herein “Tauber”) filed timely protest on the disallowance of drawback claim AA6-03139970 filed pursuant to 19 U.S.C. §1313(j)(2) on shipments of methanol. On January 21, 2005, U.S. Customs and Border Protection (“CBP”) liquidated the entry but disallowed the entire drawback claim of $35,598.88.
This involves a drawback claim under 19 U.S.C. §1313(j)(2). The claimant designated import entry 113-XXXXX7609 dated February 27, 2001 covering 8,012 metric tons of methanol imported by the vessel Stolt Effort. The claimant designated fifteen export shipments totaling 2,369,523.78 kgs. of methanol, with the exports occurring between April 25, 2002 and August 24, 2003. The Port denied the entire claim based on issues with only one of the fifteen exports, the export occurring on March 7, 2003 laden on board the vessel Stolt Durham. There were three principal reasons for denial. First, the Port of Houston (the “Port”) could not determine whether Tauber possessed the methanol as required by the statute. Second, the Port could not determine whether the imported methanol was commercially interchangeable with the exported methanol. Third, the Port could not determine whether Tauber was a proper drawback claimant due to confusion with the drawback waivers. The facts relevant to each basis for denial are as follows:
Possession
There is a Product Exchange Agreement between Sabic Americas, Inc. (“Sabic”) and Tauber. Per the agreement, Sabic delivers approximately 840,000 gallons per month of methanol FOB Point: Deerpark Texas. The product specification is listed as “Sabic Specs” which suggests that Sabic determines which product characteristics must be met. The exchange partner (Tauber) delivers 840,000 gallons per month of methanol that meets Sabic specifications. The Agreement states that Tauber must use the SGS surveyor and pay all surveyor costs. The documents required from both partners are: bill of lading, certificate of analysis from SGS surveyor upon delivery into Sabic storage tank, and a weight certificate.
For the import transaction, Tauber provided the following documentation:
CBP entry summary form 7501 supporting the import described above.
A commercial invoice dated February 26, 2001 showing the purchase by Tauber of 8,012.511 Metric Tons of Methanol laden on the Stolt Effort for CIF delivery at Houston Texas on January 11, 2001 at $217.93 per Metric Ton.
For the export transaction, Tauber provided the following documentation:
An invoice on Tauber letterhead dated March 11, 2003 showing a shipment date of March 7, 2003 of 418.32 metric tons of methanol at a price of $350 per MT, sold to Peruquimicos in Lima, Peru.
Tanker Bill of Lading showing Tauber as the shipper of 418.318 metric tons of methanol laden on the Stolt Durham with an on-board date of March 7, 2003.
Commercial Interchangeability
Pursuant to the exchange agreement, Tauber required that the import be tested by SGS Control Services, Inc. (“SGS”) to meet the specifications provided by Sabic. The client listed on the test record is Sabic. The imported product revealed the following characteristics:
Acidity, as acetic acid: 0.0011% of weight
Ethanol: 7 ppm
Hydrocarbons: Free of opalescense
Iron: 0.02 ppm
Permanganate time: >50@15 C.
Purity: 99.98%
Density @20/20 C: 0.7924
Density @25/25C: 0.7889
Water Content by weight: 0.022
The export transaction was also tested by SGS. The exported product revealed the following characteristics:
Acetone: <0.002 by % weight
Ethanol: <50 ppm
Hydrocarbons: Free of opalescence
Iron: 0.02 ppm
Permanganate Time: >50@15C
Purity: 99.98%
Density @ 20/20 C: 0.7925
Density @ 25/25 C: 0.7886
Water content by weight: 0.007
Although the exchange agreement requires that the product must meet the specifications designated by Sabic, most of the tests performed are also required to meet the American Society for Testing Materials Standard Specification for Methanol (ASTM D 1152-97), and resulted in passing scores according to the specification
Improper Drawback Waiver
Tauber initially provided drawback waivers from Holland Chemical International (“HCI”) and Brenntag Latin America Inc. (“Brenntag”), on Tauber letterhead and signed by what appears to be the same person. Tauber provided a letter with its protest dated February 5, 2003 stating that Holland Chemical International N.V. (“HCI”) and all its subsidiaries were acquired by Stinnes AG and would operate under the name Brenntag Latin America, Inc (“BLA). In the protest Tauber also provided corrected waivers.
ISSUES
Has the applicant established that it maintained possession of the merchandise as required by 19 U.S.C. §1313(j)(2)?
Are the imported methanol and substituted merchandise commercially interchangeable?
Is Tauber an improper drawback claimant due to the discrepancies on the drawback waivers?
LAW AND ANAYLSIS
As an initial matter, we note that the port denied the entire claim based on its belief that Tauber did not establish commercial interchangeability with respect to one export: the March 7, 2003 export of methanol laden on the vessel “Stolt Durham.” We find this was done in error, and denial of drawback on the entire claim based on one of the fifteen separate exports was improper. There is no issue with respect to 14 of the exports. We now focus on the one remaining export at issue.
Pursuant to 19 U.S.C. §1313(r)(1), a drawback entry and all documents necessary to complete a drawback claim shall be filed or applied for, as applicable, within 3 years after the date of exportation or destruction of the articles on which drawback is claimed. We note that the drawback claim was timely filed on August 4, 2005, within three years of the date of export. Based on the documents provided, Tauber has not changed the listed import entry or export shipment from the version that was filed. Consequently, we find that the drawback claim was complete but needed to be perfected. The CBP Regulations provide for the perfection of drawback claims under 19 CFR §191.52(b), which states:
If Customs determines that the claim is complete according to the requirements of § 191.51(a)(1), but that additional evidence or information is required, Customs will notify the filer in writing. The claimant shall furnish, or have the appropriate party furnish, the evidence or information requested within 30 days of the date of notification by Customs. Customs may extend this 30 day period for good cause if the claimant files a written request for such extension within the 30 day period. The evidence or information required under this paragraph may be filed more than 3 years after the date of exportation or destruction of the articles which are the subject of the claim.
In order to qualify for duty drawback under 19 U.S.C. §1313(j)(2), a claimant must establish that the substituted merchandise was a) commercially interchangeable with the imported merchandise b) not used within the United States; c) in the possession of the claimant and d) not subjected to any process of manufacture or other operation except allowable incidental operations as illustrated in 19 U.S.C. §1313(j)(3). We turn now to an examination of the issues raised in this protest:
Possession
The exchange agreement permitted Tauber to obtain methanol held by Sabic at the ITC terminal at Deer Park, TX and repay Sabic with methanol it delivered back to ITC at Deer Park TX or New Orleans, LA. Thus, Tauber contends that it took title to methanol and sold it to its customers under the exchange agreement. Pursuant to the exchange agreement, both Sabic and Tauber used the inspection service after each receipt of methanol into the tank. It is immaterial, then, that the Certificate of Analysis listed “Sabic” and not Tauber as the client.
Additionally, the Tanker Bill of Lading for the export on March 7, 2003 lists Tauber as the shipper of record, and Tauber issued an invoice to Peruquimicos S.A.C. for 418.32 MT of methanol. Tauber is listed as the exporter on the export summary for the shipment laden on the Stolt Durham and exported on March 7, 2003. In B.F. Goodrich Company v. United States, 794 F. Supp. 1148, 1150 (CIT 1992), the Court of International Trade held that the possession requirement of 19 U.S.C. §1313(j)(2) attaches only to the exported goods, not to the imported goods. As Tauber is the exporter of record, a fact that is supported by the export bill of lading and invoice, we find that Tauber possessed the exported product. Consequently, the possession requirement of 19 U.S.C. §1313(j)(2) has been met.
Commercial Interchangeability
Per 19 CFR §191.32(c), 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, Government and recognized industrial standards, part numbers, tariff classification and value. A comparison of the respective certificates of analysis is relevant to determining whether the government and industry standards criterion is met.
In the instant case, Tauber initially sent a certificate of analysis for the wrong tank of methanol, and as such the CBP lab was unable to make a determination of commercial interchangeability. Tauber then provided the correct certificate of analysis, described above. The CBP lab requested information from the port regarding the imported methanol. It stated that that it needed specific gravity @25/25 C, nonvolatile matter, acidity as acetic acid, acetone content, and permanganate time. A review of the Laboratory Test Record for the imported methanol reveals that product was tested for specific gravity @ 25/25 C, acidity as acetic acid and permanganate time. The analysis provided, then, had all the information requested by the lab with the exception of acetone content. Responding to a query from this office, Tauber provided a different Certificate of Quality on the same shipment of methanol which contains acetone content, showing that the product tested at 0.003 acetone content by percentage weight in conformity with the ASTM D1612-95 standard.
A comparison of the respective certificates of analysis for both the imported and substituted methanol reveals that they are identical or nearly identical, and both pass the specifications required pursuant to the exchange agreement. We do note that the product must meet criteria specified in a contract, the exchange agreement. The courts have allowed the use of contract standards such as those in the exchange agreement to be used to determine whether imported and substituted goods are commercially interchangeable. In Texport Oil the U.S. Court of Appeals for the Federal Circuit noted that in addition to the criteria of governmental and industry standards, part numbers, tariff classification, and relative values, the commercial interchangeability analysis may also include a review of "the description of the goods on bills of sale or invoices." Texport at 1295. See also Pillsbury Co. v. United States, 293 F. Supp. 2d 1351, 1356 (Ct. Int’l Trade 2003) (noting that the determination of commercial interchangeability may consider whether "the designated and substitute [merchandise] may be traded on contract standards specific to individual labels"). The imported and substituted products were nearly identical as evidenced by the conformity of both the imported and substituted product with the contract standard, which is indicative of commercial interchangeability.
Waiver
The drawback waiver initially presented from HCI and Brenntag were prepared on Tauber letterhead and were signed by the same person. Thus, it was not entirely clear that the waivers were legal and Tauber could claim drawback on the entries. Tauber states that there some confusion with the waivers due to the sale of HCI to Stinnes A.G., the parent company of Brenntag. There was a transition period in FY 2003 where the use of the name “HCI” was phased out and replaced with “Brenntag Latin America, Inc.” The Brenntag / HCI representative was unsure of how to document the assignment, and the assignment was prepared on Tauber letterhead even though the document was executed by an employee of Brenntag / HCI. Tauber attached replacement assignments with the protest that corrected the error.
The party claiming drawback must either be the importer of the imported merchandise or have received from the person who imported and paid any duty due on the imported merchandise a certificate of delivery transferring to that party, the imported merchandise, commercially interchangeable merchandise, or any combination thereof. See 19 U.S.C. §1313(j)(2(c)(ii)(I &II). Due to the inclusion of the announcement that HCI would shift its name to Brenntag Latin America, and the addition of a corrected assignment, the petitioner has corrected the error and established that Tauber is a proper drawback claimant.
HOLDING
You are instructed to GRANT the protest in full. Sixty days from the date of the decision Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director Commercial and Trade Facilitation Division