HQ 225418 - Request for Internal Advice on behalf of Allied Signal Inc.; re commercial interchangeability of caprolactam; 19 U.S.C. - United States International Trade Commision Rulings

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October 12, 1994

HQ 225418

DRA-4-CO:R:C:E 225418 CB

CATEGORY: DRAWBACK

Ms. Nora Ehrlich
Chief, Liquidation Branch
Southeast Region
U.S. Customs Service
909 S.E. 1st Avenue
Miami, FL 33131

RE: Request for Internal Advice on behalf of Allied Signal Inc.; re commercial interchangeability of caprolactam; 19 U.S.C.

Dear Ms. Ehrlich:

This is in response to your letter of May 11, 1994, wherein you requested our determination on the commercial interchangeability of the chemical, caprolactam, under same condition substitution drawback.

FACTS:

AlliedSignal Inc., Chemicals Division imports caprolactam. AlliedSignal wishes to substitute domestic caprolactam. Commercial caprolactam, both imported and domestic, is the major component of nylon fibers, resins, and films. According to the applicant, the commercial world accepts the imported and substituted manufactured caprolactam as interchangeable in all instances. The applicant states that its customers would accept both the designated imported or substitute caprolactam and both are sold at the same price.

You have requested that we make a determination regarding the substitution of caprolactam for the purposes of same condition substitution drawback.

ISSUE:

Are the imported and substituted caprolactam commercially interchangeable for 19 U.S.C. 1313(j)(2) purposes?

LAW AND ANALYSIS:

Under 19 U.S.C. 1313(j)(2), as amended, drawback may be granted if, among other requirements, there is, with respect to imported duty-paid merchandise, any other merchandise that is commercially interchangeable with the imported merchandise. To qualify for drawback, the other merchandise must be exported or destroyed within 3 years from the date of importation of the imported merchandise. Also, 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. Further, the party claiming drawback must be either 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.

The drawback law was substantively amended by section 632, title VI - Customs Modernization, Pub. L. 103-182, the North American Free Trade Agreement Implementation Act (107 Stat. 2057), enacted December 8, 1993. According to the applicable legislative history, the amendments to the drawback law (19 U.S.C. 1313) are applicable to any drawback entry made on or after the date of enactment as well as to any drawback entry made before the date of enactment if the liquidation of the entry is not final on the date of enactment (H. Rep. 103-361, 103d COng., 1st Sess., 132 (1993). House Report 103-361, supra, also contains language explaining the change from fungibility to commercial interchangeability as a standard for substitution for drawback under 19 U.S.C. 1313(j)(2). According to the Report (at page 131), the standard was intended to be made less restrictive (i.e, "the Committee intends to permit the substitution of merchandise when it is 'commercially interchangeable.' Rather than when it is 'commercially identical'"). The Report (at page 131) also states:

The Committee further intends that in determining whether two articles were commercially interchangeable, the criteria to be considered would include, but not be limited to: Governmental and recognized industrial standards, part numbers, tariff classification, and relative values.

Therefore, in order to determine whether the caprolactam is commercially interchangeable, the following analysis must be made:

1. Recognized industrial standards: The importer provided the commercial specifications and background information on industry standards for caprolactam and it has been determined that the standards are met.

2. Tariff classification: It appears that both the imported and substituted caprolactam are classifiable under subheading 2933.71.oo, Harmonized Tariff Schedule of the United States (HTSUS). Therefore, the tarrif classification criteria has been met.

3. Part number. It is assumed that this criteria is not applicable because there is no reference to part numbers in the information supplied by the importer.

4. Relative values of imported and exported caprolactam. The claimant states that the imported and domestic caprolactam would be sold at the same price. We interpret that statement to mean that the import invoice and the export invoice show that the imported caprolactam and the exported caprolactam that forms the basis for drawback eligibility would show the same price. On that basis, the relative value criteria would be satisfied.

You stated in your request that the Customs Laboratory in Savannah, Georgia, had indicated that the tested merchandise is "fungible", however, due to the method of packaging, the moisture content of the samples could not be determined. Your request, together with the information you submitted, was forwarded to the Office of Laboratories & Scientific Services ("OLSS") for their review. OLSS provided the following comments:

In the report, dated October 10, 1993, the Savannah Laboratory states that they were unable to verify the moisture content of the samples, however, we note that the moisture content is stated in the certificates of analysis submitted by the applicant. The moisture data show similar moisture content values for the domestic and imported merchandise. Therefore, based on this information and the ...listed specifications, it is our opinion that the domestic merchandise is "commercially interchangeable" with the imported (Russia) merchandise...

Additionally, we have reviewed the specifications submitted for caprolactam imported from Czech Republic (see importer's letter dated April 6, 1993), and find that the Czech caprolactam product is also "commercially interchangeable" with domestic caprolactam.

Based on the foregoing, unless you are not satisfied with OLSS' determination, we conclude that claimant has established commercial interchangeability for purposes of the drawback claims.

HOLDING:

The merchandise in this case (caprolactam) is commercially interchangeable for purposes of the substitution same condition drawback law unless the claimant uses different part numbers for the different lots of caprolactam.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and to the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels within 60 days from the date of this decision.

Sincerely,

John Durant, Director
Commercial Rulings Division

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