HQ 225547 - Request for internal advice; Drawback; 19 USC 1313(j)(2); Commercial interchangeability; Soybean meal - United States International Trade Commision Rulings

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HQ 225547

September 25, 1995

DRA-4-R:C:E 225547 GOB

CATEGORY: DRAWBACK

Regional Commissioner of Customs
Drawback Liquidation Branch
423 Canal Street, Room 337
New Orleans, LA 70130-2341

RE: Request for internal advice; Drawback; 19 USC 1313(j)(2); Commercial interchangeability; Soybean meal

Dear Sir:

FACTS:

This ruling is in response to your memorandum dated July 1, 1994 which requested internal advice pursuant to 19 CFR 177.11 with respect to the commercial interchangeability of certain soybean meal.

At issue are Drawback Entry C20-xxxxx41-3 dated July 20, 1987 and Drawback Entry C20-xxxxx34-3 dated April 5, 1990. Each drawback entry relates to both 44% soybean meal and high protein soybean meal. The drawback claimant is Archer Daniels Midland Co. ("claimant").

In a letter dated April 28, 1994, the claimant states, in pertinent part:

ADM respectfully submits that under the revised standard [commercial interchangeability], all of its shipments meet the relevant criteria including, without limitation, conformity with industry standards (see enclosed NOPA letter), part numbers (see enclosed Standard Industrial Classification Codes), tariff classification (see Customs Form 7501 and export documents previously filed by ADM), and relative values (see enclosed NOPA letter).

In support of its claim with respect to the commercial issue, the claimant has submitted a letter dated April 28, 1994 from the president of the National Oilseed Processors Association ("NOPA"), which states in pertinent part:

I am writing to confirm that 44% and high protein soybean meal, traded domestically and in international world markets, is regarded as a commercially interchangeable commodity. Soybean meal traded in world markets is traded under contracts and specifications which include characteristics such as protein, fibre, fat and moisture content. The soybean meal may also contain a flowing agent. When two shipments of soybean meal fall within the allowable ranges established for each of the characteristics and are acceptable by the buyer with or without contract adjustments, such shipments are commercially interchangeable regardless of the origin of the raw soybeans or the processed soybean meal and are so recognized by traders and users throughout the world.

ISSUE:

Are the imported and substituted soybean meal commercially interchangeable for the purpose of 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, any 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 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.

The drawback statute was substantively amended by section 632, title VI - Customs Modernization, Pub. L. No. 103-182, the North American Free Trade Agreement Implementation ("NAFTA") Act (107 Stat. 2057), enacted December 8, 1993. Before its amendment by Public Law 103-182, the standard for substitution was fungibility. House Report 103-361, 103d Cong., 1st Sess., 131 (1993) contains language explaining the change from fungibility to commercial interchangeability. According to the House Ways and Means Committee Report, the standard was intended to be made less restrictive, i.e., "the Committee intends to permit substitution of merchandise when it is commercially interchangeable,' rather than when it is commercially identical'" (the reference to "commercially identical" derives from the definition of fungible merchandise in the Customs Regulations (19 CFR 191.2(l)). 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 industry standards, part numbers, tariff classification, and relative values.

The Senate Report for the NAFTA Act (S. Rep. 103-189, 103d Cong., 1st Sess., 81-85 (1993)) contains similar language and states that the same criteria should be considered by Customs in determining commercial interchangeability.

Governmental and Recognized Industry Standards

The claimant has submitted the NOPA letter dated April 26, 1994, supra, in support of its claim on this criterion. For the reasons stated infra, we find that the NOPA letter is not supportive of the claimant's claim. Initially we note that it is not totally clear from the NOPA letter which soybean meal is being stated to be commercially interchangeable with which soybean meal. The first sentence of the NOPA letter, excerpted supra, indicates or suggests that 44% soybean meal is commercially interchangeable with high protein soybean meal. If this were so, then the commercial reason for delineating between 44% soybean meal and high protein soybean meal is inexplicable. Moreover, the copies of the contracts refer to other contracts that are not in the file. However, as we understand the matter, the claimant is claiming that the 44% soybean meal it imported is commercially interchangeable with the 44% soybean meal it exported. Similarly, as we understand this matter, the claimant claims that the high protein soybean meal which it imported is commercially interchangeable with the high protein soybean meal it exported. We do not believe that the facts of this matter indicate that the appropriate inquiry is whether the 44% soybean meal is commercially interchangeable with the high protein soybean meal. We note additionally that certain documents in the file refer to a 48% soybean meal. We assume that the 48% soybean meal is the high protein soybean meal at issue here.

Even if we were to read the NOPA letter as purporting to state or indicate that the 44% soybean meal which the claimant imported is commercially interchangeable with the 44% soybean meal which the claimant exported, and the high protein soybean meal which the claimant imported is commercially interchangeable with the high protein soybean meal which the claimant exported, the NOPA letter does not satisfactorily establish the commercial interchangeability of the pertinent soybean meal.

Relative Values

As excerpted supra, the claimant's letter of April 28, 1994 cites the NOPA letter in support of its claim of commercial interchangeability with respect to the relative values criterion.

We find that the NOPA letter is not supportive of the claimant's claim in this regard. The NOPA letter contains no specific value or price documentation or data. Generally, with respect to the relative values criterion, we wish to see, in a comprehensible and organized format, the actual values, or prices, of the imported and the exported merchandise in order that these values can be legitimately and concretely compared.

Tariff Classification

The documentation in the file indicates that most, or all, of the imported soybean meal was entered under item 184.52, Tariff Schedules of the United States ("TSUS"). There is no documentation with respect to which TSUS item the exported soybean meal would have been appropriately classified under for import purposes. We note that it would appear to be likely that the exported soybean meal would be classified under the same TSUS item (or subheading of the Harmonized Tariff System of the United States) as the imported soybean meal.

In this matter we believe that the tariff classification criterion is of very limited probative value on the commercial interchangeability issue because the tariff classification includes both soybean meal and cake, two apparently different articles of commerce, and provides no differentiation as to grades or quality.

Part Numbers

With its letter of April 28, 1994, the claimant has submitted a sheet which would appear, on the basis of its letter, to state the Standard Industrial Classification Code for soybean meal. The sheet indicates that "Soybean Cake, Meal, and Other Byproducts" is contained within Product Code 20752 and that "Cake and Meal" are contained within Product Code 2075211-9.

We find this information to be of little probative value on the issue of commercial interchangeability. Similar to our statement in the Relative Values section, we wish to see, in a comprehensible and organized format, the actual descriptive numbers used by the claimant (if there are any such numbers) of the imported and the exported merchandise in order that these numbers can be legitimately and concretely compared. There may be no such descriptive numbers used by the claimant.

Additional Comments

We add the following comments with respect to the subject drawback claims. These comments are not intended to be all encompassing with respect to the claims, but are merely comments based on our review of the file with respect to the commercial interchangeability issue.

With respect to many of the import entries in the file, it is not clear which soybean meal is 44% and which is high protein.

With respect to Drawback Entry C20-xxxxx41-3, we note that the soybean meal indicated on two import entries totals 150,310 pounds, which is the amount of 44% soybean meal claimed on the drawback entry. The amount of soybean meal on the other import entries which presumably pertain to Drawback Entry C20-xxxxx41-3 is 1,918,289 pounds, which is 50,000 pounds less than the amount of high protein soybean meal claimed on this drawback entry.

With respect to Drawback Entry C20-xxxxx34-3, we note that the amount of soybean meal reflected on the import entries in the file is much less than the amounts claimed on the drawback entry, i.e., 27,929,131 pounds of 44% soybean meal and 13,471,212 pounds of high protein soybean meal.

The claimant has submitted a Chemical Analysis Certificate, an Inspection Certificate, and several Quality Certificates with respect to certain soybean meal. This documentation is not supportive of the claimant's claim because we are unable to determine to what degree, if any, this documentation serves to prove that the imported 44% soybean meal is commercially interchangeable with the exported 44% soybean meal and that the imported high protein soybean meal is commercially interchangeable with the exported high protein soybean meal.

We note additionally that the moisture levels stated on all of these certificates do not meet the specifications described in C.S.D. 87-14, i.e., the moisture levels stated on these certificates are above the maximum moisture of 12% stated in C.S.D. 87-14.

After a review of the available evidence, we are unable to conclude that the evidence of record supports a finding that the imported and substituted 44% soybean meal are commercially interchangeable. Similarly, we are unable to conclude that the evidence of record supports a finding that the imported and substituted high protein soybean meal are commercially interchangeable.

HOLDING:

We are unable to conclude that the imported and exported 44% soybean meal are commercially interchangeable for the purpose of 19 U.S.C. 1313(j)(2). Similarly, we are unable to conclude that the imported and exported high protein soybean meal are commercially interchangeable for the purpose of 19 U.S.C. 1313(j)(2).

This decision should be mailed by your office to the claimant no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

John Durant
Director

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