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HQ 228617




January 9, 2002

DRA-4-RR:CR:DR 228617 IOR

CATEGORY: DRAWBACK

Donald S. Simpson
Vice President
Barthco Trade Consultants, Inc.
7575 Holstein Avenue
Philadelphia, PA 19153

RE: Commercial interchangeability; 19 U.S.C. 1313(j)(2); tertiary dodecyl mercaptan (TDM)

Dear Mr. Simpson:

The following is in response to your request for a ruling on the commercial interchangeability under 19 U.S.C. §1313(j)(2) of imported and domestic tertiary dodecyl mercaptan (“TDM”) which is imported and manufactured by Elf Atochem North America (“Elf”).

FACTS:

Elf has provided documentation pertaining to the imported and domestic TDM.

IMPORTED MERCHANDISE

There are two purchase orders for the imported TDM. The first purchase order is to a French supplier, dated July 2, 1999, and provides for the purchase of 20,412 Metric Tons (MT) of “tertiary dodecyl mercaptan isotank”, at a per MT price. The merchandise is referred to as item 00010 and material number 2629. The commercial invoice, dated August 9, 1999, is for 18,380 MT of “T-Dodecylmercaptan VRAC”, at the same price per MT. The invoice sets forth the “Customs tarif” as 29309070. The invoice does not make any reference to an item number, but in the “Customer reference” does refer to the same material number, 2629, following the purchase order number. The second purchase order is to the same French supplier, and is identical except for a different purchase order number. With respect to the second purchase order, the commercial invoice is for 18,320 MT of “T-Dodecylmercaptan VRAC”, at the same price per MT, dated August 20, 1999. The second invoice also references the same material number in the “Customer reference”. Neither purchase order includes specifications.

According to your submission, the imported TDM is classified under subheading 2930.90.9050, Harmonized Tariff Schedule of the United States (HTSUS).

EXPORTED DOMESTIC MERCHANDISE

Elf has provided documentation of two sales of the domestic merchandise. The first sale is pursuant to a purchase order dated July 19, 1999 to Elf, from a Brazilian customer. The purchase order is for 12,600 Kg of “terciary dodecyl mercaptan –TDM”, in drums, at a per kilogram price. The invoice from Elf to the purchaser is dated July 30, 1999, and is for 12,737.004 kg of “tertiary dodecyl mercaptan,” at the price indicated on the purchase order. In this first sale, the price of the exported TDM sold by Elf, converted to a “per MT” price, was 2.4% greater than the per MT price for the imported TDM.

The second sale is pursuant to a purchase order dated August 25, 1999 to Elf, from a Japanese customer. The purchase order is for 12,571.2 Kg of “N-Dodecylmercaptan (NDM)” at a per per kilogram price in Japanese Yen. The invoice from Elf to the purchaser is dated September 17, 1999, and is for 12,573.710 Kg of “Normal Dodecyl Mercaptan”, at the price indicated on the purchase order. In this second sale, the price of the exported NDM sold by Elf, converted to a “$ per MT” price, was 87.4% greater than the per MT price for the imported TDM.

None of the purchase orders or invoices for the exported domestic merchandise contain any references to item or material numbers.

According to your submission, the exported TDM is classified under subheading 2930.90.9050, HTSUS. The documents submitted also include technical data sheets for “tertiary dodecyl maercaptan”, with specifications, for the imported and exported merchandise. The technical data sheets do not contain any references to item or material numbers. The specifications for the imported and exported merchandise are similar, but are expressed in different terms. For the imported merchandise the specifications are expressed as follows:

Purity [Gaschromatography FT 07]..≥98.5% S (SH) [Potentiometry MA 104]..≥15.6%
Color APHA [MA 102/NFT 20-605]...≤ 15

For the exported merchandise the specifications are expressed as follows:
t-Docecyl Mercaptan (Wt.%)98.5% Minimum
Mercaptan Sulfur (Wt.%)..15.6 Minimum
Color APHA..15 Maximum Water White

According to the Office of Laboratories and Scientific Services (OLSS), currently, there are no industry, government or military standards for the TDM. In a laboratory analysis dated March 27, 2000, OLSS concluded that the foregoing specifications can be used to establish commercial interchangeability. The critical criteria of the merchandise were determined by OLSS to be the following:

Purity (i.e., percent by weight (Wt.%) of t-dodecyl mercaptan)98.5% min. Sulfur Content (expressed as Wt.% of mercaptan)15.6% min. Color APHA..15 max.

In its report, OLSS concluded that the submitted specifications are sufficient to determine commercial interchangeability of the imported and exported TDM.

In the laboratory report OLSS also stated that the “properties” listed in the technical data sheets for the merchandise differ for the exported and imported merchandise, showing different properties and values. According to OLSS the technical information provided under the “properties” are “literature” properties/values which are published in technical books, and should not be considered as part of the standard specifications for the instant chemical.

The foregoing specifications are not applicable to the exported domestic merchandise reflected in the second set of transaction documents in the sale of merchandise to the Japanese customer. The merchandise in that transaction is described as “N-Dodecylmercaptan (NDM)” and “Normal Dodecyl Mercaptan”, as opposed to TDM. According to OLSS, the “t” in TDM stands for a tertiary form of compound, and the “n” in NDM stands for the normal form of a compound. The chemicals are called isomers of the same compound but have different chemical properties and functions. No specifications or technical data sheets were provided for “Normal Dodecyl Mercaptan” or NDM.

ISSUE:

Whether the imported TDM and substituted TDM are commercially interchangeable for purposes of 19 U.S.C. §1313(j)(2).

LAW AND ANALYSIS:

Under 19 U.S.C. §1313(j)(2), as amended, substitution unused merchandise drawback may be granted if there is, with respect to imported dutypaid 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 3 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 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 statute did not define commercially interchangeable.

The drawback statute was substantively amended by section 632, title VI  Customs Modernization, Pub. L. No. 103182, the North American Free Trade Agreement Implementation (NAFTA) Act (107 Stat. 2057), enacted December 8, 1993. Before its amendment by Public Law 103182, the standard for substitution was fungibility. House Report 103361, 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 C.F.R. §191.2(l)), prior to their amendment on March 5, 1998. 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. 103189, 103d Cong., 1st Sess., 8185 (1993)) contains similar language and states that the same criteria should be considered by Customs in determining commercial interchangeability. In addition, the Senate Report states that Customs “should evaluate the critical properties of the substituted merchandise, rather than basing its determination on subjective standards.” Senate Report, at page 83.

In order to determine commercial interchangeability, Customs adheres to the Customs regulations which implement the operational language of the legislative history. The best evidence whether those criteria are used in a particular transaction are the claimant’s transaction documents. 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. The purchase and sale documents also provide the best evidence with which to compare relative values. Also, if another criterion is used by the claimant to sort the merchandise, the claimant’s records would show that fact which will enable Customs to follow the Congressional directions.

The evidence submitted does not appear to pertain to NDM, and it appears that the submission of documents for the sale of NDM was in error, as NDM is not mentioned in any of the importer’s submissions explaining its transactions and ruling request. Even if it was intended that the commercial interchangeability of TDM and NDM be considered, insufficient evidence regarding NDM has been submitted, as there is no evidence of the specifications or classification of NDM. The analysis below pertains to the TDM only. In addition, the price of the exported NDM was 87.4% greater than the imported TDM, which, without explanation, would preclude a finding of commercial interchangeability in any event.

In order to determine whether the TDM is commercially interchangeable, an analysis of the following factors must be done:

1. Governmental and Recognized Industry Standards

In the OLSS report dated March 27, 2000, it was concluded that there are no industry, government or military standards for the TDM. The OLSS report concluded that although expressed in different terms, the specifications submitted are sufficient to make a determination on commercial interchangeability. The specifications in this case are identical for the imported and substituted TDM.

The terms “isotank” and “vrac” on the purchase orders and invoices for the imported merchandise refer to the shipment of the TDM. The term “isotank” specifies shipment in a tank container built according to International Standards Organization (ISO) requirements. The term “vrac” refers to shipment in bulk, in French. The imports were ordered for delivery by tank, and the export was ordered by drums. These terms thus do not pertain to the characteristics of the merchandise itself, under these facts.

In this case, we conclude that the specifications of the imported and domestic TDM support a finding that the merchandise is commercially interchangeable, provided that the merchandise in fact meets the specifications set forth in the technical data sheets.

2. Tariff Classification

According to your submission, both the imported and substituted domestic TDM is classified in subheading 2930.90.9050, HTSUS. As both the imported and domestic TDM is classified under the same HTSUS subheading, a finding of commercial interchangeability is supported by this criteria.

3. Part Numbers

According to the documentation submitted, an item and material number was used with respect to the imported merchandise. No such numbers were used with respect to the sale of the domestic TDM, or in the technical data sheets. We find that because part numbers are not used in all of the documents, there is insufficient evidence to suggest that the TDM is bought or sold pursuant to part numbers. We find the use of item and material numbers in the import transaction alone does not preclude a finding of commercial interchangeability. However if the export sale documents did contain different item and material numbers, such difference would have to be explained before a determination of commercial interchangeability could be made.

4. Relative Values

The evidence submitted shows that the value for the exported TDM sold to the Brazilian customer in accordance with the purchase order dated July 19, 1999 is 2.4% greater than the value of the imported TDM, purchased from the French supplier, by purchase orders dated July 2, 1999. This criteria supports a finding of commercial interchangeability, as the difference in relative value is at an acceptable range.

Because we find that the governmental and recognized industry standards criteria, the tariff classification criteria, and the relative value criteria are met, and the part number criteria is inapplicable, the imported and substituted exported TDM are commercially interchangeable.

HOLDING:

The imported TDM and substituted TDM are commercially interchangeable for purposes of 19 U.S.C. §1313(j)(2).

Sincerely,

John Durant
Director

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