HQ 230363 - Protest number 5301-03-100136; Arco Chemical Co.; Denial of drawback claim; 19 USC § 1313(p); 19 USC § 1514; same kind and quality; polyether polyols; classification; commercial interchangeability. - United States International Trade Commision Rulings

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HQ 230363

July 6, 2004

DRA-4 RR:CR:DR 230363 RDC

CATEGORY: PROTEST

Port Director
Customs and Border Protection
Houston Service Port
2350 N Sam Houston Parkway East
Suite 1000
Houston, Texas 77032-3126
Att: Deidra Golden

RE: Protest number 5301-03-100136; Arco Chemical Co.; Denial of drawback claim; 19 USC § 1313(p); 19 USC § 1514; same kind and quality; polyether polyols; classification; commercial interchangeability.

Dear Sir or Madam:

Protest number 5301-03-100136 was forwarded to this office for further review on February 27, 2004. We have considered the evidence provided and the points raised by your office and the Protestant. Our decision follows.

FACTS:

The Protestant, Arco Chemical Co., (Arco), protests the denial of drawback claim AA6-xxxxx56-6. The drawback entry is filed on a CF 7539, “Drawback Entry Covering Same Condition Merchandise,” dated December 1, 1997, and the declaration stating that the merchandise was substituted is checked and signed. Included with the claim was a cover letter from the broker stating that the claim is a “1313J(P)” and “Same Condition Merchandise” claim. This letter also states that the imports and exports are “Polyether Polyols.” The claim was received by CBP on December 2, 1997.

On an attachment to the protested drawback claim that is labeled “Exporter[‘]s Chronological Summary By Date,” Arco describes the four exports. The exported articles are described as “polyethers” classified at 3907.20.00, HTSUS, and exported on April 3 and April 24, 1997. The exporting carrier and quantity are stated. The “part / model / style number is the 8-digit HTSUS number. In another attachment labeled “CF-7539 Continuation Sheet by Part # / Product Code,” dated December 1, 1997, the imported articles are described by entry number, import date, port code, reference number (which appears to be the name of a vessel), part number / product code (which appears to be the HTSUS subheading 3907.20.00), quantity claimed, value per unit, duty rate, duty paid per unit and drawback claimed. The imported articles are covered by 21 entries with import dates between November 23, 1996, and April 18, 1997. Total drawback claimed is 100 percent of the duty paid, $254,096.03.

Also provided are three letters from a customs broker addressed to CBP. One letter dated November 18, 1997, is addressed to CBP in Newark, New Jersey. This letter references 8 of the entries included on Arco’s “CF-7539 Continuation Sheet” and advises that because of “clerical error” the goods covered by these entries were classified under subheading 3903.90.50.00, HTSUS, at entry, but the correct classification should have been 3907.20.00.00, HTSUS. The entries referred to are 66-3, 65-6, 68-7, 55-6, 93-3, 00-8, 80-3, and 65-4. According to ACS, entry numbers 66-3, 65-6, 68-7, and 55-6 liquidated on April 11, 1997, March 14, 1997, May 9, 1997, and May 2, 1997, respectively, with the goods classified under subheading 3903.90.50, HTSUS.

A second letter dated November 18, 1997, is addressed to CBP in Houston and refers to five entries, numbers 63-9, 65-4, 15-3, 14-6, and 57-7, that are included on the attachment labeled “CF-7539 Continuation Sheet by Part # / Product Code.” This letter also states that there was an error in the classification of the goods at entry and the correct classification is 3907.20.00, HTSUS. According to ACS, entry numbers 63-9 and 14-6 liquidated July 7, 1997, and May 30, 1997, respectively, with the goods classified under subheading 3903.90.50, HTSUS.

The third letter, dated November 5, 1997, refers to entry number 37-7, and states that, for lines one and two, a clerical error caused the goods to be incorrectly classified at entry. The correct classification should have been 3907.20.00, HTSUS. The letter requests that the entry be reliquidated and excess duty paid in the amount of $337.41 be refunded. According to ACS, entry number 37-7 liquidated once, on February 2, 1998, with both lines of goods classified under subheading 3903.90.50, HTSUS.

Included with the file are facsimile copies, dated February 19, 2004, of “Material Safety Data Sheet[s]” for substances called “Arcol® Polyol F-3020” and “Arcol® Polyol 2580.” These substances are described as “Polyether polyols” from Lyondell Chemical Company. There are also “Material Safety Data Sheet[s]” for Arcol® Polyol E-656, Arcol® Polyol E-644 from Arco. This material is also described as “polyether polyols.”

According to ACS the protested drawback entry was liquidated on January 10, 2003, with zero drawback allowed. This claim was denied by the Houston drawback Center, (Houston), because the designated qualified articles and the exported articles were not classified under the same 8-digit Harmonized Tariff Schedule of the United States, (HTSUS), tariff classification number. The instant Protest was received on April 10, 2003, and a “supplemental legal argument” was received by CBP on December 18, 2003. On February 11, 2004, a representative of Houston requested further information from the Protestant’s broker to establish commercial interchangeability. No information was provided. The Protest was forwarded for further review on February 27, 2004.

ISSUE:

Whether designated qualified articles liquidated under subheading 3903.90.50, HTSUS (1997), and described as “polyether polyols,” and exported articles described as polyether polyols classified under 3907.20.00, HTSUS (1997), are of the “same kind and quality” as required by 19 U.S.C. § 1313(p)(3)(B)?

LAW AND ANALYSIS:

We note initially that the instant Protest was timely filed, i.e., within 90 days of the refusal to pay the drawback claim (19 U.S.C. § 1514(c)(3)(B)). Under 19 U.S.C. § 1514 “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the refusal to pay a claim for drawback . . .” (§ 1514(a)(6)) are final unless a protest of that decision is filed within 90 days of the decision to deny drawback (§ 1514(c)(3)(B)). The drawback claim was liquidated on January 10, 2003, with zero drawback paid, and this Protest was filed on April 10, 2003.

In its cover letter accompanying the drawback claim Arco describes the imported and exported articles as “polyether polyols.” However, we note at the outset that there is very little evidence, independent of the Protestant’s assertions, from which to determine the nature or identity of the imported and exported articles. There are no entry documents, no bills of lading, no invoices or packing lists to evidence the importations. There are no carrier bills of lading or invoices or manifests provided to substantiate the exports. Essentially, no independent evidence of any kind has been provided to substantiate the drawback claim.

The only documents provided by Arco are the drawback claim and attachments, prepared by Arco’s broker and the “Material Safety Data Sheets.” These Data Sheets are not linked in any way to the imports or exports, their significance is not explained nor related to the instant Protest. Therefore, there is no way to determine what it is they are intended to evince and they are not considered here. Accordingly, we make no determinations as to the nature of the imported and exported articles, but refer to them as “polyether polyols” because the Protestant describes them as such.

Moreover, we note the instant protest is so seriously deficient of legal justification for its argument that it does not meet the requirements of 19 C.F.R. § 174.13, which requires that the justification for the protest "be set forth distinctly and specifically." The protestant has not provided a recitation of the facts nor conclusions drawn from the facts have been provided. Nor does the Protestant provide the legal framework which supports the facts and events. See XL Specialty Ins. Co. v. United States, Ct. Intl. Trade Slip Op. 2004-61 (June 8, 2004); Koike Aronson, Inc. v. United States, 165 F.3d 906 (Fed. Cir. 1999).

According to the “Attachment to Protest,” drawback entry AA6-xxxxx56-6 claims drawback per 19 U.S.C. § 1313(p). Section 1313(p) of the United States Code (19 U.S.C. §1313(p)) provides for drawback of 100 percent of the duty on certain petroleum derivatives. Under § 1313(p)(1), notwithstanding any other provision of § 1313, if:

(A) an article (referred to in section 1313(p) as the “exported article”) of the same kind an quality (as specifically defined in section 1313(p)) as a qualified article is exported; (B) the requirements set forth in section 1313(p)(2) are met; and (C) a drawback claim is filed regarding the exported article,
drawback shall be allowed, in accordance with the provisions of paragraph (4). For purposes of this subsection a “qualified article” per § 1313(p)(3)(A)(i)(II), means an article described in “headings 3901 through 3914,” HTSUS, (among other headings), which is imported and duty-paid (see also 19 C.F.R. §191.172(a)).

For purposes of drawback per 1313(p),

An article, including an imported, manufactured, substituted, or exported article, is of the same kind and quality as the qualified article for which it is substituted under this subsection if it is a product that is commercially interchangeable with or referred to under the same eight-digit classification of the Harmonized Tariff Schedule of the United States as the qualified article . . . .

(19 U.S.C. § 1313(p)(3)(B)). The exported articles here are described on Arco’s “Exporter[‘]s Chronological Summary By Date,” as “polyether polyols” classified at 3907.20.00, HTSUS. CBP records reflect that the designated qualified articles were entered and liquidated under subheading 3903.90.50, HTSUS.

Per § 1313(p)(3)(B), the designated qualified polyether polyols entered under subheading 3903.90.50, HTSUS, would be of the same kind and quality as the exported polyether polyols, for which they are substituted, if the imported polyols are either a product that is commercially interchangeable with, or “referred to under the same eight-digit classification of the HTSUS,” as the exported polyols. Therefore, merchandise that was classified and liquidated under subheading 3903.90.50, HTSUS, would not be the same kind and quality as exported merchandise that was asserted to be classifiable under subheading 3907.20.00, HTSUS, because the merchandise is not “referred to under the same eight-digit classification” as required by § 1313(p)(3)(B).

In its February 19, 2004, Arco argues that “[b]ecause the consumption entries for the imports were not properly reclassified does not negate the eligibility of this claim under 19 U.S.C. §1313(p)(2)(F) . . . . . We disagree. Per 19 U.S.C. § 1514, CBP decisions regarding classification of goods (and other issues) that are not protested within 90 days of liquidation (absent certain actions on the part of the importer or CBP within the specified time limits), are final and binding on all parties, including CBP. (See HRL 966932, March 10, 2004, which held § 1514 makes final CBP decisions as to the classification, among other decisions, for entered goods, unless a protest is filed against that decision in accordance with § 1514(c)).

According to ACS, entry numbers 66-3, 65-6, 68-7, and 55-6 liquidated on April 11, 1997, March 14, 1997, May 9, 1997, and May 2, 1997, respectively, with the goods classified under subheading 3903.90.50, HTSUS. These entries were among those referred to in the November 18, 1997, letter addressed to CBP in Newark, New Jersey, requesting that the goods be reclassified under subheading 3903.90.50, HTSUS. According to ACS, entry numbers 63-9 and 14-6, which were referred to in the November 18, 1997, letter addressed to CBP in Houston, liquidated July 7, 1997, and May 30, 1997, respectively, with the goods classified under subheading 3903.90.50, HTSUS.

However, there is no evidence that CBP ever received the two letters dated November 18, 1997. The letter to Newark is simply addressed “United States Customs Service, Newark NJ, ATTN: Chemical Team,” no street address or zip code is provided. We note that in 1997 the chemical team for the port of Newark was located at 6 World Trade Center, New York, NY and that this letter would have had to be forwarded from Newark to New York. Neither letter is date-stamped as received by CBP nor contain any markings which would lead to the conclusion that they were received. In addition, Houston has no record of receiving this letter or taking action on it. (We note that all records retained by Newark’s chemical team were destroyed on September 11, 2001.)

Representatives from each port stated that if the letters had been received, some response would have been sent to the broker. No such response is mentioned by the Protestant. The Protestant states only that, “Arco made an unsuccessful attempt to correct the [classification of the goods covered by the ]designated import entry . . . .” These two letters are dated more than 90 days after six of the entries were liquidated. Per § 1514, the classification of the goods covered by these entries was final and binding on all parties after 90 days from liquidation elapsed without a valid protest having been filed. We note that since the letters state that the error in classification was due to a “clerical error” Arco had until one year after the date of liquidation to petition for re-liquidation of the entries per 19 U.S.C. § 1520(c)(1) with the goods classified under the correct subheading.

The third letter, dated November 5, 1997, referred to entry number 37-7 which was liquidated on February 2, 1998, with both lines of goods classified under subheading 3903.90.50, HTSUS. Again, the February 2, 1998, letter bears no evidence of ever having been received by CBP and Houston has no record of its receipt. Moreover, the letter requests that the entry be “reliquidated” even though the entry had not yet liquidated at the time the letter is dated. We note that if this letter had been received by CBP before May 2, 1998, it would have been untimely as a protest per § 1514(b)(3)(A) which states that a protest must be filed within 90 days of “but not before notice of liquidation . . . .” Also, a petition for reliquidation per 19 USC § 1520(c)(1) requires the “error, mistake, or inadvertence [to be] brought to the attention of [CBP] within one year after the date of liquidation . . . .”

Accordingly, to the extent that 90 days from the liquidation of the entries comprising the designated qualified articles elapsed without any action taken by the Protestant to prevent the finality of the liquidations per § 1514, the classification of the designated qualified articles was final at subheading 3903.90.50, HTSUS. Consequently, per § 1313(p)(3)(B), the designated qualified polyether polyols liquidated under subheading 3903.90.50, HTSUS, are not of the same kind and quality as the exported polyether polyols, for which they are substituted, because the imported polyols are not “referred to under the same eight-digit classification of the HTSUS,” as the exported polyols.

Section 1313(p)(3)(B), also allows the designated qualified polyether polyols to be deemed of the same kind and quality as the exported polyether polyols, for which they are substituted, if the imported polyols are commercially interchangeable with the exported polyols. The CBP Regulations at 19 C.F.R. § 191.32(c) provide 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 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 CBP to follow the Congressional directions.

HRL 230172, February 26, 2004, addressed the commercial interchangeability of imported and domestic polyol for purposes of substitution, unused merchandise drawback under 19 U.S.C. §1313(j)(2). In HRL 230172 we stated, “Polyol is used exclusively in the manufacture of polyurethane foam and has no other commercial application. Polyol is the base factor in the manufacturing process and when combined with other elements in different percentages creates foam of different densities. . . . . Each polyol has different physical and chemical properties and is used to create a specific type of foam. The polyol grade numbers are used to identify the polyols in the importation, exportation, laboratory analysis, and inventory documents.”

With regard to the instant Protest, the qualified article, the imported polyether polyols, is compared to the exported article, polyether polyols. However, there is insufficient evidence to determine commercial interchangeability. This information was requested by letter dated February 11, 2004, but was not provided. As stated above, no independent evidence was provided to even conclude that the imported and exported articles were both polyols. And even if that had been substantiated, there is no evidence of the grade numbers “used to identify the polyols in the importation, exportation, laboratory analysis, and inventory documents” as stated in HRL 230172.

On both the Exporter[‘]s Chronological Summary By Date” and the “CF-7539 Continuation Sheet by Part # / Product Code” the part / model / style number and the “part number / product code” are the asserted classifications, 3907.20.00, HTSUS. Therefore, there are no part numbers to compare. With respect to governmental and recognized industrial standards, if a standard is published and the good is traded in conformance with that standard, it is probable that the imported and exported goods are commercially interchangeable. But, in the instant case no standards are supplied, nor are there any sales documents to evidence how polyether polyols are traded.

With regard to tariff classification, even if § 1514 did not work to make the classification binding, there is insufficient information provided to determine the correct classification of either the imported designated qualified articles or the exported polyether polyols. Finally, the information necessary to calculate the value of the articles is only provided for the imported designated qualified articles. The “CF-7539 Continuation Sheet“ contains the value per unit and the quantity claimed. But, no value information is provided for the exported articles. Consequently, without any evidence for the imported designated articles and the exported articles supporting the determination of commercial interchangeability in each of the characteristics, industrial standards, part numbers, tariff classification and value, no determination of commercial interchangeability can be made. Therefore, the designated qualified articles cannot be said to be of the same kind and quality as the exported articles as required by § 1313(p)(3)(B) and the drawback claim AA6-xxxxx56-6 was properly denied.

HOLDING:

Per 19 U.S.C. § 1313(p)(3)(B), the exported “polyether polyols” classified at 3907.20.00, HTSUS, and the designated qualified “polyether polyols” entered and liquidated under subheading 3903.90.50, HTSUS, and are not of the same kind and quality because they are not classified under the same eight-digit classification of the HTSUS, and there is insufficient information to determine that they are commercially interchangeable.

Therefore, this Protest should be DENIED in full. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of 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

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