United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2005 HQ Rulings > HQ 231004 - HQ 563134 > HQ 231039

Previous Ruling Next Ruling
HQ 231039




October 3, 2005

231039 LLB

DRA-1-09 DRA-4 RR:CR:DR

CATEGORY: DRAWBACK

J.W. Brown
Danzas AEI Drawback Services, Inc.
1718 Fry Road Suite 240
Houston, TX 77084

RE: Unused merchandise drawback; Commercial interchangeability; 19 C.F.R. §191.32(c); 19 U.S.C. §1313(j)(2); propylene glycol

Dear Mr. Brown:

This is in response to your June 28, 2005, ruling request, on behalf of your client, Lyondell Chemical Company (Lyondell), regarding the commercial interchangeability of imported and domestic propylene glycol for purposes of substitution, unused merchandise drawback per 19 U.S.C. § 1313(j)(2).

On September 9, 2005, we received additional information you provided in support of your ruling request in response to our August 10, 2005, request for additional information.

FACTS

Our research indicates that propylene glycol (C.A.S. 57-55-6) is a colorless, odorless, and tasteless liquid that is used mainly as a chemical intermediate in the production of de-icing solutions for cars, airplanes, and boats; to make polyester compounds, and as solvents for paints and plastics.

According to your ruling request, Lyondell is engaged in the manufacture, import, purchase, and resale of propylene glycol. Lyondell imports propylene glycol from its manufacturing subsidiary, “Lyondell Chemie” in The Netherlands. “All imported propylene glycol is discharged and commingled into Lyondell’s dedicated shore tanks” in Houston, “which also contain domestically produced propylene glycol.” You also state, “the product nomenclature propylene glycol is used” by Lyondell to identify the imported and exported merchandise and indicate, “the same material with the same specifications, whether of foreign or domestic manufacture.” You have provided the following documentation in support of your ruling request:

Import Documents

Entry summary for entry K96-xxxxx34-6, entry date of January 13, 2005, reflecting that Lyondell is the importer of record for an amount of propylene glycol classified under subheading 2905.32.0000, Harmonized Tariff System of the United States (HTSUS). The country of origin is The Netherlands and the vessel is the Kristen Knutsen. The amount of propylene glycol in kilograms and the value are stated. This entry summary references invoice number “9505075362 12/31/04.” The date of import is January 4, 2005.

Invoice Number 95050753, dated December 31, 2004, reflecting the sale of “499202 propylene glycol, industrial” from Lyondell Chemie Nederland B.V. to Lyondell. Delivery is to Carteret, New Jersey, and the country of origin is listed as The Netherlands. The “Customer Material” number is given as 000000000000499202. The ship date is December 21, 2004. The quantity in metric tons is given, as is the price in U.S. dollars, per MT. The purchase order number referenced is 4900010774.

Purchase Order Confirmation number 4900010774 dated December 16, 2004 for sale between Lyondell and Lyondell Chemie Nederland B.V. The quantity is metric tons is given, as is the price in U.S. Dollars per MT.

Certificate of Analysis for “Lyondell Material 499202, propylene glycol industrial, bulk” identifies the ship as the “Challenger for Kr. Knutsen” and date of shipment as December 21, 2004. The shipment is destined for Carteret, New Jersey and the certificate contains, in pertinent part, the following information:

Test Specifications Test Unit of
Description Minimum Maximum Result Measure Assay as PG, on a dry basis 99.50 99.74 weight % Water 0.0200 0.004 weight %
Appearance Pass Pass
Color, Pt-Co 10 3 APHA Color
TYPICAL VALUES SHOWN BELOW
Acidity as Acetic Acid 0.0050 0.0000 ppm
Chlorides as Cl 1 ppm
Specific Gravity @ 20/20 °C 1.0350 1.0370

Export Documents

Pro-forma invoice showing a sale of propylene glycol to Lyondell Chimie France, which was shipped to France. The invoice is dated March 13, 2005 and reflects the quantity in metric tons and the price per metric ton in U.S. dollars. The invoice also references purchase order 4900011482.

Purchase order confirmation number 4900011482 dated March 7, 2005 from Lyondell to Lyondell Chemie France for an amount of Propylene Glycol priced per MT in U.S. Dollars

Tanker bill of lading (BOL) reflecting that a quantity of propylene glycol was shipped by Lyondell from Houston to Lyondell Chimie in France. The BOL is dated March 13, 2005 and identifies the ship as the Stolt Span.

A Certificate of Analysis for “Lyondell Material 499202 Propylene Glycol,” shows that is was shipped on March 13, 2005 to Lyondell Chimie in France. The certificate contains the following values:

Test Test Specifications Unit of
Description Result Minimum Maximum Measure Assay as PO, by GC 99.84 99,00 weight %
Water 0,0007 0,200 weight ppm
Color, Pt-Co 5 10 APHA Color
Appearance Pass Pass
TYPICAL VALUES SHOWN BELOW
Acidity as Acetic Acid 0,0006 0,0050 weight% Distillation IBP @760 mmHg 185,0- 190,0 degrees C Distillation DP @ 760 mmHg 185,0 – 190,0 degrees C Specific Gravity @ 20/20 °C 1,0375-1,0390

The following specifications for propylene glycol were obtained from www.lyondell.com on September 26, 2005:

U.S. Sales Specification, dated February 5, 2005

Test Specifications Unit of
Description Minimum Maximum Measure
Acidity as Acetic Acid 0 20 ppm
Appearance Pass
Assay as PO, by GC 99.98
Chlorides as Cl 0 10 ppm
Color, Pt-Co 5 APHA Color
Heavy Metals as Pb 5 weight ppm
Iron 1.00 weight ppm
Suspended matter Pass
Water 0.200 weight ppm
TYPICAL VALUES Report
Arsenic as As 0 1 weight ppm
CONEG Metals Pass
Distillation IBP @760 mmHg 185.0 190.0 degrees C Distillation DP @ 760 mmHg 185.0 190.0 degrees C IR Spectrum Pass
Refractive Index @ 20 C 1.4310 1.4340
Residue on Ignition 0.0000 0.0050
Specific Gravity @ 20/20 °C 1.0375 1.0390 Specific Gravity @ 25/25 °C 1.0350 1.0365 Sulfate 1.000 0.006 weight%

Europe Sales Specification, dated February 28, 2005

Test Specifications Unit of
Description Minimum Maximum Measure
Appearance Pass
Assay as PG, on a dry basis 99.50 weight % Color, Pt-Co 10 APHA Color
Iron 1.00 weight ppm
Water 0.0200 weight %
TYPICAL VALUES Report
Specific Gravity @ 25/25 °C 1.0350 1.0370 Chlorides as Cl 1 ppm
Acidity as Acetic Acid 0.0050 weight %

ISSUE

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

LAW AND ANALYSIS

Substitution, unused merchandise drawback is provided by 19 U.S.C. §1313(j)(2), but the statute does not define “commercially interchangeable.” The CBP Regulations reflect the legislative history that explained the change from fungibility to commercial interchangeability as the standard for substitution. Section 191.32 provides:

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.

(19 C.F.R. § 191.32(c)). In Texport Oil Co. v. United States, (185 F.3d 1291 (Fed. Cir. 1999)) the Federal Circuit Court of Appeals (CAFC) discussed the meaning of “commercially interchangeable.” The CAFC concluded that commercially interchangeable is “an objective, market-based consideration of the primary purpose of the goods in question.” (Id.) The Texport court explained:

Therefore, “commercially interchangeable” must be determined objectively from the perspective of a hypothetical reasonable competitor; if a reasonable competitor would accept either the imported or the exported good for its primary commercial purpose, then the goods are “commercially interchangeable” according to 19 U.S.C. § 1313(j)(2).

(Id. at 1295). Thus, per the Texport decision, commercial interchangeability is determined using an “objective standard.” Accordingly, an exported good is commercially interchangeable with an imported good if a buyer, in an arms’-length transaction, would accept either good at the specified price for the purpose intended. In order to determine if either good at the specified price would be acceptable for the purpose intended, the relevant characteristics of the imported good are compared with those characteristics of the exported good. Those pertinent characteristics include any governmental or industry standards applicable to the good, the tariff classification, part numbers if any, value, and any other characteristics relevant to the good.

Governmental and Recognized Industry Standards

Industry consensus standards ensure that all products meeting a standard are used in the same manner, regardless of manufacturer. Under normal circumstances, materials that meet the same industry accepted standard can be used to produce the same products or utilized for the same purposes. These uses are normally stated in the standard. We are aware of no government or industry standards for propylene glycol. This criterion is therefore irrelevant to this analysis.

Tariff Classification

With respect to the tariff classification, propylene glycol, is classified under subheading 2905.32.0000, HTSUS. According to the provided entry summary, the imported propylene glycol was classified under that subheading. The export invoice reflecting a sale of propylene glycol evidences that the exported good would also be classified under subheading 2905.32.0000, HTSUS. HQ 230898 (June 24, 2005). The tariff classification criterion, therefore, has been met.

Part Numbers

Based on the evidence presented in the submission, propylene glycol is a bulk commodity and is not assigned a part number. As such, part numbers are not a relevant criterion in this analysis of commercial interchangeability. However, both the U.S. and the European sales specifications designate propylene glycol as “Material Number 499202” at the top of the document. The import invoice and certificate of analysis use “Material Number: 499202 to refer to propylene glycol. The export certificate of analysis refers to propylene glycol as Lyondell Material: 499202.

According to Lyondell, “the product nomenclature propylene glycol is used” by Lyondell to identify the imported and exported merchandise and indicate, “the same material with the same specifications, whether of foreign or domestic manufacture.” We find that, given that the imported and exported material is consistently described as “propylene glycol” in the provided documents and, since both products specifications contain material number 499202, that the material number is used to indicate propylene glycol. Therefore, Lyondell’s use of the same material number to identify the imported and domestic propylene glycol indicates that Lyondell treats the imported and domestic propylene glycol as commercially interchangeable.

Relative Values

Based on our review of the import and export invoices, the export price for the propylene glycol is 3 percent greater than the import price. Because there is only a slight difference between the import and export price of the milk, we conclude that the fourth criterion has been met. See HQ 228773 (May 1, 2001)(holding that 9% was not significant enough to effect commercial interchangeability); HQ 227470(February 9, 1998)(holding that 6.7% difference in import and export price was not significant enough to effect commercial interchangeability);HQ 227473(March 3, 1998)(holding that a 14% difference in import and export price was not significant enough to effect commercial interchangeability).

Additional Relevant Factors

Lyondell makes its sales specifications for propylene glycol public on the Internet. That these sales specifications are published evidences that Lyondell represents to its buyers that the propylene glycol sold by Lyondell will, at least, meet one of these specifications, depending on country of manufacture. Both the U.S. and European sales specifications list the purity, appearance and the same four characteristics for propylene glycol, along with the maximum values permitted for those four criteria. In addition, both standards list the ranges for another six features within which the propylene glycol typically falls. The certificate of analysis for the exported propylene glycol shows that it is within the U.S. sales specifications. The certificate of analysis for the import reflects that the propylene glycol is within the European sales specifications.

Further, CBP’s Lab concluded that European sales specifications have a higher minimum purity, 99.5%. as opposed to the US sales specification, 99.0%. In the present case, both the imported and the exported propylene glycol, met the European specification insofar as the purity levels were 99.74% and 99.84% respectively.

In conclusion, for the designated import entry (K96-xxxxx34-6), notwithstanding that governmental or industry standards and part numbers are not applicable in this case, has met the remaining criteria and is therefore, commercially interchangeable.

HOLDING

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

This decision is limited to the specific facts set forth herein. If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on the Customs Service as provided in 19 C.F.R. §177.2(b)(1), (2) and (4) and 177.9(b)(1) and (2).

Sincerely,

William G. Rosoff, Chief
Entry Process and Duty Refunds Branch


Previous Ruling Next Ruling

See also: