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HQ W231531





November 17, 2006

231531RDC DRA-4 RR:CTF:ER

CATEGORY: DRAWBACK

Michael Kerlen, Vice President
Comstock & Theakston, Inc.
466 Kinderkamack Rd.
Oradell, NJ 07649-1536

RE: Unused merchandise drawback; Commercial interchangeability; 19 C.F.R. §191.32(c); 19 U.S.C. §1313(j)(2); Soft Red Winter Wheat.

Dear Mr. Kerlen:

This is in response to your 6/26/2006 ruling request, on behalf of your client, Louis Dreyfus Corporation (Dreyfus), regarding the commercial interchangeability of imported and substituted wheat for purposes of substitution, unused merchandise drawback per 19 U.S.C. § 1313(j)(2). On 8/23/2006 we called you to advise that this ruling is limited to the evidence provided.

FACTS:

Import: As evidence of the imported wheat, Dreyfus has supplied the following: an entry summary reflecting the importation of a quantity of wheat, stated country of origin Great Britain, classified under 1001.90.20, Harmonized Tariff Schedule of the United States (HTSUS), as “other wheat and meslin,” import date is 10/11/2002, aboard the “Handy Lilly,” port of unlading was 1501, Wilmington, North Carolina; an invoice dated 9/26/2002, from its supplier to Dreyfus describing the goods sold as “feed wheat crop 2002/2003 in bulk” from the United Kingdom, shipment period is 9/16/2002-9/30/2022, aboard the Handy Lily. The invoice includes the amount of wheat, the price per metric ton and the total amount in U.S. dollars due; the contract for the wheat was executed on 8/19/2002. The bulk wheat is to be shipped from the UK to Wilmington, North Carolina; a “U.S. Grain Standards Act Official Certificate, Submitted Sample Inspection,” (Grain Inspection Certificate), number US-NO129485, date of service 11/6/2002, identifying the sample as 58.2 pounds of “U.S. No. 2 Soft Red Winter Wheat, Dockage 0.5%.”

Export: Dreyfus’s export shipment is split into two deliveries. One amount is to be delivered to one port in Brazil and the remaining amount to a separate port in Brazil. This is evidenced by two sets of documents, one for each destination port. As evidence of the exported wheat, the following are provided: two Invoices from Dreyfus to its customer in Brazil for the sale of a certain amount of “U.S. No. 2 or better soft red winter wheat;” two “U.S. Department of Commerce, Bureau of the Census, International Trade Administration, Shipper’s Export Declarations,” that describe the commodity as “soft red winter wheat.” The Schedule B number is 1001.90.0090 and the commodity exported is described as SRW wheat; two Berth Term Grain Bills of Lading stating that a quantity of “U.S. No. Two (2) or better Soft Red Winter Wheat” was laded; one U.S.D.A. Federal Grain Inspection Service, U.S. Grain Standards Act, Official Export Grain Inspection Certificate describing the sample as “U.S. No. 2 or better soft red winter wheat, Dockage 0.7%.”

In its letter of 6/26/2006, accompanying the documents Dreyfus states that it “has imported bulk shipments of English (UK) Feedwheat and French Soft Milling Wheat. Louis Dreyfus has exported bulk shipments of Soft Red Winter Wheat of United States origin. These types of wheat are commercially interchangeable based on USDA grade. The same basis of commercial interchangeability would apply to other agricultural products.” We note that Dreyfus has provided no evidence of “French Soft Milling Wheat.” Further, Dreyfus states that “merchandise with the same USDA grade is considered commercially interchangeable regardless of source. There is no customer preference.”

ISSUE:

Whether the imported wheat and the substituted wheat 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:

. . . . “[C]ommercially 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 substituted 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. With regard to the wheat at issue, if a buyer, in an arms’-length transaction, would accept either the domestic wheat or the substituted wheat at the specified price for the purpose intended, then the imported and the substituted wheat are commercially interchangeable.

However, Dreyfus has not supplied sufficient evidence of the imported wheat to permit a comparison to the substituted SRW wheat, i.e., there is not enough information to show that the imported feed wheat and the substituted Soft Red Winder (SRW), wheat are so similar that a buyer would accept either to fulfill an order. The import invoice describes the wheat as “feed wheat.” Our research indicates that the wheat described as “feed wheat” in the United Kingdom is intended to feed livestock, and is not for human consumption. The Grain Inspection Certificate number US-NO129485 describes the sample as “U.S. No. 2 Soft Red Winter Wheat.” SRW wheat is a high yielding, low protein wheat used to make crackers, cakes, pastries and flatbreads.

Thus it appears that the Grain Inspection Certificate number US-NO129485 is not related to the wheat on the invoice and entry summary. In addition, the entry summary reflects that that wheat was imported on 10/11/2002 and the Grain Inspection Certificate number US-NO129485 states that the sample from the Handy Lily was inspected 11/6/2002. The length of time between the import date and the date that the imported wheat was inspected also supports the conclusion that the import invoice and the import Inspection Certificate number US-NO129485 are not related to the same wheat. It is implausible that the Handy Lily arrived in the U.S. on 10/11/2002 and the cargo of wheat remained on that vessel until a sample was taken and inspected on 11/6/2002. In contrast, the Grain Inspection Certificate for the exported SRW wheat states the date of service as 7/16/2003, which is also the date of exportation on the Shipper’s Export Declarations. Absent explanation as to the length of time between the importation and inspection, the different descriptions used on the invoice and the Inspection Certificate US-NO129485, we conclude that the Grain Inspection Certificate US-NO129485 is not relevant to the wheat which is the subject of the entry summary and invoice.

Consequently, Dreyfus has supplied insufficient evidence of the imported wheat, i.e., there is no inspection certificate or bill of lading related to the feed wheat nor is there an entry summary, invoice or bill of lading for the SRW wheat. In fact there is no evidence that the SRW wheat that is the subject of the Grain Inspection Certificate US-NO129485 was imported. In its request, Dreyfus states that it has imported feed wheat from the U.K. and “French Soft Milling Wheat” but does not mention importing SRW wheat. Moreover, the import evidence provided and our research results, coupled with Dreyfus’s statement that types of wheat are interchangeable based on U.S.D.A. grade, makes it impossible to determine whether Dreyfus intended that the exported SRW wheat be compared to imported feed wheat or imported SRW wheat or both.

Clearly per Texport Oil Co. v. United States, (185 F.3d 1291 (Fed. Cir. 1999)) U.S.D.A. grades would be among the factors to consider when comparing imported wheat to substituted wheat when determining commercially interchangeability, but U.S.D.A. grades would not be dispositive nor the only characteristic considered. See Texport, supra, holding that the critical properties of the exported and substituted good to be evaluated when determining commercial interchangeability “include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.” We could find no evidence that wheat has been determined commercially interchangeable based on U.S.D.A. grade alone.

In HRL 219181 issued 6/6/1989, prior to the Texport decision, we held that “in addition to the U.S.D.A. standards of quality for wheat, we are of the opinion that the protein content of the wheat is another essential element to be considered in determining fungibility for this merchandise.” In HRL 227473, 3/3/1998, we said that “The imported and substituted Cold Break tomato paste and the imported and substituted Hot Break tomato paste are commercially interchangeable for the purpose of 19 U.S.C. 1313(j)(2) on a screen size for screen size, viscosity for viscosity, and mold count for mold count basis” even though both the tomato pastes were USDA Grade A.

We note that Dreyfus does not explain why the imported and the substituted wheat are commercially interchangeable, nor identify what characteristics or properties make the wheat so similar so that a buyer would accept either for the purposes intended. Finally, Dreyfus has not supplied any legal support for its conclusion that different types of wheat are commercially interchangeable based on USDA grade.

In addition, the tariff classification criterion could not been met with the documents provided. With respect to the imported, the entry summary reflects that the imported wheat was classified under subheading 1001.90.20, HTSUS 2002, as “wheat and meslin, other.” The Shipper’s Export Declaration states that the 2003 Schedule B (we assume 2003 because the goods were exported in 2003) number for the exported wheat was 1001.90.0090. This Schedule B number given on the Shipper’s Export Declaration was not a valid number on the 2003 Schedule B, i.e., the 2003 Schedule B does not contain number 1001.90.00.90. Thus, this number could not possibly align with the import HTSUS number. The 2003 Schedule B reflects that 1001100090 indicated “durum wheat, except seed,” and 1001901000 indicated “wheat and meslin seed (except durum);” but neither of these numbers are used. Absent an explanation from Dreyfus, the lack of a valid schedule B number further evidences that it is impossible to determine commercial interchangeability based on the information provided.

HOLDING:

There is insufficient evidence of the imported wheat and therefore, the imported wheat and substituted SRW wheat cannot be said to be commercially interchangeable for purposes of 19 U.S.C. § 1313(j)(2).

Sincerely,

William G. Rosoff, Chief

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