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HQ W230499

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November 13, 2007

DRA-4
RR:CTF:EP 230499 MAS

Category: DRAWBACK

U.S. Customs and Border Protection
Port of Houston
2350 N. Sam Houston Parkway East, Suite 1000 Houston, TX 77032
Attn: Christina D. Brooks

RE: Protest/AFR No. 5301-03-100498; Drawback No. BQ5-XXXXXX24; 19 USC §§ 1313(j)(2); 19 CFR § 191.32

Dear Ms. Brooks:

Exxon Mobil Chemical Company (Protestant or Exxon) filed the above-referenced protest, on July 29, 2003, with Customs and Border Protection (CBP), Port of Houston (the Port). Exxon contests the decision to deny a claim for unused merchandise, substitution drawback. The protest seeks a determination on the commercial interchangeability of isononanol and isononyl alcohol under the trade name “Exxal 9.” Our decision follows.

FACTS

This protest concerns a drawback claim on one import entry, of isononanol, and four exports, of isononyl alcohol. On April 10, 1996, Protestant imported approximately 2.5 million kilograms (about 5.6 million pounds) of isononanol from the Netherlands, under entry number 110-04xxxx7-5. On July 11, 1996, about 1.8 million pounds of isononyl alcohol was exported to Korea via carrier Stolt Guardian (Guardian shipment). On July 29, 1996, about 1.7 million pounds of isononyl alcohol was sent to Korea upon the carrier Helluland (Helluland shipment). On August 24, 1996, Protestant exported about 1.6 million pounds of isononyl alcohol to Korea on the carrier Stolt Sapphire (Sapphire shipment). Finally, on October 8, 1996, Protestant sent about 1.1 million pounds of isononyl alcohol to Korea upon the carrier Stolt Tenacity (Tenacity shipment). Accelerated payment was made on June 2, 1997.

Protestant filed a substitution unused drawback claim (Customs Form 7539), date stamped June 2, 1997, with the Port Director of Customs in Houston, Texas, for over 5.6 million pounds of isononyl alcohol under Drawback No. BQ5-XXXXXXX2-4. To support this drawback claim, Protestant included import and export summaries and a copy of the CF 7501. The import summary described import entry number 110-xxxxxx7-5 to consist of about 5.6 million pounds of “isononyl alcohol”, valued at over $2.2 million. The chronological summary of exports for this drawback claim similarly detailed the quantity, value, and amount of duty paid for each of the four shipments of “isononyl alcohol,” destined to Korea, for a total of about 5.6 million pounds, with a value of $2.13 million.

Protestant explains that its isononanol and isononyl alcohol are produced “primarily to consume as raw material in the production of JayflexTM and Jayflex® plasticizers” and that these alcohols are marketed in Europe and the U.S. under trade names ExxalTM and Exxal®, respectively. Exxon further states that the product quality requirements for raw material used to produce JayflexTM and Jayflex®.plasticizers and finished product sales of ExxalTM and Exxal® alcohols are the same. For the period under review, Protestant’s “Exxal® 9 isononyl alcohol” listed the following specifications for commercial sales purposes:

Appearance
Free of foreign matter
Color, Pt-C0 Scale
10 max
Specific Gravity, 20/20  C
0.833 (min) - 0.837 (max)
Water Content, Wt %
0.1 max
Purity, wt % alcohol
98.0 min
Acidity, as acetic acid, wt %
0.003 max
Carbonyl No., mg KOH/g
0.2 max

Isononanol sales specifications for the same period are identified as follows:

Appearance
Clear
Color, Pt-C0 Scale
10 max
Specific Gravity, 20/20  C
0.833 min – 0.837 (max)
Water Content, Wt %
0.1 max
Purity, wt % alcohol
99.0 min
Acidity, as acetic acid, wt %
0.005 max
Carbonyl No., mg KOH/g
0.2 max

On November 15, 1999, the Port requested complete certificates of analysis which identified the percentage of purity for isononyl alcohol as additional evidence of commercial interchangeability. Protestant responded on December 15, 1999, with the submission of “independent survey reports of one import and four exports” and with sales specifications. The Port consulted the New Orleans Field Laboratory (Field Lab) for a commercial interchangeability decision on May 16, 2000. On July 21, 2000, the Field Lab concluded: “No decision can be made regarding the commercial interchangeability until independent certificates of analysis on all exportations and importations are provided which give percent purity. of C-6 through C-10 alcohols and the heavies.” Therefore, on October 10, 2000, the Port again requested Exxon provide certificates of analysis detailing percent purity of the imported isononanol, as well as for the exported isononyl alcohol. On December 5, 2000, Protestant submitted a description of the Exxal 9 specifications in effect at the time of the subject import and exports. In addition, Protestant submitted a certificate of analysis, performed by Inchcape Testing Services, Caleb Brett, which described the merchandise as “Exxal 9 Isononyl Alcohol.”

On April 18, 2003, the Port notified the Protestant that the drawback claims were to be liquidated without drawback because: “Commercial interchangeability was not established as required under 19 CFR § 191.32” and because “requested independent certificates of analysis from [an] independent lab to determine the purity levels of the products were not submitted.” The drawback claim was liquidated with no drawback on May 2, 2003. On July 29, 2003, Exxon protested the Port’s actions and requested further review, seeking reliquidation of the drawback claim.

In furtherance of its claim, Exxon submitted the documents described below.

Import Documents

Documents associated with this entry include: an entry summary; commercial invoice; certificate of analysis; testing time log; and product analysis. The entry summary, CF 7501, identifies 2.5 million kilograms (5.6 million pounds) of “Saturated Monohydric Alcohol, Other”, 2905.19.0050, HTSUS (1997), to have been transported from the Netherlands, entering the U.S. on April 10, 1996. The merchandise was valued at over $2.2 million, on which Protestant paid about $82,000 in duties.

The entry invoice, dated March 18, 1996, provides for over 5.6 million pounds of Exxal 9, described as “iso nonyl alcohol (nonyl alcohol – all isomers ST.3.CAT.C” under 2905.19.00.50, HTSUS.

The CBP Lab, at Headquarters, in Washington, D.C., explains: “‘ST.3 CAT.C’ refers to Noxious liquid, N.F., (15) n.o.s. (‘trade name’ contains ‘principle components’) ST 3, CAT.C (if combustible”) from 46 CFR 30.25-1. ST is the ship type and CAT.C is the pollution category; [both represent] the type of environmental protections that a ship is required to have in order to contain a given commodity.” An “Inchcape Testing Service Time Log” shows inspection was made, and samples were taken of merchandise described as “Exxal-9” and “Exxal-10” on April 10-12, 1996. The accompanying certificate of analysis, dated March 20, 1996, characterized the shipment of Exxal 9 as having the following characteristics:

Test
Result
Alcohol content
99.8
Acidity (as KOH)
0.04
Carbonyl Content (as KOH)
0.06
Boiling point
203.3
Dry Point
214
Water
0.02
Density @20 deg. C
0.8346
Color Pt/Co
5

The “Report of Analysis,” also performed by Inchcape Testing Service, Caleb Brett, upon the shipments arriving in Louisiana on April 10, 1996, produced the following results:

Gravity @ 15.6/15/6 C
0.8389
Appearance
Clear, Bright & Free
Color, APHA
Density @ 20 C
0.8364
Water Content Wt. %
0.03
Initial Boiling Point Deg. C
202.0
Dry Point Deg. C
214.0
Acidity as mgKOH/g
0.02

Export Documents

The export documents produced by Protestant to support its § 1313(j)(2) claim cover four dates: July 11 (Guardian shipment), July 29 (Helluland shipment), August 24 (Sapphire shipment), and October 8 (Tenacity shipment) of 1996.

Documents relating to the Guardian shipment identify over 820 kilograms (1.8 million pounds) of “isononyl alcohol”, with a gross value of over $720,000, to be shipped to South Korea. A bill of lading with the same order number, dated May 1, 1995 and destined to South Korea, similarly lists “nonyl Alcohol (all Isomers), ST.3 CAT.C) in the same quantity. Accompanying this shipment was a certificate of analysis for “Exxal 9 (Isononyl)” which corroborates the lab inspection report on file. These specifications are provided in the chart below.

The Helluland shipment consists of over 772,000 kilograms (1.7 million pounds) of “isononyl alcohol,” with a gross value of about $679,000. As with the first shipment, this import was also accompanied by a bill of lading, dated July 29, 1996, as well as time log and freight report. A certificate of analysis for “Exxal 9 (isononyl)” and a lab inspection report are similarly included with this shipment; these results are recorded below.

The Sapphire shipment consisted of about 752,000 kilograms (1.65 million pounds) of “Isononyl Alcohol – Tech”, gross value of approximately $615,000. This shipment bore the same description on the Bill of Lading. The Time Log referred to the products as “Alcohol-Exxal 10 & Isononyl Alcohol-Tech Grade”. Although a certificate of analysis was not included with this shipment, the results of an unsigned lab inspection of this shipment were recorded and are provided below.

The Tenacity shipment, which consisted of over 514,000 kilograms (1.134 million pounds) of “INA-Tech Grade,” was shipped to Seoul, Korea for a gross value of approximately $419,000. As before, the merchandise was described as “Bulk Nonyl Alcohol (all isomers) ST.3, CAT.C” on the bill of lading. The results of the lab inspection for this shipment are also in the chart below.

Guardian
Helluland
Sapphire
Tenacity
Appearance
Passes
Passes
Passes
Passes
Color, Pt-C0 Scale
4
10
5
5
Specific Gravity @ 20 C
0.8631
0.836
0.8358
0.8353
Water Content, Wt %
0.03
0.05
0.05
0.01
Acidity as KOH
0
0
0
0

ISSUE:

Whether the imported isononanol and exported isononyl alcohol meet the requisite criteria to be considered commercially interchangeable merchandise for purposes of drawback under 19 USC § 1313(j)(2)?

LAW AND ANALYSIS:

Initially, we note that this protest was timely filed under the statutory and regulatory provisions for protests. 19 USC § 1514, 19 CFR Part 174. The Port liquidated the entries on May 2, 2003 and the protest was filed on July 29, 2003, within the time afforded for protests.

Protestant reasons it is entitled to drawback payment for isononyl alcohol as a substitution drawback because the imported ExxalTM 9 isononanol was used to replenish a shortage of Exxal® 9 isononyl alcohol for the production of Jayflex® DINP. Protestant asserts the two are “commercially interchangeable” because they: were used to produce the same end product, Jayflex®DINP plasticizer; share a unique trade name, “Exxal”; share the same CAS number, 68526-84-1, and description, “Alcohols, C8-10-iso-C9-rich”; have the same 10-digit classification code, 2905.19.00.50, HTSUS; have similar relative values; and utilize an identical production process, described as “high pressure, cobalt catalyzed hydro-formulation.”

The Port denied the drawback claim because neither the certificates of analysis, lab analyses, nor sales contracts included purity data on any of the exported merchandise, although percent-purity data was stated on the certificate of analysis for the imported merchandise. The Port further justified denial because the certificates of analysis were in-house analyses and did not constitute “independent reports.” Moreover, the Port cited the determination by the New Orleans Field Lab that Exxon’s customer letter, which discussed the change in purity for the product and the different specifications for Exxal 9, did not satisfy the request for the actual purity of the INA exported. Additionally, the Port cited the change in purity levels listed on the specifications for domestic Exxal 9 – from ninety-eight to ninety-nine percent – as a basis for denial. The Port reasoned that given this change, and without information on the percent purity of each alcohol or an explanation to account for the difference in purity levels, compounded by a lack of independent certificates of analysis or sales contracts, a commercial interchangeability determination could not be made. Therefore, the claim was denied.

The only issue raised in this protest is one of commercial interchangeability. Although “commercial interchangeability” is not defined under 19 USC § 1313(j)(2), its meaning is set out in CBP Regulations, Section 191.32. That section 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 CFR § 191.32(c)

The courts have also offered guidance on how to assess whether something is commercially interchangeable, instructing: “[Commercial interchangeability is] an objective, market-based consideration of the primary purpose of the goods in question.” Texport Oil Co. v. United States, 185 F.3d 1291 (Fed. Cir. 1999) (explaining: “ ‘[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)”). 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. HQ W231531 (Nov. 17, 2006). As stated in the Regulations, those pertinent characteristics include the tariff classification, value, part numbers, and applicable government and industry standards. The foregoing analysis applies this standard of review to Exxon’s claim in light of the evidence on record.

Government and Recognized Industry Standards

Standards or grades established by the government or industry consensus aid in the determination of commercial interchangeability in that they establish markers by which the product is commoditized and measured against like products for use in the same manner, regardless of manufacturer. In this case, there is no set government standard for the manufacture of isononyl alcohol or isononanol, nor is there a certifying organization, or standardized industry specifications, for "INA Technical Grade.” Instead, most requirements or specifications are established by the manufacturer and customer, based upon the intended use and required/desired performance of the chemical.

In the absence of such government or industry-wide criteria, standards that have been established on a contract basis may be used to determine whether designated and substitute goods are commercially interchangeable. Pillsbury v. U.S., 293 F. Supp.2d 1351, 1356-57 (Oct. 27, 2003) (explaining: “Instead of relying on [government] standards, the designated and substitute [merchandise] may be traded on contract standards specific to individual labels”). In this case, the specifications used by Protestant for Exxal 9 isononyl alcohol and Exxal 9 isononanol are determined on a contract basis.

As further evidence as evidence that the two products are comparable, Protestant refers to the CAS number and description shared by isononyl alcohol and isononanol – 68526-84-1 and “alcohols, C8-10-iso-, C9-rich,” respectively. The Office of Laboratories and Scientific Services (OLSS), at CBP headquarters in Washington, DC, has affirmed Protestant’s claim that isononanol and isononyl should both be listed with the same CAS number, CAS 68526-84-1. The Lab added: “[E]ven though isononyl alcohol/isononanol could be qualified under 68526-84-1 as "Alcohols, C8-10-iso, C9 rich", the reverse does not hold true. ‘Alcohols, C8-10-iso, C9 rich’ could not fall under either of the other CAS #s due to the C8 and C10 alcohol impurities”. Furthermore, OLSS advises that the aforementioned description is appropriate because “isononyl alcohol is a C9-iso-alcohol by definition” (emphasis added). The CBP Lab explained: “While CAS 68526-84-1 is most commonly associated with the term ’Alcohols, C8-10-iso-, C9 rich’, the following CAS numbers are also associated with isononyl alcohol/isononanol:” (a) CAS # 2430-22-0, which is associated with 7-Methyl-1-octanol (synonymous name for isononyl alcohol/isononanol) and (b) CAS # 27458-94-2, which lists associated chemical names to include Isononanol, Isononyl Alcohol, Exxal 9, and Exxal 9S.

We note that although the Port identified the lack of independent certificates of analysis as a basis for denying Exxon’s 1313(j)(2) claim, it is widely recognized that CBP may accept in-house laboratory reports for purposes of establishing commercial interchangeability in a drawback claim, unless the report is somehow determined to be deficient or otherwise unsatisfactory. See HQ 224740 (Jan. 24, 1994) (holding "in-house" laboratory reports were acceptable for purposes of establishing commercial interchangeability in a drawback claim, unless Customs was not satisfied with such a report); HQ 224633 (May 6, 1994) (finding: “ A drawback claimant's laboratory analysis is acceptable to show fungibility if the claimant shows that the analysis was done in the ordinary course of business, identifies the analyst, and offers to provide the analyst's work papers to Customs for review”). Moreover, according to the legislative history, "This section is not intended to preclude Customs from accepting a company's in-house laboratory report or analyses pertaining to its own imports.” H. Rpt. 103-361, 110 (explaining the amendment of 19 USC § 1499 by section 613, title VI, Public Law 103-182). CBP is not obligated, however, to accept the report if it finds, upon review of the in-house analysis, that the in-house analysis is somehow deficient. HQ 224740 (Jan. 24, 1994) (stating in-house lab reports can be used to establish commercial interchangeability, unless CBP is unsatisfied with the report, but only if there is no industry standard). Because there is no industry standard for the subject merchandise, CBP would be justified in denying the claim if the certificates of analysis are deficient or inconsistent, and if those inconsistencies rise to the level so as to render the analyses suspect.

In the instant case, we understand the Port’s denial of the 1313(j)(2) claim because “no independent certificates of analysis [were] received” to mean the certificates were insufficient to prove a claim of commercial interchangeability. Indeed, purity level can be a crucial indicator of interchangeability. As OLSS explained, “[O]ne of the most significant specifications USCS/CBP Labs looks at when reviewing drawbacks for commercial interchangeability is the stated purity range, which is missing from all of the certificates of analysis of the exports stated in the drawback.” Protestant maintains that it is unable to provide the requested individual alcohol purity levels because the percent purity level of each alcohol was not tested at the time of import/export. Furthermore, Protestant explains that the difference in purity levels is a result of improved processing methods and more sensitive testing procedures. Additionally, Protestant notes that there was a revision in purity specifications in April 1997, from a minimum of 98 percent to 99 percent pure. Because the purity has increased from the original minimum, Protestant urges that post-April 1997 purity ranges do not conflict with the earlier requirements. OLSS also advised the differences in color were not significant.

Moreover, specifications provided by the U.S. Environmental Protection Agency (EPA), Information Systems Engineering Center, tend to support a conclusion that “isononanol” and “isononyl alcohol” are equivalent. The EPA Registry lists “isononyl alcohol” as a synonym for “isononanol” and EPA Information Systems Engineering Center maintains the two are “considered to be equivalent.” OLSS concurs with this perspective, noting the terms “are synonymous.”

The apparent consensus that isononyl alcohol and isononanol are coterminous, and Protestant’s explanation for the difference in purity levels as being a result of improved technology, weighs favorably in support of Protestant’s claim that commercial interchangeability requirements are satisfied, despite the lack of specific purity levels.

Tariff Classification

The CBP Form 7501 indicates Protestant imported isononanol under 2905.19.00.0050, HTSUS. The 1996 Harmonized Tariff Schedule, the relevant schedule for this entry, describes this heading as “Acyclic alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives: saturated monohydric alcohols: other: other.” Although the aforementioned HTSUS number is not listed on any of Protestant’s export documents, the merchandise is described as “Isononyl alcohol, Tech Grade” or “INA Tech Grade”. According to CBP’s Lab, “INA” is the acronym for IsoNonyl Alcohol and “Tech[nical] Grade,” which refers to a less pure grade than a reagent grade and which is usually used in applications where there are no official standards. Counsel for the Protestant elaborates that “‘Tech Grade’, when associated with the generic characterization ‘isononyl alcohol’, is an alternate description for Exxal 9 alcohol.” As such, the asserted classification appears justified. The CBP Lab notes that: “Even though isononyl alcohol/isononanol could be qualified under 68526-84-1 as "Alcohols, C8-10-iso, C9 rich", the reverse does not hold true. ‘Alcohols, C8-10-iso, C9 rich’ could not fall under either of the other CAS numbers due to the C8 and C10 alcohol impurities.” The fact that the isononanol and isononyl alcohol are classified under the same ten digit subheading is supportive of a commercial interchangeability claim.

Value

Goods that are commercially interchangeable will generally have very similar values when sold at the same place, at the same time, to like buyers, from like sellers. Even if the prices are not identical, the goods may still be considered commercially interchangeable if the difference is attributable to market conditions or the difference is immaterial.

As noted above, Exxon identified the gross value of the import of Exxal 9TM Isononanol at approximately $2.3 million, with a relative value per pound ($/LB) of $0.41 CFR (Cost for Freight) "Cost and Freight", or “CFR,” means that the seller arranges and pays for the freight. “CFR" is an INCOTERM used to describe whether the seller or buyer bears the cost of shipping, crating, risk of loss, etc. INCOTERMS are a set of common terms from the International Chamber of Commerce that international buyers and sellers can use to quickly describe certain aspects of the agreement they have made on shipping the goods.. The relative value of Exxal® 9 Isononyl alcohol is asserted to be $0.40 CFR for the Guardian and Helluland shipments (July 11 and 29) and $0.37 CFR for the Sapphire (August) and Tenacity (October) 1996 exports. The difference in the relative value of the imported merchandise and the goods exported in July is 2.4 percent; for the August and October shipments, the relative value for these exports is 9.7 percent. Protestant attributes this difference to variations over time in manufacturing costs, such as feed stock prices, and shipping rates.

A difference in the relative value of imports and exports will not preclude a finding of commercial interchangeability if that difference is negligible or if this difference is attributed to market conditions. See HQ 226995 (June 4, 1997) (holding that the 35 perecent difference in value was supported by the explanation and evidence in support thereto, that the difference was a result of market conditions at the time of import and export); HQ 227220 (Feb. 10, 1997) (finding that although the price difference of the imported and exported merchandise was in excess of 24 percent, the imported and exported merchandise qualified under the applicable industry standards and thus, relative value did not have as much weight when determining commercial interchangeability); HQ 228655 (Nov. 2, 2001) (holding that although difference of the imported and exported merchandise was in excess of 32 percent, the merchandise qualified under the critical properties criterion and therefore, value criterion had been met as well). In this case, the import price is higher than that for the exports, but the difference is not significant for commercially interchangeability purposes.

As defined by prior CBP rulings, this difference does not constitute a material difference and appears to be within CBP guidelines. Therefore, the slight price differential between the relative value of the imported isononanol and exported isononyl alcohol would not preclude a finding of commercial interchangeability.

Part Numbers

From invoices, bills of lading and other documents submitted, isononyl alcohol and isononanol alcohol are chemical commodities which are traded in bulk. Therefore a part numbers analysis is not relevant to the instant review.

HOLDING:

Based upon the analysis above, the imported isononanol and exported isononyl alcohol have met the criteria for commercial interchangeability for purposes of 19 USC § 1313(j)(2) substitution, unused merchandise drawback law. We find that the drawback claimant has met the requirements for commercial interchangeability under 19 USC § 1313(j)(2). Therefore, this protest should be GRANTED.

In accordance with the Protest/Petition Processing Handbook (CIS HB, Jan. 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
Commercial and Trade Facilitation Division

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See also:

• Tariff No.: 2905.19.00 - Saturated monohydric alcohols, nesoi