#  HQ 228575

> October 3, 2000
>
> Category: Commercial Interchangeability
>
> DRA-4-RR:CR:DR
>
> 228575 CK
>
> AEI Drawback Services, Inc.
>
> Attn: Wes Herndon
>
> 20501 Katy Freeway
>
> Suite 214
>
> Katy, Texas 77450
>
> RE: Ruling Request; Commercial Interchangeability; Eastman Chemical
> Co.; 19 U.S.C. 1313(j)(2); Toluhydroquinone (THQ)
>
> Dear Mr. Herndon:
>
> This is in reply to your request for a ruling of commercial
> interchangeability on behalf of your client Eastman Chemical Co. dated
> April 15, 1999. We have considered the arguments raised, and the facts
> presented, and our decision follows.
>
> **FACTS:**
>
> Eastman is engaged in the purchase and resale of toluhydroquinone
> (THQ). Eastman will be the exporter of the merchandise. Eastman
> purchases imported material from third party suppliers, such as Nagase
> America Corporation, which imports toluhydroquinone under the trade
> name methylhydroquinone. When Nagase America is the importer Eastman
> obtains a certificate of delivery. Eastman also sells both imported
> and substituted merchandise to domestic companies for export, in which
> cases proof of exportation and drawback endorsement are obtained from
> the exporter.

The imported and substituted merchandise will be THQ. The substituted
merchandise can be a product of the United States or could be other
imported material. Eastman states that substitution is made only

when the specifications of the exported and substituted THQ are
identical, which also means that the exported and substituted THQ carry
the same part number in its inventory.

In a letter dated August 25, 2000 you state that Eastman uses two
material numbers to trace THQ through their manufacturing system using
the product code GMN (Global Material Number) P0101002. This GMN code is
tied to a Sales Product Code (SPC) in their sales system. The SPC number
for THQ is 16305. Both the imported and domestic THQ are given the same
numbers.

Attached is a CF 7501 for entry 588-5 dated December 11, 1998. Nagase
America Corp. is the importer of record. The first line of merchandise
is "phenols, other, other," classified as 2907.29.9000, HTSUS, with a
duty rate of 5.8% *ad valorem*.

Also attached is a Certificate of Delivery from Nagase America
Corporation to Eastman Chemical Co. The merchandise is for 14,400 kgs of
methylhydroquinone (THQ), classified under subheading 2907.29.9000,
HTSUS. The merchandise was imported on December 11, 1998, entry number
588-5. The purchase order is number 45807515, and ID number is
023217-1-1.

Attached is an invoice from Nagase America Corp. number 45807515, with
invoice number ID 023-217-1-1. The invoice is for 14,400.00 kgs of
methylhydroquinone (THQ), GMN P0101002. The invoice also references
entry 588-5 dated December 11, 1998.

Also attached is a screen print of THQ purchase orders receipts for the
year ending 1998. Purchase order 45807515 is highlighted and is for
14,400.000 kgs of Toluhydroquinone packed in 50 kg fiber drums.

Attached is Eastman sales invoice number 03-38058349, Eastman order
03-02937969, ordered on February 9, 1999, for sale to Easchem located in
Taiwan. One line of merchandise is for 100 kgs of Toluhydroquinone, GMN
P0101002, packed in 2 fiber drums.

Also attached is a copy of a bill of lading for order 0302937969 from
Eastman to Easchem, dated February 25, 1999. The fourth line is for 2
fiber drums loaded onto 1 pallet loaded into 1 40' container of
hydroquinone & derivatives toluhydroquinone.

Also attached is a certificate of analysis done by Seiko Chemical Co.,
Ltd. for THQ, dated March 24, 1999. The quantity tested is 14,400 kgs.
The THQ was divided into seven lots, and each show an assay of between
99.8 to 99.9% purity.

Also attached is a certificate of analysis from Eastman for the sale of
toluhydroquinone dated July 28, 1999 to Typical Cofa. The THQ is
described as white to off-white crystalline powder and with an assay of
99.9 purity. This certificate of analysis also matches Eastman's sales
specification sheet.

**ISSUE:**

Is the merchandise commercially interchangeable?

**LAW AND ANALYSIS:**

Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if
there is, with respect to imported duty-paid 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 three 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 either be 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. 103-182, the North American Free
Trade Agreement Implementation (\"NAFTA\") Act (107 Stat. 2057), enacted
December 8, 1993. The foregoing summary of section 1313(j)(2) is based
on the law as amended by Public Law 103-182. Title VI of Public Law
103-182 took effect on the date of enactment of the Act (section 692 of
the Act). The amendments to the drawback law (19 U.S.C. §1313) are
applicable to any drawback entry made on or after the date of enactment
as well as to any drawback entry made before the date of enactment if
the liquidation of the entry is not final on the date of enactment (H.
Report 103-361, 103d Cong., 1st Sess., 132 (1993); see also provisions
in the predecessors to title VI of the Act; H.R. 700, 103d Cong., 1st
Sess., section 202(b); S. 106, 103d Cong., 1st Sess., section 202(b);
and H.R. 5100, 102d Cong., 2d Sess., section 232(b)).

Before its amendment by Public Law 103-182, the standard for
substitution was fungibility. House Report 103-361, 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, prior to their amendment in 1998 (19 C.F.R.
§191.2(l)). 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. 103-189, 103d Cong., 1st
Sess., 81-85 (1993)) contains similar language and states that the same
criteria should be considered by Customs in determining commercial
interchangeability. The amended Customs Regulations, 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.

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.

Our review of the aforementioned commercial documentation with respect
to the above-referenced criteria for commercial interchangeability
yields the following analysis.

1\. [Government or Industry Standards]{.underline}

In regard to this criterion, no evidence was submitted regarding the
existence of government or industry standards for THQ. However, a
product data sheet found on the Eastman Chemical website, which also
corresponds to the purchase specification sheet provided for the
toluhydroquinone contains the following information.

  ----------------------------------- -----------------------------------
  Molecular weight                    124.13

  Empirical Formula                   C~7~H~8~O~2~

  Assay                               99%
  ----------------------------------- -----------------------------------

The CAS number for toluhydroquinone is 95-71-6. The color is described
as white to off-white crystalline powder.

The two certificates of analysis, described in the FACTS portion of this
ruling, both state the assay for THQ as 99.8 to 99.9% purity.

Two other commercial certificates of analysis for the sale of
methylhydroquinone and toluhydroquinone, both CAS number 95-71-6, were
compared to the ones supplied by Eastman.

One for methylhydroquinone contained the following information.

  ----------------------------------- -----------------------------------
  Molecular weight                    124.14

  Formula                             C~7~H~8~O~2~

  Assay                               100.6%

  Appearance                          White crystalline powder
  ----------------------------------- -----------------------------------

One for toluhydroquinone contained the following information.

  ----------------------------------- -----------------------------------
  Molecular weight                    124.14

  Formula                             C~7~H~8~O~2~

  Assay                               99.7

  Appearance                          Faintly beige fine crystals
  ----------------------------------- -----------------------------------

Comparing Eastman's THQ to the commercial sales certificates of
analysis, it is clear that purity is the determining factor in the sale
of THQ. It is also clear that the purity range with which Eastman deals
is within the range used by other companies in the business of the sale
and purchase of THQ. Furthermore, it is also apparent from the
certificates of analysis supplied by Eastman that the imported THQ which
it buys, and the THQ it sells are well within the same purity range.
Additionally Eastman states that the specifications of the imported and
substituted merchandise will be identical. Therefore, based on Eastman's
sales and purchase specifications, and in comparison to the
specifications used by other companies, which deal in THQ, the THQ would
be considered to be of the same quality. However, no government or
industry standards exist for THQ, and thus, this criterion must be
considered neutral for purposes of determining commercial
interchangeability.

2\. [Part Numbers]{.underline}

In regards to this criterion, Eastman stated it uses two material
numbers to trace THQ through their manufacturing system using the
product code GMN (Global Material Number) P0101002. This GMN code is
tied to a Sales Product Code (SPC) in their sales system. The SPC number
for THQ is 16305. Both the imported and domestic THQ are given the same
numbers.

The GMN P0101002 is found in the sales invoice from Nagase America Corp.
to Eastman. The GMN P0101002 is also on the sales invoice from Eastman
to Easchem. Therefore, the Global Material Number satisfies this
criterion. However, the Sales Product Code referred to above is not
found on any of the documents submitted, therefore we are unable to
comment on that number.

3.  [Tariff Classification]{.underline}

In regards to this criterion, Eastman states that the THQ is classified
under subheading 2907.29.9000, HTSUS. Furthermore, Eastman has provided
a CF 7501 for entry 588-5, and a Certificate of Delivery for the THQ
from Nagase America Corp., the importer of record. The THQ was
classified under subheading 2907.29.9000, HTSUS. Additionally, Eastman
stated that both the imported and substituted THQ will have the same
tariff classification. While we do not have any export documentation
stating the tariff classification of the THQ, the import documents show
that THQ is classified under one subheading. Therefore, at most, this
criterion would be indeterminate.

4.  [Relative Values]{.underline}

According to sales invoice number 03-38058349, described above, which
details the sale of 100 kgs to Easchem from Eastman, the THQ is sold for
\$xx.xx per kg.

We are unable to verify the purchase price of the THQ from the Nagase
America Corp. purchase order, described above, since that invoice was
paid in Yen. However, according to the screen print of THQ purchase
orders receipts for the year ending 1998, which has purchase order
45807515 highlighted and is for 14,400.000 kgs of Toluhydroquinone
packed in 50 kg fiber drums, the amount per unit is \$xx.xx.

The difference in value of the imported and substituted merchandise may
be expressed for in percentages. In this case, the percentage would
represent how much greater the export value is in comparison to the
import value. In this case that percentage is 64%.

The differences in values do not support a finding of commercial
interchangeability, however, the value difference does not preclude a
finding of commercial interchangeability. Instead, we fine this
criterion to be inconclusive, and therefore of little weight.

Upon thorough review of the evidence submitted, we find that Eastman's
imported and substituted THQ is of the same standard and quality.
However, since no government of industry standards exist this criterion
is neutral. We conclude that Eastman uses its Global Material Number as
a part number for both its imported and substituted THQ, and therefore
this criterion is met. In this case the tariff classification and the
relative values criteria do not support nor do they preclude a finding
of commercial interchangeability. Both of those criteria should be given
little weight in the analysis. We therefore conclude, that the imported
and substituted THQ are commercially interchangeable for purposes of 19
U.S.C. 1313(j)(2).

**HOLDING:**

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

Sincerely,

William G. Rosoff, Chief

Duty and Refund Determination Branch