**HQ 227537**

April 9, 1999

DRA-4 RR:CR:DR 227537 CB

CATEGORY: Drawback

Tom Winkowski, Port Director

Miami Service Port

U.S. Customs Service

P.O. Box 025280

Miami, FL 33102

RE: Request for Internal Advice; Commercial Interchangeability of
Cranberry Juice Concentrate; 19 U.S.C. §1313(j)(2); Drawback; HQ 225409;
Proof of Export; Untimely Claim

Dear Mr. Winkowski:

This is in reply to your letter of April 22, 1997, on behalf of, Lykes
Pasco, Inc., wherein you requested internal advice concerning the
commercial interchangeability of cranberry juice concentrate ("CJC"). As
noted in the claimant's letter of March 10, 1997, this issue was the
subject of an internal advice decision (HQ 225409, dated August 29,
1995), wherein we held that we were unable to conclude that the imported
and substituted merchandise were commercially interchangeable for the
purpose of 19 U.S.C. §1313(j)(2).

Additionally, we also note that Lykes Pasco has requested confidential
treatment of product specifications and sales documentation. Please be
advised that we have reviewed the submission and concluded that the
submission contains proprietary business information. Your request for
confidential treatment of those documents is hereby **GRANTED**.

**FACTS:**

Lykes Pasco filed two substitution unused merchandise drawback claims
which were the subject of a request for internal advice with respect to
whether certain substituted CJC was commercially interchangeable with
certain imported CJC. Lykes Pasco's attorney states that, at the time
the advice was rendered, Lykes Pasco was not aware that internal advice
had been sought. Thus, it was unable to provide the information required
for a determination of commercial interchangeability. The internal
advice (HQ 225409) indicated that after a review of the available
evidence, we were unable to conclude that the evidence supported a
finding that the merchandise was commercially interchangeable.

Lykes Pasco has now provided additional information which addresses the
criteria set out in the legislative history to 19 U.S.C. §1313(j)(2), as
amended in 1993. More specifically, Lykes Pasco submitted additional
evidence on the issue of relevant Governmental Standards, product
specifications, and a summary of receiving reports and purchase orders.

The subject request involves two substitution unused merchandise
drawback claims. Specifically, entry nos. 032-XXXXX41-3 and
032-XXXXX38-9. The issue centers on whether the CJC is commercially
interchangeable for purposes of 19 U.S.C. §1313(j)(2). Drawback entry
no. 41-3, designates CJC imported on import entry no 032-XXXX091-0
covering 72 drums of 65 Brix. A copy of the CF 7501 with an accompanying
invoice is attached. The substitute exported CJC consisted of 78 drums
of 58 Brix. There is no invoice showing the value of the substitute
exported CJC. There is a copy of a Transportation Entry and Manifest of
Goods Subject to Customs Inspection and Permit (CF 7512) dated April 28,
1994 showing that 78 drums of 58 Brix CJC (gross weight 24043 lbs.) were
shipped to FTZ 99. A companion CF 214 shows that what appears to be 8
drums (gross weight 41.437 lbs.) were admitted in zone restricted status
on May 4, 1994.

Drawback entry no. 38-9 designates CJC imported on import entry no.
032-XXXX398-0 covering 268 drums of CJC of 65Brix and 335 drums of 58
Brix CJC as being exported. A copy of the CF 7501 and invoice is
attached. The CF 7539 indicates the value of the imported CJC as
\$XXX,XXX. The accompanying invoice covers 268 drums for a total price
that is \$5,000 more than shown on the CF 7539. The substitute exported
CJC consisted of 335 drums of 58 Brix. The CF 7539 shows the value of
the exported CJC was about \$18,000 more than the value of the import
designated on the CF 7539. Also attached to the CF 7539 is a copy of a
change order dated March 8, 1994 covering what appears to be a sale of
38,000 gallons of CJC 58 Brix. Also attached is a copy of a CF 7512
covering 335 drums of 58 Brix CJC a copy of an accompanying Sea Waybill.
There does not seem to be an invoice or purchase order covering these
exported 335 gallons.

**ISSUE:**

Are the imported and substituted cranberry juice concentrates
commercially interchangeable for the purpose of 19 U.S.C. §1313(j)(2)?

**LAW AND ANALYSIS:**

Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if,
among other requirements, there is, with respect to imported duty-paid
merchandise, any other merchandise that is commercially interchangeable
with the imported merchandise. To qualify for drawback, the other
merchandise must be exported or destroyed within 3 years from the date
of importation of the imported merchandise. Also, 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. Further, 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.

Section 632, title VI - Customs Modernization, Pub. L. No. 103-182, the
North American Free Trade Agreement Implementation Act (107 Stat. 2057),
enacted December 8, 1993, changed the standard for substitution unused
merchandise drawback from "fungibility" to "commercial
interchangeability." According to the applicable legislative history,
the standard was intended to be made less restrictive (i.e., "the
Committee intends to permit the 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 (19 CFR
§191.2(l))). *See* H.R. Rep. No. 103-361, 103d Cong., 1st Sess., 132
(1993). 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 industrial
> standards, part numbers, tariff classification and relative values.

The Senate Report for the NAFTA Act (S. Rep. No. 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.

In order to determine whether the cranberry juice concentrates are
commercially interchangeable, an analysis of the following factors must
be done:

***Governmental and Recognized Industry Standards***

Governmental and recognized industry standards are generally considered
the most important of the four elements with respect to the issue of
commercial interchangeability, if used in the purchase and sale of the
merchandise in question. In HQ 225409 we concluded that the evidence,
available at the time, indicated that the imported and substituted CJC
were not commercially interchangeable. The evidence consisted of an
Office of Laboratories & Scientific Services ("the Lab") report, USDA
document A-A-20201 and 22 F.R. 5853. The Lab report stated that the
available technical information indicated that European Vaccinium
oxycoccus, and North American Vaccinium macrocarpon cranberries were
different in many aspects, such as, variety, chemical composition, taste
and price.

Lykes Pasco contends that the Government specifications cited in HQ
225409 are not relevant to commercial interchangeability of the CJC.
Rather, Lykes Pasco has provided two government standards for our
consideration. The first "standard" is from the U.S. Food and Drug
Administration ("FDA"). This consists of an FDA letter dated January 31,
1984, stating that "\[I\]n our opinion, the only species which should be
labeled as 'cranberry juice' are v. macrocarpus \[sic\], domestic
cranberry, and v. oxycoccus, European cranberry." The letter is signed
by an Assistant to the Director, Division of Regulatory Guidance, Bureau
of Foods. We note that the letter does not bear an inside address and
there is no indication as to the context within which this response was
issued. There is also another letter dated March 29, 1992, from the FDA
reiterating that, in the agency's opinion, ". . . the only species that
are considered to be cranberry in the United States are [Vaccinium
macrocarpon]{.underline} and [Vaccinium oxycoccus]{.underline}." There
is also a third letter from the FDA (dated June 19, 1997) stating that
"\[i\]n the United States, the common or usual name 'cranberry' refers
to the domestic cranberry, *Vaccinium macrocarpon*, and the European
cranberry, *Vaccinium oxycoccus*."

The second standard offered by Lykes Pasco is one issued by the Codex
Alimentarius Commission (the "Codex"). This is the international body
responsible for the execution of the United Nations' Joint Food and
Agriculture Organization /World Health Organization Food Standards
Programme. The Codex standard for cranberries lists both Vaccinium
macrocarpon and Vaccinium oxycoccus under the category of "cranberries."
However, we note that the Codex standard provided by Lykes Pasco is for
pulpy nectars intended for direct consumption and not for concentrate
for manufacture. Additionally, Lykes Pasco has submitted an affidavit
from Dr. R.E. Wrolstad, a professor on the faculty of Oregon State
University, in the Department of Food Science and Technology. In his
affidavit, Dr. Wrolstad states that "I have reported the compositional
differences between *V. Macrocarpon* and *V. Oxycoccus* and our results
are very similar to those reported by Coppola, 1989; . . ." Dr. Wrolstad
states that, among other things, the European cranberry contains less
quinic acid than the North American cranberry. Dr. Wrolstad goes on to
state that " not only are these compositional differences minor but
compared with other fruits, these differences are even more
insignificant." However, this conclusion is contradicted by Dr.
Wrolstad's own statement that his laboratory is often requested to
analyze a cranberry juice concentrate to determine whether it is *V.
macrocarpon* or *V. oxycoccus* because if the formula for the substitute
concentrate is applied to a juice made from the imported concentrate,
the percent of juice estimate will be lower*.*

At this office's request, the Lab reviewed the additional information
submitted by Lykes Pasco. The Lab contacted Dr. Elia Coppola, who works
for Ocean Spray Cranberries, Inc. and sought his technical advice. Dr.
Coppola provided Customs with a copy of his report entitled
"Authenticity of Cranberry Products Including Non-Domestic Varieties."
In his report, Dr. Coppola states that, in his opinion, these two
species are different in many aspects, such as, chemical composition,
taste and price. Specifically, Dr. Coppola's report states that "quinic
acid is the most important cranberry acid and a very expensive chemical.
Addition of synthetic quinic to juice to parallel the natural occurring
quinic acid levels of cranberry juice is uneconomical."

Thus, the government standards and the technical experts contradict each
other. The Codex Alimentarius, FDA and Dr. Wrolstad indicate that the
two species are interchangeable. The USDA standard and Dr. Coppola
indicate that the two species have different composition, taste, and
price and would not be interchangeable. Because no purchase or sales
contracts were submitted by Lykes Pasco, it is impossible to determine
whether Lykes Pasco used the Codex Alimentarius or the FDA standard or
some other standard in its commercial transactions. In any event, there
is no consistency between the published standards. Thus, we are unable
to reach a conclusion with respect to this criterion.

***Part Numbers***

Lykes Pasco contends that this criterion is not applicable because CJC
is not sold with reference to part numbers. This assertion is not borne
out by the documentary evidence. According to an affidavit from Sean H.
Frielich, an employee of Lykes Pasco, material designated as "cranberry
50\" and "cranberry 58\" are domestic-origin concentrates meeting the
specifications for "LPS-002 and LPS-029," respectively. "Cranberry 65\"
is an imported concentrate meeting the specifications for "LPS-033."
This coding systems appears to be used in the change order dated March
8, 1994, which refers to LPS-020. There is no explanation as to which
product "LPS-020\" refers to. Additionally, we note that the blend
formulas refer to the different types of CJC by a separate product or
material code (*i.e.*, "cranberry 50\" = 51-1560051, etc.).

Since Lykes Pasco has failed to provide copies of inventory records we
are unable to determine exactly how these codes are used. Thus, based on
the evidence in the file we must conclude that this criterion is
applicable and that product is sold using product codes. That evidence
does not support a conclusion that Lykes Pasco treats the imported and
substituted CJC as being commercially interchangeable.

***Tariff Classification***

Regarding tariff classification, both the imported and substituted
cranberry juice concentrate are classified under subheading 2009.80.60,
Harmonized Tariff Schedule of the United States ("HTSUSA"). Thus, this
criterion is not informative with respect to any potential difference.

***Relative Values***

HQ 225409 found that complete information had not been provided with
respect to the relative value criterion. Based on the available
information in the file, we determined that the difference in relative
values between the imported designated and exported CJC was about 12 per
cent.

As stated in the FACTS portion of this ruling, the subject drawback
claims did not contain invoices or purchase orders for the substitute
exported CJC. By way of a telephone conference on April 15, 1998 and
follow-up letter dated April 21, 1998, Lykes Pasco's counsel was advised
that the file did not contain documentary evidence addressing the
relative value criterion. Lykes Pasco was afforded an opportunity to
submit the pertinent information. A complete copy of all documentation
pertaining to the purchase and/or sale of the imported and substituted
goods is essential to a determination of commercial interchangeability.
Copies of import and export invoices, packing lists for the merchandise
to be substituted, and purchase orders from the claimant to the foreign
supplier and from the foreign customer to the claimant are necessary in
order to properly apply the relative value criterion. Under cover of a
letter dated October 2, 1998, Lykes Pasco's counsel submitted copies of
purchase orders for both the imported and substitute concentrate.
Thirteen purchase orders (and one change order) were provided. Seven of
these orders are dated December 1995 to December 1996. They would appear
to be irrelevant to the subject claims since the time frame covered by
these claims is 1991 (date of imports) to 1994 (date of exports). There
are four other purchase orders (and the one change order) dated between
1989 and 1991. These purchase orders cover domestic purchases of CJC.
However, the relevancy of these orders is also not readily apparent. In
a written statement attached to the drawback claims, dated March 31,
1994, the claimant states that the substitute exported CJC was supplied
by Company A. The purchase orders are addressed to Company B. No
explanation has been provided as to this apparent discrepancy. The
remaining two purchase orders are for the imported CJC. However, we are
unable to do a relative value comparison in the absence of pricing
information for the substitute CJC.

Likewise, when a claimant is alleging that the difference in relative
values result from fluctuations in supply, due to seasonality, weather
factors, or other natural forces that affect production levels, such an
allegation must be corroborated by independent evidence. Such
independent evidence should consist of trade letters, technical
bulletins, literature, etc. Unsupported, self-serving assertions are not
evidence. *See generally*, [Bar Bea Truck Leasing]{.underline}

[Co., Inc. v. United States]{.underline}, 5 CIT 124 (1983). Lykes Pasco
has submitted copies of articles from several trade publications. The
articles, from [Food News]{.underline}, [Food Institute
Report]{.underline} and [Yakima-Herald Republic]{.underline} . These
articles indicate that the 1995 cranberry crop was affected by several
factors such as heat, drought conditions and hail. The other publication
submitted by Lykes Pasco is the August/September 1995 and June 1997
Cranberry Marketing Committee (CMC), Stats and Facts Newsletters. As
stated by counsel, the narrative discusses the likely effect of weather
conditions on the 1995 crop. The June 1997 newsletter does not shed any
light on the issue of relative values. The applicability of these
articles is also not readily apparent. These articles pertain to the
1995 crop. The instant claims are based on 1994 exports which presumably
must have been harvested in 1994, if not earlier.

We also note that Dr. Coppola's report includes a Table listing the 1993
Market Prices Per Gallon of Fruit Juice Concentrates. This table
includes pricing information for both the *v. macrocarpon* and *v.
oxycoccus* concentrates showing market price at 50% concentration. The
table discloses that the *v. macrocarpon* was valued at \$56.50 per
gallon and the *v. oxycoccus*

ranged from \$38 to \$49. Thus, according to Dr. Coppola, the difference
in relative values between the imported designated and exported CJC
ranged from 15% to 49% .

Lastly, having said all of the above, we also conclude that the claims
should be denied because they fail on other grounds. One of the claims
is untimely and both contain inconsistencies and are missing crucial
information. To-wit:

1\. Claim 032-XXXXX38-9: The CF 7539 shows that 268 drums (65 Brix)
imported under consumption entry 032-XXXX398-0 with a value of \$XXX,XXX
are being designated. It also indicates that duties were paid in the
amount of \$X,XXX. The invoice attached to the claim shows a sales price
with a difference of about \$5,000 from that indicated on the CF 7539.
As to the substitute exported CJC, the CF 7539 states that 335 drums (58
Brix) were exported with a total value of \$XXX,XXX. Attached to the
claim is a CF 7512 and a Sea Waybill showing the movement of 335 drums.
There is no invoice covering the exported merchandise so there is no way
to determine the value of the export. We note that there is a "Change
Order" included with the claim but there is no indication as to how it
fits in with either the designated imported or exported substitute CJC.
It cannot, presumably, pertain to the imported CJC because the order
refers to 58 Brix (the imported CJC was 65 Brix). Likewise, it cannot
pertain to the exported CJC because although the Brix match, according
to the order the CJC is to arrive at Lykes Pasco's facilities **after**
the date of exportation of the substitute CJC.

Additionally, we note that there is no proof of exportation, certified
or uncertified. *See* 19 CFR §191.52 (1997). The Sea Waybill only shows
that the carriage line received 335 drums on or about April 7, 1994.
This does not meet the regulatory requirements for uncertified notice of
exportation which requires that the supporting documentary evidence
shall establish fully the time and fact of exportation. 19 C.F.R.
§191.52(c)(2) (1997). Nor, is there any indication that a CF 7511 was
filed and certified by Customs at the time of exportation.

2\. Claim 032-XXXXX41-3: The CF 7539 indicates that 72 drums (65 Brix)
imported under consumption entry no. 032-XXXX091-0 with a value of
\$XXX,XXX are being designated. It also indicates that duties were paid
in the amount of \$XXX. The claim includes an invoice pertaining to the
imported CJC. As to the substitute exported CJC, the CF 7539 states that
78 drums (58 Brix) were exported with a total value of \$XXX,XXX, which
exceeds that on the import by about \$4,000. There is no invoice
included with the claim and, thus, we cannot determine if the value
listed on the CF 7539 is correct. There are attached a CF 214 and 7512
pertaining to the exported substitute CJC which contain several
discrepancies. The CF 7512 covers 78 drums weighing 24,043 lbs. being
moved to FTZ 99. The value shown is the same as that shown on the CF
7539. The CF 214 shows that 8 drums weighing 41.457 lbs were placed in
FTZ 99 in zone restricted status. The total value indicated is \$5,000
less than shown on the CF 7512 for the import. Thus, there are
discrepancies in the number of drums, weight and value of the exported
substitute CJC.

Additionally, and more importantly, this claim should be denied because
the exportation did not occur within 3 years from the date of
importation. The statutory language is very clear. Exportation must
occur before the close of the 3-year period beginning on the date of
importation. *See* 19 U.S.C. §1313(j)(2)(B). The date of importation was
May 4, 1991. The exported substitute CJC was not received into FTZ 99
until May 4, 1994. Under 19 U.S.C. §81c(a) merchandise which has been
taken into the a zone shall be considered to be exported for the purpose
of drawback. In the instant case, the CJC was not taken into the zone in
zone- restricted status until May 4, 1994. Thus, the deemed exportation,
pursuant to 19 U.S.C. §81c(a) did not occur until after expiration of
the 3-year period.

3\. With respect to both claims, as discussed above, the two shipments
(one is a exportation and the other is a deemed exportation) are covered
by a CF 7512 (Transportation Entry and Manifest of Goods Subject to
Customs Inspection and Permit). Under 19 U.S.C. §1313(u), "\[I\]ported
merchandise that has not been regularly entered or withdrawn for
consumption shall not satisfy any requirement for use, exportation, or
destruction under this section." 19 U.S.C. §1313(u). A review of each CF
7512 seems to indicate that the substitute CJC was imported, entered for
warehousing, and then withdrawn from a warehouse and moved in bond to
the port of exportation. In one case, it was shipped overseas. In the
other case, it was admitted into a zone in zone-restricted status which
would be a deemed exportation. We draw your attention to the
certification portion of the CF 7512 wherein there are references to
merchandise being withdrawn from a warehouse. Thus, if the claimant
withdrew the substitute CJC from a bonded warehouse without having first
entered it for consumption, these exportations cannot be used to satisfy
the statutory requirements. You need to ascertain if this is in fact
what happened. If so, this would be an additional ground on which to
deny drawback.

**HOLDING:**

Commercial interchangeability has not been established. Additionally,
the claims should be denied based on (1) the untimeliness of the one
claim and (2) the failure to prove the time of

exportation for the other claim. Additionally, both claims may be denied
if the exported substitute CJC was not entered for consumption prior to
exportation.

You are to mail this decision to the internal advice applicant no later
than 60 days from the date of this letter. On that date, the Office of
Regulations and Rulings will make the decision available to Customs
personnel, and to the public on the Customs Home Page on the World Wide

Web at www.customs.ustreas.gov, by means of the Freedom of Information
Act, and

other methods of public distribution.

Sincerely,

John Durant, Director

Commercial Rulings Division