Source: https://www.customsmobile.com/rulings/docview?doc_id=H030096
Timestamp: 2020-08-15 04:44:14
Document Index: 730871964

Matched Legal Cases: ['§ 1313', '§ 191', '§ 1313', '§ 191', '§ 1313', '§ 1313', '§ 191']

Customs Ruling HQ H030096 - Unused merchandise drawback: Commercial interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R § 191.32(c); Daelimpoly 50100 high density polyethylene and Daelimpoly 5502 high density polyethylene
Type : 5 • HTSUS :
OT:RR:CTF:ER H030096 ECD
RE: Unused merchandise drawback: Commercial interchangeability; 19 U.S.C. § 1313(j)(2); 19 C.F.R § 191.32(c); Daelimpoly 50100 high density polyethylene and Daelimpoly 5502 high density polyethylene
This is in response to your request for a formal ruling on the commercial interchangeability of Daelimpoly 5502 high density polyethylene (“HDPE”) and Daelimpoly 50100 HDPE, which you made on behalf of PCF Global Solutions LLC (“PCF”), and which we received on May 30, 2008. Our decision follows.
FACTS: According to your submission, PCF purchases, imports, and resells blow molding grade HDPE. The two types of HDPE you request we evaluate are Daelimpoly 5502 HDPE and Daelimpoly 50100 HDPE, which we assume are the product names and parts of particular HDPE produced by Daelim Industrial Co., Ltd., a Korean chemical company. PCF, according to the submission, treats Daelimpoly 5502 HDPE and Daelimpoly 50100 HDPE as commercially interchangeable; however, the “HDPE is kept in its individual imported container bag and is not otherwise commingled with other imports.” PCF is a wholly owned subsidiary of World Wide Polymers, Inc.
To support your claim that the two kinds of HDPE are commercially interchangeable, you provide commercial documents and one Customs Form 7501, which “exemplify a typical import and export transaction.”
For the import, you provide Customs Form 7501 for Entry 656-xxxx084-6, dated December 15, 2005; a commercial invoice, dated November 10, 2005, which indicates that Daelimpoly 50100F was sold and its sales price; a bill of lading dated November 14, 2005; and a chart of the physical properties of HDPE 50100.
For the export, you provide an invoice from World Wide Polymers, Inc., dated December 23, 2007, which indicates that HDPE “blow molding grade” HB5502B was sold and its sales price. There is also an unsigned bill of lading dated December 23, 2007, and a description of the physical properties for HDPE 5502, which has some handwritten notations. On September 8, 2008, in an email response to our questions about the documentation, you indicated that the notations “are incidental figures only.” Therefore, we are not including them in our analysis.
A comparison of Daelimpoly 50100 and 5502 HDPE, according to the physical properties provided, are provided in this table:
 50100 HDPE  5502 HDPE  Melt index (190_, 21.6 kg) ASTM D 1238 10 (HLMI) g/10 min 0.35 g/10 min  Density ASTM D 1505 0.948 g/cm3 .955 g/cm3  Tensile Yield Strength ASTM D 638 260 kg/cm2 280 kg/cm2  Ultimate Elongation ASTM D 638 >600% >600%  Flexural Modulus ASTM D 790 10000 kg/cm2 12000 kg/cm2  IZOD Impact Strength (23°C) ASTM D 256 50 kg · cm/cm 35 kg · cm/cm  Brittleness Temperature ASTM D 746 <-76 °C <-76 °C  ESCR (Condition B, F50) ASTM D 1693 >600 Hr 30 Hr  Customer Benefits Excellent processability High melt strength Good impact strength Excellent processability Good stiffness Good impact strength  Suggested Uses Industrial large container Sheet Small & medium container (Food, Detergent, Bleach, Cosmetic, Shampoo etc.)  Processing Stock Temp.: 190 ~230 °C Stock Temp.: 180~200 °C  Specification Data ASTM D 1248-Type_, Class A, Category 5 FDA Regulation 177.1520 Suitable for Food Packaging ASTM D 1248-Type_, Class A, Category 5 FDA Regulation 177.1520 Suitable for Food Packaging  
We compared the physical property charts PCF provided with the properties for the two types of HDPE listed on the Daelim Industrial Co., Ltd. PetroChemical Division (“Daelim PetroChemical Division”) website, and found that they were the identical. See Daelim PetroChemical Division website, available at http://www.daelimchem.co.kr/eng/template/prod_01.jsp?m=2&s=1 (last visited October 20, 2008). In your request, you indicated that both types of HDPE had “good impact strength and environmental stress crack resistance” and described both as used for medium to large sized commercial and industrial parts. The descriptions from the Daelim PetroChemical Division catalogue, however, indicate that HDPE part number 50100 is used for “industrial large containers” and “sheets” while its HDPE part number 5502 is used for “small & medium containers (food, detergent, bleach, cosmetic, shampoo, etc.)”. See Daelim Petrochemical Product Catalogue, available at http://www.daelimchem.co.kr/catalog/19E.pdf . Furthermore, the company lists HDPE part number 50100 as having excellent environmental stress crack resistance, but does not list environmental crack resistance as a major feature for HDPE part number 5502.
Our office forwarded the ruling request and pages from the Daelim PetroChemical Division catalogue and website to the United States Customs and Border Protection’s Office of Laboratories and Scientific Services for its opinion on the two types of HDPE. The Office of Laboratories and Scientific Services issued a report, dated October 9, 2008, (“OLSS Report”), that stated that the specifications provided were insufficient to ensure that the imported and exported products were commercially interchangeable. According to the OLSS Report, the difference in Environmental Stress Crack Resistance, or ESCR, was sufficient to determine that the end use of the products differs. ESCR tests evaluate the number of hours it takes for material to crack when it is subject to environmental stressors: the ESCR for Daelimpoly 50100 is listed as more than 600 hours, while the ESCR for Daelimpoly 5502 is 30 hours. The OLSS Report also noted that the numbers 5502 and 50100 should be considered part numbers: the plastic industry uses these numbers in a similar manner as the metal alloys industry uses grades and numbers.
Whether imported Daelimpoly 50100 HDPE is commercially interchangeable with Daelimpoly 5502 HDPE, for purposes of substitution unused drawback pursuant to 19 U.S.C. § 1313(j)(2).
For a drawback claim for substituted unused merchandise, pursuant to section 1313(j)(2), the merchandise must be commercially interchangeable with the imported merchandise. See 19 U.S.C. § 1313(j)(2). To determine commercial interchangeability, U.S. Customs and Border Protection (“CBP”) evaluates the critical properties of the merchandise. In evaluating the critical properties, CBP considers factors such as the tariff classification of the merchandise, the relative value of the merchandise, the relevant governmental and recognized industrial standards for the product, the merchandise’s part numbers, and any other relevant factors. See 19 C.F.R. § 191.32(c). Commercial interchangeability is determined by an “objective, market-based consideration of the primary purpose of the goods in question”; and CBP examines the products “from the perspective of a hypothetical reasonable competitor.” See Texport Oil Co. v. United States, 185 F.3d 1291, 1295 (Fed. Cir. 1999)(citations omitted). In this case, if a reasonable competitor would purchase either the Daelimpoly 50100 HDPE or the Daelimpoly 5502 HDPE for its primary commercial purpose, then the HDPE is commercially interchangeable.
The first two factors, tariff classification and relative values, are not dispositive. Both types of HDPE are classified under HTSUS 3901.20.5000, for “Polyethylene having a specific gravity of 0.94 or more: Other.” Although they do fall under the same tariff classification HTSUS number, the article description for the HTSUS category is broad. As for valuation, the values differ by only 0.83 percent; however, the prices more than two years apart, and PCF has not provided information as to the stability of the HDPE market. Therefore, these two factors do not determine whether the two types of HDPE are commercially interchangeable. Two other factors, the part numbers in the sales transactions as well as government and recognized industry standards, suggest that the two types of HDPE are not commercially interchangeable. Although both Daelimpoly 5502 HDPE and Daelimpoly 50100 are “blow molding grade,” they have, as explained in the OLSS Report, different part numbers. It appears, as discussed below, that these part numbers are used to distinguish the types of HDPE and their uses, and, according to PCF’s ruling request, the two types are not commingled. Furthermore, the part numbers of the HDPE appear on the commercial invoices and bills of lading for both the imported Daelimpoly 50100F HDPE and the exported HDPE “Blow Molding Grade HB5502B”, suggesting that the part number is as important to the customer as whether the HDPE is “blow molding grade.” The part numbers on the commercial invoices and bills of lading also show, as does the Daelim PetroChemical Division product catalogue, that there are additional categories related to each part number: the import documents list 50100F HDPE; the export documents list HB5502B HDPE, and the Daelim PetroChemical Division product catalogue lists 5502HS, 5502-03LD, LH-5502 as well as part number 5502 HPDE. See Daelim PetroChemical Division Product Catalogue, available at http://www.daelimchem.co.kr/catalog/19E.pdf . The use of part numbers in the purchase and sale of merchandise indicates whether a customer would substitute merchandise with different part numbers. See HQ 228261 (February 8, 2002) and HQ 228171 (February 22, 2000). Because part numbers are used in the sale and purchase of the merchandise, the different part numbers suggest the two types of HDPE are not commercially interchangeable.
The industry standards for each type of HDPE also suggest that the two types of HDPE are not commercially interchangeable. The OLSS Report stated that Daelimpoly 5502 HDPE and Daelimpoly 50100 HDPE have several similar specifications, as the chart, above, indicates: density, tensile yield strength, ultimate elongation, flexural modulus, IZOD impact strength, and brittleness temperature. Nevertheless, the difference in ECSR is, according to the OLSS Report
{E}nough to determine that the end use of the products can differ significantly. The ESCR test is designed to evaluate the number of hours it takes to incur a product’s 50% failure rate when subjected to environmental stresses; a failure is considered when the material cracks. The ESCR for 5502 is stated at 30 hrs {sic} while the ESCR for 50100 is above 600 hrs; 600 being the maximum value for the test.
Therefore, because the two types of HDPE have different part numbers and significantly different ESCR, a hypothetical competitor would probably not use the same HDPE for the same applications.
Other factors, namely, the common usage of the two types of HDPE and Daelim PetroChemical Division’s description of the types of HDPE by part number, lead us to conclude that Daelimpoly 50100 HDPE and Daelimpoly 5502 HDPE are not commercially interchangeable. Other factors CBP may consider in making a determination of commercial interchangeability include “evidence of arms-length negotiations between commercial actors, {or} the description of the goods on bills of sale or invoices.” See Texport Oil Co., 185 F.3d at 1295. In this case, the OLSS Report stated that 50100 HDPE is typically used to produce “gasoline tanks, agricultural chemical tanks and bottles for industrial chemicals,” while 5502 HDPE is used to produce bottles for food, bleach, and household detergents. The OLSS Report concluded that 50100 HDPE could be used for 5502 applications, such as small food containers; however, 5502 HDPE could not be used for 50100 applications, such as large industrial chemical containers. This conclusion is supported by Daelim PetroChemical Division’s descriptions of applications in its product catalogue: under applications, 50100 HDPE has listed “Industrial Large Containers” and “Sheets”; however, 5502 HDPE has listed “Small & Medium Containers (Food, Detergent, Bleach, Cosmetic, Shampoo, etc.).” These same applications are listed in the product characteristic charts PCF provided. Because the producer distinguishes between the two types of HDPE in its descriptions, and the typical use of the two types of HDPE differ, we conclude that Daelimpoly 50100 HDPE and Daelimpoly 5502 HDPE are not commercially interchangeable HOLDING:
Because a reasonable competitor would not use Daelimpoly 5502 HDPE for industrial large containers, an application for which it would normally use Daelimpoly 50100 HDPE, we find that Daelimpoly 50100 HDPE and Daelimpoly 5502 HDPE are not commercially interchangeable.
Type: 5 • HTSUS: