HQ 225418: Request for Internal Advice on behalf of Allied Signal Inc.; re commercial interchangeability of caprolactam; 19 U.S.C. 1313(j)(2)

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                         October 12, 1994


                            HQ 225418

DRA-4-CO:R:C:E 225418 CB

CATEGORY:  Drawback

Ms. Nora Ehrlich
Chief, Liquidation Branch
Southeast Region
U.S. Customs Service
909 S.E. 1st Avenue
Miami, FL  33131

RE:  Request for Internal Advice on behalf of Allied Signal Inc.;
     re commercial interchangeability of caprolactam; 19 U.S.C.
     1313(j)(2)


Dear Ms. Ehrlich:

     This is in response to your letter of May 11, 1994, wherein
you requested our determination on the commercial
interchangeability of the chemical, caprolactam, under same
condition substitution drawback.

FACTS:

     AlliedSignal Inc., Chemicals Division imports caprolactam. 
AlliedSignal wishes to substitute domestic caprolactam. 
Commercial caprolactam, both imported and domestic, is the major
component of nylon fibers, resins, and films.  According to the
applicant, the commercial world accepts the imported and
substituted manufactured caprolactam as interchangeable in all
instances.  The applicant states that its customers would accept
both the designated imported or substitute caprolactam and both
are sold at the same price.  

     You have requested that we make a determination regarding
the substitution of caprolactam for the purposes of same
condition substitution drawback.

ISSUE:

     Are the imported and substituted caprolactam commercially
interchangeable for 19 U.S.C. 1313(j)(2) purposes?




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 be
either 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 drawback law was substantively amended by section 632,
title VI - Customs Modernization, Pub. L. 103-182, the North
American Free Trade Agreement Implementation Act (107 Stat.
2057), enacted December 8, 1993.  According to the applicable
legislative history, 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. Rep. 103-361, 103d COng.,
1st Sess., 132 (1993).  House Report 103-361, supra, also
contains language explaining the change from fungibility to
commercial interchangeability as a standard for substitution for
drawback under 19 U.S.C. 1313(j)(2).  According to the Report (at
page 131), 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 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.


     Therefore, in order to determine whether the caprolactam is
commercially interchangeable, the following analysis must be
made:

     1.  Recognized industrial standards:  The importer provided
the commercial specifications and background information on
industry standards for caprolactam and it has been determined
that the standards are met.

     2.  Tariff classification:  It appears that both the
imported and substituted caprolactam are classifiable under
subheading 2933.71.oo, Harmonized Tariff Schedule of the United
States (HTSUS).  Therefore, the tarrif classification criteria
has been met.

     3.  Part number.  It is assumed that this criteria is not
applicable because there is no reference to part numbers in the
information supplied by the importer.

     4.  Relative values of imported and exported caprolactam. 
The claimant states that the imported and domestic caprolactam
would be sold at the same price.  We interpret that statement to
mean that the import invoice and the export invoice show that the
imported caprolactam and the exported caprolactam that forms the
basis for drawback eligibility would show the same price.  On
that basis, the relative value criteria would be satisfied.

     You stated in your request that the Customs Laboratory in
Savannah, Georgia, had indicated that the tested merchandise is
"fungible", however, due to the method of packaging, the moisture
content of the samples could not be determined.  Your request,
together with the information you submitted, was forwarded to the
Office of Laboratories & Scientific Services ("OLSS") for their
review.  OLSS provided the following comments:

     In the report, dated October 10, 1993, the Savannah
     Laboratory states that they were unable to verify the
     moisture content of the samples, however, we note that the
     moisture content is stated in the certificates of analysis
     submitted by the applicant.  The moisture data show similar
     moisture content values for the domestic and imported
     merchandise.  Therefore, based on this information and the
     ...listed specifications, it is our opinion that the
     domestic merchandise is "commercially interchangeable" with
     the imported (Russia) merchandise...

     Additionally, we have reviewed the specifications submitted
     for caprolactam imported from Czech Republic (see importer's
     letter dated April 6, 1993), and find that the Czech
     caprolactam product is also "commercially interchangeable"
     with domestic caprolactam.

     Based on the foregoing, unless you are not satisfied with
OLSS' determination, we conclude that claimant has established
commercial interchangeability for purposes of the drawback
claims.

HOLDING:

     The merchandise in this case (caprolactam) is commercially
interchangeable for purposes of the substitution same condition
drawback law unless the claimant uses different part numbers for
the different lots of caprolactam.

     The Office of Regulations and Rulings will take steps to
make this decision available to Customs personnel via the Customs
Rulings Module in ACS and to the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels within 60 days from the date of this decision.


                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division