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HQ 229161

March 20, 2002

DRA-4- RR:CR:DR 229161 RDC


Port Director of Customs
Los Angeles / Long Beach Seaport
300 South Ferry Street
Terminal Island, CA 90731

RE: Protest number 2704-00-101657; Commercial interchangeability; Shoes; 19 USC § 1313(j)(2); Size; Style number.

Dear Sir or Madam:

Protest number 2704-00-101657 was forwarded to this office for further review. We have considered the evidence provided and the points raised by your office and the protestant. Our decision follows.


The Protestant, Skechers U.S.A., Inc. (“Skechers”), an importer and exporter of causal leather footwear, protests the denial of drawback on 13 drawback claims filed per 19 USC 1313(j)(2). This Protest, number 2704-00101657, was filed June 21, 2000, with the Los Angeles Port. According to “Exhibit A” of the Protest, the drawback claims for unused merchandise (same condition drawback) per 19 USC 1313(j)(2) were filed between June 1995 and June 1997 and were liquidated on March 24, 2000. The claims were denied after a Customs audit determined that claims “met substitution unused merchandise drawback regulations except for commercial interchangeability requirements” (Drawback Audit Report number 731-99-DRO-001). The Drawback Audit Report further states, “some substituted merchandise was not commercially interchangeable because the substituted merchandise was of a different size than the exported merchandise.” Skechers states “for the drawback claims subject to the protests, Skechers substituted footwear which is the same color, style and specification but did not correspond pair for pair by size.” The Protestant contends that the subject drawback claims meet “the test for commercial interchangeability as outlined by the Court in Texport Oil Co. V. United States” (185 F.3d 1291 (U.S. App. 1999)).

As evidence of an import transaction Skechers includes a purchase order (number J3918) for 6600 pairs of shoes (dated December 19, 1997) from a factory designated only as Diamond (Protestant’s page “E2”). This purchase order is for women’s shoes of various colors in style number 7984. There are boxes on the order in which it appears Skechers designated how many pairs of each size to be ordered. Below is a representation of part of one line of the purchase order:

Color Code
Total Pairs blk/blk sued/nubu

Also included is an invoice issued to Skechers on February 21, 1998, from an entity in Taiwan for 4200 pairs of footwears [sic] style number 7984 (Protestant’s page “E7”). The invoice breaks down the order by pairs per color and states the size per each color as a range, i.e., 5-10. Below is a representation of part of the invoice:

FOB Hong Kong
Price per pair
Total Price
Order no.:

Style no.:

Mocha, Mocha/Black, Suede

1,200 PRS
USD $xx
USD $xxx

Other invoices to Skechers from the same Taiwanese entity also dated February 21, 1998, are included and follow the pattern described above. The Protestant also includes the bills of lading from the freight forwarder ostensibly for the invoices discussed. The bills of lading state the number of total cartons of “footwear (shoes),” the style numbers and corresponding colors contained in that shipment.

Page E 21 is the only Skechers Purchase Order included. It is dated May 28, 1998, control number S251991, order number AUS 1229, from an entity in Victoria, Australia. Total pairs of shoes is stated as 420. Below is a representation of a small portion of the order form. The shading represents the handwritten portion.

Cust. Sku. No.
Start Ship Date
Cancel Date
Unit Price



6/30 xx.76


Page E 30 is a Skechers Packing List dated June 8, 1998, for order number AUS1229. This packing list shows a total of 419 pairs of shoes in 69 cartons. All 419 pairs are the same style number and description (color). The packing list shoes the exact number of shoes per size as shown on the Skechers order form at page E 21 except for one less pair of size 9 on the Packing List.

Also included in the file is a bill of lading for a shipment to the Australian entity, a “Release of Domestic Goods for International Shipment” (page E 24), and an invoice (page E 25) from Skechers to the Australian company, dated June 8, 1998. This invoice breaks down the shipment by style number, color, origin material, range of sizes (stated only as 6-11), number of pairs, unit price and total price. Also in the file is an Arrival Notice / Freight Bill dated March 9, 1998, a Finished Goods Receiving Register for the period January 1, 1998, and December 31, 1998.

Finally Skechers includes the CF 7539 for drawback claim 175-0001394-5 and several attachments. Among these are the Customs approval to use the exporter’s summary procedure, which also waives the “prior notice of intent to export” requirement and approves its right to receive accelerated payments. A copy of the required bond is also attached. The Protestant also attaches a list of the various exports labeled Duty Drawback Claim #28” which includes the details regarding the importation and exportation of the drawback merchandise, such as dates, carrier, style, color destination, entry numbers, import dates, quantities, price, classification, duty rate and drawback amount.


Whether the subject shoes are commercially interchangeable merchandise for purposes of substitution unused merchandise drawback per 19 U.S.C. § 1313(j)(2).


We note initially that the instant Protest was timely filed, i.e., within 90 days of the liquidation of the entries (19 U.S.C. § 1514(c)(3)(B)). Under 19 U.S.C. § 1514(a) “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the liquidation or reliquidation of an entry . . . are final unless a protest of that decision is filed within 90 days of the decision (19 U.S.C. §1514(c)(3)(B)). The subject entries were liquidated on March 24, 2000, and this Protest was filed on June 21, 2000.

Under 19 U.S.C. § 1514(a) and 19 CFR § 174.11 decisions of the Customs Service are final unless specifically named as subject to protest (19 U.S.C. § 1514(a)). The “refusal to pay a claim for drawback” is protestable under 19 U.S.C. § 1514(a)(6). Therefore, the issue raised in the instant Protest is protestable per 19 USC § 1415(a)(6).

The criteria required for granting a Request for Further Review are set forth in 19 C.F.R. § 174.24, which states, inter alia,

Further review of a protest which would otherwise be denied by the port director shall be accorded a party filing an application for further review which meets the requirements of §174.25 when the decision against which the protest was filed:

(b) Is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts; . . .

19 C.F.R. § 174.24(b). Therefore, further review will be accorded to the party filing an application for further review which meets the requirements of § 174.25 and at least one of the criteria in § 174.24. The Protestant contends and it is the opinion of your office that this Protest warrants further review because it meets the criteria of §174.25 and involves questions of law or fact that have not been ruled upon by the Commissioner of Customs or his designee” per 19 C.F.R. § 174.24(b). This office agrees that this Protest is entitled to further review because it involves questions of fact, i.e. whether shoes of different sizes are commercially interchangeable, that have not been ruled upon.

Under 19 U.S.C. § 1313(j)(2), as amended, substitution unused merchandise 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. The statute does 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. Before its amendment by Public Law 103-182, the standard for substitution was fungibility. When the drawback standard was amended the substitution standard was changed from fungibility to commercially interchangeability 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 (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.

Thus, the determination of whether the shoes are commercially interchangeable begins with an analysis of the governmental and recognized industry standards, part numbers, tariff classification, and relative values of the substituted and exported shoes. It must be noted here that the invoices, bills of lading, purchase orders, and packing lists Skechers provides to support its position, are dated December 1997 or after. As such these documents are of dubious value as evidence of protested drawback claims which were filed between June 1995 and June 1997 in that none of the documents reflect transactions that occurred in the time period at issue.

Governmental and recognized industry standards

The Protestant states, that "there are no government or recognized industrial standards to distinguish the Skechers shoes in issue.” Based on its representation, and in the absence of evidence to the contrary, it is therefore apparent that the first of the above-listed criteria to be considered is inapplicable in this case.

Part numbers

The Protestant contends that the subject shoes meet the part numbers criterion because although the shoes may be different sizes the shoes have the same style number (e.g., 7743 or 4764). Skechers states that its style numbers “do not change even if the size of footwear changes.” The evidence support the Protestant’s contention that style numbers remain the same despite size changes. In HQ 226625 we held that even though the style number for the subject Jockey underwear remained consistent, because different colors had different codes and these codes were used on the commercial documentation as a distinguishing factor, same style numbers did not necessarily meet the part numbers criterion. The situation is the same for Skechers. Even though Skechers’ style numbers remain consistent the shoe color is a distinguishing factor and the parts number criterion is not met in this instance.

Tariff classification

Skechers states that “the imported and exported footwear has [sic] the same tariff classification.” However it is apparent from documents prepared by the Protestant that the same style number footwear does not always have the same classification. For example, according to the Duty Drawback Claim # 28, prepared on June 14, 1996, and attached to drawback claim number 175-0001394-5, 228 pairs of style number 7115, color NVS and 9 pairs of style number 7115, color BPT were exported on January 13, 1996, to New Zealand. The 228 pairs of color NVS were imported on April 1, 1995 under heading 6403.99.6075 at a duty rate of 8.5 per cent but the 9 pairs of color BPT were imported November 30, 1995 under heading 6402.99.8090 at a duty rate of 29.7 per cent. In addition 22 pairs of style number 7115, color PBS were exported to New Zealand on February 23, 1996, and were imported on December 27, 1995, under heading 6403.99.9065 at a duty rate of 10.0 per cent. According to this drawback claim the same style footwear does not always have the same classification nor tariff rate.

Relative value

The invoices sent to Skechers from the manufacturer and the invoices issued by Skechers to its customer support its contention that regardless of size differences within a style, each style has one price and thus, one value. The invoices break down the goods by order number and style number. The description for size states the range of sizes, i.e. 6 – 10. The color description lists the colors included, i.e. “BKS, Black Suede, NVS, Navy Suede.” There is only one price listed for each style number, regardless of the other characteristics, therefore the relative value criterion has been met.

Additional Relevant Factors

The Protestant contends that the substituted merchandise is commercially interchangeable under the standard stated in Texport Oil Co. v. United States (185 F.3d 1291 (U.S. App. 1999). In Texport the Court explored the evolution of § 1313(j)(2) and quoted from its legislative history:

By requiring drawback to be extended to exports that were "commercially interchangeable" with dutiable imports, Congress clearly and unequivocally stated its intention to allow the benefits of drawback to extend to exports that are not identical to the imported merchandise. The scope of the difference between the imports and exports, Congress states, is limited to "commercial interchangeability." 19 U.S.C. § 1313(j)(2). The phrase "commercially interchangeable" was inserted in place of the term "fungible" in a 1993 amendment, see Pub. L. 103-182, § 632(a)(4), 1993 U.S.C.C.A.N. (107 Stat.) 2193-94, ruling out any construction of "commercially interchangeable" that requires the imports and exports to be identical (or even very nearly so); compare 19 U.S.C. § 1313(j)(2) (1988) (amended), with 19 U.S.C. § 1313(j)(2) (1994); see also H.R. Rep. No. 103-361, at 131 (1993), reprinted in 1993 U.S.C.C.A.N. 2552, 2681 ("The Committee intends to permit the substitution of merchandise when it is 'commercially interchangeable' rather than 'commercially identical.'") . . . . Instead, we are convinced that Congress intended "commercially interchangeable" to be an objective, market-based consideration of the primary purpose of the goods in question. See, e.g., S. Rep. No. 103-189, at 83 (noting intention to create objective, fact-based standard); H.R. Rep. No. 103-361, at 131 (1993), reprinted in 1993 U.S.C.C.A.N. 2552, 2681. Therefore, "commercially 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).

185 F.3d 1291, 1295 (U.S. App. 1999). The Protestant argues that its footwear “clearly meets this standard of ‘commercial interchangeability’” because its style numbers doe not change when the shoe sizes change. Further, Skechers states that
when [it] ships footwear for export, it ships the footwear based upon style and what is in inventory. The overseas customer always hopes for a size mix simply because there is no identifiable customer who purchases footwear until after the footwear is exported and is in stock at the individual store. Hence, size is not a factor for the export sale.

However, this statement by the Protestant is not supported by the documentation it supplied. With respect to commercial intent documents such as purchase orders are relevant (Premier Graining Co. v. United States, 57 Cust. Ct. 32 (1966); Rentner v. United States, 15 Ct. Cust. 147; (1927); American Customs Brokerage Co. v. United States, 375 F. Supp. 1360, (1974); AK Steel v. United States, 34 F. Supp. 2d 756; (1998)). The number of shoes per size on the only Skechers Purchase Order offered (at page E 21), order number AUS 1229, and the number of shoes per size on the Skechers packing list at page E 30 (order number AUS 1229) are almost identical. The order form specifies: 34 size 6; 18 size 6H; 60 size 7; 26 size 7H; 120 size 8; 76 size 8H; and 86 size 9. The packing list specifies that 34 size 6; 18 size 6H; 60 size 7; 26 size 7H; 120 size 8; 76 size 8H and 85 size 9 were shipped. These documents support the conclusion that the purchaser dictated how many shoes of each size for that style was desired and that Skechers shipped the order exactly as requested except for shipping one less pair of size 9 (86 pairs appear on the order form, 85 pairs were shipped). Further, the way Skechers’ standard order form appears, i.e., with individual blank boxes beneath size numbers that are filled in by hand, does not support the contention that buyers have no choice in the sizes of the shoes they order. Hence, the evidence included with the Protest does not support the contention that Skechers’ wholesale customers purchase shoes without regard to size and that size is not a critical property of the substituted merchandise.

In HQ 222818, an internal advice dated July 1, 1991, (before the drawback statute was amended) this office held that
where the retailer specifies style, color and quantity and selects one or more pre-packaged size ranges, the “prepacks” will be considered fungible for purposes of substitution same condition drawback.

The shoes in the situation addressed by HQ 222818 were sold at the wholesale level in pre-packaged size ranges. Buyers ordered shoes by color and style and then selected among one or more pre-determined size ranges. The Protestant here states that its customers do not specify sizes when ordering the shoes, and the sizes of the shoes shipped are based on what’s in inventory. However, that assertion is contradicted by the purchase order of the Protestant’s customer. Taking into consideration that HQ 222818 was decided using the higher standard of “fungibility” and that the shoes in issue need only be commercially interchangeable, we are not convinced that size is irrelevant to the transaction, in view of the commercial documents that show size to be a criterion in the Skechers’ sales transactions.

Essentially, Skechers’ position is that same style numbers equals commercial interchangeability for purposes of 19 USC § 1313(j)(2). Clearly, style numbers do not determine commercial interchangeability. According to the evidence submitted by the Protestant one of the commercial interchangeability criteria is irrelevant (governmental and recognized industry), one satisfied (relative values) and two are unsatisfied, part numbers, tariff classification.


The subject shoes are not commercially interchangeable for purposes of 19 USC 1313(j)(2). The Protest should be DENIED in full.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office 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 take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.


John Durant, Director

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