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HQ H005284




February 21, 2006

DRA-4-RR: CTF:ER H005284

Mr. Hank Selby, Trade Compliance Advisor
Reynolds Consumer Products
6603 West Broad Street
Richmond, Virginia 23230

RE: Ruling Request; for commercial interchangeability for claiming drawback under 19 U.S.C. §1313(j) (2)

Dear Mr. Selby:

This is in response to your ruling request received on January 10, 2007, on behalf of Reynolds Consumer Products. (Reynolds), regarding the commercial interchangeability of imported and domestic produced aluminum foil.

FACTS:

Reynolds Consumer Products is a worldwide manufacturer, importer, and exporter of household aluminum foil. Reynolds markets their aluminum foil under the brand names of Reynolds Wrap®, and Diamond® Foil. When Reynolds imports and exports aluminum foil, Reynolds does so by company specific product numbers, in this instance the aluminum foil, are identified with the item numbers: 00084 and 00085. These item numbers are used by Reynolds to identify the particular aluminum foil in the importation, exportation, and on company product sheets. The aluminum foil that is either imported or exported from the United States that bears the item number of 00084, or 00085 is produced with aluminum that is uniform in physical qualities: i.e. alloy, gauge, and temper.

In 2006, Reynolds imported large ("jumbo") rolls of aluminum foil from their Bohai, China facility, to their Etobicoke, Toronto, Canada facility. There the aluminum foil was then cut, spooled, and packaged as Diamond® Foil. On October 31, 2006 a quantity of both 00084 and 00085 Diamond® Foil was imported into the United States; the Diamond® Foil was entered as China-origin foil, with duties and fees paid on it.

The import records that support the importation of item numbers 0084, and 0085 consist of entry number 0548089-0 dated November 11, 2006. The import documentation also includes Customs Form (“CF”) 7501 that indicates on line number 001 of the form that the imported merchandise is “00084 Diamond Foil, and 00085 Diamond Foil”, and states that these goods are classifiable in subheading 7607.11.6000 of the Harmonized Tariff Schedule United States (“HTSUS”). Accompanying the CF 7501 is an invoice dated October 31,2006, this invoice shows that on, October 31,2006,a shipment of aluminum foil bearing the item numbers 00084,and 00085 respectively were shipped to the United States via Detroit ,and Buffalo from Canada.

Reynolds also produces Diamond® Foil domestically for both sale in the United States, and for export. The domestically produced exported aluminu1m foil also has the identical item numbers as the imported aluminum foil and shares the identical physical properties of the imported items, i.e., alloy, gauge, and temper. The item numbers of the exported aluminum foil in this instance are 00084-00085. The exported aluminum foil is also classifiable in subheading 7607.11.6000 of the Harmonized Tariff Schedule United States The export documents for this export transaction consist of invoice number 285575 dated November 13,2006, “CF”) 7533, a bill of lading, and a packing list.

The invoice number 285575 shows a shipment from Norfolk Virginia United States to Panama City Panama. The invoice along with the export documents further indicates that the shipment is comprised in part of Diamond® Foil item numbers 00084 and 00085. The invoice also reflects a per unit price for item 00084 of about $14, and a per unit price for item 00085 of about $36.

ISSUE:

Whether the imported and domestically produced aluminum foil that are identified by item numbers are commercially interchangeable under 19 U.S.C. § 1313(j)(2)?

LAW & ANALYSIS:

Under 19 U.S.C. §1313(j)(2), as amended, drawback may be granted if there is, with respect to imported dutypaid 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 only issue raised here is one of commercial interchangeability.

The drawback statute was substantively amended by section 632, title VI  Customs Modernization, Pub. L. No. 103182, 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 103182. Title VI of Public Law 103182 took effect on the date of enactment of the Act (section 692 of the Act).

Before its amendment by Public Law 103182, the standard for substitution was fungibility. House Report 103361, 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. 103189, 103d Cong., 1st Sess., 8185 (1993)) contains similar language and states that the same criteria should be considered by Customs in determining commercial interchangeability. The amended Customs Regulations, 19 CFR 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 language of the legislative history. The best evidence whether those criteria are used in a particular transaction is 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 analysis of the four factors and critical properties follows.

Government and Recognized Industry Standards

Industry consensus standards ensure that all products meeting a standard are used in the same manner, regardless of manufacture. Under normal circumstances, materials that meet the same industry accepted standard can be used to produce the same products or utilized for the same purposes. These uses are normally stated in the standard. In the instant case, Reynolds utilizes foil that exhibits the identical industry standards in the production of Diamond® aluminum foil either, for imported or exported purposes. Diamond® foil 00084, and 00085, is manufactured with the same aluminum alloy (8111), and with alloy of the same temper ("O", dead soft) which are recognized standards provided by The Aluminum Association. In addition to Diamond® foil 00084, and 00085 having these industry standards, 00084, and 00085 are produced with the same uniformity of the gauge or thickness (.00061 inches).

From this we conclude that Reynolds manufactures Diamond® foil 00084, and 00085 by using industry standards in the guiding of the production process, and therefore, the Government and Recognized Industry Standards criterion is met in regards to the instant analysis.

Tariff Classification

With respect to tariff classification, according to the CF 7501 the aluminum foil that is entered is done so under subheading 7607.11.6000 HTSUS. There is no indication of a tariff classification on any of the export documents. However Reynolds has provided a document that is used internally that illustrates the HTSUS, numbers for all of the Reynolds exported products which include Diamond® Foil, 00084 and 00085, and this document lists the aforementioned items as being classifiable under the subheading 7607.11.6000. This combined with the fact that the item numbers are the same on all invoices and export documents, and that the same item numbers are being imported and exported, and that the item numbers feature specific industry standards while the items are being produced. We conclude that the items would fall under the same subheading.

Part Numbers

The CF 7501 lists the imported items as being, Diamond® Foil- item numbers 00084, and 00085, this in combination with the invoices and other supporting documentation all serve to identify the merchandise specifically as item numbers 00084, and 00085 Diamond® Foil. This distinguishes Diamond foil 00084, and 00085 from other aluminum foils. Therefore the company’s use of item number, 00084, and 00085, designating a particular type can be said to have met this criterion for commercial interchangeability.

Relative Values

Based on the invoices included for the imported and exported transactions, there is very little change in the value of the item number between the imported item and the exported item. The imported goods had a value of about $16.00 for imported item number 00084, and an exported value of $14.00 for the exported item 00084. The item number 00085 demonstrates a similar price comparison between the imported item and the exported item. Item 00085 have a listed import value of $36.00, and a listed export value of $36.00. This overall price variation is negligible, and may only be a price that is pervided to a preferred customer. Therefore the relative value criterion can also be said to have been met.

After evaluating all the relevant criteria suggested by the legislative history, and by adopted by Customs regulation we find that commercial interchangeability of the aluminum foil based on item number (foil identified as 00084 can be substituted for other foil identified by number 00084 and foil identified by 00085 can be substituted for other foil identified by number 00085) has been established.

HOLDING:

Based on the above determinations, we conclude that the imported and domestic aluminum foil identified by the same item numbers on all invoices another documentation are commercially interchangeable for the purposes of the substitution, unused merchandise drawback law of 19 U.S.C. §1313(j)(2).

Sincerely,

William G. Rosoff, Chief
Entry Process and Duty Refunds Branch

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