CBP Finds Monsanto Chemicals Interchangeable for Drawback Purposes

Monsanto may substitute one type of chemical for the export of another type, said CBP's Entry Process and Duty Refunds Branch in an Aug. 17 ruling recently added to CBP's CROSS database. CBP said it considered the two products commercially interchangeable and eligible for unused merchandise drawback despite different levels of the active ingredient and different tariff classifications. Specifically, CBP found the chemicals met the criteria for being interchangeable under the drawback statute, 19 U.S.C. Section 1313(j)(2).

Monsanto, represented on the issue by Richard Belanger of Sidley Austin, imports a chemical named PMIDA and plans to substitute PMIDA for Glyphosate Intermediate Cake (GI Cake) on export. PMIDA and GI Cake are intermediates used in the manufacture of agricultural herbicides, according to Monsanto. Monsanto provided product and packaging specifications for the imported product, Material Safety Data Sheets (MSDS) identifying the critical properties of the imported and substituted product, Certificates of Analysis, and sample import and export documentation, said CBP.

Different Active Ingredient Percentages

The MSDS information show that PMIDA contains 98 percent active ingredient by dry weight while GI Cake contains 87 percent active ingredient by dry weight and 12 percent water. Monsanto said that the percentage difference is because the imported merchandise is dried prior to shipment to the U.S. while GI Cake isn't dried before export. Monsanto also that the difference in water content in the imported and substituted product is not commercially significant because users of both products will have to dilute it with large quantities of water before use.

Interchangeability Criteria

The drawback statute says drawback may be claimed for the export or destruction of imported duty-paid merchandise that is substituted for commercially interchangeable and unused imported merchandise if certain requirements are satisfied. Governmental and recognized industry standards are among the factors CBP considers in determining interchangeability and while no such standard exists, CBP reviewed American Chemical Society findings. The MSDS showed differences in active ingredient percentages. As a result, Monsanto requests “drawback allowance . . . exclusively on a pound for pound basis, meaning that drawback eligibility for the export would be in its dry condition only.” Because the American Chemical Society's found that the "imported and substituted products is the same and the Certificates of Analysis show that the active ingredient in the imported and substituted product comport to the percentages shown on the MSDSs, we determine this criterion is satisfied," said CBP.

CBP also reviews tariff classification in looking at interchangeability. The imported and substituted products are classified under similar tariff headings. The entry summary, commercial import invoice, and bill of lading classify PMIDA under subheading 2931.00.9043, HTSUS, which provides for “other organo-inorganic compounds: Other: Other.” The export commercial invoice and packing list classify the substitute product, GI Cake, under Schedule B number 2931.00.9160, which also provides for “Other organo-inorganic compounds,” and mirrors the language in HTSUS subheading 2931.00.9043. Because both the imported and substituted products are classified similarly, the tariff classification criterion is satisfied, said CBP.

CBP also considers whether the imported and substituted product share the same part numbers. While the chemicals involved don't consistently receive part numbers, previous rulings have found the absence of part numbers doesn't preclude interchangeability, said CBP. CBP also looks at relative value of the two products, which in this case differ by about 9.2 percent, according to submitted documents, said CBP. Because "the import and substitute products have HTSUS and Schedule B numbers with similar descriptions," CBP said "for the purposes of commercial interchangeability, the 9.2% difference in price in the imported and substituted merchandise does not preclude a finding of commercial interchangeability."

Since the chemicals meet the criteria, CBP found they are interchangeable, though the agency cautions "drawback may be claimed exclusively on a pound for pound basis for the active ingredient, meaning that drawback eligibility is only for the export in its dry condition."