Request for Ruling; Citrosuco North America, Inc.; Juice Farms, Inc.; Substitution Unused Merchandise Drawback; Commercial Interchangeability; 19 U.S.C. §1313(j)(2); Frozen Concentrate Orange Juice for Manufacture; COJM; FCOJM; HQ 22647/222789, 226100, 226225, 226444; 225936.

HQ 228008 April 30, 1999 DRA-4-RR:CR:DR 228008 BJB CATEGORY: Drawback Robert G. Kalik, Esq. Nateman & Kalik L.L.P 1200 G Street, N.W. Suite 360 Washington, D.C. 20005 RE: Request for Ruling; Citrosuco North America, Inc.; Juice Farms, Inc.; Substitution Unused Merchandise Drawback; Commercial Interchangeability; 19 U.S.C. §1313(j)(2); Frozen Concentrate Orange Juice for Manufacture; COJM; FCOJM; HQ 22647/222789, 226100, 226225, 226444; 225936. Dear Mr. Kalik: This is in response to your letter of April 30, 1998, submitted on behalf of Citrosuco North America, Inc. (“Citrosuco”), and received by Customs on May 8, 1998. In your letter, you requested a ruling with respect to the commercial interchangeability of certain concentrated orange juice for manufacture, pursuant to 19 U.S.C. §1313(j)(2). Your letter, a follow-up to an information letter issued by this office on September 11, 1996, presented a request for advice on whether Citrosuco qualified for substitution unused merchandise drawback provided for under 19 U.S.C. §1313(j)(2), and whether Citrosuco has complied with the statutory requirements of commercial interchangeability. FACTS: Citrosuco, formerly Juice Farms, Inc., (hereinafter referred to as “Citrosuco”) is an importer of Concentrated Orange Juice for Manufacture (“COJM”), as defined in the Standards of Identity of the Food and Drug Administration (21 C.F.R. §146.153), and meets the Grade A Standards of the United States Department of Agriculture (7 C.F.R. §52.1551, Table IV). The COJM merchandise is U.S.D.A. Grade A Certified upon its importation. Citrosuco imports COJM from Brazil, Costa Rica, and Mexico and sells the product to orange juice processors and reconstituters in the United States and Canada. Citrosuco stores juice on a contractual basis at a storage facility within a foreign trade zone, in Wilmington, Delaware, where it stores COJM imported through the Port of Wilmington for sale and distribution. Products destined for Florida processors are imported directly through Port Manatee or the Port of Tampa. Citrosuco also purchases COJM from domestic processors for sale to its customers in the U.S. and, at times, for sale to the export market. In the present case, Citrosuco has imported Brazilian COJM into the United States and is exporting domestic U.S. COJM or Brazilian COJM that has been brought to the United States, placed into a foreign trade zone (“FTZ”), withdrawn and entered, and then exported to Canada. Citrosuco claims to have exported the substituted COJM from a foreign trade zone to Canada. To achieve domestic status for the exported COJM, the merchandise must be entered for consumption before it is admitted into the FTZ. Citrosuco has provided some documentation related to the entry or admission of imported COJM into a FTZ. Citrosuco is the exporter of record of COJM to its Canadian purchasers. Even when Citrosuco is not the exporter of record it has retained the drawback rights on such transactions. Citrosuco claims that its exports fall within the requirements of unused merchandise substitution drawback (19 U.S.C. 1313(j)(2)). Citrosuco filed two drawback claims, Drawback Entry # R74-XXXXX356 and Drawback Entry #R74-XXXXX703 (“Claim 356" and “Claim 703,” respectively,) with the Port of Boston seeking a total of $393,657.37 in duty refund. These claims are reviewed here to determine whether Citrosuco complied with the requirements of 19 U.S.C. §1313(j)(2), and whether it is entitled to drawback. Drawback Claim R74-XXXXX35-6 Drawback claim R74-XXXXX35-6 consists of the claim and supporting documents for “the importation of the imported product” and the supporting documents for the “exportation of domestic product.” The claim lists 18 import entries and 50 export shipments. Designated Import The first listed import entry is C11-XXXX620-2. The entry (CF 7501) shows that the date of entry was April 18, 1990, and covered 629,377 single strength liters of Brazilian Frozen Concentrated Orange Juice, 66.5 brix. The manufacturer is listed as Ansubnvcur and the export date is shown as February 16, 1990. The importing carrier is shown as FTZ 99 and relevant bill of lading is 15001-15004. The consumption entry consists of 10 removals from the zone to various locations. The zone admission (CF 214) lists the merchandise as Brazilian Frozen Concentrated Orange Juice at 66.5 brix, with a quantity of 5,696,264 single strength liters. The export date is February 16, 1990, and the date of import into the U.S. is March 1, 1990. Customs verified receipt at the zone on March 2, 1990. The concentrate was in non-privileged foreign status. An invoice (SUB 5438-A) documents a sale between Subana, N.V. of Curacao Netherlands Antilles and Juice Farms (Citrosuco’s predecessor) pursuant to Juice Farms’ purchase order 0214 of February 15, 1990. The vessel “MS Sol de Brazil” and voyage (55) is the same on the invoice and zone admission. The zone admission shows that the shipment was placed in zone lot 99J-00501. The entry (CF 3461) lists the Sol de Brazil, voyage 55 as the importing vessel and relevant bills of lading as 15001-15002. The CF 3461 describes the merchandise as Brazilian FCOJ 66.5 brix, and domestic 58.63 and 58.34 brix. The drawback claim designates only FTZ Release 2065-9 as the designated, imported duty-paid merchandise covered by import entry C11-XXXX620-2. The calculation worksheet on the drawback claim identifies invoice 21812 for the merchandise covered by import entry C11-XXXX620-2. Bill of lading 13950, which lists 2065-9 as the agent’s number, covers a shipment to McCain Citrus on April 18, 1990, and references what appears to be McCain’s purchase order h-41689 to Juice Farms (Citrosuco’s predecessor). The bill of lading describes the goods as Frozen Concentrated Orange Juice from Brazil, 66.45 brix, with a net weight of 48,000 pounds containing 31,896 pounds/solids. The calculation worksheet prepared by Juice Farms, converts the 31,896 pounds/solids to 115,104.32 single strength liters. There is a U.S.D.A. continuous inspection (H-70890) dated April 18, 1990. The goods were described as Brazilian Concentrated Orange Juice for Manufacturing brix. 66.42 to 66.45, with an average brix of 66.45, U.S. Grade A with an average score of 95. The weight (48,000 pounds) and tanker identification and seals match those on the bill of lading with the CF7501 (FL T9821D, 8424, 8425, 8426 respectively). Also, the release number on the drawback claim export summary matches that on the bill of lading and U.S.D.A. inspection (2065-9). The zone admission (CF 214) shows that the concentrate from the MS Sol de Brazil was put in zone lot 99J-00501. The entry (CF3461) indicates that the concentrate covered by the entry was drawn from zone lots 99J-00512, 99J-00502, and 99J-00511, by listing those numbers in the block titled “arrival date.” The Subana M.V. invoices SUB 5438-A and SUB 5433-A list the relevant zone lots as 99J-00501, and 00502. The drawback claim Chronological Summary of Imports asserts that the concentrate covered by the designated import entry has a score of 95. Export Shipments As noted above with respect to the designated import entry, the drawback claim states that 115,104.32 single strength liters were designated against export shipments. The first three export shipments listed on the chronological summary of exports total 116,322 single strength liters (54,782; 3,257; and 58,283 respectively). The first three exports on the chronological summary are stated to have been exported on March 3, 1993, and are identified as being covered by consumption entry C11-XXXX106-9. The first and second shipments are further identified on the summary by release No. 21752. The third shipment is identified by release 21692. The first two shipments are said to have a score of 94 while the third shipment is said to have a score of 93. The export shipments covered by consumption entry C11-XXXX106-9 were also from a foreign trade zone. The first and second export shipments are covered by bill of lading 21618. That bill of lading is dated March 4, 1993, and was to be delivered to the Canadian customer on March 8, 1993. There is a U.S.D.A. inspection certificate dated March 4, 1993 (J-31732) which references the release number on the chronological summary of exports (2175-2) and for which the seal numbers and carrier match that of the bill of lading (0304, 0549, 0550, and 6048, and Bynum, respectively). The U.S.D.A. certificate shows that the concentrate was U.S. Grade A with an average score of 95. The certificate states that the concentrate contains product made from citrus fruit grown in Brazil. The bill of lading contains the following handwritten notation: 99J-00689: 22,650# Domestic 99J-00687: 23,997# Brazilian 99J-00690: 1,347# Domestic 47,994# The bill of lading for the tanker shipment is stated to be for a net weight of 48,000 pounds. The consumption entry (CF 3461) records refer to zone lots in the block titled “arrival date” as 99J-00677, 99J-00687, and domestic lots 99J-00689, 99J-00690, 99J-009691, 99J-00692m, and 99J-00693. There is an unlabeled document attached to the relevant Zone Constructive Transfer Application which lists the export shipment as consisting of 22,650 pounds of domestic concentrate and 22,650 pounds of foreign concentrate. Transportation Entry 192,355,376 of February 1, 1993 (CF7512), identifies the shipment as Brazilian Frozen Concentrate that had been imported on the Yasaha Reefer on February 1, 1993 from Brazil and refers to zone lot 99J-0677. The consumption entry (CF 3461) lists the vessels that carried the merchandise as the Sol de Brazil #86 (presumably voyage 86), Yasaha Reefer and domestic product. Block 19 on the CF7501 references bills of lading 15001-15004 and lists the manufacturer as ANSUBNVCUR. The consumption date is March 4, 1993. The chronological summary of exports lists the first shipment as coming from zone lot 99J-00689. The same summary lists the second shipment as coming from zone lot 99J-00690. The third export shipment is identified on the chronological summary as coming from zone lot 99J-00691 and is covered by bill of lading 21621. Bill of lading 21621 covers a shipment to Canada. It is dated March 4, 1993, and states that delivery is to be made on March 5, 1993. The agent number on the bill of lading matches the release number (2169-2) and is referenced on the U.S.D.A. inspection certificate. That certificate describes the merchandise as concentrated orange juice for manufacturing 65.32 brix, U.S. Grade A, average score 95, and states that it contains concentrate made from Brazilian fruit. The related Transportation Entry (CF7512)(No. 192,355,380) states that the goods were imported from Brazil on the Yasaha Reefer on February 1, 1993. The transportation entry is dated February 1, 1993 and references zone lot 99J-00677. The seals referenced on the bill of lading and U.S.D.A. inspection certificate match (0226, 0378, 0229, and 228), as does the truck identification. While the transportation entries (CF7512) are dated February 1, 1993 and purport to cover an export movement from Wilmington, Delaware to Canada, the zone release numbers, which appear to have been created in March, 1993, are listed on both transportation entries. The 1993 zone admission (CF214) for the Brazilian concentrate imported on the Sol de Brazil, apparently voyage 86, and the Yasaha Reefer was not present in the file. The CF3461 covering consumption entry C11-XXXX106-9 refers to the Sol de Brazil #86. Drawback Claim R74-XXXXX70-3 The claim consists of 21 import shipments covered by 11 consumption entries and 58 export shipments. As in drawback claim R74-XXXXX35-6, the exports are identified by consumption entries from a foreign trade zone. There were 13 such consumption entries from a foreign trade zone covering the 58 export shipments. The imports are stated to have occurred from May 9, 1990 to June 8, 1990. The exports are stated to have occurred from April 2, 1993 to April 30, 1993. Consumption Entry C11-XXXX635-0 The first designated import entry is C11-XXXX635-0 of May 9, 1990. The drawback claim chronological summary of imports states that the designated duty-paid merchandise was concentrated orange juice for manufacture (COJM) 66.45, brix score 95, 115,104 single strength liters. That claim summary identifies the importation as covered by release 2194-9, bill of lading 14082 and invoice 21999. A zone admission (CF214) identifies imported merchandise as Brazilian Frozen COJM, 66.5 brix, 5,696,264 single strength liters, that was imported by the “Sol de Brazil” voyage 55 on March 1, 1990, and put in zone lot 99J-00501. The Subana MV invoice references the MS “Sol de Brazil”, voyage 55 and states that the shipment is covered by Juice Farms purchase order 0214 of February 15, 1990. The COJM was in non-privileged foreign status. Consumption entry C11-XXXX635-0 of May 9, 1990 covers the entry of 345,345 single strength liters of Brazilian COJM, 66.5 brix. The designated imported duty-paid COJM is stated to be covered by release 2194-9, bill of lading 14082 and invoice 21999. A U.S.D.A. inspection certificate (H-70515) refers to release 2194-9. The certificate covers 48,000 pounds of FCOJ, 66.45 brix U.S. Grade A, score 95. The Juice Farms invoice 021999 covers COJM, 66.45 Brix 31896 pounds/solids. The invoice lists the buyer’s purchase order H47265. The bill of lading was not in the file. The drawback claim calculation sheet asserts that 31,896 pounds/solids equals 115,104.32 single strength liters. Export Shipments The first four identified export shipments on the chronological summary of exports are said to cover 176,645 single strength liters of COJM. The first four export shipments are covered by one consumption entry C11-XXXX127-5. The four export shipments are said to be from three foreign trade zone lots (99J-010772, 99J-00773, and 99J-00774.) Consumption entry C11-XXXX127-5 (CF3461) of April 2, 1993 references the three zone lots noted above and four other lots. The entry lists the covered COJM as coming from Brazilian COJM imported by the Sol de Brazil, voyage 86 and domestic sources. The zone constructive transfer (CF215) lists the amount transferred from lot 99J-00772 as Domestic COJM, 63.62 brix, 3,358 gallons, 36,628 pounds. The same form lists the amount transferred from zone lot 99J-00773 as Domestic COJM; 63.05 brix, 4,307 gallons; 46,860 pounds. The form lists the amount transferred from lot 99J-00774 as 1,841 gallons, 20,138 pounds. Zone release 2377-2 is listed on bill of lading 21801 which states that it covers 48,000 pounds and two zone lots (99J-0072 and 99J-0073). The U.S.D.A. inspection certificate (J-34283) refers to release 2377-2 and covers 48,000 pounds. The U.S.D.A. inspection certificate lists the COJM as U.S. Grade A, score 95, 65.53 brix, and states that it contains product made from Brazilian fruit. The total listed weight for the two shipments identified by zone release 2377-2 is 28,800 pounds, which are stated to be 65,094 single strength liters. (17,671 + 47,423 = 65,094). Transportation entry (CF7512) (192,355,866) of March 3, 1993 references FTZ entry 99J-00687 and lists Release 2377-2 and bill of lading 21801. The entry states that it covers Brazilian COJM (48,000 pounds) imported by the Sol de Brazil, voyage 86 on February 16, 1993. It references bills of lading 15001-15004. There are two copies of bill of lading 21801. One copy contains the handwritten notation: SDB #86 99J-00687 19200 99J-00772 7833 99J-00773 20967 Total 48000 The truck identification and seal numbers match those on the U.S.D.A. inspection certificate (FL T00501, and CCI2719, 2716, 2720, respectively). Juice Farms invoice 032194 lists four line items of COJM, 65.53 brix. The total pounds/solids for the four line items is 31,454.40. The bill of lading lists the same amount of pounds/solids. The third export shipment is identified by release 2380-2, bill of lading 21804 and invoice 32195 and is listed as COJM, 64.19 brix with a score of 95. Bill of lading 21804 references release 2380-2 as the agent number and references seals 2740, 2840, and 2837 and identifies the goods as COJM, 65.48 brix. The U.S.D.A. inspection certificate (J-34286) references the same release and seal numbers. The certificate states that the COJM is U.S. Grade A, score 95, 65.48 brix, and amounts to 48,000 pounds. Transportation Entry 192,355,892 of March 3, 1993 references the release and bill of lading and identifies the trailer number as 3356; which is also identified on the U.S.D.A. Certificate Invoice 032195 covers two line items of COJM totaling 31430.4 pounds/solids, brix 65.48. There are two copies of bill of lading 21804. One copy contains handwritten notations: SDB#86 99J-00687- 19200 99J-00774- 17219 99J-00775- 11581 Total 48000 The bill of lading refers to the 4800 COJM as containing 31,430.4 pounds/solids. The fourth export shipment is identified by FTZ lot 99J-00774, release 23892, bill of lading 21813, and invoice 32202. It is listed as covering COJM, score 95, and 64.19 brix. The Zone Admission of March 22, 1993, covering zone lot 99J-00774, covers 48,960 pounds of COJM, 64.19 brix from Sun Pac Foods, Winter Haven, Florida. The U.S.D.A. inspection certificate (J-34606) states that the COJM is U.S. Grade A, score 95, with a brix of 64.19. The seals and truck license numbers on the Sun Pac shipping order match those covered by the U.S.D.A. certificate. The 37-page document titled “Drawback Claim R74-XXXXX70-3 Supporting Documents for Exportation of Domestic Product” does not contain bill of lading 21813 invoice 32202. None of the papers in that 37-page document refers to release 23892. Citrosuco also submitted a copy of a letter sent to Customs, dated April 14, 1998, and produced by Joseph J. O’Neill, Secretary of the Citrus Associates of the New York Cotton Exchange, Inc. The letter pertains to Customs reliance upon the Cotton Exchange Standards as “recognized industry standards.” Mr. O’Neill states that, “to the extent that Customs has relied upon Section 82(a) and (b) to support its policy [setting recognized citrus industry standards of commercial interchangeability], this reliance is misplaced.” Mr. O’Neill also states in his letter, “[a]lthough the specific criteria set forth in Section 82(a) are narrower than those provided in the U.S.D.A. standards, the fact is of little significance since less that five percent (5%) of all deliveries of FCOJM in the United States take place under Exchange contracts.” There is no evidence or documentation as to how he determined that 95% of all FCOJM deliveries did not take place under the Cotton Exchange standards. Thus, Customs claimed that for its purposes, it is sufficient that drawback claimants based their transactions on the Cotton Exchange standards, for them to be regarded “a recognized industry standard” of interchangeability. Mr. O’Neill was also given an opportunity to further explain how he knew that 95% of all orange juice sales took place outside of the Cotton Exchange standards and that the terms of those sales were without reference to the Cotton Exchange terms. He failed to respond further. Under Claims 356 and 703, there were a total of 39 designated import entries and 100 designated export entries. Despite this large number of transactions, Citrosuco has provided only one underlying COJM contract. This one contract was for two million gallons of COJM annually (September through August) over a four year period and very general in its terms. The contract provided that each shipment would be “[p]riced at time of shipment, duty paid in applicable, and competitive with other major Brazilian suppliers in Canada for like quality.” Ci