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...and other big words..
The Court of Appeals for the Federal Circuit (CAFC) recently issued a ruling in the Texport Oil case dealing with the concept of commercial interchangeability as it pertains to drawback. The concept of fungibility was revised some time ago in order to provide greater flexibility with respect to the substitution of products for drawback purposes. The former fungibility requirement meant that the product needed to be identical in every respect. Commercially interchangeable means that, in the intended application, the use of one product or another is based on a two part test. This test states that the two products must be commercially accepted and the sales invoice descriptions must coincide.
The CAFC stated that the Court of International Trade’s (CIT) two-part test is not objective enough and would allow parties to use vague language to describe products ways designed to increase drawback potential. The CAFC also stated that Congress wanted the concept of commercial interchangeability to be market-based consideration of the product in question and that a far more objective standard is required.
The standard under discussion concerns the "reasonable competitor" if a competitor would use or accept either of the interchangeable items the standard would be met. Evidence of acceptance could include industrial standards, governmental standards, independent accredited lab standards, part numbers, tariff classifications, values of the goods and descriptions.
The CAFC has remanded the case to the Court of International Trade to decide if the Texport disputed claims meet the requirements of commercial interchangeability using the CAFC standard.
On a different note, two more crucial issues were decided by the CAFC concerning drawback. You may have been following the Harbor Maintenance Tax (HMT) and Merchandise Processing Fee (MPF) issue both with respect to the US Shoe case (export) and drawback. The CAFC reversed the Court of International Trade decision and ruled that Harbor Maintenance Tax is not eligible for drawback.
The lead article in this issue was written by Mr. Ronald Jacobsen, Vice-President of Northstar Drawback Consultants, Ltd. of Arlington Heights, IL.
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