HQ 0223773 - Your ruling request concerning theoretical transfer under 19 CFR 19.24; 19 USC 1312(b)(5); credit at one port exports from another port; 19 CFR 19.23; 19 USC 1312(b)(1) - United States International Trade Commision Rulings

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HQ 223773

June 8, 1992

WAR-3-03 CO:R:C:E; ENT-7-04-CO:R:C:E 223773 C

CATEGORY: ENTRY LIQUIDATION

T.W. Kennard
Senior Vice President
Western Overseas Corporation
813 Pacific Avenue
Tacoma, WA 98409

RE: Your ruling request concerning theoretical transfer under 19 CFR 19.24; 19 USC 1312(b)(5); credit at one port exports from another port; 19 CFR 19.23; 19 USC 1312(b)(1)

Dear Mr. Kennard:

This responds to your letter of February 24, 1992, concerning the referenced matter. You presented several possible transactions that would accommodate your client, Steinweg/Puget Sound Warehousing Corporation (SPWC), who operates a foreign trade subzone in Tacoma, WA. We have reviewed your proposals and our response follows. In view of the fact that the answer to your inquiry is based on Customs long standing interpretation of the Customs law pertaining to theoretical transfer, a ruling is not necessary. This response is an information letter issued under section 177.1(d)(2) (19 C.F.R. 177.1(d)(2)).

The facts as we understand them are as follows: Your client, SPWC, operates a foreign trade subzone (FTZ) in Tacoma, WA. Cerro Sales Corporation (CSC), a client of SPWC, intends to purchase copper cathode from a domestic supplier and enter that cathode into the FTZ in zone restricted status for later exportation. Cerro Copper Products Company (CCPC), another client of SPWC, operates a bonded storage warehouse in St. Louis, MO, wherein imported copper cathode is stored. CCPC wants to cancel charges against its storage warehouse bond in St. Louis upon the entry of the domestic cathode into the FTZ in Tacoma by CSC. Alternatively, CCPC would cancel the bond charges upon exportation of the domestic cathode from the FTZ. You propose that this transaction is possible by application of the theoretical transfer provision of the Customs regulations, 19 C.F.R. 19.24. That is, CCPC files in St. Louis a CF 7512 withdrawal for exportation as a theoretical transfer of cathode, identifying the domestic cathode entered into the FTZ (in zone restricted status) by CSC. Alternatively, a CF 7512 entry for immediate exportation from a FTZ is filed in Tacoma, presumably by CSC, identifying an entry pertaining to cathode entered into the bonded storage warehouse in St. Louis by CCPC and noting on the entry the following: "Warehouse withdrawal for exportation without physical shipment." A third proposal is to combine elements of the above two proposals.

In one of the above ways, you propose that the exportation of the domestically obtained cathode, either by admission into the FTZ in zone restricted status or by withdrawal for exportation from the FTZ, can form the basis for a corresponding reduction of charges against the bond of the storage warehouse in St. Louis.

The theoretical transfer, or transfer of bond charges from one warehouse bond to another without the physical shipment of material, is provided under 19 U.S.C. 1312(b)(5) and section 19.24 of the Customs Regulations (19 C.F.R. 19.24). The regulation implements the statutory provision. The statute, 19 U.S.C. 1312, applies to bonded smelting and or refining warehouses. The theoretical transfer provision, subsection 1312(b)(5), applies to transfers of bond charges from one smelting and/or refining warehouse to another. These statutory limitations preclude application of the theoretical transfer to the situation you have presented.

Under your scenario, there is a bonded storage warehouse and a foreign trade subzone. The former is provided for under 19 U.S.C. 1557 and the latter under 19 U.S.C 81a through u. The theoretical transfer provision of 19 U.S.C. 1312(b)(5) simply does not apply to the situation presented. Neither 19 U.S.C. 1557 nor 19 U.S.C. 81a-u provide for theoretical transfer.

You also suggested applicability of section 19.23 of the Customs Regulations pertaining to the crediting of one warehouse bond at one port for exportations from another warehouse at another port (19 C.F.R. 19.23). This cross-crediting for exportations is provided for in 19 U.S.C. 1312(b)(1). Again, it applies only to smelting and/or refining warehouses and has no application to the situation you presented.

You asked that we recommend a means by which the charges against the bond at the storage warehouse in St. Louis can be reduced based on the exportation of cathode from the FTZ in Tacoma. We are constrained to state that on the facts presented, the only way to reduce those bond charges is to withdraw the cathode from the bonded storage warehouse for consumption or exportation. Entry of merchandise into a FTZ in zone restricted status, or the exportation of merchandise from a FTZ, is a separate and distinct customs transaction. Whereas the statutory scheme governing smelting and/or refining warehouses provides for maneuverability respecting credits for exportations and transfers of bond charges, no such maneuverability for transactions between bonded storage warehouses and foreign trade zones exists.

If you have any further questions, please contact this office.

Sincerely,

John Durant, Director

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