HQ 224034: Request for Internal Advice Regarding Fungibility of Electrolytic Copper Cathodes; 19 U.S.C. 1313(j)(2); substitution same condition drawback

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 224034

                         October 8, 1992

DRA-4-CO:R:C:E 224034 CB

CATEGORY:  Drawback

Chief, Drawback Branch
U.S. Customs Service
New York Region
Suite 762
6 World Trade Center
New York, NY 10048

RE:  Request for Internal Advice Regarding Fungibility of
     Electrolytic Copper Cathodes; 19 U.S.C.  1313(j)(2);
     substitution same condition drawback

Dear Madam:

     This is in response to your request for internal advice
dated June 19, 1992 (your file DRA-4-04-O:C:D BCH) regarding
Cerro Sales Corporation (Cerro) and their request for a binding
ruling on the fungibility of imported and domestic electrolytic
copper cathodes for substitution same condition drawback.

FACTS:

     Cerro imports "CCC" Brand electrolytic copper cathodes from
Chile and substitutes them with exports of various brands:  P*D,
KUE, MAGMA, CYPRUS, and MMB electrolytic copper cathodes. 
According to Cerro, they import and export by ASTM number.  

     In its submission, Cerro states that the cathodes vary in
size because each producer uses different equipment.  As an
example, Cerro states that a producer who has an older refinery
finds it more cost-efficient to produce a larger size cathode;
whereas, the U.S. producers, having modern equipment, find it
convenient to produce smaller cathodes.  Cerro states that all of
the cathodes involved, irrespective of size, are considered good
delivery against a contract inasmuch as they meet the same ASTM
standards.

ISSUE:

     Whether the subject electrolytic copper cathodes are
fungible?

LAW AND ANALYSIS:

     Section 313(j)(2) of the Tariff Act of 1930, as amended (19
U.S.C.  1313(j)(2)), provides that for substitution same
condition drawback purposes, the merchandise substituted for
exportation must be fungible with the duty-paid merchandise and
in the same condition as was the imported merchandise at the time
of its importation.

     Fungibility is defined in the Customs Regulations as
"merchandise which for commercial purposes is identical and
interchangeable in all situations."  19 CFR  191.2(1).  Customs
has interpreted fungibility as not requiring that merchandise be
precisely identical; identical for "commercial purposes" allows
some slight differences.  The key is complete commercial
interchangeability.  As stated in C.S.D. 85-52:  "[t]he
commercial world consists of buyers, sellers, comminglers,
government agencies and others.  If these groups treat articles
or merchandise as fungible or commercially identical, the
articles or merchandise are fungible. . . .  When two or more
units of apparently identical properties are treated differently
by the commercial world for any reason, they are not fungible." 
19 Cust. Bull. 605, 607 (1985).

     In the instant case, the importer states that they import
and export by ASTM number and that the size of the cathode is
irrelevant to any use for such cathodes.  Statements of cathode
producers were supplied in which the producers stated that size
was of no consideration for use and that purchases are on a
weight basis.  At our request the importer provided the
specifications for the merchandise.  Our Office of Laboratories
and Scientific Services has reviewed the information provided and
determined that the CCC, KUE, MAGMA and MMB brand meet ASTM B
115-83 Grade 1 requirements for electrolytic cathode copper. 
Therefore, in our opinion, the MAGMA, MMB and KUE brands are
fungible with the imported CCC.  Regarding the P*D brand, the
amount listed for bismuth for this brand is greater than the
maximum level listed in ASTM B 115-83 for Grade 1.  Thus, it is
not fungible with the imported product.  Finally, we did not
receive any specifications for the CYPRUS brand and, therefore,
cannot make a fungibility determination with regard to that
brand.

     Under substitution same condition drawback (19 U.S.C.  1313
(j)(2)), there is a requirement of possession.  Possession has
been defined in C.S.D. 85-52, which holds that ownership of a
commodity is not necessarily possession of that commodity for
purposes of the same condition substitution drawback law. 
"Possession ... means complete control over the articles or
merchandise on premises or locations where the possessor can put
the articles or merchandise to any use chosen.  It does not mean
that by trading commercial paper, e.g., purchase orders or bills
of lading, between brokers or others in a commodity while that
commodity winds its way across America by train or truck,
possession is somehow created.  Transactions made in order to
create a climate for drawback will not support drawback."

     "Possession" was incorporated into the drawback statute in
order to prevent one company from using another company's
drawback rights.  (See HQ 222500, dated July 16, 1990).  The term
"possession" is defined in Black's Law Dictionary as:

     the detention and control, of the manual or ideal custody,
     of anything which may be the subject of property, for one's
     use and enjoyment, either as owner or as the propietor of a
     qualified right in it, and either held personally or by
     another who exercises it in one's place and name.  Actual
     possession exists where the thing is in the immediate
     occupancy of the party. . . .  Black's Law Dictionary 1325
     (4th ed. 1968).


     In the ruling request the importer does not provide
sufficient information to enable us to make a determination
regarding possession.  You must establish that you have a
possessory interest in the merchandise (for example, provide
copies of bills of lading) and that you exercise physical control
over the merchandise.  Possession of personal property involves
the power to control and the intent to control.  Such power and
intent to control is established by: (1) actual or potential
physical control; (2) intention to exercise dominion; and (3)
external manifestations of intent and control.  In your request
the importer states that he purchases domestic material and has
it shipped directly to the port for exportation.  A more detailed
explanation of this transaction must be provided, with copies of
the specific documents covering the transaction.

HOLDING:

     Electrolytic copper cathodes that meet the specifications
set in ASTM B 115-83, Grade 1 are fungible.  To the extent that
the statements of producers that cathode size is irrelevant for
any use to which a cathode is intended, are verified, cathode
size may be disregarded.

                              Sincerely,




                              John A. Durant, Director
                              Commercial Rulings Division