HQ 223715: Theoretical transfer from one bonded smelting and refiningwarehouse to another; withdrawal for exportation credited toanother bonded smelting and refining warehouse; 19 U.S.C.1312(b)(1); 19 U.S.C. 1312(b)(5); 19 C.F.R. 19.23; and 19 C.F.R.19.24

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 223715

                          May 28, 1992

WAR-3-03 CO:R:C:E 223715 C

CATEGORY:  Entry/Liquidation

Stan Langham
JAMES A. GREEN JR & CO.
1311 Minnesota AVenue
Kansas City, Kansas  66102

RE:  Theoretical transfer from one bonded smelting and refining
warehouse to another; withdrawal for exportation credited to
another bonded smelting and refining warehouse; 19 U.S.C.
1312(b)(1); 19 U.S.C. 1312(b)(5); 19 C.F.R. 19.23; and 19 C.F.R.
19.24

Dear Mr. Langham:

     This responds to your letter of February 7, 1992, concerning
generally the withdrawal and exportation of bonded materials from
a smelting and/or refining warehouse.  We have reviewed your
submission and our response follows.

FACTS:

     We understand the facts as follows:  Company XYZ, which
operates a bonded smelting and/or refining warehouse, or class 7
warehouse, wishes to purchase domestic smelted material from
another warehouse that is not a class 7 warehouse and (to) have
that domestic smelted material shipped to the west coast for
exportation to a foreign buyer.  That domestic smelted material
will be placed on the bonded premises of the steamship company or
the port authority, whichever is applicable, located on the west
coast at the port of exportation.  (Transportation costs from the
non-bonded warehouse are considerably less than would be required
for shipment from Company XYZ to the west coast.)  Meanwhile,
Company XYZ proposes to file a CF 7512 for withdrawal for
transportation at the local Customs office, thereby effecting a
theoretical transfer from its class 7 facility to the bonded
premises of the steamship company.  The domestic material shipped
there from the non-bonded warehouse will be the domestic material
in like form on hand to satisfy the transferred bond charge.  The
withdrawal for transportation will be canceled by the filing of a
CF 7512 for exportation at the port of exportation.  In this way,
bonded material in the class 7 warehouse is transferred to the
west coast for export, and shipment of the non-bonded domestic
material from the non-bonded warehouse to the west coast is 
accomplished at less cost to Company XYZ.  Also, bonded material
at Company XYZ's class 7 warehouse that was theoretically
transferred to the west coast becomes unbonded material; thus,
when it is withdrawn from the warehouse for domestic sale, no
duties need be paid.

     You set forth the foregoing scenario as a proposal.  You
identify as an impediment to this proposed transaction Customs
interpretation of section 19.24 of the Customs Regulations, 19
C.F.R. 19.24, which is, fundamentally, that merchandise
theoretically transferred from a class 7 warehouse must be
transferred to another class 7 warehouse.  Contrarily, you state
that the regulation should be interpreted to allow a transfer to
any bonded facility where there is a sufficient quantity of like
material on hand to satisfy the transferred bond charge.  You
point out that the regulation refers to transfers to other ports
or plants and does not specify that transfer to a bonded class 7
warehouse is required.

ISSUE:

     Does Customs Regulation 19.24, 19 C.F.R. 19.24, permit the
theoretical transfer from a bonded smelting and/or refining
warehouse to a bonded facility that is not a smelting and/or
refining warehouse?

LAW AND ANALYSIS:

     Under 19 U.S.C. 1312(a), metal-bearing materials may be
admitted, duty-free, into a smelting and/or refining bonded
warehouse, there to be smelted, refined or both.  Upon admission
of such metal-bearing materials into the class 7 warehouse, the
bond is charged with a sum equal in amount to the duties that
would be payable if such materials were entered for consumption.

     Under 19 U.S.C. 1312(b), charges made against the bond in
accordance with section 1312(a) can be cancelled.  Under section
1312(b)(5), bond charges can be cancelled upon the transfer of
bond charges, without the physical transfer of material, from one
class 7 warehouse to another class 7 warehouse.  This is the
"theoretical transfer."  The bond charge is transferred, not the
material.  The statute is explicit:

          (b)  The several charges against such bond
          may be canceled in whole or in part - 

             (5) upon the transfer to another bonded
          smelting or refining warehouse without
          physical shipment of metal of bond charges
          representing a quantity of dutiable metal
          contained in imported metal-bearing materials
          less wastage . . . provided there is on hand
          at the warehouse to which the transfer is
          made sufficient like metal in any form to
          satisfy the transferred bond charges.
          (Emphasis added.)

     The language of the statute, as above, is plain and
unequivocal.  A theoretical transfer must be made from a class 7
warehouse to a class 7 warehouse.  This is made still plainer
upon examination of the statute.  Subsections 1312(b)(3), (4),
and (5) pertain to transfers from one warehouse to another
(theoretical and physical).  Subsections 1312(b)(3) and (5)
explicitly provide for transfer to other smelting or refining
warehouses, while subsection 1312(b)(4) explicitly provides for
transfers to "a bonded customs warehouse other than a bonded
smelting or refining warehouse."  The latter quoted language
clearly indicates that where the statute is intended to refer to
a bonded warehouse other than a class 7 warehouse, it will so
state in clear and certain terms.  Thus, where the statute
specifically refers to a smelting or refining warehouse, it is
intended to apply only to such a warehouse.  The plain and
unequivocal language of the statute is to permit transfers to
only smelting or refining warehouses, in some cases, and to other
than smelting or refining warehouses in other cases.  Theoretical
transfers under section 1312(b)(5) are allowed only for transfers
from one class 7 warehouse to another class 7 warehouse.

     This being the statutory mandate - that theoretical
transfers apply only to class 7 warehouses - Customs is without
authority to apply it otherwise.  Only Congress can amend the
law.  The regulation promulgated by Customs, 19 C.F.R. 19.24,
implements subsection 1312(b)(5) and is applied in a manner
consistent with the statutory provision.  Although the language
of the regulation is not explicit in pertinent respect, the
procedure therein described applies only to theoretical transfers
from one class 7 warehouse to another class 7 warehouse.

     Consequently, your proposal that a theoretical transfer can
be accomplished between a class 7 warehouse and some other bonded
premises is contrary to law, and Customs is without authority to
authorize it.  This means that the theoretical transfer you
propose from Company XYZ's bonded class 7 warehouse to the bonded
premises of the steamship company on the west coast is not
permissible under the law.  Nor would a theoretical transfer from
Company XYZ's class 7 warehouse to the non-bonded warehouse from
which the domestic material is shipped to the west coast be
permitted.

     Examining the provisions of 19 U.S.C. 1312(b), we recognize
only three ways to cancel bond charges at a class 7 warehouse: 1)
by withdrawal and exportation of bonded material from the
warehouse; 2) by payment of duties respecting bonded material in
the warehouse; and 3) by the transfers authorized under
subsections 1312(b)(3),(4), and (5), the former two being
physical transfers of bonded material and the latter one being
the theoretical transfer, or the transfer of bond charges without
physical transfer.  Unfortunately, none of these provisions would
be effective to accomplish your client's intentions.

     Finally, you proposed that the transaction you described
could be accomplished by combining the procedures provided in the
regulation pertaining to theoretical transfers with the
procedures provided in the regulation pertaining to cross
crediting withdrawals for export from a class 7 warehouse at one
port to a class 7 warehouse at another port.  The foregoing
analysis demonstrates sufficiently that the proposed transaction
is not possible.  However, we wish to note that these regulations
cannot be combined in the way you propose, since each one
implements a separate and distinct provision of the statute: 19
C.F.R. 19.24 implements 19 U.S.C. 1312(b)(5) and 19 C.F.R. 19.23
implements 19 U.S.C. 1312(b)(1).  Since the statutory provisions
are separate and distinct, the regulatory provisions are separate
and distinct, each applying to different situations.  Without
combining the statutory provisions through the amendment process,
the regulatory provisions cannot be combined.  Again, only
Congress can amend the law; Customs is without authority to do
so.

HOLDING:

     Customs Regulation 19.24, 19 C.F.R. 19.24, implements 19
U.S.C. 1312(b)(5) pertaining to theoretical transfer of bond
charges from one bonded smelting and/or refining warehouse to
another.  The statute is explicit in providing that transfer must
be from a class 7 warehouse to another class 7 warehouse. 
Consequently, the regulation must be applied accordingly.  It
does not permit theoretical transfer to a bonded premises other
than a class 7 warehouse.

     If you have any further questions regarding this letter or
any customs business, please contact this office.

                               Sincerely,




                               John Durant, Director
                               Commercial Rulings Division