HQ 224683: 19 U.S.C. 1313(j)(2); same condition substitution drawback;possession of merchandise; bailment; CSD 85-52; Maulding v. U.S. Dear Sir:

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 224683
                         December 6, 1993

DRA-4-CO:R:C:E  224683  SR

CATEGORY:  Drawback

Deputy Regional Director
Commercial Operations Division
U.S. Customs Service
300 N. Los Angeles, California 90012

RE:  19 U.S.C. 1313(j)(2); same condition substitution drawback;
possession of merchandise; bailment; CSD 85-52; Maulding v. U.S. 
Dear Sir:

     This request for internal advice was initiated by a letter
dated April 26, 1993, from the Deputy Regional Director of the
Commercial Operations Division of the Pacific Region of Customs.

FACTS:

     Clarendon Ltd. imports copper cathodes for which they pay
the duty.  These imported copper cathodes are sold domestically. 
Clarendon also purchases fungible copper; cathodes from Magma
Copper Co., a domestic copper producer located in San Manuel,
Arizona.  (A company called Philipp Brothers, Inc., went out of
business and assigned its rights to Clarendon Ltd. to purchase
copper cathodes from Magma Copper Company.)  Clarendon instructs
Magma Copper to ship the copper cathodes to Western Sunset
International in Dominguez, California, a container stuffing
station where they are loaded into containers for ocean shipment
to foreign purchasers.  The inland bills of lading provided show
that more copper is shipped than is to be exported.  It is common
practice for Clarendon to ship copper for domestic use and for
exportation together to reduce shipping costs.

     Clarendon states that once Magma Copper has received payment
Clarendon issues instructions for Magma to ship the copper
cathodes.  In order to expedite the shipments the shipping orders
are generally given orally and are then confirmed by letter which
may be dated after goods have been shipped.  The railway bills of
lading show that the goods are consigned to Clarendon in care of
Western Sunset International.  Western Sunset International is
paid by Clarendon to load the containers and prepare the export
documentation according to Clarendon's instructions.  Clarendon
is the exporter of record on the ocean bills of lading and export
declarations.



                               -2-


ISSUE:

     Whether Clarendon had possession of the products as required
by 19 U.S.C. 1313(j)(2).

LAW AND ANALYSIS:

     Same condition substitution drawback is provided for under
19 U.S.C. 1313(j)(2).  Under this provision a drawback claimant
must show that the exported merchandise:

          1.  is fungible with the imported merchandise;

          2.  was not used in the United States during the three
               years prior to exportation, beginning with the
               date the imported merchandise was imported;

          3.  is in the same condition at the time of exportation
               as was the imported merchandise at the time of
               importation; and

          4.  was in the possession of the claimant during the 
               period between the relevant importation and
               exportation.

     It was found in C.S.D. 85-52 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."

     C.S.D. 85-52 further states: "To hold that for purposes of
same condition drawback arbitragers and futures dealers in
commodities have 'possession' of these commodities because of the
purchase of commercial paper and temporary storage in leased bins
or tanks, would not further the intent of Congress or the
fundamental purpose of the drawback law."

     The drawback claimant is not required to have physical
possession if the merchandise is stored in bailment.  Bailment,
in its ordinary legal signification, imports the delivery of
personal property by one person to another in trust for a
specific purpose, with a contract, express or implied, that the 

                               -3-


trust shall be faithfully executed, and the property returned or
duly accounted for when the specific purpose is accomplished, or
kept until the bailor reclaims it.  8 Am. Jur. Bailment section 2
(1980).

     The relationship of bailor-bailee arises when the owner,
while retaining general title, delivers personal property to
another for some particular purpose on an express or implied
contract to redeliver the goods when the purpose has been
fulfilled, or otherwise deal with the goods according to the
bailor's directions.  Maulding v. U.S., (CA9 Alaska) 257 F. 2d
56.

     In this case Clarendon becomes the owner and bailor when the
copper cathode is purchased from Magma.  Magma, acting as bailee,
ships the copper cathode to the container stuffing station under
instructions from Clarendon.  On all documents after the purchase
Clarendon is named as the owner of the merchandise.  Clarendon
pays all costs involved after the purchase.  These facts show
that Clarendon does have possession of the merchandise before
exportation.  When Magma ships the copper cathode to the
container station it is merely acting as the bailee.

HOLDING:

     Clarendon does have possession of the copper cathode for
purposes of same condition substitution drawback under 19 U.S.C.
1313(j)(2).

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division