[Federal Register Volume 61, Number 16 (Wednesday, January 24, 1996)]
[Proposed Rules]
[Pages 1877-1879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1048]



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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

RIN 1515-AB83


Centralized Examination Stations; Immediate Suspension or 
Permanent Revocation As Operator Upon Indictment for Any Felony

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Customs Regulations 
primarily to enable Customs port directors to immediately suspend 
operations at a Centralized Examination Station (CES) whenever the 
operator, entity, or other person exercising substantial ownership or 
control over the operator, is indicted for, convicted of, or has 
committed acts which would constitute any felony. This document also 
proposes to make it more specific that a CES operator's failure to 
follow the terms of the CES written agreement constitutes a ground for 
proposed permanent revocation of the CES and cancellation of the 
written agreement to operate the facility. This action is taken in 
order to protect the public interest and to promote public confidence 
concerning the integrity of the CES program.

DATES: Comments must be received on or before March 25, 1996.

ADDRESSES: Comments (preferably in triplicate) must be submitted to the 
U.S. Customs Service, Attn: Regulations Branch, Franklin Court, 1301 
Constitution Avenue, NW., Washington, DC 20229, and may be inspected at 
the Regulations Branch, 1099 14th Street NW., Suite 4000, Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Linda Walfish, Office of Field 
Operations, Trade Compliance (202) 927-1167.

SUPPLEMENTARY INFORMATION:

Background

    In T.D. 93-6 (58 FR 5596) Customs amended the Customs Regulations 
(19 CFR Ch. I) to create a new part 118 that set forth the regulatory 
framework for the establishment, operation, and termination of 
Centralized Examination Stations (CESs). A CES is a privately-operated 
facility, not in the charge of a Customs officer, at which imported 
merchandise is made available to Customs officers for physical 
examination. Regarding the termination of CESs, Customs stated that 
immediate revocation and cancellation for a criminal act should not be 
limited to cases involving an actual conviction or admission, and that 
the only criminal offenses which should result in an immediate 
revocation and cancellation would be those which involved theft, 
smuggling, or a theft-connected crime.
    On further consideration of the issue of when revocation, 
cancellation, or suspension of an entity selected to be a CES operator 
should occur, Customs now believes that if a CES operator, an officer 
of a corporation which operates a CES, or a person the local ``port 
director'' (a new designation reflecting Customs pending field 
reorganization, the subject of a separate document) determines 
exercises substantial ownership or control over such operator or 
corporation is charged with any conduct which is proscribed as 
criminal, the character and integrity of the particular CES operation 
becomes questionable and consideration is warranted by the local port 
director as to whether the operations of the CES facility should be 
immediately suspended for a temporary period of time, i.e., a period 
commensurate with the seriousness of the crime charged, pending further 
investigation or outside adjudication of facts and/or the institution 
of permanent revocation and cancellation proceedings.
    This action is being proposed in order to enhance port directors' 
ability to protect the public interest and to promote public confidence 
concerning the integrity of the CES program. Because the CES program 
centralizes at a particular location several otherwise disparate 
processes, including cartage, devanning, Customs inspection, sampling, 
reloading, and returning merchandise to the stream of commerce, and 
because the number of CES operators is limited (see, T.D. 93-6, 58 FR 
5596, 5597 (January 22, 1993), the discussion of comments received 
concerning the final CES rule), Customs officers must have authority to 
ensure thorough confidence in the integrity of CES operators, 
employees, and premises. Therefore, this proposed rulemaking would 
provide port directors with additional discretion to decide whether, on 
a case-by-case basis, particular circumstances and risks involving the 
listed offenses warrant immediate suspension, proposed revocation and 
cancellation, both, or neither. This proposal is intended to provide 
Customs greater flexibility to address the varying situations with 
appropriate measures reasonably calculated to protect the public 
interest and to promote public confidence in the CES program.
    Accordingly, Customs proposes to amend Sec. 118.21, which provides 
for the revocation of selection and cancellation of the written 
agreement to operate a CES. Paragraph (a) will be revised to provide 
for the immediate suspension of a CES operator's or entity's selection 
and the written agreement to operate the CES if the local port director 
finds that (1) the selection and written agreement were obtained 
through fraud or the misstatement of a material fact; or (2) the CES 
operator, an officer of a corporation which is a CES operator, or a 
person the port director determines to exercise substantial ownership 
or control over such operator or officer is indicted for, convicted of, 
or has committed acts which would constitute a felony, or a misdemeanor 
involving theft or a theft-connected crime. In the absence of an 
indictment or conviction, the port director must at least have probable 
cause to believe the proscribed acts occurred. When CES operations are 
suspended or revoked and cancelled by Customs, it will be the CES 
operator's responsibility to ensure that merchandise already at the CES 
is properly consigned to another location for inspection, as directed 
by the importer and approved by the port director.
    Paragraph (b) is proposed to be amended by adding a new 
subparagraph (6) which makes the above-referenced conduct a separate 
ground for the port director to pursue permanent revocation and 
cancellation procedures, and revising subparagraph (1) to make more 
specific that failure to comply with the responsibilities of a CES 
operator also constitutes a ground for proposed revocation and 
cancellation.
    The circumstance of a change in employment status as not precluding 
adverse action, formerly provided for under paragraph (a), is made into 
a new paragraph (c) to make it clear that this consideration is 
applicable equally to actions regarding immediate suspension and 
permanent revocation. 

[[Page 1878]]


Additional Changes to the Regulations

    Because of the proposed change to Sec. 118.21 discussed above, 
conforming changes to other referencing provisions in part 118 must 
also be made. The following changes are noted in this regard:

Section 118.0

    The second sentence of the scope section to part 118 (Sec. 118.0) 
is revised to reference the port director's discretion to immediately 
suspend a CES operator's or entity's selection and the written 
agreement to operate the CES for the type conduct specified above.

Section 118.22

    Section 118.22 is proposed to be revised to reference the port 
director's responsibility to provide written notice to the CES operator 
or entity when the decision to immediately suspend operations has been 
made.

Section 118.23

    Section 118.23 is proposed to be revised to reference the CES 
operator or entity's right to appeal the port director's decision to 
immediately suspend CES operations to the Assistant Commissioner of the 
Office of Field Operations (another new designation reflecting Customs 
pending field reorganization) or his designee. A sentence is added to 
make it clear that once a suspension or revocation action takes effect, 
the CES operator must cease CES operations. Further, where the port 
director follows an immediate suspension action with proposed permanent 
revocation and cancellation proceedings, the temporary suspension of 
CES operations remains in effect during the appeal process.

Comments

    Before adopting this proposal as a final rule, consideration will 
be given to any written comments timely submitted to Customs. Comments 
submitted will be available for public inspection in accordance with 
the Freedom of Information Act (5 U.S.C. 552), Sec. 1.4 of the Treasury 
Department Regulations (31 CFR 1.4), and Sec. 103.11(b) of the Customs 
Regulations (19 CFR 103.11(b)), on regular business days between the 
hours of 9 a.m. and 4:30 p.m. at the Regulations Branch, U.S. Customs 
Service, 1099 14th Street, NW., Suite 4000, Washington, DC.

Regulatory Flexibility Act

    Pursuant to provisions of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.), it is certified that, if adopted, the proposed amendments 
will not have a significant economic impact on a substantial number of 
small entities, as the current number of centralized examination 
station operators is small, i.e., less than 200. Accordingly, the 
proposed amendments are not subject to the regulatory analysis or other 
requirements of 5 U.S.C. 603 and 604.

Executive Order 12866

    This document does not meet the criteria for a ``significant 
regulatory action'' as defined in E.O. 12866.

    Drafting Information: The principal author of this document was 
Gregory R. Vilders, Attorney, Regulations Branch, U.S. Customs 
Service.
    However, personnel from other offices participated in its 
development.

List of Subjects in 19 CFR Part 118

    Administrative practice and procedure, Customs duties and 
inspection, Examination stations, Imports, Licensing, Reporting and 
recordkeeping requirements.

Proposed Amendment

    For the reasons stated above, it is proposed to amend part 118, 
Customs Regulations (19 CFR part 118), as set forth below:

PART 118--CENTRALIZED EXAMINATION STATIONS

    1. The authority citation for part 118 continues to read as 
follows:

    Authority: 19 U.S.C. 66, 1499, 1623, 1624.

    2. In Sec. 118.0, the second sentence is revised to read as 
follows:


Sec. 118.0  Scope

    * * * It covers the application process, the responsibilities of 
the person or entity selected to be a CES operator, the written 
agreement to operate a CES facility, the port director's discretion to 
immediately suspend a CES operator's or entity's selection and the 
written agreement to operate the CES or to propose the permanent 
revocation of a CES operator's or entity's selection and cancellation 
of the written agreement for specified conduct, and the appeal 
procedures to challenge an immediate suspension or proposed revocation 
and cancellation action. * * *.
    3. In Sec. 118.21:
    (a) The heading is revised and the introductory text is 
republished;
    (b) Paragraph (a) is revised;
    (c) Paragraph (b)(1) is amended by adding the words ``to comply 
with any of'' before the words ``the provisions of'';
    (d) A new paragraph (b)(6) is added; and
    (e) A new paragraph (c) is added.
    The revisions and additions to read as follows:


Sec. 118.21  Temporary suspension; permanent revocation of selection 
and cancellation of agreement to operate a CES.

    The port director may immediately suspend or propose permanent 
revocation and cancellation of CES operations for cause as provided in 
this section.
    (a) Immediate suspension. The port director may immediately 
suspend, for a temporary period of time or until revocation and 
cancellation proceedings are concluded pursuant to Sec. 118.23, a CES 
operator's or entity's selection and the written agreement to operate 
the CES if:
    (1) The selection and written agreement were obtained through fraud 
or the misstatement of a material fact; or
    (2) The CES operator, an officer of a corporation which is a CES 
operator, or a person the port director determines to exercise 
substantial ownership or control over such operator or officer is 
indicted for, convicted of, or has committed acts, which would 
constitute a felony, or a misdemeanor involving theft or a theft-
connected crime. In the absence of an indictment or conviction, the 
port director must at least have probable cause to believe the 
proscribed acts occurred.
    (b) * * *
    (6) The CES operator, an officer of a corporation which is a CES 
operator, or a person the port director determines to exercise 
substantial ownership or control over such operator or officer is 
indicted for, convicted of, or has committed acts, which would 
constitute any of the offenses listed under paragraph (a) of this 
section. Where adverse action is initiated by the port director 
pursuant to paragraph (a) of this section and continued under this 
subparagraph, the suspension of CES activities remains in effect 
through the appeal procedures provided under Sec. 118.23.
    (c) Circumstance of change in employment not a bar to adverse 
action. Any change in the employment status of a corporate officer (for 
example, discharge, resignation, demotion, or promotion) prior to 
indictment or conviction or after committing any acts which would 
constitute the culpable behavior described under paragraph (a) of this 
section, will not preclude application of this section, but may be 
taken into account by the port director in exercising discretion to 
take adverse action. If the person whose employment status changed 
remains in a substantial ownership, control, or beneficial relationship 
with the CES operator, this 

[[Page 1879]]
factor will also be considered in exercising discretion under this 
section.
    4. Section 118.22 revised to read as follows:


Sec. 118.22  Notice of immediate suspension or proposed revocation and 
cancellation action.

    Adverse action pursuant to the provisions of Sec. 118.21(a) or (b) 
is initiated when the port director serves written notice on the 
operator or entity selected to operate the CES. The notice shall be in 
the form of a statement specifically setting forth the grounds for the 
adverse action and shall inform the operator of the appeal procedures 
under Sec. 118.23 of this part.
    5. Section 118.23 revised to read as follows:


Sec. 118.23  Appeal to the Assistant Commissioner; procedure; status of 
CES operations.

    (a) Appeal to the Assistant Commissioner. Appeal of a port 
director's decision under Sec. 118.21(a) or (b) must be taken to the 
Assistant Commissioner, Office of Field Operations, within 10 calendar 
days of receipt of the written notice of the adverse action. The appeal 
shall be filed in duplicate and shall set forth the CES operator's or 
entity's responses to the grounds specified by the port director in his 
written notice letter for the adverse action initiated. The Assistant 
Commissioner, Office of Field Operations, or his designee, shall render 
a written decision to the CES operator or entity, stating the reasons 
for the decision, by letter mailed within 30 working days following 
receipt of the appeal, unless the period for decision is extended with 
due notification to the CES operator or entity.
    (b) Status of CES operations during appeal. During this appeal 
period, an immediate suspension of a CES operator's or entity's 
selection and written agreement pursuant to Sec. 118.21(a) of this part 
shall remain in effect. A proposed revocation of a CES operator's or 
entity's selection and cancellation of the written agreement pursuant 
to Sec. 118.21(b)(1)-(5) of this part shall not take effect unless the 
appeal process under this paragraph has been concluded with a decision 
adverse to the operator.
    (c) Effect of suspension or revocation. Once a suspension or 
revocation action takes effect, the CES operator must cease CES 
operations. However, when CES operations are suspended or revoked and 
cancelled by Customs, it is the CES operator's responsibility to ensure 
that merchandise already at the CES is properly consigned to another 
location for inspection, as directed by the importer and approved by 
the port director.

    Approved: December 13, 1995.
Michael H. Lane,
Acting Commissioner of Customs.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-1048 Filed 1-23-96; 8:45 am]
BILLING CODE 4820-02-P