[Federal Register Volume 61, Number 42 (Friday, March 1, 1996)]
[Rules and Regulations]
[Pages 7987-7990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4797]



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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10 and 113

[T.D. 96-20]
RIN 1515-AB51


Treatment of Reusable Shipping Devices Arriving From Canada or 
Mexico

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to allow certain 
foreign- or U.S.-manufactured shipping devices arriving from Canada or 
Mexico to be released, under specified conditions, without entry and 
payment of duty at the time of arrival and without the devices being 
serially numbered or marked, if they are always transported on or 
within either intermodal and similar containers which are themselves 
vehicles or vehicle appurtenances and accessories. As millions of these 
devices are used annually in hundreds of millions of transportation 
moves between the United States and Canada or Mexico, Customs has 
determined that requiring the importing and exporting communities to 
individually mark and track these devices places a burden on commerce 
that may be alleviated.

EFFECTIVE DATE: April 1, 1996.

FOR FURTHER INFORMATION CONTACT: Louis Hryniw, Regulatory Audit, (202-
927-1100).

SUPPLEMENTARY INFORMATION:

Background

    Pursuant to Chapter 98, Subchapter III, U.S. Note 3, Harmonized 
Tariff Schedule of the United States (HTSUS) (19 U.S.C. 1202), in order 
to facilitate the prompt clearance at ports of entry of certain 
substantial containers and holders, the Secretary of the Treasury is 
authorized to permit the admission of such devices without entry and to 
permit any duties thereon to be paid cumulatively from time to time 
either before or after their importation when conditions exist which 
permit adequate Customs controls to be maintained.
    In this connection, Customs received a petition from, and met with 
representatives of, the American Automobile Manufacturers Association 
(AAMA) concerning an amendment to Sec. 10.41b, Customs Regulations (19 
CFR 10.41b), intended to ease the burden of serially numbering and 
marking certain containers or holders arriving from Canada or Mexico, 
as otherwise generally required thereunder.
    After reviewing the AAMA proposal, Customs concluded that the 
requirements to serially number and mark the substantial holders and 
containers in question could be eased under the circumstances without 
risking a loss of control or revenue.
    Accordingly, by a document published in the Federal Register on 
November 1, 1994 (59 FR 54537), Customs proposed to amend Sec. 10.41b, 
to allow certain foreign-made shipping devices arriving from Canada or 
Mexico to be released without entry and payment of applicable duty, and 
without the devices being serially numbered or marked, following the 
submission and approval of an application by the importer or his agent 
in this regard.
    Such application had to, among other things, describe the subject 
shipping devices, identify the ports where they would arrive and depart 
the U.S., and set forth the program for accounting for and reporting 
the shipping devices to Customs. If the application were approved, the 
importer or agent would submit to Customs a periodic report for the 
shipping devices, which could not be less frequent than annual, using 
his own accounting and recordkeeping procedures to keep track of the 
devices. Records supporting the periodic reports of the shipping 
devices would have to be retained for at least 3 years from the date 
the reports were filed with Customs. Any duty applicable to the devices 
would have to be tendered cumulatively at the time specified in the 
approved application. Such tender could not occur more than 90 days 
following the end of the related reporting period.
    In the event the application were to be denied by Customs at the 
initial stage, a right of appeal was also provided in the proposal.
    Since duty under the proposal would be due on all shipping devices 
acquired within the period covered by the periodic report which the 
applicant would undertake to file, even though the devices might not 
have yet been used in transborder traffic, accounting for specific 
movements of the devices or for diversions to domestic traffic would be 
superfluous.
    Eight comments, including one from the AAMA, were received in 
response to the notice of proposed rulemaking, six supporting the 
proposal, with one posing a number of questions regarding the bond 
conditions applicable under the proposed program. Another comment 
advocated that the proposal be expanded to allow substantial holders or 
outer containers formally designated as ``instruments of international 
traffic'' to be temporarily diverted, from time to time, to domestic 
traffic without an entry being required therefore. Customs finds that 
this latter comment would have to be the subject of a separate 
publication, inasmuch as it clearly falls outside the scope of the 
published notice.
    A discussion of the specific issues that were raised with respect 
to the proposed program itself, together with Customs response thereto, 
is set forth below.

Discussion of Comments

    Comment: The AAMA in its comment wanted the proposed regulation 
clarified to state explicitly that an approval by one Customs office of 
an importer's application for tracking and reporting on its shipping 
devices would constitute an approval binding on all Customs offices 
nationwide. Also, it was recommended that the proposed regulation be 
revised to reflect the Customs Reorganization Plan, which eliminated 
regional and district offices.
    Response: An approval by the Customs office with which the subject 
application is filed would indeed be binding on all Customs offices 
nationwide. Section 10.41b(b)(4) is changed by adding an express 
provision to this effect, and by deleting the provision therefrom 
indicating that approval would be limited to those Customs offices 
listed in the application. Likewise, Sec. 10.41b(b)(2)(ii) is changed 
to make clear that only the intended ports where it is anticipated the 
devices will be arriving and departing the U.S. need be listed in the 
application. The applicant should of course endeavor to fully 
anticipate and list in the application all ports to be involved in the 
program.
    Also, Sec. 10.41b(b) is changed to reflect the Customs 
Reorganization Plan, by 

[[Page 7988]]
providing that the application would be filed with a port director, 
instead of with a district director; and by providing that a right of 
appeal would lie with the Assistant Commissioner, Office of Field 
Operations, rather than with a regional commissioner, should the 
application be denied.
    Comment: The AAMA also observed that Sec. 113.66 of the Customs 
Regulations (19 CFR 113.66) cited in proposed Sec. 10.41b(b)(3) 
regarding the bond requirements for the importer's recordkeeping and 
reporting program did not itself make corresponding provision for these 
requirements; accordingly, the AAMA recommended that Sec. 113.66 be 
appropriately amended to reiterate the basic requirements set forth for 
the program in proposed Sec. 10.41b(b), to which the underlying bond 
would relate.
    Furthermore, a surety association posed a number of questions about 
the bond requirements occasioned under the proposed amendment, viewing 
the proposal as appearing not to provide sufficient information in this 
matter. In particular, this commenter wanted the intended coverage 
under the bond clarified, together with the basis both for assessing 
liquidated damages under the bond, and for setting the limit of the 
bond.
    Additionally, this commenter compared the 3-year record retention 
requirement of the proposal to 19 U.S.C. 1508(c) which enabled Customs 
to require the retention of records relating to import transactions for 
up to 5 years, and asked in this context which time frame would be 
applicable. This commenter further wanted to know whether the 
importer's accounting or auditing records, which would be relied upon 
by Customs to establish compliance with the proposed program, would be 
available to the surety as well.
    Response: Section 113.66 has been revised to replicate the 
importer's basic recordkeeping and reporting obligations concerning the 
subject shipping devices, which would be covered by the bond, as 
already amply evidenced in the proposed amendment of Sec. 10.41b. 
Customs believes that the proposed rule in this regard adequately 
framed the subject matter thereof for effective evaluation and comment. 
To this end, Sec. 113.66 is revised by redesignating paragraph (c) as 
paragraph (d), and by making corresponding provision for the bond 
requirements in a new paragraph (c).
    In this latter respect, liquidated damages under the bond would be 
determined in the manner provided in Sec. 10.41b(b)(3) and in newly 
redesignated Sec. 113.66(d) (formerly Sec. 113.66(c)). Specifically, if 
the conditions of the bond were violated, the port director could issue 
a claim for liquidated damages in an amount equal to the domestic value 
of the container.
    Likewise, the setting of the bond limit will follow the existing 
guidelines previously issued pursuant to Secs. 113.12 and 113.13, 
Customs Regulations (19 CFR 113.12, 113.13); for activity code 3a bonds 
(applicable to substantial holders or outer containers under 
Sec. 10.41b), this means that bond liability would be fixed at $10,000 
or such larger amount as deemed necessary to accomplish the purpose for 
which the bond is given.
    By the same token, a surety's access to an importer's business 
records relating to the reports of its shipping devices would be 
dependent, once again, on Customs existing practices in this general 
area, and, in particular, on the Freedom of Information Act, as amended 
(5 U.S.C. 552), and the Trade Secrets Act, as amended (18 U.S.C. 1905).
    The record retention period under 19 U.S.C. 1508(c) is tied to the 
date of entry. The shipping devices in question, however, will not be 
subject to entry as such, and Customs is satisfied that a record 
retention requirement of 3 years from the date the importer's reports 
of the shipping devices are filed with Customs would be sufficient 
under the circumstances.
    Comment: One commenter observed that the rule should be expanded to 
apply equally to similar shipping devices of U.S. manufacture, inasmuch 
as they should not be placed in a less favorable competitive position 
than the foreign articles.
    Response: Customs agrees. Section 10.41b(b) is amended accordingly.
    Comment: Two commenters asked that the program not be limited to 
reusable shipping devices arriving only from Canada or Mexico. It was 
stated that Part I, Article I, of the GATT (General Agreement on 
Tariffs and Trade) mandated uniform treatment for like products 
originating from all contracting parties.
    Response: Customs has concluded that a rational basis exists for 
limiting the amendment, at least initially, to reusable shipping 
containers and holders arriving from Canada or Mexico, inasmuch as 
these countries are contiguous to the U.S., and it is believed that the 
amendment as thus circumscribed can be safely implemented without 
risking a loss of revenue or a loss of effective Customs control with 
respect to the shipping devices concerned. Customs thus does not 
perceive this limitation on the rule as violative of the GATT.
    However, Customs finds significant merit in the commenter's 
request, and will proceed to expeditiously review the prospect of 
further extending the program.

Conclusion

    In view of the foregoing, and following careful consideration of 
the comments received and further review of the matter, Customs has 
concluded that the proposed amendment with the modifications discussed 
above should be adopted.
    In addition, in order to apprise the Customs inspector that the 
shipping devices in question have been relieved from having to be 
serially numbered or marked as otherwise mandated under Sec. 10.41b, 
the introductory text of Sec. 10.41b(b) is revised to require that a 
notation appear on the manifest for the transporting vehicle or vessel 
to the effect that such shipping devices have been exempted from serial 
numbering or marking requirements pursuant to an application approved 
under 19 CFR 10.41b(b). Also, Customs has determined to amend 
Sec. 10.41b(b)(2)(vi) in order to emphasize that the location of the 
supporting records in the U.S., which is required to be identified in 
the importer's application, must be so identified therein by specific 
name and address; and Sec. 10.41b(b)(6) is changed to provide that if 
an approved application should later be revoked by the port director, 
the procedures described in Sec. 10.41b(b)(5) will apply. Furthermore, 
at the end of the introductory text of Sec. 10.41b(b), a provision is 
added that pallets and other solid wood shipping devices must be 
accompanied by an importer document, to the extent that this is 
required by the Animal and Plant Health Inspection Service, Department 
of Agriculture, regarding plant pest risk.

Regulatory Flexibility Act and Executive Order 12866

    For the reasons set forth in the preamble, pursuant to the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it 
is certified that the amendments will not have a significant economic 
impact on a substantial number of small entities. Accordingly, it is 
not subject to the regulatory analysis requirements of 5 U.S.C. 603 and 
604. Nor do the amendments result in a ``significant regulatory 
action'' under E.O. 12866.

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

[[Page 7989]]


List of Subjects

19 CFR Part 10

    Alterations, Bonds, Customs duties and inspection, Exports, 
Imports, Preference programs, Repairs, Reporting and recordkeeping 
requirements, Trade agreements.

19 CFR Part 113

    Air carriers, Customs duties and inspection, Exports, Freight, 
Imports, Surety bonds, Vessels.

Amendments to the Regulations

    Parts 10 and 113, Customs Regulations (19 CFR parts 10 and 113), 
are amended as set forth below.

PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, 
ETC.

    1. The general authority citation for part 10 continues to read as 
follows, and the specific sectional authority for part 10 is amended by 
adding specific sectional authority for Sec. 10.41b, in appropriate 
numerical order thereunder, to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 
1498, 1508, 1623, 1624;
* * * * *
    Section 10.41b also issued under 19 U.S.C. 1202 (Chapter 98, 
Subchapter III, U.S. Note 3, Harmonized Tariff Schedule of the U.S. 
(HTSUS));
* * * * *
    2. Section 10.41b is amended by redesignating paragraphs (b), (c), 
(d), (e), (f), (g) and (h) as (c), (d), (e), (f), (g), (h) and (i), 
respectively, and by adding a new paragraph (b) to read as follows:


Sec. 10.41b  Clearance of serially numbered substantial holders or 
outer containers.

* * * * *
    (b) Subject to the approval of a port director pursuant to the 
procedures described in this paragraph, certain foreign- or U.S.-made 
shipping devices arriving from Canada or Mexico, 12 including racks, 
holders, pallets, totes, boxes and cans, need not be serially numbered 
or marked if they are always transported on or within either intermodal 
and similar containers or containers which are themselves vehicles or 
vehicle appurtenances and accessories such as twenty and forty foot 
containers of general use and ``igloo'' air freight containers. The 
following or similar notation shall appear on the vehicle or vessel 
manifest in relation to such shipping devices which are exempt from 
serial numbering or marking requirements pursuant to this paragraph: 
``The shipping devices transported herein, which are not serially 
numbered or marked, have been exempted from such requirement pursuant 
to an application approved under 19 CFR 10.41b(b).'' Also, pallets and 
other solid wood shipping devices must be accompanied by an importer 
document, to the extent that this is required by the U.S. Department of 
Agriculture, Animal and Plant Health Inspection Service, attesting to 
the admissibility of such devices as regards plant pest risk, as 
provided for in 7 CFR 319.40-3.
    (1) An importer or his agent, regardless of whether the importer is 
the owner of the foreign- or U.S.-manufactured shipping devices, may 
apply to a port director of Customs at one of the importer's chiefly 
utilized Customs ports or the port within which the importer's or 
agent's recordkeeping center is located for permission to have such 
shipping devices arriving from Canada or Mexico released without entry 
and payment of duty at the time of arrival and without the devices 
being serially 13 numbered or marked. Application may be filed in only 
one port. Although no particular format is specified for the 
application, it must contain the information enumerated in paragraph 
(b)(2) of this section. Any duty which may be due on these shipping 
devices shall be tendered and paid cumulatively at the time specified 
in an approved application, which may be either before or after the 
arrival of the shipping devices in the U.S. (such as, at the time a 
contract, purchase order or lease agreement is issued).
    (2) The application shall:
    (i) Describe the types of shipping devices covered, their 
classification under the Harmonized Tariff Schedule of the U.S. 
(HTSUS), their countries of origin, and whether and to whom required 
duty was paid for them or when it will be paid for them, including 
duties for repair and modifications to such shipping devices while 
outside the U.S.;
    (ii) Identify the intended ports where it is anticipated the 
shipping devices will be arriving and departing the U.S., as well as 
the particular movements and conveyances in which they are intended to 
be utilized;
    (iii) Describe the applicant's proposed program for accounting for 
and reporting these shipping devices;
    (iv) Identify the reporting period (which shall in no event be less 
frequent than annual), as well as the payment period within which 
applicable duty and fees must be tendered 14 (which shall in no event 
exceed 90 days following the close of the related reporting period);
    (v) Describe the type of inventory control and recordkeeping, 
including the specific records, to be maintained to support the reports 
of the shipping devices; and
    (vi) Provide the location in the United States, including the name 
and address, where the records supporting the reports will be retained 
by law and will be made available for inspection and audit upon 
reasonable notice. (The records supporting the reports of the shipping 
devices must be kept for a period of at least 3 years from the date 
such reports are filed with the port director.)
    (3) The application shall be filed along with a continuous bond 
containing the conditions set forth in Sec. 113.66(c) of this chapter. 
If the application is approved by the port director and the conditions 
set forth in the application or of the bond are violated, the port 
director may issue a claim for liquidated damages equal to the domestic 
value of the container. If the domestic value exceeds the amount of the 
bond, the claim for liquidated damages will be equal to the amount of 
the bond.
    (4) The port director receiving the application shall evaluate the 
program proposed to account for, report and maintain records of the 
shipping devices. The port director may suggest amendments to the 
applicant's proposal. The port director shall notify the applicant in 
writing of his decision on the 15 application within 90 days of its 
receipt, unless this period is extended for good cause and the 
applicant is so informed in writing. Approval of the application by the 
port director with whom it is filed shall be binding on all Customs 
ports nationwide.
    (5) If the decision is to deny the application, in whole or in 
part, the port director shall specify the reason for the denial in a 
written reply, and inform the applicant that such denial may be 
appealed to the Assistant Commissioner, Office of Field Operations, 
Customs Headquarters, within 21 days of its date. The Assistant 
Commissioner's decision shall be issued, in writing, within 30 days of 
the receipt of the appeal, and shall constitute the final Customs 
determination concerning the application.
    (6) If the application is approved, an importer may later apply to 
amend his application to add or delete particular types of shipping 
devices listed in the application in which the procedures set forth in 
the application may be utilized. If a requested amendment to an 
approved application should be denied, or if an approved application 
should be 

[[Page 7990]]
revoked, in whole or in part, by the port director, the procedures 
described in paragraph (b)(5) of this section shall apply.
    (7) Application for and approval of a reporting program shall not 
limit or restrict the use of other alternative 16 means for obtaining 
the release of holders, containers and shipping devices.
* * * * *

PART 113--CUSTOMS BONDS

    1. The general authority citation for part 113 continues to read as 
follows:

    Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
    2. Section 113.66 is amended by redesignating paragraph (c) as (d) 
and by adding a new paragraph (c) to read as follows:


Sec. 113.66  Control of containers and instruments of international 
traffic bond conditions.

* * * * *
    (c) Agreement to comply with application approved under 19 CFR 
10.41b(b). If the principal establishes a program for the cross-border 
movements of shipping devices based upon an application approved as 
provided in Sec. 10.41b(b) of this chapter (19 CFR 10.41b(b)), the 
principal agrees:
    (1) To timely file complete and accurate reports on the shipping 
devices, and to pay any applicable duty due on the devices and repairs 
made to such devices, as provided in the approved application;
    (2) To retain complete and accurate records regarding the shipping 
devices, and to make such records available to Customs for inspection 
and audit upon reasonable notice, as also required in the approved 
application; and
    (3) To otherwise comply with every other condition of the approved 
application.

    Approved: January 31, 1996.
George J. Weise,
Commissioner of Customs.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-4797 Filed 2-29-96; 8:45 am]
BILLING CODE 4820-02-P