[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Rules and Regulations]
[Pages 39070-39071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18894]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

[T.D. 96-57]
RIN 1515-AB83


Centralized Examination Stations; Immediate Suspension or 
Permanent Revocation as Operator Upon Indictment for any Felony

AGENCY: Customs Service, Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to enable Customs 
port directors to suspend immediately 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 makes 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.

EFFECTIVE DATE: August 26, 1996.

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 Chapter 1) 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 in T.D. 
93-6 that while immediate revocation and cancellation for a criminal 
act should not be limited to cases involving an actual conviction or 
admission, 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 this issue, Customs published a 
document in the Federal Register (61 FR 1877) on January 24, 1996, 
proposing to amend the Customs Regulations to enable Customs port 
directors to immediately suspend operations at a 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. The notice of 
proposed rulemaking also sought 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. The 
regulatory amendments proposed were promulgated in order to protect the 
public interest and to promote public confidence concerning the 
integrity of the CES program. The notice proposed to amend Sec. 118.21, 
which provides for the revocation of selection and cancellation of the 
written agreement to operate a CES. Additional, conforming changes were 
also proposed to Secs. 118.0, 118.22, and 118.23. The document 
solicited comments concerning these changes.
    The comment period closed on March 25, 1996. Only one comment was 
received and it was from a Customs field office. Because the comment is 
beyond the scope of the proposal, it will not be discussed in this 
document and will be addressed through another forum. After further 
consideration of the proposal, Customs has decided to adopt the 
proposed regulatory amendments as a final rule without substantive 
change.

Regulatory Flexibility Act

    Pursuant to 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, 
as the current number of centralized examination station operators is 
small, i.e., less than 200, and the regulation only will affect those 
who commit felonies or fail to follow the terms of their agreement. 
Accordingly, the 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.

Amendment to the Regulations

    For the reasons stated above, part 118, Customs Regulations (19 CFR 
part 118), is amended 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

[[Page 39071]]

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 introductory text is added;
    (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 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 or an officer of a corporation which is a CES 
operator or a person the port director determines is exercising 
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 have probable cause to believe the proscribed acts 
occurred.
    (b) * * *
    (6) The CES operator or an officer of a corporation which is a CES 
operator or a person the port director determines is exercising 
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 
paragraph, 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 factor will also be considered in 
exercising discretion under this section.
    4. Section 118.22 is 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 is 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 filed with 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) through (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.
George J. Weise,
 Commissioner of Customs.
    Approved: June 8, 1996.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-18894 Filed 7-25-96; 8:45 am]
BILLING CODE 4820-02-P