[Federal Register Volume 62, Number 160 (Tuesday, August 19, 1997)]
[Proposed Rules]
[Pages 44102-44103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21843]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

RIN 1515-AC07


Centralized Examination Stations

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Customs Regulations 
regarding the establishment and scope of operation of Centralized 
Examination Stations (CESs). To reflect Customs interest in maximizing 
compliance with export control laws and regulations without unduly 
impeding the movement of outbound merchandise, it is proposed to expand 
the definition of a CES to allow merchandise intended to be exported as 
well as imported merchandise to be handled by a CES. Further, Customs 
is proposing to allow for the inspection of outbound cargo at CESs at 
ports other than the shipment's designated port of exit. To make the 
CES application procedure more amenable to local conditions, Customs is 
proposing more flexibility regarding the time frame for an applicant to 
conform a facility to meet Customs security or other physical or 
equipment requirements. Lastly, Customs is proposing to amend one of 
the criteria on the application to operate a CES because Customs 
believes it is too subjective. These changes are proposed in order to 
keep the CES program responsive to both Customs and the trade 
community's demands for the facilitated examinations of trade 
merchandise.

DATES: Comments must be received on or before October 20, 1997.

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:

    For Policy Inquiries: Steven T. Soggin, Office of Field Operations, 
Trade Compliance, (202) 927-0765;
    For Legal Inquiries: Jerry Laderberg, Office of Regulations and 
Rulings, Entry Procedures and Carriers Branch, (202) 482-7052.

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.
    Currently, CESs are authorized to provide inspectional facilities 
for Customs officers to examine only imported merchandise. However, 
because merchandise intended to be exported often is required to be 
examined, Customs would like CESs to be authorized to provide 
inspectional facilities for this merchandise as well. Customs has 
statutory authority to inspect merchandise intended to be exported 
pursuant to 22 U.S.C. 401, concerning the exportation of munitions and 
other articles, and 31 U.S.C. 5317, concerning the search and 
forfeiture of monetary instruments. Further, Customs broad authority to 
conduct warrantless examinations of outbound merchandise has long been 
recognized by the courts. See e.g., United States v. Udofot, 711 F.2d 
831, 839 (8th Cir. 1983), cert. denied, 464 U.S. 896 (1983); United 
States v. Ajlouny, 629 F.2d 830, 834 (2d Cir. 1980), cert. denied, 449 
U.S. 111 (1981); United States v. Stanley, et al., 545 F.2d 661, 665-67 
(9th Cir. 1976), cert. denied, 436 U.S. 917 (1978); cf., California 
Bankers Ass'n v. Shultz, 416 U.S. 21, 63 (1974). Accordingly, to 
reflect the authority to inspect merchandise intended to be exported, 
the authority citation for Part 118 is revised. Also, Customs proposes 
to amend the first sentence of Sec. 118.1 by removing the word 
``imported'' to allow CESs to provide inspectional facilities for 
merchandise regardless of whether it is inbound or outbound.
    Customs ability to inspect at inland ports shipments scheduled for 
export from another port is authorized at the functional equivalent of 
the border. See, United States v. Udofot, 711 F.2d 831 (8th Cir. 1983), 
cert. denied, 464 U.S. 896 (1983); United States v. Hernandez-Salazar, 
813 F.2d 1126 (11th Cir. 1987). To conduct such inspections at 
locations other than the port of export, the exportation must be 
imminent and the goods committed to export. Accordingly, should a 
carrier, freight forwarder, or shipper wish to have its shipment 
inspected at a CES at a port other than the designated port of export, 
sufficient evidence that exportation is imminent and that the goods are 
committed to export must be made available to Customs. Alternatively, 
evidence of the shipper's consent to Customs inspection at an inland 
port may be presented. To advise the exporting community of Customs 
requirements for inspecting merchandise declared for export at a port 
other than the port of exit, Customs proposes to further amend 
Sec. 118.1 by adding a new sentence at the end that provides that 
either proof of the shipper's consent to the inspection must be 
furnished or transportation documents must accompany outbound shipments 
to evidence that the exportation of the goods is imminent and that the 
goods are committed to export.
    Pursuant to the provisions of 19 CFR 118.4(g), the CES operator is 
required to maintain a custodial bond. The terms and conditions of the 
custodial bond obligate the bond principal to accept only merchandise 
authorized under Customs Regulations (see 19 CFR 113.63(a)(2)), and 
keep safe any merchandise placed in its custody (see 19 CFR 
113.63(b)(2)). A proposed amendment to Sec. 118.4(g) makes it clear 
that the CES operator is authorized to accept and must keep safe all 
merchandise that is delivered for examination. Accordingly, the 
custodial bond will guarantee the receipt and safekeeping of 
merchandise delivered for an import or export examination.
    Regarding the application procedure to operate a CES, paragraph (b) 
of Sec. 118.11 currently provides that where a significant capital 
expenditure would be required in order for an existing facility to meet 
security or other physical or equipment requirements necessary for the 
CES operation, an applicant may

[[Page 44103]]

request in the application, and the port director may allow, up to an 
additional 30 calendar days after tentative selection to conform the 
facility to such requirements. Because compliance with the 30-calendar-
day time-frame requirement for significant capital expenditures is 
subject to building permits and other requirements of a local nature, 
which may not be forthcoming within the time period specified, this 
requirement imposes a burdensome condition in the application 
procedure, which may operate to dissuade many potential applicants from 
applying to become CES operators. Accordingly, Customs proposes to 
remove this requirement and instead allow the time frames for making 
capital improvements to a facility to be addressed locally.
    Further, paragraph (g) of this same section currently provides that 
an applicant must present any information showing the applicant's 
experience in international cargo operations and knowledge of Customs 
procedures and regulations, ``or a commitment to acquire that 
knowledge.'' Because a demonstrable knowledge of such operations, 
procedures, and regulations is essential prior to selection as a CES 
operator, the alternative ``commitment to acquire that knowledge'' 
language in the regulation is too subjective a standard by which to 
measure an applicant's credentials to operate a CES. Accordingly, 
Customs proposes to remove this language.

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 9:00 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, because the amendments would operate to confer new 
benefits on potential CES operations, by allowing them to perform more 
services. 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.

List of Subjects in 19 CFR Part 118

    Administrative practice and procedure, Customs duties and 
inspection, Examination stations, Exports, 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 is revised to read as 
follows:

    Authority: 19 U.S.C. 66, 1499, 1623, 1624; 22 U.S.C. 401; 31 
U.S.C. 5317.

    2. In Sec. 118.1, the first sentence is amended by removing the 
word ``imported'', and a new sentence is added at the end to read as 
follows:


Sec. 118.1  Definition.

    * * * To present outbound cargo for inspection at a CES at a port 
other than the shipment's designated port of exit, either proof of the 
shipper's consent to the inspection must be furnished or a complete set 
of transportation documents must accompany the shipment to evidence 
that exportation of the goods is imminent and that the goods are 
committed to export, thereby, making them subject to Customs 
examination.
    3. In Sec. 118.4, paragraph (g) is amended by adding a new second 
sentence to read as follows:


Sec. 118.4  Responsibilities of a CES operator.

* * * * *
    (g) * * * The CES operator will accept and keep safe all 
merchandise delivered to the CES for examination. * * *
* * * * *
    4. In Sec. 118.11, the second sentence in paragraph (b) is amended 
by removing the words ``, and the port director may allow, up to an 
additional 30 calendar days after tentative selection to conform the 
facility to such requirements, but in such a case the agreement 
referred to in Sec. 118.3 of this part shall not be executed until 
those requirements are met'' and adding, in their place, the words 
``time to conform the facility to such requirements. The agreement 
referred to in Sec. 118.3 of this part shall not be executed, in any 
event, until the facility is conformed to meet the requirements''; and 
paragraph (g) is amended by removing the words ``, or a commitment to 
acquire that knowledge''.

    Approved: June 3, 1997.
Samuel H. Banks,
Acting Commissioner of Customs.
[FR Doc. 97-21843 Filed 8-18-97; 8:45 am]
BILLING CODE 4820-02-P