[Federal Register Volume 63, Number 65 (Monday, April 6, 1998)]
[Rules and Regulations]
[Pages 16683-16685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8940]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

[T.D. 98-29]
RIN 1515-AC07


Centralized Examination Stations

AGENCY: Customs Service, Treasury.

ACTION: Final rule.

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SUMMARY: This document amends 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, the definition of a CES is expanded 
to allow merchandise intended to be exported as well as imported 
merchandise to be handled by a CES. The amendment allows outbound cargo 
to be inspected at CESs at ports other than the shipment's designated 
port of exit. Further, to make the CES application procedure more 
amenable to local conditions, this amendment provides CES applicants 
with more flexibility regarding the time frame to conform a facility to 
meet Customs security or other physical or equipment requirements. 
Lastly, this amendment removes one of the criteria on the application 
to operate a CES because Customs believes it is too subjective. These 
changes are made 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: Effective: May 6, 1998.

FOR FURTHER INFORMATION CONTACT:
    For Policy Inquiries: Steven T. Soggin, Office of Field Operations, 
(202) 927-0765;
    For Legal Inquiries: Jerry Laderberg, Office of Regulations and 
Rulings, Entry Procedures and Carriers Branch, (202) 927-2269.

SUPPLEMENTARY INFORMATION:

Background

    In 1993, Customs amended the Customs Regulations to provide 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. Because 
merchandise intended to be exported is subject to examination, Customs 
wanted CESs to be authorized to provide inspectional facilities for 
this merchandise as well. Accordingly, on August 19, 1997, Customs 
published a Notice of Proposed Rulemaking in the Federal Register (62 
FR 44102) that proposed to amend the Customs Regulations regarding the 
establishment and scope of operation of CESs.
    In order to reflect Customs' interest in maximizing compliance with 
export control laws and regulations without unduly impeding the 
movement of outbound merchandise, the Notice proposed to expand the 
definition of a

[[Page 16684]]

CES to allow merchandise intended to be exported as well as imported 
merchandise to be handled by a CES. Further, the document proposed to 
allow for the inspection of outbound cargo at CESs at ports other than 
the shipments' designated ports of exit. To make the CES application 
procedure more amenable to local conditions, the document proposed 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 proposed to amend one of the criteria on 
the application to operate a CES because of Customs' belief that it is 
too subjective. These changes were 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. These proposed 
changes to the regulations affected Secs. 118.0, 118.22, and 118.23 of 
the Customs Regulations (19 CFR 118.0, 118.22, and 118.23). The 
document solicited comments concerning these changes.
    The comment period closed on October 20, 1996. Six comments were 
received. The comments and Customs responses to them follow.

Discussion of Comments

    The comments received were from a major manufacturing corporation 
involved with importing/exporting its products; a trade association 
representing 1,000 member firms engaged in all aspects of international 
trade; an exporter of merchandise; a manufacturer that exports its 
product; a CES operator; and an association representing insurance and 
surety companies.
    Comment: Four commenters opposed the use of CESs for outbound 
inspections because they stated that expansion of the CES program to 
exports will mean that the burdens (needless delays and cost overruns) 
routinely experienced on the import side with CESs will also occur with 
examination of exports. These commenters argue that similar processing 
delays could result in missing the time for lading the merchandise to 
be exported, which may result in the loss of export sales, leading to a 
negative impact on the country's balance of trade.
    Customs response: Customs disagrees. Inspection time involved with 
export examinations is considerably less than the inspection time 
involved with import examinations due to less paperwork being required. 
Further, the proposed amendments were designed to keep CESs responsive 
to the trade community's demands for facilitating examinations. Since 
the number of export shipments is expected to increase 6% per year, 
reaching a total value of $1.2 trillion by the year 2003, Customs 
believes that centralizing outbound examinations will facilitate 
inspections. As Customs will be able to conduct the outbound 
examination before merchandise is loaded for transport to a port of 
exit, unnecessary delays of shipments will be prevented by sparing 
exporters the expense and delay involved in unloading shipments at 
dispersed ports of exit for inspection.
    Comment: One commenter stated that the proposed amendment to the 
Customs custodial bond provision of Sec. 118.4(g) is unnecessary. The 
commenter stated that the obligation envisioned by the new language, 
that CES operators will accept and keep safe all merchandise delivered 
to the CES for examination, currently exists and that unless the 
amendment serves some significant, but unstated, need, it should be 
deleted from the final rule.
    Customs response: Customs disagrees with the proposition that the 
proposed amendment is not necessary because it speaks to an existing 
obligation. The proposed amendment to Sec. 118.4(g) clarifies Customs 
policy that a CES operator will accept all merchandise delivered to the 
CES for examination, thus, eliminating any assumption that CES 
operators have discretion whether to accept merchandise delivered to 
the facility for Customs examination. Accordingly, Customs believes 
that the proposed amendment to Sec. 118.4(g) is necessary.

Conclusion

    After analysis and review of the comments and further consideration 
by Customs, Customs has determined to adopt the final rule as it was 
proposed.

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

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.

Amendments 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 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. * * *
* * * * *


Sec. 118.11  [Amended]

    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''.


[[Page 16685]]


    Approved: March 13, 1998.
Samuel H. Banks,
Acting Commissioner of Customs.

John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 98-8940 Filed 4-3-98; 8:45 am]
BILLING CODE 4820-02-P