[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Rules and Regulations]
[Pages 43608-43613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20606]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 151, 174, 178

[T.D. 99-65]
RIN 1515-AB75


Detention of Merchandise

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to provide for 
procedures regarding the detention of merchandise that is undergoing 
extended Customs examination. The changes promulgated accurately 
reflect amendments to the underlying statutory

[[Page 43609]]

authority, enacted as part of the Customs modernization portion of the 
North American Free Trade Agreement Implementation Act. The regulations 
provide importers with an accelerated method to receive administrative 
or judicial review of any decision to exclude merchandise from the 
United States. Certain other conforming amendments are also made.

EFFECTIVE DATE: September 10, 1999.

FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch, 
Office of Regulations and Rulings, 202-927-2344.

SUPPLEMENTARY INFORMATION:

Background

    In a notice of proposed rulemaking (NPRM) published in the Federal 
Register (61 FR 28522) on June 5, 1996, Customs proposed to amend the 
provisions of part 151 of the Customs Regulations (19 CFR part 151), 
relating to the examination, sampling and testing of merchandise, to 
provide for procedures to be followed with regard to the detention of 
merchandise. Section 613 of the North American Free Trade Agreement 
Implementation Act, Pub. L. 103-182, Title VI of which is popularly 
known as the Customs Modernization Act (Mod Act), amended the 
provisions of section 499 of the Tariff Act of 1930, as amended (19 
U.S.C. 1499), to provide for the detention of merchandise in any case 
where Customs is unable, upon initial examination, to make a 
determination as to whether that imported merchandise may be released 
into commerce or seized or denied entry because of some sort of defect 
regarding its admissibility into the United States. This legislation 
brought the law into conformity with existing Customs practice with 
regard to the examination and detention of merchandise.
    Prior to this amendment, Customs, while having extensive 
examination and broad detention authority, had no specific statutory or 
regulatory procedures for detaining merchandise whose admissibility had 
not yet been determined. The Mod Act codified Customs current detention 
practices and provided importers with an accelerated method to receive 
administrative or judicial review of any decision to exclude or a 
deemed exclusion.
    Under the provisions of section 613, Customs has five working days 
after merchandise is presented for examination to determine whether 
such merchandise should be detained or can be released. The NPRM 
provided that merchandise shall be considered to be presented for 
Customs examination when it is in a condition to be viewed and examined 
by a Customs officer. Mere presentation to the examining officer of a 
cargo van, container, or instrument of international traffic in which 
the merchandise to be examined is contained was not to be considered to 
be presentation of the merchandise for Customs examination purposes so 
as to start the five-day period in which the decision to detain or 
release must be made. Further, consistent with the provisions of 
Sec. 151.7 of the Customs Regulations (19 CFR 151.7), relating to the 
examination of merchandise at a place other than the public stores, the 
importer shall bear any expense involved in preparing or transporting 
the merchandise for Customs examination.
    The NPRM required Customs to issue a written notice of detention to 
the importer or other party having an interest in the merchandise. The 
notice of detention must advise the importer or other interested party 
of the initiation of the detention, the specific reason for, and the 
anticipated length of, the detention, the nature of the tests or 
inquiries to be conducted and the nature of any information which, if 
supplied to the Customs Service, may accelerate the disposition of the 
detention. After 30 days, or such longer period authorized by law, if 
Customs has not made a determination to release or seize, the goods are 
deemed to be excluded for purposes of 19 U.S.C. 1514. Under the 
proposed rule, the 30-day limitation could be extended when the 
importer or interested party requests in writing an extension of the 
detention period, in order to comply with Customs requirements. Barring 
that, the importer or interested party may file a protest as to the 
exclusion. If, within 30 days after filing of the protest, Customs 
fails to act, the importer or interested party may seek judicial review 
in the Court of International Trade. The proposed regulations also 
permitted Customs to allow exportation of the goods in lieu of seizure 
with all costs of exportation being borne by the importer.
    The statute compels Customs to make timely decisions, provide 
timely notices, disclose available testing results and descriptions of 
procedures and methodologies that are not proprietary to Customs or the 
holder of any copyright or patent, and process any exclusion protests 
within a prescribed statutory time period. If a notice to exclude is 
not issued within such time period and a court action is commenced, the 
burden of proof is on Customs, by a preponderance of the evidence, to 
show good cause as to why an admissibility decision had not been made 
prior to the time the importer commenced suit. If Customs makes the 
decision to exclude, an importer wishing to challenge the decision 
shall bear the burden of proof. These procedures are applicable to 
those cases where Customs has the responsibility and authority to 
determine the admissibility of the merchandise. They do not apply to 
those situations where the decision of admissibility is vested with 
another Federal agency.
    One party responded to the NPRM, making various comments. A 
description of each comment made, followed by Customs response to the 
comment, is set forth below.

Discussion of Comments

Comment

    The commenter suggests that the statute did not contemplate that 
all detentions arising from laws administered by other government 
agencies would be exempt from the new detention and seizure provisions. 
The commenter notes that the legislative history to the Mod Act simply 
recognized that Customs often detains merchandise on behalf of other 
agencies, but specifically stated that the law would not preclude 
application of this new procedure to those situations if agreed to by 
the other agency. As such, the commenter avers that Congress clearly 
provided authority for all imports to be governed by the same time 
restraints and notice procedures.

Customs Response

    The legislative history to which the commenter refers expressly 
states that nothing in the statute is intended to change the procedures 
or relationship between Customs and other Federal agencies. This would 
not preclude application of this new procedure and remedy in those 
cases where Customs has the responsibility and authority to determine 
the admissibility of the merchandise, and such procedure and remedy are 
agreed to by the other agency. However, it does not authorize 
application of the new procedure to detentions made by Customs on 
behalf of another agency that retains the authority to make its own 
admissibility determinations.
    A full reading of the legislative history makes it clear that 
Congress had no intention of unilaterally applying Customs detention 
procedures in instances where longstanding procedures of other agencies 
are in place. Nor would the new detention provisions apply in any 
situation where the determination as to admissibility of merchandise 
rests with the other agency. For example, the newly

[[Page 43610]]

legislated procedures would not be applicable to determinations of 
admissibility of imported merchandise as required by the Food, Drug and 
Cosmetic Act (see 21 U.S.C. 381). The Food and Drug Administration 
(FDA), and not Customs, is responsible for determinations of 
admissibility of importations that fall under that Act. A full 
complement of regulations providing for a well-established detention 
and hearing program for such merchandise is already in place. Customs 
detention procedures promulgated in this final rule are clearly 
inapplicable in such a setting.

Comment

    The commenter asks for clarification as to whether copyright and 
trademark requirements are governed by the proposed regulations.

Customs Response

    The regulations governing the detention of possibly piratical 
(copyright violations) merchandise are specifically enumerated in part 
133, subpart E, Customs Regulations (19 CFR part 133, subpart E), and 
find their statutory origins in 17 U.S.C. 603. The regulations 
governing the detention of confusingly similar trademark-violative 
merchandise are specifically enumerated in part 133, subpart C, Customs 
Regulations (19 CFR part 133, subpart C) and find their statutory 
origins in 15 U.S.C. 1124. Section 151.16 is changed to confirm the 
inapplicability of its detention notice requirements to those 
situations involving suspected piratical or confusingly similar 
merchandise. It should be noted that regulatory changes have recently 
been issued in a separate document (T.D. 98-21, 63 FR 11825, dated 
March 11, 1998), which clarify detention procedures with regard to 
suspected copyright and trademark violations.

Comment

    The commenter states that the proposed rule does not assure that 
the importer is aware of the date that triggers the five-working day 
period for decision-making by the Customs Service. It is averred that 
the regulation should require that Customs provide notice to the 
importer or broker of the date of availability of the merchandise for 
examination so that the importer is aware of its rights and can 
exercise those rights without making ad hoc inquiries to the Customs 
Service. Additionally, the commenter suggests that the notice of 
detention should indicate the date on which the merchandise was 
presented for examination.

Customs Response

    Customs agrees that the date the merchandise was presented for 
examination should appear on the notice of detention and 
Sec. 151.16(c)(1) has been amended to provide for this. It is also 
Customs view that it would be an unnecessary burden to send an 
additional notification to the importer of the date that presentation 
actually occurred. When intensive examination of a shipment is to be 
undertaken, the importer or agent of the importer (generally the 
Customs broker) is apprised of the fact and is instructed to arrange to 
present the merchandise for examination. Once the importer or his agent 
has arranged for the examination, it would be wasteful of resources to 
require the Government to send an additional notice that the 
merchandise for which examination has been arranged was actually 
presented for examination on a date certain.

Comment

    The commenter proposes that Customs should be required to issue a 
notice of detention when it fails to act to release the goods within 
the initial 5-working day period, but does not make a formal decision 
to detain the merchandise.

Customs Response

    Section 151.16(b) states that merchandise that is not released 
within the 5-working day period shall be considered to be detained 
merchandise. As such, Customs is required to send a notice of detention 
on this merchandise. Section 151.16(c) is amended to make this clear.

Comment

    The commenter suggests, in reference to proposed Sec. 151.16(i), 
that Customs retain authority to approve any protest and release or 
seize the merchandise up to and after a summons is filed in the Court 
of International Trade. The commenter states that it would be 
counterproductive to require an importer to go to court for a favorable 
decision where Customs intends to act favorably but merely misses the 
30-day deadline. The commenter notes that the legislative history to 
the statute recognizes the continuing authority of Customs to release 
the merchandise where a protest is ``deemed'' denied.

Customs Response

    Customs agrees that if an action concerning a deemed denial of a 
protest with respect to a detention has not been commenced in the Court 
of International Trade, Customs has the authority to act favorably on 
the protest and release the merchandise; however, if an action is 
commenced, Customs is of the view that the matter is within the 
jurisdiction of the Court and release could only be ordered by the 
Court. Also, Customs is of the view that it has the authority 
officially to deny the protest in accordance with Sec. 174.30 of the 
Customs Regulations.
    Consequently, Sec. 151.16 is changed by adding a new paragraph (h) 
to reflect Customs authority to grant protests that have been deemed 
denied and to release detained goods or to deny protests in accordance 
with Sec. 174.30 of the Customs Regulations at any time prior to 
initiation of a court action pursuant to 28 U.S.C. 1581.

Comment

    The commenter indicates that no sensitive import information should 
be released to a third party based upon ``suspicion'' or without first 
providing a reasonable opportunity for the importer to resolve the 
questions concerning the detention directly with Customs. The commenter 
states that if Customs adopts the subject proposed rule in concert with 
a second separate proposed rule (58 FR 44476, dated August 23, 1993) 
which involves the release of sensitive information to trademark owners 
where merchandise is detained under suspicion that it bears an 
infringing trademark or copyright, then the possibility will be created 
that information will be provided to third persons because merchandise 
was ``deemed'' detained or seized. The commenter indicates that the 
subject proposed rule must be modified to assure that the release of 
information only occurs where there is an affirmative decision by 
Customs that there is a violation and the importer has not directly 
resolved the issue with Customs.

Customs Response

    In Customs view, the rule as proposed and as adopted here does not 
provide for the release of confidential or proprietary business 
information to any parties. Further, the commenter does not suggest how 
the rule is suspect with regard to the release of this sensitive 
information.
    Merchandise will be detained when a question as to admissibility 
arises and further examination or testing is required. Indeed, the 
final rule is careful to exempt specifically from release any 
information on testing procedures or methodologies that are proprietary 
to holders of copyrights or patents

[[Page 43611]]

(Sec. 151.16(d)). Customs believes that this final rule does not serve 
to assist in the illegal dissemination of trade sensitive information 
in violation of any law or regulation.
    It is noted that the other proposed rule referred to by the 
commenter, which was published in the Federal Register (58 FR 44476) on 
August 23, 1993, and did address certain disclosure matters, has 
recently been adopted as a final rule (T.D. 98-21, supra).

Conclusion

    In view of the foregoing, and following careful consideration of 
the issues raised by the commenter and further review of the matter, 
Customs has concluded that the proposed amendments with the 
modifications discussed above should be adopted.

Additional Changes

    In addition, Customs has determined to change Sec. 151.16(c) to 
make clear that issuance of a notice of detention is not a final 
determination so as to permit the filing of a protest pursuant to 19 
U.S.C. 1514(a)(4). Proposed Sec. 151.16(e), redesignated as 
Sec. 151.16(j) for editorial clarity, is revised regarding seizure and 
forfeiture to allow Customs to deny entry or allow exportation of 
detained merchandise where authorized by law, with the importer 
responsible for paying all expenses of exportation. Proposed paragraphs 
(f) and (g) of Sec. 151.16, redesignated as paragraphs (e) and (f) in 
this document, respectively, are changed to remove any references that 
would have allowed the importer or interested party to extend the time 
Customs has to issue a final determination with respect to detained 
merchandise. Customs has determined that the importer may, without the 
necessity of asking for an extension of time, bring the merchandise 
into compliance thereby lifting the detention or file a protest based 
upon Customs failure to issue a final determination. In this latter 
regard, the term ``decision'' in proposed Sec. 151.16(f), redesignated 
as Sec. 151.16(e) is changed to ``determination'', for purposes of 
editorial consistency with redesignated Sec. 151.16(f). Section 
151.16(e) is further revised to provide that a final determination 
thereunder may be the subject of a protest.
    In order to bring consistency to the regulations with regard to the 
disallowance of any extension of time which Customs has to issue a 
final determination to exclude merchandise, Sec. 174.21(b), Customs 
Regulations (19 CFR 174.21(b)) is amended by removing the provision 
which allowed for delay in issuance of a decision on a protest relating 
to the deemed exclusion of merchandise (at the protestant's request) 
insofar as that provision of the regulations is inconsistent with the 
provisions of 19 U.S.C. 1499(c)(5)(B).
    In order to clarify the time period in which a protestant has to 
commence a civil action in the Court of International Trade in response 
to a deemed denial of a protest, Customs has amended Sec. 174.31 by 
adding a new paragraph (c) to indicate that a civil action must be 
filed within 180 days after the date that a protest is deemed denied 
under proposed Sec. 151.16(h), which is redesignated as Sec. 151.16(g). 
Customs has also added the phrase ``for purposes of 28 U.S.C. 1581'' to 
Secs. 151.16(g) and 174.21(b) to further clarify this change.

Regulatory Flexibility Act and Executive Order 12866

    This final rule document accurately reflects recent amendments to 
statutory law, enacted as part of the Mod Act. These amendments 
essentially constitute a codification of existing and longstanding 
Customs practice with regard to the examination and detention of 
imported merchandise. As such, pursuant to the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it is certified that 
this rule does not have a significant economic impact on a substantial 
number of small entities. Thus, the rule is not subject to the 
regulatory analysis or other requirements of 5 U.S.C. 603 or 604. Nor 
does the rule result in a ``significant regulatory action'' under E.O. 
12866.

Paperwork Reduction Act

    The collection of information contained in this final rule has been 
reviewed and approved by the Office of Management and Budget (OMB) in 
accordance with the requirements of the Paperwork Reduction Act of 1995 
(44 U.S.C. 3507(d)) under control number 1515-0210. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a valid control number 
assigned by OMB.
    The collection of information in this final rule is contained in 
Sec. 151.16(d). This information is necessary and will be used to 
determine the admissibility of imported merchandise and to otherwise 
comply with the requirements of the Mod Act and protect the revenue. 
The likely respondents and/or recordkeepers are businesses or other 
for-profit institutions.
    The estimated average annual burden associated with this collection 
is 2 hours per respondent or recordkeeper.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Office 
of Management and Budget, Attention: Desk Officer for the Department of 
the Treasury, Office of Information and Regulatory Affairs, Washington, 
DC 20503. A copy should also be sent to the Regulations Branch, Office 
of Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania 
Avenue, NW., 3rd Floor, Washington, D.C. 20229.

List of Subjects

19 CFR Part 151

    Customs duties and inspection, Examination, Sampling and testing, 
Imports, Laboratories, Penalties, Reporting and recordkeeping 
requirements.

19 CFR Part 174

    Administrative practice and procedure, Customs duties and 
inspection, Reporting and recordkeeping requirements.

19 CFR Part 178

    Administrative practice and procedure, Collections of information, 
Paperwork requirements, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, parts 151, 174, and 178, Customs Regulations (19 CFR 
parts 151, 174, and 178), are amended as set forth below.

PART 151--EXAMINATION, SAMPLING AND TESTING OF MERCHANDISE

    1. The general authority citation for part 151, and the specific 
authority for subpart A, continue to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Notes 20 and 21, 
Harmonized Tariff Schedule of the United States), 1624. Subpart A 
also issued under 19 U.S.C. 1499. * * *

    2. Part 151 is amended by adding a new Sec. 151.16 to read as 
follows:


Sec. 151.16  Detention of merchandise.

    (a) Exemptions from applicability. The provisions of this section 
are not applicable to detentions effected by Customs on behalf of other 
agencies of the U.S. Government in whom the determination of 
admissibility is vested and to detentions arising from possibly 
piratical copies (see part 133, subpart E, of this chapter) or import 
of goods bearing marks which are confusingly similar to recorded 
trademarks or restricted gray market merchandise (see part 133, subpart 
C, of this chapter.)
    (b) Decision to detain or release. Within the 5-day period 
(excluding weekends and holidays) following the date on which 
merchandise is presented

[[Page 43612]]

for Customs examination, Customs shall decide whether to release or 
detain merchandise. Merchandise which is not released within such 5-day 
period shall be considered to be detained merchandise. For purposes of 
this section, merchandise shall be considered to be presented for 
Customs examination when it is in a condition to be viewed and examined 
by a Customs officer. Mere presentation to the examining officer of a 
cargo van, container or instrument of international traffic in which 
the merchandise to be examined is contained will not be considered to 
be presentation of merchandise for Customs examination for purposes of 
this section. Except when merchandise is examined at the public stores, 
the importer shall pay all costs relating to the preparation and 
transportation of merchandise for examination.
    (c) Notice of detention. If a decision to detain merchandise is 
made, or the merchandise is not released within the 5-day period, 
Customs shall issue a notice to the importer or other party having an 
interest in such merchandise no later than 5 days (excluding weekends 
and holidays) after such decision or failure to release (see paragraph 
(b) of this section). Issuance of a notice of detention is not to be 
construed as a final determination as to admissibility of the 
merchandise. The notice shall be prepared by the Customs officer 
detaining the merchandise and shall advise the importer or other 
interested party of the:
    (1) Initiation of the detention, including the date the merchandise 
was presented for examination;
    (2) Specific reason for the detention;
    (3) Anticipated length of the detention;
    (4) Nature of the tests or inquiries to be conducted; and
    (5) Nature of any information which, if supplied to the Customs 
Service, may accelerate the disposition of the detention.
    (d) Providing testing results. Upon written request by the importer 
or other party having an interest in detained merchandise, Customs 
shall provide copies of the results of any testing conducted on the 
merchandise together with a description of the testing procedures and 
methodologies used (unless such procedures or methodologies are 
proprietary to the holder of a copyright or patent or were developed by 
Customs for enforcement purposes). The results and test description 
shall be in sufficient detail to permit the duplication and analysis of 
the testing and the results.
    (e) Final determinations. A final determination with respect to 
admissibility of detained merchandise will be made within 30 days from 
the date the merchandise is presented for Customs examination. Such a 
determination may be the subject of a protest.
    (f) Effect of failure to make a determination. The failure by 
Customs to make a final determination with respect to the admissibility 
of detained merchandise within 30 days after the merchandise has been 
presented for Customs examination, or such longer period if 
specifically authorized by law, shall be treated as a decision by 
Customs to exclude the merchandise for purposes of section 514(a)(4) of 
the Tariff Act of 1930, as amended (19 U.S.C. 1514(a)(4)). Such a 
deemed exclusion may be the subject of a protest.
    (g) Failure to decide protest. If a protest which is filed as a 
result of a final determination or a deemed exclusion of detained 
merchandise is not allowed or denied in whole or in part before the 
30th day after the day on which the protest was filed, it shall be 
treated as having been denied on such 30th day for purposes of 28 
U.S.C. 1581.
    (h) Decision before commencement of court action. Customs may at 
any time after a deemed denial of a protest as provided in paragraph 
(g) of this section, but before commencement of a court action as 
provided in paragraph (i) of this section, grant a protest and permit 
release of detained merchandise, or deny a protest in accordance with 
Sec. 174.30 of this chapter.
    (i) Commencement of court action; burden of proof and decisions of 
the court. Once a court action respecting a detention is commenced, 
unless Customs establishes by a preponderance of the evidence that an 
admissibility decision has not been reached for good cause, the court 
shall grant the appropriate relief which may include, but is not 
limited to, an order to cancel the detention and release the 
merchandise.
    (j) Seizure and forfeiture; denial of entry or exportation. If 
otherwise provided by law, detained merchandise may be seized and 
forfeited. In lieu of seizure and forfeiture, where authorized by law, 
Customs may deny entry and permit the merchandise to be exported, with 
the importer responsible for paying all expenses of exportation.

PART 174--PROTESTS

    1. The general authority citation for part 174 continues to read as 
follows, and a specific sectional authority citation for Sec. 174.21 is 
added to read as follows:

    Authority: 19 U.S.C. 66, 1514, 1515, 1624.
    Section 174.21 also issued under 19 U.S.C. 1499.

    2. Section 174.21 is amended by revising paragraph (b) to read as 
follows:


Sec. 174.21  Time for review of protests.

* * * * *
    (b) Protests relating to exclusion of merchandise. If the protest 
relates to an administrative action involving exclusion of merchandise 
from entry or delivery under any provision of the Customs laws, the 
port director shall review and act on a protest filed in accordance 
with section 514(a)(4), Tariff Act of 1930, as amended (19 U.S.C. 
1514(a)(4)), within 30 days from the date the protest was filed. Any 
protest filed pursuant to this paragraph shall clearly so state on its 
face. Any protest filed pursuant to this paragraph which is not allowed 
or denied in whole or in part before the 30th day after the day on 
which the protest was filed shall be treated as having been denied on 
such 30th day for purposes of 28 U.S.C. 1581.
    3. Section 174.31 is amended by removing the word ``or'' following 
the comma at the end of paragraph (a); by removing the period at the 
end of paragraph (b), and adding a comma in its place, followed by the 
word ``or'; and by adding a new paragraph (c) thereafter to read as 
follows:


Sec. 174.31  Judicial review of denial of protest.

* * * * *
    (c) The date that a protest is deemed denied in accordance with 
Sec. 174.21(b), or Sec. 151.16(g) of this chapter.

PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

    1. The authority citation for part 178 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.

    2. Section 178.2 is amended by adding a new listing to the table in 
numerical order to read as follows:


Sec. 178.2  Listing of OMB control numbers.

------------------------------------------------------------------------
                                                             OMB control
           19 CFR Section                  Description           No.
------------------------------------------------------------------------
 
                  *        *        *        *        *
151.16(d)).........................  Detention of              1515-0210
                                      merchandise.
 

[[Page 43613]]

 
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Commissioner of Customs,
Raymond W. Kelly.
    Approved: July 8, 1999.
Deputy Assistant Secretary of the Treasury
John P. Simpson
[FR Doc. 99-20606 Filed 8-10-99; 8:45 am]
BILLING CODE 4820-02-P