[Federal Register Volume 66, Number 141 (Monday, July 23, 2001)]
[Notices]
[Pages 38344-38347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18252]


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DEPARTMENT OF THE TREASURY

Customs Service


Second Test: Importer Compliance Monitoring Program

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: General notice.

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SUMMARY: This document announces the second test to be conducted 
regarding the Importer Compliance Monitoring Program (ICMP). The test 
is intended to be run for three years whereupon a decision will be made 
whether to extend the test. The ICMP is intended to promote importer 
compliance with Customs laws and regulations pertaining to cargo 
processing and will afford mutual benefits to both Customs and the 
importing community. By a document published in the Federal Register on 
April 24, 1998, Customs initially announced a test of the ICMP that was 
thereafter conducted with limited participation. Customs now seeks to 
achieve more extensive participation in the program test in order to 
ensure a more comprehensive and effective evaluation of the program. 
Written requests to participate in the program test, as well as public 
comments on any aspect of the test, are solicited.

EFFECTIVE DATES: The program test will commence no earlier than August 
22, 2001, and will continue for three years. Comments on any aspect of 
the planned test must be received on or before August 22, 2001. Written 
requests to participate in the program test may be submitted on or 
after July 23, 2001.

ADDRESSES: Written applications to participate in the program test 
should be addressed to: Director, Regulatory Audit, Office of Strategic 
Trade, U.S. Customs Service, 1300 Pennsylvania Avenue, NW., Washington, 
D.C. 20229. Written comments on any aspect of the planned test may be 
addressed to: Matthew Krimski, Director, Compliance Assessments, 
Regulatory Audit Division, 1300 Pennsylvania Avenue, NW, Room 6.3-A, 
Washington, D.C. 20229.

FOR FURTHER INFORMATION CONTACT: ICMP program coordinator for the 
application process: Mark Zaepfel, Senior Auditor, Regulatory Audit 
Division, (202) 927-0809.
    ICMP program coordinator for marketing: Russell Ugone, Director, 
Trade Agreements Branch, Regulatory Audit Division, (202) 927-0728.
    For general information about the ICMP: Matthew Krimski, Director, 
Compliance Assessments Branch, (202) 927-0411; Joseph Palmer, Field 
Director, Regulatory Audit, (312) 983-9615; Russell Ugone, Director, 
Trade Agreements Branch, (202) 927-0728.

SUPPLEMENTARY INFORMATION:

Background

    Since passage of the Customs Modernization provisions (107 Stat. 
2170) contained in the North American Free Trade Agreement 
Implementation Act (Pub. L. 103-182, 107 Stat. 2057, December 8, 1993), 
the primary goal of the trade compliance process has been to maximize 
importer compliance with U.S. trade laws, while facilitating the 
importation and entry of admissible merchandise. To meet these 
challenges, Customs has extensively reviewed and sought to improve and 
redesign the trade compliance process using established business 
practices, re-engineered tools, and new methodologies that enhance 
service to importers without compromising the enforcement aspect of the 
Customs mission.
    To this end, one of the methodologies that Customs has developed is 
the Compliance Assessment Process which has been subject to continual 
process improvement since its introduction (see Sec. 163.11, Customs 
Regulations (19 CFR 163.11)). The Compliance Assessment Process allows 
Customs to determine the level of compliance based on an overall 
assessment of a company's import operations.
    Also, Customs has under development a new program called the

[[Page 38345]]

Focused Assessment Process. The Focused Assessment Process is an 
additional tool that will be used by Customs for purposes of assessing 
the compliance levels of major importers. Similar to the Compliance 
Assessment Process, the Focused Assessment Process will be a more 
closely defined assessment program designed to focus on those areas of 
a particular importer's transactions that pose a risk to Customs and 
the importer.
    Both the Compliance Assessment Process and the Focused Assessment 
Process are geared toward the company's import operations that occurred 
prior to the time the assessment is conducted.
    However, events can occur within a company, such as mergers, system 
changes, and loss of key personnel, that may potentially have an impact 
on the company's continuing compliance with Customs laws and 
regulations.
    Accordingly, the Importer Compliance Monitoring Program (ICMP) was 
initiated to enable interested importers to participate in a program to 
assess their own ongoing compliance with Customs laws and regulations 
related to cargo processing on a continuing basis.
    After identifying necessary policies and procedures upon which to 
test the ICMP, Customs, by a document published in the Federal Register 
(63 FR 20442) on April 24, 1998, announced that a test of the ICMP 
would be conducted and requested that companies apply to participate in 
the test. Participation in the program test, however, was limited to no 
more than 50 companies. Following the selection of test participants, a 
test of the ICMP was thereafter conducted for a period of one year.
    Due to the limited participation in the test, Customs has found 
that a further test of the ICMP is warranted in which increased 
importer participation is requested, and encouraged. Customs seeks to 
develop additional and more complete information that will help ensure 
a more comprehensive and effective evaluation of the ICMP.
    Generally, the procedures and approach to be used in the new ICMP 
test will be consistent with those that will be adopted in the new 
Focused Assessment procedure under development by Customs. These 
procedures will be similar to those employed under the Compliance 
Assessment process, but will be oriented to those areas that are 
identified as posing the most risk to Customs and the importer.
    It is also noted, as more fully explained below, that as a result 
of the prior test, Customs has made some alterations to the ICMP test 
procedures. In particular, only those areas of a company's import 
operations that are initially identified by Customs as posing a risk to 
both the importer and Customs will be covered in the new test. Customs 
will review these areas periodically for current applicability. ICMP 
participants can expect that these areas may change over the duration 
of the importer's participation in the ICMP as the importer's business 
evolves.

Low Risk Designation

    The new ICMP test also includes significant benefits for 
participation. Customs recognizes that many companies have voluntarily 
invested extensive resources in an effort to heighten their compliance 
with Customs import requirements. In consideration of this, the ICMP 
will now provide a framework, with significant commensurate benefits, 
for those companies to maintain their efforts at increased compliance. 
These benefits will include having the company designated as Low Risk 
for Customs purposes on a conditional basis as long as the company 
meets the requirements of the ICMP. This Low Risk designation can 
result in a marked decrease in the number of cargo examinations 
performed by Customs. It should be clearly understood, however, that 
this Low Risk designation may be withdrawn at Customs discretion if, 
for example, a company fails to meet its commitments regarding the ICMP 
program or if there are significant departures from Customs law and 
regulation by the company.
    It should be recognized that the benefit of the Low Risk 
designation is specifically tied to the importations associated with 
individual company IRS numbers. If a company uses multiple numbers in 
its importations, only those numbers identified by the company and 
reviewed and evaluated by Customs will be identified for Low Risk.

Components of ICMP Test: Application and Implementation

    The new ICMP test is comprised of two parts: the application part 
of the test and the implementation phase.
    The first part of the test is an application phase that will allow 
Customs to review the company's operations to determine its readiness 
to be recommended for Low Risk. If issues arise during this phase, the 
company will have the opportunity to take corrective action before 
participating in the program. Customs recognizes that companies 
volunteering for the ICMP are demonstrating a commitment to a 
continuing program of compliance. As such, Customs makes a similar 
commitment to assist importers with their efforts to participate in the 
program including working with importers to resolve initial issues in 
the application process.
    The second part of the test, the implementation phase, will provide 
the company Low Risk benefits as long as it meets the commitments it 
has made to Customs to stay in the program and does not engage in any 
misconduct (see section below on Misconduct and Removal from Test 
Participation). These commitments include testing the company's 
business transactions for specific areas identified by Customs using 
Customs approved testing procedures. The commitments also provide for 
the company to meet certain reporting requirements on an annual basis 
to ensure Customs is made aware of the most recent significant 
information regarding the company's activities.
    As with the initial test, this program test is undertaken pursuant 
to ' 101.9(a), Customs Regulations (19 CFR 101.9(a)), which permits the 
implementation of a test program or procedure designed to evaluate the 
effectiveness of new technology or operational procedures regarding the 
processing of passengers, vessels, or merchandise.

Overview of Importer Compliance Monitoring Program

    In general, the ICMP is designed to enhance the cargo processing of 
participating importers as well as their level of compliance with 
Customs laws and regulations. After the company is notified of 
acceptance into the program, Customs will continue the consultation 
process with the company. This consultation process, which is an 
essential cornerstone of the ICMP, is necessary to ensure that all 
parties involved with the company's import functions have a mutual 
understanding of the company's business practices and the ICMP 
requirements for their successful participation in the program.
    While the ICMP is voluntary and does not require a company to have 
undergone or been scheduled for a Customs compliance or focused 
assessment, the ICMP employs many of the same procedures that are used 
in a compliance or focused assessment. In this regard, the ICMP will 
require the importer to conduct a systemic overview of a selected group 
of its import operations that will involve both import process and 
transactional reviews of those operations. An objective group, 
independent of the company's importing function, may

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conduct these reviews; use of outside professionals for this purpose is 
not required but may be done at the discretion of the importer.
    Once accepted into the ICMP program, the company will conduct tests 
of the trade areas identified by Customs using sampling procedures 
meeting Customs standards. The company will test each area identified 
once during the three year test period. The company will notify Customs 
of the timing of the tests in order to develop an approved sampling 
plan and to allow Customs to monitor and validate the sampling 
procedures if it so chooses.
    The participating company will also prepare an annual submission 
that will update the flowchart and narrative of the company's internal 
controls over its import process. Also, the company will identify for 
Customs those areas of its import operations that it plans to test in 
the upcoming year. This submission will form the basis of the annual 
consultation conducted by Customs with the ICMP participant every year 
that will provide needed guidance to the participant to effectively 
carry out its testing program. Customs will provide ongoing guidance 
and assistance to the company through continual communication by the 
ICMP Customs Regulatory Audit team and the company's Customs Account 
Manager, if one is assigned. A Customs Account Manager is a Customs 
employee (from Customs Office of Field Operations) who may be assigned 
to a major importing company in order to act as a facilitator between 
the company and Customs. Because of their role, Customs Account 
Managers can provide significant benefits in the ICMP coordination 
process.
    The above process will continue for three years. If the test is 
extended beyond three years, a new three year program will be developed 
by Customs and the importer taking into account any significant changes 
to the importer's Customs transactions.
    Transactional reviews under the program will use testing procedures 
or statistical and judgmental sampling methodologies that are also 
fully coordinated with Customs during the consultation process and will 
be the same or equivalent testing procedures and sampling programs 
utilized in compliance and/or focused assessments. Errors detected in a 
company's import transactions will be evaluated based on the number, 
nature and the materiality of these errors, and, where applicable, a 
compliance improvement plan will be prepared and submitted to Customs 
outlining actions taken or proposed to correct any identified 
deficiencies. Reports of errors that are detected by the importer 
through its own review may be treated as prior disclosures under part 
162 of the Customs Regulations (19 CFR part 162) if they meet these 
prior disclosure regulatory requirements.
    Test participants are expected to retain all applicable 
documentation pertaining to these import process and transactional 
reviews. As necessary, Customs will validate these import process and 
transactional reviews.
    Benefits of participation in the ICMP accruing to an importer, as 
stated, include the preferential designation of Low Risk that will be 
accorded the importer upon acceptance into the program and will be 
retained as long as the importer meets the conditions and requirements 
of the program (see section below on Misconduct and Removal from Test 
Participation). This Low Risk category can significantly decrease the 
number of cargo examinations conducted by Customs. Additionally, 
Customs, through the interaction of the company's Customs Account 
Manager, can decrease the information demands made by Customs on the 
company.

Duration of Test; Selection of Test Participants

    The ICMP program test will commence not earlier than August 22, 
2001, and will proceed for three years at which time it may be 
extended. Once Customs determines to extend or end the program test, 
reasonable advance notice of this will be published in the Federal 
Register. Customs seeks and encourages increased importer participation 
in this ICMP test, in order that additional and more complete 
information may be gathered during the course of the test. This 
information will help Customs ensure a more comprehensive and effective 
evaluation of the ICMP. Written requests to participate in the program 
test may be submitted on or after July 23, 2001.

Test Application

    In order to apply for the test, the applicant must provide in 
writing the following information:
    1. The name of the company;
    2. The address of the company;
    3. All importer Internal Revenue Service (IRS) numbers used by the 
company;
    4. The location of the business records dealing with the Customs 
transactions of the company; and
    5. The name and telephone number of a person in the company that 
will be a contact point for the ICMP application and who is 
knowledgeable about the company's Customs business transactions.
    The application containing the above information should be sent to: 
Director, Regulatory Audit, Office of Strategic Trade, U.S. Customs 
Service, 1300 Pennsylvania Avenue, NW., Washington, D.C. 20229.
    Customs reserves the right in its discretion to approve or 
disapprove an application. Applications may be sent to Customs at any 
time. Further, in selecting applicants for participation in the program 
test, Customs reserves the right, if necessary, depending upon the 
number of applications received, to prioritize the processing of such 
applications based upon the volume and/or nature of each applicant's 
Customs transactions. Customs will notify each applicant in writing of 
its selection or non-selection to participate in the test, and give the 
reason(s) for non-selection, should that be the case.
    In the event that an applicant should not be selected for 
participation as a result of an initial review by Customs, the 
applicant may appeal in writing to the Director, Regulatory Audit 
Division, Office of Strategic Trade, U.S. Customs Service, 1300 
Pennsylvania Avenue, NW., Washington, D.C. 20229, within 10 days of the 
date of Customs written notification of non-selection.
    Due to the voluntary nature of the program, a company selected for 
participation in the test may discontinue its participation at any 
time. It should be kept in mind, however, that participation in this 
program does not insulate a company from enforcement actions on 
specific imports.
    Upon receipt of the application from the importer, Customs will 
immediately conduct an internal review within Customs of the company's 
current transactions to determine if there are any immediate issues 
that may impact further processing the application. If there are 
issues, Customs will attempt to resolve them with the importer. Customs 
will work closely with the applicant throughout this process.
    The application process requires that a company intending to 
participate in the program apply by filling out a questionnaire and a 
process map detailing its Customs transactions and compliance 
processes. Customs will schedule an on-site review to validate the 
information and identify those areas posing the highest risk to the 
company and Customs.
    The Customs on-site review will include a review of the company's 
internal controls over the compliance processes outlined in the 
questionnaire and a limited review of supporting transactions. The 
purpose of the review will be to identify those areas of the

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company's internal controls that pose the maximum risk to the company 
and Customs. Under the previous test, the ICMP involved a continuing 
general overview of all of a company's import operations. In this test, 
only the identified group of higher risk import operations will be 
reviewed and subsequently monitored.
    If Customs finds the internal controls to be in place and working 
effectively, then a recommendation can be made for acceptance into the 
program. If there are indications of weak internal controls or non-
compliance, Customs will work with the company to develop a Compliance 
Improvement Plan to correct the situation.
    Any company seeking to participate in the ICMP should be aware that 
any issues concerning non-compliance that come to light during the 
application/evaluation process must be corrected and can result in 
enforcement actions depending upon the circumstances. In fact, the ICMP 
entails an effective commitment by the company to resolve any issues of 
non-compliance that arise during either the application process or the 
subsequent program process of the test.

Misconduct and Removal From Test Participation

    If a test participant makes late or inadequate submissions to 
Customs of its annual report or other information, fails to exercise 
reasonable care in the execution of its test obligations, or otherwise 
fails to follow the procedures, as outlined in this document, or 
applicable laws and regulations, the participant may be suspended or 
removed from the test program and/or subject to penalties or liquidated 
damages. Customs has the discretion to suspend or remove a test 
participant based on a determination that an unacceptable compliance 
risk exits. This action may be invoked at any time after acceptance in 
the test.
    At any time during the test, the appropriate Field Director of 
Regulatory Audit may propose in writing to remove a company from 
participation in the program. The notice of proposed removal will 
inform the company of the facts or conduct warranting removal. Removal 
from participation in the program test, and elimination of all benefits 
that were received as a result of test participation including the Low 
Risk designation, may result from activities including, but not limited 
to, the following:
    (1) Failure of the company to comply with ICMP requirements (such 
as failing to successfully implement a Compliance Improvement Plan 
after two attempts); or
    (2) The presence of documented or alleged fraud, other 
investigative activity, or failing to follow applicable Customs laws 
and regulations.
    Any decision proposing to remove a company from participation in 
the test may be appealed in writing to the Director, Regulatory Audit 
Division, Office of Strategic Trade, U.S. Customs Service, 1300 
Pennsylvania Avenue, NW., Washington D.C. 20229, within 30 days of the 
date of the written notice of proposed removal. This decision will 
notify the company of the facts or conduct warranting removal. In 
appealing this notice of proposed removal, the company should address 
the facts or conduct referenced in the notice and state how it complies 
or will achieve compliance with the requirements for program 
participation.
    In the case of willfulness or where the public health, interest or 
safety is involved, program removal and elimination of the Low Risk 
benefit may be effective immediately at Customs discretion. In all 
other cases, the removal of participation will be effective after 30 
days from the date of the notice of removal unless the notice is timely 
appealed.

Program Consultation

    One of the cornerstones of the ICMP is the consultation and review 
process that Customs affords the importer. Prior to approval for 
participation in the test, the importer's Customs transactions will be 
reviewed by Customs during the application/evaluation process and the 
results of this information will be shared with the importer. The test 
participant will have continuing access to the Customs Account Manager, 
if one is assigned, as well as Customs Regulatory Audit sources to 
provide guidance and information regarding the test and the importer's 
progress throughout the test. Additionally, Regulatory Audit will 
consult annually with the company regarding its progress over the prior 
year and its plans for the upcoming year and will provide guidance 
toward the accomplishment of the company's scheduled testing.

Comments and Evaluation of Test

    Customs will review all public comments that are received 
concerning any aspect of the planned program test. The test is planned 
to run for three years, at which time it will be evaluated as to 
whether it should continue as a test, be adopted for implementation as 
a permanent program, or be terminated. If Customs determines to end the 
program test, reasonable notice of the expiration date will be 
published in the Federal Register. In addition, approximately 90 days 
after conclusion of the test, evaluations of the test will be conducted 
and final results will be made available to the public upon request. 
Participation in the test is not confidential and may be disclosed.

    Dated: July 17, 2001.
Cynthia A. Covell,
Director, Regulatory Audit Division.
[FR Doc. 01-18252 Filed 7-20-01; 8:45 am]
BILLING CODE 4820-02-P