[Federal Register Volume 68, Number 16 (Friday, January 24, 2003)]
[Rules and Regulations]
[Pages 3381-3384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1758]



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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 101

[T.D. 03-05]


Consolidation of Customs Drawback Centers

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule, with a clarification, 
the proposed amendments to the Customs Regulations that reflect the 
closure of the Customs Drawback Centers located at the ports of Boston, 
Massachusetts; Miami, Florida; and New Orleans, Louisiana. The closing 
of the three Drawback Centers is part of a planned consolidation and is 
intended to promote operational efficiency in the processing of 
drawback claims.

EFFECTIVE DATES: This regulation becomes effective January 24, 2003. 
The closing of the Customs Drawback Center located at the port of New 
Orleans, LA becomes effective February 24, 2003. The closing of the 
Customs Drawback Centers located at the ports of Boston, MA and Miami, 
FL become effective July 23, 2003.

FOR FURTHER INFORMATION CONTACT: Sherri Lee Hoffman, Entry and Drawback 
Management, Office of Field Operations, U.S. Customs Service, Tel. 
(202) 927-0300.

SUPPLEMENTARY INFORMATION:

Background

    Since 1996, Customs has recognized a decrease in both the number of 
drawback claims and the amount of drawback payments. To verify these 
trends, and to determine how to most efficiently operate the Drawback 
Program, Customs conducted an internal evaluation of the program. 
Customs also retained the services of an independent contractor to 
review the Drawback Program to ensure that the agency's findings were 
valid. The findings of both the agency-led review and the independent 
contractor's assessment indicated the benefits of consolidating the 
processing of drawback claims by reducing the number of Drawback 
Centers.
    In a Notice to Congress on March 12, 2001, filed in accordance with 
19 U.S.C. 2075, Customs proposed the closure of four Drawback Centers. 
The Senate Finance and House Ways and Means Committees concurred with 
the proposal for consolidation, but with the recommendation that only 
three Drawback Centers be eliminated and the San Francisco Drawback 
Center remain operational. The Commissioner of Customs concurred with 
this recommendation and it was proposed to phase-in the closure of the 
Drawback Centers located at the ports of Boston, MA; Miami, FL; and New 
Orleans, LA.
    On August 21, 2002, Customs published in the Federal Register (67 
FR 54137) a proposed amendment to the Customs Regulations to reflect 
the planned closure of these Customs Drawback Centers, and a request 
for public comment regarding the proposed actions. In that document, 
Customs described a phased-in closure process whereby the Customs 
Drawback Centers located at the ports of Boston and New Orleans would 
close 30 days from the date a final rule adopting the proposed changes 
was published in the Federal Register, and the Drawback Center located 
at the port of Miami would close 180 days from such date. The document 
also stated that any unliquidated drawback claims that remained at each 
of these Drawback Centers twelve months after their respective closing 
dates would be transferred to another Drawback Center for processing as 
follows: Remaining claims from Boston would be transferred to the New 
York/Newark, NJ Drawback Center; remaining claims from New Orleans 
would be transferred to the Houston Drawback Center; and remaining 
claims from Miami would be transferred to the Chicago Drawback Center.
    In accordance with the proposal, the five Drawback Centers located 
at the ports of New York/Newark, NJ; Houston, TX; Chicago, IL; Los 
Angeles, CA; and San Francisco, CA, will remain operational.

Discussion of Comments

    Fourteen comments were received in response to the solicitation of 
public comment published in the August 21, 2002, Federal Register 
document. A description of the comments received, together with Customs 
analyses, is set forth below.
    Comment: Several commenters expressed concern that closure of three 
Drawback Centers will negatively impact the level of service at the 
remaining Drawback Centers. Specific comments were submitted regarding 
anticipated inefficiencies at the remaining Drawback Centers resulting 
from:
    [sbull] Reduction in full-time Customs Drawback Specialist 
positions;
    [sbull] Increased workload for remaining Drawback Specialists and 
failure to utilize existing Drawback personnel to their potential;
    [sbull] Transfer of backlogged drawback cases;
    [sbull] Lack of specific published proposals demonstrating how 
service levels will be maintained; and
    [sbull] Lack of realistic methods of determining which Drawback 
Centers should have been closed;
    Customs Response: To ensure that the level of service at the 
remaining Drawback Centers will remain the same as before the 
consolidation, Customs reviewed the workload of each Center and 
assessed the burden of any workload that would be transferred to 
another Drawback Center as result of the consolidation. The 
determination as to which Drawback Centers would receive drawback cases 
that remain unliquidated twelve months after closure of a Center was 
based upon this review. It is noted, however, that the workload 
transfers that were described in the August 21, 2002, Federal Register 
document have been changed, due to further internal analysis of 
workloads, staffing and backlogs, and are described in the section of 
this document entitled ``Further Customs Analysis,'' set forth below.
    Regarding staffing issues, Customs recognizes that Drawback 
personnel levels at the remaining Drawback Centers will have to be 
routinely reviewed to ensure that the centers are able to sustain pre-
consolidation levels of service. Customs is striving to automate and 
simplify the drawback process to reduce the workload of Drawback 
Specialists. In an effort to utilize Drawback personnel to their 
potential, Drawback Specialists will continue to receive annual 
training.
    The Customs Drawback Program has evolved over the years, and the 
processing procedures in place today are to ensure that the workload 
increases do not create unworkable backlogs and preserve a pre-
consolidation level of service to the trade.
    Lastly, Customs notes that its determination to close three 
Drawback Centers was based on a detailed internal evaluation of the 
program, as well as the findings of an independent contractor. The 
findings of the agency-led review and the independent contractor's 
assessment were based on facts and clearly indicated the benefits of 
consolidation of the program.
    Comment: Two commenters requested that the requirement to re-apply 
for a new letter of intent to operate under a general drawback ruling 
when transferring from one drawback center to another be waived.

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    Customs response: Claimants will not have to re-file a general 
drawback ruling request at the Drawback Center designated to receive 
their claims. If, however, a claimant opts to file a claim at a 
Drawback Center other than the one designated to receive their claims, 
that claimant will have to file a new letter of intent to operate under 
a general drawback ruling at that location.
    Comment: Several commenters questioned whether consolidating the 
drawback program would subvert the intent of Congress to assist in 
increasing U.S. exports.
    Customs response: Consolidation of the drawback program will not 
negatively impact U.S. exports.
    Comment: One commenter objected to the fact that the identity of 
the independent contractor brought in to perform the review of the 
Drawback Program was not made public.
    Customs response: The purpose of retaining an independent 
contractor was to have an unbiased third party conduct a review of the 
Drawback Program. Individuals seeking more information may file a 
request for information pursuant to the Freedom of Information Act (5 
U.S.C. 552).
    Comment: Several commenters noted that although the number of 
drawback claims has decreased, the volume of import and export 
shipments that appear on claims has increased.
    Customs response: Customs has data that reflects that the number of 
underlying imports in 2001 decreased over 40% from 1999 levels. While 
it is true that more exports are being claimed in a summarized format, 
consolidation of the drawback program is a legitimate means of 
increasing the program's efficiency without impairing U.S. exports.
    Comment: Two commenters questioned why claimants are not allowed to 
file a single application for the waivers and privileges set forth in 
Sec. Sec.  191.91, 191.92 and 191.195 of the Customs Regulations (i.e., 
waiver of prior notice of intent to export, accelerated payment, 
certification in the drawback compliance program).
    Customs response: Claimants do have the option of filing a single 
application for these waivers and privileges pursuant to 19 CFR 191.93.
    Comment: Several commenters noted that all Drawback Specialists 
must now perform more mandatory audits and/or desk reviews as ordered 
by the General Accounting Office (GAO).
    Customs response: Customs has enhanced the processing procedures 
for drawback so that fewer full desk reviews are completed by each 
Drawback Specialist. Audits are completed by Regulatory Auditors with 
input from the Drawback Specialist. It is noted that the number of 
audits over the years has remained consistent.
    Comment: One commenter noted that the proposed rulemaking should 
have stated that only a customs broker requires a license/permit to 
file a drawback claim, and not a drawback claimant.
    Customs response: Customs agrees; the background section of the 
proposed rulemaking published in the Federal Register (67 FR 54137) on 
August 21, 2002, should have specified that a drawback claimant's 
customs broker must possess a district or national permit to file a 
drawback claim.
    Comment: One commenter questioned whether a broker must file 
drawback claims via the Automated Broker Interface (ABI) to have a 
national permit, and noted that the Customs Regulations permit drawback 
claims to be filed either manually or electronically (via ABI).
    Customs response: Section 111.19(f) of the Customs Regulations (19 
CFR 111.19(f)) allows for national broker permits under any of the 
circumstances described in Sec.  111.2(b)(2)(i) (19 CFR 
111.2(b)(2)(i)). Section 111.2(b)(2)(i)(B) allows for electronic (ABI) 
drawback claims. There is no allowance in Sec.  111.2(b)(2)(i) for 
manual drawback claims. Drawback claims may be filed manually by 
brokers with a district permit. See 19 CFR 111.2(b)(2)(ii).
    Comment: Several commenters noted that by closing Drawback Centers, 
Customs will be unable to liquidate and audit drawback claims within 
the three year time period allowed by law.
    Customs response: As stated previously, Customs believes that 
consolidation of the Drawback Program will bring about more efficient 
and effective drawback claim processing, and thereby claims should get 
liquidated more expeditiously. It is noted that there is no legal or 
regulatory requirement to liquidate or audit a drawback claim within 
three years. A drawback claimant is required to retain records for 
three years after payment of a drawback claim. See 19 CFR 163.4(b)(1). 
If drawback is paid via accelerated payment, pursuant to 19 CFR 191.92, 
and the three year time period to retain records expires prior to the 
underlying claim being liquidated, there may be instances where the 
records necessary to verify a claim are no longer available. This 
problem, however, has no bearing on the consolidation of the Drawback 
Program. It is further noted that audits are performed on unliquidated 
drawback claims, and this document does not make any changes to the 
Regulatory Audit functions of drawback.
    Comment: One commenter viewed the requirement to provide advance 
notification to Customs of any changes to a drawback claim as 
impractical, and questioned who, within Customs, should be notified in 
such instances.
    Customs response: Notification of changes to a drawback claim 
should be provided to the Drawback Specialist handling the original 
claim.
    Comment: One commenter questioned whether the Government will 
actually save money by closing three Drawback Centers and reducing 
personnel, given the fact that no specific information as to the 
expected savings have been presented.
    Customs response: The proposed rulemaking published in the August 
21, 2002, Federal Register stated that the consolidation is ``intended 
to promote operational efficiency in the processing of drawback 
claims.'' The document does not suggest savings as a reason for the 
consolidation.
    Comment: One commenter noted that consolidation of the Drawback 
Program will necessitate submission of drawback applications to Customs 
Drawback Centers that are outside the Customs port areas most familiar 
with the claimant/company and thereby further increase delays and 
backlogs. Additionally, if drawback claims are required to be submitted 
at ports other than the port of import, the process of obtaining 
records will be more difficult, time-consuming and expensive.
    Customs response: The Drawback Program is not currently a port-
specific program. Therefore, Drawback Specialists are already adept at 
reviewing claims that originate from outside their geographical area. 
Also, the process of transmitting or shipping data to other Customs 
ports is already followed by all ports that do not have a Drawback 
Center.
    Comment: One commenter requested that Customs publish each Drawback 
Center's drawback claims filing statistics (i.e., dollar amounts 
claimed, number of drawback personnel assigned to the Drawback Center, 
number of exports being claimed).
    Customs response: Relevant export data is unavailable because it is 
not part of Customs automated system. The other types of drawback 
statistics specified in the comment may be available by information 
requests made pursuant to the Freedom of Information Act (5 U.S.C. 
552).
    Comment: One commenter noted that a decline in the number of 
drawback claims suggests that existing Drawback Centers have idle time 
and that

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privileges and claims should all be approved on time, including those 
applications made at Customs Headquarters.
    Customs response: Applications for privileges are not approved at 
Customs Headquarters. Customs is being proactive, rather than reactive, 
by consolidating the Drawback Program and ensuring that Drawback 
resources are used optimally.
    Comment: One commenter stated that Customs will increase costs by 
closing some of the Drawback Centers because a Drawback Specialist 
usually visits the drawback claimant with an Auditor and this will 
increase Customs travel expenses. In a related comment, several 
commenters noted that by closing the Boston Drawback Center, Customs 
expenses will increase because Auditors and Inspectors will have to 
travel to remote customs sites beyond their port's geographical area to 
review and audit drawback claims.
    Customs response: A Drawback Specialist does not always accompany 
an Auditor. Moreover, Drawback Specialists are technical experts that 
an Auditor can consult as a resource either electronically or 
telephonically. Customs already incurs some of these travel 
expenditures in that a drawback claimant can use any of the eight 
existing Drawback Centers and does not always choose to file a drawback 
claim at the Center located nearest the claimant. Regarding the comment 
directed at the Boston Drawback Center, it is noted that Auditors and 
Inspectors are located throughout the Customs Service. Regulatory 
Auditors will remain in Boston, as well as other sites. Inspectors 
located at the port of export will perform the export examinations, as 
they always have. They perform functions separate from those of a 
Drawback Specialist and the role of Inspectors will not be affected by 
the consolidation.
    Comment: Several commenters stated that the cost of staffing and 
training new Drawback personnel will be significant.
    Customs response: The remaining Drawback Centers have well-trained, 
capable staffs and there is no need to immediately increase staffing 
levels at those Centers. New staff will be hired to replace personnel 
lost through attrition or retirement and to accommodate any sustained 
increase in drawback filings nationwide.
    Comment: Several commenters noted that as proposed Free Trade 
Agreements and yearly reductions in duty rates will eventually 
eliminate the need for drawback, closure of the Drawback Centers at 
this time is unwarranted.
    Customs response: Customs views a consolidated, more efficient 
Drawback Program as consistent with the trade trends cited in the 
comment above.
    Comment: Several commenters are of the view that it is not prudent 
to change the Drawback Program during this time of transition of the 
Customs Service to the Homeland Security Department and that any such 
changes will distract from the goals of fighting terrorism.
    Customs response: Customs is of the view that the agency's efforts 
regarding anti-terrorism and its move to the Homeland Security 
Department will not be impacted by any of the changes to the Drawback 
Program discussed in this document.
    Comment: Several commenters questioned why California will have two 
Drawback Centers operating after the consolidation, even though Boston 
has more volume than the Los Angeles Drawback Center. The commenters 
also suggested documenting the length of time it takes certain Drawback 
Centers to process drawback claims and correcting inefficiencies.
    Customs response: As stated above, many factors were taken into 
consideration in making the determination to close the Boston Drawback 
Center. Regarding workload volume, Customs notes that the volume at the 
Boston and Los Angeles Centers is approximately the same.
    Comment: Several commenters stated that exporters will have their 
costs increased by having to submit drawback applications and claims to 
remote Drawback Centers. The commenters also expected increased delays 
in having to wait for shipment inspections and payment of drawback 
claims.
    Customs response: Exporters file their claims at the port of 
exportation. A Drawback Center has no bearing on the export process. 
There is no reason to believe there will be any delays in shipment 
inspections, as there have been no changes made to this process.

Further Customs Analysis

    Customs has determined that based on the above comments, no change 
is necessary to the proposed rulemaking published in the Federal 
Register on August 21, 2002 (67 FR 54137). However, it has come to 
Customs attention, upon further review of the proposed consolidation, 
that a redistribution of the workload that is to be transferred from 
the closed Drawback Centers, as well as an extension of the time period 
that the Boston Drawback Center will remain operational, will assist in 
maintaining the level of service at the remaining Drawback Centers that 
existed prior to consolidation.
    The original phased-in consolidation plan, which detailed the 
transfer of remaining unliquidated drawback cases and the time frames 
for Drawback Center closures, as published in the August 21, 2002, 
Federal Register document, remains in effect except for the following 
changes:
    (1) Drawback claims that remain unliquidated twelve months after 
closure of the Miami Drawback Center and require Customs review will be 
forwarded to the Los Angeles Drawback Center (not to the Chicago 
Drawback Center); and
    (2) The Drawback Center at the port of Boston, MA will close 180 
days from the date of publication of this document in the Federal 
Register (not 30 days from such date as originally planned). As of that 
date, drawback claims will no longer be accepted at the Boston Drawback 
Center and claims must be filed at one of the five remaining Drawback 
Centers. Drawback claims submitted to the Boston Drawback Center after 
this date will be rejected. Once rejected, it is the responsibility of 
the claimant to ensure timely filing of the drawback claim at one of 
the five remaining Drawback Centers. Customs personnel at the port of 
Boston will continue to process drawback claims for a period of 12-
months after closure of the Boston Drawback Center. After this time, 
all remaining unliquidated drawback claims filed at the Boston Drawback 
Center prior to its closure that require Customs review will be 
forwarded to the Chicago Drawback Center for final processing (not to 
the New York/Newark Drawback Center as originally planned).

Conclusion

    After analysis of the comments and further review of the matter, 
Customs has determined to adopt as a final rule the amendments proposed 
in the Notice of Proposed Rulemaking published in the Federal Register 
(67 FR 54137) on August 21, 2002.

Inapplicability of Delayed Effective Date

    Although this final rule was issued after a notice for public 
comments, it is not subject to the notice and public procedure 
requirements of 5 U.S.C. 553 because it relates to agency management 
and organization. Customs solicited and reviewed comments as a courtesy 
to the public. Accordingly, there is no requirement for a delayed 
effective date for this regulation.

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The Regulatory Flexibility Act and Executive Order 12866

    Because these amendments relate to agency management and 
organization, they are not subject to the notice and public procedure 
requirements of 5 U.S.C. 553. Accordingly, this document is not subject 
to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Agency 
organization matters, such as this proposed closing of three Customs 
Drawback Centers, are not subject to Executive Order 12866.

Drafting Information

    The principal author of this document was Ms. Suzanne Kingsbury, 
Regulations Branch, Office of Regulations and Rulings, U.S. Customs 
Service. However, personnel from other offices participated in its 
development.

List of Subjects in 19 CFR Part 101

    Customs duties and inspection, Customs ports of entry.

Amendments to the Regulations

    For the reasons set forth in the preamble, amend part 101 of the 
Customs Regulations (19 CFR 101) as follows:

PART 101--GENERAL PROVISIONS

    1. The general authority citation for part 101 continues to read as 
follows:


    Authority:  5 U.S.C. 301; 19 U.S.C. 2, 66, 1202 (General Note 
23, Harmonized Tariff Schedule of the United States), 1623, 1624, 
1646a.
    Section 101.3 and 101.4 also issued under 19 U.S.C. 1 and 58b;
* * * * *


Sec.  101.3  [Amended]

    2. In Sec.  101.3, the table in paragraph (b)(1) is amended by 
removing the plus sign in the ``Ports of entry'' column before the 
column listings for ``Miami'' under the state of Florida, ``New 
Orleans'' under the state of Louisiana, and ``Boston'' under the state 
of Massachusetts.

Robert C. Bonner,
Commissioner of Customs.
    Approved: January 22, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-1758 Filed 1-23-03; 8:45 am]
BILLING CODE 4820-02-P