[Federal Register Volume 68, Number 156 (Wednesday, August 13, 2003)]
[Proposed Rules]
[Pages 48327-48331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20567]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

19 CFR Part 103

RIN 1515-AD18


Confidentiality Protection for Vessel Cargo Manifest Information

AGENCY: Customs and Border Protection, Department of Homeland Security.

ACTION: Withdrawal of notice of proposed rulemaking.

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SUMMARY: This document withdraws a notice of proposed rulemaking (NPRM) 
published in the Federal Register by the U.S. Customs Service (now a 
bureau within the new Department of Homeland Security and renamed the 
Bureau of Customs and Border Protection (CBP)) on January 9, 2003, 
regarding the confidential treatment of certain vessel manifest 
information. The NPRM proposed to provide that, in addition to the 
importer or consignee, parties that electronically transmit vessel 
cargo manifest information directly to CBP 24 or more hours before 
cargo is laden aboard the vessel at the foreign port may request 
confidentiality with respect to importer or consignee identification 
information. Current regulations allow only the importer or consignee, 
or an authorized employee, attorney, or official of the importer or 
consignee, to make such requests. After careful consideration, CBP has 
decided to withdraw the proposal because of the

[[Page 48328]]

clear lack of consensus on the part of the trade community regarding 
the value of the proposed amendment and the administrative burden the 
proposal, if adopted, would create for CBP and U.S. importers.

EFFECTIVE DATE: The effective date of this withdrawal is August 13, 
2003.

FOR FURTHER INFORMATION CONTACT: Joanne Roman Stump, Chief, Disclosure 
Law Branch, OR&R, (202) 572-8717, and Glen Vereb, Chief, Entry 
Procedures & Carriers Branch, Office of Regulations and Rulings (OR&R), 
at (202) 572-8724.

SUPPLEMENTARY INFORMATION:

Background

    On January 9, 2003, the U.S. Customs Service (now a bureau within 
the new Department of Homeland Security and renamed the Bureau of 
Customs and Border Protection (CBP)) published a notice of proposed 
rulemaking (the NPRM) in the Federal Register (68 FR 1173) proposing to 
amend Sec.  103.31 of the Customs Regulations (19 CFR 103.31) 
pertaining to public disclosure of vessel manifest information and the 
confidential treatment of some of that information for importers and 
consignees. Under Sec.  103.31(d)(1), an importer or consignee, or an 
authorized employee, attorney, or official of the importer or 
consignee, can file a request for confidentiality (referred to as a 
certification in the regulation) relative to the name and address of 
the importer or consignee and the name and address of its shippers. The 
proposed regulation would allow, in certain circumstances, certain 
carriers handling the importer's or consignee's shipments, if properly 
authorized, to also file a confidentiality request on behalf of the 
importer or consignee.
    This document withdraws the NPRM.

Prior Relevant Rulemaking and the NPRM

    On October 31, 2002, CBP published a final rule document in the 
Federal Register (67 FR 66318) that amended the Customs Regulations 
pertaining to the inward foreign manifest to provide that CBP must 
receive from the carrier the vessel's Cargo Declaration (Customs Form 
(CF) 1302), one document among a few that comprise the manifest, or a 
CBP-approved electronic equivalent of the cargo declaration, at least 
24 hours before the cargo is laden aboard the vessel at the foreign 
port, and to require that Vessel Automated Manifest System (AMS) 
participants provide the cargo declaration electronically.
    The regulation also provides that a properly licensed or registered 
non-vessel operating common carrier (NVOCC) that is in possession of an 
International Carrier Bond containing the provisions of Sec.  113.64 of 
the regulations (19 CFR 113.64) may electronically transmit required 
manifest information directly to CBP through the AMS 24 or more hours 
before cargo it delivers to the vessel carrier is laden aboard the 
vessel at the foreign port. If the NVOCC chooses not to transmit the 
required manifest information to CBP, as described above, the 
regulation requires the NVOCC to instead fully disclose and present the 
required information to the vessel carrier to allow the vessel carrier 
to present the information to CBP via the AMS system (see 19 CFR 
4.7(b)(3)). (The manifest information filing procedure of Sec.  4.7(b) 
is sometimes referred to in this document as the ``24-hour rule.'')
    The final rule document (in the preamble discussion) also noted the 
NVOCC community's concern that certain information and data that a 
NVOCC would supply under the procedures of the ``24-hour rule'' would 
be subject to release for publication under 19 U.S.C. 1431 (section 
1431) and Sec.  103.31 of the Customs Regulations. The NVOCC group 
contended that such release would reveal confidential business 
information that could result in harm to the NVOCC community.
    To respond to this concern, CBP indicated that it would publish 
another NPRM for the purpose of seeking further input from the trade 
regarding the value of amending Sec.  103.31 to allow NVOCCs and vessel 
operating common carriers (ocean carriers) filing manifest information 
in accordance with the ``24-hour rule'' to request confidentiality 
under the regulation on behalf of importers and consignees. At the same 
time, the agency began considering whether section 1431 might 
accommodate expanding the parties who can file a confidentiality 
request on behalf of an importer or consignee. The result was 
publication of the January 9, 2003, NPRM and its request for public 
comment.

The Statute and the Regulation

    At the heart of the NPRM were the provisions of section 1431 
regarding public disclosure and confidential treatment of vessel 
manifest information. Under section 1431(c)(1), certain vessel manifest 
information must be made available for public disclosure, including, 
among other things, the name and address of each importer and 
consignee, the name and address of the importer's or consignee's 
shipper, the general character of the cargo, the name of the vessel or 
carrier, and the country of origin of the shipment. Under section 
1431(c)(1)(A), the importer or consignee may request that its name and 
address and the name and address of its shipper be kept confidential by 
filing a biennial certification in accordance with regulations adopted 
by CBP. Under Sec.  103.31(a) of the Customs Regulations (19 CFR 
103.31(a)), vessel manifest information must be made available, under 
rules set forth in the regulation, to accredited representatives of the 
press, including newspapers, commercial magazines, trade journals, and 
similar publications. As stated previously, under Sec.  103.31(d), an 
importer or consignee, or an authorized employee, attorney or official 
of the importer or consignee, may request confidentiality relative to 
the importer's or consignee's name and address, and the name and 
address of its shippers, by filing a request with CBP every two years.
    The statute and regulation thus require that certain manifest 
information be made available to the public and, at the same time, that 
importers and consignees be permitted to keep their identity 
confidential, along with that of their shippers, should they so choose. 
In passing section 1431, Congress struck a balance between freedom of 
information (the requirement to release/disclose manifest information) 
and fair competition (the right to request confidentiality of certain 
information by importers and consignees) (hereinafter referred to as 
the ``freedom of information--confidentiality balance''). Many in the 
trade community and related businesses benefit from the availability of 
manifest information, and some importers and consignees utilize the 
confidentiality provision to protect their competitive posture. 
Regarding this balance, it is noted that Congress stated that ``greater 
disclosure of manifest information will facilitate better public 
analysis of import trends, and allow port authorities and 
transportation companies, among others, more easily to identify 
potential customers and changes in their industries.'' (S. Rep. No. 
308, 98th Cong., 1st Sess. 30 (1983), reprinted in 1984 U.S.C.C.A.N. 
4910, 4939.) Congress further stated that section 1431 ``retains 
sufficient protection for business-confidential data of importing 
firms, while encouraging greater competition among those in the import-
servicing trades.'' Id.

Discussion of Comments

    A total of 60 comments were submitted in response to the NPRM. A 
substantial majority of the comments were opposed to amending Sec.  
103.31 as

[[Page 48329]]

the NPRM proposed, and most of the minority in favor of the proposal 
indicated that it did not go far enough and recommended ways to improve 
it.

Comments in Favor of the Proposed Amendment

    Eight of the 60 commenters favored adoption of the amendment 
proposed in the NPRM. These commenters include organizations 
representing customs brokers, freight forwarders, NVOCCs, importers, 
exporters, and/or retailers, and one organization representing 
producers and marketers of distilled spirits. All of these commenters 
favored adoption of the proposal, claiming that it would protect from 
disclosure what they consider commercially sensitive business 
confidential information submitted in accordance with the ``24-hour 
rule.'' These commenters contended that release of this information 
will harm their competitive posture, expose their and their customers' 
shipments to a greater risk of theft, and pose a terrorist security 
threat to the nation. They pointed out that their information was not 
subject to disclosure prior to promulgation of the ``24-hour rule'' and 
contended that the ``24-hour rule's'' implementation, which they do not 
oppose, should not impose this negative impact on their businesses.
    Despite their support for the proposed amendment, most of these 
commenters indicated their dissatisfaction with the particulars of the 
proposal and recommended several ways to improve it, variously 
including:
    (1) dropping the documentation requirement (power of attorney and/
or letter of authorization) applicable to the additional parties that 
could request confidentiality under the proposed regulation, on the 
grounds it is time consuming and onerous for importers/consignees to 
produce it and for the additional parties (NVOCCs and ocean carriers) 
to manage and submit it (many commenters, both for and against, were 
unsure whether the proposed regulation, which requires that the 
importer/consignee designate the NVOCC or ocean carrier as its 
attorney-in-fact, requires a power of attorney);
    (2) allowing the additional parties filing confidentiality requests 
under the proposed regulation to retain the required documentation in 
their records rather than submit it with the confidentiality request;
    (3) adding a general exclusion from the disclosure requirement for 
any information relative to FROB (Freight Remaining on Board) 
merchandise;
    (4) allowing all NVOCCs to request confidentiality, whether or not 
they are licensed or registered with the Federal Maritime Commission or 
they have the capacity to file information electronically;
    (5) providing that a general grant of confidentiality apply to all 
information submitted by NVOCCs and ocean carriers under the ``24-hour 
rule,'' not just importer/consignee identification information; and
    (6) improving the process by reducing the incidence of erroneous 
disclosures and eliminating the biennial filing requirement.

Comments in Opposition to the Proposed Amendment

    Fifty-two of the 60 commenters opposed adoption of the amendment 
proposed in the NPRM. These commenters include: U.S. manufacturers, 
producers, and importers; a publisher of trade information; a United 
States Attorney, Department of Justice; ocean carriers and shipping 
companies; market researchers and consultants; trade associations; port 
authorities; local and regional economic and business development 
organizations; offshore suppliers; and a U.S. Congressman. From their 
comments, several significant reasons for opposition to the proposed 
amendment emerged. Because of the number of individual comments 
opposing the proposal, they are consolidated and presented below 
according to subject.
The Proposed Amendment Goes Beyond the Terms of the Statute and Is 
Contrary to Congressional Policy
    Many of the commenters opposing the proposed amendment contended 
that: (1) The proposed expansion of the parties authorized to request 
confidentiality under the regulation strains the language of the 
statute and the intent of Congress and (2) this expansion would wrongly 
upset the ``freedom of information--confidentiality balance'' provided 
for under section 1431.
    These commenters stated that allowing additional parties to request 
confidentiality under the regulation would lead to the filing of more 
requests and a corresponding reduction of available information. Also, 
according to these commenters, most or perhaps all of these additional 
requests would be authorized by importers or consignees who otherwise 
would not make the request of their own volition; instead, the NVOCCs 
and ocean carriers allowed to request confidentiality under the 
proposed regulation would seek authorization, for their own reasons, 
from their importer and consignee clients to file the confidentiality 
requests. Thus, these commenters stated, access to information would be 
blocked, to the detriment of those who rely on that information, while 
the purpose of section 1431--excluding from disclosure the identities 
of importers and consignees for their protection--would not be served.
The Proposed Amendment Is Not Necessary
    Many commenters contended that there is no need to amend the 
regulation. This contention has two parts. The first asserts that there 
is no need to amend the regulation because the ``disclosure-
confidentiality process'' that is now in place under the statute and 
the regulation works well for both the trade community that utilizes 
the information and the importers and consignees who may request 
confidentiality if they so desire. These commenters repeatedly stated 
that the current law strikes the right balance between freedom of 
information and confidentiality. In this regard, these commenters 
pointed out that the NPRM did not identify a single problem, 
difficulty, or impediment facing importers or consignees under the 
current system that might warrant a fix to further the intent of the 
law.
    The second part of the contention questioned the NVOCC community's 
claim to need protection from harm that would result from disclosure of 
the manifest information for which it now seeks to request 
confidentiality. These commenters pointed out that, for many years, 
under the current system, ocean carriers have not suffered harm 
requiring remedy despite the fact that they have not had the right to 
request confidentiality on behalf of their importer or consignee 
clients. They thus questioned the contention that a level of harm 
requiring remedy would result upon the release of that same manifest 
information submitted by NVOCCs authorized to file confidentiality 
requests under the proposed amendment.
The Proposed Amendment Harms Those Entities That Utilize Publicly 
Available Trade Information
    Many commenters in opposition cited the broad extent of the harm 
that the proposed amendment would inflict on those many elements of the 
trade and related communities that utilize the disclosed manifest 
information for a wide variety of reasons. A long list of users of and 
uses for the information emerged from the comments. Some of the users 
are: Trade associations and other advocates for U.S. manufacturers/
producers, importers, and exporters;

[[Page 48330]]

port authorities; advocates for local, state, and regional economic and 
business development; carriers and others involved in shipping and 
shipping related businesses; a publisher of trade information; a market 
researcher and consultant; and law enforcement entities. Some of the 
uses are to: identify overseas markets; locate overseas suppliers; 
attract and develop customers; promote increased international trade 
and resulting economic growth; plan port expansion and development; 
compete with other ports for business; compile trade information to 
advise/assist business and trade clients; and enforce laws concerning 
counterfeit trademarks and unlawful foreign competition.
    These commenters asserted that allowing additional parties to 
request confidentiality for importers and consignees, and the 
corresponding reduction of available information caused by this 
expansion, would result in serious harm to their competitive advantage 
and damage or ruin their businesses. These commenters asserted that CBP 
should not limit its evaluation of the matter to the harm that the 
NVOCC community alleges it would suffer, but should also consider the 
negative impact the change would have on other elements of the trade 
community.
Operational Burdens
    A few commenters objected to the proposal on grounds that it would 
impose additional operational burdens on all parties and would result 
in a more bureaucratic and less efficient system. First, the NVOCC or 
ocean carrier would have to contact its importer and consignee clients 
to solicit the authorizations, requiring a considerable effort and a 
major document management task. The importers and consignees would have 
to prepare a power of attorney (or other document for attorney-in-fact 
designation) and a letter of authorization for a NVOCC or ocean carrier 
seeking to file a confidentiality request on their behalf, something 
they do not have to do under the current regulation. A few commenters 
asked if a set of such documents would have to be prepared for each 
NVOCC or carrier seeking authorization and if confidentiality would 
then be applied on a shipment-by-shipment basis or on a NVOCC/carrier-
by-NVOCC/carrier basis.
    Second, the NVOCC or ocean carrier would then have to submit the 
request along with the authorization letter to CBP, a more onerous task 
than merely submitting a request in the manner the current procedure 
provides. Several asked whether a power of attorney would have to be 
submitted with the request and authorization letter. Others asked about 
recordkeeping requirements.
    Third, these commenters indicated that the burden on CBP also would 
increase significantly in verifying and tracking authorizations and 
requests, suggesting creation of a more bureaucratic system with a more 
complicated document management component. Some asked how multiple 
requests (from different NVOCCs or carriers) for the same importer or 
consignee would be handled. Even if only one request per importer or 
consignee were required, which is not clear under the proposed 
regulation, CBP would have to determine if a request had already been 
filed on behalf of an importer/consignee each time it received a 
request for an importer/consignee. Also, if requests were not 
accompanied by the required document(s), CBP would have to request the 
document(s) or send the certification back to the filer, holding 
acceptance and processing of the certification in abeyance. If 
questions were raised about the legitimacy or details of the 
authorization letter or the power of attorney (or other document), if 
required and submitted, CBP would have to make inquiries.
The Proposed Amendment Poses a Security Risk
    Another reason for opposition to the proposed amendment mentioned 
by a few commenters was the matter of security. Some contended that 
curtailing the quantity of available information would harm local, 
state, and federal security and law enforcement interests. Some stated 
that the fact that the information is not disclosed until after a 
shipment has arrived and been processed/released does not mean that the 
information would lack value. Meaningful investigative information 
could be gleaned after the fact, revealing patterns or past conduct 
that could be helpful in law enforcement or anti-terrorism security 
initiatives. One commenter's letter included a letter from a U.S. 
Attorney whose access to trade information assisted his office in 
obtaining convictions for a smuggling related crime.
Business Practices Adjustment
    Several commenters in opposition complained that altering the 
disclosure/ confidentiality process under the regulation would require 
further adjustments by those involved in the import and import 
servicing trades. For example, one commenter stated that changing the 
content of information disclosed would result in an unfavorable change 
to its business practices and a negative impact on its bottom line.

CBP's Determination

    After reviewing the comments, and upon further consideration of the 
matter, CBP has determined to withdraw the proposal. It is apparent 
that most of those who favored the idea behind the proposed regulation 
nevertheless believe that the regulation, as drafted, does not go 
nearly far enough; however, the plain language of the statute will not 
allow CBP to go nearly as far as they would prefer. Those who objected 
to the proposed regulation believe that it went much too far and that 
the status quo was preferable for many reasons. Thus, because such a 
substantial majority of the commenters did not favor the actual 
proposed regulation and the comments revealed such a strong split 
within the trade community, CBP has decided not to engage in any 
rulemaking activity in this area for these reasons and the reasons 
explained below.
    CBP agrees with those commenters who stated that adoption of the 
proposed amendment would result in an increase in the number of 
confidentiality requests made under the regulation. CBP acknowledges 
that most of that increase would likely result from the solicitation of 
importer and consignee authorizations by NVOCCs and carriers allowed to 
make the request under the proposed regulation. In a recent month since 
publication of the NPRM, although certainly premature, one quarter of 
the confidentiality requests CBP received were made by NVOCCs on behalf 
of their importer/consignee clients. If the proposed amendment were 
adopted, the increase in the volume of confidentiality requests would, 
to a corresponding extent, result in less available information for 
those segments of the trade community that utilize and rely on that 
information. This, in turn, raises a legitimate question as to whether 
the proposal would have a deleterious impact on the ``freedom of 
information--confidentiality balance'' that the statute provides.
    Regarding the terms of the statute, because most of the additional 
requests would be made on behalf of importers and consignees who might 
not otherwise make the request of their own volition, CBP has had to 
consider whether the proposed amendment would serve the interests of 
parties not intended to be beneficiaries of the law,

[[Page 48331]]

i.e., NVOCCs and ocean carriers handling the importer's/consignee's 
shipments. CBP agrees that the statute is designed to protect the 
identities of importers and consignees (and their shippers if desired) 
for reasons that are related to their own competitive well being, not 
for reasons related to the competitive well being of the NVOCCs and 
ocean carriers filing manifest information in accordance with the ``24-
hour rule.''
    Thus, upon review of the comments and further review of the matter, 
CBP recognizes that allowing these other parties to file 
confidentiality requests for their importer and consignee clients will 
not further the intent of the law's confidentiality provision to 
protect the interests of the importers/consignees, but will instead 
serve the interests of these other parties at the expense of users of 
manifest information whose interest this law is also intended to serve. 
Importers and consignees already enjoy the benefits of this law through 
the current regulation, which allows confidentiality requests to be 
made by their authorized employees, attorneys, or officials.
    Moreover, CBP is further persuaded by several of the other comments 
opposing the proposed amendment and submits that the weight of these 
other comments, taken together, provides additional support for a 
decision to abandon the NPRM. Primary among these other reasons against 
adoption of the proposal are that the proposal, if adopted, would cause 
some degree of harm to certain elements of the trade community without 
producing a beneficial impact on the law's beneficiaries or achieving a 
result mandated by law; the proposal would create an unacceptable 
operational burden on CBP; and it would create additional operational 
burdens on all involved parties, including the importers and consignees 
who may request confidentiality under the current regulation without 
preparing a power of attorney or authorization letter. Also, the 
proposed amendment raised a number of significant questions, as made 
clear by the comments for and against, and as discovered by CBP during 
its further review of the matter, indicating that amending the process 
as proposed is more complicated and problematic than initially 
contemplated. This recommends to an additional extent abandonment of 
the project.
    In summary, it is clear that there is no consensus among members of 
the trade community on the value of adopting the proposed regulation 
and that the greater weight of the comments is persuasively against 
adoption. Also, the proposed regulation, if adopted, would have 
presented a considerable challenge to administrative efficiency for 
both CBP and importers and consignees.

    Dated: August 7, 2003.
Robert C. Bonner,
Commissioner, Customs and Border Protection.
[FR Doc. 03-20567 Filed 8-12-03; 8:45 am]
BILLING CODE 4820-02-P