Changes to the In-Bond Process

DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 4, 10, 18, 19, 113, 122, 123, 141, 142, 143, 144, 146, 151, and 181

[USCBP-2012-0002: CBP Dec. 17-13]

RIN 1515-AD81

Changes to the In-Bond Process

AGENCY:

U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury.

ACTION:

Final rule.

SUMMARY:

This final rule adopts, with several changes, proposed amendments to U.S. Customs and Border Protection (CBP) regulations regarding changes to the in-bond process published in the

Federal Register

on February 22, 2012. The in-bond process allows imported merchandise to be entered at one U.S. port of entry without appraisement or payment of duties and transported by a bonded carrier to another U.S. port of entry or other authorized destination provided all statutory and regulatory conditions are met. At the destination port, the merchandise is entered or exported. The changes in this rule, including the automation of the in-bond process, will enhance CBP's ability to regulate and track in-bond merchandise and ensure that in-bond merchandise is properly entered or exported. This document addresses comments received in response to the proposed rule and makes several changes in response to the comments that further simplify and facilitate the in-bond process.

DATES:

This rule is effective on November 27, 2017.

FOR FURTHER INFORMATION CONTACT:

James Swanson, Director, Cargo Security and Controls, Cargo Conveyance & Security, Office of Field Operations, (202) 325-1257.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. Notice of Proposed Rulemaking

B. Summary of Main Changes From NPRM

1. In-Transit Time for Merchandise Transported by Barge

2. Uniform Timeframe for Report of Arrival, Notice of Export, and Other Events

3. Description of the Merchandise

4. Reporting the Quantity of In-Bond Merchandise

5. Divided Shipments

6. Clarification of the Term “Bonded Carrier”

7. Transfer (Transshipment) From One Conveyance to Another

8. Seals—Transportation of Bonded Merchandise With Non-Bonded Merchandise

9. Other Changes

C. Flexible Enforcement Period

II. Discussion of Comments

A. Comments Regarding This Rulemaking Generally

1. Elimination of In-Bond Types

2. Scope

3. Outreach

4. In-Bond Shipments Between the United States and Canada

B. Electronic Filing and Processing of In-Bond Applications

1. Filing the In-Bond Application

2. Elimination of the CBP Form 7512

3. Information Required

4. Updating and Amending the In-Bond Record

5. Who May File

6. Licensed Customs Brokers

7. Unauthorized Use of a Bond

8. Procedures

9. Change of Foreign Destination

C. New Information Requirements for In-Bond Shipments

1. New Information Requirements Generally

2. Special Classes of Merchandise

3. Quantity

4. Location of the Merchandise

5. Destination

D. In-Transit Time

1. In-Transit Time Generally

2. In-Bond Shipments Transported by Barge

3. Extension of In-Transit Time

4. Shortening of In-Transit Time

5. Start of In-Transit Time

6. Procedures

7. Intermodal Transportation

8. Report of Arrival

9. General Order Merchandise

E. Transfers

F. Sealing of Conveyances and Reporting of Seal Numbers

G. Air Cargo

H. Liability of the Parties

I. Export of Merchandise

1. Reporting Arrival at Port of Exportation

2. Proof of Exportation

J. Diversion of Merchandise

K. Immediate Transportation

L. Divided Shipments and Retention of Goods Within Port Limits

1. Divided Shipments

2. Retention of Goods Within Port Limits

M. Potential Impact

N. Miscellaneous Items

1. Impact on Inland Ports

2. Supervision of Rail Shipments

3. Textiles

4. Cartmen

5. Carnets

6. Sharing of Information and Confidentiality

7. Definitions

8. Restriction of Immediate Exportation by Truck

9. Express Shipments

10. Automated Broker Interface (ABI)

11. Foreign-Trade Zones (FTZs)

12. Importer Security Filing (ISF)

13. Redelivery

14. Pipelines

III. Adoption of Proposal

IV. Regulatory Analyses

A. Executive Order 12866—Regulatory Planning and Review

B. Regulatory Flexibility Act

Summary FRFA

C. Unfunded Mandates Reform Act of 1995

D. Paperwork Reduction Act

V. Signing Authority

VI. Regulatory Amendments

List of Acronyms and Technical Terms

ABI Automated Broker Interface

ACE Automated Commercial Environment

AMS Automated Manifest System

CBP Customs and Border Protection

DHS Department of Homeland Security

EDI Electronic Data Interchange

EIN Employer Identification Number

FIRMS Facilities Information and Resources Management System

FTZ Foreign Trade Zone

GAO Government Accountability Office

HTSUS Harmonized Tariff Schedule of the United States

ISF Importer Security Filing

IE Immediate Exportation

IT Immediate Transportation

NVOCC Non-Vessel Operating Common Carrier

SCAC Standard Carrier Alpha Code

SNP Secondary Notify Party

T&E Transportation and Exportation

VOC Vessel Operating Carrier

QP/WP—An ABI hosted in-bond system for all modes that allows all parties, carriers and non-carriers, to submit electronic in-bond applications directly to CBP, as well as report their arrival and export. The “QP” half is the application function, the “WP” half is the arrival/export function.

I. Background

Pursuant to 19 U.S.C. 1552 and 19 U.S.C. 1553, merchandise may be entered at a U.S. port of entry, without appraisement or the payment of duties, for transportation to another port for entry, or for exportation, provided that all statutory and regulatory conditions are met. The applicable regulations governing the transportation of in-bond merchandise under the above authorities are set forth in title 19 of the Code of Federal Regulations (19 CFR), parts 18, 122, and 123. Part 18 covers “Transportation in bond and merchandise in transit”; part 122 covers “Air Commerce regulations”; and part 123 covers “CBP relations with Canada and Mexico.” For a detailed discussion of the statutory and regulatory histories, and the factors governing development of these regulations, see the notice of proposed rulemaking (NPRM), “Changes to the In-Bond Process,” published in the

Federal Register

on February 22, 2012 (77 FR 10622).

Generally, when merchandise reaches the United States, the merchandise may

be entered for consumption, entered for warehouse, admitted into a foreign trade zone, or entered for transportation in-bond to another port. The focus of this rule is on merchandise that is entered for transportation in-bond. Transportation of merchandise in-bond is the movement of imported merchandise, secured by a bond, from one port to another prior to the appraisement of the merchandise and without the payment of duties. The transportation of in-bond merchandise is frequently referred to as an in-bond movement or shipment.

There are three types of in-bond transportation entries: Immediate Transportation (IT), Transportation and Exportation (T&E), and Immediate Exportation (IE). An IT entry allows merchandise upon its arrival at a U.S. port to be transported to another U.S. port, where a subsequent entry must be filed.

See

19 U.S.C. 1552 and 19 CFR 18.11. A T&E entry allows merchandise to be entered at a U.S. port for transit through the United States to another U.S. port, where the merchandise is exported without the payment of duties.

See

19 U.S.C. 1553 and 19 CFR 18.20. An IE entry allows cargo that has arrived at a U.S. port to be immediately exported from that same port without the payment of duties.

See

19 CFR 18.7 and 18.25.

A. Notice of Proposed Rulemaking

On February 22, 2012, Customs and Border Protection (CBP) published a NPRM titled “Changes to the In-Bond Process” in the

Federal Register

(77 FR 10622), proposing to revise the in-bond regulations in part 18 as well as other applicable parts of the CBP regulations. The proposed amendments would change the in-bond process from a paper-dependent process to an automated paperless process, provide CBP with the necessary tools to better track in-bond merchandise to improve security and trade compliance, and address certain weaknesses in the in-bond system identified by the Government Accountability Office (GAO) in a report to Congress dated April 17, 2007 (GAO Report).

CBP proposed making the following five major changes to the in-bond process: (1) Except for merchandise transported by pipeline and truck shipments transiting the United States from Canada, eliminate the paper in-bond application (CBP Form 7512) and require carriers or their agents to electronically file the in-bond application; (2) require additional information on the in-bond application including the six-digit Harmonized Tariff Schedule of the United States number if available; (3) establish a 30-day maximum transit time to transport in-bond merchandise between U.S. ports, for all modes of transportation except pipeline; (4) require carriers to electronically request and receive permission from CBP before diverting in-bond merchandise from its intended destination port to another port; and (5) require carriers to report the arrival and location of the in-bond merchandise within 24 hours of arrival at the port of destination or port of exportation. CBP did not propose changing the in-bond procedures found in the air commerce regulations at 19 CFR part 122, subparts J and L, except to change the specified maximum transit and export times to conform to the proposed changes in Part 18. For a detailed discussion of the proposed changes to the regulations and the GAO Report see the NPRM.

CBP requested public comments on the NPRM. In response, CBP received 51 comments from the trade community including carriers, brokers, importers, freight forwarders, zone operators, and trade groups. The comments were generally favorable to the rule as a whole. However, commenters raised concerns about specific proposed amendments and how the amendments would affect their operations. Many comments and questions related to the automated systems for the electronic filing of in-bond transactions. After consideration of all the comments, CBP has decided to issue this final rule, which adopts the proposed amendments with several changes in response to the comments. The main changes are summarized in Section I.B., Summary of Main Changes from NPRM, and explained in more detail in Section II, Discussion of Comments. Additional technical and conforming changes are also explained in Section II, Discussion of Comments. CBP is also adding a flexible implementation and enforcement period, as described in Section I.C.

B. Summary of Main Changes From NPRM

1. In-Transit Time for Merchandise Transported by Barge

CBP received many comments regarding the proposed requirement that all in-bond movements must be completed within 30 days. Specifically, commenters expressed concern that due to the specific circumstances of barge transportation, it is not feasible for all in-bond shipments transported by barge to be completed within 30 days and stated that the current 60-day in-bond barge transit time should be maintained. The specific comments are addressed in more detail in Section II, Discussion of Comments.

Because of the unique nature of barge transportation and because of the various factors that can delay barge shipments, CBP is changing proposed § 18.1(i)(1) in the final rule to extend the in-transit time for in-bond merchandise transported by barge to 60 days, while maintaining the proposed 30-day transit time for the other modes of transportation.

2. Uniform Timeframe for Report of Arrival, Notice of Export, and Other Events

The current regulations require the bonded carrier to report to CBP the arrival of any portion of the in-bond shipment promptly, but no more than two working days after the arrival of the merchandise at the port of destination or the port of exportation. The bonded carrier generally must manually surrender the in-bond document, CBP Form 7512, to the port director, as notice of arrival of the merchandise.

See

19 CFR 18.2(d).

To allow for better tracking, CBP proposed to amend §§ 18.1, 18.7, and 18.20 to require that the report of arrival for each in-bond shipment be made within 24 hours of the arrival of the merchandise at the port of destination or the port of exportation and to require the delivering bonded carrier to transmit the notice of arrival electronically via a CBP-approved EDI system. CBP also proposed that when in-bond merchandise is exported, CBP be notified of the export within 24 hours of export.

CBP received many comments expressing concern that the requirement to report the arrival of merchandise within 24 hours of arrival would result in firms having to increase their staffing levels and suggested that CBP retain or extend the current two-day reporting requirement. The specific comments are discussed in Section II, Discussion of Comments.

CBP proposed shortening the above timeframes to improve CBP's ability to track in-bond merchandise. However, after further consideration and a review of the comments, CBP decided not to shorten the reporting timeframe. Therefore, CBP is changing proposed § 18.1(j) in the final rule to retain the current time limit of two working days for bonded carriers to report the arrival of merchandise at the port of destination or port of exportation with one technical change. CBP is also changing proposed § 18.7(a)(3) regarding the timeframe for submitting the notice of export from 24 hours to two business days. In addition, CBP is changing all the provisions in

part 18 that impose a timeframe for reporting or updating the in-bond record to two business days so that the requirements are uniform. The sections in part 18 where these changes have been made are §§ 18.1(d)(1)(v), 18.1(h), 18.1(j), 18.7(a)(1), 18.7(a)(3), 18.20, 18.23(a), 18.24(b), 18.25(f), and 18.26(e).

3. Description of the Merchandise

CBP received many comments about the proposed required information on the in-bond application as specified in proposed § 18.1(d)(1). Among other things, CBP proposed requiring the six-digit Harmonized Tariff Schedule of the United States (HTSUS) number if the number is available. If the six-digit HTSUS number is not available, then a detailed description must be provided setting forth the exact nature of the merchandise with sufficient detail to enable CBP and other government agencies to determine if the merchandise is subject to a rule, regulation, law, standard or ban relating to health, safety or conservation. CBP also proposed that if the carrier or other responsible party submitting the in-bond application knows that the merchandise is subject to a rule, regulation, law, standard or ban relating to health, safety or conservation enforced by CBP or another government agency, a statement must be provided setting forth the rule, regulation, law, standard or ban to which the merchandise is subject and the name of the government agency responsible for enforcing the rule, regulation, law, standard or ban. Many commenters thought the proposed requirements were too onerous and that carriers would not have access to the required information.

In response to the above concerns, CBP is eliminating or changing several proposed required data elements on the in-bond application. First, CBP is removing the requirement in proposed § 18.1(d)(1)(ii) that, if the party submitting the in-bond application knows that the merchandise is subject to a rule, regulation, law, standard or ban relating to healthy safety or conservation, the filer must provide that information to CBP along with the name of the government agency responsible for enforcing the rule, regulation, law, standard or ban. In its place, CBP is changing proposed § 18.1(d)(1)(ii) in the final rule to require that in-bond merchandise subject to the authority of a U.S. government agency be described with sufficient accuracy to enable the agency concerned to determine the contents of the shipment.

Second, CBP is removing the requirement in proposed § 18.1(d)(1)(iii) that the in-bond filer identify prohibited or restricted merchandise.

Third, CBP is removing the requirement in proposed § 18.1(d)(1)(iv) to provide information regarding textiles and textile products for all in-bond applications. This requirement will be retained in a new paragraph (d) in § 18.11 governing T&E in-bond movements. This is consistent with current regulations and should therefore provide no additional burden to parties moving merchandise in-bond.

Fourth, CBP is eliminating the requirement in proposed § 18.1(d)(1)(v) that the filer of the in-bond application “must provide” information regarding merchandise for which the U.S. Government, foreign government or other issuing authority, has issued a visa, permit, license, or other similar number or identifying information and stating instead that the filer “may provide” this information. In lieu of requiring all of the information above, CBP is changing proposed § 18.1(d)(l)(i) to require the filer to provide the six-digit HTSUS number. This is necessary to ensure that CBP knows what merchandise is being transported in-bond in light of the above changes to the required information. The six-digit HTSUS number should be available to in-bond filers because importers need this information to determine duty, cost and admissibility status prior to finalizing purchase contracts or shipment contracts. The six-digit HTSUS number is one of the required data elements for the Importer Security Filing (ISF) for all merchandise arriving by vessel.

4. Reporting the Quantity of In-Bond Merchandise

CBP received many comments about the requirement in proposed § 18.1(d)(1)(vi) to provide “the quantity of the merchandise to be transported to the smallest piece count” in the in-bond application. Commenters found this proposal confusing and requested clarification. To address this concern, CBP is changing proposed § 18.1(d)(1)(vi) to incorporate similar language used in §§ 4.7a (inward manifest) and 123.92 (electronic information for truck cargo required in advance of arrival) regarding quantity. Specifically, CBP is changing the text in the final rule to require “the quantity of the smallest external packing unit.”

5. Divided Shipments

The current regulations allow an in-bond shipment to be split after the shipment reaches the port of destination with a portion of the shipment entered for consumption or warehouse while the remainder of the shipment is forwarded under a new in-bond to a different port of destination. That provision is contained in § 18.5, which governs in-bond shipments diverted from one destination port to another. Because the provisions for splitting a shipment are not limited to diverted shipments we are moving the text of this provision, currently proposed § 18.5(d), to a new paragraph (m) in § 18.1.

6. Clarification of the Term “Bonded Carrier”

CBP received several comments and questions about which party would be considered the “bonded carrier” and would therefore be liable for a failure to comply with the in-bond requirements. To address these comments, CBP is adding a definition of the term “bonded carrier” in § 18.0(b). “Bonded carrier” is defined as a “carrier of merchandise whose bond under § 113.63 of this title is obligated for the transportation and delivery of merchandise.” The party that will be ultimately liable is the party whose bond is obligated in the in-bond record for the in-bond movement.

7. Transfers (Transshipment) From One Conveyance to Another

A review of the comments addressing proposed § 18.3, revealed that there is some confusion regarding the scope of the term “transshipment” and how the provision should be applied. In order to clarify the rules that apply when merchandise is transferred from one conveyance to another, CBP is replacing the term “transshipment” with the term “transfer.” Accordingly, CBP is renaming § 18.3 from “Transshipment; transfer by bonded cartmen” to “Transfers.” In the discussion that follows, the term “transfer” will be used instead of “transshipment.”

The main concern of the commenters with regard to proposed § 18.3 is with the requirement to report to CBP each time the merchandise is transferred from one conveyance to another. Because in-bond merchandise may be transferred several times during the course of its journey, it is claimed that this reporting requirement places a substantial burden on the bonded carrier liable under the bond.

CBP has reevaluated this requirement in light of the comments and has concluded that the requirement to notify CBP when in-bond merchandise is transferred from one conveyance to another is not necessary. The important information for CBP is which party has assumed liability for the shipment of the in-bond merchandise. Accordingly, CBP is changing proposed § 18.3 by removing the requirement to notify CBP

when merchandise is transferred from one conveyance to another.

In addition, CBP is changing proposed § 18.3 to require that when in-bond merchandise is taken over by a subsequent bonded carrier which assumes liability for the merchandise, a report of arrival must be filed by the original bonded carrier and the subsequent carrier must submit a new in-bond application pursuant to § 18.1 for the merchandise to be transported in-bond.

8. Seals—Transportation of Bonded Merchandise With Non-Bonded Merchandise

CBP received many comments expressing concern about proposed amendments to § 18.4 governing the sealing of conveyances and containers. One of the principal concerns was that the proposed regulations do not allow for the transportation of in-bond merchandise with non-bonded merchandise in the same container, unless all of the merchandise, bonded and non-bonded, is destined for the same port. The result is that in-bond merchandise would not be able to be shipped in “less than container loads” with non-bonded merchandise.

1

1

Less than container load, or LCL, is a term commonly used in the transportation industry to refer to cargo containers that hold goods belonging to more than one shipper or consignee. Carriers use LCL shipments when a load of merchandise is not large enough to fill an entire cargo container. Freight in an LCL shipment is frequently transported to multiple destinations.

CBP has reviewed these comments and concurs that, as proposed, the limitations on transporting in-bond merchandise with non-bonded merchandise would unnecessarily hamper the transportation of in-bond merchandise. Accordingly, CBP is changing the sealing requirements in proposed § 18.4 by adding new provisions § 18.4(b)(2) and (3) in the final rule that allow for the transportation of in-bond merchandise with non-bonded merchandise in a container or compartment that is not sealed, if the in-bond merchandise is corded and sealed, or labeled as in-bond merchandise. This will allow in-bond merchandise to be transported with non-bonded merchandise in a container that is not sealed and will facilitate the filling of containers that would otherwise be less than container load shipments.

Additionally, for clarity, the provision regarding the breaking of seals in case of an emergency or for some other reason is being moved from § 18.3 (transshipment) to § 18.4 (sealing conveyances, compartments and containers). In response to comments, CBP is removing the requirements to obtain CBP permission to break and replace a seal. However, as provided in § 163.1, the transportation or storage of merchandise carried or held under bond into or from the customs territory of the United States is an activity covered by the general recordkeeping requirements of part 163. Such activity would include the breaking and replacing of seals on merchandise transported in-bond. Therefore, records pertaining to such activity would be covered under part 163.

9. Other Changes

CBP is making additional wording changes and minor editorial changes for better organization or to improve clarity. Among other changes, CBP is no longer using the term “ultimate destination” in proposed § 18.1(d)(1)(vi) to avoid inconsistency with other export laws and regulations and is revising paragraph (vi) to clarify the destination information that is required on the in-bond application for IT shipments and T&E/IE shipments. In addition, CBP is adding a sentence to proposed § 18.1(i)(1), which sets forth the maximum in-transit time, to clarify that in-bond merchandise transported by pipeline is not subject to the time limits in that section. CBP is also revising proposed § 18.1(i)(2), which provides procedures on requesting an extension of the in-transit time, to clarify that the decision to extend the in-transit time period is within CBP's discretion and to describe some of the factors that may be considered in CBP's decision to extend the in-transit time period. For further discussion, see Section II, Discussion of Comments.

C. Flexible Enforcement Period

In order to provide the trade with sufficient time to adjust to the new requirements and in consideration of the business process changes that may be necessary to achieve full compliance, CBP in implementing and enforcing the rule, will take into account challenges that carriers may face in complying with the rule, so long as carriers are making satisfactory progress toward compliance and are making a good faith effort to comply with the rule to the extent of their ability. This flexible enforcement will last for 90 days after the effective date of this rule. Additionally, CBP will provide guidance on the new requirements and endeavor to conduct outreach to interested parties in order to facilitate a smooth transition to the new requirements.

II. Discussion of Comments

A. Comments Regarding This Rulemaking Generally

1. Elimination of In-Bond Types

Comment:

The specific types of transportation entries (IE, T&E, IT) are outdated and have no effect on cargo security and the movement of goods. Therefore, CBP should consider eliminating them and apply a generic in-bond transportation entry to cover all movement types. CBP currently receives data elements indicating a domestic (D) and international export (I) during the in-bond request process and would know the anticipated movement as a result of these designations.

CBP Response:

The current system using specific bond types is derived from 19 U.S.C. 1552 and 1553 which provide for “entry for immediate transportation” and “entry for transportation and exportation,” respectively. Therefore, CBP cannot eliminate them. The current system is beneficial in that it clearly specifies the intended disposition of the goods,

i.e.,

whether the goods will be exported, transported to another port for possible consumption entry, or transported to another port for exportation. There are separate rules for the handling and processing of in-bond merchandise depending on the type of in-bond entry, for example an Importer Security Filing (ISF) is required for a T&E and not an IT.

2. Scope

Comment:

CBP should clarify the relationship between proposed § 18.0(a), with respect to requirements and procedures in part 18 of the in-bond regulations and the requirements and procedures of parts 122 and 123 (Air Commerce, and Customs Relations with Canada and Mexico, respectively).

CBP Response:

Proposed § 18.0 (Scope; definitions), provides that except as provided in parts 122 and 123, part 18 sets forth the requirements and procedures pertaining to the transportation of merchandise in-bond. Parts 122 (Air Commerce) and 123 (Customs Relations with Canada and Mexico) govern the rules and procedures for the transportation of in-bond merchandise in the air environment and merchandise traveling through and into the United States by truck and train. This means that the provisions of part 18 are applicable to the in-bond procedures not addressed by specific instruction in parts 122 and 123. For example, proposed § 18.8 governing the liability of in-bond carriers is applicable to all in-bond

movements, regardless of the mode of transportation. Conversely, proposed § 18.4(a)(1) requiring the sealing of containers does not apply to in-bond merchandise traveling by air, because § 122.92(f) specifically provides that the sealing of aircraft, aircraft compartments carrying bonded merchandise, or the cording and sealing of bonded packages carried by the aircraft, is not required. More information on the in-bond transport of air cargo is discussed in Section II.G., Air Cargo.

3. Outreach

Comment:

CBP should conduct multiple public meetings well in advance of publication of the final rule. These meetings will allow a necessary forum by which the entire trade community (exporters, freight forwarders, warehouse operators, agents, and carriers) can engage with government to learn about the justifications behind these significant modifications to the current in-bond process. This will also provide all affected parties the opportunity to discuss mutually beneficial alternatives which may accomplish the government's objectives without putting any sector of the trade at an economic disadvantage when competing in the increasingly fast paced global marketplace.

Should CBP decide to adopt a final rule which does not adopt many of the suggested changes included in the comments, CBP should meet with the affected commenter prior to the finalization and publication of the rule in the

Federal Register

.

CBP Response:

CBP worked closely with the various sectors of the trade community, the Trade Support Network (TSN), the Customs Electronic Systems Action Committee (CESAC), and the Advisory Committee on Commercial Operations of Customs and Border Protection (COAC), before publishing the NPRM regarding the general changes to the in-bond system that were being considered, and CBP took into account extensive feedback from the trade community in the formation of the NPRM. Although CBP has not conducted public meetings or met privately with interested parties regarding the proposals published in the NPRM, CBP has carefully analyzed the various comments that have been submitted and has incorporated numerous suggestions made by the commenters in the drafting of this final rule. In order to provide the trade sufficient time to adjust to the new requirements and in consideration of the business process changes that may be necessary to achieve full compliance, CBP is providing a 60-day delayed effective date to be followed by a 90-day flexible enforcement period. This means that CBP will show flexibility in enforcing the rule, taking into account challenges that carriers may face in complying with the rule, so long as carriers are making satisfactory progress toward compliance and are making a good faith effort to comply with the rule to the extent of their current ability. CBP will also provide guidance on the new requirements and endeavor to conduct outreach to interested parties in order to facilitate a smooth transition to the new requirements.

4. In-Bond Shipments Between the United States and Canada

Comment:

The United States and Canada should harmonize the Canadian and U.S. rules on in-transit shipments: Canada could adopt the U.S. approach and require full commercial information, effectively terminating in-transit movements in both countries; or CBP could revise its position on the requirement for full commercial information and harmonize with the current Canadian rules which would restore in-transit shipments through the United States.

CBP Response:

The NPRM did not address this issue, and this comment is beyond the scope of this rulemaking.

B. Electronic Filing and Processing of In-Bonds

1. Filing the In-Bond Application

Comment:

Many commenters requested further information on the filing process, the systems that will be used, how to file an in-bond application, what functions will be available and how the different systems will work for the various modes of transportation. Some commenters wanted to know how CBP will advise the trade about CBP-approved systems.

CBP Response:

Under this rule, an electronic in-bond application is required for in-bond merchandise transported by ocean, rail and truck. The methods available to submit an in-bond application are the Automated Commercial Environment (ACE) or QP/WP. QP/WP is an ABI hosted in-bond system that allows all parties, carriers and non-carriers, to submit electronic in-bond applications directly to CBP, as well as report their arrival and export. The “QP” half is the application function, the “WP” half is the arrival/export function. ACE can be used to file the in-bond application in conjunction with advance or arriving manifest information. For in-bond merchandise transported by air, carriers can file the in-bond application also using ACE or QP/WP.

For reference purposes, the table below lists the EDI systems used for filing in-bond applications for the various modes of transportation and provides links to the Web sites that contain the relevant filing instructions or implementation guides. CBP will promptly inform the public of new CBP approved systems via CBP's Web site and regular communication systems.

Mode of

transportation

CBP EDI system

In-bond application procedures

Ocean

ACE

The in-bond application for cargo arriving by vessel may be filed as part of the arriving ocean manifest or as a subsequent/supplemental filing. Filing instructions are available on the ACE Web site at:

http://www.cbp.gov/trade/ace/ocean-manifest

.

Rail

ACE

The in-bond application for cargo arriving by rail may be filed as part of the arriving rail manifest or as a subsequent/supplemental filing. Filing instructions are available on the ACE Web site at:

http://www.cbp.gov/trade/ace/rail-manifest

.

Truck

ACE

The in-bond application for cargo arriving by truck may be filed as part of the arriving truck manifest. Filing instructions are available on the ACE Web site at:

http://www.cbp.gov/trade/ace/truck-manifest/edi/message/electronic-truck-manifest

.

Air

ACE

The in-bond application for cargo arriving by air may be filed as part of the arriving air manifest or as a subsequent/supplemental filing. Filing instructions are available on the ACE Web site at:

http://www.cbp.gov/trade/ace/air-manifest

.

Ocean, Rail, Truck, and Air

Automated Broker Interface (ABI)

The automated broker interface (ABI) for in-bond entries, known as QP/WP, allows in-bond entries filed for a particular shipment to be associated with arriving manifests or subsequent/supplemental in-bond entries filed for merchandise arriving by any mode. In-bond entries are associated with the arriving manifest by using the Standard Carrier Alpha Code (SCAC) in addition to a unique number to identify the bill of lading. This process covers cargo arriving by ocean, rail, truck, and air, as well as bonded warehouse withdrawals, foreign trade zone movements, pipeline arrivals, etc. Data messages are found in the ACE implementation guides located at:

http://www.cbp.gov/document/guidance/bond

.

Comment:

CBP needs to explain the requirements and procedures for ACE as they may apply to the in-bond process from now until such time as all ACE modules are fully developed and implemented.

CBP Response:

Information regarding the requirements and procedures for ACE as they may apply to the in-bond process is available on the CBP Web site at the links listed in the table above. Additionally, CBP will issue additional guidance on the ACE requirements and procedures as ACE modules are developed and deployed. Additional information on messages (

e.g.

arrival, exportation, amendments and diversions) for in-bond entries using the appropriate data interfaces can be found in the following implementation guides: ACE:

http://www.cbp.gov/trade/ace

. Air: AMS

http://www.cbp.gov/site-page/camir-air-chapters

.

Comment:

Will the ACE Secure Data Portal (“Portal”) be a viable option for those carriers that do not have EDI capabilities, elect to utilize the ACE Portal as opposed to EDI, or utilize both technologies depending on the situation? Will any function available to EDI users also be available to users of the ACE Secure Data Portal? Will the ACE Portal be available to use for diversion requests?

CBP Response:

The ACE Portal does not provide any in-bond functionality and there are no plans to use it for in-bond transactions in the future.

Comment:

Bonded carriers will have to electronically report the arrival and exportation of in-bond merchandise in separate CBP-approved systems (Air AMS for air, ACE for ground, ocean and rail). CBP should design its systems so that the arrival and departure messages are communicated between the various systems that have to be used by carriers. This will provide greater visibility and reduce redundancy for in-bond shipments that are transported by air and other modes of transportation. CBP should automate the arrival and export of electronic in-bond shipments regardless of the system used to initiate the in-bond shipment.

CBP Response:

CBP agrees that messaging between the systems for in-bond transactions would greatly facilitate the processing of in-bond transactions. This functionality is now available through Air ACE.

Comment:

CBP should expand the availability of the Document Imaging System to motor carriers in order to eliminate the use of paper.

CBP Response:

There is no need to use the Document Imaging System (DIS) for the processing of in-bond shipments by truck. CBP is discontinuing the use of the CBP Form 7512 for in-bond shipments transported by truck. Manifest information must be filed using an approved Electronic Data Interchange method.

Comment:

CBP should create a web-based technology to allow the broadest level of compliance by the trade. A web-based portal would allow CBP to receive real time in-bond information. CBP must consider the development of a web-based portal where the bonded carrier, FTZ operator or authorized agent can electronically request the status of the in-bond movement. This web-based tool should be used across all modes. A web-based portal would be ideal and would help to serve CBP's objective to maximize the automation of in-bonds with minimum impact to the trade.

CBP Response:

CBP is using its current systems to implement the new in-bond requirements and is not creating web-based technology or using a web-based portal for the processing of in-bond transactions beyond what it has already developed within ACE, at this time.

Comment:

Current functionality does not allow for the filing of an electronic in-bond application without access to QP and QP requires ABI connectivity which carriers do not currently need to access during their normal business operations.

CBP Response:

Although the commenter is correct that in order to file an in-bond application using QP, the filer must have ABI connectivity, an in-bond applicant can also use ACE when the in-bond application is filed as part of the advance or arriving manifest. When filing an in-bond application using QP, the in-bond application is filed as a stand-alone filing that will be reported on the manifest when all the data has been transmitted.

Comment:

Will there be a stand-alone in-bond system available within ACE that is not linked to the manifest record of the original importation?

CBP Response:

In order to facilitate processing of in-bond shipments and to reduce redundant filing requirements, CBP has designed the in-bond systems so that they are linked to the manifest record. There will not be a stand-alone in-bond system within ACE that is not linked to the manifest record of the original importation.

Comment:

How will responses to diversion requests be transmitted to the carrier? How long will it take for CBP to respond to the diversion request?

CBP Response:

The carrier will submit the diversion request using a ACE EDI or a QP/WP message. CBP's response will be immediate. CBP's disposition of the diversion request will be automated so that the carrier will receive authorization for, or denial of, the diversion immediately. The updating of the destination port code in the system will constitute approval of the diversion request. If the destination port code is rejected, that will constitute a denial of the diversion request.

Comment:

Will the in-bond application be fully paperless, meaning that there will be no requirement to file hard copies at the origination port for authorization? Some origination ports currently require that the in-bond documentation be validated through the use of perforation machines (

e.g.,

Los Angeles).

CBP Response:

When this rule is effective, the in-bond process for in-bond merchandise transported by ocean, rail, or truck, will be fully paperless. It is expected that air will eventually be fully paperless as well, but CBP would propose that through a separate rulemaking.

Comment:

With regard to an in-bond application consisting of a transportation entry and manifest, the manifest or its electronic equivalent should only be required at the origination port of entry when the merchandise is first imported into the

United States. Subsequent in-bond applications for the same merchandise should require only a transportation entry.

CBP Response:

ACE links all phases of the in-bond movement. When a subsequent in-bond application is filed, the first movement is closed and the second is initiated. The system will require the previous in-bond number, and will then link the two in-bond movements. The manifest information will not have to be submitted a second time.

2. Elimination of the CBP Form 7512

Comment:

Some commenters stated that they support eliminating the paper in-bond application (CBP Form 7512) and requiring carriers to file electronically. Carriers already file in-bond entries electronically, so electronic filing will not impose new burdens. It will, however, provide CBP with real time information on goods in transit and allow for easy reconciliation of shipments as goods are arrived and entered at another U.S. port or exported. The Automated Commercial System (ACS) currently allows for electronic in-bond filing now, but does not collect all the information CBP needs. These commenters support the proposal to utilize the increasingly functional ACE for this purpose. Because shippers are already familiar with ACE, this should not cause problems for them and it will increase efficiency.

CBP Response:

CBP appreciates the positive feedback and agrees that changing the in-bond process from a paper to an electronic process will increase efficiency, allow for easier reconciliation for carriers, and facilitate the collection of information by CBP without further burdening the trade.

Comment:

Some commenters, who agree that the in-bond application (the filing) should be electronically submitted to CBP, stated that the CBP Form 7512 should not be completely eliminated. The common trade practice is to maintain a hard-copy of the actual CBP Form 7512 which is used as an attachment to the bill of lading to properly identify the shipment as an in-bond shipment. It accompanies the shipment as it moves from trucking terminal to trucking terminal. Eliminating the CBP Form 7512 form will require many carriers to redesign their internal systems at great expense.

CBP Response:

Many carriers are already filing in-bonds electronically and are not using a paper CBP Form 7512. While there are some carriers that will have to revise their business practices as a result of CBP's efforts to modernize the in-bond process, CBP does not plan to maintain a two tiered in-bond system with both electronic filing and paper filing in order to accommodate those carriers that currently use the CBP Form 7512 for tracking purposes. If, for their own use for internal tracking purposes, carriers prefer a hard-copy document to accompany the shipment, carriers can choose to create a form with the same information as the CBP Form 7512 or print a hard-copy of the electronic in-bond application.

Comment:

Many bonded carriers are not automated and rely upon the CBP Form 7512 as their control document. Unless CBP is prepared to mandate that bonded carriers become AMS certified, the CBP Form 7512 will continue to be needed.

CBP Response:

CBP is requiring automated filing of in-bond entries. How bonded carriers manage their own internal controls is up to each bonded carrier.

3. Information Required

Comment:

The current flow of commercial information is not structured in such a way that all of the new in-bond information requirements would be readily available. CBP should work with the various sectors of the trade community in identifying what information is truly necessary, and in developing a phased-in compliance schedule that would afford business the time to adjust its procedures to the new regime. CBP's program for implementation of the ISF requirements is a good model for phased-in compliance.

CBP Response:

CBP worked closely with the various sectors of the trade community before publishing the NPRM regarding the general changes to the in-bond system that were being considered. CBP received and took into account extensive feedback from the trade community in the formulation of the NPRM. Moreover, as a result of the comments CBP received in response to the NPRM regarding the required information on the in-bond application, CBP is making several changes regarding these requirements so that they are less burdensome but still provide CBP with the necessary information. The rule will have a 60-day delayed effective date to enable the trade to make required adjustments to comply with the rule. CBP is also providing a 90-day flexible enforcement period similar to that used for implementation of the ISF requirements that will start from the effective date of this rule. Additionally, CBP will work closely with the trade to resolve compliance issues that the trade might experience as a result of this rule.

Comment:

The list of proposed changes in the NPRM includes a statement that an in-bond application must be filed for each conveyance transporting the shipment. However, this requirement is absent from the proposed regulatory language. Further guidance should be given regarding the requirement to file an in-bond for each conveyance.

CBP Response:

The statement in the list of proposed changes of the NPRM that an in-bond application must be filed for each conveyance was incorrect. A separate in-bond will not be required for each conveyance. One in-bond application can cover merchandise that is transported by multiple conveyances.

Comment:

Some carriers move in-bond merchandise via centralized hubs wherein in-bond merchandise is transported to a hub and consolidated in a new container before being transported to the port of exportation. If an in-bond shipment is moved in this manner, will one T&E application covering the entire movement of the in-bond merchandise be acceptable?

CBP Response:

Only one T&E in-bond application is necessary to move an in-bond shipment from the origination port to the port of exportation. In-bond merchandise can be moved from one container to another container in a centralized hub, if the sealing procedures in § 18.4 are followed. However, multiple in-bond shipments from different origination ports cannot be entered under a single T&E and consolidated in a centralized hub.

4. Updating and Amending the In-Bond Record

Comment:

Will CBP allow all data elements to be amended within the in-bond record or will there be restrictions? CBP must provide guidance with respect to which elements can be amended.

CBP Response:

Prior to departure from the originating port, all data elements related to the in-bond may be updated or amended. After departure (during transit), the in-bond data may not be updated or amended, except for the quantity, destination, and seal numbers. If the reported quantity is not correct or if it changes, the in-bond record must be updated. Updating the quantity does not relieve the initial bonded carrier from liability for any shortages based on the quantity originally reported in the in-bond application. If the seal number is not known when the in-bond application is filed, the in-bond record must be updated with the seal number within

two business days. It is also necessary to update the in-bond record with notice and proof of export and with information regarding divided shipments at the port of exportation.

Comment:

Will other parties be allowed to amend the in-bond record or does the amendment have to be made by the original in-bond filer? CBP needs to define what is considered “permission.” The filer is not the appropriate party to grant permission to amend the official record and this authorization should be obtained from the owner of the commercial information since that is the true party in interest. Guidance should be provided indicating the appropriate method of notification or permission to both CBP and other parties who are authorized to make changes.

CBP Response:

Any party that files an in-bond application as provided in proposed § 18.1(c) can amend the in-bond record. This may be the carrier or agent that is authorized by the carrier to obligate the carrier's bond and that brings the merchandise to the origination port; the carrier, or authorized agent of the carrier that accepts the merchandise under the carrier's bond; or any person who has a sufficient interest in the merchandise as shown by the bill of lading, manifest or other document. To provide additional clarity, CBP is changing proposed § 18.1(h) to eliminate the requirement that the party updating or amending the in-bond record receive “permission” from the “filer” and requiring instead that the party that is updating or amending the in-bond application obtain the “authorization” of the “party whose bond is obligated.” CBP is requiring “authorization” from the party whose bond is obligated, as opposed to the filer because the party whose bond is obligated bears the responsibility for ensuring the proper movement of the merchandise.

Comment:

CBP should explain how the amending and updating of the in-bond record will work (process, time limits for amending, etc.).

CBP Response:

The in-bond record can be updated and amended by entering the new information in the CBP approved electronic system. The system will automatically update the in-bond record, barring any system edits in place prohibiting the update. CBP will provide additional procedures for amending and updating the in-bond record as necessary, using its normal trade outreach and by posting the information on the CBP Web site. CBP is also changing proposed § 18.1(h) in the final rule to specify a timeframe for amending the in-bond record. That timeframe is “within two business days of the event that requires amendment.”

5. Who May File

Comment:

Proposed § 18.1(c)(3) stating that a transportation entry may be filed by “[a]ny person who has a sufficient interest in the merchandise as shown by the bill of lading or manifest, a certificate of the importing carrier, or by any other document satisfactory to CBP” is an overly broad grant of authority. CBP should limit the term “sufficient interest” to those persons with a property right in the merchandise or those persons who have been properly authorized by the owner of the goods. The right to file an in-bond application should be further restricted to the originating bonded carrier or a licensed customs broker. CBP should identify examples of such “other documents” that will be acceptable to CBP to include a properly executed power of attorney, a letter of authorization, etc. Alternatively, the term “other documents” should be deleted because it is unnecessary.

CBP Response:

The quoted language in proposed § 18.1(c)(3) is not new. It is derived from § 18.11(b) of the existing regulations which similarly allows a person who has sufficient interest in the merchandise as shown by the bill of lading or manifest, a certificate of the importing carrier, or by any other document satisfactory to CBP to transport merchandise in-bond. CBP has not experienced problems with parties without sufficient interest transporting merchandise in-bond and prefers to maintain the existing standard to facilitate trade. With regard to the documents that are acceptable to demonstrate sufficient interest, CBP believes it should provide the trade with some flexibility to present documentation to demonstrate that a party has sufficient interest in the merchandise.

Comment:

As filing of the in-bond is often made by an authorized agent of a party with sufficient interest, the proposed language in § 18.1(c)(3) should be updated to read, “[a]ny person, or the authorized agent of any person with sufficient interest in the merchandise, as shown by the bill of lading or manifest, a certificate of the importing carrier, or by any other document satisfactory to CBP.”

CBP Response:

CBP agrees. CBP is modifying the regulatory text in § 18.1(c)(3) to allow the authorized agent of any person who has a sufficient interest in the merchandise to file the in-bond application.

Comment:

Proposed § 18.1(c)(1) refers to a transportation entry made by “the carrier that brings the merchandise to the origination port.” CBP should modify this to read: “the carrier, or authorized agent of the carrier, that brings the merchandise to the origination port.” Proposed § 18.1(c)(2) refers to a transportation entry made by “the carrier that is to accept the merchandise under its bond or a carnet for transportation to the port of destination or port of exportation;” CBP should modify this provision to read “the carrier, or authorized agent of the carrier, that is to accept the merchandise under its bond or a carnet for transportation to the port of destination or port of exportation;”

CBP Response:

CBP agrees and is changing proposed §§ 18.1(c)(1) and (c)(2) to include the phrase “or authorized agent of the carrier.”

Comment:

The referenced “certificate of the importing carrier” is not defined. This reference is in addition to a person having an interest in the shipment as shown by the bill of lading or manifest, so it is vague and confusing to refer to an undefined “certificate.” CBP should delete this reference as it may be unnecessary, or define what may constitute an acceptable certificate.

CBP Response:

The provision allowing for the use of a “certificate from the importing carrier” in proposed § 18.1(c)(3) is contained in the existing regulations in § 18.11(b). A power of attorney or letter of authorization would constitute an acceptable certificate. CBP will not establish a specific definition of what constitutes an acceptable certificate, but will accept a document or electronic request from the importing carrier that authorizes another party to file an in-bond application.

Comment:

CBP should require the party obligating the bond to provide all shipment information to the carrier when requested for investigation and audit purposes.

CBP Response:

CBP will not require third parties to provide shipment information to the carrier. This is a matter to be resolved contractually between carriers and those parties with whom they do business. However, as provided in 19 U.S.C. 1508(a)(1)(B) and 19 CFR 163.2, persons who knowingly cause the transportation of merchandise carried or held under bond are responsible for maintaining the appropriate in-bond records, which must be supplied to CBP upon request.

6. Licensed Customs Brokers

Comment:

Only a licensed customs broker should be able to file the in-bond application; bonded carriers should only be able to file in limited cases when they simply file data without

exercising discretion. The classification of merchandise, even at the six-digit level, and determining the “admissibility of merchandise” is customs business and should be done only by a licensed customs broker. Customs brokers have the knowledge and experience to identify prohibited and restricted merchandise and will more accurately identify whether merchandise is subject to a rule, regulation, law, standard or ban relating to health, safety or conservation.

CBP Response:

An entry for transportation in bond is an excepted activity pursuant to 19 CFR 111.2(a)(2)(iv) for which a customs broker's license is not required.

See

19 CFR 111.2(a)(2)(iv). Moreover, customs business does not involve the mere electronic transmission of data received for transmission to CBP, but does involve classification for entry purposes.

See

19 CFR 111.1. The six-digit HTSUS number required on the in-bond application is necessary to ensure cargo safety and security and not to determine merchandise entry procedures that fall within the scope of customs business. This is in contrast to a 10-digit HTSUS number which does involve classification for entry purposes. Although the proposed rule does require more information to be provided than in the past, this information is generally available to the carrier and does not require the expertise of a customs broker and does not require making admissibility determinations. Moreover, as discussed in Section I.B.3., Description of the Merchandise, and Section II.C., New Information Requirements for In-Bond Shipments, CBP is requiring much less information about the in-bond merchandise on the in-bond application than was proposed. For example, CBP is eliminating the requirement in proposed § 18.1(d)(1)(ii) for carriers to provide the rule, regulation, law, standard or ban relating to health, safety or conservation enforced by CBP or another government agency that is applicable to the in-bond merchandise. This, and other changes relating to the description of the merchandise, will lessen the burden on carriers and ensure that admissibility determinations are not required in order to file an in-bond application.

Comment:

The bonded carrier should only be allowed to file the in-bond application when it does not have to make decisions regarding the classification or whether merchandise is restricted, prohibited, or subject to a rule, regulation, law, standard or ban relating to health, safety or conservation. The bonded carrier should be allowed to file the in-bond application only when it has received written documentation from a party that (1) has the right to make a consumption entry, (2) has an active continuous customs importer bond, (3) is required to exercise reasonable care in ascertaining and proving all of the required data elements to the bonded carrier, and (4) is responsible for liquidated damages on its continuous customs bond and/or penalties under 19 U.S.C. 1592 for false, inaccurate or incomplete information.

CBP Response:

CBP will not restrict who can file an in-bond application in the manner proposed in this comment.

7. Unauthorized Use of a Bond

Comment:

Several commenters raised concerns related to a bonded party's ability to restrict usage of its bond by other parties and to monitor the obligations made to its bond. These commenters said that the bonded party should be able to prohibit the obligation of its bond by third parties. In addition, these commenters indicated that the bonded party should be able to see, within the new proposed automated paperless environment, all in-bond movements that obligate its custodial bond. Without such functionality in the electronic in-bond system, the bonded party may be exposed to fraudulent activity and liquidated damages assessed by CBP when a carrier files an in-bond application without authorization from the bonded party.

CBP Response:

We agree that the bonded carrier should be able to look into the in-bond record and restrict usage of its bond by other parties. In ACE and QP/WP, bonded parties can prevent the unauthorized use of their bond by restricting use of their bond by other parties and by setting conditions on the use of their bond. These in-bond systems are designed to allow an approved bonded carrier that has a CBP-approved ACE account to allow restricted or unrestricted use of its bonds. If the bonded carrier's account is unrestricted, any other party may open an in-bond application using the bonded carrier's account number. If the bonded carrier restricts the usage of the bond account number, that carrier can log into its account and select the other parties that are authorized to obligate its bond. If the bonded carrier selects parties that are authorized, all other parties will be unauthorized and any attempt to use the bond by an unauthorized user will be rejected. In addition, the bonded party will receive notifications when the in-bond record is amended or updated if the in-bond filer designates the bonded party as a Secondary Notify Party (SNP) in ACE.

A party who moves bonded merchandise without authorization, either as a non-bonded carrier holding itself out as a bonded carrier or as a non-bonded carrier using the identity/bond information of a bonded carrier without the latter's authorization, may be subject to a penalty pursuant to 19 U.S.C. 1595a(b) for violation of 19 U.S.C. 1551, 19 CFR 18.1 and 19 CFR 112.12, or 19 U.S.C. 1592.

8. Procedures

Comment:

Under current electronic in-bond processing in AMS, it is possible for an ocean carrier's taxpayer identification (IRS) number to be used by a third party to file an in-bond movement without the carrier's knowledge. While the ACE M1 functionality will allow ocean carriers to better control which parties are authorized to use the carrier's IRS number to file an in-bond application, carriers need to be able to know when their bonds are used by a third party so that the carrier can close any in-bond applications filed against the carrier's IRS number that the third party filer fails to close.

To enable ocean carriers to monitor when their IRS numbers are used to file in-bonds, CBP should modify the EDI in-bond message set for M1 to include two additional pieces of information: (1) The SCAC of the bonded party, and (2) the SCAC or filer code of the party that filed the initial in-bond application.

CBP should also develop a mechanism within ACE M1 that would allow an ocean carrier to electronically close an in-bond that the in-bond filer created in the Automated Broker Interface (ABI) using the ocean carrier's IRS number but then never closed in ABI. This would enable ocean carriers, none of whom use ABI (a broker filing system) to use ACE M1 to close in-bonds cut against the carrier's IRS number.

CBP Response:

CBP agrees that more accurate information should be provided to bonded parties regarding the use of their bond and thanks the commenter for these suggestions. Now that the ACE eManifest Rail and Sea (M1) has been successfully deployed, enhancements such as this will be considered and prioritized based on the needs of the trade and CBP. M1 currently allows any EDI filer (ABI or carrier) to provide updates on in-bond transactions including arrivals and exports. CBP encourages the party with the most accurate information to provide those updates.

9. Change of Foreign Destination

Comment:

CBP should clarify the difference between proposed § 18.23 requiring the carrier to notify CBP of a change in foreign destination of an in-bond shipment and the requirement in proposed § 18.5 that carriers obtain authorization from CBP for diversion of an in-bond shipment.

CBP Response:

Section 18.5 requires the filer of the in-bond application to submit a request to divert merchandise via a CBP-approved EDI system. A diversion occurs when the U.S. port for which the in-bond merchandise is destined is changed and the merchandise is shipped to a different port. Section 18.1(h) requires the carrier to update information included in the original in-bond application, such as the first foreign port, when there are changes. Section 18.23 concerns the requirement to update information in the in-bond application as it applies to TE and IT shipments. CBP is adding language to § 18.23 to make this clearer.

New Information Requirements for In-Bond Shipments

10. New Information Requirements Generally

Comment:

Many commenters expressed concern that the new information requirements of the in-bond application are too burdensome.

CBP Response:

The requirements proposed in the NPRM, when considered as a whole, potentially would require more information from carriers. Accordingly, CBP is making several changes to the proposed regulations in response to these comments. First, CBP is removing the requirement in proposed § 18.1(d)(1)(ii) that if the party submitting the in-bond application knows that the merchandise is subject to a rule, regulation, law, standard or ban relating to health, safety or conservation, the filer must provide the rule, regulation, law, standard or ban to which the merchandise is subject as well as the government agency responsible for enforcing the rule, regulation, law, standard, or ban. In its place, CBP is requiring that merchandise subject to detention or supervision by a U.S. government agency be described with sufficient accuracy to enable the agency concerned to determine the contents of the shipment. This is a requirement in existing § 18.11(e). Second, CBP is removing the requirement in proposed § 18.1(d)(1)(iii) that the in-bond filer identify prohibited or restricted merchandise. Third, CBP is removing the requirement in proposed § 18.1(d)(1)(iv) to provide additional information for all in-bond shipments of textiles and textile products. Fourth, CBP is making optional the requirement in proposed § 18.1(d)(1)(v) that the filer of the in-bond application must provide information regarding merchandise for which the U.S. Government, foreign government or other issuing authority has issued a visa, permit, license, or other similar number or identifying information. In lieu of the above requirements and to ensure that CBP is still able to assess security and health and safety threats, CBP is changing proposed § 18.1(l)(i) to require the six-digit HTSUS number on the in-bond application in all instances. The six-digit HTSUS number is one of the required data elements for all merchandise arriving by vessel on the Importer Security Filing (ISF).

11. Special Classes of Merchandise

Comment:

Proposed § 18.20(a) prohibits the use of a transportation and exportation (T&E) entry, with no exceptions noted for several classes of merchandise as detailed at § 18.1(l), namely (1) health, safety, and conservation; (2) plants and plant products; (3) narcotics and other prohibited articles; (4) non-narcotics; (5) explosives; and (6) livestock. This conflicts with proposed § 18.1(l), which allows a T&E entry to be filed if approved by the appropriate governmental agency,

e.g.,

explosives as regulated by ATF, DOT, and USCG. Additionally, if a T&E entry may not be utilized for these specified commodities, two separate in-bond movements would be required to move the shipment through the United States to its final destination,

i.e.,

an Immediate Transportation (IT) to the port of exportation and a separate Immediate Exportation (IE) at the port of destination. This would create an unnecessary increase in work for both CBP and affected carriers and filers.

CBP Response:

Proposed § 18.20(a) does not prohibit the use of T&E entries for the named classes of merchandise in all cases. It specifically allows for T&E entries, subject to the provision of § 18.1(l). There is no conflict between the two provisions. While proposed § 18.1(l) imposes restrictions on the named classes of merchandise, it does not prohibit the use of T&E entries. It merely requires authorization from the appropriate government agency to ship these classes of merchandise under a T&E entry. Moreover, these are not new restrictions on T&E entries. Existing § 18.21 provides for these same restrictions on T&E entries. This rule makes these restrictions applicable to all in-bond entries by moving them to § 18.1(l).

Comment:

CBP should amend proposed § 12.11 to allow plant or plant product shipments subject to Animal and Plant Health Inspection Service/Plant Protection and Quarantine Programs (APHIS/PPQ) permit conditions to be shipped from the port of first arrival to another port for proper inspection at an APHIS/PPQ facility, without an in-bond application if all CBP requirements have been met.

CBP Response:

CBP disagrees. Until such time as the plant or plant product has been inspected or treated by APHIS/PPQ, the merchandise must remain under CBP bond, which insures compliance with APHIS/PPQ requirements.

12. Quantity

Comment:

Proposed § 18.1(d)(1)(vi) states that “the quantity of the merchandise to be transported to the smallest piece count” must be provided. This is a confusing standard and clarification should be provided as to whether this means that the quantity will be reported at the smallest external packaging unit or something different, such as the smallest piece count. CBP should use the “smallest exterior packing unit” as the standard for providing the quantity of the merchandise. This is a workable standard and the data is readily available and verifiable to the carrier. “The smallest piece count” standard would be burdensome as manifests and bills of lading normally do not contain this information and verification may be difficult.

CBP Response:

CBP concurs and is changing proposed § 18.1(d)(1)(vi) to require the reporting of the quantity using the “smallest exterior packing unit” standard. This will enable carriers to verify the quantity of the goods they are transporting and ensure that there is no shortage.

Comment:

CBP should modify proposed § 18.1(d)(1)(vi) to require that the quantity of merchandise to be transported be reported in the in-bond application as the quantity used in the bill of lading and or manifest. This will ensure consistency in reporting between the application filer and CBP as well as amongst all trading partners involved in the transportation movement of the in-bond shipment.

CBP Response:

CBP disagrees. The quantity of merchandise used in the bill of lading or the manifest may not reflect the actual quantity, as required in § 18.1(d)(1)(iv). CBP needs to ensure the entire shipment is accounted for at the destination port or port of exportation.

Proposed § 18.1(d)(1)(vi) requires the quantity of merchandise to be transported in-bond to be reported and will specify how that quantity is to be reported. As discussed in the prior comment response, the required quantity standard will be the smallest exterior packing unit.

Comment:

CBP should remove proposed § 18.1(d)(4), which requires the initial bonded carrier to assert that there is no discrepancy between the quantity of the goods received from the importing carrier and the quantity of goods delivered to the in-bond carrier for transportation in-bond. Quantity information is already required under proposed § 18.1(d)(1)(vi) and the initial bonded carrier cannot make the assertion in good faith without independently verifying the quantities prior to importation which is impractical and costly. Alternatively, CBP should change proposed § 18.1(d)(4) to provide that by submission of an in-bond application, the initial bonded carrier asserts that there is no “known discrepancy” between the quantity received from the initial carrier and quantity delivered to the in-bond carrier, unless the arriving carrier and the in-bond carrier are the same, in which case the provision does not apply.

CBP Response:

Proposed § 18.1(d)(4) does not impose new requirements on bonded carriers. Under § 18.8 of the current regulations, if an in-bond shipment arrives at the destination port and the quantity of goods that arrives is less than the quantity manifested, the bonded carrier is liable for the shortage. This rule does not change that requirement. However, CBP has concluded that proposed § 18.1(d)(4) is unnecessary as it is covered in § 18.8. Therefore, CBP is removing this provision.

Comment:

Bonded carriers need to be able to file manifest discrepancy reports after the in-bond shipment arrives at the port of destination. The discrepancy reports would reflect the quantity of good actually received by the in-bond carrier when the container is unloaded at the port of destination.

CBP Response:

CBP disagrees. CBP is not creating a new manifest discrepancy reporting system for in-bond shipments which would insulate carriers from liability for a shortage. Although carriers must use the procedure described in § 18.1(h) to update the in-bond record to report any discrepancy in quantity of in-bond merchandise, the carrier is responsible for the quantity of goods reported in the in-bond application.

13. Location of the Merchandise

Comment:

Proposed § 18.1(j) requires the reporting of the “[p]hysical location of the merchandise within the port.” The term “physical location” should be defined and CBP should provide additional detail as to the level of specificity required;

e.g.,

the Facilities Information and Resources Management System (FIRMS) code if known, or dock location, pier, street, address, city, etc. FIRMS codes need to be established for border crossing locations where carriers do not have a physical presence.

CBP Response:

CBP agrees that the proposed text is not clear and leaves room for error in providing the physical location of the merchandise. Therefore, CBP is changing proposed § 18.1(j) to require the reporting of the FIRMS code rather than a description of the physical location of the goods. FIRMS codes are used to identify a specific physical location. Locations,

e.g.,

warehouses, with FIRMS codes that are used solely for the purposes of providing the location of in-bond merchandise are not required to be bonded facilities, unlike other locations with FIRMS codes. However, FIRMS code locations that are used solely for reporting the location of in-bond merchandise cannot be used for other purposes for which a bond is required,

e.g.,

manipulation of the merchandise. If the merchandise is sitting on the dock, the FIRMS code of the terminal should be provided.

Comment:

Does the new rule allow truck carriers to use their terminal facilities as the arrival destination and use that location to report to CBP?

CBP Response:

Yes. However, if there is not an existing FIRMS code for the terminal facility the truck carrier company will need to obtain one.

Comment:

Will CBP be updating or changing the current FIRMS code process? CBP should centralize the process at headquarters, rather than have the ports responsible.

CBP Response:

CBP is not updating or changing the process for obtaining a FIRMS code. The current process is to obtain a FIRMS code at the local port. A member of the trade requests a FIRMS code via a letter to the port director on company letterhead. An Officer in the POE creates a FIRMS file in ACE for the requesting party and CBP mails the FIRMS code to the requesting party. However, CBP headquarters will continue to oversee the process.

Comment:

CBP should require the reporting of the FIRMS code of the bonded location “at which the in-bond merchandise is arrived” instead of the physical location of the in-bond merchandise within the port. For shipments that will be exported across a land border, CBP should accept an alternate location code if a FIRMS code does not exist for the location where the goods will be exported.

CBP Response:

CBP is requiring in § 18.1(j) that the bonded carrier report the FIRMS code for the arrival of all in-bond merchandise at the destination port and port of exportation.

14. Destination

Comment:

The reporting of the “ultimate destination” is a new requirement and CBP should explain what “ultimate destination” means. The carrier that files the electronic in-bond application has no way to know the “ultimate destination” of a particular in-bond shipment. The carrier can only provide CBP with information about the final destination of the cargo movement under the carrier's contract of carriage with the shipper. The carrier does not know what the shipper does with the cargo after the carrier has delivered the cargo according to the contract of carriage. The proposed rule should be amended to clarify that for a carrier filing an in-bond application the final destination of the cargo movement under the carrier's contract of carriage with the shipper is acceptable.

CBP Response:

To address the comment above and avoid inconsistency with other export control laws and regulations, CBP is no longer using the term “ultimate destination” in § 18.1(d)(1)(vi). CBP is making changes to § 18.1(d)(1)(vi) to clarify that for IT shipments, the port of destination in the United States must be provided, and for T&E and IE shipments, the port of exportation and the first foreign port must be provided.

Comment:

Any requirements associated with the destination beyond the port code could significantly erode the confidentiality of sensitive customer information.

CBP Response:

CBP routinely considers commercial information on entry documents as confidential business information protected by the Trade Secrets Act, 18 U.S.C. 1905, and therefore subject to exemption 4 of the Freedom of Information Act (FOIA) protecting trade secrets and commercial or financial information. CBP does not require businesses to designate that information as confidential.

See

19 CFR 103.35. CBP would consider the destination of the in-bond merchandise to be confidential and privileged under exemption 4 of the FOIA and would not release this information.

Comment:

There is often a need to move in-bond jet fuel to airports that operate with international flights.

Current systems allow for the use of a multi-destination field. CBP should recognize the operational realities of the jet fuel and airline business and specifically address in the final rule that in-bond movements with multiple destinations may continue to be used.

CBP Response:

This rule will not specifically address multi-destination fields currently used in some situations to move jet fuel in-bond. This is an operational issue. However, CBP is not planning to limit or stop the use of this practice at this time.

C. In-Transit Time

1. In-Transit Time Generally

Comment:

The proposed 30-day transit time is sufficient to arrive at the destination port. It is more than sufficient time for carriers to enter and exit the United States with Canadian domestic goods.

CBP Response:

CBP agrees with these comments, except with respect to in-bond shipments transported by barge, as addressed below.

2. In-Bond Shipments Transported by Barge

Comment:

The current 60-day in-transit time for in-bond shipments that travel by barge should be preserved. Barge delivery times frequently exceed 30 days. Industry data indicates that average barge transit times between 26 common origination and destination points for inland barge transportation routinely exceed the proposed 30-day in-transit time. In addition to average transit times that may exceed 30 days, barge in-transit times are also frequently impacted by other factors such as fog, icing, high water, low water, lock closure, maintenance, and congestion that further lengthen transit times beyond 30 days.

CBP Response:

Due to the special circumstances noted above pertaining to travel by barge, CBP agrees that the proposed 30-day in-transit time for in-bond shipments transported by barge is not adequate and is changing proposed § 18.1(i)(1) to allow for a 60-day in-transit time for barge shipments.

3. Extension of In-Transit Time

Comment:

Requests for an extension of the 30-day in-transit time should be considered approved unless CBP denies the request. The process should be automated and extensions should be granted in 30-day timeframes. The process for requesting an extension should be explained in more detail.

CBP Response:

CBP disagrees that extensions should be automatically approved. CBP will consider on a case-by-case basis whether to grant an extension of the in-transit time period and if so, the length of the extension. CBP is changing proposed § 18.1(i)(2) to clarify that the decision to extend the in-transit time period is within the discretion of CBP. CBP is also changing proposed § 18.1(i)(2) to provide factors that may be considered in its decision, which include extraordinary circumstances beyond the control of the parties.

With regard to automation, the functionality does not currently exist to accept and approve extensions electronically via electronic EDI. Accordingly, all requests for an extension must be made to the port director of the port of destination or port of exportation, as appropriate. See § 18.1(i)(2).

Comment:

CBP should issue the denial of an extension request within 24 hours of the request and provide a reason for the denial.

CBP Response:

CBP will consider each extension request on a case-by-case basis and will endeavor to issue any denials within 24 hours of receiving the request. CBP will not provide the reason for denying an extension request since the request may be denied for law enforcement purposes.

Comment:

CBP should continue to take into account and provide extensions for rail cars that have been delayed due to rail cars being unavailable to transport in-bond merchandise or due to other transit issues. CBP should continue to provide reasonable relief from the 30-day limit.

CBP Response:

CBP will consider requests for extensions on a case-by-case basis.

Comment:

Can the request for an extension be made for all cargo covered on the bill of lading, or must the request for an extension be made for each individual in-bond entry?

CBP Response:

A request for an extension must be made for each individual in-bond entry. CBP will not grant a blanket extension for all shipments covered by a bill of lading.

Comment:

The proposed rule states CBP may extend the in-transit time if delays are caused due to the examination or inspection of the merchandise by CBP or another government agency. Because this issue can result in irregular deliveries due to no fault of the carrier, CBP should change “may extend” to “will extend.” The in-transit timeframe should be revised to account for the delay and recorded as part of the in-bond application record and communicated to the in-bond filer.

CBP Response:

CBP agrees that proposed § 18.1(i)(1) should be changed to address this issue. The new text will state that when the merchandise is subject to examination or inspection by CBP or another government agency, the time for which the merchandise is held due to the examination or inspection will not be considered part of the in-transit time. Because of this change, it is unnecessary to change “may extend” to “will extend.”

Comment:

CBP should provide examples of circumstances in which CBP will grant an extension “for some other reason.”

CBP Response:

In order to clarify proposed § 18.1(i)(2), CBP is removing the phrase “for some other reason.” In its place, CBP is changing proposed § 18.1(i)(2) to provide factors that may be considered in its decision to extend the in-transit time period. CBP will consider all requests for an extension on a case-by-case basis.

Comment:

Some in-bond shipments cannot be made within the mandatory in-transit time due to logistical issues that are beyond the control of the shipper. For example, a vessel shipment may contain 50 coils of steel, which would need to be divided into at least 25 truckloads. Due to truck shortages and bad weather it is not uncommon for shipments to take longer than the in-transit time for trucks of 30 days.

CBP Response:

CBP will take into account logistical issues such as the one described above when considering a request for an extension of the in-transit time.

4. Shortening of In-Transit Time

Comment:

Proposed § 18.1(i)(3) provides that CBP may shorten the in-transit time. CBP should clarify and explain why the in-transit time would ever need to be shortened once the application has been authorized and no holds have been placed on the shipment. CBP should provide more information and justification as to when this authority might be exercised so that the trade can more adequately comment.

CBP Response:

The in-transit time will only be shortened when required by another agency's transit requirements. The primary reason why CBP would shorten the in-transit time would be to comply with U.S. Department of Agriculture (USDA) statutory requirements related to merchandise moving on a USDA permit. Other government agencies may also require shortened transit periods.

Comment:

Does the proposal that “CBP will provide notice of a CBP-shortened in-transit time with the movement authorization,” include

notification by other government agencies of shortened in-transit times? CBP needs to ensure that there are procedural protections for the importer and the carrier to avoid arbitrary and costly restrictions.

CBP Response:

The in-transit time will only be shortened in order to comply with another agency's transit requirements. CBP will provide notice to the carrier to facilitate compliance. To clarify this, CBP is changing proposed § 18.1(i)(3) to provide that “CBP will provide notice of a government-shortened in-transit time with the movement authorization.”

Comment:

The “shortened in-transit time” information should be transmitted as a distinct data element or disposition code that is sent to filers. This code will ensure that the carrier will be aware of the restriction, and the carrier may then examine the text explanation of the shortened time for the details of the restriction. Instructions from CBP that require the trade to take any action must not be included as a remark to formal status messages because free form messages may be mistyped by the initiator, truncated by the system, or misinterpreted by the recipient.

CBP Response:

CBP will communicate to the carrier via EDI when the in-transit time has been shortened. CBP agrees that the creation of a disposition code is a good idea and will endeavor to create a new disposition code for this purpose.

5. Start of In-Transit Time

Comment:

The current regulations begin the running of the 30-day in-transit time at the time the forwarding carrier receives the merchandise. In many seaports, it is not uncommon for containers to be delayed within a port terminal for myriad reasons, two to four days on average, before they are delivered to the forwarding carrier. Beginning the in-transit time from the time of the filing of the in-bond application does not take these routine delays into account. The language of existing § 18.2(c)(2) that allows the forwarding carrier to report the date on which it received the merchandise at the port of arrival from the importing carrier should be retained.

CBP Response:

CBP has analyzed in-bond movements including intermodal movements and determined that beginning the in-transit time at the time of filing the application would not seriously impinge on the 30-day (60-day for barges) in-transit time to deliver the cargo, even, taking into account a 2- to 4-day delay at the port. Requiring the forwarding carrier to report when it receives the merchandise makes determining when the in-transit time begins more cumbersome, and makes the system dependent on a party whose bond may not be obligated. Extensions of the transit time can be requested in the event of a delay at the port.

Comment:

In the ocean environment, in-bond authorization may be provided up to 30 days prior to vessel arrival at the first U.S. seaport. Taking this into account, the 30-day transit time should not start until the conveyance has arrived at the first U.S. port and all government holds have been removed.

CBP Response:

CBP agrees. CBP is changing proposed § 18.1(i)(1) to provide that the in-transit time will not begin until vessel arrival or CBP movement authorization, whichever is later.

Comment:

In-bond merchandise traveling through the United States and destined for Mexico often requires several days at the port of exportation on the United States-Mexico border for various legitimate reasons before the merchandise can be imported into Mexico. Generally, the merchandise is transported to the port of exportation by the originating bonded carrier. Next, a new in-bond application is filed and the merchandise and bond liability is transferred to a local bonded carrier for exportation to Mexico. Taking commercial realities of importing goods into Mexico into consideration, if the originating bonded carrier arrives at the port of exportation without a sufficient number of days remaining before the expiration of the 30-day maximum time period, it will be difficult to find a succeeding bonded carrier to accept liability for the merchandise knowing that delays are anticipated and there is high risk of not being able to export the merchandise timely. This will likely cause in-bond merchandise to have to enter a foreign trade zone or customs bonded warehouse to avoid liquidated damages for irregular delivery. Alternatively, Mexican importers may divert this business outside of the United States for direct shipment to a Mexican sea port, which would be devastating for the local bonded carriers in Laredo, Texas.

CBP Response:

CBP recognizes that there are many circumstances in which it may not be practicable to export in-bond merchandise within 15 days of arrival at the port of exportation. However, shippers will be responsible for ensuring that basic logistical issues are resolved. In the scenario presented, the originating bonded carrier will have 30 days in which to deliver the merchandise to the port of exportation, at which point the arrival must be reported within two business days. The reporting of the arrival of the merchandise at the destination port completes the in-bond movement for purposes of meeting the in-transit time requirements. The merchandise must then be exported within 15 days. If the merchandise cannot be exported within 15 days after arrival, the original bonded carrier can file an immediate exportation entry. This will provide an additional 15 days in which to export the merchandise. The carrier can also request permission to retain the goods within the port limits for an additional 90 days pursuant to § 18.24 or admit the merchandise into a FTZ, before the 15-day limit expires.

6. Procedures

Comment:

All parties involved in an in-bond shipment should be able to verify when the in-bond shipment was authorized for movement and whether they are delivering the merchandise within the required timeframe.

CBP Response:

Within ACE, the carrier filing the in-bond application has the ability to provide multiple Secondary Notify Parties (SNPs). SNPs receive the same status messages as the carrier. It is up to the parties involved in the transportation of the merchandise to ensure that the appropriate parties are designated as SNPs.

Comment:

Receipt of messages is a major issue for some non-vessel operating common carriers (NVOCCs). NVOCCs must be nominated by the vessel operating carrier (VOC) as a SNP in order to receive all status messages. Many VOCs have system constraints and can only accommodate one NVOCC per Master Bill of Lading even though AMS and ACE can accommodate more. An NVOCC automatically becomes a SNP when it creates an in-bond. However, it only receives status messages from the time it creates the in-bond.

CBP Response:

SNPs receive the same status messages as the carrier. CBP already provides the ability to provide multiple SNPs within ACE. It is the responsibility of the parties involved in the transportation of the merchandise to ensure that the appropriate parties are designated as SNPs.

7. Intermodal Transportation

Comment:

The reduction in in-transit times between ports from 60 days to 30 days is insufficient for those shippers who are moving goods with a mix of intermodal transportation (rail, barge and truck) and it might be difficult to meet the new 30-day requirement in these situations. This is especially true for those using barge movements. CBP should consider either keeping the current 60-day requirement for barges or

providing an exemption similar to what has been granted for pipelines.

CBP Response:

As indicated in Section I.B.1., In-Transit Time for Shipments Transported by Barge, CBP is changing the proposed in-transit time for in-bond shipments transported by barge to 60 days. In this final rule, CBP is providing in § 18.1(i) that if any portion of the movement involves the movement of goods on a barge, the 60-day transit time will apply.

Comment:

Which time period applies when there is a movement of petroleum products that involves the use of truck and pipeline? For instance, jet fuel could be moved in-bond via pipeline then transferred to a truck destined for an international airport. This movement could take significantly longer than 30 days. CBP should clarify whether the 30-day transit time applies to the entire movement when part of the movement involves transportation via pipeline.

CBP Response:

The initial pipeline movement is an in-bond movement, but the duration of that transit time would not be included in the 30-day transit time limitation. To clarify this, CBP is adding a sentence to proposed § 18.1(i)(1) that expressly excludes pipeline shipments from the provisions of that section.

8. Report of Arrival

Comment:

CBP proposes to reduce the arrival notification timeframe for an in-bond from two working days to 24 hours. Due to the mandatory electronic submission of in-bonds and the ability for any party to generate an in-bond without proper notification to all parties, it will be nearly impossible for a manual data entry process to happen within 24 hours when many in-bond shipments arrive over the weekend and holidays. CBP should retain the current 48-hour arrival timeframe or extend it to 72 hours to accommodate the various business models in the trade and lessen the cost of complying with the proposed rule.

CBP Response:

CBP agrees that the 24-hour notification timeframe is too short. CBP is changing proposed § 8.1(j) to require the report of arrival to be filed within two business days after arrival at the destination port.

Comment:

If CBP approval is required prior to removing the seal, this may impact the carrier's ability to timely report the arrival of the in-bond cargo.

CBP Response:

Except as provided for in § 18.4, a sealed container cannot be opened prior to the reporting of the arrival. Pursuant to § 18.4(c), if it becomes necessary to remove seals for good reason, a responsible agent of the carrier may remove the seals, supervise the transfer or handling of the merchandise and seal the conveyance, compartment, or container. CBP approval is not required. Once the arrival has been reported, the container can be opened and the in-bond merchandise removed.

Comment:

For rail movements there are several check points within the port of destination area and it can take up to three to four days before the shipment finally reaches the point of unloading for vessel exports. What will be the point at which the arrival must be transmitted?

CBP Response:

The arrival must be reported at the first point of arrival within the destination port.

Comment:

The impact of the arrival on the transit and general order clock is significant to zone operations. It is imperative for CBP to explain the ramifications of arrival on both the transit clock and the transfer of bond liability.

CBP Response:

The reporting of the arrival of the merchandise at the destination port completes the in-bond movement for purposes of meeting the in-transit time requirements. The arrival of the in-bond merchandise, however, does not transfer bond liability. The party whose bond is obligated is liable until the in-bond is closed out by the in-bond merchandise being exported, entered for consumption, admitted into an FTZ, or entered through the filing of some other type of entry.

Comment:

Under the proposed rule, will the in-transit clock stop for an entire in-bond shipment when the first portion of an in-bond shipment arrives at the port of exportation or destination port?

CBP Response:

The arrival of a portion of shipment at the destination port will not stop the transit period for the remainder of the shipment that has not yet arrived at the port. For multiple container movements, the arrival will be performed at the equipment/container level. This means that each equipment/container must arrive within 30 days and each equipment/container must be reported as arrived within two business days after its arrival.

9. General Order Merchandise

Comment:

Does the reporting of arrival pursuant to proposed § 18.1(j) stop the in-transit clock and begin the general order clock of 15 days as provided in proposed § 18.1(k)?

CBP Response:

No. Subsection 18.1(j) requires the report of arrival of any portion of a shipment after it arrives at the port. Only the arrival of the full shipment of in-bond merchandise at the destination port or the port of exportation, not the reporting of arrival, stops the in-transit time and begins the 15-day general order period.

Comment:

Reporting the arrival of the in-bond shipment at the destination port when the first portion of the shipment arrives and remaining portions have not arrived, creates a significant issue with the management of the general order clock. Allowing the clock to run on goods that may not have physically arrived creates a potential gap in the control of in-bond merchandise because merchandise that has “arrived” may not be physically present.

CBP Response:

CBP agrees that the general order clock should begin when the last portion of the in-bond shipment arrives. Therefore, CBP is changing proposed § 18.1(k) to provide that the 15-day period for general order merchandise begins on the date of arrival “of the entire in-bond shipment” at the port of destination or port of exportation. When only a portion of a shipment arrives at the port of destination or port of exportation, the general order clock will generally not begin until the last portion of the shipment arrives. However, if part of a shipment does not arrive within the timeframe for completing the in-bond movement (30 days in most cases), the general order clock for the merchandise that has already arrived will start to run at the end of the applicable timeframe for completing the in-bond movement.

Comment:

CBP should clarify that the total proposed in-bond transit time from the time of in-bond application authorization to the time of entry at the port of destination or export at port of exportation is a total of 45 days unless an extension has been granted.

CBP Response:

The maximum in-transit time from the time of authorization of the in-bond application to arrival at the destination port is 30 days or 60 days for barges. Once the merchandise has arrived, the merchandise must either be entered or exported within 15 days of arrival or it will be subject to General Order and required notifications must be provided. It is incorrect to think that CBP will combine the two periods.

Comment:

Reference to FTZ admission is omitted from the language regarding potential events that prevent goods from being sent to General Order. The language in proposed § 18.1(k) should be revised to include FTZ admission, such as: “Any merchandise covered by an in-bond shipment (including carnets) that has arrived at the port of destination or the port of exportation must be entered, exported or admitted to a foreign-trade zone pursuant to this part within 15 days

from the date of arrival at the port of destination or port of exportation, or in the case of goods authorized for direct delivery destined to a foreign-trade zone, within 15 days of the arrival at the zone or subzone pursuant to § 146.40(c)(3).”

CBP Response:

CBP concurs that admission into an FTZ should be included as a means to prevent merchandise from going into General Order and is changing proposed § 18.1(k) accordingly. It is not necessary to include language regarding direct delivery pursuant to § 146.40 because the general reference to admission into an FTZ encompasses the procedures provided for in part 146.

Comment:

It is unclear how limiting the time to 15 days will help CBP verify that the in-bond merchandise was, in fact, exported or entered.

CBP Response:

The requirement to enter or export merchandise within 15 days of arrival at the destination port is consistent with existing regulations and is generally the current practice. See §§ 4.37, 18.12(d), 122.50, and 123.10. The changes in proposed §§ 18.1(k), 18.7, 18.12, 18.20, 18.25 and 18.26 are to ensure that there is uniformity within the customs regulations on this point.

Comment:

The 15-day requirement to export or enter in-bond merchandise under proposed § 18.1(k) or to export merchandise pursuant to proposed §§ 18.7(a)(2), 18.20(f), 18.25(c) and 18.26(d) is not reasonable in many cases for goods intended to be exported by ocean carrier and for some petroleum shipments. Shippers sometimes need to hold in-bond merchandise after it has arrived in order to consolidate shipments from various vendors, which can take longer than 15 days. Merchandise to be exported by ocean carrier can only be exported according to the schedule of the vessel bound for the foreign destination of the goods. Ocean carriers do not call at each port of exportation every 15 days for every foreign destination. In many cases goods are required to remain at the port of exportation after arrival for periods longer than the proposed 15-day limit. Similarly, many petroleum products that move in-bond cannot be exported within 15 days of arrival due to infrastructure limitations. CBP should revisit this provision to either extend the 15-day time period to a minimum of 30 days or clarify that standing exceptions to the 15-day requirement to export product will be provided by CBP based on the operational realities that exist for these type of product in-bond movements.

CBP Response:

The 15-day requirement to export or enter the in-bond merchandise is an existing requirement and is not a change to the GO requirements. CBP will not extend the timeframe to 30 days as this would be inconsistent with other regulations governing General Order merchandise. However, § 18.24(a) (Retention of goods within port limits) authorizes the port director to allow in-transit merchandise to remain within the port limits for up to 90 days. Additional 90-day extensions may be granted for up to one year from the date of arrival. Carriers can request an extension when they cannot export within 15 days of arrival due to scheduling or other issues.

D. Transfers

Comment:

CBP received several comments regarding the transshipment provision in proposed § 18.3, which provides the procedures to be followed when in-bond merchandise is transferred from one conveyance to another. The main concern was with the requirement to report to CBP each time the merchandise was transferred from one conveyance to another. Because in-bond merchandise may be transferred several times during the course of its journey, this reporting requirement places a substantial burden on the bonded carrier liable under the bond.

CBP Response:

CBP has taken these concerns into consideration and agrees that CBP does not need to be notified when in-bond merchandise is transferred from one conveyance to another. Accordingly, CBP is changing proposed § 18.3 by removing the requirement to notify CBP when merchandise is transferred from one conveyance to another and by clarifying when in-bond merchandise is transferred to a subsequent bonded carrier that assumes liability for the merchandise, a report of arrival must be filed for the in-bond shipment and the subsequent carrier must submit a new in-bond application pursuant to § 18.1.

Comment:

A new in-bond application should be required when another bond is obligated. Since the notification of transshipment must include the name of the bonded carrier receiving the merchandise for shipment to the port of destination or port of exportation, it is implied that there could be a change of carriers. Is liability for the merchandise transferred to the new carrier's bond or is a new in-bond application required to transfer the liability?

CBP Response:

CBP agrees that a new in-bond application is necessary when a different bond is obligated. Therefore, CBP is changing proposed § 18.3 in the final rule to require that when merchandise is transferred to a bonded carrier that assumes the liability of the in-bond shipment, a report of arrival must be filed for the in-bond shipment and the subsequent carrier must submit a new in-bond application pursuant to § 18.1 for the merchandise to be transported in-bond.

Comment:

Proposed § 18.3(a) requires that the notification to CBP via EDI be done before the merchandise can be transshipped, but proposed § 18.3(b) includes no such stipulation. CBP should make the requirements consistent for transshipment to a single conveyance (18.3(a)) and transshipment to multiple conveyances (18.3(b)).

CBP Response:

The change that CBP is making to proposed § 18.3,

i.e.,

removing the requirement to notify CBP when merchandise is transferred from one conveyance to another, addresses the concerns expressed in this comment.

Comment:

The carrier's difficulties in verifying the quantity of the merchandise to the piece count level is exacerbated when multiple carriers are involved. Because the transfer to multiple conveyances adds an additional level of complexity as compared to a transfer to a single conveyance, the potential for irregularities in the reporting and exchange of data in these situations is more prevalent.

CBP Response:

The change that CBP is making to proposed § 18.3,

i.e.,

removing the requirement to notify CBP when merchandise is transshipped from one conveyance to another, reduces the likelihood of irregularities that may result in reporting and exchanging of data.

Comment:

How will the trade identify the bonded carrier? It is assumed the bonded carrier can be identified by their SCAC code and/or EIN number where available. Please clarify in the final rule.

CBP Response:

The bonded carrier will be identified by the carrier's SCAC or tax identification number (EIN), or, for air carriers, the International Air Transport Association (IATA) number.

Comment:

The proposal to require the in-bond carrier to report, via EDI, the transfer of in-bond merchandise from one conveyance to another, presents a number of problems and questions. An ocean carrier that files an in-bond application, and on whose bond the shipment is authorized, often will assume the transportation responsibility for arranging the delivery of the goods to the in-bond destination, and this frequently involves numerous intermodal transshipments. Proposed § 18.3(b) and (c) would require the bonded carrier to provide multiple EDI notifications to CBP. This would make

the continued efficient transportation of such cargo impossible.

CBP Response:

The change that CBP is making to proposed § 18.3,

i.e.,

removing the requirement to notify CBP when merchandise is transferred from one conveyance to another, addresses the concerns in this comment.

E. Sealing of Conveyances and Reporting of Seal Numbers

Comment:

CBP should clarify or define the term “container” as used in this rule. Does the requirement to seal containers only apply to “containers” as defined by the Customs Convention on Containers or does it include all road (trucks and truck trailers) and rail (rail cars and truck trailers on rail cars) conveyances?

CBP Response:

The § 18.4 seal requirements apply to containers that can be sealed. This includes truck and rail conveyances. For further information about what are considered containers for CBP purposes see part 115 of the CBP regulations governing containers. The seal requirements for air cargo are specified in § 122.92 and are discussed in section G below.

Comment:

The seal and container numbers should not be mandatory data elements. CBP would have the ability to verify the application of seals prior to movement and upon arrival. Seal numbers are not always available at the time of the in-bond transmission, especially if the in-bond request is made by an authorized party other than the carrier that loads the cargo. Providing the seal and container number with the in-bond request will only add minimum assurance that the goods have been properly controlled. Most carrier manifest systems currently do not capture the seal or container number. However, they do have elaborate scanning systems to track the progress of packages as they are sorted and loaded during transportation and movement, which allows for quick identification and location of a shipment in the event CBP chooses to inspect an in-bond shipment at any point in the supply chain. A provision to add the seal number after the initial in-bond request is made should be included.

CBP Response:

CBP does not agree that the seal and container numbers should be optional information. Requiring carriers to provide the seal number and container number as part of the in-bond application facilitates CBP's ability to ensure the safety and security of in-bond merchandise. To address the issue of carriers not knowing seal numbers at the time the in-bond application is filed, CBP is changing proposed § 18.1(d)(1)(v) to provide that “[i]f, at the time of the filing of the in-bond application, the seal number is not known, the in-bond application must be updated with the seal number within two business days of the date the bonded carrier obtains a seal number. CBP is also changing proposed § 18.4(c) so that in the event that it becomes necessary to remove and replace seals from a conveyance, compartment, or container containing bonded merchandise, updated seal numbers must be transmitted to CBP. The requirements to keep in-bond merchandise sealed, and to re-seal unsealed merchandise, throughout the in-bond movement remains, and the party whose bond is obligated will be liable for liquidated damages for any loss, theft, or irregular delivery.

Comment:

CBP should clarify that the container and seal numbers do not need to be filed as part of the in-bond application because they have already been reported to CBP as part of the advance electronic manifest.

CBP Response:

The container and seal number information on the advance manifest will be automatically associated with the in-bond application. Therefore, if the container and seal number have already been provided on the advance manifest, the filer of the in-bond application will not have to resubmit the container and seal number as part of the in-bond application.

Comment:

Proposed § 18.3(d)(1) specifically permits the breaking of CBP seals in emergency situations. CBP should specify that any responsible agent of the carrier may remove and replace seals at any time for any good reason. The requirement in proposed §§ 18.3(d) and 18.4(c) to obtain CBP permission to break and replace a seal, and to update the in-bond record would place a significant burden on the carrier.

CBP Response:

To address this comment and for clarity, CBP is making the following changes to the proposed sections regarding seals. First, CBP is moving some language about seal removal from proposed § 18.3 and is addressing the circumstances for removing seals in § 18.4. Proposed § 18.3(d)(1), which covers the transfer (transshipment) of in-bond merchandise from one conveyance to another, allows for the breaking of seals in case of an emergency or for some other reason. CBP has concluded that the rules about when seals can be removed would fit better within § 18.4 which applies to the sealing of conveyances.

Second, CBP is changing proposed § 18.4 in the final rule to make it less restrictive. CBP agrees that a responsible agent of the carrier should be able to remove and replace seals for good reason and not just in emergencies. In response to concerns that the requirement to obtain CBP permission to break and replace a seal and to update the in-bond record with the new seal information would place a significant burden on in-bond carriers and to facilitate processing of in-bond shipments, CBP is removing these requirements and allowing a responsible agent of the carrier to remove the seals and reseal the merchandise. Specifically, CBP is changing proposed § 18.4 in the final rule to provide that seals may be removed for the purpose of transferring in-bond merchandise to another conveyance, compartment or container, or to gain access to the shipment because of casualty or for other good reason, such as when required by law enforcement or another government agency.

Comment:

C-TPAT partners should be exempt from the requirement to provide seal numbers. Encouraging carriers to join programs such as C-TPAT will offer the additional assurance and controls CBP expects.

CBP Response:

CBP disagrees. Compliance with the in-bond regulations, including those pertaining to the sealing requirements, complements supply chain security and efficiency procedures being implemented by C-TPAT partners. However, C-TPAT membership will continue to be a relevant factor for targeting purposes.

Comment:

Proposed § 18.4(b)(1) states that merchandise that is not covered by a bond may only be transported in a sealed conveyance or compartment that contains bonded merchandise if the merchandise is destined for the same or subsequent port as the bonded merchandise. CBP should recognize that less than carload or container load (LTL) in-bond shipments may move in conveyances, commingled with non-bonded merchandise, that are not sealed. This is a normal operating practice in domestic truck operations where numerous shipments are commingled on trailers and transferred, sometimes multiple times, during the life cycle of the shipment. CBP should allow flexibility for this requirement for LTL carriers, allowing them to commingle freight.

CBP Response:

CBP agrees that the proposed limitations on transporting in-bond merchandise with non-bonded merchandise could hamper the transportation of in-bond merchandise, especially for LTL shipments. Accordingly, CBP is changing the sealing requirements in proposed § 18.4 by adding new paragraph (b)(2) allowing

for the transportation of in-bond merchandise with non-bonded merchandise in a container or compartment that is not sealed, if the in-bond merchandise is corded and sealed, or labeled as in-bond merchandise. This will allow in-bond merchandise to be transported with non-bonded merchandise in a container that is not sealed and will facilitate the use of less than container load shipments.

Comment:

How would a filer/carrier apply for the waiver of seal requirements as mentioned in proposed § 18.4(a)(2)?

CBP Response:

A request for a waiver of the sealing requirement can submitted by indicating that there is “no seal” when filing the in-bond application. If CBP has concerns regarding the lack of a seal, CBP may require additional information or reject the in-bond application.

Comment:

The regulatory text regarding the removal and breaking of seals should be changed so that seals must remain intact at all times except for transfer operations covered under §§ 18.3(b), 18.3(c), 18.3(d) and bonded warehouse operations covered under § 19.6(e), in which case the breaking and affixing of new seals by the responsible party per 18.1(c) is authorized. Failure to keep the seals intact and/or remove the seals without CBP permission should result in the assessment of liquidated damages. This will act as a deterrent to theft and substitution. Furthermore, the unauthorized breaking of seal acts as a notification to the bonded carrier that something may be amiss.

CBP Response:

The proposed suggestions regarding the removal and breaking of seals is too restrictive and is not necessary for security purposes. The requirements in § 18.4 of this rule adequately address these security issues without impeding the movement of the goods. By allowing for the removal of seals and requiring that new seals be affixed by a responsible agent of the carrier, CBP is providing flexibility so that the transport of the in-bond merchandise can be completed while still maintaining the integrity of the shipment.

Comment:

CBP should change the requirements in proposed § 18.3 so that CBP authorization is not required in order to remove seals in order to transfer in-bond merchandise from one conveyance to another.

CBP Response:

With the change that CBP is making to proposed § 18.3,

i.e.,

removing the requirement to notify CBP when merchandise is transferred from one conveyance to another, the concerns in this comment have been addressed.

Comment:

How will CBP handle trucks that are stopped for a potential road violation where the driver is required to open the truck by the highway patrol or other governmental agency resulting in the seal that was used for the movement of in-bond merchandise being broken?

CBP Response:

CBP is changing proposed § 18.4(c) in the final rule to allow for the removal of seals for good reason and, as discussed in a prior response, require new seals to be affixed by a responsible agent of the carrier. Accordingly, if the responsible agent of a carrier,

e.g.,

the driver, is required to open a sealed container by local law enforcement or other governmental agency, the agent can replace the broken seal with a new seal.

Comment:

As unforeseen circumstances not contemplated by proposed § 18.3(d) could arise, we suggest that the language be updated to read “removal of seals without CBP permission may result in the assessment of liquidated damages.”

CBP Response:

As discussed in a prior response, CBP permission will not be needed to remove seals. However, the party whose bond is obligated will be liable for liquidated damages for any loss, theft, or irregular delivery of the in-bond merchandise.

Comment:

Proposed § 18.4(a)(1) states, “The seals to be used and the method for sealing conveyances, compartments, or packages must meet the requirements of §§ 24.13 and 24.13a of this chapter [19 CFR].” Can CBP confirm that containerized ocean cargo shipments being transported in-bond that are secured with a high security seal meeting applicable ISO standards meet the requirements of these sections?

CBP Response:

The proposed regulations do not change any of the existing requirements regarding how containers are sealed and what types of seals are to be used. Containerized ocean cargo shipments being transported in-bond may be secured with a high security seal meeting applicable ISO standards, which meets CBP's requirements to seal containers transporting in-bond merchandise.

Comment:

CBP should require that trailers be sealed with ISO compliant high security seals when goods are being shipped in-transit through the United States or Canada.

CBP Response:

Proposed § 18.4 requires that in-bond merchandise be sealed in accordance with CBP regulations, specifically §§ 24.13 and 24.13a. However, it should be noted that C-TPAT members are required to use International Organization for Standardization (ISO) compliant seals by virtue of their participation in C-TPAT. As a result, many in-bond carriers use ISO compliant seals.

F. Air Cargo

Comment:

CBP needs to clarify the scope of this NPRM, which is confusing in respect to existing CBP air commerce regulations. It is not clear if air carriers would be subject to the new process supplemented by any specific provisions in part 122 (air commerce regulations), or if air carriers would not be affected and would be able to simply continue handling in bonds under only the provisions of part 122.

CBP Response:

The existing air commerce regulations in part 122 will continue to govern the movement of in-bond shipments by air, except for the maximum in-transit time. Under the existing regulations, the maximum in-transit time for air cargo transported in-bond is 15 days. Under proposed §§ 122.119 and 122.120 the maximum in-transit time for air cargo transported to another U.S. port is increased to 30 days. Proposed § 18.0 (Scope; definitions), provides that except as provided in parts 122 and 123, part 18 sets forth the requirements and procedures pertaining to the transportation of merchandise in-bond. Parts 122 (Air Commerce) and 123 (Customs Relations with Canada and Mexico) govern the rules and procedures for the transportation of in-bond merchandise, respectively, in the air environment and in-transit merchandise traveling through the United States, Canada or Mexico by truck and train. The provisions of part 18 are applicable to the in-bond procedures not specifically addressed in parts 122 and 123. For example, proposed § 18.8 governing the liability of in-bond carriers is applicable to all in-bond movements, regardless of the mode of transportation. Conversely, the provision of proposed § 18.4(a)(1) requiring the sealing of containers does not apply to in-bond merchandise traveling by air, because § 122.92(f) specifically provides that the sealing of aircraft, aircraft compartments carrying bonded merchandise, or the cording and sealing of bonded packages carried by the aircraft, is not required.

Comment:

With regard to the in-bond application process, air carriers are aware that ACE provides additional functionality to allow better visibility to and control of who obligates a carrier's bond. With the elimination of the 7512 paper form, air carriers will have no visibility to or ability to control who is obligating their bonds. Until such time as air is fully transitioned into ACE, CBP must provide air carriers with the

capability to view electronic in-bonds opened on their behalf and control who has the ability to obligate their bonds. One suggestion is to provide air carriers with the ability to open an ACE account to allow them the same access to in-bond reports and control tools that are available to ocean and rail carriers.

CBP Response:

When the notice of proposed rulemaking was issued, the functionality for filing electronic air in-bond applications for air shipments in ACE did not exist. However, this functionality was delivered through Air ACE (M2.1) on June 7, 2015. Currently, Air ACE permits an air carrier to view in-bond reports to see who is obligating its bonds. Although CBP intends to fully automate the in-bond process, including in-bond movements by air, changes to the regulations pertaining to in-bond movements by air will be handled under a separate rulemaking. Until such time, the 7512 paper form may still be used in the air environment.

Comment:

The proposed changes will force bonded carriers to operate in multiple CBP-approved electronic systems (ACE, Air AMS, and ABI QP/WP) when the mode of transportation changes as shipments are transported. This is a problem for express carriers that currently use Air AMS to process in-bond shipments. For example, it is common to have transit shipments arrive into the United States via truck and the electronic in-bond request submitted at the land border via ACE. The shipment subsequently departs the United States via air. CBP should provide status messages between ACE and Air AMS, allowing for the electronic arrival and exportation of these bonded shipments via AMS for the proper closure in CBP systems. Without this electronic interface, the bonded carrier would have no choice but to provide paper in-bonds to CBP for proper exportation. If CBP does not provide status updates between EDI systems, the bonded entity will have a tremendous administrative burden to track all in-bond shipments opened in ACE, which would require “manual” posting in ACE (arrival/exportation). This issue is further compounded when transportation services are shared between multiple business units within the same entity.

CBP Response:

CBP tracks the in-bond merchandise based on the mode in which the in-bond application was filed, regardless of what other modes of transportation are used to transport the in-bond merchandise. Accordingly, if the in-bond movement starts out in air, it remains an air in-bond entry for tracking purposes until the in-bond merchandise arrives at the destination port, port of exportation, or the in-bond is closed and a new in-bond is initiated in another mode of transportation. The movement will be tracked according to the new mode of transportation when a new in-bond number is created as the result of a new in-bond application.

CBP has established multi-modal electronic procedures within ABI (QP/WP) that will allow any authorized party to file an in-bond application electronically regardless of the mode of transportation. QP is used to initiate the in-bond application and WP is used to arrive/export the in-bond shipment. As of June 7, 2015, QP/WP can be used for all in-bond transactions, regardless of mode. This provides tracking of in-bond transactions between various modes and tracking history within ACE.

Comment:

Air carriers request that CBP clearly define the requirements and procedures for intermodal in-bond transfers prior to any implementation of this rule. Currently, other transport modes provide a CBP Form 7512 with shipments that are moving to an air carrier, and the air carrier delivers the CBP Form 7512 to CBP at the port of exportation or destination to close the in-bond. The air carrier regulations at §§ 122.92 and 122.93 specifically state that form 7512 or “other Customs approved document” shall be delivered to the carrier at the in-bond origin, and the carrier shall deliver that to the port director at the in-bond destination port. What will be the process for reconciling “intermodal-to-air” in-bonds in the absence of a 7512 paper form?

CBP Response:

QP/WP now can be used for all in-bond transactions, regardless of mode, and provides tracking of in-bond transactions between various modes and tracking history within ACE. Whether the initial in-bond is filed in ocean, rail, truck or air, the in-bond movement will be tracked by CBP in the mode in which it was opened. In such case, the in-bond can be closed with an electronic filing upon arrival at the destination port.

Comment:

Air carriers utilize “unit load devices” (ULDs) which are totally dissimilar in structural integrity from an ocean container. Aircraft also have multiple areas used for transport of cargo, whether loaded in ULDs or loose. Does CBP consider ULDs and these areas “compartments” that might be subject to sealing under the proposed rule?

CBP Response:

The sealing and labeling requirements for in-bond merchandise transported by air are specified in §§ 122.92(f) and 122.92(g), respectively. Section 122.92(f) does not require the sealing of aircraft compartments carrying in-bond merchandise, or the cording and sealing of bonded packages. However, § 122.92(g) requires bonded packages to be affixed with the label provided for in proposed § 18.4(b)(3). Therefore, pursuant to § 122.92(f), ULDs used in aircraft do not have to be sealed. However, in-bond merchandise inside of ULDs must be labeled pursuant to § 122.92(g), which requires the affixing of labels as provided for in proposed § 18.4(b)(3).

Comment:

Do the timeframes for notifying CBP of arrival contained in proposed §§ 18.1(j) (Report of Arrival), 18.7(a)(1) (Lading for Exportation, Notice), and 18.20(c) (Entry Procedures), apply to air cargo moving in-bond via truck to the port of destination, since there are no arrival timelines provided in § 122.93?

CBP Response:

If the movement is an air in-bond movement initiated under part 122, the notice of arrival procedures contained in § 122.93 are applicable. As of June 7, 2015, air carriers can submit the notice of arrival electronically in ACE.

Comment:

Considering the existence of § 122.94 which places no restrictions on divided shipments, what is the exact application of the proposed § 18.24(b) language to air with regard to the submission of new in-bond applications and time limits for initiation of divided shipment movements?

CBP Response:

Proposed § 18.24(b) does not apply to air shipments of in-bond merchandise. Sections 122.93 and 122.94 specify the procedures for exporting air in-bond merchandise, including the handling of divided shipments at the port of exportation for in-bond merchandise transported by air.

Comment:

CBP should revise existing § 122.92 which allows for three copies of an air waybill for T&E, because CBP has indicated that the core intent is to automate the in-bond process.

CBP Response:

Although CBP intends to fully automate the in-bond process, including in-bond movements by air, changes to the regulations pertaining to in-bond movements by air will be handled under a separate rulemaking. Until that rulemaking process is completed, § 122.92 applies to in-bond movements by air.

G. Liability of the Parties

Comment:

The transfer of bond liability is currently based on signed paper documents, but it is unclear in a completely automated environment what “electronic” event triggers the transfer of liability and the obligation of a different bond.

CBP Response:

The transfer of liability to a new bonded party will be

accomplished by the filing and acceptance of a new in-bond application for the merchandise to be transported in-bond. CBP is changing proposed § 18.3 in the final rule to make this clear.

Comment:

Throughout the proposed regulations there are references to “the bonded carrier” but it is often unclear which bonded carrier has the liability for the cargo. As there may be more than one bonded entity involved in an in-bond movement (

e.g.,

arriving carrier, delivering carrier, export carrier, FTZ operator), a clear understanding is required of the events and evidence that would shift legal liability from one bonded party to another, particularly in an electronic environment.

CBP Response:

For further clarification, CBP is adding a definition to proposed § 18.0(b) for “bonded carrier.” This term is defined as the carrier whose bond is obligated for the in-bond movement of the merchandise as shown in the in-bond record. This party is liable for failure to meet the requirements of Part 18, Part 122 or Part 123 (as applicable) or any of the other conditions specified in the bond. CBP is also changing proposed § 18.3 in the final rule to clarify that in order to transfer liability from one carrier to another, a report of arrival must be filed for the in-bond merchandise and the subsequent carrier must submit a new in-bond application pursuant to § 18.1.

Comment:

Holding the bonded carrier liable for liquidated damages for failing to comply with any of the requirements found at Part 18 or any of the conditions specified in the bond is too broad. This affords CBP a general license to impose liquidated damages against bonded carriers for even minor and technical infractions such as unintended data transmission errors. CBP should assess liquidated damages only for egregious violations and other violations specifically listed, such as for irregular delivery.

CBP Response:

Liquidated damages are assessed when the conditions of the bond are violated. One of the conditions is to comply with CBP regulations relating to the handling of bonded merchandise.

See

§ 113.63(b)(3). CBP primarily ensures compliance with in-bond requirements, including those that the commenters have categorized as “minor and technical infractions,” through the assessment of liquidated damages. CBP disagrees that it should take action only with respect to egregious violations. The obligations established by regulation regarding the processing of in-bond entries and safekeeping of in-bond merchandise are necessary requirements. A breach of any of the obligations may result in the assessment of liquidated damages. The decision to assess any claim is one of administrative discretion, so CBP may always refrain from issuing a claim if deemed advisable. CBP may also choose to cancel liquidated damages claims upon payment of a lesser amount pursuant to 19 U.S.C. 1623(c) and has published guidelines when CBP deems that such action is appropriate.

Comment:

The bonded carrier should not be held liable for the submission of data elements for which it has no true knowledge of their accuracy.

CBP Response:

The carrier whose bond is obligated is responsible for the information submitted in conjunction with the in-bond application and subsequent updates to the in-bond record and is subject to the assessment of liquidated damages for not complying with the terms of the bond, which includes adherence to the in-bond regulations. However, when issuing claims and considering their mitigation, CBP will consider whether a party reasonably relied on information submitted to it from a third party.

Comment:

The language in proposed § 18.2 should be revised so that when merchandise is delivered to a bonded common carrier, contract carrier, freight forwarder or private carrier, the merchandise may be transported with the use of facilities of other bonded or non-bonded carriers; however, the responsibility for the merchandise will remain with the common carrier, contract carrier, freight forwarder or private carrier whose bond is obligated.

CBP Response:

Under proposed § 18.2, merchandise may be transported with the use of facilities of other bonded or non-bonded carriers. However, the responsibility for transporting in-bond merchandise will remain with the party whose bond is obligated.

H. Export of Merchandise

1. Reporting Arrival at Port of Exportation

Comment:

The proposed changes to the in-bond process mandate that the delivering carrier report, via a CBP-approved EDI system, the arrival of any portion of an in-bond shipment within 24 hours of arrival at the port of exportation. This represents a substantial change from the current regulations. Currently, the carrier has “2 working days after arrival” to report. The reduction to 24 hours places a substantial new reporting burden on the carrier, zone operators, and other parties, that will require additional staff to work weekends and holidays. The proposed 24-hour requirement should be changed to two business days.

CBP Response:

CBP agrees. As discussed in Section I.B.2. above, CBP is changing proposed § 18.20 to require the report of arrival be filed within two business days after arrival. In addition, CBP is moving the provision setting forth this time limit from § 18.20(c) to § 18.20(g), as it fits better in the context of paragraph (g).

Comment:

How will CBP respond to system down time if ACE is not available to report the arrival of the in-bond merchandise within 24 hours?

CBP Response:

CBP is changing proposed §§ 18.1(j), 18.7(a)(1), and 18.20 to provide that the notice of arrival must be submitted within two business days after arrival. This should generally provide adequate time in the event of a system outage. In case there is an outage that prevents compliance with the notice requirements, carriers will need to contact the port at which the in-bond merchandise has arrived for instructions on how to submit the required information. Each outage presents unique circumstances that will be dealt with on a case-by-case basis according to the port's instructions.

Comment:

Proposed §§ 18.7(a)(3), 18.20(g), 18.25(f) and 18.26(e) require the bonded carrier to update the in-bond record when the in-bond merchandise is exported. The proposed language is unclear as to which bonded carrier must complete this notification. Because there can be multiple bonded carriers involved in the transport of merchandise for a single shipment, CBP should clarify the language regarding the specific bonded carrier that is responsible for this notification.

CBP Response:

After further consideration, CBP is of the view that for consistency, any of the parties who can amend the in-bond record as described in proposed § 18.1(h) should be able to update the in-bond record to reflect that the merchandise has been exported. These parties include the filer of the in-bond application or any other party identified in § 18.1(c). Therefore, CBP is changing proposed §§ 18.7(a)(3), 18.20(g), 18.25(f) and 18.26(e) in the final rule to remove the requirement that the bonded carrier must update the record and to simply provide that the in-bond record must be updated by any of the parties identified in 18.1(c) or their agent. However, the party whose bond is obligated is the party that is responsible for ensuring the in-bond record is up to date.

2. Proof of Exportation

Comment:

For consistency, CBP should provide a detailed list of all

acceptable forms of proof of exportation. The current CBP practice on the southern border with Mexico is to require a supervised export and for CBP to provide the driver with a perforated copy of the CBP Form 7512. This document serves as the proof of exportation. Will CBP create a new form that can serve as proof of export?

CBP Response:

Section 113.55 covers the procedures for cancelling export bonds and lists the documents that may be used as proof of export for such purpose. These documents would also be acceptable proof that in-bond merchandise has been exported. The documents, or their electronic equivalent, included in § 113.55 are the listing of the merchandise on the outward manifest or outward bill of lading, the inspector's certificate of lading, the record of clearance of the vessel or of the departure of the vehicle, and a foreign landing certificate if the certificate is required by the port director. CBP will not create a new form of the perforated CBP Form 7512. These paper documents would be used in an audit scenario to demonstrate exportation of the in-bond merchandise.

Comment:

Proposed §§ 18.7(a)(3), 18.20(g), 18.25(f) and 18.26(e) provide that the principal on any bond filed to guarantee exportation may be required by the port director to provide evidence of exportation. However, the language is unclear as to which bond is obligated especially when there are multiple carriers. Clarification as to which principal is required to complete this notification, especially in the circumstance of multiple carriers for a single in-bond move, should be provided.

CBP Response:

The requirement to provide proof of exportation at the request of the port director resides with the party whose bond was obligated to complete the in-bond transaction.

Comment:

CBP should clarify the meaning and intent of proposed § 18.26(c) (Transfer at selected port of exportation). It specifies that if in-bond merchandise is to be transferred to another conveyance after it has arrived at the port of exportation, the procedures prescribed in proposed § 18.3(d) will be followed. However, proposed § 18.3(d) pertains to the “Transshipment of merchandise in emergency situations.” The transfer to another conveyance under normal course of business is not an “emergency situation.”

CBP Response:

For clarity, CBP is moving the provision covering the removal of seals from proposed § 18.3(d) (transshipment of merchandise in emergency situations) to § 18.4(c) (removal and replacement of seals). The language in proposed § 18.26(c) is being changed accordingly to reference the procedures for the removal of seals in § 18.4(c) in this final rule. Regarding the concerns of the commenter, the placement of the procedures for the removal of seals under its new heading in § 18.4(c) makes clear that the procedures do not merely apply in an “emergency situation.”

Comment:

Proposed § 18.23 provides that T&Es may be entered for consumption, warehouse, FTZ or any other form of entry, and are subject to all the conditions pertaining to merchandise entered at a port of first arrival. The options provided are viable for in-bond shipments, whether or not there is a change of foreign destination or change of entry. Therefore, this language should apply to all types of entries, not just T&Es and should be included in proposed § 18.20 (General Rules), rather than in § 18.23 regarding change of foreign destination.

CBP Response:

Although the commenter's suggestion has some merit, for consistency and clarity CBP has tried to mirror the format of the existing regulations when possible and to include substantive provisions under detailed headings. In this case, the current regulation that addresses the change of entry for T&Es is § 18.23 (Change of destination; change of entry) and the current regulation that addresses the change of entry for ITs is § 18.12 (Entry at port of destination). We are amending § 18.12(a) to specifically state that merchandise received under an immediate transportation entry at the port of destination may be entered for consumption, transportation and exportation, immediate exportation, or for immediate transportation, or under an FTZ admission. Current § 18.23 also specifies what happens when T&E merchandise is subject on importation to quarantine or other restrictions. The proposed regulations maintain this same format and headings. The statement that T&Es are subject to all the conditions pertaining to merchandise entered at a port of first arrival is intended to incorporate and expand on the concept in the current regulation about merchandise that is subject on importation to quarantine or other restrictions.

I. Diversion of Merchandise

Comment:

Proposed § 18.5(a) requires the party that submitted the in-bond application to submit a request to divert merchandise via a CBP-approved EDI system. It further provides that authorization for the diversion and movement of merchandise will be transmitted via a CBP-approved EDI system. Approval should be automatic. When the diversion request is denied, CBP should provide a detailed reason for the denial within 24 hours of the denial notification.

CBP Response:

CBP will notify the filer of the approval immediately by the updating of the port code in the in-bond record. If the update of the port code is rejected, that will constitute the denial of the diversion request. The in-bond record will be updated quickly upon the denial of the diversion request. Although the filer will not be notified of the reason for the denial, the filer may contact the port for such information.

Comment:

If a diversion is prohibited, for example, by law or for a specific control of a commodity or shipment, this could be noted systemically by CBP at the time of original processing and approval of the in-bond application. A statement such as “Diversion Not Authorized” could be added to the in-bond record for simple reference by CBP and the in-bond carrier.

CBP Response:

CBP will take this comment under advisement for future updates to the CBP-approved EDI.

Comment:

Express carriers use multiple ports from which to export in-bond shipments from the United States. Packages shipped in-bond may be re-routed and diverted to different ports of exportation several times prior to the actual exportation of the merchandise. As a result, CBP may receive several diversion requests for one in-bond shipment prior to exportation. This could place a substantial burden on the carrier and on CBP's systems. Moreover, due to the large volume and short timeframes involved, it may not be possible to verify the accuracy of the requests until the in-bond shipment is physically exported. Therefore, CBP should accept diversion updates post departure when the data is most accurate. This would minimize the number of diversion messages reported to CBP and increase data accuracy.

CBP Response:

CBP is requiring authorization to divert in-bond merchandise because the existing diversion procedures make it challenging for CBP to identify the destination port of a diverted shipment and to determine whether the merchandise reaches that destination. This situation presents a security risk, a risk of circumvention of other agencies' admissibility requirements, and a risk that proper duties will not be collected. Acceptance of post-departure diversion requests would undermine the objectives of the proposed rule. Diversion requests and updates can be submitted at any time and are not

limited in number. If the port of exportation for in-transit shipments changes multiple times, the requests should be submitted for each change as the change occurs.

Comment:

The requirement in proposed § 18.5(a) to obtain authorization prior to the diversion of in-bond merchandise will reduce the ability of carriers to arrive merchandise at the destination port or port of exportation within 30 days. This is especially true if the diversion request is denied and the carrier has to re-route the in-bond merchandise.

CBP Response:

Approval and denial of diversion requests will be communicated immediately and should not result in delays long enough to impede the completion of the in-bond movement within the required in-transit time. However, an extension of the in-transit time may be requested when necessary.

Comment:

In order to provide guidance to the trade community and to help CBP review diversion requests, CBP should establish criteria for granting or denying a diversion request. Some factors CBP should consider are the carrier's associated costs if the diversion request is denied, the time constraints associated with denying diversion requests, and any other constraints associated with the original port of destination or port of exportation.

CBP Response:

Although CBP has the discretion to deny a request for diversion, CBP will generally grant a reasonable diversion requests. For example, CBP will deny a request for a diversion when another government agency mandates delivery of the merchandise to the destination identified in the original filing. CBP is revising § 18.5 to incorporate this example.

J. Immediate Transportation

Comment:

With respect to the filing of an IT in-bond application, proposed § 18.11(a)(2) requires the importer to stipulate in the in-bond application that within 24 hours after the arrival of any part of the merchandise or baggage to a place outside the port of entry, the importer will file an entry for the shipment and will comply with the provisions of § 151.9 of this chapter, before permission will be granted by CBP to transport the merchandise in-bond. There is concern about having the bonded carrier stipulate that the importer will timely file an entry and comply with other regulations since this is outside of the bonded carrier's control. It is also unclear how a stipulation to file entry is to be included on the in-bond application upon submission to CBP. In an effort to continue to transition to an electronic environment, if an actual stipulation is required, provisions for including this declaration in the electronic in-bond application should be available.

CBP Response:

To address these concerns, CBP is removing § 18.11(a)(2) from the final rule and adding the requirement that the in-bond merchandise be transported to a place outside the port of entry in accordance with the provisions of §§ 151.7 and 151.9 of this Chapter.

K. Divided Shipments and Retention of Goods Within Port Limits

1. Divided Shipments

Comment:

Is CBP requiring the bonded carrier to request authorization for a split shipment in advance of the shipment movement? If so, when must the request be submitted? In most cases, the bonded carrier will not be aware of a split movement until the initial conveyance has departed. The split movement will not be known until a portion of the shipment has in fact been exported, departed the port of unlading or has arrived at the destination port.

CBP Response:

Proposed § 18.5(c) only covers situations where a carrier diverts an in-bond shipment to more than one port, or where a portion of an in-bond shipment is approved for a consumption or warehouse entry. In such cases, a diversion request is necessary. If granted, a new in-bond application must be submitted for each portion of the original shipment to be transported in-bond. CBP is changing proposed § 18.3 in the final rule regarding transfer to eliminate the requirement to obtain CBP authorization when in-bond merchandise is transported on more than one conveyance, but arrives at the same destination port or port of exportation. Also, for clarity, CBP will use the term “divided shipment” in this final rule instead of “split shipment” to refer to the situation where a carrier diverts an in-bond shipment to more than one port or to a consumption or warehouse entry. CBP used the term “split shipment” in the proposed rule to refer to the division of an in-bond shipment. However, the term “split shipments” refers specifically to the treatment of multiple entries of merchandise as a single transaction pursuant to 19 U.S.C. 1484(j) and 19 CFR 141.57 and 141.58.

Comment:

The requirement in proposed § 18.5(c) to initiate a new in-bond for each [divided] shipment will be difficult for express carriers to comply with because of the large number of in-bond shipments that they move through the United States. CBP should consider allowing the carrier or agent to submit the [divided] shipment information after departure, when the information is most accurate. This process will provide CBP the most accurate up to date export or arrival information which will assist CBP with the electronic reconciliation of the in-bond record.

CBP Response:

CBP is requiring the filing of a new in-bond application for in-bond shipments that will be diverted to more than one port to enable CBP to identify in advance the destination of a diverted shipment and to determine whether the merchandise reaches that destination. This procedure will also ensure that other agencies' admissibility requirements are not circumvented and that proper duties are collected. CBP appreciates that this process may impose a burden on express carriers and CBP will seek ways to mitigate this burden.

Comment:

CBP should automate the ASN3 (in-bond arrival message set for Air AMS) and ASN7 (in-bond export message set for Air AMS) messages to allow for piece count and export port identifier to properly track the [divided] shipment. This will provide CBP updated movement information, including ports of departure.

CBP Response:

CBP has incorporated these automation features in Air ACE, which has replaced Air AMS and is now operational.

Comment:

CBP's requirement in proposed § 18.24(b) that all movements of a [divided] shipment be initiated within two days after the [division] has been authorized is not feasible for various reasons. First, the conveyance must be secured and loaded and normal delivery hours and schedules at the port can limit the amount of loading that can be accomplished in a two-day period. Second, in many cases, a bonded carrier may have limited conveyances for specific export destinations or ports. Third, it may be impossible to close a [divided] shipment within two days when multiple modes are utilized (combination of truck and air). Finally, some shipments are more time consuming and require special handling.

CBP Response:

CBP agrees that it may not be feasible to initiate movement of divided shipments within two days of the day CBP authorized the divided shipment. CBP is removing this requirement in the final rule.

2. Retention of Goods Within Port Limits

Comment:

Proposed § 18.24(a), which allows for the retention of goods within

the port limits for up to 90 days with CBP approval, should be clarified as follows: (1) To indicate that retention as described is at the port of exportation and (2) to specify how the application to retain the goods at the port of exportation for up to 90 days should be made. Is the purpose of requiring the filing of an Immediate Exportation (IE) entry to close the original Transportation and Exportation (T&E) entry to shift liability for the in-bond cargo?

CBP Response:

CBP is changing proposed § 18.24(a) in the final rule to clarify that the retention of goods applies to the port of exportation. The application to retain the merchandise at the port of exportation must be made, and approval will be given, via a CBP approved EDI. The purpose of filing an IE is to close out the original T&E. The party whose bond is obligated on the IE will be the party who is responsible for the export of the merchandise. However, the party obligated on the original T&E remains obligated for the shipment unless and until an IE is filed.

M. Potential Impact

Comment:

One commenter estimated that the new data, reporting, and monitoring requirements of the proposed rule will increase costs for in-bond carriers in a number of ways. The commenter claims that requiring carriers to report the HTSUS number and changing the requirement from having to file the final foreign destination to having to file the ultimate destination will increase costs by an estimated 5 percent and 1 percent, respectively, and requiring carriers to notify CBP of a change in the final foreign destination will increase costs by an additional 5 percent. The commenter further states that carriers will see significant cost increases due to the shortened transit time, the requirement to request extensions when in-bond cargo cannot reach the ultimate destination within the required time, and the ability of government agencies to shorten, with notice, the required transit time. Lastly, the commenter notes that the requirement to receive authorization to transport and/or divert restricted merchandise from the government agencies responsible for regulating the restricted merchandise will also increase costs significantly.

CBP Response:

CBP has taken these cost estimates submitted by the commenter under advisement when finalizing this rule. However, because CBP received comments on the cost impacts of this rule from only one party and this commenter does not provide specific data concerning the nature of the cost impacts, we are unable to extrapolate the estimates to the entire universe of carriers. CBP believes that the above changes to the in-bond requirements are necessary for the security of the United States, for protection of the revenue and to ensure that merchandise admissibility is not compromised. However, whenever possible, CBP has made changes to lessen the burden and costs to the public in response to various comments. For example, in response to concerns that in-bond shipments transported by barge may not be able to arrive at the destination port or port of exportation within 30 days, CBP changed proposed § 18.1(i)(1) to allow 60 days for the arrival of in-bond merchandise transported by barge. For a full discussion of the costs and benefits of this regulation, see Section IV., Regulatory Analysis.

N. Miscellaneous Items

1. Impact on Inland Ports

Comment:

Has CBP taken into consideration the impact the changes this rule will have on inland ports of entry and the clearance process? As shippers examine the impact of the proposed changes on their business and determine that the in-bond process has become too onerous and burdensome, they may look to change their business practices and stop transporting merchandise in-bond. This could impact staffing levels at inland ports that were once needed to process consumption entries for in-bond merchandise.

CBP Response:

The new electronic in-bond processing should facilitate the use of in-bond procedures. Although concerns have been raised about some of the requirements contained within the proposal (many of which CBP is addressing by not adopting various proposed provisions in this final rule), CBP has received no other comments indicating that shippers will stop using the in-bond program.

2. Supervision of Rail Shipments

Comment:

To maximize space and weight used on a rail car, importers may preload a railcar and provide the carrier the load sheet details. The carrier then transmits the exact load per rail car to CBP. Once the in-bond submission is accepted by CBP the rail car dispatches. Will CBP advise the carrier prior to loading and in-bond transmission if supervision is required?

CBP Response:

If supervision is required, CBP will notify the carrier prior to acceptance of the in-bond application.

3. Textiles

Comment:

The textile provision in proposed § 18.1(d)(1)(iv) goes far beyond the requirements of a carrier moving commodities from origin to destination, regardless of crossing borders. This provision, which is specific to legislation dating back over 60 years, pertains to admissibility and not transport. More fundamentally, reference to the Agricultural Act of 1954 is in essence reference to quantitative restrictions,

i.e.

quotas, which are now eliminated for textile and apparel items from most origin countries. Consequently, this requirement is applicable for only a small minority of imported textile and apparel items, and therefore unduly burdensome. Moreover, this provision requires information that is not readily available to carriers and in such detail that carriers cannot comply with the provision without the assistance of a customs broker.

CBP Response:

The proposed requirements mandating the in-bond filer to provide sufficient detail for certain textile items so that the port director can determine the duties and taxes are in the existing regulations at § 18.11(e), pertaining to IT shipments. These requirements have not posed problems for carriers in the past. The proposed regulations did expand the application of these requirements by making them also applicable to IE and T&E shipments. In order to minimize the burden on the trade and to make it consistent with the existing regulations, CBP is removing this requirement from proposed § 18.1(d)(1)(iv) and moving it to § 18.11(d) so that it is only applicable to IT in-bond shipments as is currently the case.

4. Cartmen

Comment:

Proposed § 18.1(d)(3) provides that the in-bond application can be filed at any time prior to the merchandise departing the in-bond origination port. In the past, CBP required authorization for the movement of the cargo from the importing carrier/terminal to the bonded carrier by bonded cartmen within the

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