Treatment of Reusable Shipping Devices Arriving From Canada or Mexico

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 10

RIN 1515-AB51

Treatment of Reusable Shipping Devices Arriving From Canada or

Mexico

AGENCY: Customs Service, Department of the Treasury.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend the Customs Regulations to

allow certain foreign-manufactured shipping devices arriving from

Canada or Mexico to be released, under specified conditions, without

entry and payment of duty at the time of arrival and without the

devices being serially numbered or marked, if they are always

transported on or within either intermodal and similar containers or

containers which are themselves vehicles or vehicle appurtenances and

accessories. As millions of these devices are used annually in hundreds

of millions of transportation moves between the United States and

Canada or Mexico, Customs recognizes that requiring the importing and

exporting communities to individually mark and track these devices

places a burden on commerce that Customs should attempt to alleviate.

DATES: Comments must be received on or before January 3, 1995.

ADDRESSES: Comments (preferably in triplicate) must be submitted to

U.S. Customs Service, ATTN: Regulations Branch, Franklin Court, 1301

Constitution Avenue, NW., Washington, D.C. 20229, and may be inspected

at the Regulations Branch, 1099 14th Street, NW., Suite 4000,

Washington, D.C.

FOR FURTHER INFORMATION CONTACT: Louis Hryniw, Office of Regulatory

Audit, (202-927-1100).

SUPPLEMENTARY INFORMATION:

Background

Pursuant to Chapter 98, Subchapter III, U.S. Note 3, Harmonized

Tariff Schedule of the United States (HTSUS) (19 U.S.C. 1202), in order

to facilitate the prompt clearance at ports of entry of certain

substantial containers and holders, the Secretary of the Treasury is

authorized to permit the admission of the containers without entry and

to permit any duties thereon to be paid cumulatively from time to time

either before or after their importation when conditions exist which

permit adequate Customs controls to be maintained. Pursuant to

subheading 9803.00.50, HTSUS, substantial containers and holders which

are of foreign production and previously imported and duty (if any)

thereon paid, or if of a class specified by the Secretary of the

Treasury as instruments of international traffic (IITs) are free of

duty. Pursuant to 19 U.S.C. 1322, instruments of international traffic

shall be excepted from the application of the customs laws to such

extent and subject to such terms and conditions as may be prescribed in

regulations or instruction of the Secretary of the Treasury.

Current regulations regarding shipping devices are set forth in

Secs. 10.41a and 10.41b, Customs Regulations (19 CFR 10.41a and

10.41b). According to Sec. 10.41a, certain containers are designated as

IITs and, as such, may be released without entry or duty subject to the

provisions of the section. According to Sec. 10.41b, other substantial

containers and holders are required to be serially numbered and marked

in order to be released without entry or payment of duty. Section

10.41b(b), (c) and (d) currently describe the numbering and marking

requirements.

In this latter regard, Customs has received a petition from, and

has met with representatives of, the American Automobile Manufacturers

Association (AAMA) concerning an amendment to the Customs Regulations

intended to ease the burden of serially numbering and marking certain

containers arriving from Canada or Mexico. According to the AAMA, the

business community cannot efficiently and economically individually

mark and track the millions of these smaller shipping devices that hold

goods, such as racks, holders, pallets, totes, and packaging material,

that are used annually in hundreds of millions of transportation moves

between the United States and Canada or Mexico without placing an

excessive and undue burden on commerce. In the highly integrated

manufacturing environment of today's economy, programs which place

strict reporting, control and usage requirements on reusable shipping

devices, beyond what is actually necessary for Customs to acquit its

responsibilities, create an unusual and unnecessary burden on the

growth and competitiveness of companies located in the U.S.

Restrictions on the use and control of these reusable shipping devices

needlessly increase the cost of goods and materials in the U.S.

After reviewing the AAMA proposal, Customs believes that the

requirements to serially number and mark the substantial holders and

containers in question can be eased without risking a loss of revenue.

Accordingly, Customs is proposing to amend Sec. 10.41b to allow an

importer or his agent to apply to a district director of Customs for

permission to have certain foreign-made shipping devices arriving from

Canada or Mexico released without entry and payment of duty at the time

of arrival and without the devices being serially numbered or marked.

The application would, among other things, describe the subject

shipping devices, identify the ports where they would arrive and depart

the U.S., and set forth the proposed program for accounting for and

reporting the shipping devices to Customs. If the application is

approved, the importer or agent would submit to Customs a periodic

report for the shipping devices, which could not be less frequent than

annual, using his own accounting and recordkeeping procedures to keep

track of the devices. Records supporting the periodic reports of the

shipping devices would have to be retained for at least 3 years from

the date the reports are filed with Customs. Any duty applicable to the

devices would have to be tendered cumulatively at the time specified in

the approved application. Such tender could not occur more than 90 days

following the end of the related reporting period.

In the event the application should be denied, in whole or in

part, by the district director, the applicant could appeal the denial

to the regional commissioner.

By eliminating the serial numbering and marking of the shipping

devices concerned, and by permitting a consolidated accounting or

reporting period for such devices, the real benefit of the proposal, it

is believed, will be reduced operating costs for the international

trade community.

In this respect, the proposed rule would achieve the desired

purposes for those who wish to apply, by supplanting the existing

system which depends upon physical examination of the shipping devices

concerned as well as the maintenance of elaborate and costly

identification systems, with a system based upon the applicant's own

books and records, including, most importantly, acquisition and repair

cost records. Since duty would be due on all shipping devices acquired

within the period covered by the periodic report which the applicant

would undertake to file, even though the devices may not have yet been

used in transborder traffic, accounting for specific movements of the

devices or for diversions would be superfluous.

The proposed amendments to the Customs Regulations are set forth

below.

Comments

Before adopting the proposed amendments, consideration will be

given to any written comments timely submitted to Customs. Comments

submitted will be available for public inspection in accordance with

the Freedom of Information Act (5 U.S.C. 552), Sec. 1.4, Treasury

Department Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs

Regulations (19 CFR 103.11(b)), on regular business days between the

hours of 9 a.m. and 4:30 p.m. at the Regulations Branch, Franklin

Court, 1099 14th Street, NW., Suite 4000, Washington, DC.

Regulatory Flexibility Act and Executive Order 12866

For the reasons set forth in the preamble, pursuant to the

provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it

is certified that, if adopted, the proposed amendments will not have a

significant economic impact on a substantial number of small entities.

Accordingly, the amendments are not subject to the regulatory analysis

or other requirements of 5 U.S.C. 603 and 604. Nor would the proposed

amendments result in a ``significant regulatory action'' under E.O.

12866.

Paperwork Reduction Act

The collection of information contained in this notice of proposed

rulemaking has been submitted to the Office of Management and Budget

for review in accordance with the Paperwork Reduction Act of 1980 (44

U.S.C. 3504(h)). Comments on this collection of information should be

sent to the Office of Management and Budget, Attention: Desk officer

for the Department of the Treasury, Office of Information and

Regulatory Affairs, Washington, DC 20503. A copy should also be sent to

Customs at the address set forth previously.

The collection of information in these proposed regulations is in

Sec. 10.41(b). The information is necessary so that Customs may

determine whether the plan submitted by the importer or his agent to

keep track of and pay duty on his shipping devices is acceptable. The

likely respondents would be business organizations.

Estimated total annual reporting and/or recordkeeping burden:

Estimated average annual burden per respondent/recordkeeper:

Estimated number of respondents and/or recordkeepers:

Estimated annual frequency of responses:

Drafting Information

The principal author of this document was Russell Berger,

Regulations Branch, U.S. Customs Service. However, personnel from other

offices participated in its development.

List of Subjects in 19 CFR Part 10

Alterations, Bonds, Customs duties and inspection, Exports,

Imports, Preference programs, Repairs, Reporting and recordkeeping

requirements, Trade agreements.

Proposed Amendments to the Regulations

It is proposed to amend part 10, Customs Regulations (19 CFR part

10), as set forth below:

PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,

ETC.

1. The general authority citation for part 10 would continue to

read as follows, and the specific sectional authority for part 10 would

be amended by adding specific authority for Sec. 10.41b, in appropriate

numerical order thereunder, to read as follows:

Authority: 19 U.S.C. 66, 1202, 1481, 1484, 1498, 1508, 1623,

1624;

* * * * *

Section 10.41b also issued under 19 U.S.C. 1202 (Chapter 98,

Subchapter III, U.S. Note 3, Harmonized Tariff Schedule of the U.S.

(HTSUS)).

* * * * *

2. It is proposed to amend section 10.41b by redesignating

paragraphs (b), (c), (d), (e), (f), (g) and (h) as (c), (d), (e), (f),

(g), (h) and (i), respectively, and by adding a new paragraph (b) to

read as follows:

Sec. 10.41b Clearance of serially numbered substantial holders or

outer containers.

* * * * *

(b) Subject to the approval of a district director pursuant to the

procedures described in this paragraph, certain foreign-manufactured

shipping devices arriving from Canada or Mexico, including racks,

holders, pallets, totes, boxes and cans, need not be serially numbered

or marked if they are always transported on or within either intermodal

and similar containers or containers which are themselves vehicles or

vehicle appurtenances and accessories such as twenty and forty foot

containers of general use and ``igloo'' air freight containers.

(1) An importer or his agent, regardless of whether the importer is

the owner of the foreign-manufactured shipping devices, may apply to a

district director of Customs at one of the importer's chiefly utilized

Customs districts or the district within which the importer's or

agent's recordkeeping center is located for permission to have such

shipping devices arriving from Canada or Mexico released without entry

and payment of duty at the time of arrival and without the devices

being serially numbered or marked. Application may be filed in only one

district. Although no particular format is specified for the

application, it must contain the information enumerated in paragraph

(b)(2) of this section. Any duty which may be due on these shipping

devices shall be tendered and paid cumulatively at the time specified

in an approved application, which may be either before or after the

arrival of the shipping devices in the U.S. (e.g., at the time a

contract, purchase order or lease agreement is issued).

(2) The application shall:

(i) Describe the types of shipping devices covered, their

classification under the Harmonized Tariff Schedule of the U.S.

(HTSUS), their countries of origin, and whether and to whom required

duty was paid for them or when it will be paid for them, including

duties for repair and modifications to such shipping devices while

outside the U.S.;

(ii) Identify the ports where the shipping devices will be arriving

and departing the U.S., as well as the particular movements and

conveyances in which they are intended to be utilized;

(iii) Describe the applicant's proposed program for accounting for

and reporting these shipping devices;

(iv) Identify the reporting period (which shall in no event be less

frequent than annual), as well as the payment period within which

applicable duty and fees must be tendered (which shall in no event

exceed 90 days following the close of the related reporting period);

(v) Describe the type of inventory control and recordkeeping,

including the specific records, to be maintained to support the reports

of the shipping devices; and

(vi) Provide the location in the United States where the records

supporting the reports will be retained by law and will be made

available for inspection and audit upon reasonable notice. (The records

supporting the reports of the shipping devices must be kept for a

period of at least 3 years from the date such reports are filed with

the district director.)

(3) The application shall be filed along with a continuous bond

containing the conditions set forth in Sec. 113.66 of this chapter. If

the application is approved by the district director and the conditions

set forth in the application or of the bond are violated, the district

director may issue a claim for liquidated damages equal to the domestic

value of the container. If the domestic value exceeds the amount of the

bond, the claim for liquidated damages will be equal to the amount of

the bond.

(4) The district director receiving the application shall evaluate

the program proposed to account for, report and maintain records of the

shipping devices. The district director may suggest amendments to the

applicant's proposal. The district director shall notify the applicant

in writing of his decision on the application within 90 days of its

receipt, unless this period is extended for good cause and the

applicant so informed in writing. The district director shall have

authority to approve the application and procedures for utilization in

each district or area identified in the application.

(5) If the decision is to deny the application, in whole or in

part, the district director shall specify the reason for the denial in

a written reply, and inform the applicant that such denial may be

appealed to the regional commissioner within 21 days of its date. If

the decision is appealed, the regional commissioner shall coordinate

his review thereof with the district director. The regional

commissioner's decision shall be issued, in writing, within 30 days of

the receipt of the appeal, and shall constitute the final Customs

determination concerning the application.

(6) If the application is approved, an importer may later apply to

amend his application to add or delete particular types of shipping

devices listed in the application and districts and areas identified in

the application in which the procedures set forth in the application

may be utilized. If a requested amendment to an approved application

should be denied, in whole or in part, by the district director, the

appeal process described in paragraph (b)(5) of this section shall

apply.

(7) Application for and approval of a reporting program shall not

limit or restrict the use of other alternative means for obtaining the

release of holders, containers and shipping devices.

* * * * *

George J. Weise,

Commissioner of Customs.

Approved: October 13, 1994.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 94-26955 Filed 10-31-94; 8:45 am]

BILLING CODE 4820-02-P