Centralized Examination Stations; Immediate Suspension or Permanent Revocation As Operator Upon Indictment for Any Felony

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

RIN 1515-AB83

Centralized Examination Stations; Immediate Suspension or

Permanent Revocation As Operator Upon Indictment for Any Felony

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document proposes to amend the Customs Regulations

primarily to enable Customs port directors to immediately suspend

operations at a Centralized Examination Station (CES) whenever the

operator, entity, or other person exercising substantial ownership or

control over the operator, is indicted for, convicted of, or has

committed acts which would constitute any felony. This document also

proposes to make it more specific that a CES operator's failure to

follow the terms of the CES written agreement constitutes a ground for

proposed permanent revocation of the CES and cancellation of the

written agreement to operate the facility. This action is taken in

order to protect the public interest and to promote public confidence

concerning the integrity of the CES program.

DATES: Comments must be received on or before March 25, 1996.

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

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

Constitution Avenue, NW., Washington, DC 20229, and may be inspected at

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

DC.

FOR FURTHER INFORMATION CONTACT: Linda Walfish, Office of Field

Operations, Trade Compliance (202) 927-1167.

SUPPLEMENTARY INFORMATION:

Background

In T.D. 93-6 (58 FR 5596) Customs amended the Customs Regulations

(19 CFR Ch. I) to create a new part 118 that set forth the regulatory

framework for the establishment, operation, and termination of

Centralized Examination Stations (CESs). A CES is a privately-operated

facility, not in the charge of a Customs officer, at which imported

merchandise is made available to Customs officers for physical

examination. Regarding the termination of CESs, Customs stated that

immediate revocation and cancellation for a criminal act should not be

limited to cases involving an actual conviction or admission, and that

the only criminal offenses which should result in an immediate

revocation and cancellation would be those which involved theft,

smuggling, or a theft-connected crime.

On further consideration of the issue of when revocation,

cancellation, or suspension of an entity selected to be a CES operator

should occur, Customs now believes that if a CES operator, an officer

of a corporation which operates a CES, or a person the local ``port

director'' (a new designation reflecting Customs pending field

reorganization, the subject of a separate document) determines

exercises substantial ownership or control over such operator or

corporation is charged with any conduct which is proscribed as

criminal, the character and integrity of the particular CES operation

becomes questionable and consideration is warranted by the local port

director as to whether the operations of the CES facility should be

immediately suspended for a temporary period of time, i.e., a period

commensurate with the seriousness of the crime charged, pending further

investigation or outside adjudication of facts and/or the institution

of permanent revocation and cancellation proceedings.

This action is being proposed in order to enhance port directors'

ability to protect the public interest and to promote public confidence

concerning the integrity of the CES program. Because the CES program

centralizes at a particular location several otherwise disparate

processes, including cartage, devanning, Customs inspection, sampling,

reloading, and returning merchandise to the stream of commerce, and

because the number of CES operators is limited (see, T.D. 93-6, 58 FR

5596, 5597 (January 22, 1993), the discussion of comments received

concerning the final CES rule), Customs officers must have authority to

ensure thorough confidence in the integrity of CES operators,

employees, and premises. Therefore, this proposed rulemaking would

provide port directors with additional discretion to decide whether, on

a case-by-case basis, particular circumstances and risks involving the

listed offenses warrant immediate suspension, proposed revocation and

cancellation, both, or neither. This proposal is intended to provide

Customs greater flexibility to address the varying situations with

appropriate measures reasonably calculated to protect the public

interest and to promote public confidence in the CES program.

Accordingly, Customs proposes to amend Sec. 118.21, which provides

for the revocation of selection and cancellation of the written

agreement to operate a CES. Paragraph (a) will be revised to provide

for the immediate suspension of a CES operator's or entity's selection

and the written agreement to operate the CES if the local port director

finds that (1) the selection and written agreement were obtained

through fraud or the misstatement of a material fact; or (2) the CES

operator, an officer of a corporation which is a CES operator, or a

person the port director determines to exercise substantial ownership

or control over such operator or officer is indicted for, convicted of,

or has committed acts which would constitute a felony, or a misdemeanor

involving theft or a theft-connected crime. In the absence of an

indictment or conviction, the port director must at least have probable

cause to believe the proscribed acts occurred. When CES operations are

suspended or revoked and cancelled by Customs, it will be the CES

operator's responsibility to ensure that merchandise already at the CES

is properly consigned to another location for inspection, as directed

by the importer and approved by the port director.

Paragraph (b) is proposed to be amended by adding a new

subparagraph (6) which makes the above-referenced conduct a separate

ground for the port director to pursue permanent revocation and

cancellation procedures, and revising subparagraph (1) to make more

specific that failure to comply with the responsibilities of a CES

operator also constitutes a ground for proposed revocation and

cancellation.

The circumstance of a change in employment status as not precluding

adverse action, formerly provided for under paragraph (a), is made into

a new paragraph (c) to make it clear that this consideration is

applicable equally to actions regarding immediate suspension and

permanent revocation.

[[Page 1878]]

Additional Changes to the Regulations

Because of the proposed change to Sec. 118.21 discussed above,

conforming changes to other referencing provisions in part 118 must

also be made. The following changes are noted in this regard:

Section 118.0

The second sentence of the scope section to part 118 (Sec. 118.0)

is revised to reference the port director's discretion to immediately

suspend a CES operator's or entity's selection and the written

agreement to operate the CES for the type conduct specified above.

Section 118.22

Section 118.22 is proposed to be revised to reference the port

director's responsibility to provide written notice to the CES operator

or entity when the decision to immediately suspend operations has been

made.

Section 118.23

Section 118.23 is proposed to be revised to reference the CES

operator or entity's right to appeal the port director's decision to

immediately suspend CES operations to the Assistant Commissioner of the

Office of Field Operations (another new designation reflecting Customs

pending field reorganization) or his designee. A sentence is added to

make it clear that once a suspension or revocation action takes effect,

the CES operator must cease CES operations. Further, where the port

director follows an immediate suspension action with proposed permanent

revocation and cancellation proceedings, the temporary suspension of

CES operations remains in effect during the appeal process.

Comments

Before adopting this proposal as a final rule, 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 of the Treasury

Department Regulations (31 CFR 1.4), and Sec. 103.11(b) of the 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, U.S. Customs

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

Regulatory Flexibility Act

Pursuant to 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, as the current number of centralized examination

station operators is small, i.e., less than 200. Accordingly, the

proposed amendments are not subject to the regulatory analysis or other

requirements of 5 U.S.C. 603 and 604.

Executive Order 12866

This document does not meet the criteria for a ``significant

regulatory action'' as defined in E.O. 12866.

Drafting Information: The principal author of this document was

Gregory R. Vilders, Attorney, Regulations Branch, U.S. Customs

Service.

However, personnel from other offices participated in its

development.

List of Subjects in 19 CFR Part 118

Administrative practice and procedure, Customs duties and

inspection, Examination stations, Imports, Licensing, Reporting and

recordkeeping requirements.

Proposed Amendment

For the reasons stated above, it is proposed to amend part 118,

Customs Regulations (19 CFR part 118), as set forth below:

PART 118--CENTRALIZED EXAMINATION STATIONS

1. The authority citation for part 118 continues to read as

follows:

Authority: 19 U.S.C. 66, 1499, 1623, 1624.

2. In Sec. 118.0, the second sentence is revised to read as

follows:

Sec. 118.0 Scope

* * * It covers the application process, the responsibilities of

the person or entity selected to be a CES operator, the written

agreement to operate a CES facility, the port director's discretion to

immediately suspend a CES operator's or entity's selection and the

written agreement to operate the CES or to propose the permanent

revocation of a CES operator's or entity's selection and cancellation

of the written agreement for specified conduct, and the appeal

procedures to challenge an immediate suspension or proposed revocation

and cancellation action. * * *.

3. In Sec. 118.21:

(a) The heading is revised and the introductory text is

republished;

(b) Paragraph (a) is revised;

(c) Paragraph (b)(1) is amended by adding the words ``to comply

with any of'' before the words ``the provisions of'';

(d) A new paragraph (b)(6) is added; and

(e) A new paragraph (c) is added.

The revisions and additions to read as follows:

Sec. 118.21 Temporary suspension; permanent revocation of selection

and cancellation of agreement to operate a CES.

The port director may immediately suspend or propose permanent

revocation and cancellation of CES operations for cause as provided in

this section.

(a) Immediate suspension. The port director may immediately

suspend, for a temporary period of time or until revocation and

cancellation proceedings are concluded pursuant to Sec. 118.23, a CES

operator's or entity's selection and the written agreement to operate

the CES if:

(1) The selection and written agreement were obtained through fraud

or the misstatement of a material fact; or

(2) The CES operator, an officer of a corporation which is a CES

operator, or a person the port director determines to exercise

substantial ownership or control over such operator or officer is

indicted for, convicted of, or has committed acts, which would

constitute a felony, or a misdemeanor involving theft or a theft-

connected crime. In the absence of an indictment or conviction, the

port director must at least have probable cause to believe the

proscribed acts occurred.

(b) * * *

(6) The CES operator, an officer of a corporation which is a CES

operator, or a person the port director determines to exercise

substantial ownership or control over such operator or officer is

indicted for, convicted of, or has committed acts, which would

constitute any of the offenses listed under paragraph (a) of this

section. Where adverse action is initiated by the port director

pursuant to paragraph (a) of this section and continued under this

subparagraph, the suspension of CES activities remains in effect

through the appeal procedures provided under Sec. 118.23.

(c) Circumstance of change in employment not a bar to adverse

action. Any change in the employment status of a corporate officer (for

example, discharge, resignation, demotion, or promotion) prior to

indictment or conviction or after committing any acts which would

constitute the culpable behavior described under paragraph (a) of this

section, will not preclude application of this section, but may be

taken into account by the port director in exercising discretion to

take adverse action. If the person whose employment status changed

remains in a substantial ownership, control, or beneficial relationship

with the CES operator, this

[[Page 1879]]

factor will also be considered in exercising discretion under this

section.

4. Section 118.22 revised to read as follows:

Sec. 118.22 Notice of immediate suspension or proposed revocation and

cancellation action.

Adverse action pursuant to the provisions of Sec. 118.21(a) or (b)

is initiated when the port director serves written notice on the

operator or entity selected to operate the CES. The notice shall be in

the form of a statement specifically setting forth the grounds for the

adverse action and shall inform the operator of the appeal procedures

under Sec. 118.23 of this part.

5. Section 118.23 revised to read as follows:

Sec. 118.23 Appeal to the Assistant Commissioner; procedure; status of

CES operations.

(a) Appeal to the Assistant Commissioner. Appeal of a port

director's decision under Sec. 118.21(a) or (b) must be taken to the

Assistant Commissioner, Office of Field Operations, within 10 calendar

days of receipt of the written notice of the adverse action. The appeal

shall be filed in duplicate and shall set forth the CES operator's or

entity's responses to the grounds specified by the port director in his

written notice letter for the adverse action initiated. The Assistant

Commissioner, Office of Field Operations, or his designee, shall render

a written decision to the CES operator or entity, stating the reasons

for the decision, by letter mailed within 30 working days following

receipt of the appeal, unless the period for decision is extended with

due notification to the CES operator or entity.

(b) Status of CES operations during appeal. During this appeal

period, an immediate suspension of a CES operator's or entity's

selection and written agreement pursuant to Sec. 118.21(a) of this part

shall remain in effect. A proposed revocation of a CES operator's or

entity's selection and cancellation of the written agreement pursuant

to Sec. 118.21(b)(1)-(5) of this part shall not take effect unless the

appeal process under this paragraph has been concluded with a decision

adverse to the operator.

(c) Effect of suspension or revocation. Once a suspension or

revocation action takes effect, the CES operator must cease CES

operations. However, when CES operations are suspended or revoked and

cancelled by Customs, it is the CES operator's responsibility to ensure

that merchandise already at the CES is properly consigned to another

location for inspection, as directed by the importer and approved by

the port director.

Approved: December 13, 1995.

Michael H. Lane,

Acting Commissioner of Customs.

Dennis M. O'Connell,

Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 96-1048 Filed 1-23-96; 8:45 am]

BILLING CODE 4820-02-P