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

[T.D. 96-57]

RIN 1515-AB83

Centralized Examination Stations; Immediate Suspension or

Permanent Revocation as Operator Upon Indictment for any Felony

AGENCY: Customs Service, Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to enable Customs

port directors to suspend immediately 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 makes 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.

EFFECTIVE DATE: August 26, 1996.

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 Chapter 1) 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 in T.D.

93-6 that while immediate revocation and cancellation for a criminal

act should not be limited to cases involving an actual conviction or

admission, 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 this issue, Customs published a

document in the Federal Register (61 FR 1877) on January 24, 1996,

proposing to amend the Customs Regulations to enable Customs port

directors to immediately suspend operations at a 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. The notice of

proposed rulemaking also sought 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. The

regulatory amendments proposed were promulgated in order to protect the

public interest and to promote public confidence concerning the

integrity of the CES program. The notice proposed to amend Sec. 118.21,

which provides for the revocation of selection and cancellation of the

written agreement to operate a CES. Additional, conforming changes were

also proposed to Secs. 118.0, 118.22, and 118.23. The document

solicited comments concerning these changes.

The comment period closed on March 25, 1996. Only one comment was

received and it was from a Customs field office. Because the comment is

beyond the scope of the proposal, it will not be discussed in this

document and will be addressed through another forum. After further

consideration of the proposal, Customs has decided to adopt the

proposed regulatory amendments as a final rule without substantive

change.

Regulatory Flexibility Act

Pursuant to provisions of the Regulatory Flexibility Act (5 U.S.C.

601 et seq.), it is certified that the 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, and the regulation only will affect those

who commit felonies or fail to follow the terms of their agreement.

Accordingly, the 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.

Amendment to the Regulations

For the reasons stated above, part 118, Customs Regulations (19 CFR

part 118), is amended 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

[[Page 39071]]

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 introductory text is added;

(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 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 or an officer of a corporation which is a CES

operator or a person the port director determines is exercising

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 have probable cause to believe the proscribed acts

occurred.

(b) * * *

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

operator or a person the port director determines is exercising

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

paragraph, 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 factor will also be considered in

exercising discretion under this section.

4. Section 118.22 is 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 is 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 filed with 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) through (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.

George J. Weise,

Commissioner of Customs.

Approved: June 8, 1996.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 96-18894 Filed 7-25-96; 8:45 am]

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