Centralized Examination Stations

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

RIN 1515-AC07

Centralized Examination Stations

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Customs Regulations

regarding the establishment and scope of operation of Centralized

Examination Stations (CESs). To reflect Customs interest in maximizing

compliance with export control laws and regulations without unduly

impeding the movement of outbound merchandise, it is proposed to expand

the definition of a CES to allow merchandise intended to be exported as

well as imported merchandise to be handled by a CES. Further, Customs

is proposing to allow for the inspection of outbound cargo at CESs at

ports other than the shipment's designated port of exit. To make the

CES application procedure more amenable to local conditions, Customs is

proposing more flexibility regarding the time frame for an applicant to

conform a facility to meet Customs security or other physical or

equipment requirements. Lastly, Customs is proposing to amend one of

the criteria on the application to operate a CES because Customs

believes it is too subjective. These changes are proposed in order to

keep the CES program responsive to both Customs and the trade

community's demands for the facilitated examinations of trade

merchandise.

DATES: Comments must be received on or before October 20, 1997.

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:

For Policy Inquiries: Steven T. Soggin, Office of Field Operations,

Trade Compliance, (202) 927-0765;

For Legal Inquiries: Jerry Laderberg, Office of Regulations and

Rulings, Entry Procedures and Carriers Branch, (202) 482-7052.

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.

Currently, CESs are authorized to provide inspectional facilities

for Customs officers to examine only imported merchandise. However,

because merchandise intended to be exported often is required to be

examined, Customs would like CESs to be authorized to provide

inspectional facilities for this merchandise as well. Customs has

statutory authority to inspect merchandise intended to be exported

pursuant to 22 U.S.C. 401, concerning the exportation of munitions and

other articles, and 31 U.S.C. 5317, concerning the search and

forfeiture of monetary instruments. Further, Customs broad authority to

conduct warrantless examinations of outbound merchandise has long been

recognized by the courts. See e.g., United States v. Udofot, 711 F.2d

831, 839 (8th Cir. 1983), cert. denied, 464 U.S. 896 (1983); United

States v. Ajlouny, 629 F.2d 830, 834 (2d Cir. 1980), cert. denied, 449

U.S. 111 (1981); United States v. Stanley, et al., 545 F.2d 661, 665-67

(9th Cir. 1976), cert. denied, 436 U.S. 917 (1978); cf., California

Bankers Ass'n v. Shultz, 416 U.S. 21, 63 (1974). Accordingly, to

reflect the authority to inspect merchandise intended to be exported,

the authority citation for Part 118 is revised. Also, Customs proposes

to amend the first sentence of Sec. 118.1 by removing the word

``imported'' to allow CESs to provide inspectional facilities for

merchandise regardless of whether it is inbound or outbound.

Customs ability to inspect at inland ports shipments scheduled for

export from another port is authorized at the functional equivalent of

the border. See, United States v. Udofot, 711 F.2d 831 (8th Cir. 1983),

cert. denied, 464 U.S. 896 (1983); United States v. Hernandez-Salazar,

813 F.2d 1126 (11th Cir. 1987). To conduct such inspections at

locations other than the port of export, the exportation must be

imminent and the goods committed to export. Accordingly, should a

carrier, freight forwarder, or shipper wish to have its shipment

inspected at a CES at a port other than the designated port of export,

sufficient evidence that exportation is imminent and that the goods are

committed to export must be made available to Customs. Alternatively,

evidence of the shipper's consent to Customs inspection at an inland

port may be presented. To advise the exporting community of Customs

requirements for inspecting merchandise declared for export at a port

other than the port of exit, Customs proposes to further amend

Sec. 118.1 by adding a new sentence at the end that provides that

either proof of the shipper's consent to the inspection must be

furnished or transportation documents must accompany outbound shipments

to evidence that the exportation of the goods is imminent and that the

goods are committed to export.

Pursuant to the provisions of 19 CFR 118.4(g), the CES operator is

required to maintain a custodial bond. The terms and conditions of the

custodial bond obligate the bond principal to accept only merchandise

authorized under Customs Regulations (see 19 CFR 113.63(a)(2)), and

keep safe any merchandise placed in its custody (see 19 CFR

113.63(b)(2)). A proposed amendment to Sec. 118.4(g) makes it clear

that the CES operator is authorized to accept and must keep safe all

merchandise that is delivered for examination. Accordingly, the

custodial bond will guarantee the receipt and safekeeping of

merchandise delivered for an import or export examination.

Regarding the application procedure to operate a CES, paragraph (b)

of Sec. 118.11 currently provides that where a significant capital

expenditure would be required in order for an existing facility to meet

security or other physical or equipment requirements necessary for the

CES operation, an applicant may

[[Page 44103]]

request in the application, and the port director may allow, up to an

additional 30 calendar days after tentative selection to conform the

facility to such requirements. Because compliance with the 30-calendar-

day time-frame requirement for significant capital expenditures is

subject to building permits and other requirements of a local nature,

which may not be forthcoming within the time period specified, this

requirement imposes a burdensome condition in the application

procedure, which may operate to dissuade many potential applicants from

applying to become CES operators. Accordingly, Customs proposes to

remove this requirement and instead allow the time frames for making

capital improvements to a facility to be addressed locally.

Further, paragraph (g) of this same section currently provides that

an applicant must present any information showing the applicant's

experience in international cargo operations and knowledge of Customs

procedures and regulations, ``or a commitment to acquire that

knowledge.'' Because a demonstrable knowledge of such operations,

procedures, and regulations is essential prior to selection as a CES

operator, the alternative ``commitment to acquire that knowledge''

language in the regulation is too subjective a standard by which to

measure an applicant's credentials to operate a CES. Accordingly,

Customs proposes to remove this language.

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 9:00 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, because the amendments would operate to confer new

benefits on potential CES operations, by allowing them to perform more

services. 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.

List of Subjects in 19 CFR Part 118

Administrative practice and procedure, Customs duties and

inspection, Examination stations, Exports, 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 is revised to read as

follows:

Authority: 19 U.S.C. 66, 1499, 1623, 1624; 22 U.S.C. 401; 31

U.S.C. 5317.

2. In Sec. 118.1, the first sentence is amended by removing the

word ``imported'', and a new sentence is added at the end to read as

follows:

Sec. 118.1 Definition.

* * * To present outbound cargo for inspection at a CES at a port

other than the shipment's designated port of exit, either proof of the

shipper's consent to the inspection must be furnished or a complete set

of transportation documents must accompany the shipment to evidence

that exportation of the goods is imminent and that the goods are

committed to export, thereby, making them subject to Customs

examination.

3. In Sec. 118.4, paragraph (g) is amended by adding a new second

sentence to read as follows:

Sec. 118.4 Responsibilities of a CES operator.

* * * * *

(g) * * * The CES operator will accept and keep safe all

merchandise delivered to the CES for examination. * * *

* * * * *

4. In Sec. 118.11, the second sentence in paragraph (b) is amended

by removing the words ``, and the port director may allow, up to an

additional 30 calendar days after tentative selection to conform the

facility to such requirements, but in such a case the agreement

referred to in Sec. 118.3 of this part shall not be executed until

those requirements are met'' and adding, in their place, the words

``time to conform the facility to such requirements. The agreement

referred to in Sec. 118.3 of this part shall not be executed, in any

event, until the facility is conformed to meet the requirements''; and

paragraph (g) is amended by removing the words ``, or a commitment to

acquire that knowledge''.

Approved: June 3, 1997.

Samuel H. Banks,

Acting Commissioner of Customs.

[FR Doc. 97-21843 Filed 8-18-97; 8:45 am]

BILLING CODE 4820-02-P