Accreditation of Commercial Testing Laboratories; Approval of Commercial Gaugers

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 113 and 151

RIN 1515-AB60

Accreditation of Commercial Testing Laboratories; Approval of

Commercial Gaugers

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Customs Regulations

relating to the commercial testing and gauging of imported merchandise,

pursuant to Customs modernization provisions of the North American Free

Trade Agreement Implementation Act. The proposed regulations revise the

general procedures for the accreditation/reaccreditation of commercial

laboratories, the approval/reapproval of commercial gaugers, and the

suspension and revocation of such accreditations/approvals. Further,

the proposed regulations establish a reimbursable fee schedule that

Customs will charge such laboratories/gaugers to accredit/ approve and

periodically reaccredit/reapprove their commercial services, and make

provision for the imposition of monetary penalties for failure to

adhere to any of the provisions applicable to the examination,

sampling, and testing of imported merchandise.

DATES: Comments must be received on or before August 10, 1998.

ADDRESSES: Written comments (preferably in triplicate) may be addressed

to the Regulations Branch, Office of Regulations and Rulings, U.S.

Customs Service, 1300 Pennsylvania Avenue, NW., Washington, DC 20229.

Comments submitted may be inspected at the Regulations Branch, Office

of Regulations and Rulings, U.S. Customs Service, Suite 3000, 1300

Pennsylvania Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Ira Reese, Laboratories & Scientific

Services, (202) 927-1060.

SUPPLEMENTARY INFORMATION:

Background

On December 8, 1993, the United States enacted the North American

Free Trade Agreement Implementation Act (the Act), Pub. L. 103-182, 107

Stat. 2057. Title VI of the Act contains provisions pertaining to

Customs Modernization (107 Stat. 2170); section 613 of Subtitle A to

Title VI amends section 499 of the Tariff Act of 1930 (19 U.S.C. 1499),

which provides Customs with the authority to conduct examinations and

detain imported merchandise.

The Commercial Laboratory/Gauger Testing Provisions of Section 613

The provisions of section 613, among other things, codify Customs

regulations and administrative guidelines concerning the use of

commercial laboratories and gaugers by adding a new paragraph (b) to

section 499 (19 U.S.C. 1499(b)). Regarding the accreditation/approval

aspects of commercial laboratories/gaugers, the provisions of new

paragraph (b) authorize Customs to:

(1) Set procedures for the accreditation of commercial laboratories

in the United States, which may be used to perform tests relating to

the admissibility, quantity, composition, or characteristics of

imported merchandise, and the approval of commercial gaugers in the

United States, which may be used to perform tests to establish the

quantities of imported merchandise;

(2) Impose reasonable charges for such accreditations/approvals and

periodic reaccreditations/reapprovals; and

(3) Establish the conditions regarding the suspension and

revocation of such accreditations and approvals, which may include the

imposition of monetary penalties not to exceed $100,000, in addition to

penalties for any loss of revenue, in appropriate cases.

Regarding the testing/gauging aspects of commercial laboratories/

gaugers, new paragraph (b) further provides that:

(1) In the absence of Customs testing, Customs shall accept

analysis and quantity results from Customs-accredited laboratories and

Customs-approved gaugers; however, this circumstance does not limit or

otherwise preclude Customs or any other Federal agency from

independently testing, analyzing, or quantifying any sample or

merchandise;

(2) Testing procedures and methodologies will be made available

upon request to any person, except when they are proprietary to the

holder of a copyright or patent or developed by Customs for enforcement

purposes; information resulting from any Customs testing will be made

available to the importer of record and any agents thereof, except when

the information meets the above specified exclusions from disclosure;

and

(3) Laboratories/gaugers may seek judicial review of any final

Customs decision that adversely affects their accreditation/approval,

i.e., denial, suspension, or revocation, or that

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imposes a monetary penalty, by commencing an action within 60 days of

such decision in the Court of International Trade.

New paragraph (b) also provides that commercial laboratories/

gaugers already accredited/approved under current Customs regulations

(see, 19 CFR 151.13) will not be required to reapply, but will be

subject to reaccreditation/ reapproval procedures and requirements.

Until the time for reaccreditation/reapproval, those commercial

laboratories/gaugers already accredited/approved may conduct only those

tests they were originally accredited/approved to perform.

A. Proposed Amendments Concerning Accrediting Commercial Laboratories

Heretofore, Customs accredited commercial laboratories to perform

selected tests on certain imported merchandise entered under chapters

27 (pertaining to mineral fuels, mineral oils and products of their

distillation; bituminous substances; and mineral waxes) and 29

(pertaining to organic chemicals) of the Harmonized Tariff Schedule of

the United States (HTSUS). The proposed amendments will expand the

scope of accreditation to allow laboratories to perform the majority of

tests vested in, or delegated to, the Customs Service; accreditation

will extend to the performance of functions for determining the

admissibility, quantity, composition, or characteristics of imported

merchandise. Accordingly, more importers may now choose, at their

expense, to have merchandise tested by Customs-accredited laboratories

whose test results will be accepted by Customs, if the importer

certifies that the sample tested was taken from the merchandise in the

entry. This could result in the earlier availability of test results

and should assist in the proper classification and entry of imported

merchandise.

The proposed regulations do not preclude Customs from testing

merchandise from a shipment which has already been tested by an

accredited laboratory at the importer's expense. Occasionally, Customs

may request sample splits (discussed below) retained by accredited

laboratories to test. In cases where merchandise has been analyzed by

both Customs and an accredited laboratory, Customs actions will be

based upon the analysis provided by Customs, unless other action is

indicated by the Director, Laboratories & Scientific Services

(Director).

Merchandise samples tested by accredited laboratories will be from

an importer's actual importations. Customs will release to the importer

a representative sample of the merchandise, which will be taken and

split into two essentially equal parts under Customs supervision at the

port of entry. Each part will be of sufficient size so that complete

testing for Customs purposes can be performed. The accredited

laboratory will test one part and retain the second sample and any

remnants from the testing, under proper storage conditions, for a

period of one year from the date of the laboratory's final analysis

report, unless other instructions are issued in writing by Customs. At

the end of the one-year retention time period the accredited laboratory

may dispose of the retained samples and sample remnants in a manner

consistent with federal, state, and local statutes; perishable samples

and sample remnants may be disposed of more expeditiously, if done in

accordance with acceptable laboratory procedures.

Commercial laboratories will be accredited to perform accepted

industry and Customs-specified tests on merchandise by commodity groups

that parallel the chapters and subheadings contained in the HTSUS.

These commodity groups are set forth in the proposed rule. Laboratories

may be accredited to perform testing in more than one of these

commodity groups. Further, because certain tests require expensive,

highly-specialized equipment or narrow technical expertise, and because

any given commodity group may involve many different chemical,

physical, or mechanical tests, Customs will consider, upon application,

granting accreditation for subgroups of tests within a commodity group.

Customs may expand the list of commodity groups for accreditation.

While Customs recognizes that many laboratory-accreditation systems

perform accreditation by fields of testing, such as chemical,

biological, mechanical, etc., Customs is not proposing to adopt this

method of accreditation. Instead, Customs proposes to perform

accreditation by commodity groups and subgroups because of Customs

technical requirements and because many commodities require testing in

more than one traditional field. Accordingly, laboratories seeking

Customs accreditation should become aware of Customs testing

requirements and seek accreditation in the multiple fields required to

test a particular commodity for Customs purposes. For example, a

metals-testing laboratory, in order to obtain Customs accreditation,

will need to have the ability to perform both chemical and mechanical

testing.

Specific testing methods for accreditation will be designated in

Commodity Group Brochures available from Customs to ensure that the

importer-client is aware of the appropriate test procedures for Customs

purposes. Some of these testing methods may reference general industry

standards, published by such organizations as the American Society for

Testing and Materials (ASTM) and the American Petroleum Institute

(API). It is recognized that different test methods may produce

different results, and it is imperative for this program that Customs

laboratories and Customs-accredited laboratories utilize the same test

methods.

To become a Customs-accredited laboratory, individuals or

commercial organizations must submit a letter of application to Customs

requesting accreditation to perform testing for specific commodity

groups, e.g., textiles or metals. The technical and operational

requirements for accreditation include having an appropriate facility

properly equipped to perform the designated tests and staff capable of

performing these tests. In addition to reviewing an applicant's overall

physical plant and management system, specific review and testing will

be conducted for each commodity group in which accreditation is sought.

Customs evaluation of an applicant's professional abilities will be in

accordance with the general criteria contained in ASTM E548: Standard

Guide for General Criteria Used for Evaluating Laboratory Competence.

Customs determination of an applicant's overall competence,

independence, and character will be based on the information contained

in the application submitted by the Laboratory and by conducting on-

site inspections and background investigations.

Applicants will be required to retain certain records so that

Customs can evaluate and verify all Customs-related work performed. The

normal record-retention period under the Customs Regulations is five

years (see, present Sec. 151.13(i)). However, should litigation arise

within the five-year record-retention-period of time that involves

certain laboratory records, those records may be required by Customs to

be maintained for a longer period of time. Should laboratory operations

cease, the laboratory shall inform Customs where the records will be

located. Failure to properly safeguard or account for analysis records

and laboratory testing/gauger measurement results will make the

accredited laboratory/approved

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gauger subject to liquidated damages in the amount of the bond

(discussed below) or, in the event of bankruptcy, render the surety

liable for such damages.

Further, applicants will be required to obtain a bond executed in

accordance with part 113 of the Customs Regulations (19 CFR part 113).

The limits of liability on the bond will be established by the Customs

port nearest to the applicant's main office in consultation with the

Director.

Following Customs evaluation of a laboratory's overall competence

to become an accredited laboratory, Customs will notify the laboratory

in writing of its approval/nonselection; in the case of nonselection,

specific reasons will be given. Laboratories receiving an adverse

accreditation determination, and wishing to appeal the decision must

file an appeal within 30 days to the Director. Within 30 days of

receipt of the appeal, the Director will make a determination and

notify the laboratory in writing. If the Director reaffirms the

nonselection, again citing specific reasons, the applicant may then

choose to either submit a new application to the Director after waiting

90 days from the date of the Director's last decision; or commence an

action in the Court of International Trade within 60 days after

issuance of Customs decision or order.

Once accredited, laboratories may apply to expand their

accreditation at any time. Extensions of accreditation may be requested

to add a new site and/or to increase the number of accredited commodity

groups or subgroups at a previously accredited site. The procedure for

extensions of accreditation is essentially the same as that for

accreditation; certain initial processing steps, e.g., background

investigations and review of educational credentials, however, may not

need to be repeated. The reaccreditation fee will be adjusted

accordingly. Customs-accredited laboratories must undergo

reaccreditation every three years. Regarding adverse reaccreditation

determinations and any suspension/revocation/penalty decisions

(discussed below), the appeal procedures discussed above will apply.

Once accredited, a laboratory must maintain its accreditation

credentials by maintaining its overall physical plant and management

system, as well as by remaining proficient at performing approved

methods of analysis. In particular, accredited laboratories will be

required to perform periodic analyses of check samples and to submit

the results to Customs. Check samples are samples which have been

distributed by Customs to test proficiency in a certain area of

accreditation. The results must demonstrate that the laboratory has the

continuing ability to produce a work product that assists in the proper

classification and entry of imported merchandise.

In addition to establishing the requirements and procedures for

laboratories to receive and maintain accreditation, the proposed

regulations make provision for the suspension or revocation of such

accreditation, and the imposition of monetary penalties not to exceed $

100,000 in addition to the recovery of any loss of revenue that may

have occurred. Customs will seek to recover lost revenue from

accredited laboratories in cases where the laboratory intentionally

falsified the analysis in collusion with the importer. Customs may

assess monetary penalties on an accredited laboratory for failure to

adhere to any of the regulatory requirements imposed on accredited

commercial laboratories. Otherwise, Customs will not assess penalties

nor seek to recover lost revenue merely because of a good-faith

difference of professional opinion. Via a separate Federal Register

document, Customs will publish guidelines governing penalties and any

mitigating factors it will consider in imposing such penalties.

B. Proposed Amendments Concerning Approving Commercial Gaugers

The regulatory amendments proposed separately provide for the

approval of commercial gaugers and the acceptance of reports from

Customs-approved commercial gaugers. The commercial gauger-approval

amendments generally parallel those concerning laboratory

accreditation. Approval may extend to the performance of the functions

of gauging and measuring merchandise. Customs approval extends only to

the performance of such functions as are vested in, or delegated to,

Customs. The imported products for which gauging approval may be

obtained remains the same as those currently listed in the regulations.

But Customs may expand the list of commodity groups for approval.

C. Proposed Amendments Concerning Reimbursable Fees for Accreditation/

Approval and Periodic Reaccreditation/Reapproval

At the time of promulgating the Customs Modernization provisions of

the Act, Congress agreed that in order for Customs to expand the

Customs laboratory/gauger program the cost of the program should be

recaptured through the imposition of reasonable fees. A Customs task

force was formed to study the kind of fee structure that would be

necessary for Customs to recoup the costs associated with the

application process, travel costs, conducting ongoing background

investigations, and maintaining the program. The fee structure adopted

would have to cover the costs associated with implementing the expanded

program.

The regulatory amendments proposed provide for the imposition of

reasonable, i.e., reimbursable, charges associated with the work

required by Customs to accredit/approve and periodically reaccredit/

reapprove commercial laboratories/gaugers. These charges necessarily

will be variable, dependent on specific travel costs and the scope of

particular accreditation/approval applications, and are designed merely

to reimburse Customs for the actual costs of establishing and

regulating the laboratory/gauger program. Accordingly, the fee

structure is based on recovering those expenses which are variable,

directly associated with specific travel and the conduct of background

investigations, and those expenses which are fixed, based on

administrative estimates generally applicable to recovering the

technical and clerical support costs associated with the program.

Variable Costs

The variable portion of the accreditation-reaccreditation/approval-

reapproval fee schedules will be based on the actual costs incurred for

travel and associated with the scope of the background investigation.

These charges are estimated to be approximately $ 1,000 per visit and $

1,700 per background investigation. Whenever possible, Customs will

endeavor to bundle these variable costs so that where travel or

investigations costs apply to more than one laboratory or gauger, the

costs will be fairly apportioned between applicants.

In the event of a dispute concerning the amount of assessment for

travel costs and per diem charges relating to a scheduled inspection

visit, the laboratory/gauger concerned may file an appeal within 30

days of the assessment with the Director. The appeal letter must

specify which charges are disputed and give reasons for the dispute,

accompanied by supporting documentation where appropriate.

Fixed Costs

The fixed portion of the accreditation-reaccreditation/ approval-

reapproval fee schedules is based on administrative guidelines which

estimate program

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administrative support costs that do not consider salary or related

costs. The primary accreditation/approval fee is meant to defray the

following costs:

(1) Preparation and distribution of methods manuals (for

laboratories only) and policies;

(2) Development and distribution of application packages;

(3) Set up and storage of company and/or branch files;

(4a) For laboratories, check samples and blind sample programs

(costs of collection, documentation, and mailing of samples; costs of

obtaining and storing samples; and costs of excess sample disposal);

(4b) For gaugers, development and application of proficiency

testing; and

(5) Office supplies used to administer the program, i.e., copier

costs, envelopes, etc.

Customs is authorized to charge 15% of program costs for

administrative overhead. See, 19 CFR 24.21. Based on the above

referenced administrative estimates of program-support costs, Customs

has determined that the following initial fee schedules for

accrediting/reaccrediting laboratories and approving/reapproving

gaugers are reasonable:

For Laboratories:

General Accreditation Fee.................................... $ 750

Additional Commodities Fee................................... 200

Laboratory Reaccreditation Fee............................... 375

Commodity Reaccreditation Fee................................ 150

For Gaugers:

General Approval Fee......................................... 400

Reapproval Fee............................................... 200

Laboratories/gaugers will be required to submit to the Director,

fifty percent of the applicable accreditation/ general approval fee

amount with their initial application for accreditation/approval, to

cover preliminary processing costs. This pre-payment is nonrefundable.

Before a laboratory/gauger will be designated by Customs as an

accredited/approved facility or can have its existing accreditation/

approval extended to cover additional commodity testing it must have

paid the applicable variable charges assessed and the balance of the

fixed fee associated with the action within 30 days of notification to

Customs, and have its laboratory/gauger bond on file. Then the

applicant will receive accreditation/approval documentation and a

notice of accreditation/approval or extension of existing

accreditation/approval will be published in the Federal Register and

Customs Bulletin.

Three years from the date of the initial accreditation/ approval,

Customs, Account Services Division, will bill the licensee for

reaccreditation/reapproval. There will be a 30-day billing period. If

payment is not received by Customs within the 30 day billing period,

revocation procedures will be initiated against all accreditations/

approvals granted the licensee.

Following the first year of operation, these initial fee schedules

may be revised to capture expenses not reimbursed to Customs. If the

fee schedules are revised, they will be published in the Federal

Register and the Customs Bulletin.

Already Accredited/Approved Laboratories/Gaugers

Laboratories accredited and gaugers approved under Customs

regulations prior to December 8, 1993, will not be required to apply

for initial accreditation/approval. Until the time for reaccreditation/

reapproval, however, those commercial laboratories/gaugers already

accredited/approved must, however, conduct their business in a manner

consistent with the administrative portions of the amended regulations,

and will be required to pay applicable reaccreditation/ reapproval fees

in the third year following the date these proposed regulations become

final.

Customs-accredited laboratories may make their accreditation known

to potential customers, but must accurately represent the tests for the

commodity group(s) for which accreditation has been obtained. Such

laboratories will be limited to the use of terms that appear in the

Notice of Accreditation they receive at the time they are accredited.

Parallel provisions will apply to Customs-approved gaugers.

The regulations currently implementing the examination of

merchandise provisions of 19 U.S.C. 1499 are found in part 151 of the

Customs Regulations (19 CFR part 151); Sec. 151.13 currently pertains

to both commercial laboratories and gaugers. Other Customs regulatory

provisions referencing part 151 are found in part 113 (19 CFR part

113). In this document Customs proposes to amend parts 113 and 151 of

the Customs Regulations, as discussed below, to implement the Customs

Modernization provisions pertaining to laboratory accreditations/gauger

approvals (19 U.S.C. 1499(b)), as discussed above.

In sum, it is proposed to revise two references in Sec. 113.67 of

the Customs Regulations (19 CFR 113.67) to carry the proper cross

references for the commercial laboratory or gauger provisions that are

redesignated as proposed in this document. In part 151, it is proposed

to provide for commercial laboratories and gaugers in separate

sections, so that each program can be more easily administered.

Accordingly, Sec. 151.12, currently reserved, will be amended to set

forth the accreditation requirements and procedures applicable to

commercial laboratories, and Sec. 151.13 will be amended to set forth

the approval requirements and procedures applicable to commercial

gaugers. Section 151.14 will be revised to remove reference to the

product characteristic table currently contained in Sec. 151.13(a)(2),

as these analysis methods will be contained in Commodity Group

Brochures.

Discussion of Proposed Changes to Regulations

It is proposed to utilize Sec. 151.12--currently reserved--to set

forth the provisions concerning the accreditation of commercial

laboratories. Section 151.12 will contain 11 paragraphs ((a) through

(k)) in a new question and answer format designed to facilitate an

understanding of how the new laboratory-accreditation program will

operate.

Proposed New Section 151.12

Paragraph (a) will contain the definitions of three terms or

phrases that will be used throughout the remaining paragraphs of

Sec. 151.12.

Paragraph (b) will pose the question ``What is a ``Customs-

accredited laboratory''?'' and describes the eligibility requirements

for commercial laboratories. The paragraph explains that those

laboratories that can demonstrate the capability to perform approved

methods of analysis used to determine the admissibility, quantity,

composition, or characteristics for certain tariff commodity groups can

be accredited by Customs to perform such tests for Customs purposes.

Paragraph (c) will pose the question ``What are the obligations of

a Customs-accredited laboratory?'' and delineates the six requirements

commercial laboratories must agree to before they can be accredited by

Customs.

Paragraph (d) will pose the question ``What are the commodity

groups for which accreditation may be sought?'' and contains the list

of commodity groups for which accreditation is available without

special permission from the Director. The list of commodity groups,

although similar to the provisions currently at Sec. 151.13(a)(2), is

expanded from two HTSUS chapters to include more than 40 HTSUS chapters

to reflect the scope of imported merchandise for which Customs is

responsible for testing.

Paragraph (e) will pose the question ``What are the approved

methods of

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analysis?'' and provides that the approved methods of testing will be

published in Customs Commodity Group Brochures. The brochures will

specify the particular testing procedures required, unless written

permission from the Director is given to use an alternate method.

Procedures required by the Director may reference applicable general

industry standards, published by such organizations as the American

Society for Testing and Materials (ASTM) and the American Petroleum

Institute (API).

Paragraph (f) will pose the question ``How would a commercial

laboratory become a Customs-accredited laboratory?'' and explains the

essential requirements that prospective commercial laboratories must

respond to when applying for accreditation: (1) What the application

should contain, (2) where an application should be sent, and (3) how

the application will be reviewed. Further, this paragraph will describe

the criteria by which Customs will appraise each applicant's overall

physical plant and management system to ascertain the laboratory's

ability to manage and control the acquisition of technical data

associated with the accreditation sought and describe Customs

determination of an applicant's competence.

Paragraph (g) will pose the question ``How will an applicant be

notified concerning accreditation?'' and describes the procedures

Customs will follow when notifying applicants concerning the

disposition of their applicationor request for extension of

accreditation. The paragraph also describes the grounds for

nonselection, based on application, background investigation, or

capability matters, and the appeal procedures applicants must follow to

appeal adverse determinations concerning their application or request

for extension of accreditation.

Paragraph (h) will pose the question ``What are the accreditation/

reaccreditation fee requirements?'' and provides that any fixed fee

changes will be published in the Customs Bulletin and the Federal

Register; the fees for the first year are as discussed above.

Paragraph (i) will pose the question ``Can existing Customs-

accredited laboratories continue to operate?'' and provides that while

such laboratories, accredited prior to December 8, 1993, will retain

that accreditation, they must, however, conduct their business in a

manner consistent with the administrative portions of the new

regulations. This paragraph also provides that these existing

facilities will have their status reevaluated in the third year

following the effective date of this regulation. At the time of

reaccreditation, these laboratories must meet the requirements of the

regulations and pay the applicable fees; a failure to meet these

requirements will result in revocation or suspension of the

accreditation.

Paragraph (j) will pose the question ``How will Customs-accredited

laboratories operate?'' and describes (1) the testing of samples, (2)

the acceptance of reports by Customs, (3) recordkeeping requirements,

(4) limited representation of Customs accreditation, and (5) a

prohibition against accredited laboratories subcontracting Customs-

related analyses work. The testing of samples procedures provide that

importers may have samples of their merchandise tested by Customs-

accredited laboratories, and that the commercial laboratory designated

to test the sample is required to test only one part of the sample that

will be split into two parts under Customs supervision, reserving the

second part for a period of one year. Further, these provisions provide

that Customs and any other Federal agency reserve the right to

independently challenge the results of such reports.

Lastly, paragraph (k) will pose the question ``How can a laboratory

have its accreditation suspended or revoked or be required to pay a

monetary penalty?'' and explains (1) how the laboratory's accreditation

may be revoked or suspended or how the laboratory may be assessed a

monetary penalty in lieu of, or in addition to, suspension or

revocation of accreditation, (2) what are the grounds for suspension,

revocation, or assessment of a monetary penalty, (3) the notice

requirements Customs will follow, (4) the appeal rights of the

laboratory, (5) publication requirements, and (6) penalty provisions.

Regarding the appeal of a revocation, suspension, or penalty decision,

these provisions parallel the appeal provisions regarding nonselection.

Regarding the monetary penalty provisions, these can be in addition to

or in lieu of an order regarding suspension or revocation of

accreditation. No penalty may exceed $100,000.

Proposed Amended Section Sec. 151.13

It is further proposed to amend the provisions of Sec. 151.13,

which currently contains provisions pertaining to both commercial

gaugers and laboratories, to make its provisions exclusive to

commercial gaugers. Section 151.13 will contain 9 paragraphs ((a)

through (i)) in a similar question and answer format designed to

facilitate how the new gauger-approval program will operate.

Paragraph (a) will pose the question ``What is a `Customs-approved

gauger'?'' and describes the eligibility requirements for commercial

gaugers. The paragraph explains that those gaugers that can demonstrate

the capability to perform the approved gauging and measurement

procedures for certain tariff commodity groups listed in the section

can be approved by Customs to perform such procedures for Customs

purposes.

Paragraph (b) will pose the question ``What are the obligations of

a Customs-approved gauger?'' and delineates the six requirements

commercial gaugers must agree to before they can be approved by

Customs.

Paragraph (c) will pose the question ``What are the approved

gauging and measurement procedures?'' and provides that the approved

gauging and measurement procedures will be published in Customs

Commodity Group Brochures. The brochures will specify the particular

measurements and procedures required, unless written permission from

the Director is given to use an alternate method. Procedures required

by the Director may reference applicable general industry standards,

published by such organizations as the American Society for Testing and

Materials (ASTM) and the American Petroleum Institute (API).

Paragraph (d) will pose the question ``How would a commercial

gauger become a Customs-approved gauger?'' and explains the essential

requirements that prospective commercial gaugers must meet when

applying for approval. These provisions substantially mirror the

requirements discussed above for proposed Sec. 151.12(f).

Paragraph (e) will pose the question of ``How will an applicant be

notified concerning approval?'' and describes the procedures Customs

will follow when notifying applicants concerning the disposition of

their application or request for extension of approval. The paragraph

also describes the grounds for nonselection, based on application,

background investigation, or capability matters, and the appeal

procedures applicants must follow if their application or request is

disapproved. These provisions substantially mirror the requirements

discussed above for proposed Sec. 151.12(g).

Paragraph (f) will pose the question ``What are the approval/

reapproval fee requirements?'' and provides that any fixed fee changes

will be published in the Customs Bulletin and the Federal Register.

These provisions substantially mirror the requirements discussed above

for proposed Sec. 151.12(h).

[[Page 31390]]

Paragraph (g) will pose the question ``Can existing Customs-

approved gaugers continue to operate?'' and provides that while such

gaugers, approved prior to December 8, 1993, will retain that approval,

they must, however, conduct their business in a manner consistent with

the administrative portions of the new regulations. Other provisions in

this paragraph applicable to gaugers substantially mirror the

requirements discussed above for laboratories at proposed

Sec. 151.12(i).

Paragraph (h) will pose the question ``How will Customs-approved

gaugers operate?'' and describes (1) the acceptance of reports by

Customs, (2) recordkeeping requirements, (3) limited representation of

Customs approval requirements, and (4) a prohibition against approved

gaugers subcontracting Customs-related work. These provisions

substantially mirror the requirements discussed above for proposed

Sec. 151.12(j).

Paragraph (i) will pose the question ``How can a gauger have its

approval suspended or revoked or be required to pay a monetary

penalty?'' and explains (1) how the gauger's approval may be revoked or

suspended or how the gauger may be assessed a monetary penalty in lieu

of, or in addition to, suspension or revocation of approval, (2) what

are the grounds for suspension, revocation, or assessment of a monetary

penalty, (3) the notice requirements Customs will follow, (4) the

appeal rights of the gauger, (5) publication requirements, and (6)

penalty provisions. These provisions substantially mirror the

requirements discussed above for proposed Sec. 151.12(k).

Other Regulatory Amendments Proposed

Section 151.14 will be revised to remove a reference to the table

of product characteristics found at Sec. 151.13(a)(2) because product

characteristics will no longer be set forth in the regulations, but

will be contained in specific Commodity Group Brochures.

In Sec. 113.67, two references to current Sec. 151.13 will be

revised to correspond to the changes proposed to Secs. 151.13 and

151.14.

Comments

Before adopting these proposed regulations 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,

Office of Regulations and Rulings, U.S. Customs Service, Suite 3000,

1300 Pennsylvania Avenue, NW., Washington, DC.

The Regulatory Flexibility Act, and Executive Order 12866

Because the number of accredited laboratories and approved gaugers

is expected to be small, and such accreditation and approval will

confer a benefit on the importing public, 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

adverse economic impact on a substantial number of small entities.

Accordingly, they are not subject to the regulatory analysis or other

requirements of 5 U.S.C. 603 and 604. This document does not meet the

criteria for a ``significant regulatory action'' as specified in 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

(OMB) for review in accordance with the Paperwork Reduction Act of 1995

(44 U.S.C. 3507). Comments on the collection of information should be

sent to OMB, 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 the Regulations Branch at the

address set forth previously. Comments should be submitted within the

time frame that comments are due regarding the substance of the

proposal.

Comments are invited on:

(a) Whether the collection of information is necessary for the

proper performance of the functions of the agency, including whether

the information shall have practical utility;

(b) The accuracy of the agency's estimate of the information

collection burden;

(c) Ways to enhance the quality, utility, and clarity of the

information to be collected;

(d) Ways to minimize the information collection burden on

respondents, including through the use of automated collection

techniques or other forms of information technology; and

(e) Estimates of capital or start up costs and costs of operations,

maintenance, and purchase of services to provide information.

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless the collection of

information displays a valid control number.

The collections of information in these proposed regulations are in

Secs. 151.12(e) and 151.13(c). The information requested is necessary

so that Customs can determine whether those laboratories/gaugers

seeking accreditation/approval to test/measure imported merchandise are

competent to receive or maintain such credentials. The likely

respondents are individuals and commercial organizations who either

analyze merchandise or measure, gauge, or sample merchandise.

Estimated total annual reporting and/or recordkeeping burden: 50

hours.

Estimated average annual burden per respondent/ recordkeeper: 5

hours.

Estimated number of respondents and/or recordkeepers: 10.

Estimated annual frequency of responses: 1.

Part 178 of the Customs Regulations (19 CFR part 178), which lists

the information collections contained in the regulations and control

numbers assigned by OMB, would be amended accordingly if this proposal

is adopted.

Drafting Information

The principal author of this document was Gregory R. Vilders,

Attorney, Regulations Branch, Office of Regulations and Rulings.

However, personnel from other offices participated in its development.

List of Subjects

19 CFR Part 113

Bonds, Customs duties and inspection, Exports, Freight, Imports,

Reporting and recordkeeping requirements.

19 CFR Part 151

Customs duties and inspection, Examination, Fees assessment,

Gaugers, Imports, Laboratories, Licensing, Penalties, Reporting and

recordkeeping requirements, Sampling and testing.

Amendments to the Regulations

For the reasons stated above, it is proposed to amend parts 113 and

151 of the Customs Regulations (19 CFR parts 113 and 151) as set forth

below:

PART 113--CUSTOMS BONDS

1. The general authority citation for part 113 continues to read as

follows:

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

* * * * *

[[Page 31391]]

Sec. 113.67 [Amended]

2. In Sec. 113.67, paragraph (a)(1)(ii) is amended by removing the

words ``terms of the Commercial Gauger Agreement [see

Sec. 151.13(b)(9)] and by the''; and by removing the citations

``Secs. 151.13 and 151.14'' and adding, in their place, the citation

``Sec. 151.13(b)''.

Sec. 113.67 [Amended]

3. In Sec. 113.67, paragraph (b)(1)(ii) is amended by removing the

words ``terms of the Commercial Laboratory Agreement [see

Sec. 151.13(b)(9)] and by the''; and by removing the citation

``Sec. 151.13'' and adding, in its place, the citation

``Sec. 151.12(c)''.

PART 151--EXAMINATION, SAMPLING, AND TESTING OF MERCHANDISE

1. The general authority citation for part 151 continues to read as

follows:

Authority: 19 U.S.C. 66, 1202 (General Notes 20 and 21,

Harmonized Tariff Schedule of the United States (HTSUS)), 1624.

Subpart A also issued under 19 U.S.C. 1499.

* * * * *

2. In subpart A, Sec. 151.12 is added to read as follows:

Sec. 151.12 Accreditation of commercial laboratories.

This section sets forth the requirements for commercial

laboratories to obtain accreditation by Customs for the testing of

certain commodities, and explains the operation of such accredited

laboratories. This section also provides for the imposition of

accreditation and reaccreditation fees, sets forth grounds for the

suspension and revocation of accreditation, and provides for the

imposition of a monetary penalty for an accredited commercial

laboratory that fails to adhere to the provisions of this section.

(a) Definitions. For purposes of this section, the following words

and phrases have the meanings indicated:

Analysis record. An ``analysis record'' is a compilation of all

documents which have been generated during the course of analysis of a

particular sample which, under normal circumstances, culminates in the

issuance of a laboratory report. An analysis record may include, both

in paper and electronic-form, such documents as work sheets, notes,

associated spectra (both spectra of the actual product and any standard

spectra used for comparison), photographs and microphotographs, and the

laboratory report.

Check samples. ``Check samples'' are samples which have been

distributed by Customs to accredited laboratories to test their

proficiency in a certain area of accreditation.

Commodity Group Brochure. A ``Commodity Group Brochure'' is a

booklet which contains a listing of the laboratory methods and

application procedures which commercial laboratories are required to

have the capability to perform to qualify for Customs-accreditation in

a particular commodity group. The brochures will specify the particular

laboratory testing procedures required for particular commodity groups,

unless written permission from the Director is given to use an

alternate method. Procedures required by the Director may reference

applicable general industry testing standards, published by such

organizations as the American Society for Testing and Materials (ASTM)

and the American Petroleum Institute (API). Commodity Group Brochures

are available from the U.S. Customs Service, Attention: Director,

Laboratories & Scientific Services, Washington, D.C. 20229.

Director. In Secs. 151.12 and 151.13, references to the

``Director'' mean the Director, Laboratories & Scientific Services,

located in Washington, DC.

(b) What is a ``Customs-accredited laboratory''? ``Commercial

laboratories'' are individuals and commercial organizations that

analyze merchandise, i.e., determine its composition and/or

characteristics, through laboratory analysis. A ``Customs-accredited

laboratory'' is a commercial laboratory, within the United States, that

has demonstrated, to the satisfaction of the Director, pursuant to this

section, the capability to perform analysis of certain commodities to

determine elements relating to the admissibility, quantity,

composition, or characteristics of imported merchandise. Customs

accreditation extends only to the performance of such functions as are

vested in, or delegated to, Customs.

(c) What are the obligations of a Customs-accredited laboratory? A

commercial laboratory accredited by Customs agrees to the following

conditions and requirements:

(1) To comply with the requirements of part 151, Customs

Regulations (19 CFR part 151), and to conduct professional services in

conformance with approved standards and procedures, including

procedures which may be required by the Commissioner of Customs or the

Director;

(2) To have no interest in or other connection with any business or

other activity which might affect the unbiased performance of duties as

a Customs-accredited laboratory. It is understood that this does not

prohibit acceptance of the usual fees for professional services;

(3) To maintain the ability, i.e., the instrumentation, equipment,

qualified staff, facilities, etc., to perform the services for which

the laboratory is accredited, and allow the Director to evaluate that

ability on a periodic basis by such means as on-site inspections,

demonstrations of analysis procedures, reviews of submitted records,

and proficiency testing through check samples;

(4) To retain those laboratory records beyond the five-year record-

retention period specified by Customs as necessary to address matters

concerned in pending litigation, and, should laboratory operations or

accreditation cease, to contact Customs immediately regarding the

disposition of records retained;

(5) To promptly investigate any circumstance which might affect the

accuracy of work performed as an accredited laboratory, to correct the

situation immediately, and to notify both the port director and the

Director of such matters, their consequences, and any corrective action

taken or that needs to be taken; and

(6) To immediately notify both the port director and the Director

of any attempt to impede, influence, or coerce laboratory personnel in

the performance of their duties, or of any decision to terminate

laboratory operations or accredited status. Further, within 5 days of

any changes involving legal name, address, ownership, parent-subsidiary

relationships, bond, other offices or sites, managerial or professional

or executive staff, approved signatories, facilities, instruments, or

equipment, etc., to notify the Director by certified mail.

(d) What are the commodity groups for which accreditation may be

sought? (1) Commercial laboratories may apply for accreditation to

perform tests for any of the commodity groups listed in paragraph

(d)(2) of this section. Applicable test procedures are listed in

Commodity Group Brochures. Application may be made for accreditation in

more than one commodity group. At the discretion of the Director

accreditation may be granted for subgroups of tests within a commodity

group or for commodity groups not specifically enumerated. Once

accredited, a Customs-accredited laboratory may apply at any time to

expand its accreditation, to add new testing sites, or increase the

number of commodity groups or subgroups accredited.

(2) The commodity groups for which accreditation may be sought

without

[[Page 31392]]

special permission from the Director are:

(i) Dairy and Chocolate Products entered under Chapters 4, 18, and

21 of the Harmonized Tariff Schedule of the United States (HTSUS);

(ii) Food and Food Products entered under Chapters 7-12, 15, 16,

and 19-21, HTSUS;

(iii) Botanical Identification--materials and products entered

under Chapter 14 and Section IX, HTSUS;

(iv) Sugar, Sugar Syrups, and Confectionery products entered under

Chapter 17, HTSUS;

(v) Spirituous Beverages entered under Chapter 22, HTSUS;

(vi) Inorganic Materials, including Inorganic Compounds and Ores,

entered under Chapters 26, 28, 31, and 36-38, HTSUS;

(vii) Petroleum and Petroleum Products entered under Chapters 27

and 29, HTSUS;

(viii) Organic Materials, including Intermediates and

Pharmaceuticals, entered under Chapters 29, 30, 34, 35, and 38, HTSUS;

(ix) Building Stone, Ceramics, Glassware, and Other Mineral

Substances entered under Chapter 25 and Section XIII, HTSUS;

(x) Rubber, Plastics, Polymers, Pigments and Paints entered under

Chapter 32 and Section VII, HTSUS;

(xi) Essential Oils and Perfumes entered under Chapter 33, HTSUS;

(xii) Leather and Articles of Leather entered under Chapters 41 and

42, HTSUS;

(xiii) Wood and Articles of Wood entered under Chapters 44 and 46,

HTSUS;

(xiv) Paper and Paper Products entered under Section X, HTSUS;

(xv) Textiles and Related Products, including footwear and hats,

entered under Sections XI and XII, HTSUS; and,

(xvi) Metals and Alloys entered under Section XV, HTSUS.

(e) What are the approved methods of analysis? Customs-accredited

laboratories shall follow the general or specific testing methods set

forth in Commodity Group Brochures in the testing of designated

commodities, unless the Director gives written permission to use an

alternate method. Alternative methods will be considered and approved

on a case-by-case basis.

(f) How would a commercial laboratory become a Customs-accredited

laboratory?--(1) What should an application contain? An application for

Customs-accreditation shall contain the following information:

(i) The applicant's legal name and the addresses of its principal

place of business and any other facility out of which it will work;

(ii) Detailed statements of ownership and any partnerships, parent-

subsidiary relationships, or affiliations with any other domestic or

foreign organizations, including, but not limited to, importers, other

commercial laboratories, producers, refiners, Customs brokers, and

carriers;

(iii) A statement of financial condition;

(iv) If a corporation, a copy of the articles of incorporation and

the names of all officers and directors;

(v) The names, titles, and qualifications of each person who will

be authorized to sign or approve analysis reports on behalf of the

commercial laboratory;

(vi) A complete description of the applicant's facilities,

instruments, and equipment;

(vii) Express agreement that if notified by Customs of pending

accreditation to execute a bond in accordance with part 113, Customs

Regulations (19 CFR part 113), and submit it to the Customs port

nearest to the applicant's main office. (The limits of liability on the

bond will be established by the Customs port in consultation with the

Director. In order to retain Customs accreditation, the laboratory must

maintain an adequate bond, as determined by the port director);

(viii) A listing of each commodity group for which accreditation is

being sought and, if procedures are being submitted for approval which

are not specifically provided for in a Commodity Group Brochure, a

listing of such procedures;

(ix) A statement for each commodity group for which accreditation

is being sought, providing:

(A) That all tests on all commodities in a named group can be

performed, or

(B) That all tests on the commodities in a group except those

indicated can be performed; or,

(C) That the listed procedures which are not specifically provided

for in the Commodity Group Brochure are being submitted for approval

for use;

(x) Express agreement to be bound by the obligations contained in

paragraph (c) of this section; and,

(xi) A nonrefundable pre-payment equal to 50 percent of the fixed

accreditation fee, as published in the Federal Register and Customs

Bulletin, to cover preliminary processing costs. Further, the applicant

agrees to pay Customs within 30 days of notification the associated

charges assessed for accreditation, i.e., those charges for actual

travel and background investigation costs, and the balance of the fixed

accreditation fee.

(2) Where should an application be sent? A commercial laboratory

seeking accreditation or an extension of an existing accreditation

shall send a letter of application to the U.S. Customs Service,

Attention: Director, Laboratories & Scientific Services, Washington,

D.C. 20229.

(3) How will an application be reviewed?

(i) Physical plant and management system. The facility of the

applicant will be inspected to ensure that it is properly equipped to

perform the necessary tests and that staff personnel are capable of

performing required tests. Customs evaluation of an applicant's

professional abilities will be in accordance with the general criteria

contained in the American Society for Testing and Materials (ASTM)

E548: Standard Guide for General Criteria Used for Evaluating

Laboratory Competence. This review will ascertain the laboratory's

ability to manage and control the acquisition of technical data. The

review will be performed at the time of initial application and upon

reaccreditation at three-year intervals.

(ii) Ability to perform tests on specified commodity groups. For

each commodity group applied for, the applicant will undergo a separate

review and testing. The specific accreditation will be based on the

laboratory's ability to perform the tests required for that commodity

group. This will include the qualifications of the technical personnel

in this field and the instrument availability required by the test

methods. Maintenance of accreditation will be on-going and will require

the submission of test results on periodic check samples. The criteria

for acceptance will be based on the laboratory's ability to produce a

work product that assists in the proper classification and entry of

imported merchandise.

(iii) Determination of competence. The Director shall determine the

applicant's overall competence, independence, and character by

conducting on-site inspections, which will include demonstrations by

the applicant of analysis procedures; reviewing analysis records

submitted; conducting proficiency testing through check samples; and

conducting background investigations.

(iv) Evaluation of technical and operational requirements. Customs

shall determine whether the following technical and operational

requirements are met:

(A) Equipment. The laboratory shall be equipped with all of the

instruments and equipment needed to conduct the tests for which it is

accredited. The

[[Page 31393]]

laboratory shall ensure that all instruments and equipment are properly

calibrated, checked, and maintained.

(B) Facilities. The laboratory shall have, at a minimum, adequate

space, lighting, and environmental controls to ensure compliance with

the conditions prescribed for appropriate test procedures.

(C) Personnel. The laboratory shall be staffed with persons having

the necessary education, training, knowledge, and experience for their

assigned functions (e.g., maintaining equipment, calibrating

instruments, performing laboratory analyses, evaluating analytical

results, and signing analysis reports on behalf of the laboratory). In

general, each technical staff member should hold, at a minimum, a

bachelor's degree in science or have two years related experience in an

analytical laboratory.

(g) How will an applicant be notified concerning accreditation?--

(1) Notice of approval or nonselection. When Customs evaluation of a

laboratory's credentials is completed, the Director shall notify the

laboratory in writing of its preliminary approval or nonselection.

(Final approval determinations will not be made until the applicant has

satisfied all bond requirements and made payment on all assessed

charges and the balance of the applicable accreditations fee). Notices

of nonselection will state the reasons for the determination. All

notices of accreditation, reaccreditation, or extension of existing

accreditations will be published in the Federal Register and Customs

Bulletin.

(2) Grounds for nonselection. The Director may deny a laboratory's

application for any of the following reasons:

(i) The application contains false or misleading information

concerning a material fact;

(ii) The laboratory, a principal of the laboratory, or a person the

Director determines is exercising substantial ownership or control over

such laboratory or officer, has been indicted for, convicted of, or

committed acts which, under United States federal or state law, would

constitute any felony or misdemeanor involving misstatements, fraud,

theft-related offenses or any other violation which would reflect

adversely on the business integrity of the applicant;

(iii) A determination is made that the laboratory-applicant does

not possess the capability or have adequate facilities and management

to perform the approved methods of analysis for Customs purposes;

(iv) A determination is made that the laboratory has submitted

false reports or statements concerning the sampling of merchandise, or

that the applicant was subject to sanctions by state, local, or

professional administrative bodies for such conduct;

(v) Nonpayment of assessed charges and the balance of the fixed

accreditation fee; or

(vi) Failure to execute a bond in accordance with part 113 of this

chapter.

(3) Appeal of adverse determinations. Laboratories receiving an

adverse accreditation determination and wishing to appeal the

determination must file an appeal within 30 days to the Director.

Within 30 days of receipt of the appeal, the Director shall make a

final determination regarding the appeal and notify the laboratory in

writing. If the Director reaffirms the nonselection, again citing

specific reasons, then the applicant may choose to either:

(i) Submit a new application to the Director after waiting 90 days

from the date of the Director's last decision; or

(ii) File an action with the Court of International Trade, pursuant

to chapter 169 of title 28, United States Code, within 60 days after

the issuance of the Director's final decision.

(h) What are the accreditation/reaccreditation fee requirements?

(1) In general. A fixed fee, representing Customs administrative

overhead expense, will be assessed for each application for

accreditation or reaccreditation. In addition, associated assessments,

representing the actual costs associated with travel and per diem of

Customs employees related to verification of application criteria and

background investigations will be charged. The combination of the fixed

fee and associated assessments represent reimbursement to Customs for

costs related to accreditation and reaccreditation. The fixed fee will

be published in the Customs Bulletin and the Federal Register. Based on

a review of the actual costs associated with the program, the fixed fee

may be adjusted periodically; any changes will be published in the

Customs Bulletin and the Federal Register.

(i) Accreditation fees. A nonrefundable pre-payment equal to 50

percent of the fixed accreditation fee to cover preliminary processing

costs must accompany each application for accreditation. Before a

laboratory will be accredited, it must remit to Customs, Account

Services Division, within the 30 day billing period the associated

charges assessed for the accreditation and the balance of the fixed

accreditation fee.

(ii) Reaccreditation fees. Before a laboratory will be

reaccredited, it must submit to Customs, Account Services Division,

within the 30 day billing period the fixed reaccreditation fee.

(2) Disputes. In the event a laboratory disputes the charges

assessed for travel and per diem costs associated with scheduled

inspection visits, it may file an appeal within 30 days of the date of

the assessment with the Director. The appeal letter must specify which

charges are in dispute and provide such supporting documentation as may

be available for each allegation. The Director shall make findings of

fact concerning the merits of an appeal and communicate the agency

decision to the laboratory in writing within 30 days of the date of the

appeal.

(i) Can existing Customs-accredited laboratories continue to

operate? Commercial laboratories accredited by the Director prior to

December 8, 1993, will retain that accreditation under these

regulations provided they conduct their business in a manner consistent

with the administrative portions of this section. This paragraph does

not pertain to any laboratory which has had its accreditation suspended

or revoked. Laboratories which have had their accreditations continued

under this section will have their status reevaluated in the third year

following the effective date of this regulation. At the time of

reaccreditation, these laboratories must meet the requirements of this

section and remit to Customs, Account Services Division, within the 30

day billing period the fixed reaccreditation fee. Failure to meet these

requirements will result in revocation or suspension of the

accreditation.

(j) How will Customs-accredited laboratories operate?

(1)(i) Samples for testing. Upon request by the importer of record

of merchandise, the port director will release a representative sample

of the merchandise for testing by a Customs-accredited laboratory at

the expense of the importer. Under Customs supervision, the sample

shall be split into two essentially equal parts and given to the

Customs-accredited laboratory. One portion of the sample may be used by

the Customs-accredited laboratory for its testing. The other portion

shall be retained by the laboratory, under appropriate storage

conditions, for Customs use, as necessary, unless Customs requires

other specific procedures. Upon request, the sample portion reserved

for Customs purposes shall be surrendered to Customs. Samples reserved

for Customs and sample remnants from any testing shall be retained by

the accredited

[[Page 31394]]

laboratory for a period of one year from the date of the laboratory's

final analysis report, unless other instructions are issued in writing

by Customs. At the end of the one-year retention time period the

accredited laboratory may dispose of the retained samples and sample

remnants in a manner consistent with federal, state, and local

statutes; perishable samples and sample remnants may be disposed of

more expeditiously, if done in accordance with acceptable laboratory

procedures.

(2) Contents of reports. The testing results from a Customs-

accredited laboratory that are submitted by an importer of record with

respect to merchandise in an entry shall, in the absence of testing

conducted by Customs laboratories, be accepted by Customs provided that

the importer of record certifies that the sample tested was taken from

the merchandise in the entry and the report establishes elements

relating to the admissibility, quantity, composition, or

characteristics of the merchandise entered, as required by law. The

data must be obtained using methods approved by the Director. Nothing

in these regulations shall preclude Customs from sampling and testing

merchandise from a shipment which has been sampled and tested by a

Customs-accredited laboratory at the request of an importer. In cases

where a shipment has been analyzed by both Customs and a Customs-

accredited laboratory, all Customs actions will be based upon the

analysis provided by the Customs laboratory, unless the Director

advises otherwise. If a Customs laboratory performs a test of

merchandise, it shall release the results of its test to the importer

of record or its agent upon request unless it is proprietary to the

holder of a copyright or patent, or developed by Customs for

enforcement purposes.

(3) Recordkeeping requirements. Customs-accredited laboratories

shall maintain records of the type normally kept in the ordinary course

of business in accordance with the provisions of this chapter and any

other applicable provision of law, and make them available during

normal business hours for Customs inspection. In addition, these

laboratories shall maintain all records necessary to permit the

evaluation and verification of all Customs-related work, including, as

appropriate, those described below. All records shall be maintained for

five years, unless the laboratory is notified in writing by Customs

that a longer retention time is necessary for particular records.

Electronic data storage and transmission may be approved by Customs.

(i) Sample records. Records for each sample tested for Customs

purposes must be readily accessible and contain the following

information:

(A) A unique identifying number;

(B) The date when the sample was received or taken;

(C) The identity of the commodity (e.g., crude oil);

(D) The name of the client;

(E) The source of the sample (e.g., name of vessel, flight number

of airline, name of individual taking the sample); and,

(F) If available, the Customs entry date, entry number, and port of

entry and the names of the importer, exporter, manufacturer, and

country-of-origin.

(ii) Major equipment records. Records for each major piece of

equipment or instrument (including analytical balances) used in

Customs-related work must identify the name and type of instrument, the

manufacturer's name, the instrument's model and any serial numbers, and

the occurrence of all servicing performed on the equipment or

instrument, to include recalibration and any repair work, identifying

who performed the service and when.

(iii) Records of analytical procedures. The Customs-accredited

laboratory must maintain complete and up-to-date copies of all approved

analytical procedures, calibration methods, etc., and must document the

procedures each staff member is authorized to perform. These procedures

must be readily available to appropriate staff.

(iv) Laboratory analysis records. The Customs-accredited laboratory

must identify each analysis by sample record number (see paragraph

(j)(3)(i) of this section) and must maintain all information or data

(such as sample weights, temperatures, references to filed spectra,

etc.) associated with each Customs-related laboratory analysis. Each

analysis record must be dated and initialed or signed by the staff

member(s) who did the work.

(v) Laboratory analysis reports. Each laboratory analysis report

submitted to Customs must include:

(A) The name and address of the Customs-accredited laboratory;

(B) A description and identification of the sample, including its

unique identifying number;

(C) The designations of each analysis procedure used;

(D) The analysis report itself (i.e., the pertinent characteristics

of the sample);

(E) The date of the report; and

(F) The signature of the person accepting technical responsibility

for the analysis report (i.e., an approved signatory).

(4) Representation of Customs-accredited status. Commercial

laboratories accredited by Customs shall limit statements or wording

regarding their accreditation to an accurate description of the tests

for the commodity group(s) for which accreditation has been obtained.

Use of terms other than those appearing in the notice of approval (see

paragraph (f) of this section) is prohibited.

(5) Subcontracting prohibited. Customs-accredited laboratories

shall not subcontract Customs-related analysis work.

(k) How can a laboratory have its accreditation suspended or

revoked or be required to pay a monetary penalty?

(1) Grounds for suspension, revocation, or monetary penalty. (i)

General. A laboratory's accreditation may be revoked or suspended or a

laboratory may be assessed a monetary penalty at any time by the

Director.

(ii) Grounds for suspension, revocation, or assessment of a

monetary penalty. A laboratory's accreditation may be suspended or

revoked, or a monetary penalty may be assessed because:

(A) The selection was obtained through fraud or the misstatement of

a material fact by the laboratory;

(B) The laboratory, or other person the port director determines is

exercising substantial ownership or control over the laboratory

operation or corporate officer, is indicted for, convicted of, or has

committed acts which would constitute any felony or misdemeanor under

United States Federal or State law. In the absence of an indictment,

conviction, or other legal process, a port director must have probable

cause to believe the proscribed acts occurred;

(C) Staff laboratory personnel refuse or otherwise fail to follow

any proper order of a Customs officer or any Customs order, rule, or

regulation relative to continued licensing as a Customs-accredited

laboratory;

(D) The laboratory fails to operate in accordance with the

obligations of paragraph (c) of this section;

(E) A determination is made that the laboratory is no longer

technically or operationally proficient at performing the approved

methods of analysis for Customs purposes;

(F) The laboratory fails to remit to Customs, the Accounts Services

Division, within the 30 day billing period the associated charges

assessed for the accreditation and the balance of the fixed

accreditation fee;

(G) The laboratory fails to maintain its bond; or

(H) The laboratory fails to remit to Customs, the Accounts Services

Division, within the 30 day billing period the fixed reaccreditation

fee.

[[Page 31395]]

(iii) Assessment of monetary penalties. The assessment of a

monetary penalty under this section, may be in lieu of, or in addition

to, a suspension or revocation of accreditation under this section. The

monetary penalty may not exceed $100,000 per violation and shall be

assessed and mitigated pursuant to published guidelines. Any monetary

penalty under this section can be in addition to the recovery of any

loss of revenue or liquidated damages assessed under the laboratory's

Customs bond.

(2) Notice. When a decision to suspend, revoke, and/or to assess a

monetary penalty is contemplated, Customs shall immediately notify the

laboratory in writing of the proposed action. The notice of proposed

action shall contain a description of the grounds for the proposed

revocation, suspension, and/or assessment of a monetary penalty action,

and advise the laboratory of the procedures for filing appeals.

(3) Appeal procedures. A Customs-accredited laboratory receiving a

notice of suspension or revocation of accreditation, and/or of

assessment of a monetary penalty, and wishing to appeal the decision

shall follow the appeal procedures set forth in paragraph (g)(3) of

this section. An appeal to the Director may contain an acceptance of

responsibility and may also provide extenuating circumstances and/or

rebuttal evidence. Further, the appeal may ask for a meeting with the

Director or his designee to discuss proposed actions. Should the

laboratory fail to file an appeal within the required time period, the

Director shall take actions to implement the proposed suspension or

revocation and/or to collect the monetary penalty assessed in the

notice.

(4) Publication. All final notices of suspension or revocation of a

laboratory's accreditation and/or assessment of a monetary penalty will

be published in the Federal Register and Customs Bulletin, giving the

effective date, duration, and scope of each action.

3. Section 151.13 is revised to read as follows:

Sec. 151.13 Approval of commercial gaugers.

This section sets forth the requirements for commercial gaugers to

obtain approval by Customs for the measuring of certain merchandise,

and explains the operation of such approved gaugers. This section also

provides for the imposition of approval and reapproval fees, sets forth

grounds for the suspension or revocation of approval, and provides for

the imposition of a monetary penalty for an approved commercial gauger

that fails to adhere to the provisions of this section.

(a) What is a ``Customs-approved gauger''? ``Commercial gaugers''

are individuals and commercial organizations that measure, gauge, or

sample merchandise (usually merchandise in bulk form) and who deal

mainly with petroleum, petroleum products, and bulk chemicals. A

``Customs-approved gauger'' is a commercial concern, within the United

States, that has demonstrated, to the satisfaction of the Director

(defined at Sec. 151.12(a)), pursuant to this section the capability to

perform certain gauging and measurement procedures for certain

commodities. Customs approval extends only to the performance of such

functions as are vested in, or delegated to, Customs.

(b) What are the obligations of a Customs-approved gauger? A

commercial gauger approved by Customs agrees to the following

conditions and requirements:

(1) To comply with the requirements of part 151, Customs

Regulations (19 CFR part 151), and to conduct professional services in

conformance with approved standards and procedures, including

procedures which may be required by the Commissioner of Customs or the

Director;

(2) To have no interest in or other connection with any business or

other activity which might affect the unbiased performance of duties as

a Customs-approved gauger. It is understood that this does not prohibit

acceptance of the usual fees for professional services;

(3) To maintain the ability, i.e., the instrumentation, equipment,

qualified staff, facilities, etc., to perform the services for which

the gauger is approved, and allow the Director to evaluate that ability

on a periodic basis by such means as on-site inspections,

demonstrations of gauging procedures, and reviews of submitted records;

(4) To retain those gauger records beyond the five-year record-

retention period specified by Customs as necessary to address matters

concerned in pending litigation, and, should laboratory operations or

accreditation cease, to contact Customs immediately regarding the

disposition of records retained;

(5) To promptly investigate any circumstance which might affect the

accuracy of work performed as an approved gauger, to correct the

situation immediately, and to notify both the port director and the

Director of such matters, their consequences, and any corrective action

taken or that needs to be taken; and

(6) To immediately notify both the port director and the Director

of any attempt to impede, influence, or coerce gauger personnel in the

performance of their duties, or of any decision to terminate laboratory

operations or accredited status. Further, within 5 days of any changes

involving legal name, address, ownership, parent-subsidiary

relationships, bond, other offices or sites, managerial or professional

or executive staff, approved signatories, facilities, instruments, or

equipment, etc., to notify the Director by certified mail.

(c) What are the approved gauging and measurement procedures?

Customs-accredited gaugers shall follow the general or specific gauging

and measurement procedures set forth in Commodity Group Brochures (see

definition at Sec. 151.12(a)) in the testing of designated commodities,

unless the Director gives written permission to use an alternate

method. Alternative methods will be considered and approved on a case-

by-case basis.

(d) How would a commercial gauger become a Customs-approved gauger?

(1) What should an application contain? An application for approval

shall contain the following information:

(i) The applicant's legal name and the addresses of its principal

place of business and any other facility out of which it will work;

(ii) Detailed statements of ownership and any partnerships, parent-

subsidiary relationships, or affiliations with any other domestic or

foreign organizations, including, but not limited to, importers;

producers; refiners; Customs brokers; or carriers;

(iii) A statement of financial condition;

(iv) If a corporation, a copy of the articles of incorporation and

the names of all officers and directors;

(v) The names, titles, and qualifications of each person who will

be authorized to sign or approve gauging reports on behalf of the

commercial gauger;

(vi) A complete description of the applicant's facilities,

instruments, and equipment;

(vii) Express agreement that if notified by Customs of pending

accreditation to execute a bond in accordance with part 113, Customs

Regulations (19 CFR part 113), and submit it to the Customs port

nearest to the applicant's main office. (The limits of liability on the

bond will be established by the Customs port in consultation with the

Director. In order to retain Customs approval, the gauger must maintain

an adequate bond, as determined by the port director);

[[Page 31396]]

(viii) Express agreement to be bound by the obligations contained

in paragraph (b) of this section; and,

(ix) A nonrefundable pre-payment equal to 50 percent of the fixed

approval fee, as published in the Federal Register and Customs

Bulletin, to cover preliminary processing costs. Further, the applicant

agrees to pay to Customs within 30 days of notification the associated

charges assessed for approval, i.e., those charges for actual travel

and background investigation costs, and the balance of the fixed

approval fee.

(2) Where should an application be sent? A commercial gauger

seeking approval or an extension of an existing approval shall send a

letter of application to the U.S. Customs Service, Attention: Director,

Laboratories & Scientific Services, Washington, DC 20229.

(3) How will an application be reviewed?

(i) Determination of competence. The Director shall determine the

applicant's overall competence, independence, and character by

conducting on-site inspections, which will include demonstrations by

the applicant of gauging procedures; reviewing records submitted; and

conducting background investigations.

(ii) Evaluation of technical and operational requirements. Customs

shall determine whether the following technical and operational

requirements are met:

(A) Equipment. The facility shall be equipped with all of the

instruments and equipment needed to conduct approved services. The

gauger shall ensure that all instruments and equipment are properly

calibrated, checked, and maintained.

(B) Facilities. The facility shall have, at a minimum, adequate

space, lighting, and environmental controls to ensure compliance with

the conditions prescribed for appropriate measurements.

(C) Personnel. The facility shall be staffed with persons having

the necessary education, training, knowledge, and experience for their

assigned functions (e.g., maintaining equipment, calibrating

instruments, performing gauging services, evaluating gauging results,

and signing gauging reports on behalf of the commercial gauger). In

general, each technical staff member should have, at a minimum, six (6)

months training and experience in gauging.

(e) How will an applicant be notified concerning approval?

(1) Notice of approval or nonselection. When Customs evaluation of

a gauger's credentials is completed, the Director shall notify the

gauger in writing of its approval or nonselection. (Final approval

decisions will not be made until the applicant has satisfied all bond

requirements and made payment on all assessed charges and the balance

of the application fee.) Notices of nonselection will state the reasons

for the decision. All notices of approval, reapproval, or extension of

a gauger's existing Customs-approval will be published in the Federal

Register and Customs Bulletin.

(2) Grounds for nonselection. The Director may deny a gauger's

application for any of the following reasons:

(i) The application contains false or misleading information

concerning a material fact;

(ii) The gauger has been indicted for, convicted of, or committed

acts which under United States federal or state law would constitute

any felony or misdemeanor involving misstatements, fraud, theft-related

offenses or any other violation which would reflect adversely on the

business integrity of the applicant;

(iii) A determination is made that the gauger-applicant does not

possess the capability or have adequate facilities and management to

perform the approved methods of measurement for Customs purposes;

(iv) A determination is made that the gauger has submitted false

reports or statements concerning the measurement of merchandise, or

that the applicant was subject to sanctions by state, local, or

professional administrative bodies for such conduct;

(v) Nonpayment of assessed charges and the balance of the fixed

approval fee; or

(vi) Failure to execute a bond in accordance with part 113 of this

chapter.

(3) Appeal of adverse determinations. Gaugers receiving an adverse

approval determination and wishing to appeal the determination must

file an appeal within 30 days to the Director. Within 30 days of

receipt of the appeal, the Director shall make a final determination

regarding the appeal and notify the gauger in writing. If the Director

reaffirms the nonselection, again citing specific reasons, then the

applicant may choose to either:

(i) Submit a new application to the Director after waiting 90 days

from the date of the Director's last decision; or

(ii) File an action with the Court of International Trade, pursuant

to chapter 169 of title 28, United States Code, within 60 days after

the issuance of the Director's final decision.

(f) What are the approval/reapproval fee requirements?

(1) In general. A fixed fee, representing Customs administrative

overhead expense, will be assessed for each application for approval or

reapproval. In addition, associated assessments, representing the

actual costs associated with travel and per diem of Customs employees

related to verification of application criteria and background

investigations will be charged. The combination of the fixed fee and

associated assessments represent reimbursement to Customs for costs

related to approval and reapproval. The fixed fee will be published in

the Customs Bulletin and the Federal Register. Based on a review of the

actual costs associated with the program, the fixed fee may be adjusted

periodically; any changes will be published in the Customs Bulletin and

the Federal Register.

(i) Approval fees. A nonrefundable pre-payment equal to 50 percent

of the fixed approval fee to cover preliminary processing costs must

accompany each application for approval. Before a gauger will be

approved, it must submit to Customs, Account Services Division, within

the 30 day billing period the associated charges assessed for the

approval and the balance of the fixed approval fee.

(ii) Reapproval fees. Before a gauger will be reapproved, it must

submit to Customs, Account Services Division, within the 30 day billing

period the fixed reapproval fee.

(2) Disputes. In the event a gauger disputes the charges assessed

for travel and per diem costs associated with scheduled inspection

visits, it may file an appeal within 30 days of the date of the

assessment with the Director. The appeal letter must specify which

charges are in dispute and provide such supporting documentation as may

be available for each allegation. The Director shall make findings of

fact concerning the merits of an appeal and communicate the agency

decision to the gauger in writing within 30 days of the date of the

appeal.

(g) Can existing Customs-approved gaugers continue to operate?

Commercial gaugers approved by the Director prior to December 8, 1993,

will retain approval under these regulations provided that they conduct

their business in a manner consistent with the administrative portions

of this section. This paragraph does not pertain to any gauger which

has had its approval suspended or revoked. Gaugers which have had their

approvals continued under this section will have their status

reevaluated in the third year

[[Page 31397]]

following the effective date of this regulation. At the time of

reapproval, these gaugers must meet the requirements of this section

and remit to Customs, Account Services Division, within the 30 day

billing period the fixed reapproval fee. Failure to meet these

requirements will result in revocation or suspension of the approval.

(h) How will Customs-approved gaugers operate?

(1)(i) Contents of reports. The measurement results from a Customs-

approved gauger that are submitted by an importer of record with

respect to merchandise in an entry shall, in the absence of measurement

conducted by Customs laboratories, be accepted by Customs, provided

that the importer of record certifies that the measurement was of the

merchandise in the entry. All reports shall measure net landed

quantity, except in the case of crude petroleum of Heading 2709,

Harmonized Tariff Schedule of the United States (HTSUS), which may be

measured by gross quantity. Reports shall be given in the appropriate

HTSUS units of quantity, e.g., liters, barrels, or kilograms.

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

HTSUS Product Unit of quantity

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

Headings 1501-1515................... Animal and vegetable oils.... Kilogram.

Subheadings 2707.10-2707.30 and Benzene, toluene and xylene.. Liter.

2902.20-2902.44.

Heading 2709......................... Crude Petroleum.............. Barrel.

Heading 2710 (various subheadings)... Fuel oils, motor oils, Barrel

kerosene, naphtha,

lubricating oils.

Chapter 29 (various subheadings)..... Organic compounds in bulk and Kilogram, liter, etc.

liquid form.

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

(ii) Nothing in these regulations shall preclude Customs from

gauging a shipment which has been gauged by a Customs-approved gauger

at the request of an importer. In cases where a shipment has been

gauged by both Customs and a Customs-approved gauger, all Customs

actions will be based upon the gauging reports issued by Customs,

unless the Director advises other actions. If Customs measures

merchandise, it shall release the reports of its measurements to the

importer of record or its agent upon request unless it is proprietary

to the holder of a copyright or patent, or developed by Customs for

enforcement purposes.

(2) Recordkeeping requirements. Customs-approved gaugers shall

maintain records of the type normally kept in the ordinary course of

business in accordance with the provisions of this chapter and any

other applicable provisions of law, and make them available during

normal business hours for Customs inspection. In addition, these

gaugers shall maintain all records necessary to permit the evaluation

and verification of all Customs-related work, including, as

appropriate, those described below. All records shall be maintained for

five years, unless the gauger is notified in writing by Customs that a

longer retention time is necessary for particular records. Electronic

data storage and transmission may be approved by Customs.

(i) Transaction records. Records for each Customs-related

transaction must be readily accessible and have the following:

(A) A unique identifying number;

(B) The date and location where the transaction occurred;

(C) The identity of the product (e.g. crude oil);

(D) The name of the client;

(E) The source of the product (e.g., name of vessel, flight number

of airline); and

(F) If available, the Customs entry date, entry number, and port of

entry and the names of the importer, exporter, manufacturer, and

country-of-origin.

(ii) Major equipment records. Records for each major piece of

equipment used in Customs-related work must identify the name and type

of instrument, the manufacturer's name, the instrument's model and any

serial numbers, and the occurrence of all servicing performed on the

equipment or instrument, to include recalibration and any repair work,

identifying who performed the service and when.

(iii) Records of gauging procedures. The Customs-approved gauger

must maintain complete and up-to-date copies of all approved gauging

procedures, calibration methods, etc., and must document the procedures

that each staff member is authorized to perform. These procedures must

be readily available to appropriate staff.

(iv) Gauging records. The Customs-approved gauger must identify

each transaction by transaction record number (see paragraph (h)(2)(i)

of this section) and must maintain all information or data (such as

temperatures, etc.) associated with each Customs-related gauging

transaction. Each gauging record (i.e., the complete file of all data

for each separate transaction) must be dated and initialed or signed by

the staff member(s) who did the work.

(v) Gauging reports. Each gauging report submitted to Customs must

include:

(A) The name and address of the Customs-approved gauger;

(B) A description and identification of the transaction, including

its unique identifying number;

(C) The designations of each gauging procedure used;

(D) The gauging report itself (i.e., the quantity of the

merchandise);

(E) The date of the report; and,

(F) The signature of the person accepting technical responsibility

for the gauging report (i.e., an approved signatory).

(3) Representation of Customs-approved status. Commercial gaugers

approved by Customs shall limit statements or wording regarding their

approval to an accurate description of the commodities for which

approval has been obtained.

(4) Subcontracting prohibited. Customs-approved gaugers shall not

subcontract Customs-related work.

(i) How can a gauger have its approval suspended or revoked or be

required to pay a monetary penalty?

(1) Grounds for suspension, revocation, or assessment of a monetary

penalty.--(i) General. A gauger's approval may be revoked or suspended

or a gauger may be assessed a monetary penalty at any time by the

Director.

(ii) Grounds for suspension, revocation, or monetary penalty. A

gauger's accreditation may be suspended or revoked, or a monetary

penalty may be assessed because:

(A) The selection was obtained through fraud or the misstatement of

a material fact by the gauger;

(B) The gauger, or other person the port director determines is

exercising substantial ownership or control over the gauger operation

or corporate officer, is indicted for, convicted of, or has committed

acts which would constitute any felony or misdemeanor under United

States Federal or State law. In the absence of an indictment,

conviction, or other legal process, a port director must have probable

cause to believe the proscribed acts occurred;

[[Page 31398]]

(C) Staff gauger personnel refuse or otherwise fail to follow any

proper order of a Customs officer or any Customs order, rule, or

regulation relative to continued licensing as a Customs-accredited

gauger;

(D) The gauger fails to operate in accordance with the obligations

of paragraph (b) of this section;

(E) A determination is made that the gauger is no longer

technically or operationally proficient at performing the approved

methods of measurement for Customs purposes;

(F) The gauger fails to remit to Customs, the Accounts Services

Division, within the 30 day billing period the associated charges

assessed for the approval and the balance of the fixed approval fee;

(G) The gauger fails to maintain its bond; or

(H) The gauger fails to remit to Customs, the Accounts Services

Division, within the 30 day billing period the fixed reapproval fee.

(iii) Assessment of monetary penalties. The assessment of a

monetary penalty under this section, may be in lieu of, or in addition

to, a suspension or revocation of accreditation under this section. The

monetary penalty may not exceed $100,000 per violation and shall be

assessed and mitigated pursuant to published guidelines. Any monetary

penalty under this section can be in addition to the recovery of any

loss of revenue or liquidated damages assessed under the gauger's

Customs bond.

(2) Notice. When a decision to suspend, revoke, and/or to assess a

monetary penalty is contemplated, Customs shall immediately notify the

gauger in writing of the proposed action. The notice of proposed action

shall contain a description of the grounds for the proposed revocation,

suspension, and/or assessment of a monetary penalty action, and advise

the gauger of the procedures for filing appeals.

(3) Appeal procedures. A Customs-approved gauger receiving a notice

of suspension or revocation of approval, and/or of assessment of a

monetary penalty, and wishing to appeal the decision, shall follow the

appeal procedures set forth in paragraph (e)(3) of this section. An

appeal to the Director may contain an acceptance of responsibility and

may also provide extenuating circumstances and/or rebuttal evidence.

Further, the appeal may ask for a meeting with the Director or his

designee to discuss proposed actions. Should the gauger fail to file an

appeal within the required time period, the Director shall take actions

to implement the proposed suspension or revocation and/or to collect

the monetary penalty assessed in the notice.

(4) Publication. All final notices of suspension or revocation of a

commercial gauger's approval, and/or assessment of a monetary penalty

will be published in the Federal Register and Customs Bulletin, giving

the effective date, duration, and scope of each action.

4. In Sec. 151.14, the first sentence is amended by removing the

words `` `sediment and water' characteristic as set out in

Sec. 151.13(a)(2)'' and adding, in its place, the words ``analysis

method for crude petroleum contained in ASTM D96 or other approved

analysis method''.

Approved: May 6, 1998.

Samuel H. Banks,

Acting Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 98-15336 Filed 6-8-98; 8:45 am]

BILLING CODE 4820-02-P