Increase of Maximum Amount for Informal Entries to $2,000

DEPARTMENT OF THE TREASURY CUSTOMS SERVICE

19 CFR Parts 10, 123, 128, 141, 143, 145 and 148

[T.D. 98-28]

RIN 1515-AC11

Increase of Maximum Amount for Informal Entries to $2,000

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule a proposal to increase,

from $1,250 to $2,000, the maximum dollar value prescribed for most

informal entries of merchandise under the Customs Regulations. Section

662 of the Customs Modernization provisions of the North American Free

Trade Agreement Implementation Act raised the statutory limit

applicable to informal entries to $2,500, and it has been determined

that a raise to the intermediate level of $2,000 is appropriate at the

present time. This regulatory change will have the effect of reducing

the overall regulatory burden on importers and other entry filers by

expanding the availability of the simplified informal entry procedures.

EFFECTIVE DATE: July 2, 1998.

FOR FURTHER INFORMATION CONTACT: Operational Aspects: Linda Walfish,

Office of Field Operations (202-927-0042).

Legal Aspects: Jerry Laderberg, Office of Regulations and Rulings

(202-927-2320).

SUPPLEMENTARY INFORMATION:

Background

All merchandise imported into the customs territory of the United

States is subject to entry and clearance procedures. Section 484(a),

Tariff Act of 1930, as amended (19 U.S.C. 1484(a)), provides that the

``importer of record'' or his authorized agent shall: (1) Make entry

for imported merchandise by filing such documentation or information as

is necessary to enable Customs to determine whether the merchandise may

be released from Customs custody; and (2) complete the entry by filing

with Customs the declared value, classification and rate of duty

applicable to the merchandise and such other documentation or other

information as is necessary to enable Customs to properly assess duties

on the merchandise and collect accurate statistics with respect to the

merchandise and determine whether any other applicable requirement of

law is met. Part 142, Customs Regulations (19 CFR Part 142), implements

section 484 and prescribes procedures applicable to most Customs entry

transactions. These procedures are referred to as formal entry

procedures and generally involve the completion and filing of one or

more Customs forms (such as Customs Form 7501, Entry/Entry Summary,

which contains detailed information regarding the import transaction)

as well as the filing of commercial documents pertaining to the

transaction.

As originally enacted, section 498, Tariff Act of 1930

(subsequently codified at 19 U.S.C. 1498), authorized the Secretary of

the Treasury to prescribe rules and regulations for the declaration and

entry of, among other things, imported merchandise when the aggregate

value of the shipment did not exceed such amount, but not greater than

$250, as the Secretary shall specify in the regulations. Regulations

implementing this aspect of section 498 are contained in Subpart C of

Part 143, Customs Regulations (19 CFR Part 143) which is entitled

``Informal Entry''. The informal entry procedures set forth in Subpart

C of Part 143 are less burdensome than the formal entry procedures

prescribed in Part 142 of the regulations. For example, if authorized

by the port director, informal entry may be effected by the filing of a

commercial invoice setting forth a declaration signed by the importer

or his agent attesting to the accuracy of the information on the

invoice.

Section 206 of the Trade and Tariff Act of 1984 (Public Law 98-573,

98 Stat. 2948) amended section 498 by increasing to $1,250 (but with

some exceptions) the maximum dollar amount that the Secretary could

prescribe by regulation for purposes of the declaration and entry of

imported merchandise. On July 23, 1985, T.D. 85-123 was published in

the Federal Register (50 FR 29949) to, among other things, increase to

$1,000 the regulatory limit for which informal entries could be filed.

The regulatory amendments in this regard involved changes to Subpart C

of Part 143 and various other provisions of the Customs Regulations

that reflected the $250 informal entry dollar limit, and Customs

explained in the background portion of T.D. 85-123 that the new limit

would be set initially in the regulations at $1,000, with the option to

increase it to $1,250 in the future. On August 31, 1989, Customs

published in the Federal Register (54 FR 36025) T.D. 89-82 which

amended the Customs Regulations by increasing the limit for which

informal entries could be filed to the maximum $1,250 permitted under

section 498 as amended by section 206 of the Trade and Tariff Act of

1984.

Section 662 of the North American Free Trade Agreement

Implementation Act (Public Law 103-182, 107 Stat. 2057) amended section

498 by increasing to $2,500 the maximum dollar amount that the

Secretary could prescribe by regulation for purposes of the declaration

and entry of merchandise. As a result of this further increase in the

statutory maximum, and in consideration of the fact that the regulatory

limit for informal entries had not been increased since 1989, on June

9, 1997, Customs published in the Federal Register (62 FR 31383) a

notice setting forth proposed amendments to the Customs Regulations to

again increase the regulatory limit for informal entries.

[[Page 16415]]

Similar to the approach taken in 1985 and noting that the new

statutory maximum still represented a ceiling but did not preclude

adoption of a lower regulatory limit, Customs expressed the view in the

June 9, 1997, notice of proposed rulemaking that it would be preferable

to take an intermediate step by establishing a new informal entry limit

of $2,000 which Customs believed would result in the best balance

between the revenue and statistical collection and enforcement

responsibilities of Customs and the interest of the importing public in

having an expanded opportunity to use the less burdensome informal

entry procedures. In addition, even if the proposed new $2,000 informal

entry limit were to be adopted in a final rulemaking action, the notice

pointed out that Customs would still retain the option of proposing a

further upward adjustment of the regulatory limit at an appropriate

future date, subject to the statutory maximum, after evaluating the

operational effect of the new $2,000 limit and any other intervening

change in circumstances having an impact on the entry process. The

notice of proposed rulemaking made provision for the submission of

public comments on the proposed regulatory changes for consideration

before adoption of those changes as a final rule, and the prescribed

public comment period closed on August 8, 1997.

Discussion of Comments

A total of fifteen commenters responded to the June 9, 1997, notice

of proposed rulemaking.

Nine commenters supported the basic principle of increasing the

informal entry limit. In addition to expressing support for that basic

principle, these nine commenters made the following specific points:

1. Eight commenters favored increasing the informal entry limit to

the $2,500 statutory maximum rather than only to $2,000 as proposed.

2. One commenter expressed concern that Customs would not be able

to provide in a timely fashion the necessary changes to the Automated

Commercial System (ACS) to reflect any increase in the informal entry

limit.

While Customs, of course, has no reason to take issue with the

general support expressed by the nine commenters, Customs notes the

following with regard to the specific points made by these commenters:

1. For the reasons outlined in the notice of proposed rulemaking

and summarized above, Customs remains of the opinion that any increase

in the informal entry limit beyond the proposed $2,000 level would not

be appropriate at the present time.

2. This document prescribes a 90-day (rather than the usual 30-day)

delayed effective date in order to give Customs additional time to make

the necessary changes to ACS.

Six commenters expressed opposition to the basic principle of

increasing the informal entry limit. The following specific points were

made by these commenters in this regard:

1. One commenter stated that the informal entry limit should be

lowered instead of raised.

2. Two commenters were concerned that the increase in the informal

entry limit would lead to products regulated by other agencies, for

example, food and medical devices regulated by the Food and Drug

Administration (FDA), being more readily admitted if they are in fact

unsafe. One of these commenters noted that although Customs can require

formal entry under 19 CFR 143.22, there should be a formal Customs

policy requiring formal entry for products, regardless of value,

sampled by the FDA.

3. Similar to the concern expressed in the comment immediately

above, two commenters claimed that an increase in the informal entry

limit will allow more importations to be made without a bond being

filed, thereby making it more difficult for Customs to protect the

revenue or to demand redelivery, especially in the case of unsafe food

and medical devices.

4. Four commenters were concerned that there would be a significant

loss of statistical data, collected by both the United States and other

countries, if the informal entry limit is increased. A major concern

expressed was that loss of such data could adversely affect trade

policy. It was argued that this loss of data could be significant since

there has been a large increase in small and medium size businesses

which make small shipments.

5. One commenter proposed that, instead of raising the informal

entry limit, Customs should eliminate informal entries for all

commercial transactions.

6. One commenter stated that most informal entries under the

proposed limit would arrive by courier and, because of the volume and

repetition of the shipments, would present opportunities to evade the

law and regulations.

7. One commenter argued that an increase in the informal entry

limit will add to the burdens on Customs personnel, especially

inspectors.

8. One commenter stated that there would be an appreciable loss of

merchandise processing fee (MPF) collections, since the MPF for

informal entries is less than that for formal entries.

9. One commenter claimed that the requirement to exercise

reasonable care contained in 19 U.S.C. 1484 would be removed for a

large number of entries because it only applies to formal entries.

10. Finally, one commenter expressed concern that an increase in

the informal entry limit would remove entries from the recordkeeping

requirements of 19 U.S.C. 1509(a)(1)(a).

The following are the Customs responses to the above points made in

opposition to the proposal to increase the informal entry limit:

1. Since Congress was aware of the likely consequence of the

amendment to 19 U.S.C. Sec. 1498(a)(1), that is, that the maximum

regulatory limit for informal entry would be raised, Customs believes

that lowering the informal entry limit would clearly be in conflict

with what Congress had in mind.

2. As already noted by one of these commenters, there is a

safeguard in place in that Customs can require a formal entry,

regardless of value. Moreover, coordination between the FDA and Customs

in the case of entries of merchandise sampled or otherwise regulated by

the FDA will continue in order to ensure that unsafe merchandise is not

admitted; however, this is an interagency operational issue that

Customs does not believe is appropriate for regulatory text. Finally,

Customs notes that setting a policy to require importers to make formal

entry for all merchandise regulated by the FDA is beyond the scope of

the published proposal.

3. As regards revenue protection, since goods that are informally

entered are not released prior to Customs determining and collecting

duties, taxes and fees, Customs disagrees with this aspect of the

comment. Moreover, while it is more difficult to secure redelivery of

informally entered noncommercial goods subsequent to their release

because such transactions are normally not covered by a Customs bond,

Customs notes that most importations involving FDA-controlled goods are

commercial transactions which are handled through the Automated Broker

Interface (ABI) and thus are covered by a Customs bond even if

informally entered; Customs will reiterate and enforce its policy of

requiring a bond on all ABI/statement entries, whether formal or

informal.

4. While some statistical data will be lost, Congress raised the

informal entry limit in order to streamline the entry process and

increase efficiency for

[[Page 16416]]

informal entries. Thus, it appears these benefits outweigh any loss in

statistical data. In addition, Customs notes that the informal entry

limit has not been raised since 1989, and raising the informal entry

limit takes that factor and the effects of inflation into account.

Customs will continue its policy of making available to the U.S. Bureau

of the Census as much statistical information as possible, and Customs

will also work with Census to develop statistical sampling methods for

use in trade program areas.

5. Customs notes that 19 U.S.C. 1498 provides no exclusion for

commercial merchandise from being entered informally. This comment

raises a policy issue that is beyond the scope of the published

proposal.

6. Customs believes that the provisions in Part 128 of the Customs

Regulations (19 CFR Part 128) covering express consignments provide

adequate safeguards in this regard.

7. An increase in the informal entry limit might result in an

increased burden on Customs inspectors or other personnel at some, but

certainly not all, locations. Appropriate steps will be explored by

Customs to address any such resulting workload increases.

8. Customs projects that the proposed increase in the informal

entry limit would result in a loss of approximately $20 million per

year in MPF collections. However, it must be assumed that Congress took

the potential loss of MPF collections into account when it decided to

raise the statutory ceiling which controls the maximum informal entry

limit.

9. Although a party making an informal entry would not have to

comply with the requirements for making formal entry under 19 U.S.C.

1484, 19 CFR 143.26 requires an eligible party making an informal entry

to use reasonable care in doing so.

10. Although there is a lesser recordkeeping burden for informal

entries because fewer records are prescribed by law or regulation in

connection with the informal entry process, Customs notes that 19

U.S.C. 1509(a)(1)(A) does not per se make a distinction between formal

and informal entries (the statute merely refers to ``entry'' records).

Customs believes that the issue of whether a distinction should be made

between formal and informal entries for recordkeeping purposes would be

more appropriately addressed in the regulations that specifically deal

with recordkeeping requirements.

Conclusion

Accordingly, based on the comments received and the analysis of

those comments as set forth above, and after further review of this

matter, Customs believes that the proposed regulatory amendments should

be adopted as a final rule without change.

Executive Order 12866

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

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

Regulatory Flexibility Act

Pursuant to the provisions of the Regulatory Flexibility Act (5

U.S.C. 601 et seq.), it is certified that the regulatory amendments

will not have a significant economic impact on a substantial number of

small entities. The amendments are in response to a statutory change

and will have the effect of reducing the regulatory burden on the

public. Accordingly, the amendments are not subject to the regulatory

analysis or other requirements of 5 U.S.C. 603 and 604.

Drafting Information

The principal author of this document was Francis W. Foote, Office

of Regulations and Rulings, U.S. Customs Service. However, personnel

from other offices participated in its development.

List of Subjects

19 CFR Part 10

Customs duties and inspection, Imports, Reporting and recordkeeping

requirements.

19 CFR Part 123

Aircraft, Canada, Customs duties and inspection, Imports, Mexico,

Motor carriers, Railroads, Reporting and recordkeeping requirements,

Vehicles, Vessels.

19 CFR Part 128

Carriers, Couriers, Customs duties and inspection, Entry, Express

consignments, Freight, Imports, Informal entry procedures, Manifests,

Reporting and recordkeeping requirements.

19 CFR Part 141

Bonds, Customs duties and inspection, Entry of merchandise,

Invoices, Release of merchandise, Reporting and recordkeeping

requirements.

19 CFR Part 143

Customs duties and inspection, Entry of merchandise, Invoice

requirements, Reporting and recordkeeping requirements.

19 CFR Part 145

Customs duties and inspection, Imports, Mail, Postal service,

Reporting and recordkeeping requirements.

19 CFR Part 148

Customs duties and inspection, Imports, Personal exemptions,

Reporting and recordkeeping requirements.

Amendments to the Regulations

For the reasons stated in the preamble, Parts 10, 123, 128, 141,

143, 145 and 148 of the Customs Regulations (19 CFR Parts 10, 123, 128,

141, 143, 145 and 148), are amended as set forth below.

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

ETC.

1. The authority citation for Part 10 continues to read in part as

follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized

Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508,

1623, 1624, 3314.

* * * * *

Sec. 10.1 [Amended]

2. In Sec. 10.1, the introductory text of paragraph (a) and the

first sentence of paragraph (b) are amended by removing the reference

``$1,250'' and adding, in its place, the reference ``$2,000''.

PART 123--CUSTOMS RELATIONS WITH CANADA AND MEXICO

1. The general authority citation for Part 123 is revised to read,

and the specific authority citation for Sec. 123.4 continues to read,

as follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized

Tariff Schedule of the United States (HTSUS)), 1431, 1433, 1436,

1448, 1624.

* * * * *

Section 123.4 also issued under 19 U.S.C. 1484, 1498;

* * * * *

Sec. 123.4 [Amended]

2. In Sec. 123.4, the first sentence of paragraph (b) is amended by

removing the reference ``$1,250'' and adding, in its place, the

reference ``$2,000''.

PART 128--EXPRESS CONSIGNMENTS

1. The authority citation for Part 128 continues to read as

follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized

Tariff Schedule of the United States), 1321, 1484, 1498, 1551, 1555,

1556, 1565, 1624.

[[Page 16417]]

Sec. 128.24 [Amended]

2. In Sec. 128.24, paragraph (a) is amended by removing the

reference ``$1,250'' wherever it appears and adding, in its place, the

reference ``$2,000''.

PART 141--ENTRY OF MERCHANDISE

1. The authority citation for Part 141 continues to read in part as

follows:

Authority: 19 U.S.C. 66, 1448, 1484, 1624.

* * * * *

Subpart F also issued under 19 U.S.C. 1481;

* * * * *

Sec. 141.82 [Amended]

2. In Sec. 141.82, paragraph (d) is amended by removing the

reference ``$1,250'' and adding, in its place, the reference

``$2,000''.

PART 143--SPECIAL ENTRY PROCEDURES

1. The authority citation for Part 141 continues to read as

follows:

Authority: 19 U.S.C. 66, 1481, 1484, 1498, 1624.

Sec. 143.21 [Amended]

2. In Sec. 143.21, paragraphs (a), (b), (c), (f) and (g) are

amended by removing the reference ``$1,250'' and adding, in its place,

the reference ``$2,000''.

Sec. 143.22 [Amended]

3. In Sec. 143.22, the second sentence is amended by removing the

reference ``$1,250'' and adding, in its place, the reference

``$2,000''.

Sec. 143.23 [Amended]

4. In Sec. 143.23, paragraphs (d) and (i) are amended by removing

the reference ``$1,250'' and adding, in its place, the reference

``$2,000''.

Sec. 143.26 [Amended]

5. In Sec. 143.26, the heading and text of paragraph (a) are

amended by removing the reference ``$1,250'' and adding, in its place,

the reference ``$2,000''.

PART 145--MAIL IMPORTATIONS

1. The authority citation for Part 145 continues to read in part as

follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized

Tariff Schedule of the United States), 1624.

Section 145.4 also issued under 18 U.S.C. 545, 19 U.S.C. 1618;

* * * * *

Section 145.12 also issued under 19 U.S.C. 1315, 1484, 1498;

* * * * *

Section 145.35 through 145.38, 145.41, also issued under 19

U.S.C. 1498;

* * * * *

Sec. 145.4 [Amended]

2. In Sec. 145.4, paragraph (c) is amended by removing the

reference ``$1,250'' and adding, in its place, the reference

``$2,000''.

Sec. 145.12 [Amended]

3. In Sec. 145.12, paragraphs (a)(2), (a)(3) and (b)(1) and the

heading and text of paragraph (c) are amended by removing the reference

``$1,250'' wherever it appears and adding, in its place, the reference

``$2,000''.

Sec. 145.35 [Amended]

4. Section 145.35 is amended by removing the reference ``$1,250''

and adding, in its place, the reference ``$2,000''.

Sec. 145.41 [Amended]

5. Section 145.41 is amended by removing the reference ``$1,250''

and adding, in its place, the reference ``$2,000''.

PART 148--PERSONAL DECLARATIONS AND EXEMPTIONS

1. The authority citation for Part 148 continues to read in part as

follows:

Authority: 19 U.S.C. 66, 1496, 1498, 1624. The provisions of

this part, except for subpart C, are also issued under 19 U.S.C.

1202 (General Note 20, Harmonized Tariff Schedule of the United

States).

* * * * *

Sec. 148.23 [Amended]

2. In Sec. 148.23, the heading and text of paragraph (c)(1) and the

heading and introductory text of paragraph (c)(2) are amended by

removing the reference ``$1,250'' and adding, in its place, the

reference ``$2,000''.

Approved: March 18, 1998.

Robert S. Trotter,

Acting Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 98-8832 Filed 4-2-98; 8:45 am]

BILLING CODE 4820-02-P