Centralized Examination Stations

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 118

[T.D. 98-29]

RIN 1515-AC07

Centralized Examination Stations

AGENCY: Customs Service, Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations regarding the

establishment and scope of operation of Centralized Examination

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

with export control laws and regulations without unduly impeding the

movement of outbound merchandise, the definition of a CES is expanded

to allow merchandise intended to be exported as well as imported

merchandise to be handled by a CES. The amendment allows outbound cargo

to be inspected at CESs at ports other than the shipment's designated

port of exit. Further, to make the CES application procedure more

amenable to local conditions, this amendment provides CES applicants

with more flexibility regarding the time frame to conform a facility to

meet Customs security or other physical or equipment requirements.

Lastly, this amendment removes one of the criteria on the application

to operate a CES because Customs believes it is too subjective. These

changes are made in order to keep the CES program responsive to both

Customs and the trade community's demands for the facilitated

examinations of trade merchandise.

DATES: Effective: May 6, 1998.

FOR FURTHER INFORMATION CONTACT:

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

(202) 927-0765;

For Legal Inquiries: Jerry Laderberg, Office of Regulations and

Rulings, Entry Procedures and Carriers Branch, (202) 927-2269.

SUPPLEMENTARY INFORMATION:

Background

In 1993, Customs amended the Customs Regulations to provide for the

establishment, operation, and termination of Centralized Examination

Stations (CESs). A CES is a privately-operated facility, not in the

charge of a Customs officer, at which imported merchandise is made

available to Customs officers for physical examination. Because

merchandise intended to be exported is subject to examination, Customs

wanted CESs to be authorized to provide inspectional facilities for

this merchandise as well. Accordingly, on August 19, 1997, Customs

published a Notice of Proposed Rulemaking in the Federal Register (62

FR 44102) that proposed to amend the Customs Regulations regarding the

establishment and scope of operation of CESs.

In order to reflect Customs' interest in maximizing compliance with

export control laws and regulations without unduly impeding the

movement of outbound merchandise, the Notice proposed to expand the

definition of a

[[Page 16684]]

CES to allow merchandise intended to be exported as well as imported

merchandise to be handled by a CES. Further, the document proposed to

allow for the inspection of outbound cargo at CESs at ports other than

the shipments' designated ports of exit. To make the CES application

procedure more amenable to local conditions, the document proposed more

flexibility regarding the time frame for an applicant to conform a

facility to meet Customs security or other physical or equipment

requirements. Lastly, Customs proposed to amend one of the criteria on

the application to operate a CES because of Customs' belief that it is

too subjective. These changes were proposed in order to keep the CES

program responsive to both Customs' and the trade community's demands

for the facilitated examinations of trade merchandise. These proposed

changes to the regulations affected Secs. 118.0, 118.22, and 118.23 of

the Customs Regulations (19 CFR 118.0, 118.22, and 118.23). The

document solicited comments concerning these changes.

The comment period closed on October 20, 1996. Six comments were

received. The comments and Customs responses to them follow.

Discussion of Comments

The comments received were from a major manufacturing corporation

involved with importing/exporting its products; a trade association

representing 1,000 member firms engaged in all aspects of international

trade; an exporter of merchandise; a manufacturer that exports its

product; a CES operator; and an association representing insurance and

surety companies.

Comment: Four commenters opposed the use of CESs for outbound

inspections because they stated that expansion of the CES program to

exports will mean that the burdens (needless delays and cost overruns)

routinely experienced on the import side with CESs will also occur with

examination of exports. These commenters argue that similar processing

delays could result in missing the time for lading the merchandise to

be exported, which may result in the loss of export sales, leading to a

negative impact on the country's balance of trade.

Customs response: Customs disagrees. Inspection time involved with

export examinations is considerably less than the inspection time

involved with import examinations due to less paperwork being required.

Further, the proposed amendments were designed to keep CESs responsive

to the trade community's demands for facilitating examinations. Since

the number of export shipments is expected to increase 6% per year,

reaching a total value of $1.2 trillion by the year 2003, Customs

believes that centralizing outbound examinations will facilitate

inspections. As Customs will be able to conduct the outbound

examination before merchandise is loaded for transport to a port of

exit, unnecessary delays of shipments will be prevented by sparing

exporters the expense and delay involved in unloading shipments at

dispersed ports of exit for inspection.

Comment: One commenter stated that the proposed amendment to the

Customs custodial bond provision of Sec. 118.4(g) is unnecessary. The

commenter stated that the obligation envisioned by the new language,

that CES operators will accept and keep safe all merchandise delivered

to the CES for examination, currently exists and that unless the

amendment serves some significant, but unstated, need, it should be

deleted from the final rule.

Customs response: Customs disagrees with the proposition that the

proposed amendment is not necessary because it speaks to an existing

obligation. The proposed amendment to Sec. 118.4(g) clarifies Customs

policy that a CES operator will accept all merchandise delivered to the

CES for examination, thus, eliminating any assumption that CES

operators have discretion whether to accept merchandise delivered to

the facility for Customs examination. Accordingly, Customs believes

that the proposed amendment to Sec. 118.4(g) is necessary.

Conclusion

After analysis and review of the comments and further consideration

by Customs, Customs has determined to adopt the final rule as it was

proposed.

Regulatory Flexibility Act

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

601 et seq.), it is certified that the amendments will not have a

significant economic impact on a substantial number of small entities,

because the amendments would operate to confer new benefits on

potential CES operations, by allowing them to perform more services.

Accordingly, the amendments are not subject to the regulatory analysis

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

Executive Order 12866

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

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

List of Subjects in 19 CFR Part 118

Administrative practice and procedure, Customs duties and

inspection, Examination stations, Exports, Imports, Licensing,

Reporting and recordkeeping requirements.

Amendments to the Regulations

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

part 118), is amended as set forth below:

PART 118--CENTRALIZED EXAMINATION STATIONS

1. The authority citation for part 118 is revised to read as

follows:

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

U.S.C. 5317.

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

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

follows:

Sec. 118.1 Definition.

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

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

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

of transportation documents must accompany the shipment to evidence

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

committed to export, thereby, making them subject to Customs

examination.

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

sentence to read as follows:

Sec. 118.4 Responsibilities of a CES operator.

* * * * *

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

merchandise delivered to the CES for examination. * * *

* * * * *

Sec. 118.11 [Amended]

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

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

additional 30 calendar days after tentative selection to conform the

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

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

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

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

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

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

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

acquire that knowledge''.

[[Page 16685]]

Approved: March 13, 1998.

Samuel H. Banks,

Acting Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 98-8940 Filed 4-3-98; 8:45 am]

BILLING CODE 4820-02-P