Detention of Merchandise

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 151, 174, 178

[T.D. 99-65]

RIN 1515-AB75

Detention of Merchandise

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs Regulations to provide for

procedures regarding the detention of merchandise that is undergoing

extended Customs examination. The changes promulgated accurately

reflect amendments to the underlying statutory

[[Page 43609]]

authority, enacted as part of the Customs modernization portion of the

North American Free Trade Agreement Implementation Act. The regulations

provide importers with an accelerated method to receive administrative

or judicial review of any decision to exclude merchandise from the

United States. Certain other conforming amendments are also made.

EFFECTIVE DATE: September 10, 1999.

FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch,

Office of Regulations and Rulings, 202-927-2344.

SUPPLEMENTARY INFORMATION:

Background

In a notice of proposed rulemaking (NPRM) published in the Federal

Register (61 FR 28522) on June 5, 1996, Customs proposed to amend the

provisions of part 151 of the Customs Regulations (19 CFR part 151),

relating to the examination, sampling and testing of merchandise, to

provide for procedures to be followed with regard to the detention of

merchandise. Section 613 of the North American Free Trade Agreement

Implementation Act, Pub. L. 103-182, Title VI of which is popularly

known as the Customs Modernization Act (Mod Act), amended the

provisions of section 499 of the Tariff Act of 1930, as amended (19

U.S.C. 1499), to provide for the detention of merchandise in any case

where Customs is unable, upon initial examination, to make a

determination as to whether that imported merchandise may be released

into commerce or seized or denied entry because of some sort of defect

regarding its admissibility into the United States. This legislation

brought the law into conformity with existing Customs practice with

regard to the examination and detention of merchandise.

Prior to this amendment, Customs, while having extensive

examination and broad detention authority, had no specific statutory or

regulatory procedures for detaining merchandise whose admissibility had

not yet been determined. The Mod Act codified Customs current detention

practices and provided importers with an accelerated method to receive

administrative or judicial review of any decision to exclude or a

deemed exclusion.

Under the provisions of section 613, Customs has five working days

after merchandise is presented for examination to determine whether

such merchandise should be detained or can be released. The NPRM

provided that merchandise shall be considered to be presented for

Customs examination when it is in a condition to be viewed and examined

by a Customs officer. Mere presentation to the examining officer of a

cargo van, container, or instrument of international traffic in which

the merchandise to be examined is contained was not to be considered to

be presentation of the merchandise for Customs examination purposes so

as to start the five-day period in which the decision to detain or

release must be made. Further, consistent with the provisions of

Sec. 151.7 of the Customs Regulations (19 CFR 151.7), relating to the

examination of merchandise at a place other than the public stores, the

importer shall bear any expense involved in preparing or transporting

the merchandise for Customs examination.

The NPRM required Customs to issue a written notice of detention to

the importer or other party having an interest in the merchandise. The

notice of detention must advise the importer or other interested party

of the initiation of the detention, the specific reason for, and the

anticipated length of, the detention, the nature of the tests or

inquiries to be conducted and the nature of any information which, if

supplied to the Customs Service, may accelerate the disposition of the

detention. After 30 days, or such longer period authorized by law, if

Customs has not made a determination to release or seize, the goods are

deemed to be excluded for purposes of 19 U.S.C. 1514. Under the

proposed rule, the 30-day limitation could be extended when the

importer or interested party requests in writing an extension of the

detention period, in order to comply with Customs requirements. Barring

that, the importer or interested party may file a protest as to the

exclusion. If, within 30 days after filing of the protest, Customs

fails to act, the importer or interested party may seek judicial review

in the Court of International Trade. The proposed regulations also

permitted Customs to allow exportation of the goods in lieu of seizure

with all costs of exportation being borne by the importer.

The statute compels Customs to make timely decisions, provide

timely notices, disclose available testing results and descriptions of

procedures and methodologies that are not proprietary to Customs or the

holder of any copyright or patent, and process any exclusion protests

within a prescribed statutory time period. If a notice to exclude is

not issued within such time period and a court action is commenced, the

burden of proof is on Customs, by a preponderance of the evidence, to

show good cause as to why an admissibility decision had not been made

prior to the time the importer commenced suit. If Customs makes the

decision to exclude, an importer wishing to challenge the decision

shall bear the burden of proof. These procedures are applicable to

those cases where Customs has the responsibility and authority to

determine the admissibility of the merchandise. They do not apply to

those situations where the decision of admissibility is vested with

another Federal agency.

One party responded to the NPRM, making various comments. A

description of each comment made, followed by Customs response to the

comment, is set forth below.

Discussion of Comments

Comment

The commenter suggests that the statute did not contemplate that

all detentions arising from laws administered by other government

agencies would be exempt from the new detention and seizure provisions.

The commenter notes that the legislative history to the Mod Act simply

recognized that Customs often detains merchandise on behalf of other

agencies, but specifically stated that the law would not preclude

application of this new procedure to those situations if agreed to by

the other agency. As such, the commenter avers that Congress clearly

provided authority for all imports to be governed by the same time

restraints and notice procedures.

Customs Response

The legislative history to which the commenter refers expressly

states that nothing in the statute is intended to change the procedures

or relationship between Customs and other Federal agencies. This would

not preclude application of this new procedure and remedy in those

cases where Customs has the responsibility and authority to determine

the admissibility of the merchandise, and such procedure and remedy are

agreed to by the other agency. However, it does not authorize

application of the new procedure to detentions made by Customs on

behalf of another agency that retains the authority to make its own

admissibility determinations.

A full reading of the legislative history makes it clear that

Congress had no intention of unilaterally applying Customs detention

procedures in instances where longstanding procedures of other agencies

are in place. Nor would the new detention provisions apply in any

situation where the determination as to admissibility of merchandise

rests with the other agency. For example, the newly

[[Page 43610]]

legislated procedures would not be applicable to determinations of

admissibility of imported merchandise as required by the Food, Drug and

Cosmetic Act (see 21 U.S.C. 381). The Food and Drug Administration

(FDA), and not Customs, is responsible for determinations of

admissibility of importations that fall under that Act. A full

complement of regulations providing for a well-established detention

and hearing program for such merchandise is already in place. Customs

detention procedures promulgated in this final rule are clearly

inapplicable in such a setting.

Comment

The commenter asks for clarification as to whether copyright and

trademark requirements are governed by the proposed regulations.

Customs Response

The regulations governing the detention of possibly piratical

(copyright violations) merchandise are specifically enumerated in part

133, subpart E, Customs Regulations (19 CFR part 133, subpart E), and

find their statutory origins in 17 U.S.C. 603. The regulations

governing the detention of confusingly similar trademark-violative

merchandise are specifically enumerated in part 133, subpart C, Customs

Regulations (19 CFR part 133, subpart C) and find their statutory

origins in 15 U.S.C. 1124. Section 151.16 is changed to confirm the

inapplicability of its detention notice requirements to those

situations involving suspected piratical or confusingly similar

merchandise. It should be noted that regulatory changes have recently

been issued in a separate document (T.D. 98-21, 63 FR 11825, dated

March 11, 1998), which clarify detention procedures with regard to

suspected copyright and trademark violations.

Comment

The commenter states that the proposed rule does not assure that

the importer is aware of the date that triggers the five-working day

period for decision-making by the Customs Service. It is averred that

the regulation should require that Customs provide notice to the

importer or broker of the date of availability of the merchandise for

examination so that the importer is aware of its rights and can

exercise those rights without making ad hoc inquiries to the Customs

Service. Additionally, the commenter suggests that the notice of

detention should indicate the date on which the merchandise was

presented for examination.

Customs Response

Customs agrees that the date the merchandise was presented for

examination should appear on the notice of detention and

Sec. 151.16(c)(1) has been amended to provide for this. It is also

Customs view that it would be an unnecessary burden to send an

additional notification to the importer of the date that presentation

actually occurred. When intensive examination of a shipment is to be

undertaken, the importer or agent of the importer (generally the

Customs broker) is apprised of the fact and is instructed to arrange to

present the merchandise for examination. Once the importer or his agent

has arranged for the examination, it would be wasteful of resources to

require the Government to send an additional notice that the

merchandise for which examination has been arranged was actually

presented for examination on a date certain.

Comment

The commenter proposes that Customs should be required to issue a

notice of detention when it fails to act to release the goods within

the initial 5-working day period, but does not make a formal decision

to detain the merchandise.

Customs Response

Section 151.16(b) states that merchandise that is not released

within the 5-working day period shall be considered to be detained

merchandise. As such, Customs is required to send a notice of detention

on this merchandise. Section 151.16(c) is amended to make this clear.

Comment

The commenter suggests, in reference to proposed Sec. 151.16(i),

that Customs retain authority to approve any protest and release or

seize the merchandise up to and after a summons is filed in the Court

of International Trade. The commenter states that it would be

counterproductive to require an importer to go to court for a favorable

decision where Customs intends to act favorably but merely misses the

30-day deadline. The commenter notes that the legislative history to

the statute recognizes the continuing authority of Customs to release

the merchandise where a protest is ``deemed'' denied.

Customs Response

Customs agrees that if an action concerning a deemed denial of a

protest with respect to a detention has not been commenced in the Court

of International Trade, Customs has the authority to act favorably on

the protest and release the merchandise; however, if an action is

commenced, Customs is of the view that the matter is within the

jurisdiction of the Court and release could only be ordered by the

Court. Also, Customs is of the view that it has the authority

officially to deny the protest in accordance with Sec. 174.30 of the

Customs Regulations.

Consequently, Sec. 151.16 is changed by adding a new paragraph (h)

to reflect Customs authority to grant protests that have been deemed

denied and to release detained goods or to deny protests in accordance

with Sec. 174.30 of the Customs Regulations at any time prior to

initiation of a court action pursuant to 28 U.S.C. 1581.

Comment

The commenter indicates that no sensitive import information should

be released to a third party based upon ``suspicion'' or without first

providing a reasonable opportunity for the importer to resolve the

questions concerning the detention directly with Customs. The commenter

states that if Customs adopts the subject proposed rule in concert with

a second separate proposed rule (58 FR 44476, dated August 23, 1993)

which involves the release of sensitive information to trademark owners

where merchandise is detained under suspicion that it bears an

infringing trademark or copyright, then the possibility will be created

that information will be provided to third persons because merchandise

was ``deemed'' detained or seized. The commenter indicates that the

subject proposed rule must be modified to assure that the release of

information only occurs where there is an affirmative decision by

Customs that there is a violation and the importer has not directly

resolved the issue with Customs.

Customs Response

In Customs view, the rule as proposed and as adopted here does not

provide for the release of confidential or proprietary business

information to any parties. Further, the commenter does not suggest how

the rule is suspect with regard to the release of this sensitive

information.

Merchandise will be detained when a question as to admissibility

arises and further examination or testing is required. Indeed, the

final rule is careful to exempt specifically from release any

information on testing procedures or methodologies that are proprietary

to holders of copyrights or patents

[[Page 43611]]

(Sec. 151.16(d)). Customs believes that this final rule does not serve

to assist in the illegal dissemination of trade sensitive information

in violation of any law or regulation.

It is noted that the other proposed rule referred to by the

commenter, which was published in the Federal Register (58 FR 44476) on

August 23, 1993, and did address certain disclosure matters, has

recently been adopted as a final rule (T.D. 98-21, supra).

Conclusion

In view of the foregoing, and following careful consideration of

the issues raised by the commenter and further review of the matter,

Customs has concluded that the proposed amendments with the

modifications discussed above should be adopted.

Additional Changes

In addition, Customs has determined to change Sec. 151.16(c) to

make clear that issuance of a notice of detention is not a final

determination so as to permit the filing of a protest pursuant to 19

U.S.C. 1514(a)(4). Proposed Sec. 151.16(e), redesignated as

Sec. 151.16(j) for editorial clarity, is revised regarding seizure and

forfeiture to allow Customs to deny entry or allow exportation of

detained merchandise where authorized by law, with the importer

responsible for paying all expenses of exportation. Proposed paragraphs

(f) and (g) of Sec. 151.16, redesignated as paragraphs (e) and (f) in

this document, respectively, are changed to remove any references that

would have allowed the importer or interested party to extend the time

Customs has to issue a final determination with respect to detained

merchandise. Customs has determined that the importer may, without the

necessity of asking for an extension of time, bring the merchandise

into compliance thereby lifting the detention or file a protest based

upon Customs failure to issue a final determination. In this latter

regard, the term ``decision'' in proposed Sec. 151.16(f), redesignated

as Sec. 151.16(e) is changed to ``determination'', for purposes of

editorial consistency with redesignated Sec. 151.16(f). Section

151.16(e) is further revised to provide that a final determination

thereunder may be the subject of a protest.

In order to bring consistency to the regulations with regard to the

disallowance of any extension of time which Customs has to issue a

final determination to exclude merchandise, Sec. 174.21(b), Customs

Regulations (19 CFR 174.21(b)) is amended by removing the provision

which allowed for delay in issuance of a decision on a protest relating

to the deemed exclusion of merchandise (at the protestant's request)

insofar as that provision of the regulations is inconsistent with the

provisions of 19 U.S.C. 1499(c)(5)(B).

In order to clarify the time period in which a protestant has to

commence a civil action in the Court of International Trade in response

to a deemed denial of a protest, Customs has amended Sec. 174.31 by

adding a new paragraph (c) to indicate that a civil action must be

filed within 180 days after the date that a protest is deemed denied

under proposed Sec. 151.16(h), which is redesignated as Sec. 151.16(g).

Customs has also added the phrase ``for purposes of 28 U.S.C. 1581'' to

Secs. 151.16(g) and 174.21(b) to further clarify this change.

Regulatory Flexibility Act and Executive Order 12866

This final rule document accurately reflects recent amendments to

statutory law, enacted as part of the Mod Act. These amendments

essentially constitute a codification of existing and longstanding

Customs practice with regard to the examination and detention of

imported merchandise. As such, pursuant to the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it is certified that

this rule does not have a significant economic impact on a substantial

number of small entities. Thus, the rule is not subject to the

regulatory analysis or other requirements of 5 U.S.C. 603 or 604. Nor

does the rule result in a ``significant regulatory action'' under E.O.

12866.

Paperwork Reduction Act

The collection of information contained in this final rule has been

reviewed and approved by the Office of Management and Budget (OMB) in

accordance with the requirements of the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(d)) under control number 1515-0210. An agency may not

conduct or sponsor, and a person is not required to respond to, a

collection of information unless it displays a valid control number

assigned by OMB.

The collection of information in this final rule is contained in

Sec. 151.16(d). This information is necessary and will be used to

determine the admissibility of imported merchandise and to otherwise

comply with the requirements of the Mod Act and protect the revenue.

The likely respondents and/or recordkeepers are businesses or other

for-profit institutions.

The estimated average annual burden associated with this collection

is 2 hours per respondent or recordkeeper.

Comments concerning the accuracy of this burden estimate and

suggestions for reducing this burden should be directed to the Office

of Management and Budget, 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, Office

of Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania

Avenue, NW., 3rd Floor, Washington, D.C. 20229.

List of Subjects

19 CFR Part 151

Customs duties and inspection, Examination, Sampling and testing,

Imports, Laboratories, Penalties, Reporting and recordkeeping

requirements.

19 CFR Part 174

Administrative practice and procedure, Customs duties and

inspection, Reporting and recordkeeping requirements.

19 CFR Part 178

Administrative practice and procedure, Collections of information,

Paperwork requirements, Reporting and recordkeeping requirements.

Amendments to the Regulations

Accordingly, parts 151, 174, and 178, Customs Regulations (19 CFR

parts 151, 174, and 178), are amended as set forth below.

PART 151--EXAMINATION, SAMPLING AND TESTING OF MERCHANDISE

1. The general authority citation for part 151, and the specific

authority for subpart A, continue to read as follows:

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

Harmonized Tariff Schedule of the United States), 1624. Subpart A

also issued under 19 U.S.C. 1499. * * *

2. Part 151 is amended by adding a new Sec. 151.16 to read as

follows:

Sec. 151.16 Detention of merchandise.

(a) Exemptions from applicability. The provisions of this section

are not applicable to detentions effected by Customs on behalf of other

agencies of the U.S. Government in whom the determination of

admissibility is vested and to detentions arising from possibly

piratical copies (see part 133, subpart E, of this chapter) or import

of goods bearing marks which are confusingly similar to recorded

trademarks or restricted gray market merchandise (see part 133, subpart

C, of this chapter.)

(b) Decision to detain or release. Within the 5-day period

(excluding weekends and holidays) following the date on which

merchandise is presented

[[Page 43612]]

for Customs examination, Customs shall decide whether to release or

detain merchandise. Merchandise which is not released within such 5-day

period shall be considered to be detained merchandise. For purposes of

this section, merchandise shall be considered to be presented for

Customs examination when it is in a condition to be viewed and examined

by a Customs officer. Mere presentation to the examining officer of a

cargo van, container or instrument of international traffic in which

the merchandise to be examined is contained will not be considered to

be presentation of merchandise for Customs examination for purposes of

this section. Except when merchandise is examined at the public stores,

the importer shall pay all costs relating to the preparation and

transportation of merchandise for examination.

(c) Notice of detention. If a decision to detain merchandise is

made, or the merchandise is not released within the 5-day period,

Customs shall issue a notice to the importer or other party having an

interest in such merchandise no later than 5 days (excluding weekends

and holidays) after such decision or failure to release (see paragraph

(b) of this section). Issuance of a notice of detention is not to be

construed as a final determination as to admissibility of the

merchandise. The notice shall be prepared by the Customs officer

detaining the merchandise and shall advise the importer or other

interested party of the:

(1) Initiation of the detention, including the date the merchandise

was presented for examination;

(2) Specific reason for the detention;

(3) Anticipated length of the detention;

(4) Nature of the tests or inquiries to be conducted; and

(5) Nature of any information which, if supplied to the Customs

Service, may accelerate the disposition of the detention.

(d) Providing testing results. Upon written request by the importer

or other party having an interest in detained merchandise, Customs

shall provide copies of the results of any testing conducted on the

merchandise together with a description of the testing procedures and

methodologies used (unless such procedures or methodologies are

proprietary to the holder of a copyright or patent or were developed by

Customs for enforcement purposes). The results and test description

shall be in sufficient detail to permit the duplication and analysis of

the testing and the results.

(e) Final determinations. A final determination with respect to

admissibility of detained merchandise will be made within 30 days from

the date the merchandise is presented for Customs examination. Such a

determination may be the subject of a protest.

(f) Effect of failure to make a determination. The failure by

Customs to make a final determination with respect to the admissibility

of detained merchandise within 30 days after the merchandise has been

presented for Customs examination, or such longer period if

specifically authorized by law, shall be treated as a decision by

Customs to exclude the merchandise for purposes of section 514(a)(4) of

the Tariff Act of 1930, as amended (19 U.S.C. 1514(a)(4)). Such a

deemed exclusion may be the subject of a protest.

(g) Failure to decide protest. If a protest which is filed as a

result of a final determination or a deemed exclusion of detained

merchandise is not allowed or denied in whole or in part before the

30th day after the day on which the protest was filed, it shall be

treated as having been denied on such 30th day for purposes of 28

U.S.C. 1581.

(h) Decision before commencement of court action. Customs may at

any time after a deemed denial of a protest as provided in paragraph

(g) of this section, but before commencement of a court action as

provided in paragraph (i) of this section, grant a protest and permit

release of detained merchandise, or deny a protest in accordance with

Sec. 174.30 of this chapter.

(i) Commencement of court action; burden of proof and decisions of

the court. Once a court action respecting a detention is commenced,

unless Customs establishes by a preponderance of the evidence that an

admissibility decision has not been reached for good cause, the court

shall grant the appropriate relief which may include, but is not

limited to, an order to cancel the detention and release the

merchandise.

(j) Seizure and forfeiture; denial of entry or exportation. If

otherwise provided by law, detained merchandise may be seized and

forfeited. In lieu of seizure and forfeiture, where authorized by law,

Customs may deny entry and permit the merchandise to be exported, with

the importer responsible for paying all expenses of exportation.

PART 174--PROTESTS

1. The general authority citation for part 174 continues to read as

follows, and a specific sectional authority citation for Sec. 174.21 is

added to read as follows:

Authority: 19 U.S.C. 66, 1514, 1515, 1624.

Section 174.21 also issued under 19 U.S.C. 1499.

2. Section 174.21 is amended by revising paragraph (b) to read as

follows:

Sec. 174.21 Time for review of protests.

* * * * *

(b) Protests relating to exclusion of merchandise. If the protest

relates to an administrative action involving exclusion of merchandise

from entry or delivery under any provision of the Customs laws, the

port director shall review and act on a protest filed in accordance

with section 514(a)(4), Tariff Act of 1930, as amended (19 U.S.C.

1514(a)(4)), within 30 days from the date the protest was filed. Any

protest filed pursuant to this paragraph shall clearly so state on its

face. Any protest filed pursuant to this paragraph which is not allowed

or denied in whole or in part before the 30th day after the day on

which the protest was filed shall be treated as having been denied on

such 30th day for purposes of 28 U.S.C. 1581.

3. Section 174.31 is amended by removing the word ``or'' following

the comma at the end of paragraph (a); by removing the period at the

end of paragraph (b), and adding a comma in its place, followed by the

word ``or'; and by adding a new paragraph (c) thereafter to read as

follows:

Sec. 174.31 Judicial review of denial of protest.

* * * * *

(c) The date that a protest is deemed denied in accordance with

Sec. 174.21(b), or Sec. 151.16(g) of this chapter.

PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

1. The authority citation for part 178 continues to read as

follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.

2. Section 178.2 is amended by adding a new listing to the table in

numerical order to read as follows:

Sec. 178.2 Listing of OMB control numbers.

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OMB control

19 CFR Section Description No.

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* * * * *

151.16(d))......................... Detention of 1515-0210

merchandise.

[[Page 43613]]

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Commissioner of Customs,

Raymond W. Kelly.

Approved: July 8, 1999.

Deputy Assistant Secretary of the Treasury

John P. Simpson

[FR Doc. 99-20606 Filed 8-10-99; 8:45 am]

BILLING CODE 4820-02-P