Warehouse Withdrawals; Aircraft Fuel Supplies; Pipeline Transportation of Merchandise in Bond

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10, 18, 113 and 178

[T.D. 99-33]

RIN 1515-AB67

Warehouse Withdrawals; Aircraft Fuel Supplies; Pipeline

Transportation of Merchandise in Bond

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule, with some changes, the

interim rule amending the Customs Regulations that was published in the

Federal Register on February 22, 1996, as T.D. 96-18. The interim rule

implemented certain statutory changes to the Customs laws contained in

the Customs modernization portion of the North American Free Trade

Agreement Implementation Act regarding recordkeeping for merchandise

transported by pipeline and duty-free withdrawals from Customs bonded

warehouses of aircraft turbine fuel. The interim rule also clarified

the procedures applicable to aircraft turbine fuel withdrawn from a

bonded warehouse for certain duty-free use and then commingled with

other lots of fuel before being so used.

EFFECTIVE DATE: April 5, 1999.

FOR FURTHER INFORMATION CONTACT: Jerry C. Laderberg, Office of

Regulations and Rulings, 202-927-2320.

SUPPLEMENTARY INFORMATION:

Background

Title VI of the North American Free Trade Agreement Implementation

Act, Pub. L. 103-182 (December 8, 1993), popularly known as the Customs

Modernization Act (Mod Act), significantly amended certain Customs

laws. This document concerns sections 664 and 665 of the Mod Act.

Section 664 added a new section 553a to the Tariff Act of 1930 (19

U.S.C. 1553a), to account for bonded merchandise transported by

pipeline. Section 665 amended section 557(a) of the Tariff Act of 1930

(19 U.S.C. 1557(a)), to provide for the duty-free withdrawal of turbine

fuel from a Customs bonded warehouse under a 30-day accounting period.

Under section 553a, bonded merchandise transported by pipeline may

be accounted for on a quantitative basis. For this purpose, the bill of

lading or equivalent document of receipt, issued by the pipeline

carrier to the shipper and accepted by the consignee, may be used to

account for the quantity of merchandise so transported and to maintain

the identity of that merchandise. This facilitates the commingling of

bonded merchandise with non-bonded merchandise being transported by

pipeline. Commingling previously was not permitted under Customs law,

which required that the physical identity of the bonded merchandise be

maintained. However, since most merchandise transported by pipeline is

commingled and is susceptible to quantitative accounting, section 553a

is intended both to enable the effective use of modern fuel

transportation systems and to reduce the administrative costs and

paperwork for the industry and the Government.

Under amended section 1557(a), aircraft turbine fuel may be

withdrawn from a Customs bonded warehouse for use as provided under

section 309 of the Tariff Act of 1930 (19 U.S.C. 1309) without the

payment of duty if an amount equal to the quantity of fuel withdrawn is

shown to be used as provided for in section 1309 within 30 days of its

withdrawal. Duties must be deposited on turbine fuel that was withdrawn

in excess of the quantity

[[Page 16346]]

shown to have been used under section 1309 during the 30-day period

following withdrawal of the fuel. Previously, Customs required daily

accounting for such fuel, which resulted in great administrative

expense and excessive paperwork for industry. The amended procedure

allows for the commingling of different lots of fuel, whether bonded,

imported, or domestic, in a modern hydrant system, with accounting for

the bonded fuel in a manner which is cost-effective and which

substantially reduces paperwork.

Accordingly, by a document published in the Federal Register (61 FR

6772) on February 22, 1996, as T.D. 96-18, Customs issued interim

regulations to implement the foregoing statutory enactments.

The interim regulations added a new Sec. 18.31 to its regulations

(19 CFR 18.31) to allow bonded merchandise being transported by

pipeline to be accounted for on a quantitative basis, and a new

Sec. 10.62b to permit accounting on a monthly basis for the duty-free

withdrawal of aircraft turbine fuel from a bonded warehouse for use as

provided in 19 U.S.C. 1309. In connection with new Secs. 10.62b and

18.31, the interim regulations also made conforming changes to existing

Secs. 10.60(d), 10.62(a), 18.1(a)(1), and 113.62(b) of the Customs

Regulations (19 CFR 10.60(d), 10.62(a), 18.1(a)(1), and 113.62(b)).

Discussion of Comments

One commenter responded to the request for comments on the interim

regulations contained in T.D. 96-18. This commenter agreed with the

substance of the interim regulations, but made a number of suggestions

in an effort to clarify the meaning of the regulations or to further

simplify their administration. The suggestions made by the commenter,

together with the responses by Customs, are set forth below.

Comment: The reference in Sec. 10.62(a) to Customs Form (CF) 7506

should be changed to Customs Form 7501 because Customs has since

adopted the use of CF 7501 in place of CF 7506.

Customs Response: Customs agrees. Section 10.62(a) is changed

accordingly.

Comment: The last sentence in Sec. 10.62b(b) should be changed to

require that the withdrawal of turbine fuel be made using CF 7512

unless the blanket withdrawal procedure is used.

Customs Response: Customs disagrees. Under Sec. 144.37, Customs

Regulations (19 CFR 144.37), either a CF 7512 or a CF 7501 may be used

to document the withdrawal.

Comment: The commenter stated that the use of the phrase, ``the

fuel withdrawn which is not entered and upon which duties have not been

paid'', in Sec. 10.62b(c)(1) and its subordinate paragraphs, is

superfluous and should be deleted from these provisions. The commenter

asserts that, as used in paragraph (c)(1)(ii)(C) of Sec. 10.62b, the

phrase appears misplaced because this paragraph deals with fuel being

loaded onto an aircraft, as opposed to being withdrawn without entry or

payment of duty from a bonded warehouse.

Customs Response: Customs disagrees that the phrase should be

entirely deleted from Sec. 10.62b(c). It serves to remind Customs and

the party withdrawing the fuel that the fuel must be entered if not

timely laden under 19 U.S.C. 1309. Customs agrees, however, that the

phrase is inappropriate as used in Sec. 10.62b(c)(1)(ii)(C). Section

10.62b(c)(1)(ii)(C) is revised consistent with the request made by the

commenter.

Comment: The commenter believes that it would be helpful to both

Customs and importers to indicate in Sec. 10.62b(c)(1) that the

referenced documents should be submitted to Customs at the port where

the bonded entry was filed.

Customs Response: Customs agrees and the provision is modified.

Comment: The commenter states, with reference to Sec. 10.62b(g)(5),

that blanket withdrawals of fuel from a bonded warehouse eliminate the

need to file a CF 7512. The commenter advocates that the provision be

revised to provide that a withdrawal document meeting the requirements

of Sec. 10.62b can be submitted instead of CF 7512. The commenter also

suggests that the withdrawal document, which is issued by the warehouse

proprietor under Sec. 10.62b(g)(5), could also be issued by a pipeline

operator, barge or vessel operator, or other party acceptable to

Customs.

In addition, the commenter wants to delete the requirement in

Sec. 10.62b(g)(5)(ii) that the withdrawal document identify the

specific tank from which the bonded fuel is withdrawn. The commenter is

of the opinion that because fuel may be withdrawn from several tanks in

frequent batches at multi-tank terminals, the precise tank or tanks

from which a particular batch of fuel is withdrawn cannot readily be

known. Moreover, the commenter declares that precise tank

identification is not currently maintained for commercial or Customs

purposes.

Customs Response: Customs disagrees with the suggested changes. As

already mentioned, under Sec. 144.37, Customs Regulations (19 CFR

144.37), a CF 7512, or a CF 7501, may be used to document withdrawals

for export.

Because the warehouse proprietor is the party obligated under bond

for the proper withdrawal of fuel supplies from the warehouse, the

proprietor is the appropriate party to issue the withdrawal document.

Customs believes that permitting another party, such as a pipeline,

vessel, or barge operator, to issue a withdrawal document would impose

an administrative burden on the agency as well as on the trade.

Furthermore, Customs believes that the withdrawal document must

include the specific tank from which fuel is withdrawn in order to

enable the agency to audit the withdrawal of the fuel accurately and

effectively.

Conclusion

For these reasons, and after careful consideration of the comments

and further review of the matter, Customs concludes that the interim

rule published in the Federal Register (61 FR 6772) on February 22,

1996, as T.D. 96-18, should be adopted as a final rule with the changes

explained above.

Regulatory Flexibility Act and Executive Order 12866

As discussed in the interim rule, since the amendments are not

subject to the notice and public procedure requirements of the

Administrative Procedure Act (5 U.S.C. 553), they are not subject to

the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Nor do the

amendments constitute a ``significant regulatory action'' under E.O.

12866.

Paperwork Reduction Act

The collection of information contained in this final regulation

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 1515-0209. Part

178, Customs Regulations (19 CFR part 178) is amended to make provision

for this information collection. 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 in Sec. 10.62b.

This information is required and will be used to verify that turbine

fuel withdrawn from a Customs bonded warehouse is used on aircraft

qualifying for duty-free withdrawal of fuel supplies, in accordance

with statutory law. The likely respondents are businesses.

[[Page 16347]]

The estimated average annual burden associated with the collection

of information in this final rule is 12 hours per respondent/

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, DC 20229.

List of Subjects

19 CFR Part 10

Customs duties and inspection, Exports, Imports, Reporting and

recordkeeping requirements, Shipments.

19 CFR Part 18

Bonded transportation, Common carriers, Customs duties and

inspection, Exports, Imports.

19 CFR Part 113

Common carriers, Customs duties and inspection, Exports, Freight,

Laboratories, Reporting and recordkeeping requirements, Surety bonds.

19 CFR Part 178

Administrative practice and procedure, Exports, Imports, Reporting

and recordkeeping requirements.

Amendments to the Regulations

Accordingly, the interim rule amending parts 10, 18 and 113,

Customs Regulations (19 CFR parts 10, 18 and 113), which was published

at 61 FR 6772 on February 22, 1996, is adopted as a final rule with the

changes set forth below. In addition, part 178 is amended to add a new

listing to Customs approved information collection requirements.

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

ETC.

1. The general authority citation for part 10, and the relevant

specific authority citations, continue to read as follows:

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

Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484,

1498, 1508, 1623, 1624, 3314.

* * * * *

Sections 10.61, 10.62, 10.63, 10.64, 10.64a also issued under 19

U.S.C. 1309;

* * * * *

Section 10.62b also issued under 19 U.S.C. 1557;

* * * * *

Sec. 10.62 [Amended]

2. In Sec. 10.62(a), the first sentence is amended by removing the

reference to ``Customs Form 7506'' and by adding, in its place,

``Customs Form 7501''.

3. Section 10.62b is amended by revising paragraphs (c)(1) and

(c)(1)(ii)(C) to read as follows:

Sec. 10.62b Aircraft turbine fuel.

* * * * *

(c) Establishment of use of fuel by qualifying aircraft. * * *

(1) The person withdrawing aircraft turbine fuel under paragraph

(b) of this section must establish that an aircraft qualifying for the

privileges provided for in section 309, Tariff Act of 1930, as amended,

used fuel in an amount equal to or exceeding the quantity of the fuel

withdrawn that is not entered and upon which duties are not paid by

submitting to Customs, at the port where the bonded warehouse entry was

filed, within the time provided in paragraph (d) of this section,

either--

* * * * *

(ii) * * *

(C) All of the aircraft into which fuel is loaded hereunder were

used in a trade provided for in section 309; and

* * * * *

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

appropriate numerical order to read as follows:

Sec. 178.2 Listing of OMB control numbers.

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19 CFR section Description OMB Control No.

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* * * *

* * *

Sec. 10.62b................. Certificate of 1515-0209

compliance for

turbine fuel

withdrawals.

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Approved: March 8, 1999.

Raymond W. Kelly,

Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 99-8333 Filed 4-2-99; 8:45 am]

BILLING CODE 4820-02-P