[Federal Register Volume 61, Number 42 (Friday, March 1, 1996)]
[Rules and Regulations]
[Pages 7987-7990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4797]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 10 and 113
[T.D. 96-20]
RIN 1515-AB51
Treatment of Reusable Shipping Devices Arriving From Canada or
Mexico
AGENCY: Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document amends the Customs Regulations to allow certain
foreign- or U.S.-manufactured shipping devices arriving from Canada or
Mexico to be released, under specified conditions, without entry and
payment of duty at the time of arrival and without the devices being
serially numbered or marked, if they are always transported on or
within either intermodal and similar containers which are themselves
vehicles or vehicle appurtenances and accessories. As millions of these
devices are used annually in hundreds of millions of transportation
moves between the United States and Canada or Mexico, Customs has
determined that requiring the importing and exporting communities to
individually mark and track these devices places a burden on commerce
that may be alleviated.
EFFECTIVE DATE: April 1, 1996.
FOR FURTHER INFORMATION CONTACT: Louis Hryniw, Regulatory Audit, (202-
927-1100).
SUPPLEMENTARY INFORMATION:
Background
Pursuant to Chapter 98, Subchapter III, U.S. Note 3, Harmonized
Tariff Schedule of the United States (HTSUS) (19 U.S.C. 1202), in order
to facilitate the prompt clearance at ports of entry of certain
substantial containers and holders, the Secretary of the Treasury is
authorized to permit the admission of such devices without entry and to
permit any duties thereon to be paid cumulatively from time to time
either before or after their importation when conditions exist which
permit adequate Customs controls to be maintained.
In this connection, Customs received a petition from, and met with
representatives of, the American Automobile Manufacturers Association
(AAMA) concerning an amendment to Sec. 10.41b, Customs Regulations (19
CFR 10.41b), intended to ease the burden of serially numbering and
marking certain containers or holders arriving from Canada or Mexico,
as otherwise generally required thereunder.
After reviewing the AAMA proposal, Customs concluded that the
requirements to serially number and mark the substantial holders and
containers in question could be eased under the circumstances without
risking a loss of control or revenue.
Accordingly, by a document published in the Federal Register on
November 1, 1994 (59 FR 54537), Customs proposed to amend Sec. 10.41b,
to allow certain foreign-made shipping devices arriving from Canada or
Mexico to be released without entry and payment of applicable duty, and
without the devices being serially numbered or marked, following the
submission and approval of an application by the importer or his agent
in this regard.
Such application had to, among other things, describe the subject
shipping devices, identify the ports where they would arrive and depart
the U.S., and set forth the program for accounting for and reporting
the shipping devices to Customs. If the application were approved, the
importer or agent would submit to Customs a periodic report for the
shipping devices, which could not be less frequent than annual, using
his own accounting and recordkeeping procedures to keep track of the
devices. Records supporting the periodic reports of the shipping
devices would have to be retained for at least 3 years from the date
the reports were filed with Customs. Any duty applicable to the devices
would have to be tendered cumulatively at the time specified in the
approved application. Such tender could not occur more than 90 days
following the end of the related reporting period.
In the event the application were to be denied by Customs at the
initial stage, a right of appeal was also provided in the proposal.
Since duty under the proposal would be due on all shipping devices
acquired within the period covered by the periodic report which the
applicant would undertake to file, even though the devices might not
have yet been used in transborder traffic, accounting for specific
movements of the devices or for diversions to domestic traffic would be
superfluous.
Eight comments, including one from the AAMA, were received in
response to the notice of proposed rulemaking, six supporting the
proposal, with one posing a number of questions regarding the bond
conditions applicable under the proposed program. Another comment
advocated that the proposal be expanded to allow substantial holders or
outer containers formally designated as ``instruments of international
traffic'' to be temporarily diverted, from time to time, to domestic
traffic without an entry being required therefore. Customs finds that
this latter comment would have to be the subject of a separate
publication, inasmuch as it clearly falls outside the scope of the
published notice.
A discussion of the specific issues that were raised with respect
to the proposed program itself, together with Customs response thereto,
is set forth below.
Discussion of Comments
Comment: The AAMA in its comment wanted the proposed regulation
clarified to state explicitly that an approval by one Customs office of
an importer's application for tracking and reporting on its shipping
devices would constitute an approval binding on all Customs offices
nationwide. Also, it was recommended that the proposed regulation be
revised to reflect the Customs Reorganization Plan, which eliminated
regional and district offices.
Response: An approval by the Customs office with which the subject
application is filed would indeed be binding on all Customs offices
nationwide. Section 10.41b(b)(4) is changed by adding an express
provision to this effect, and by deleting the provision therefrom
indicating that approval would be limited to those Customs offices
listed in the application. Likewise, Sec. 10.41b(b)(2)(ii) is changed
to make clear that only the intended ports where it is anticipated the
devices will be arriving and departing the U.S. need be listed in the
application. The applicant should of course endeavor to fully
anticipate and list in the application all ports to be involved in the
program.
Also, Sec. 10.41b(b) is changed to reflect the Customs
Reorganization Plan, by
[[Page 7988]]
providing that the application would be filed with a port director,
instead of with a district director; and by providing that a right of
appeal would lie with the Assistant Commissioner, Office of Field
Operations, rather than with a regional commissioner, should the
application be denied.
Comment: The AAMA also observed that Sec. 113.66 of the Customs
Regulations (19 CFR 113.66) cited in proposed Sec. 10.41b(b)(3)
regarding the bond requirements for the importer's recordkeeping and
reporting program did not itself make corresponding provision for these
requirements; accordingly, the AAMA recommended that Sec. 113.66 be
appropriately amended to reiterate the basic requirements set forth for
the program in proposed Sec. 10.41b(b), to which the underlying bond
would relate.
Furthermore, a surety association posed a number of questions about
the bond requirements occasioned under the proposed amendment, viewing
the proposal as appearing not to provide sufficient information in this
matter. In particular, this commenter wanted the intended coverage
under the bond clarified, together with the basis both for assessing
liquidated damages under the bond, and for setting the limit of the
bond.
Additionally, this commenter compared the 3-year record retention
requirement of the proposal to 19 U.S.C. 1508(c) which enabled Customs
to require the retention of records relating to import transactions for
up to 5 years, and asked in this context which time frame would be
applicable. This commenter further wanted to know whether the
importer's accounting or auditing records, which would be relied upon
by Customs to establish compliance with the proposed program, would be
available to the surety as well.
Response: Section 113.66 has been revised to replicate the
importer's basic recordkeeping and reporting obligations concerning the
subject shipping devices, which would be covered by the bond, as
already amply evidenced in the proposed amendment of Sec. 10.41b.
Customs believes that the proposed rule in this regard adequately
framed the subject matter thereof for effective evaluation and comment.
To this end, Sec. 113.66 is revised by redesignating paragraph (c) as
paragraph (d), and by making corresponding provision for the bond
requirements in a new paragraph (c).
In this latter respect, liquidated damages under the bond would be
determined in the manner provided in Sec. 10.41b(b)(3) and in newly
redesignated Sec. 113.66(d) (formerly Sec. 113.66(c)). Specifically, if
the conditions of the bond were violated, the port director could issue
a claim for liquidated damages in an amount equal to the domestic value
of the container.
Likewise, the setting of the bond limit will follow the existing
guidelines previously issued pursuant to Secs. 113.12 and 113.13,
Customs Regulations (19 CFR 113.12, 113.13); for activity code 3a bonds
(applicable to substantial holders or outer containers under
Sec. 10.41b), this means that bond liability would be fixed at $10,000
or such larger amount as deemed necessary to accomplish the purpose for
which the bond is given.
By the same token, a surety's access to an importer's business
records relating to the reports of its shipping devices would be
dependent, once again, on Customs existing practices in this general
area, and, in particular, on the Freedom of Information Act, as amended
(5 U.S.C. 552), and the Trade Secrets Act, as amended (18 U.S.C. 1905).
The record retention period under 19 U.S.C. 1508(c) is tied to the
date of entry. The shipping devices in question, however, will not be
subject to entry as such, and Customs is satisfied that a record
retention requirement of 3 years from the date the importer's reports
of the shipping devices are filed with Customs would be sufficient
under the circumstances.
Comment: One commenter observed that the rule should be expanded to
apply equally to similar shipping devices of U.S. manufacture, inasmuch
as they should not be placed in a less favorable competitive position
than the foreign articles.
Response: Customs agrees. Section 10.41b(b) is amended accordingly.
Comment: Two commenters asked that the program not be limited to
reusable shipping devices arriving only from Canada or Mexico. It was
stated that Part I, Article I, of the GATT (General Agreement on
Tariffs and Trade) mandated uniform treatment for like products
originating from all contracting parties.
Response: Customs has concluded that a rational basis exists for
limiting the amendment, at least initially, to reusable shipping
containers and holders arriving from Canada or Mexico, inasmuch as
these countries are contiguous to the U.S., and it is believed that the
amendment as thus circumscribed can be safely implemented without
risking a loss of revenue or a loss of effective Customs control with
respect to the shipping devices concerned. Customs thus does not
perceive this limitation on the rule as violative of the GATT.
However, Customs finds significant merit in the commenter's
request, and will proceed to expeditiously review the prospect of
further extending the program.
Conclusion
In view of the foregoing, and following careful consideration of
the comments received and further review of the matter, Customs has
concluded that the proposed amendment with the modifications discussed
above should be adopted.
In addition, in order to apprise the Customs inspector that the
shipping devices in question have been relieved from having to be
serially numbered or marked as otherwise mandated under Sec. 10.41b,
the introductory text of Sec. 10.41b(b) is revised to require that a
notation appear on the manifest for the transporting vehicle or vessel
to the effect that such shipping devices have been exempted from serial
numbering or marking requirements pursuant to an application approved
under 19 CFR 10.41b(b). Also, Customs has determined to amend
Sec. 10.41b(b)(2)(vi) in order to emphasize that the location of the
supporting records in the U.S., which is required to be identified in
the importer's application, must be so identified therein by specific
name and address; and Sec. 10.41b(b)(6) is changed to provide that if
an approved application should later be revoked by the port director,
the procedures described in Sec. 10.41b(b)(5) will apply. Furthermore,
at the end of the introductory text of Sec. 10.41b(b), a provision is
added that pallets and other solid wood shipping devices must be
accompanied by an importer document, to the extent that this is
required by the Animal and Plant Health Inspection Service, Department
of Agriculture, regarding plant pest risk.
Regulatory Flexibility Act and Executive Order 12866
For the reasons set forth in the preamble, pursuant to the
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. Accordingly, it is
not subject to the regulatory analysis requirements of 5 U.S.C. 603 and
604. Nor do the amendments result in a ``significant regulatory
action'' under E.O. 12866.
Drafting Information: The principal author of this document was
Russell Berger, Regulations Branch, U.S. Customs Service. However,
personnel from other offices participated in its development.
[[Page 7989]]
List of Subjects
19 CFR Part 10
Alterations, Bonds, Customs duties and inspection, Exports,
Imports, Preference programs, Repairs, Reporting and recordkeeping
requirements, Trade agreements.
19 CFR Part 113
Air carriers, Customs duties and inspection, Exports, Freight,
Imports, Surety bonds, Vessels.
Amendments to the Regulations
Parts 10 and 113, Customs Regulations (19 CFR parts 10 and 113),
are amended as set forth below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The general authority citation for part 10 continues to read as
follows, and the specific sectional authority for part 10 is amended by
adding specific sectional authority for Sec. 10.41b, in appropriate
numerical order thereunder, 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;
* * * * *
Section 10.41b also issued under 19 U.S.C. 1202 (Chapter 98,
Subchapter III, U.S. Note 3, Harmonized Tariff Schedule of the U.S.
(HTSUS));
* * * * *
2. Section 10.41b is amended by redesignating paragraphs (b), (c),
(d), (e), (f), (g) and (h) as (c), (d), (e), (f), (g), (h) and (i),
respectively, and by adding a new paragraph (b) to read as follows:
Sec. 10.41b Clearance of serially numbered substantial holders or
outer containers.
* * * * *
(b) Subject to the approval of a port director pursuant to the
procedures described in this paragraph, certain foreign- or U.S.-made
shipping devices arriving from Canada or Mexico, 12 including racks,
holders, pallets, totes, boxes and cans, need not be serially numbered
or marked if they are always transported on or within either intermodal
and similar containers or containers which are themselves vehicles or
vehicle appurtenances and accessories such as twenty and forty foot
containers of general use and ``igloo'' air freight containers. The
following or similar notation shall appear on the vehicle or vessel
manifest in relation to such shipping devices which are exempt from
serial numbering or marking requirements pursuant to this paragraph:
``The shipping devices transported herein, which are not serially
numbered or marked, have been exempted from such requirement pursuant
to an application approved under 19 CFR 10.41b(b).'' Also, pallets and
other solid wood shipping devices must be accompanied by an importer
document, to the extent that this is required by the U.S. Department of
Agriculture, Animal and Plant Health Inspection Service, attesting to
the admissibility of such devices as regards plant pest risk, as
provided for in 7 CFR 319.40-3.
(1) An importer or his agent, regardless of whether the importer is
the owner of the foreign- or U.S.-manufactured shipping devices, may
apply to a port director of Customs at one of the importer's chiefly
utilized Customs ports or the port within which the importer's or
agent's recordkeeping center is located for permission to have such
shipping devices arriving from Canada or Mexico released without entry
and payment of duty at the time of arrival and without the devices
being serially 13 numbered or marked. Application may be filed in only
one port. Although no particular format is specified for the
application, it must contain the information enumerated in paragraph
(b)(2) of this section. Any duty which may be due on these shipping
devices shall be tendered and paid cumulatively at the time specified
in an approved application, which may be either before or after the
arrival of the shipping devices in the U.S. (such as, at the time a
contract, purchase order or lease agreement is issued).
(2) The application shall:
(i) Describe the types of shipping devices covered, their
classification under the Harmonized Tariff Schedule of the U.S.
(HTSUS), their countries of origin, and whether and to whom required
duty was paid for them or when it will be paid for them, including
duties for repair and modifications to such shipping devices while
outside the U.S.;
(ii) Identify the intended ports where it is anticipated the
shipping devices will be arriving and departing the U.S., as well as
the particular movements and conveyances in which they are intended to
be utilized;
(iii) Describe the applicant's proposed program for accounting for
and reporting these shipping devices;
(iv) Identify the reporting period (which shall in no event be less
frequent than annual), as well as the payment period within which
applicable duty and fees must be tendered 14 (which shall in no event
exceed 90 days following the close of the related reporting period);
(v) Describe the type of inventory control and recordkeeping,
including the specific records, to be maintained to support the reports
of the shipping devices; and
(vi) Provide the location in the United States, including the name
and address, where the records supporting the reports will be retained
by law and will be made available for inspection and audit upon
reasonable notice. (The records supporting the reports of the shipping
devices must be kept for a period of at least 3 years from the date
such reports are filed with the port director.)
(3) The application shall be filed along with a continuous bond
containing the conditions set forth in Sec. 113.66(c) of this chapter.
If the application is approved by the port director and the conditions
set forth in the application or of the bond are violated, the port
director may issue a claim for liquidated damages equal to the domestic
value of the container. If the domestic value exceeds the amount of the
bond, the claim for liquidated damages will be equal to the amount of
the bond.
(4) The port director receiving the application shall evaluate the
program proposed to account for, report and maintain records of the
shipping devices. The port director may suggest amendments to the
applicant's proposal. The port director shall notify the applicant in
writing of his decision on the 15 application within 90 days of its
receipt, unless this period is extended for good cause and the
applicant is so informed in writing. Approval of the application by the
port director with whom it is filed shall be binding on all Customs
ports nationwide.
(5) If the decision is to deny the application, in whole or in
part, the port director shall specify the reason for the denial in a
written reply, and inform the applicant that such denial may be
appealed to the Assistant Commissioner, Office of Field Operations,
Customs Headquarters, within 21 days of its date. The Assistant
Commissioner's decision shall be issued, in writing, within 30 days of
the receipt of the appeal, and shall constitute the final Customs
determination concerning the application.
(6) If the application is approved, an importer may later apply to
amend his application to add or delete particular types of shipping
devices listed in the application in which the procedures set forth in
the application may be utilized. If a requested amendment to an
approved application should be denied, or if an approved application
should be
[[Page 7990]]
revoked, in whole or in part, by the port director, the procedures
described in paragraph (b)(5) of this section shall apply.
(7) Application for and approval of a reporting program shall not
limit or restrict the use of other alternative 16 means for obtaining
the release of holders, containers and shipping devices.
* * * * *
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.
* * * * *
2. Section 113.66 is amended by redesignating paragraph (c) as (d)
and by adding a new paragraph (c) to read as follows:
Sec. 113.66 Control of containers and instruments of international
traffic bond conditions.
* * * * *
(c) Agreement to comply with application approved under 19 CFR
10.41b(b). If the principal establishes a program for the cross-border
movements of shipping devices based upon an application approved as
provided in Sec. 10.41b(b) of this chapter (19 CFR 10.41b(b)), the
principal agrees:
(1) To timely file complete and accurate reports on the shipping
devices, and to pay any applicable duty due on the devices and repairs
made to such devices, as provided in the approved application;
(2) To retain complete and accurate records regarding the shipping
devices, and to make such records available to Customs for inspection
and audit upon reasonable notice, as also required in the approved
application; and
(3) To otherwise comply with every other condition of the approved
application.
Approved: January 31, 1996.
George J. Weise,
Commissioner of Customs.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-4797 Filed 2-29-96; 8:45 am]
BILLING CODE 4820-02-P
