[Federal Register Volume 59, Number 231 (Friday, December 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29711]
[[Page Unknown]]
[Federal Register: December 2, 1994]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 141
[T.D. 94-95]
RIN 1515-AB39
Establishment of Conditional Release Period for Textiles and
Textile Products
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document amends the Customs Regulations to establish a
conditional release period of 180 days on entries of textiles and
textile products for the sole purpose of facilitating a determination
as to whether the country of origin of the entered goods has been
accurately represented to Customs. This amendment will permit Customs
to issue Notices of Redelivery to importers of textiles and textile
products within 30 days after the end of the conditional release period
if investigation or information reveals that the merchandise was
claimed to originate in a country where little or no manufacturing
processes occurred in order to avoid quota or visa admissibility
requirements. An importer who fails to redeliver the merchandise to
Customs custody would be liable for liquidated damages under the terms
of the Basic Importation and Entry Bond.
EFFECTIVE DATE: January 3, 1995.
FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch,
Office of Regulations and Rulings, 202-482-6950.
SUPPLEMENTARY INFORMATION:
Background
On March 30, 1994, Customs published a notice in the Federal
Register (59 FR 14808) which proposed to amend Part 141 of the Customs
Regulations (19 CFR Part 141) to provide for a conditional release
period of 180 days on all textiles and textile products that are
subject to the provisions of section 204, Agricultural Act of 1956, as
amended (7 U.S.C. 1854). The notice referred to the significant
enforcement problem regarding textiles and textile products that are
imported into the United States in violation of quota restrictions or
without the appropriate visa from the country of origin. The notice
stated that this problem involves merchandise that is the product of a
country to which stringent quotas or visa requirements apply and that
is transshipped through a second country having less rigorous quota and
visa standards, often in order to facilitate the making of a false
claim, upon importation into the United States, that the merchandise is
a product of the country through which it was transshipped and
therefore subject to the more lenient quota and visa entry standards
applicable to products of that country. The notice pointed out two
principal obstacles to effective enforcement efforts in such cases: (1)
While the penalty provisions of section 592 of the Tariff Act of 1930,
as amended (19 U.S.C. 1592), are in principle available for assessment
against any party who has committed fraud, gross negligence or
negligence in connection with the entry of such transshipped
merchandise, it is not always possible to establish the requisite
culpability; and (2) the other alternative, namely the issuance of a
Notice of Redelivery followed by the issuance of a claim for liquidated
damages for a failure to redeliver, is often not available because in
many cases the violation is discovered only after the close of the time
period provided in the regulations for issuance of a Notice of
Redelivery (for textiles and textile products and other merchandise for
which a conditional release period is not specified in the regulations,
issuance must be within 30 days of the release of the merchandise from
Customs custody).
In order to address these problems, Customs proposed to amend
Sec. 141.113 of the Customs Regulations (19 CFR 141.113) by adding a
new paragraph (b) to provide for a specific conditional release period
of 180 days from the date of release for all textiles and textile
products subject to section 204 of the Agricultural Act of 1956. Thus,
under the terms of Sec. 113.62(d) of the Customs Regulations (19 CFR
113.62(d)), Customs would then have up to 30 days from the end of the
conditional release period to issue a Notice of Redelivery whenever it
is determined that a textile or textile product is not entitled to
admission into the commerce of the United States. Failure to redeliver
merchandise within the time period specified in the Notice of
Redelivery (generally 30 days from the date of the Notice) would result
in the assessment of a claim for liquidated damages under the Basic
Importation and Entry Bond as provided in Sec. 113.62(k) of the
regulations. In addition, the notice set forth proposed conforming
changes to Sec. 141.113 as a consequence of the addition of the
proposed new paragraph (b). The notice invited the public to submit
written comments on the proposals, and the public comment period closed
on May 31, 1994.
Analysis of Comments
Twenty-seven comments were received. Four of the commenters were
entirely in favor of the proposed regulatory amendments as written and
suggested no changes. Twenty-three commenters opposed the proposals.
The comments in opposition are discussed below.
Comment: All of the commenters opposing the proposed rule indicated
that the proposed conditional release period of 180 days on all textile
importations did not take into account the commercial reality of
textile importation and distribution. Textile and apparel sales are
subject to seasonal requirements and stylistic variables, and the
commenters charged that it would be commercially untenable to maintain
on hand seven months worth of inventory in order to be insulated from
any liability for possible redelivery violations. Many of the
commenters noted that they operate in a ``just in time'' environment so
that as little inventory as possible remains on hand. It was generally
agreed upon by the negative commenters that the proposed rule would
impose a significant economic burden on the legitimate importer but
that the nefarious importer would continue to operate without regard
for any possible consequence.
Customs response: Customs recognizes that some potential economic
risk would result from the establishment of the 180-day conditional
release period. As noted in the analysis of the following comment made
with regard to the proposal, Customs acknowledges the potential
economic hardship that might be caused by a sweeping regulation and,
therefore, has drawn the conditions upon which redelivery can be based
narrowly so as to affect as few entries as possible. In weighing the
economic harm caused by illegally transshipped goods against the
potential liability incurred by an importer because of the extension of
the 30-day redelivery period, Customs believes that this objection to
the proposed amendment does not constitute a sufficient basis for not
proceeding with a final rule on this matter.
Comment: All of the commenters opposed to the proposed regulation
stated that it was overly broad, noting that the proposed text would
apply a 180-day conditional release period to all textile and apparel
entries on any issue of admissibility, including issues of
classification, valuation or duty assessment. The following observation
was typical of the comments submitted on this point: Although the
release period modification was intended to address the assumed
abundance of transshipment violations, importers may be exposed to
liability merely for instances of classification/quota category
disputes; Customs will therefore have the opportunity to penalize
importers for matters independent of the intentions of the proposal.
Customs response: Customs agrees that the sweep of the proposed
regulation is too broad. Accordingly, the regulatory text in question,
as set forth below, has been redrafted to establish a conditional
release period of 180 days for textiles and textile products only for
purposes of determining whether a transshipment violation has occurred.
This narrowing of the scope of the regulation will serve to alleviate
many of the concerns of risk raised by the commenters. The 180-day
period would not be applicable to issues of classification, valuation
or other issues of admissibility not related to a transshipment
violation.
Comment: Two commenters suggested that the proposed rule directly
violates section 621 of the Customs Modernization (hereinafter the
``Mod Act'') provisions contained in Title VI of the North American
Free Trade Agreement Implementation Act (Public Law 103-182, 107 Stat.
2057). These commenters asserted that under the Mod Act provisions and
the intent of the Congress expressed therein, an importer is held to a
standard of ``reasonable care'' in discharging those entry and related
activities for which he is responsible. Failure to maintain that
standard will result in assessment of penalties for violation of the
provisions of 19 U.S.C. 1592. The commenters claimed that Customs,
through liquidated damages assessment, is gutting the reasonable care
concept and imposing a strict liability standard on a situation which
Customs admits cannot be sanctioned through a 1592 action due to a
failure of proof.
Customs response: Customs does not agree with this analysis. By
acting as importer of record, an importer or broker knowingly accepts
the terms of the Basic Importation and Entry Bond. When a transshipment
violation occurs, the importation of violative goods into the United
States results. Compensation for that harm, which is the purpose of a
liquidated damage claim, is not readily quantifiable and need not be
based upon a finding of culpability.
Liability under section 1592 is based upon a finding of culpability
and is not limited to the importer of the goods. The penalty provisions
reach importers, brokers, manufacturers, shippers, and the like, and
may also include aiders and abettors of violations. These penalties
serve to punish violators and deter future violative conduct but they
do not serve to compensate the Government for harm. It is inapposite to
impose standards of reasonable care promulgated by the Mod Act to a
bond violation situation. Customs does not believe that the proposed
regulation is in conflict with the Mod Act and therefore sees no reason
to modify or withdraw the proposed rule based on this comment.
Comment: Several commenters suggested that imposition of liquidated
damages equal to three times the value of merchandise which is not
redelivered serves to punish rather than compensate when the violation
involves illegal transshipment of textile merchandise. These commenters
noted that an importer could be found to be negligent and incur a 1592
penalty but pay considerably less than a three-times-the-value-of-the-
merchandise claim assessed as liquidated damages.
Customs response: Illegally transshipped textile merchandise, while
prohibited in nature, does not cause a health or safety hazard to the
general public. Accordingly, Customs agrees with the thrust of this
comment and, therefore, the regulatory text as set forth below, has
been redrafted to limit any liquidated damages assessment for
transshipment violations to the value of the merchandise involved in
the breach.
Conclusion
Accordingly, for the above reasons, Customs has determined that the
proposed regulatory changes should be adopted as a final rule, subject
to the textual modifications to the proposed regulatory text as
discussed in the above comment analysis and as set forth below.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in Executive Order 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. Establishment of a conditional release period for
textiles and textile products, which is necessary for law enforcement
purposes, will affect only the relatively small percentage of importers
who import such merchandise contrary to law. Accordingly, the
amendments are not subject to the regulatory analysis or other
requirements of 5 U.S.C. 603 and 604.
List of Subjects in 19 CFR Part 141
Bonds, Customs duties and inspection, Entry procedures, Imports,
Release of merchandise.
Amendments to the Regulations
Accordingly, for the reasons set forth above, Part 141, Customs
Regulations (19 CFR Part 141), is amended as set forth below.
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.
* * * * *
Section 141.113 also issued under 19 U.S.C. 1499, 1623.
2. Section 141.113 is amended by redesignating paragraphs (b)
through (g) as (c) through (h), by adding the words ``or (b)'' after
the words ``paragraph (a)'' in newly designated paragraph (c), and by
adding a new paragraph (b) to read as follows:
Sec. 141.113 Recall of merchandise released from Customs custody.
* * * * *
(b) Textiles and textile products. For purposes of determining
whether the country of origin of textiles and textile products subject
to the provisions of Sec. 12.130 of this chapter has been accurately
represented to Customs, the release from Customs custody of any such
textile or textile product shall be deemed conditional during the 180-
day period following the date of release. If the district director
finds during the conditional release period that a textile or textile
product is not entitled to admission into the commerce of the United
States because the country of origin of the textile or textile product
was not accurately represented to Customs, he shall promptly demand its
return to Customs custody. Notwithstanding the provisions of paragraph
(h) of this section and Sec. 113.62(k)(1) of this chapter, a failure to
comply with a demand for return to Customs custody made under this
paragraph shall result in the assessment of liquidated damages equal to
the value of the merchandise involved.
* * * * *
Michael H. Lane,
Acting Commissioner of Customs.
Approved: October 24, 1994.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 94-29711 Filed 12-01-94; 8:45 am]
BILLING CODE 4820-02-P
