[Federal Register Volume 64, Number 147 (Monday, August 2, 1999)]
[Proposed Rules]
[Pages 41851-41853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19636]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 12, 113 and 141
RIN 1515-AC45
Assessment of Liquidated Damages Regarding Imported Merchandise
That is Not Admissible Under the Food, Drug and Cosmetic Act
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to amend the Customs Regulations to
provide for the assessment of liquidated damages equal to the domestic
value of the merchandise in the case of merchandise that is not
admissible under the provisions of the Food, Drug and Cosmetic Act and
that is not treated or otherwise disposed of in accordance with that
Act. The document also proposes to amend various provisions of the
Customs Regulations pertaining to customs bonds to provide for
liquidated damages of three times the appraised value of the
merchandise in the case of merchandise that is restricted or prohibited
from entry. Finally, the document sets forth a proposed editorial
correction within one of the sections of the Customs Regulations
pertaining to Customs bonds. The substantive changes reflected in the
proposed amendments are intended to enhance the effectiveness of the
affected regulatory provisions by increasing and clarifying the
potential liability for the payment of liquidated damages by principals
and sureties on customs bonds.
DATES: Comments must be received on or before October 1, 1999.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Regulations Branch, Office of Regulations and Rulings, U.S.
Customs Service, 1300 Pennsylvania Avenue, N.W., Washington, D.C.
20229. Comments submitted may be inspected at the Regulations Branch,
Office of Regulations and Rulings, U.S. Customs Service, 1300
Pennsylvania Avenue, N.W., 3rd Floor, Washington, D.C.
FOR FURTHER INFORMATION CONTACT: Jeremy Baskin, Penalties Branch (202-
927-2344).
SUPPLEMENTARY INFORMATION:
Background
Section 801 of the Food, Drug and Cosmetic Act, as amended (21
U.S.C. 381), and the regulations promulgated thereunder, provide the
basic legal framework governing the importation of foodstuffs into the
United States. Under 21 U.S.C. 381(a), the Secretary of Health and
Human Services is authorized to refuse admission of, among other
things, any article that is adulterated, misbranded or has been
manufactured, processed or packed under insanitary conditions. The
Secretary of the Treasury is required by section 381(a) to cause the
destruction of any article refused admission unless the article is
exported, under regulations prescribed by the Secretary of the
Treasury, within 90 days of the date of notice of the refusal or within
such additional time as may be permitted pursuant to those regulations.
Under 21 U.S.C. 381(b), pending decision as to the admission of an
article being imported or offered for import, the Secretary of the
Treasury may authorize delivery of such article to the owner or
consignee upon the execution of a good and sufficient bond providing
for the payment of liquidated damages in the event of default as may be
required pursuant to regulations of the Secretary of the Treasury. In
addition, section 381(b) allows the owner or consignee in certain
circumstances to take action to bring an imported article into
compliance for admission purposes, under such bonding and other
requirements as the Secretary of the Treasury may prescribe by
regulation.
Based upon the above statutory authority, imported foodstuffs are
conditionally released under bond while determinations as to
admissibility are made; see Sec. 12.3 of the Customs Regulations (19
CFR 12.3). Under Sec. 141.113(c) of the Customs Regulations (19 CFR
141.113(c)), Customs may demand the return to Customs custody of most
types of merchandise that fail to comply with the laws or regulations
governing their admission into the United States (also referred to as
the redelivery procedure). The condition of the basic importation and
entry bond contained in Sec. 113.62(d) of the Customs Regulations (19
CFR 113.62(d)) sets forth the obligation of the importer of record to
timely redeliver released merchandise to Customs on demand and provides
that a demand for redelivery will be made no later than 30 days after
the date of release of the merchandise or 30 days after the end of the
conditional release period, whichever is later. Failure to meet the
obligation to redeliver contained in Sec. 113.62(d) will create a
potential liability for the payment of liquidated damages under the
terms of the bond.
Use of the Domestic Value Standard for Liquidated Damages
In an April 1998 report to the Chairman of the Permanent
Subcommittee on Investigations, Committee on Governmental Affairs, U.S.
Senate, on the subject of food
[[Page 41852]]
safety, the United States General Accounting Office (GAO) determined
that federal efforts to ensure the safety of imported foods were
inconsistent and unreliable. Among its specific conclusions, the GAO
report indicated that a weakness existed in the Customs bond structure
in that liquidated damages arising from breach of obligations to
redeliver merchandise for which admission was refused did not represent
a deterrent to the importation of unsafe products.
In response to this study, Customs is proposing in this document to
amend Sec. 12.3 of the Customs Regulations (19 CFR 12.3) by designating
the present text as paragraph (a) and adding a new paragraph (b) that
would refer specifically to the assessment of liquidated damages with
regard to any food, drug, device or cosmetic that is not redelivered
into Customs custody or otherwise treated or disposed of within the
time period prescribed by law after such merchandise has been found to
be inadmissible pursuant to the provisions of the Food, Drug and
Cosmetic Act. The proposed new paragraph (b) specifically provides for
the assessment of liquidated damages in an amount equal to the domestic
value of the merchandise at the time of entry as if it had not been
refused admission or otherwise found to be noncompliant. The meaning of
domestic value as set forth in Sec. 162.43(a) of the Customs
Regulations (19 CFR 162.43(a)) for purposes of seized merchandise (that
is, ``the price at which such or similar property is freely offered for
sale at the time and place of appraisement, in the same quantity or
quantities as seized, and in the ordinary course of trade'') would be
used as the basis for calculating the liquidated damages.
Use of the ``Three Times'' Value Standard for Prohibited Merchandise
The conditions of the basic importation and entry bond set forth in
Sec. 113.62 of the Customs Regulations (19 CFR 113.62), the conditions
of the basic custodial bond set forth in Sec. 113.63 of the Customs
Regulations (19 CFR 113.63), the conditions of the international
carrier bond set forth in Sec. 113.64 of the Customs Regulations (19
CFR 113.64), the conditions of the commercial gauger and commercial
laboratory bond set forth in Sec. 113.67 of the Customs Regulations (19
CFR 113.67), and the conditions of the foreign trade zone operator bond
set forth in Sec. 113.73 of the Customs Regulations (19 CFR 113.73)
prescribe, as a consequence of default, the assessment of liquidated
damages equal to three times the appraised value of the merchandise
involved in the default if that merchandise is ``restricted merchandise
or alcoholic beverages.'' Similar language is also used in
Sec. 141.113(h) of the Customs Regulations (19 CFR 141.113(h)), which
recites the liquidated damages that may be assessed for failure to
comply with a demand for return of merchandise to Customs custody.
A question has arisen whether the higher ``three times'' standard
for liquidated damages would be appropriate when the merchandise
involved is prohibited from entry. While it remains Customs position
that the regulatory provisions referred to above permit the assessment
of three times the appraised value of the merchandise when the
merchandise involved is prohibited, this document proposes to amend
those regulatory provisions to explicitly provide for the assessment of
three times the appraised value of the merchandise involved when that
merchandise is restricted ``or prohibited.''
Editorial Correction
Finally, this document proposes to make an editorial correction to
the first sentence of Sec. 113.62(l)(1) of the Customs Regulations (19
CFR 113.62(l)(1)), which sets forth consequences of default. This
sentence refers to ``conditions (a), (g), or (i)'' as exceptions to the
general rules regarding the amount of liquidated damages that may be
assessed (that is, the value of, or three times the value of, the
merchandise involved in the default). However, the sentence in question
also should exclude condition (k) of Sec. 113.62, for which a different
level of liquidated damages (that is, $100 per thousand board feet of
the imported lumber) is prescribed in paragraph (l)(5) of that section.
Comments
Before adopting these proposed regulatory amendments as a final
rule, consideration will be given to any written comments timely
submitted to Customs, including comments on the clarity of this
proposed rule and how it may be made easier to understand. Comments
submitted will be available for public inspection in accordance with
the Freedom of Information Act (5 U.S.C. 552), Sec. 1.4, Treasury
Department Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs
Regulations (19 CFR 103.11(b)), on regular business days between the
hours of 9:00 a.m. and 4:30 p.m. at the Regulations Branch, Office of
Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania
Avenue, N.W., 3rd Floor, Washington, D.C.
Regulatory Flexibility Act And Executive Order 12866
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that the proposed amendments, if
adopted, will not have a significant economic impact on a substantial
number of small entities. The proposed regulatory amendments will not
require any additional action on the part of the public but rather are
intended to facilitate Customs enforcement efforts involving existing
import requirements. Accordingly, the proposed amendments are not
subject to the regulatory analysis or other requirements of 5 U.S.C.
603 and 604. Furthermore, this document does not meet the criteria for
a ``significant regulatory action'' as specified in E.O. 12866.
List of Subjects
19 CFR Part 12
Bonds, Customs duties and inspection, Labeling, Marking, Prohibited
merchandise, Reporting and recordkeeping requirements, Restricted
merchandise, Seizure and forfeiture, Trade agreements.
19 CFR Part 113
Bonds, Customs duties and inspection, Imports, Reporting and
recordkeeping requirements, Surety bonds.
19 CFR Part 141
Bonds, Customs duties and inspection, Entry procedures, Imports,
Prohibited merchandise, Release of merchandise.
Proposed Amendments to The Regulations
For the reasons stated above, it is proposed to amend parts 12, 113
and 141 of the Customs Regulations (19 CFR parts 12, 113 and 141) as
set forth below.
PART 12--SPECIAL CLASSES OF MERCHANDISE
1. The general authority citation for part 12 continues to read,
and the specific authority citation for Sec. 12.3 is revised to read,
as follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20,
Harmonized Tariff Schedule of the United States (HTSUS), 1624.
* * * * *
Section 12.3 also issued under 7 U.S.C. 135h, 21 U.S.C. 381;
* * * * *
2. Section 12.3 is revised to read as follows:
[[Page 41853]]
Sec. 12.3 Release under bond; liquidated damages.
(a) Release. No food, drug, device, cosmetic, pesticide, hazardous
substance or dangerous caustic or corrosive substance that is the
subject of Sec. 12.1 will be released except in accordance with the
laws and regulations applicable to the merchandise. Where any
merchandise that is the subject of Sec. 12.1 is to be released under
bond pursuant to regulations applicable to that merchandise, a bond on
Customs Form 301, containing the bond conditions set forth in
Sec. 113.62 of this chapter, shall be required.
(b) Liquidated damages. Whenever liquidated damages arise with
regard to any food, drug, device or cosmetic subject to Sec. 12.1(a)
for failure to redeliver merchandise into Customs custody or for
failure to rectify any non-compliance with the applicable provisions of
admission, including the failure to export or destroy the merchandise
within the time period prescribed by law after the merchandise has been
refused admission pursuant to the provisions of the Food, Drug, and
Cosmetic Act, those liquidated damages will be assessed in an amount
equal to the domestic value (see Sec. 162.43(a) of this chapter) of the
merchandise at the time of entry as if the merchandise were admissible
and otherwise in compliance.
PART 113--CUSTOMS BONDS
1. The authority citation for Part 113 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
Sec. 113.62 [Amended]
2. In Sec. 113.62, paragraph (l)(1) is amended by removing the
words ``conditions (a), (g), or (i)'' and adding, in their place, the
words ``conditions (a), (g), (i), or (k)'' and by adding the words ``or
prohibited'' after the word ``restricted''.
Sec. 113.63 [Amended]
3. In Sec. 113.63, paragraph (h)(1) is amended by adding the words
``or prohibited'' after the word ``restricted''.
Sec. 113.64 [Amended]
4. In Sec. 113.64, the second sentence of paragraph (b) is amended
by adding the words ``or prohibited'' after the word ``restricted''.
Sec. 113.67 [Amended]
5. In Sec. 113.67, paragraphs (a)(2)(i) and (b)(2)(i) are amended
by adding the words ``or prohibited'' after the word ``restricted''.
Sec. 113.73 [Amended]
6. In Sec. 113.73, the second sentence of paragraph (a)(2) is
amended by adding the words ``or prohibited'' after the word
``restricted''.
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.
Sec. 141.113 [Amended]
2. In Sec. 141.113, the first sentence of paragraph (h) is amended
by adding the words ``or prohibited'' after the word ``restricted''.
Raymond W. Kelly,
Commissioner of Customs.
Approved: June 17, 1999.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 99-19636 Filed 7-30-99; 8:45 am]
BILLING CODE 4820-02-P
