[Federal Register Volume 63, Number 115 (Tuesday, June 16, 1998)]
[Rules and Regulations]
[Pages 32916-32955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15771]
[[Page 32915]]
_______________________________________________________________________
Part II
Department of the Treasury
_______________________________________________________________________
Customs Service
_______________________________________________________________________
19 CFR Part 19 et al.
Recordkeeping Requirements; Rule
Federal Register / Vol. 63, No. 115 / Tuesday, June 16, 1998 / Rules
and Regulations
[[Page 32916]]
DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 19, 24, 111, 113, 143, 162, 163, 178 and 181
[T.D. 98-56]
RIN 1515-AB77
Recordkeeping Requirements
AGENCY: Customs Service, Treasury.
ACTION: Final rule.
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SUMMARY: This document adopts as a final rule, with some changes,
proposed amendments to the Customs Regulations to reflect changes to
the Customs laws regarding recordkeeping requirements, examination of
records and witnesses, regulatory audit procedures, and judicial
enforcement contained in the Customs Modernization provisions of the
North American Free Trade Agreement Implementation Act. The final
regulatory texts include detailed provisions regarding what records
must be maintained, who must maintain them, and how they must be
maintained and made available for examination by Customs. The final
regulations also provide for electronic or other alternate methods for
storage of records, set forth penalties for failure to maintain or
produce certain records, and establish a voluntary recordkeeping
compliance program as an alternative to penalties.
EFFECTIVE DATE: July 16, 1998.
FOR FURTHER INFORMATION CONTACT: For questions relating to
recordkeeping in general and the voluntary Recordkeeping Compliance
Program, call Stan Hodziewich, Regulatory Audit Division, Washington,
D.C. (202-927-0999), or Howard Spencer, Regulatory Audit Division,
Atlanta Branch (770-994-2273, Ext.158).
For questions relating to the Appendix ((a)(1)(A) list) and its
underlying documents and other entry records, call Jerry Laderberg,
Office of Regulations and Rulings (202-927-2269).
SUPPLEMENTARY INFORMATION:
Background
On December 8, 1993, the President signed into law the North
American Free Trade Agreement Implementation Act (the ``NAFTA
Implementation Act''), Public Law 103-182, 107 Stat. 2057. Title VI
thereof contained provisions pertaining to Customs Modernization and
thus is commonly referred to as the Customs Modernization Act or ``Mod
Act''. Sections 614, 615 and 616 within the Mod Act amended sections
508, 509 and 510 of the Tariff Act of 1930, as amended (19 U.S.C. 1508,
1509 and 1510) which pertain to recordkeeping requirements applicable
to importers and others. In addition, within Title II of the NAFTA
Implementation Act, entitled ``Customs Provisions'', section 205
amended sections 508 and 509 of the Tariff Act of 1930 to include
recordkeeping requirements for exportations to Canada and Mexico for
purposes of the United States-Canada Free Trade Agreement and the
NAFTA.
Before its amendment by the Mod Act, section 508 of the Tariff Act
of 1930 limited recordkeeping requirements to any owner, importer,
consignee, or agent thereof who imported, or knowingly caused to be
imported any merchandise into the Customs territory of the United
States. Section 614 of the Mod Act amended these requirements and
expanded the parties subject to Customs recordkeeping requirements to
include parties who file an entry or declaration, transport or store
merchandise carried or held under bond, file drawback claims, or cause
an importation, or transportation or storage of merchandise carried or
held under bond. Section 614 of the Mod Act further amended section 508
of the Tariff Act of 1930 to clarify that all parties who must keep
records for Customs purposes are subject to recordkeeping requirements.
In addition, in order to reflect the current electronic environment in
which both Customs and the importing and exporting community operate,
section 614 of the Mod Act expanded the concept of ``records'' set
forth in section 508 of the Tariff Act of 1930 to include information
and data maintained in the form of electronically generated or machine
readable data.
The Mod Act amended various provisions of the Customs laws to grant
to Customs authority not to require the presentation of certain
documentation or information at time of entry; these amendments were
intended to permit a reduction of the documentation and information
requirements at time of entry, thereby facilitating the entry process.
However, in exchange for not requiring presentation of documents at the
time of entry, and in order to not jeopardize the ability of Customs to
obtain those records at a later date, section 615 of the Mod Act
amended section 509 of the Tariff Act of 1930: (1) to authorize Customs
to examine, or to require the production of, inter alia, any records
which are required by law for the entry of merchandise, whether or not
Customs required their presentation at the time of entry; (2) to
provide for the imposition of substantial administrative penalties for
a failure to comply, within a reasonable time, with a demand for
production of such entry records; and (3) to require Customs to
identify and make available to the importing community, by publication,
a list of all such entry records or information (referred to as the
``(a)(1)(A) list'' based on the paragraph within 19 U.S.C. 1509 which
specifically concerns such records). Thus, the Mod Act amendments
resulted in a statutory distinction between those business, financial
or other records that pertain to activities listed in section 508 of
the Tariff Act of 1930 and are maintained in the normal course of
business and those that are required for the entry of merchandise and
are required to be identified in the ``(a)(1)(A) list'' and as to which
penalties may apply for a failure to produce if demanded by Customs. In
addition, section 615 of the Mod Act amended section 509 of the Tariff
Act of 1930: (1) to set forth procedures applicable to regulatory
audits conducted by Customs; and (2) to provide for a voluntary
recordkeeping compliance program under which program participants might
be eligible for alternatives to penalties for a failure to produce
demanded entry records and information.
Section 205 of the Mod Act amended section 508 of the Tariff Act of
1930, inter alia, to provide (1) that any person who completes and
signs a NAFTA Certificate of Origin for a good for which preferential
treatment is claimed under the NAFTA shall make, keep, and render for
examination and inspection all records relating to the origin of the
good (including the Certificate or copies thereof) and the associated
records and (2) that such records shall be retained for at least 5
years from the date of signature of the NAFTA Certificate of Origin.
Section 205 of the Mod Act also made a conforming amendment to section
509 of the Tariff Act of 1930 regarding persons to whom a summons may
be issued, involving the addition of a reference to persons who
exported merchandise, or knowingly caused merchandise to be exported,
to a NAFTA country or to Canada during such time as the United States-
Canada Free Trade Agreement is in force. Section 616 of the Mod Act
amended section 510 of the Tariff Act of 1930 by adding the assessment
of a monetary penalty as a sanction that may be applied by a U.S.
district court if a person does not comply with a summons issued by
Customs under section 509 of the Tariff Act of 1930.
On April 23, 1997, Customs published in the Federal Register (62 FR
19704) a notice setting forth proposed
[[Page 32917]]
amendments to the Customs Regulations to implement the changes to the
statutory recordkeeping provisions effected by the NAFTA Implementation
Act as summarized above. Customs stated in that notice of proposed
rulemaking that a new, separate part within the Customs Regulations,
dealing solely with recordkeeping and related requirements, would be
the appropriate approach. Accordingly, the notice proposed to add a new
Part 163 (19 CFR Part 163) entitled ``Recordkeeping'' which would
contain the recordkeeping and related provisions previously set forth
in Part 162 of the Customs Regulations (19 CFR Part 162) and would also
reflect the amendments to sections 508, 509 and 510 of the Tariff Act
of 1930 effected by sections 205, 614, 615 and 616 of the NAFTA
Implementation Act. In addition, that notice: (1) set forth, as an
appendix to proposed new Part 163, the (a)(1)(A) list that had been
previously published in the Customs Bulletin on January 3, 1996, as
T.D. 96-1 and in the Federal Register on July 15, 1996, at 61 FR 36956;
and (2) included proposed conforming or collateral amendments to
various provisions within Parts 24, 111, 143 and 162 of the Customs
Regulations (19 CFR Parts 24, 111, 143 and 162). The notice of proposed
rulemaking made provision for the submission of public comments on the
proposed regulatory changes for consideration before adoption of those
changes as a final rule, and the prescribed public comment period
closed on June 23, 1997. A correction document pertaining to the April
23, 1997, notice of proposed rulemaking was published in the Federal
Register on May 5, 1997 (62 FR 24374).
Discussion of Comments
Twenty-three commenters responded to the solicitation of comments
in the April 23, 1997, notice of proposed rulemaking referred to above.
The comments submitted are summarized and responded to below.
Treatment of Express Consignment Carriers
Comment: Two commenters complained that the proposed regulations do
not adequately reflect, nor address, the unique role that express
consignment carriers play in the import process. These commenters noted
that express consignment carriers, as nominal consignees, have the
right under 19 U.S.C. 1484 to designate a customs broker to make entry
of merchandise and that, in order to deliver an integrated service,
they frequently designate their own brokerages which make entry in
their own names; thus, express consignment carriers play multiple roles
with regard to customs processing as a carrier, broker, and importer of
record, and they also operate as transporters and storers of
merchandise carried or held under bond. The proposed regulations, on
the other hand, simply list together all of the different parties
required to make, keep, and produce records without making any clear
distinction between those parties with reference to the roles they play
in the import process (for example, the distinction between an express
consignment carrier and the actual importer or consignee). Thus, under
the proposed regulations an express consignment carrier would be
required to make, keep, and produce records for each of its import-
related activities, including, as nominal consignee, every document
that accompanies a shipment and is identified in the (a)(1)(A) list as
being necessary for the entry of merchandise. The commenters further
asserted that the burden imposed by the regulatory proposals is
accentuated in the case of express consignment carriers by virtue of
the very large volume of shipments that they handle.
In addition to the above general comments regarding the unique
nature of the express consignment industry, these two commenters made
the following specific recommendations or observations:
1. In order to avoid redundancy and unnecessary burdens in the
recordkeeping requirements, separate and distinct recordkeeping
requirements should be established for express consignment carriers and
that those requirements should appear in Part 128 of the Customs
Regulations (19 CFR Part 128) which sets forth requirements and
procedures for the clearance of imported merchandise carried by express
consignment operators and carriers. These commenters suggested that
there is precedent for this approach in that separate sections dealing
with recordkeeping responsibilities appear in the Part 111 regulations
governing customs brokers.
2. In order to avoid rendering meaningless the benefits provided
under current Part 128 and also to reflect what records are in fact
kept in the ordinary course of business, express consignment carriers
should only be required to keep and produce, as (a)(1)(A) records,
those records presently prescribed for entry purposes in Part 128: for
letter and document shipments (express consignment carrier acts as
carrier), the summary manifest or manifest; for shipments that may be
entered free of duty under 19 U.S.C. 1321 and 19 CFR 10.151 (express
consignment carrier acts as carrier/broker), the manifest; for
shipments covered by an informal entry (express consignment carrier
acts as broker), the manifest or Customs Form 3461 and the invoice and
Customs Form 7501 or, if a consolidated informal entry, the manifest
and consolidated Customs Form 7501; and for shipments covered by a
formal entry (express consignment carrier acts as broker), the manifest
or Customs Form 3461 and the invoice and Customs Form 7501, together
with a power of attorney if entry is made in the name of the express
consignment carrier's customer and certain records required for the
entry of specific categories of merchandise. All other records
pertaining to a particular import (for example, air waybills,
commercial invoices) should be kept and produced by the recipient of
the shipment, that is, the actual importer.
3. Requiring the retention of more than the records mentioned at
point 2 above in the case of express consignment carriers neither makes
economic sense nor provides an enforcement benefit to Customs because
(1) while the value of an express consignment shipment is not typically
very high, the retention of additional records would be extremely
costly to the express consignment carrier given the volume of shipments
involved and (2) compliance assessment (including document review) for
express consignment shipments is performed either at the time of entry
by on-site Customs inspectors at express carrier facilities or,
particularly in the case of informal entries where enforcement risks
are minimal, not at all.
4. While express consignment carriers generally maintain the
consolidated Customs Form 7501 for informal entries, Customs might
consider eliminating this requirement since the document contains very
little information other than totals on duties and number of entries.
5. It should be clarified up front that the monetary penalties
provided for in 19 U.S.C. 1509(g) and in proposed Sec. 163.6(b) are
inapplicable to express consignment carriers because the documentation
or information that the express consignment industry should be required
to maintain will be presented at the time of entry. In support of this
position, it was pointed out that, in House Report No. 361, 103d
Congress, 1st Session (1993), it was noted that those penalties should
not be imposed where the ``information demanded has been presented to
and retained by the Customs Service at the time of entry.''
[[Page 32918]]
Moreover, with reference to the role that express consignment carriers
often play as customs brokers, it was pointed out that the same House
Report recognized that while customs brokers may be recordkeepers under
section 1509 and may act as importers of record in certain cases,
``their status as 'brokers'' does not change because of this and
failure to maintain the records as specified in section 615 should not
automatically subject them to penalties set forth in subsection (g)'';
rather, the House Report indicated that Customs should proceed against
customs brokers for recordkeeping violations under 19 U.S.C. 1641 and
only under section 1509(g) in exceptional circumstances such as where
there is ``an egregious, flagrant or willful violation of the
requirements of section 1509, or when there is a pattern or practice of
abuse occurring over a sustained period of time, also in willful
disregard of those recordkeeping requirements.''
Customs response: Customs disagrees with the implication of the
above general comments, that is, that express couriers should be
excepted from these recordkeeping regulatory requirements. While it is
true that express couriers not only act as carriers but also at times
as brokers and consignees, the fact remains that these separate
functions constitute activities that trigger recordkeeping
responsibilities under section 508(a). Customs does not believe that,
merely because express couriers act in these varied roles, they are so
unique that special recordkeeping requirements should apply to them.
Moreover, Customs notes that express couriers do not always exercise
unique control because some express companies have multiple brokers.
1. For the reasons stated above in response to the general
comments, Customs disagrees that separate recordkeeping requirements
should be created for express couriers.
2. Customs disagrees with the suggestion that the Part 163 texts
would have the effect of rendering meaningless the benefits provided by
Part 128. The scope and benefits of Part 128 go far beyond
recordkeeping requirements. Moreover, the Part 163 texts of necessity
reflect recordkeeping requirements that apply to express couriers for
all roles that couriers play in international transactions. The parties
listed in proposed Sec. 163.2(a) as being required to maintain records
are specifically required by Sec. 163.3 to maintain ``(a)(1)(A)''
records, that is, those records required for entry. Since each import
transaction/entry is unique and may require different (a)(1)(A)
documents depending upon a number of factors, it would be impossible to
limit the (a)(1)(A) records for each party listed in Sec. 163.2(a).
This is especially true for express couriers whose role may change from
transaction to transaction.
However, in the light of the points made by these commenters,
Customs has reconsidered this matter and now believes that, for
purposes of prescribing a minimum period during which records must be
retained, there is a valid basis for making an exception to the normal
rule in the following cases: (1) Where an informal entry is filed by a
customs broker appointed by a consignee who is not the owner or
purchaser of the imported merchandise; and (2) where the records either
relate to bona fide gifts and other articles admitted free of duty and
tax under 19 U.S.C. 1321(a)(2) and Secs. 10.151-10.153 of the Customs
Regulations or consist of carriers' records pertaining to manifested
cargo that is exempt from entry under the Customs Regulations (for
example, records, diagrams and data covered by General Note 16(c) of
the Harmonized Tariff Schedule of the United States (HTSUS), and
undeliverable articles described in General Note 16(e), HTSUS, which
are exempt from entry under Sec. 141.4(b)(1) of the Customs
Regulations). In such cases, Customs believes that a 2-year record
retention period (rather than the normal 5-year period) is appropriate
because compliance measurement most often takes place at the time of
importation or entry (and rarely, if ever, more than two years
thereafter) and because, in the case of informal entries filed by
customs brokers at the behest of consignees, the most important records
(that is, the entry records) would still have to be maintained and made
available to Customs by the broker for the normal 5-year period.
Accordingly, Sec. 163.4(b), which lists exceptions to the 5-year record
retention rule, has been modified as set forth below by the addition of
two new subparagraphs (3) and (4) to reflect these considerations.
3. Customs disagrees with this statement. Given the concerns of
Customs regarding misdeliveries within the express courier industry,
Customs deems the information on even informal entries crucial for
post-audit and compliance measurement purposes at least during the 2-
year period that might apply to an express courier under the modified
Sec. 163.4(b) text as discussed above in the point 2 comment response.
The modified Sec. 163.4(b) text, together with the provision for
alternative storage of records in Sec. 163.5, serve in part to address
the issue of the burden of maintaining a large volume of documents.
4. Customs disagrees for the reasons stated in the point 3 response
above.
5. Customs agrees, and proposed Sec. 163.6(b)(4)(iii) made clear,
that where (a)(1)(A) documents are presented to and retained by
Customs, no recordkeeping penalties will be issued. The position of
Customs is that recordkeeping violations by customs brokers will be
handled either under 19 U.S.C. 1641 and Part 111 of the Customs
Regulations or under 19 U.S.C. 1509(g) and Part 163 of the Customs
Regulations, depending on the nature and circumstances of the
violation.
Section 111.21(b)--Applicability of Part 163 to Customs Brokers
Comment: One commenter took issue with proposed new paragraph (b)
of Sec. 111.21 which provides that a customs broker shall comply with
the provisions of Part 163 when maintaining records that reflect on his
transactions as a broker. This commenter stated that the regulatory
text is too broad, and could give rise to uncertainty on the part of
Customs and a broker when an audit is being performed, because it does
not differentiate between the different functions and responsibilities
of brokers. While conceding that a broker acting as importer of record
would assume the recordkeeping responsibilities of Part 163, this
commenter argued that Sec. 111.21(b) should be limited to brokers
acting in that capacity and should not apply to other broker functions
authorized under 19 U.S.C. 1641.
Customs response: Customs disagrees. The requirements and
procedures governing the retention and subsequent production of records
under sections 508 and 509 are contained in Part 163, and proposed new
Sec. 111.21(b) was included to reflect this fact. Thus, the
``provisions'' referred to in Sec. 111.21(b) clearly would apply to
customs brokers whether they act solely as an agent on behalf of the
importer of record or list themselves as the importer of record or file
a drawback claim on behalf of the importer or transport goods on behalf
of the importer or carry on any activity of a broker authorized under
19 U.S.C. 1641 and which is also described in section 508(a) and in
Sec. 163.1(a).
Customs notes that present Sec. 111.21 (the text of which was
redesignated as paragraph (a) in the proposed regulatory amendments)
requires a broker to keep ``records of account reflecting all his
financial transactions as a broker''; this provision has always been
intended to include, among other things, financial records pertaining
to client accounts (billing records, payment of Customs duty refunds to
clients where the broker
[[Page 32919]]
was importer of record, etc.) which, even if they are not records
required to be maintained under section 508, are nevertheless records
that pertain to the conduct of ``customs business'' as that term is
defined in section 1641. For purposes of consistency and in order to
clarify the broad scope of amended Sec. 111.21 as regards the
maintenance of records, the following changes have been included in the
final regulatory amendments set forth below: (1) The proposed amendment
to the definition of ``records'' in Sec. 111.1 (which involved a simple
cross-reference change) has been replaced by an amendment setting forth
a new definition text which refers to ``documents, data and information
referred to in, and required to be made or maintained under, this part
and any other records, as defined in Sec. 163.1(a) of this chapter,
that are required to be maintained by a broker under part 163 of this
chapter''; and (2) the text of new Sec. 111.21(b) has been modified to
refer to the provisions of ``this part and part 163 of this chapter''.
Again with reference to newly designated Sec. 111.21(a), Customs
further notes that the second sentence thereof requires a broker to
maintain, among other things, ``a copy of each entry made by him with
all supporting records, except those documents he is required to file
with Customs''; this simply reflects a requirement imposed on a broker
by sections 508 and 509, whether the broker is acting as importer of
record or as an agent for the importer of record. In view of the
addition of paragraph (b) of Sec. 111.21 which refers to Part 163, and
consistent with the specific coverage of sections 508 and 509 with
regard to records pertaining to the entry process, Customs believes
that the regulatory provisions of Part 163 should control in this
context. Accordingly, the amendments to Sec. 111.21 have been modified
as set forth below to include the removal of these words from the
second sentence of newly designated paragraph (a).
Section 111.21(c)--Designation of Recordkeeping Officer and Backup
Comment: Six comments were received on proposed new paragraph (c)
of Sec. 111.21 which requires a customs broker to designate a
knowledgeable company employee to be the broker's recordkeeping officer
as well as a back-up recordkeeping officer. The points made by these
commenters were as follows:
1. One commenter supported the proposed regulatory provision as
being in accord with the Customs principle of ``People, Processes and
Partnership'' by creating a primary point of contact. This commenter,
however, suggested that the word ``manager'' be used in place of
``officer'' in the regulatory text so that a broker could designate a
non-corporate officer to handle these responsibilities.
2. Four commenters argued that the provision should be eliminated
entirely on the grounds that it is unnecessary and overly intrusive.
These commenters pointed out that, contrary to the case of a regular
importer, a customs broker is already required under Part 111 of the
regulations to have on record with Customs an individually licensed
broker who is responsible for the supervision and control of the
broker's customs business (including recordkeeping requirements). In
addition, brokers are different from importers in that a broker can be
penalized (by monetary fines or by suspension or revocation of its
license) under the broker statute and regulations for a failure to meet
its recordkeeping responsibilities, whereas after certification an
importer would merely have its privilege suspended or terminated.
Moreover, brokers are licensed and thus should be aware of their
obligations regarding recordkeeping, and the appointment of
recordkeeping officers would not in itself ensure greater compliance.
It should be sufficient for a broker, if necessary, to simply provide a
contact name to Customs when needed, without prescribing in the
regulations how a broker should organize its business.
3. One commenter suggested that, rather than requiring an express
designation of a recordkeeping officer, the licensed qualifying officer
of the broker should automatically serve as the recordkeeping officer
unless the broker makes an alternative designation. This commenter also
recommended that the requirement of a back-up recordkeeping officer be
eliminated for small brokers having less than 25 employees.
Customs response: While Customs does not agree that the regulatory
provision at issue should be eliminated entirely, Customs is in
substantial agreement with the above comments regarding the sufficiency
of a mere recordkeeping contact (and without a required back-up) within
the brokerage, because Customs requires only the existence of a
designated individual responsible for recordkeeping compliance in the
case of the Recordkeeping Compliance Program. Section 111.21(c) as set
forth below has been modified accordingly. In addition, in the revised
text the word ``entry'', which was used in the proposed text, has been
replaced by ``customs business'' to reflect the broad scope of
Sec. 111.21 as discussed above in the comment response regarding
Sec. 111.21(b).
Section 111.22--Additional Record of Transactions
Comment: A commenter supported the proposed amendment to
Sec. 111.22 which would transfer, from the port director to the Field
Director of Regulatory Audit responsible for the geographical area in
which the broker's designated recordkeeping officer is located, the
authority to exempt a broker from the recordkeeping requirement set
forth in that section. This commenter opined that this proposed change
recognizes changing industry trends and should shorten approval times
and improve lines of communication between brokers and Customs.
Customs response: While the changes to Sec. 111.21(c) discussed in
the comment response immediately above would appear to affect the
wording of the proposed changes to Sec. 111.22, Customs has
reconsidered the need for Sec. 111.22 as a whole. In light of the fact
that numerous requests for exemptions from the requirements of this
section are granted yearly by Customs, and since approval authority has
been granted to Regulatory Audit which utilizes a new audit approach,
Customs believes that Sec. 111.22, and the recordkeeping burden imposed
thereby, are no longer necessary. Accordingly, the final regulatory
amendments set forth below include the removal of Sec. 111.22 in its
entirety.
Section 111.23(a)(1)--Consolidation of Records
Comment: Four comments were received on the proposed revision of
Sec. 111.23(a)(1) which would permit the consolidation of records with
the approval of the Field Director of Regulatory Audit responsible for
the geographical area in which the broker's designated recordkeeping
officer is located. Two of the commenters stated their agreement with
the general principle of allowing the consolidation of records.
However, all four commenters made the following complaints or
suggestions with regard to the proposed regulatory text:
1. There should be no provision for review and approval by the
local Field Director of Regulatory Audit; all that should be required
is that the Field Director of Regulatory Audit be notified of the
storage location. Moreover, the proposed regulatory text could lead to
inconsistent treatment of requests since the text allows for the
rejection of a request without requiring a reason or justification.
Accordingly, the proposed text should be modified (1) to set forth
[[Page 32920]]
the reasonable requirements for consolidation that the broker must
meet, (2) to provide for a certification from the broker that it meets
those requirements, and (3) to provide for issuance of an
acknowledgment from the Field Director of Regulatory Audit to the
broker showing receipt of the consolidation plan.
2. A broker should only be required to notify Customs of
consolidation of records, and such notification should be provided to
Customs Headquarters rather than to a field office. The approach taken
in the Federal Maritime Commission regulations in 15 CFR 762.5 should
be followed.
3. While one commenter read the proposed text as permitting
consolidation of records in multiple locations, another commenter
recommended that the text specifically provide that brokers can
consolidate records in one or more (regional) locations.
4. The regulatory text should provide that, where electronic data
storage or imaging is being used, the term ``consolidate'' covers a
computer system that may have a distributed database.
5. Brokerage firms having multiple district permits could possibly
have, if required, a recordkeeping officer located in a different
geographic area than its home district where its licensed qualifying
officer is located, thus creating confusion over authorities and
responsibilities.
6. The regulatory text should specifically provide that for brokers
for which multiple district permits have been issued, only one
application and approval to consolidate records would be required for
use in all permitted districts.
Customs response: 1 and 2. While Customs has reconsidered the
proposed provision and agrees with the commenters both that brokers
need only notify Customs in advance of the decision to consolidate
their records and that such notification should go to a single,
centralized location, Customs does not agree that such notification
should go to Customs Headquarters. Rather, Customs believes that the
Miami regulatory audit field office is the appropriate location for
submission of the written notice of consolidation because the Miami
office houses the field audit specialist on recordkeeping requirements
and also houses the staff that will be responsible for creating
Customs-wide recordkeeping information data bases and entering the data
therein. The proposed regulatory text in question (redesignated in this
document as paragraph (b)(2) of Sec. 111.23 as discussed below) has
been modified accordingly.
Based on the agreement of Customs to dispense with the proposed
requirement for Customs approval of consolidation of records, and in
view of the changes to the Part 111 proposed amendments already
discussed above, the Sec. 111.23 amendments as set forth below
incorporate some other changes not reflected in the amendments as
originally proposed. The following points are noted in this regard: (1)
In paragraph (a)(1), reference is simply made to ``records'' (the
meaning of which should be clear from the new definition thereof in
Sec. 111.1), the reference to Customs approval and the last sentence
regarding appeal of a denial of approval have been removed, reference
is made to consolidation at ``one or more'' locations (to clarify that
the intent was not to restrict consolidation to one location, so that a
broker could, for example, opt to keep all entry records at one
location and all client financial account records at another location),
and the reference to the geographical location of the broker's
recordkeeping officer has been removed in favor of a simple reference
at the end of the text to the subparagraph which sets forth the
notification procedures (formerly paragraph (e)); (2) proposed new
paragraph (b) has been omitted (because it adds nothing that is not
already stated in new Sec. 111.21(b) and because the reference in the
proposed text to only Part 163 failed to reflect that some records
required to be maintained under the Part 111 texts are not records
covered by Part 163) and, consequently, former paragraph (e) has been
redesignated as (b) (rather than as (c)); (3) within newly designated
paragraph (b), the word ``financial'' has been removed from
subparagraphs (1) and (2)(ii) and the word ``accounting'' has been
removed from the first sentence of subparagraph (2)(i) in order to
reflect that consolidation applies to all records (that is, those
required under Part 111 and those required to be maintained under Part
163), and new language regarding where notice of consolidation is to be
given, as discussed above, has been included in the introductory text
of subparagraph (2); (4) former paragraph (b) has been removed (because
it will not be replaced by a new paragraph (b) text as originally
proposed and, as with the other paragraphs removed from this section,
is superseded by the Part 163 texts); and (5) paragraph (f) (which was
inadvertently not redesignated or otherwise mentioned in the proposed
Sec. 111.23 amendments) has been removed because its substance is
adequately covered by other provisions within Sec. 111.23 and Part 163.
3. Customs agrees, and the modified Sec. 111.23(a)(1) text, as
discussed above and set forth below, now makes this clear.
4. Customs disagrees. The issue raised by this comment in effect
concerns alternate methods for storage of records and is adequately and
more properly addressed in Sec. 163.6.
5. While Customs agrees with this commenter's observation, it is
essentially rendered moot by the changes to Secs. 111.21 and 111.23 as
discussed above and set forth below.
6. The substance of this comment has been addressed by the
regulatory text changes discussed above and set forth below.
Section 143.35--Procedure for Electronic Entry Summary
Comment: With regard to the proposed revision of Sec. 143.35 which
provides that documentation submitted before being requested by Customs
will not be accepted or retained by Customs, a commenter requested that
the regulatory text be modified to provide that any such documents will
be promptly returned to the filer.
Customs response: Customs disagrees with the requested change.
Documents submitted before being requested by Customs will not be
accepted by Customs, thus obviating the need to return them.
Section 143.36(c)--Retention and Submission of Invoice
Comment: Two comments were received on the proposed changes to
Sec. 143.36(c) which would provide (1) that the invoice is to be
retained by the filer unless requested by Customs and (2) that Customs
will not accept or retain an invoice submitted by a filer before a
request is made by Customs.
One commenter claimed that the refusal of Customs to accept and
retain the invoice will impose an unreasonable burden on broker-filers
in cases where the broker knows that the entry summary may later be
used in connection with a drawback entry. This commenter stated that it
already has been overwhelmed in some cases when Customs requested
copies of entry summaries and related documents for paperless entries
because a drawback claim was later filed by the importer or exporter,
pointing out that the request from Customs usually is not for a single
entry summary but rather for dozens at a time. This commenter therefore
suggested that a broker should be allowed the option of filing such
[[Page 32921]]
documents at the time of entry summary while its files are at hand,
rather than be forced to assume the time and expense of retrieving
documents from a storage location.
The second commenter argued that, where Customs refuses to accept
and retain an invoice filed without a request for it having been made,
the regulatory text should provide for a prompt return of the document
to the filer.
Customs response: Customs disagrees. As regards the first comment,
section 615 of the Mod Act and the subsequent proposed recordkeeping
regulations were written in order to reduce the burden of filing other
documents with the entry or entry summary because Customs frequently
did not need the documents to process the entry or entry summary. The
decision of whether Customs needs the documentation either at or after
the time of entry is a decision best left to Customs. If the broker
knows that certain entry summaries and supporting documentation will be
used for a subsequent claim for drawback, the broker could maintain
those records separately and thus forego any time or expense for future
retrieval. The substance of the second comment has been addressed above
in the comment response regarding Sec. 143.35.
Section 143.37(a)--Retention of Records
Comment: With regard to the reference to records that must be
retained by a broker, a commenter requested clarification on whether or
not a Customs electronic response to a broker transmission must be
maintained.
Customs response: Since a Customs electronic response to a broker
transmission is not one of the documents or data elements covered by
sections 508 and 509 and by the definition of ``records'' in
Sec. 163.1(a), there is no regulatory requirement that such electronic
responses be maintained; however, a prudent broker might want to retain
them for other purposes.
Also with regard to Sec. 143.37, as a result of a further internal
review of the proposed regulatory amendments to paragraphs (c) and (d),
Customs has concluded that these two paragraphs should be removed
rather than merely amended as proposed. As regards paragraph (c), which
concerns consolidation of electronic entry records, the issue of
consolidated records is specifically covered for brokers in amended
Sec. 111.23(a) because that provision also sets forth a basic standard
for where records are to be maintained in the absence of consolidation;
however, in the case of other entry filers, consolidation of records
lacks a regulatory context because the regulations have never
prescribed (and the proposed new Part 163 texts did not mention) a
basic records location standard to which consolidation would have
reference. Thus, the removal of paragraph (c) would allow Parts 111 and
163 to control and would have the added benefit of avoiding an
unnecessary distinction between electronic entry records (for which
consolidation was specifically mentioned under the proposed texts) and
other records (for which no consolidation standards were proposed). As
regards paragraph (d), which concerns the condition in which supporting
documentation must be retained, Customs notes that the substance of
this provision is also the subject of proposed Sec. 163.5; thus, in
view of the cross-reference to Part 163 in amended Sec. 143.37(a),
paragraph (d) no longer serves any necessary or useful purpose.
Accordingly, the regulatory amendments set forth below include the
removal of paragraphs (c) and (d) of Sec. 143.37.
In addition, also based on a further internal review, Customs has
determined that present Sec. 143.38, which concerns the retrievability
of supporting documentation regarding electronic transactions (and
which was not affected by the proposed regulatory amendments),
duplicates, or is inconsistent with, the new Part 163 provisions. Since
Customs believes that the Part 163 provisions should control, the
regulatory amendments set forth below also include the removal of this
section.
Section 143.39--Penalties
Comment: Four comments were received on the proposed revision of
Sec. 143.39 which refers to brokers and importers unable to produce
documents requested by Customs within a reasonable time and provides
that such brokers will be subject to penalties pursuant to Parts 111
and/or 163 and that such importers will be subject to penalties
pursuant to Part 163. The points made by these commenters were as
follows:
1. One commenter argued that the maximum period for production of
records is much too short for large companies with centralized payment
offices and that, thus, it is unreasonable to penalize an importer for
a failure to produce documents within a ``reasonable time''. Noting
that there are currently no administrative penalties for failure to
keep and produce required records for examination, this commenter
complained that, under the proposed rule, recordkeepers that fail to
comply could find themselves held in contempt by a district court,
subject to monetary penalties fixed by the court, and could be
prohibited from importing until they comply.
2. One commenter argued that brokers should not be liable for
penalties under both Part 111 and Part 163 because this could represent
double liability for one error. This commenter suggested limiting
liability for brokers to Part 111 which subjects a broker to the
greatest potential liability, that is, loss of its license.
3. One commenter stated that since broker records are retained by a
broker only because of the requirements of Part 111, brokers should be
subject to penalties only under Part 111 (and not under Part 163)
unless the broker is also the importer of record or unless the broker
is a certified recordkeeping agent for one or more of its clients.
Similarly, another commenter requested clarification on its assumption
that penalties under Part 163 would apply to a broker only when the
broker acts as importer of record and that penalties under Part 111
would apply in all other cases.
Customs response: 1. Customs has extensively modified proposed
Sec. 163.6(a), as discussed below in connection with the comments
received on that provision, and the regulatory text, as so modified,
addresses the substance of this comment.
2 and 3. Customs agrees with these comments only in regard to the
issue of double liability: Whether a broker on a Customs transaction
was acting as the importer of record or only as an agent for the
importer of record, if disciplinary action (including the assessment of
monetary penalties) under 19 U.S.C. 1641 and Part 111 of the Customs
Regulations is taken against the broker for a recordkeeping violation,
no additional penalties under 19 U.S.C. 1509(g) and Part 163 of the
Customs Regulations can be assessed; this is made clear by the text of
proposed Sec. 163.6(b)(5)(ii) (redesignated as Sec. 163.6(b)(4)(ii)) as
set forth below. On the other hand, whenever a broker engages in an
activity (such as filing an entry as importer of record or as an agent
for the importer of record) that triggers the record maintenance and
production requirements of 19 U.S.C. 1508 and 1509 and Part 163 of the
Customs Regulations, Customs may, in response to a recordkeeping
violation by that broker and depending on the nature and circumstances
of the violation, opt for imposition of a section 509/Part 163
[[Page 32922]]
penalty in lieu of taking disciplinary action under section 641/Part
111.
Based on a further internal Customs review of the proposed
regulatory amendments, the following clarifying changes have been
included in the text of revised Sec. 143.39 as set forth below: (1) in
paragraph (a) and paragraph (b), the word ``documents'' has been
replaced by ``records'' for purposes of terminology consistency vis-a-
vis Parts 111 and 163, and the words ``within a reasonable time'' have
been removed in light of the changes made to the record production
requirements of Sec. 163.6(a) as discussed below; and (2) in paragraph
(a), reference is made to ``disciplinary action or'' penalties, and
reference is made to part 111 ``or'' part 163 (rather than ``and/or'',
for the reason stated in the points 2 and 3 comment response
immediately above).
Section 163.1(a)--Definition of ``Records''
Comment: In the definitions of ``records'' and ``activities'' it
should be specified that records either are, or need not be, kept for
imports where no entry or record of importation needs to be filed by a
customs broker. This should be clarified for informal entries,
importations of merchandise under $250 where no entry is required, all
forms of in-bond entries and the like. Without such clarification the
importing community will not know whether those documents fit under the
definition.
Customs response: Customs disagrees. The meanings of the terms
``records'' and ``activities'' are quite specific and, in the case of
the latter, are provided by statute. Whether or not a particular
importation is subject to formal entry or informal entry, or is exempt
from entry, the transaction would still fall within the scope of either
an ``importation'' or the requiring of a ``declaration'' and therefore
there must be records, documents or data associated with that
importation or declaration and they must be maintained. In all cases,
the activities described in the comment (informal entry, exemption from
entry, and movement under bond) are all subject to the recordkeeping
requirements. The sole exception would be for declarations made by
arriving travelers as provided for in proposed Sec. 163.2(g)
(redesignated as Sec. 163.2(e) as set forth below).
Comment: In the introductory text of proposed Sec. 163.1(a),
Customs has included the words ``directly or indirectly'' although the
concept of ``indirectly'' pertaining to an activity is nowhere
specified in the statute itself. Thus, this is a ``stretch'' not
sanctioned by law.
Customs response: Customs agrees that these words should be removed
from the text. Section 163.1(a) as set forth below has been modified
accordingly.
Comment: With regard to subparagraph (1)(ii) of the proposed
definition, which refers to shipments carried under bond, a commenter
noted that, under the anticipated remote location filing program, goods
will move to designated examination sites under the importer's bond and
it is likely that carriers will not be aware that such movements are
under bond and thereby potentially be in violation. This commenter
stated that clarity is needed regarding what constitutes ``under bond''
and suggested doing this either by simply referring to 19 CFR Part 18
or by exemption in the case of movements covered by the bond provisions
set forth in 19 CFR 113.62, because a carrier should not be required to
be aware of or be required to keep records related to goods moving to a
designated examination site under the remote location filing program.
Customs response: There are no regulations in place concerning
remote entry filing, and creation of special language in this provision
in anticipation of possible future regulations under the entry
procedure therefore would be inappropriate. If and when such provisions
are created which may cause a conflict or confusion with the
recordkeeping provisions, amendments can be made at that time.
Comment: With regard to subparagraph (2) of the proposed
definition, which sets forth examples of information which are
considered records, a commenter took issue with the reference to
``computer programs necessary to retrieve information in a usable
form''. This commenter asserted that under no circumstances should
Customs seek to obtain from an importer or other affected party the
source or object code or any other program information that would
permit Customs, as contrasted with the affected party, to retrieve data
independent of production by the affected party. Customs has the right
to ask for the production of records and, if the records are not
produced, Customs may take such steps as are within the scope of 19
U.S.C. 1509 to obtain production.
Customs response: The requirement in question is not new but rather
has been in the Customs Regulations since 1979 when Part 162 was first
adopted. The inclusion of language to cover computer programs was
intended to ensure that recordkeepers who store documents/information
electronically would also maintain the programming necessary to
retrieve the documents/information in a format which could be read by
Customs. The substantive interest of Customs lies not in the
programming per se but rather in the data stored with the use of that
programming. Without this requirement, it could be argued that the
submission to Customs of corrupted or encrypted data, or data produced
by obsolete programs, would satisfy the statutory and regulatory record
maintenance and production requirements.
Based on a further internal Customs review of the proposed
definition of ``records'', the text of Sec. 163.1(a) as set forth below
has been modified to incorporate some changes in addition to the change
discussed above. Aside from minor editorial-type wording changes, these
changes are as follows:
a. The proposed introductory text has been designated as
subparagraph (1), subparagraph (2) of the proposed text (examples) has
been moved into the text of new subparagraph (1), and subparagraph (1)
of the proposed text (activities) has been redesignated as subparagraph
(2). These organizational changes will improve the clarity of the text
by placing the examples next to the part of the text to which they
directly relate.
b. The word ``Further'' has been removed from the beginning of the
second sentence of the definition in order to avoid any appearance that
what is mentioned in that sentence is in addition to, rather than
within the scope of, the first sentence (in other words, what is
mentioned in the second sentence is subject to the basic first sentence
``normally kept in the ordinary course of business'' standard which
reflects a basic requirement of section 508(a)).
c. The words ``electronically stored or transmitted information or
data'' have been added to the examples in the text in order to (1)
ensure coverage of what is referred to in section 509(g)(1) and (2)
facilitate removal of all references to ``information'' elsewhere in
the Part 163 texts (e.g., in the term ``records/information'' used in
Sec. 163.5 and in referring to demanded ``information'' in Sec. 163.6)
when the regulatory text clearly is attempting to address ``records.''
With regard to the second point, Customs now recognizes that the
proposed texts had the improper effect of introducing an undefined term
(``information''), or of joining that undefined term with a defined
term (``records'') by means of a slash (thereby creating another
undefined term ``records/information''), into substantive text, thereby
creating
[[Page 32923]]
potential confusion regarding the coverage of the regulatory texts and
frustrating the purpose behind the adoption of the regulatory
definition of ``records'' (which was to bring together in one all-
inclusive definition all the different statutory terms and contexts
that are subject to the maintenance and production requirements of
sections 508 and 509). Accordingly, in addition to the above-described
addition to the definition of ``records,'' the Part 163 texts as set
forth below have been modified by removing all references to ``/
information'' and by replacing all references to ``information'' by the
term ``records'' wherever the context clearly relates to records as
defined in Sec. 163.1(a).
d. Subparagraph (iv) in the list of activities has been modified to
refer to the ``completion and signature of a NAFTA Certificate of
Origin'' (rather than only to ``any exportation to a NAFTA country'')
in order to conform to the terms of the statute (section 508(b)(2)(A)).
A similar conforming change has been made to the text of Sec. 163.2(c)
as set forth below.
e. In subparagraph (v) within the list of activities, a reference
to ``duties'' has been added to ensure consistency with the statutory
(section 509) and regulatory (Sec. 163.6) record examination authority,
and the text has been rearranged for purposes of clarity.
Section 163.1(d)--Definition of ``Certified Recordkeeper''
Comment: Three comments were received on the proposed Sec. 163.1(d)
definition as it relates to customs brokers. The points made by these
commenters were as follows:
1. One commenter requested confirmation of its understanding that
the ``agent'' referred to as a certified recordkeeper would be a broker
acting as importer of record and would not apply when entry is made in
the name of the actual importer.
2. Another commenter proposed, as in the case of Sec. 111.21(c)
discussed above, that the certified recordkeeper automatically be the
licensed qualifying officer of a broker unless the broker makes an
alternate designation.
3. The third commenter took issue with that portion of the
Sec. 163.1(d) definition that provides that a customs broker ``may be a
certified recordkeeper's agent in its own name and on its own account
for records required by Sec. 111.21 without client participation.''
This commenter asserted that: (1) The purpose of Sec. 111.21 is to
ensure that the broker will maintain records which support the entry
and that such records are available to Customs officials; (2) until the
passage of the ``Mod Act'' provisions allowing electronic entries and
entry summaries, relevant importer documents were routinely submitted
to Customs and the broker did not have to retain copies; (3) with
paperless entries, the importer is required to maintain those documents
required for release of a shipment (the ``(a)(1)(A) list'') and, to the
extent that these documents are not submitted with the entry, they must
also be retained by the broker; and (4) the failure of a broker to
submit the paper entry documents is solely a violation of 19 U.S.C.
1641, punishable either by monetary fine or by license suspension or
termination. This commenter further stated that, in contrast, the
purpose of participation in the ``certified recordkeeper'' program
under proposed Sec. 163.14 is the avoidance or reduction of penalties
under 19 U.S.C. 1509 for failure to produce (a)(1)(A) documents when
requested by Customs. Since Sec. 111.21 is unrelated to the provisions
for maintaining the (a)(1)(A) records, for which brokers may be liable
for penalties under section 1641, there is no reason for a broker to
seek certification, as an ``agent'' or otherwise, for Sec. 111.21
records unless it is the intention of Customs to grant the same relief
to brokers in connection with a section 1641 violation (i.e., avoidance
of a section 1641 penalty). Accordingly, this commenter requested that
the provision at issue be deleted from the Sec. 163.1(d) text.
Customs response:
1. This commenter is generally correct regarding its understanding
of the intent of the proposed regulatory text.
2. Since it is the brokerage firm that is a recordkeeper and that
would be certified, Customs sees no point in referring to a certified
recordkeeper as an individual holding a license or someone designated
by the broker. Notwithstanding the designation of a recordkeeping
contact under amended Sec. 111.21(c) as discussed above and set forth
below, Customs would still hold the firm responsible.
3. Customs does not agree with all of the statements in this
comment, in particular as regards the relationship between the broker
statute/regulations and sections 508/509/Part 163. Section 111.21, as
discussed above and as set forth in part below, clearly has reference,
inter alia, to records required to be maintained and produced under
sections 508 and 509 and Part 163; therefore, a failure to comply with
Sec. 111.21 as it relates to Part 163 record maintenance requirements
could result in penalties under section 509/Part 163 (in which case, as
stated above, disciplinary action under section 641/Part 111 could not
be taken). A broker can be a certified recordkeeper in his own name and
on his own account and as such might be able to obtain relief from
section 509/Part 163 penalties; however a broker's status as a
certified recordkeeper would afford no basis for relief if Customs
opted for disciplinary action under section 641/Part 111 in lieu of
penalty action under section 509/Part 163.
In view of the uncertainty reflected in the above comments
regarding the role of agents/brokers as certified recordkeepers, and
based on a further internal review of the proposed text, Customs
believes that the proposed text should be changed to simply parallel
the statute (section 509(f)) as regards participation in the
Recordkeeping Compliance Program. Accordingly, the proposed definition
of ``certified recordkeeper'' in Sec. 163.1(d) has been modified, as
set forth below, by removing the last two sentences and by revising the
remaining first sentence to refer simply to a person who is required to
keep records under the Customs Regulations and who is a participant in
the Recordkeeping Compliance Program (the section within Part 163
dealing with eligibility for that Program identifies the eligible
participants specifically as persons described in Sec. 163.2(a), that
is, persons required to keep records under section 508(a)). Thus, under
the statute and under the regulatory texts as set forth below, the
eligibility of brokers and other persons to apply to become certified
recordkeepers is simply a function of their obligation (based on their
activities either as a principal or as an agent) to maintain records
under section 508(a).
Comment: A commenter referred to ISO9000 which was described as an
internationally recognized system that by definition is a minimum
system requirement which helps ensure items are provided in accordance
with good management practice and which includes documentation of the
system, control of documents and both internal and external auditing.
In order to achieve the benefits of a certified, audited recordkeeping
program without asking importers to expose more information than they
feel comfortable, this commenter recommended that importers who become
registered to the ISO9000 standard be considered automatically a
``certified recordkeeper''.
Customs response: Customs disagrees. While the ISO9000 standard is
a rigorous one, it certainly applies to a number of areas other than
recordkeeping. The fact that an importer
[[Page 32924]]
meets those standards is a factor, and admittedly a significant factor,
to be considered in the certification process under the Recordkeeping
Compliance Program, but it cannot and should not be the sole criterion.
Section 163.1(e)--Definition of ``Certified Recordkeeper's Agent''
Comment: Customs should consider either expanding the proposed
definition of a certified recordkeeper's agent (that is, beyond an
importer of record or a customs broker) or creating a new class of
agent (an Independent Certified Recordkeepers Agent, or ICRA) to
include only those who utilize alternative storage methods, such as CD
ROM and optical disk, to maintain records. The ICRA would essentially
be a specialized service bureau that scans paper documents,
appropriately indexes and permanently stores the scanned images on CD
ROM or optical disk; the ICRA would be independently certified by
Customs but such certification would be limited in scope to
certification of alternative recordkeeping methods as provided for in
proposed Sec. 163.5(b) and would not relieve the primary recordkeeper
from certification requirements set forth in proposed Sec. 163.14. The
ICRA would ``team up'' with a certified recordkeeper to provide the
conversion, indexing, storage and retrieval portion of the overall
certification program. This commenter argued that adding a provision
for an ICRA would result in the following benefits for Customs and the
importing community: (1) It would expedite the certification process
for Customs and the party wishing to become a certified recordkeeper
who uses alternative storage methods because the ICRA would have
established standards regarding conversion techniques, the system of
storage to be used and the security safeguards to prevent alteration of
the stored images, and thus Customs would only have to review the ICRA
standards once; (2) it would make it easier and more convenient for a
primary recordkeeper to become a certified recordkeeper and thus would
encourage more recordkeepers to become certified; (3) by independently
certifying an ICRA, the proposed Sec. 163.5(c)(3) standard for
alternative record storage (i.e., vendor specifications/documentation
and benchmark data regarding the storage medium) would already have
been made available to Customs and would be the same for each certified
recordkeeper that the ICRA represents; (4) it would automatically
provide for segregation of duties between those responsible for
maintaining and producing the original records and those responsible
for the transfer process, as required in proposed Sec. 163.5(c)(9); and
(5) it would expedite the quarterly internal sampling-exception-
reporting/testing required by proposed Sec. 163.5(c)(10) because the
ICRA would perform the testing and file the necessary reports on behalf
of each certified recordkeeper it represents, using standardized
procedures and reporting which would facilitate the Customs review
process.
Customs response: Customs does not agree with this suggestion. As
pointed out above in the discussion of the definition of ``certified
recordkeeper'', Customs may certify under section 509(f) only persons
who are required to keep records under section 508(a); thus, Customs
has no authority to certify persons who do not have a recordkeeping
responsibility under the applicable Customs laws and regulations, and
it was never intended that such persons would be covered by the
``certified recordkeeper's agent'' definition. In this light and in
view of the modified text of the definition of ``certified
recordkeeper'' as discussed above and set forth below, Customs has
reconsidered this matter and no longer believes that it is necessary or
appropriate either to retain the definition of ``certified
recordkeeper's agent'' or to include any references to a certified
recordkeeper's agent in the operative provisions dealing with the
Recordkeeping Compliance Program. The Part 163 texts as set forth below
have been modified accordingly.
Section 163.1(f)--Definition of ``Compliance Assessment''
Comment: A commenter suggested that the last sentence of this
proposed definition be made a part of proposed Sec. 163.1(c)
(definition of ``audit''), because the Sec. 163.1(f) definition both
states what a compliance assessment is and then goes on to note that a
compliance assessment can be expanded into a ``detailed audit''.
Customs response: This suggestion should not be adopted. The last
sentence of the proposed ``compliance assessment'' definition was
considered necessary in that specific context in order to indicate that
there is a distinction between compliance assessment procedures and
more detailed ``audit'' (as defined in paragraph (c)) procedures.
However, based on this comment and as a result of a further
internal review of the proposed regulatory texts, Customs no longer
believes that a compliance assessment should be specifically defined as
the first phase of an audit. Customs notes in this regard that (1) in
many cases compliance assessments are concluded without the need to
expand the inquiry into a detailed audit and (2) in some cases an audit
may be initiated without having been preceded by a compliance
assessment. Accordingly, the definition of ``compliance assessment''
(redesignated below as paragraph (e) of Sec. 163.1) has been revised to
more precisely describe a compliance assessment as a type of importer
audit and to more succinctly describe the procedures and purposes of a
compliance assessment.
Comment: A commenter took issue with the statement in this proposed
definition that in the compliance phase of an audit Customs will review
``* * * internal controls, operations, and procedures to ensure
compliance. * * *'' While a review of an importer's systems (i.e.,
controls, operations and procedures) may be a reasonable way for
Customs to test for accuracy of records and may be appropriate in some
circumstances, this commenter stated that it was aware of no provision
of law requiring an importer to subject its ``systems'', as
distinguished from its required records, to Customs scrutiny, noting in
particular that 19 U.S.C. 1508 merely identifies those records which an
importer shall make, keep, and render for examination and that 19
U.S.C. 1509 merely sets forth rules for the examination of such
records. This commenter stated that the proposed definition should be
amended accordingly and suggested, as a minimum, the addition of the
words ``and may, in appropriate circumstances, review'' before the
words ``internal controls, operations, and procedures''.
Customs response: Notwithstanding the revision of the proposed
definition of ``compliance assessment'' as discussed above, Customs
disagrees with the basic premise of this comment. A compliance
assessment is designed to test exactly those areas referred to by this
commenter. It should be noted that records and recordkeeping systems
are a part of compliance, not its sole purpose. In this regard, see the
second sentence of Sec. 163.0 which spells out the various purposes of
compliance assessments, audits and other inquiries.
While considering the above issues regarding the definitions of
``audit'' and ``compliance assessment'', Customs noted that whereas the
statute (section 509) makes the basic distinction between an
``investigation'' and an ``inquiry'', the proposed Sec. 163.1
definitions did not address this distinction. It is clear that, in the
[[Page 32925]]
context of section 509, the broad term ``inquiry'' is intended to cover
any request for information by a Customs officer that does not
constitute an investigation (and thus would encompass, for example,
compliance assessment and other audit procedures and more informal
procedures such as requests for information made by telephone or on
Customs Form 28). In order to address this point, Sec. 163.1 has been
modified as set forth below by the addition of a new paragraph (g)
definition of ``inquiry'', and additional editorial changes have been
made elsewhere in the Part 163 texts as set forth below to conform
those texts to the principle reflected in this new definition.
Section 163.1(h)--Definition of ``Original Records'' and ``Original
Information''
Comment: Ten comments were received on the concept of ``original''
records and information, in some cases not only with reference to the
definition in proposed Sec. 163.1(h) but also with reference to the
basic requirement in proposed Sec. 163.5(a) that records be retained in
their original formats. The points made by these commenters were as
follows:
1. One commenter referred specifically to the first sentence of the
Sec. 163.1(h) definition which mentions ``paper documents or electronic
data retained in the condition they were received by the party
responsible for maintaining records pursuant to 19 U.S.C. 1508.'' This
commenter complained that this requirement as it reads is open-ended
and suggests that all original records and original information
received by an importer are covered, whether or not the record or
information is one normally kept in the ordinary course of business or
is one required to be maintained by statute or is identified as one
listed on the (a)(1)(A) list. This commenter argued that the
recordkeeping statute does not require maintenance of every piece of
paper or electronic data received by an importer and that, therefore,
original records and electronic data should be limited in the
regulatory text to such records and electronic data received and
normally kept in the ordinary course of the importer's business and
such records and electronic data that are required to be maintained by
statutory fiat or that are included on the (a)(1)(A) list.
2. Three commenters complained that the proposed definition does
not adequately distinguish between documents and data and thus does not
accurately reflect the way that companies do business, particularly
with regard to how they receive and process electronic information. One
of these commenters pointed out that some importers receive shipment
data from the foreign seller in a proprietary electronic data interface
(EDI) format as enormous strings of raw data in a preliminary record
layout form which, as such, is not used for commercial purposes and is
not transmitted as such to a customs broker for filing with Customs;
this raw EDI data must undergo system edits to test its reliability,
and only after the data has been processed through the importer's
system (and thus is no longer raw data) can it be used for commercial
and entry purposes. Thus, although the entry information transmitted to
Customs would not match the original record layout data as transmitted
by the foreign seller, the information transmitted to Customs is the
most accurate information and, from a practical and legal standpoint,
it is ``original'' data for purposes of conducting business and making
the proper declarations to Customs. Another commenter stated that when
paper documents are involved, often they are a result of data acquired
through a chain of computer activities (purchase order, pick lists,
invoice, shipping data, etc.); the regulatory texts, by not including a
reference to ``electronic documentation'', place too much emphasis on
the original paper and the retention thereof, where, in fact, the
information should be the focus. Moreover, imaging is increasingly
becoming a standard for preservation of data because it facilitates
workflow and storage management (particularly for large customs brokers
and importers who handle large volumes of paper), and thus paper
documents are routinely scanned into a computer upon receipt and
facsimile transmissions are received directly into the image system
without making ``hard copies'' unless requested by Customs. The third
commenter noted that an importer or other required recordkeeper
probably will not receive records only in a single format but rather
will receive them in more than one format, such as an EDIFACT
electronic invoice, a facsimile transmission of the same invoice, a
carbon copy air waybill, and an original hard copy truck bill of lading
for delivery; while under the proposed rule the importer would be
maintaining these records in at least two formats, it would be more
realistic for the importer to be able to keep them all in hard copy or
all electronically, instead of in a combination of methods based on how
they were received, without having to obtain specific approval from
Customs so long as certain basic requirements are met. In addition to
these observations, the commenters made the following specific
suggestions:
a. The recordkeeping requirements and definition at issue should be
revised to allow importers' systems data, as described above, to be
considered as ``original''. This could be done by adopting the standard
in Rule 1001 of the Federal Rules of Evidence which states that ``[i]f
data are stored in a computer or similar device, any printout or other
output readable by sight, shown to reflect the data accurately, is an
`original'.''
b. The regulations should recognize that, in addition to
photocopies and facsimile, a printout of an image from a computer may
be considered an original in satisfying all Customs requirements.
c. The first sentence of Sec. 163.1(h) should be amended to read
``[t]he terms `original records' or `original information' mean paper
documents or electronic documentation or data retained in the condition
they were received * * *''.
d. In the first sentence of Sec. 163.1(h), ``and/or'' should be
used in place of ``or'' between the terms ``paper documents'' and
``electronic data''.
3. Four commenters stated that the fifth sentence in the
Sec. 163.1(h) definition may create some confusion with regard to
maintaining multi-part or carbon copy (multiple impression) forms (for
example, delivery orders or bills of lading), photocopies and facsimile
copies. One of these commenters noted that, in the case of multi-part
or carbon copy forms, the originals are often separated and information
or notations are placed on one copy only or only on the top copy, thus
raising the question of which copy is the true original copy; this
commenter stated that the regulations should be more specific as to
what constitutes an original record. Another commenter noted that
whereas an original hard copy record may, for example, be submitted to
a bank and the importer, broker or other person may only have a copy,
the importer, broker or other person would be considered to have an
``original'' record within the definition so long as the copy is
``retained in the condition received * * *''; this commenter questioned
whether the definition was necessary, suggesting that it would be as
easy to revise proposed Sec. 163.5(a) to require the party responsible
for maintaining records pursuant to 19 U.S.C. 1508 to retain the record
in the condition received unless an alternative method was approved
[[Page 32926]]
under Sec. 163.5(b). The third and fourth commenters suggested that the
reference in the definition to copies and multi-part forms should be
clarified since the record/information received as a copy is acceptable
under the definition; one of these commenters also questioned whether
the fifth sentence was necessary if the importer is obligated to retain
the record in the condition received, and both commenters believed that
the reference to ``a certified copy'' in the sixth sentence of the
definition should be clarified as to who would be the certifier, one
commenter suggesting that it would have to be the importer because of
what is stated in the next sentence.
4. With reference to the overall effect of proposed Sec. 163.1(h)
and 163.5 and in particular the requirement of obtaining Customs
approval before converting records to another format for storage and
retrieval, a commenter requested clarification as to whether the
regulatory texts mean that every system that an importer may use to
maintain records (microfiche, CD-ROM, etc.) must be approved in advance
by Customs when such systems are part of a company's normal course of
business. This commenter further questioned whether Customs has the
staffing necessary to certify these systems for importers.
5. A commenter referred to the provision in proposed Sec. 163.1(h)
that electronically received data will be considered the original
record even though it is converted to paper upon request by Customs.
This commenter stated that it expects to obtain authority to convert
paper documents into an electronic storage medium, and reasonably soon
thereafter, to be allowed to destroy the original paper documents. This
commenter suggested that Sec. 163.1(h) should include provision for
exemption which may be granted under Sec. 163.5; under the exemption,
such a converted document may, upon the request of Customs, be
certified to be a true copy of the original record or document.
Customs response:
1. Customs disagrees. Proposed Sec. 163.1(h) was merely intended to
define what is meant by the term ``original records/information''.
Which records or information are to be maintained is properly the
subject of other provisions of Part 163.
2. The raw EDIFACT feed is original information from which other
forms of the data are created; putting it in a readable form is
acceptable. Customs agrees that it is the information that is the focus
of the Part 163 retention and production provisions, provided that the
information in question falls within the Sec. 163.1(a) definition of
``records'' (see the above discussion of the changes made to that
definition and the below discussion of the changes to the definition at
issue here). Although alternate storage is the subject of Sec. 163.5
and is discussed below in that context, Customs notes that where
originals are in different formats and importers wish to use a single
format for storage, the alternative storage provisions of Sec. 163.5
are intended to accommodate that. The following are the Customs
responses to the specific suggestions of these commenters:
a. Customs disagrees. The standard cited from Federal Rules of
Evidence provides a very limited guideline which would not qualify as a
proper definition encompassing a wide variety of situations. Customs
believes that the approach in the proposed definition is sufficient to
cover advances in technology.
b. Customs agrees in part. Photocopies and facsimiles, if
originally received in that format, would be considered to be original
documents. A computer printout, however, is a secondary source or copy
because the electronic data stored in the computer is the original
data. While not considered as an original, the printout may in fact
satisfy Customs requirements for production of the record since it
would qualify as a ``facsimile paper format'' or possibly as a
``hardcopy spreadsheet''.
c. The substance of this comment has already been addressed above.
d. This comment is obviated by the changes made to the proposed
definition as discussed below.
3. Customs disagrees generally with the comments. In the case of a
multi-part form or document, the first copy where the initial
impression occurs could be considered the ``original'' and the
subsequent carbon copies could be considered ``copies''. Recognizing
that other entities such as carriers or banks may remove and keep the
``original'' (top) copy, the proposed regulatory text provided for the
acceptability of a carbon copy form, a facsimile copy and a photocopy
in lieu of the original (top copy) page, thus rendering moot the
question of which copy is the ``original''. The provisions regarding
alternative storage methods (Sec. 163.5) are not the proper context for
dealing with this issue. Moreover, the phrase in the first sentence
``retained in the condition they were received'' does not answer the
question and obviate the need for the sentence regarding multi-part
forms because the importer could be the person who created the form to
begin with or who received the form from a third party and removed a
copy and then forwarded the form; in those cases, the ``original'' form
issue is not addressed by the words ``condition . . . received''. With
regard to the last two sentences of the proposed definition, Customs
believes that, in view of the overall subject matter of Part 163 which
is the maintenance and production of records, it should be sufficiently
clear that the person who would certify the copy can only be the person
who has the statutory and regulatory responsibility for maintaining and
producing the record (and who thus knows what happened to the
``original'').
4. The concerns of this commenter are addressed in the changes
which have been made to proposed Sec. 163.5 as discussed below in
connection with the comments received on that section.
5. Customs disagrees with this suggestion. Substantive requirements
regarding storage methods are set forth in Sec. 163.5 and thus are
inappropriate for this definitional provision.
In consideration of the comments received and based on a further
review of the regulatory text, Customs has determined that some changes
should be made to the definition as proposed. In addition to some
minor, editorial changes, the text of the Sec. 161.1(h) definition as
set forth below incorporates the following changes:
a. The defined term has been changed to read simply ``original'',
for four reasons. First, the term defined in the proposed text was not
used as such in the text of the proposed provision to which it had the
most direct relevance (that is, Sec. 163.5(a) which used the words
``original formats''). Second, inclusion of the word ``records'' in the
defined term is unnecessary and inappropriate because ``records'' has
already been defined (and thus cannot have a new meaning here). Third,
use of the word ``information'', thereby implying something different
from ``records'', is inappropriate for the reasons stated above at the
end of the comment discussion concerning Sec. 163.1(a). Finally, based
on the proposed definition and the proposed Part 163 texts as a whole,
it seems clear that the proposed definition was in essence merely
trying to establish the concept of ``original''.
b. As a companion to the change in the term that is defined, the
proposed first sentence of the definition has been modified to refer to
the specific context in which the defined term is used within Part 163
(that is, in the context of maintenance of records). In addition, this
text, as modified, refers to records that are in the condition in which
they were ``made or'' received, because
[[Page 32927]]
section 508 refers to the making and keeping of records and some
records that are required to be kept by section 508 and Part 163 are
made (rather than merely received) by the person required to keep them
(compare this textual change to the change to the introductory text of
Sec. 163.2(a) discussed below at the end of the Customs responses to
the comments on that section). Finally, the first sentence of the
proposed definition has been changed into an introductory text and,
except as otherwise stated in point c immediately below, the remaining
text of the proposed definition has been set forth as a list of four
subparagraph exemplars of original records covered by the general
definition in the introductory text.
c. The third sentence in the proposed text (regarding when original
electronic information or paper documents must be provided to Customs)
and a portion of the language in the sixth sentence of the proposed
text (that is, regarding the assessment of penalties) have been omitted
from the modified definition because they are not appropriate for a
definitional text and merely repeat what is more appropriately covered
in Sec. 163.6.
d. In the first exemplar of the modified definition text (which
corresponds to the second sentence of the proposed text), a reference
to ``other electronic records'' has been included to clarify that
electronic information may be used to develop not only paper documents
but also other records set forth and maintained in an electronic
format.
e. Finally, in the fourth exemplar of the modified definition text
(which corresponds to the last two sentences of the proposed text),
provision is made for submission of a signed certifying statement only
if required by Customs (rather than in all cases covered by that
exemplar).
Section 163.1(k)--Definition of ``Third-Party Recordkeeper''
Comment: With regard to accountants as third-party recordkeepers, a
commenter contended that the definition should state that accountants
are not empowered to conduct ``customs business'' as statutorily
defined.
Customs response: Customs disagrees. The regulatory text in
question (redesignated below as Sec. 163.1(l)) merely provides a
definition of a third party recordkeeper in the context of Part 163
which concerns recordkeeping. The concept of ``customs business,'' and
the rules regarding who may engage in customs business, are established
under the customs broker statute and regulations (19 U.S.C. 1641 and 19
CFR Part 111) and are not relevant to these recordkeeping regulations.
With regard to the Sec. 163.1 definitions, an internal Customs
review of the proposed regulatory texts disclosed that the terms
``party'' and ``person'' were used throughout the proposed Part 163
texts without the appearance of any clear rationale for using one term
or the other in a given context (except as regards references to a
``third party recordkeeper'' which is a statutory expression), and it
is noted that sections 508 and 509 are similarly inconsistent in the
use of these terms. In order to avoid the impression that a different
meaning is intended when one term is used and not the other, and
because Customs does not believe that any such difference in meaning
was intended in the applicable statutory provisions, Customs has
modified the Part 163 texts as set forth below (1) by adding a new
definition of ``party/person'' as Sec. 163.1(i) and (2) by using the
term ``person'' throughout the Part 163 texts except where the
expression ``third party recordkeeper'' appears. The new definition is
similar to what is found in other parts of the Customs Regulations
(see, for example, 19 CFR 177.1(c)) except that ``natural person'' is
used in place of ``individual'' because that term is used in the Part
163 service of summons provisions.
Section 163.2--Parties Required To Maintain Records
Comment: Two commenters complained about the absence from this
proposed section of any specific mention of recordkeeping requirements
for express consignment operators and couriers who operate under Part
128 of the regulations. One of these commenters stated that there are
unique situations under Part 128 that should be addressed, especially
regarding manifest entries and consolidated informal entries. The other
commenter, noting the large number of shipments carried by express
consignment courier companies and the fact that they or their agents
act as importer of record, suggested the addition of a new paragraph
(f) to Sec. 163.2 to read as follows: ``(f) Recordkeeping required for
express consignment operators and carriers. Each courier, express
consignment operator or carrier shall maintain records of all
documents, entries and clearances associated with international import
shipments in accordance with 163 of this chapter.''
Customs response: Customs does not agree that the suggested new
text is necessary. As in the case of the underlying statute, the
proposed text of Sec. 163.2 adequately covers the activities of express
consignment operators and couriers.
Section 163.2(a)--General Recordkeeping Obligation
Comment: Five comments were received on proposed Sec. 163.2(a)
which sets forth the basic categories of persons required to make and
keep records and render them for examination and inspection. The points
made by these commenters were as follows:
1. The proposed regulatory text expands the recordkeeping
requirement to include those who cause an importation, anyone who files
an entry or declaration, drawback claimants, customs bonded carriers
and cartmen, bonded warehouse proprietors, and foreign trade zone
operators. Importers must also keep all information and documents
required by law for the entry of merchandise. The proposed rule would
require many importers that do not receive and retain all entry
documents in their business process to set up recordkeeping systems to
capture and retain those documents. This places an undue hardship on
many importers.
2. A commenter complained that Customs proposes that persons who
``knowingly cause merchandise to be imported'' will be subject to
recordkeeping requirements and that Customs includes within this group
persons who ``control the terms and conditions of the importation'' and
persons who supplied the importer with ``technical data, molds,
equipment, other production assistance, material, components, or parts
* * * with knowledge that they will be used in the manufacture or
production of the imported merchandise.'' This commenter stated that
this proposal will result in some companies being required to maintain
documents which normally would be discarded in the ordinary course of
business. The commenter referred specifically to companies that have
established so-called L/C ``direct import'' programs under which a U.S.
company's foreign vendor sells merchandise directly to the company's
domestic customer (for example, a retailer or mass merchandiser) which
acts as importer of record and as such assumes responsibility for
customs duty payments and entry requirements, and under which the U.S.
company may be responsible for designing imported merchandise,
providing equipment used in the production process, or supplying the
foreign vendors with materials, components or parts; these L/C programs
benefit all concerned by reducing costs to the U.S. customers and the
ultimate consumers, and they allow the mass merchandiser, which is more
[[Page 32928]]
knowledgeable regarding Customs rules and regulations (including the
need to maintain records and thus obtain any relevant documents from
the U.S. company that may be necessary), to assume responsibility for
Customs requirements by acting as importer of record. This commenter
argued that ``legal'' responsibility to maintain records should rest
with the importer of record and that a non-importing party should not
be required to maintain a second set of such records which constitutes
an unnecessary burden on the public without enhancing the ability of
Customs to effectively administer the laws it is charged with
enforcing. Accordingly this commenter urged Customs to modify the
proposed regulations to provide that persons who do not themselves act
as importers of record will not be subjected to recordkeeping
requirements merely because they may knowingly cause merchandise to be
imported. Alternatively, this commenter requested that the regulations
be clarified to provide that: (1) persons who do not act as importers
of record are not required to make, keep and render for examination and
inspection any records which they do not otherwise maintain in the
ordinary course of business; and (2) Part 163 does not impose on a
party which does not itself act as importer of record any requirements
to maintain any records which the party does not otherwise maintain in
the ordinary course of business for reasons not relating to customs
laws and regulations.
3. By mentioning an ``entry filer'' (subparagraph (1)) and an
``agent'' (subparagraph (2)), proposed Sec. 163.2(a) requires that,
where a customs broker acts as importer of record, both the actual
importer and the broker are required to maintain all records, including
those specified in the (a)(1)(A) list. If this reading is correct, the
proposed regulation will have a chilling effect on when a broker will
choose to act as the importer of record (currently, that decision is
made based on convenience to the importer and because of the need to
expedite the release of the goods).
4. In subparagraph (1), the term ``entry filer'' should be replaced
by ``customs broker'' because the only filers are customs brokers and
importers handling their own transactions and importers are already
specifically mentioned. In this context ``entry filer'' is confusing.
5. A customs broker serving as importer of record will almost never
be in possession of all of the records defined in proposed
Sec. 163.1(a), because the broker will not have caused the importation
or subsequent uses of imported goods. A broker when also serving as
importer of record should only be required to maintain records which
support the entry/entry summary declarations.
Customs response:
1. Customs disagrees. The proposed regulatory text merely reflects
the relevant statutory provisions as amended by the Mod Act. Moreover,
Customs notes that the provision for recordkeeping by importers,
including maintenance of entry records, is not new but rather was in
existence prior to the Mod Act changes (19 U.S.C. 1508 and 19 CFR Part
162, Subpart A).
2. Customs disagrees with the basic complaint of this commenter.
Customs did not create the language ``knowingly causes the
importation.'' That language comes directly from the statute (section
508(a)(1)(B)) as modified by the Mod Act, and Customs does not have
authority to promulgate regulations that are inconsistent with the
statutory requirements. Customs is not able to respond to the example
of the ``L/C direct import program'' because the paucity of information
regarding the role of the U.S. firm makes it impossible to determine
whether or not it ``knowingly caused the importation.'' Customs also
disagrees with the two specific suggested clarifications because the
first one is already provided for in the Part 163 texts and the second
one would be in direct opposition to the statute.
3. Customs agrees with the commenter's reading of these provisions.
As regards the alleged effect on a broker's decision whether to act as
importer of record, Customs notes that such a decision is merely one of
the business decisions that each broker must make when conducting
customs business.
4. Customs disagrees. The term ``entry filer'' reflects the
statutory language. The fact that a party could be mentioned twice (for
example, an owner/purchaser is usually the importer) is not the issue
here. Customs does not have authority to promulgate regulations that
are inconsistent with the statutory requirements.
5. Customs disagrees. When a customs broker is listed as the
importer of record, the broker is responsible for all the records
listed in Sec. 163.1(a) along with any additional duties or taxes
determined to be due and any other requirements placed on the party
shown as the importer of record.
Based on a further internal review of the proposed texts, Customs
has determined that the introductory text of Sec. 163.2(a) should only
reflect the requirement to maintain (rather than also ``make'') records
for the following reasons: (1) Maintenance of records is the thrust of
Sec. 163.2 as a whole; and (2) while it is true that section 508
reflects an obligation to ``make'' records, that obligation is
reflected throughout the Customs Regulations according to the specific
substantive context to which the records relate (for example, basic
entry record requirements are prescribed in Parts 141-143, and drawback
record requirements are prescribed in Part 191) and thus does not have
to be, nor should be, reflected in the more general Part 163 texts.
Section 163.2(b)--Exclusion of Domestic Transactions
Comment: The words ``who does not knowingly cause merchandise to be
imported'' should be eliminated from the introductory text of this
proposed section, because often a person in a domestic transaction is
aware that the goods ordered from an importer have been, or will be,
imported but the buyer's purchase and sale is domestic and is not
connected directly or indirectly with the import transaction; such a
domestic buyer should not be required to maintain records on the import
transaction just because he knows that the goods are imported. With
this suggested change, a person ordering merchandise from an importer
in a domestic transaction, whether or not that person knows that the
goods are to be imported, will not be required to maintain records
unless the person controls the import transaction or is involved with
the production of the goods by furnishing assists.
Customs response: Customs disagrees. The regulatory language in
question reflects the statute, and Customs does not have authority to
promulgate regulations that are inconsistent with the statutory
requirements. Further, the regulatory text gives two examples which
clearly demonstrate that the domestic buyer who simply knows that the
goods are imported is not, by that fact alone, encompassed within the
concept of knowingly causing merchandise to be imported.
Based on a further internal review of the proposed Sec. 163.2(b)
text, Customs has discovered that the text (which was based on present
Sec. 162.1b(b)), included in the introductory text the addition of the
word ``who'' before the words ``does not knowingly * * * ''; the
addition of this word, from a grammatical standpoint and with reference
to the rest of the text, had the unintended effect of creating a new
class of persons required to maintain records that was not listed in
the general provisions of Sec. 163.2(a).
[[Page 32929]]
The wording of introductory text of Sec. 163.2(b) as set forth below
has been appropriately modified to correct this and clarify that the
provision specifically relates to the class of persons listed in
Sec. 163.2(a)(1)(ii).
Section 163.2(d)--Recordkeeping Required for Customs Brokers
Comment: Irrespective of whether the broker acts as the importer of
record, the (a)(1)(A) recordkeeper under section 1509 is always the
actual importer, and that statutory provision is worded so that Customs
may always require the importer to produce the (a)(1)(A) records.
Accordingly, Sec. 163.2(d) should reflect that, when the broker acts as
the importer of record, the broker is only subject to the provisions of
section 1509(g) relating to assessment of additional duties, but is
never liable for ``penalties'' for failure to produce the (a)(1)(A)
records.
Customs response: Customs disagrees and notes that the substance of
this comment has been addressed above in the Customs response to the
comments on Sec. 143.39.
Based on a further internal review of proposed Sec. 163.2, Customs
now believes that paragraph (e) (which concerned recordkeeping required
for parties filing drawback claims) and paragraph (f) (which concerned
recordkeeping required for other activities) are not needed. Customs
notes in this regard that these two paragraphs merely repeat what has
already been provided for in the Sec. 163.1(a) definition of
``records'' and in paragraph (a) of Sec. 163.2. Accordingly, these two
paragraphs have been removed from the text of Sec. 163.2 as set forth
below and proposed paragraph (g) has been redesignated below as
paragraph (e).
Section 163.2(g)--Recordkeeping Required for Travelers
Comment: A commenter claimed that this proposed section sets up a
bifurcated recordkeeping requirement that almost no returning traveler
will know exists and that flies in the face of the mandate to make
regulations truly meaningful: a traveler does not have to maintain
records either before entering or while physically within a Customs
facility, but the traveler would have to keep records for merchandise
acquired abroad that exceeds the personal exemption or the flat rate of
duty. This commenter asked whether a traveler could not make a
declaration that all merchandise acquired abroad was within the
personal exemption and flat rate, pay no duty, and then take the
position that no recordkeeping obligation existed. The commenter noted
that while it is probably best that returning travelers be required to
produce records of all purchases abroad, once they clear the Customs
facility (even after having made a misdeclaration of value while having
on their persons records showing the true value of the purchases) there
is little likelihood that Customs will catch up with them.
Customs response: Customs disagrees. This provision is not
radically different from existing provisions or practices. Customs may
or may not ask for supporting documentation (purchase receipts or
invoices) at the time the declaration is made. After clearance, Customs
in the vast majority of cases would have no further interest in the
declaration and, consequently, in the supporting documentation. In
other words, any questions are usually resolved at the time of
presentation or declaration as Customs normally does not go back and
review declarations. The net effect of proposed Sec. 163.2(g)
(redesignated below as Sec. 163.2(e)) was to provide that for most
travelers bringing in non-commercial merchandise valued at no more than
$1,400 (that is, the $400 personal exemption amount for returning
residents plus $1,000 to which the flat rate of duty applies) per
traveler, no supporting documents will be required to be maintained;
for commercial importations or declarations over $1,400, supporting
documents must be maintained. It should be noted that application of
the personal exemption and flat rate of duty dollar limits (and thus
application of the recordkeeping exemption) is a function of the actual
value of the imported merchandise and thus does not, as a matter of
law, depend solely on what value the traveler chooses to declare to
Customs.
Section 163.3--Entry Records
Comment: Four commenters made observations on proposed Sec. 163.3
which sets forth general requirements regarding the production of
records required by law or regulation for the entry of merchandise (the
``(a)(1)(A)'' list). The points made by these commenters were as
follows:
1. One commenter approved of the language giving general time
standards for the production of documents but expressed concern that
local Customs offices would focus on the table under Sec. 163.6, to the
exclusion of the Sec. 163.3 legal guidelines. This commenter therefore
stated that the Sec. 163.3 language should be moved to Sec. 163.6 where
it is more appropriate.
2. One commenter noted that, because under Sec. 163.2(a)
recordkeepers include companies that do not act as importers of record
but that knowingly caused merchandise to be imported, Sec. 163.3 could
be interpreted to mean that persons other than importers of record are
required to maintain (a)(1)(A) records. Given the substantial penalties
which may be imposed for a failure to produce those records on demand,
and given the fact that those penalties were only intended to apply to
importers of record who no longer will be required to submit certain
specified information to Customs at the time of entry, this commenter
requested that Customs modify the regulations to expressly provide that
responsibility for producing (a)(1)(A) list records is limited to the
importer of record who is responsible for filing (or expressly
authorizing the filing of) a Customs Form 7501 (entry summary) and
commercial invoice with Customs at the time of entry.
3. Two commenters objected to the requirement to retain copies of
records when the records have been given to Customs. One of these
commenters referred specifically to cases in which the records are
returned by Customs, stating that this places an unreasonable burden of
proof on the party to whom the records are allegedly returned because
there would otherwise be no proof of such return and/or receipt. The
other commenter stated that customs brokers should not be required to
maintain any record that has already been tendered to Customs, and this
commenter further asserted that this requirement is contradicted by
Sec. 163.6(b)(4)(iii).
Customs response: 1. Customs does not agree that Customs personnel
would overlook, and thus fail to apply, a clear regulatory standard,
and it is noted that the Sec. 163.3 guidelines referred to by this
commenter were also reflected in the proposed Sec. 163.6(a) text.
However, on further reflection, Customs believes that it is not
necessary to state in Sec. 163.3 the general standard by which entry
records must be produced because Sec. 163.6 is more appropriate for
that purpose. Accordingly, Sec. 163.3 as set forth below has been
modified by removing all statements regarding the manner in which entry
records should be produced and by adding a simple reference to the
production of entry records ``in accordance with Sec. 163.6(a)''.
2. Customs disagrees. Each party specified in section 1508(a) is
individually required to ``* * * make, keep, and render for examination
and inspection records * * * '' that pertain to an activity described
in section 508(a) and that are normally kept in the ordinary course of
business; thus, under
[[Page 32930]]
the terms of the statute, the fact that one party mentioned in the
statute is subject to a particular recordkeeping requirement cannot
have the effect of precluding application of that recordkeeping
requirement to another party covered by the statute. Since the
(a)(1)(A) records referred to by this commenter are entry records and
thus are covered by the statute, adoption of this commenter's suggested
change to Sec. 163.3 would represent an improper limitation of the
statutory terms.
3. Customs disagrees with the first comment. The purpose of the
statutory and regulatory changes is to reduce the number of documents/
information filed at time of entry so that Customs would request and
retain only those documents that are needed. All other documents should
therefore be retained by the responsible party. Customs may simply
review a document and return it to the responsible party. That party
must maintain the document/information in the event Customs returns to
the entry or issue. Customs also disagrees that proposed
Sec. 163.6(b)(4)(iii) contradicts Sec. 163.3 because the former section
involves a different regulatory context (that is, the liability for
penalties).
Section 163.4--Record Retention Period
Comment: A commenter stated that the general 5-year record
retention period requirement set forth in proposed paragraph (a), on
its face, would require that any importer, person involved in the
import transaction, or person supplying technical assistance to the
manufacturer maintain every piece of paper, every fax and every E-mail
or voice-mail communication for a period of 5 years from entry,
notwithstanding that in the ordinary course of business the particular
record would normally be destroyed immediately upon receipt. On the
assumption that Customs did not intend to impose such an onerous
requirement on the importing community in contravention of its
obligation to impose a minimum burden on the public it is serving, this
commenter requested that Customs confirm that: (1) the only records
which must be maintained are those records which the company usually
maintains in the ordinary course of business; and (2) the Customs
recordkeeping requirements do not impose upon a person an obligation to
maintain faxes, E-mail or voice-mail communications which are normally
discarded after receipt or upon completion of a transaction and which
do not constitute normal business records otherwise required to be
maintained for commercial purposes.
Customs response: While Customs agrees that the only records that
are required to be maintained under section 508(a) are those that are
normally kept in the ordinary course of business, Customs disagrees
with the other statements of this commenter. Section 163.4 does not set
forth a new requirement: While the parties listed in Sec. 163.2
represent an expansion over those listed in the present regulation (19
CFR 162.1(b)) as a result of changes made to section 508 by the Mod
Act, the parties mentioned by the commenter have since 1978 been
required to maintain records for five years. As regards the second
point on which confirmation was requested, Customs notes that the
proposed definition of ``records'' in Sec. 163.1(a) included a
reference to ``information pertaining directly or indirectly to any
information element set forth in a collection of information required
by the Tariff Act of 1930, as amended, in connection with any activity
listed in paragraph (a)(1) of this section.'' Clearly, this could
include faxes, E-Mail and similar records, depending on prevailing
business requirements and practices, because the nexus between a
particular record and the requirement to maintain it is the activity to
which the record relates: If the record pertains to an activity
specified in section 508(a) and is normally kept in the ordinary course
of business, it must be maintained for the applicable period specified
in the statute and regulations.
The observations made by this commenter demonstrate the need for a
clear statement of the position of Customs regarding the relationship
between sections 508(a) and 509 and the meaning of the statutory
expression ``normally kept in the ordinary course of business'', in
particular as concerns ``(a)(1)(A)'' records. Section 508(a) requires
making and keeping and rendering for examination and inspection those
records that pertain to specified activities and that are normally kept
in the ordinary course of business. Section 509 on the other hand sets
forth specific standards for the examination of records by Customs,
including special rules under paragraph (a)(1)(A) for records that are
required by law or regulation for the entry of merchandise (the so-
called ``(a)(1)(A)'' records, also referred to in the Part 163 texts as
``entry'' records). Central to the operation of section 509 is the
assumption that the records to be produced under that section have been
made and maintained in accordance with section 508(a) (in other words,
if a record, including an (a)(1)(A) record, is not required to be made
and maintained, there can be no requirement to produce it under section
509). Thus, whereas not all section 508(a) records are (a)(1)(A)
records, all (a)(1)(A) records are covered by section 508(a).
As regards (a)(1)(A) records, it is the position of Customs that
they meet the two essential tests that define the coverage of section
508(a), that is, they pertain to an activity specified in the statute
and they are normally kept in the ordinary course of business. As
regards the first test, the fact that they relate to the entry process
clearly means that they pertain to the actions of an owner, importer,
consignee, importer of record, entry filer, or other party who imports,
or knowingly causes the importation of, merchandise into the customs
territory of the United States, as provided in section 508(a)(1)(A) and
(B). With regard to the second test, the fact that a record is required
by law or regulation for the entry of merchandise means that it is, by
definition, normally kept in the ordinary course of business (in other
words, the legal requirement for the existence of the record is
sufficient to meet the statutory test); if this were not the case, no
record that is prescribed by a provision of the Customs Regulations
would have to be maintained under section 508(a) or produced under
section 509 unless the person identified in section 508(a) chose of his
own volition to maintain it for business purposes, and this would
render any such regulatory requirement essentially unenforceable and
thus useless. Thus, contrary to the position implicit in this
commenter's assertions, what constitutes a record ``normally kept in
the ordinary course of business'' is not exclusively a function of what
a businessman may choose to create and maintain.
Comment: A commenter suggested that Customs should consider
different (i.e., shorter) record retention periods for express
consignment carrier shipments (for example, letter and document
shipments, shipments that may be entered free of duty under 19 U.S.C.
1321, and shipments covered by an informal entry). This commenter
argued that in such cases, where the cost of record retention is high
due to the large number of shipments and enforcement or compliance
measurement normally is performed at the time of entry, there is little
justification for lengthy record retention periods.
Customs response: The substance of this comment has been addressed
in significant part by the addition of new subparagraphs (3) and (4) to
the Sec. 163.4(b) text as discussed above in the
[[Page 32931]]
Customs responses to the comments regarding the treatment of express
consignment carriers.
Comment: With regard to the proposed paragraph (b)(1) exception to
the 5-year rule in the case of drawback claims, a commenter referred to
the May 5, 1997, correction document which clarified the Background
section of the April 23, 1997, notice of proposed rulemaking with
regard to the (maximum) length of time that drawback records could have
to be maintained under the proposed regulatory text, that is, ``a
period of about eleven years from the date of importation''. Noting
that the correction document assumed a payment under the accelerated
payment program, this commenter asserted that the retention period in
fact could be considerably longer when the accelerated payment program
is not used because payment in such cases is made at the time of
liquidation of the drawback claim and there is no deadline imposed on
Customs for the liquidation of drawback claims (the commenter alleged
that there have been many instances in which Customs liquidated a
drawback claim more than five years after the claim date). Assuming
that manufactured goods are exported five years after importation of
the drawback merchandise and a drawback claim is filed three years
after export, liquidation may take place ten to twelve years after
importation, thus creating a record retention period of from thirteen
to fifteen years. This commenter further asserted that the recently
published proposed revision of the drawback regulations would impose
new, stringent requirements for the accelerated payment ``privilege'',
thus leading to increased record retention periods because a larger
percentage of drawback claimants will receive payment at the time of
liquidation.
Customs response: The published statement was correct under the
stated facts. However, the commenter is also correct that if a claimant
is not paid under the accelerated payment program and liquidation is
delayed, the recordkeeping period is necessarily extended.
Comment: With regard to the proposed paragraph (b)(2) exception to
the 5-year rule in the case of packing lists, two commenters stated
that there should be no requirement to retain a packing list for any
period of time. These commenters argued that a packing list is a
temporary, transition document that has no use, and thus is discarded,
once the shipment is unloaded or released.
Customs response: Customs disagrees. Customs finds packing lists to
be very useful in performing examinations of cargo, in verifying
invoice data, and in verifying inventory receipts.
Based on a further internal review of the proposed regulatory
texts, the words ``whichever is later'' have been added at the end of
the first part of the Sec. 163.4(b)(2) text as set forth below in order
to remove a possible ambiguity in determining the applicable 60-day
period for retention of packing lists following a release or
conditional release period.
Section 163.5(a)--Original Format Record Storage
Comment: Four comments were received on proposed Sec. 163.5(a)
which provides for the maintenance of all required records in the
original formats unless alternative storage methods have been approved
by Customs. The points made by these commenters were as follows:
1. It is unclear from the proposed text whether or not electronic
ABI records serve the same purpose as the hardcopy Customs forms. If
stored electronically, this commenter asked whether the trade would be
required to produce the information in the format of the current
hardcopy records (i.e., Customs Form 3461, 7501) or whether the
electronic data would suffice. This commenter stated its desire to
store the records in the electronic ABI formats and to eliminate the
requirement to store paper records, suggesting that for audit purposes
the electronic data could easily be linked to its accounts payable
records through the entry number.
2. The term ``original formats'' in this section is too limiting
and unmanageable because it does not comport with modern business
practices. If the normal course of business is to take paper documents
and scan them directly into a computer image system, then, practically,
once there are assurances that the image meets Customs standards, the
paper should be allowed to be discarded.
3. A commenter suggested that the text of the section be revised to
read simply as follows: ``All parties listed in Sec. 163.2 must
maintain all records required by law and regulation for the required
retention periods. The records must be capable of being retrieved on
request or demand by Customs.'' This commenter argued that this
shortened version states the basic requirement of the law and also
eliminates reference to prior approval of the recordkeeping program
(the latter point is addressed more fully in the Sec. 163.5(b) comment
discussion below).
4. There should be no requirement for Government approval of
alternative storage methods.
Customs response:
1. Customs agrees that the electronic data would suffice. Clearly,
the ABI data could qualify as ``original'' records. The definition of
``original'' in Sec. 163.1(g) as discussed above and as set forth below
includes ``electronic information which was used to develop paper
documents''.
2. Customs does not believe the proposed reference to ``original
formats'' would be limiting, and it is further noted that use of
alternative storage methods would allow for discarding the original
paper documents. In consideration of the decision to define
``original'' in Sec. 163.1(h) rather than ``original records/
information'' as discussed above, the first sentence of Sec. 163.5(a),
as set forth below, has been modified by replacing the words ``in the
original formats'' by ``as original records'' as regards how records
generally are to be maintained.
3. Customs agrees with the basic principle reflected in this
comment and therefore, on further reflection, has concluded that the
requirement for advance approval of alternative storage methods is
unnecessarily onerous and thus should be eliminated. Accordingly,
Sec. 163.5(a), as set forth below, has been modified by removing the
words ``approved in writing by the director of the regulatory audit
field office who has responsibility for the geographical area in which
the designated requestor's recordkeeping officer resides'' and adding
in their place the words ``adopted in accordance with paragraph (b) of
this section''. See also the related changes to the text of
Sec. 163.5(b) noted below in the Customs response to the comments on
that section.
4. Customs agrees. The substance of this comment has been addressed
in the comment response immediately above.
Section 163.5(b)--Alternative Storage Method Approval
Comment: Five comments were received on proposed Sec. 163.5(b)
which sets forth the procedures for approval by Customs of alternative
methods (formats) for storing records. One of these commenters
supported the proposed text, stating that the approval process is sound
and will allow the trade to employ consistent procedures for the entire
recordkeeping system and will eliminate port-to-port differences and
will reduce the cycle time for approval and implementation of
alternative storage methods. The other four commenters made the
following negative comments or suggestions regarding the proposed text:
[[Page 32932]]
1. The requirement for written authorization from Customs to
maintain records and information in alternative formats is contrary to
the Mod Act which in section 614 amended 19 U.S.C. 1508(a) to allow
importers to maintain records in electronically generated or machine
readable data formats, and this was a self-implementing amendment.
Thus, the Mod Act amendment gives the option to engage in electronic
recordkeeping as an unencumbered right, not as a ``privilege'' as
stated in proposed Sec. 163.5(i). While Customs may audit or review the
electronic recordkeeping systems of an importer to determine
compliance, it may not make review a prerequisite to the establishment
of an electronic recordkeeping system.
2. The last sentence should be reworded to read as follows: ``If
the applicable director of the regulatory audit field office needs
additional information on the alternative method of storage, or
disapproves of the method proposed, he or she will contact the
requesting party within 30 calendar days of receipt; if not, the
request is deemed approved.'' The reason for this suggested change is
that the regulations as proposed could cause hundreds or thousands of
parties to contact regulatory audit seeking approval of their proposed
methods and, given the standards in proposed Sec. 163.5(c), such
requests could be voluminous. In order to ease the burden on Customs
and the importing public, Customs needs to adopt a set of standards and
guidelines and then allow parties subject to recordkeeping requirements
to establish programs that meet those standards and guidelines, and
acceptance of the proposed method would be assumed unless some
information is missing or there are serious flaws in the proposal. This
commenter argued that this approach is consistent with ``informed
compliance'' in that Customs would provide the information and set the
standards and recordkeepers would have to establish programs to comply.
In addition, Customs can periodically check to ensure that the
recordkeeper is continuing to follow the standards, with authority to
impose sanctions or hold the recordkeeper to a corrective action plan
if the standards are not being followed.
3. In the case of customs brokers, the requirement for ``approval''
is unnecessary. A more enlightened and reasonable approach can be found
in the Department of Commerce regulations at 15 C.F.R. 762.5 which
requires neither notice to, nor advance approval by, the Department of
Commerce but rather sets forth the requirements for which compliance is
expected, and the same should be true for Customs. If a broker cannot
produce the ``original'' or a ``copy'' of a document, which it is
required to maintain under Sec. 111.21, it is in violation of 19 U.S.C.
1641 and is subject to a penalty. The fact that a broker received
permission from Customs to make copies using a particular method will
not aid the broker when it cannot produce a requested record.
4. There should be provision for grandfathering-in existing
programs for alternative record storage methods that meet the standards
of these regulations.
Customs response: Customs does not entirely agree with the comment
made at point 1 above. In order to capture or encompass all possible
records, section 508(a) had to refer to ``electronically generated or
machine readable data'' along with other possible documents and
information. This does not per se constitute an approval of those
formats, nor does it constitute express authority to alter original
paper documents, records or information into such formats; it is merely
a recognition of existing data technology rather than an expression of
an unencumbered right regarding records maintenance methodology.
However, as stated above in connection with Sec. 163.5(a), Customs does
agree that, as a general principle, advance review and approval by
Customs should not be a prerequisite of alternative storage methods. In
order to accommodate this principle and also enhance the clarity of the
proposed text, Sec. 163.5, as set forth below, reflects the following
modifications in structure and content:
a. It is noted that, with the exception of paragraph (a) which sets
forth the basic rule regarding maintenance of original records, the
text of proposed Sec. 163.5 (that is, paragraphs (b) through (j))
related entirely to alternative records storage which operates as an
exception to the paragraph (a) rule. In order to more clearly reflect
the relationship between these provisions, Sec. 163.5 has been
reorganized into two paragraphs, with paragraph (a) corresponding to
proposed paragraph (a) and with paragraph (b) entitled ``alternative
method of storage'' and covering the remainder of proposed Sec. 163.5
but with a number of additional substantive changes as noted below.
b. Paragraph (b)(1) corresponds to proposed paragraph (b) and thus
sets forth general provisions regarding alternative storage methods.
The modified text, except in the case of records required to be
maintained as original records under laws and regulations administered
by other Federal government agencies (which requirements may not be
obviated by the Customs Regulations), (1) allows use of an alternative
method for records storage so long as the recordkeeper provides written
notification thereof to the Miami regulatory audit field office
(Customs believes that a single, centralized location should be used
for this purpose and that it should be the Miami office, for the same
reasons stated above as regards notification of consolidation of broker
records under Sec. 111.23) at least 30 calendar days before
implementation of the alternative method, (2) provides that the written
notice must identify the type of alternative storage method to be used
and must state that the alternative storage method complies with the
standards of paragraph (b)(2), and (3) provides for an exception to
alternative storage under certain circumstances if Customs at any time
instructs the recordkeeper in writing that records described therein
must be maintained as original records (this exception is necessary,
for example, to ensure consistency in the form, identification and
custody of records and could be applied whenever the records are
relevant to an ongoing inquiry or investigation or administrative or
judicial proceeding). Thus, there is no longer any reference to a
formal request and approval process, and the reference to the location
of a recordkeeping officer has been eliminated (see the changes
reflected in new paragraph (b)(2) as discussed below in connection with
the comments on proposed Sec. 163.5(c)).
c. As a consequence of the removal of the request/approval process
and based on a further internal review of the proposed texts, Customs
believes that it is neither necessary nor appropriate to retain the
following paragraphs of proposed Sec. 163.5: (1) proposed paragraph
(e), which concerned retrievability of records and is adequately
covered by Sec. 163.6; (2) proposed paragraph (g), which concerned
notification of noncompliance with the agreed-upon alternative storage
method and is no longer necessary since there will be no such specific
agreement between Customs and the recordkeeper; (3) proposed paragraph
(i), which concerned revocation of the alternative storage method
privilege and thus is no longer relevant; and (4) proposed paragraph
(j), which concerned appeal procedures for denial or revocation of the
alternative storage method privilege and thus also is no longer
relevant. As a result of the removal of these four proposed paragraphs
and the
[[Page 32933]]
reorganization of Sec. 163.5 as discussed above, proposed paragraphs
(f) and (h) have been redesignated as paragraphs (b)(3) and (b)(4) and,
for purposes of consistency with the notice procedures under modified
paragraph (b)(1) as discussed above, the new paragraph (b)(3) text as
set forth below has been modified to provide that notice of changes to
alternative recordkeeping procedures must be given to the Director of
the Miami regulatory audit field office. In addition, as a consequence
of the removal of the request/approval process, newly designated
paragraph (b)(4) has been modified as set forth below by the removal of
all references to requesting, granting and revoking alternative storage
method privileges. See also the below discussion of the comments on
proposed Sec. 163.5(c) for the treatment in this document of proposed
paragraphs (c) and (d). Finally, a new paragraph (b)(5) has been added
to provide that Customs may instruct a recordkeeper in writing to
discontinue its use of an alternative storage method if the
recordkeeper fails to comply with the conditions and requirements for
alternative storage set forth in Sec. 163.5 (this new paragraph is
addressed in more detail below in the comment discussion regarding
proposed Sec. 163.5(i)).
The substance of the comments made in points 2, 3, and 4 above have
been addressed by the changes described above.
Section 163.5(c)--Standards for Alternative Storage Methods
Comment: Seven commenters made general observations regarding the
approach of proposed Sec. 163.5(c) which provides examples of commonly
used methods for storage of records, sets forth a general rule
regarding what storage methods will satisfy Customs requirements, and
prescribes minimum standards that Customs will consider in evaluating
proposals for alternative storage methods. The points made by these
commenters were as follows:
1. One commenter stated that the examples of storage methods in the
first sentence of the introductory text of the section should be
expanded to include disc access storage devices (DASD) used for the
capture and storage of electronic transmissions, image storage devices
such as CD ROM juke boxes, voice recordings and full motion video in
computerized files.
2. One commenter stated that the Sec. 163.5(c) standards are too
intrusive in that they impose on private industry new sets of
procedures regarding business records. This commenter argued that since
companies regularly undergo independent financial audits that test
business record integrity and because the Mod Act was not intended to
hinge industry efficiencies on the good graces of Customs, importers
should not need Customs approval to use alternative storage techniques
for records kept in the ordinary course of business.
3. Four commenters objected to the minimum standards that Customs
will use to evaluate alternative storage proposals, arguing that the
proposed regulatory standards are too detailed and burdensome, are not
achievable by the great majority of importers and thus will discourage
use of alternative storage methods, are difficult to understand and
follow, and will lead Customs to micro manage the recordkeeping
programs of importing parties. Three of these commenters further
questioned whether Customs would have the resources necessary to manage
such alternative recordkeeping standards, and two of these commenters
also noted that Customs has permitted alternative methods or storage in
the past without imposing ``minimum standards'' and without major
problems arising therefrom. In order to address these problems, one of
the four commenters specifically recommended removal of the last
sentence of the introductory text of the section and removal of
subparagraphs (1) through (12) and inclusion of the substance of
subparagraph (13) as a second unnumbered paragraph, arguing that the
resulting text would represent a concise summary of the recordkeeping
program requirements for which no further detail is required.
4. One commenter argued, with specific reference to customs
brokers, that some of the ``minimum standards'' (i.e., subparagraph (9)
regarding segregation of duties and subparagraph (11) regarding
continuing surveillance over the medium transfer system), while well
suited to the handling and storage of ``top secret'' documents, are
largely inapplicable to a broker's customs records.
Customs response:
1. Customs disagrees. The specific storage methods listed are
intended to be illustrative rather exhaustive; therefore, Customs sees
no reason to add to that list. However, language has been added to the
first sentence of the text (redesignated as paragraph (b)(2) as set
forth below as part of the structural changes to Sec. 163.5 discussed
above in connection with the comments regarding proposed Sec. 163.5(b))
to clarify that the listed items are not all-inclusive.
2. Customs disagrees, except as regards the issue of needing
Customs approval as already discussed above in connection with proposed
Sec. 163.5(b). It is noted that alternative storage is voluntary and
not a requirement. Furthermore, alternative storage is concerned with
only those records involving Customs matters and accordingly does not
impose any additional burden on business as regards other records.
3. Based on these comments and the comments below regarding
individual standards for alternative storage methods (proposed
paragraphs (c)(1)-(13)), and as a result of further internal review of
the proposed paragraph (c) text, Customs has determined that a number
of additional changes should be made to the text of proposed paragraph
(c) of Sec. 163.5. These changes, as reflected in the text of
redesignated paragraph (b)(2) set forth below, are as follows:
a. In the last sentence of the introductory text of the paragraph,
the reference to minimum standards that will be considered by Customs
in evaluating proposals for alternative storage methods has been
replaced by a reference to standards that must be applied by
recordkeepers when using alternative storage methods, in order to
reflect the decision discussed above to do away with the requirement
for advance review and approval by Customs.
b. In order to simplify the procedures to be followed by, and thus
reduce the burden on, recordkeepers who choose to use alternative
storage methods, and in other cases in order to reduce the complexity
of the text where the proposed text in effect added nothing of
substance to the basic obligation to maintain records and make them
available to Customs, the following provisions that were contained in
proposed paragraph (c) have been entirely eliminated from new paragraph
(b)(2) as set forth below: Subparagraph (1), which concerned
recordkeeping officer designation; subparagraph (4), which concerned
documentation of data retention and transfer procedures; subparagraph
(5), which referred to a data transfer audit trail; subparagraph (6),
which provided for the integrity and nonerasability of the storage
medium; subparagraph (7), which concerned the maintenance of papers
regarding the transfer process; subparagraph (9), which concerned
internal control systems covering persons responsible for maintaining,
producing or transferring records; subparagraph (11), which concerned
medium transfer system surveillance and availability of
[[Page 32934]]
internal review files; and subparagraph (12), which concerned
procedures for preventing the destruction of hard copy records.
c. Proposed paragraphs (c)(2) and (c)(3) have been combined and
redesignated as paragraph (b)(2)(i), and the new text no longer
contains the proposed provisions concerning documentation of the
electronic media used and life cycle and disposition procedures,
certification regarding documents required by other agencies, and
showing that the medium to which the transfer will occur is reliable.
In addition, in the provision regarding having in place operational and
written procedures ``to ensure that the imaging and/or other media
storage process preserves the integrity, readability, and security of
the original records'', the words ``the information contained in'' have
been added before ``the original records'' in order to clarify that in
an alternative storage context the standard relates to what is
alternatively stored.
d. Proposed paragraph (c)(8) has been redesignated as paragraph
(b)(2)(ii) and the text has been modified to simply provide for an
effective labeling, naming, filing, and indexing system (thus, the
references to permitting easy retrieval in a timely manner and to where
the finding aids must be located have been eliminated).
e. Proposed paragraph (c)(10) has been divided into two new
paragraphs (b)(2)(iii) and (b)(2)(iv) which incorporate the following
changes to the proposed paragraph (c)(10) text: (1) in new paragraph
(b)(2)(iii), the requirement for maintenance of all original records
for a minimum of one year after the date of transfer has been replaced
by a requirement for maintenance of entry records (except packing lists
which, under Sec. 163.4(b)(2), do not have to be retained in any format
beyond 60 calendar days) in their original formats for 120 calendar
days, with the start of the 120-day period determined in the same
manner as in the case of that 60-day packing list retention period; and
(2) new paragraph (b)(2)(iv) merely provides that an internal testing
of the system must be performed on a yearly basis (thus, the new text
eliminates the quarterly testing standard and the prohibition against
destruction of original records after one year in the absence of proof
of accurate transfer of records).
f. Proposed paragraph (c)(13) has been redesignated as paragraph
(b)(2)(v) and the text has been modified by removing the reference to
parties who requested and were granted permission to use alternative
storage methods.
g. Finally, proposed paragraph (d) has been moved into paragraph
(b) as paragraph (b)(2)(vi) and the text has been modified as follows:
(1) the reference to parties who requested and were granted permission
to use alternative storage methods has been eliminated; and (2) the
requirement for retaining and keeping available two copies of the
records on approved media at different locations has been replaced by a
requirement for retaining and keeping available one working copy and
one back-up copy stored in a secure location.
4. The changes to the proposed texts discussed under point 3 above
effectively address the substance of this comment.
Section 163.5(c)(1)--Recordkeeping Officer and Back-Up Officer
Comment: The requirement to designate a recordkeeping officer and a
back-up officer should not apply to customs brokers who are licensed
and thus should be aware of their obligations regarding recordkeeping.
Customs response: The substance of this comment has been addressed
by the changes made to proposed Sec. 163.5(c) as discussed above.
Section 163.5(c)(2)--Operational and Written Procedures
Comment: A commenter stated that the purpose and intent of the
second sentence of this proposed section is unclear, asking in this
regard whether it is intended to require that other agency documents
required for Customs purposes be stored using the same procedures, or
whether it is intended to require that every recordkeeper in every
department of a corporation keep records using exactly the same
software, hardware and procedures. This commenter argued that if the
latter is the intent, the requirement is unreasonable and will prevent
any corporation of significant size from using an alternative storage
process.
Customs response: The substance of this comment has been addressed
by the changes made to proposed Sec. 163.5(c) as discussed above.
Section 163.5(c)(6)--Integrity of the Storage Medium
Comment: A commenter noted that during the life cycle of a document
management program, documents and data hopefully will evolve as time
passes from on-line to near-line and ultimately to tape storage, and
current documents and data will be kept on-line for quick access. This
commenter stated that proposed Sec. 163.5(c)(6) seems to provide that
hard-drive disk space cannot be reused when documents or data are moved
to tape storage and that, if so, the requirement is unacceptable and
unnecessary. This commenter questioned why Customs cares what happens
to the medium if the recordkeeper has a process in place to ensure that
the documents or data are not destroyed, discarded or written over.
Customs response: The substance of this comment has been addressed
by the changes made to proposed Sec. 163.5(c) as discussed above.
Section 163.5(c)(10)--One-Year Retention of Original Records
Comment: Ten comments were submitted on proposed Sec. 163.5(c)(10)
which provides that all original records be maintained for a minimum of
one year after the date of transfer, that internal sampling-exception-
reporting/testing of accuracy and readability must be performed on a
quarterly basis, and that no original records will be destroyed after a
year unless there is acceptable proof that the records are being
accurately transferred. The comments concerned primarily the 1-year
retention requirement and all commenters were opposed to the
requirement which they felt was excessively long, commercially
unrealistic, unnecessary, burdensome, costly, redundant and
unreasonable and thus should be removed. The following additional
arguments were made by these commenters in opposition to the proposed
provision:
1. If a failure to comply with recordkeeping requirements should
arise, Customs and the courts can impose penalties for failure to
maintain or produce records, and these avenues would seem to provide
Customs with more than adequate protection.
2. If the internal sampling-exception-reporting/testing of accuracy
and readability are performed, the records should be eligible for
destruction immediately after capture or at most after a 30-day
retention period.
3. It is not possible to comply with this provision as written.
Almost all forms of media can be destroyed. The requirements for
alternative media should be no more restrictive than for the media
being copied (paper).
4. There will always be, at a minimum, at least three copies of the
records available to Customs: the first copy will be records stored by
the alternative storage medium; the second copy will be the back up of
the alternative storage system; and the third copy will be the copy
maintained by the broker. Thus, there is no value in requiring the
importer to maintain the
[[Page 32935]]
hard copy version of the records when alternative storage media are
employed.
5. The requirement to test accuracy and readability on a quarterly
basis will also be burdensome to the trade. If the approved system is
reliable, a year-end check will suffice.
6. The guidelines and standards presented in Sec. 163.5 provide
stringent procedures for alternate storage methods in order to meet the
expectations of Customs, and those guidelines and standards should be
sufficient so as to obviate the redundant requirement of maintaining
the original records, the cost of which would be (for this one
commenter) approximately $32,000 per year. Therefore, Sec. 163.5(c)(10)
should be revised to read as follows: ``Upon receiving written approval
for alternate storage methods by the director of the regulatory audit
field office, original documents are not required to be maintained once
the transfer process has been successfully completed. Quarterly
sampling, exception reporting and testing of accuracy and readability
must be performed and documented.''
7. There should be no requirement to maintain paper documents in
addition to electronic records because: (1) section 637 of the Mod Act
states that electronic transmission of data must be certified by the
importer of record as to its accuracy and truth and thus each certified
transmission is as binding, and has the same force and effect, as a
signed paper document; (2) the proposed section assumes that paper
documents are the basis for all business transactions, but this is not
the case; and (3) if the purpose of maintaining hard copies is to
ensure that the electronic records are backed up, there are already
sufficient back-up procedures in that under Sec. 163.5(c)(13) there
must be a capability to make hard copies and under Sec. 163.5(d) two
copies of the records must be maintained in two separate locations.
8. If an electronic image of an invoice is satisfactory for Customs
purposes 366 days after the transfer from paper, then it should be
acceptable even one day after transfer.
9. If the purpose of the 1-year document retention requirement is
to permit quarterly testing and sampling, the requirement is
inappropriate. In a professionally managed imaging process, documents
are checked for quality more frequently than once a quarter. Typically,
one out of ten documents is checked for quality during the scanning
process so that, if a quality problem exists, no more than ten
documents need to be rescanned.
10. If the regulatory provision at issue cannot be deleted in its
entirety, it should at least be modified to permit the destruction of
paper documents sooner for those importers who exceed the quarterly
quality testing standard.
Customs response: The concerns reflected in these comments have
been largely addressed by the changes made to proposed Sec. 163.5(c) as
discussed above.
Section 163.5(d)--Retention of Approved Media Records
Comment: Three commenters objected to proposed Sec. 163.5(d) which
provides that parties who were granted permission to use alternative
storage methods shall retain and keep available two copies of the
records/information on approved media at different locations. One of
these commenters stated that the requirement is too intrusive, another
commenter questioned the need to retain two copies in a paperless
environment, and the third commenter alleged that the proposed
provision is so burdensome that it will discourage customs brokers from
electing to use alternative storage methods.
Customs response: The changes to the text of proposed Sec. 163.5(d)
(redesignated as Sec. 163.5(b)(2)(vi) as set forth below) that are
discussed above in connection with Sec. 163.5(c) include removal of the
requirement to retain copies at different locations. As regards the
requirement to retain two copies, Customs believes that retention of a
working copy and a back-up thereof is essential and consistent with
prudent business practice.
Section 163.5(e)--Retrievability of Records
Comment: One comment was received in regard to that portion of
proposed Sec. 163.5(e) that provides that a ``certified hardcopy'' may
be used when information is received and stored electronically for
Customs requests for information. This commenter argued that this
requirement is unreasonable because electronically-stored data is now
printed out in hard copy from mainframe systems every day for Customs
without certification being required, noting that Customs will have the
same remedies it now has (i.e., penalties, rate advances,
investigations) if the hard copy provided to Customs is incorrect. The
commenter also complained that the regulations do not set forth the
certification process and objected that any such process will add to
the expense of producing hard copies.
Customs response: The elimination of proposed Sec. 163.5(e), as
discussed above in connection with the comments on Sec. 163.5(b),
effectively addresses this comment.
Comment: Three commenters objected to the last sentence of proposed
Sec. 163.5(e) that provides that records shall be kept of the frequency
and to whom copies of the records were given. The points made by these
commenters were as follows:
1. The provision could be interpreted to mean that a separate
tracking and measuring system must be maintained. Typically, a customs
broker receives numerous and multiple requests for records from the
importer and/or Customs, and some requests are as simple as asking for
a copy of the import invoice to enable the importer to place the
broker's bill in line for payment. To maintain a separate tracking
system outside of an entry summary notation system for this type of
request is onerous and not economically justifiable and is an
unnecessary level of detail.
2. The reason or rationale for this requirement should be
explained. There is no such requirement for paper documents and,
clearly, it would be extremely burdensome and costly to the
recordkeeper with no apparent benefit to Customs or anyone else.
3. The requirement does not seem to have any usefulness to any
parties and would be excessively burdensome, particularly on customs
brokers operating from multiple locations. Customs should only be
interested in obtaining the documents it seeks in a timely manner. A
confidentiality requirement in the case of brokers already exists in
Sec. 111.24.
Customs response: Again, the elimination of proposed Sec. 163.5(e)
effectively addresses these comments.
Section 163.5(f)--Changes to Alternate Storage Procedures
Comment: It is unreasonable to require the approval of Customs
before making any changes to the alternative recordkeeping procedures,
and Customs will end up micro managing every one of these programs
without having the requisite resources for doing this. Significant
changes should be reported to Customs but, while it might be preferable
to report the changes before implementation, realistically there will
be times when this will not occur (what will happen when an importer
must make a change to ensure continued compliance, but Customs cannot
respond in a timely manner?). In the past, Customs tried to impose the
same type of procedure in the Foreign Trade Zone Procedure Manual and
found that it could not review and approve changes in a timely or
effective manner; as a result, the requirement was changed to provide
that the zone operator keep an
[[Page 32936]]
up-to-date manual available for Customs review. This is a more
practical and realistic approach.
Customs response: Customs agrees with regard to the issue of
advance Customs approval of changes, for the same reason that Customs
has agreed that initial advance approval of the use of alternative
recordkeeping methods is not necessary. However, as in the case of an
initial decision to use alternative storage methods, Customs believes
that advance notice to Customs is necessary when a change in
alternative storage procedures is made. Accordingly, the proposed
regulatory text (redesignated in this document as Sec. 163.5(b)(3) as
discussed above) has been modified to require written notification of
the change at least 30 calendar days before implementation of the
change.
Section 163.5(g)--Notification of Noncompliance
Comment: Five comments were received on proposed Sec. 163.5(g)
which provides that written notification of noncompliance with the
agreed upon alternative storage methods must be made to Customs within
10 business days and that the notification must detail what corrective
action will take place. The points made by these commenters were as
follows:
1. This regulation makes little sense in light of the fact that
proposed Sec. 163.5(f) will prove to be unworkable (viz. the above
comment on that section). Customs will be unable to approve every
change to these programs, and the burden on even the most diligent
recordkeeper will be wholly out of proportion to the benefit to be
derived by Customs. Customs and importers only are interested in the
failure to produce documents or data requested by Customs, and the
mission of Customs is to protect the revenue and ensure compliance with
the laws enacted by Congress. The proposed regulation creates an
unnecessarily stringent requirement which will likely result in
unnecessary disputes over whether notification was required in certain
situations and which will simply result in a waste of the resources of
importers and Customs without a counterbalancing benefit to either
side.
2. The absolute requirement of notification to Customs regarding
noncompliance gives rise to the concern that Customs is conceivably
requiring self-incrimination for criminal violations.
3. The 10-day requirement for notification to Customs is
unnecessarily short because, regardless of the time period specified
for notification, none of the newly generated records will be destroyed
since original records are to be maintained for at least one year under
proposed Sec. 163.5(c)(10). Since it may take much longer than ten days
to find out the scope of the problem and to determine what corrective
action to take, thirty (30) days would be a more appropriate time
period.
4. Two commenters stated that the required notification period
should run from the ``date of discovery'' by the recordkeeper.
Customs response: The elimination of proposed Sec. 163.5(g), as
discussed above in connection with the comments on Sec. 163.5(b),
effectively addresses these comments.
Section 163.5(i)--Revocation of Privilege To Maintain Alternative
Records
Comment: Two comments were received on proposed Sec. 163.5(i) which
provides for revocation of the privilege to use alternative storage
methods for failure to meet regulatory conditions and requirements,
states that the revocation is effective on the date of issuance of the
written notice of revocation and shall remain in effect pending any
appeal, and in the last sentence provides that revocation requires the
party immediately to begin to maintain original records and subjects
the party to penalties under Sec. 163.6 for failure to do so. The
points made by these commenters were as follows:
1. Taking a recordkeeper off the alternative method of storage
pending appeal is too restrictive and gives too much authority to a
field officer (the applicable regulatory audit field office director).
Customs should decide on a case-by-case basis whether the recordkeeper
should be taken off the program pending appeal and the decision to do
so should be made at Customs Headquarters, because often these are
nationwide programs involving tremendous investment.
2. With regard to the last sentence of the proposed text, proposed
Sec. 163.5(c)(10) already requires the maintenance of (original)
records. Since the effect of revocation will be to deny a party the
right to destroy records in favor of the alternative method of storage,
the last sentence should be revised to read as follows: ``Revocation
requires the party immediately to cease to destroy original records and
will subject such person to penalties provided for in Sec. 163.6 for
failure to do so.''
Customs response: While the elimination of proposed paragraph (i)
of Sec. 163.5, as discussed above, renders moot some of the specific
points made by these commenters, Customs believes that there must be
provision for preventing a recordkeeper from continuing to use
alternative storage procedures when the recordkeeper has failed to
comply with the regulatory standards for alternative storage, because
those regulatory standards have ongoing, rather than only initial,
relevance; new paragraph (b)(5) of Sec. 163.5 as mentioned above was
added for this specific purpose. The new paragraph (b)(5) text uses the
word ``may'' in order to ensure that written instructions to
discontinue alternative storage are issued on a case-by-case basis.
However, Customs remains of the view that any appropriate Customs
office should have authority to make the determination as to whether
such an instruction is necessary, similar to the procedure reflected in
the modified paragraph (b)(1) text discussed above and set forth below.
The new text does not set forth an appeal procedure but rather refers
to the availability of a more direct and expeditious procedure (that
is, the recordkeeper may give to Customs the 30-day notification of
[re-]initiation of alternative storage under paragraph (b)(1) once the
noncompliance situation has been rectified). As regards the last
comment, Customs believes that neither the proposed text nor the
replacement text suggested by the commenter is necessary.
Section 163.6(a)(1)--Production of Entry Records
Comment: Ten commenters made observations on proposed
Sec. 163.6(a)(1) which provides for written, oral, or electronic
requests by Customs for entry records, requires a written follow-up to
an oral request, provides for timely production of such records taking
into consideration the number, type and age of the item, sets forth a
table containing guidelines as to the maximum time Customs expects to
wait for the records (maximum period in business days, with reference
to the age of the entry/entry summary), and provides for the
recordkeeper to notify Customs if the recordkeeper believes that he
will not be able to meet the applicable production time period. All of
the commenters were concerned with the effect of the time limits on a
recordkeeper's ability to properly comply with a Customs request for
records. The various specific points made by these commenters were as
follows:
1. While the time periods specified in the table for producing
records might be suitable in the case of requests for single records or
small numbers of records, a large volume of records would require
[[Page 32937]]
more time to produce; thus, the time periods set forth in the table,
which are tied to the date of the entry/entry summary, are not suitable
when large numbers of records are involved. One commenter suggested
that large requests will increase as Customs moves toward an audit
basis of review and gave, as an example, a request for all files for a
specific product over a period of several years, which could involve
generating a program to search for particular files and printing a list
of those files and identifying them with entry numbers and file numbers
and then going to several locations to pull the information, possibly
involving hundreds of files.
2. Although the timetable set forth in the table is characterized
in the regulatory text as ``general guidelines'', experience shows that
this table would be treated by Customs field officers as a mandatory
and inflexible rule.
3. In the case of an entry/entry summary not more than one month
old, the 5-day period for producing a record is not enough time because
in the case of mailed written requests the postal delivery/receipt
process will consume most or all of that time. Also, the proposed
regulatory text is unclear as to whether the requested records must be
merely sent to, or be actually received by, Customs within the 5-day
period.
4. Where a request is made orally, the text should state (1) that
the oral request ``must'' (rather than ``will'') be followed by a
written request and (2) that the time period for producing the record
runs from the date of the written request as is the current practice
with Customs Forms 28 and 29.
5. Customs brokers in many instances receive requests for records
covering a year or more without reference to particular entry numbers
(e.g., a request for copies of all entries filed by an importer during
a particular time period), and brokers may also receive requests from
several Customs sources at the same time. Thus, guidelines are needed
to grant brokers substantially more time than the periods set forth in
the proposed regulation.
In addition, the following specific recommendations were made by
some of these commenters to address the general points made above:
a. The fourth sentence of the text and the table should be removed.
b. A uniform production date of 30 days should be established for
all documents except where extenuating circumstances require a shorter
or longer period.
c. The word ``maximum'' in the second column of the table should be
changed to read ``suggested''.
d. The word ``maximum'' in the second column of the table should be
changed to read ``normal''.
e. The word ``maximum'' in the fourth sentence of the text and in
the second column of the table should be changed to read ``expected''.
f. Increase the 5-day period in the table to ten days.
g. If the 5-day period in the table is to be retained, it should
run from the date a properly addressed request is received, and a
minimum of three days should be added to effect a response to a request
delivered by mail.
Customs response: 1. Customs agrees with the substance of this
comment and therefore has modified the proposed text (redesignated in
this document as paragraph (a) of Sec. 163.6 as a result of the removal
of proposed paragraph (a)(2) as discussed below) as follows: (1) by
removing the table at the end; (2) by specifying in the text a general
30-day maximum period for the production of the records unless Customs
prescribes a shorter period when the records are needed in connection
with a determination regarding the release or admissibility of
merchandise; and (3) by replacing the last sentence (regarding written
notice of an inability to meet the record production deadline) with a
text setting forth a procedure whereby a recordkeeper may make a
written or electronic request for approval of an additional period of
time to produce the entry records if the recordkeeper encounters a
problem in timely complying with the demand, which Customs would either
approve or deny based on the circumstances of the individual case. It
should be noted that in a case involving an admissibility or release
issue, a failure to produce the records within the period set by
Customs may result in a refusal by Customs to release the merchandise
(or issuance of a demand for return to Customs custody if release has
taken place). Moreover, it should be noted that, under the modified
text, the mere act of submitting a request to Customs for additional
time to produce entry records would preclude the imposition of monetary
penalties or other lawful sanctions for failure to comply with the
original demand only if the request for additional time is approved by
Customs. Finally, the word ``demand'' has been inserted in place of
``request'' throughout the paragraph (a) text in order to align on the
terminology used in the statute in the case of entry records.
Customs believes that the general 30-day response time, coupled
with the opportunity to obtain additional time to produce the entry
records if such additional time is warranted by the circumstances,
provides a more appropriate framework for the flexible approach that
Congress had in mind when the section 509 amendments were enacted, in
particular as regards the requirement in section 509(a)(1)(A) to
produce an entry record ``within a reasonable time after demand for its
production is made, taking into consideration the number, type, and age
of the item demanded.'' In this regard, Customs notes the following
statement contained in the relevant legislative history (H. Rep. 103-
361, 103d Cong., 1st Sess., at 116):
The Committee believes that the statute is relatively clear on
how factors such as ``number, type, and age of the item demanded''
will impact on the obligation to produce. A single request for a
single page document associated with a six-month old entry should be
produced within a matter of days. In contrast, the production of 50
commercial invoices from an equal number of entries that were filed
more than two years preceding the date of the demand obviously will
take longer to produce, and may take as much as two to four weeks,
depending on whether the records had to be retrieved from storage
and the method of storage. Again, if the Informed Compliance Program
works as the Committee intends, the Customs Service and the
importing public should be able to develop document production
schedules that do not impact adversely on the current business at
hand, but at the same time permit the Customs Service to verify the
accuracy of information directly related to one or more import
transactions.
It is expected that, as a result of experience gained while working
with the trade in applying the modified Sec. 163.1(a) text discussed
above and set forth below, Customs will be able to develop more
detailed guidelines for inclusion in an appropriate informed compliance
publication to further assist the public in this area.
2 and 3. The elimination of the table and the adoption of the 30-
day period, as discussed above, effectively addresses these comments.
4. Customs agrees with the first point and has replaced ``will'' by
``shall'' to clarify the mandatory nature of the text. Customs
disagrees with the second point because the date of initial
communication of the demand (whether oral or otherwise) should control.
In addition, the text has been modified to permit an ``electronic''
demand as a follow-up to an oral demand.
5. Customs believes that the concerns reflected in this comment
have been addressed by the revised text as discussed above and set
forth below.
Finally, Customs believes that the changes to the text discussed
above and reflected below effectively address the
[[Page 32938]]
specific recommendations made by these commenters.
Section 163.6(a)(2)--Previously Requested Records
Comment: Four comments were received on proposed Sec. 163.6(a)(2)
which concerns requests for records that include records previously
requested and provided to Customs and which requires that a
recordkeeper provide specific information regarding the record
previously requested and provided. The points made by these commenters
were as follows:
1. The word ``entry'' must be added to the text to modify the words
``record'' and ``records''.
2. The regulatory text should make clear that entry records
previously filed with Customs, irrespective of whether they were
specifically requested, are exempt from the new production request.
3. One commenter stated that the text needs to be restructured
because, although it requires the recordkeeper to provide a copy of the
Customs notice letter pertaining to the previous request, the beginning
of the text does not specify that the request by Customs must be in
writing. Three commenters argued that this provision places an
unnecessary burden on importers (including the need to review all
requests to see if a particular requested record had been previously
provided) and that the recordkeeper should not be required to ensure
that Customs coordinates effectively by providing Customs with a copy
of the letter which originally requested the record or the date it was
provided to Customs: the name and address of the Customs officer to
whom the record was provided should suffice.
Customs response: 1 and 3. Based on the comments received and as a
result of further internal review of the proposed texts, Customs agrees
that paragraph (a)(2) of proposed Sec. 163.6 is overly burdensome and
should be removed, and Sec. 163.6 as set forth below has been modified
accordingly. Thus, the textual changes suggested by these commenters
have been rendered moot by the removal of the paragraph.
2. Notwithstanding the removal of proposed paragraph (a)(2) as
discussed above, Customs must emphasize its disagreement with the
statement of this commenter. Entry records previously filed but
returned by Customs to the broker/importer are not exempt from the
production requirement. Moreover, whereas penalties under section
509(g) for a failure to produce demanded entry records may be avoided
if the records were presented to and retained by Customs at the time of
entry or were submitted to Customs in response to an earlier demand,
the avoidance of penalties does not affect the basic statutory
requirement to produce demanded entry records and Customs has other
enforcement tools that may be used in cases where section 509(g)
penalties are not applicable.
Section 163.6(b)--Penalties for Failure To Maintain or Produce Entry
Records
Comment: Three commenters submitted observations on this proposed
section. The points made by these commenters were as follows:
1. The word ``entry'' should modify the word ``record'' throughout
the text since that is the term of reference, and the reference to
``paragraph (b)(2)'' in paragraph (b)(1) should read ``paragraph
(b)(4)''.
2. The final regulations should confirm (1) that (a)(1)(A) list
records are the only documents whose nonproduction can result in
Sec. 163.6 penalties, (2) that importers of record (or designated
recordkeepers) are the only persons required to maintain (a)(1)(A) list
documents, and (3) that importers of record (or designated
recordkeepers) are the only persons who can be subjected to Sec. 163.6
penalties.
3. Sliding scale guidelines are needed in this area. For example,
if a document is insignificant and satisfactory information can be
provided by other means to satisfy the production requirement, there
should be no penalty.
4. There is a danger that Customs officers will construe this
proposed section as a license to assess the maximum penalties specified
by law whenever (a)(1)(A) list documents are not produced within the
time periods specified in Sec. 163.6(a), including in instances in
which a failure to comply with a lawful request for documents resulted
from non-negligent inadvertence, including a failure on the part of
Customs to notify the person in the company primarily responsible for
recordkeeping and to impress upon the company the importance of the
request. In order to avoid these problems, before a penalty is assessed
Customs should establish clearly defined procedures ensuring that the
demand for documents was properly made and received and that the
company recognizes the severe consequences of noncompliance; these
guidelines should be codified in the regulations, and if Customs does
not follow the specified procedures it should be precluded from
penalizing a company for failure to produce records in a timely manner.
In addition, the regulations should provide that any penalties assessed
will be mitigated to nominal amounts, as specified in the regulations,
if the records are provided to Customs during the course of the penalty
proceeding; it is critical for Customs to distinguish situations in
which the information was not maintained from situations in which the
required information was maintained but for one reason or another not
presented to Customs in a timely manner, similar to the way that
Customs has published guidelines for mitigating ``late filing''
penalties.
5. With regard to proposed paragraph (b)(2) which permits
reliquidation and denial of special (column 1) rate of duty status for
an entry liquidated within two years of a demand for a record that was
not properly produced, one commenter requested that this provision be
removed and made the following specific observations in this regard:
(1) the proposed text must be consistent with NAFTA claims since denial
of NAFTA status requires the United States to adhere to the NAFTA
Agreement and NAFTA regulations, and Customs recordkeeping requirements
clearly cannot override U.S. international obligations; and (2) the
(a)(1)(A) list includes ``GSP declaration (plus supporting
documentation)'' but without defining the supporting documentation so
that Customs has total discretion as to the nature of documents
necessary to support GSP claims, and thus Customs has effectively
rendered meaningless the liquidation of entries of merchandise at the
special GSP duty rate.
6. Also with regard to proposed paragraph (b)(2), a commenter
referred to a situation in which an entry was liquidated as entered and
the entered classification did not involve a column 1 special rate of
duty and, after a demanded record is produced, Customs finds a
misclassification of the goods; this commenter asked whether Customs
could reliquidate the entry for the change in classification.
7. With regard to proposed subparagraph (b)(4)(iv), it is too
restrictive to provide an exemption from these heavy penalties for just
the first willful violation because in some cases there can be multiple
violations arising out of one general negligent act. In addition,
provision should be made for the volume of records required to be kept,
with more room for error being given to very large firms with multiple
locations. Moreover, there should be a time limit allowing renewal of
exempt status, such as allowing one mistake every year or every two
years depending on the size of the recordkeeper.
[[Page 32939]]
Customs response: 1. Customs agrees. The word ``entry'' has been
added throughout Sec. 163.6(b) and elsewhere in the Part 163 texts as
set forth below wherever the context clearly relates to entry records,
and the erroneous reference to paragraph ``(b)(2)'' has been corrected.
2. Customs disagrees with the suggested changes. The regulations
already provide for penalties only for nonproduction of entry records.
Importers of record are not the only parties required to maintain and
produce entry records, nor are they the only parties who may be subject
to Sec. 163.6 penalties. Customs does not have the authority to
promulgate regulations that are inconsistent with the statutory
requirements.
3. Customs disagrees. The ``sliding scale guidelines'' are more
appropriate to mitigation guidelines. As regards the example provided,
it was reflected in proposed Sec. 163.6(b)(4)(ii) (Sec. 163.6(b)(3)(ii)
as set forth below) as one of the bases for avoidance of penalties.
4. The reason for the substantial statutory penalties is to impress
upon recordkeepers the importance of maintaining and producing records
and speaks more eloquently to the issue than any narrative attempt by
Customs. Customs Headquarters will exercise tight control over the
imposition of recordkeeping penalties and, until Customs gains some
experience in administering this penalty provision, no such penalty
will be issued without prior Headquarters review and approval. Customs
is preparing mitigation guidelines to cover recordkeeping penalties;
however, Customs does not have authority to promulgate regulations that
are inconsistent with the basic statutory requirements to maintain
entry records and produce them pursuant to a demand from Customs.
Finally, the changes to Sec. 163.6(a) discussed above will eliminate
much of the source of the concerns reflected in this comment.
5. Customs agrees that regulations, standing alone, cannot override
U.S. international obligations, but Customs does not agree that these
recordkeeping regulations override the NAFTA and the regulations
thereunder in any respect. Moreover, even if there were a conflict
between the NAFTA and the Part 163 provisions, the latter would prevail
to the extent that they reflect the requirements of sections 508 and
509 (see 19 U.S.C. 3312(a)). As regards the GSP, the Customs
requirements regarding evidence to support a claim for free entry under
the GSP are contained in Secs. 10.171-10.178 of the Customs Regulations
and continue in effect. Neither the Part 163 regulatory texts nor the
(a)(1)(A) list would have the effect of amending or superseding those
regulations. The (a)(1)(A) list is merely a convenient summary list of
existing entry requirements.
6. Since the record in the example was produced, the provisions of
Sec. 163.6(b)(2) would not apply. As to whether Customs could
reliquidate the entry to correct the classification error, it would
depend on whether the liquidation was final. If it was, the government
could only collect increased duties pursuant to 19 U.S.C. 1592(d) and
only if a violation of 19 U.S.C. 1592(a) was involved.
7. Customs does not agree that the subparagraph is too restrictive,
and it is noted in this regard that the regulatory text reflects the
terms of the statute (section 509(g)(7)(A)). Nor does Customs believe
that a graduated scale should be made for the volume of records
required to be kept by large firms with multiple locations. It is noted
that the statute (section 509(a)(1)(B)) provides that a person ``may be
subject to penalty under subsection (g)'' if the person fails to comply
with a demand for entry records. The statute and the legislative
history relating thereto make it clear that imposition of penalties for
failure to comply with a demand for entry records is discretionary with
Customs, not mandatory.
In addition to the changes discussed above, the following changes
have been made to the text of Sec. 163.6(b) as set forth below:
a. Paragraphs (2) and (3) have been merged into one paragraph (2),
with proposed paragraph (2) set forth as subparagraph (2)(i) and titled
``general'' and proposed paragraph (3) set forth as subparagraph
(2)(ii) and titled ``exception,'' and proposed paragraphs (4)-(7) have
consequently been redesignated as paragraphs (3)-(6).
b. In redesignated subparagraph (3)(iv), which concerns avoidance
of penalties by persons who participate in the Recordkeeping Compliance
Program, a reference to being ``generally in compliance with * * *
that program'' has been added to reflect the terms of the statute
(section 509(g)(7)(A)(ii)).
c. Redesignated paragraph (6) has been redrafted to more closely
reflect the terms of the statute (section 509(g)(6)) as regards the
relationship between the imposition of penalties and the issuance of a
summons and in order to avoid the impression given by the proposed text
that the issuance of a summons is in the nature of a sanction.
Section 163.6(c)(2)--Notice of Examination of Records
Comment: This proposed section states that the notice of intent to
examine records may be provided ``electronically, orally or in
writing''. However, when notice is provided orally, provision must be
made for the oral request to be followed by a written request.
Customs response: Customs does not agree with this suggestion in
the case of non-entry records because the need to examine specific
records under Sec. 163.6(c)(2) could arise during the course of an on-
site inquiry, compliance assessment, audit or investigation, in which
case the requirement for a written follow-up notice would be
impractical. However, Customs agrees with the suggestion insofar as
entry records are concerned because there is no basis under the statute
for making a distinction in this regard between entry records demanded
under paragraph (a) and entry records examined under paragraph (c) (see
the below discussion of the changes that Customs has made to the text
of Sec. 163.6(c)(2)).
Based on a further internal review of the proposed text, Customs
has made the following substantive changes to the text of
Sec. 163.6(c)(2) as set forth below:
a. A reference to ``entry or other'' records has been added to
clarify that, consistent with the statutory provision on which
Sec. 163.6(c) is based (that is, section 509(a)), the examination of
records applies equally to entry records.
b. The words ``, statements, declarations, or other documents''
have been removed after the word ``records'' because they are covered
by the Sec. 163.1(a) definition of ``records'' and thus are redundant.
c. The word ``reasonable'' has been added as a modifier of
``notice'' in order to reflect a basic standard contained in the
statute (that is, section 509(a)(1)).
d. A new sentence has been added at the end to clarify that the
notice and production procedures under paragraph (a), and the penalties
or other actions under paragraph (b) for failure to produce, apply to
the examination of entry records under this provision.
Section 163.10(e)--Stay of Summons
Comment: The proposed text did not explain the process by which an
owner, importer, etc., would issue a stay of a summons. The procedure
should be described in detail so that the affected persons will know
how to issue such a stay.
Customs response: The procedures whereby an owner, importer, etc.
would issue a stay of compliance with a
[[Page 32940]]
summons were clearly set forth in paragraph (c) of proposed Sec. 163.10
(which has been redesignated as Sec. 163.8 as discussed below). In
order to clarify the application of the regulatory texts, the paragraph
(e) text as set forth below has been modified by the addition of a
reference to issuance of a stay ``in accordance with paragraph (c) of
this section''.
Based on a further internal review of the summons and related
provisions of proposed Secs. 163.7-163.12, Customs has determined that
the following changes should be made to the proposed texts:
a. Although proposed Secs. 163.7-163.9 followed the 3-section
approach of present Part 162, Customs now believes that it would be
preferable to combine these three sections into one section for the
following reasons: (1) The three sections all deal with various aspects
of essentially one subject, that is, the basic procedures regarding the
issuance and execution of a summons; and (2) a single-section approach
will assist in drawing the necessary distinction between these normal
procedures and the special procedures for third-party recordkeepers
covered by the next section. Accordingly, the three proposed sections
have been redesignated in the Part 163 texts set forth below as
Sec. 163.7, with proposed Sec. 163.7 covered by paragraph (a), proposed
Sec. 163.8 covered by paragraph (b), and proposed Sec. 163.9 covered by
paragraph (c). In addition, because paragraph (b) of proposed
Sec. 163.7 (which concerns the transcript of testimony under oath) was
clearly out-of-place (context), it has been moved to the end of new
Sec. 163.7 as paragraph (d). As a consequence of the adoption of the
one-section approach for proposed Secs. 163.7-163.9, the remaining
sections of Part 163 (that is, Secs. 163.10-163.15) have been
redesignated below as Secs. 163.8-163.13.
b. In paragraph (a) of new Sec. 163.7: (1) The first sentence of
the introductory text has been modified by the addition of a reference
to issuance of a summons requiring a person ``within a reasonable
period of time to appear before the appropriate Customs officer,'' in
order to more closely reflect the terms of the corresponding statutory
provision (section 509(a)(2)); and (2) in subparagraph (2), the words
``Canada or Mexico pursuant to the North American Free Trade Agreement
Implementation Act (19 U.S.C. 3301(4)'' have been replaced by ``a NAFTA
country as defined in 19 U.S.C. 3301(4),'' again in order to more
closely track the corresponding statutory provision (section
509(a)(2)(A)(ii)).
c. In paragraph (b) of new Sec. 163.7, subparagraph (1)(ii) has
been modified by the addition of a reference to the address ``within
the customs territory of the United States,'' in order to reflect the
terms of the statute (section 509(a)(2)).
d. The text of paragraph (a) of redesignated Sec. 163.8 (third-
party recordkeeper summons) has been modified to refer to testimony
relating to ``records pertaining'' to transactions of a person, in
order to reflect the terms of the statute (section 509(d)(1)(B) and
(d)(2)(B)).
e. In paragraph (e) of redesignated Sec. 163.8, the three
references to the taking of testimony have been removed because the
statute (section 509(d)(6)) mentions (that is, precludes) only the
examination of records in this context.
f. In the introductory text of paragraph (f)(3) of redesignated
Sec. 163.8, a reference has been added to ``the stay of compliance
provisions of paragraph (c),'' because the judicial determination
exception in the statute (section 509(d)(7)) is not limited to the
notice provisions.
g. In redesignated Sec. 163.9 (enforcement of summons), a sentence
has been added at the end to state that a person who is entitled to
notice under Sec. 163.8(a) shall have the right to intervene in the
enforcement proceeding. This new sentence reflects the terms of section
509(d)(5)(A) and, by being limited to a person entitled to notice, also
reflects the exception contained in section 509(d)(7).
Section 163.13--Regulatory Audit Procedures
Comment: Three comments were submitted in regard to this proposed
section. One commenter specifically stated its support for proposed
paragraph (a)(9) which requires Customs auditors to send a copy of the
formal written audit report to the person audited within 30 days
following completion of the audit. The other two commenters expressed
disappointment with the overall content of proposed Sec. 163.13 and
made the following points with regard to what they felt was missing
from, and thus should be added to, the proposed text:
1. The proposed text sets forth only vague procedures to be
followed by auditors, sets few time limits regarding the conduct of an
audit, and provides for no direct consequences (sanctions) on the audit
or the auditor for failing to adhere to the procedures or time limits
that are provided. Thus, in effect, the proposed section does little
more than repeat the provisions of 19 U.S.C. 1509(b).
2. For the new importer or an importer that has never been
subjected to a regulatory audit, the proposed text fails to explain the
purpose of a regulatory audit and does not distinguish between a
compliance assessment and a full audit.
3. The proposed text does not specify what information will be
required and does not outline the rights and obligations of the
parties.
Customs response: 1. Customs disagrees and believes the regulatory
provisions appropriately serve the intended purpose.
2 and 3. Customs believes that the Part 163 texts as set forth
below (in particular, the definitions of ``audit'' and ``compliance
assessment'' in Secs. 163.1(c) and (e), the provisions regarding the
examination of records in Sec. 163.6, and the provisions of this
section which has been redesignated as Sec. 163.11 as discussed above)
provide adequate basic guidance regarding these issues. Moreover, to
the extent that more detailed guidance is required, other published
agency guidelines and procedures are, or will be, made available (for
example, cat kits, standard operating procedures, and audit manuals).
In the light of the modified definition of ``compliance
assessment'' as discussed above (in which a compliance assessment is
described as a type of importer audit but is no longer described as the
first phase of an audit), and based on a further internal review of the
proposed regulatory text, a number of changes have been incorporated in
redesignated Sec. 163.11 as set forth below. The majority of these
changes are based on the view of Customs that, notwithstanding the fact
that the term ``audit'' technically encompasses a compliance
assessment, and consistent with current Customs practice, the statutory
procedures applicable to full audits (that is, notice and time
estimates, entry and closing conferences, and preparing and providing a
copy of a formal written report) should be reflected specifically and
succinctly in the regulations as applying equally to compliance
assessments which are often performed independently of other audit
procedures. The changes in question are as follows:
a. The section title has been modified to read ``compliance
assessment and other audit procedures'', and throughout the section
text each separate reference to an ``audit'' or to a ``compliance
assessment'' has been replaced by a reference to a ``compliance
assessment or other audit.''
b. The words ``which does not include a quantity verification for a
customs bonded warehouse or general purpose
[[Page 32941]]
foreign trade zone or an inquiry,'' which are definitional in nature,
have been removed from the introductory text of paragraph (a), and
equivalent phraseology has been included in the definition of ``audit''
in Sec. 163.1(c) but without any reference to an ``inquiry'' (see the
above discussion regarding the addition of a new definition covering
this term).
c. Although subparagraphs (a)(1) (regarding notice and time
estimates), (a)(2) (regarding the entry conference) and (a)(3)
(regarding additional time) remain essentially the same except for the
textual change (use of the expression ``compliance assessment or other
audit'') discussed above, the remainder of proposed paragraph (a) has
been reorganized into three subparagraphs (a)(4) through (a)(6) in
order to avoid repetitive text and otherwise simplify the text and in
order to make clear the equal applicability of the subject procedures
to all audit procedures (including compliance assessments). New
subparagraph (a)(4) covers closing conferences, new subparagraph (a)(5)
concerns the preparation of reports, and new subparagraph (a)(6)
concerns sending a copy of the report.
d. The order of proposed paragraphs (b) (exceptions) and (c)
(petitions regarding failure to hold a closing conference) has been
reversed because the exceptions include, and thus should follow, the
petition provision.
e. The reference in proposed paragraph (b) to paragraphs ``(a)(4)
through (a)(6) and (a)(8) through (a)(9) and (c)'' has been modified in
the paragraph (c) text of Sec. 163.11 set forth below to read ``(a)(5),
(a)(6) and (b)'' in order to properly reflect the exceptions in the
statute (section 509(b)(5), which refers to paragraphs (3) and (4) but
not to paragraph (2) which concerns entry and closing conferences) and
in order to reflect the simplified paragraph (a) structure discussed
above.
Section 163.14--Recordkeeping Compliance Program
Comment: Six commenters made the following points regarding this
proposed section:
1. Customs does not have the resources necessary to grant the
number of requests to become certified recordkeepers that will come in
under the program. Customs may wish to allow customs brokers (the only
persons licensed and regulated by Customs) to handle these requests and
audit parties participating in the program. Customs could then audit
the customs brokers' processes in providing these suggested services.
2. There is no concrete benefit for companies to enter into the
certification program. A blanket waiver from all penalties (except
perhaps those resulting from the intentional destruction of records)
would be a more meaningful inducement for companies to enter the
program. If a participant fails to meet the level of service required
by the certification program, the participant would be given a warning
notice or have its certification revoked.
3. One commenter stated that while the Recordkeeping Compliance
Program concept is good, the proposed benefits are less than what would
be expected for the time and effort to establish and maintain such a
program because the proposed text appears to grant one violation
whereby mitigation would be considered, and thereafter suspension or
removal of participation would result and without further consideration
for mitigation of monetary penalties; even a ``three strikes and out''
law appears to be less severe on violators. Based on similar reasoning,
another commenter recommended that the following new sentence be added
after the first sentence of paragraph (b) of this proposed section:
``The participant is also eligible for reduction or cancellation of any
liquidated damages assessments or penalties arising under 19 U.S.C.
1592 or 1641 for failure to produce certain records.''
4. The Recordkeeping Compliance Program must be limited to
(a)(1)(A) entry records because the quid pro quo of the program is the
avoidance of penalties for failure to produce demanded entry records;
thus, the program should not apply to records kept in the ordinary
course of business. In this regard, some of the program requirements
take on a radically burdensome character when applied to ordinary
business records. For example, proposed paragraph (a)(3)(iv) requires
the participant to have procedures in place regarding the preparation
and maintenance of required records and the production of such records
to Customs. Thousands of hours would be required for a Fortune 500
company to comply with this requirement because of the extensive nature
of its financial accounting recordkeeping systems.
5. Proposed paragraph (a)(3)(vi) should be revised to read as
follows: ``(vi) Have a record maintenance procedure which complies with
the requirements of Customs and other federal agencies whose
regulations apply to the import transactions.'' This change will
simplify the text and also recognizes that an importer may be subject
to other related regulatory recordkeeping requirements.
6. Two commenters criticized proposed paragraph (a)(3)(vii) which
requires program participants to disclose to Customs variances to, and
violations of, the program requirements and to take corrective action
when notified by Customs of any such variances or violations. One
commenter complained that it creates the potential for self-
incrimination and eliminates the voluntary nature of prior disclosures
of violations pursuant to the civil penalty statute; this commenter
argued that acceptable procedures should merely require that the
recordkeeper consult with legal counsel and take remedial steps that
may include Customs notification. The other commenter stated that the
recordkeeper should be allowed a reasonable time after discovery to
correct the error before reporting to Customs; the recordkeeper would
still be obliged to report the error to Customs and Customs may still
take appropriate action if not satisfied with the corrective action
taken by the recordkeeper.
7. The Recordkeeping Compliance Handbook referred to in this
proposed section should be part of the regulatory text or should be
posted on the Customs Internet web site.
Customs response: 1. Customs disagrees. Customs has adequate
resources to process applications for the Recordkeeping Compliance
Program. Moreover, since Customs will be performing the investigations
and compliance assessments, audits and other inquiries, it is only
appropriate that Customs retain the approval authority for this program
and not delegate it to private concerns.
2. Customs disagrees. The regulatory text provides for issuance of
a notice in lieu of a penalty for the first violation, and Customs
considers this to be a reasonably concrete benefit. A blanket waiver
would not be feasible and would be unwarranted since the statute
(section 509(g)(7)(A)) specifically provides for an alternative to
penalties only if the violation is not a repeat or willful violation.
3. Customs disagrees. The proposed text did not limit mitigation
under 19 U.S.C. 1618 to the first violation. Moreover, the regulatory
text permits, but does not mandate, removal from the program. The
suggested additional sentence would be inappropriate since it goes
beyond the authority conferred on Customs by the statute.
Based on a further review of the proposed regulatory text, Customs
has concluded that it is redundant, and thus unnecessary, to refer to
penalty mitigation in this regulatory context because the opportunity
for mitigation
[[Page 32942]]
is in theory available to any person under section 509(g)(5) and 19
U.S.C. 1618 without regard to whether the person is a participant in
the Recordkeeping Compliance Program; the text of the opening paragraph
of proposed Sec. 163.14 (redesignated below as Sec. 163.12 as discussed
above) has been modified accordingly. In addition, a new sentence has
been added at the end of that opening paragraph to clarify that
participation in the Recordkeeping Compliance Program has no limiting
effect on the authority of Customs to use other legal means (summons,
court order, etc.) to compel a participant to produce records.
4. Customs agrees that a recordkeeper's quid pro quo for
participating in the Recordkeeping Compliance Program (that is, having
an alternative to a penalty for failure to produce a demanded record)
only has reference to entry ((a)(1)(A) list) records, and appropriate
references to ``entry'' records have been added to the text of
redesignated Sec. 163.12 to clarify this point. However, this does not
mean that a recordkeeper's responsibilities or obligations under the
Recordkeeping Compliance Program relate only to ``entry records.'' In
this regard, the importing community is reminded of the requirement to
make, keep, and render for examination and inspection business,
financial and other records (including, but not limited to, statements,
declarations, documents and electronically generated data) which
pertain to any activity specified in the statute (section 508(a) and
(b)) and in the regulations (Sec. 163.1(a)(2)); both the statute
(section 509(f)(2)(A)-(F)) and the implementing regulations
(Sec. 163.12(b)(3)(i)-(vi)) set forth Recordkeeping Compliance Program
certification criteria involving recordkeeping standards that clearly
relate to records in this broad sense rather than only in the narrower
context of ``entry records.'' Thus, whereas a failure to properly
maintain and produce a particular record will not always constitute a
violation giving rise to a potential liability for section 509(g)
penalties, such a failure nevertheless would always be relevant to the
issue of whether a recordkeeper may participate in the Recordkeeping
Compliance Program.
5. Customs does not believe that it is necessary or appropriate to
refer to the requirements of other government agencies in this context.
6. Customs disagrees. The reporting of recordkeeping violations
under the Recordkeeping Compliance Program does not affect the
voluntary nature of prior disclosures. The regulatory text in question
merely reflects the terms of the statute (section 509(f)(2)(F)).
7. Customs does not agree that the Recordkeeping Compliance
Handbook (which is merely for guidance purposes) should be included
within the regulatory texts. However, the Handbook will be posted to
the Customs internet web site (www.customs.ustreas.gov) and will be
available through the Customs Electronic Bulletin Board (703-921-6155).
Based on a further internal review of the proposed regulatory texts
and as a result of other changes made to the proposed texts as
discussed above, Customs has determined that a number of additional
changes should be made to the Recordkeeping Compliance Program
provisions of redesignated Sec. 163.12 and proposed Sec. 163.15
(redesignated as Sec. 163.13 as discussed above). These changes,
reflected in the texts set forth in this document, are as follows:
a. As a consequence of the changes to the definition of ``certified
recordkeeper'' and the removal of the definition of ``certified
recordkeeper's agent'', all references to agents of certified
recordkeepers, and all textual discussions of such agents, have been
removed.
b. As a consequence of the removal from Sec. 163.5 of the
requirement for Customs approval of alternate storage methods, all
references to ``approved'' alternate storage methods have been replaced
by references to ``adopted'' alternate storage methods.
c. In redesignated Sec. 163.12, the following organizational
changes have been made: (1) The introductory text has been designated
as paragraph (a) and proposed paragraph (a) has been redesignated as
(b); (2) proposed paragraph (b), which concerned benefits of
participation, has been redesignated as paragraph (d) and has been
reheaded ``alternatives to penalties''; (3) the discussion of the
Customs Recordkeeping Compliance Handbook has been moved from paragraph
(c) to paragraph (b)(2) since it relates to application procedures, and
the paragraph (c) heading has been modified to refer to application
``review''; and (4) in redesignated paragraph (b)(3), which concerns
certification requirements, the first listed requirement (proposed
subparagraph (i) concerning compliance with the Customs Recordkeeping
Compliance Handbook) has been moved into the introductory text and the
remaining listed requirements have been renumbered accordingly.
d. In redesignated Sec. 163.12(b)(1), the reference ``Sec. 163.2(a)
and (c)'' has been changed to read ``Sec. 163.2(a)'' to conform to the
statute (section 509(f)(1)) which, in identifying who may participate
in the program, refers only to ``parties listed in section 508(a).''
The recordkeepers described in Sec. 163.2(c) (preparers and signers of
NAFTA Certificates of Origin) are mentioned in section 509(b) and thus
are outside the scope of the statutory (and, thus, regulatory)
provisions in question. In addition, the second sentence of the
proposed text (regarding the voluntary nature of program participation)
has been removed because it repeats what has already been said in the
preceding paragraph.
e. In redesignated Sec. 163.12(b)(3), all references to an
``agreement'' between Customs and the participant have been removed
because no separate agreements will exist.
f. The texts of redesignated Secs. 163.12(c)(1) and (c)(2) have
been modified to clarify that the Miami regulatory audit field office
will also be responsible for reviewing and approving the application
and issuing the certification.
g. In redesignated Sec. 163.12(d)(1), the following changes have
been made: (1) The first sentence of the text as proposed (proposed
Sec. 163.14(b)(1)) has been eliminated because the benefits of the
program have already been stated earlier; (2) in the first sentence of
the text below, a proviso has been added regarding general compliance
with the procedures and requirements of the program in order to reflect
the terms of the statute (section 509(g)(7)(A)(ii); and (3) in the last
sentence regarding the application of sanctions, the references to ``no
attempt to correct deficiencies'' and to ``a failure to exercise
reasonable care'' have been removed, and a reference to removal of
certification ``until corrective action satisfactory to Customs is
taken'' has been added at the end in order to reflect the terms of the
statute (section 509(g)(7)(A)).
h. In redesignated Sec. 163.12(d), a new subparagraph (3) has been
added to reflect the requirement in the statute (section 509(g)(7)(C))
that a program participant who has received a notice of violation must
notify Customs within a reasonable time regarding the steps that have
been taken to prevent a recurrence of the violation.
i. In addition to the changes noted above, redesignated Sec. 163.13
as set forth below has been extensively modified (1) by providing for
``removal'' of certification in place of ``suspension'' or
``revocation'' of certification, (2) by adding a new paragraph (b) text
to set forth specific grounds and procedures for denial of an
application for
[[Page 32943]]
certification which were missing from the text as proposed, (3) by
revising the list of grounds upon which a certification removal action
may be based to conform to other changes made to the proposed texts by
this document and to reflect more closely the standards that are
applied in other regulatory contexts involving the removal of
privileges previously granted by Customs, and (4) by joining the denial
appeal provisions with the removal appeal procedures in paragraph (d)
and adding a 30-day appeal period for removal appeals to align on the
appeal period prescribed for denial appeals. Thus, under the modified
Sec. 163.13 text, paragraph (a) consists of a general statement
referring to certification denial and removal actions, paragraph (b)
sets forth certification denial procedures, paragraph (c) concerns
certification removal, and paragraph (d) concerns the appeal of
certification denial and removal. Finally, the texts in new paragraphs
(b) and (c) have been modified to specify that both initial
application/certification denials and initial certification removal
actions are taken by the Director of the Miami regulatory audit field
office, and the text of new subparagraph (c)(3), which concerns the
effect of removal actions, has been modified to limit the circumstances
in which a removal action will take effect upon issuance of the notice
(thus, in most cases the action will be effective only after the appeal
procedure has been concluded).
Appendix to Part 163
Although several comments were received with regard to the
(a)(1)(A) list which was set forth in the Appendix to proposed new Part
163, Customs believes that such comments should be dealt with not in
this document but rather in connection with the overall review of the
(a)(1)(A) list referred to in the notice published in the Federal
Register on December 24, 1996 (61 FR 67872). Accordingly, the Appendix
to Part 163 as set forth below reflects the (a)(1)(A) list as
previously published except for two changes thereto which are necessary
in order to reflect amendments to the Customs Regulations that were
adopted after initial publication of the (a)(1)(A) list. These changes
involve the following: (1) Replacement of the listings for Secs. 7.8(a)
and 7.8(b) by a listing for Sec. 7.3(f), in order to reflect the
revision and redesignation of former Sec. 7.8 effected by T.D. 97-75
(published in the Federal Register on September 3, 1997, 62 FR 46433);
and (2) the addition of a listing for Sec. 12.140 which was added by
T.D. 97-9 (published in the Federal Register on February 26, 1997, 62
FR 8620) and which requires the submission of specific new information
in connection with the entry of certain softwood lumber products from
Canada.
Additional Changes to the Regulations
In addition to the changes to the proposed regulatory texts
identified and discussed above in connection with the public comments,
Customs has made numerous editorial, nonsubstantive changes to the
proposed texts (in most cases involving wording, punctuation or
structure) in order to enhance the clarity, readability and application
of the regulatory texts. Furthermore, following publication of the
proposed regulatory texts, Customs discovered that a number of other
changes to other provisions of the Customs Regulations, that are
necessary in order to ensure conformity with the new Part 163
provisions, were inadvertently omitted from the published proposals.
These additional conforming regulatory changes have therefore been
included in this final rule document and are summarized below:
Part 19
On April 3, 1997, a final rule amending Part 19 of the Customs
Regulations (19 CFR Part 19) in regard to duty-free stores was
published in the Federal Register (62 FR 15831). The final texts
included a revision of Sec. 19.4 which, in paragraph (b)(4)(i)(B), sets
forth a requirement to retain all records ``defined in Sec. 162.1(a),''
which section is being removed by this document in favor of the
definition in new Sec. 163.1(a); accordingly, this document corrects
that paragraph (b)(4)(i)(B) section reference to read
``Sec. 163.1(a).'' In addition, the new Sec. 19.4 text sets forth, in
paragraph (b)(5), rules regarding record retention in lieu of originals
(including provisions regarding Customs approval of alternative storage
methods); since the new Part 163 provisions (which have general
application and thus clearly apply to duty-free store operators)
include, in Sec. 163.5, rules regarding alternative record storage, and
in order to ensure regulatory consistency, this document replaces that
paragraph (b)(5) text with a shorter text that refers to the Sec. 163.5
provisions.
Part 113
Section 113.62(j) of the Customs Regulations (19 CFR 113.62(j))
sets forth the text of an agreement to comply with electronic entry
filing requirements provided for in Part 143, as one of the conditions
of the basic importation and entry bond. Subparagraphs (2) and (3)
thereof refer to the retention of supporting documents and the
production thereof, but the language therein is not entirely consistent
with the new Part 163 provisions. In the light of the changes to the
Part 143 texts set forth in this document (which include an appropriate
cross-reference regarding the applicability of the Part 163
provisions), this document revises the Sec. 113.62(j) text to eliminate
the subparagraph (2) and (3) provisions, thereby avoiding any possible
inconsistency with the Part 143 and Part 163 texts.
Part 181
In Sec. 181.12 of the Customs Regulations (19 CFR 181.12) which
concerns the maintenance and availability of NAFTA export records: (1)
In the introductory text of paragraph (a)(1), a specific reference to
maintenance of the Certificate of Origin (or a copy thereof) has been
added to more accurately reflect the scope of the corresponding
statutory provisions (sections 508(b) and (c)); and (2) in paragraph
(b)(1), the reference to ``Sec. 162.1d'' has been changed to read
``part 163'' to reflect adoption of new Part 163. In addition, in
Sec. 181.13 of the Customs Regulations (19 CFR 181.13) a sentence has
been added at the end to clarify that penalties may be imposed pursuant
to 19 U.S.C. 1508(e) for a failure to retain NAFTA export records.
Finally, in Sec. 181.22(a) of the Customs Regulations (19 CFR
181.22(a)), the reference in the last sentence to records as specified
in ``Sec. 162.1a(a)'' has been changed to read ``Sec. 163.1(a)'' to
reflect the location of the definition of ``records'' in the new Part
163 texts.
Conclusion
Accordingly, based on the comments received and the analysis of
those comments as set forth above, and after further review of this
matter, Customs believes that the proposed regulatory amendments should
be adopted as a final rule with certain changes thereto as discussed
above and as set forth below. This document also includes an
appropriate update of the list of information collection approvals
contained in Sec. 178.2 of the Customs Regulations (19 CFR 178.2).
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
Insofar as the regulatory amendments closely follow legislative
direction, pursuant to the provisions of the Regulatory Flexibility Act
(5 U.S.C. 601
[[Page 32944]]
et seq.), it is certified that the amendments will not have a
significant economic impact on a substantial number of small entities.
Accordingly, they are not subject to the regulatory analysis or other
requirements of 5 U.S.C. 603 and 604.
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 Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d))
under control number 1515-0214. 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 Part 163.
Although other parts of the Customs Regulations are being amended, all
information required by these amendments is contained or identified in
Part 163. This information is to be maintained in the form of records
which are necessary to ensure that the Customs Service will be able to
effectively administer the laws it is charged with enforcing while, at
the same time, imposing a minimum burden on the public it is serving.
Respondents or recordkeepers are already required by statute or
regulation to maintain the vast majority of the information covered in
this proposed regulation. The likely respondents or recordkeepers are
business organizations including importers, exporters and
manufacturers.
The estimated average annual burden associated with the collection
of information in this final rule is 117.2 hours per respondent or
recordkeeper. Comments concerning the accuracy of this burden estimate
and suggestions for reducing this burden should be directed to the U.S.
Customs Service, Information Services Group, Office of Finance, 1300
Pennsylvania Avenue, N.W., Washington, D.C. 20229, and to OMB,
Attention: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, D.C. 20503.
Drafting Information
The principal author of this document was Francis W. Foote, Office
of Regulations and Rulings, U.S. Customs Service. However, personnel
from other offices participated in its development.
List of Subjects
19 CFR Part 19
Customs duties and inspection, Imports, Exports, Reporting and
recordkeeping requirements, Warehouses.
19 CFR Part 24
Accounting, Customs duties and inspection, Reporting and
recordkeeping requirements, Harbors, Taxes.
19 CFR Part 111
Administrative practice and procedures, Customs duties and
inspection, Brokers, Reporting and recordkeeping requirements,
Penalties.
19 CFR Part 113
Bonds, Customs duties and inspection, Imports, Reporting and
recordkeeping requirements, Surety bonds.
19 CFR Part 143
Customs duties and inspection, Reporting and recordkeeping
requirements.
19 CFR Part 162
Administrative practice and procedure, Customs duties and
inspection, Recordkeeping and reporting requirements, Trade agreements.
19 CFR Part 163
Administrative practice and procedure, Customs duties and
inspection, Exports, Imports, Recordkeeping and reporting requirements.
19 CFR Part 178
Administrative practice and procedure, Recordkeeping and reporting
requirements.
19 CFR Part 181
Canada, Customs duties and inspection, Exports, Imports, Mexico,
Recordkeeping and reporting requirements, Trade agreements (North
American Free Trade Agreement).
Amendments to the Regulations
Accordingly, for the reasons stated in the preamble, Chapter I of
Title 19, Code of Federal Regulations (19 CFR Chapter I) is amended by
amending Parts 19, 24, 111, 113, 143, 162, 178 and 181 and by adding a
new Part 163 to read as follows:
PART 19--CUSTOMS WAREHOUSES, CONTAINER STATIONS AND CONTROL OF
MERCHANDISE THEREIN
1. The authority citation for Part 19 continues to read in part as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20,
Harmonized Tariff Schedule of the United States), 1624.
* * * * *
2. In Sec. 19.4, paragraph (b)(4)(i)(B) is amended by removing the
reference ``Sec. 162.1(a)'' and adding, in its place, the reference
``Sec. 163.1(a)'' and paragraph (b)(5) is revised to read as follows:
Sec. 19.4 Customs and proprietor responsibility and supervision over
warehouses.
* * * * *
(b) * * *
(5) Record retention in lieu of originals. A warehouse proprietor
may, in accordance with Sec. 163.5 of this chapter, utilize alternative
storage methods in lieu of maintaining records in their original
formats.
* * * * *
PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE
1. The authority citation for Part 24 continues to read in part as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General
Note 20, Harmonized Tariff Schedule of the United States), 1624; 31
U.S.C. 9701.
* * * * *
Sec. 24.22 [Amended]
2. Section 24.22(d)(5) is amended by removing the phrase ``shall be
maintained for a period of 3 years'' and adding, in its place, the
phrase ``shall be maintained in the United States for a period of 5
years''.
3. Section 24.22(g)(6) is amended by removing the phrase ``shall be
maintained for a period of 2 years'' and adding, in its place, the
phrase ``shall be maintained in the United States for a period of 5
years''.
PART 111--CUSTOMS BROKERS
1. The authority citation for Part 111 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1624, 1641.
* * * * *
2. In Sec. 111.1, the definition of ``Records'' is revised to read
as follows:
Sec. 111.1 Definitions.
* * * * *
Records. ``Records'' means documents, data and information referred
to in, and required to be made or maintained under, this part and any
other records, as defined in Sec. 163.1(a) of this chapter, that are
required to be maintained by a broker under part 163 of this chapter.
* * * * *
[[Page 32945]]
3. Section 111.21 is amended by designating the existing paragraph
as paragraph (a), by removing from the second sentence of newly
designated paragraph (a) the words ``a copy of each entry made by him
with all supporting records, except those documents he is required to
file with Customs, and'', and by adding new paragraphs (b) and (c) to
read as follows:
Sec. 111.21 Record of transactions.
(a) * * *
(b) Each broker shall comply with the provisions of this part and
part 163 of this chapter when maintaining records that reflect on his
transactions as a broker.
(c) Each broker shall designate a knowledgeable company employee to
be the contact for Customs for broker-wide customs business and
financial recordkeeping requirements.
Sec. 111.22 [Removed and reserved]
4. Section 111.22 is removed and reserved.
5. Section 111.23 is amended by revising paragraph (a)(1) to read
as follows, by removing paragraphs (b), (c), (d) and (f), by
redesignating paragraph (e) as paragraph (b), in newly redesignated
paragraph (b) by removing the word ``centralized'' each time it appears
and adding, in its place, the word ``consolidated'', in newly
redesignated paragraphs (b)(1) and (b)(2)(ii) by removing the word
``financial'', in the introductory text of newly designated paragraph
(b)(2) by removing the words ``Office of Field Operations,
Headquarters'' [sic] and adding, in their place, the words ``Director,
Regulatory Audit Division, U.S. Customs Service, 909 S.E. First Avenue,
Miami, Florida 33131'', and in the first sentence of newly redesignated
paragraph (b)(2)(i) by removing the word ``accounting'':
Sec. 111.23 Retention of records.
(a) Place and period of retention--(1) Place. Records shall be
retained by a broker in accordance with the provisions of this part and
part 163 of this chapter within the broker district that covers the
Customs port to which they relate unless the broker chooses to
consolidate records at one or more other locations, and provides
advance notice of such consolidation to Customs, in accordance with
paragraph (b) of this section.
* * * * *
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.
* * * * *
2. Section 113.62(j) is revised to read as follows:
Sec. 113.62 Basic importation and entry bond conditions.
* * * * *
(j) Agreement to comply with electronic entry filing requirements.
If the principal is qualified to utilize electronic entry filing as
provided for in part 143, subpart D, of this chapter, the principal
agrees to comply with all conditions set forth in that subpart and to
send and accept electronic transmissions without the necessity of paper
copies.
* * * * *
PART 143--SPECIAL ENTRY PROCEDURES
1. The authority citation for Part 143 continues to read as
follows:
Authority: 19 U.S.C. 66, 1481, 1484, 1498, 1624.
Sec. 143.32 [Amended]
2. In Sec. 143.32, paragraph (n) is amended by removing the
reference ``Sec. 162.1a(a)'' and adding, in its place, the reference
``part 163''.
3. Section 143.35 is revised to read as follows:
Sec. 143.35 Procedure for electronic entry summary.
In order to obtain entry summary processing electronically, the
filer will submit certified entry summary data electronically through
ABI. Data will be validated and, if the transmission is found error-
free, will be accepted. If it is determined through selectivity
criteria and review of data that documentation is required for further
processing of the entry summary, Customs will so notify the filer.
Documentation submitted before being requested by Customs will not be
accepted or retained by Customs. The entry summary will be scheduled
for liquidation once payment is made under statement processing (see
Sec. 24.25 of this chapter).
4. In Sec. 143.36, the first sentence of paragraph (a) and the
introductory text of paragraph (c) are revised to read as follows:
Sec. 143.36 Form of immediate delivery, entry and entry summary.
(a) Electronic form of data. If Customs determines that the
immediate delivery, entry or entry summary data is satisfactory under
Secs. 143.34 and 143.35, the electronic form of the immediate delivery,
entry or entry summary through ABI shall be deemed to satisfy all
filing requirements under this part. * * *
* * * * *
(c) Submission of invoice. The invoice will be retained by the
filer unless requested by Customs. If the invoice is submitted by the
filer before a request is made by Customs, it will not be accepted or
retained by Customs. When Customs requests presentation of the invoice,
invoice data must be submitted in one of the following forms:
* * * * *
5. In Sec. 143.37, paragraphs (c) and (d) are removed and paragraph
(a) is revised to read as follows:
Sec. 143.37 Retention of records.
(a) Record maintenance requirements. All records received or
generated by a broker or importer must be maintained in accordance with
part 163 of this chapter.
* * * * *
Sec. 143.38 [Removed and Reserved]
6. Section 143.38 is removed and reserved.
7. Section 143.39 is revised to read as follows:
Sec. 143.39 Penalties.
(a) Brokers. Brokers unable to produce records requested by Customs
under this chapter will be subject to disciplinary action or penalties
pursuant to part 111 or part 163 of this chapter.
(b) Importers. Importers unable to produce records requested by
Customs under this chapter will be subject to penalties pursuant to
part 163 of this chapter.
PART 162--INSPECTION, SEARCH, AND SEIZURE
1. The authority citation for Part 162 continues to read in part as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1624.
* * * * *
2. The heading of Part 162 is revised to read as set forth above.
3. Section 162.0 is revised to read as follows:
Sec. 162.0 Scope.
This part contains provisions for the inspection, examination, and
search of persons, vessels, aircraft, vehicles, and merchandise
involved in importation, for the seizure of property, and for the
forfeiture and sale of seized property. It also contains provisions for
Customs enforcement of the controlled substances laws. Provisions
relating to petitions for remission or mitigation of fines, penalties,
and forfeitures incurred are contained in part 171 of this chapter.
[[Page 32946]]
4. In Subpart A, the Subpart heading is revised to read as follows:
Subpart A--Inspection, Examination, and Search
5. In Subpart A, Secs. 162.1a through 162.1i are removed.
1. Part 163 is added to read as follows:
PART 163--RECORDKEEPING
Sec.
163.0 Scope.
163.1 Definitions.
163.2 Persons required to maintain records.
163.3 Entry records.
163.4 Record retention period.
163.5 Methods for storage of records.
163.6 Production and examination of entry and other records and
witnesses; penalties.
163.7 Summons.
163.8 Third-party recordkeeper summons.
163.9 Enforcement of summons.
163.10 Failure to comply with court order; penalties.
163.11 Compliance assessment and other audit procedures.
163.12 Recordkeeping Compliance Program.
163.13 Denial and removal of program certification; appeal
procedures.
Appendix to Part 163--Interim (a)(1)(A) List
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510,
1624.
Sec. 163.0 Scope.
This part sets forth the recordkeeping requirements and procedures
governing the maintenance, production, inspection, and examination of
records. It also sets forth the procedures governing the examination of
persons in connection with any investigation or compliance assessment,
audit or other inquiry conducted for the purposes of ascertaining the
correctness of any entry, for determining the liability of any person
for duties, fees and taxes due or that may be due, for determining
liability for fines, penalties and forfeitures, or for ensuring
compliance with the laws and regulations administered or enforced by
Customs. Additional provisions concerning records maintenance and
examination applicable to U.S. importers, exporters, and producers
under the United States-Canada Free Trade Agreement and the North
American Free Trade Agreement are contained in parts 10 and 181 of this
chapter, respectively.
Sec. 163.1 Definitions.
When used in this part, the following terms shall have the meaning
indicated:
(a) Records--(1) In general. The term ``records'' means any
information made or normally kept in the ordinary course of business
that pertains to any activity listed in paragraph (a)(2) of this
section. The term includes any information required for the entry of
merchandise (the (a)(1)(A) list) and other information pertaining to,
or from which is derived, any information element set forth in a
collection of information required by the Tariff Act of 1930, as
amended, in connection with any activity listed in paragraph (a)(2) of
this section. The term includes, but is not limited to, the following:
Statements; declarations; documents; electronically generated or
machine readable data; electronically stored or transmitted information
or data; books; papers; correspondence; accounts; financial accounting
data; technical data; computer programs necessary to retrieve
information in a usable form; and entry records (contained in the
(a)(1)(A) list).
(2) Activities. The following are activities for purposes of
paragraph (a)(1) of this section:
(i) Any importation, declaration or entry;
(ii) The transportation or storage of merchandise carried or held
under bond into or from the customs territory of the United States;
(iii) The filing of a drawback claim;
(iv) The completion and signature of a NAFTA Certificate of Origin
pursuant to Sec. 181.11(b) of this chapter;
(v) The collection, or payment to Customs, of duties, fees and
taxes; or
(vi) Any other activity required to be undertaken pursuant to the
laws or regulations administered by Customs.
(b) (a)(1)(A) list. See the definition of ``entry records''.
(c) Audit. ``Audit'' means a Customs regulatory audit verification
of information contained in records required to be maintained and
produced by persons listed in Sec. 163.2 or pursuant to other
applicable laws and regulations administered by Customs but does not
include a quantity verification for a customs bonded warehouse or
general purpose foreign trade zone. The purpose of an audit is to
determine that information submitted or required is accurate, complete
and in accordance with laws and regulations administered by Customs.
(d) Certified recordkeeper. A ``certified recordkeeper'' is a
person who is required to keep records under this chapter and who is a
participant in the Recordkeeping Compliance Program provided for in
Sec. 163.12.
(e) Compliance assessment. A ``compliance assessment'' is a type of
importer audit performed by a Customs Compliance Assessment Team which
uses various audit techniques, including statistical testing of import
and financial transactions, to assess the importer's compliance level
in trade areas, to determine the adequacy of the importer's internal
controls over its customs operations, and to determine the importer's
rates of compliance.
(f) Entry records/(a)(1)(A) list. The terms ``entry records'' and
``(a)(1)(A) list'' refer to records required by law or regulation for
the entry of merchandise (whether or not Customs required their
presentation at the time of entry). The (a)(1)(A) list is contained in
the Appendix to this part.
(g) Inquiry. An ``inquiry'' is any formal or informal procedure,
other than an investigation, through which a request for information is
made by a Customs officer.
(h) Original. The term ``original'', when used in the context of
maintenance of records, has reference to records that are in the
condition in which they were made or received by the person responsible
for maintaining the records pursuant to 19 U.S.C. 1508 and the
provisions of this chapter, including records consisting of the
following:
(1) Electronic information which was used to develop other
electronic records or paper documents;
(2) Electronic information which is in a readable format such as a
facsimile paper format or an electronic or hardcopy spreadsheet;
(3) In the case of a paper record that is part of a multi-part form
where all parts of the form are made by the same impression, one of the
carbon-copy parts or a facsimile copy or photocopy of one of the parts;
and
(4) A copy of a record that was provided to another government
agency which retained it, provided that, if required by Customs, a
signed statement accompanies the copy certifying it to be a true copy
of the record provided to the other government agency.
(i) Party/person. The terms ``party'' and ``person'' refer to a
natural person, corporation, partnership, association, or other entity
or group.
(j) Summons. ``Summons'' means any summons issued under this part
that requires the production of records or the giving of testimony, or
both.
(k) Technical data. ``Technical data'' are records which include
diagrams and other data with regard to a business or an engineering or
exploration operation, whether conducted inside or outside the United
States, and whether on paper, cards, photographs, blueprints, tapes,
microfiche, film, or other media or in electronic or magnetic storage.
(l) Third-party recordkeeper. ``Third-party recordkeeper'' means
any attorney, any accountant or any customs
[[Page 32947]]
broker other than a customs broker who is the importer of record on an
entry.
Sec. 163.2 Persons required to maintain records.
(a) General. Except as otherwise provided in paragraph (b) or (e)
of this section, the following persons shall maintain records and shall
render such records for examination and inspection by Customs:
(1) An owner, importer, consignee, importer of record, entry filer,
or other person who:
(i) Imports merchandise into the customs territory of the United
States, files a drawback claim, or transports or stores merchandise
carried or held under bond, or
(ii) Knowingly causes the importation or transportation or storage
of merchandise carried or held under bond into or from the customs
territory of the United States;
(2) An agent of any person described in paragraph (a)(1) of this
section; or
(3) A person whose activities require the filing of a declaration
or entry, or both.
(b) Domestic transactions. For purposes of paragraph (a)(1)(ii) of
this section, a person who orders merchandise from an importer in a
domestic transaction knowingly causes merchandise to be imported only
if:
(1) The terms and conditions of the importation are controlled by
the person placing the order with the importer (for example, the
importer is not an independent contractor but rather is the agent of
the person placing the order: Whereas a consumer who purchases an
imported automobile from a domestic dealer would not be required to
maintain records, a transit authority that prepared detailed
specifications from which imported subway cars or busses were
manufactured would be required to maintain records); or
(2) Technical data, molds, equipment, other production assistance,
material, components, or parts are furnished by the person placing the
order with the importer with knowledge that they will be used in the
manufacture or production of the imported merchandise.
(c) Recordkeeping required for certain exporters. Any person who
exports goods to Canada or Mexico for which a Certificate of Origin was
completed and signed pursuant to the North American Free Trade
Agreement must also maintain records in accordance with part 181 of
this chapter.
(d) Recordkeeping required for customs brokers. Each customs broker
must also make and maintain records and make such records available in
accordance with part 111 of this chapter.
(e) Recordkeeping not required for certain travelers. After having
physically cleared the Customs facility, a traveler who made a baggage
or oral declaration upon arrival in the United States will not be
required to maintain supporting records regarding non-commercial
merchandise acquired abroad which falls within the traveler's personal
exemptions or which is covered by a flat rate of duty.
Sec. 163.3 Entry records.
Any person described in Sec. 163.2(a) with reference to an import
transaction shall be prepared to produce or transmit to Customs, in
accordance with Sec. 163.6(a), any entry records which may be demanded
by Customs. If entry records submitted to Customs not pursuant to a
demand are returned by Customs, or if production of entry records at
the time of entry is waived by Customs, such person shall continue to
maintain those entry records in accordance with this part. Entry
records which are normally kept in the ordinary course of business must
be maintained by such person in accordance with this part whether or
not copies thereof are retained by Customs.
Sec. 163.4 Record retention period.
(a) General. Except as otherwise provided in paragraph (b) of this
section, any record required to be made, kept, and rendered for
examination and inspection by Customs under Sec. 163.2 or any other
provision of this chapter shall be kept for 5 years from the date of
entry, if the record relates to an entry, or 5 years from the date of
the activity which required creation of the record.
(b) Exceptions. (1) Any record relating to a drawback claim shall
be kept until the third anniversary of the date of payment of the
claim.
(2) Packing lists shall be retained for a period of 60 calendar
days from the end of the release or conditional release period,
whichever is later, or, if a demand for return to Customs custody has
been issued, for a period of 60 calendar days either from the date the
goods are redelivered or from the date specified in the demand as the
latest redelivery date if redelivery has not taken place.
(3) A consignee who is not the owner or purchaser and who appoints
a customs broker shall keep a record pertaining to merchandise covered
by an informal entry for 2 years from the date of the informal entry.
(4) Records pertaining to articles that are admitted free of duty
and tax pursuant to 19 U.S.C. 1321(a)(2) and Secs. 10.151 through
10.153 of this chapter, and carriers' records pertaining to manifested
cargo that is exempt from entry under the provisions of this chapter,
shall be kept for 2 years from the date of the entry or other activity
which required creation of the record.
(5) If another provision of this chapter sets forth a retention
period for a specific type of record that differs from the period that
would apply under this section, that other provision controls.
Sec. 163.5 Methods for storage of records.
(a) Original records. All persons listed in Sec. 163.2 shall
maintain all records required by law and regulation for the required
retention periods and as original records, whether paper or electronic,
unless alternative storage methods have been adopted in accordance with
paragraph (b) of this section. The records, whether in their original
format or under an alternative storage method, must be capable of being
retrieved upon lawful request or demand by Customs.
(b) Alternative method of storage--(1) General. Any of the persons
listed in Sec. 163.2 may maintain any records, other than records
required to be maintained as original records under laws and
regulations administered by other Federal government agencies, in an
alternative format, provided that the person gives advance written
notification of such alternative storage method to the Director,
Regulatory Audit Division, U.S. Customs Service, 909 S.E. First Avenue,
Miami, Florida 33131, and provided further that the Director of the
Miami regulatory audit field office does not instruct the person in
writing as provided herein that certain described records may not be
maintained in an alternative format. The written notice to the Director
of the Miami regulatory audit field office must be provided at least 30
calendar days before implementation of the alternative storage method,
must identify the type of alternative storage method to be used, and
must state that the alternative storage method complies with the
standards set forth in paragraph (b)(2) of this section. If an
alternative storage method covers records that pertain to goods under
Customs seizure or detention or that relate to a matter that is
currently the subject of an inquiry or investigation or administrative
or court proceeding, the appropriate Customs office may instruct the
person in writing that those records must be maintained as original
records and therefore may not be converted to an alternative format
until specific written authorization is received from that Customs
office. A written instruction to a person under
[[Page 32948]]
this paragraph may be issued during the 30-day advance notice period
prescribed in this section or at any time thereafter, must describe the
records in question with reasonable specificity but need not identify
the underlying basis for the instruction, and shall not preclude
application of the planned alternative storage method to other records
not described therein.
(2) Standards for alternative storage methods. Methods commonly
used in standard business practice for storage of records include, but
are not limited to, machine readable data, CD ROM, and microfiche.
Methods that are in compliance with generally accepted business
standards will generally satisfy Customs requirements, provided that
the method used allows for retrieval of records requested within a
reasonable time after the request and provided that adequate provisions
exist to prevent alteration, destruction, or deterioration of the
records. The following standards must be applied by recordkeepers when
using alternative storage methods:
(i) Operational and written procedures are in place to ensure that
the imaging and/or other media storage process preserves the integrity,
readability, and security of the information contained in the original
records. The procedures must include a standardized retrieval process
for such records. Vendor specifications/documentation and benchmark
data must be available for Customs review;
(ii) There is an effective labeling, naming, filing, and indexing
system;
(iii) Except in the case of packing lists (see Sec. 163.4(b)(2)),
entry records must be maintained in their original formats for a period
of 120 calendar days from the end of the release or conditional release
period, whichever is later, or, if a demand for return to Customs
custody has been issued, for a period of 120 calendar days either from
the date the goods are redelivered or from the date specified in the
demand as the latest redelivery date if redelivery has not taken place;
(iv) An internal testing of the system must be performed on a
yearly basis;
(v) The recordkeeper must have the capability to make, and must
bear the cost of, hard-copy reproductions of alternatively stored
records that are required by Customs for audit, inquiry, investigation,
or inspection of such records; and
(vi) The recordkeeper shall retain and keep available one working
copy and one back-up copy of the records stored in a secure location
for the required periods as provided in Sec. 163.4.
(3) Changes to alternative storage procedures. No changes to
alternative recordkeeping procedures may be made without first
notifying the Director of the Miami regulatory audit field office. The
notification must be in writing and must be provided to the director at
least 30 calendar days before implementation of the change.
(4) Penalties. All persons listed in Sec. 163.2 who use alternative
storage methods for records and who fail to maintain or produce the
records in accordance with this part shall be subject to penalties
pursuant to Sec. 163.6 for entry records or sanctions pursuant to
Secs. 163.9 and 163.10 for other records.
(5) Failure to comply with alternative storage requirements. If a
person listed in Sec. 163.2 uses an alternative storage method for
records that is not in compliance with the conditions and requirements
of this section, the appropriate Customs office may instruct the person
in writing to discontinue use of the alternative storage method. The
instruction shall take effect upon receipt thereof and shall remain in
effect until the noncompliance has been rectified and alternative
storage has recommenced in accordance with the procedures set forth in
paragraph (b)(1) of this section.
Sec. 163.6 Production and examination of entry and other records and
witnesses; penalties.
(a) Production of entry records. Pursuant to written, oral, or
electronic notice, any Customs officer may require the production of
entry records by any person listed in Sec. 163.2(a) who is required
under this part to maintain such records, even if the entry records
were required at the time of entry. Any oral demand for entry records
shall be followed by a written or electronic demand. The entry records
shall be produced within 30 calendar days of receipt of the demand or
within any shorter period as Customs may prescribe when the entry
records are required in connection with a determination regarding the
admissibility or release of merchandise. Should any person from whom
Customs has demanded entry records encounter a problem in timely
complying with the demand, such person may submit a written or
electronic request to Customs for approval of a specific additional
period of time in which to produce the records; the request must be
received by Customs before the applicable due date for production of
the records and must include an explanation of the circumstances giving
rise to the request. Customs will promptly advise the requesting person
electronically or in writing either that the request is denied or that
the requested additional time period, or such shorter period as Customs
may deem appropriate, is approved. The mere fact that a request for
additional time to produce demanded entry records was submitted under
this section shall not by itself preclude the imposition of a monetary
penalty or other sanction under this part for failure to timely produce
the records, but no such penalty or other sanction will be imposed if
the request is approved and the records are produced before expiration
of that additional period of time.
(b) Failure to produce entry records--(1) Monetary penalties
applicable. The following penalties may be imposed if a person fails to
comply with a lawful demand for the production of an entry record and
is not excused from a penalty pursuant to paragraph (b)(3) of this
section:
(i) If the failure to comply is a result of the willful failure of
the person to maintain, store, or retrieve the demanded record, such
person shall be subject to a penalty, for each release of merchandise,
not to exceed $100,000, or an amount equal to 75 percent of the
appraised value of the merchandise, whichever amount is less; or
(ii) If the failure to comply is a result of negligence of the
person in maintaining, storing, or retrieving the demanded record, such
person shall be subject to a penalty, for each release of merchandise,
not to exceed $10,000, or an amount equal to 40 percent of the
appraised value of the merchandise, whichever amount is less.
(2) Additional actions--(i) General. In addition to any penalty
imposed under paragraph (b)(1) of this section, and except as otherwise
provided in paragraph (b)(2)(ii) of this section, if the demanded entry
record relates to the eligibility of merchandise for a column 1 special
rate of duty in the Harmonized Tariff Schedule of the United States
(HTSUS), the entry of such merchandise:
(A) If unliquidated, shall be liquidated at the applicable HTSUS
column 1 general rate of duty; or
(B) If liquidated within the 2-year period preceding the date of
the demand, shall be reliquidated, notwithstanding the time limitation
in 19 U.S.C. 1514 or 1520, at the applicable HTSUS column 1 general
rate of duty.
(ii) Exception. Any liquidation or reliquidation under paragraph
(b)(2)(i)(A) or (b)(2)(ii)(B) of this section shall be at the
applicable HTSUS column 2 rate of duty if Customs demonstrates that the
merchandise should be dutiable at such rate.
(3) Avoidance of penalties. No penalty may be assessed under
paragraph (b)(1)
[[Page 32949]]
of this section if the person who fails to comply with a lawful demand
for entry records can show:
(i) That the loss of the demanded record was the result of an act
of God or other natural casualty or disaster beyond the fault of such
person or an agent of the person;
(ii) On the basis of other evidence satisfactory to Customs, that
the demand was substantially complied with;
(iii) That the record demanded was presented to and retained by
Customs at the time of entry or submitted in response to an earlier
demand; or
(iv) That he has been certified as a participant in the
Recordkeeping Compliance Program (see Sec. 163.12), that he is
generally in compliance with the appropriate procedures and
requirements of that program, and that the violation in question is his
first violation and was a non-willful violation.
(4) Penalties not exclusive. Any penalty imposed under paragraph
(b)(1) of this section shall be in addition to any other penalty
provided by law except for:
(i) A penalty imposed under 19 U.S.C. 1592 for a material omission
of any information contained in the demanded record; or
(ii) Disciplinary action taken under 19 U.S.C. 1641.
(5) Remission or mitigation of penalties. A penalty imposed under
this section may be remitted or mitigated under 19 U.S.C. 1618.
(6) Customs summons. The assessment of a penalty under this section
shall not limit or preclude the issuance or enforcement of a summons
under this part.
(c) Examination of entry and other records--(1) Reasons for
examination. Customs may initiate an investigation or compliance
assessment, audit or other inquiry for the purpose of:
(i) Ascertaining the correctness of any entry, determining the
liability of any person for duties, taxes and fees due or duties, taxes
and fees which may be due, or determining the liability of any person
for fines, penalties and forfeitures; or
(ii) Ensuring compliance with the laws and regulations administered
or enforced by Customs.
(2) Availability of records. During the course of any investigation
or compliance assessment, audit or other inquiry, any Customs officer,
during normal business hours, and to the extent possible at a time
mutually convenient to the parties, may examine, or cause to be
examined, any relevant entry or other records by providing the person
responsible for such records with reasonable written, oral or
electronic notice that describes the records with reasonable
specificity. The examination of entry records shall be subject to the
notice and production procedures set forth in paragraph (a) of this
section, and a failure to produce entry records may result in the
imposition of penalties or the taking of other action as provided in
paragraph (b) of this section.
(3) Examination notice not exclusive. In addition to, or in lieu
of, issuance of an examination notice under paragraph (c)(2) of this
section, Customs may issue a summons pursuant to Sec. 163.7, and seek
its enforcement pursuant to Secs. 163.9 and 163.10, to compel the
production of any records required to be maintained and produced under
this chapter.
Sec. 163.7 Summons.
(a) Who may be served. During the course of any investigation or
compliance assessment, audit or other inquiry initiated for the reasons
set forth in Sec. 163.6(c), the Commissioner of Customs or his
designee, but no designee of the Commissioner below the rank of port
director, field director of regulatory audit or special agent in
charge, may issue a summons requiring a person within a reasonable
period of time to appear before the appropriate Customs officer and to
produce records or give relevant testimony under oath or both. Such a
summons may be issued to any person who:
(1) Imported, or knowingly caused to be imported, merchandise into
the customs territory of the United States;
(2) Exported merchandise, or knowingly caused merchandise to be
exported, to a NAFTA country as defined in 19 U.S.C. 3301(4) (see also
part 181 of this chapter) or to Canada during such time as the United
States-Canada Free Trade Agreement is in force with respect to, and the
United States applies that Agreement to, Canada;
(3) Transported or stored merchandise that was or is carried or
held under customs bond, or knowingly caused such transportation or
storage;
(4) Filed a declaration, entry, or drawback claim with Customs;
(5) Is an officer, employee, or agent of any person described in
paragraph (a)(1) through (a)(4) of this section;
(6) Has possession, custody or care of records relating to an
importation or other activity described in paragraph (a)(1) through
(a)(4) of this section; or
(7) Customs may deem proper.
(b) Contents of summons--(1) Appearance of person. Any summons
issued under this section to compel the appearance of a person shall
state:
(i) The name, title, and telephone number of the Customs officer
before whom the appearance shall take place;
(ii) The address within the customs territory of the United States
where the person shall appear, not to exceed 100 miles from the place
where the summons was served;
(iii) The time of appearance; and
(iv) The name, address, and telephone number of the Customs officer
issuing the summons.
(2) Production of records. If a summons issued under this section
requires the production of records, the summons shall set forth the
information specified in paragraph (b)(1) of this section and shall
also describe the records in question with reasonable specificity.
(c) Service of summons--(1) Who may serve. Any Customs officer is
authorized to serve a summons issued under this section if designated
in the summons to serve it.
(2) Method of service--(i) Natural person. Service upon a natural
person shall be made by personal delivery.
(ii) Corporation, partnership, association. Service shall be made
upon a domestic or foreign corporation, or upon a partnership or other
unincorporated association which is subject to suit under a common
name, by delivery to an officer, managing or general agent, or any
other agent authorized by appointment or law to receive service of
process.
(3) Certificate of service. On the hearing of an application for
the enforcement of a summons, the certificate of service signed by the
person serving the summons is prima facie evidence of the facts it
states.
(d) Transcript of testimony under oath. Testimony of any person
taken pursuant to a summons may be taken under oath and when so taken
shall be transcribed or otherwise recorded. When testimony is
transcribed or otherwise recorded, a copy shall be made available on
request to the witness unless for good cause shown the issuing officer
determines under 5 U.S.C. 555 that a copy should not be provided. In
that event, the witness shall be limited to inspection of the official
transcript of the testimony. The testimony or transcript may be in the
form of a written statement under oath provided by the person examined
at the request of the Customs officer.
Sec. 163.8 Third-party recordkeeper summons.
(a) Notice required. Except as otherwise provided in paragraph (f)
of this section, if a summons issued under Sec. 163.7 to a third-party
recordkeeper
[[Page 32950]]
requires the production of, or the giving of testimony relating to,
records pertaining to transactions of any person, other than the person
summoned, who is identified in the description of the records contained
in the summons, then notice of the summons shall be provided to the
person so identified in the summons.
(b) Time of notice. The notice of service of summons required by
paragraph (a) of this section should be provided by the issuing officer
immediately after service of summons is obtained under Sec. 163.7(c),
but in no event shall notice be given less than 10 business days before
the date set in the summons for the production of records or the giving
of testimony.
(c) Contents of notice. The issuing officer shall ensure that any
notice issued under this section includes a copy of the summons and
provides the following information:
(1) That compliance with the summons may be stayed if written
direction not to comply with the summons is given by the person
receiving notice to the person summoned;
(2) That a copy of any such direction to not comply and a copy of
the summons shall be sent by registered or certified mail to the person
summoned and to the Customs officer who issued the summons; and
(3) That the actions under paragraphs (c)(1) and (c)(2) of this
section shall be accomplished not later than the day before the day
fixed in the summons as the day upon which the records are to be
examined or the testimony is to be given.
(d) Service of notice. The Customs officer who issues the summons
shall serve the notice required by paragraph (a) of this section in the
same manner as is prescribed in Sec. 163.7(c)(2) for the service of a
summons, or by certified or registered mail to the last known address
of the person entitled to notice.
(e) Examination of records precluded. If notice is required by this
section, no record may be examined before the date fixed in the summons
as the date to produce the records. If the person entitled to notice
under paragraph (a) of this section issues a stay of compliance with
the summons in accordance with paragraph (c) of this section, no
examination of records shall take place except with the consent of the
person staying compliance or pursuant to an order issued by a U.S.
district court.
(f) Exceptions to notice and stay of summons provisions--(1)
Personal liability for duties, fees, or taxes. The notice provisions of
paragraph (a) of this section shall not apply to any summons served on
the person, or on any officer or employee of the person, with respect
to whose liability for duties, fees, or taxes the summons is issued.
(2) Verification of existence of records. The notice provisions of
paragraph (a) of this section shall not apply to any summons issued to
determine whether or not records of transactions of an identified
person have been made or kept.
(3) Judicial determination. The notice provisions of paragraph (a)
of this section and the stay of compliance provisions of paragraph (c)
of this section shall not apply with respect to a summons described in
paragraph (a) of this section if a U.S. district court determines, upon
petition by the issuing Customs officer, that reasonable cause exists
to believe that the giving of notice may lead to an attempt:
(i) To conceal, destroy, or alter relevant records;
(ii) To prevent the communication of information from other persons
through intimidation, bribery, or collusion; or
(iii) To flee to avoid prosecution, testifying, or production of
records.
Sec. 163.9 Enforcement of summons.
Whenever a person does not comply with a Customs summons, the
issuing officer may request the appropriate U.S. attorney to seek an
order requiring compliance from the U.S. district court for the
district in which the person is found or resides or is doing business.
A person who is entitled to notice under Sec. 163.8(a) shall have a
right to intervene in any such enforcement proceeding.
Sec. 163.10 Failure to comply with court order; penalties.
(a) Monetary penalties. The U.S. district court for any judicial
district in which a person served with a Customs summons is found or
resides or is doing business may order such person to comply with the
summons. Upon the failure of a person to obey a court order to comply
with a Customs summons, the court may find such person in contempt and
may assess a monetary penalty.
(b) Importations prohibited. If a person fails to comply with a
court order to comply with a Customs summons and is adjudged guilty of
contempt, the Commissioner of Customs, with the approval of the
Secretary of the Treasury, for so long as that person remains in
contempt:
(1) May prohibit importation of merchandise by that person,
directly or indirectly, or for that person's account; and
(2) May withhold delivery of merchandise imported by that person,
directly or indirectly, or for that person's account.
(c) Sale of merchandise. If any person remains in contempt for more
than 1 year after the Commissioner issues instructions to withhold
delivery under paragraph (b)(2) of this section, the merchandise shall
be considered abandoned and shall be sold at public auction or
otherwise disposed of in accordance with subpart E of part 162 of this
chapter.
Sec. 163.11 Compliance assessment and other audit procedures.
(a) Conduct of a Customs compliance assessment or other audit. In
conducting a compliance assessment or other audit, the Customs
auditors, except as otherwise provided in paragraph (c) of this
section, shall:
(1) Provide notice, telephonically and in writing, to the person
who is to be the subject of the compliance assessment or other audit,
in advance of the compliance assessment or other audit and with a
reasonable estimate of the time to be required for the compliance
assessment or other audit;
(2) Inform the person who is to be the subject of the compliance
assessment or other audit, in writing and before commencing the
compliance assessment or other audit, of his right to an entry
conference at which time the objectives and records requirements of the
compliance assessment or other audit will be explained and the
estimated termination date will be set;
(3) Provide a further estimate of any additional time for the
compliance assessment or other audit if, in the course of the
compliance assessment or other audit, it becomes apparent that
additional time will be required;
(4) Schedule a closing conference upon completion of the compliance
assessment or other audit on-site work to explain the preliminary
results of the compliance assessment or other audit;
(5) Complete a formal written compliance assessment or other audit
report within 90 calendar days following the closing conference
referred to in paragraph (a)(4) of this section, unless the Director,
Regulatory Audit Division, at Customs Headquarters provides written
notice to the person who was the subject of the compliance assessment
or other audit of the reason for any delay and the anticipated
completion date; and
(6) After application of any exemption contained in 5 U.S.C. 552,
send a copy of the formal written compliance assessment or other audit
report to the person who was the subject of the compliance assessment
or other audit
[[Page 32951]]
within 30 calendar days following completion of the report.
(b) Petition procedures for failure to conduct closing conference.
Except as otherwise provided in paragraph (c) of this section, if the
estimated or actual termination date for a compliance assessment or
other audit passes without a Customs auditor providing a closing
conference to explain the results of the compliance assessment or other
audit, the person who was the subject of the compliance assessment or
other audit may petition in writing for such a conference to the
Director, Regulatory Audit Division, U.S. Customs Service, Washington,
DC 20229. Upon receipt of such a request, the Director shall provide
for such a conference to be held within 15 calendar days after the date
of receipt.
(c) Exception to procedures. Paragraphs (a)(5), (a)(6) and (b) of
this section shall not apply after Customs commences a formal
investigation with respect to the issue involved.
Sec. 163.12 Recordkeeping Compliance Program.
(a) General. The Recordkeeping Compliance Program is a voluntary
Customs program under which certified recordkeepers may be eligible for
alternatives to penalties (see paragraph (d) of this section) that
might be assessed under Sec. 163.6 for failure to produce a demanded
entry record. However, even where a certified recordkeeper is eligible
for an alternative to a penalty, participation in the Recordkeeping
Compliance Program has no limiting effect on the authority of Customs
to use a summons, court order or other legal process to compel the
production of records by that certified recordkeeper.
(b) Certification procedures--(1) Who may apply. Any person
described in Sec. 163.2(a) who is required to maintain and produce
entry records under this part may apply to participate in the
Recordkeeping Compliance Program.
(2) Where to apply. An application for certification to participate
in the Recordkeeping Compliance Program shall be submitted to the
Director, Regulatory Audit Division, U.S. Customs Service, 909 S.E.
First Avenue, Miami, Florida 33131. The application shall be submitted
in accordance with the guidelines contained in the Customs
Recordkeeping Compliance Handbook which may be obtained by downloading
it from the Customs Electronic Bulletin Board (703-921-6155) or by
writing to the Recordkeeping Compliance Program, Regulatory Audit
Division, Office of Strategic Trade, U.S. Customs Service, 909 S.E.
First Avenue, Suite 710, Miami, Florida 33131.
(3) Certification requirements. A recordkeeper may be certified as
a participant in the Recordkeeping Compliance Program after meeting the
general recordkeeping requirements established under this section or
after negotiating an alternative program suited to the needs of the
recordkeeper and Customs. To be certified, a recordkeeper must be in
compliance with Customs laws and regulations. Customs will take into
account the size and nature of the importing business and the volume of
imports and Customs workload constraints prior to granting
certification. In order to be certified, a recordkeeper must meet the
applicable requirements set forth in the Customs Recordkeeping
Compliance Handbook and must be able to demonstrate that it:
(i) Understands the legal requirements for recordkeeping, including
the nature of the records required to be maintained and produced and
the time periods relating thereto;
(ii) Has in place procedures to explain the recordkeeping
requirements to those employees who are involved in the preparation,
maintenance and production of required records;
(iii) Has in place procedures regarding the preparation and
maintenance of required records, and the production of such records to
Customs;
(iv) Has designated a dependable individual or individuals to be
responsible for recordkeeping compliance under the program and whose
duties include maintaining familiarity with the recordkeeping
requirements of Customs;
(v) Has a record maintenance procedure acceptable to Customs for
original records or has an alternative records maintenance procedure
adopted in accordance with Sec. 163.5(b); and
(vi) Has procedures for notifying Customs of any occurrence of a
variance from, or violation of, the requirements of the Recordkeeping
Compliance Program or negotiated alternative program, as well as
procedures for taking corrective action when notified by Customs of
violations or problems regarding such program. For purposes of this
paragraph, the term ``variance'' means a deviation from the
Recordkeeping Compliance Program that does not involve a failure to
maintain or produce records or a failure to meet the requirements set
forth in this section. For purposes of this paragraph, the term
``violation'' means a deviation from the Recordkeeping Compliance
Program that involves a failure to maintain or produce records or a
failure to meet the requirements set forth in this section.
(c) Application review and approval and certification process--(1)
Review of applications. The Miami regulatory audit field office will
process the application and will coordinate and consult, as may be
necessary, with the appropriate Customs Headquarters and field
officials. The Miami regulatory audit field office will review and
verify the information contained in the application and may initiate an
on-site verification prior to approval and certification. If an on-site
visit is warranted, the Miami regulatory audit field office shall
inform the applicant. If additional information is necessary to process
the application, the applicant shall be notified. Customs requests for
information not submitted with the application or for additional
explanation of details will cause a delay in the application approval
and certification of applicants and may result in the suspension of the
application approval and certification process until the requested
information is received by Customs.
(2) Approval and certification. If, upon review, Customs determines
that the application should be approved and that certification should
be granted, the Director of the Miami regulatory audit field office
shall issue the certification with all the applicable conditions stated
therein.
(d) Alternatives to penalties--(1) General. If a certified
participant in the Recordkeeping Compliance Program does not produce a
demanded entry record for a specific release or provide the information
contained in the demanded entry record by acceptable alternate means,
Customs shall, in lieu of a monetary penalty provided for in
Sec. 163.6(b), issue a written notice of violation to the person as
described in paragraph (d)(2) of this section, provided that the
certified participant is generally in compliance with the procedures
and requirements of the program and provided that the violation was not
a willful violation and was not a repeat violation. A willful failure
to produce demanded entry records or repeated failures to produce
demanded entry records may result in the issuance of penalties under
Sec. 163.6(b) and removal of certification under the program (see
Sec. 163.13) until corrective action satisfactory to Customs is taken.
(2) Contents of notice. A notice of violation issued to a
participant in the Recordkeeping Compliance Program for failure to
produce a demanded entry record or information contained therein shall:
[[Page 32952]]
(i) State that the recordkeeper has violated the recordkeeping
requirements;
(ii) Identify the record or information which was demanded and not
produced;
(iii) Warn the recordkeeper that future failures to produce
demanded entry records or information contained therein may result in
the imposition of monetary penalties and could result in the removal of
the recordkeeper from the Recordkeeping Compliance Program.
(3) Response to notice. Within a reasonable time after receiving
written notice under paragraph (d)(1) of this section, the recordkeeper
shall notify Customs of the steps it has taken to prevent a recurrence
of the violation.
Sec. 163.13 Denial and removal of program certification; appeal
procedures.
(a) General. Customs may take, and applicants and participants may
appeal and obtain administrative review of, the following decisions
regarding the Recordkeeping Compliance Program provided for in
Sec. 163.12:
(1) Denial of certification for program participation in accordance
with paragraph (b) of this section; and
(2) Removal of certification for program participation in
accordance with paragraph (c) of this section.
(b) Denial of certification for program participation--(1) Grounds
for denial. Customs may deny an application for certification for
participation in the Recordkeeping Compliance Program for any of the
following reasons:
(i) The applicant fails to meet the requirements set forth in
Sec. 163.12(b)(3);
(ii) A circumstance involving the applicant arises that would
justify initiation of a certification removal action under paragraph
(c) of this section; or
(iii) In the judgment of Customs, the applicant appears not to be
in compliance with Customs laws and regulations.
(2) Denial procedure. If the Director of the Miami regulatory audit
field office determines that an application submitted under Sec. 163.12
should not be approved and that certification for participation in the
Recordkeeping Compliance Program should not be granted, the Director
shall issue a written notice of denial to the applicant. The notice of
denial shall set forth the reasons for the denial and shall advise the
applicant of its right to file an appeal of the denial in accordance
with paragraph (d) of this section.
(c) Certification removal--(1) Grounds for removal. The
certification for participation in the Recordkeeping Compliance Program
by a certified recordkeeper may be removed when any of the following
conditions are discovered:
(i) The certification privilege was obtained through fraud or
mistake of fact;
(ii) The program participant no longer has a valid bond;
(iii) The program participant fails on a recurring basis to provide
entry records when demanded by Customs;
(iv) The program participant willfully refuses to produce a
demanded or requested record;
(v) The program participant is no longer in compliance with the
Customs laws and regulations, including the requirements set forth in
Sec. 163.12(b)(3); or
(vi) The program participant is convicted of any felony or has
committed acts which would constitute a misdemeanor or felony involving
theft, smuggling, or any theft-connected crime.
(2) Removal procedure. If Customs determines that the certification
of a program participant should be removed, the Director of the Miami
regulatory audit field office shall serve the program participant with
written notice of the removal. Such notice shall inform the program
participant of the grounds for the removal and shall advise the program
participant of its right to file an appeal of the removal in accordance
with paragraph (d) of this section.
(3) Effect of removal. The removal of certification shall be
effective immediately in cases of willfulness on the part of the
program participant or when required by public health, interest, or
safety. In all other cases, the removal of certification shall be
effective when the program participant has received notice under
paragraph (c)(2) of this section and either no appeal has been filed
within the time limit prescribed in paragraph (d)(2) of this section or
all appeal procedures thereunder have been concluded by a decision that
upholds the removal action. Removal of certification may subject the
affected person to penalties.
(d) Appeal of certification denial or removal--(1) Appeal of
certification denial. A person may challenge a denial of an application
for certification for participation in the Recordkeeping Compliance
Program by filing a written appeal with the Director, Regulatory Audit
Division, U.S. Customs Service, Washington, DC 20229. The appeal must
be received by the Director, Regulatory Audit Division, within 30
calendar days after issuance of the notice of denial. The Director,
Regulatory Audit Division, will review the appeal and will respond with
a written decision within 30 calendar days after receipt of the appeal
unless circumstances require a delay in issuance of the decision. If
the decision cannot be issued within the 30-day period, the Director,
Regulatory Audit Division, will advise the appellant of the reasons for
the delay and of any further actions which will be carried out to
complete the appeal review and of the anticipated date for issuance of
the appeal decision.
(2) Appeal of certification removal. A certified recordkeeper who
has received a Customs notice of removal of certification for
participation in the Recordkeeping Compliance Program may challenge the
removal by filing a written appeal with the Director, Regulatory Audit
Division, U.S. Customs Service, Washington, DC 20229. The appeal must
be received by the Director, Regulatory Audit Division, within 30
calendar days after issuance of the notice of removal. The Director,
Regulatory Audit Division, shall consider the allegations upon which
the removal was based and the responses made thereto by the appellant
and shall render a written decision on the appeal within 30 calendar
days after receipt of the appeal.
Appendix to Part 163--Interim (a)(1)(A) List
List of Records Required for the Entry of Merchandise
General Information
(1) Section 508 of the Tariff Act of 1930, as amended (19 U.S.C.
1508), sets forth the general recordkeeping requirements for
Customs-related activities. Section 509 of the Tariff Act of 1930,
as amended (19 U.S.C. 1509) sets forth the procedures for the
production and examination of those records (which includes, but is
not limited to, any statement, declaration, document, or
electronically generated or machine readable data).
(2) Section 509(a)(1)(A) of the Tariff Act of 1930, as amended
by title VI of Public Law 103-182, commonly referred to as the
Customs Modernization Act (19 U.S.C. 1509(a)(1)(A)), requires the
production, within a reasonable time after demand by the Customs
Service is made (taking into consideration the number, type and age
of the item demanded) if ``such record is required by law or
regulation for the entry of the merchandise (whether or not the
Customs Service required its presentation at the time of entry).''
Section 509(e) of the Tariff Act of 1930, as amended by Public Law
103-182 (19 U.S.C. 1509(e)) requires the Customs Service to identify
and publish a list of the records and entry information that is
required to be maintained and produced under subsection (a)(1)(A) of
section 509 (19 U.S.C. 1509(a)(1)(A)). This list is commonly
referred to as ``the (a)(1)(A) list.''
(3) The Customs Service has tried to identify all the presently
required entry
[[Page 32953]]
information or records on the following list. However, as automated
programs and new procedures are introduced, these may change. In
addition, errors and omissions to the list may be discovered upon
further review by Customs officials or the trade. Pursuant to
section 509(g), the failure to produce listed records or information
upon reasonable demand may result in penalty action or liquidation
or reliquidation at a higher rate than entered. A recordkeeping
penalty may not be assessed if the listed information or records are
transmitted to and retained by Customs.
(4) Other recordkeeping requirements: The importing community
and Customs officials are reminded that the (a)(1)(A) list only
pertains to records or information required for the entry of
merchandise. An owner, importer, consignee, importer of record,
entry filer, or other party who imports merchandise, files a
drawback claim or transports or stores bonded merchandise, any agent
of the foregoing, or any person whose activities require them to
file a declaration or entry, is also required to make, keep and
render for examination and inspection records (including, but not
limited to, statements, declarations, documents and electronically
generated or machine readable data) which pertain to any such
activity or the information contained in the records required by the
Tariff Act in connection with any such activity, and are normally
kept in the ordinary course of business. While these records are not
subject to administrative penalties, they are subject to examination
and/or summons by Customs officers. Failure to comply could result
in the imposition of significant judicially imposed penalties and
denial of import privileges.
(5) The following list does not replace entry requirements, but
is merely provided for information and reference. In the case of the
list conflicting with regulatory or statutory requirements, the
latter will govern.
List of Records and Information Required for the Entry of
Merchandise
The following records (which include, but are not limited to,
any statement, declaration, document, or electronically generated or
machine readable data) are required by law or regulation for the
entry of merchandise and are required to be maintained and produced
to Customs upon reasonable demand (whether or not Customs required
their presentation at the time of entry). Information may be
submitted to Customs at the time of entry in a Customs authorized
electronic or paper format. Not every entry of merchandise requires
all of the following information. Only those records or information
applicable to the entry requirements for the merchandise in question
will be required/mandatory. The list may be amended as Customs
reviews its requirements and continues to implement the Customs
Modernization Act. When a record or information is filed with and
retained by Customs, the record is not subject to recordkeeping
penalties, although the underlying backup or supporting information
from which it is obtained may also be subject to the general record
retention regulations and examination or summons pursuant to 19
U.S.C. 1508 and 1509. (All references, unless otherwise indicated,
are to the current edition of title 19, Code of Federal Regulations,
as amended by subsequent Federal Register documents.)
I. General list of records required for most entries.
Information shown with an asterisk (*) is usually on the appropriate
form and filed with and retained by Customs:
Secs. 141.11 through 141.15 Evidence of right to make entry (airway
bill/bill of lading or *carrier certificate, etc.) when goods are
imported on a common carrier
Sec. 141.19 * Declaration of entry (usually contained on the entry
summary or warehouse entry)
Sec. 141.32 Power of attorney (when required by regulations)
Sec. 141.54 Consolidated shipments authority to make entry (if this
procedure is utilized)
Sec. 142.3 Packing list (where appropriate)
Sec. 142.4 Bond information (except if 10.101 or 142.4(c) applies)
Parts 4, 18, 122, 123 * Vessel, Vehicle or Air Manifest (filed by
the carrier)
II. The following records or information are required by
Sec. 141.61 on Customs Form (CF) 3461 or CF 7533 or the regulations
cited. Information shown with an asterisk (*) is contained on the
appropriate form and/or otherwise filed with and retained by
Customs:
Secs. 142.3, 142.3a * Entry Number
* Entry Type Code
* Elected Entry Date
* Port Code
Sec. 142.4 * Bond information
Secs. 141.61, 142.3a * Broker/Importer Filer Number
Secs. 141.61, 142.3 * Ultimate Consignee Name and Number/street
address of premises to be delivered
Sec. 141.61 * Importer of Record Number
* Country of Origin
Sec. 141.11 * IT/BL/AWB Number and Code
* Arrival Date
Sec. 141.61 * Carrier Code
* Voyage/Flight/Trip
* Vessel Code/Name
* Manufacturer ID Number (for AD/CVD must be actual mfr.)
* Location of Goods-Code(s)/Name(s)
* U.S. Port of Unlading
* General Order Number (only when required by the regulations)
Sec. 142.6 * Description of Merchandise
Sec. 142.6 * HTSUSA Number
Sec. 142.6 * Manifest Quantity
* Total Value
* Signature of Applicant
III. In addition to the information listed above, the following
records or items of information are required by law and regulation
for the entry of merchandise and are presently required to be
produced by the importer of record at the time the Customs Form 7501
is filed:
Sec. 141.61 * Entry Summary Date
Sec. 141.61 * Entry Date
Sec. 142.3 * Bond Number, Bond Type Code and Surety code
Sec. 142.3 * Ultimate Consignee Address
Sec. 141.61 * Importer of Record Name and Address
Sec. 141.61 * Exporting Country and Date Exported
* I.T. (In-bond) Entry Date (for IT Entries only)
* Mode of Transportation (MOT Code)
Sec. 141.61 * Importing Carrier Name
Sec. 141.82 Conveyance Name/Number
* Foreign Port of Lading
* Import Date and Line Numbers
* Reference Number
* HTSUS Number
Sec. 141.61 * Identification number for merchandise subject to
Anti-dumping or Countervailing duty order (ADA/CVD Case Number)
Sec. 141.61 * Gross Weight
* Manifest Quantity
Sec. 141.61 * Net Quantity in HTSUSA Units
Sec. 141.61 * Entered Value, Charges, and Relationship
Sec. 141.61 * Applicable HTSUSA Rate, ADA/CVD Rate, I.R.C. Rate,
and/or Visa Number, Duty, I.R. Tax, and Fees (e.g. HMF, MPF, Cotton)
Sec. 141.61 Non-Dutiable Charges
Sec. 141.61 * Signature of Declarant, Title, and Date
* Textile Category Number
Sec. 141.83, 141.86 Invoice information which includes, e.g., date,
number, merchandise (commercial product) description, quantities,
values, unit price, trade terms, part, model, style, marks and
numbers, name and address of foreign party responsible for
invoicing, kind of currency
Terms of Sale
Shipping Quantities
Shipping Units of Measurements
Manifest Description of Goods
Foreign Trade Zone Designation and Status
Designation (if applicable)
Indication of Eligibility for Special Access Program (9802/GSP/
CBI)
Sec. 141.89 CF 5523
Part 141 Corrected Commercial Invoice
141.86 (e) Packing List
177.8 * Binding Ruling Identification Number (or a copy of the
ruling)
Sec. 10.102 Duty Free Entry Certificate (9808.00.30009 HTS)
Sec. 10.108 Lease Statement
IV. Documents/records or information required for entry of
special categories of merchandise (the listed documents or
information is only required for merchandise entered [or required to
be entered] in accordance with the provisions of the sections of 19
CFR [the Customs Regulations] listed). These are in addition to any
documents/records or information required by other agencies in their
regulations for the entry of merchandise:
Sec. 4.14 CF 226 Information for vessel repairs, parts and
equipment
Sec. 7.3(f) CF 3229 Origin certificate for insular possessions
Shipper's and importer's declaration for insular possessions
Part 10 Documents required for entry of articles exported and
returned:
Secs. 10.1 through 10.6 Foreign shipper's declaration or master's
certificate, declaration for free entry by owner, importer or
consignee
Sec. 10.7 Certificate from foreign shipper for reusable containers
[[Page 32954]]
Sec. 10.8 Declaration of person performing alterations or repairs
Declaration for non-conforming merchandise
Sec. 10.9 Declaration of processing
Sec. 10.24 Declaration by assembler Endorsement by importer
Secs. 10.31, 10.35 Documents required for Temporary Importations
Under Bond:
Information required, Bond or Carnet
Sec. 10.36 Lists for samples, professional equipment, theatrical
effects
Documents required for Instruments of International Traffic:
Sec. 10.41 Application, Bond or TIR carnet
Note: additional 19 U.S.C. 1508 records: see Sec. 10.41b(e)
Sec. 10.43 Documents required for exempt organizations
Sec. 10.46 Request from head of agency for 9808.00.10 or 9808.00.20
HTSUS treatment
Documents required for works of art
Sec. 10.48 Declaration of artist, seller or shipper, curator, etc.
Secs. 10.49, 10.52 Declaration by institution
Sec. 10.53 Declaration by importer
USFWS Form 3-177, if appropriate
Secs. 10.59, 10.63 Documents/CF 5125 for withdrawal of ship
supplies
Secs. 10.66, 10.67 Declarations for articles exported and returned
Secs. 10.68, 10.69 Documents for commercial samples, tools,
theatrical effects
Secs. 10.70, 10.71 Purebred breeding certificate
Sec. 10.84 Automotive Products certificate
Sec. 10.90 Master records and metal matrices: detailed statement of
cost of production
Sec. 10.98 Declarations for copper fluxing material
Sec. 10.99 Declaration of non-beverage ethyl alcohol, ATF permit
Secs. 10.101 through 10.102 Stipulation for government shipments
and/or certification for government duty-free entries, etc.
Sec. 10.107 Report for rescue and relief equipment
15 CFR part 301 Requirements for entry of scientific and
educational apparatus
Sec. 10.121 Certificate from USIA for visual/auditory materials
Sec. 10.134 Declaration of actual use (When classification involves
actual use)
Sec. 10.138 End Use Certificate
Secs. 10.171 through 10.178 Documents, etc. required for entries of
GSP merchandise, GSP Declaration (plus supporting documentation)
Sec. 10.174 Evidence of direct shipment
Sec. 10.179 Certificate of importer of crude petroleum
Sec. 10.180 Certificate of fresh, chilled or frozen beef
Sec. 10.183 Civil aircraft parts/simulator documentation and
certifications
Secs. 10.191 through 10.198 Documents, etc. required for entries of
CBI merchandise, CBI declaration of origin (plus supporting
information)
Sec. 10.194 Evidence of direct shipment
[Sec. 10.306 Evidence of direct shipment for CFTA]
[Sec. 10.307 Documents, etc. required for entries under
CFTA Certificate of origin of CF 353]
[CFTA provisions are suspended while NAFTA remains in
effect. See part 181]
Sec. 12.6 European Community cheese affidavit
Sec. 12.7 HHS permit for milk or cream importation
Sec. 12.11 Notice of arrival for plant and plant products
Sec. 12.17 APHIS Permit animal viruses, serums and toxins
Sec. 12.21 HHS license for viruses, toxins, antitoxins, etc. for
treatment of man
Sec. 12.23 Notice of claimed investigational exemption for a new
drug
Secs. 12.26 through 12.31 Necessary permits from APHIS, FWS &
foreign government certificates when required by the applicable
regulation
Sec. 12.33 Chop list, proforma invoice and release permit from HHS
Sec. 12.34 Certificate of match inspection and importer's
declaration
Sec. 12.43 Certificate of origin/declarations for goods made by
forced labor, etc.
Sec. 12.61 Shipper's declaration, official certificate for seal and
otter skins
Secs. 12.73, 12.80 Motor vehicle declarations
Sec. 12.85 Boat declarations (CG-5096) and USCG exemption
Sec. 12.91 FDA form 2877 and required declarations for electronics
products
Sec. 12.99 Declarations for switchblade knives
Secs. 12.104 through 12.104i Cultural property declarations,
statements and certificates of origin
Sec. 12.105 through 12.109 Pre-Columbian monumental and
architectural sculpture and murals
Certificate of legal exportation
Evidence of exemption
Sec. 12.110 Pesticides, etc. notice of arrival
Secs. 12.118 through 12.127 Toxic substances: TSCA statements
Sec. 12.130 Textiles & textile products
Single country declaration
Multiple country declaration
VISA
Sec. 12.132 NAFTA textile requirements
Sec. 12.140 Province of first manufacture, export permit number and
fee status of softwood lumber from Canada
Sec. 54.5 Declaration by importer of use of certain metal articles
Sec. 54.6(a) Re-Melting Certificate
Part 114 Carnets (serves as entry and bond document where
applicable)
Part 115 Container certificate of approval
Part 128 Express consignments
Sec. 128.21 * Manifests with required information (filed by
carrier)
Sec. 132.23 Acknowledgment of delivery for mailed items subject to
quota
Sec. 133.21(b)(6) Consent from trademark or trade name holder to
import otherwise restricted goods
Secs. 134.25, 134.36 Certificate of marking; notice to repacker
Sec. 141.88 Computed value information
Sec. 141.89 Additional invoice information required for certain
classes of merchandise including, but not limited to:
Textile Entries: Quota charge Statement, if applicable including
Style Number, Article Number and Product
Steel Entries: Ordering specifications, including but not
limited to, all applicable industry standards and mill certificates,
including but not limited to, chemical composition.
Sec. 143.13 Documents required for appraisement entries Bills,
statements of costs of production Value declaration
Sec. 143.23 Informal entry: commercial invoice plus declaration
Sec. 144.12 Warehouse entry information
Sec. 145.11 Customs Declaration for Mail, Invoice
Sec. 145.12 Mail entry information (CF 3419 is completed by Customs
but formal entry may be required.)
Part 148 Supporting documents for personal importations
Part 151, subpart B Scale Weight
Part 151, subpart B Sugar imports sampling/lab information
(Chemical Analysis)
Part 151, subpart C Petroleum imports sampling/lab information Out
turn Report 24. to 25.--Reserved
Part 151, subpart E Wool and Hair invoice information, additional
documents
Part 151, subpart F Cotton invoice information, additional
documents
Sec. 181.22 NAFTA Certificate of origin and supporting records
19 U.S.C. 1356k Coffee Form O (currently suspended)
Other Federal and State Agency Documents
State and Local Government Records
Other Federal Agency Records (See 19 CFR part 12, 19 U.S.C. 1484,
1499)
Licenses, Authorizations, Permits
Foreign Trade Zones
Sec. 146.32 Supporting documents to CF 214
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.
[[Page 32955]]
------------------------------------------------------------------------
OMB control
19 CFR section Description No.
------------------------------------------------------------------------
* * * *
* * *
Part 163......................... General recordkeeping 1515-0214
and record production
requirements.
* * * *
* * *
------------------------------------------------------------------------
PART 181--NORTH AMERICAN FREE TRADE AGREEMENT
1. The authority citation for Part 181 continues to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1624, 3314.
Sec. 181.12 [Amended]
2. In Sec. 181.12, the introductory text of paragraph (a)(1) is
amended by removing the words ``all records'' and adding, in their
place, the words ``the Certificate (or a copy thereof) and all other
records'', and paragraph (b)(1) is amended by removing the reference
``Sec. 162.1d'' and adding, in its place, the reference ``part 163''.
3. In Sec. 181.13, a new sentence is added at the end to read as
follows:
Sec. 181.13 Failure to comply with requirements.
* * * Such measures may include the imposition of penalties
pursuant to 19 U.S.C. 1508(e) for failure to retain records required to
be maintained under Sec. 181.12.
Sec. 181.22 [Amended]
4. In Sec. 181.22, the second sentence of paragraph (a) is amended
by removing the reference ``Sec. 162.1a(a)'' and adding, in its place,
the reference ``Sec. 163.1(a)''.
Approved: May 26, 1998.
Samuel H. Banks,
Acting Commissioner of Customs.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 98-15771 Filed 6-15-98; 8:45 am]
BILLING CODE 4820-02-P
