[Federal Register Volume 60, Number 51 (Thursday, March 16, 1995)]
[Rules and Regulations]
[Pages 14211-14215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6525]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 101
[T.D. 95-21]
RIN 1515-AB47
Test Programs
AGENCY: Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document amends the Customs Regulations by adding a new
provision that allows for test programs and procedures in general and,
specifically, for purposes of implementing those Customs Modernization
provisions of the North American Free Trade Agreement Implementation
Act that provide for the National Customs Automation Program. The
regulation allows the Commissioner of Customs to conduct limited test
programs/procedures, which have as their goal the more efficient and
effective processing of passengers, carriers, and merchandise. Test
programs may impose upon eligible, voluntary participants requirements
different from those specified in the Customs Regulations, but only to
the extent that such different requirements do not affect the
collection of the revenue, public health, safety, or law enforcement.
EFFECTIVE DATE: April 17, 1995.
FOR FURTHER INFORMATION CONTACT: John Durant, Director, Commercial
Rulings Division, (202) 482-6990.
SUPPLEMENTARY INFORMATION:
Background
Title VI of the North American Free Trade Agreement Implementation
Act (the Act), Public Law 103-182, 107 Stat. 2057 (December 8, 1993),
contains provisions pertaining to Customs Modernization (107 Stat.
2170). Subtitle B of title VI establishes the National Customs
Automation Program (NCAP)--an automated and electronic system for the
processing of commercial importations. Section 631 in Subtitle B of the
Act creates sections 411 through 414 of the Tariff Act of 1930 (19
U.S.C. 1411-1414), which define and list the existing and planned
components of the NCAP (section 411), promulgate program goals (section
412), provide for the implementation and evaluation of the program
(section 413), and provide for remote location filing (section 414).
Section 631 of the Act provides Customs with direct statutory
authority for full electronic processing of all Customs-related
transactions. For each planned NCAP program component, Customs is
required to prepare a separate implementation plan in consultation with
the trade community, establish eligibility criteria for voluntary
participation in the program, test the component, and transmit to
Congress the implementation plan, testing results, and an evaluation
report. The testing of any planned NCAP components would be conducted
under carefully delineated circumstances--with objective measures of
success or failure, a predetermined time frame, and a defined class of
participants. Notice of any NCAP program component testing would be
published in both the Customs Bulletin and the Federal Register and
participants solicited.
In addition to testing planned NCAP components, Customs also
proposed conducting limited test programs/procedures in other areas of
Customs-related transactions wherein Customs and the trade community
could benefit from the valuable information that such testing could
provide. Thus, Customs proposed a general test authority in order both
to meet its obligations under the NCAP legislation and to provide
itself with the ability to obtain information necessary to predict the
effects of various policy options.
The regulation proposed would allow the Commissioner of Customs to
conduct limited test programs and procedures and allow certain eligible
members of the public to participate on a voluntary basis. Also,
because test programs could require exemptions from regulations in
various parts of the Customs Regulations, e.g., parts 113 (Customs
bonds), 141 (entry of merchandise), 142 (entry process), 171 (fines,
penalties, and forfeitures), 174 (protests), and 191 (drawback),
participants would be subject to requirements different from those
specified in the Customs Regulations, but only to the extent that such
different requirements do not affect the collection of the revenue,
public health, safety, or law enforcement. Accordingly, pursuant to the
Secretary's authority under section 624 of the Tariff Act of 1930 (19
U.S.C. 1624) to make such rules and regulations as may be necessary to
carry out the provisions of the Tariff Act of 1930 and pursuant to the
requirement set forth in section 413 of the Tariff Act of 1930 (19
U.S.C. 1413) that the Secretary test planned NCAP program components,
on August 16, 1994, Customs published a Notice of Proposed Rulemaking
in the Federal Register (59 FR 41992) that proposed to amend part 101
of the Customs Regulations (19 CFR part 101) by adding a new Sec. 101.9
that would allow the Commissioner of Customs to conduct limited test
programs and procedures in general and for purposes of implementing
NCAP program components. Seven comments, most favorable to the proposed
regulation, were received. These comments raised four areas of concern.
The comments received and Customs responses to them are set forth
below.
Discussion of Comments
Comments were received from corporate sureties (1), customs brokers
[[Page 14212]] (4), and transportation associations (2). The comments
raised four areas of concern. The concerns relate to: (1) Generally,
whether there will be equal opportunity to participate in tests and
whether statutory requirements would be subject to suspension; (2) the
manner and amount of notice that would be provided; (3) the length of
time in which tests would be conducted; and, (4) the nature of
voluntary participation. We address each of these concerns seriatim.
In General
Comment: A commenter states that language should be added to
Sec. 101.9(a) ``to protect Customs businesses'' to the effect that no
test shall be made that will give economical advantages to one class of
importer, exporter, carrier, customs broker, freight forwarder, or
courier over another, or one geographic area over another.
Customs Response: While Customs understands the commenter's
concern, it believes that adding the suggested language to the
regulation would unduly inhibit Customs ability to modernize, i.e., to
streamline and automate the commercial operations of the Customs
Service, the reason the Customs Modernization provisions were
promulgated in the first place. The purpose of a test is to experiment
to see if something works. Hopefully, if the test is successful, those
who have chosen to participate will benefit. Customs, however, does not
wish to be unfair to non-participants. Accordingly, the proposed
regulation provides for notice in the Federal Register to the public
when a test will be run. These notices of proposed tests will allow all
interested parties to choose to participate and to comment on any
problem they perceive will result from the test proposed, including a
perceived problem of economical advantages being offered to one party
over another. Customs, generally, will attempt to address such concerns
before a test is run. If there are instances when Customs may need to
conduct tests that are company-/industry-specific, so that economies of
scale and other program parameters can be realized, the proposed
regulation seeks to limit the advantage that the test may provide by
requiring that the test be limited in time and scope.
While not adding the language suggested by the commenter, Customs
has determined, after review of this comment and others, to modify the
proposal to broaden the notice requirements. As now drafted, the final
regulation no longer provides that public notice is not required for
non-NCAP tests affecting carriers and passengers. Further, the
``whenever practicable'' language in the non-NCAP paragraph describing
the publication requirement is removed. Instead, the regulation
provides that whenever a particular test allows for deviation from any
regulatory requirement, notice shall be published in the Federal
Register not less than 30 days prior to implementing such test. Customs
believes that this allows all Customs businesses to comment on all
tests and provides adequate time for comments.
Comment: Two commenters are concerned with whether tests will be
conducted other than on a parallel basis which would violate a
statutory requirement. One of these commenters argues that language
should be added to Sec. 101.9(a) to the extent that no test should be
implemented that is contrary to U.S. law, because federal agencies
should not be allowed to set up a ``test'' as a simple way of
circumventing the laws passed by Congress.
Customs Response: Customs believes that it is clearly understood
that any test programs will be consistent with statutes and, therefore,
it is unnecessary to add language to the regulation to so indicate.
Notice
Comment: The proposed regulatory text may not provide sureties with
proper and timely notice of variations of its risk. The commenter, a
corporate surety, states that notice provided ``whenever practicable''
or ``within a reasonable period of time'' may run contrary to the
stated objectives of the Notice because it would ``affect the
collection of revenue'' by varying the surety's risk under its bond.
The obligation of a compensated surety is predicated upon certain known
risks or underwriting components and to the extent a surety's risk is
varied without its prior consent, sureties could be discharged from any
obligation under their bonds. Accordingly, the commenter suggests that
proper and timely notice of all test programs and results should be
provided to sureties to enable them to decide whether to agree to be
bound under a particular varied risk arising under a NCAP test program.
Another commenter believing that the Sec. 101.9(b)(2) requirement
for publication of complete test results ``within a reasonable time''
is not specific enough recommends that the regulation should provide
that, ``unless extended by Federal Register Notice, within 60 days
following the completion of the test, complete test results shall be
published.'' Further, the commenter urges that the published results
also include a list of the participants in the test.
Customs Response: Test programs will not be run that affect the
collection of the revenue. All duties, taxes, and fees owed to the U.S.
by law continue to be owed by the responsible parties throughout any
test program.
Regarding the issue of proper and timely notice to sureties,
Customs has modified the proposal in this final rule to provide that
whenever a particular test allows for deviation from any regulation
requirement, notice shall be published not less than 30 days prior to
implementing such test. When there is publication in the Federal
Register, such publication serves as constructive notice and is notice
to all. Customs believes that the 30-day time frame affords interested
sureties adequate time to discuss any of their bond conditions within
the context of participating in a test program, and to separately
respond to those test notices about which they may have questions
concerning their underwritten risk. In accordance with the above,
Customs has determined that it will not provide separate notices to
sureties.
Regarding the suggestion to amend the proposed regulation to
provide that publication of complete test results be accomplished
within 60 days unless extended by Federal Register notice, Customs does
not agree. While in general Customs will make every effort to publish
discrete test results as soon as possible, setting forth a specific
time frame in the regulation--applicable to all tests results--will not
give the Customs Service the flexibility it needs to properly evaluate
certain NCAP program components to assess their contribution toward
achieving specified program goals. Some tests may not be one-time
tests, and others may build on other test results.
Concerning publishing a list of the participants in an NCAP test,
while Customs has no hesitation in providing this information, Customs
does not want to routinely publish such lists. Accordingly, Customs
will provide a list of participants upon written request and believes
that this element of test notices need not be set forth in the
regulation.
Comment: A commenter states that, although notification of tests
will be published in the Federal Register and the Customs Bulletin,
Customs should ensure that the trade community is involved and informed
about all of the test programs and procedures for the various
components. Accordingly, the commenter suggests that test information
be sent via electronic mail to the main contacts for various trade
community representatives or that a [[Page 14213]] primary contact,
knowledgeable of all test programs and procedures be appointed as the
single contact for the trade community. Also, the commenter does not
feel that the proposed regulation should further the cause for
producing additional `paper-based' forms.
Customs Response: Section 631 of the Act specifically requires the
Secretary to consult with the trade community, to include importers,
brokers, shippers, and other affected parties when developing NCAP
program components. To this end, in addition to the regulatory
notification requirements adopted, Customs will be placing test
information on the Customs electronic bulletin board. As for furthering
the need for paper-based forms, it is hoped that the need for this
medium of information will be changed based on tests proposed to take
advantage of new or changing technologies.
Comment: A commenter states that proposed Sec. 101.9(a)(2) should
be amended to require advance notification to passengers and carriers
because tests affecting passengers will necessarily affect the carriers
they use. Thus, carriers should be notified of proposed tests well in
advance.
Customs Response: As stated earlier in the document, Customs is
modifying the proposal in this final rule to provide notice whenever a
particular test allows for deviation from any regulation requirement.
Comment: One commenter states that it is not at all clear from
either the BACKGROUND section or the proposed regulatory text section
of the Notice whether the procedures which will be tested will be in
addition to those already required under the regulations, i.e., will
they constitute a parallel test, or whether the current regulatory
procedures would not be followed. If the latter is the case, proposed
Sec. 101.9 should provide that Customs Headquarters will issue a letter
to each participant advising them of the fact that, during the period
of the test, they will not have to abide by certain identified
regulation(s) or specify any other requirements.
Customs Response: The proposal to amend Sec. 101.9 to provide that
Customs will issue a letter to participants only advising them that
they will not have to abide by certain identified regulation(s) or
specify any other requirements is rejected. This approach is not in
keeping with program requirements to consult with the trade community.
Instead, each Federal Register notice published announcing a specific
test will identify which, if any, regulatory requirements may be
suspended for purposes of the test. Customs believes such publication
will afford all interested parties an opportunity to comment on planned
tests. Accordingly, no change to the regulation is made based on this
comment.
Time/Duration
Comment: A commenter believes that implementation of the proposed
rule, as written, would mean that Customs would have carte blanche
authority to do whatever it wanted with respect to ``testing'',
``procedures'' or any derivation of these two words. It could conduct
such ``tests'' or invoke such ``procedures'' for whatever period of
time it decided--one month, one year, five years. Customs could select
whomever it chose to participate without being subject to anyone's
challenge. The sole interpreter would be Customs and neither importers
nor brokers would have any timely recourse. For these reasons, it
strongly opposes issuance of the rule as proposed; there is too big a
chance for misuse.
Customs Response: The purpose of publishing test proposals in the
Federal Register is to avoid such problems. The Customs Modernization
provisions are intended, in part, to provide safeguards, uniformity,
and due process rights for importers. Customs believes that the
publication requirement imposed by the proposed regulation adequately
meets the unlimited-time-fears expressed by the commenter and affords
all interested parties the opportunity to comment on any aspect of
proposed tests, including the proposed length of a test. Accordingly,
no change to the regulation is made based on this comment.
Comment: A commenter states that the 30-day time period for giving
notice prior to implementing a test, provided at Secs. 101.9 (a)(2) and
(b)(1), should be increased to 60 days to allow adequate time for the
trade community to comment on proposed tests and to give Customs time
to review the comments before the test is put into effect. To this end
the commenter states that Customs has, in the past, instituted
``programs'', e.g., revising the CF 7512, which resulted in the public
spending hundreds of thousands of dollars to acquire the new form only
to have Customs withdraw the form because of problems with the form.
The commenter suggests that an extended comment period will save more
money than it costs over the long run. Further, since almost all tests
will involve computer programming time, the trade will need the
additional time to reprogram their computers for the test.
Customs Response: As already stated, Customs will be publishing
notice of proposed tests on the Customs electronic bulletin board and
otherwise inform the trade community of pending developments. As no
rational basis has been given to double the length of time for
comments--from 30-days to 60-days--and the present electronic
environment adequately affords Customs time to review comments before a
test is implemented, no change to the regulation is made based on this
comment.
Comment: A commenter suggests that the ``time'' for a test should
be defined--given a definite time restriction--and published with the
initial notification of a test, as, in the past, Customs has had some
``tests'' go on for years, e.g., monthly periodic Customs entries on
automobile parts and imports of oil and gas. Further, if the test is
successful, the Customs Regulations and practices should be changed so
that the new procedure(s) can be enjoyed by all. And if it is necessary
to extend a test period, 30 days prior to the test end date, notice
should be published.
Also concerned with the length of time for a test, another
commenter suggests that in all cases, the regulation should specify
that the notice must contain either the specific dates for the test
(beginning and ending) or the length of the test. If Customs finds it
cannot adhere to the period specified, a notice should be published
specifying the reasons for the variance and the new dates. This
procedure, it is felt, will avoid what has been the past practice of
continuing tests ad infinitum.
Customs Response: These comments concerning unlimited time periods
for tests do not square with the provisions of the proposed regulation,
which expressly state that tests will be ``limited in scope, time, and
application to such relief as may be necessary to facilitate the
conduct of a specified program or procedure.'' 19 CFR 101.9 (a)(1) and
(b). At the risk of sounding repetitive, we again state that the
publication requirement will allow all interested parties to comment on
proposed tests and to express their particular concerns. This
publication requirement does not constitute a hollow gesture on Customs
part, as, for NCAP tests, Customs must subsequently prepare a user
satisfaction survey of parties participating in the program and
transmit a report of this survey to Congress. As the proposed
regulations adequately address these comments, no change to the
regulation is made based on this comment. [[Page 14214]]
Voluntary Participation
Comment: Two commenters express concern regarding the ``voluntary''
nature of participation in tests. One commenter states that voluntary
participation in a test should mean that volunteers should be allowed
to withdraw from a test upon a change in the conditions of the test.
The other commenter suggests that, to recognize the importance of
Customs test programs and filers' voluntary participation in these
programs, a new paragraph (c) be added to Sec. 101.9 to read as
follows:
(c) Voluntary participation. For tests affecting the entry of
merchandise, and for which participation by an entry filer requires or
includes a change in the manner, amount, or format of data submitted to
Customs by that filer, such participation shall be entirely voluntary.
An otherwise qualified filer's entry privileges, including but not
limited to electronic entry privileges, may not be reduced, suspended,
limited, or withdrawn by Customs solely because that filer declines to
participate in one or more such tests.
The commenter states that the voluntary status of filer
participation in new Customs programs would be explicitly limited to
those involving merchandise, and to those which are in fact test
programs. There would be no impediment to Customs mandatory
implementation of uniform procedures at points past the test stage.
The commenter states the impetus for this amendment to the proposed
regulations is a recent Customs/FDA electronic interface pilot program
in Seattle. Although in the first few months of the program filer
participation was entirely voluntary, such that brokerage firms could
elect when to participate, for the last year and a half participation
has been mandatory for Seattle-area brokers who wish to file their
entries electronically. If a Seattle broker does not wish to
participate in the pilot program, that broker must file non-ABI entries
for cargo subject to FDA oversight. In effect, the commenter claims
that such a broker is penalized by Customs for declining to participate
in that particular test program. In general, the commenter is also very
concerned about the potential impact of some types of Customs test
programs upon certain sections of the trade community, especially those
test programs which alter the manner, amount, or format of data
transmitted by an entry filer to Customs, as such programs require the
filer to incur at least some additional costs, in order to participate
in each test program.
Customs Response: Section 631 of the Act expressly provides that
``[p]articipation in the [NCAP] Program is voluntary.'' 19 U.S.C.
1411(b). Accordingly, a broker's, importer's, etc., initial decision to
become automated is entirely voluntary. However, as stated in the
BACKGROUND portion of the Federal Register notice of proposed
rulemaking, section 631 of the Act also provides Customs with direct
statutory authority for full electronic processing of all Customs-
related transactions. Thus, for Customs to implement the NCAP and
comply with the other mandates of section 631--(1) development of
separate implementation plans for each NCAP component, in consultation
with the trade community, (2) establishment of eligibility criteria for
voluntary participation, (3) testing of the components, and (4)
transmittal to Congress of the implementation plan, testing results,
and an evaluation report--a certain continuity of test participants
must be observed. Accordingly, while Customs will make every effort to
make as many aspects of tests as completely voluntary as possible,
Customs believes that while the decision by a broker or other
participant to participate in an automated Customs program is voluntary
in the first instance, continued participation in a particular test may
be required. In any event, a participant may always choose to not
participate with a particular automated component if the parameters of
the testing are not to their liking. If any doubts as to participation
in a particular test program or procedure exist after the parameters of
the test are published in the Federal Register, the hesitant
participant should take advantage of the comment period to seek
clarification. Accordingly, because of the extensive statutory
requirements that Customs must meet to conduct NCAP tests, Customs does
not believe that further regulatory language is needed at this time.
Inapplicability of the Regulatory Flexibility Act, and Executive Order
12866
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.) and based upon the information set forth above, it
is certified that the regulation will not have a significant impact on
a substantial number of small entities. Accordingly, the regulation is
not subject to the regulatory analysis or other requirements of U.S.C.
603 and 604. Further, this document does not meet the criteria for a
``significant regulatory action'' as specified in E.O. 12866.
Drafting Information
The principal author of this document was Gregory R. Vilders,
Attorney, Office of Regulations and Rulings, Regulations Branch.
However, personnel from other offices participated in its development.
List of Subjects in 19 CFR Part 101
Customs duties and inspection, Exports, Imports, Organization and
functions (Government agencies), Reporting and recordkeeping
requirements, Sureties, Tests.
Amendments to the Regulations
For the reasons stated above, part 101 of the Customs Regulations
(19 CFR part 101) is amended as set forth below:
PART 101--GENERAL PROVISIONS
1. The authority citation for part 101 is revised to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 2, 66, 1202 (General Note 17,
Harmonized Tariff Schedule of the United States (HTSUS)), 1623,
1624.
Section 101.3 and 101.4 also issued under 19 U.S.C. 1 and 58b;
Section 101.9 also issued under 19 U.S.C. 1411-1414.
2. In part 101, a new Sec. 101.9 is added to read as follows:
Sec. 101.9 Test programs or procedures; alternate requirements.
(a) General testing. For purposes of conducting a test program or
procedure designed to evaluate the effectiveness of new technology or
operational procedures regarding the processing of passengers, vessels,
or merchandise, the Commissioner of Customs may impose requirements
different from those specified in the Customs Regulations, but only to
the extent that such different requirements do not affect the
collection of the revenue, public health, safety, or law enforcement.
The imposition of any such different requirements shall be subject to
the following conditions:
(1) Defined purpose. The test is limited in scope, time, and
application to such relief as may be necessary to facilitate the
conduct of a specified program or procedure;
(2) Prior publication requirement. Whenever a particular test
allows for deviation from any regulatory requirements, notice shall be
published in the Federal Register not less than thirty days prior to
implementing such test, followed by publication in the Customs
Bulletin. The notice shall invite public comments concerning the
methodology of the test program or procedure, and inform interested
members of the public of the eligibility criteria for voluntary
participation in [[Page 14215]] the test and the basis for selecting
participants.
(b) NCAP testing. For purposes of conducting an approved test
program or procedure designed to evaluate planned components of the
National Customs Automation Program (NCAP), as described in section
411(a)(2) of the Tariff Act of 1930 (19 U.S.C. 411), the Commissioner
of Customs may impose requirements different from those specified in
the Customs Regulations, but only to the extent that such different
requirements do not affect the collection of the revenue, public
health, safety, or law enforcement. In addition to the requirement of
paragraph (a)(1) of this section, the imposition of any such different
requirements shall be subject to the following conditions:
(1) Prior publication requirement. For tests affecting the NCAP,
notice shall be published in the Federal Register not less than thirty
days prior to implementing such test, followed by publication in the
Customs Bulletin. The notice shall invite public comments concerning
any aspect of the test program or procedure, and inform interested
members of the public of the eligibility criteria for voluntary
participation in the test and the basis for selecting participants;
and,
(2) Post publication requirement. Within a reasonable time period
following the completion of the test, a complete description of the
results shall be published in both the Federal Register and the Customs
Bulletin.
Approved: February 21, 1995.
George J. Weise,
Commissioner of Customs.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 95-6525 Filed 3-15-95; 8:45 am]
BILLING CODE 4820-02-P