Details of CBP Proposed Rule to Change In-Bond Regs (Part II-General Rules)

U.S. Customs and Border Protection has issued a proposed rule to amend 19 CFR to transform the in-bond process from a paper dependent entry process to an automated paperless process in ACE. It would also require additional information to be reported on the in-bond application, establish a 30-day transit time for all modes except pipelines, and require electronic permission from CBP for in-bond cargo diversion, among other changes. Comments on the proposed rule are due by April 23, 2012.

This is Part II of a multi-part series of summaries on this proposed rule. Part II covers proposed revisions to the in-bond regulations in 19 CFR Part 18 Subpart A, which contains the general provisions for transportation in bond and merchandise in transit.

Highlights of Proposed 19 CFR 18 Subpart A (General Provisions)

The following are highlights of the proposed changes to the in-bond regulations contained in 19 CFR 18 Subpart A (General Provisions):

Scope of In-Bond Requirements, Definitions

The proposed rule would create section 18.0 to provide the scope of 19 CFR 18 and to define terms that are commonly used in the in-bond environment, such as common carrier, origination port, port of destination, port of diversion, and port of export. The scope would include the requirements and procedures pertaining to the transportation of merchandise in-bond, except as provided in Parts 122 (air commerce regulations) and 123 (CBP relations with Canada and Mexico).

General Requirements for Filing In-Bond Entries

Proposed section 18.1 would provide the following general requirements for filing in-bond entries:

• General requirements. Paragraph (a) would require an in-bond application consisting of a transportation entry and a manifest in order to transport merchandise in-bond.
• Types of entries & withdrawals. Paragraph (b) lists the following types of transportation entries and withdrawals that could be made for merchandise to be transported in-bond: (1) entry for immediate transportation (IT); (2) warehouse or rewarehouse withdrawal for IT; (3) warehouse or rewarehouse withdrawal for immediate exportation (IE) or for transportation and exportation (T&E); (4) entry for T&E; (5) entry for IE; (6) entry of vessel and aircraft supplies for IE or for T&E; and (7) entry of vessel and aircraft supplies for T&E.
• Who may file applications. Paragraph (c) would state that the following can file an in-bond application: (1) the carrier that brings the merchandise to the origination port; (2) the carrier that is to accept the merchandise under its bond or a carnet for transportation to the port of destination or the port of export; or (3) any person who has a sufficient interest in the merchandise as shown by the bill of lading or manifest, a certificate of the importing carrier, or by any other document satisfactory to CBP.

Electronic in-bond application info. Paragraph (d) would require the submission of an in-bond application, via a CBP-approved electronic data interchange (EDI) system (ACE), containing the following information:

• Description of the merchandise -- if available, the six-digit Harmonized Tariff Schedule (HTS) number of the merchandise. (CBP will also accept the 8 or 10-digit HTS number.) If not available, then a detailed description setting forth the exact nature of the merchandise must be provided with sufficient detail to enable CBP and other government agencies to determine if the merchandise is subject to a rule, regulation, law, standard, or ban relating to health, safety, or conservation;
• Health, safety, or conservation -- if known by the carrier or other responsible party, a statement setting forth a rule, regulation, law, standard, or ban relating to health, safety, or conservation enforced by CBP or another government agency that applies to the merchandise;
• Prohibited or restricted merchandise -- merchandise that is prohibited or subject to entry restrictions;
• Textiles -- textiles and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 USC 1854, available here), described in such detail as to enable the port director to estimate the duties and taxes, if any, due;
• Other identifying information -- a visa, permit, license, entry number, or other similar number or identifying information that has been issued by the U.S. government, foreign government, or other issuing authority, relating to the merchandise;
• Quantity -- the quantity of the merchandise to be transported to the smallest piece count;
• Seals -- the container number of the container in which the merchandise is being transported and the seal number of the seal that seals the container; and
• Ultimate destination - the ultimate destination, either in the U.S. or abroad, of the merchandise to be transported in-bond.

Submission before departing origination port. Paragraph (d) would also allow the in-bond application to be submitted at any time prior to the merchandise departing the origination port. Additionally, it would state that by filing an in-bond application, the initial bonded carrier asserts that there is no discrepancy between the quantity of goods received from the importing carrier and the quantity of goods delivered to the in-bond carrier for transportation in-bond.

Custodial bond on Form 301. Paragraph (e) would require a custodial bond on a CBP Form 301 to transport merchandise in-bond. Currently, this requirement is included only in the section on direct exportation; however, this paragraph would apply to all types of in-bond entries.

Movement authorization. Paragraph (f) would require authorization from CBP before merchandise may be transported in-bond. Authorization would be transmitted by CBP via a CBP-approved EDI system.

CBP can supervise lading. Paragraph (g) would give CBP discretion to supervise the lading of merchandise delivered to a bonded carrier. It would also eliminate the requirement that CBP supervise the lading of in-bond merchandise, except in certain circumstances, and would give CBP the authority to exercise its supervision authority as necessary. (When merchandise is delivered from a warehouse or from a foreign trade zone to a bonded carrier for transportation in-bond, supervision of lading would have to be accomplished in accordance with procedures set forth in other provisions.)

In-Bond record could be updated. Paragraph (h) would provide that the in-bond filer or other responsible party may update or amend the in-bond record using a CBP-approved EDI system.

30-day transit times. Paragraph (i) would provide that merchandise to be transported in-bond must be delivered to CBP at the port of destination or port of export within 30 days from the date CBP provides movement authorization to the in-bond applicant. This limit would apply to all modes of transportation, except for pipeline shipments, which would continue to have no time limit. Neither the diversion to another port nor the filing of a new in-bond application would extend the 30-day maximum. Failure to deliver the merchandise within the prescribed period would constitute an irregular delivery.

Exceptions. If it is anticipated that a shipment will not be capable of completing its transit to the port of destination or port of export within the 30 days or if there are delays due to the examination or inspection of the merchandise by CBP or other government agencies, the 30-day limit could be extended by CBP upon request. Additionally, CBP or any other government agency with jurisdiction over the merchandise could shorten the in-transit time to less than 30 days.

24-hours to report arrival. Paragraph (j) would mandate that the delivering carrier report, via a CBP-approved EDI system, the arrival of any portion of an in-bond shipment within 24 hours of arrival at the port of destination or port of export and would subject the carrier to liquidated damages and other applicable claims for failure to do so. It would also require the delivering carrier to notify CBP of the physical location of the merchandise within the port.

15 days to export merchandise. Paragraph (k) would specify that in-bond merchandise that has arrived at the port of destination or the port of export must be entered or exported within 15 calendar days from the date of arrival at the port of destination or port of export. On the 16th day it would become subject to general order requirements.

OGA and restricted merchandise. Paragraph (l) would state that release for transportation in-bond of merchandise not in compliance with other government agencies' (OGA) rules, regulations, laws, standards, or bans relating to health, safety or conservation may only be made upon the authorization of the OGA. (For example, plants and plant products would only be released for transportation in-bond by authorization of APHIS.)

Paragraph (l) would also provide requirements for restricted merchandise: (i) narcotics (may not be entered for transportation in-bond); (ii) drugs, medicines, or chemicals (will be detained for examination if no evidence is provided showing that they are non-narcotics); (iii) explosives (may not be transported in-bond unless license or permit obtained first); and (iv) carload shipments of livestock (may not be entered for in-bond transportation unless they arrive at the destination port before seals must be removed or unless the seals are removed under CBP supervision).

(Proposed section 18.2 would provide the bonding requirements for carriers, cartmen, and lightermen. Proposed section 18.3 would provide the procedures for the transshipment of merchandise from one conveyance to another, and for carriers to notify CBP of the transshipment using a CBP-approved EDI system, etc. These sections are not covered in this summary. See proposed rule for full requirements under these sections.)

Other In-Bond Requirements Regarding Seals, Diversion, Short Shipments, Etc.

The proposed rule also contains the following provisions under 19 CFR 18 Subpart A:

Carriers would seal merchandise. Proposed section 18.4 would provide the seal requirements for in-bond merchandise. Among other things, this section would require the carrier (not CBP) to seal the merchandise, unless CBP authorizes a waiver, and transmit the seal number to CBP. It would also provide that liquidated damages will be assessed against the carrier or other authorized party for any unauthorized removal of the seals.

All diversions would require CBP permission. Section 18.5 would provide the procedures and requirements for diverting in-bond merchandise. This proposed section would require permission from CBP to divert in-bond merchandise and if permission is granted, would require the merchandise to be delivered to the port of diversion within 30 days from the date CBP first authorized the in-bond movement. This section would also prohibit the diversion of merchandise subject to a law, regulation, rule, standard, or ban that requires authorization from another government agency, without authorization of that agency. It would also delete the requirement for CBP permission to divert certain textile products as all diversions would require CBP approval.

Requirements for short shipments. Section 18.6 would provide the procedures and requirements for the handling of short shipments, shortages, entry and allowance. The proposed changes would require that CBP be notified of a short shipment using a CBP-approved EDI system, and also require that a new in-bond application be filed in order to transport short shipped merchandise to the port of destination or port of export.

CBP discretion to verify export records. Section 18.7 would provide the requirements and procedures for the verification and lading of merchandise for exportation. Among other things, this section would require that the bonded carrier update the in-bond record within 24 hours of exportation to reflect that the merchandise has been exported and would specify that the port director may require evidence of exportation. Additionally, the proposed amendments would remove the requirement that CBP occasionally verify entries and withdrawals against the exporting carrier’s records and instead give CBP discretion to verify as needed.

Clarify consequences for noncompliance. Section 18.8 would provide the consequences for not meeting the requirements of 19 CFR 18 and other conditions of the bond, including shortages, irregular delivery, or nondelivery. This section would clarify that the party whose bond is obligated on the transportation entry, generally the initial carrier, is liable for the payment of liquidated damages and for the payment of all taxes, duties, fees and charges. The proposed rule states that CBP would consider appropriate commercial or government documentation for determining whether proper delivery occurred.

Forwarded or returned merchandise. Section 18.9 would require that the carrier or other parties submit a new in-bond application in order to forward or return merchandise from the port of destination or port of export named in the original in-bond application, or from the port of diversion, to any other port. If the merchandise is moving under cover of a carnet, the carnet could be accepted as a transportation entry.

Special manifest. Section 18.10 would state that merchandise for which no other type of bonded movement is appropriate (e.g., prematurely discharged or overcarried merchandise, etc.) may be allowed to be shipped in-bond from the port of unlading to the port of destination, port of export, or port of diversion where applicable, upon approval by CBP.

See future issue of ITT for additional detailed summaries of this proposed rule.

(Note that CBP authorities have stated that most of the proposed rule's requirements have already been built in ACE.

See ITT's Online Archives 12022218 for Part I of this series, which provides an overview of the major amendments proposed to the in-bond regulations. See ITT's Online Archives 12022131 for initial summary announcing the availability of this proposed rule.)

CBP Contact -- Gary Schreffler (202) 344-1535

(Docket Number USCBP-2012-0002, FR Pub 02/22/12)