in the period of time during which the articles may remain in the Customs territory of the United States under bond (including any lawful extension), the district director shall make a demand in writing under the bond for the payment of liquidated damages equal to double the estimated duties applicable to such entry, unless a lower amount is prescribed by § 10.31(f). On the one hand, § 10.31(f) empowers the district director to require a bond in excess of double the duties, but the provisions of § 10.39(d) only permit him to assess liquidated damages at double the estimated duties or such lower amount (emphasis added) as prescribed by § 10.31(f). These regulations can provide anomalous results and inefficient protection of the revenue. Accordingly, the NPRM proposed an amendment to the regulations to permit, in the case of breach of a TIB, assessment of liquidated damages in an amount equal to double the estimated duties or any different amount prescribed by § 10.31(f) rather than only a lower amount. When a TIB entry is filed, no merchandise processing fees are charged to the importer of record. However, § 111 of the Customs and Trade Act of 1990 (Pub. L. 101-382) amended 19 U.S.C. 58c(g) (the statute which requires payment of the merchandise processing fee) to provide that all administrative and enforcement provisions of the Customs laws and regulations, except those relating to drawback, shall apply with respect to any fee prescribed under 19 U.S.C. 58c(a) (which requires payment of the merchandise processing fee), and with respect to persons liable therefor, as if such fee is a Customs duty. Any penalty which is expressed in terms of a relationship to the amount of the duty (e.g., liquidated damages expressed in terms of an amount equal to double the estimated duties due on an entry) shall be assessed as a multiple of the unpaid fee. Accordingly, when calculating the measure of liquidated damages for breach of a TIB, the amount of estimated duties due for breach should include duties plus the merchandise processing fees that would have been applicable to the entry had an entry for consumption been filed. The NPRM proposed an amendment to the regulations to provide that, for purposes of assessment of liquidated damages for breach of a TIB, the term duties includes any merchandise processing fees that would have been due on a consumption entry that would have been filed with regard to such TIB merchandise. Under the provisions of § 10.39(e) of the Customs Regulations (19 CFR 10.39(e)), if there has been a default with respect to all the articles covered by the bond and a written petition for relief is filed timely, the regulations state that the petition "shall be transmitted to Headquarters, U.S. Customs Service, with a full report of the facts, unless it is allowed by the district director in whole or in part in accordance with this regulation, * * *.” This language noting referral to Headquarters is unique to TIB cases in which all the articles covered by the bond are in default and the district director allows no mitigation. The NPRM posited that the jurisdictional amount found in § 172.21 of the Customs Regulations (19 CFR 172.21) should govern review of all petitions. Jurisdiction should not be predicated on a denial of relief in a limited fact situation. Accordingly, the NPRM proposed that § 10.39(e) be amended to remove the reference regarding referral of the petition to Customs Headquarters. ANALYSIS OF COMMENTS Five comments were received with regard to the subject document. It should initially be noted that Customs, in error, indicated the harbor maintenance fees, as required by the provisions of the Harbor Maintenance Review Act of 1986 (Pub. L. 99-682), are not imposed on TIB entries. The NPRM then went on to state also in error that unpaid harbor maintenance fees, as well as merchandise processing fees, should be included in any calculation of double the duties or 110 percent of the duties for assessment of liquidated damages. Two commenters noted these errors. Customs concedes these mistakes, and the final rule avoids any mention of harbor maintenance fees in the calculation of duties, fees and charges in TIB liquidated damages assessment. Two commenters suggested that the proposed regulatory amendment would only permit anticipatory breach as to the entire amount of merchandise entered under a TIB and would not permit anticipatory breach if a percentage of TIB merchandise covered by a single entry was intended to remain in the United States in violation of the bond provisions but the remaining percentage was to be exported or destroyed in compliance with bond conditions. The regulations require assessment of the full amount of liquidated damages applicable to the entry. The commenters suggest that there would be little incentive to comply with anticipatory breach provisions because the importer who wishes to file a partial anticipatory breach would be required to pay for the full amount of the entry. Customs concedes that the comment has some validity but it should be emphasized that acceptance of payment in recognition of anticipatory breach of TIB conditions is being promulgated in response to requests made to Customs and as a courtesy to the importing community. It will permit importers to close out the records on a TIB rather than wait for the one-year bond period to expire. Partial anticipatory breaches would be difficult for Customs to administer, particularly if merchandise which the importer still intends to export or destroy in compliance with bond conditions has not yet been exported or destroyed so as to close the bond out in its entirety. Customs will not accept a partial anticipatory breach if the merchandise not covered by the breach has not been exported or destroyed in compliance with bond terms because of the difficulty of administration. A comment received from a representative of surety companies did not oppose the concept of anticipatory breach, but did request that Customs notify a surety that anticipatory breach occurred, liquidated damages were paid and that the bond could be closed with regard to that particular TIB entry. Customs has no objection to this request and has added language which would require surety notification by the importer when an anticipatory breach occurs. Inasmuch as the importer seeks the benefit of anticipatory breach, Customs does not find it burdensome to require the importer to notify surety of its actions. One commenter was of the view that the proposed amendment to § 10.31(f) gave Customs excessively broad discretion in deciding the bond amount. We disagree. The provisions of § 10.31(f) give the district director discretion to require a bond in sufficient size to protect the revenue. As a condition precedent to requiring a larger bond, the district director must notify the entrant, in writing or by equivalent electronic notification, of the increase. The language of the regulation does not permit an increase in the bond amount without cause. Finally, one commenter indicates that under proposed amendments to § 10.39(e) of the regulations, Customs could be faced with an anomalous situation regarding review of petitions for relief. As proposed, the district director would review petitions for relief in all cases where the claim is for $100,000 or less and the entire amount of merchandise entered under a TIB is in default. Under the provisions of § 10.39(f), a petition for relief could be reviewed by the district director when a partial default occurs and the liability for liquidated damages on the articles in respect of which there has been a default does not exceed $50,000. Thus, jurisdictional amounts are not consistent, and Headquarters review would be required in certain TIB liquidated damages cases, depending upon what percentage of articles are in default. We agree with the comment and, therefore, are amending § 10.39(f) to be consistent with the change to § 10.39(e). Accordingly, the regulations are amended as proposed except that references to the harbor maintenance fee have been removed, notice of anticipatory breach will now be required to be afforded to sureties by the breaching importer, and the jurisdictional amount in § 10.39(f) is amended to $100,000 to be consistent with § 10.39(e). REGULATORY FLEXIBILITY ACT AND EXECUTIVE ORDER 12866 Pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it is certified that the amendments will not have a significant economic impact on a substantial number of small entities. Accordingly, the amendments are not subject to the regulatory analysis requirements of 5 U.S.C. 603 and 604. The document does not meet the criteria for a “significant regulatory action" as specified in Executive Order 12866. LIST OF SUBJECTS ON 19 CFR PART 10 Articles Conditionally Free, Temporary Importations Under Bond. AMENDMENTS Part 10, Customs Regulations (19 CFR Part 10), is amended as set forth below. PART 10-ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC. 1. The general authority citation for Part 10 continues to read as Authority: 19 U.S.C. 66, 1202 (General Note 17, Harmonized Tariff Schedule of the United States), 1481, 1484, 1498, 1508, 1623, 1624; (f) With the exceptions stated herein, a bond shall be given on Cus- toms Form 301, containing the bond conditions set forth in § 113.62 of this chapter, in an amount equal to double the duties, including fees, which it is estimated would accrue (or such larger amount as the district director shall state in writing or by the electronic equivalent to the en- trant is necessary to protect the revenue) had all the articles covered by the entry been entered under an ordinary consumption entry. In the case of samples solely for use in taking orders entered under subheading 9813.00.20, HTSUS, motion-picture advertising films entered under subheading 9813.00.25, HTSUS, and professional equipment, tools of trade and repair components for such equipment or tools entered under subheading 9813.00.50, HTSUS, the bond required to be given shall be in an amount equal to 110 percent of the estimated duties, including 3. Section 10.39(d)(1) is amended by removing the word "lower" in the first sentence and by adding in its place the word "different", and by adding a sentence at the end of the paragraph to read as follows: (d)(1) *** For purposes of this section, the term estimated duties shall include any merchandise processing fees applicable to such entry. 4. Section 10.39(e) is amended by revising its first sentence to read as § 10.39 Cancellation of bond charges. (e) If there has been a default with respect to all the articles covered by * * * 5. Section 10.39(f) is amended by removing the figure "$50,000" in the first sentence and by adding in its place the figure "$100,000". 6. Section 10.39 is amended by redesignating paragraph (g) as paragraph (h) and by adding a new paragraph (g) to read as follows: (g) Anticipatory breach. If an importer anticipates that the merchandise entered under a Temporary Importation Bond will not be exported or destroyed in accordance with the terms of the bond, the importer may indicate to Customs in writing before the bond period has expired of the anticipatory breach. At the time of written notification of the breach, the importer shall pay to Customs the full amount of liquidated damages that would be a ssessed at the time of breach of the bond, and the entry will be closed. The importer shall notify the surety in writing of the breach and payment. By this payment, the importer waives his right to receive a notice of claim for liquidated damages as required by § 172.1(a) of this chapter. Approved: February 23, 1995. DENNIS M. O'CONNELL, PETER J. BAISH, Acting Commissioner of Customs. Acting Deputy Assistant Secretary of the Treasury. |