August 6, 2002

Mr. Jeremy Baskin
Regulations Branch 
Office of Regulations and Rulings
U.S. Customs Service
1300 Pennsylvania Avenue, N.W.
Washington, D.C. 20229

	Re: Customs Service Notice of Proposed Rulemaking on the Conditional Release Period
            and Customs Bond Obligations for Food, Drugs, Devices, and Cosmetics (67 Fed. Reg. 39322, June 7, 2002)

Dear Mr. Baskin:

The Office of Advocacy of the U.S. Small Business Administration
was created in 1976 to represent the views and interests of small 
business in Federal policy making activities.  The Chief Counsel,
who heads the Office of Advocacy, participates in rulemakings 
when he deems it necessary to ensure proper representation of small
business interests.  In addition to these responsibilities, the Chief
Counsel monitors compliance with the Regulatory Flexibility Act 
(RFA) and works with Federal agencies to ensure that their 
rulemakings demonstrate an analysis of the impacts that their decisions 
will have on small businesses. (1) 

The Office of Advocacy would like to provide you with its position
concerning the U.S. Customs Services Notice of Proposed Rulemaking 
(NPRM) on the Conditional Release Period and Customs Bond
Obligations for Food, Drugs, Devices and Cosmetics.  The 
rulemaking seeks to amend current regulations for the importation
 of goods regulated by the Food and Drug Administration (FDA).  

Advocacy does not believe that the proposed rulemaking provides
an adequate factual basis to support its certification that the rule 
will not have a significant impact on a substantial number of small
entities as is required by the RFA.  Further, based on information
provided by industry sources, Advocacy is concerned that the 
rulemaking will prove particularly onerous to thousands of small
importers of products regulated by the FDA.  

U.S. Customs Certification of No Impact is Inadequate

Section 605(b) of the RFA requires that any agency certifying
that a rulemaking will not have a significant impact on a
substantial number of small entities must publish in the 
Federal Register providing the factual basis for the
certification.  The NPRM published in the Federal Register
 on June 7, 2002, provides a certification that the rule will not
have a significant impact on a substantial number of small 
entities.  Customs indicates that the certification is based
on the fact that, the proposed regulatory amendments
reflect current statutory requirements, and they will not require
any additional action on the part of the public but rather are
intended to facilitate Customs enforcement efforts involving
existing import requirements.  Advocacy believes this 
statement is vague and that the statement is insufficient
under the requirements of the RFA.  For example, Customs
does not identify any statutory provision that requires it to
amend the conditional release period.  Therefore, Customs
appears to have decided to do so through the regulatory
process.  As such, Customs is required to comply with notice 
and comment provisions contained in the RFA and the 
Administrative Procedure Act (APA). 

The most prominent change in current practice contained in 
the NPRM expands the current 30-day conditional release period
to 180-days.(2)  Customs does not provide any information in the
NPRM as to why the FDA requires a 180-day conditional release 
period to perform its enforcement functions.  Customs 
justification for establishing the 180-day conditional release
period seems to be derived from the provisions contained in 
19 CFR 141.113(b), which prescribes a 180-day conditional
release period for purposes of determining the correct country 
of origin of imported textiles and textile products.  Customs
should inform the public why the 180-day conditional release
period is necessary, and why a lesser period is unreasonable.  
Also, Customs should consider reasonable alternatives to the 
rule.  This could result in Customs learning that the 180-day
conditional release period is unwarranted when balanced against
the potential economic injury to small importers of these products.

The NPRM has the Potential to Affect Thousands of Small Businesses

The proposed rule has the potential to cost small importers
significant revenue.  Affected businesses will either have to 
retain custody of the products for up to six months and incur 
associated warehousing costs and adverse effects on the 
commercial value of the product, or distribute the product 
during the six-month conditional release period and risk liability
for penalties that will exceed the value of the imported merchandise.  
The rule also has the potential to increase the value of 
customs surety bonds, putting them out of reach for
small importers.  These dilemmas will likely prove 
onerous to a small business and will put many import businesses
at risk of not surviving.   

This is exactly the type of situation that the RFA was designed
to ameliorate.   Section 603(a - b) of the RFA provides that when
an agency cannot certify that a rule will not have a significant
impact on a substantial number of small entities, it must prepare 
an initial regulatory flexibility analysis (IRFA).  The IRFA shall
describe, inter alia, the impact of the proposed rule on small 
entities, the number of small entities expected to be affected, 
and a description of applicable alternatives. 
Advocacy believes that the Customs Service should suspend
the NPRM and re-propose the rule to comply with section 603
of the RFA, or reopen the comment period on the current proposal
in conjunction with a supplemental IRFA.  Thank you for your 
attention to the above matters.  If you have any questions about
 this correspondence, please do not hesitate to contact
Linwood Rayford at (202) 401-6880.

Sincerely,

Thomas M. Sullivan
Chief Counsel for Advocacy

Linwood L. Rayford, III
Assistant Chief Counsel for Advocacy
 

 
Endnote: 
1.Pub. L. No. 96-354, 94 Stat. 1164 (1981). (codified as amended at 5 U.S.C.  601-612). 

2. In reality, the 180-day conditional release period is 210-days, as the FDA has an additional 30 days beyond the 180-day conditional release period to notify the importer that it has questions about the admissibility of the product.