64248 Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Notices

Ewing, P.C., 213 West Miner Street, P.O.

Box 796, West Chester, PA 19381–0796.

Decided: November 26, 1997.

By the Board, David M. Konschnik,

Director, Office of Proceedings.

Vernon A. Williams,

Secretary.

[FR Doc. 97–31796 Filed 12–3–97; 8:45 am]

BILLING CODE 4915–00–P

DEPARTMENT OF THE TREASURY

Customs Service

[TD 97–96]

Reasonable Care Checklist

AGENCY: U.S. Customs Service,

Department of the Treasury.

ACTION: General notice.

SUMMARY: This document sets forth, for

guidance, a checklist of measures which

importers and their agents may find

helpful in meeting the ‘‘reasonable care’’

requirements of the Customs laws.

DATES: Effective December 4, 1997.

FOR FURTHER INFORMATION CONTACT:

Robert Pisani, Penalties Branch,

International Trade Compliance

Division, Office of Regulations and

Rulings, (202) 927–1203.

SUPPLEMENTARY INFORMATION:

Background

On May 16, 1997, the Customs

Service published a Second Discussion

Draft in the Customs Bulletin (as well as

the Customs Electronic Bulletin Board

and Customs Internet Website)

concerning the importer’s obligation to

use reasonable care. Based on comments

received in response to the initial

discussion draft on reasonable care,

Customs decided to adopt a ‘‘checklist’’

approach—as a means to provide

guidance regarding an importer’s

obligation to use reasonable care. The

second discussion draft set forth an

expanded and revised checklist, and

requested public comment on the

document by June 30, 1997.

Customs has finalized its review of all

second discussion draft comments

received from interested parties. The

‘‘final’’ checklist follows the discussion

of the public comments, and Customs

notes that the document contains

relatively minor revisions to the

checklist published on May 16, 1997.

Customs also notes that the majority of

the comments received from the public

favored the adoption of the checklist. It

should also be pointed out that although

Customs is publishing the ‘‘final’’

checklist, the agency’s adoption of this

format for providing guidance may

readily be expanded in the future to suit

the changing nature of international

trade—without resort to statutory or

regulatory amendment. Also it should

be reiterated that, as new Customs

regulations are proposed, it is

anticipated that regulatory references to

the reasonable care standard will be

included.

Discussion

The majority of comments received by

Customs applauded the agency’s

decision to adopt the checklist approach

to the issue of reasonable care. There is

a general consensus that a ‘‘black and

white’’ definition of reasonable care is

impossible, inasmuch as the concept of

acting with reasonable care depends

upon individual circumstances.

The most prevalent concern about the

checklist raised by commenters

involved Customs use of the term

‘‘expert’’ in those checklist questions

pertaining to relying on the advice of an

‘‘expert.’’ Some commenters are

concerned that unlicensed and

unregulated individuals are regularly

advising importers in Customs

matters—i.e., holding themselves out as

‘‘Customs experts’’ or Customs

consultants, in violation of section 641

of the Tariff Act of 1930. In addition,

one commenter is of the opinion that

the public should not be misled into

believing that it constitutes reasonable

care to consult with anyone who

chooses to call himself or herself a

Customs expert.

With respect to the above concerns,

Customs notes that publication of the

checklist is not intended to condone the

unlawful conduct of Customs business

by unlicensed individuals or entities.

Rather, the agency’s use of the term

‘‘expert’’ is in conformity with the

Customs Modernization Act’s legislative

history as reflected in the language of

the House of Representatives and Senate

Reports (H.Rep. 103–361, pg. 120; S.

Rep. 103–189, pg. 73) discussion of the

reasonable care standard. A party’s

selection of an expert, and the expert’s

qualifications are part and parcel of the

review of all of the facts and

circumstances in the agency’s

determination whether the party has

exercised reasonable care. In Customs

view, the importer who retains the

services of an ‘‘expert’’ bears some

responsibility in ensuring that the party

is qualified to render advice on the

Customs matter at issue. In Customs

view, it is not unreasonable to expect

that a party selecting an expert will

inquire about the Customs experience

and credentials of an expert. Customs

believes this responsibility to be

particularly important in cases

involving selection of unlicensed

experts such as consultants. The

existence of experienced Customs

lawyers and licensed brokers makes

fulfillment of this responsibility an

easier task—but in Customs view, to

limit the selection of an expert to these

individuals runs contrary to the

language of the congressional reports. In

sum, the importer or party selecting an

expert must use judgment and reason in

making his or her selection.

One commenter expressed a

reservation about the checklist in that

‘‘assiduous compliance with the list for

every entry would require an impossible

expenditure of time and resources.’’ The

commenter believes that the checklist

fails to keep sight of ‘‘commercial

realities and business realities.’’

Customs believes it is important to

underscore that the checklist is not a

law or Customs regulation, and that it

merely serves to provide guidance and

information to the importing

community to assist the members of the

community in meeting reasonable care

obligations. In publishing the checklist,

Customs is not mandating that each and

every question be asked by each and

every importer for all transactions.

Rather, the checklist serves as a flexible

tool to help importers find and/or

understand statutory and regulatory

obligations involved in the importation

process. Customs notes that the agency

rejected the regulatory and policy

statement approaches set forth in the

first discussion draft for the very

reasons set forth by the commenter. In

this regard, Customs believes the

following excerpts from the second

discussion draft warrant reiteration:

* * * [I]t is important to remember that

not every incident of non-compliance

involves a failure to exercise reasonable care.

The circumstances surrounding an incident

of non-compliance determine whether or not

the incident involves culpable conduct.

* * * For example, if Customs were to

enact a regulation, or issue a policy statement

setting forth ‘‘reasonable care’’ parameters

and standards, such regulation or policy

statement could be considered helpful, costeffective and instructive to a large multinational importer, yet harmful, impractical,

intrusive and cost-defective to a smaller

organization.

Rather than attempting to dictate specific

methods of compliance with regard to a

standard that demands flexibility and is

dependent upon circumstance, Customs

believes that by providing guidance and

education the agency is working toward

fulfilling the principle of informed

compliance which underscores the Customs

Modernization Act.

One of the commenters suggested that

the agency abandon General Question
Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Notices 64249

No. 3 pertaining to alerting Customs of

different treatment at different ports for

the same merchandise or transactions.

The commenter believes that it is the

responsibility of the Customs Service to

coordinate and ensure uniformity. In

addition, the commenter believes it is

unnecessary to require that the importer

attach a ruling it receives to every entry,

provided that the importer follows the

ruling.

Customs does not agree that it is

reasonable for an importer to remain

silent when it becomes aware that the

same merchandise or transaction is

receiving different treatment at different

ports. Further, it is important to

remember that the checklist is not a

vehicle to amend existing law or

regulation or law—rather, the checklist

questions pertaining to the Customs

rulings program simply point out the

importer’s obligations under existing

law and regulation.

Several commenters recommended

that Customs revise some of the

questions in the checklist to emphasize

that the exercise of reasonable care also

applies to the process employed by the

importer in preparing its Customs

entries. The commenters suggest that

some questions be added and/or revised

to reflect that the exercise of reasonable

care also encompasses an importer’s

development and maintenance of

reasonable steps or reasonable

procedures to ensure compliance with

the Customs laws and regulations.

Customs agrees and has added new

questions and/or revised some of the

existing questions to reflect the

recommendations set forth above.

As a convenience to the public, the

checklist published below also includes

the checklist previously published in

the Federal Register for use in certain

textile and apparel importations. The

full document was published in 62 FR

48340 (September 15, 1997).

Reasonable Care Checklist

Preamble

One of the most significant effects of

the Customs Modernization Act is the

establishment of the clear requirement

that parties exercise ‘‘reasonable care’’

in importing into the United States.

Section 484 of the Tariff Act, as

amended, requires an importer of record

‘‘using reasonable care’’ to make entry

by filing such information as is

necessary to enable the Customs Service

to determine whether the merchandise

may be released from customs custody,’’

and using reasonable care—‘‘complete

the entry by filing with the Customs

Service the declared value,

classification and rate of duty’’ and

‘‘such other documentation * * * or

information as is necessary to enable the

Customs Service to * * * properly

assess duties * * * collect accurate

statistics * * * determine whether any

other applicable requirement of law

* * * is met.’’ Despite the seemingly

simple connotation of the term

‘‘reasonable care,’’ this explicit

responsibility defies easy explanation.

The facts and circumstances

surrounding every import transaction

differ—from the experience of the

importer to the nature of the imported

articles. Consequently, neither the

Customs Service nor the importing

community can develop a foolproof

reasonable care ‘‘checklist’’ which

would cover every import transaction.

On the other hand, in keeping with the

Modernization Act’s theme of

‘‘informed compliance,’’ the Customs

Service would like to take this

opportunity to recommend that the

importing community examine the list

of questions below. In Customs view,

the list of questions may prompt or

suggest a program, framework or

methodology which importers may find

useful in avoiding compliance problems

and meeting ‘‘reasonable care’’

responsibilities.

Obviously, the questions below

cannot be exhaustive or encyclopedic—

ordinarily, every import transaction is

different. For the same reason, it cannot

be overemphasized that although the

following information is provided to

promote enhanced compliance with the

Customs laws and regulations, it has no

legal, binding or precedential effect on

Customs or the importing community.

In this regard, Customs notes that the

checklist is not an attempt to create a

presumption of negligence, but rather,

an attempt to educate, inform and

provide guidance to the importing

community. Consequently, Customs

believes that the following information

may be helpful to the importing

community and hopes that this

document will facilitate and encourage

importers to develop their own unique

compliance measurement plans, reliable

procedures and ‘‘reasonable care’’

programs.

As a convenience to the public, the

checklist also includes the text of a

checklist previously published in the

Federal Register for use in certain

textile and apparel importations. The

full document was published in 62 FR

48340 (September 15, 1997).

As a final reminder, it should be

noted that to further assist the importing

community, Customs issues rulings and

informed compliance publications on a

variety of technical subjects and

processes. It is strongly recommended

that importers always make sure that

they are using the latest versions of

these publications.

Asking and answering the following

questions may be helpful in assisting

importers in the exercise of reasonable

care

General Questions for all Transactions

1. If you have not retained an expert

to assist you in complying with Customs

requirements, do you have access to the

Customs Regulations (Title 19 of the

Code of Federal Regulations), the

Harmonized Tariff Schedule of the

United States, and the GPO publication

‘‘Customs Bulletin and Decisions?’’ Do

you have access to the Customs Internet

Website, Customs Electronic Bulletin

Board or other research service to

permit you to establish reliable

procedures and facilitate compliance

with Customs laws and regulations?

2. Has a responsible and

knowledgeable individual within your

organization reviewed the Customs

documentation prepared by you or your

expert to ensure that it is full, complete

and accurate? If that documentation was

prepared outside your own

organization, do you have a reliable

system in place to insure that you

receive copies of the information as

submitted to Customs; that it is

reviewed for accuracy; and that Customs

is timely apprised of any needed

corrections?

3. If you use an expert to assist you

in complying with Customs

requirements, have you discussed your

importations in advance with that

person and have you provided that

person with full, complete and accurate

information about the import

transactions?

4. Are identical transactions or

merchandise handled differently at

different ports or Customs offices within

the same port? If so, have you brought

this to the attention of the appropriate

Customs officials?

Questions Arranged by Topic

Merchandise Description & Tariff

Classification

Basic Question: Do you know or have

you established a reliable procedure or

program to ensure that you know what

you ordered, where it was made and

what it is made of?

1. Have you provided or established

reliable procedures to ensure you

provide a complete and accurate

description of your merchandise to

Customs in accordance with 19 U.S.C.

1481? (Also, see 19 CFR 141.87 and 19

CFR 141.89 for special merchandise

description requirements.)
64250 Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Notices

2. Have you provided or established

reliable procedures to ensure you

provide a correct tariff classification of

your merchandise to Customs in

accordance with 19 U.S.C. 1484?

3. Have you obtained a Customs

‘‘ruling’’ regarding the description of the

merchandise or its tariff classification

(See 19 CFR part 177), and if so, have

you established reliable procedures to

ensure that you have followed the ruling

and brought it to Customs attention?

4. Where merchandise description or

tariff classification information is not

immediately available, have you

established a reliable procedure for

providing that information, and is the

procedure being followed?

5. Have you participated in a Customs

pre-classification of your merchandise

relating to proper merchandise

description and classification?

6. Have you consulted the tariff

schedules, Customs informed

compliance publications, court cases

and/or Customs rulings to assist you in

describing and classifying the

merchandise?

7. Have you consulted with a Customs

‘‘expert’’ (e.g., lawyer, broker,

accountant, or Customs consultant) to

assist in the description and/or

classification of the merchandise?

8. If you are claiming a conditionally

free or special tariff classification/

provision for your merchandise (e.g.,

GSP, HTS Item 9802, NAFTA, etc.),

How have you verified that the

merchandise qualifies for such status?

Have you obtained or developed reliable

procedures to obtain any required or

necessary documentation to support the

claim? If making a NAFTA preference

claim, do you already have a NAFTA

certificate of origin in your possession?

9. Is the nature of your merchandise

such that a laboratory analysis or other

specialized procedure is suggested to

assist in proper description and

classification?

10. Have you developed a reliable

program or procedure to maintain and

produce any required Customs entry

documentation and supporting

information?

Valuation

Basic Questions: Do you know or have

you established reliable procedures to

know the ‘‘price actually paid or

payable’’ for your merchandise? Do you

know the terms of sale; whether there

will be rebates, tie-ins, indirect costs,

additional payments; whether ‘‘assists’’

were provided, commissions or royalties

paid? Are amounts actual or estimated?

Are you and the supplier ‘‘related

parties’’?

1. Have you provided or established

reliable procedures to provide Customs

with a proper declared value for your

merchandise in accordance with 19

U.S.C. 1484 and 19 U.S.C. 1401a?

2. Have you obtained a Customs

‘‘ruling’’ regarding the valuation of the

merchandise (See 19 CFR Part 177), and

if so, have you established reliable

procedures to ensure that you have

followed the ruling and brought it to

Customs attention?

3. Have you consulted the Customs

valuation laws and regulations, Customs

Valuation Encyclopedia, Customs

informed compliance publications,

court cases and Customs rulings to

assist you in valuing merchandise?

4. Have you consulted with a Customs

‘‘expert’’ (e.g., lawyer, accountant,

broker, Customs consultant) to assist in

the valuation of the merchandise?

5. If you purchased the merchandise

from a ‘‘related’’ seller, have you

established procedures to ensure that

you have reported that fact upon entry

and taken measures or established

reliable procedures to ensure that value

reported to Customs meets one of the

‘‘related party’’ tests?

6. Have you taken measures or

established reliable procedures to

ensure that all of the legally required

costs or payments associated with the

imported merchandise have been

reported to Customs (e.g., assists, all

commissions, indirect payments or

rebates, royalties, etc.)?

7. If you are declaring a value based

on a transaction in which you were/are

not the buyer, have you substantiated

that the transaction is a bona fide sale

at arm’s length and that the

merchandise was clearly destined to the

United States at the time of sale?

8. If you are claiming a conditionally

free or special tariff classification/

provision for your merchandise (e.g.,

GSP, HTS Item 9802, NAFTA, etc.),

have you established a reliable system

or program to ensure that you reported

the required value information and

obtained any required or necessary

documentation to support the claim?

9. Have you established a reliable

program or procedure to produce any

required entry documentation and

supporting information?

Country of Origin/Marking/Quota

Basic Question: Have you taken

reliable measures to ascertain the

correct country of origin for the

imported merchandise?

1. Have you established reliable

procedures to ensure that you report the

correct country of origin on Customs

entry documents?

2. Have you established reliable

procedures to verify or ensure that the

merchandise is properly marked upon

entry with the correct country of origin

(if required) in accordance with 19

U.S.C. 1304 and any other applicable

special marking requirement (watches,

gold, textile labeling, etc)?

3. Have you obtained a Customs

‘‘ruling’’ regarding the proper marking

and country of origin of the

merchandise (See 19 CFR Part 177), and

if so, have you established reliable

procedures to ensure that you followed

the ruling and brought it to Customs

attention?

4. Have you consulted with a Customs

‘‘expert’’ (e.g., lawyer, accountant,

broker, Customs consultant) regarding

the correct country of origin/proper

marking of your merchandise?

5. Have you taken reliable and

adequate measures to communicate

Customs country of origin marking

requirements to your foreign supplier

prior to importation of your

merchandise?

6. If you are claiming a change in the

origin of the merchandise or claiming

that the goods are of U.S. origin, have

you taken required measures to

substantiate your claim (e.g., Do you

have U.S. milling certificates or

manufacturer’s affidavits attesting to the

production in the U.S.)?

7. If you are importing textiles or

apparel, have you developed reliable

procedures to ensure that you have

ascertained the correct country of origin

in accordance with 19 U.S.C. 3592

(Section 334, Pub. L. 103–465) and

assured yourself that no illegal

transshipment or false or fraudulent

practices were involved?

8. Do you know how your goods are

made from raw materials to finished

goods, by whom and where?

9. Have you checked with Customs

and developed a reliable procedure or

system to ensure that the quota category

is correct?

10. Have you checked or developed

reliable procedures to check the Status

Report on Current Import Quotas

(Restraint Levels) issued by Customs to

determine if your goods are subject to a

quota category which has ‘‘part’’

categories?

11. Have you taken reliable measures

to ensure that you have obtained the

correct visas for your goods if they are

subject to visa categories?

12. In the case of textile articles, have

you prepared or developed a reliable

program to prepare the proper country

declaration for each entry, i.e., a single

country declaration (if wholly obtained/

produced) or a multi-country

declaration (if raw materials from one
Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Notices 64251

country were produced into goods in a

second)?

13. Have you established a reliable

maintenance program or procedure to

ensure you can produce any required

entry documentation and supporting

information, including any required

certificates of origin?

Intellectual Property Rights

Basic Question: Have you determined

or established a reliable procedure to

permit you to determine whether your

merchandise or its packaging bear or use

any trademarks or copyrighted matter or

are patented and, if so, that you have a

legal right to import those items into,

and/or use those items in, the U.S.?

1. If you are importing goods or

packaging bearing a trademark

registered in the U.S., have you checked

or established a reliable procedure to

ensure that it is genuine and not

restricted from importation under the

‘‘gray-market’’ or parallel import

requirements of U.S. law (see 19 CFR

133.21), or that you have permission

from the trademark holder to import

such merchandise?

2. If you are importing goods or

packaging which consist of, or contain

registered copyrighted material, have

you checked or established a reliable

procedure to ensure that it is authorized

and genuine? If you are importing sound

recordings of live performances, were

the recordings authorized?

3. Have you checked or developed a

reliable procedure to see if your

merchandise is subject to an

International Trade Commission or

court ordered exclusion order?

4. Have you established a reliable

procedure to ensure that you maintain

and can produce any required entry

documentation and supporting

information?

Miscellaneous Questions

1. Have you taken measures or

developed reliable procedures to ensure

that your merchandise complies with

other agency requirements (e.g., FDA,

EPA/DOT, CPSC, FTC, Agriculture, etc.)

prior to or upon entry, including the

procurement of any necessary licenses

or permits?

2. Have you taken measures or

developed reliable procedures to check

to see if your goods are subject to a

Commerce Department dumping or

countervailing duty investigation or

determination, and if so, have you

complied or developed reliable

procedures to ensure compliance with

Customs reporting requirements upon

entry (e.g., 19 CFR 141.61)?

3. Is your merchandise subject to

quota/visa requirements, and if so, have

you provided or developed a reliable

procedure to provide a correct visa for

the goods upon entry?

4. Have you taken reliable measures to

ensure and verify that you are filing the

correct type of Customs entry (e.g., TIB,

T&E, consumption entry, mail entry,

etc.), as well as ensure that you have the

right to make entry under the Customs

Regulations?

Additional Questions for Textile and

Apparel Importers

Note: Section 333 of the Uruguay Round

Implementation Act (19 U.S.C. 1592a)

authorizes the Secretary of the Treasury to

publish a list of foreign producers,

manufacturers, suppliers, sellers, exporters,

or other foreign persons who have been

found to have violated 19 U.S.C. 1592 by

using certain false, fraudulent or counterfeit

documentation, labeling, or prohibited

transshipment practices in connection with

textiles and apparel products. Section 1592a

also requires any importer of record entering,

introducing, or attempting to introduce into

the commerce of the United States textile or

apparel products that were either directly or

indirectly produced, manufactured, supplied,

sold, exported, or transported by such named

person to show, to the satisfaction of the

Secretary, that such importer has exercised

reasonable care to ensure that the textile or

apparel products are accompanied by

documentation, packaging, and labeling that

are accurate as to its origin. Under section

1592a, reliance solely upon information

regarding the imported product from a

person named on the list does not constitute

the exercise of reasonable care. Textile and

apparel importers who have some

commercial relationship with one or more of

the listed parties must exercise a degree of

reasonable care in ensuring that the

documentation covering the imported

merchandise, as well as its packaging and

labeling, is accurate as to the country of

origin of the merchandise. This degree of

reasonable care must rely on more than

information supplied by the named party.

In meeting the reasonable care

standard when importing textile or

apparel products and when dealing with

a party named on the list published

pursuant to section 592A an importer

should consider the following questions

in attempting to ensure that the

documentation, packaging, and labeling

is accurate as to the country of origin of

the imported merchandise. The list of

questions is not exhaustive but is

illustrative.

1. Has the importer had a prior

relationship with the named party?

2. Has the importer had any

detentions and/or seizures of textile or

apparel products that were directly or

indirectly produced, supplied, or

transported by the named party?

3. Has the importer visited the

company’s premises and ascertained

that the company has the capacity to

produce the merchandise?

4. Where a claim of an origin

conferring process is made in

accordance with 19 CFR 102.21, has the

importer ascertained that the named

party actually performed the required

process?

5. Is the named party operating from

the same country as is represented by

that party on the documentation,

packaging or labeling?

6. Have quotas for the imported

merchandise closed or are they nearing

closing from the main producer

countries for this commodity?

7. What is the history of this country

regarding this commodity?

8. Have you asked questions of your

supplier regarding the origin of the

product?

9. Where the importation is

accompanied by a visa, permit, or

license, has the importer verified with

the supplier or manufacturer that the

visa, permit, and/or license is both valid

and accurate as to its origin? Has the

importer scrutinized the visa, permit or

license as to any irregularities that

would call its authenticity into

question?

Dated: December 1, 1997.

Stuart P. Seidel,

Assistant Commissioner, Office of

Regulations and Rulings.

[FR Doc. 97–31802 Filed 12–3–97; 8:45 am]

BILLING CODE 4820–02–P

DEPARTMENT OF THE TREASURY

Fiscal Service

Surety Companies Acceptable on

Federal Bonds; Termination of

Authority: Munich American

Reinsurance Company, Munich

Reinsurance Company, U.S. Branch

SUMMARY: (Dept. Circ. 570, 1997—Rev.,

Supp. No. 3).

FOR FURTHER INFORMATION CONTACT:

Surety Bond Branch (202) 874–7102.

SUPPLEMENTARY INFORMATION: Notice is

hereby given that the Certificates of

Authority issued by the Treasury to

Munich American Reinsurance

Company and Munich Reinsurance

Company, U.S. Branch, under the

United States Code, Title 31, Sections

9304–9308, to qualify as an acceptable

surety and as an acceptable reinsuring

company on Federal bonds are hereby

terminated.

Munich American Reinsurance

Company was last listed as an

acceptable surety on Federal bonds at 62

FR 35567, July 1, 1997 and Munich