[Federal Register Volume 61, Number 110 (Thursday, June 6, 1996)]
[Proposed Rules]
[Pages 28808-28821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14125]



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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 19, 113 and 144

RIN 1515-AB86


Duty-Free Stores

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend the Customs Regulations 
principally with respect to duty-free stores in order to reduce the 
overall paperwork burden for proprietors thereof as well as for 
Customs. In particular, for purposes of Customs audit of, and control 
over, such facilities, greater reliance would be placed on the use of 
records generated and maintained by proprietors and importers in the 
ordinary course of business, instead of on the use of specially 
prepared Customs forms. The proposed amendments would provide

[[Page 28809]]

benefits in this regard to other classes of Customs bonded warehouses 
as well.

DATES: Comments must be received on or before August 5, 1996.

ADDRESSES: Written comments (preferably in triplicate) must be 
submitted to the U.S. Customs Service, ATTN: Regulations Branch, 
Franklin Court, 1301 Constitution Avenue, NW., Washington, DC 20229, 
and may be inspected at the Regulations Branch, 1099 14th Street, NW., 
Suite 4000, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Michael Jackson, Customs Management 
Center, Seattle, (206-553-6944).

SUPPLEMENTARY INFORMATION:

Background

    By a final rule document published in the Federal Register as T.D. 
92-81 on August 20, 1992 (57 FR 37692), the Customs Regulations were 
amended to designate duty-free stores as a new class of Customs bonded 
warehouse, and to incorporate operating procedures for the 
administration of these facilities.
    However, in letters dated October 6 and 13, 1992, a major trade 
association voiced a number of concerns with respect to the final rule. 
Prompted by these correspondences, Customs, by a document published in 
the Federal Register (57 FR 47409) on October 16, 1992, delayed the 
October 19, 1992, effective date of the final rule until further 
notice, in order to review various aspects of the duty-free store 
rules. Before any changes could be made to the final rule, however, 
Customs concluded that its indefinite suspension was legally 
inoperative and proceeded to reinstate the original effective date 
thereof, by a document published in the Federal Register (58 FR 29349) 
on May 20, 1993.
    After lengthy study, Customs has now determined that specific 
revisions to the duty-free store regulations are in order. The proposed 
changes would also provide some benefits to other classes of bonded 
warehouses, and are intended to reduce the overall paperwork burden 
both for warehouse proprietors and for Customs.

Discussion of Principal Changes

    The following sections of the Customs Regulations would be amended: 
Secs. 19.1, 19.2, 19.4, 19.6, 19.11, 19.12, 19.35, 19.36, 19.37, 19.39, 
113.63, 144.34, 144.36, 144.37, 144.39 and 144.41.

Proposed Changes to Part 19

    A sentence would be added to Sec. 19.1(a)(9) to clarify that all 
distribution warehouses used exclusively to provide individual duty-
free sales locations and storage cribs with conditionally duty free 
merchandise are also Class 9 warehouses.
    Section 19.1(c) would be deleted. While language concerning 
warehouse security would be added to Sec. 19.4(b)(6), warehouse 
construction requirements will not be set forth in the regulations. The 
warehouse construction is a factor that will be considered by the port 
director in deciding whether to approve the application.
    Section 19.2(a) would be amended to require that all bonded 
warehouse applicants have available an inventory control and 
recordkeeping system procedures manual. Also, the application would 
have to include a certification that the inventory control and 
recordkeeping system meets the requirements of Sec. 19.12.
    Section 19.2(b) would be modified to specify that the procedures 
for inventory control, recordkeeping and delivery methods must be set 
forth in the proprietor's procedures manual which must be furnished to 
Customs upon request.
    References to Sec. 19.3 (e) and (f) would be deleted from 
Sec. 19.2(g).
    Sections 19.4 and 19.12 would be reformatted to move the storage 
and security requirements from Sec. 19.12 and consolidate them in 
Sec. 19.4. Section 19.12 would be devoted to the inventory control and 
recordkeeping system requirements.
    The heading of Sec. 19.4 would be changed to ``Customs and 
proprietor responsibility and supervision over warehouses'', and two 
subsections would be added: (a) Customs supervision and (b) 
``Proprietor responsibility and supervision. Subsection (b) is divided 
into nine sections: (1) Supervision, (2) Customs access, (3) 
Safekeeping of merchandise and records, (4) Records maintenance, (5) 
Record retention in lieu of originals, (6) Warehouse and merchandise 
security, (7) Storage conditions, (8) Manner of storage, and (9) 
Miscellaneous responsibilities. The intent of these proposed changes is 
to clarify the proprietors' responsibilities.
    Proposed Sec. 19.4(a), entitled ``Customs supervision'', and 
proposed Sec. 19.4(b)(2), entitled ``Customs access'', contain the 
current Sec. 19.4 language relating to Customs supervision over 
warehouses.
    The requirements of current Sec. 19.12(b)(1), concerning 
supervision by the warehouse proprietor, would be moved to 
Sec. 19.4(b)(1) and expanded to cover all activities that a bonded 
warehouse proprietor is authorized to perform.
    The restrictions on unauthorized disclosure of proprietary 
information would be moved from current Sec. 19.12(a)(7) to 
Sec. 19.4(b)(3). The last sentence in current Sec. 19.12(a)(7) has been 
deleted because the consequence of unauthorized disclosure is covered 
by Sec. 19.3(e)(8).
    Proposed Sec. 19.4(b)(4) summarizes the proprietor's 
responsibilities relating to records maintenance.
    Proposed Sec. 19.4(b)(5), dealing with the retention of copies of 
records in lieu of the originals, provides proprietors with the 
convenience of storing required records on microfilm, microfiche, CD 
ROM (compact disk, read-only memory), or other medium. Those approved 
for this storage method could do so any time after the final withdrawal 
of merchandise covered by the entry to which the records pertain. Duty-
free store operators could use the aforementioned means to store sales 
ticket information after six months from the date of sale. This 
provision would greatly reduce the physical space required to maintain 
the volumes of hard-copy originals. Proprietors would be required to 
provide authenticated copies upon demand for audit purposes. Approval 
would be obtained from the appropriate regulatory audit field director.
    Proposed Sec. 19.4(b)(6), concerning warehouse and merchandise 
security, incorporates the requirements of current Sec. 19.12(b) (3) 
and (4) relating to security of warehouses and bonded tanks. Specific 
reference to T.D. 72-56 is replaced with references to more general 
security standards.
    The ``safe and sanitary storage'' requirements would be moved from 
Sec. 19.12(b)(5) to Sec. 19.4(b)(7). The sentences concerning prompt 
removal of trash and waste and prohibition of fires would be deleted 
because Customs believes that the first sentence in this paragraph 
provides adequate coverage.
    Proposed Sec. 19.4(b)(8), entitled ``Manner of storage'', is based 
on current Sec. 19.12(b)(6), and would allow proprietors to store 
merchandise covered by a single entry number or unique identifier in 
more than one location within the warehouse, provided the inventory 
control system could identify the quantities in each location upon 
demand by Customs. It also provides regulatory recognition of First-In-
First-Out (FIFO) inventory control systems for the first time.
    Section 19.6(a)(1) would be amended to change the time requirement 
for filing a discrepancy report from two business days to five business 
days.
    Section 19.6(d)(1) would be amended to allow a duty-free sales 
enterprise to use a blanket permit for withdrawal for transportation to 
another port.

[[Page 28810]]

    Section 19.6(d)(2) would be amended to reflect a new cross-
reference.
    Section 19.6(d)(4), entitled ``Blanket permit summary'', would be 
redesignated as Sec. 19.6(d)(5). A proposed new Sec. 19.6(d)(4) would 
add a provision describing procedures under which blanket withdrawals 
for aircraft and vessel supplies from more than one warehouse entry 
could be combined on one Customs Form 7512.
    Section 19.11(h) would be amended to change the phrase ``saleable 
units'' to ``smallest irreducible unit'', for purposes of 
clarification. Under the provisions for blanket permit to destroy, the 
phrase ``upon receipt'' would be deleted. Goods may be determined 
``nonsaleable'' long after receipt. The dollar amount covered by a 
blanket permit for destruction would be increased from $100 to less 
than 5 percent of the value of the merchandise at the time of entry or 
$1250, whichever is less, in its undamaged condition. This increase is 
being proposed in order to reduce the number of permits for destruction 
that would otherwise be required under the circumstances.
    Proposed Sec. 19.12 is based on the inventory control and 
recordkeeping requirements in current Sec. 19.12 which would thus be 
modified to more clearly describe the proprietor's responsibilities and 
what constitutes an adequate inventory control and recordkeeping 
system.
    Proposed Sec. 19.12(c)(1) includes the requirement for a proprietor 
receipt for merchandise transported to his warehouse by himself or his 
agent, as provided for by T.D. 94-81. Proposed changes to subsection 
(d)(1) and (d)(2) clarify the requirements for accounting for 
merchandise entered in the warehouse.
    Proposed Sec. 19.12(d)(3) modifies existing requirements relating 
to theft, shortage, overage or damage. To accommodate proprietors, the 
proposed modification extends the time for providing written 
confirmation for any theft, overage, extraordinary shortage or damage 
from two business days to five business days after the discrepancy is 
discovered. The definition of extraordinary shortage or damage would be 
expanded to cover missing merchandise on which duties and taxes in 
excess of $100 are due. The time for paying applicable duties and taxes 
on thefts and shortages would be extended from 10 business days after 
discovery to 20 calendar days following the end of the calendar month 
in which the shortage is discovered.
    The following new requirements would be added by Customs under 
proposed Sec. 19.12(d)(3) in order to clarify that the proprietor 
should ensure that the following actions are taken when discovered 
discrepancies occur: (1) An entry must be filed for all overages within 
five business days of the date of discovery; (2) When cumulative 
thefts, shortages or overages under a specific entry or unique 
identifier total one percent or more of the value of the merchandise or 
cumulative duties and taxes are in excess of $100, the reporting and 
payment requirements of this paragraph must be met; (3) All shortages 
and overages must be recorded in the inventory control and 
recordkeeping system at the time of discovery, whether or not they must 
be reported to Customs at that time; (4) Duties and taxes applicable to 
any non-extraordinary shortage or damage, and not required to be paid 
earlier, shall be submitted at the time the Customs Form 300 is due or 
at the time the certification of preparation of the annual 
reconciliation report is due.
    A proposed new Sec. 19.12(d)(4)(ii), entitled ``Review'', the 
substance of which is currently set forth in Sec. 19.12(a)(4), would 
change the permit file folder filing requirement for entries after 
final withdrawal from 30 business days to 30 calendar days. This is 
intended to provide greater ease in calculating the due date.
    In an effort to reduce paperwork requirements for both warehouse 
proprietors and Customs, proposed Sec. 19.12(d)(4)(iii), contains new 
provisions which would allow for exemption from maintaining the permit 
file folder (PFF), if the proprietor has a system which can provide a 
summary of all transactions relating to an entry, appropriately cross-
referenced to supporting documents which are readily retrievable. 
Proposed Sec. 19.12(d)(4)(iv) would also allow port directors to accept 
formal notification of final withdrawal in lieu of submission of the 
PFF or entry activity summary and only require submission of the PFF or 
alternative documentation on a selective basis. Failure to provide 
requested documentation would result in reinstatement of the 
requirements to maintain PFFs and to submit the PFF to Customs upon 
final withdrawal. This change would eliminate the current requirement 
that the proprietor maintain records in a specified method required by 
Customs and would allow the proprietor to use his normal recordkeeping 
system to satisfy Customs requirements. It would also allow the port 
director the option to review the number of permit file folders or the 
approved alternative system on a selective basis.
    Proposed Sec. 19.12(d)(5) would add a new requirement that 
proprietors must take at least an annual physical inventory, report any 
discrepancies discovered to the port director, record appropriate 
adjustments in the inventory control and recordkeeping system, and make 
any required entries and payments to Customs. The proprietor would have 
to advise Customs in advance of dates that the inventories would be 
taken so that Customs could observe or participate in the inventory 
process, if deemed necessary.
    Although many warehouses currently use the FIFO inventory method 
for fungible merchandise, the current regulations do not provide any 
guidance for use of inventory control systems other than direct 
identification by Customs entry number. The acceptability of a FIFO 
inventory system has been recognized by Customs since issuance of 
C.S.D. 83-63, 17 Cust. Bull. 869 (1983), but the regulations were never 
revised to cover FIFO systems. Proposed Sec. 19.12(f) is based on 
appropriate sections of the Bonded Warehouse Manual and would 
incorporate requirements into the regulations governing an acceptable 
FIFO inventory control system.
    Proposed Sec. 19.12(g) contains the requirement for the annual 
warehouse proprietor submission currently set forth in 
Sec. 19.12(a)(5). A provision is added to allow use of an alternative 
format if prior written approval is obtained from the Customs field 
director of regulatory audit. Additional instructions are included for 
proprietors who have merchandise covered by one entry, but stored in 
multiple locations as provided for under proposed Sec. 144.34.
    To reduce paperwork requirements for the proprietor and handling by 
Customs, proposed Sec. 19.12(h) discontinues the requirement to file a 
Customs Form 300, Warehouse Proprietor's Submission, for class 2, 
importers' private bonded warehouses and classes 4, 5, 6, 7, 8 and 9 
warehouses if the warehouse proprietor and the importer are the same 
party. Instead, under the proposed revision, they must prepare a 
reconciliation report at the end of each fiscal year which will be kept 
on file. A certification would have to be sent to the field director, 
regulatory audit, stating that the reconciliation has been performed 
and is accurate.
    Proposed Sec. 19.12(i) requires all proprietors to perform an 
annual internal review of the inventory control and recordkeeping 
system, and to prepare and maintain on file a report

[[Page 28811]]

identifying deficiencies discovered and the corrective action taken.
    Proposed Sec. 19.12(j) provides special instructions for 
preparation of the Customs Form 300 or reconciliation when merchandise 
transferred from one warehouse continues to be accounted for under the 
original warehouse entry rather than under a rewarehouse entry, as 
provided for under proposed Sec. 144.34(c).
    In proposed Sec. 19.13(g), specific reference to T.D. 72-56 is 
replaced with reference to the more general security standards 
contained in proposed Sec. 19.4(b)(6).
    Section 19.13a would be modified to delete the reference to 
Sec. 19.12(a) and substitute references to Secs. 19.4(b) and 19.12.
    Section 19.13a(b) would be modified to delete the reference to 
Sec. 19.12(a)(5) and substitute reference to Sec. 19.12(g).
    Section 19.35(c), entitled ``Integrated locations'', would be 
modified to accommodate duty-free stores which do not have inventory 
control systems which automatically reduce inventory balances on a real 
time basis. Proposed Sec. 19.35(c) would allow multiple noncontiguous 
sales and crib locations to be treated by Customs as one location if 
inventory records are updated no less frequently than at the end of 
each business day to reflect that day's activity. Integrated locations 
are defined as separate sales and storage locations within a close 
proximity to one another, e.g., multiple outlets at an airport. Under 
the proposed revision, language is added to allow the proprietor 
discretion in determining if integrated status is desired and the word 
``will'' is replaced with ``may'' in ``* * * may be treated by Customs 
as one location * * *''.
    Section 19.35(f) would be modified to delete the reference to 
Sec. 19.12(b)(3) and substitute a reference to Sec. 19.4(b)(6).
    Section 19.36(e) would be modified by deleting the requirement that 
purchasers know whether or not a commodity is either duty-paid or U.S.-
origin.
    Section 19.36(g) would be modified to replace the reference to 
Sec. 19.12(a) with Sec. 19.12 (d), (e) and (f).
    Section 19.37(a), dealing with crib operations, would be modified 
by deleting the word ``small'' in the first sentence. Concerning the 
amount of goods which may be stored in a crib, the phrase, ``* * * 
limited to an amount estimated to be a two weeks' supply * * *'', 
appearing in the fourth sentence of Sec. 19.37(a) would be removed, and 
the following phrase would be added in its place: ``* * * an amount 
requested by the proprietor which is commercially necessary for the 
delivery operations for a period, if approved by the port director.''.
    Section 19.39(c)(2), entitled ``Passenger delivery'', would be 
modified by deleting the last three sentences to eliminate the 
requirement for airline officials to certify the proprietor's 
certificate of lading. It is the proprietor's responsibility to 
establish procedures to ensure exportation. The regulation as currently 
written creates an undue burden on both the proprietor and the airline.
    Section 19.39(c)(3), entitled ``Aircraft delivery'', would be 
modified to include the statutory language that duty-free purchases 
must be laden on board the same aircraft on which the passenger will 
depart. It is the proprietor's obligation to establish procedures 
satisfactory to the port director to provide reasonable assurance of 
exportation.
    A proposed new Sec. 19.39(c)(4)(ii) would be added to clarify that 
unit-load delivery methods could be used only on the same aircraft as 
the passenger who purchased the conditionally duty-free merchandise 
will depart the United States. Existing paragraphs (c)(4) (ii)-(iv) of 
Sec. 19.39 would be renumbered.
    A revision of paragraph (c)(5) of Sec. 19.39 is proposed to 
establish procedures to handle deliveries of duty-free merchandise to 
passengers whose flights have to be rescheduled by the airline. Customs 
believes that the rescheduling of a cancelled or aborted flight should 
not require the proprietor to retrieve the goods until the passenger 
departs on the rescheduled flight. The Customs Service believes that 
the revenue risk is minimal because the passenger has no control over 
rescheduling a flight that is cancelled by the airline. Merchandise 
would only be delivered to a passenger who has already bought a ticket 
that usually is far in excess of any possible duty savings. Customs 
believes that to monitor the period between the cancellation of the 
passenger's original flight and the departure of the passenger on the 
rescheduled flight is wasteful of Customs and trade resources because 
of that risk assessment. With respect to merchandise delivered to an 
airline on behalf of a passenger who fails to board the flight, the 
proprietor must coordinate with the airline to establish a procedure to 
retrieve the merchandise because in that situation the passenger has 
acted contrary to the stated intention to export the goods and there is 
no reason to believe that the passenger will reschedule a different 
flight.
    Also, Sec. 19.39(e) would be modified by adding the phrase, ``or 
bonded carriers'', after the reference to ``licensed cartmen''. See 
T.D. 94-81, 59 FR 51496.

Warehouse Withdrawals and Rewarehouse Entries

    An extensive change to the procedures governing transfers of 
warehoused merchandise is proposed.
    Currently, the procedure to transfer warehoused merchandise 
requires the transfer to be done by Customs bonded cartage operators or 
carriers. The transfer in the same port may require a rewarehouse entry 
into the destination warehouse when both warehouses are within the same 
port. A rewarehouse entry is required if the transfer is between 
warehouses in different ports. The current procedure will be retained 
in Sec. 144.34 (a) and (b).
    An alternative procedure for merchandise in Class 2 or Class 9 
warehouses is proposed in a new paragraph (c) to Sec. 144.34. Under the 
alternative, the merchandise would be treated as remaining in the 
warehouse in which it was originally entered for warehouse. The 
importer and the proprietor of that warehouse would be liable for 
duties and for the proprietor's custodial responsibilities, 
respectively. To ensure that the parties in interest are fully aware of 
their responsibilities, the proposal requires the importer, all 
proprietors, and their sureties to sign the application to use the 
alternative procedure. Section 113.63 would be revised by adding new 
paragraphs (a)(4) and (b)(4), and by revising paragraph (d), in order 
to secure the obligors' custodial performance here.
    The primary attribute of the proposed alternative is the 
eligibility requirement that the applicant have a centralized inventory 
control system so that Customs is able to spot check and verify the 
status of warehoused merchandise, by location, at all times. Although 
the proposal requires that each warehouse location keep subordinate or 
secondary records of merchandise at the location, the concept of the 
proposal is that the importer and the warehouse into which the 
merchandise was first entered remain liable as though the merchandise 
was present in that warehouse. That concept, implemented by the 
required centralized inventory system, is expected to ensure that 
Customs can administer its obligations to protect the revenue and 
ensure that no merchandise is released from Customs custody before any 
required charge, such as a lien, has been satisfied.
    The alternative would eliminate the documentary transfers of 
liability for custodians because conceptually the

[[Page 28812]]

warehoused merchandise is treated as not having left the original 
warehouse. For that reason, no significant change to Sec. 144.39 is 
proposed as a result of the alternative to the procedures in paragraphs 
(a) and (b) of Sec. 144.34.
    Section 144.36(c) would be substantially revised to allow for 
withdrawals for transportation from a single warehouse, via a single 
conveyance, consigned to the same consignee and to be deposited into a 
single warehouse to be combined on one Customs Form 7512. The exemption 
contained in proposed Sec. 144.34(c), addressed above, would be 
incorporated into Secs. 144.36 (f) and (g).
    The signature requirement on sales tickets contained in 
Sec. 144.37(h)(2)(v) would be deleted for all purchases. Also, the 
address requirement would be deleted for all purchases except alcoholic 
beverages in quantities in excess of 4 liters and cigarettes in 
quantities in excess of 3 cartons.
    Section 144.37(h)(3) would be modified by deleting the reference 
``Sec. 19.6(d)(4)'' and substituting a reference to ``Sec. 19.6(d)(5)'' 
in place thereof.
    Section 144.41(c), entitled ``Combining separate shipments'', would 
be modified and expanded to allow multiple withdrawals from a single 
warehouse which are transported on a single conveyance to be 
rewarehoused, at the proprietor's discretion, as one or more 
rewarehouse entries. To ensure the five-year provision of 19 U.S.C. 
1557 is met, the combined rewarehouse entries will assume the import 
date of the oldest warehouse entry in the new combined entry. This 
provision will reduce the number of rewarehouse entry transactions at 
the receiving port.

Comments

    Before adopting the proposed amendments, consideration will be 
given to any written comments that are timely submitted to Customs. 
Comments submitted will be available for public inspection in 
accordance with the Freedom of Information Act (5 U.S.C. 552), 
Sec. 1.4, Treasury Department Regulations (31 CFR 1.4), and 
Sec. 103.11(b), Customs Regulations (19 CFR 103.11(b)), on regular 
business days between the hours of 9 a.m. and 4:30 p.m. at the 
Regulations Branch, Franklin Court, 1099 14th Street, NW., Suite 4000, 
Washington, DC.

Regulatory Flexibility Act and Executive Order 12866

    For the reasons set forth in the preamble, pursuant to the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), it 
is certified that, if adopted, the proposed amendments will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, the proposed amendments are not subject to the regulatory 
analysis or other requirements of 5 U.S.C. 603 or 604. Nor would the 
proposed amendments result in a ``significant regulatory action'' under 
E.O. 12866.

Paperwork Reduction Act

    The collection of information in this document is contained in 
Secs. 19.2, 19.4, 19.6, 19.11, 19.12, 19.36, 19.37, 19.39, 144.36, 
144.37 and 144.41. This information is required and will be used to 
ensure the exportation of merchandise from duty-free stores and other 
Customs bonded warehouses, and to otherwise satisfy the requirements of 
law and the protection of the revenue. This notice of proposed 
rulemaking is intended to simplify recordkeeping requirements for duty-
free stores and other Customs bonded warehouses. The likely respondents 
and/or recordkeepers are business or other for-profit institutions.
    The collection of information contained in this notice of proposed 
rulemaking has already been approved by the Office of Management and 
Budget (OMB) under 1515-0005. An Inventory Control Worksheet will be 
submitted to OMB, which will reflect any changes in the information 
collection burdens occasioned by this rule, together with a request for 
a suitable extension of the existing approval.
    Estimated annual reporting and/or recordkeeping burden: 61,000 
hours.
    Estimated average annual burden per respondent/recordkeeper: 10 
hours.
    Estimated number of respondents and/or recordkeepers: 10,000.
    Estimated annual frequency of responses: On-Occasion.
    Comments on the collection of information should be sent to the 
Office of Management and Budget, Attention: Desk Officer of the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503. A copy should also be sent to the 
Regulations Branch, Office of Regulations and Rulings, U.S. Customs 
Service, 1301 Constitution Avenue, NW., Washington, DC 20229. Comments 
should be submitted within the time frame that comments are due 
regarding the substance of the proposal.
    Comments are invited on: (a) Whether the collection is necessary 
for the proper performance of the functions of the agency, including 
whether the information shall have practical utility; (b) the accuracy 
of the agency's estimate of the burden of the collection of the 
information; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
the collection of information on respondents, including through the use 
of automated collection techniques or other forms of information 
technology.

Drafting Information

    The principal author of this document was Russell Berger, 
Regulations Branch, U.S. Customs Service. However, personnel from other 
offices participated in its development.

List of Subjects

19 CFR Part 19

    Customs duties and inspection, Imports, Exports, Warehouses.

19 CFR Part 113

    Customs bonds.

19 CFR Part 144

    Customs duties and inspection, Imports, Warehouses.

Proposed Amendments

    It is proposed to amend parts 19, 113 and 144, Customs Regulations 
(19 CFR parts 19, 113 and 144) as set forth below.

PART 19--CUSTOMS WAREHOUSES, CONTAINER STATIONS AND CONTROL OF 
MERCHANDISE THEREIN

    1. The general authority citation for part 19 and the specific 
authority for Secs. 19.1, 19.6, 19.11, and 19.35-19.39 would continue 
to read as follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20, 
Harmonized Tariff Schedule of the United States), 1624;

    Section 19.1 also issued under 19 U.S.C. 1311, 1312, 1555, 1556, 
1557, 1560, 1561, 1562;
    Section 19.6 also issued under 19 U.S.C. 1555;
* * * * *
    Section 19.11 also issued under 19 U.S.C. 1556, 1562;
* * * * *
    Sections 19.35-19.39 also issued under 19 U.S.C. 1555;
* * * * *
    2. It is proposed to amend Sec. 19.1 by adding a sentence at the 
end of paragraph (a)(9) to read as set forth below, and by removing 
paragraph (c).


Sec. 19.1  Classes of customs warehouses.

    (a) * * *
    (9) * * * All distribution warehouses used exclusively to provide 
individual

[[Page 28813]]

duty-free sales locations and storage cribs with conditionally duty-
free merchandise are also Class 9 warehouses.
* * * * *
    3. It is proposed to amend Sec. 19.2 by revising its heading, by 
adding three sentences at the end of paragraph (a), and by revising 
paragraphs (b)(2) and (g), to read as follows:


Sec. 19.2  Applications to bond.

    (a) * * * The applicant must prepare and have available at the 
warehouse a procedures manual describing the inventory control and 
recordkeeping system that will be used in the warehouse. A 
certification by the proprietor that the inventory control and 
recordkeeping system meets the requirements of Sec. 19.12 will be 
submitted with the application. The physical security of the facility 
must meet the approval of the port director.
    (b) * * *
    (2) A description of the store's procedures, which includes 
inventory control, recordkeeping, and delivery methods. These 
procedures must be set forth in the proprietor's procedures manual. 
Such manual and subsequent changes therein must be furnished to the 
port director upon request. The procedures in the manual shall provide 
reasonable assurance that conditionally duty-free merchandise sold 
therein will be exported;
* * * * *
    (g) The port director shall promptly notify the applicant in 
writing of his decision to approve or deny the application to bond the 
warehouse. If the application is denied the notification shall state 
the grounds for denial. The decision of the port director will be the 
final Customs administrative determination in the matter.
    4. It is proposed to revise Sec. 19.4 to read as follows:


Sec. 19.4  Customs and proprietor responsibility and supervision over 
warehouses.

    (a) Customs supervision. The character and extent of Customs 
supervision to be exercised in connection with any warehouse facility 
or transaction provided for in this part shall be in accordance with 
Sec. 161.1 of this chapter. Independent of any need to appraise or 
classify merchandise, the port director may authorize a Customs officer 
to supervise any transaction or procedure at the bonded warehouse 
facility. Such supervision may be performed through periodic audits of 
the warehouse proprietor's records, quantity counts of goods in 
warehouse inventories, spot checks of selected warehouse transactions 
or procedures or reviews of conditions of recordkeeping, storage, 
security, or safety in a warehouse facility.
    (b) Proprietor responsibility and supervision.--(1) Supervision. 
The proprietor shall supervise all transportation, receipts, 
deliveries, sampling, recordkeeping, repacking, manipulation, 
destruction, physical and procedural security, conditions of storage, 
and safety in the warehouse as required by law and regulations. 
Supervision by the proprietor shall be that which a prudent manager of 
a storage and manipulation facility would be expected to exercise.
    (2) Customs access. The warehouse proprietor shall permit access to 
the warehouse by any Customs officer.
    (3) Safekeeping of merchandise and records. The proprietor is 
responsible for safekeeping of merchandise and records concerning 
merchandise entered in Customs bonded warehouses. The proprietor or his 
employees shall safeguard and shall not disclose proprietary 
information contained in or on related documents to anyone other than 
the importer, importer's transferee, or owner of the merchandise to 
whom the document relates or their authorized agent.
    (4) Records maintenance.--(i) Maintenance. The proprietor shall:
    (A) Maintain the inventory control and recordkeeping system in 
accordance with the provisions of Sec. 19.12 of this part;
    (B) Retain all records required in this part and defined in 
Sec. 162.1(a) of this chapter, pertaining to bonded merchandise for 5 
years after the date of the final withdrawal under the entry; and
    (C) Protect proprietary information in its custody from 
unauthorized disclosure.
    (ii) Availability. Records shall be readily available for Customs 
review at the warehouse. In addition, a proprietor may keep records at 
another location for Customs review, but only if the proprietor first 
receives written approval for such storage from the port director.
    (5) Record retention in lieu of originals. A warehouse proprietor 
may utilize alternative storage methods in lieu of maintaining records 
in their original formats, if such storage is approved by Customs under 
paragraph (b)(5)(i) of this section. For Customs purposes, original 
records may be stored in alternate form at any time after the final 
withdrawal under the entry to which these records pertain, except that 
duty-free store operators may store original sales tickets in alternate 
form at any time beginning six months after date of sale. If the 
proprietor chooses to use alternative storage methods, the following 
conditions must be met:
    (i) Approval. The proprietor may request approval to maintain 
records in an alternative format by writing and describing the system 
of storage, the conversion techniques used and the security safeguards 
to be employed to prevent alteration, to the director of the regulatory 
audit field office closest to the party's headquarters operation. If 
satisfied that the alternative storage proposed will ensure the 
accuracy and availability of the records when required, the director 
will grant written approval.
    (ii) Retention of reproductions. The proprietor shall retain and 
keep available an original and one duplicate of each microfilm, 
microfiche, cd ROM (compact disk, Read-Only Memory), or other storage 
medium used, for five years from the date of the final withdrawal under 
the entry to which these records pertain. Duty-free store operators 
must keep alternate storage media containing sales tickets for five 
years from the date of the final withdrawal or five years from the date 
of the sale, whichever is shorter.
    (iii) Hard-copy reproductions. The proprietor must have the 
capability of making direct hard-copy reproductions of the data stored 
on the microfilm, microfiche, cd ROM, or other storage medium. The 
proprietor shall bear the expense of making hard-copy reproductions of 
any or all records required by any proper official of the U.S. Customs 
Service for the audit or inspection of books and records.
    (iv) Standards required for reproducing records. Proprietors shall 
maintain the integrity of the original records by insuring that copies 
are true reproductions of the original records and serve the purpose 
for which such records were created. The following shall be observed: 
Copies shall contain all significant record detail shown on the 
original; copies of the record shall be so arranged, identified, and 
indexed that any individual document or component of the records can be 
located with reasonable facility; any indexes, registers, or other 
finding aids shall be contained on the storage medium at the beginning 
of the records to which they relate; each time reproductions are made, 
a written certification will be executed by a responsible company 
official (see Sec. 191.6(a) of this chapter; the same parties who have 
authority to sign drawback documents are ``responsible company 
officials'' for purposes of this section), stating that the 
reproductions stored on the microfilm,

[[Page 28814]]

microfiche, cd ROM, or other storage medium constitute a true, complete 
and accurate reproduction of the original documents; and the proprietor 
shall maintain and make available a manual describing procedures for 
reproducing original records on alternative storage media and controls 
in effect for assuring completeness and accuracy of the reproductions. 
The procedures shall incorporate reasonable controls for assuring 
accuracy and completeness of alternative records. The proprietor is 
responsible for assuring that these controls are executed each time 
original records are reproduced.
    (v) Revocation of alternative record storage method. Failure to 
maintain the records in accordance with these conditions and 
requirements will constitute a breach of the proprietor's bond and may 
result in the revocation by Customs of the privilege of maintaining 
records in a form other than the original format.
    (6) Warehouse and merchandise security. The warehouse proprietor 
shall maintain the warehouse facility in a safe and sanitary condition 
and establish procedures adequate to ensure the security of all 
merchandise under Customs custody stored in the facility. The warehouse 
construction will be a factor that will be considered by the port 
director in deciding whether to approve the application. The facility 
shall be built in such a manner as to render it impossible for 
unauthorized personnel to enter the premises without such violence as 
to make the entry easy to detect. If a portion of the facility is to be 
used for the storage of non-bonded merchandise, the port director shall 
designate the means for effective separation of the bonded and non-
bonded merchandise, such as a wall, fence, or painted line. All inlets 
and outlets to bonded tanks shall be secured with locks and/or in-bond 
seals.
    (7) Storage conditions. Merchandise in the bonded area shall be 
stored in a safe and sanitary manner to minimize damage to the 
merchandise, avoid hazards to persons, and meet local, state, and 
Federal requirements applicable to specific kinds of goods. Aisles 
shall be established and maintained, and doors and entrances left 
unblocked for access by Customs officers and warehouse proprietor 
personnel.
    (8) Manner of storage. Packages shall be received in the warehouse 
and recorded in the proprietor's inventory and accounting records 
according to their marks and numbers. Packages containing weighable or 
gaugeable merchandise not bearing shipping marks and numbers shall be 
received under the weighers or gaugers numbers. Packages with 
exceptions due to damage or loss of contents, or not identical as to 
quantity or quality of contents shall be stored separately until the 
discrepancy is resolved with Customs. Merchandise received in the 
warehouse shall be stored in a manner directly identifying the 
merchandise with the entry, general order, or seizure number; using a 
unique identifier for inventory categories composed of fungible 
merchandise accounted for on a First-In-First-Out (FIFO) basis; or 
using a unique identifier for inventory categories composed of fungible 
merchandise accounted for using another approved alternative inventory 
method.
    (i) Direct identification. The warehouse proprietor shall mark all 
shipments for identification, showing the general order or warehouse 
entry number or seizure number and the date of the general order, 
entry, or delivery ticket in the case of seizures. Containers covered 
by a given warehouse entry, general order or seizure shall not be mixed 
with goods covered by any other entry, general order or seizure. 
Merchandise covered by a given warehouse entry, general order or 
seizure may be stored in multiple locations within the warehouse if the 
proprietor's inventory control system specifically identifies all 
locations where merchandise for each entry, general order or seizure is 
stored and the quantity in each location. The proprietor must provide, 
upon request by a Customs officer, a record balance of goods, 
specifying the quantity in each storage location, covered by any 
warehouse entry, general order, or seizure so a physical count can be 
made to verify the accuracy of the record balance.
    (ii) FIFO. A proprietor may account for fungible merchandise on a 
First-In-First-Out (FIFO) basis instead of specific identification by 
warehouse entry number, provided the merchandise meets the criteria for 
fungibility and the recordkeeping requirements contained in Sec. 19.12 
of this part are met. As of the beginning date of FIFO procedures, each 
kind of fungible merchandise in the warehouse under FIFO shall 
constitute a separate inventory category. Each inventory category shall 
be assigned a unique number or other identifier by the proprietor to 
distinguish it from all other inventory categories under FIFO. All of 
the merchandise in a given inventory category shall be physically 
placed so as to be segregated from merchandise under other inventory 
categories or merchandise accounted for under other inventory methods. 
The unique identifier shall be marked on the merchandise, its 
container, or the location where it is stored so as to clearly show the 
inventory category of each article under FIFO procedures. Merchandise 
covered by a given unique identifier may be stored in multiple 
locations within the warehouse if the proprietor's inventory control 
system specifically identifies all locations where merchandise for a 
specific unique identifier is stored and the quantity in each location. 
The proprietor must provide, upon request by a Customs officer, a 
record balance of goods, specifying the quantity in each storage 
location, covered by any warehouse entry, general order, or seizure so 
a physical count can be made to verify the accuracy of the record 
balance.
    (iii) Other alternative inventory methods. Other alternative 
inventory systems may be used, if Customs approval is obtained. 
Importers or proprietors who wish to use an alternative inventory 
method other than FIFO must apply to Customs Headquarters, Office of 
Regulations and Rulings, for approval.
    (9) Miscellaneous responsibilities. The proprietor is responsible 
for complying with requirements for transport to his warehouse, 
deposit, manipulation, manufacture, destruction, shortage or overage, 
inventory control and recordkeeping systems, and other requirements as 
specified in this part.
    5. It is proposed to amend Sec. 19.6 by revising the fourth 
sentence of paragraph (a)(1), paragraph (d)(1), and the sixth sentence 
of paragraph (d)(2), by redesignating paragraph (d)(4) as (d)(5) and by 
adding a new paragraph (d)(4), to read as follows:


Sec. 19.6  Deposits, withdrawals, blanket permits to withdraw and 
sealing requirements.

    (a)(1) Deposit in warehouse. * * * A copy of any joint report of 
discrepancy shall be made within five business days of agreement and 
provided to the port director on the appropriate cartage documents as 
set forth in Sec. 125.31 of this chapter. * * *
* * * * *
    (d) Blanket permits to withdraw. (1) General. (i) Blanket permits 
may be used to withdraw merchandise from bonded warehouses for:
    (A) Delivery to individuals departing directly from the Customs 
territory for exportation under the sales ticket procedure of 
Sec. 144.37(h) of this chapter (Class 9 warehouses only);
    (B) Aircraft or vessel supplies under section 309 or 317, Tariff 
Act of 1930, as amended (19 U.S.C. 1309, 1317); or
    (C) The personal or official use of personnel of foreign 
governments and

[[Page 28815]]

international organizations set forth in subpart I, part 148 of this 
chapter; or
    (D) A combination of the foregoing.
    (ii) Blanket permits to withdraw may be used only for delivery at 
the port where withdrawn and not for transportation in bond to another 
port, except for a withdrawal for transportation to another port by a 
duty-free sales enterprise which meets the requirements for exemption 
as stated in Sec. 144.34(c) of this chapter. Blanket permits to 
withdraw may not be used for delivery to a location for retention or 
splitting of shipments under the provisions of Sec. 18.24 of this 
chapter. A withdrawer who desires a blanket permit shall state in 
capital letters on the warehouse entry, or on the warehouse entry/entry 
summary when used as an entry, that ``Some or all of the merchandise 
will be withdrawn under blanket permit per section 19.6(d), C.R.'' 
Customs acceptance of the entry will constitute approval of the blanket 
permit. A copy of the entry will be delivered to the proprietor, 
whereupon merchandise may be withdrawn under the terms of the blanket 
permit. The permit may be revoked by the port director in favor of 
individual applications and permits if the permit is found to be used 
for other purposes, or if necessary to protect the revenue or properly 
enforce any law or regulation Customs is charged with administering. 
Merchandise covered by an entry for which a blanket permit was issued 
may be withdrawn for purposes other than those specified in this 
paragraph if a withdrawal is properly filed as required in subpart D, 
part 144, of this chapter.
    (2) Withdrawals under blanket permit. * * * A copy of the 
withdrawal shall be retained in the records of the proprietor as 
provided in Sec. 19.12(d)(4) of this part. * * *
* * * * *
    (4) Withdrawals under blanket permit for aircraft or vessel 
supplies. Multiple withdrawals under a blanket permit for aircraft or 
vessel supplies, if consigned to the same daily aircraft flight number 
or vessel sailing, may be filed on one Customs Form 7512; however, an 
attachment form, developed by the warehouse proprietor and approved by 
the port director may be used for all withdrawals. This attachment form 
shall provide a sufficient summary of the goods being withdrawn, and 
shall include the warehouse entry number, the quantity and weight being 
withdrawn, the Harmonized Tariff Schedule of the United States 
number(s), the value of the goods, import and export lading 
information, the duty rate and amount, and any applicable Internal 
Revenue Tax Calculation, for each warehouse entry being withdrawn. A 
copy of Customs Form 7512 and the summary attachment must be attached 
to each permit file folder unless the warehouse proprietor qualifies 
for the permit file folder exemption under Sec. 19.12(d)(4)(iii) of 
this part.
* * * * *
    6. It is proposed to amend Sec. 19.11 by revising paragraph (h) to 
read as follows:


Sec. 19.11  Manipulation in bonded warehouses and elsewhere.

* * * * *
    (h) Merchandise which has been entered for warehouse and placed in 
a Class 9 warehouse (duty-free store) may be unpacked into its smallest 
irreducible unit for sale without a prior permit issued by the port 
director. The port director may issue a blanket permit to a duty-free 
store for up to one year permitting the destruction of merchandise 
covered by any entry and found to be nonsaleable, if the merchandise to 
be destroyed is valued at less than 5 percent of the value of the 
merchandise at entry or $1250, whichever is less, in its undamaged 
condition. Such permit may be revoked in favor of a permit for each 
entry and/or destruction whenever necessary to assure proper 
destruction and protection of the revenue. The proprietor shall 
maintain a record of unpacking merchandise into saleable units and 
destruction of nonsaleable merchandise in its inventory and accounting 
records.
    7. It is proposed to revise Sec. 19.12 to read as follows:


Sec. 19.12  Inventory control and recordkeeping system.

    (a) Systems capability. The proprietor shall maintain either manual 
or automated inventory control and recordkeeping systems or combination 
manual and automated systems capable of:
    (1) Accounting for all merchandise transported, deposited, stored, 
manipulated, manufactured, smelted, refined, destroyed in or removed 
from the bonded warehouse and all merchandise collected by a proprietor 
or his agent for transport to his warehouse. The records shall provide 
an audit trail from deposit through manipulation, manufacture, 
destruction, and withdrawal from the bonded warehouse either by 
specific identification or other Customs authorized inventory method. 
The records to be maintained are those which a prudent businessman in 
the same type of business can be expected to maintain. The records are 
to be kept in sufficient detail to permit effective and efficient 
determination by Customs of the proprietor's compliance with these 
regulations and correctness of his annual submission or reconciliation;
    (2) Producing accurate and timely reports and documents as required 
by this part; and
    (3) Identifying shortages and overages of merchandise in sufficient 
detail to determine the quantity, description, tariff classification 
and value of the missing or excess merchandise so that appropriate 
reports can be filed with Customs on a timely basis.
    (b) Procedures manual. (1) The proprietor shall have available at 
the warehouse an English language copy of its written inventory control 
and recordkeeping systems procedures manual in accordance with the 
requirements of this part.
    (2) The proprietor shall keep current its procedures manual and 
shall submit to the port director a new certification at the time any 
change in the system is implemented.
    (c) Entry of merchandise into a warehouse.--(1) Identification. All 
merchandise collected by a proprietor or his agent for transport to his 
warehouse shall be receipted. In addition, all merchandise entered in a 
warehouse will be recorded in a receiving report or document using a 
Customs entry number or unique identifier if an alternate inventory 
control method has been approved. All merchandise will be traceable to 
a Customs entry and supporting documentation.
    (2) Quantity verification. Quantities received will be reconciled 
to a receiving report or document such as an invoice with any 
discrepancy reported to the port director as provided in Sec. 19.6(a).
    (3) Recordation. Merchandise received will be accurately recorded 
in the accounting and inventory system records from the receiving 
report or document using the Customs entry number or unique identifier 
if an alternative inventory control method has been approved.
    (d) Accountability for merchandise in a warehouse.--(1) 
Identification of merchandise. The Customs entry number or unique 
identifier, as applicable under Sec. 19.4(b)(8), will be used to 
identify and trace merchandise.
    (2) Inventory records. The inventory records will specify by 
Customs entry number or unique identifier if an alternative inventory 
control method is approved:
    (i) The location of the merchandise within the warehouse;

[[Page 28816]]

    (ii) The cost or value of the merchandise, unless the proprietor's 
financial records maintain cost or value and the records are made 
available for Customs review; and
    (iii) The beginning balance, cumulative receipts and withdrawals, 
adjustments, destructions, and current balance on hand by date and 
quantity.
    (3) Theft, shortage, overage or damage. Any theft or suspected 
theft or overage or any extraordinary shortage or damage (one percent 
or more of the value of the merchandise in an entry or covered by a 
unique identifier; or if the missing merchandise is subject to duties 
and taxes in excess of $100) shall be immediately brought to the 
attention of the port director, and confirmed in writing within five 
business days after the shortage, overage, or damage has been brought 
to the attention of the port director. An entry for warehouse must be 
filed for all overages by the person with the right to make entry 
within five business days of the date of discovery. The applicable 
duties, taxes and interest on thefts and shortages so reported shall be 
paid by the responsible party to Customs within 20 calendar days 
following the end of the calendar month in which the shortage is 
discovered. The port director may allow the consolidation of duties and 
taxes applicable to multiple shortages into one payment. These same 
requirements shall apply when cumulative thefts, shortages or overages 
under a specific entry or unique identifier total one percent or more 
of the value of the merchandise or if the duties and taxes owed exceed 
$100. Upon identification, the proprietor shall record all shortages 
and overages in its inventory control and recordkeeping system, whether 
or not they are required to be reported to the port director at the 
time. The proprietor shall also record all shortages and overages as 
required in the Customs Form 300 or annual reconciliation report under 
paragraphs (f) or (g) of this section, as appropriate. Duties and taxes 
applicable to any non-extraordinary shortage or damage and not required 
to be paid earlier shall be submitted to the port director at the time 
the Warehouse Proprietor's Submission, Customs Form 300 is due or at 
the time the certification of preparation of the annual reconciliation 
report is due, as prescribed in paragraphs (g) and (h) of this section.
    (4) Permit file folders.--(i) Maintenance. Permit file folders 
shall be maintained and kept up to date by filing all receipts, damage 
or shortage reports, manipulation requests, withdrawals, removals and 
blanket permit summaries within five business days after the event 
occurs. The permit file folders shall be kept in a secure area and 
shall be made available for inspection by Customs at all reasonable 
hours.
    (ii) Review. When the final withdrawal of merchandise relating to a 
specific warehouse entry, general order or seizure occurs, the 
warehouse proprietor shall: Review the permit file folder to ensure 
that all necessary documentation is in the file folder accounting for 
the merchandise covered by the entry; notify Customs of any merchandise 
covered by the warehouse entry, general order or seizure which has not 
been withdrawn or removed; and file the permit file folder with Customs 
within 30 calendar days after final withdrawal, except as allowed by 
paragraph (b)(4)(iv) of this section. The permit file folder for 
merchandise not withdrawn during the general order period shall be 
submitted to the port director upon receipt from Customs of the Customs 
Form 6043.
    (iii) Exemption to maintenance requirement. Maintenance of permit 
file folders will not be required, if the proprietor has an automated 
system capable of: satisfactorily summarizing all actions by Customs 
warehouse entry; providing upon demand by Customs an entry activity 
summary report which lists all individual receipts, withdrawals, 
destructions, manipulations and adjustments by warehouse entry and is 
cross-referenced to the source documents for each transaction; and 
maintaining source documents so that the documents can be readily 
retrieved upon request. Failure to provide the entry activity summary 
report or documentation supporting the entry activity summary report 
upon demand by the port director or the field director of regulatory 
audit could result in reinstatement by the port director of the 
requirement to maintain the permit file folder for all warehouse 
entries. When final withdrawal is made, the proprietor must submit the 
entry activity summary report to Customs. Prior to submission, the 
proprietor must ensure the accuracy of the summary report and assure 
that all supporting documentation is on file and available for review 
if requested by Customs.
    (iv) Exemption to submission requirement. At the discretion of the 
port director, a proprietor may be allowed to furnish formal 
notification of final withdrawal in lieu of the requirement to submit 
the permit file folder or entry activity summary within 30 calendar 
days of each final withdrawal. If approved to use this procedure the 
proprietor could be required by the port director to submit permit file 
folders or entry activity summaries on a selective basis. Failure to 
promptly provide the permit file folder or entry activity summary upon 
request by the port director or the field director of regulatory audit 
could result in withdrawal of this privilege.
    (5) Physical inventory. The proprietor shall take at least an 
annual physical inventory of all merchandise in the warehouse, or 
periodic cycle counts of selected categories of merchandise such that 
each category is counted at least once during the year, with prior 
notification of the date(s) given to Customs so that Customs personnel 
may observe or participate in the inventory if deemed necessary. If the 
proprietor of a Class 2 or Class 9 warehouse has merchandise covered by 
one warehouse entry, but stored in multiple warehouse facilities as 
provided for under Sec. 144.34 of this chapter, the facility where the 
original entry was filed must reconcile the on-hand balances at all 
locations with the record balance for those entries with merchandise in 
multiple locations. The proprietor shall notify the port director of 
any discrepancies, record appropriate adjustments in the inventory 
control and recordkeeping system, and make required payments and 
entries to Customs, in accordance with paragraph (d)(3) of this 
section. Discrepancies found in a Class 9 warehouse with integrated 
locations as set forth in Sec. 19.35(c) will be the net discrepancies 
for a specific identifier such that overages within one sales location 
will be offset against shortages in another location that is within the 
integrated location. A Class 9 proprietor who transfers merchandise 
between facilities in different ports without being required to file a 
rewarehouse entry in accordance with Sec. 144.34 of this chapter may 
offset overages and shortages within the same specific identifier for 
merchandise located in stores in different ports.
    (e) Withdrawal of merchandise from a warehouse. All bonded 
merchandise withdrawn from a warehouse will be accurately recorded 
within the inventory control and recordkeeping system. The inventory 
control and recordkeeping system must have the capability to trace all 
withdrawals back to a Customs entry and to ultimate disposition of the 
merchandise by the proprietor.
    (f) Special provisions for use of FIFO inventory procedures.--(1) 
Notification. A proprietor who wishes to use FIFO procedures for all or 
part of the merchandise in a bonded warehouse shall provide the port 
director a written certification that: the proprietor has read and 
understands Customs FIFO procedures set forth in this section; the

[[Page 28817]]

proprietor's procedures are in accordance with Customs FIFO procedures, 
and the proprietor agrees to abide by those procedures; and the 
proprietor of a public warehouse will obtain the written consent of any 
importer using the warehouse before applying FIFO procedures to their 
merchandise.
    (2) Qualifying merchandise. FIFO inventory procedures may be used 
only for fungible merchandise. For purposes of this section, ``fungible 
merchandise'' means merchandise which is identical and interchangeable 
for all commercial purposes. While commercial interchangeability is 
usually decided between buyer and seller or between proprietor and 
importer, Customs is the final arbiter of fungibility in bonded 
warehouses. The criteria for determining whether merchandise is 
fungible include, but are not limited to, Governmental and recognized 
industrial standards, part numbers, tariff classification, value, brand 
name, unit of quantity (such as barrels, gallons, pounds, pieces), 
model number, style and same kind and quality.
    (3) Merchandise specifically excluded. FIFO procedures cannot be 
applied to the following merchandise, as well as any other merchandise 
which does not comply with the requirements of paragraph (f)(2) of this 
section:
    (i) Merchandise subject to quota, visa or export restrictions 
chargeable to different countries of origin;
    (ii) Textile and textile products of different quota categories;
    (iii) Merchandise with different tariff classifications or rates of 
duty, except where the difference is within the merchandise itself 
(such as kits, merchandise in unusual containers) or where the tariff 
classification or dutiability is determined only by conditions upon 
withdrawal (for example, withdrawal for vessel supplies, bonded wool 
transactions);
    (iv) Merchandise with different legal requirements for marking, 
labelling or stamping;
    (v) Merchandise with different trademarks;
    (vi) Merchandise of different grades or qualities;
    (vii) Merchandise with different importers of record;
    (viii) Damaged or deteriorated merchandise;
    (ix) Restricted merchandise; or
    (x) General order, abandoned or seized merchandise.
    (4) Maintenance of FIFO. FIFO procedures used for merchandise in 
any inventory category, must be used consistently throughout the 
warehouse storage and recordkeeping practices and procedures for the 
merchandise. For example, merchandise may not be added to inventory by 
FIFO but withdrawn by bypassing certain inventory layers to reach a 
specific warehouse entry other than the oldest one. However, this does 
not preclude the use of specific identification for some merchandise in 
a warehouse entry and FIFO for other merchandise, so long as they are 
segregated in physical storage and clearly distinguished in the 
inventory and accounting records.
    (5) FIFO recordkeeping. In the inventory and accounting records, 
the proprietor shall establish an inventory layer for each warehouse 
entry represented in each inventory category. The layers shall be 
established in the order of time of acceptance of the entry or by the 
date of importation of merchandise covered by each applicable warehouse 
entry. There shall be no mixing of layering both by time of acceptance 
and date of importation in the same warehouse. Records for each layer 
shall, as a minimum, show the warehouse entry number, date of 
acceptance, date of importation, quantity and unit of quantity. They 
shall also show for each entry the type of warehouse withdrawal number 
or other specific removal event charged against the entry, by date and 
quantity. Each addition to or deduction from the inventory category 
shall be posted in the appropriate inventory category within 2 business 
days after the event occurs. All FIFO records and documentation shall 
consistently use the same unit of quantity within each inventory 
category.
    (6) Entry requirements. Warehouse entries covering any merchandise 
to be accounted for under FIFO must be prominently marked ``FIFO'' on 
the face of the entry document. The entry document or an attachment 
thereto shall show the unique identifier of each inventory category to 
be accounted for under FIFO, the quantity in each inventory category 
and the unit of quantity.
    (7) Receipts. Any shortages, overages, or damage found upon receipt 
shall be attributed to the entry under which the merchandise was 
received. FIFO procedures will not take effect until the merchandise is 
physically placed in the storage location for the inventory category 
represented in the entry.
    (8) Manipulation. When manipulation results in a product with a 
different unique identifier, the inventory and accounting records shall 
show the quantities of merchandise in each inventory category appearing 
in the product covered by the new unique identifier. The withdrawal 
shall show the unique identifiers of both the materials used in the 
manipulation and the product as manipulated. The quantities of the 
original unique identifiers will be deducted from their respective 
warehouse entries on a FIFO basis when the resultant product is 
withdrawn.
    (9) Discontinuance of FIFO. A proprietor may voluntarily 
discontinue the use of FIFO procedures for all or part of the 
merchandise currently under FIFO by providing written notification to 
the port director. The notification shall clearly describe the 
merchandise, by commercial names and unique identifiers, to be removed 
from FIFO. Following notification, the merchandise shall be segregated 
in both the recordkeeping system and the physical location by warehouse 
entry number and the quantities so removed shall be deducted from the 
appropriate FIFO inventory category balances. Merchandise so removed 
shall be maintained under the specific identification inventory method. 
FIFO procedures which were voluntarily discontinued may be reinstated, 
but not for merchandise covered by any warehouse entry for which FIFO 
was discontinued.
    (g) Warehouse proprietor submission. Except as otherwise provided 
in paragraph (h) of this section or Sec. 19.19(b) of this part, the 
warehouse proprietor shall file with the field director of regulatory 
audit within 45 calendar days from the end of his business year a 
Warehouse Proprietor's Submission on Customs Form 300. If the 
proprietor of a Class 2 or Class 9 warehouse has merchandise covered by 
one warehouse entry, but stored in multiple warehouse facilities as 
provided for under Sec. 144.34 of this chapter, the CF 300 shall cover 
all locations and warehouses of the proprietor. An alternative format 
may be used for providing the information required on the CF 300, if 
prior written approval is obtained from the field director of 
regulatory audit.
    (h) Annual reconciliation.--(1) Report. Instead of filing Customs 
Form 300 as required under paragraph (g) of this section, the 
proprietor of a class 2, importers' private bonded warehouse, and 
proprietors of classes 4, 5, 6, 7, 8, and 9 warehouses if the warehouse 
proprietor and the importer are the same party, shall prepare a 
reconciliation report within 90 days after the end of the fiscal year 
unless the port director authorizes an extension for reasonable cause. 
The proprietor shall retain the annual reconciliation report for 5 
years from the end of the fiscal year covered by the report. The report 
must be available for a spot check or audit by

[[Page 28818]]

Customs, but need not be furnished to Customs unless requested. There 
is no form specified for the preparation of the report.
    (2) Information required. The report must contain the company name; 
address of the warehouse; class of warehouse; date of inventory or 
information on cycle counts; a description of merchandise for each 
entry or unique identifier, quantity on hand at the beginning of the 
year, cumulative receipts and transfers (by unit), quantity on hand at 
the end of the year, and cumulative positive and negative adjustments 
(by unit) made during the year. If the proprietor of a Class 2 or Class 
9 warehouse has merchandise covered by one warehouse entry, but stored 
in multiple warehouse facilities as provided for under Sec. 144.34 of 
this chapter, the reconciliation shall cover all locations and 
warehouses of the proprietor at the same port. If the annual 
reconciliation includes entries for which merchandise was transferred 
to a warehouse without filing a rewarehouse entry, as allowed under 
Sec. 144.34, the annual reconciliation must contain sufficient detail 
to show all required information by location where the merchandise is 
stored. For example, if merchandise covered by a single entry is stored 
in warehouses located in 3 different ports, the annual reconciliation 
should specify individually the beginning and ending inventory 
balances, cumulative receipts, transfers, and positive and negative 
adjustments for each location.
    (3) Certification. The proprietor shall submit to the field 
director of regulatory audit within 10 business days after preparation 
of the annual reconciliation report, a letter signed by the proprietor 
certifying that the annual reconciliation has been prepared, is 
available for Customs review, and is accurate. The certification letter 
must contain the proprietor's IRS number; date of fiscal year end; the 
name and street address of the warehouse; the name, title, and 
telephone number of the person having custody of the records; and the 
address where the records are stored. Reporting of shortages and 
overages based on the annual reconciliation will be made in accordance 
with paragraph (d)(3) of this section. Any previously unreported 
shortages and overages should be reported to the port director and any 
unpaid duties, taxes and fees should be paid at this time.
    (i) System review. The proprietor shall perform an annual internal 
review of the inventory control and recordkeeping system and shall 
prepare and maintain on file a report identifying any deficiency 
discovered and corrective action taken, to ensure that the system meets 
the requirements of this part.
    (j) Special requirements. A warehouse proprietor submission (CF 
300) or annual reconciliation must be prepared for each facility or 
location as defined in Secs. 19.2(a) and 19.35(c) of this part. When 
merchandise is transferred from one facility or location to another 
without filing a rewarehouse entry, as provided for in Sec. 144.34(c) 
of this chapter, the submission/reconciliation for the warehouse where 
the entry was originally filed should account for all merchandise under 
the warehouse entry, indicating the quantity in each location.
    8. It is proposed to amend Sec. 19.13 by revising the fourth 
sentence of paragraph (g) to read as follows:


Sec. 19.13  Requirements for establishment of warehouses.

* * * * *
    (g) Secure storage. * * * The areas for storage of bonded material 
and manufactured products shall be secured in accordance with the 
standards prescribed in Sec. 19.4(b)(6) of this part. * * *
* * * * *
    9. It is proposed to amend Sec. 19.13a by revising the first 
sentence of its introductory text and by revising paragraph (b) to read 
as follows:


Sec. 19.13a  Recordkeeping requirements.

    The proprietor of a manufacturing warehouse shall comply with the 
recordkeeping requirements of Secs. 19.4(b) and 19.12.* * *
* * * * *
    (b) Take an annual physical inventory of the merchandise as 
provided in Sec. 19.12(d)(5) in conjunction with the annual submission 
required by Sec. 19.12(g); and
* * * * *
    10. It is proposed to amend Sec. 19.35 by revising the introductory 
text of paragraph (c) and by revising paragraphs (c)(2) and (f) to read 
as follows:


Sec. 19.35  Establishment of duty-free stores (Class 9 warehouses).

* * * * *
    (c) Integrated locations. A Class 9 warehouse with multiple 
noncontiguous sales and crib locations (see Sec. 19.37(a) of this part) 
containing conditionally duty-free merchandise and requested by the 
proprietor may be treated by Customs as one location if:
* * * * *
    (2) The recordkeeping system is centralized up to the point where a 
sale is made so as to automatically reduce the sale quantity by 
location from centralized inventory or inventory records must be 
updated no less frequently than at the end of each business day to 
reflect that day's activity.
* * * * *
    (f) Security of sales rooms and cribs. The physical and procedural 
security requirements of Sec. 19.4(b)(6) of this part shall be applied 
to the security of the sales rooms and cribs by the port director. The 
proprietor shall establish procedures to safeguard the merchandise so 
as to accommodate the movement of purchasers and prospective purchasers 
of conditionally duty-free merchandise contained in duty-free sales 
rooms and cribs.
* * * * *
    11. It is proposed to amend Sec. 19.36 by revising the last 
sentence of paragraph (e) and the third sentence of paragraph (g) to 
read as follows:


Sec. 19.36  Requirements for duty-free store operations.

* * * * *
    (e) Merchandise eligible for warehousing. * * * However, such 
merchandise must be either identified or marked ``DUTY-PAID'' or 
``U.S.-ORIGIN'', or similar markings, as applicable, so that Customs 
officers can easily distinguish conditionally duty-free merchandise 
from other merchandise in the sales or crib area.
* * * * *
    (g) Inventory procedure. * * * The inventory shall be reconcilable 
with the accounting and inventory records and the permit file folder 
requirements of Sec. 19.12(d), (e) and (f) of this part. * * *
    12. It is proposed to amend Sec. 19.37 by revising the first and 
fourth sentences, and the fifth (and last) sentence of paragraph (a) to 
read as follows:


Sec. 19.37  Crib operations.

    (a) Crib. A crib means a bonded area, separate from the storage 
area of a Class 9 warehouse, for the retention of a supply of articles 
for delivery to persons departing from the United States. * * * The 
quantity of goods in the crib may be an amount requested by the 
proprietor which is commercially necessary for the delivery operations 
for a period, if approved by the port director. The port director may 
increase or decrease the quantity as deemed necessary for the 
protection of the revenue and proper administration of U.S. laws and 
regulations, or may order the return to the storage area of goods 
remaining unsold.
* * * * *
    13. It is proposed to amend Sec. 19.39 by removing the last three 
sentences of

[[Page 28819]]

paragraph (c)(2); it is further proposed to amend Sec. 19.39 by 
revising the first sentence of paragraph (c)(3), by redesignating 
paragraphs (c)(4)(ii), (c)(4)(iii) and (c)(4)(iv), as (c)(4)(iii), 
(c)(4)(iv) and (c)(4)(v), respectively, and adding a new paragraph 
(c)(4)(ii), and by revising paragraphs (c)(5) and (e), to read as set 
forth below:


Sec. 19.39  Delivery for exportation.

* * * * *
    (c) * * *
    (3) Aircraft Delivery. The merchandise will be delivered by a 
licensed cartman for lading as baggage directly on the aircraft on 
which the passenger will depart. * * *;
    (4) Unit-load delivery. * * *
    (ii) Merchandise shall be placed on the aircraft on which the 
passenger departs the United States for carriage as passenger baggage;
* * * * *
    (5) Cancelled or aborted flights or no-show passengers. (i) 
Cancelled or aborted flights. The proprietor shall, upon request, make 
available to Customs the purchaser's name and address, the purchaser's 
airline ticket number and the identity and quantity of the merchandise 
delivered by the proprietor to the purchaser (if the merchandise was 
delivered to the airline rather than the passenger, the name of the 
airline employee to whom the merchandise was delivered), and the date 
and time of that delivery in lieu of retrieving the merchandise for 
safekeeping until the purchaser actually departs.
    (ii) No-show passengers. A proprietor who delivers merchandise 
directly to an airline for delivery to a passenger who does not board 
the flight shall establish a procedure to obtain redelivery of that 
merchandise from the airline.
* * * * *
    (e) Delivery method. Delivery of conditionally duty-free 
merchandise to persons for exportation will be made by licensed cartmen 
or bonded carriers under the procedures in subpart D, part 125, and 
Sec. 144.34(a), of this chapter, or under a local control system 
approved by the port director wherein any discrepancy found in the 
merchandise will be treated as if it occurred in the bonded warehouse.
* * * * *

PART 113--CUSTOMS BONDS

    1. The general authority citation for part 113 would continue to 
read as follows:

    Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
    2. It is proposed to amend Sec. 113.63 by redesignating paragraph 
(a)(4) as (a)(5) and adding a new paragraph (a)(4), by adding a new 
paragraph (b)(4), and by revising the first sentence of paragraph (d), 
to read as follows:


Sec. 113.63  Basic custodial bond conditions.

    (a) * * *
    (4) If authorized to use the alternative transfer procedure set 
forth in Sec. 144.34(c) of this chapter, to operate as constructive 
custodian for all merchandise transferred under those procedures, 
thereby assuming primary responsibility for the continued proper 
custody of the merchandise notwithstanding its geographical location;
* * * * *
    (b) * * *
    (4) If authorized to use the alternative transfer procedure set 
forth in Sec. 144.34(c) of this chapter, to keep safe any merchandise 
so transferred.
* * * * *
    (d) * * * If the principal is designated a bonded carrier, or 
licensed to operate a cartage or lighterage business, or authorized to 
use the alternative transfer procedure set forth in Sec. 144.34(c) of 
this chapter, the principal agrees to redeliver timely, on demand by 
Customs, any merchandise delivered to unauthorized locations or to the 
consignee without the permission of Customs. * * *
* * * * *

PART 144--WAREHOUSE AND REWAREHOUSE ENTRIES AND WITHDRAWALS

    1. The general authority citation for part 144 and the specific 
authority for Sec. 144.37 would continue to read as follows:

    Authority: 19 U.S.C. 66, 1484, 1557, 1559, 1624;
* * * * *
    Section 144.37 also issued under 19 U.S.C. 1555, 1562.

    2. It is proposed to amend Sec. 144.34 by adding a new paragraph 
(c) to read as follows:


Sec. 144.34  Transfer to another warehouse.

* * * * *
    (c) Transfers between integrated bonded warehouses.--(1) 
Eligibility.
    (i) Only an importer who will transfer warehoused merchandise among 
Class 2 and 9 warehouses listed on the application in paragraph (c)(2) 
of this section is eligible to participate.
    (ii) The importer must have a centralized inventory control system 
that shows the location of all of the warehoused merchandise at all 
times, including merchandise in transit.
    (iii) The importer and its surety must sign the application. If the 
application to use this alternative procedure is approved by the 
appropriate port director, the importer's entry bond containing the 
conditions provided under Sec. 113.62 of this chapter will continue to 
attach to any merchandise transferred under these alternative 
procedures.
    (iv) Each proprietor of a warehouse listed on the application and 
each surety who underwrites that proprietor's custodial bond coverage 
under Sec. 113.63 of this chapter shall sign the application.
    (2) Application. Application must be made in writing to the port 
director of the port in which the applicant's centralized inventory 
control system exists, with copies to all affected port directors, for 
exemptions from the requirements for transfer of merchandise from one 
bonded warehouse to another set forth in paragraphs (a) and (b) of this 
section. The application must list all bonded warehouses to and from 
which the merchandise may be transferred; all such warehouses must be 
covered by the same centralized inventory control system. Only blanket 
exemption requests will be considered; exemptions will not be 
considered for individual transfers. The application may be in letter 
form, signed by all participants, and contain a certification to the 
port director by the applicant that he maintains accounting records, 
documents and financial statements and reports that adequately support 
Customs activities.
    (3) Operation. An importer who receives approval to transfer 
merchandise between bonded warehouses in accordance with the provisions 
of this section may, after entry into the first warehouse, transfer 
that merchandise to any other warehouse without filing a withdrawal 
from warehouse or a rewarehouse entry. The warehoused merchandise will 
be treated as though it remains in the first warehouse so long as the 
actual location of the merchandise at all times is recorded as provided 
under the provisions of this section.
    (4) Inventory control requirements. The records required to be 
maintained must include a centralized inventory control system and 
supporting documentation which meets the following requirements:
    (i) Provide Customs upon demand with the proper on-hand balance of 
each inventory item in each warehouse

[[Page 28820]]

facility and each storage location within each warehouse;
    (ii) Provide Customs upon demand with the proper on-hand balance 
for each open warehouse entry and the actual quantity in each warehouse 
facility;
    (iii) If an alternative inventory system has been approved, provide 
Customs upon demand with the proper on-hand balance for each unique 
identifier and the quantity related to each open warehouse entry and 
the quantity in each warehouse facility;
    (iv) Maintain documentation for all intracompany movements, 
including authorizations for the movement, shipping documents and 
receiving reports. These documents must show the appropriate warehouse 
entry number or unique identifier, the description and quantity of the 
merchandise transferred, and must be properly authorized and signed 
evidencing shipment from and delivery to each location;
    (v) Maintain a consolidated permit file folder at the location 
where the merchandise was originally warehoused. The consolidated 
permit file folder must meet the requirements of Sec. 19.12(d)(4) of 
this chapter regardless of the warehouse facility in which the action 
occurred. Documentation for all intracompany movements, including 
authorizations for movement, shipping documents, receiving reports, as 
well as documentation showing ultimate disposition of the merchandise 
must be filed in the consolidated permit file folder within seven 
business days; and
    (vi) Maintain a subordinate permit file at all intracompany 
locations where merchandise is transferred containing copies of 
documentation required by Sec. 19.12(d)(4) of this chapter and by 
paragraph (c)(3)(v) of this section relating to merchandise quantities 
transferred to the location. A copy of all documents in the subordinate 
permit file folder must be filed in the consolidated permit file folder 
within seven business days; no exceptions will be granted to this 
requirement. When the final withdrawal is made on the respective entry, 
the subordinate permit file shall be considered closed and filed at the 
intracompany location to which the merchandise was transferred.
    (vii) File the withdrawal from Customs custody at the original 
warehouse location at which the merchandise was entered.
    (5) Waiver of permit file folder requirements. The permit file 
folder requirements of paragraphs (c)(3)(v) and (c)(3)(vi) of this 
section may be waived if the proprietor's recordkeeping and inventory 
control system qualifies under the requirements of 
Sec. 19.12(d)(4)(iii) of this chapter at all locations where bonded 
merchandise is stored.
    (6) Procedure not available. (i) Liens. The transfer procedures 
permitted under paragraph (c) of this section shall not be available 
for merchandise with respect to which Customs is notified of the 
existence of a lien, as prescribed in Sec. 141.112 of this chapter (see 
19 U.S.C. 1564), until proof shall be produced at the original 
warehouse location that the lien has been satisfied or discharged.
    (ii) Restricted merchandise. Merchandise subject to a restriction 
on release such as covered by a licensing, quota or visa requirement, 
is not eligible.
    3. It is proposed to amend Sec. 144.36 by revising paragraphs (c) 
and (f), and by adding the word ``or'' at the end of paragraph (g)(5) 
and adding a new paragraph (g)(6) thereafter, to read as follows:


Sec. 144.36  Withdrawal for transportation.

* * * * *
    (c) Form. (1) A withdrawal for transportation shall be filed on 
Customs Form 7512 in five copies. An extra copy or copies of the 
Customs Form 7512 may be required for use in connection with the 
delivery of the merchandise to the bonded carrier and, in the case of 
alcoholic beverages, two extra copies shall be required for use in 
furnishing the duty statement to the port director at destination.
    (2) Separate withdrawals for transportation from a single 
warehouse, via a single conveyance, consigned to the same consignee, 
and deposited into a single warehouse, can be filed on one Customs Form 
7512, under one control number, provided that there is an attachment, 
to be certified by a Customs officer, providing the information for 
each withdrawal, as required in paragraph (d) of this section. This 
procedure shall not be allowed for merchandise which is in any way 
restricted (for example, quota/visa).
    (3) The requirement that a Customs Form 7512 be filed and the 
information required in paragraph (d) of this section be shown shall 
not be required if the merchandise qualifies under the exemption in 
Sec. 144.34(c).
* * * * *
    (f) Forwarding procedure. The merchandise shall be forwarded in 
accordance with the general provisions for transportation in bond 
(Secs. 18.1 through 18.8 of this chapter). However, when the alternate 
procedures under Sec. 144.34(c) are employed, the merchandise need not 
be delivered to a bonded carrier for transportation, and an entry for 
transportation (Customs Form 7512) and a rewarehouse entry will not be 
required.
    (g) Procedure at destination. * * *
    (5) * * *; or
    (6) Deposited into the proprietor's bonded warehouse or duty free 
store warehouse without rewarehouse entry as required in Sec. 144.41, 
if the merchandise qualifies for the exemption specified in 
Sec. 144.34(c).
* * * * *
    4. It is proposed to amend Sec. 144.37 by revising paragraph 
(h)(2)(v), and by revising the fourth sentence and the sixth (and last) 
sentence of paragraph (h)(3), concluding text, to read as follows:


Sec. 144.37  Withdrawal for exportation.

* * * * *
    (h) * * *
    (2) * * *
    (v) The full name and address of the purchaser. However, the port 
director may waive the address requirement for all merchandise except 
for alcoholic beverages in quantities in excess of 4 liters and 
cigarettes in quantities in excess of 3 cartons; and
* * * * *
    (3) Sales ticket register. * * * The sales ticket register shall be 
included in the permit file folder with or in lieu of the blanket 
permit summary, as provided in Sec. 19.6(d)(5) of this chapter. * * * 
In lieu of placing a copy of sales tickets in each permit file folder, 
the warehouse proprietor may keep all sales tickets in a readily 
retrievable manner in a separate file.
    5. It is proposed to amend Sec. 144.39 by revising its first 
sentence to read as follows:


Sec. 144.39  Permit to transfer and withdraw merchandise.

    With the exception of merchandise transferred under the procedures 
of Sec. 144.34(c), if all legal and regulatory requirements are met, 
the appropriate Customs officer shall approve the application to 
transfer or withdraw merchandise from a bonded warehouse by endorsing 
the permit copy and returning it to the applicant. * * *
    6. It is proposed to amend Sec. 144.41 by revising paragraph (c) to 
read as follows:


Sec. 144.41  Entry for rewarehouse.

* * * * *
    (c) Combining Separate shipments. (1) Separate shipments consigned 
to the same consignee and received under separate withdrawals for 
transportation may be combined into one rewarehouse entry if the 
warehouse withdrawals are from the same original warehouse entry.
    (2) Shipments covered by multiple warehouse entries, and shipped 
from a

[[Page 28821]]

single warehouse under separate withdrawals for transportation, via a 
single conveyance, may be combined into one rewarehouse entry if 
consigned to the same consignee and deposited into a single warehouse. 
This procedure shall not be allowed for merchandise which is in any way 
restricted (for example, quota/visa). The combined rewarehouse entry 
shall have attached either copies of each warehouse entry package which 
is being combined into the single rewarehouse entry or a summary with 
pertinent information, that is, the date of importation, commodity 
description, size, HTSUS and entry numbers, for all entries withdrawn 
for consolidation as one rewarehouse entry. Any combining of separate 
withdrawals into one rewarehouse entry shall result in the rewarehouse 
entry being assigned the import date of the oldest entry being combined 
into the rewarehouse entry.
    (3) Combining of separate shipments shall be prohibited in all 
other circumstances.
* * * * *
Michael H. Lane,
Acting Commissioner of Customs.
    Approved: April 8, 1996.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-14125 Filed 6-5-96; 8:45 am]
BILLING CODE 4820-02-P