28808 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

originally recorded information. Thus,

the erroneous information being crossed

out would not be obliterated and an

audit should reveal the original

information recorded on the trading

record, as well as any information

subsequently recorded. Because the

amendment to paragraph (d)(7) would

make this provision applicable to all

trading records, the Commission

believes that this amendment would

further limit the opportunity for the

fabrication or alteration of trading

records.

The Commission believes that

erroneous data normally should be

crossed out using the same or a similar

pen as is used by the member to record

trade executions. In any event, the use

of a felt pen or marker that obliterates

the original recorded information, even

if the information is crossed out with no

more than a single line, would not be in

compliance with this amended

regulation. Overwriting erroneous

information with corrected information,

rather than crossing out the erroneous

information in the prescribed manner,

also would not be in compliance with

this amended regulation.

III. Other Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act

(‘‘RFA’’), 5 U.S.C. 601 et. seq., requires

that agencies, in proposing rules,

consider the impact of those rules on

small businesses. The Commission has

previously determined that contract

markets are not ‘‘small entities’’ for

purposes of the RFA, and that the

Commission need not, therefore,

consider the effect of proposed

amendments on contract markets in

relation to the RFA. 47 FR 18618, 18619

(April 30, 1982). The Commission has

also determined that FCMs should be

excluded from the definition of ‘‘small

entity’’ based upon the fiduciary nature

of the FCM/customer relationships as

well as the fact that FCMs must meet

minimum financial requirements. 47 FR

18618, 18619 (April 30, 1982).

With respect to contract market

members, the Commission has stated

that it is appropriate to evaluate within

the context of a particular rule proposal

whether some or all members that

would be affected by the rule should be

considered small entities and, if so, to

analyze the economic impact on such

entities at that time. 47 FR 18618, 18620

(April 30, 1982). The contract market

members affected by the proposed

amendment, other than clearing

members, would be floor brokers and

floor traders.

The Commission recognizes that

contract market members would be

subject to the proposed amendments

and that certain contract market

members could be considered to be

small entities for the purposes of the

RFA. However, the Commission

believes that the proposed amendment,

as designed, would not impose a

significant economic burden on

members.

Accordingly, the Acting Chairman, on

behalf of the Commission, hereby

certifies, pursuant to 5 U.S.C. 605(b),

that the action taken herein will not

have a significant economic impact on

a substantial number of small entities.

B. Paperwork Reduction Act: Comment

Request

The Paperwork Reduction Act of 1980

(‘‘ACT’’), 44 U.S.C. 3501 et. seq.,

imposes certain requirements on federal

agencies (including the Commission) in

connection with their conducting or

sponsoring any collection of

information as defined by the Act.

While this proposed rule has no burden,

the group of rules (3038–0022) of which

this is a part has the following burden:

Average burden hours per response3,546.

Number of Respondents—15,286.

Frequency of Response—On occasion.

Persons wishing to comment on the

information which would be required

by this proposed/amended rule should

contact Jeff Hill, Office of Management

and Budget, Room 3228, NEOB,

Washington, DC 20503, (202) 395–7340.

Copies of the information collection

submission to OMB are available from

Joe F. Mink, CFTC Clearance Officer,

Three Lafayette Centre, 1155 21st Street

NW., Washington, DC 20581, (202) 418–

5170.

List of Subjects in 17 CFR Part 1

Commodity futures, Commodity

options, Contract markets, Customers,

Members of contract markets,

Noncompetitive trading, Reporting and

recordkeeping requirements.

In consideration of the foregoing, and

pursuant to the authority contained in

the Commodity Exchange Act and, in

particular, Sections 5, 5a, 5b, 6(a), 6b,

8a(7), 8a(9) and 8c, 7 U.S.C. 7, 7a, 7b,

8(a), 8b, 12a(7), 12a(9), and 12c, the

Commission hereby proposes to amend

Part 1 of Chapter I of Title 17 of the

Code of Federal Regulations as follows:

PART 1—GENERAL REGULATIONS

UNDER THE COMMODITY EXCHANGE

ACT

1. The authority citation for Part 1

continues to read as follows:

Authority: 7 U.S.C. 2, 2a, 4, 4a, 6, 6a, 6b,

6c, 6d, 6e, 6f, 6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n,

6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, 13a1, 16, 16a, 19, 21, 23 and 24.

2. Section 1.35 is proposed to be

amended by revising paragraph (d)(7) to

read as follows:

§ 1.35 Records of Cash Commodity,

Futures, and Option Transactions.

* * * * *

(d) * * *

(7) Trading records prepared by a

member of a contract market pursuant to

contract market rules must:

(i) Be submitted in accordance with

contract market rules adopted pursuant

to paragraph (j)(1) of this section; and

(ii) Be completed in non-erasable ink.

A member may correct any errors (A) by

crossing out erroneous information with

no more than a single line through each

character, without obliterating or

otherwise making illegible any of the

originally recorded information or (B)

with regard to trading cards only, by

rewriting the trading card; provided,

however, that the member is

accountable pursuant to paragraph

(d)(6) of this section for any trading card

that is subsequently rewritten.

* * * * *

Issued in Washington, DC on May 31, 1996

by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 96–14129 Filed 6–05–96; 8:45 am]

BILLING CODE 6351–01–P

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.

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
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 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: §§ 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

§ 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 § 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 § 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 § 19.3 (e) and (f) would

be deleted from § 19.2(g).

Sections 19.4 and 19.12 would be

reformatted to move the storage and

security requirements from § 19.12 and

consolidate them in § 19.4. Section

19.12 would be devoted to the inventory

control and recordkeeping system

requirements.

The heading of § 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 § 19.4(a), entitled ‘‘Customs

supervision’’, and proposed § 19.4(b)(2),

entitled ‘‘Customs access’’, contain the

current § 19.4 language relating to

Customs supervision over warehouses.

The requirements of current

§ 19.12(b)(1), concerning supervision by

the warehouse proprietor, would be

moved to § 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

§ 19.12(a)(7) to § 19.4(b)(3). The last

sentence in current § 19.12(a)(7) has

been deleted because the consequence

of unauthorized disclosure is covered by

§ 19.3(e)(8).

Proposed § 19.4(b)(4) summarizes the

proprietor’s responsibilities relating to

records maintenance.

Proposed § 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 § 19.4(b)(6), concerning

warehouse and merchandise security,

incorporates the requirements of current

§ 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

§ 19.12(b)(5) to § 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 § 19.4(b)(8), entitled

‘‘Manner of storage’’, is based on current

§ 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.
28810 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

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 § 19.6(d)(5). A proposed

new § 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 § 19.12 is based on the

inventory control and recordkeeping

requirements in current § 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 § 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 § 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 § 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 § 19.12(d)(4)(ii),

entitled ‘‘Review’’, the substance of

which is currently set forth in

§ 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

§ 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 § 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 § 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 § 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 § 19.12(g) contains the

requirement for the annual warehouse

proprietor submission currently set

forth in § 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 § 144.34.

To reduce paperwork requirements

for the proprietor and handling by

Customs, proposed § 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 § 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
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 28811

identifying deficiencies discovered and

the corrective action taken.

Proposed § 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

§ 144.34(c).

In proposed § 19.13(g), specific

reference to T.D. 72–56 is replaced with

reference to the more general security

standards contained in proposed

§ 19.4(b)(6).

Section 19.13a would be modified to

delete the reference to § 19.12(a) and

substitute references to §§ 19.4(b) and

19.12.

Section 19.13a(b) would be modified

to delete the reference to § 19.12(a)(5)

and substitute reference to § 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

§ 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 § 19.12(b)(3) and

substitute a reference to § 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 § 19.12(a) with

§ 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 § 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 § 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 § 19.39 would be renumbered.

A revision of paragraph (c)(5) of

§ 19.39 is proposed to establish

procedures to handle deliveries of dutyfree 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, § 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 § 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 § 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
28812 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

warehoused merchandise is treated as

not having left the original warehouse.

For that reason, no significant change to

§ 144.39 is proposed as a result of the

alternative to the procedures in

paragraphs (a) and (b) of § 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 § 144.34(c),

addressed above, would be incorporated

into §§ 144.36 (f) and (g).

The signature requirement on sales

tickets contained in § 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

‘‘§ 19.6(d)(4)’’ and substituting a

reference to ‘‘§ 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), § 1.4, Treasury Department

Regulations (31 CFR 1.4), and

§ 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 §§ 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

§§ 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 § 19.1 by

adding a sentence at the end of

paragraph (a)(9) to read as set forth

below, and by removing paragraph (c).

§ 19.1 Classes of customs warehouses.

(a) * * *

(9) * * * All distribution warehouses

used exclusively to provide individual
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 28813

duty-free sales locations and storage

cribs with conditionally duty-free

merchandise are also Class 9

warehouses.

* * * * *

3. It is proposed to amend § 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:

§ 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 § 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 § 19.4 to

read as follows:

§ 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 § 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 § 19.12 of this

part;

(B) Retain all records required in this

part and defined in § 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 § 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,
28814 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

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 nonbonded 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-InFirst-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-InFirst-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 § 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 § 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:

§ 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 § 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 § 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
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 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 dutyfree sales enterprise which meets the

requirements for exemption as stated in

§ 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 § 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 § 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 § 19.12(d)(4)(iii) of

this part.

* * * * *

6. It is proposed to amend § 19.11 by

revising paragraph (h) to read as

follows:

§ 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 § 19.12 to

read as follows:

§ 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

§ 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 § 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;
28816 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

(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 § 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 § 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 § 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
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 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

§ 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 § 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
28818 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

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 § 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

§ 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 §§ 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 § 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 § 19.13 by

revising the fourth sentence of

paragraph (g) to read as follows:

§ 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 § 19.4(b)(6) of this part.

* * *

* * * * *

9. It is proposed to amend § 19.13a by

revising the first sentence of its

introductory text and by revising

paragraph (b) to read as follows:

§ 19.13a Recordkeeping requirements.

The proprietor of a manufacturing

warehouse shall comply with the

recordkeeping requirements of

§§ 19.4(b) and 19.12.* * *

* * * * *

(b) Take an annual physical inventory

of the merchandise as provided in

§ 19.12(d)(5) in conjunction with the

annual submission required by

§ 19.12(g); and

* * * * *

10. It is proposed to amend § 19.35 by

revising the introductory text of

paragraph (c) and by revising

paragraphs (c)(2) and (f) to read as

follows:

§ 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 § 19.37(a) of

this part) containing conditionally dutyfree 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 § 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 § 19.36 by

revising the last sentence of paragraph

(e) and the third sentence of paragraph

(g) to read as follows:

§ 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 dutyfree 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

§ 19.12(d), (e) and (f) of this part. * * *

12. It is proposed to amend § 19.37 by

revising the first and fourth sentences,

and the fifth (and last) sentence of

paragraph (a) to read as follows:

§ 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 § 19.39 by

removing the last three sentences of
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 28819

paragraph (c)(2); it is further proposed

to amend § 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:

§ 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 noshow 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 § 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 § 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:

§ 113.63 Basic custodial bond conditions.

(a) * * *

(4) If authorized to use the alternative

transfer procedure set forth in

§ 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

§ 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 § 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

§ 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 § 144.34 by

adding a new paragraph (c) to read as

follows:

§ 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 § 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 § 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
28820 Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules

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 § 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

§ 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 § 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

§ 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 § 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:

§ 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 § 144.34(c).

* * * * *

(f) Forwarding procedure. The

merchandise shall be forwarded in

accordance with the general provisions

for transportation in bond (§§ 18.1

through 18.8 of this chapter). However,

when the alternate procedures under

§ 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 § 144.41, if the

merchandise qualifies for the exemption

specified in § 144.34(c).

* * * * *

4. It is proposed to amend § 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:

§ 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 § 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 § 144.39 by

revising its first sentence to read as

follows:

§ 144.39 Permit to transfer and withdraw

merchandise.

With the exception of merchandise

transferred under the procedures of

§ 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 § 144.41 by

revising paragraph (c) to read as follows:

§ 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
Federal Register / Vol. 61, No. 110 / Thursday, June 6, 1996 / Proposed Rules 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

DEPARTMENT OF COMMERCE

International Trade Administration

19 CFR Parts 351, 353 and 355

Antidumping Duties; Countervailing

Duties

AGENCY: Import Administration,

International Trade Administration,

Commerce.

ACTION: Announcement of opportunity

to file public comments on the public

hearing of proposed antidumping and

countervailing duty regulations.

SUMMARY: The Department of Commerce

(the Department) is announcing the

opportunity to file public comments on

issues raised at the public hearing on

the proposed antidumping and

countervailing duty regulations. The

deadline for filing comments is June 17,

1996. The public hearing will be held

on June 7, 1996.

DATES: A public hearing will be held at

10:00 on June 7, 1996. The deadline for

filing comments is June 17, 1996.

ADDRESSES: The public hearing will be

held in the Auditorium of the Herbert C.

Hoover Building at Pennsylvania

Avenue and 14th Street, N.W.,

Washington, D.C. Address written

comments and requests to participate in

the public hearing to Paul Joffe, Acting

Assistant Secretary for Import

Administration, Central Records Unit,

Room B–099, U.S. Department of

Commerce, Pennsylvania Avenue and

14th Street, N.W., Washington, D.C.

20230. Comments on the proposed

regulations should be addressed:

Attention: Hearing Comments. Each

person submitting a comment should

include his or her name, address, and

give reasons for any recommendation.

FOR FURTHER INFORMATION CONTACT:

Penelope Naas at (202) 482–3534.

SUPPLEMENTARY INFORMATION: On

February 27, 1996, the Department

published proposed antidumping and

countervailing duty regulations (61 FR

7308). We will hold a public hearing on

June 7, 1996. We are allowing

submission of written comments on

issues raised at the hearing. As well, we

are allowing submission of written

comments on any issue raised in written

comments previously submitted.

Proposed Regulations

The proposed regulations are

available on the Internet at the following

address:

HTTP://WWW.ITA.DOC.GOV/IMPORT—

ADMIN/RECORDS/

In addition, the proposed regulations

are available to the public on 3.5′′

diskettes, with specific instructions for

accessing compressed data, at cost, and

paper copies available for reading and

photocopying in Room B–099 of the

Central Records Unit. Any questions

concerning file formatting, document

conversion, access on Internet, or other

file requirements should be addressed to

Andrew Lee Beller, Director of Central

Records, (202) 482–1248.

Format and Number of Copies

To simplify the processing and

distribution of the public comments

pertaining to the Department’s proposed

regulations, parties are encouraged to

submit documents in electronic form

accompanied by an original and three

paper copies. All documents filed in

electronic form must be on DOS

formatted 3.5′′ diskettes, and must be

prepared in either WordPerfect format

or a format that the WordPerfect

program can convert and import into

WordPerfect. Please submit comments

on a separate file on the diskette and

labeled by the section number in the

regulations. If possible, the Department

would appreciate the documents being

filed in either ASCII format or

WordPerfect 5.1, and containing generic

codes. The Department would also

appreciate the use of descriptive file

names.

Dated: June 3, 1996.

Paul Joffe,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 96–14308 Filed 6–5–96; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[IA–26–94]

RIN 1545–AU34

Qualified Small Business Stock

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the 50-

percent exclusion for gain from certain

small business stock. The proposed

regulations reflect changes to the law

made by the Omnibus Budget

Reconciliation Act of 1993 (OBRA ’93)

and provide guidance to the issuers and

owners of the stock of certain small

businesses. This document also

provides a notice of public hearing on

these proposed regulations.

DATES: Written comments and outlines

of oral comments to be presented at the

public hearing scheduled for October 3,

1996 must be received by September 4,

1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (IA–26–94), Room

5226, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative,

submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m.

to CC:DOM:CORP:R (IA–26–94),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

NW., Washington, DC. The public

hearing will be held in Room 2615,

Internal Revenue Building, 1111

Constitution Avenue, NW., Washington,

DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,

Catherine A. Prohofsky at (202) 622–

4930; concerning submissions and the

public hearing, Christina Vasquez at

(202) 622–7180; (not toll-free numbers).