Amended Bond Procedures for Articles Subject to an Exclusion Order Issued by the U.S. International Trade Commission

AGENCY:

Customs Service, Department of the Treasury.

ACTION:

Final rule.

SUMMARY:

This document adopts as a final rule, with some changes, proposed amendments to the Customs Regulations regarding bond procedures for the entry of articles subject to an exclusion order issued by the U.S. International Trade Commission (“Commission”). Merchandise that is subject to a Commission exclusion order may be entitled to entry under a special bond prescribed by the Secretary of the Treasury in an amount determined by the Commission to be sufficient to protect the complainant from any injury. If the Commission later determines that the respondent has violated the provisions of section 337, the bond may be forfeited to the complainant. This document adds the text of this special importation and entry bond to the Customs Regulations, and makes conforming changes to other regulatory provisions that are impacted by the addition of the new bond text.

EFFECTIVE DATE:

January 12, 2001.

FOR FURTHER INFORMATION CONTACT:

Glen Vereb, Entry Procedures and Carriers Branch, (202) 927-1327.

SUPPLEMENTARY INFORMATION:

Background

Under section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), the U.S. International Trade Commission (“Commission”) has the authority to conduct investigations into certain alleged unfair practices in import trade. Most complaints filed under this provision involve allegations of patent infringement, trademark infringement, or misappropriation of trade secrets. The Commission may determine that section 337 has been violated or, during the course of an investigation, that there is reason to believe that section 337 has been violated.

If the Commission finds a violation, or reason to believe there is a violation, of section 337, it may direct the Secretary of the Treasury to exclude the subject articles from entry into the U.S. During the period the Commission's exclusion order remains in effect, and prior to the date that the Commission's determination of a violation of section 337 becomes final, articles otherwise excluded may be entered under a single entry bond prescribed by the Secretary of the Treasury.

Certain statutory changes to section 337 of the Tariff Act of 1930 were enacted pursuant to the Uruguay Round Agreements Act (URAA), Public Law 103-465, 108 Stat. 4809 (December 8, 1994). Paragraphs (e)(1) and (j)(3) of section 337, as respectively amended by sections 321(a)(3) and (6) of the URAA, provide that articles subject to a Commission exclusion order may be entered under bond prescribed by the Secretary of the Treasury in an amount determined by the Commission to be sufficient to protect the complainant from any injury and that if the Commission later determines that the respondent has violated the provisions of section 337, the bond may be forfeited to the complainant.

On February 8, 2000, Customs published a document in the Federal Register (65 FR 6062) that proposed to amend the Customs Regulations to implement the statutory changes to section 337 effected by section 321 of the URAA.

In that document, it was proposed to create a new single entry bond that must be filed for articles subject to a Commission exclusion order. It was proposed that the amount of the single entry bond would be determined by the Commission to be sufficient to protect the complainant from any injury. It was proposed that if the Commission later determines that the respondent has violated the provisions of section 337, the bond may be forfeited to the 3 complainant. The procedures for importing merchandise subject to the bonding requirements of section 337 were proposed to be set forth in § 12.39, Customs Regulations. The new bond conditions were proposed to be set forth in part 113, Customs Regulations.

Further, it was proposed to remove any reference to Commission exclusion orders from § 113.62, as this section pertains to basic importation and entry bonds. The newly proposed bond to indemnify the complainant under section 337 is applicable where merchandise is subject to a Commission exclusion order and is set forth in appendix B to part 113. Customs wishes to emphasize that the proposed special importation and entry bond is in addition to, not in lieu of, the basic importation and entry bond (§ 113.62) and any other Customs requirements for the importation of merchandise subject to a Commission exclusion order.

It was also noted in the proposal that the “(a)(1)(A)” list of documents required for entry, set forth in the appendix to part 163 of the Customs Regulations, would be amended if the proposal were adopted. The (a)(1)(A) list would be amended to reflect the fact that the new bond would be required as an entry document for entry of merchandise covered by a Commission exclusion order.

In addition, it was noted in the proposal that part 178, which lists the information collections contained in the regulations and the control numbers assigned by OMB, would be amended accordingly if the proposal were adopted.

Comments were solicited on the proposal.

Discussion of Comment

One comment was received by Customs in response to the solicitation of comments.

Comment: The commenter recommended four changes to the text of the proposed bond, as follows:

(1) Bond Obligee: That additional text be included in the bond to better identify the actual complainant. This is suggested to be achieved by including a blank space for the complainant's name to be typed on the bond and by including a blank space in which to type the specific Commission case or investigation number;

(2) Description of the Merchandise: That the bond text require the entry date and entry number for the merchandise so that there is certainty as to which merchandise is secured by which bond;

(3) Prompt Notice to the Principal from the Port Director Regarding the Commission Exclusion Determination: That a condition of the bond be that the port director's notice to redeliver to the importer be promptly issued after the Commission investigation; and

(4) Agreement to Pay Face Value of the Bond Upon Default of the Principal's Obligation to Export/Destroy the Merchandise: That the seventh paragraph of the proposed bond text be clarified to indicate that the principal and the surety, “jointly and severally,” agree to pay an amount equal to the face value of the bond in the event of default.

Customs Response: With respect to these four recommendations, Customs agrees with the adoption of all but the third (i.e., “Prompt Notice to the Principal from the Port Director regarding the Commission Exclusion Determination”). Unlike the previous Commission bond that indemnified the Government, the new Commission bond indemnifies the complainant. Consequently, the new bond should impose as few preconditions as possible on the Government. Since a Commission order is either served on the principal, or made by general announcement in the Federal Register, there is no need to add, as a condition of the bond, the requirement that a port director issue a notice to redeliver, let alone impose a requirement that such a notice be issued “promptly” within a specified time period.

Conclusion

After review of the comment and further consideration, Customs has decided that the proposed amendments, with the changes to the text of the proposed special importation and entry bond discussed above, should be adopted as a final rule.

The Regulatory Flexibility Act and Executive Order 12866

Because these amendments conform the Customs Regulations to reflect the terms of an existing statute regarding bond procedures for articles subject to an exclusion order issued by the Commission, pursuant to the provisions of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., it is certified that these amendments will not have a significant impact on a substantial number of small entities. Further, these amendments do not meet the criteria for a “significant regulatory action” as specified in Executive Order 12866.

Paperwork Reduction Act

The collection of information contained in this final rule has been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) under control number 1515-0222. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by OMB.

The collection of information in this final rule is in appendix B to part 113. Although other parts of the Customs Regulations are being amended, all information required by these amendments is contained or identified in appendix B to part 113. The information requested is necessary to enable Customs to permit the entry of merchandise the subject of a Commission exclusion order under a bond to indemnify a complainant under section 337 of the Tariff Act of 1930, as amended. The likely respondents are individuals or commercial organizations that seek to import merchandise that is the subject of a section 337 exclusion order into the U.S.

The estimated average annual burden associated with the collection of information in this final rule is 30 minutes per respondent or recordkeeper. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be sent to the U.S. Customs Service, Information Services Group, Office of Finance, 1300 Pennsylvania Avenue, N.W. Washington, D.C. 20229, and to OMB, Attention: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, D.C. 20503. A copy should also be sent to the Regulations Branch at the address set forth above.

Drafting Information

The principal author of this document was Suzanne Kingsbury, Office of Regulations and Rulings, U.S. Customs Service. However, personnel from other offices participated in its development.

List of Subjects

19 CFR Part 12

• Bonds
• Customs duties and inspection
• Entry of merchandise
• Imports
• Restricted merchandise
• Unfair competition

19 CFR Part 113

• Bonds
• Customs duties and inspection
• Imports

19 CFR Part 163

• Administrative practice and procedure
• Customs duties and inspection
• Imports
• Reporting and recordkeeping requirements

19 CFR Part 178

• Administrative practice and procedure
• Collections of information
• Imports
• Paperwork requirements
• Reporting and recordkeeping requirements

Amendments to the Regulations

For the reasons stated in the preamble, parts 12, 113, 163 and 178 of the Customs Regulations (19 CFR parts 12, 113, 163 and 178) are amended as follows:

PART 12—SPECIAL CLASSES OF MERCHANDISE

1. The general authority citation for part 12 and the specific authority citation for § 12.39 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 (HTSUS)), 1624.

Section 12.39 is also issued under 19 U.S.C. 1337, 1623.

2. Section 12.39(b)(2) is revised to read as follows:

PART 113—CUSTOMS BONDS

1. The general authority citation for part 113 continues to read as follows, and a new authority citation is added for § 113.74:

Authority: 19 U.S.C. 66, 1623, 1624.

§ 113.74 also issued under 19 U.S.C. 1337.

2. In § 113.62:

a. The introductory paragraph is amended by removing that portion of the text which reads “, except that a bond taken in the case of merchandise subject to an exclusion order of the International Trade Commission under 19 U.S.C. 1337 shall be a single entry bond”; and

b. Paragraph (l)(1) is amended by removing the words “except that in the case of merchandise subject to an exclusion order of the International Trade Commission under 19 U.S.C. 1337 which has been released before such order becomes final, the obligors agree to pay liquidated damages in the amount specified in the order for failure to redeliver such merchandise”;

3. A new § 113.74 is added to read as follows:

4. A new appendix B is added to part 113 to read as follows:

Appendix B to Part 113—Bond to Indemnify Complainant Under Section 337, Tariff Act of 1930, as Amended

This appendix contains the bond to indemnify a complainant under section 337 of the Tariff Act of 1930, as amended. The provisions contained in 11 §§ 12.39(b)(2) and 113.74 of the Customs Regulations (19 CFR Chapter I) and § 210.50(d) of the U.S. International Trade Commission Regulations (19 CFR Chapter II) apply.

Bond to Indemnify Complainant Under Section 337, Tariff Act of 1930, As Amended

______ as principal and ____ as surety, are held and bound to ______, as the complainant in U.S. International Trade Commission case/investigation number ____, of unfair practices or methods of competition in import trade in violation of section 337, Tariff Act of 1930, as amended, in the sum of ____ dollars ($____), for payment of which we bind ourselves, our heirs, executors, administrators, successors, and assigns, jointly and severally, by these conditions.

Pursuant to the provisions of section 337, Tariff Act of 1930, as amended, the principal and surety recognize that the Commission has, according to the conditions described in its order, excluded from, or authorized, entry into the United States of the following merchandise ________ ____________ under entry number ______, dated ______.

The principal and surety recognize that the Commission has excluded that merchandise from entry until its investigation is completed, or until its decision that there is a violation of section 337 becomes final.

The principal and surety recognize that certain merchandise excluded from entry by the Commission was, or may be, offered for entry into the United States while the Commission's prohibition is in effect.

The principal and surety recognize that the principal desires to obtain a release of that merchandise pending a final determination of the merchandise's admissibility into the United States, as provided under section 337, and, for that purpose, the principal and surety execute this stipulation:

If it is determined, as provided in section 337 of the Tariff Act of 1930, as amended, to exclude that merchandise from the United States, then, on notification from the port director of Customs, the principal is obligated to export or destroy under Customs supervision the merchandise released under this stipulation within 30 days from the date of the port director's notification.

The principal and surety, jointly and severally, agree that if the principal defaults on that obligation, the principal and surety shall pay to the complainant an amount equal to the face value of the bond as may be demanded by him/her under the applicable law and regulations.

Witness our hands and seals this ____ day of ______ (month), ____ (year).

________ (seal)

Principal

________ (seal)

Surety

PART 163—RECORDKEEPING

1. The authority citation for part 163 continues to read as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 1624.

2. In the appendix to part 163—Interim (a)(1)(A) List, under section “IV.,” the list of documents/records or information required for entry of special categories of merchandise is amended by adding the following new listing in the appropriate numerical order:

Part 113, Appendix B—Bond to Indemnify Complainant Under Section 337, Tariff Act of 1930, as Amended

PART 178—APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

1. The authority citation for part 178 continues to read as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.

2. Section 178.2 is amended by adding a new listing to the table in numerical order to read as follows: