[Federal Register: January 24, 2003 (Volume 68, Number 16)]
[Rules and Regulations]
[Page 3381-3384]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja03-6]
[[Page 3381]]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 101
[T.D. 03-05]
Consolidation of Customs Drawback Centers
AGENCY: Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document adopts as a final rule, with a clarification,
the proposed amendments to the Customs Regulations that reflect the
closure of the Customs Drawback Centers located at the ports of Boston,
Massachusetts; Miami, Florida; and New Orleans, Louisiana. The closing
of the three Drawback Centers is part of a planned consolidation and is
intended to promote operational efficiency in the processing of
drawback claims.
EFFECTIVE DATES: This regulation becomes effective January 24, 2003.
The closing of the Customs Drawback Center located at the port of New
Orleans, LA becomes effective February 24, 2003. The closing of the
Customs Drawback Centers located at the ports of Boston, MA and Miami,
FL become effective July 23, 2003.
FOR FURTHER INFORMATION CONTACT: Sherri Lee Hoffman, Entry and Drawback
Management, Office of Field Operations, U.S. Customs Service, Tel.
(202) 927-0300.
SUPPLEMENTARY INFORMATION:
Background
Since 1996, Customs has recognized a decrease in both the number of
drawback claims and the amount of drawback payments. To verify these
trends, and to determine how to most efficiently operate the Drawback
Program, Customs conducted an internal evaluation of the program.
Customs also retained the services of an independent contractor to
review the Drawback Program to ensure that the agency's findings were
valid. The findings of both the agency-led review and the independent
contractor's assessment indicated the benefits of consolidating the
processing of drawback claims by reducing the number of Drawback
Centers.
In a Notice to Congress on March 12, 2001, filed in accordance with
19 U.S.C. 2075, Customs proposed the closure of four Drawback Centers.
The Senate Finance and House Ways and Means Committees concurred with
the proposal for consolidation, but with the recommendation that only
three Drawback Centers be eliminated and the San Francisco Drawback
Center remain operational. The Commissioner of Customs concurred with
this recommendation and it was proposed to phase-in the closure of the
Drawback Centers located at the ports of Boston, MA; Miami, FL; and New
Orleans, LA.
On August 21, 2002, Customs published in the Federal Register (67
FR 54137) a proposed amendment to the Customs Regulations to reflect
the planned closure of these Customs Drawback Centers, and a request
for public comment regarding the proposed actions. In that document,
Customs described a phased-in closure process whereby the Customs
Drawback Centers located at the ports of Boston and New Orleans would
close 30 days from the date a final rule adopting the proposed changes
was published in the Federal Register, and the Drawback Center located
at the port of Miami would close 180 days from such date. The document
also stated that any unliquidated drawback claims that remained at each
of these Drawback Centers twelve months after their respective closing
dates would be transferred to another Drawback Center for processing as
follows: Remaining claims from Boston would be transferred to the New
York/Newark, NJ Drawback Center; remaining claims from New Orleans
would be transferred to the Houston Drawback Center; and remaining
claims from Miami would be transferred to the Chicago Drawback Center.
In accordance with the proposal, the five Drawback Centers located
at the ports of New York/Newark, NJ; Houston, TX; Chicago, IL; Los
Angeles, CA; and San Francisco, CA, will remain operational.
Discussion of Comments
Fourteen comments were received in response to the solicitation of
public comment published in the August 21, 2002, Federal Register
document. A description of the comments received, together with Customs
analyses, is set forth below.
Comment: Several commenters expressed concern that closure of three
Drawback Centers will negatively impact the level of service at the
remaining Drawback Centers. Specific comments were submitted regarding
anticipated inefficiencies at the remaining Drawback Centers resulting
from:
[sbull] Reduction in full-time Customs Drawback Specialist
positions;
[sbull] Increased workload for remaining Drawback Specialists and
failure to utilize existing Drawback personnel to their potential;
[sbull] Transfer of backlogged drawback cases;
[sbull] Lack of specific published proposals demonstrating how
service levels will be maintained; and
[sbull] Lack of realistic methods of determining which Drawback
Centers should have been closed;
Customs Response: To ensure that the level of service at the
remaining Drawback Centers will remain the same as before the
consolidation, Customs reviewed the workload of each Center and
assessed the burden of any workload that would be transferred to
another Drawback Center as result of the consolidation. The
determination as to which Drawback Centers would receive drawback cases
that remain unliquidated twelve months after closure of a Center was
based upon this review. It is noted, however, that the workload
transfers that were described in the August 21, 2002, Federal Register
document have been changed, due to further internal analysis of
workloads, staffing and backlogs, and are described in the section of
this document entitled ``Further Customs Analysis,'' set forth below.
Regarding staffing issues, Customs recognizes that Drawback
personnel levels at the remaining Drawback Centers will have to be
routinely reviewed to ensure that the centers are able to sustain pre-
consolidation levels of service. Customs is striving to automate and
simplify the drawback process to reduce the workload of Drawback
Specialists. In an effort to utilize Drawback personnel to their
potential, Drawback Specialists will continue to receive annual
training.
The Customs Drawback Program has evolved over the years, and the
processing procedures in place today are to ensure that the workload
increases do not create unworkable backlogs and preserve a pre-
consolidation level of service to the trade.
Lastly, Customs notes that its determination to close three
Drawback Centers was based on a detailed internal evaluation of the
program, as well as the findings of an independent contractor. The
findings of the agency-led review and the independent contractor's
assessment were based on facts and clearly indicated the benefits of
consolidation of the program.
Comment: Two commenters requested that the requirement to re-apply
for a new letter of intent to operate under a general drawback ruling
when transferring from one drawback center to another be waived.
[[Page 3382]]
Customs response: Claimants will not have to re-file a general
drawback ruling request at the Drawback Center designated to receive
their claims. If, however, a claimant opts to file a claim at a
Drawback Center other than the one designated to receive their claims,
that claimant will have to file a new letter of intent to operate under
a general drawback ruling at that location.
Comment: Several commenters questioned whether consolidating the
drawback program would subvert the intent of Congress to assist in
increasing U.S. exports.
Customs response: Consolidation of the drawback program will not
negatively impact U.S. exports.
Comment: One commenter objected to the fact that the identity of
the independent contractor brought in to perform the review of the
Drawback Program was not made public.
Customs response: The purpose of retaining an independent
contractor was to have an unbiased third party conduct a review of the
Drawback Program. Individuals seeking more information may file a
request for information pursuant to the Freedom of Information Act (5
U.S.C. 552).
Comment: Several commenters noted that although the number of
drawback claims has decreased, the volume of import and export
shipments that appear on claims has increased.
Customs response: Customs has data that reflects that the number of
underlying imports in 2001 decreased over 40% from 1999 levels. While
it is true that more exports are being claimed in a summarized format,
consolidation of the drawback program is a legitimate means of
increasing the program's efficiency without impairing U.S. exports.
Comment: Two commenters questioned why claimants are not allowed to
file a single application for the waivers and privileges set forth in
Sec. Sec. 191.91, 191.92 and 191.195 of the Customs Regulations (i.e.,
waiver of prior notice of intent to export, accelerated payment,
certification in the drawback compliance program).
Customs response: Claimants do have the option of filing a single
application for these waivers and privileges pursuant to 19 CFR 191.93.
Comment: Several commenters noted that all Drawback Specialists
must now perform more mandatory audits and/or desk reviews as ordered
by the General Accounting Office (GAO).
Customs response: Customs has enhanced the processing procedures
for drawback so that fewer full desk reviews are completed by each
Drawback Specialist. Audits are completed by Regulatory Auditors with
input from the Drawback Specialist. It is noted that the number of
audits over the years has remained consistent.
Comment: One commenter noted that the proposed rulemaking should
have stated that only a customs broker requires a license/permit to
file a drawback claim, and not a drawback claimant.
Customs response: Customs agrees; the background section of the
proposed rulemaking published in the Federal Register (67 FR 54137) on
August 21, 2002, should have specified that a drawback claimant's
customs broker must possess a district or national permit to file a
drawback claim.
Comment: One commenter questioned whether a broker must file
drawback claims via the Automated Broker Interface (ABI) to have a
national permit, and noted that the Customs Regulations permit drawback
claims to be filed either manually or electronically (via ABI).
Customs response: Section 111.19(f) of the Customs Regulations (19
CFR 111.19(f)) allows for national broker permits under any of the
circumstances described in Sec. 111.2(b)(2)(i) (19 CFR
111.2(b)(2)(i)). Section 111.2(b)(2)(i)(B) allows for electronic (ABI)
drawback claims. There is no allowance in Sec. 111.2(b)(2)(i) for
manual drawback claims. Drawback claims may be filed manually by
brokers with a district permit. See 19 CFR 111.2(b)(2)(ii).
Comment: Several commenters noted that by closing Drawback Centers,
Customs will be unable to liquidate and audit drawback claims within
the three year time period allowed by law.
Customs response: As stated previously, Customs believes that
consolidation of the Drawback Program will bring about more efficient
and effective drawback claim processing, and thereby claims should get
liquidated more expeditiously. It is noted that there is no legal or
regulatory requirement to liquidate or audit a drawback claim within
three years. A drawback claimant is required to retain records for
three years after payment of a drawback claim. See 19 CFR 163.4(b)(1).
If drawback is paid via accelerated payment, pursuant to 19 CFR 191.92,
and the three year time period to retain records expires prior to the
underlying claim being liquidated, there may be instances where the
records necessary to verify a claim are no longer available. This
problem, however, has no bearing on the consolidation of the Drawback
Program. It is further noted that audits are performed on unliquidated
drawback claims, and this document does not make any changes to the
Regulatory Audit functions of drawback.
Comment: One commenter viewed the requirement to provide advance
notification to Customs of any changes to a drawback claim as
impractical, and questioned who, within Customs, should be notified in
such instances.
Customs response: Notification of changes to a drawback claim
should be provided to the Drawback Specialist handling the original
claim.
Comment: One commenter questioned whether the Government will
actually save money by closing three Drawback Centers and reducing
personnel, given the fact that no specific information as to the
expected savings have been presented.
Customs response: The proposed rulemaking published in the August
21, 2002, Federal Register stated that the consolidation is ``intended
to promote operational efficiency in the processing of drawback
claims.'' The document does not suggest savings as a reason for the
consolidation.
Comment: One commenter noted that consolidation of the Drawback
Program will necessitate submission of drawback applications to Customs
Drawback Centers that are outside the Customs port areas most familiar
with the claimant/company and thereby further increase delays and
backlogs. Additionally, if drawback claims are required to be submitted
at ports other than the port of import, the process of obtaining
records will be more difficult, time-consuming and expensive.
Customs response: The Drawback Program is not currently a port-
specific program. Therefore, Drawback Specialists are already adept at
reviewing claims that originate from outside their geographical area.
Also, the process of transmitting or shipping data to other Customs
ports is already followed by all ports that do not have a Drawback
Center.
Comment: One commenter requested that Customs publish each Drawback
Center's drawback claims filing statistics (i.e., dollar amounts
claimed, number of drawback personnel assigned to the Drawback Center,
number of exports being claimed).
Customs response: Relevant export data is unavailable because it is
not part of Customs automated system. The other types of drawback
statistics specified in the comment may be available by information
requests made pursuant to the Freedom of Information Act (5 U.S.C.
552).
Comment: One commenter noted that a decline in the number of
drawback claims suggests that existing Drawback Centers have idle time
and that
[[Page 3383]]
privileges and claims should all be approved on time, including those
applications made at Customs Headquarters.
Customs response: Applications for privileges are not approved at
Customs Headquarters. Customs is being proactive, rather than reactive,
by consolidating the Drawback Program and ensuring that Drawback
resources are used optimally.
Comment: One commenter stated that Customs will increase costs by
closing some of the Drawback Centers because a Drawback Specialist
usually visits the drawback claimant with an Auditor and this will
increase Customs travel expenses. In a related comment, several
commenters noted that by closing the Boston Drawback Center, Customs
expenses will increase because Auditors and Inspectors will have to
travel to remote customs sites beyond their port's geographical area to
review and audit drawback claims.
Customs response: A Drawback Specialist does not always accompany
an Auditor. Moreover, Drawback Specialists are technical experts that
an Auditor can consult as a resource either electronically or
telephonically. Customs already incurs some of these travel
expenditures in that a drawback claimant can use any of the eight
existing Drawback Centers and does not always choose to file a drawback
claim at the Center located nearest the claimant. Regarding the comment
directed at the Boston Drawback Center, it is noted that Auditors and
Inspectors are located throughout the Customs Service. Regulatory
Auditors will remain in Boston, as well as other sites. Inspectors
located at the port of export will perform the export examinations, as
they always have. They perform functions separate from those of a
Drawback Specialist and the role of Inspectors will not be affected by
the consolidation.
Comment: Several commenters stated that the cost of staffing and
training new Drawback personnel will be significant.
Customs response: The remaining Drawback Centers have well-trained,
capable staffs and there is no need to immediately increase staffing
levels at those Centers. New staff will be hired to replace personnel
lost through attrition or retirement and to accommodate any sustained
increase in drawback filings nationwide.
Comment: Several commenters noted that as proposed Free Trade
Agreements and yearly reductions in duty rates will eventually
eliminate the need for drawback, closure of the Drawback Centers at
this time is unwarranted.
Customs response: Customs views a consolidated, more efficient
Drawback Program as consistent with the trade trends cited in the
comment above.
Comment: Several commenters are of the view that it is not prudent
to change the Drawback Program during this time of transition of the
Customs Service to the Homeland Security Department and that any such
changes will distract from the goals of fighting terrorism.
Customs response: Customs is of the view that the agency's efforts
regarding anti-terrorism and its move to the Homeland Security
Department will not be impacted by any of the changes to the Drawback
Program discussed in this document.
Comment: Several commenters questioned why California will have two
Drawback Centers operating after the consolidation, even though Boston
has more volume than the Los Angeles Drawback Center. The commenters
also suggested documenting the length of time it takes certain Drawback
Centers to process drawback claims and correcting inefficiencies.
Customs response: As stated above, many factors were taken into
consideration in making the determination to close the Boston Drawback
Center. Regarding workload volume, Customs notes that the volume at the
Boston and Los Angeles Centers is approximately the same.
Comment: Several commenters stated that exporters will have their
costs increased by having to submit drawback applications and claims to
remote Drawback Centers. The commenters also expected increased delays
in having to wait for shipment inspections and payment of drawback
claims.
Customs response: Exporters file their claims at the port of
exportation. A Drawback Center has no bearing on the export process.
There is no reason to believe there will be any delays in shipment
inspections, as there have been no changes made to this process.
Further Customs Analysis
Customs has determined that based on the above comments, no change
is necessary to the proposed rulemaking published in the Federal
Register on August 21, 2002 (67 FR 54137). However, it has come to
Customs attention, upon further review of the proposed consolidation,
that a redistribution of the workload that is to be transferred from
the closed Drawback Centers, as well as an extension of the time period
that the Boston Drawback Center will remain operational, will assist in
maintaining the level of service at the remaining Drawback Centers that
existed prior to consolidation.
The original phased-in consolidation plan, which detailed the
transfer of remaining unliquidated drawback cases and the time frames
for Drawback Center closures, as published in the August 21, 2002,
Federal Register document, remains in effect except for the following
changes:
(1) Drawback claims that remain unliquidated twelve months after
closure of the Miami Drawback Center and require Customs review will be
forwarded to the Los Angeles Drawback Center (not to the Chicago
Drawback Center); and
(2) The Drawback Center at the port of Boston, MA will close 180
days from the date of publication of this document in the Federal
Register (not 30 days from such date as originally planned). As of that
date, drawback claims will no longer be accepted at the Boston Drawback
Center and claims must be filed at one of the five remaining Drawback
Centers. Drawback claims submitted to the Boston Drawback Center after
this date will be rejected. Once rejected, it is the responsibility of
the claimant to ensure timely filing of the drawback claim at one of
the five remaining Drawback Centers. Customs personnel at the port of
Boston will continue to process drawback claims for a period of 12-
months after closure of the Boston Drawback Center. After this time,
all remaining unliquidated drawback claims filed at the Boston Drawback
Center prior to its closure that require Customs review will be
forwarded to the Chicago Drawback Center for final processing (not to
the New York/Newark Drawback Center as originally planned).
Conclusion
After analysis of the comments and further review of the matter,
Customs has determined to adopt as a final rule the amendments proposed
in the Notice of Proposed Rulemaking published in the Federal Register
(67 FR 54137) on August 21, 2002.
Inapplicability of Delayed Effective Date
Although this final rule was issued after a notice for public
comments, it is not subject to the notice and public procedure
requirements of 5 U.S.C. 553 because it relates to agency management
and organization. Customs solicited and reviewed comments as a courtesy
to the public. Accordingly, there is no requirement for a delayed
effective date for this regulation.
[[Page 3384]]
The Regulatory Flexibility Act and Executive Order 12866
Because these amendments relate to agency management and
organization, they are not subject to the notice and public procedure
requirements of 5 U.S.C. 553. Accordingly, this document is not subject
to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Agency
organization matters, such as this proposed closing of three Customs
Drawback Centers, are not subject to Executive Order 12866.
Drafting Information
The principal author of this document was Ms. Suzanne Kingsbury,
Regulations Branch, Office of Regulations and Rulings, U.S. Customs
Service. However, personnel from other offices participated in its
development.
List of Subjects in 19 CFR Part 101
Customs duties and inspection, Customs ports of entry.
Amendments to the Regulations
For the reasons set forth in the preamble, amend part 101 of the
Customs Regulations (19 CFR 101) as follows:
PART 101--GENERAL PROVISIONS
1. The general authority citation for part 101 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 2, 66, 1202 (General Note
23, Harmonized Tariff Schedule of the United States), 1623, 1624,
1646a.
Section 101.3 and 101.4 also issued under 19 U.S.C. 1 and 58b;
* * * * *
Sec. 101.3 [Amended]
2. In Sec. 101.3, the table in paragraph (b)(1) is amended by
removing the plus sign in the ``Ports of entry'' column before the
column listings for ``Miami'' under the state of Florida, ``New
Orleans'' under the state of Louisiana, and ``Boston'' under the state
of Massachusetts.
Robert C. Bonner,
Commissioner of Customs.
Approved: January 22, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-1758 Filed 1-23-03; 8:45 am]
BILLING CODE 4820-02-P