Conditional Release Period and CBP Bond Obligations for Food, Drugs, Devices, and Cosmetics, 4423-4430 [07-408]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• DEPARTMENT OF THE TREASURY
• Bureau of Customs and Border Protection
• Customs and Border Protection Bureau

[Federal Register Volume 72, Number 20 (Wednesday, January 31, 2007)]
[Rules and Regulations]
[Pages 4423-4430]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-408]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 113, 141, and 151

[CBP Dec. 07-02]
RIN 1505-AB57


Conditional Release Period and CBP Bond Obligations for Food, 
Drugs, Devices, and Cosmetics

AGENCIES: Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document amends the Customs and Border Protection (CBP) 
regulations to clarify the responsibilities of importers of food, 
drugs, devices, and cosmetics under the basic CBP importation bond and 
to provide a reasonable period of time to allow the Food and Drug 
Administration (FDA) to perform its enforcement functions with respect 
to these covered articles. The amendments include a provision for a 
specific conditional release period of 30 days for any food, drug, 
device, or cosmetic which has been released under bond and for which 
admissibility is to be determined under the provisions of

[[Page 4424]]

the Federal Food, Drug, and Cosmetic Act (the Act). The amendments also 
clarify the amount of liquidated damages that may be assessed when 
there is a breach of the terms and conditions of the bond and authorize 
any representative of FDA to obtain a sample of any imported article 
subject to section 801 of the Act, as amended.

DATES: Effective Date: The amendments set forth in this document are 
effective on May 1, 2007.

FOR FURTHER INFORMATION CONTACT: Wende Schuster, Office of 
International Trade, (202-572-8761).

SUPPLEMENTARY INFORMATION:

Background

Federal Food, Drug, and Cosmetic Act

    Section 801 of the Federal Food, Drug, and Cosmetic Act, as amended 
(21 U.S.C. 381 referred to herein as section 381), and the regulations 
promulgated under that statute, provide the basic legal framework 
governing the importation of food, drugs, devices, and cosmetics into 
the United States. Under 21 U.S.C. 381(a), the Secretary of the 
Treasury shall deliver to the Secretary of Health and Human Services, 
upon request, samples of food, drugs, devices, and cosmetics which are 
being imported or offered for import. The Secretary of Health and Human 
Services is authorized under section 381(a) to refuse admission of, 
among other things, any article that appears from the examination or 
otherwise to be adulterated or misbranded or to have been manufactured, 
processed, or packed under insanitary conditions. In addition, the 
Secretary of the Treasury is required by section 381(a) to cause the 
destruction of any article refused admission unless the article is 
exported, under regulations prescribed by the Secretary of the 
Treasury, within 90 days of the date of notice of the refusal or within 
such additional time as may be permitted pursuant to those regulations.
    Under 21 U.S.C. 381(b), pending decision (by FDA) as to the 
admission of an article being imported or offered for import, the 
Secretary of the Treasury may authorize delivery of that article to the 
owner or consignee upon the execution by him of a good and sufficient 
bond providing for the payment of liquidated damages in the event of 
default, as may be required pursuant to regulation. In addition, 
section 381(b) allows the owner or consignee in certain circumstances 
to take action to bring an imported article into compliance for 
admission purposes under such bonding requirements as the Secretary of 
the Treasury may prescribe by regulation.

Authority Delegation

    On November 25, 2002, the President signed into law the Homeland 
Security Act of 2002, Public Law 107-296, 116 Stat. 2135 (referred to 
in this document as ``the HS Act''), which involved, among other 
things, the creation of a new cabinet-level department, the Department 
of Homeland Security (DHS), and the transfer or reorganization of a 
number of executive branch agencies and offices within existing 
cabinet-level departments. This legislation and subsequent 
reorganization plans affected the organization and operation of the 
Customs Service.
    Section 402 of the HS Act provides that the Secretary of Homeland 
Security shall be responsible for administering the customs laws of the 
United States. With regard to the Customs Service, section 403(1) of 
the HS Act transferred the functions, personnel, assets, and 
liabilities of the Customs Service, including the functions of the 
Secretary of the Treasury relating to the Customs Service, to the 
Secretary of Homeland Security. However, notwithstanding the transfer 
of the Customs Service to DHS, section 412 of the HS Act provides that 
the legal authority vested in the Secretary of the Treasury over 
customs revenue functions is to be retained by the Secretary of the 
Treasury. Section 412 also authorizes the Secretary of the Treasury to 
delegate any of the retained legal authorities over the customs revenue 
functions to the Secretary of Homeland Security.
    By Treasury Order 100-16, dated May 15, 2003, the Secretary of the 
Treasury, by virtue of authority vested in him/her by 31 U.S.C. 321(b) 
and section 412 of the Homeland Security Act of 2002, delegated to the 
Secretary of Homeland Security authority for customs revenue functions 
with certain exceptions, including that contained in paragraph 
(1)(a)(i) of the Order by which the Secretary of the Treasury retains 
the sole authority to approve regulations concerning import quotas or 
trade bans, user fees, marking, labeling, copyright and trademark 
enforcement, and the completion of entry or substance of entry summary 
including duty assessment and collection, classification, valuation, 
application of the U.S. Harmonized Tariff Schedules, eligibility or 
requirements for preferential trade programs, and establishment of 
related recordkeeping requirements. As this final rule concerns 
activities involving both the completion of entry and the substance of 
the entry summary focusing on bond obligations and consequences that 
might arise as a result of post-entry and post-summary determinations 
of admissibility of merchandise, its subject matter is excepted from 
the delegation of authority to the Secretary of Homeland Security. 
Thus, the responsibility for this regulation rests with the Secretary 
of the Treasury.

Applicable Regulations

    Based upon the above Federal Food, Drug, and Cosmetic Act statutory 
provisions, imported foods, drugs, devices, and cosmetics are 
conditionally released under bond while determinations as to 
admissibility are made; see 19 CFR 12.3. Under current 19 CFR 
141.113(c), CBP may demand the return to CBP custody of most types of 
merchandise that fail to comply with the laws or regulations governing 
their admission into the United States (also referred to as the 
redelivery procedure).
    The condition of the basic importation and entry bond contained in 
19 CFR 113.62(d) sets forth the obligation of the importer of record to 
timely redeliver released merchandise to CBP on demand and provides 
that a demand for redelivery will be made no later than 30 days after 
the date of release of the merchandise or 30 days after the end of the 
conditional release period, whichever is later. Under current 
procedures, when imported merchandise is refused admission by the Food 
and Drug Administration (FDA), CBP issues a notice of redelivery in 
order to establish a claim for liquidated damages if the importer of 
record fails to export, destroy, or redeliver the refused merchandise 
in the time period prescribed in that notice of redelivery.
    CBP has taken the position in C.S.D. 86-21 that the term ``end of 
the conditional release period'' in 19 CFR 113.62(d) has reference to a 
set time limitation that is either established by regulation (see, for 
example, 19 CFR 141.113(b) which prescribes a 180-day conditional 
release period for purposes of determining the correct country of 
origin of imported textiles and textile products) or by express 
notification to the importer of record. The end of the conditional 
release period does not refer to the liquidation of the entry covering 
the imported merchandise.

Proposed Regulatory Changes

    On June 7, 2002, a Notice of Proposed Rulemaking was published in 
the Federal Register (67 FR 39322; the NPRM) that proposed to amend the 
regulations to provide for a specific conditional release period for

[[Page 4425]]

merchandise for which the FDA is authorized to determine admissibility. 
The changes proposed were intended to clarify importers' 
responsibilities under the bond, provide a defined period of time to 
allow the FDA to perform its enforcement functions, and provide 
finality to the process.
    The NPRM proposed to make the following specific changes to what 
were then referred to as the Customs regulations (now the CBP 
regulations):
    1. To redesignate some paragraphs in 19 CFR 141.113 due to the 
addition of a new paragraph (c), which provided for a specific 
conditional release period of 180 days for any food, drug, device, or 
cosmetic. The FDA would have this time period to make its determination 
of admissibility. Similar to the case of textiles and textile products 
mentioned above, the proposed amendment specified a 180-day conditional 
release period but also provided for a shorter period if FDA made a 
determination of inadmissibility before the expiration of that 180-day 
period. It is noted that under the proposed regulatory text, a demand 
for redelivery under 19 CFR 113.62(d) could be made up to 210 days 
(that is, 180 days plus 30 days) after the date of release of the 
merchandise. (The standard CBP bond condition states that redelivery 
may be demanded within 30 days after release or 30 days after the end 
of any applicable conditional release period, whichever is later.) The 
proposed regulation also made clear that the failure to redeliver 
merchandise would result in the assessment of liquidated damages equal 
to three times the value of the merchandise or equal to the domestic 
value of the merchandise in those instances where the port director has 
required a bond equal to the domestic value as permitted by current 19 
CFR 12.3.
    2. To amend 19 CFR 151.11 to authorize a representative of the FDA 
to obtain samples of food, drugs, devices, and cosmetic products 
covered by the Federal Food, Drug, and Cosmetic Act.

Comments

    One hundred and forty (140) comments were received from importers, 
brokers, sureties, freight forwarders, express consignment operators, 
and trade associations. All commenters were opposed to the length of 
time of the proposed conditional release period. An analysis of those 
comments follows.

Comment

    The vast majority of commenters stated that, as importers of food 
and health and beauty aid products, having a conditional release period 
of 180 days would effectively put them out of business. The costs 
involved in warehousing the goods would make their businesses 
unmanageable. Additionally, the long waiting period could cause 
products to fall out of specification, lose effectiveness, or become 
obsolete or unusable. These comments assume that any FDA-regulated 
merchandise must be held intact for 180 days after entry. Other 
commenters who stated that the 180-day period is too long recognize 
that the intent of the regulation was not to require that all this 
merchandise be held during the pendency of the conditional release 
period, but rather that it only apply to merchandise for which an 
admissibility decision by FDA is not made. Many of these commenters 
specifically recommended that the conditional release period end upon 
issuance of a notice from FDA providing that the goods may proceed (a 
may proceed notice) or issuance of a notice of refusal if those acts 
occur before the end of the 180-day conditional release period. Various 
other commenters noted that under FDA's own Regulatory Procedures 
Manual, articles which have been released by FDA are no longer 
considered to be in import status by that agency.

Response

    After review of all the comments, CBP concurs that the 180-day 
conditional release period is too long. Thus, the regulatory text of 
this final rule is amended to provide that the conditional release 
period ends upon the soonest occurring of the following events: 
issuance by the FDA that the merchandise may proceed, issuance of a 
notice of refusal of admission, or expiration of the 30-day period 
after release of the goods.
    It was not the intention of the proposed regulation to require that 
all goods regulated by the FDA be warehoused for 6 months while the 
conditional release period runs its course. When FDA issues a notice 
that the merchandise may proceed (which is the case on the vast 
majority of entries that come under FDA scrutiny), that act will serve 
to end the conditional release period. Accordingly, we concur with the 
commenter who recommended amendment of the proposed rule to indicate 
that the conditional release period ends upon issuance of the notice by 
FDA that the merchandise may proceed. In addition, the issuance of a 
notice of refusal of admission would end the conditional release 
period.
    There may be some situations where FDA will need additional time to 
determine admissibility. Accordingly, the final rule also includes 
regulatory language that would permit FDA to extend the general 30-day 
conditional release period through express notification to the importer 
identifying the necessary testing requiring this extension.

Comment

    Many commenters opposed the 180-day conditional release period for 
the reason that it extends the current conditional release period of 30 
days.

Response

    Under the conditions of the basic importation bond, in order to 
establish a valid claim for liquidated damages for failure to redeliver 
merchandise into CBP custody, CBP must issue a notice of redelivery 
within 30 days of CBP release of merchandise or within 30 days after 
the end of the conditional release period, whichever is later. As 
stated in the notice of proposed rulemaking, there currently exists no 
conditional release period created by regulation for merchandise the 
admissibility of which is determined by the FDA. Therefore, neither the 
proposed rulemaking nor this final rule extends the conditional release 
period from 30 to 180 days because no express conditional release 
period for FDA contexts has ever been created by regulation. The 
commenters were apparently confusing the conditional release period 
with the 30-day period, after the conditional release period, during 
which CBP may still demand redelivery.

Comment

    One commenter suggested that the proposed sampling procedures would 
result in the compromising of its packaging between manufacturing sites 
and customers' facilities. The commenter proposed a process whereby it 
and other manufacturers could provide dedicated samples of present and 
proposed imported products, and CBP could maintain a data bank of 
importers and known imported products covered by these regulations.

Response

    The commenter's suggestion is outside the scope of the regulation 
because it proposes an examination procedure that is not done on a 
shipment-by-shipment basis. Under the provisions of 21 U.S.C. 381, CBP 
delivers to the Secretary of Health and Human Services such samples of 
food, drugs, devices, and cosmetics that are being imported or offered 
for import into the United States. Through these regulations, this 
sampling authority is

[[Page 4426]]

delegated to the FDA in recognition of the practicalities of 
merchandise inspection. This will clarify that FDA inspectors may, 
under section 381(a), pull samples of imports of food, drugs, devices, 
and cosmetics.

Comment

    One commenter asked whether CBP contemplates changing line release 
(otherwise known as Border Release Advanced Screening and Selectivity 
(BRASS)) procedures to accommodate the exchange of information 
necessary for providing notices of sampling.

Response

    Contemplated changes to line release (otherwise known as BRASS 
release) systems are operational in nature and are, thus, outside the 
scope of this rulemaking.

Comment

    One commenter suggested that the rule must be rescinded in order to 
comply with Executive Order (E.O.) 12866. The commenter stated that 
given the huge volume of imports involved, the storage costs alone 
would almost certainly exceed the $100 million threshold or would, at 
the very least, adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, or jobs.

Response

    The commenter did not provide detail or justification for these 
comments, but CBP does not believe that storage costs of this magnitude 
would be incurred as a result of the rule now being promulgated. As 
noted above, CBP does believe that the 180-day conditional release 
period originally proposed is too long and realizes that this time 
period could negatively affect importers. To that end, CBP has modified 
the conditional release period from 180 days to 30 days in the final 
rule to reduce potential negative impacts to imports and corresponding 
storage costs.

Comment

    Various commenters state that CBP has failed to comply with the 
Regulatory Flexibility Act, disagreeing with the statement in the 
proposed rulemaking that the proposed amendments, if adopted, will not 
have a significant impact on a substantial number of small entities. 
The commenters claim that, contrary to the assertion in the notice of 
proposed rulemaking, assessment of liquidated damages of three times 
the value of imported merchandise could have a devastating impact upon 
the many thousands of small companies engaged in the importation of 
FDA-regulated products. It is also stated that the proposed rulemaking 
represents a radical departure from current CBP policy with regard to 
redelivery of FDA-regulated products.

Response

    CBP does not agree because the rule is not a radical departure from 
current CBP policy. Additionally, in response to the comments to the 
proposed rule, the final rule reduces the conditional release period 
time from 180 days to 30 days, and potential costs that could be 
incurred should now be substantially less. The rule should not affect 
small entities that are compliant with redelivery requirements, and the 
rule does not impose further entry requirements or additional paperwork 
burden.

Comment

    Various commenters suggested that CBP rescind or place a stay on 
consideration of the proposed rulemaking until the implications of 
recently passed legislation governing port security can be considered 
in relation to FDA's inspection protocol and CBP's release procedures. 
The commenters indicated that the new law requires that importers 
provide CBP and FDA with advance notice of their intent to import food 
products--a procedure that should enhance FDA's ability to promptly 
identify shipments that pose a safety concern. Those commenters also 
stated that the proposed rule should be rescinded in order to allow CBP 
and FDA to examine and discuss standardization of FDA notifications to 
importers and to take into account the commercial needs of the 
importing community.

Response

    CBP disagrees. We are unaware of legislation governing port 
security that impinges upon or supplants FDA's authority to refuse 
merchandise pursuant to the provisions of 21 U.S.C. 381(a). That 
provision allows for the release of merchandise under bond while the 
determination as to admissibility is made. This rulemaking simply 
provides for the creation of a conditional release period for FDA 
contexts that is more clearly defined than the practice that currently 
exists. Furthermore, the Bioterrorism Act creates a new section 21 
U.S.C. 381(m), which specifically indicates that FDA-regulated food and 
food products for which prior notice of arrival is not received shall 
not be released under a bond authorized by section 381(b). As set out 
in implementing regulations issued by FDA and CBP (see 68 FR 58974), 
decisions regarding compliance with new prior notice requirements are 
different from, and may precede, determinations of admissibility under 
other sections of the Federal Food, Drug, and Cosmetic Act or other 
laws. (See 21 CFR 1.283(g).) While CBP believes that the Bioterrorism 
Act will affect the importation of FDA-regulated products, it does not 
serve to overrule regulations concerning longstanding FDA and CBP 
authorities. Effect must be given to all of the substantive provisions 
of 21 U.S.C. 381, not part of them. Further, since the FDA-regulated 
food or food products for which prior notice of arrival is not received 
will not be released under a bond authorized by section 381(b), any 
issues arising concerning a conditional release period for merchandise 
released under bond are moot.

Comment

    One commenter suggested that the time period to comment on the 
proposed rule be extended because of the complex underlying issues 
involved.

Response

    CBP disagrees that the comment period needed to be extended. CBP 
received 140 comments to the proposed rule, and a wide variety of 
issues were presented in these comments. The primary concern, which was 
raised by all commenters to the proposed rule, was the length of the 
conditional release period. In response to this concern CBP has reduced 
the conditional release period from 180 to 30 days.

Comment

    Many commenters conceded that it may be appropriate to clearly 
define a conditional release period, but they also suggested that 30 
days would be a reasonable conditional release period for these 
products. Those same commenters also stated that CBP must further 
clarify and limit the scope of the proposed rule. Clarification is 
needed that clearly exempts from the conditional release period 
shipments that have been issued a may proceed notice. The commenters 
also suggested that FDA should notify importers when an entry is deemed 
conditional. As proposed, the commenters claimed that the rule 
represents a radical departure from current practices when the release 
of imported product is only rendered conditional through FDA's timely 
notification of its intent to examine or sample the product.

[[Page 4427]]

Response

    CBP agrees that the rule should make clear that a conditional 
release period ends when FDA provides a may proceed notice. The final 
rule has been amended accordingly. CBP also agrees that a conditional 
release period shorter than 180 days is appropriate and has amended the 
rule to provide for a conditional release period of 30 days after the 
release of the merchandise unless FDA issues a may proceed notice or a 
notice of refusal which would immediately end the conditional period as 
provided for in the final rule. However, shipments that have been 
issued a may proceed notice are still subject to demands for redelivery 
for 30 days from the issuance of the may proceed notice. The regulation 
confirms that all FDA-regulated products under the Federal Food, Drug, 
and Cosmetic Act are conditionally released pending FDA's determination 
of admissibility. In the vast majority of cases the conditional release 
period will end when the may proceed notice is provided before the end 
of the time provided in the regulation.

Comment

    Various commenters contended that CBP seeks to modify its 
regulations in order to reverse the result of the court decision in 
United States v. So's USA Company, Inc., 23 CIT 605 (1999). These 
commenters stated that the So's court indicated that an importer must 
have affirmative notice that goods are released conditionally in order 
to extend the redelivery period beyond the 30 days from the date of 
release. Another stated that under the proposed regulation, FDA would 
no longer be required to advise an importer why its product is on hold, 
or even that it is on hold, within the first 30 days of entry.

Response

    CBP disagrees. The final rule is entirely consistent with the So's 
opinion and it does not conflict with that opinion in any respect. 
Further, this regulation does not affect any notice that FDA provides 
to an importer under its authorities.

Comment

    One commenter stated that the proposal is arbitrary because the 
Government has not explained the need for a 180-day period to render a 
decision on admissibility. The statement in the proposed rule that the 
180-day period is a reasonable period of time to allow the FDA to 
perform its enforcement functions is not supported by any explanation.

Response

    Again, CBP agrees that the 180-day period is too long a time period 
to have this merchandise conditionally released by regulation. 
Accordingly, the conditional release period has been reduced to 30 days 
in the final regulation. The 30-day release period can be shortened by 
the earlier issuance of a may proceed notice or a notice of refusal of 
admission. It also can be extended by an express notification from FDA 
to the importer.

Comment

    One commenter suggested that FDA import inspectors issue a notice 
of review with regard to any shipment for which a may proceed notice is 
not provided. The commenter stated that the conditional release period 
could be established from the issuance date of the notice of review. 
That same commenter stated that for perishable products, the 
conditional release period should not exceed 5 days. For non-perishable 
products, the conditional release period should not exceed 30 days.

Response

    Issuance of a new FDA form of notice that a shipment is under 
review is beyond the scope of this regulation. CBP disagrees that a 
conditional release period should be for as little as 5 days. The 
taking of samples and testing of merchandise could exceed that 5-day 
time period.

Comment

    Some commenters stated that the 180-day conditional release period 
is not consistent with the Customs-Trade Partnership Against Terrorism 
(C-TPAT) in that homeland security efforts are focused on increased 
review of imports at the time of admission. The proposed 180-day period 
would provide no potential homeland security benefits since the 
materials would already be conditionally released to importers.

Response

    CBP acknowledges that the proposed 180-day conditional release 
period is too long and has revised the regulation accordingly. Review 
of cargo for terrorism concerns preferably is performed earlier than 
the time of admission of merchandise. In fact, review for terrorism 
concerns is performed in the information transmission or presentation 
process, which is in advance of arrival. For example, the FDA's prior 
notice regulations (21 CFR 1.276 et seq.) require notice of food being 
imported or offered for import into the United States in advance of the 
foods' arrival, and CBP's advance electronic cargo information 
regulations (set forth in 68 FR 68140) require information concerning 
cargo before the cargo is brought into the United States by any mode of 
transportation, so that CBP can pre-screen all cargo based on advance 
data transmission. CBP's enforcement of these requirements is 
consistent with C-TPAT. The conditional release period is meant to 
address the longstanding application of the provisions of the Federal 
Food, Drug, and Cosmetic Act, which allow for the release of 
merchandise under good and sufficient bond pending an admissibility 
determination and therefore is in addition to the prior notice and 
advance cargo information requirements that implement border security 
measures.

Comment

    Many commenters stated that a 180 day conditional release period is 
contrary to public policy in that merchandise which causes a public 
health or safety issue should be identified and refused by FDA as 
quickly as possible. A 180-day period raises an unreasonable risk.

Response

    CBP has revised the regulation to provide for a 30-day conditional 
release period in order to address this concern.

Comment

    Many commenters indicated that if the redelivery period was shorter 
than the 180-days prescribed, companies would hold merchandise pending 
such a period and there would be more chance for a successful recall 
for safety concerns, since there is less chance that the goods would 
have been used or consumed.

Response

    CBP agrees and has revised the final rule to provide for a 30-day 
conditional release period in order to address this concern.

Comment

    One commenter suggested that CBP should strive to allow 
unconditional release of FDA-regulated merchandise with the filing of 
the CF-3461 (CBP entry document) as long as the entry summary and 
carrier manifest data are consistent with information contained within 
the FDA approved product listings.

Response

    CBP disagrees because this would have CBP making decisions as to 
admissibility under the Federal Food, Drug, and Cosmetic Act when this

[[Page 4428]]

decision-making authority clearly resides with the Secretary of Health 
and Human Services.

Comment

    Many commenters stated that the proposed amendment to 19 CFR 151.10 
of the CBP regulations regarding the collection of samples is not 
necessary. The commenters noted that the provisions of section 702(a) 
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 372) already 
allow for the taking of samples by representatives of FDA.

Response

    Under the provisions of 21 U.S.C. 381(a), CBP delivers samples of 
food, drugs, devices, and cosmetics that are being imported or offered 
for import into the United States, to the Secretary of Health and Human 
Services upon his request. The proposed amendment simply clarifies that 
such delivery authority is delegated to representatives of FDA and is 
not intended to intrude on any other authority that the Secretary of 
Health and Human Services may already have.

Comment

    A group of commenters suggested the adoption of regulatory language 
that would preclude the issuance of fines or penalties against an 
importer who distributes articles after having received an FDA may 
proceed notice.

Response

    CBP disagrees with this proposed language. CBP cannot by regulatory 
amendment exempt an importer from incurring fines or penalties that may 
otherwise be imposed for violation of a statute.

Comment

    Various commenters stated that imposition of a 180-day conditional 
release period is violative of U.S. international obligations under the 
GATT 1994, and one commenter indicated that the proposed rule is 
violative of the Agreement on the Application of Sanitary and 
Phytosanitary Measures. While conceding that some additional controls 
at the border are acceptable, these commenters asserted that extending 
CBP control over imports for a seven-month period after importation 
would not stand scrutiny. Additionally, it was noted that sanitary and 
phytosanitary procedures must be undertaken and completed without undue 
delay (commenter's emphasis) and in no less favorable a manner for 
imported products than for like domestic products. Imposition of a 
conditional release period of 180 days is claimed to be violative of 
this ``undue delay'' proscription.

Response

    Again, CBP has reduced the conditional release period from 180 to 
30 days in the final rule.

Comment

    Some commenters indicated that continuation of a conditional 
release period after FDA admits goods into commerce is inconsistent 
with the provisions of the Federal Food, Drug, and Cosmetic Act. The 
commenters stated that conditional delivery of the merchandise to the 
owner is made pending a decision as to admission generally, and not 
solely a decision to deny admission. It is argued that conditional 
release also ends upon admission of the article and, as such, CBP's 
proposal to extend the conditional release period to 180 days without 
concern as to whether the merchandise has been admitted defeats the 
statutory intent of the Act. In contrast, another commenter stated that 
once a positive determination as to admissibility is made, the importer 
should not have to be subjected to the possibility of a redelivery 
demand for sampling or testing of the product. The latter commenter 
further contended that even after receiving a may proceed notice, an 
importer is left in the dark as to the status of goods that are 
apparently admitted into the commerce.

Response

    CBP agrees that issuance of a notice from FDA that the merchandise 
may proceed would usually make it unnecessary to issue a redelivery 
notice in order to establish liability under the bond. For purposes of 
clarity, CBP is amending the language in the final rule to indicate 
that one of three acts occurring first in time--issuance of a notice of 
refusal, issuance of a may proceed notice or passage of 30 days from 
the date of conditional release--will end the conditional release 
period. However, it should be understood that issuance of a may proceed 
notice does not mean that CBP is precluded from issuing a subsequent 
demand to redeliver within 30 days from the end of that conditional 
release period.

Comment

    Two commenters suggested that sureties be given the earliest 
possible notice (preferably in electronic form) that goods they have 
secured are subject to detention, refusal, and/or redelivery in order 
that immediate action can be taken with regard to pending and future 
importations. Also, mitigation guidelines should be adopted that 
provide extraordinary mitigation to sureties for efforts to locate, 
redeliver, and/or rehabilitate goods which are subject to liquidated 
damages for failure to redeliver into CBP custody.

Response

    Mitigation guidelines for claims for liquidated damages are outside 
the scope of this rulemaking. Issuance of notices of detention and 
refusal are governed by FDA statute and regulation and any changes to 
issuance of those documents are also outside the scope of this 
regulation. Notices of redelivery may include private or confidential 
business information that would not be releasable to a surety unless a 
demand for payment was made against its bond.

Comment

    One commenter proposed that the regulation require that all demands 
for redelivery be made contemporaneously with the notice of refusal 
issued by FDA. The commenter contended that this change would promote 
cooperation between FDA and CBP and encourage compliance through the 
more efficient issuance of required notices.

Response

    CBP does not agree because, for operational reasons, it may not 
always be possible for notices to be issued contemporaneously.

Conclusion

    In accordance with the foregoing analysis of the comments and 
further consideration of the matter, CBP has determined that the 
amendments of the proposed rule should be adopted as final with the 
sole major change being a reduction in the conditional release period 
from 180 days to 30 days, as set forth in the regulatory text further 
below. In addition, cross-references to the section of the regulations 
involving conditional release periods are being added to the relevant 
portion of the section on basic importer and entry bond conditions in 
19 CFR 113.62.

Executive Order 12866 and the Regulatory Flexibility Act

    This rule is not considered to be a significant regulatory action 
under Executive Order 12866. Accordingly, a regulatory assessment is 
not required.
    It is certified, pursuant to the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), that the regulatory amendments 
set forth in this final rule will not have a significant economic 
impact on a substantial

[[Page 4429]]

number of small entities. The rule should not affect small entities 
that are compliant with redelivery requirements, and the rule does not 
impose further entry requirements or additional paperwork burdens.
    A review of data for FY2004 indicates actual CBP liquidated damage 
collections for FDA jurisdiction goods are comparatively rare and of 
modest amounts. The total amount of liquidated damages collected in 
FY2004 for these goods was approximately $4 million. The total revenue 
(including those liquidated damages) collected for all imports was $27 
billion. This amount reflects 6,000 liquidated damage cases, compared 
to 28.1 million entries of all goods worth $1.41 trillion. Pertinent 
cases and liquidated damage amounts are a tiny fraction (less than 1 
percent) of overall revenue collected and import value. The value of 
liquidated damages collected changes minimally from year to year based 
on the number of importers, the number of bonds, and the number of 
violations. CBP does not expect this amount to change as a result of 
this rule.
    Additionally, the conditional release period should help importers, 
regardless of size, by clarifying that CBP must issue a redelivery 
notice within 30 days if it wishes to collect liquidated damages. As 
noted previously, there is currently no set date to issue a redelivery 
notice. The rule will compel CBP to act more quickly to provide notice 
to importers that violate the conditions of their bond. If CBP cannot 
act within the 30 days, it then foregoes collecting any liquidated 
damages.

List of Subjects

19 CFR Part 113

    Customs bond conditions.

19 CFR Part 141

    Bonds, Customs duties and inspection, Entry procedures, Imports, 
Prohibited merchandise, Release of merchandise.

19 CFR Part 151

    Customs duties and inspection, Examination, Sampling and testing, 
Imports, Laboratories, Penalties, Reporting and recordkeeping 
requirements.

Amendments to the Regulations

0
For the reasons stated above, parts 113, 141, and 151 of the CBP 
regulations (19 CFR Parts 141 and 151) are amended as set forth below.

PART 113--CUSTOMS BOND CONDITIONS

0
1. The authority citation for part 113 continues to read in part as 
follows:

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


Sec.  113.62  [Amended]

0
2. Section 113.62(d) is amended by adding a sentence at the end to read 
as follows: ``(See Sec. Sec.  141.113(b), 12.73(b)(2), and 12.80 of 
this chapter.)''

PART 141--ENTRY OF MERCHANDISE

0
3. The authority citation for part 141 continues to read in part as 
follows:

    Authority: 19 U.S.C. 66, 1448, 1484, 1624.
* * * * *
    Section 141.113 also issued under 19 U.S.C. 1499, 1623.


0
4. Section 141.113 is amended as follows:
0
a. The heading of the section is revised to read as set forth below;
0
b. Paragraph (a) is amended by, after the heading, designating the 
introductory text of paragraph (a) as paragraph (a)(1), redesignating 
current paragraphs (1) through (5) as paragraphs (a)(1)(i) through (v), 
and designating the remaining text, after redesignated paragraph 
(a)(1)(v), as paragraph (a)(2);
0
c. In redesignated paragraph (a)(2), first sentence, the words 
``Customs custody'' are removed and replaced with the words ``CBP 
custody'';
0
d. In paragraph (b), the two references to ``Customs'' are replaced 
with reference to ``CBP'' and the three references to ``Customs 
custody'' are replaced with reference to ``CBP custody'';
0
e. Current paragraphs (c) through (h) are redesignated as paragraphs 
(d) through (i);
0
f. New paragraph (c) is added;
0
g. In redesignated paragraph (d), the words ``in paragraph (a) or (b) 
of this section'' are removed and replaced with the words ``in 
paragraph (a), (b), or (c) of this section'', and the words ``Customs 
custody'' are removed and replaced with the words ``CBP custody'';
0
h. In redesignated paragraphs (e) and (f), the words ``Customs 
custody'' are removed and replaced with the words ``CBP custody'';
0
i. In redesignated paragraph (g), first sentence, the words ``Customs 
custody'' are removed and replaced with the words ``CBP custody''; and
0
j. In redesignated paragraph (h) and in the first sentence of 
redesignated paragraph (i), the words ``Customs custody'' are removed 
and replaced with the words ``CBP custody''.
    The revisions read as follows:


Sec.  141.113  Recall of merchandise released from Customs and Border 
Protection custody.

* * * * *
    (c) Food, drugs, devices, and cosmetics--(1) Conditional release 
period. For purposes of determining the admissibility of any food, 
drug, device, or cosmetic imported pursuant to section 801(a) of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 381(a)), as amended, 
the release from CBP custody of any such product will be deemed 
conditional. Unless extended in accordance with paragraph (c)(2) of 
this section, the conditional release period will terminate upon the 
earliest occurring of the following events:
    (i) The date that FDA issues a notice of refusal of admission;
    (ii) The date that FDA issues a notice that the merchandise may 
proceed; or
    (iii) Upon the end of the 30-day period following the date of 
release.
    (2) Extension of conditional release period. The conditional 
release period provided under this paragraph (c) may be extended. The 
FDA must issue a written or electronic notice of sampling, detention, 
or other FDA action to the bond principal (i.e., importer of record) 
within 30 days of the release of the merchandise in order for the 
extension of the conditional release period to be valid.
    (3) Issuance of a redelivery notice. If FDA refuses admission of a 
food, drug, device or cosmetic into the United States, or if any notice 
of sampling or other request is not complied with, FDA will communicate 
that fact to the CBP port director who will demand the redelivery of 
the product to CBP custody. CBP will issue a notice of redelivery 
within 30 days from the date the product was refused admission by the 
FDA or from the date FDA determined the noncompliance with a notice of 
sampling or other request. The demand for redelivery may be made 
contemporaneously with the notice of refusal issued by the FDA. 
Notwithstanding the provisions of paragraph (i) of this section, a 
failure to comply with a demand for redelivery made under this 
paragraph (c) will result in the assessment of liquidated damages equal 
to three times the value of the merchandise involved unless the port 
director has prescribed a bond equal to the domestic value of the 
merchandise pursuant to Sec.  12.3(b) of this Chapter.
* * * * *

[[Page 4430]]

PART 151--EXAMINATION, SAMPLING, AND TESTING OF MERCHANDISE

0
5. The general authority citation for part 151 continues to read, and a 
specific authority citation for Sec.  151.11 is added to read, as 
follows:

    Authority: 19 U.S.C. 66, 1202 (General Notes 3(i) and 3(j), 
Harmonized Tariff Schedule of the United States (HTSUS)), 1624.
    Section 151.11 also issued under 21 U.S.C. 381;
* * * * *

0
6. Section 151.11 is amended as follows:
0
a. In the first sentence, the words ``Customs custody'' are removed and 
replaced with the words ``CBP custody'';
0
b. In the second sentence, the words ``Customs custody'' are replaced 
with the words ``CBP custody''; and
0
c. After the second sentence, a third sentence is added, to read as 
follows:


Sec.  151.11  Request for samples or additional examination packages 
after release of merchandise.

    * * * For purposes of determining admissibility, representatives of 
the Food and Drug Administration may obtain samples of any food, drug, 
device, or cosmetic, the importation of which is governed by section 
801 of the Federal Food, Drug, and Cosmetic Act, as amended (21 U.S.C. 
381).

Deborah J. Spero,
Acting Commissioner, Customs and Border Protection.
    Approved: January 25, 2007.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 07-408 Filed 1-30-07; 8:45 am]
BILLING CODE 9111-14-P