DEPARTMENT OF THE TREASURY
Customs Service
AGENCY: U.S. Customs Service, Treasury.
19 CFR Parts 19, 112 and 146
Customs Regulations Amendments Relating to the Suspension or
Revocation of the Rights of a Proprietor To Operate a Bonded
Warehouse, the Privilege of Operating a Container Station, a
Cartman's or Lighterman's License or the Activated Status of
a Foreign Trade Zone and Associated Privileges
[T.D. 88-63]
53 FR 40218
October 14, 1988
ACTION: Final rule.
SUMMARY: This document amends the Customs Regulations setting forth the
conditions under which the rights, privileges or licenses of bonded
warehouses, container stations, cartmen, lightermen and Foreign Trade Zone
(FTZ) operators can be suspended or revoked. These changes focus on the
status of corporate operators or license holders liable to suspensions or
revocations because of the conviction of a corporate officer of a felony or
misdemeanor if the misdemeanor involves theft, smuggling or a theft-
connected crime. The purpose of the changes is to make it clear that
resignation of the officer before conviction does not avoid the suspension
or revocation jeopardy to the corporate license, rights or privileges.
The changes also no longer limit, where applicable, suspensions or
revocations to situations where there is a conviction. In the absence of a
conviction, commission of acts constituting a felony, theft, smuggling or
theft-related crime, subject to the protections afforded by the
administrative procedures applicable, will be sufficient under the changes
to warrant suspension or revocation.
EFFECTIVE DATE: November 14, 1988.
FOR FURTHER INFORMATION CONTACT: Currita Waddy, Office of the Chief
Counsel, (202) 566-2482.
TEXT: SUPPLEMENTARY INFORMATION:
Background
Included among the reasons enumerated for suspending or revoking the
right of a proprietor to operate a bonded warehouse (19 CFR 19.3(e)(3)),
suspending or revoking the privilege of operating a container station (19
CFR 19.48(a)(3)), suspending or revoking the license of a cartman or
lighterman (19 CFR 112.30(a)(5)), or suspending the activated status of a
Foreign Trade Zone (FTZ), or the privileges of an FTZ user (19 CFR
146.82(a)(3)), is the conviction of a corporate officer of a felony, or
conviction of a misdemeanor involving theft, smuggling or a theft-connected
crime. However, it has come to the attention of the Customs Service that
these provisions have been literally interpreted as precluding suspension
or revocation if the offending corporate officer resigns and leaves the
corporation before conviction. Customs proposed to clarify the regulations
and avoid this interpretation with respect to cartman and lighterman in a
notice of proposed rule making published in the Federal Register on
August 26, 1986 (51 FR 30376). Another notice was published on October
30, 1987 (52 FR 41734), to extend the proposal to the similar reasons for
suspensions or revocations applicable to bonded warehouses, container
stations and FTZ's, which were subject to the same misinterpretation.
Since commission of the type of offense involved under existing provisions
applicable to FTZ operators is sufficient, without a conviction, for a
suspension, Customs also proposed making commission of an offense similarly
sufficient by itself for suspensions or revocations involving bonded
warehouses, container stations, cartmen and lightermen.
A total of three comments were received in response to the proposed
amendments.
Analysis of Comments
Two commenters agreed that the existing regulations allow a wrongdoer
corporate officer to resign to avoid disciplinary action against their
corporation and commended the proposed amendments as closing this loophole.
Another commenter objected to both proposals. First, this commenter
stated that they were strongly opposed to the proposed changes as overly
broad since the proposed amendments would suspend a right, license or
privilege for any felony or misdemeanor involving theft by a corporate
officer. This commenter contended that the crime serving as the basis of
the disciplinary action should be related to the importation or exportation
of goods into or out of the United States or should be connected with the
corporate officer's responsibilities with respect to a corporate warehouse
proprietor, container station operator, cartman, lighterman or FTZ operator.
This commenter also objected to suspension or revocation on the basis of an
alleged commission of an illegal act and claimed that such action should
be restricted to conviction.
However, Customs does not agree. While the relationship of a crime to
importing or exporting or to responsibilities under a bond, privilege or
license may be pertinent to the type of disciplinary action proposed, that
should not be a controlling consideration. Crimes relating to matters other
than the importation or exportation of goods, or to a licensee's
responsibilities, are, nevertheless, related to the broader considerations
of trust inherent in the entitlement to the rights, privileges or licenses
issued by the Customs Service.
Further, we do not agree that disciplinary action should only be based
on a conviction rather than the commission of acts constituting a specified
offense. Suspensions or revocations are not based on mere allegations, but
are subject to the administrative due process procedures provided in the
applicable Customs regulations. In those procedures, a finding that a
corporate wrongdoer is not guilty in a criminal trial does not bind the
Customs Service in an administrative proceeding. Further, in the
administrative proceeding, Customs is not determining a criminal penalty,
but is making a judgment as to the corporation's fitness to continue under
a right, privilege or license originally granted by Customs.
Finally, one commenter expressed concern about the statement in the
"Background" section of the Federal Register notice that the person's
employment status at the time of conviction with respect to the corporate
operator or licensee was "unimportant." This commenter stated that this
factor is important, but should not be determinative, and that Customs may
take into account the fact than an innocent corporation immediately
terminated the offending officer upon discovery of the wrongdoing. We agree
that employment status is not entirely irrelevant. The decision to suspend
or revoke will be make upon consideration of all facts pertinent to a
particular case. We regret the misconstruction of our intentions which the
language objected to unintentionally may have conveyed to some readers.
For the above reasons, the amendments to the Customs Regulations are
adopted as proposed.
Executive Order 12291
This document does not meet the criteria for a "major rule" as specified
in E.O. 12291. Accordingly, no regulatory impact has been prepared.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C.
601 et seq.), it is certified that the regulation amendments will not have
significant impact on a substantial number of small entities. Accordingly,
the amendments are not subject to the regulatory analysis or other
requirements of 5 U.S.C. 603 and 604.
Drafting Information
The principal author of this document was James C. Hill, Regulations and
Disclosure Law 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, Warehouses.
19 CFR Part 112
Administrative practices and procedures, Customs duties and inspection,
Imports.
19 CFR Part 146
Customs duties and inspection, Foreign Trade Zones, Imports.
Amendments to the Regulations
PART 19 -- CUSTOMS WAREHOUSES, CONTAINER STATIONS AND CONTROL
OF MERCHANDISE THEREIN
1. The authority citation for Part 19 continues to read in part as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1624.
21* * * @ 19.48 also issued under 19 U.S.C. 1499, 1623. * * *
@ 19.3 [Amended]
2. Section 19.3(e)(3) is amended by removing the semicolon, replacing it
with a period, and adding the following at the end of the paragraph: "Any
change in the employment status of the corporate officer, (e.g., discharge,
resignation, demotion, or promotion) prior to conviction of a felony or
prior to conviction of a misdemeanor involving theft, smuggling, or a
theft-connected crime, resulting from acts committed while a corporate
officer, will not preclude application of this provision;"
3. Section 19.48(a)(3) is revised to read as follows:
@ 19.48 Suspension or revocation of the privilege of operating a
container station; hearings.
(a) * * *
(3) The container station operator or an officer of a corporation which
has been granted the privilege of operating a container station is convicted
of or has committed acts which would constitute a felony, or a misdemeanor
involving theft, smuggling, or a theft-connected crime. Any change in the
employment status of the corporate officer (e.g., discharge, resignation,
demotion, or promotion) prior to conviction of a felony or prior to
conviction of a misdemeanor involving theft, smuggling, or a theft-connected
crime, resulting from acts committed while a corporate officer, will not
preclude application of this provision;
* * * * *
PART 112 -- CARRIERS, CARTMEN, AND LIGHTERMEN
1. The authority citation for Part 112 is revised to read as follows:
Authority: 19 U.S.C. 66, 1551, 1565, 1623, 1624.
2. Section 112.30(a)(5) is revised to read as follows:
@ 112.30 Suspension or revocation of license.
(a) * * *
(5) The holder of such a license or an officer of a corporation holding
such a license is convicted of or has committed acts which would constitute
a felony, or a misdemeanor involving theft, smuggling, or a theft-connected
crime. Any change in the employment status of the corporate officer (e.g.,
discharge, resignation, demotion, or promotion) prior to conviction of a
felony or prior to conviction of a misdemeanor involving theft, smuggling,
or a theft-connected crime, resulting from acts committed while a corporate
officer, will not preclude application of this provision;
* * * * *
PART 146 -- FOREIGN TRADE ZONES
1. The authority citation for Part 146 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 81a-81u, 1202 (Gen. Hdnote 11), 1623, 1624.
* * *
2. Section 146.82(a)(3) is revised to read as follows:
@ 146.82 Suspension.
(a) * * *
(3) The operator, or any officer of a corporation which has been granted
the right to operate a zone, is convicted of or has committed acts which
would constitute a felony, or misdemeanor involving theft, smuggling, or a
theft-connected crime. Any change in the employment status of the corporate
officer (e.g., discharge, resignation, demotion, or promotion) prior to
conviction of a felony or prior to conviction of a misdemeanor involving
theft, smuggling, or a theft-connected crime, resulting from acts committed
while a corporate officer, will not preclude application of this provision;
* * * * *
Michael H. Lane,
Acting Commissioner of Customs.
Approved: September 15, 1988.
Salvatore R. Martoche,
Assistant Secretary of the Treasury.
[FR Doc. 88-23549 Filed 10-13-88; 8:45 am]
BILLING CODE 4820-02-M