On October 28, 2011, U.S. Customs and Border Protection (“CBP”) published a proposed rule in theFederal Register(76 FR 66875) proposing to amend title 19 of the Code of Federal Regulations (“19 CFR”) to increase the informal entry limit from $2,000 to $2,500, the maximum statutory limit, in response to inflation and thereby to reduce the burden on importers and other entry filers. We note that an increase of the informal entry limit is also consistent with one of the goals of the Beyond the Border Initiative, which began on February 4, 2011, and encourages bilateral cooperation between the United States and Canada. Through the Beyond the Border Initiative, the United States and Canada have agreed to increase and harmonize the value thresholds to $2,500 for expedited customs clearance from the current levels of $2,000 for the United States and $1,600 for Canada. (For further information on the Beyond the Border Action Plan, seehttp://www.dhs.gov/files/publications/beyond-the-border.shtm.) CBP also proposed to remove the language requiring formal entry for certain articles, because with the elimination of absolute quotas under the Agreement on Textiles and Clothing, CBP no longer needs to require formal entries for these articles. For further details on the proposal, please reference the published proposed rule.
CBP solicited public comments on the proposed rule.
This document also makes a technical correction to conform the regulations to reflect the statutory amendment to section 13031(a)(9) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(a)(9)) by section 2 of the Trade Adjustment Assistance Extension Act of 2011 that increased thead valoremMerchandise Processing Fee (MPF) of 0.21 percent to 0.3464 percent.SeePub. L. 112-40, 125 Stat. 401 (October 23, 2011). The increased MPF applies to imported merchandise entered on or after October 1, 2011 until June 30, 2014.
Discussion of Comments
Eighteen commenters responded to the solicitation of public comments in the proposed rule. These comments can be found athttp://www.regulations.gov/#!docketDetail;dct=PS;rpp=25;po=0;D=USCBP-2011-0042.The vast majority of the commenters expressed support for increasing the informal entry limit and/or removing the formal entry list. CBP's responses to the comments are set forth below.
Comment:Fifteen commenters expressed general agreement with the proposal to increase the informal entry limit to $2,500. Fourteen of these fifteen commenters agreed with the proposal to remove the formal entry requirement for certain articles and one commenter did not comment on the proposal concerning the formal entry requirement.
CBP Response:CBP concurs with proceeding to increase the informal entry amount to its statutory limit and to remove the formal entry requirement for certain articles that were previously subject to absolute quotas under the Agreement on Textiles and Clothing.
Comment:One commenter questioned whether filing an informal entry is less time consuming and burdensome than filing a formal entry. The commenter stated that an importer must use due diligence for both formal and informal entries.
CBP Response:CBP notes that importers filing by paper are required to complete more data elements in the formal entry paper form than in the informal entry form. For example, importers filing a formal entry paper form are required to provide the location of the goods, whereas importers filing an informal entry paper form are not required to provide this data element. Therefore, for paper filers, the informal entry is less time consuming. The bulk of affected filings are electronic, however, and in the electronic format filers provide the same data for both formal and informal entries. CBP agrees that the importer must use due diligence for filing both informal and formal entries.
Comment:Two commenters indicated that adjusting the informal entry limit to reflect inflation from 1998 to 2011 would raise the amount to approximately $2,800 rather than the proposed $2,500. One commenter suggested increasing the informal entry limit to $3,000.
CBP Response:Although CBP agrees that inflation would increase the informal entry limit from $2,000 to approximately $2,800, CBP is bound by the statutory limit of $2,500.
Comment:One commenter asked whether a study has been conducted to determine how many entries between the value of $2,000 and $2,500 would have been filed in the past years if the informal entry limit were $2,500.
CBP Response:As set forth in this document (see the “Executive Orders 12866 and 13563” section), CBP estimates that in fiscal year 2011 (the latest year of available data), there were approximately 852,000 formal entries between the value of $2,000 and $2,500. Approximately 558,000 of those entries would have been affected by this rule because they were required to pay MPFs.
Comment:One commenter suggested that CBP postpone the effective date of the rule until 2015 because promulgation of the rule would result in a net loss of $11 million to the U.S. Treasury. Two other commenters stated that the timing of the policy seemed inconsistent with the recent Congressional decision to increase thead valoremMPFs by 60 percent. These two commenters noted that CBP would lose revenue from MPFs by increasing the informal entry limit and one of these commenters additionally noted that removing the formal entry requirement for textile and apparel entries would reduce revenue further because of the reduced collection of MPFs.
CBP Response:CBP notes that the MPF is set by Congress and the level of the MPF is beyond the scope of this rule. The reduction in MPF for the shipments which are affected by this rule should facilitate trade.
Comment:Three commenters stated that the analysis of the impact on small entities was too conservative and did not address the savings that would be achieved by small and medium businesses. Four commenters cited a June 2011 study conducted by the Peterson Institute for International Economics (“Peterson study”) in support of this statement and in support of its statement that raising the informal entry level would result in a substantial savings to CBP, the United States Postal Service, the express industry, and U.S. consumers.
CBP Response:CBP has reviewed the Peterson study, and while we agree that this final rule could result in meaningful benefits for the public, the estimates in the study relied on assumptions that CBP could not verify or support. Given the limitations in the data available for this analysis, CBP cannot ascertain with any degree of certainty the specific monetary impacts to businesses based on size.
Comment:Two commenters questioned CBP's ability to conduct post-entry audit on informal entries. One commenter noted that the security of the cargo and the accuracy of the cargo's description is at risk becausethere is no review of incoming air cargo prior to lading on board an aircraft. The other commenter stated that a similar issue would arise in the case of antidumping and countervailing duties entries that were not properly prepared.
CBP Response:CBP has the ability to conduct post-entry audits on informal entries because CBP has regulatory auditors who conduct either scheduled or random audits on importers' liquidated entries to determine compliance with applicable U.S. laws and regulations. Moreover, CBP notes that formal entries are required for all antidumping and countervailing duties entries. The commenter's concern regarding the security of the cargo prior to lading is not impacted by raising the informal entry limit because CBP screens all manifested merchandise on board the carrier without regard to its value.
Comment:One commenter asserted that CBP inspectors universally seem to agree that a large percentage of import violations occur when importers inaccurately claim that their goods are valued less than $2,000.
CBP Response:Even when entries are informal, CBP reviews for correctness of the entry and the admissibility of the merchandise to ensure compliance with applicable U.S. laws and regulations.
Comment:One commenter asked whether Congress will allow resource deviation from CBP's enforcement efforts to the further development of the Automated Commercial Environment (ACE) system.
CBP Response:The anticipated actions of Congress are beyond the scope of this rulemaking.
After review of the comments and further consideration, CBP has decided to adopt the proposed rule that was published in theFederal Register(76 FR 66875) on October 28, 2011, with the addition of the conforming technical amendment to the MPF as discussed above. Additional minor grammatical and editorial changes were made in this final rule.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget (OMB). CBP has prepared the following analysis to help inform stakeholders of the potential impacts of this final rule.
CBP requires importers to submit a completed CBP Form 7501 (OMB Control Number 1651-0022) or its electronic equivalent with each entry of merchandise for consumption. Merchandise valued over $2,000 requires a formal entry, which generally includes detailed information regarding the import transaction as well as commercial documents pertaining to the transaction. In addition, a surety bond is required, and the importer may take possession of the merchandise before duties and taxes are assessed. Currently, merchandise valued below $2,000 may be entered informally without a bond; and duties and taxes are assessed immediately. However, based on his/her discretion, a port director, may require a formal entry to be filed. This final rule increases the ceiling for which merchandise may qualify for an informal entry from $2,000 to $2,500.
Unless exempt under a free trade agreement and in addition to any duty or tax owed, merchandise requiring a formal entry was subject to a 0.21 percentad valoremMPF, which may be no greater than $485 and no less than $25. Since the publication of the NPRM, thead valoremrate has increased from 0.21 percent to 0.3464 percent (starting on October 1, 2011). Any merchandise currently requiring a formal entry with a value of $2,000 to $2,500 is subject to the minimum $25 MPF. Entries that are now considered informal entries as a result of the change in the threshold would now be subject to only a $2 MPF (assuming they are filed electronically, see 19 CFR 24.23(b)(2)(i)). In the NPRM, CBP stated that in fiscal year (FY) 2009, 476,081 formal entries, valued between $2,000 and $2,500, were processed which were not subject to free trade agreements and were subject to the $25 MPF. Since the publication of the NPRM, these formal entries have increased from 476,081 entries in FY 2009 to 558,259 entries for FY 2011. Consequently, raising the informal entry limited to $2,500 would result in a loss of approximately $14 million in revenues if the $25 MPF were not collected for these entries in FY 2011 (558,259 × $25 = $14.0 million). Revenues would now be approximately $1 million (558,259 × $2 = $1.1 million), thus the net loss in fees collected would be approximately $13 million ($14 million − $1 million). We note that the estimated loss in net fees collected has increased from approximately $11 million estimated in the NPRM to $13 million estimated here for the final rule.
Because the informal entry limit has not kept pace with inflation, some importers may have paid a higher MPF than would have been required if the informal entry limit had kept pace with inflation. Due to data limitations CBP is unable to determine the aggregate savings any particular firm will realize if this regulation is finalized. CBP estimates importers as a whole, however, will realize a benefit of approximately $13 million when this regulation is finalized. CBP notes that this benefit to the trade represents a transfer from the government.
Additionally, this increase in the informal entry level meets the agreed upon value of $2,500 for the Beyond the Border Initiative. Harmonizing the informal entry value thresholds of the United States and Canada eliminates one difference in the customs clearance process.
Regulatory Flexibility Act
This section examines the impact of the rule on small entities as required by the Regulatory Flexibility Act (5 U.S.C. 601et. seq.), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996. A small entity may be a small business (defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act); a small not-for-profit organization; or a small governmental jurisdiction (locality with fewer than 50,000 people).
CBP has considered the impact of this rule on small entities. To the extent that this rule affects small entities, these entities would experience a small cost savings on a per-transaction basis. The total cost savings per entity would be based on its annual transaction levels. CBP does not believe such a small cost savings would rise to the level of a “significant economic impact.” During the comment period for the NPRM, CBP did not receive any comments that would amend this conclusion. Thus, CBP certifies that this rule will not have a significant impact on a substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by theprivate sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the provisions of the Unfunded Mandates Reform Act of 1995.
Executive Order 13132 (Federalism)
Executive Order 13132 requires CBP to develop a process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” Policies that have federalism implications are defined in the Executive Order to include rules that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” CBP has analyzed the rule in accordance with the principles and criteria in the Executive Order and has determined that it does not have federalism implications or a substantial direct effect on the States. The rule increases the informal entry limit from $2,000 to $2,500 and removes the formal entry list. States do not conduct activities with which this rule would interfere. For this reason, this rule would not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.
Executive Order 12988 (Civil Justice Reform)
This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988. That Executive Order requires agencies to conduct reviews, before proposing legislation or promulgating regulations, to determine the impact of those proposals on civil justice and potential issues for litigation. The Order requires that agencies make reasonable efforts to ensure that a regulation clearly identifies preemptive effects, effects on existing Federal laws and regulations, any retroactive effects of the proposal, and other matters. CBP has determined that this regulation meets the requirements of Executive Order 12988 because it does not involve retroactive effects, preemptive effects, or other matters addressed in the Order.
National Environmental Policy Act
Increasing the informal entry limit, removing the formal entry list, and amending the regulations to reflect a recent statutory amendment that increased thead valoremMerchandise Processing Fee (MPF) from 0.21 percent to 0.3464 percent, is non-invasive and there is no potential environmental impact of any kind. Therefore, an environmental statement under the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321et seq.) is not required.
Paperwork Reduction Act
The collection of information on the Entry Summary and Informal Entry has been previously reviewed and approved by OMB in accordance with the requirements of the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1651-0022. This collection of information is used to identify imported merchandise entering the commerce of the United States, to document the amount of duty and/or tax paid, and to serve as a record of the import transaction for the purposes of required certifications, enforcement information, and statistical data. An agency may not conduct or sponsor and an individual is not required to respond to a collection of information unless it displays a valid OMB control number. This rule does not implicate recordkeeping requirements; however, please note that the recordkeeping requirements for the filing of informal and formal entries are covered in part 163 of title 19 of the CFR (19 CFR part 163), and are approved under OMB control number 1651-0076.
This document is being issued in accordance with 19 CFR 0.1(a)(1) pertaining to the Secretary of the Treasury's authority (or that of his delegate) to approve regulations related to certain customs revenue functions.
List of Subjects
19 CFR Parts 10, 123, 128, 141, 143, and 145
Customs duties and inspection, Reporting and recordkeeping requirements.
19 CFR Parts 24 and 148
Customs duties and inspection, Reporting and recordkeeping requirements, Taxes.
19 CFR Part 102
Canada, Customs duties and inspection, Imports, Mexico, Reporting and recordkeeping requirements, Trade agreements.
Amendments to the CBP Regulations
For the reasons set forth in the preamble, parts 10, 24, 102, 123, 128, 141, 143, 145, and 148 of title 19 of the CFR (19 CFR parts 10, 24, 102, 123, 128, 141, 143, 145, and 148) are amended as set forth below.
PART 10—ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC.
1. The general authority citation for part 10 continues to read as follows:
19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 1498, 1508, 1623, 1624, 3314.
2. In § 10.1:
a. Paragraph (a) introductory text is amended by removing the word “shall” and adding in its place the word “must”, and by removing the sum “$2,000” and adding in its place the sum “$2,500”;
b. Paragraph (a)(1) is amended by revising“19___” to read “20___”;
c. Paragraph (a)(2) introductory text is amended in the last sentence by removing the word “shall” and adding in its place the word “must”;
d. Paragraph (b) is amended by removing the sum “$2,000” and adding in its place the sum “$2,500”;
e. Paragraph (e) is amended by removing the word “shall” and adding in its place the word “will”;
f. Paragraph (f) is amended by removing the word “shall” each place that it appears and adding in its place the word “must”;
g. Paragraph (g)(1) is amended by:
i. Removing the word “Customs” each place that it appears and adding in its place the term “CBP”;
ii. Removing the word “shall” the first time that it appears and adding in its place the word “must”; and
iii. Removing the word “shall” in the last sentence and adding in its place the word “will”;
h. Paragraph (g)(2) introductory text is amended by removing the word “shall” and adding in its place the word “must”, and by removing the word “Customs” and adding in its place the term “CBP”;
i. Paragraph (g)(3) is amended by removing the word “Customs” and adding in its place the term “CBP”, and removing the word “shall” and adding in its place the word “will”;
j. Paragraph (h)(1) introductory text is amended by removing the word “Customs” each place that it appears and adding in its place the term “CBP”, and removing the word “shall” each place that it appears and adding in its place the word “must”;
k. Paragraph (h)(2) is amended by removing the word “shall” and adding in its place the word “will”, and by removing the word “Customs” and adding in its place the term “CBP”;
l. Paragraph (h)(3) introductory text is amended by removing the word “Customs” each place that it appears and adding in its place the term “CBP”, and removing the word “shall” and adding in its place the word “must”;
m. Paragraph (h)(4) introductory text is amended by removing the word “shall” and adding in its place the word “must”;
n. Paragraph (h)(5) is amended by removing the word “Customs” and adding in its place the term “CBP”, and removing the word “shall” and adding in its place the word “will”;
o. Paragraph (i) is amended by removing in the first sentence the word “Customs” the first two times it appears and adding in its place the term “CBP”, and by removing the word “shall” each place that it appears and adding in its place the word “must”; and
p. Paragraph (j)(2) is amended by removing the word “Customs” each place that it appears and adding in its place the term “CBP”, and by removing the word “shall” each place that it appears and adding in its place the word “must”.