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HQ 224245

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June 30, 1994

BON-2 CO:R:C:E 224245 AJS

CATEGORY: BONDS

District Director
U.S. Customs Service
423 Canal Street
New Orleans, LA 70130

RE: Request for Internal Advice; expenses for FDA sampling, testing and examination of gloves; 19 U.S.C. 1623(a); 19 CFR 113.62; charges; St. Paul Fire and Marine Insurance Company v. United States; 19 CFR 113.62(g)(2); exonerate; Webster's II New Riverside University Dictionary; 21 U.S.C. 381(a),(b) and (c); 21 CFR 1.99; United States v. Utex International Inc.; 19 CFR 174.11(c); Vivitar Corp. v. United States.

Dear Sir:

This is in reply to your Internal Advice request of October 9, 1992, regarding expenses incurred by the Food and Drug Administration (FDA) for the sampling, examining and testing of rubber latex examination gloves.

FACTS:

In May of 1991, L & M Trading Co., Inc., attempted to enter small, medium and large size rubber latex examination gloves. Prior to the release of the gloves, personnel of the FDA detained the shipment for examination. The purpose of this examination was to, among other things, determine whether the gloves contained any holes. After sampling and testing of only the small gloves, the FDA determined that they did in fact possess holes and were in violation of section 801(a)(3) of the Federal Food, Drug and Cosmetic Act (Act). Based on this determination, all of the gloves in the entry were detained. The importer then requested an opportunity to recondition the gloves and bring them into compliance with the Act. The FDA incurred travel, supervisory and analyst expenses for sampling, examining and testing the gloves to determine whether the importer had
successfully brought them into compliance. Eventually, some of the gloves were brought into compliance or relabeled for industrial use only and released.

The entry was liquidated "No Change" on December 13, 1991. Despite the later, the importer was billed by Customs for $1,883.50 which represented the amount of the above expenses. On January 31, 1992, the importer informed the District Director that they refused to pay the bill as the charges were "outrageous". However, the importer had earlier signed a FDA form 766 in which they agreed to pay all supervisory costs in accordance with current regulations. When payment of the bill was not received, a demand was made on the Surety under the Customs Bond for the amount of the bill. On May 28, 1992, the Surety filed protest 2002-21-000700 claiming that the FDA charges are not "legally fixed" and "that they [the charges] were incurred by a government agency whose activities are not covered by the bond but are covered by the agency's own particular statutes and regulations".

ISSUE:

Whether the expenses for sampling, testing and examination of the gloves incurred by the FDA are "charges" which may be collected against the Customs bond.

Whether the amount billed for such expenses is protestable as a charge pursuant to 19 U.S.C. 1514(a)(3).

LAW AND ANALYSIS:

19 U.S.C. 1623(a) states that "[i]n any case in which bond or security is not specifically required by law, the Secretary of the Treasury may by regulation or specific instruction require, or authorize customs officers to require, such bonds or other security as he, or they, may deem necessary for the protection of the revenue or to assure compliance with any provision of law, regulation, or instruction which the Secretary of the Treasury or the Customs Service may be authorized to enforce." Accordingly, Customs is authorized to require a bond to assure compliance with FDA laws and regulations which Customs is required to enforce.

19 CFR 113.62 sets forth the basic importation and entry bond conditions and states that a bond for basic importation and entry shall contain the conditions listed in this section. Paragraph (a)(ii) of this section requires that if merchandise is imported and released from Customs custody, the obligors (principal and surety, jointly and severally)
agree to: "[p]ay, as demanded by Customs, all additional charges subsequently found due, legally fixed, and imposed on any entry secured by the bond." The issue in this instance is whether FDA expenses for sampling, testing and examining are "charges" which the surety is obligated to pay.

The courts have found the term "charges" to be applied to actual assessments of specific sums of money (other than ordinary customs duties) on imported merchandise. St. Paul Fire and Marine Insurance Company v. United States, 729 F. Supp. 1371, 1374 (1990); See also Alberta Gas Chemicals, Inc. v. Blumenthal, 82 Cust. Ct. 77, 82, C.D. 4792 (1979). Furthermore, a "charge" has been interpreted as an obligation or duty; a claim or encumbrance; a liability, an expense or the price of an object; an entry in an account of what's due from one party to another. St Paul, 1374. The subject expenses satisfy these descriptions. They are actual assessments of specific expenses on imported merchandise. Therefore, they are additional "charges" which must be paid according to the terms of the Customs bond.

Even if the subject expenses are not considered "charges", 19 CFR 113.62(g)(2) further requires the obligors of a Customs bond to exonerate the United States and its officers from any expense arising out of the principal's importation, entry, or withdrawal of merchandise. The term "exonerate" means to release from an obligation. Webster's II New Riverside University Dictionary, 453 (1984). The subject expenses are an obligation which arises out of the principal's importation or entry. Therefore, the Surety is also required to release Customs from the obligation of the subject expenses under this provision.

The Surety claims that the subject charges are not "legally fixed", and thus not recoverable under the bond. 21 U.S.C. 381(a) states that the Secretary of the Treasury shall deliver to the Secretary of Health and Human Services (HHS), upon his request, samples of food, drugs, devices, and cosmetics, which are being imported or offered for import into the United States. Section 381(a) further provides that if it appears from the examination of such samples or otherwise that such article is adulterated, then such article shall be refused admission. The subject gloves were examined, determined to be adulterated, and then refused admission pursuant to the Act.

If it appears to the Secretary of HHS that an adulterated article can, by relabeling or other action, be brought into compliance with chapter 21 or rendered other than a food, drug, device, or cosmetic, final determination as to admission of such article may be deferred and, upon
filing of timely written application and the execution of a bond with the Secretary of the Treasury, the applicant may be authorized to perform such relabeling or other required action. 21 U.S.C. 381(b). All such relabeling or other action shall be under the supervision of an officer or employee of the Department of HHS (i.e., the FDA), or an officer or employee of the Department of the Treasury (i.e., Customs). Thus, Customs is required to demand a bond if the importer attempts to bring an adulterated article into compliance with the Act, and this action must be supervised by either the FDA or Customs. In this instance, the importer was taking action to bring an article into compliance with the Act under FDA supervision, while Customs possessed the importer's bond for the entry.

21 U.S.C. 381(c) provides that "all expenses" (including travel, per diem or subsistence, and salaries of officers or employees of the United states) in connection with the supervision of the relabeling or other action authorized under the provisions of subsection (b) of this section, the amount of such expenses to be determined in accordance with regulations, shall be paid by the owner or consignee. The subject expenses satisfy this description. They are expenses for the travel and salaries of FDA employees which were incurred in connection with an action (i.e., to bring the gloves into compliance with the Act) under subsection (b). Therefore, the basis for the subject expenses is "legally fixed" by statute.

21 CFR 1.99 further elaborates on and establishes the amount to be charged for expenses. The costs for an action to bring an article into compliance with the Act shall include the travel expenses, and charges for the services of the supervising officer and analyst. 21 CFR 1.99(a),(c) and (d). The specific amount chargeable for travel expenses, which the importer admits they were expecting to pay, is fixed by the FDA's Regulatory Procedures Manual at .25 cents per mile, while the other charges are fixed by paragraph (c) and (d) of section 1.99. Consequently, not only are the subject charges "legally fixed", but the specific amount to be charged is provided for by regulation or manual. By examination of the above statute and regulation, the Surety should have been aware of their potential financial liability for FDA expenses.

The Surety further asserts that the examination activities were incurred by a government agency whose activities are not covered by the bond but are covered by the agency's own particular statutes and regulations. It is Customs' responsibility to carry out FDA decisions, in accordance with Customs law and regulation. United States v.

Utex International Inc., 857 F.2d 1408, 1411 (Fed. Cir. 1988). The various statutes and regulations make clear that Customs is the enforcement arm of the process wherein admissibility is determined by the FDA. Utex, 1411. FDA's own statute (i.e., 21 U.S.C. 381(b)) provides for a bond to be received by Customs. As discussed previously, Customs itself may require a bond pursuant to 19 U.S.C. 1623(a) to assure compliance with FDA laws and regulations. Accord- ingly, the relevant statutes governing both Customs and the FDA indicate that the subject FDA activities are covered by the Customs bond.

This request additionally asks whether the amount billed for FDA charges may be protested pursuant to 19 U.S.C. 1514. 19 CFR 174.11(c) provides that all "charges" of whatever character within the jurisdiction of the Secretary of the Treasury, including the legality of all orders and findings entering into the same, may be protested under the provisions of section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514 (a)(3)). In this instance, the subject charges are FDA expenses. The amount billed for these charges is not within the jurisdiction of the Secretary of the Treasury. As discussed previously, this amount is within the jurisdiction of the Secretary of HHS according to both statute and regulation. Therefore, the amount billed for the subject expenses may not be protested as "charges" within the jurisdiction of the Secretary of the Treasury pursuant to 19 U.S.C. 1514.

The Surety filed a protest concerning the subject expenses under 19 U.S.C. 1514(c)(2), which allows a protest by a surety that has an unsatisfied legal claim under its bond. The legislative history of this provision indicates that Congress intended this provision to "[p]ermit a surety to file a protest in its own name and extend the time within which it may file a protest." St. Paul, 1375. Section 1514(c)(2) requires that a protest of a "decision, order or finding" described in section 1514(a) shall be final within 90 days after the date of demand for payment against a surety bond. Utex, 1413. The proposition naturally follows that this protest must relate to a "decision, order or finding" subject to protest within section 1514(a). As stated in the preceding paragraph, the amount billed for the subject expenses is not a charge protestable under section 1514(a)(3). Therefore, the surety may not protest the amount billed for FDA expenses under 19 U.S.C.

We note that the Court of International Trade (CIT) stated that Congress intended for the district courts to have jurisdiction over cases involving imported goods arising
under the Act (i.e., Federal Food, Drug and Cosmetic Act 21 U.S.C 300 et seg. (1982)). Vivitar Corporation v. United States, 7 CIT 170, 176-77 (1984). If the CIT does not possess jurisdiction over cases involving the Act, it naturally follows that Customs also does not possess authority over FDA decisions involving the Act. As stated previously, this case involves a decision concerning expenses under section 381(c) of the Act. Accordingly, Customs does not have authority to decide this issue. However, Customs is required by the Act to execute a bond and to enforce the terms of this bond based upon FDA decisions.

HOLDING:

The expenses for sampling, testing and examination of the subject gloves incurred by the FDA are "charges" which may be collected against the Customs bond. The amount billed for these expenses is not a matter subject to protest pursuant to 19 U.S.C. 1514.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

John Durant, Director
Commercial Rulings Division


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