HQ 226856 - Request for internal advice; Centralized examination station; 19 CFR Part 118; Authority of port director - United States International Trade Commision Rulings

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HQ 226856

May 31, 1996

ENT-7-RR:IT:EC 226856 GOB

Category: ENTRY

Port Director of Customs
10 Causeway Street
Boston, Massachusetts 02222-1059

RE: Request for internal advice; Centralized examination station; 19 CFR Part 118; Authority of port director

Dear Sir:

This is in response to your memorandum of March 27, 1996, which requested internal advice with respect to a matter involving the centralized examination station (CES) within your port.

FACTS:

On November 13, 1995, a CES Agreement of Understanding ("CES Agreement") was executed by yourself as Port Director, Boston and Kendall P. Kellaway, Jr., on behalf of Kellaway Terminal Services

On November 29, 1995, Kellaway advised you that it wished to relocate the CES from the Braintree site to its new facility at 1 Kellaway Dive, Randolph, Massachusetts. In a letter dated January 24, 1996, Kellaway states:

The Randolph facility doubles the amount of space deemed adequate at Braintree to operate a CES, and provides new and more desirable space for Customs personnel, as well as better electronic and phone connections. The separate commercial decision to locate Kellaway's container yard and container freight station at the Randolph site has been made. Relocation of the CES to the same site will eliminate the need to truck merchandise between the two sites, reducing the importer's time and freight costs. The ease of movement and increased capacity at the new facility will allow trucks to receive containers more quickly, in some cases in approximately half the time now required, even including the approximately seven minute added travel time from the North (and not counting the reduced travel time to the South Shore, which accounts for 75% of the freight moving through the current facility).

In a submission dated April 17, 1996, Kellaway includes a Centralized Examination Station Agreement of Understanding ("Agreement of Understanding") which is attached to Port of Los Angeles Public Bulletin No. 96-020, issued April 8, 1996. Kellaway cites paragraph t of the Agreement of Understanding which states:

The CES operator agrees that the relocation of a CES operation to another facility on or after the date this Agreement is signed by both parties may, at the discretion of the Port Director, void this Agreement, and that any change in ownership will void this Agreement.

In its letter of April 17, 1996, Kellaway states, with respect to paragraph t:

This is all Kellaway has ever suggested, not that a right to relocate exists, but if the factors involved are favorable, the port director can authorize the move.

ISSUE:

Does a port director have the authority to permit a transfer of the CES from the Braintree facility to the Randolph facility?

LAW AND ANALYSIS:

The CES Agreement states in part as follows:

1. Your firm, Kellaway Terminal Services, has been selected as a Centralized Examination Station (CES) within the port of Boston. The physical location of this CES will be at 235 Wood Road, Braintree, Massachusetts.

2. The CES will commence operation on Monday, November 13, 1995...

3. The agreement shall be effective for 3 years from the date on which it is signed by both parties. This agreement cannot be transferred, sold, inherited or conveyed in any manner...
...
5. The designation of a CES carries the following specific responsibilities which the undersigned CES operator understands and agrees to:

(a) The facility designated as the CES must meet and maintain the security standards for a container station as outlined in TD-72-56.

Subparagraphs (b) through (o) of section five of the CES Agreement contain various responsibilities of the CES operator. Kendall P. Kellaway, Jr. signed the CES Agreement as the CES operator.

The Customs regulations with respect to centralized examination stations are found in 19 CFR Part 118. Certain of these regulations state as follows:

?118.4 Responsibilities of a CES operator.

By signing the agreement and commencing operation of a CES, an operator agrees to:
(a) Maintain the facility designated as the CES in conformity with the security standards as outlined in the approved application...

?118.11 Contents of application.

Each application to operate a CES shall consist of the following information...
(a) The name and address of the facility to be operated as the CES, the names of all principals or corporate officers, and the name and telephone number of an individual to be contacted for further information;
(b) A description of the CES's accessibility within the port or other location, and a floor plan of the facility actually dedicated to the CES operation...

Part 118, Customs Regulations was promulgated by Treasury Decision 93-6 (58 Federal Register 5604, January 22, 1993). The authority for Part 118 is 19 U.S.C. 66 (Rules and forms prescribed by Secretary), 1499 (Examination of merchandise), 1623 (Bonds and other security), and 1624 (General regulations). None of these statutes contain any specific authority or reference with respect to the subject issue. 19 U.S.C. 66 and 1624 contain the general rule making authority for Customs.

After a consideration of the pertinent facts, law, and regulations, we make the following determinations. When Customs selected a CES in the port of Boston, as memorialized in the CES Agreement, it made two selections. One selection was the CES operator, Kellaway. The second selection was the CES itself, the facility at 235 Wood Road, Braintree, Massachusetts. Both of these selections are reflected in the CES Agreement. The first paragraph of the CES Agreement states the CES operator and the location of the CES.

Similarly, 19 CFR Part 118 indicates the significance of both the CES and the CES operator. The CES, as defined in section 118.1, is the actual facility, in this case 235 Wood Road, Braintree, Massachusetts. Section 118.4, excerpted supra, states the responsibilities of a CES operator, including the maintenance of "the facility designated as the CES." Thus, both the CES and the CES operator are indispensable factors in the selection and operation of a CES. What is proposed is the termination of an existing CES and the establishment of a new CES, since both the operator and the location constitute a CES under 19 CFR Part 118.

In numerous of its sections, 19 CFR Part 118 provides for public notice and comment - section 118.2 provides for public notice and comment with respect to the establishment of a CES; section 118.5 calls for public notice and comment with respect to changes to the fee schedule of the CES; section 118.12 provides for public notice and comment with respect to applications to establish a CES; and section 118.13 requires public notice with respect to the final selection of the CES and the date on which it will commence operations. Thus, we believe that there is a clearly reflected policy in Part 118 that the procedures for the selection and operation of a CES be conducted with public notice and comment.

Kellaway proposes to change the location of the CES and claims that the port director has the discretion to amend the CES Agreement to change the CES.

We disagree. We believe that a change in the CES, i.e., a change in the location of the CES facility, is a material change to the CES Agreement and is a change of sufficient magnitude that it should be subject to the notice and comment procedures of 19 CFR Part 118.

More importantly, we believe that the port director does not have statutory or regulatory authority to permit a change in the CES. There is no express authority for the port director to act in the absence of a specific regulation permitting the change of the CES.

HOLDING:

The port director does not have the authority to permit a change in either the operator or the location of the CES, except by following the procedure for establishing a new CES under 19 CFR Part 118.

This decision should be mailed by your office to Kellaway no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Director,
International Trade Compliance
Division

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