B-202169, O.M., FEB 23, 1981

B-202169: Feb 23, 1981

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OGC - CHRISTINE SARYN: YOU HAVE REQUESTED OUR OPINION ON SEVERAL QUESTIONS WHICH HAVE ARISEN IN CONNECTION WITH YOUR EVALUATION OF ENFORCEMENT BY THE UNITED STATES CUSTOMS SERVICE (CUSTOMS) OF OTHER AGENCIES' LAWS. AS YOU HAVE INDICATED. THE MERCHANDISE IS OFTEN ALLOWED TEMPORARY ENTRY INTO THE COUNTRY ON FURNISHING OF A BOND BY THE IMPORTER. THE IMPORTER'S PROMISE TO PAY IS GUARANTEED BY A SURETY. AS THE LANGUAGE OF THIS ORDER IS VERY GENERAL AND IMPOSES NO SPECIFIC COORDINATION REQUIREMENTS. IT WOULD BE DIFFICULT TO FIND THAT THE AGENCIES UNDER AUDIT HAVE CONTRAVENED THIS EXECUTIVE ORDER. ANSWER 2: AS SOON AS THE CONDITIONS OF THE BOND ARE BREACHED (FOR EXAMPLE. BOTH THE PRINCIPAL AND THE SURETY ARE IN DEFAULT AND ARE JOINTLY LIABLE ON THE BOND.

B-202169, O.M., FEB 23, 1981

CUSTOMS' ENFORCEMENT RESPONSIBILITIES (CODE 263800) (FILE B-202169)

TEAM LEADER, LARO - DENNIS A. DEHART, ATTORNEY-ADVISER, OGC - ANDREA KOLE, ROTATING-ATTORNEY, OGC - CHRISTINE SARYN:

YOU HAVE REQUESTED OUR OPINION ON SEVERAL QUESTIONS WHICH HAVE ARISEN IN CONNECTION WITH YOUR EVALUATION OF ENFORCEMENT BY THE UNITED STATES CUSTOMS SERVICE (CUSTOMS) OF OTHER AGENCIES' LAWS. MOST OF YOUR QUESTIONS DEAL WITH ADMINISTRATION OF IMPORTERS' BONDS BY CUSTOMS. AS YOU HAVE INDICATED, WHEN CUSTOMS FINDS THAT MERCHANDISE OFFERED FOR IMPORTATION INTO THE UNITED STATES DOES NOT COMPLY WITH APPLICABLE STATUTORY REQUIREMENTS, THE MERCHANDISE IS OFTEN ALLOWED TEMPORARY ENTRY INTO THE COUNTRY ON FURNISHING OF A BOND BY THE IMPORTER. GENERALLY, BY POSTING THE BOND THE IMPORTER AGREES EITHER TO REDELIVER THE MERCHANDISE ON DEMAND BY CUSTOMS, OR TO BE LIABLE IN THE AMOUNT OF DAMAGES SPECIFIED IN THE BOND. THE IMPORTER'S PROMISE TO PAY IS GUARANTEED BY A SURETY, WHO ALSO JOINS IN THE BOND.

QUESTION 1: DOES EXEC. ORDER. NO. 12044, 3 C.F.R. 152 (1978), 5 U.S.C.A. 553 N. (1980), REQUIRE AN AGENCY TO DO MORE THAN PUBLISH ITS PROPOSED REGULATIONS IN THE FEDERAL REGISTER TO EFFECTUATE THE ORDER'S REQUIREMENT OF COORDINATION BETWEEN FEDERAL AGENCIES?

ANSWER 1: NO. EXEC. ORDER NO. 12044 DOES NOT SPECIFICALLY REQUIRE COORDINATION OF A PARTICULAR KIND BETWEEN AN AGENCY PROMULGATING REGULATIONS AND ANOTHER AGENCY WHICH MIGHT BE AFFECTED BY THE PROPOSED REGULATIONS. INSTEAD, THE EXECUTIVE ORDER, IN VERY BROAD LANGUAGE, PROVIDES FOR IMPROVING CURRENT PROCEDURES FOR ISSUING REGULATIONS THROUGH EARLY PARTICIPATION BY AFFECTED PARTIES, INCLUDING OTHER AGENCIES. SEE SECTION 1(C).

AS THE LANGUAGE OF THIS ORDER IS VERY GENERAL AND IMPOSES NO SPECIFIC COORDINATION REQUIREMENTS, IT WOULD BE DIFFICULT TO FIND THAT THE AGENCIES UNDER AUDIT HAVE CONTRAVENED THIS EXECUTIVE ORDER.

QUESTION 2: TAKING INTO ACCOUNT THE FEDERAL CLAIMS COLLECTION ACT, WHEN MAY CUSTOMS FIRST REQUEST PAYMENT ON A BOND FROM THE SURETY IF THE IMPORTER DEFAULTS?

ANSWER 2: AS SOON AS THE CONDITIONS OF THE BOND ARE BREACHED (FOR EXAMPLE, WHEN THE IMPORTER FAILS TO REDELIVER A NON-CONFORMING CAR), BOTH THE PRINCIPAL AND THE SURETY ARE IN DEFAULT AND ARE JOINTLY LIABLE ON THE BOND. SINCE THEIR LIABILITY ARISES AT THE SAME TIME, CUSTOMS COULD PROCEED AGAINST THE SURETY IMMEDIATELY UPON BREACH OF THE BOND, AND EVEN BEFORE DEMAND IS MADE ON THE PRINCIPAL. SEE GENERALLY 74 AM. JUR.2D, SURETYSHIP SECS. 137, 141 (1974). THE FEDERAL CLAIMS COLLECTION ACT OF 1966, 31 U.S.C. SECS. 951-953, HAS NO IMPACT ON THIS QUESTION.

QUESTION 3: COULD CUSTOMS ITSELF TAKE OUT AND MAINTAIN THE BOND, BUT HAVE ANOTHER AGENCY ADMINISTER THE PETITION PROCESS? IF THE OTHER AGENCY FAILED TO COLLECT ON THE BOND, COULD CUSTOMS THEN DEMAND PAYMENT FROM THE SURETY?

ANSWER 3: ALTHOUGH EXISTING CUSTOMS REGULATIONS PROVIDE THAT PETITIONS REQUESTING MITIGATION OF DAMAGES BE HANDLED ENTIRELY BY CUSTOMS, SEE 19 C.F.R. PART 172, THERE IS NO STATUTORY OBSTACLE TO ALLOWING OTHER AGENCIES TO ASSUME AN ADVISORY ROLE IN PETITION DECISIONS. HOWEVER, THERE IS NOTHING IN 19 U.S.C. SEC. 1623, THE STATUTE AUTHORIZING CUSTOMS TO SET AND ADMINISTER BONDS, WHICH AUTHORIZES CUSTOMS TO COMPEL ANOTHER AGENCY TO PARTICIPATE IN THE PETITION PROCESS.

IF IN FACT ANOTHER AGENCY PARTICIPATED TO THE EXTENT OF UNSUCCESSFULLY ATTEMPTING COLLECTION ON THE BOND, CUSTOMS ITSELF COULD STILL STEP IN AND DEMAND PAYMENT FROM THE SURETY. CUSTOMS' AUTHORITY UNDER 19 U.S.C. SEC. 1623 IS VERY BROAD, AND PARTICIPATION BY ANOTHER AGENCY IN THE PETITION PROCESS DOES NOT DIMINISH CUSTOMS' AUTHORITY TO COLLECT ON THE BOND.

QUESTION 4: IF CUSTOMS' BONDS WERE WORDED TO REQUIRE PAYMENT TO THE UNITED STATES, RATHER THAN THE CUSTOMS SERVICE, WOULD AGENCIES OTHER THAN CUSTOMS BE PERMITTED TO ADMINISTER THE PETITION PROCESS?

ANSWER 4: THE WORDING OF THAT PORTION OF THE BOND WOULD HAVE NO EFFECT ON HOW OR BY WHICH AGENCY THE BOND IS ADMINISTERED. IN FACT, IT SEEMS DOUBTFUL THAT THE BOND WOULD REQUIRE PAYMENT TO CUSTOMS, SINCE THE REAL PARTY IN INTEREST IS THE UNITED STATES. AT LEAST ONE STANDARD BOND FORM, CUSTOMS FORM 7601, IS WORDED TO REQUIRE PAYMENT TO THE UNITED STATES, NOT CUSTOMS.

QUESTION 5: COULD THE AMOUNT OF THE CUSTOMS BOND BE RAISED TO THE DOMESTIC VALUE OF THE MERCHANDISE PLUS DUTY OWED, INSTEAD OF CURRENT FOREIGN OR ENTRY VALUE PLUS DUTY OWED, WITHOUT CHANGING THE STATUTE?

ANSWER 5: CUSTOMS' AUTHORITY TO SET THE FORM AND CONDITIONS OF THE BOND AND TO FIX ITS AMOUNT IS VERY BROAD. 19 U.S.C. SEC. 1623 (B). THE AMOUNT OF THE BOND CAN BE SET AT ANY RATE CALCULATED TO ENSURE COMPLIANCE BY THE IMPORTER WITH ANY APPLICABLE STATUTORY OR OTHER REQUIREMENTS. 19 U.S.C. SEC. 1623(A). THEREFORE, THE MEASURE OF VALUE BY WHICH THE AMOUNT OF THE BOND IS DETERMINED IS FLEXIBLE AND CAN BE CHANGED UNDER THE CURRENT LAW. HOWEVER, THE EXISTING REGULATIONS, 19 C.F.R. SEC. 113.14, WOULD HAVE TO BE AMENDED TO CONFORM TO THE NEW STANDARD.

QUESTION 6: MUST CUSTOMS ACCEPT ANOTHER AGENCY'S RECOMMENDATION FOR MITIGATING A PENALTY, OR CAN CUSTOMS SET THE AMOUNT OF THE PENALTY REGARDLESS OF WHAT ANOTHER AGENCY SAYS?

ANSWER 6: UNDER 19 U.S.C. SEC. 1618, CUSTOMS IS GIVEN UNQUALIFIED AUTHORITY TO REMIT OR MITIGATE PENALTIES RESULTING FROM OPERATION OF CUSTOMS LAWS. THERE IS NO REQUIREMENT THAT CUSTOMS CONSIDER OTHER AGENCIES' RECOMMENDATIONS IN THIS REGARD.

QUESTION 7: IF A NOTICE OF LIQUIDATED DAMAGES IS SENT TO THE IMPORTER AND SURETY STATING THAT THEY HAVE 60 DAYS TO PETITION FOR RELIEF, IS THEIR RIGHT TO PETITION WAIVED IF THEY FAIL TO RESPOND WITHIN THAT PERIOD?

ANSWER 7: UNDER 19 C.F.R. SEC. 172.12(B), THE IMPORTER AND SURETY ARE GIVEN 60 DAYS FROM MAILING OF THE NOTICE OF LIABILITY FOR LIQUIDATED DAMAGES TO FILE A PETITION FOR RELIEF. ASSUMING NO EXTENSION OF THE 60- DAY PERIOD IS GRANTED BY CUSTOMS, THE PARTIES' FAILURE TO SUBMIT A PETITION WITHIN THAT TIME WOULD CONSTITUTE A WAIVER OF THEIR RIGHT TO PETITION.

QUESTION 8: UNDER THOSE PROVISIONS OF THE CLEAN AIR ACT AND THE NATIONAL TRAFFIC AND MOTOR VEHICLE SAFETY ACT APPLICABLE TO VEHICLES IMPORTED INTO THE UNITED STATES, WHAT IS THE EXTENT OF CUSTOMS' AUTHORITY TO DETAIN NON- CONFORMING VEHICLES INSTEAD OF RELEASING THEM, EITHER ON BOND OR WITHOUT A BOND FOR TEMPORARY USE?

ANSWER 8: THE CUSTOMS SERVICE HAS THE AUTHORITY TO REFUSE ADMISSION INTO THE U. S. OF ALL MOTOR VEHICLES OFFERED FOR IMPORTATION INTO THE U. S. WHICH DO NOT MEET THE APPLICABLE REQUIREMENTS OF THE CLEAN AIR ACT AND THE NATIONAL TRAFFIC AND MOTOR VEHICLE SAFETY ACT. 42 U.S.C. SEC. 7522(B)(2); 15 U.S.C. SEC. 1397(B) (3). HOWEVER, THOSE SAME PROVISIONS ALSO ALLOW THE SECRETARY OF THE TREASURY AND THE IMPLEMENTING AGENCY TO PERMIT ENTRY OF NONCONFORMING VEHICLES ON APPROPRIATE CONDITIONS, INCLUDING FURNISHING OF A BOND. IN ADDITION, THE MOTOR VEHICLE SAFETY ACT ALLOWS THE AGENCIES TO PERMIT TEMPORARY IMPORTATION OF A VEHICLE "AFTER THE FIRST PURCHASE OF IT IN GOOD FAITH FOR PURPOSES OTHER THAN RESALE." 15 U.S.C. SEC. 1397(B)(4). THESE EXCEPTIONS TO THE GENERAL REQUIREMENT THAT NON- CONFORMING VEHICLES BE REFUSED ENTRY ARE DISCRETIONARY WITH THE AGENCIES INVOLVED. THE STATUTES PROVIDE ONLY THAT THEY "MAY" ISSUE REGULATIONS ALLOWING TEMPORARY ENTRY OR ENTRY ON BOND. THE AGENCIES ARE NOT REQUIRED TO DO SO.

CUSTOMS AND THE OTHER TWO AGENCIES INVOLVED HAVE DECIDED TO EXERCISE THEIR DISCRETIONARY AUTHORITY TO ALLOW TEMPORARY ENTRY. CURRENT CUSTOMS REGULATIONS ALLOW RELEASE ON BOND UNDER BOTH STATUTES FOR VEHICLES WHICH THE IMPORTERS AGREE TO BRING INTO CONFORMITY WITH STATUTORY REQUIREMENTS. 19 C.F.R. SECS. 12.73 (B)(5)(X), 12.73(C) (CLEAN AIR ACT); 19 C.F.R. SECS. 1280(B)(1)(III), 12.80(E) (MOTOR VEHICLE SAFETY ACT). IN ADDITION, THE REGULATIONS ALLOW TEMPORARY ENTRY OF NONCONFORMING VEHICLES BELONGING TO NONRESIDENTS OF THE UNITED STATES. 19 C.F.R. SEC. 12.73(B)(5)(V), 12.80 (B)(1)(V).

THERE IS LITTLE SPECIFIC REFERENCE IN THE LEGISLATIVE HISTORY TO GUIDE THE EXERCISE OF DISCRETION BY THE AGENCIES. THE CLEAREST REFERENCE APPLIES TO 15 U.S.C. SEC. 1397(B)(4) WHICH APPARENTLY WAS INTENDED TO ACCOMODATE FOREIGN TOURISTS AND DIPLOMATIC OR MILITARY PERSONNEL WHO WISH TO USE THEIR NON-CONFORMING VEHICLES WHILE TEMPORARILY RESIDING IN THE UNITED STATES. SEE H. R. REP. NO. 1776, 89TH CONG., 2D SESS. 24 (1966). THE REPORT DOES STRESS THAT THE PROVISION WAS DESIGNED TO ALLOW ENTRY OF SUCH VEHICLES FOR TEMPORARY PERIODS ONLY. ID.

THE MORE GENERAL PROVISIONS ALLOWING ENTRY ON FURNISHING A BOND ARE NOT EXTENSIVELY COMMENTED ON IN THE LEGISLATIVE HISTORY OF EITHER STATUTE. THE MOST SPECIFIC REFERENCE INDICATES THAT THE PROVISION IN THE MOTOR VEHICLE SAFETY ACT WAS INTENDED TO ALLOW SUFFICIENT ADMINISTRATIVE FLEXIBILITY IN THE AGENCIES TO PERMIT ENTRY OF VEHICLES WHICH WILL BE BROUGHT INTO COMPLIANCE. H. P. REP. NO. 1776, SUPRA. THE RELEVANT LEGISLATIVE HISTORY TO THE CLEAN AIR ACT DOES LITTLE MORE THAN REPEAT THE LANGUAGE OF THE STATUTE. SEE S. REP. NO. 192, 89TH CONG., 1ST SESS. 197 (1965); H. R. REP. NO. 899, 89TH CONG., 1ST SESS. 63 (1965).

IN FACT, THE ACTUAL LANGUAGE OF THE STATUTES MAY PROVIDE THE MOST SIGNIFICANT LIMIT ON CUSTOMS' AUTHORITY TO ALLOW ENTRY UNDER BOND. BOTH 42 U.S.C. SEC. 7522(B)(2) AND 15 U.S.C. SEC. 1397(B)(3) REQUIRE THAT THE BOND OR OTHER CONDITIONS IMPOSED ON ENTRY BE SUFFICIENT TO ENSURE THAT THE VEHICLE WILL BE BROUGHT INTO COMPLIANCE WITH THE STATUTORY STANDARDS. CUSTOMS, FOR EXAMPLE, COULD NOT SET BONDS SO LOW THAT THEY PROVIDE NO INCENTIVE FOR THE IMPORTER TO BRING THE VEHICLE INTO COMPLIANCE.

IN SUM, CUSTOMS IS NOW AUTHORIZED BY STATUTE TO REFUSE ENTRY TO ANY NON- CONFORMING VEHICLE. HOWEVER, CUSTOMS HAS CHOSEN TO LIMIT ITS AUTHORITY BY ALLOWING ENTRY UNDER BOND. SINCE THE SCANT REFERENCES IN THE LEGISLATIVE HISTORY WOULD INDICATE THAT THE BOND PROVISIONS WERE ENACTED TO PROVIDE "ADMINISTRATIVE FLEXIBILITY," THE AGENCIES HAVE BROAD CONTROL OVER WHEN TO ALLOW ENTRY ON BOND, LIMITED PRINCIPALLY BY THE REQUIREMENT THAT THE CONDITIONS OF ENTRY BE SUFFICIENT TO ENSURE EVENTUAL COMPLIANCE WITH STATUTORY STANDARDS.

DIGESTS

1. EXEC. ORDER NO. 12044, 3 C.F.R. 152 (1978), 5 U.S.C.A. 553 N. (1980), DOES NOT REQUIRE COORDINATION OF PARTICULAR KIND BETWEEN AGENCY PROMULGATING REGULATION AND AGENCY WHICH MIGHT BE AFFECTED BY PROPOSED REGULATION, ALTHOUGH IT DOES ENCOURAGE IMPROVING PROCEDURES FOR ISSUING REGULATIONS THROUGH EARLY PARTICIPATION BY AFFECTED PARTIES.

2. UNITED STATES CUSTOMS SERVICE (CUSTOMS) MAY REQUEST PAYMENT ON SURETY BOND FROM EITHER PRINCIPAL OR SURETY AS SOON AS CONDITIONS OF BOND ARE BREACHED.

3. NO STATUTORY OBSTACLE EXISTS TO OTHER AGENCIES ASSUMING ADVISORY ROLE IN CUSTOMS' PETITION PROCESS. UNSUCCESSFUL ATTEMPTS BY OTHER AGENCIES TO COLLECT ON SURETY BOND WOULD NOT DIMINISH CUSTOMS' AUTHORITY TO SEEK PAYMENT FROM SURETY.

4. LANGUAGE IN CUSTOMS' BONDS REQUIRING PAYMENT ON BOND TO UNITED STATES RATHER THAN TO CUSTOMS WOULD HAVE NO EFFECT ON HOW BOND IS ADMINISTERED.

5. AMOUNT OF CUSTOMS' BONDS MAY BE CHANGED TO DOMESTIC VALUE OF MERCHANDISE PLUS DUTY OWED, INSTEAD OF CURRENT FOREIGN OR ENTRY VALUE PLUS DUTY OWED, IN LIGHT OF CUSTOMS' BROAD AUTHORITY UNDER 19 U.S.C. SEC. 1623 TO SET FORM AND CONDITIONS OF BOND.

6. CUSTOMS IS NOT REQUIRED TO CONSIDER OTHER AGENCIES' RECOMMENDATIONS REGARDING MITIGATION OF PENALTIES UNDER 19 U.S.C. SEC. 1615, SINCE CUSTOMS' AUTHORITY IN THIS AREA IS UNQUALIFIED.

7. PARTY'S FAILURE TO SUBMIT PETITION FOR RELIEF TO CUSTOMS WITHIN 60 DAYS OF MAILING OF NOTICE OF LIABILITY, AS REQUIRED UNDER 19 C.F.R. SEC. 172.12(B), CONSTITUTES WAIVER OF PARTY'S RIGHT TO PETITION.

8. UNDER CLEAN AIR ACT, 42 U.S.C. SEC. 7522(B)(2), AND NATIONAL TRAFFIC AND MOTOR VEHICLE SAFETY ACT, 42 U.S.C. SECS. 1397(B)(3), (B)(4), CUSTOMS HAS DISCRETION EITHER TO REFUSE ADMISSION INTO U. S. OF ALL MOTOR VEHICLES OFFERED FOR IMPORTATION INTO U. S. WHICH DO NOT MEET REQUIREMENTS OF THOSE ACTS OR TO PERMIT ENTRY OF NON-CONFORMING VEHICLES ON APPROPRIATE CONDITIONS, INCLUDING FURNISHING OF BOND. HOWEVER, CONDITIONS OF ENTRY UNDER BOND MUST BE SUFFICIENT TO ENSURE VEHICLE WILL BE BROUGHT INTO COMPLIANCE WITH STATUTORY STANDARDS.