CSMS Message: 98-000126

TO : ALL ABI BROKERS.

FROM : JOHN ZZ-PIERCE

SUBJECT : ENHANCEMENTS-ITM & VESSEL OPS

DATE : 02/11/98

8036071

FEBRUARY 5, 1998

FO:TC:C:C STS

TO : ALL INSPECTORS
ALL ENTRY OFFICERS
ALL OTHER INTERESTED PARTIES

FROM : ASSISTANT COMMISSIONER
OFFICE OF FIELD OPERATIONS

SUBJECT: ENHANCEMENTS TO ITM AND VESSEL SUPPLY OPERATIONS
IN CUSTOMS APPROVED STORAGE ROOMS (CASR'S)

THIS MEMO IS IN REFERENCE TO RECENT DISCUSSIONS WITH CUSTOMS
FIELD OFFICES AND THE TRADE COMMUNITY PERTAINING TO INTERNATIONAL
TRAVEL MERCHANDISE (ITM) AND VESSEL SUPPLIES. DURING DISCUSSIONS
WITH FIELD OFFICES AND CUSTOMS HEADQUARTERS, THE TRADE
RECOMMENDED THAT CUSTOMS PROVIDE RELIEF TO OPERATORS OF VESSEL
SUPPLIES AND INTERNATIONAL TRAVEL MERCHANDISE (ITM) SOLD ON BOARD
AIRCRAFT. I AM PLEASED TO SAY THAT WE HAVE IMPROVED OUR CONTROLS
IN THESE TWO AREAS WHILE PROVIDING RELIEF TO SEVERAL OF THE TRADE'
S COMPLAINTS. THE ENHANCEMENTS TO ITM AND VESSEL SUPPLIES NOTED
BELOW ARE EFFECTIVE IMMEDIATELY.

RECENT CUSTOMS AUDITS OF CUSTOMS APPROVED STORAGE ROOMS (CASR'S),
COMMONLY USED TO RETAIN ITM AND VESSEL SUPPLIES, INDICATE THAT
ACCOUNTABILITY AND CONTROL OF MERCHANDISE HAS BEEN INADEQUATE.
THE CHANGES BELOW WILL INCREASE CUSTOMS CONTROL OF SUCH
MERCHANDISE AND ENHANCE THE TRADES ABILITY TO REMAIN COMPETITIVE.

THESE CHANGES REMAIN IN EFFECT UNTIL SUCH TIME A NEW FACILITY IS
ESTABLISHED BY REGULATION TO RETAIN ITM AND VESSEL SUPPLIES. WE
INTEND TO ESTABLISH A NEW CLASS OF WAREHOUSE (CLASS 10)
SPECIFICALLY FOR VESSEL SUPPLIES AND ITM.

PLEASE DISTRIBUTED THIS DOCUMENT TO INTERESTED PARTIES IN THE
TRADE COMMUNITY. FOR FURTHER INFORMATION ON THIS MATTER, PLEASE
CONTACT STEVEN SOGGIN, PROGRAM OFFICER, OFFICE OF FIELD
OPERATIONS, AT (202) 927-0765.

SIGNED
ROBERT S. TROTTER

"REENGINEERING VESSEL SUPPLY & ITM OPERATIONS"
C.A.S.R.'S - U.S. CUSTOMS SERVICE
EFFECTIVE DATE: OCTOBER 30, 1997

1. RECOMMENDATION: ALLOW REMOVAL OF MERCHANDISE FROM CARTS

IN THE VESSEL SUPPLY AND IN-FLIGHT BUSINESS, THE PACKAGE OF
INTERNATIONAL TRAVEL MERCHANDISE (ITM) AND LIQUOR IS LOADED AS A
KIT AND PLACED ONTO AN AIRPLANE, WHERE GOODS ARE SOLD TO
PASSENGERS. THE REMAINING MERCHANDISE IS OFTEN STORED OVERNIGHT
OR FOR SOME PERIOD AT THE FOREIGN DESTINATION POINT AND IS LIKELY
TO BE LOADED ON A RETURN FLIGHT AND FURTHER DEPLETED. ONCE IT
ARRIVES IN THE UNITED STATES, IT IS TAKEN TO THE CUSTOMS APPROVED
STOREROOM (CASR) WHERE IT IS REPLENISHED.

SOME PORTS DO NOT ALLOW A RETURN TO THE SHELVES FOR THESE GOODS
FROM THE CARTS. THIS CAUSES A PROBLEM FOR THE INFLIGHT AND
VESSEL SUPPLY OPERATORS IF THEY ARE UNABLE TO SELL CERTAIN ITEMS,
OR IF THERE IS A PRODUCT CHANGE.

SOLUTION: APPLIES TO BOTH ITM & VESSEL SUPPLIES

MERCHANDISE REMOVED FROM CARTS MAY BE STORED IN A CASR SO LONG AS
A NEW CUSTOMS ENTRY (E.G., CONSUMPTION, QUOTA ENTRY), OR A
CF 7512, IS FILED WITH CUSTOMS WITHIN FIVE BUSINESS DAYS OF
AIRCRAFT ENTRY. MERCHANDISE TO BE TRANSFERRED FROM THE CARTS TO
A CUSTOMS APPROVED STOREROOM (CASR) MAY BE REMOVED FROM CARTS
PENDING ENTRY PROVIDED IT IS SEGREGATED FROM EXISTING
MERCHANDISE, PROPERLY DOCUMENTED AND ACCOUNTED FOR. MERCHANDISE
SO REMOVED FROM THE VARIOUS CARTS OF ONE AIRLINE FOR RETURN TO
THE SAME CASR OR OTHER SINGULAR AUTHORIZED FACILITY (E.G., BONDED
WAREHOUSE, FTZ) MAY BE CONSOLIDATED UNDER ONE ENTRY. APPLICABLE
ENTRY RESTRICTIONS ON ALCOHOL, TOBACCO, AND TEXTILES APPLY (E.G.,
ATF, FDA, QUOTA REQUIREMENTS).

2. RECOMMENDATION: SUMMARIZE MANIFEST DISCREPANCY REPORTING
(MDR'S)

AN INVENTORY IS CONDUCTED IN THE U.S. UPON THE KIT'S RETURN TO
THE CASR. DIFFERENCES BETWEEN THE MANIFESTED QUANTITY AND THE
PHYSICAL QUANTITY IN THE KITS REFLECT WHETHER A DISCREPANCY
EXISTS. DISCREPANCIES ARISE BY THE FOLLOWING: CLERICAL ERRORS,
OVERAGES, AND SHORTAGES. DUE TO LARGE VOLUMES OF DISCREPANCIES
GENERATED BY INFLIGHT OPERATORS, THE "IMMEDIATE" REPORTING
REQUIREMENT CAUSES REPORTS TO BE SUBMITTED DAILY. TO REDUCE
PAPERWORK, OPERATORS OF INFLIGHT MERCHANDISE SEEK RELIEF FROM AN "
IMMEDIATE" DISCREPANCY REPORTING REQUIREMENT TO A 30 DAY SUMMARY
REPORTING OF SHORTAGES, AS WELL AS UNIFORM REQUIREMENTS FOR THE
TREATMENT OF OVERAGES AND SHORTAGES.

SOLUTION: APPLIES ONLY TO ITM GOODS

A REVIEW OF MANIFESTING OF ITM MERCHANDISE REVEALS THAT
DISCREPANCIES HAVE OCCURRED. ITM MERCHANDISE ON BOARD AIRCRAFT
ENTERING THE CUSTOMS TERRITORY IS NOT OF A TYPE OR CHARACTER THAT
IS EXCEPTED FROM MANIFESTING BY STATUTE OR REGULATION. ALONG
WITH THE LACK OF REPORTING MANIFEST DISCREPANCIES, CUSTOMS IS
CONCERNED WITH A REPETITIVE PATTERN OF NUMEROUS "CLERICAL ERRORS."
A PATTERN OR PRACTICE OF MANIFEST DISCREPANCIES CAN REVEAL
NEGLIGENCE OR ILLEGAL ACTIVITY, DIVERTING REVENUE FROM THE TRADE
AND FROM CUSTOMS COLLECTION. INACCURATE REPORTING IMPEDES
CUSTOMS ABILITY TO ACCOUNT FOR MERCHANDISE AND PROTECT REVENUE.
TIMELY AND ACCURATE REPORTING, ON THE OTHER HAND, CAN ASSIST
CUSTOMS WITH ITS COLLECTION AND ENFORCEMENT RESPONSIBILITIES.

IN CONSIDERATION OF THE TRADE'S ATTEMPT TO IMPROVE REQUIRED
REPORTING OF DISCREPANCIES, WE ARE PROVIDING RELIEF TO ITM
DISCREPANCY REPORTING IN THE FOLLOWING AREAS:

MANIFEST DISCREPANCY REPORTS FOR ITM SHALL BE SUBMITTED TO
CUSTOMS FOR ANY:

A) EVIDENCE OF SEAL TAMPERING;

B) DIFFERENCES BETWEEN THE SEAL NUMBERS ON THE KIT AND THOSE
RECORDED ON THE MANIFEST LOCATED IN THE KIT AND ATTACHED TO
THE AIRCRAFT GENERAL DECLARATION;

C) DIFFERENCE IN QUANTITY (OVERAGES AND EXTRAORDINARY
SHORTAGES) AS SHOWN ON THE MANIFEST.

A DISCREPANCY REPORT SHALL CONTAIN THE FOLLOWING
INFORMATION: AIRLINE, FLIGHT NUMBER, ARRIVAL DATE, UNIQUE
ITM MANIFEST NUMBER, ITEM DESCRIPTION, AMOUNT OF OVERAGE,
SHORTAGE, DISCREPANT QUANTITY, UNIT VALUE, AND TOTAL VALUE.

IN THE EVENT OF EXTRAORDINARY SHORTAGES OR OVERAGES, (DEFINED AS
A DISCREPANCY OF SIX INDIVIDUAL UNITS OR MORE BETWEEN THE
MANIFESTED QUANTITY AND THE PHYSICAL QUANTITY), A CONSOLIDATED
DISCREPANCY REPORT SHALL BE SUBMITTED TO CUSTOMS WITHIN 30
CALENDAR DAYS OF AIRCRAFT ENTRY PURSUANT TO 19 CFR 122.49.

2(A). WHEN SECURITY SEALS ARE INTACT UPON ARRIVAL IN THE UNITED STATES
AND NO EVIDENCE OF TAMPERING EXISTS:

IN THE INSTANCE OF NONEXTRAORDINARY SHORTAGES OR OVERAGES,
(DEFINED AS A DISCREPANCY OF FIVE UNITS OR LESS BETWEEN THE
MANIFESTED QUANTITY AND THE PHYSICAL QUANTITY), NO SUBMISSION
OF REPORTS TO THE PORT DIRECTOR WILL BEREQUIRED. HOWEVER, THE CASR
OPERATOR WILL MAINTAIN ALLDISCREPANCIES NOTED ON AN ITM MANIFEST,
WHICH SHALL BEIMMEDIATELY AVAILABLE FOR CUSTOMS AUDIT OR SPOT-CHECK.

2(B). WHEN SECURITY SEALS ON ITM CARTS ARE NOT INTACT UPON
ARRIVAL IN THE UNITED STATES:

ALL MANIFEST DISCREPANCIES SHALL BE REPORTED WITHIN 30
CALENDAR DAYS FROM AIRCRAFT ENTRY.

2(C). WHEN INDICATION OF THEFT OR SEAL TAMPERING EXISTS, OR
THERE IS A DIFFERENCE BETWEEN THE SEAL NUMBERS ON THE KIT AND
THOSE RECORDED ON THE ITM MANIFEST LOCATED IN THE KIT AND
ATTACHED TO THE AIRCRAFT GENERAL DECLARATION:

ANY AMOUNT OF DISCREPANCY (OVERAGE OR SHORTAGE) SHALL BE
REPORTED IMMEDIATELY TO THE PORT DIRECTOR AND CONFIRMED IN
WRITING WITHIN 5 DAYS AFTER AIRCRAFT ENTRY. UPON NOTICE BY
CUSTOMS, A CONSUMPTION ENTRY MAY BE REQUIRED FOR
SHORTAGES.

FAILURE TO SUBMIT A MANIFEST DISCREPANCY REPORT TO CUSTOMS
SUBJECTS A PARTY TO MONETARY PENALTIES UNDER 19 U.S.C. 1584.
IF CUSTOMS RECEIVES AN ADEQUATE MANIFEST DISCREPANCY REPORT (MDR)
WITHIN THE TIME PERIOD PROVIDED FOR BY REGULATION (60 DAYS FOR
VESSELS PER 19 CFR 4.12, 30 DAYS FOR AIRCRAFT PER 19 CFR
122.49(A)(2), THEN NO PENALTY ACTION IS WARRANTED UNDER 19 U.S.C.
1584 FOR FAILURE TO SUBMIT A CORRECTED MANIFEST.

DISCREPANCY REPORTS WILL BE ACCOMPANIED BY ANY EVIDENCE, IF ANY,
TO SUBSTANTIATE A CLAIM THAT THE DISCREPANCY OCCURRED OUTSIDE THE
CUSTOMS TERRITORY.

CONSOLIDATION OF MANIFEST DISCREPANCY REPORTS FOR ITM WILL
PROVIDE RELIEF TO BOTH CUSTOMS AND THE TRADE. CUSTOMS DETERMINES
WHETHER DISCREPANCIES OCCUR WITHIN THE CUSTOMS TERRITORY, AND
WHETHER A LOSS OF REVENUE EXISTS. THE TRADE'S RESPONSIBILITY TO
REPORT DISCREPANCIES (BOTH CLERICAL AND NON-CLERICAL) TO CUSTOMS
REMAINS A VITAL ELEMENT TO ESTABLISH COMPLIANCE OF A MANIFEST AND
TO PROTECT REVENUE.

IMMEDIATE REPORTING OF DISCREPANCIES FOR VESSEL SUPPLIES TO THE
PORT DIRECTOR IS REQUIRED BY REGULATION ^19 CFR 122.135(E)|. AN
AMENDMENT IS UNDER CONSIDERATION.

3. RECOMMENDATION: ALLOW TRANSFER OF MERCHANDISE AMONG CASR'S

CASR OPERATORS SOMETIMES EXPERIENCE A DEPLETION OF MERCHANDISE AS
A RESULT OF UNEXPECTED SALES VOLUME. THIS MAY RESULT IN STOCK
SHORTAGES REDUCING OPERATORS' PROFITS IF THEY DO NOT HAVE AN
AMPLE SUPPLY OF PRODUCT. OTHER CASR'S MAINTAIN AN OVERABUNDANCE
OF A PARTICULAR PRODUCT. OPERATORS WANT TO BE ABLE TO TRANSFER
MERCHANDISE TO ANOTHER CASR TO ENHANCE AND BALANCE INVENTORY
LEVELS AMONG CASR'S.

SOLUTION: APPLICABLE TO BOTH ITM AND VESSEL SUPPLY OPERATORS

ITM AND VESSEL SUPPLIES MAY BE TRANSFERRED TO ANOTHER CASR BY
INITIATING A CUSTOMS FORM 7512, TRANSPORTATION & EXPORTATION,
ENTRY TYPE 62, IN ACCORDANCE WITH 19 CFR 18.26. TO EFFECT
TRANSFERS FROM ONE CASR TO ANOTHER CASR, A NEW CF 7512 SHALL BE
PREPARED. THE QUANTITY REPORTED ON THE CF 7512 MUST ACCURATELY
PROVIDE THE TOTAL NUMBER OF CASES AND INDIVIDUAL UNITS ON THE
CF 7512. THE CARRIER WILL ACCOUNT AND REMAIN LIABLE FOR
TRANSPORTATION AND EXPORTATION OF THE MERCHANDISE UNDER ITS BOND
BY NOTING THE FOLLOWING ON THE NEW CF 7512, T&E:

A) THE ORIGINAL CF 7512 FOREIGN ARRIVAL INFORMATION (DATE, PIECE
COUNT, DESCRIPTION, FLIGHT INFO);

B) ORIGINAL ENTRY NUMBER ON THE NEW CF 7512 ALONG WITH AIRLINE
BOND NUMBER, ORIGINAL DATE OF ENTRY AND DATE OF IMPORTATION.

A NEW CF 7512 WILL BE REQUIRED TO EFFECT TRANSFERS. UTILIZING
THE ORIGINAL CF 7512 WOULD BE INAPPROPRIATE AND ILLEGIBLE, SINCE
THE DESIGNATION AND DESTINATION WILL CHANGE FOR A TRANSPORTATION
IN BOND TO ANOTHER CASR.

THE BONDED CARRIER IS LIABLE FOR THE EXPORTATION OF THE BONDED
MERCHANDISE PURSUANT TO 19 CFR 18.26(D) AND MUST CAUSE THE
MERCHANDISE TO BE EXPORTED BY PROVIDING EVIDENCE OF EXPORTATION
AS REQUIRED BY THE PORT DIRECTOR UNDER 19 CFR 113.55 WITHIN 30
DAYS OF EXPORTATION, UNLESS ITM IS ADMITTED INTO A CASR PURSUANT
TO CUSTOMS DIRECTIVE 099 3280-008 WHICH ALLOWS FOR AN EXTENDED
STORAGE PERIOD BEYOND 30 DAYS.

TRANSFER TO AN FTZ OR BONDED WAREHOUSE FROM A CASR:

INSTEAD OF TRANSFERRING MERCHANDISE TO ANOTHER CASR, MERCHANDISE
MAY BE TRANSFERRED FROM A CASR AND ADMITTED TO AN FTZ ON A CF
214, OR ENTERED INTO A BONDED WAREHOUSE BY FILING AN APPROPRIATE
WAREHOUSE ENTRY. THE DOCUMENT REQUIRED TO INITIATE MOVEMENT FROM
A CASR TO AN FTZ OR BONDED WAREHOUSE SHALL BE ON A CF 7512,
IMMEDIATE TRANSPORTATION, TYPE 61.

4. RECOMMENDATION: SIMPLIFY DESIGNATIONS OF CF 7512'S

THE TRADE STATES THAT VARIANCES OCCUR AMONG CUSTOMS PORTS WITH
RESPECT TO THE DESIGNATION REQUIRED ON A CF 7512. FOR EXAMPLE,
SOME PORTS REQUIRE A "VSIE" DESIGNATION, WHEREAS OTHER PORTS
REQUIRE AN "IE" DESIGNATION. THE TRADE NOTES THIS CAUSES
CONFUSION TO BOTH CUSTOMS AND THE INDUSTRY. THE TRADE REQUESTS A
SIMPLIFIED DESIGNATION BE USED FOR CF 7512'S FOR VESSEL SUPPLIES
AND ITM.

SOLUTION: APPLIES TO VESSEL SUPPLIES &ITM

CF 7512 DESIGNATIONS WILL BE SIMPLIFIED FOR ITM AND VESSEL
SUPPLIES. SINCE ITM GOODS DO NOT QUALIFY AS VESSEL SUPPLIES OR
EQUIPMENT WITHIN THE MEANING OF 19 U.S.C. 1309, THEY ARE NOT
ENTITLED TO DUTY FREE PRIVILEGES UNDER THAT SECTION. TO
DISTINGUISH THIS DIFFERENCE ON THE DESIGNATION OF A CF 7512,

CF 7512'S FOR MOVEMENT OF VESSEL SUPPLIES SHALL BEGIN WITH A "VS."
FOR EXAMPLE, IF VESSEL SUPPLIES ARE REMOVED FROM A CASR FOR
IMMEDIATE EXPORTATION, THE DESIGNATION SHALL STATE, "VSIE."

FOR VESSEL SUPPLIES REMOVED FOR TRANSPORTATION IN-BOND TO ANOTHER
PORT FOR EXPORTATION, THE CF 7512 SHALL STATE, "VSTE."
FOR ITM MERCHANDISE, NO "VS" DESIGNATION SHALL APPLY. FOR
EXAMPLE, FOR ITM ARRIVING IN A CASR DIRECTLY FROM FOREIGN AND
STORED IN A CASR FOR IMMEDIATE EXPORTATION, THE CF 7512 SHALL BE
DESIGNATED "IE." IF ITM IS WITHDRAWN FROM A CUSTOMS BONDED
WAREHOUSE FOR TRANSPORTATION IN BOND TO A CASR IN ANOTHER PORT
FOR EXPORTATION, THE CF 7512 SHALL INDICATE, "WDTE."

5. RECOMMENDATION: INCREASE MERCHANDISE STORAGE PERIOD

BOTH CASR OPERATORS OF VESSEL SUPPLIES AND ITM NOTE THE EXISTING
90 DAY RETENTION PERIOD UNDER 19 CFR 18.24 AND C.D. 099 3240-034
("IN-BOND: TIME LIMITS FOR EXPORTATION" ) ARE INADEQUATE BECAUSE
INVENTORY "TURN OVER" TIME DEMANDS A LONGER PERIOD. CUSTOMS HAS
ALLOWED CARRIERS TO IMPORT VESSEL SUPPLIES AND ITM FOR RETENTION
AT A CASR FOR A PERIOD OF 90 DAYS, WITH LIMITED EXTENSIONS
APPROVED BY THE PORT DIRECTOR. TO PROVIDE RELIEF, ONE MEMBER OF
THE TRADE SEEKS AN 18 MONTH RETENTION PERIOD WHILE ANOTHER PARTY
SEEKS ONE YEAR TO STORE MERCHANDISE UNDER TRANSPORTATION IN BOND.
SOLUTION: APPLIES TO BOTH VESSEL SUPPLIES & ITM

A RECENTLY PUBLISHED HEADQUARTERS RULING (226238) STATED THAT THE
MAXIMUM RETENTION PERIOD IN A CASR IS 6 MONTHS. CUSTOMS HAS
RECENTLY RECONSIDERED ITS POSITION ON THE LENGTH OF TIME THAT
GOODS MAY BE STORED IN A CASR.

PRIOR TO THE CUSTOMS MODERNIZATION ACT ("MOD ACT"), CUSTOMS
IMPOSED A ONE YEAR LIMIT ON GOODS IN A CASR. THIS WAS BASED ON
THE TIMES SPECIFIED IN 19 U.S.C. 1491 AND 19 CFR 18.24. THE MOD
ACT CHANGED THE TIME IN 19 U.S.C. 1491 TO SIX MONTHS. CUSTOMS
ADJUSTED THE CASR RETENTION PERIOD ACCORDINGLY.

CUSTOMS HAS NOW DETERMINED THAT THE CHANGES WROUGHT BY THE MOD
ACT RENDERED THE SIX MONTH TIME LIMIT INAPPLICABLE TO ITM AND
VESSEL SUPPLIES STORED IN A CASR. THIS IS BECAUSE THE NEW
LANGUAGE IN 19 U.S.C. 1491 NARROWS THE SCOPE OF THAT SECTION TO
MERCHANDISE ALREADY IN A BONDED WAREHOUSE. SINCE CASR'S ARE NOT
BONDED WAREHOUSES, GOODS IN A CASR ARE NOT SUBJECT TO THE
PROVISIONS OF 19 U.S.C. 1491. THE CORRECT RETENTION PERIOD,
THEREFORE, IS THAT STATED IN 19 CFR 18.24(A). THIS REGULATION
IMPOSES A 90 DAY LIMIT, WHICH MAY BE EXTENDED IN INCREMENTS OF 90
DAYS, NOT TO EXCEED ONE YEAR FROM THE DATE OF IMPORTATION.

AS AN ALTERNATIVE STORAGE METHOD, VESSEL SUPPLIES (NOT ITM)
STORED IN A BONDED WAREHOUSE MAY BE ELIGIBLE FOR BLANKET
WITHDRAWALS UNDER 19 CFR 19.6(D)(1)(II). THIS PROCEDURE WOULD
ALLOW FOR THE ELIMINATION OF MULTIPLE CF 7512'S, SINCE BLANKET
WITHDRAWAL PROCEDURES APPLY. STORAGE IN A BONDED WAREHOUSE
ALLOWS A 5 YEAR RETENTION PERIOD. RETENTION OF MERCHANDISE IN A
BONDED WAREHOUSE WOULD PROVIDE RELIEF TO THE TRADE'S CONCERN FOR
VESSEL SUPPLY RETENTION TIME PERIODS.

PLEASE DISTRIBUTED THIS DOCUMENT TO INTERESTED PARTIES IN THE
TRADE COMMUNITY. FOR FURTHER INFORMATION ON THIS MATTER, PLEASE
CONTACT STEVEN SOGGIN, PROGRAM OFFICER, OFFICE OF FIELD
OPERATIONS, AT (202) 927-0765.