HQ 226856: Request for internal advice; Centralized examinationstation; 19 CFR Part 118; Authority of port director

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                              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
("Kellaway"). 

     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