Conditional Release Period For FDA-Regulated Products

Attached for your information is a July 3, 2007 Port of Chicago Pipeline from U.S. Customs and Border Protection ("Customs") on recent amendments to the Customs Regulations imposing a conditional release period of up to 30 days on any food, drug, device or cosmetic released pending a determination of admissibility by the U.S. Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act. A related Federal Register notice issued earlier this year is also attached. Under these amendments, which took effect on May 1, 2007, the release of FDA-regulated merchandise from Customs custody is deemed to be a conditional release; these amendments also allow FDA to extend the 30-day conditional release period.

A conditional release period is a period of time prescribed by regulation or otherwise established by notice to the importer which, inter alia, effectively extends the time in which Customs can demand redelivery of imported merchandise pursuant to a Customs bond. Generally, Customs can demand redelivery of imported merchandise until 30 days after the date on which the merchandise is released from Customs custody or 30 days after the end of any conditional release period, whichever is later. For certain merchandise, such as textiles, textile products and motor vehicles, the Customs Regulations have long prescribed specific conditional release periods. Customs has also indicated that a Customs Form ("CF") 28 Request for Information or other appropriate form issued by Customs no later than 30 days after the release of merchandise will establish a conditional release period. In C.S.D. 90-99, for example, Customs stated: "The beginning of the conditional release period is the date the CF 28 is issued; the end of the conditional release period is the date Customs receives the sample."

According to Customs, the regulation as amended with effect from May 1, 2007 "confirms that all FDA-regulated products under the Federal Food, Drug, and Cosmetic Act are conditionally released pending FDA’s determination of admissibility." Generally, the conditional release period prescribed for FDA-regulated products will terminate upon the earliest occurring of the following events: (1) the date that FDA issues a notice of refusal of admission; (2) the date that FDA issues a notice that the merchandise may proceed; or (3) upon the end of the 30-day period following the date of release. Thus, a refusal of admission or "may proceed" notice can shorten the 30-day conditional release period.

Under the recently amended Customs provisions, if FDA does not issue either a refusal of admission or may proceed notice on an import of FDA-regulated merchandise and does not act to extend the conditional release period within 30 days after the date of release from Customs custody, the conditional release period should normally terminate at the end of that 30-day period. However, even in that scenario, Customs still has an additional 30 days after the termination of the conditional release period – that is, up to 60 days after the release of the merchandise from Customs custody – in which to demand redelivery. Customs also stresses that "shipments that have been issued a may proceed notice are still subject to demands for redelivery for 30 days from the issuance of the may proceed notice."

The amended regulation provides that FDA may extend the conditional release period beyond the prescribed 30 days by issuing a written or electronic notice of sampling, detention "or other FDA action" to the bond principal (i.e., importer of record) within 30 days of the release of the merchandise. However, it does not limit how long such an extension may last, nor does it confirm whether receipt of a sample by FDA or another specific event will terminate an FDA extension of the conditional release period. The amended regulation does state that, if FDA refuses admission of a food, drug, device or cosmetic or determines that a notice of sampling or other request has not been complied with, Customs will issue a notice demanding redelivery within 30 days from the date the product was refused admission by FDA or from the date FDA determined noncompliance with a notice of sampling or other request. Moreover, according to the attached Federal Register notice, "If [Customs] cannot act within the 30 days, it then foregoes collecting any liquidated damages."

Under the amended regulation, a failure to comply with a valid Customs demand for redelivery of FDA-regulated products will result in the assessment of liquidated damages equal to three times the value of the merchandise involved unless the port director of Customs has prescribed a bond equal to the domestic value of the merchandise. For egregious violations, Customs notes that civil penalties under section 1592 of the Tariff Act of 1930 may be assessed on top of liquidated damages. As the amended provisions discussed above concern conditional release pending FDA admissibility determinations, these provisions do not limit other statutory or regulatory provisions that could apply to FDA-regulated products.

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