[Federal Register: November 30, 2004 (Volume 69, Number 229)]
[Rules and Regulations]
[Page 69511-69523]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no04-6]
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DEPARTMENT OF HOMELAND SECURITY
Bureau of Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR Parts 10 and 163
[CBP Dec. 04-40]
RIN 1505-AB42
Preferential Treatment of Brassieres Under the Caribbean Basin
Economic Recovery Act
AGENCY: Customs and Border Protection, Department of Homeland Security.
ACTION: Final rule.
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SUMMARY: This document adopts as a final rule amendments to the Customs
and Border Protection (CBP) Regulations to implement the standards for
preferential treatment for brassieres imported from Caribbean Basin
countries. This rule was initially published as an interim regulation
in the Federal Register on October 4, 2001, as T.D. 01-74, and later
amended by T.D. 03-29 published in the Federal Register on September
30, 2003.
T.D. 01-74 set forth interim amendments to the CBP Regulations to
implement those provisions within the United States-Caribbean Basin
Trade Partnership Act (CBTPA) which established the standards for
preferential treatment for brassieres imported from CBTPA beneficiary
countries. T.D. 03-29 amended the brassieres provision set forth in
T.D. 01-74 to reflect the amendments to section 213(b) of the Caribbean
Basin Economic Recovery Act (the CBERA) that were made by section 3107
of the Trade Act of 2002. T.D. 03-29 also included a number of other
changes to the CBERA implementing regulations for brassieres to clarify
a number of issues that arose after their original publication.
EFFECTIVE DATES: Final rule effective on December 30, 2004.
FOR FURTHER INFORMATION CONTACT:
Operational issues: Robert Abels, Office of Field Operations ((202)
344-1959).
Legal issues: Cynthia Reese, Office of Regulations and Rulings
((202) 572-8790).
SUPPLEMENTARY INFORMATION:
Background
Textile and Apparel Articles Under the Caribbean Basin Economic
Recovery Act
The Caribbean Basin Economic Recovery Act (the CBERA, also referred
[[Page 69512]]
to as the Caribbean Basin Initiative, or CBI, statute codified at 19
U.S.C. 2701-2707) instituted a duty preference program that applies to
exports of goods from those Caribbean Basin countries that have been
designated by the President as program beneficiaries. On May 18, 2000,
the President signed into law the Trade and Development Act of 2000,
Pub. L. 106-200, 114 Stat. 251, which included as Title II the United
States-Caribbean Basin Trade Partnership Act, or CBTPA. The CBTPA
provisions included section 211 which amended section 213(b) of the
CBERA (19 U.S.C. 2703(b)) in order to, among other things, provide in
new paragraph (2) for the preferential treatment of certain textile and
apparel articles, specified in subparagraph (A), that had previously
been excluded from the CBI duty-free program. The preferential
treatment for those textile and apparel articles under paragraph (2)(A)
of section 213(b) involves not only duty-free treatment but also entry
in the United States free of quantitative restrictions, limitations, or
consultation levels for all qualifying goods. Paragraph (2)(A) of the
statute includes, in clause (iv), a specific provision covering
brassieres from designated CBTPA beneficiary countries.
On October 2, 2000, the President signed Proclamation 7351 to
implement the provisions of the CBTPA. This Proclamation, which was
published in the Federal Register (65 FR 59329) on October 4, 2000,
modified the Harmonized Tariff Schedule of the United States (HTSUS)
by, among other things, the addition of a new Subchapter XX to Chapter
98 to address the majority of the textile and apparel provisions of the
CBTPA. Within that Subchapter XX, the brassieres provision of paragraph
(2)(A)(iv) of the CBTPA statute is dealt with in U.S. Note 2(d) and in
subheading 9820.11.15.
On October 5, 2000, the U.S. Customs Service (now U.S. Customs and
Border Protection (CBP)) published in the Federal Register (65 FR
59650) T.D. 00-68 to amend the Customs and Border Protection (CBP)
Regulations on an interim basis in order to set forth basic legal
requirements and procedures that apply for purposes of obtaining
preferential treatment of textile and apparel articles pursuant to the
provisions added to section 213(b) by the CBTPA. Those interim
regulations, consisting of Sec. Sec. 10.221 through 10.227 of the CBP
Regulations (19 CFR 10.221 through 10.227), include, in paragraph (a)
of Sec. 10.223, a list of the various groups of articles that are
eligible for preferential treatment under the statute. Paragraph (a)(6)
of Sec. 10.223 specifically addressed the basic CBTPA brassieres
provision of subclause (I) of paragraph (2)(A)(iv) of the statute and
subheading 9820.11.15 of the HTSUS. The regulatory texts set forth in
T.D. 00-68 did not address subclauses (II) and (III) of paragraph
(2)(A)(iv) of the statute and U.S. Note 2(d) of Subchapter XX, Chapter
98, HTSUS, because under the terms of the statute those provisions
applied only to articles entered on or after October 1, 2001.
On October 4, 2001, CBP (as legacy Customs) published in the
Federal Register (66 FR 50534) T.D. 01-74 to amend the CBP Regulations
on an interim basis in order to implement the terms of subclauses (II)
and (III) of paragraph (2)(A)(iv) of the statute and U.S. Note 2(d) of
Subchapter XX, Chapter 98, HTSUS. Those regulatory amendments involved
primarily the addition of a new Sec. 10.228 which set forth specific
rules for the application of the minimum 75 and 85 percent U.S. fabric
component content requirements under subclauses (II) and (III) that
took effect for purposes of preferential treatment of brassieres
described in subclause (I) starting on October 1, 2001.
T.D. 01-74 also amended the introductory text in Sec. 10.222 to
account for the newly created Sec. 10.228. In addition, T.D. 01-74
amended paragraph (a)(7) of Sec. 10.223 to exclude brassieres from the
apparel articles that are constructed of fabrics or yarns that are
considered to be in ``short supply'' for purposes of Annex 401 of the
NAFTA. We note that while T.D. 01-74 amended paragraph (a)(6) of Sec.
10.223 by adding a proviso at the end to indicate that the requirements
of new Sec. 10.228 also must be satisfied, paragraph (a)(6) was later
amended in its entirety by T.D. 03-12, published in the Federal
Register (68 FR 13827) on March 21, 2003.
T.D. 01-74 also amended the Appendix to Part 163 of the CBP
Regulation (19 CFR 163), which sets forth a list of entry records (that
is, records that are required by statute or regulation for the entry of
merchandise--the ``(a)(1)(A)'' list), by adding a listing that covers
the CBTPA declaration of compliance for brassieres.
Trade Act of 2002 Amendments
On August 6, 2002, the President signed into law the Trade Act of
2002 (the ``Act''), Pub. L. 107-210, 116 Stat. 933. Section 3107(a) of
the Act made a number of changes to the textile and apparel provisions
of paragraph (2)(A) of section 213(b) of the CBERA. The amendments made
by section 3107(a) of the Act included a revision of the brassieres
provisions of paragraph (2)(A)(iv) of the statute which involved the
following textual changes: (1) Subclause (I) was amended by the
addition of exception language regarding articles covered by certain
other clauses under paragraph (2)(A); and (2) subclauses (II) and (III)
were amended by replacing each reference to ``fabric components'' with
``fabrics,'' by adding exclusion language regarding findings and
trimmings after each reference to fabric(s), and by adding various
references to articles that are ``entered'' and that are ``eligible''
under clause (iv). The principal effects of the language changes within
subclauses (II) and (III) were: (1) Adoption of a cost or value
percentage standard based on a comparison between U.S. fabric and all
fabric (rather than based on a comparison between U.S. fabric
components and all fabric) contained in the articles; and (2) removal
of the requirement that the articles must be both produced and entered
in the same year. The amended paragraph (2)(A)(iv) text now reads as
follows:
(iv) Certain Other Apparel Articles.--(I) General Rule.--Subject
to subclause (II), any apparel article classifiable under subheading
6212.10 of the HTS, except for articles entered under clause (i),
(ii), (iii), (v), or (vi), if the article is both cut and sewn or
otherwise assembled in the United States, or one or more CBTPA
beneficiary countries, or both.
(II) Limitation.--During the 1-year period beginning on October
1, 2001, and during each of the 6 succeeding 1-year periods, apparel
articles described in subclause (I) of a producer or an entity
controlling production shall be eligible for preferential treatment
under subparagraph (B) only if the aggregate cost of fabrics
(exclusive of all findings and trimmings) formed in the United
States that are used in the production of all such articles of that
producer or entity that are entered and eligible under this clause
during the preceding 1-year period is at least 75 percent of the
aggregate declared customs value of the fabric (exclusive of all
findings and trimmings) contained in all such articles of that
producer or entity that are entered and eligible under this clause
during the preceding 1-year period.
(III) Development of Procedure to Ensure Compliance.--The United
States Customs Service shall develop and implement methods and
procedures to ensure ongoing compliance with the requirement set
forth in subclause (II). If the Customs Service finds that a
producer or an entity controlling production has not satisfied such
requirement in a 1-year period, then apparel articles described in
subclause (I) of that producer or entity shall be ineligible for
preferential treatment under subparagraph (B) during any succeeding
1-year period until the aggregate cost of fabrics (exclusive of all
findings and trimmings) formed in the United States that are used in
the production of such articles of that producer or entity
[[Page 69513]]
entered during the preceding 1-year period is at least 85 percent of
the aggregate declared customs value of the fabric (exclusive of all
findings and trimmings) contained in all such articles of that
producer or entity that are entered and eligible under this clause
during the preceding 1-year period.
On November 13, 2002, the President signed Proclamation 7626
(published in the Federal Register at 67 FR 69459 on November 18, 2002)
which included, among other things, modifications to the HTSUS to
implement the changes to section 213(b)(2)(A) of the CBERA made by
section 3107(a) of the Act. Those modifications included an amendment
of U.S. Note 2(d) to Subchapter XX, Chapter 98, HTSUS, to reflect the
changes to subclauses (II) and (III) of paragraph (2)(A)(iv) of the
statute discussed above. The Proclamation further provided that this
amendment of U.S. Note 2(d) was effective with respect to goods
entered, or withdrawn from warehouse for consumption, on or after
October 1, 2002.
Interim Regulatory Amendments in T.D. 03-29
As a consequence of the statutory amendments described above and as
a result of the modifications to the HTSUS made by Proclamation 7626,
the interim regulatory provisions published in T.D. 01-74 no longer
fully reflected the current standards that apply for purposes of
preferential treatment of brassieres under the CBERA. In this regard,
the effect of the statutory changes required changes throughout the
text of interim Sec. 10.228. Moreover, following publication of T.D.
01-74, some other issues came to the attention of CBP that warranted
additional changes to the interim Sec. 10.228 text.
Accordingly, in T.D. 03-29, CBP set forth an interim rule document
revising interim Sec. 10.228 in its entirety to reflect the amendments
to the statute and to clarify or otherwise improve the previously
published text. T.D. 03-29 was limited to the text of interim Sec.
10.228 and therefore did not address the change that the Act made to
paragraph (2)(A)(iv)(I) of the statute; that provision was reflected in
Sec. 10.223(a)(6) within the interim CBTPA regulations published in
T.D. 00-68, and later amended by T.D. 03-12, published in the Federal
Register on March 21, 2003. That change is discussed in a separate
final rule document that addresses the other statutory changes to the
CBERA made by the Act.
The interim regulatory changes to Sec. 10.228 contained in T.D.
03-29 are restated below.
Amendments To Reflect the Statutory Changes
The changes to Sec. 10.228 as set forth in T.D. 03-29 in response
to the changes made to paragraph (2)(A)(iv) of the statute by section
3107(a) of the Act were as follows:
1. The definition of ``fabric components formed in the United
States'' in paragraph (a)(3) was replaced by a definition of ``fabrics
formed in the United States'' to reflect the fact that subclauses (II)
and (III) of the statute no longer refer to fabric ``components.''
Similarly, the definition of ``cost'' in paragraph (a)(4) and the
definition of ``declared customs value'' in paragraph (a)(5) were
modified to refer simply to ``fabrics.''
2. The following changes were made to paragraph (b) which concerns
the 75/85 percent U.S. fabric content requirements for preferential
treatment in subclauses (II) and (III) of the statute:
a. In the introductory text of paragraph (b)(1), reference was made
to the year that begins on ``October 1, 2002'' (rather than ``October
1, 2001'') to reflect the applicable effective date set forth in
Proclamation 7626.
b. Throughout the paragraph (b) texts, all references to U.S.-
formed ``fabric components'' were replaced by references to U.S.-formed
``fabric,'' the words ``produced and'' were removed from the expression
``produced and entered,'' and the parenthetical reference ``(exclusive
of all findings and trimmings)'' has been added as appropriate after
references to ``fabrics'' and ``fabric.'' These changes simply conform
the regulatory text to the wording changes in the statute.
c. Paragraph (b)(1)(i), which concerns the 75 percent requirement
of subclause (II) of the statute, was changed to refer to articles that
are ``entered as articles described in Sec. 10.223(a)(6),'' and
paragraph (b)(1)(ii), which concerns the 85 percent requirement of
subclause (III) of the statute, was changed to refer to articles that
``conform to the production standards set forth in Sec.
10.223(a)(6).'' These wording changes are in response to the statutory
wording changes regarding articles that are ``entered'' and that are
``eligible'' under clause (iv). The differences in wording in the two
regulatory texts were necessary in order to enable the 85 percent
standard to operate. As explained in T.D. 03-29, CBP notes that if the
universe of articles that are looked at for purposes of assessing
compliance with the 85 percent standard is the same as that used for
purposes of the 75 percent standard (that is, articles that were
entered under the HTSUS subheading that applies to articles described
in paragraph (2)(A)(iv)(I) of the statute and Sec. 10.223(a)(6)), it
would be impossible in the first year following the statutory changes
(that is, starting on October 1, 2002) for a new producer or entity to
enter the program, or for a producer or entity that failed to meet the
75 percent standard in the previous year to reenter the program. This
is because application of the 85 percent standard presupposes a failure
to have met the 75 percent standard in the preceding year. This would
mean that there could not be any entries in the next year under the
HTSUS subheading that applies to articles described in paragraph
(2)(A)(iv)(I) of the statute and Sec. 10.223(a)(6) against which
compliance with the 85 percent standard can be determined. The wording
used in paragraph (b)(1)(ii) of the regulatory text (which is also
reflected in the general statement of the paragraph (b)(1) introductory
text and in the general rule in paragraph (b)(2)(i)(A)), by referring
to articles that meet the U.S./Caribbean cutting and assembly
production requirement (regardless of the HTSUS subheading under which
they are entered), is intended to avoid this anomalous result.
d. In the general rules of application set forth in paragraph
(b)(2)(i), two new subparagraphs (C) and (D) were added to clarify the
application of the different regulatory language for the 75 and 85
percent standards discussed at point c. above, and former subparagraph
(D) was removed because it concerned the year of production which is no
longer relevant under the amended statutory text.
e. Also in paragraph (b)(2)(i), former subparagraph (C) was
redesignated as subparagraph (E) and the text was modified, and a new
subparagraph (L) was added, primarily to reflect that the findings and
trimmings referred to in the context of brassieres are not limited to
foreign findings and trimmings.
f. Also in paragraph (b)(2)(i), former subparagraph (E) was
redesignated as subparagraph (G) and the text, which concerns a new
producer or new entity controlling production, was revised to
incorporate the new wording (``entered as articles described in Sec.
10.223(a)(6)'') of paragraph (b)(1)(i) and to clarify what CBP believes
is a necessary conclusion under the statutory text, that is, that in
the described context the producer or entity must first meet the 85
(rather than the 75) percent standard.
g. In paragraph (b)(2)(ii), a new Example 2 and a new Example 3
were added to cover new subparagraphs (C) and (D) of paragraph
(b)(2)(i), and Examples 2 through 6 consequently
[[Page 69514]]
were redesignated as Examples 4 through 8.
h. Also in paragraph (b)(2)(ii), redesignated Example 6 was revised
in order to replace the former ``produced and entered'' in the same
year scenario with a factual pattern addressing the 75 versus 85
percent standard and entry in different years.
i. Also in paragraph (b)(2)(ii), redesignated Example 7 was revised
in order to reflect that the 85 percent standard (rather than the 75
percent standard) applies to a new producer or entity controlling
production, as stated in redesignated and revised subparagraph (G) of
paragraph (b)(2)(i).
3. In paragraph (c)(3)(i), the text of the declaration of
compliance was modified by removing each reference to ``components''
and by removing the words ``produced and'' before the word ``entered''
in blocks 4 and 6, in each case to reflect changes in statutory
language.
4. Finally, in paragraph (d)(1)(v), the next to last sentence was
modified to state that the inventory records must indicate that the
required production occurred (rather than ``identify the date of''
production), and the last sentence was modified to refer to purchases
made during the ``accounting period'' (rather than ``year''), because
the year of production is not relevant under the amended statute.
Other Amendments
In addition to the changes described above that result from the
changes made to the statute by section 3107(a) of the Act, CBP also
included a number of other changes in the revised text of Sec. 10.228
set forth in T.D. 03-29. These additional changes, which were intended
to clarify or otherwise improve the previous interim regulatory texts,
were as follows:
1. The definition of ``cost'' in paragraph (a)(4) and the
definition of ``declared customs value'' in paragraph (a)(5) were
revised for purposes of clarity, in particular in order to include
rules covering cases in which there is no price based on an exportation
to a CBTPA beneficiary country.
2. The definition of ``year'' in paragraph (a)(6) was reworded for
purposes of clarity.
3. In Example 1 under paragraph (b)(2)(ii), the words ``in the
first year'' were added to the scenario in the first sentence to
clarify that the year in question is one during which the 75 percent
standard must be met.
4. In Example 5 under paragraph (b)(2)(ii), the references to
foreign origin straps were replaced by references to ``strips and
labels'' to ensure that the example is clearly directed to findings and
trimmings and not to materials that are considered to be components of
brassieres.
5. In paragraph (c)(3)(i), the text of the declaration of
compliance was modified by replacing the words ``all articles'' with
``brassieres'' in blocks 4 through 6 and by simplifying the wording
within block 6.
6. Finally, in paragraph (c)(3)(ii), the subparagraph (E)
instruction for completion of block 6 was removed in light of the
simplification of the block 6 text, and former subparagraph (F)
consequently was redesignated as (E).
CBP is now publishing one document that adopts, as a final rule,
the Sec. 10.228 provisions contained in T.D. 03-29 and the other
regulatory changes pertaining to brassieres under the CBTPA that were
published in T.D. 01-74. This final rule document also summarizes and
responds to the public comments previously submitted on the changes to
Sec. Sec. 10.222 and 10.223(a)(7) published in T.D. 01-74 and
addresses the comments submitted on the revised Sec. 10.228 text set
forth in T.D. 03-29. Because CBP significantly modified Sec. 10.228 in
T.D. 03-29, CBP did not consider or address any public comments
previously submitted on the text of Sec. 10.228 as published in T.D.
01-74 that were addressed by statutory changes.
Discussion of Comments in Response to T.D. 01-74
A total of 8 commenters responded to the solicitation of public
comments in the October 4, 2001, interim rule document referred to
above. The comments submitted are summarized and responded to below. To
the extent that the comments received regarding Sec. 10.228 were not
addressed by the changes made in T.D. 03-29, CBP has responded.
We note that after T.D. 01-74 amended Sec. 10.223(a)(6), T.D. 03-
12 again amended Sec. 10.223(a)(6). Therefore, the change to Sec.
10.223(a)(6) and the comments submitted regarding that change are
discussed in a separate final rule document that addresses the other
statutory changes to the CBERA made by the Trade Act of 2002.
Exclusion of Brassieres From Short Supply Provision
Six commenters disagree with the amendment to Sec. 10.223(a)(7),
which excludes brassieres conforming to the description set forth in
Sec. 10.223(a)(6) from receiving preferential treatment under the
CBTPA short supply provision found in revised Sec. 213(b)(2)(A)(v)(I)
of the CBERA (and Sec. 10.223(a)(7)). The specific points made by the
commenters on this issue are set forth below.
Comment: There is nothing in the CBTPA or its legislative history
to support CBP's interpretation in regard to this issue. While Congress
did create a separate provision for brassieres in the CBTPA, with a
minimum United States fabric content requirement, there is no evidence
that Congress also meant to disqualify brassieres made of fabrics that
have already been determined to be in short supply in the U.S., such as
silk, from CBTPA eligibility. CBP's interpretation has the absurd
consequence of precluding a CBTPA producer or entity that make only
silk brassieres from receiving CBTPA treatment even though no silk is
made in the United States. Congress intended that the short supply
provision be applied equally to all garments.
CBP's Response: As stated in the preamble of the interim
regulations, Sec. 10.223(a)(7) provides for apparel articles
constructed of fabrics or yarns which for purposes of Annex 401 of the
NAFTA are deemed to be in ``short supply.'' There is no list of ``short
supply'' fabrics or yarns for purposes of NAFTA. The determination of
these ``short supply'' fabrics or yarns is based upon the various
provisions of NAFTA and whether, under NAFTA, for the particular
apparel article at issue, certain fabrics or yarns are explicitly
permitted to be sourced from outside the NAFTA parties for use in the
production of an ``originating'' good by omission of the fabrics or
yarns from the list of excluded materials in the rule of origin for the
particular apparel article. If sourcing of certain fabrics or yarns
outside the NAFTA parties is allowed, then those fabrics or yarns are
deemed to be in ``short supply'' for that apparel article.
In the case of brassieres under NAFTA, no restrictions or
limitations apply regarding fabrics or yarns. Fabrics and yarns may be
sourced from anywhere. The only requirement under Annex 401 is that
articles classified in subheading 6212.10, HTSUS, must be ``both cut
(or knit to shape) and sewn or otherwise assembled in the territory of
one or more of the NAFTA parties.'' CBP does not agree with the
presumption that since no restrictions exist, then all fabrics or yarns
must be in ``short supply.'' If that presumption were true, Sec.
10.223(a)(6) would be rendered meaningless. Accordingly, CBP concludes
that the amendment to Sec. 10.223(a)(7) of clarifying language to
exclude articles described in Sec. 10.223(a)(6) is appropriate.
Comment: If CBP insists that the CBTPA brassiere provision is sui
[[Page 69515]]
generis, standing alone, and must be read divorced from the rest of the
statute, CBP should make clear that the separate CBTPA provisions
relating to ``findings and trimmings,'' de minimis, and elastomeric
yarn also do not apply to brassieres classified in subheading 6212.10,
HTSUS.
CBP's Response: CBP disagrees with the assertion that the CBTPA
provisions relating to ``findings and trimmings,'' de minimis, and
elastomeric yarn do not apply to brassieres classified in subheading
6212.10, HTSUS. These provisions of the CBTPA clearly do apply to the
provision of the CBTPA specific to brassieres, as well as the other
various provisions described in paragraph (b)(2)(A) of amended section
213. These special rules refer to eligibility for ``preferential
treatment under this paragraph.'' The paragraph referred to in these
contexts is paragraph (b)(2) of amended section 213, and since the
brassiere provision is part of paragraph (b)(2), there is no doubt
these ``special rules'' are applicable to goods described in that
provision.
Comment: CBTPA provisions that exempt, exclude or deem products
ineligible for preferential treatment do so by identifying the product
by HTS [HTSUS] number. Had Congress wanted to exclude brassieres of
subheading 6212.10, HTSUS, from receiving duty-free treatment under the
short supply provision found in Sec. 213(b)(2)(A)(v)(I) of the CBERA,
they would have included a specific provision to that effect. An
example of a specific limitation in a CBTPA provision is the ``findings
and trimmings'' provision where by explicit reference it is stated that
elastic strips are findings and trimmings if ``less than one inch in
width and used in the production of brassieres.'' In fact, the
reference to brassieres in the ``findings and trimmings'' provision
confirms that Congress intended for brassieres to be entitled to
preference through a variety of CBTPA provisions.
CBP's Response: This comment has been addressed, in part, in the
above responses. In addition, however, it is CBP's view that although
the ``current short supply'' provision in the CBTPA does not encompass
brassieres based upon the application of the ``short supply''
provisions in Annex 401 of the NAFTA, the language in Sec.
211(b)(2)(A)(v), as written, would allow for the designation of new or
additional fabrics or yarns as in ``short supply'' for apparel articles
including brassieres. If, as suggested by the commenter, Congress had
included language in Sec. 211(b)(2)(A)(v)(I) to exclude brassieres of
subheading 6212.10, HTSUS, then brassieres would be excluded from
possible application of 211(b)(2)(A)(v)(II), thus precluding the
designation of new or additional fabrics or yarns as in ``short
supply'' for brassiereres.
Comment: The CBTPA and the Africa Growth and Opportunity Act (AGOA)
are both part of the Trade and Development Act of 2000. While the CBTPA
includes both short supply and brassiere provisions, the AGOA contains
short supply provisions but no separate brassiere provision. CBP's
instructions to the ports dated September 14, 2001 (TBT-00-023-01)
state that the AGOA short supply provisions do not apply to brassieres.
This instruction seems to contradict CBP's logic that the presence of
the separate CBTPA brassiere provision confirms Congressional intent
that the Sec. 10.223(a)(7) short supply provision does not apply to
brassieres of subheading 6212.10, HTSUS. CBP's logic is also called
into question by the exclusion of brassieres of subheading 6212.10,
HTSUS, only from the Sec. 10.223(a)(7) provision. If the presence of
the specific brassiere provision in the CBTPA were construed to exclude
brassieres from one CBTPA preference provision, it follows that
brassieres should be excluded from the other CBTPA preference
provisions (including the Sec. 10.223(a)(8) short supply provision) as
well.
CBP's Response: CBP's rationale for clarifying that Sec.
10.223(a)(7) does not include brassieres of subheading 6212.10, HTSUS,
is based upon the application of the current ``short supply''
provisions in Annex 401 of the NAFTA and the methodology necessary to
determine fabrics and yarns deemed to be in ``short supply'' for
purposes of NAFTA. In order to qualify for preferential treatment under
NAFTA, brassieres need only be cut (or knit to shape) and sewn or
otherwise assembled in the territory of one or more of the NAFTA
parties. There is no requirement provided for the sourcing of fabrics
or yarns used in the production of qualifying brassieres, thus allowing
fabrics or yarns to be sourced from anywhere. As it would be
nonsensical to view the rule as establishing all fabrics and yarns to
be ``short supply'' for brassieres under NAFTA, CBP interprets the rule
as not designating any fabrics or yarns as ``short supply'' for
brassieres. Based on that rationale, the instructions to the ports
dated September 14, 2001 (TBT-00-023-01) stating that the AGOA ``short
supply'' provision did not apply to brassieres was appropriate. The
reference by CBP in the interim regulations document to Sec.
10.223(a)(6) as support for CBP's view that Sec. 10.223(a)(7) does not
include brassieres of subheading 6212.10, HTSUS, was simply, as stated,
additional support for the view adopted by CBP. As a result of the
amendments to the CBTPA brassiere provision in the Trade Act of 2002,
reliance on Sec. 10.223(a)(6) as support for CBP's view would now seem
misplaced. However, it was not the basis for that view.
The primary reason that CBP has concluded that the current ``short
supply'' provision of the CBTPA does not include brassieres is based
upon the manner in which ``short supply'' yarns and fabrics are
determined under the NAFTA as has already been explained above.
Comment: The fact that the short supply provision of Sec.
213(b)(2)(A)(v)(I) comes directly after the CBTPA brassieres provision
suggests that, contrary to CBP's reasoning, Congress intended the short
supply provision to apply to brassieres of subheading 6212.10, HTSUS.
CBP's Response: CBP does not believe that the order of the
statutory provisions in question is persuasive, and CBP disagrees with
the conclusion of the commenter for the reasons set forth earlier in
this comment discussion.
Comment: In support of its interpretation regarding this issue, CBP
notes that the NAFTA Annex 401 rule for subheading 6212.10, HTSUS,
includes no designation of fabrics or yarns in short supply. This is a
misreading of the application of Annex 401 to the CBTPA short supply
provision. Congress was using the Annex 401 language as the easiest way
of capturing those fabrics and yarns that are already designated as
short supply under NAFTA, and not as a re-creation of the basic rule of
origin under NAFTA.
CBP's Response: Annex 401 of the NAFTA does not contain a
convenient list of ``short supply'' fabrics and yarns. Additionally,
for certain apparel, annex 401 specifies distinct fabrics by technical
descriptions. The only means by which CBP is able to determine the
``short supply'' fabrics and yarns currently allowed under the NAFTA
and thus allowed under the CBTPA is by reviewing the specific rules
contained in annex 401.
Declaration of Compliance
Comment: One commenter recommends that Sec. 10.228(c)(1) provide
that the declaration of compliance be submitted to CBP no later than 30
days prior to the beginning of the next year (October 1st) to afford
CBP sufficient time to evaluate the declaration, assign a distinct and
unique identifier, and
[[Page 69516]]
notify the ports of the identifier. The 10-day time frame currently
specified in this regulation is unrealistic.
CBP's Response: CBP does not agree that it is necessary to make any
change in the specified time frame for filing the Declaration of
Compliance. CBP notes that the requirement is for submission at least
10 calendar days prior to the date of the first shipment. The reference
to the first shipment was intended to accommodate goods shipped after a
year has already begun, and the change suggested by this commenter
would remove this flexibility. CBP is still of the opinion that the 10-
day period is the appropriate minimum period needed for processing the
Declaration of Compliance and giving notice of the distinct and unique
identifier to the producer or entity controlling production and to the
importer. However, CBP would not object to submissions made well in
advance of that 10-day period. It is noted that the regulatory text
merely sets forth a minimum period and therefore does not preclude
earlier submissions.
Comment: Four commenters disagree with the general rule set forth
in Sec. 10.228(b)(2)(i)(G), providing that a declaration of compliance
prepared by a producer or by an entity must cover all production of
that producer or all production that the entity controls. The
commenters allege that requiring a declaration to cover all of a
producer's production presents confidentiality problems in situations
such as presented in Example 6 under Sec. 10.228(b)(2)(ii) where an
entity controls a portion of a producer's production but the producer
also operates independently by producing for several U.S. importers.
The commenters maintain that the entity may be reluctant or may even
refuse to provide the producer with the fabric cost and value
information needed for the producer to file its declaration of
compliance. According to these commenters, the statute does not require
that production be reported twice, as it would be in this example. The
commenters suggest that the regulations should provide some method
through which confidentiality for cost information can be maintained by
the producer or entity that has this information but still allow each
party to file a declaration based only on that part of the information
for which it is directly responsible.
CBP's Response: In the case of the producer, the Declaration of
Compliance must include all the production of the producer that meets
the description of 19 CFR 10.223(a)(6) and is entered in the United
States. In the case of an entity controlling production, the
Declaration of Compliance must include all the production that meets
the description of Sec. 10.223(a)(6) and is entered in the United
States. These requirements reflect the wording of the statute as
regards who must bear the burden of meeting the 75 or 85 percent
standard. The regulatory provisions are intended to encompass all
possible production scenarios that could arise under the statutory
framework and therefore include circumstances in which there is an
overlap as regards information reported by an entity and information
reported by a producer. Since the suggestion of these commenters would
lead to a result that is incompatible with the wording of the statute,
it cannot be adopted.
With regard to the issue of confidentiality, CBP recognizes that
there may be legitimate commercial concerns regarding the information
that must be disclosed between producers and entities controlling
production in order to demonstrate compliance with the statutory
requirements. However, CBP believes that confidentiality issues in this
context are a private commercial matter which must be addressed by the
private parties directly affected, as part of the process of weighing
the advantages and disadvantages of participating in this statutory
preferential tariff program. CBP further believes that it would be
inadvisable to address those concerns in the manner suggested by these
commenters because it would result in a reporting requirement that
would not allow CBP to effectively verify compliance with the statutory
requirements.
Certificate of Origin
Comment: Four commenters argue that a Certificate of Origin under
Sec. 10.224 should not be required for brassieres entered duty-free
under subheading 9820.11.15, HTSUS. The commenters state that, because
CBTPA eligibility for brassieres is dictated only by the validity of
the information on the Declaration of Compliance, a Certificate of
Origin should be unnecessary when the declaration identifier number is
on the entry.
CBP's Response: Paragraph (b)(4)(A)(i) of amended section 213
provides that ``[a]ny importer that claims preferential treatment under
paragraph (2) or (3) shall comply with customs procedures similar in
all material respects to the requirements of Article 502(1) of the
NAFTA * * *.'' Article 502(1)(a) of the NAFTA obligates each NAFTA
Party to require an importer that claims preferential tariff treatment
to make a written declaration based on a valid Certificate of Origin.
Paragraph (b)(4)(A)(ii) of amended section 213 sets forth certain
conditions that must be met in order for a CBTPA beneficiary country's
merchandise ``to qualify for the preferential treatment under paragraph
(2) or (3) and for a Certificate of Origin to be valid with respect to
any article for which such treatment is claimed.'' CBP interprets the
references in paragraph (b)(4)(A)(i) to NAFTA Article 502(10) and in
paragraph (b)(4)(A)(ii) to a Certificate of Origin to mean that
Congress intended to require Certificates of Origin for claims of CBTPA
preferential treatment, including for brassieres. The commenters seem
to be suggesting that, for brassieres alone, the declaration of
compliance should replace the Certificate of Origin.
Furthermore, as a practical matter, the Declaration of Compliance
cannot effectively replace the CBTPA Textile Certificate of Origin
provided for under Sec. 10.224 because the latter document contains
information elements that are not set forth on, or that are useful in
verifying information provided on, the Declaration of Compliance.
Recordkeeping and Verification Requirements
Comment: Five commenters allege that the recordkeeping and
verification requirements set forth in Sec. 10.228(d) are too onerous,
do not conform to the way most companies maintain their records and are
not authorized by the CBTPA. The commenters contend that a company
should not have to create new accounting records to satisfy this
regulatory provision; they note in this regard that many companies do
not keep cash disbursement, purchase journals or record the date of
production. According to these commenters, so long as the producer or
the entity is able to establish that the 75 or 85 percent standard is
met in any given year using generally accepted accounting principles,
the statutory requirement should be satisfied.
CBP's Response: With regard to the assertion that the Sec.
10.228(d) recordkeeping requirements (such as the cash disbursement or
purchase journal) do not conform to the way most companies keep their
records, CBP notes that the regulatory text does not mandate the
maintenance of specific types of records. Rather, the regulatory text
states in this regard that the audit trail documents must consist of a
cash disbursement or purchase journal ``or equivalent records'' to
establish the purchase of the fabric or component. Therefore, if a
company does not maintain a cash disbursement or purchase journal,
alternative records
[[Page 69517]]
that reflect the purchase of the fabric or component would be
acceptable.
The recordkeeping and verification requirements were included in
Sec. 10.228 so that the trade community would know what CBP would
expect to see when verifying a claim for preferential treatment of
brassieres under the CBTPA. These requirements are implicitly
authorized by the CBTPA because they are directed to the specific
statutory standards that apply in the case of brassieres under the
CBTPA and because they are promulgated by the government agency that is
charged with responsibility for enforcing those statutory standards.
The basic point to remember is that CBP must be able to verify that the
requirements of the statute have been met, even if this means that a
producer must create certain records that were not maintained prior to
the CBTPA (such as records regarding the date of production, which are
germane to the year-to-year standard established by the statute). There
would be no objection to the use of generally accepted accounting
principles (GAAP) to establish that the 75 or 85 percent standard is
met, provided that the use of GAAP yields a result that is verifiable
and that accurately reflects the applicable CBTPA statutory standards.
Finally, as regards the complaint that the recordkeeping and
verification requirements are too onerous, CBP would simply note that a
decision whether to enter into transactions under a duty-preference
program may require the consideration of a variety of factors,
including whether the benefits outweigh the business costs that must be
incurred in order to comply with the requirements of the program.
Comments in Response to T.D. 03-29
One comment was received in response to the notice of solicitation
of comments on the interim regulations implementing the Preferential
Treatment of Brassieres Under the Caribbean Basin Economic Recovery Act
(68 FR 56166) which appeared in the Federal Register on September 30,
2003. The comment addressed two concerns with regard to the
implementing regulations.
Comment: The first concern expressed by the commenter is with
regard to the clarity of the regulations as to the entry requirement
for brassieres entered into the United States in a prior year which are
considered in the calculation to determine whether the U.S. fabric
content requirement set forth by Congress has been met in order for
imported brassieres to qualify for preferential treatment in a
subsequent year. The commenter is concerned that the language of the
regulations as drafted suggests that brassieres considered in the
fabric content calculation must be produced in the same year in which
they are entered. The regulations contain examples of the application
of the provisions set forth in the regulations and the commenter
acknowledges that Example 6, which illustrates that brassieres may be
produced in one year and entered in a different year, is consistent
with changes in the brassiere provision enacted by Congress in the
Trade Act of 2002. However, the commenter seeks further clarification
and suggests the addition of the phrase ``without regard to the year in
which the articles were produced'' after the phrase ``within the same
year'' in Sec. 10.228(b)(2)(i)(A).
CBP's Response: CBP disagrees with the need for further
clarification as suggested by the commenter. The language at issue in
Sec. 10.228(b)(2)(i)(A) clearly addresses the manner of production of
the brassieres in question and then specifies that the brassieres must
all be entered in the same year. Example 6 serves to further clarify
that the production of the brassieres under consideration need not
occur in the same year as the entry of the brassieres. However, all
brassieres considered in determining whether brassieres in a subsequent
year will qualify for preferential treatment must be entered in the
same program year.
Comment: The commenter's second concern is that the regulations
need to be clarified as to the relationship between Sec. 10.223(a)(6),
the provision specific to brassieres, and other provisions of the
CBTPA. Specifically, the commenter requests that CBP clarify the
regulations to provide that brassieres entered under 19 U.S.C.
2703(b)(2)(A)(i), (ii), (iii), (v), or (vi), which are described in
Sec. 10.223(a)(1), (2), (3), (4), (7), (8) or (9) of the CBP
Regulations, are not to be considered in the fabric content calculation
to determine the eligibility of brassieres for preferential treatment
in a subsequent year. The commenter suggests as an example that
brassieres may be entered under the provision for apparel made of
regionally produced knit fabric, Sec. 10.223(a)(4), or under either
short supply provision, Sec. 10.223(a)(7) or Sec. 10.223(a)(8), and
brassieres so entered would not be considered in calculating the fabric
content to determine if the requisite percentage of U.S. fabric had
been used to allow for subsequent year preferential treatment.
CBP's Response: CBP disagrees with the commenter. First, CBP cannot
agree with the commenter that brassieres entered under other provisions
of the CBTPA will not be considered for determining eligibility for
preferential treatment under Sec. 10.223(a)(6). CBP agrees with this
assertion of the commenter only to the extent that it applies to
determining whether the 75 percent threshold U.S. fabric content
requirement has been met. With regard to cases when the 75 percent
requirement has not been met and a producer or entity controlling
production must meet the stricter 85 percent U.S. fabric content
requirement, or in the case of a new producer or entity controlling
production which did not enter brassieres in the first year of the
program and must therefore meet the stricter 85 percent U.S. fabric
content requirement, if CBP does not consider brassieres entered under
other provisions of the CBTPA, that is, provisions other than Sec.
10.223(a)(6), a producer or entity controlling production would never
be able to meet the 85 percent U.S. fabric content requirement.
Secondly, CBP rejects the commenter's suggestion that brassieres
currently may be entered under all of the provisions associated with
the statutory paragraphs identified in 19 U.S.C. 2703(b)(2)(A)(i),
(ii), (iii), (v), or (vi). Section 10.223(a)(9) of the CBP Regulations
is associated with 19 U.S.C. 2703(b)(2)(A)(vi) and provides for
handloomed, hand-made and folklore articles. At this time, this
provision does not include brassieres as eligible for entry under that
provision. Therefore, brassieres may not be entered under Sec.
10.223(a)(9). Likewise, Sec. 10.223(a)(7) and (8), the provisions
which allow for apparel articles produced from fabrics or yarns
determined to be in short supply, do not currently include brassieres
as eligible for entry under those provisions.
Additional Change to the Regulations
While CBP has not adopted any changes identified and discussed
above in connection with the public comments, CBP has amended blocks 4-
6 of the declaration of compliance for brassieres by adding exclusion
language regarding findings and trimmings after each reference to
fabric(s) as provided for in section 3107(a) of the Act. Additionally,
wherever the term ``Customs'' appears in the CBP Regulations affected
by this final rule (i.e. 19 CFR 10.228), it is replaced with the term
``CBP.''
Conclusion
After analysis of the comments and further review and consideration
of the matter, CBP is adopting as a final rule the interim rule set
forth in T.D. 01-74
[[Page 69518]]
amending Sec. 10.222, paragraph (a)(7) of Sec. 10.223, and the
Appendix to Part 163 of the CBP Regulations which was published in the
Federal Register at 66 FR 50534 on October 4, 2001. CBP is also
adopting as a final rule, with the changes discussed above, the interim
rule set forth in T.D. 03-29 amending Sec. 10.228 of Part 10 of the
CBP Regulations which was published in the Federal Register at 68 FR
56166 on September 30, 2003.
It is noted that while T.D. 01-74 amended Sec. 10.223(a)(6), T.D.
03-12 published in the Federal Register at 68 FR 59649 on March 21,
2003, set forth additional changes to Sec. 10.223(a)(6). Therefore, as
the changes to Sec. 10.223(a)(6) set forth in T.D. 01-74 were further
amended, those changes will be finalized in a separate final rule
document that addresses the other statutory changes to the CBERA made
by the Act.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866. This rule is limited in
scope and affects only a small segment of the trade community.
Moreover, it sets forth the technical requirements for a statutorily
mandated trade benefits program.
Regulatory Flexibility Act
As set forth in the preamble, the regulations to implement the
standards for preferential treatment for brassieres imported from
Caribbean Basin countries were previously published as interim
regulations. Those interim regulations provided trade benefits to the
importing public, implemented direct statutory mandates, and were
necessary to carry out the preferential treatment and United States
tariff changes proclaimed by the President under the Caribbean Basin
Economic Recovery Act. Pursuant to the provisions of 5 U.S.C.
553(b)(B), CBP issued the regulations as interim rules because it had
determined that prior public notice and comment procedures on these
regulations were unnecessary and contrary to the public interest. For
these reasons, pursuant to the provisions of 5 U.S.C. 553(d)(1) and
(3), CBP also found that there was good cause for dispensing with a
delayed effective date. Because no notice of proposed rulemaking was
required, the provisions of the Regulatory Flexibility Act (5 U.S.C.
601 et seq.) do not apply. Accordingly, this final rule is not subject
to the regulatory analysis or other requirements of 5 U.S.C. 603 and
604.
Paperwork Reduction Act
The collection of information contained in this interim rule has
previously been reviewed and approved by the Office of Management and
Budget (OMB) in accordance with the requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) under OMB control number
1651-0083.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
Signing Authority
This regulation is being issued in accordance with 19 CFR
0.1(a)(1).
List of Subjects
19 CFR Part 10
Assembly, Bonds, Caribbean Basin Initiative, Customs duties and
inspection, Exports, Imports, Preference programs, Reporting and
recordkeeping requirements, Trade agreements.
19 CFR Part 163
Administrative practice and procedure, Customs duties and
inspection, Imports, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
For the reasons stated in the preamble, Part 10 and Part 163 (19 CFR
Part 10 and 19 CFR Part 163) are amended to read as follows:
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
0
1. The authority citation for Part 10 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 23, Harmonized
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484,
1498, 1508, 1623, 1624, 3314;
* * * * *
Sections 10.221 through 10.228 and Sec. Sec. 10.231 through 10.237
also issued under 19 U.S.C. 2701 et seq.
0
2. The introductory text in Sec. 10.222 is republished to read as
follows:
Sec. 10.222 Definitions.
When used in Sec. Sec. 10.221 through 10.228, the following terms
have the meanings indicated:
* * * * *
0
3. In Sec. 10.223, paragraph (a)(7) is republished to read as follows:
Sec. 10.223 Articles eligible for preferential treatment
* * * * *
(a) * * *
(7) Apparel articles, other than articles described in paragraph
(a)(6) of this section, that are both cut (or knit-to-shape) and sewn
or otherwise assembled in one or more CBTPA beneficiary countries, from
fabrics or yarn that is not formed in the United States or in one or
more CBTPA beneficiary countries, to the extent that apparel articles
of those fabrics or yarn would be eligible for preferential treatment,
without regard to the source of the fabrics or yarn, under Annex 401 of
the NAFTA;
* * * * *
0
4. Section 10.228 is revised to read as follows:
Sec. 10.228 Additional requirements for preferential treatment of
brassieres.
(a) Definitions. When used in this section, the following terms
have the meanings indicated:
(1) Producer. ``Producer'' means an individual, corporation,
partnership, association, or other entity or group that exercises
direct, daily operational control over the production process in a
CBTPA beneficiary country.
(2) Entity controlling production. ``Entity controlling
production'' means an individual, corporation, partnership,
association, or other entity or group that is not a producer and that
controls the production process in a CBTPA beneficiary country through
a contractual relationship or other indirect means.
(3) Fabrics formed in the United States. ``Fabrics formed in the
United States'' means fabrics that were produced by a weaving,
knitting, needling, tufting, felting, entangling or other fabric-making
process performed in the United States.
(4) Cost. ``Cost'' when used with reference to fabrics formed in
the United States means:
(i) The price of the fabrics when last purchased, f.o.b. port of
exportation, as set out in the invoice or other commercial documents,
or, if the price is other than f.o.b. port of exportation:
(A) The price as set out in the invoice or other commercial
documents adjusted to arrive at an f.o.b. port of exportation price; or
(B) If no exportation to a CBTPA beneficiary country is involved,
the price as set out in the invoice or other commercial documents, less
the freight, insurance, packing, and other costs incurred in
transporting the fabrics to the place of production if included in that
price; or
(ii) If the price cannot be determined under paragraph (a)(4)(i) of
this section or if CBP finds that price to be
[[Page 69519]]
unreasonable, all reasonable expenses incurred in the growth,
production, manufacture, or other processing of the fabrics, including
the cost or value of materials (which includes the cost of non-
recoverable scrap generated in forming the fabrics) and general
expenses, plus a reasonable amount for profit, and the freight,
insurance, packing, and other costs, if any, incurred in transporting
the fabrics to the port of exportation.
(5) Declared customs value. ``Declared customs value'' when used
with reference to fabric contained in an article means the sum of:
(i) The cost of fabrics formed in the United States that the
producer or entity controlling production can verify; and
(ii) The cost of all other fabric contained in the article,
exclusive of all findings and trimmings, determined as follows:
(A) In the case of fabric purchased by the producer or entity
controlling production, the f.o.b. port of exportation price of the
fabric as set out in the invoice or other commercial documents, or, if
the price is other than f.o.b. port of exportation:
(1) The price as set out in the invoice or other commercial
documents adjusted to arrive at an f.o.b. port of exportation price,
plus expenses for embroidering and dyeing, printing, and finishing
operations applied to the fabric if not included in that price; or
(2) If no exportation to a CBTPA beneficiary country is involved,
the price as set out in the invoice or other commercial documents, plus
expenses for embroidering and dyeing, printing, and finishing
operations applied to the fabric if not included in that price, but
less the freight, insurance, packing, and other costs incurred in
transporting the fabric to the place of production if included in that
price;
(B) In the case of fabric for which the cost cannot be determined
under paragraph (a)(5)(ii)(A) of this section or if CBP finds that cost
to be unreasonable, all reasonable expenses incurred in the growth,
production, or manufacture of the fabric, including the cost or value
of materials (which includes the cost of non-recoverable scrap
generated in the growth, production, or manufacture of the fabric),
general expenses and embroidering and dyeing, printing, and finishing
expenses, plus a reasonable amount for profit, and the freight,
insurance, packing, and other costs, if any, incurred in transporting
the fabric to the port of exportation;
(C) In the case of fabric components purchased by the producer or
entity controlling production, the f.o.b. port of exportation price of
those fabric components as set out in the invoice or other commercial
documents, less the cost or value of any non-textile materials, and
less expenses for cutting or other processing to create the fabric
components other than knitting to shape, that the producer or entity
controlling production can verify, or, if the price is other than
f.o.b. port of exportation:
(1) The price as set out in the invoice or other commercial
documents adjusted to arrive at an f.o.b. port of exportation price,
less the cost or value of any non-textile materials, and less expenses
for cutting or other processing to create the fabric components other
than knitting to shape, that the producer or entity controlling
production can verify; or
(2) If no exportation to a CBTPA beneficiary country is involved,
the price as set out in the invoice or other commercial documents, less
the cost or value of any non-textile materials, and less expenses for
cutting or other processing to create the fabric components other than
knitting to shape, that the producer or entity controlling production
can verify, and less the freight, insurance, packing, and other costs
incurred in transporting the fabric components to the place of
production if included in that price; and
(D) In the case of fabric components for which a fabric cost cannot
be determined under paragraph (a)(5)(ii)(C) of this section or if CBP
finds that cost to be unreasonable: all reasonable expenses incurred in
the growth, production, or manufacture of the fabric components,
including the cost or value of materials (which does not include the
cost of recoverable scrap generated in the growth, production, or
manufacture of the fabric components) and general expenses, but
excluding the cost or value of any non-textile materials, and excluding
expenses for cutting or other processing to create the fabric
components other than knitting to shape, that the producer or entity
controlling production can verify, plus a reasonable amount for profit,
and the freight, insurance, packing, and other costs, if any, incurred
in transporting the fabric components to the port of exportation.
(6) Year. ``Year'' means a 12-month period beginning on October 1
and ending on September 30 but does not include any 12-month period
that began prior to October 1, 2000.
(7) Entered. ``Entered'' means entered, or withdrawn from warehouse
for consumption, in the customs territory of the United States.
(b) Limitations on preferential treatment--(1) General. During the
year that begins on October 1, 2002, and during any subsequent year,
articles of a producer or an entity controlling production that conform
to the production standards set forth in Sec. 10.223(a)(6) will be
eligible for preferential treatment only if:
(i) The aggregate cost of fabrics (exclusive of all findings and
trimmings) formed in the United States that were used in the production
of all of those articles of that producer or that entity controlling
production that are entered as articles described in Sec. 10.223(a)(6)
during the immediately preceding year was at least 75 percent of the
aggregate declared customs value of the fabric (exclusive of all
findings and trimmings) contained in all of those articles of that
producer or that entity controlling production that are entered as
articles described in Sec. 10.223(a)(6) during that year; or
(ii) In a case in which the 75 percent requirement set forth in
paragraph (b)(1)(i) of this section was not met during a year and
therefore those articles of that producer or that entity controlling
production were not eligible for preferential treatment during the
following year, the aggregate cost of fabrics (exclusive of all
findings and trimmings) formed in the United States that were used in
the production of all of those articles of that producer or that entity
controlling production that conform to the production standards set
forth in Sec. 10.223(a)(6) and that were entered during the
immediately preceding year was at least 85 percent of the aggregate
declared customs value of the fabric (exclusive of all findings and
trimmings) contained in all of those articles of that producer or that
entity controlling production that conform to the production standards
set forth in Sec. 10.223(a)(6) and that were entered during that year;
and
(iii) In conjunction with the filing of the claim for preferential
treatment under Sec. 10.225, the importer records on the entry summary
or warehouse withdrawal for consumption (CBP Form 7501, column 34), or
its electronic equivalent, the distinct and unique identifier assigned
by CBP to the applicable documentation prescribed under paragraph (c)
of this section.
(2) Rules of application--(i) General. For purposes of paragraphs
(b)(1)(i) and (b)(1)(ii) of this section and for purposes of preparing
and filing the documentation prescribed in paragraph (c) of this
section, the following rules will apply:
(A) The articles in question must have been produced in the manner
specified
[[Page 69520]]
in Sec. 10.223(a)(6) and the articles in question must be entered
within the same year;
(B) Articles that are exported to countries other than the United
States and are never entered are not to be considered in determining
compliance with the 75 or 85 percent standard specified in paragraph
(b)(1)(i) or paragraph (b)(1)(ii) of this section;
(C) Articles that are entered under an HTSUS subheading other than
the HTSUS subheading which pertains to articles described in Sec.
10.223(a)(6) are not to be considered in determining compliance with
the 75 percent standard specified in paragraph (b)(1)(i) of this
section;
(D) For purposes of determining compliance with the 85 percent
standard specified in paragraph (b)(1)(ii) of this section, all
articles that conform to the production standards set forth in Sec.
10.223(a)(6) must be considered, regardless of the HTSUS subheading
under which they were entered;
(E) Fabric components and fabrics that constitute findings or
trimmings are not to be considered in determining compliance with the
75 or 85 percent standard specified in paragraph (b)(1)(i) or paragraph
(b)(1)(ii) of this section;
(F) Beginning October 1, 2002, in order for articles to be eligible
for preferential treatment in a given year, a producer of, or entity
controlling production of, those articles must have met the 75 percent
standard specified in paragraph (b)(1)(i) of this section during the
immediately preceding year. If articles of a producer or entity
controlling production fail to meet the 75 percent standard specified
in paragraph (b)(1)(i) of this section during a year, articles of that
producer or entity controlling production:
(1) Will not be eligible for preferential treatment during the
following year;
(2) Will remain ineligible for preferential treatment until the
year that follows a year in which articles of that producer or entity
controlling production met the 85 percent standard specified in
paragraph (b)(1)(ii) of this section; and
(3) After the 85 percent standard specified in paragraph (b)(1)(ii)
of this section has been met, will again be subject to the 75 percent
standard specified in paragraph (b)(1)(i) of this section during the
following year for purposes of determining eligibility for preferential
treatment in the next year.
(G) A new producer or new entity controlling production, that is, a
producer or entity controlling production which did not produce or
control production of articles that were entered as articles described
in Sec. 10.223(a)(6) during the immediately preceding year, must first
establish compliance with the 85 percent standard specified in
paragraph (b)(1)(ii) of this section as a prerequisite to preparation
of the declaration of compliance referred to in paragraph (c) of this
section;
(H) A declaration of compliance prepared by a producer or by an
entity controlling production must cover all production of that
producer or all production that the entity controls for the year in
question;
(I) A producer is not required to prepare a declaration of
compliance if all of its production is covered by a declaration of
compliance prepared by an entity controlling production;
(J) In the case of a producer, the 75 or 85 percent standard
specified in paragraph (b)(1)(i) or paragraph (b)(1)(ii) of this
section and the declaration of compliance procedure under paragraph (c)
of this section apply to all articles of that producer for the year in
question, even if some but not all of that production is also covered
by a declaration of compliance prepared by an entity controlling
production;
(K) The U.S. importer does not have to be the producer or the
entity controlling production who prepared the declaration of
compliance; and
(L) The exclusion references regarding findings and trimmings in
paragraph (b)(1)(i) and paragraph (b)(1)(ii) of this section apply to
all findings and trimmings, whether or not they are of foreign origin.
(ii) Examples. The following examples will illustrate application
of the principles set forth in paragraph (b)(2)(i) of this section.
Example 1. A CBTPA beneficiary country producer of articles that
meet the production standards specified in Sec. 10.223(a)(6) in the
first year sends 50 percent of that production to CBTPA region
markets and the other 50 percent to the U.S. market; the cost of the
fabrics formed in the United States equals 100 percent of the value
of all of the fabric in the articles sent to the CBTPA region and 60
percent of the value of all of the fabric in the articles sent to
the United States. Although the cost of fabrics formed in the United
States is more than 75 percent of the value of all of the fabric
used in all of the articles produced, this producer could not
prepare a valid declaration of compliance because the articles sent
to the United States did not meet the minimum 75 percent standard.
Example 2. A producer sends to the United States in the first
year three shipments of articles that meet the description in Sec.
10.223(a)(6); one of those shipments is entered under the HTSUS
subheading that covers articles described in Sec. 10.223(a)(6), the
second shipment is entered under the HTSUS subheading that covers
articles described in Sec. 10.223(a)(12), and the third shipment is
entered under subheading 9802.00.80, HTSUS. In determining whether
the minimum 75 percent standard has been met in the first year for
purposes of entry of articles under the HTSUS subheading that covers
articles described in Sec. 10.223(a)(6) during the following (that
is, second) year, consideration must be restricted to the articles
in the first shipment and therefore must not include the articles in
the second and third shipments.
Example 3. A producer in the second year begins production of
articles that conform to the production standards specified in Sec.
10.223(a)(6); some of those articles are entered in that year under
HTSUS subheading 6212.10 and others under HTSUS subheading
9802.00.80 but none are entered in that year under the HTSUS
subheading which pertains to articles described in Sec.
10.223(a)(6) because the 75 percent standard had not been met in the
preceding (that is, first) year. In this case the 85 percent
standard applies, and all of the articles that were entered under
the various HTSUS provisions in the second year must be taken into
account in determining whether that 85 percent standard has been
met. If the 85 percent was met in the aggregate for all of the
articles entered in the second year, in the next (that is, third)
year articles of that producer may receive preferential treatment
under the HTSUS subheading which pertains to articles described in
Sec. 10.223(a)(6).
Example 4. An entity controlling production of articles that
meet the description in Sec. 10.223(a)(6) buys for the U.S.,
Canadian and Mexican markets; the articles in each case are first
sent to the United States where they are entered for consumption and
then placed in a commercial warehouse from which they are shipped to
various stores in the United States, Canada and Mexico.
Notwithstanding the fact that some of the articles ultimately ended
up in Canada or Mexico, a declaration of compliance prepared by the
entity controlling production must cover all of the articles rather
than only those that remained in the United States because all of
those articles had been entered for consumption.
Example 5. Fabric is cut and sewn in the United States with
other U.S. materials to form cups which are joined together to form
brassiere front subassemblies in the United States, and those front
subassemblies are then placed in a warehouse in the United States
where they are held until the following year; during that following
year all of the front subassemblies are shipped to a CBTPA
beneficiary country where they are assembled with elastic strips and
labels produced in an Asian country and other fabrics, components or
materials produced in the CBTPA beneficiary country to form articles
that meet the production standards specified in Sec. 10.223(a)(6)
and that are then shipped to the United States and entered during
that same year. In determining whether the entered articles meet the
minimum 75 or 85 percent standard, the fabric in the elastic strips
and labels is to be disregarded entirely because the strips and
labels constitute findings or trimmings for purposes of this
section, and all of the fabric
[[Page 69521]]
in the front subassemblies is countable because it was all formed in
the United States and used in the production of articles that were
entered in the same year.
Example 6. A CBTPA beneficiary country producer's entire
production of articles that meet the description in Sec.
10.223(a)(6) is sent to a U.S. importer in two separate shipments,
one in February and the other in June of the same calendar year; the
articles shipped in February do not meet the minimum 75 percent
standard, the articles shipped in June exceed the 85 percent
standard, and the articles in the two shipments, taken together, do
meet the 75 percent standard; the articles covered by the February
shipment are entered for consumption on March 1 of that calendar
year, and the articles covered by the June shipment are placed in a
CBP bonded warehouse upon arrival and are subsequently withdrawn
from warehouse for consumption on November 1 of that calendar year.
The CBTPA beneficiary country producer may not prepare a valid
declaration of compliance covering the articles in the first
shipment because those articles did not meet the minimum 75 percent
standard and because those articles cannot be included with the
articles of the second shipment on the same declaration of
compliance since they were entered in a different year. However, the
CBTPA beneficiary country producer may prepare a valid declaration
of compliance covering the articles in the second shipment because
those articles did meet the requisite 85 percent standard which
would apply for purposes of entry of articles in the following year.
Example 7. A producer in the second year begins production of
articles exclusively for the U.S. market that meet the production
standards specified in Sec. 10.223(a)(6), but the entered articles
do not meet the requisite 85 percent standard until the third year;
the entered articles fail to meet the 75 percent standard in the
fourth year; and the entered articles do not attain the 85 percent
standard until the sixth year. The producer's articles may not
receive preferential treatment during the second year because there
was no production (and thus there were no entered articles) in the
immediately preceding (that is, first) year on which to assess
compliance with the 75 percent standard. The producer's articles
also may not receive preferential treatment during the third year
because the 85 percent standard was not met in the immediately
preceding (that is, second) year. However, the producer's articles
are eligible for preferential treatment during the fourth year based
on compliance with the 85 percent standard in the immediately
preceding (that is, third) year. The producer's articles may not
receive preferential treatment during the fifth year because the 75
percent standard was not met in the immediately preceding (that is,
fourth) year. The producer's articles may not receive preferential
treatment during the sixth year because the 85 percent standard has
become applicable and was not met in the immediately preceding (that
is, fifth) year. The producer's articles are eligible for
preferential treatment during the seventh year because the 85
percent standard was met in the immediately preceding (that is,
sixth) year, and during that seventh year the 75 percent standard is
applicable for purposes of determining whether the producer's
articles are eligible for preferential treatment in the following
(that is, eighth) year.
Example 8. An entity controlling production (Entity A) uses five
CBTPA beneficiary country producers (Producers 1-5), all of which
produce only articles that meet the description in Sec.
10.223(a)(6); Producers 1-4 send all of their production to the
United States and Producer 5 sends 10 percent of its production to
the United States and the rest to Europe; Producers 1-3 and Producer
5 produce only pursuant to contracts with Entity A, but Producer 4
also operates independently of Entity A by producing for several
U.S. importers, one of which is an entity controlling production
(Entity B) that also controls all of the production of articles of
one other producer (Producer 6) which sends all of its production to
the United States. A declaration of compliance prepared by Entity A
must cover all of the articles of Producers 1-3 and the 10 percent
of articles of Producer 5 that are sent to the United States and
that portion of the articles of Producer 4 that are produced
pursuant to the contract with Entity A, because Entity A controls
the production of those articles. There is no need for Producers 1-3
and Producer 5 to prepare a declaration of compliance because they
have no production that is not covered by a declaration of
compliance prepared by an entity controlling production. A
declaration of compliance prepared by Producer 4 would cover all of
its production, that is, articles produced for Entity A, articles
produced for Entity B, and articles produced independently for other
U.S. importers; a declaration of compliance prepared by Entity B
must cover that portion of the production of Producer 4 that it
controls as well as all of the production of Producer 6 because
Entity B also controls all of the production of Producer 6. Producer
6 would not prepare a declaration of compliance because all of its
production is covered by the declaration of compliance prepared by
Entity B.
(c) Documentation--(1) Initial declaration of compliance. In order
for an importer to comply with the requirement set forth in paragraph
(b)(1)(iii) of this section, the producer or the entity controlling
production must have filed with CBP, in accordance with paragraph
(c)(4) of this section, a declaration of compliance with the applicable
75 or 85 percent requirement prescribed in paragraph (b)(1)(i) or
(b)(1)(ii) of this section. After filing of the declaration of
compliance has been completed, CBP will advise the producer or the
entity controlling production of the distinct and unique identifier
assigned to that declaration. The producer or the entity controlling
production will then be responsible for advising each appropriate U.S.
importer of that distinct and unique identifier for purposes of
recording that identifier on the entry summary or warehouse withdrawal.
In order to provide sufficient time for advising the U.S. importer of
that distinct and unique identifier prior to the arrival of the
articles in the United States, the producer or the entity controlling
production should file the declaration of compliance with CBP at least
10 calendar days prior to the date of the first shipment of the
articles to the United States.
(2) Amended declaration of compliance. If the information on the
declaration of compliance referred to in paragraph (c)(1) of this
section is based on an estimate because final year-end information was
not available at that time and the final data differs from the
estimate, or if the producer or the entity controlling production has
reason to believe for any other reason that the declaration of
compliance that was filed contained erroneous information, within 30
calendar days after the final year-end information becomes available or
within 30 calendar days after the date of discovery of the error:
(i) The producer or the entity controlling production must file
with the CBP office identified in paragraph (c)(4) of this section an
amended declaration of compliance containing that final year-end
information or other corrected information; or
(ii) If that final year-end information or other corrected
information demonstrates noncompliance with the applicable 75 or 85
percent requirement, the producer or the entity controlling production
must in writing advise both the CBP office identified in paragraph
(c)(4) of this section and each appropriate U.S. importer of that fact.
(3) Form and preparation of declaration of compliance--(i) Form.
The declaration of compliance referred to in paragraph (c)(1) of this
section may be printed and reproduced locally and must be in the
following format:
[[Page 69522]]
Caribbean Basin Trade Partnership Act Declaration of Compliance for
Brassieres
[19 CFR 10.223(a)(6) and 10.228]
------------------------------------------------------------------------
------------------------------------------------------------------------
1. Year beginning date: October 1, Official U.S. Customs and Border
__.
Year ending date: September 30, Protection Use Only
__.
Assigned number: ____
Assignment date: ____
2. Identity of preparer (producer or entity controlling production):
Full name and address: Telephone number: ____
Facsimile number: ____
Importer identification number:
____
3. If the preparer is an entity controlling production, provide the
following for each producer:
Full name and address: Telephone number: ____
Facsimile number: ____
4. Aggregate cost of fabrics (exclusive of all findings and trimmings)
formed in the United States that were used in the production of
brassieres that were entered during the year: ____
5. Aggregate declared customs value of the fabric (exclusive of all
findings and trimmings) contained in brassieres that were entered
during the year: ____
6. I declare that the aggregate cost of fabric (exclusive of all
findings and trimmings) formed in the United States was at least 75
percent (or 85 percent, if applicable under 19 CFR 10.228(b)(1)(ii)) of
the aggregate declared customs value of the fabric contained in
brassieres entered during the year.
7. Authorized signature: 8. Name and title (print or type):
________
Date:
------------------------------------------------------------------------
(ii) Preparation. The following rules will apply for purposes of
completing the declaration of compliance set forth in paragraph
(c)(3)(i) of this section:
(A) In block 1, fill in the year commencing October 1 and ending
September 30 of the calendar year during which the applicable 75 or 85
percent standard specified in paragraph (b)(1)(i) or paragraph
(b)(1)(ii) of this section was met;
(B) Block 2 should state the legal name and address (including
country) of the preparer and should also include the preparer's
importer identification number (see Sec. 24.5 of this chapter), if the
preparer has one;
(C) Block 3 should state the legal name and address (including
country) of the CBTPA beneficiary country producer if that producer is
not already identified in block 2. If there is more than one producer,
attach a list stating the legal name and address (including country) of
all additional producers;
(D) Blocks 4 and 5 apply only to articles that were entered during
the year identified in block 1; and
(E) In block 7, the signature must be that of an authorized
officer, employee, agent or other person having knowledge of the
relevant facts and the date must be the date on which the declaration
of compliance was completed and signed.
(4) Filing of declaration of compliance. The declaration of
compliance referred to in paragraph (c)(1) of this section:
(i) Must be completed either in the English language or in the
language of the country in which the articles covered by the
declaration were produced. If the declaration is completed in a
language other than English, the producer or the entity controlling
production must provide to CBP upon request a written English
translation of the declaration; and
(ii) Must be filed with the New York Strategic Trade Center,
Customs and Border Protection, 1 Penn Plaza, New York, New York 10119.
(d) Verification of declaration of compliance--(1) Verification
procedure. A declaration of compliance filed under this section will be
subject to whatever verification CBP deems necessary. In the event that
CBP for any reason is prevented from verifying the statements made on a
declaration of compliance, CBP may deny any claim for preferential
treatment made under Sec. 10.225 that is based on that declaration. A
verification of a declaration of compliance may involve, but need not
be limited to, a review of:
(i) All records required to be made, kept, and made available to
CBP by the importer, the producer, the entity controlling production,
or any other person under part 163 of this chapter;
(ii) Documentation and other information regarding all articles
that meet the production standards specified in Sec. 10.223(a)(6) that
were exported to the United States and that were entered during the
year in question, whether or not a claim for preferential treatment was
made under Sec. 10.225. Those records and other information include,
but are not limited to, work orders and other production records,
purchase orders, invoices, bills of lading and other shipping
documents;
(iii) Evidence to document the cost of fabrics formed in the United
States that were used in the production of the articles in question,
such as purchase orders, invoices, bills of lading and other shipping
documents, and customs import and clearance documents, work orders and
other production records, and inventory control records;
(iv) Evidence to document the cost or value of all fabric other
than fabrics formed in the United States that were used in the
production of the articles in question, such as purchase orders,
invoices, bills of lading and other shipping documents, and customs
import and clearance documents, work orders and other production
records, and inventory control records; and
(v) Accounting books and documents to verify the records and
information referred to in paragraphs (d)(1)(ii) through (d)(1)(iv) of
this section. The verification of purchase orders, invoices and bills
of lading will be accomplished through the review of a distinct audit
trail. The audit trail documents must consist of a cash disbursement or
purchase journal or equivalent records to establish the purchase of the
fabric. The headings in each of these journals or other records must
contain the date, vendor name, and amount paid for the fabric. The
verification of production records and work orders will be accomplished
through analysis of the inventory records of the producer or entity
controlling production. The inventory records must reflect the
production of the finished article which must be referenced to the
original purchase order or lot number covering the fabric used in
production. In the inventory production records, the inventory should
show the opening balance of the inventory plus the purchases made
during the accounting
[[Page 69523]]
period and the inventory closing balance.
(2) Notice of determination. If, based on a verification of a
declaration of compliance filed under this section, CBP determines that
the applicable 75 or 85 percent standard specified in paragraph
(b)(1)(i) or paragraph (b)(1)(ii) of this section was not met, CBP will
publish a notice of that determination in the Federal Register.
PART 163--RECORDKEEPING
0
5. The authority citation for Part 163 continues to read as follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510,
1624.
0
6. In the Appendix to Part 163 the listing under section IV of ``Sec.
10.228 CBTPA Declaration of Compliance for brassieres'' is republished.
* * * * *
Approved: November 23, 2004.
Robert C. Bonner,
Commissioner of Customs and Border Protection.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 04-26359 Filed 11-29-04; 8:45 am]
BILLING CODE 4820-02-P