00-3846. Changes in Watch, Watch Movement and Jewelry Program for the U.S. Insular Possessions

AGENCIES:

Import Administration, International Trade Administration, Department of Commerce; Office of Insular Affairs, Department of the Interior.

ACTION:

Final rule.

SUMMARY:

This action amends the Departments' regulations governing duty-exemption allocations for watch producers and duty-refund benefits for watch and jewelry producers in the United States insular possessions (the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands (“CNMI”). The rule amends Subpart A of Title 15 CFR Part 303 by establishing the total quantity and respective territorial shares of insular watches and watch movements which are allowed to enter the United States free of duty during calendar year 2000 and clarifies the definition of a new firm for watches. The rule also amends Subparts A and B of 15 CFR 303 by establishing a permanent formula for the creditable wage ceiling.

EFFECTIVE DATE:

February 17, 2000.

FOR FURTHER INFORMATION CONTACT:

Faye Robinson, [phone].

SUPPLEMENTARY INFORMATION:

We published proposed regulatory revisions on January 6, 2000 (65 FR 731) and invited comments. We received no comments.

The insular possessions watch industry provision in Sec. 110 of Pub. L. No. 97-446 (96 Stat. 2331) (1983), as amended by Sec. 602 of Pub. L. 103-465 (108 Stat. 4991) (1994); additional U.S. Note 5 to chapter 91 of the Harmonized Tariff Schedule of the United States (“HTSUS”), as amended by Pub.L. 94-241 (90 Stat 263)(1976) requires the Secretary of Commerce and the Secretary of the Interior, acting jointly, to establish a limit on the quantity of watches and watch movements which may be entered free of duty during each calendar year. The law also requires the Secretaries to establish the shares of watches and watch movements which may be entered from the Virgin Islands, Guam, American Samoa and the CNMI. Regulations on the establishment of these quantities and shares are contained in Sections 303.3 and 303.4 of Title 15, Code of Federal Regulations (15 CFR 303.3 and 303.4). The Departments amend Sec. 303.14(e) by establishing for calendar year 2000 a total quantity of 3,366,000 units and respective territorial shares as shown in the following table:

Virgin Islands	1,866,000
Guam	500,000
American Samoa	500,000
CNMI	500,000

The enactment of Public Law 106-36 amended additional U.S. notes to chapter 71 of the Harmonized Tariff Schedule of the United States to provide a duty-refund benefit for any article of jewelry within heading 7113 which is a product of the Virgin Islands, Guam, American Samoa or the CNMI in accordance with the new provisions of the note in chapter 71 and additional U.S. Note 5 to chapter 91. The Departments published a final rule on December 1, 1999 (64 FR 67149) which amended the regulations by changing Title 15 CFR Part 303 to include jewelry and creating a Subpart A for the insular watch and watch movement regulations and a Subpart B for the new regulations pertaining to jewelry duty-refund benefits authorized by Pub. L. 106-36. When we requested comments on the proposed jewelry regulations, we received a comment regarding the requirement that a new firm be “completely separate from and not associated with, by way of ownership or control” with other jewelry program participants in the territory. In the final jewelry rule, we revised the language using new terminology borrowed from existing fair trade law to clarify the language. To ensure consistency and clarity, we amend § 303.2(a)(5) to include the new terminology in Subpart A as well.

The rule also establishes a permanent formula for the creditable wage ceiling for watches and jewelry by amending §§ 303.2(a)(13), 303.14(a)(1)(i) and 303.16(a)(9), respectively. The creditable wage ceiling is used in the calculation of the value of the production incentive certificate (duty refund). The annual creditable wage ceiling is up to an amount equal to 65% of the contribution and benefit base for Social Security as defined in section 230(c) of the Social Security Act, as amended (42 U.S.C. 430). Until 1976, the Departments credited wages up to the contribution and benefit base for Social Security. In that year, the Departments adopted an independent ceiling lower than the contribution and benefit base in order to increase the incentive for the employment and training of territorial residents in skilled jobs (see 40 FR 54274 (1975)). Since 1983, the Departments have revised the ceiling upwards several times to keep pace with inflation. This rule establishes a new ceiling in the form of a fixed percentage of the contribution and benefit base for Social Security which assists producers in better planning expenditures and calculating potential profits and benefits. This change also eliminates the need for periodic rulemaking to adjust the ceiling, provides an annual incremental increase consistent with the Departments' past policy objectives, id., and creates transparency in the calculation of the ceiling.

Under the Administrative Procedure Act, 5 U.S.C. 553(d)(1), the effective date of this rule need not be delayed for 30 days because this rule relieves a restriction by creating an annual increase in the creditable wage ceiling used in the calculation of the duty refund.

Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chief Counsel for Regulation at the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration, that the rule will not have a significant economic impact on a substantial number of small entities. There are currently five watch companies, all of which are located in the Virgin Islands. Although there is a reduction of the 2000 Virgin Islands territorial share of duty-exemption, the reduced amount still represents more than twice the amount of duty-exemption used in 1998. The statute does not permit a lower amount in the year 2000. Similarly, clarifying new entrant affiliation language and updating the creditable wage ceiling with a permanent annual mechanism will not impose any cost or have any other adverse economic effect on the producers.

Paperwork Reduction Act

This rulemaking involves no new collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995. Collection activities are currently approved by the Office of Management and Budget under control numbers 0625-0040 and 0625-0134, and the amendments do not increase the information burden on the public or change the information collection requirements.

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information unless it displays a currently valid OMB Control Number.

E.O. 12866

It has been determined that the rulemaking is not significant for purposes of Executive Order 12866.

List of Subjects in 15 CFR Part 303

• Administrative practice and procedure
• American Samoa
• Customs duties and inspection
• Guam
• Imports
• Marketing quotas
• Northern Mariana Islands
• Reporting and recordkeeping requirements
• Virgin Islands
• Watches and jewelry

For reasons set forth above, the Departments amend 15 CFR Part 303 as follows:

PART 303—WATCHES, WATCH MOVEMENTS AND JEWELRY PROGRAM

1. The authority citation for 15 CFR Part 303 reads as follows:

Authority: Pub. L. 97-446, 96 Stat. 2331 (19 U.S.C. 1202, note); Pub. L. 103-465, 108 Stat. 4991; Pub. L. 94-241, 90 Stat. 263 (48 U.S.C. 1681, note); Pub. L. 106-36, 113 Stat.127,167.

2. Section 303.2(a)(5) is revised to read as follows:

§ 303.2

Definitions and forms.

(a) Definitions. Unless the context indicates otherwise:

* * * * *

(5) New firm is a watch firm which may not be affiliated through ownership or control with any other watch duty-refund recipient. In assessing whether persons or parties are affiliated, the Secretaries will consider the following factors, among others: stock ownership; corporate or family groupings; franchise or joint venture agreements; debt financing; and close supplier relationships. The Secretaries may not find that control exists on the basis of these factors unless the relationship has the potential to affect decisions concerning production, pricing, or cost. Also, no watch duty-refund recipient may own or control more than one jewelry duty-refund recipient. A new entrant is a new watch firm which has received an allocation.

* * * * *

3. The first sentence of Section 303.2(a)(13) is amended by removing “—up to the amount per person shown in § 303.14(a)(1)(i)—” and adding “, up to an amount equal to 65% of the contribution and benefit base for Social Security as defined in the Social Security Act for the year in which the wages were earned,” in its place.

4. Section 303.14(a)(1)(i) is amended by removing “, up to a maximum of $38,650 per person,” and adding “, up to an amount equal to 65% of the contribution and benefit base for Social Security as defined in the Social Security Act for the year in which the wages were earned,” in its place.

5. Section 303.14(e) is amended by removing “2,240,000” and adding “1,866,000” in its place.

6. The first sentence of Section 303.16(a)(9) is amended by removing “—up to the amount per person of $38,650—“ and adding “, up to an amount equal to 65% of the contribution and benefit base for Social Security as defined in the Social Security Act for the year in which the wages were earned,” in its place.

Robert S. LaRussa,

Assistant Secretary for Import Administration, Department of Commerce.

Ferdinand Aranza,

Director, Office of Insular Affairs, Department of the Interior.