07-1578. Changes in the Insular Possessions Watch, Watch Movement and Jewelry Programs 2006

AGENCIES:

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

ACTION:

Final rule.

SUMMARY:

The Departments of Commerce and the Interior (the Departments) amend their regulations governing watch duty-exemption allocations and the watch and jewelry duty-refund benefits for producers in the United States insular possessions (the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands). The rule amends certain regulations by updating the maximum total value of watch components per watch that are eligible for duty-free entry into the United States under the insular program, further clarifying the definition of creditable and non-creditable wages and fringe benefits, providing more details about the calculation of mid-year and annual duty-refund and verification process, and making minor editorial changes.

DATES:

This rule is effective May 7, 2007.

FOR FURTHER INFORMATION CONTACT:

Faye Robinson, [phone], same address as above.

SUPPLEMENTARY INFORMATION:

The Departments of Commerce and the Interior (the Departments) issue this rule to amend their regulations governing watch duty-exemption allocations and the watch and jewelry duty-refund benefits for producers in the United States insular possessions (the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands). The background information and purpose of this rule is found in the preamble to the proposed rule (72 FR 3083, January 24, 2007) and is not repeated here.

Amendments

We amend § 303.14(b)(3) by raising the maximum total value of watch components per watch and watch movement that are eligible for duty-free entry into the U.S., from $800 to $3,000 per watch and from $35 to $300 per watch movement due to recent increases in the price of gold.

The rule amends §§ 303.1(c) and 303.15(b) to reflect that the duty-refunds may now be obtained on any articles that entered the customs territory of the United States duty paid except for any article containing a material which is the product of a country to which column 2 rates of duty apply, pursuant to Public Law 108-429. The rule further amends § 303.1(c) by removing the erroneous reference to “Headnote 6” and adding “additional U.S. note 5 to chapter 91 of the HTSUS” in its place.

We also amend § 303.2(a)(8) to correct a minor typographical error by adding the closing parenthesis at the end of the sentence and amend § 303.2(a)(10) by changing “watch components” to “watch movements” to more accurately define the kind of component.

Further, we amend §§ 303.2(a)(13), 303.2(a)(13)(ii), 303.2(a)(13)(ii)(A), 303.2(a)(13)(ii)(B), 303.2(a)(14), 303.2(a)(14)(ii), 303.2(a)(14)(ii)(A), 303.2(a)(14)(ii)(B), 303.16(a)(9), 303.16(a)(9)(ii), 303.16(a)(9)(ii)(A), 303.16(a)(9)(ii)(B), 303.16(a)(10), 303.16(a)(10)(ii), 303.16(a)(10)(ii)(A) and 303.16(a)(10)(ii)(B) to further clarify which wages, health insurance, life insurance and pension benefits are creditable in the Departments' calculation of the duty-refund benefits and which are not.

The rule also amends §§ 303.16(a)(9)(i)(C) and (a)(10)(i)(D) by clarifying that two program producers may, under certain circumstances, work on the same unit of jewelry and receive creditable wages and fringe benefits proportionally if both producers demonstrate that they have met all the qualifications of the regulations and have records sufficient for the Departments' verification. However, a non-program jewelry producer may not work together with a program jewelry producer on the manufacturing of a single article of jewelry and receive creditable wages and benefits.

Further the rule amends §§ 303.12(a)(1), 303.14(c), 303.19(a)(1) and 303.20(b) to provide further details about the calculation of the mid-year duty-refund and annual duty-refund. The rule also modifies the criteria for the calculation of the annual duty-refund to include health insurance, life insurance and pension benefits, pursuant to Public Law 108-429 and modifies the criteria for the calculation of the mid-year duty refund.

We amend the heading to § 303.5(b) to reflect that only verified data is used in the calculation of the duty-exemptions and duty-refunds. Also, we amend §§ 303.5(b)(5) and 303.17(b)(6) to clarify that the payroll information that should be available for use in the verification includes time cards for each employee. The rule amends §§ 303.5(c) and 303.17(c) to specify that all data must be available at the time of the annual verification and that the Departments will not consider further data after the verification for the particular year has been completed.

The rule amends §§ 303.13(b) and 303.21(b) by changing “post office address” to “address” because some producers might not have post office addresses and express mail carriers often will not deliver to a post office address.

Finally, the rule amends §§ 303.2(b)(5) and 303.16(b)(3) by adding “duty paid” so it will be clearer that the refund of duties is specifically on items that entered into the Customs territory of the United States “duty paid”.

ITA received three comments in response to the proposed rule and request for comments. The commenters supported the provisions that were proposed and suggested no changes. As a result we are adopting the proposed regulations without change.

Administrative Law Requirements

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 this rule would not have a significant economic impact on a substantial number of small entities. The factual basis for this certification was published in the proposed rule and is not repeated here. No comments were received regarding the economic impact of this rule on small entities. As a result, a final regulatory flexibility analysis is not required and has not been prepared.

Paperwork Reduction Act. This rulemaking does not contain revised 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.

Not withstanding 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 record keeping 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 PROGRAMS

1. The authority citation for 15 CFR Part 303 continues to read 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. 167; Pub. L. 108-429, 118 Stat. 2582.

§ 303.1

[Amended]

2. Section 303.1 is amended as follows:

A. Remove “on watches and watch movements and parts (except discrete watch cases) imported into the customs territory of the United States.” from the first sentence of paragraph (c) and add “on any article imported into the customs territory of the United States duty paid except for any article containing a material which is the product of a country to which column 2 rates of duty apply.” in its place.

B. Remove “Headnote 6” from the last sentence in paragraph (c) and add “additional U.S. note 5 to chapter 91 of the Harmonized Tariff Schedule of the United States, HTSUS” in its place.

3. Section 303.2 is amended as follows:

A. Remove “American Samoa) and the Northern Mariana Islands.” from the only sentence in paragraph (a)(8) and add “American Samoa and the Northern Mariana Islands).” in its place.

B. Remove “watch components” from the only sentence in paragraph (a)(10) and add “watch movements” in its place.

C. Amend paragraph (a)(13) introductory text by removing “wages” and adding “wages and associated” in its place.

D. Add one new sentence at the end of paragraph (a)(13)(ii) introductory text as set forth below.

E. Add one new sentence at the end of paragraph (a)(13)(ii)(A) as set forth below.

F. Add one new sentence at the end of paragraph (a)(13)(ii)(B) as set forth below.

G. Revise paragraph (a)(14) introductory text as set forth below.

H. Add one new sentence at the end of paragraph (a)(14)(ii) introductory text as set forth below.

I. Add one new sentence at the end of paragraph (a)(14)(ii)(A) as set forth below.

J. Add one new sentence at the beginning of paragraph (a)(14)(ii)(B) as set forth below.

K. Remove “United States during” from the second sentence of paragraph (b)(5) and add “United States duty paid during” in its place.

§ 303.2

Definitions and forms.

(a) * * *

(13) * * *

(ii) * * * Only during the time employees are earning creditable wages are they entitled to health and life insurance duty refund benefits under the program.

(A) * * * Only during the time employees are earning creditable wages are they entitled to health and life insurance duty refund benefits under the program.

(B) * * * Only during the time employees are earning creditable wages are they entitled to pension duty refund benefits under the program.

* * * * *

(14) Non-creditable wages and associated non-creditable fringe benefits ineligible for the duty refund benefit include, but are not limited to, the following:

* * * * *

(ii) * * * Any health and life insurance costs during the time an employee is not earning creditable wages.

(A) * * * Any health and life insurance costs during the time an employee is not earning creditable wages.

(B) Any pension benefits that were not based on associated creditable wages. * * *

* * * * *

4. Section 303.5 is amended as follows:

A. Revise the section heading to read as set forth below.

B. Remove “allocation shall” from the first sentence of paragraph (b) introductory text and add “allocation or duty-refund certificate shall” in its place.

C. Remove “payroll, production records” from paragraph (b)(5) and add “payroll, including time cards, production records” in its place.

D. Remove the last sentence of paragraph (c) and add two sentences in its place as set forth below.

§ 303.5

Application for annual allocations of duty-exemptions and duty-refunds.

* * * * *

(c) * * * It is the responsibility of each program producer to make the appropriate data available to the Departments' officials for the calendar year for which the annual verification is being performed and no further data, from the calendar year for which the audit is being completed, will be considered for benefits at any time after the audit has been completed. In the event of discrepancies between the application and substantiating data before the audit is complete, the Secretaries shall determine which data will be used in the calculation of the duty refund and allocations.

* * * * *

§ 303.12

[Amended]

5. Section 303.12 is amended as follows:

A. Remove “creditable wages paid during” from the second sentence in paragraph (a)(1) and add “creditable wages, determined from the wages as reported on the employer's first two quarterly federal tax returns (941-SS), paid during” in its place.

B. Remove “duty refund will remain the same.” from the fifth sentence in paragraph (a)(1) and add “duty refund will be based on verified creditable wages, duty-free shipments into the customs territory of the United States, creditable health insurance, life insurance and pension benefits and the duty differential, if watch tariffs have been reduced during the calendar year.” in its place.

§ 303.13

[Amended]

6. Section 303.13 is amended by removing “post office address” from the first sentence of paragraph (b) introductory text and adding “address” in its place.

7. Section 303.14 is amended as follows:

A. Revise the section heading to read as set forth below.

B. In paragraph (b)(3), remove “35” and add “300” in its place; and remove “800” and add “3,000” in its place.

C. Revise paragraph (c) to read as follows.

§ 303.14

Allocation factors, duty refund calculations and miscellaneous provisions.

* * * * *

(c) Calculation of the value of the mid-year production incentive certificates. (1) The value of each producer's certificate shall equal the producer's average creditable wage per unit shipped during the first six months of the calendar year multiplied by the sum of:

(i) The number of units shipped up to 300,000 units times a factor of 90%; plus

(ii) Incremental units shipped up to 450,000 units times a factor of 85%; plus

(iii) Incremental units shipped up to 600,000 units times a factor of 80%; plus

(iv) Incremental units shipped up to 750,000 units times a factor of 75%.

(2) Calculation of the value of the annual production incentive certificates. The value of each producer's certificate shall equal the producer's average creditable benefit per unit based on creditable wages, health insurance, life insurance and pension benefits plus any duty differential, if applicable, averaged from the amount of duty free units shipped during the calendar year multiplied by the sum of the following to obtain the total verified amount of the annual duty-refund per company. This amount would then be adjusted by deducting the amount of the mid-year duty-refund already issued.

(i) The number of units shipped up to 300,000 units times a factor of 90%; plus

(ii) Incremental units shipped up to 450,000 units times a factor of 85%; plus

(iii) Incremental units shipped up to 600,000 units times a factor of 80%; plus

(iv) Incremental units shipped up to 750,000 units times a factor of 75%.

(3) The Departments may make adjustments for these data in the manner set forth in § 303.5(c).

* * * * *

§ 303.15

[Amended]

8. Section 303.15 is amended by removing “on watches and watch movements and parts (except discrete watch cases) imported into the customs territory of the United States.” from the first sentence of paragraph (b) and adding “on any article imported into the customs territory of the United States duty paid except for any article containing a material which is the product of a country to which column 2 rates of duty apply.” in its place.

9. Section 303.16 is amended as follows:

A. Amend paragraph (a)(9) introductory text by removing “wages and creditable fringe benefits” and adding “wages and associated creditable fringe benefits and creditable duty differentials” in its place.

B. Remove “two producers” from the first sentence of paragraph (a)(9)(i)(C) and add “two program producers” in its place.

C. Add one new sentence at the end of paragraph (a)(9)(ii) introductory text as set forth below.

D. Add one new sentence at the end of paragraph (a)(9)(ii)(A) as set forth below.

E. Add one new sentence at the end of paragraph (a)(9)(ii)(B) as set forth below.

F. Revise paragraph (a)(10) introductory text as set forth below.

G. Add one new sentence at the end of paragraph (a)(10)(ii) introductory text as set forth below.

H. Add one new sentence at the end of paragraph (a)(10)(ii)(A) as set forth below.

I. Add one new sentence at the beginning of paragraph (a)(10)(ii)(B) as set forth below.

J. Remove “working on the premises of the company office and” from the first sentence of paragraph (a)(10)(i)(D) and add “working on the premises of the company office; wages paid to employees working with a non-program producer to create a single piece of HTSUS heading 7113 jewelry whether or not it entered the United States free of duty; and” in its place.

K. Remove “United States during” from the second sentence of paragraph (b)(3) and add “United States duty paid during” in its place.

§ 303.16

Definitions and forms.

(a) * * *

(9) * * *

(ii) * * * Only during the time employees are earning creditable wages are they entitled to health and life insurance duty refund benefits under the program.

(A) * * * Only during the time employees are earning creditable wages are they entitled to health and life insurance duty refund benefits under the program.

(B) * * * Only during the time employees are earning creditable wages are they entitled to pension duty refund benefits under the program.

* * * * *

(10) Non-creditable wages and associated non-creditable fringe benefits ineligible for the duty refund benefit include, but are not limited to, the following:

* * * * *

(ii) * * * Any health and life insurance costs during the time an employee is not earning creditable wages.

(A) * * * Any health and life insurance costs during the time an employee is not earning creditable wages.

(B) Any pension benefits that were not based on associated creditable wages. * * *

* * * * *

10. Section 303.17 is amended as follows:

A. Revise the section heading to read as set forth below.

B. Remove “payroll, production records” from paragraph (b)(6) and add “payroll, including time cards, production records” in its place.

D. Remove the last sentence of paragraph (c) and add two sentences in its place as set forth below.

§ 303.17

Application for annual duty-refunds.

* * * * *

(c) * * * It is the responsibility of each program producer to make the appropriate data available to the Departments' officials for the calendar year for which the annual verification is being performed and no further data, from the calendar year for which the audit is being completed, will be considered for benefits at any time after the audit has been completed. In the event of discrepancies between the application and substantiating data before the audit is complete, the Secretaries shall determine which data will be used in the calculation of the duty refund and allocations.

* * * * *

§ 303.19

[Amended]

11. Section 303.19 is amended as follows:

A. Remove “creditable wages paid during” from the second sentence in paragraph (a)(1) and add “creditable wages, determined from the wages as reported on the employer's first two quarterly federal tax returns (941-SS), paid during” in its place.

B. Remove “duty refund will remain the same.” from the fifth sentence in paragraph (a)(1) and add “duty refund will be based on verified creditable wages, duty-free shipments into the customs territory of the United States, creditable health insurance, life insurance and pension benefits and the duty differential, if watch tariffs have been reduced during the calendar year.” in its place

12. Section 303.20 is amended as follows:

A. Revise the section heading to read as set forth below.

B. Revise paragraph (b) to read as follows.

§ 303.20

Duty refund calculations and miscellaneous provisions.

* * * * *

(b) Calculation of the value of the mid-year production incentive certificates. (1) The value of each producer's certificate shall equal the producer's average creditable wage per unit shipped during the first six months of the calendar year multiplied by the sum of:

(i) The number of units shipped up to 300,000 units times a factor of 90%; plus

(ii) Incremental units shipped up to 450,000 units times a factor of 85%; plus

(iii) Incremental units shipped up to 600,000 units times a factor of 80%; plus

(iv) Incremental units shipped up to 750,000 units times a factor of 75%.

(2) Calculation of the value of the annual production incentive certificates. The value of each producer's certificate shall equal the producer's average creditable benefit per unit based on creditable wages, health insurance, life insurance and pension benefits plus any duty differential, if applicable, averaged from the amount of duty free units shipped during the calendar year multiplied by the sum of the following to obtain the total verified amount of the annual duty-refund per company. This amount would then be adjusted by deducting the amount of the mid-year duty-refund already issued.

(i) The number of units shipped up to 300,000 units times a factor of 90%; plus

(ii) Incremental units shipped up to 450,000 units times a factor of 85%; plus

(iii) Incremental units shipped up to 600,000 units times a factor of 80%; plus

(iv) Incremental units shipped up to 750,000 units times a factor of 75%.

(3) The Departments may make adjustments for these data in the manner set forth in § 303.17(c).

* * * * *

§ 303.21

[Amended]

13. Section 303.21 is amended by removing “post office address” from the first sentence of paragraph (b) and adding “address” in its place.

Dated: March 26, 2007.

David Spooner,

Assistant Secretary for Import Administration, Department of Commerce.

Dated: March 22, 2007.

Edgar Johnson,

Acting Director for Insular Affairs, Department of the Interior.