E9-1215. Imports of Certain Apparel Articles: Interim Procedures for the Implementation of the Earned Import Allowance Program Established Under the Andean Trade Preference Act of 2008

AGENCY:

Department of Commerce, International Trade Administration.

ACTION:

Interim Procedures, Request for Comments

SUMMARY:

The Department of Commerce is issuing interim procedures implementing provisions under the Andean Trade Preference Act of 2008 (“the Act”), enacted in its entirety by Congress on October 3, 2008. Section 2 of the Act contains amendments to Title IV of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (Public Law 109-53; 119 Stat. 495). Under Section 2 of the Act, Title IV of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act is amended by adding Section 404 of the Act creating a benefit for eligible apparel articles wholly assembled in the Dominican Republic that meet the requirements for a “2 for 1” earned import allowance. The amendment requires the Secretary of Commerce to establish a program to provide earned import allowance certificates to any producer or entity controlling production of eligible apparel articles in the Dominican Republic, such that apparel wholly assembled in the Dominican Republic from fabric or yarns, regardless of their source, and imported directly from the Dominican Republic may enter the United States duty-free, pursuant to the satisfaction of the terms governing issuance of the earned import allowance certificate by the producer or entity controlling production of eligible apparel articles in the Dominican Republic.

DATES:

These interim procedures are effective as of December 1, 2008. Although these procedures are not subject to the requirement to provide prior notice and opportunity for public comment under 5 U.S.C. 553(b)(A) (“Administrative Procedures Act”), Commerce will consider written comments received by 5:00 p.m. on March 23, 2009.

ADDRESSES:

Comments should be addressed to: Janet Heinzen, Acting Deputy Assistant Secretary for Textiles and Apparel, Room 3001, United States Department of Commerce, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT:

Robert Carrigg, Office of Textiles and Apparel, U.S. Department of Commerce, [phone].

SUPPLEMENTARY INFORMATION:

BACKGROUND:

The Department of Commerce is issuing interim procedures implementing Section 2 of the Act, which was enacted in its entirety by Congress on October 3, 2008. Section 2 of the Act contains amendments creating a benefit for apparel from the Dominican Republic in Title IV of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (Public Law 109-53; 119 Stat. 495). These amendments are also cited as the Earned Import Allowance Program.

Under Section 404 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, Title IV is amended by creating an uncapped benefit for eligible apparel articles wholly assembled in the Dominican Republic that meet the requirements for a “2 for 1” earned import allowance. The Act requires that the Secretary of Commerce establish an Earned Import Allowance program under Section Title IV such that eligible apparel articles wholly assembled in the Dominican Republic from fabrics or yarns and imported directly from the Dominican Republic shall enter the United States free of duty, without regard to the source of the fabrics (not including denim), fabric components, or yarns from which the articles are made, if such apparel articles are accompanied by an earned import allowance certificate (“certificate”) that reflects the amount of credits equal to the total square meter equivalent (“SME“) of such apparel articles, in accordance with the program outlined below. The Secretary of Commerce has delegated his authority under the Act to implement and administer the Earned Import Allowance Program to the International Trade Administration's Office of Textiles and Apparel (“OTEXA”).

This notice sets forth the interim procedures OTEXA will follow in implementing the provisions of the Earned Import Allowance Program. In accordance with these procedures, OTEXA will issue certificates to qualifying apparel producers to accompany imports of eligible apparel articles wholly formed in the Dominican Republic and exported from the Dominican Republic. Such certificates will be issued as long as there is a sufficient balance of SMEs available as a result of the purchase of qualifying woven fabrics, as defined below, intended for production of apparel in the Dominican Republic. OTEXA, promptly upon promulgation of these interim procedures, intends to begin the process of opening and administering qualifying apparel producers' accounts to issue certificates as appropriate.

These procedures may be modified in the future to address concerns that may arise as OTEXA gains experience in implementing them. Pursuant to the Secretary's delegation of authority, OTEXA may reconsider, and/or subsequently amend any determination to deposit credits or request to issue certificates that may have been procured by error, fraud, or similar faults.

Interim Procedures:

1. Introduction: OTEXA will issue a certificate to any producer or entity controlling production in the Dominican Republic (“qualifying apparel producer”) based on the following elements: (1) One SME credit shall be issued to a qualifying apparel producer for every two SMEs of qualifying woven fabric that the qualifying apparel producer can demonstrate that it purchased for the manufacture in the Dominican Republic of eligible apparel articles wholly assembled in the Dominican Republic. SME quantities are to be calculated by the use of the appropriate conversion factor, defined below. OTEXA shall, as requested by a qualifying apparel producer, create and maintain an account for such qualifying apparel producer, into which such credits shall be deposited. (2) Such qualifying apparel producer may redeem credits for certificates reflecting such number of credits as the qualifying apparel producer may request and has available. Requests for deposits of credits for purchases of qualifying woven fabrics as well as redemption of said credits for earned import allowance certificates will be made through a dedicated on-line system, known as the Dominican Republic 2 for 1 Earned Import Allowance Online System (“DR 2 for 1 online system”).

2. Definitions:

a. The Act: The Andean Trade Preference Act of 2008.

b. Conversion Factor: Conversion factors listed in “Correlation: U.S. Textile and Apparel Industry Category System with the Harmonized Tariff Schedule of the United States of America, 2008,” or its successor publications, of the United States Department of Commerce.

c. Imported Directly from the Dominican Republic: Articles are “imported directly from the Dominican Republic” if -

(1) the articles are shipped directly from the Dominican Republic into the United States without passing into the territory of any intermediate country; or

(2) the articles are shipped from the Dominican Republic into the United States through the territory of an intermediate country, and -

(A) the articles in the shipment do not enter into the commerce of any intermediate country, and the invoices, bills of lading, and other shipping documents specify the United States as the final destination; or

(B) the invoices and other documents do not specify the United States as the final destination, but the articles in the shipment -

(i) remain under the control of the customs authority in the intermediate country;

(ii) do not enter into the commerce of the intermediate country except for the purpose of a sale other than at retail; and

(iii) have not been subjected to operations in the intermediate country other than loading, unloading, or other activities necessary to preserve the articles in good condition.

d. Qualifying Apparel Producer: An individual, corporation, partnership, association, or other entity or group that exercises direct, daily operational control over the apparel production process in the Dominican Republic; or an individual, corporation, partnership, association or other entity that is not a producer and that controls the apparel production process in the Dominican Republic through a contractual relationship or other indirect means.

e. Qualifying Woven Fabric: For the purposes of these procedures, the term “qualifying woven fabric” means woven fabric of cotton, wholly formed in the United States from yarns wholly formed in the United States and certified by the producer or entity controlling production as being suitable for use in the manufacture of apparel items such as trousers, bib and brace overalls, breeches and shorts, skirts and divided skirts or pants, all the foregoing of cotton, purchased on or after August 1, 2007, expressly for production of apparel in the Dominican Republic, except that:

(1) fabric otherwise eligible as qualifying woven fabric shall not be ineligible as qualifying woven fabric because the fabric contains nylon filament yarn to which Section 213(b)(2)(A)(vii)(IV) of the Caribbean Basin Economic Recovery Act (“CBERA”) applies;

(2) fabric that would otherwise be ineligible as qualifying woven fabric because the fabric contains yarns not wholly formed in the United States shall not be ineligible as qualifying woven fabric if the total weight of all such yarns is not more than 10 percent of the total weight of the fabric, except that any elastomeric yarn contained in an eligible article must be wholly formed in the United States; and

(3) fabric otherwise eligible as qualifying fabric shall not be ineligible as qualifying fabric because the fabric contains yarns or fibers that have been designated as not commercially available pursuant to--

(a) article 3.25(4) or Annex 3.25 of the Agreement;

(b) Annex 401 of the North American Free Trade Agreement;

(c) section 112(b)(5) of the African Growth and Opportunity Act;

(d) section 204(b)(3)(B)(i)(III) or (ii) of the Andean Trade Preference Act;

(e) section 213(b)(2)(A)(v) or 213A(b)(5)(A) of the Caribbean Basin Economic Recovery Act; or

(f). any other provision, relating to determining whether a textile or apparel article is an originating good eligible for preferential treatment, of a law that implements a free trade agreement entered into by the United States that is in effect at the time the claim for preferential treatment is made.

f. Qualifying Apparel Articles: the term `eligible apparel articles' means the following articles classified in chapter 62 of the Harmonized Tariff System of the United States (and meeting the requirements of the rules relating to chapter 62 of the HTS contained in general note 29(n) of the HTS) of cotton (but not of denim): trousers, bib and brace overalls, breeches and shorts, skirts and divided skirts, and pants.

g. Wholly Assembled: A good is “wholly assembled” in the Dominican Republic if all its components, of which there must be at least two, pre-existed in essentially the same condition as found in the finished good and were combined to form the finished good in the Dominican Republic. Minor attachments and minor embellishments (for example, appliqués, beads, spangles, embroidery, and buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, cuffs, plackets, and pockets), shall not affect the determination of whether a good is “wholly assembled” in the Dominican Republic.

3. Submitting a Request to Open an Account: A qualifying apparel producer, as defined in section 2(d) of these procedures, may request that OTEXA open an account to which records of purchases of qualifying woven fabric, as defined in section 2(e) of these procedures may be deposited toward a balance from which to draw certificates. Such request should be made online, via the DR 2 for 1 online system, located on the OTEXA website. In making a request to open an account, the qualifying apparel producer must provide:

a. The full name and address of the qualifying apparel producer;

b. All designated contacts and contact information, and any designees authorized to have access to the account; and

c. A statement affirming the accuracy and authenticity of the information submitted to OTEXA.

Once the application has been received by the DR 2 for 1 online system and reviewed and approved by OTEXA, the qualifying apparel producer will be assigned a unique user identification number, and a password to enable future access to its online account. The qualifying apparel producer may request to update contact and designee information in its account at any time through the DR 2 for 1 online system.

4. Submitting a Request to Deposit Credits. A qualifying apparel producer with an existing account may submit a request to deposit credits for purchases of qualifying woven fabric. The request must contain the following information:

a. The name of the qualifying apparel producer;

b. A complete description of the qualifying woven fabric;

c. The quantity, in SMEs, of the qualifying woven fabric;

d. A statement that the qualifying woven fabric is intended for the production of eligible apparel articles in the Dominican Republic; and

e. Supporting documentation: documentation, which, in their totality includes:

(1) the U.S. manufacturer of the qualifying woven fabric;

(2) the full description of the fabric in question, including any non-U.S. components or inputs and their manufacturer;

(3) the name of the qualifying apparel producer as the ultimate consignee; and

(4) that the fabric purchased is intended for production of eligible apparel articles in the Dominican Republic.

f. An affirmation from the qualifying apparel producer as to the accuracy and authenticity of the information provided.

The request must be submitted via the DR 2 for 1 online system. All supporting documentation must be submitted either electronically via the DR 2 for 1 online system, or via fax to 202-482-0858 or 202-482-0667. OTEXA will review the request and supporting documentation and shall make a determination whether to approve or deny the request to deposit credits. Should there be insufficient information with which to make a determination, OTEXA may request additional information from the qualifying apparel producer, the manufacturer of the fabric at issue, or any other entity identified in supporting documentation, as provided by section 6.

5. Submitting a Request for an Earned Income Allowance Certificate. A qualifying apparel producer may request the issuance of a certificate via the DR 2 for 1 online system. The qualifying apparel producer must log on to the DR 2 for 1 online system to access its account, and submit a request to redeem credits and be issued a certificate. As long as there are sufficient credits available, a certificate will be automatically generated by the DR 2 for 1 online system, and the credits will be automatically withdrawn from the qualifying apparel producer's account. If there are insufficient credits in the qualifying apparel producer's account, the request for a certificate will automatically be denied by the DR 2 for 1 online system.

6. Verification of Submitted Information. OTEXA may, at any time, verify the information submitted by a qualifying apparel producer or its designee. OTEXA may require any textile mill or other entity located in the United States that exports to the Dominican Republic qualifying woven fabric, upon such export or upon request, documentation to OTEXA: (a) verifying that the qualifying woven fabric was exported to a producer in the Dominican Republic or to an entity controlling production; and (b) identifying such producer or entity controlling production, and the quantity and description of qualifying woven fabric exported to such producer or entity controlling production. OTEXA may also require that a producer or entity controlling production submit documentation to verify purchases of qualifying woven fabric. OTEXA may make available to each person or entity identified in documentation submitted under these provisions information contained in the documentation that relates to the purchase of qualifying woven fabric involving such person or entity. OTEXA may establish and impose penalties for the submission to OTEXA of fraudulent information under this program, other than a claim under the customs laws of the United States or under title 18, United States Code.

7. Contact Information: Questions regarding the Earned Import Allowance program or the DR 2 for 1 online system may contact OTEXA via email at [e-mail], or by phone to the Office of Textiles and Apparel, U.S. Department of Commerce, [phone].

Dated: January 15, 2009.

R. Matthew Priest,

Deputy Assistant Secretary for Textiles and Apparel.