[Federal Register Volume 61, Number 20 (Tuesday, January 30, 1996)]
[Rules and Regulations]
[Pages 2908-2914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1677]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 10, 113, 141, 144 and 181
[T.D. 96-14]
RIN 1515-AB87
North American Free Trade Agreement (NAFTA)--Implementation of
Duty-Deferral Program Provisions
AGENCY: Customs Service, Treasury.
ACTION: Interim regulations; solicitation of comments.
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SUMMARY: In response to comments received on the final rule
implementing NAFTA, this document sets forth interim regulations
establishing procedural and other requirements that apply to the
collection, waiver and reduction of duties under the duty-deferral
program provisions of the North American Free Trade Agreement. The
document prescribes the documentary and other requirements that must be
followed when merchandise is withdrawn from a U.S. duty-deferral
program either for exportation to another NAFTA country or for entry
into a duty-deferral program of another NAFTA country, the procedures
that must be followed in filing a claim for a waiver or reduction of
duties collected on such merchandise, and the procedures for
finalization of duty collections and duty waiver or reduction claims.
DATES: Interim rule effective January 1, 1996; comments must be
submitted by April 1, 1996.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Regulations Branch, U.S. Customs Service, Franklin Court, 1301
Constitution Avenue, N.W., Washington, D.C. 20229. Comments submitted
may be inspected at the Regulations Branch, Office of Regulations and
Rulings, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington,
DC.
FOR FURTHER INFORMATION CONTACT: Angela Downey, Office of Field
Operations (202-927-1082).
SUPPLEMENTARY INFORMATION:
Background
On September 6, 1995, Customs published in the Federal Register (60
FR 46334) a document which adopted, as a final rule, interim
regulations implementing the Customs-related provisions of the North
American Free Trade Agreement (NAFTA) which was adopted by the United
States with the enactment of the North American Free Trade Agreement
Implementation Act (the ``Act''), Public Law 103-182, 107 Stat. 2057.
The majority of the NAFTA implementing regulations are set forth in
Part 181 of the Customs Regulations (19 CFR Part 181) which includes,
in Subpart E, regulations implementing the NAFTA drawback (including
duty-deferral) provisions of Article 303 of the NAFTA and section 203
of the Act which apply to goods imported into the United States and
then subsequently exported from the United States to Canada on or after
January 1, 1996, or to Mexico on or after January 1, 2001.
Within Subpart E of Part 181, Sec. 181.53 specifically addresses
the provisions concerning the collection, and waiver or reduction, of
duty on goods imported into the United States pursuant to a duty-
deferral program (that is, imported into a manipulation warehouse,
manufacturing warehouse, smelting or refining warehouse or foreign
trade zone, or imported under a temporary importation bond) and
subsequently exported, or used as a material in the production of
another good that is exported, to Canada or Mexico. Paragraph (a)(1)
defines the term ``duty-deferral program'' for purposes of the section.
Paragraph (a)(2) provides that the exported good shall be treated as if
it had been entered or withdrawn for consumption and thus subject to
duty. Paragraph (a)(3) states that Customs shall waive or reduce, in
accordance with paragraphs (b) through (f), the duties paid or owed
under paragraph (a)(2) provided that evidence of exportation and
satisfactory evidence of duties paid in Canada or Mexico are submitted
within 60 calendar days of the date of exportation. Paragraphs (b)
through (f) set forth the duty assessment and waiver or reduction rules
with reference to each type of duty-deferral program, and each of these
paragraphs provides that the duty shall be waived or reduced in an
amount that does not exceed the lesser of the total amount of duty
payable under the section or the total amount of customs duties paid to
Canada or Mexico.
In the discussion of public comments submitted on the interim NAFTA
implementing regulations, the September 6, 1995, final rule document
noted that a number of commenters raised questions regarding the
procedures, including documentary requirements, that would apply for
purposes of the collection and waiver or reduction of duty under
Sec. 181.53. In responding to these comments, Customs agreed that the
regulations should specifically address such procedural issues. Customs
further stated that it would be preferable to address these issues in a
separate Federal Register document, with a view to having appropriate
regulations in place on January 1, 1996, when the Subpart E regulations
go into effect (that is, with regard to goods exported to or entered
into a duty-deferral program in Canada). The regulatory amendments set
forth in this document are intended to accomplish that purpose.
Discussion of Amendments
Section 10.31
In Sec. 10.31, which concerns temporary importations under bond,
paragraph (h) is amended by adding at the end a new sentence regarding
merchandise imported under subheading 9813.00.05, HTSUS, that is
exported to Canada or Mexico, because the entry and bond requirements
under amended Sec. 181.53 may apply to such merchandise.
Section 113.62
In Sec. 113.62, which sets forth the basic importation and entry
bond conditions, paragraphs (a) and (b) are amended by the addition of
references to the withdrawal of merchandise from a duty-deferral
program either for exportation to Canada or Mexico or for entry into a
duty-deferral program in Canada or Mexico because such transactions
will involve the filing of an entry under amended Sec. 181.53 as
discussed below. Paragraph (a) concerns the agreement to pay duties,
taxes and fees, and paragraph (b) concerns the agreement to make or
complete entry.
Section 141.0a
The definition of ``entry'' in paragraph (a) and the definition of
``entered for consumption'' in paragraph (f) have been expanded by the
addition of a sentence at the end referring to documentation required
under amended Sec. 181.53 as discussed below.
Section 141.68
A new paragraph (i) has been added to Sec. 141.68 (time of entry)
regarding merchandise covered by the entry procedures contained in
amended Sec. 181.53 as discussed below.
[[Page 2909]]
Section 144.38
In Sec. 144.38, which concerns withdrawals for consumption, a new
paragraph (b) has been added to cover withdrawals either for
exportation to Canada or Mexico or for entry into a duty-deferral
program in Canada or Mexico.
Section 181.53
Section 181.53 is retitled to reflect that the section also covers
collection (rather than only waiver or reduction) of duty, and the
section text is extensively revised in order to accommodate the
necessary documentation and other procedural requirements regarding the
collection and waiver or reduction of duty under the NAFTA duty-
deferral provisions. In addition to editorial, nonsubstantive changes
to enhance the clarity of the text, the revised text incorporates a
number of organizational and substantive changes that are outlined
below.
Paragraph (a)(1) is retitled as a definitions paragraph and a new
definition of ``date of exportation'' has been added as subparagraph
(i) thereof.
Paragraph (a)(2) still concerns the ``treatment as entered or
withdrawn for consumption'' principle but is divided into the following
subparagraphs:
1. Subparagraph (i) incorporates the provisions of former paragraph
(a)(2) and also includes two new principles stating that the
documentation required to be filed under the section shall constitute
an entry or withdrawal for consumption for purposes of the Customs
Regulations and that any assessment of duty under this section shall
include the duties and fees referred to in Secs. 181.42 (a)-(c) (that
is, antidumping and countervailing duties, premiums on quota, tariff
rate quota or tariff preference level goods, and fees under section 22
of the Agricultural Adjustment Act) and the fees provided for in
Sec. 24.23 (that is, fees for processing merchandise). Subparagraph (i)
refers to goods withdrawn for exportation to Canada or Mexico
(subparagraph (i)(A)) and goods withdrawn and entered into a duty-
deferral program in Canada or Mexico (subparagraph (i)(B)) because
Canada, Mexico and the United States (the three NAFTA Parties) agreed
that goods withdrawn from a duty-deferral program in one NAFTA country
and entered into a duty-deferral program in another NAFTA country shall
be deemed not to have been exported (see section F, article X of the
``Regulatory Standards for Implementation of the North American Free
Trade Agreement'' published in the Federal Register on September 6,
1995, at 60 FR 46464).
2. Subparagraph (ii) is new and provides for application of the
bond provisions of Sec. 142.4 to each withdrawal and exportation
transaction under Sec. 181.53.
3. Subparagraph (iii) is a new provision covering documentation
filing and duty payment procedures. Subparagraph (A) thereunder
specifies the persons who must file the documentation required under
the section. Subparagraph (B) provides for the filing of a Customs Form
7501 within 10 working days of the date of exportation or within 10
working days after being entered into a duty-deferral program in Canada
or Mexico. Subparagraph (C) concerns duty payment and requires that the
duty be deposited with Customs at any time prior to, but no later than,
60 calendar days after the date of exportation of the good or 60
calendar days after the date the good is entered into a duty-deferral
program in Canada or Mexico, and subparagraph (C) also provides for the
calculation of interest from the applicable 60th calendar day.
Paragraph (a)(3) is retitled ``waiver or reduction of duties'' and
is divided into the following subparagraphs:
1. Subparagraph (i) incorporates the provisions of former paragraph
(a)(3) but also includes two new substantive provisions. The first of
these new provisions consists of an exception clause at the beginning
of the subparagraph regarding duties and fees referred to in
Secs. 181.42 (a)-(c) and fees provided for in Sec. 24.23, because such
duties and fees may not be waived or reduced under the NAFTA drawback
(including duty-deferral) provisions. The second of these new
substantive provisions requires the filing of a ``claim'' for waiver or
reduction of duties and states that the claim shall be ``based on''
evidence of exportation to Canada or Mexico or of entry into a duty-
deferral program in Canada or Mexico and satisfactory evidence of
duties paid in Canada or Mexico. The ``based on'' provision replaces
the former requirement of submission of such evidence, is modeled on
the approach used for NAFTA preferential duty claims (see
Sec. 181.21(a) of the NAFTA regulations), and is intended to reduce the
paperwork burden and to facilitate electronic filings.
2. Subparagraph (ii) is a new provision covering the procedures for
filing claims and paying reduced duties. This subparagraph requires
that the claim be filed on Customs Form 7501 which must include
specified Canadian or Mexican import information and provides that any
reduced duties must be deposited with Customs when a claim for reduced
duties is filed.
3. Subparagraph (iii) is a new provision which provides for the
filing of a drawback claim if goods entered into a Canadian or Mexican
duty-deferral program are subsequently withdrawn from that duty-
deferral program.
Paragraph (a)(4) is a new provision setting forth procedures
regarding the liquidation of entries filed under Sec. 181.53 both if no
claim for waiver or reduction of duties is filed (subparagraph (i)) and
if a claim is filed (subparagraph (ii)). This paragraph generally
reflects existing statutory and regulatory standards regarding
liquidations, including notices of liquidation, deemed liquidations,
and the time for filing protests after liquidation. In addition, in
cases in which a claim is filed, this paragraph provides for an
automatic 3-year extension of liquidation, because Customs will require
additional time to obtain any information from Canadian or Mexican
Customs necessary to verify a claim (see Sec. 181.50(b) which provides
for a 3-year delay in liquidation of drawback claims).
Former paragraphs (b) through (f) are redesignated as subparagraphs
(1) through (5) under a new paragraph (b) titled ``assessment and
waiver or reduction of duty''. The introductory texts and/or examples
in newly designated paragraphs (b) (1)-(5), each of which still deals
with a separate type of duty-deferral program, have been modified as
follows: (1) by replacing the references to evidence of exportation and
payment of duty by references to the filing of a proper claim under
paragraph (a)(3) of the section; (2) to refer, where appropriate, to
the filing of Customs Form 7501; and (3) by revising the examples to
more accurately reflect a NAFTA duty-deferral context. In addition, the
example concerning manipulation in warehouse (former paragraph (b), now
paragraph (b)(1)) has been removed because it no longer reflects
current law as interpreted by the courts (see Tropicana Products Inc.
v. U.S., 789 F.Supp. 1154, 16 CIT 155 (1992)). Finally, an exception
regarding a good imported from Canada or Mexico for repair or
alteration has been added at the beginning of the text covering
temporary importation under bond (former paragraph (f), now paragraph
(b)(5)), in order to reflect the terms of article 307(2) of the NAFTA.
Paragraph (c) concerns recordkeeping and corresponds to former
paragraph (g) but includes a new requirement that evidence of
exportation or of entry into a Canadian or Mexican duty-deferral
[[Page 2910]]
program and payment of Canadian or Mexican duty be maintained by the
person who files a claim for waiver or reduction of duty under the
section.
Paragraph (d) corresponds to former paragraph (h) and differs from
the former text in referring to a failure to file a proper claim
(rather than to a failure to provide evidence of duties paid or owed to
Canada or Mexico) and also in referring more specifically to the
persons who are liable for the payment of full duties.
Finally, paragraph (e) corresponds to former paragraph (i) but has
been modified to refer to reliquidation of the ``entry filed under this
section pursuant to 19 U.S.C. 1508(b)(2)(B)(iii) even after liquidation
of the entry has become final'' (see Sec. 181.50(b)).
Comments
Before adopting these interim regulations as a final rule,
consideration will be given to any written comments timely submitted to
Customs. Comments submitted will be available for public inspection in
accordance with the Freedom of Information Act (5 U.S.C. 552),
Sec. 1.4, Treasury Department Regulations (31 CFR 1.4), and
Sec. 103.11(b), Customs Regulations (19 CFR 103.11(b)), on regular
business days between the hours of 9 a.m. and 4:30 p.m. at the
Regulations Branch, Office of Regulations and Rulings, U.S. Customs
Service, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington,
DC.
Inapplicability of Notice and Delayed Effective Date Requirements
Pursuant to the provisions of 5 U.S.C. 553(a), public notice is
inapplicable to these interim regulations because they are within the
foreign affairs function of the United States. The United States is
obligated under Chapter Three of the NAFTA to implement the NAFTA duty-
deferral provisions with respect to exportation to Canada on January 1,
1996. Furthermore, for the same reason, it is determined that good
cause exists under the provisions of 5 U.S.C. 553(d)(3) for dispensing
with a delayed effective date.
Executive Order 12866
Because this document involves a foreign affairs function of the
United States and implements an international agreement, it is not
subject to the provisions of E.O. 12866.
Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for interim
regulations, the provisions of the Regulatory Flexibility Act (5 U.S.C.
601 et seq.) do not apply.
Paperwork Reduction Act
These regulations are being issued without prior notice and public
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).
For this reason, the collections of information contained in these
regulations have been reviewed and, pending receipt and evaluation of
public comments, approved by the Office of Management and Budget in
accordance with the requirements of the Paperwork Reduction Act (44
U.S.C. 3507) under control number 1515-0208.
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.
The collection of information in these regulations is in
Sec. 181.53. This information is required in connection with the
withdrawal of goods from U.S. duty deferral programs for export to
Canada or Mexico and will be used by the U.S. Customs Service both to
determine the amount of duty to be collected on the exported goods and
to determine eligibility for a waiver or reduction of such duty. The
likely respondents are business organizations including importers,
exporters and manufacturers.
Estimated total annual reporting and/or recordkeeping burden:
405,070 hours.
Estimated average annual burden per respondent/recordkeeper: 227
hours.
Estimated number of respondents and/or recordkeepers: 1783.
Estimated annual frequency of responses: 1,069,800.
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the functions of the agency,
including whether the information shall have practical utility; (b) the
accuracy of the agency's estimate of the burden of the collection of
information; (c) ways to enhance the quality, utility, and clarity of
the information to be collected; and (d) ways to minimize the burden of
the collection of information on respondents, including through the use
of automated collection techniques or other forms of information
technology. Comments should be directed to the Office of Management and
Budget, Attention: Desk Officer for the Department of the Treasury,
Office of Information and Regulatory Affairs, Washington, DC 20503. A
copy should also be sent to the Regulations Branch, Office of
Regulations and Rulings, U.S. Customs Service, 1301 Constitution
Avenue, NW., Washington, DC 20229.
Drafting Information. The principal author of this document was
Francis W. Foote, Office of Regulations and Rulings, U.S. Customs
Service. However, personnel from other offices participated in its
development.
List of Subjects
19 CFR Part 10
Alterations, Bonds, Customs duties and inspection, Exports,
Imports, Preference programs, Repairs, Reporting and recordkeeping
requirements, Trade agreements.
19 CFR Part 113
Air carriers, Bonds, Customs duties and inspection, Exports,
Foreign commerce and trade statistics, Freight, Imports, Reporting and
recordkeeping requirements, Vessels.
19 CFR Part 141
Bonds, Customs duties and inspection, Entry of merchandise,
Invoices, Powers of attorney, Packaging, Release of merchandise,
Reporting and recordkeeping requirements.
19 CFR Part 144
Bonds, Customs duties and inspection, Reporting and recordkeeping
requirements, Warehouses.
19 CFR Part 181
Administrative practice and procedure, Canada, Customs duties and
inspection, Exports, Imports, Mexico, Reporting and recordkeeping
requirements, Trade agreements (North American Free-Trade Agreement).
Amendments to the Regulations
Accordingly, parts 10, 113, 141, 144 and 181, Customs Regulations
(19 CFR parts 10, 113, 141, 144 and 181), are amended as set forth
below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The authority citation for part 10 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508,
1623, 1624, 3314;
* * * * *
2. In Sec. 10.31, paragraph (h) is amended by adding a new sentence
at the end to read as follows:
Sec. 10.31 Entry; bond.
* * * * *
(h) * * * However, a TIB importer may be required to file an entry
for consumption and pay duties, or pay liquidated damages under its
bond for a failure to do so, in the case of
[[Page 2911]]
merchandise imported under subheading 9813.00.05, HTSUS, and
subsequently exported to Canada or Mexico (see Sec. 181.53 of this
chapter).
PART 113--CUSTOMS BONDS
1. The authority citation for part 113 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
2. In Sec. 113.62, the introductory texts of paragraphs (a)(1) and
(b) are revised to read as follows:
Sec. 113.62 Basic importation and entry bond conditions.
* * * * *
(a) Agreement to Pay Duties, Taxes, and Charges.
(1) If merchandise is imported and released from Customs custody or
withdrawn from a Customs bonded warehouse into the commerce of, or for
consumption in, the United States, or under Sec. 181.53 of this chapter
is withdrawn from a duty-deferral program for exportation to Canada or
Mexico or for entry into a duty-deferral program in Canada or Mexico,
the obligors (principal and surety, jointly and severally) agree to:
* * * * *
(b) Agreement to Make or Complete Entry. If all or part of imported
merchandise is released before entry under the provisions of the
special delivery permit procedures under 19 U.S.C. 1448(b), or released
before the completion of the entry under 19 U.S.C. 1484(a), or
withdrawn from a duty-deferral program for either exportation to Canada
or Mexico or for entry into a duty-deferral program in Canada or Mexico
before the filing of the documentation provided for in
Sec. 181.53(a)(2) of this chapter, the principal agrees to file within
the time and in the manner prescribed by law and regulation,
documentation to enable Customs to:
* * * * *
PART 141--ENTRY OF MERCHANDISE
1. The authority citation for part 141 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1448, 1484, 1624.
* * * * *
Section 141.68 also issued under 19 U.S.C. 1315;
* * * * *
2. In Sec. 141.0a, paragraphs (a) and (f) are amended by adding a
sentence at the end to read as follows:
Sec. 141.0a Definitions.
* * * * *
(a) Entry. * * * ``Entry'' also means that documentation required
by Sec. 181.53 of this chapter to be filed with Customs to withdraw
merchandise from a duty-deferral program in the United States for
exportation to Canada or Mexico or for entry into a duty-deferral
program in Canada or Mexico.
* * * * *
(f) Entered for consumption. * * * ``Entered for consumption'' also
means the necessary documentation has been filed with Customs to
withdraw merchandise from a duty-deferral program in the United States
for exportation to Canada or Mexico or for entry into a duty-deferral
program in Canada or Mexico (see Sec. 181.53 of this chapter).
* * * * *
3. Section 141.68 is amended by adding a new paragraph (i) to read
as follows:
Sec. 141.68 Time of entry.
* * * * *
(i) Exportation to Canada or Mexico of goods imported into the
United States under a duty-deferral program defined in Sec. 181.53 of
this chapter. When merchandise in a U.S. duty-deferral program is
withdrawn for exportation to Canada or Mexico or for entry into a duty-
deferral program in Canada or Mexico, the date of entry is the date the
entry is required to be filed under Sec. 181.53(a)(2)(iii) of this
chapter.
PART 144--WAREHOUSE AND REWAREHOUSE ENTRIES AND WITHDRAWALS
1. The authority citation for part 144 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1484, 1557, 1559, 1624.
* * * * *
2. Section 144.38 is amended by adding a new paragraph (b) to read
as follows:
Sec. 144.38 Withdrawal for consumption.
* * * * *
(b) Withdrawal for exportation to Canada or Mexico. A withdrawal
for exportation to Canada or Mexico or for entry into a duty-deferral
program in Canada or Mexico is considered a withdrawal for consumption
pursuant to Sec. 181.53 of this chapter.
* * * * *
PART 181--NORTH AMERICAN FREE TRADE AGREEMENT
1. The authority citation for part 181 continues to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1624, 3314.
2. Section 181.53 is revised to read as follows:
Sec. 181.53 Collection and waiver or reduction of duty under duty-
deferral programs.
(a) General.
(1) Definitions. The following definitions shall apply for purposes
of this section:
(i) Date of exportation. ``Date of exportation'' means the date of
importation into Canada or Mexico as reflected on the applicable
Canadian or Mexican entry document (see Sec. 181.47(c) (1) and (2)).
(ii) Duty-deferral program. A ``duty-deferral program'' means any
measure which postpones duty payment upon arrival of a good in the
United States until withdrawn or removed for exportation to Canada or
Mexico or for entry into a Canadian or Mexican duty-deferral program.
Such measures govern manipulation warehouses, manufacturing warehouses,
smelting and refining warehouses, foreign trade zones, and those
temporary importations under bond that are specified in paragraph
(b)(5) of this section.
(2) Treatment as entered or withdrawn for consumption.
(i) General.
(A) Where a good is imported into the United States pursuant to a
duty-deferral program and is subsequently withdrawn from the duty-
deferral program for exportation to Canada or Mexico or is used as a
material in the production of another good that is subsequently
withdrawn from the duty-deferral program for exportation to Canada or
Mexico, and provided that the good is a ``good subject to NAFTA
drawback'' within the meaning of 19 U.S.C. 3333 and is not described in
Sec. 181.45 of this part, the documentation required to be filed under
this section in connection with the exportation of the good shall, for
purposes of this chapter, constitute an entry or withdrawal for
consumption and the exported good shall be subject to duty which shall
be assessed in accordance with paragraph (b) of this section.
(B) Where a good is imported into the United States pursuant to a
duty-deferral program and is subsequently withdrawn from the duty-
deferral program and entered into a duty-deferral program in Canada or
Mexico or is used as a material in the production of another good that
is subsequently withdrawn from the duty-deferral program and entered
into a duty-
[[Page 2912]]
deferral program in Canada or Mexico, and provided that the good is a
``good subject to NAFTA drawback'' within the meaning of 19 U.S.C. 3333
and is not described in Sec. 181.45, the documentation required to be
filed under this section in connection with the withdrawal of the good
from the U.S. duty-deferral program shall, for purposes of this
chapter, constitute an entry or withdrawal for consumption and the
withdrawn good shall be subject to duty which shall be assessed in
accordance with paragraph (b) of this section.
(C) Any assessment of duty under this section shall include the
duties and fees referred to in Sec. 181.42 (a) through (c) and the fees
provided for in Sec. 24.23 of this chapter; these inclusions shall not
be subject to refund, waiver, reduction or drawback.
(ii) Bond requirements. The provisions of Sec. 142.4 of this
chapter shall apply to each withdrawal and exportation transaction
described in paragraph (a)(2)(i) of this section. However, in applying
the provisions of Sec. 142.4 of this chapter in the context of this
section, any reference to release from Customs custody in Sec. 142.4 of
this chapter shall be taken to mean exportation to Canada or Mexico.
(iii) Documentation filing and duty payment procedures.
(A) Persons required to file. In the circumstances described in
paragraph (a)(2)(i) of this section, the documentation described in
paragraph (a)(2)(iii)(B) of this section must be filed by one of the
following persons:
(1) In the case of a withdrawal of the goods from a warehouse, the
person who has the right to withdraw the goods;
(2) In the case of a temporary importation under bond (TIB)
specified in paragraph (b)(5) of this section, the TIB importer whether
or not he sells the goods for export to Canada or Mexico unless
Sec. 10.31(h) of this chapter applies; or
(3) In the case of a withdrawal from a foreign trade zone, the
person who has the right to make entry. However, if a zone operator is
not the person with the right to make entry of the good, the zone
operator shall be responsible for the payment of any duty due in the
event the zone operator permits such other person to remove the goods
from the zone and such other person fails to comply with Secs. 146.67
and 146.68 of this chapter.
(B) Documentation required to be filed and required filing date.
The person required to file shall file Customs Form 7501 no later than
10 working days after the date of exportation to Canada or Mexico or 10
working days after being entered into a duty-deferral program in Canada
or Mexico. Except where the context otherwise requires and except as
otherwise specifically provided in this paragraph, the procedures for
completing and filing Customs Form 7501 in connection with the entry of
merchandise under this chapter shall apply for purposes of this
paragraph. For purposes of completing Customs Form 7501 under this
paragraph, any reference on the form to the entry date shall be taken
to refer to the date of exportation of the good or the date the goods
are entered into a duty-deferral program in Canada or Mexico. The
Customs Form 7501 required under this paragraph may be transmitted
electronically.
(C) Duty payment. The duty estimated to be due under paragraph (b)
of this section shall be deposited with Customs 60 calendar days after
the date of exportation of the good. If a good is entered into a duty-
deferral program in Canada or Mexico, the duty estimated to be due
under paragraph (b) of this section, but without any waiver or
reduction provided for in that paragraph, shall be deposited with
Customs 60 calendar days after the date the good is entered into such
duty-deferral program. Nothing shall preclude the deposit of such
estimated duty at the time of filing the Customs Form 7501 under
paragraph (a)(2)(iii)(B) of this section or at any other time within
the 60-day period prescribed in this paragraph. However, any interest
calculation shall run from the date the duties are required to be
deposited.
(3) Waiver or reduction of duties.
(i) General. Except in the case of duties and fees referred to in
Secs. 181.42(a) through (c) and fees provided for in Sec. 24.23 of this
chapter, Customs shall waive or reduce the duties paid or owed under
paragraph (a)(2) of this section by the person who is required to file
the Customs Form 7501 (see paragraph (a)(2)(iii)(A) of this section) in
accordance with paragraph (b) of this section, provided that a claim
for waiver or reduction of the duties is filed with Customs within the
appropriate 60-day time frame. The claim shall be based on evidence of
exportation or entry into a Canadian or Mexican duty-deferral program
and satisfactory evidence of duties paid in Canada or Mexico (see
Sec. 181.47(c)).
(ii) Filing of claim and payment of reduced duties. A claim for a
waiver or reduction of duties under paragraph (a)(3)(i) of this section
shall be made on Customs Form 7501 which shall set forth, in addition
to the information required under paragraph (a)(2)(iii)(B) of this
section, a description of the good exported to Canada or Mexico and the
Canadian or Mexican import entry number, date of importation, tariff
classification number, rate of duty and amount of duty paid. If a claim
for reduction of duties is filed under this paragraph, the reduced
duties shall be deposited with Customs when the claim is filed.
(iii) Drawback on goods entered into a duty-deferral program in
Canada or Mexico. After goods in a duty-deferral program in the United
States which have been sent from the United States and entered into a
duty-deferral program in Canada or Mexico are then withdrawn from that
Canadian or Mexican duty-deferral program either for entry into Canada
or Mexico or for export to a non-NAFTA country, the person who filed
the Customs Form 7501 (see paragraph (a)(2)(iii)(A) of this section)
may file a claim for drawback if the goods are withdrawn within 5 years
from the date of the original importation of the good into the United
States. If the goods are entered for consumption in Canada or Mexico,
drawback will be calculated in accordance with Sec. 181.44 of this
part.
(4) Liquidation of entry.
(i) If no claim is filed. If no claim for a waiver or reduction of
duties is filed in accordance with paragraph (a)(3) of this section,
Customs shall determine the final duties due under paragraph (a)(2)(i)
of this section and shall post a bulletin notice of liquidation of the
entry filed under this section in accordance with Sec. 159.9 of this
chapter. Where no claim was filed in accordance with this section and
Customs fails to liquidate, or extend liquidation of, the entry filed
under this section within 1 year from the date of the entry, upon the
date of expiration of that 1-year period the entry shall be deemed
liquidated by operation of law in the amount asserted by the exporter
on the Customs Form 7501 filed under paragraph (a)(2)(iii)(A) of this
section. A protest under section 514, Tariff Act of 1930, as amended
(19 U.S.C. 1514), and part 174 of this chapter shall be filed within 90
days from the date of posting of the notice of liquidation under this
section.
(ii) If a claim is filed. If a claim for a waiver or reduction of
duties is filed in accordance with paragraph (a)(3) of this section, an
extension of liquidation of the entry filed under this section shall
take effect for a period not to exceed 3 years from the date the entry
was filed. Before the close of the extension period, Customs shall
liquidate the entry filed under this section and shall post a bulletin
notice
[[Page 2913]]
of liquidation in accordance with Sec. 159.9 of this chapter. If
Customs fails to liquidate the entry filed under this section within 4
years from the date of the entry, upon the date of expiration of that
4-year period the entry shall be deemed liquidated by operation of law
in the amount asserted by the exporter on the Customs Form 7501 filed
under paragraph (a)(3)(ii) of this section. A protest under section
514, Tariff Act of 1930, as amended (19 U.S.C. 1514), and part 174 of
this chapter shall be filed within 90 days from the date of posting of
the notice of liquidation under this section.
(b) Assessment and waiver or reduction of duty.
(1) Manipulation in warehouse. Where a good subject to NAFTA
drawback under this subpart is withdrawn from a bonded warehouse (19
U.S.C. 1562) after manipulation for exportation to Canada or Mexico or
for entry into a duty-deferral program in Canada or Mexico, duty shall
be assessed on the good in its condition and quantity, and at its
weight, at the time of such withdrawal from the warehouse and with such
additions to, or deductions from, the final appraised value as may be
necessary by reason of its change in condition. Such duty shall be paid
no later than 60 calendar days after the date of exportation or of
entry into the duty-deferral program of Canada or Mexico, except that,
upon filing of a proper claim under paragraph (a)(3) of this section,
the duty shall be waived or reduced in an amount that does not exceed
the lesser of the total amount of duty payable on the good under this
section or the total amount of customs duties paid to Canada or Mexico.
(2) Bonded manufacturing warehouse. Where a good is manufactured in
a bonded warehouse (19 U.S.C. 1311) with imported materials and is then
withdrawn for exportation to Canada or Mexico or for entry into a duty-
deferral program in Canada or Mexico, duty shall be assessed on the
materials in their condition and quantity, and at their weight, at the
time of their importation into the United States. Such duty shall be
paid no later than 60 calendar days after either the date of
exportation or of entry into a duty-deferral program of Canada or
Mexico, except that, upon filing of a proper claim under paragraph
(a)(3) of this section, the duty shall be waived or reduced in an
amount that does not exceed the lesser of the total amount of duty
payable on the materials under this section or the total amount of
customs duties paid to Canada or Mexico.
Example. Company N imports tea into the United States and makes
a Class 6 warehouse entry. Company N manufactures sweetened ice tea
mix by combining the imported tea with refined cane sugar and other
flavorings and packaging it in retail size canisters. Upon
withdrawal of the ice tea mix from the warehouse for exportation to
Canada, a Customs Form 7501 is filed showing $900 in estimated U.S.
duties on the basis of the unmanufactured tea. Upon entry into
Canada, the equivalent of US$800 is assessed on the exported ice tea
mix. Company N submits to Customs a proper claim under paragraph
(a)(3) of this section showing payment of the US$800 equivalent in
duties to Canada. Company N will only be required to pay $100 in
U.S. duties out of the $900 amount reflected on the Customs Form
7501.
(3) Bonded smelting or refining warehouse. For any qualifying
imported metal-bearing materials (19 U.S.C. 1312), duty shall be
assessed on the imported materials and the charges against the bond
canceled no later than 60 calendar days after either the date of
exportation of the treated materials to Canada or Mexico or the date of
entry of the treated materials into a duty-deferral program of Canada
or Mexico, either from the bonded smelting or refining warehouse or
from such other customs bonded warehouse after the transfer of the same
quantity of material from a bonded smelting or refining warehouse.
However, upon filing of a proper claim under paragraph (a)(3) of this
section, the duty on the imported materials shall be waived or reduced
in an amount that does not exceed the lesser of the total amount of
duty payable on the imported materials under this section or the total
amount of customs duties paid to Canada or Mexico.
Example. Company Z imports 47 million pounds of electrolytic
zinc which is entered into a bonded smelting and refining warehouse
(Class 7) for processing. Thereafter, Company Z withdraws the
merchandise for exportation to Canada and files a Customs Form 7501
showing $90,000 in estimated U.S. duty on the dutiable quantity of
metal contained in the imported metal-bearing materials. Upon entry
of the processed zinc into Canada, the equivalent of US$50,000 in
duties are assessed. Within 60 days of exportation Company Z files a
proper claim under paragraph (a)(3) of this section and Customs
liquidates the entry with duty due in the amount of $40,000.
(4) Foreign trade zone. For a good that is manufactured or
otherwise changed in condition in a foreign trade zone (19 U.S.C.
81c(a)) and then withdrawn from the zone for exportation to Canada or
Mexico or for entry into a Canadian or Mexican duty-deferral program,
the duty assessed, as calculated under paragraph (e)(1) or (e)(2) of
this section, shall be paid no later than 60 calendar days after either
the date of exportation of the good to Canada or Mexico or the date of
entry of the good into a duty-deferral program of Canada or Mexico,
except that, upon filing of a proper claim under paragraph (a)(3) of
this section, the duty shall be waived or reduced in an amount that
does not exceed the lesser of the total amount of duty payable on the
good under this section or the total amount of customs duties paid to
Canada or Mexico.
(i) Nonprivileged foreign status. In the case of a nonprivileged
foreign status good, duty is assessed on the good in its condition and
quantity, and at its weight, at the time of its exportation from the
zone to Canada or Mexico or its entry into a duty-deferral program of
Canada or Mexico.
Example. CMG imports $1,000,000 worth of auto parts from Korea
and admits them into Foreign-Trade Subzone number 00, claiming
nonprivileged foreign status. (If the auto parts had been regularly
entered they would have been dutiable at 4 percent, or $40,000.) CMG
manufactures subcompact automobiles. Automobiles are dutiable at 2.5
percent ($25,000) if entered for consumption in the United States.
CMG withdraws the automobiles from the zone and exports them to
Mexico. Upon entry of the automobiles in Mexico, CMG pays the
equivalent of US$20,000 in duty. Before the expiration of 60
calendar days from the date of exportation, CMG files a proper claim
under paragraph (a)(3) of this section and pays $5,000 in duty to
Customs representing the difference between the $25,000 which would
have been paid if the automobiles had been entered for consumption
from the zone and the US$20,000 equivalent paid to Mexico.
(ii) Privileged foreign status. In the case of a privileged foreign
status good, duty is assessed on the good in its condition and
quantity, and at its weight, at the time privileged status is granted
in the zone.
Example. O&G, Inc. admits Kuwaiti crude petroleum into its zone
and requests, one month later, privileged foreign status on the
crude before refining the crude into motor gasoline and kerosene.
Upon withdrawal of the refined goods from the zone by O&G, Inc. for
exportation to Canada, a Customs Form 7501 is filed showing $700 in
estimated duties on the imported crude petroleum (rather than on the
refined goods which would have been assessed $1,200). D&O is the
consignee in Canada and pays the Canadian customs duty assessment of
the equivalent of US$1,500 on the goods. O&G, Inc. is entitled to a
waiver of the full $700 in duties upon filing of a proper claim
under paragraph (a)(3) of this section.
(5) Temporary importation under bond. Except in the case of a good
imported from Canada or Mexico for repair or alteration, where a good,
regardless of its origin, was imported temporarily free of duty for
repair,
[[Page 2914]]
alteration or processing (subheading 9813.00.05, Harmonized Tariff
Schedule of the United States) and is subsequently exported to Canada
or Mexico, duty shall be assessed on the good on the basis of its
condition at the time of its importation into the United States. Such
duty shall be paid no later than 60 calendar days after either the date
of exportation or the date of entry into a duty-deferral program of
Canada or Mexico, except that, upon filing of a proper claim under
paragraph (a)(3) of this section, the duty shall be waived or reduced
in an amount that does not exceed the lesser of the total amount of
duty payable on the good under this section or the total amount of
customs duties paid to Canada or Mexico.
Example. Company A imports glassware under subheading
9813.00.05, HTSUS. The glassware is from France and would be
dutiable under a regular consumption entry at $6,000. Company A
alters the glassware by etching hotel logos on the glassware. Two
weeks later, Company A sells the glassware to Company B, a Mexican
company, and ships the glassware to Mexico. Company B enters the
glassware and is assessed duties in an amount equivalent to US$6,200
and claims NAFTA preferential tariff treatment. Company B provides a
copy of the Mexican landing certificate to Company A showing that
the US$6,200 equivalent in duties was assessed but not yet paid to
Mexico. If Mexico ultimately denies Company B's NAFTA claim and the
Mexican duty payment becomes final, Company A, upon submission to
Customs of a proper claim under paragraph (a)(3) of this section, is
entitled to a waiver of the full $6,000 in U.S. duty.
(c) Recordkeeping requirements. If a person intends to claim a
waiver or reduction of duty on goods under this section, that person
shall maintain records concerning the value of all involved goods or
materials at the time of their importation into the United States and
concerning the value of the goods at the time of their exportation to
Canada or Mexico or entry into a duty-deferral program of Canada or
Mexico, and if a person files a claim under this section for a waiver
or reduction of duty on goods exported to Canada or Mexico or entered
into a Canadian or Mexican duty-deferral program, that person shall
maintain evidence of exportation or entry into a Canadian or Mexican
duty-deferral program and satisfactory evidence of the amount of any
customs duties paid to Canada or Mexico on the good (see
Sec. 181.47(c)). Failure to maintain adequate records will result in
denial of the claim for waiver or reduction of duty.
(d) Failure to file proper claim. If the person identified in
paragraph (a)(2)(iii)(A) of this section fails to file a proper claim
within the 60-day period specified in this section, that person, or the
FTZ operator pursuant to paragraph (a)(2)(iii)(A)(3) of this section,
will be liable for payment of the full duties assessed under this
section and without any waiver or reduction thereof.
(e) Subsequent claims for preferential tariff treatment. If a claim
for a refund of duties is allowed by the Canadian or Mexican customs
administration under Article 502(3) of the NAFTA or under any other
circumstance after duties have been waived or reduced under this
section, Customs may reliquidate the entry filed under this section
pursuant to 19 U.S.C. 1508(b)(2)(B)(iii) even after liquidation of the
entry has become final.
George J. Weise,
Commissioner of Customs.
Approved: January 24, 1996.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 96-1677 Filed 1-29-96; 8:45 am]
BILLING CODE 4820-02-P
