[Federal Register Volume 63, Number 20 (Friday, January 30, 1998)]
[Proposed Rules]
[Pages 4601-4608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2249]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 /
Proposed Rules
[[Page 4601]]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 10
RIN 1515-AB59
Andean Trade Preference
AGENCY: Customs Service, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to amend the Customs Regulations to
implement the duty preference provisions of the Andean Trade Preference
Act (the Act). The document sets forth the country of origin and
related rules which apply for purposes of duty-free or reduced-duty
treatment on imported goods under the Act and specifies the documentary
and other procedural requirements which apply to any claim for such
preferential tariff treatment under the Act.
DATES: Comments must be received on or before March 31, 1998.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Regulations Branch, Office of Regulations and Rulings, U.S.
Customs Service, 1300 Pennsylvania Avenue, NW., Washington, DC 20229.
Comments submitted may be inspected at the Regulations Branch, Office
of Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania
Avenue, NW., 3rd Floor, Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Operational Aspects: Tony Mazzoccoli, Office of Field Operations (202-
927-0564).
Legal Aspects: Craig Walker, Office of Regulations and Rulings (202-
927-1116).
SUPPLEMENTARY INFORMATION:
Background
On December 4, 1991, President Bush signed into law the Andean
Trade Preference Act (Public Law 102-182, Title II, Secs. 201-206, 105
Stat. 1236-1244) (``the Act'', commonly referred to as the ATPA), the
provisions of which are codified at 19 U.S.C. 3201 through 3206.
Sections 202 and 204(c) of the Act (19 U.S.C. 3201 and 3203(c))
authorize the President to proclaim duty-free treatment for all
eligible articles, and duty reductions for certain other goods, from
any country designated by the President as a beneficiary country
pursuant to section 203 of the Act (19 U.S.C. 3202). On July 2, 1992,
President Bush signed Proclamation 6455 (57 FR 30069) which (1)
Proclaimed the duty treatment authorized by the Act, (2) designated
Colombia as a beneficiary country for purposes of the Act, and (3)
modified the Harmonized Tariff Schedule of the United States (HTSUS) to
incorporate the substance of the relevant provisions of the Act; under
the terms of the proclamation, the proclaimed duty treatment was
effective with respect to articles entered, or withdrawn from warehouse
for consumption, on or after July 22, 1992. On the same date President
Bush signed Proclamation 6456 (57 FR 30097) designating Bolivia as a
beneficiary country for purposes of the Act, similarly effective July
22, 1992. On April 13, 1993, President Clinton signed Proclamation 6544
(58 FR 19547) which, among other things, designated Ecuador as a
beneficiary country for purposes of the Act, effective April 30, 1993.
On August 11, 1993, President Clinton signed Proclamation 6585 (58 FR
43239) designating Peru as a beneficiary country for purposes of the
Act, effective August 26, 1993. The modifications to the HTSUS
contained in Proclamation 6455 setting forth the substance of the
relevant provisions of the Act are now contained in General Note 11,
HTSUS, and eligible articles and other goods to which preferential duty
treatment under the Act applies are identified within the HTSUS by the
designation ``J'' appearing with or without an asterisk in the
``Special'' rate of duty subcolumn.
Sections 204(a)-(c) of the Act (19 U.S.C. 3203(a)-(c)) set forth
the standards which govern the eligibility of articles for duty-free or
reduced-duty treatment under the Act. Section 204(a), which contains
the basic origin and related rules for purposes of duty-free treatment,
was based on section 213(a) of the Caribbean Basin Economic Recovery
Act, as amended (19 U.S.C. 2703(a)), which sets forth the origin and
related rules governing duty-free treatment under the Caribbean Basin
Initiative (CBI). Thus, in order to be eligible for duty-free treatment
under the Act, an article imported from a designated beneficiary
country must meet three basic requirements: (1) It must be imported
directly from a beneficiary country into the customs territory of the
United States; (2) it must have its origin in a beneficiary country,
that is, it either must be wholly the growth, product, or manufacture
of a beneficiary country or must be a new or different article of
commerce that has been grown, produced, or manufactured in a
beneficiary country; and (3) it must have a minimum domestic value
content, that is, at least 35 percent of its appraised value must be
attributed to the sum of the cost or value of materials produced in one
or more beneficiary countries plus the direct costs of processing
operations performed in one or more beneficiary countries. The
provisions of section 204(a) of the Act further parallel the provisions
of section 213(a) of the CBI statute in the following regards: (1)
Simple combining or packaging operations or mere dilution with water or
another substance does not confer beneficiary country origin on an
imported article or on a constituent material of an imported article;
(2) the term ``beneficiary country'' is defined as including the
Commonwealth of Puerto Rico and the U.S. Virgin Islands for purposes of
determining compliance with the 35 percent value content requirement;
(3) the cost or value of materials produced in the customs territory of
the United States (other than in Puerto Rico) may be counted toward the
35 percent value content requirement to a maximum of 15 percent of the
appraised value of the imported article; and (4) the expression
``direct costs of processing operations'' is defined in the same
manner. However, the origin and related rules of section 204(a) of the
Act differ from the corresponding provisions in section 213(a) of the
CBI statute in two principal respects: (1) Section 204(a) of the Act
specifically allows input attributable to one or more CBI beneficiary
countries for purposes of the 35 percent value content requirement (the
corresponding CBI statutory provision makes no mention of input
attributable to beneficiary countries under the Act); and (2) section
204(a) of the Act has no provision corresponding
[[Page 4602]]
to section 213(a)(4) of the CBI statute which was added to facilitate
the addition of value to an article in Puerto Rico and the granting of
duty-free treatment after final exportation of an article from a CBI
beneficiary country. Section 204(b) of the Act lists eight categories
of goods excluded from the duty-free treatment provided for in section
204(a), one of which refers to articles to which reduced rates of duty
apply under section 204(c) of the Act. Section 204(c) directs the
President to proclaim reductions in the rates of duty on handbags,
luggage, flat goods, work gloves and leather wearing apparel that: (1)
Are the product of any beneficiary country; and (2) were not designated
on August 5, 1983, as eligible articles for purposes of the Generalized
System of Preferences (GSP) under Title V of the Trade Act of 1974 (19
U.S.C. 2461-2466). These reduced duty rates, which were generally
implemented in equal annual stages over a 5-year period (commencing in
1992 and ending in 1996), appear in the HTSUS in the ``Special'' rate
of duty subcolumn followed by the symbol ``J'' within parentheses.
The U.S. Customs Service is responsible for the administration of
laws and regulations regarding the entry of merchandise into the United
States. Moreover, section 204(a)(2) of the Act specifically directs the
Secretary of the Treasury to promulgate such regulations as may be
necessary to carry out the duty-free treatment provisions of the Act.
Accordingly, this document proposes to amend the Customs Regulations to
implement the duty preference provisions of the Act.
In view of the similarity between the origin and related rules
under the Act and those under the CBI, the proposed regulations set
forth in this document are based in significant part on the CBI
regulations contained in Secs. 10.191-10.198 of the Customs Regulations
(19 CFR 10.191-10.198). However, some variations have been made from
the CBI approach, in some cases to reflect differences between the Act
and the CBI statute and in other cases to simplify or otherwise improve
on the layout of the CBI regulations. The proposed regulations are
discussed in detail below.
Discussion of Proposed Amendments
Section 10.201
This section sets forth a general statement regarding the purpose
of the regulations with reference to the Act and its implementation by
the President.
Section 10.202
This section sets forth definitions of terms or expressions of
general use throughout the regulatory texts.
Paragraph (a), which defines ``beneficiary country'', reflects both
the definition in section 203(a)(1) of the Act and the approach taken
in Sec. 10.191(b)(1) of the CBI regulations. The exception language in
the definition is directed to those entities that are treated as
beneficiary countries only for the limited purpose of the 35 percent
value content requirement (see the discussion of Sec. 10.206(b) below).
Thus, where the term ``beneficiary country'' appears in a regulatory
text without any modifier or qualification and the context does not
involve the 35 percent value content requirement, such term has
reference only to an ATPA beneficiary country as so designated by the
President.
The definition of ``eligible articles'' in paragraph (b) is similar
to the approach taken in Sec. 10.191(b)(2) of the CBI regulations. The
definition refers specifically to duty-free treatment, which is
authorized under section 204(a) of the Act, and thus does not apply to
reduced-duty treatment under section 204(c) of the Act (see Sec. 10.208
below). The list of articles excluded from the definition reflect the
terms of section 204(b) of the Act.
The definition of ``entered'' in paragraph (c) is taken from
section 203(a)(2) of the Act.
The definition of ``wholly the growth, product, or manufacture of a
beneficiary country'' in paragraph (d) simply refers to the definition
of the same expression set forth in Sec. 10.191(b)(3) of the CBI
regulations.
Section 10.203
This section makes a general reference to the requirements for
preferential duty treatment and with cross-references to the specific
sections which set forth those requirements in detail. Although
somewhat different from the approach taken in the CBI regulations,
Customs believes that this general statement/cross-reference approach
will facilitate the reader's overall understanding of the duty-free
aspects of the Act and the requirements thereunder.
This section refers only to duty-free treatment (which is provided
for under section 204(a) of the Act) and to those sections of the
regulations that deal with the requirements for such treatment. Thus,
this section and the other sections cited therein have no application
in the case of reduced-duty treatment which is provided for separately
under section 204(c) of the Act (see the discussion of Sec. 10.208
below).
Section 10.204
This section implements the ``imported directly'' requirement of
section 204(a)(1)(A) of the Act and is based on Sec. 10.193 of the CBI
regulations. As in the case of the CBI, reference is made to shipment
from ``any'' beneficiary country because, under the wording of the
statute (and as a means to facilitate cumulation of value among
multiple beneficiary countries--see Sec. 10.206 below), the article
merely must be imported directly from ``a'' beneficiary country and
thus does not have to be shipped from the beneficiary country where it
was produced.
Section 10.205
This section sets forth the basic country of origin rules which
apply to articles for purposes of duty-free treatment under section 204
of the Act.
The ``wholly the growth, product, or manufacture'' language in
paragraph (a)(1) and the ``new or different article of commerce which
has been grown, produced, or manufactured'' language in paragraph
(a)(2) reflect standards required by section 204(a)(2) of the Act to be
included in the implementing regulations.
Paragraph (b) implements the simple combining or packaging or mere
dilution exceptions to duty-free eligibility required to be in the
regulations by section 204(a)(2) of the Act. Since the language of the
Act in this regard is identical to language used in the CBI statute,
this paragraph follows Sec. 10.195(a)(1) of the CBI regulations by
including the words ``(as opposed to complex or meaningful)'' after the
word ``simple'', and the last sentence is intended to shorten the
regulatory text by incorporating by reference the provisions of the CBI
regulations which clarify the meaning and application of identical
statutory language. It should be noted that, as in the case of the CBI,
the simple combining or packaging or mere dilution language operates
only in the limited context of eligibility for duty-free treatment;
that language does not limit or otherwise affect a determination as to
whether a new or different article of commerce has been created in a
beneficiary country within the meaning of paragraph (a)(2) of this
section.
Section 10.206
This section implements the 35 percent value content requirement
contained in section 204(a)(1)(B) of the Act.
Paragraph (a) sets forth the basic requirement but refers simply to
``a beneficiary country or countries''
[[Page 4603]]
without specifically mentioning CBI beneficiary countries even though
such countries are specified in the statutory text with regard to both
the cost or value of materials and the direct costs of processing
operations (see the discussion of paragraph (b) below). As in the case
of the CBI, the statutory and regulatory texts permit unlimited
cumulation of value among ``beneficiary countries'' for purposes of
meeting the 35 percent value content requirement.
In paragraph (b), the first sentence defines ``beneficiary
country'' as including, for purposes of the 35 percent value content
requirement, (1) the Commonwealth of Puerto Rico and the U.S. Virgin
Islands and (2) any CBI beneficiary country. The reference to CBI
beneficiary countries in this regulatory context (rather than in
paragraph (a) of this section) is intended to simplify the regulatory
texts here and elsewhere and will have no substantive effect on the
proper interpretation and application of the statutory provisions. The
second sentence of this paragraph is based on the second sentence of
Sec. 10.195(b) of the CBI regulations and is intended to clarify a
basic legal limitation on the statutorially-permitted cumulation of
value attributable to entities that are not ``beneficiary countries''
as defined in section 203(a)(1) of the Act: except in the case of
Puerto Rico which is part of the customs territory of the United
States, if value is added to an article in any such entity (that is, in
the U.S. Virgin Islands or in a CBI beneficiary country) after final
exportation of the article from a beneficiary country designated as
such by the President under the Act and prior to importation into the
United States, such addition of value would disqualify the article from
duty-free treatment because the article would have entered the commerce
of the intermediate entity and thus could not be considered to be
``imported directly'' upon arrival in the customs territory of United
States within the meaning of section 204(a)(1)(A) of the Act and
Sec. 10.204 of the implementing regulations. While the same legal
limitation would not apply per se in the case of value added in Puerto
Rico or in the case of U.S.-produced materials added in the United
States (see paragraph (c) of this section), as a practical matter the
opportunities for such additions in a post-final-exportation context
and prior to entry for consumption are limited by the following
factors: (1) Bonded manufacturing warehouses cannot be used because
under 19 U.S.C. 1311 and Sec. 19.15 of the Customs Regulations (19 CFR
19.15) the article subjected to a manufacturing process in such a
warehouse may not be withdrawn for consumption but rather must be
exported; (2) while a storage and manipulation warehouse under 19
U.S.C. 1557 and 1562 and Part 144 of the Customs Regulations (19 CFR
Part 144) could be used, the benefit as regards added value would not
be significant in most cases because manufacturing processes are
precluded in such warehouses; (3) while foreign-trade zones established
and operated under 19 U.S.C. 81a-81u and Part 146 of the Customs
Regulations (19 CFR Part 146) could be used, such facilities involve
special procedures and limitations; and (4) while an article could be
imported under a temporary importation bond for processing (including
manufacture) under subheading 9813.00.05, HTSUS, and Sec. 10.31 of the
Customs Regulations (19 CFR 10.31), such an article ultimately would
have to be exported in accordance with the terms of the bond. It is
also noted in this regard that the Act contains no provision similar to
section 213(a)(4) of the CBI statute (19 U.S.C. 2703(a)(4)) which was
added in 1984 specifically for the purpose of facilitating the addition
of value through tail-end processing performed in bonded manufacturing
warehouses located in Puerto Rico.
Paragraph (c) reflects section 204(a)(1) as regards the inclusion
of U.S.-produced materials and is based on Sec. 10.195(c) of the CBI
regulations.
Paragraph (d) is based on Sec. 10.196 of the CBI regulations. The
following points are noted as regards this paragraph:
1. Subparagraph (1) corresponds to paragraph (a) of the CBI
regulation but with the following principal differences: (1) the simple
combining or packaging or mere dilution limitation (also applicable to
materials under section 204(a)(2) of the Act) has been included
directly, rather than as a cross-reference to the rule set forth in the
regulatory provision covering articles (Sec. 10.205(b)), for purposes
of clarity and in order to ensure that a clear distinction is made
between application of the rule for purposes of eligibility of an
article for duty-free treatment and application of the rule for
purposes of determining the origin of a material for purposes of the 35
percent value content requirement; and (2) to avoid unnecessary
repetition of regulatory text, the examples of Sec. 10.196(a), and the
principles and examples of Sec. 10.195(a)(2), of the CBI regulations
have been incorporated by reference since those CBI provisions are
equally applicable in the present context.
2. Subparagraph (2) is taken from Sec. 10.196(b) of the CBI
regulations.
3. Subparagraph (3) follows Sec. 10.196(c) of the CBI regulations
but also refers specifically to materials produced in the customs
territory of the United States.
Paragraph (e) implements section 204(a)(3) of the Act (which is
identical to section 213(a)(3) of the CBI statute (19 U.S.C.
2703(a)(3)) and follows the terms of Sec. 10.197 of the CBI
regulations.
Paragraph (f) is based on, and is used in the same context as,
Sec. 10.195(e) of the CBI regulations. Wherever origin terminology and
the term ``beneficiary country'' are used together with reference to an
article, the latter term is restricted so as to cover only a
beneficiary country designated under the Act by the President, in order
to reflect the fact that an article (as opposed to materials
incorporated in an article) must be a product of such a beneficiary
country and cannot be a product of a CBI beneficiary country.
Section 207
This section is intended to cover all procedural requirements,
including the submission of documentation required to support a claim
for duty-free treatment. The provisions of this section are based on
CBI regulatory provisions.
Paragraph (a), which concerns the procedure for filing a claim for
duty-free treatment, is based on Sec. 10.192 of the CBI regulations but
does not include the first sentence of the CBI provision which Customs
believes is redundant and thus unnecessary. The exception language at
the beginning of the paragraph is intended to reflect the fact that
this procedure does not apply in the case of an informal entry.
Paragraph (b) concerns the documentary evidence of country of
origin and of compliance with the 35 percent value content requirement
and, subject to changes to reflect the context of the Act, follows the
terms of Sec. 10.198(a) of the CBI regulations.
Paragraph (c) sets forth the procedures which apply in the case of
informal entries and is based on Sec. 10.198(b) of the CBI regulations.
Paragraph (d), which concerns evidence of direct importation, is
based on Sec. 10.194 of the CBI regulations. However, the last sentence
of paragraph (a) of the CBI provision has not been included because it
is covered by paragraph (e) of this section.
Paragraph (e), which concerns verification of submitted
documentation, is based on Sec. 10.198(c) of the CBI regulations but
refers to all documentation submitted under Sec. 10.207, that is,
evidence of country of
[[Page 4604]]
origin and of compliance with the 35 percent value content requirement
submitted under paragraph (b) and evidence of direct importation
submitted under paragraph (d).
Section 10.208
This section implements the duty-reduction provisions of section
204(c) of the Act. This section is set forth separately to reflect the
fact that the Act treats the duty-reduction provisions separately from
the duty-free provisions of section 204(a) and without any repetition
of, or cross-reference to, the legal requirements that apply for
purposes of duty-free treatment. Thus, paragraph (a) of this section
does not refer to direct importation, the 35 percent value content
requirement, or the simple combining or packaging or mere dilution
limitation because, under the terms of the Act, those legal standards
apply only for purposes of duty-free treatment under section 204(a),
and no ATPA Declaration is required under this section because the ATPA
Declaration is directed primarily to compliance with the 35 percent
value content requirement. However, because Customs believes that the
words ``product of'' as used in section 204(c)(1)(A) of the Act should
be interpreted as synonymous with the basic origin rule used for
Customs purposes, paragraph (a) of this section repeats the rule set
forth in Sec. 10.205(a) as discussed above. Paragraph (b), which sets
forth the normal procedure for filing a reduced-duty claim, and
paragraph (c), which covers verification of a reduced-duty claim, are
variations of Secs. 10.207(a) and (e) and are otherwise self-
explanatory.
Comments
Before adopting the proposed amendments as a final rule,
consideration will be given to any written comments (preferably in
triplicate) 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, 1300 Pennsylvania Anenue, N.W., 3rd
Floor, Washington, D.C.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in Executive Order 12866.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that, if adopted, the proposed
amendments will not have a significant economic impact on a substantial
number of small entities. The amendments reflect statutory requirements
that are already in effect and follow existing regulatory provisions
that implement similar statutory programs. Accordingly, the proposed
amendments are not subject to the regulatory analysis or other
requirements of 5 U.S.C. 603 and 604.
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507).
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 proposed regulations is in
Sec. 10.207. This information conforms to requirements in 19 U.S.C.
3203(a) and is used by Customs to determine whether goods imported from
designated beneficiary countries are entitled to duty-free entry under
that statutory provision. The likely respondents are business
organizations including importers, exporters, and manufacturers.
Estimated total annual reporting and/or recordkeeping burden: 5,000
hours.
Estimated average annual burden per respondent/recordkeeper: 2
minutes.
Estimated number of respondents and/or recordkeepers: 150,000.
Estimated annual number of responses: 150,000.
Comments on the collection of information should be sent to the
Office of Management and Budget, Attention: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, D.C. 20503. A copy should also be sent to the
Regulations Branch, Office of Regulations and Rulings, U.S. Customs
Service, 1300 Pennsylvania Avenue, N.W., Washington, D.C. 20229.
Comments should be submitted within the time frame that comments are
due regarding the substance of the proposal.
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; (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; and (e) estimates of capital or startup costs and costs of
operations, maintenance, and purchase of services to provide
information.
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 in 19 CFR Part 10
Andean trade preference, Customs duties and inspection, Entry
procedures, Exports, Imports, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
For the reasons set forth above, it is proposed to amend Part 10,
Customs Regulations (19 CFR Part 10), as set forth below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The general authority citation for Part 10 continues to read,
and a specific authority citation for Secs. 10.201 through 10.207 is
added to read, 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;
* * * * *
Sec. 10.201 through 10.207 also issued under 19 U.S.C. 3203.
2. Part 10 is amended by adding a new center heading followed by
new sections 10.201 through 10.208 to read as follows:
Andean Trade Preference
10.201 Applicability.
10.202 Definitions.
10.203 Eligibility criteria in general.
10.204 Imported directly.
10.205 Country of origin criteria.
10.206 Value content requirement.
10.207 Procedures for filing duty-free treatment claim and
submitting supporting documentation.
10.208 Duty reductions for certain products.
Andean Trade Preference
Sec. 10.201 Applicability.
Title II of Public Law 102-182 (105 Stat. 1233), entitled the
Andean Trade
[[Page 4605]]
Preference Act (ATPA) and codified at 19 U.S.C. 3201-3206, authorizes
the President to proclaim duty-free treatment for all eligible articles
from any beneficiary country, to designate countries as beneficiary
countries, and to proclaim duty reductions for certain goods not
eligible for duty-free treatment. The provisions of Secs. 10.202
through 10.208 of this part set forth the legal requirements and
procedures that apply for purposes of obtaining such duty-free or
reduced-duty treatment for articles from a beneficiary country which
are identified for purposes of such treatment in General Note 11,
Harmonized Tariff Schedule of the United States (HTSUS), and in the
``Special'' rate of duty column of the HTSUS.
Sec. 10.202 Definitions.
The following definitions apply for purposes of Secs. 10.201
through 10.208:
(a) Beneficiary country. Except as otherwise provided in
Sec. 10.206(b), the term ``beneficiary country'' refers to any country
or successor political entity with respect to which there is in effect
a proclamation by the President designating such country or successor
political entity as a beneficiary country in accordance with section
203 of the ATPA (19 U.S.C. 3202).
(b) Eligible articles. The term ``eligible'' when used with
reference to an article means any merchandise which is imported
directly from a beneficiary country as provided in Sec. 10.204, which
meets the country of origin criteria set forth in Sec. 10.205 and the
value-content requirement set forth in Sec. 10.206, and which, if the
requirements of Sec. 10.207 are met, is therefore entitled to duty-free
treatment under the ATPA. The following merchandise shall not be
considered eligible articles entitled to duty-free treatment under the
ATPA:
(1) Textile and apparel articles which are subject to textile
agreements;
(2) Footwear not designated on December 4, 1991, as eligible for
the purpose of the Generalized System of Preferences under Title V,
Trade Act of 1974, as amended (19 U.S.C. 2461-2466);
(3) Tuna, prepared or preserved in any manner, in airtight
containers;
(4) Petroleum, or any product derived from petroleum, provided for
in headings 2709 and 2710, Harmonized Tariff Schedule of the United
States (HTSUS);
(5) Watches and watch parts (including cases, bracelets, and
straps), of whatever type including, but not limited to, mechanical,
quartz digital or quartz analog, if such watches or watch parts contain
any material which is the product of any country with respect to which
HTSUS column 2 rates of duty apply;
(6) Sugars, syrups, and molasses classified in subheadings
1701.11.03, 1701.12.02, 1701.99.02, 1702.90.32, 1806.10.42, and
2106.90.12, HTSUS;
(7) Rum and tafia classified in subheading 2208.40.00, HTSUS; or
(8) Articles to which reduced rates of duty apply under section
204(c) of the ATPA (19 U.S.C. 3203(c)) (see Sec. 10.208).
(c) Entered. The term ``entered'' means entered, or withdrawn from
warehouse for consumption, in the customs territory of the United
States.
(d) Wholly the growth, product, or manufacture of a beneficiary
country. The expression ``wholly the growth, product, or manufacture of
a beneficiary country'' has the same meaning as that set forth in
Sec. 10.191(b)(3) of this part.
Sec. 10.203 Eligibility criteria in general.
An article classifiable under a subheading of the Harmonized Tariff
Schedule of the United States for which a rate of duty of ``Free''
appears in the ``Special'' subcolumn followed by the symbol ``J'' or
``J*'' in parentheses is eligible for duty-free treatment, and will be
accorded such treatment, if each of the following requirements is met:
(a) Imported directly. The article is imported directly from a
beneficiary country as provided in Sec. 10.204.
(b) Country of origin criteria. The article complies with the
country of origin criteria set forth in Sec. 10.205.
(c) Value content requirement. The article complies with the value
content requirement set forth in Sec. 10.206.
(d) Filing of claim and submission of supporting documentation. The
claim for duty-free treatment is filed, and any required documentation
in support of the claim is submitted, in accordance with the procedures
set forth in Sec. 10.207.
Sec. 10.204 Imported directly.
In order to be eligible for duty-free treatment under the ATPA, an
article shall be imported directly from a beneficiary country into the
customs territory of the United States. For purposes of this
requirement, the words ``imported directly'' mean:
(a) Direct shipment from any beneficiary country to the United
States without passing through the territory of any non-beneficiary
country; or
(b) If shipment from any beneficiary country to the United States
was through the territory of a non-beneficiary country, the articles in
the shipment did not enter into the commerce of the non-beneficiary
country while en route to the United States, and the invoices, bills of
lading, and other shipping documents show the United States as the
final destination; or
(c) If shipment from any beneficiary country to the United States
was through the territory of a non-beneficiary country and the invoices
and other documents do not show the United States as the final
destination, then the articles in the shipment, upon arrival in the
United States, are imported directly only if they:
(1) Remained under the control of the customs authority in the
intermediate country;
(2) Did not enter into the commerce of the intermediate country
except for the purpose of sale other than at retail, and the articles
are imported into the United States as a result of the original
commercial transaction between the importer and the producer or the
latter's sales agent; and
(3) Were not subjected to operations in the intermediate country
other than loading and unloading, and other activities necessary to
preserve the articles in good condition.
Sec. 10.205 Country of origin criteria.
(a) General. Except as otherwise provided in paragraph (b) of this
section, an article may be eligible for duty-free treatment under the
ATPA if the article is either:
(1) Wholly the growth, product, or manufacture of a beneficiary
country; or
(2) A new or different article of commerce which has been grown,
produced, or manufactured in a beneficiary country.
(b) Exceptions. No article shall be eligible for duty-free
treatment under the ATPA by virtue of having merely undergone simple
(as opposed to complex or meaningful) combining or packaging
operations, or mere dilution with water or mere dilution with another
substance that does not materially alter the characteristics of the
article. The principles and examples set forth in Sec. 10.195(a)(2) of
this part shall apply equally for purposes of this paragraph.
Sec. 10.206 Value content requirement.
(a) General. An article may be eligible for duty-free treatment
under the ATPA only if the sum of the cost or value of the materials
produced in a beneficiary country or countries, plus the direct costs
of processing operations performed in a beneficiary country or
countries, is not less than 35 percent of the appraised value of the
article at the time it is entered.
(b) Commonwealth of Puerto Rico, U.S. Virgin Islands and CBI
beneficiary
[[Page 4606]]
countries. For purposes of determining the percentage referred to in
paragraph (a) of this section, the term ``beneficiary country''
includes the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and
any CBI beneficiary country as defined in Sec. 10.191(b)(1) of this
part. Any cost or value of materials or direct costs of processing
operations attributable to the Virgin Islands or any CBI beneficiary
country must be included in the article prior to its final exportation
to the United States from a beneficiary country as defined in
Sec. 10.202(a).
(c) Materials produced in the United States. For purposes of
determining the percentage referred to in paragraph (a) of this
section, an amount not to exceed 15 percent of the appraised value of
the article at the time it is entered may be attributed to the cost or
value of materials produced in the customs territory of the United
States (other than the Commonwealth of Puerto Rico). The principles set
forth in paragraph (d)(1) of this section shall apply in determining
whether a material is ``produced in the customs territory of the United
States'' for purposes of this paragraph.
(d) Cost or value of materials. (1) ``Materials produced in a
beneficiary country or countries'' defined. For purposes of paragraph
(a) of this section, the words ``materials produced in a beneficiary
country or countries'' refer to those materials incorporated in an
article which are either:
(i) Wholly the growth, product, or manufacture of a beneficiary
country or two or more beneficiary countries; or
(ii) Substantially transformed in any beneficiary country or two or
more beneficiary countries into a new or different article of commerce
which is then used in any beneficiary country as defined in
Sec. 10.202(a) in the production or manufacture of a new or different
article which is imported directly into the United States. For purposes
of this paragraph (d)(1)(ii), no material shall be considered to be
substantially transformed into a new or different article of commerce
by virtue of having merely undergone simple (as opposed to complex or
meaningful) combining or packaging operations, or mere dilution with
water or mere dilution with another substance that does not materially
alter the characteristics of the article. The examples set forth in
Sec. 10.196(a) of this part, and the principles and examples set forth
in Sec. 10.195(a)(2) of this part, shall apply for purposes of the
corresponding context under paragraph (d)(1) of this section.
(2) Questionable origin. When the origin of a material either is
not ascertainable or is not satisfactorily demonstrated to the
appropriate port director, the material shall not be considered to have
been grown, produced, or manufactured in a beneficiary country or in
the customs territory of the United States.
(3) Determination of cost or value of materials. (i) The cost or
value of materials produced in a beneficiary country or countries or in
the customs territory of the United States includes:
(A) The manufacturer's actual cost for the materials;
(B) When not included in the manufacturer's actual cost for the
materials, the freight, insurance, packing, and all other costs
incurred in transporting the materials to the manufacturer's plant;
(C) The actual cost of waste or spoilage, less the value of
recoverable scrap; and
(D) Taxes and/or duties imposed on the materials by any beneficiary
country or by the United States, provided they are not remitted upon
exportation.
(ii) Where a material is provided to the manufacturer without
charge, or at less than fair market value, its cost or value shall be
determined by computing the sum of:
(A) All expenses incurred in the growth, production, or manufacture
of the material, including general expenses;
(B) An amount for profit; and
(C) Freight, insurance, packing, and all other costs incurred in
transporting the material to the manufacturer's plant.
(iii) If the pertinent information needed to compute the cost or
value of a material is not available, the appraising officer may
ascertain or estimate the value thereof using all reasonable ways and
means at his disposal.
(e) Direct costs of processing operations. (1) Items included. For
purposes of paragraph (a) of this section, the words ``direct costs of
processing operations'' mean those costs either directly incurred in,
or which can be reasonably allocated to, the growth, production,
manufacture, or assembly of the specific merchandise under
consideration. Such costs include, but are not limited to the
following, to the extent that they are includable in the appraised
value of the imported merchandise:
(i) All actual labor costs involved in the growth, production,
manufacture, or assembly of the specific merchandise, including fringe
benefits, on-the-job training, and the cost of engineering,
supervisory, quality control, and similar personnel;
(ii) Dies, molds, tooling, and depreciation on machinery and
equipment which are allocable to the specific merchandise;
(iii) Research, development, design, engineering, and blueprint
costs insofar as they are allocable to the specific merchandise; and
(iv) Costs of inspecting and testing the specific merchandise.
(2) Items not included. For purposes of paragraph (a) of this
section, the words ``direct costs of processing operations'' do not
include items which are not directly attributable to the merchandise
under consideration or are not costs of manufacturing the product.
These include, but are not limited to:
(i) Profit; and
(ii) General expenses of doing business which either are not
allocable to the specific merchandise or are not related to the growth,
production, manufacture, or assembly of the merchandise, such as
administrative salaries, casualty and liability insurance, advertising,
and salesmen's salaries, commissions, or expenses.
(f) Articles wholly the growth, product, or manufacture of a
beneficiary country. Any article which is wholly the growth, product,
or manufacture of a beneficiary country as defined in Sec. 10.202(a),
and any article produced or manufactured in a beneficiary country as
defined in Sec. 10.202(a) exclusively from materials which are wholly
the growth, product, or manufacture of a beneficiary country or
countries, shall normally be presumed to meet the requirement set forth
in paragraph (a) of this section.
Sec. 10.207 Procedures for filing duty-free treatment claim and
submitting supporting documentation.
(a) Filing claim for duty-free treatment. Except as provided in
paragraph (c) of this section, a claim for duty-free treatment under
the ATPA may be made at the time of filing the entry summary by placing
the symbol ``J'' as a prefix to the Harmonized Tariff Schedule of the
United States subheading number applicable to each article for which
duty-free treatment is claimed on that document.
(b) Shipments covered by a formal entry. (1) Articles not wholly
the growth, product, or manufacture of a beneficiary country. (i)
Declaration. In a case involving an article covered by a formal entry
for which duty-free treatment is claimed under the ATPA and which is
not wholly the growth, product, or manufacture of a single beneficiary
country as defined in Sec. 10.202(a), the exporter or other appropriate
party having knowledge of the relevant facts
[[Page 4607]]
in the beneficiary country as defined in Sec. 10.202(a) where the
article was produced or last processed shall be prepared to submit
directly to the port director, upon request, a declaration setting
forth all pertinent detailed information concerning the production or
manufacture of the article. When requested by the port director, the
declaration shall be prepared in substantially the following form:
ATPA DECLARATION
I, __________________ (name), hereby declare that the articles
described below (a) were produced or manufactured in ______________
(country) by means of processing operations performed in that
country as set forth below and were also subjected to processing
operations in the other beneficiary country or countries (including
the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and any
CBI beneficiary country) as set forth below and (b) incorporate
materials produced in the country named above or in any other
beneficiary country or countries (including the Commonwealth of
Puerto Rico, the U.S. Virgin Islands, and any CBI beneficiary
country) or in the customs territory of the United States (other
than the Commonwealth of Puerto Rico) as set forth below:
----------------------------------------------------------------------------------------------------------------
Processing operations performed on Material produced in a beneficiary
articles country or in the U.S.
---------------------------------------------------------------------------
Description of Description of
Number and date articles and Description of material,
of invoices quantity processing Direct costs of production Cost or value of
operations and processing process, and material
country of operations country of
processing production
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Date-------------------------------------------------------------------
Address----------------------------------------------------------------
Signature--------------------------------------------------------------
Title------------------------------------------------------------------
(ii) Retention of records and submission of declaration. The
information necessary for the preparation of the declaration shall be
retained in the files of the party responsible for its preparation and
submission for a period of 5 years. In the event that the port director
requests submission of the declaration during the 5-year period, it
shall be submitted by the appropriate party directly to the port
director within 60 days of the date of the request or such additional
period as the port director may allow for good cause shown. Failure to
submit the declaration in a timely fashion will result in a denial of
duty-free treatment.
(iii) Value added after final exportation. In a case in which value
is added to an article in the Commonwealth of Puerto Rico or in the
United States after final exportation of the article from a beneficiary
country as defined in Sec. 10.202(a), in order to ensure compliance
with the value requirement under Sec. 10.206(a), the declaration
provided for in paragraph (b)(1)(i) of this section shall be filed by
the importer or consignee with the entry summary. The declaration shall
be completed by the party responsible for the addition of such value.
(2) Articles wholly the growth, product, or manufacture of a
beneficiary country. In a case involving an article covered by a formal
entry for which duty-free treatment is claimed under the ATPA and which
is wholly the growth, product, or manufacture of a single beneficiary
country as defined in Sec. 10.202(a), a statement to that effect shall
be included on the commercial invoice provided to Customs.
(c) Shipments covered by an informal entry. The normal procedure
for filing a claim for duty-free treatment as set forth in paragraph
(a) of this section need not be followed, and the filing of the
declaration provided for in paragraph (b)(1)(i) of this section will
not be required, in a case involving a shipment covered by an informal
entry. However, the port director may require submission of such other
evidence of entitlement to duty-free treatment as deemed necessary.
(d) Evidence of direct importation. (1) Submission. The port
director may require that appropriate shipping papers, invoices, or
other documents be submitted within 60 days of the date of entry as
evidence that the articles were ``imported directly'', as that term is
defined in Sec. 10.204.
(2) Waiver. The port director may waive the submission of evidence
of direct importation when otherwise satisfied, taking into
consideration the kind and value of the merchandise, that the
merchandise was, in fact, imported directly and that it otherwise
clearly qualifies for duty-free treatment under the ATPA.
(e) Verification of documentation. The documentation submitted
under this section to demonstrate compliance with the requirements for
duty-free treatment under the ATPA shall be subject to such
verification as the port director deems necessary. In the event that
the port director is prevented from obtaining the necessary
verification, the port director may treat the entry as fully dutiable.
Sec. 10.208 Duty reductions for certain products.
(a) General. Handbags, luggage, flat goods, work gloves, and
leather wearing apparel that were not designated on August 5, 1983, as
eligible articles for purposes of the Generalized System of Preferences
under Title V, Trade Act of 1974, as amended (19 U.S.C. 2461-2466), are
not eligible for duty-free treatment under the ATPA. However, any such
article from a beneficiary country may be subject to a reduced rate of
duty set forth in the Harmonized Tariff Schedule of the United States
in the applicable ``Special'' subcolumn followed by the symbol ``J'' in
parenthesis, provided the article is a product of any beneficiary
country. For purposes of this section, an article is a ``product of'' a
beneficiary country if the article is either:
(1) Wholly the growth, product, or manufacture of a beneficiary
country; or
(2) A new or different article of commerce which has been grown,
produced, or manufactured in a beneficiary country.
(b) Filing reduced-duty claim. A claim for reduced-duty treatment
under the ATPA may be made at the time of filing the entry summary or
other entry document by placing thereon the symbol ``J'' as a prefix to
the Harmonized Tariff Schedule of the United States subheading number
applicable to each article for which reduced-duty treatment is claimed
and
[[Page 4608]]
by placing thereon the reduced duty rate applicable to each such
article.
(c) Verification of reduced-duty claim. Any claim for reduced-duty
treatment under this section shall be subject to such verification as
the port director deems necessary. In the event that the port director
is prevented from obtaining the necessary verification, the port
director may treat the entry as dutiable at the applicable non-ATPA
rate.
Samuel H. Banks,
Acting Commissioner of Customs.
Approved: December 24, 1997.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 98-2249 Filed 1-29-98; 8:45 am]
BILLING CODE 4820-02-P
