E6-13947. NAFTA: Merchandise Processing Fee Exemption and Technical Corrections

AGENCY:

Customs and Border Protection, Department of Homeland Security; Department of the Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The current regulations in title 19 of the Code of Federal Regulations allow CBP to collect a merchandise processing fee (MPF) on imported shipments to recoup administrative expenses. However, “originating merchandise” that qualifies to be marked as goods of Canada or of Mexico under the NAFTA are exempted from this fee. CBP is proposing to amend the regulations to clarify that an importer is subject to the same declaration requirement that is established for claiming NAFTA duty preference in order to claim the exemption of the MPF for goods that meet a NAFTA rule of origin even when the goods are unconditionally free.

In addition, CBP is proposing to make several technical corrections. CBP is proposing to amend the regulations to clarify that a Certificate of Origin is not required for a commercial importation for which the total value of originating goods does not exceed $2,500. CBP is also proposing to remedy two incorrect addresses and an incorrect Code of Federal Regulations citation.

DATES:

Comments must be received on or before October 23, 2006.

ADDRESSES:

You may submit comments, identified by docket number, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments via docket number USCBP-2006-0090.
• Mail: Trade and Commercial Regulations Branch, Office of Regulations and Rulings, Bureau of Customs and Border Protection, 1300 Pennsylvania Avenue, NW., (Mint Annex), Washington, DC 20229.

Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the SUPPLEMENTARY INFORMATION section of this document.

Docket: For access to the docket to read background documents or comments received, go to http://www.regulations.gov. Submitted comments may also be inspected during regular business days between the hours of 9 a.m. and 4:30 p.m. at the Office of Regulations and Rulings, Bureau of Customs and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Joseph Clark at [phone].

FOR FURTHER INFORMATION CONTACT:

Seth Mazze, Trade Agreements Branch, Office of Field Operations, [phone].

SUPPLEMENTARY INFORMATION:

Public Participation

Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of the proposed rule. CBP also invites comments that relate to the economic, environmental, or federalism effects that might result from this proposed rule. Comments that will provide the most assistance to CBP in developing these procedures will reference a specific portion of the proposed rule, explain the reason for any recommended change, and include data, information, or authority that support such recommended change.

Background

On December 17, 1992, the United States, Canada, and Mexico entered into the North American Free Trade Agreement (NAFTA). Among the stated objectives of the NAFTA is the elimination of barriers to trade in, and the facilitation of the cross-border movement of, goods and services between the territories of the countries. The provisions of the NAFTA were adopted by the United States with the enactment of the North American Free Trade Agreement Implementation Act (“the Act,” 19 U.S.C. 3301-3473). On September 6, 1995, Customs published Treasury Decision (T.D.) 95-68 (North American Free Trade Agreement) in the Federal Register (60 FR 46334), adopting amendments to the regulations in title 19 of the Code of Federal Regulations (CFR) to implement Customs-related aspects of the NAFTA. The final rule went into effect on October 1, 1995. Sections 403(1) and 411 of the Homeland Security Act of 2002 (Pub. L. 107-296) transferred the United States Customs Service and certain of its functions from the Department of the Treasury to the Department of Homeland Security; pursuant to section 1502 of the Act, the President renamed the “Customs Service” as the “Bureau of Customs and Border Protection,” also referred to as the “CBP.”

Merchandise Processing Fee (MPF) Exemption

As a means of recouping administrative expenses for the processing of imported shipments, CBP charges a merchandise processing fee (MPF), as provided for in 19 U.S.C. 58c. However, under 19 U.S.C. 58c(b)(10)(B), for goods qualifying under the rules of origin set out in 19 U.S.C. 3332, the fee may not be charged with respect to goods that qualify to be marked as goods of Canada or of Mexico (pursuant to Annex 311 of the NAFTA). In order to claim a NAFTA duty preference, an importer must make a declaration. The same declaration is used to claim the MPF exemption. That is, the importer must place the appropriate special program indicator (e.g., “CA” for goods of Canada and “MX” for goods of Mexico) opposite the good on the entry form. The proposal in this document addresses the situation in which an importer of an originating good has no duty preference incentive to make the required NAFTA declarations on the entry because the Normal Trade Relations rate of duty on the good is free (i.e., the good is unconditionally duty free). Accordingly, CBP is proposing to amend 19 CFR 181.21(a) to clarify, consistent with existing law and CBP practice, that in order to claim the MPF exemption for unconditionally free goods from a NAFTA country, an importer of an originating good must place the appropriate special program indicator opposite the good on the entry form even though the importer is not claiming a NAFTA duty preference.

Technical Corrections

Exemption From Providing Certificate of Origin

Section 181.22(b) of title 19, CFR (19 CFR 181.22(b)), requires an importer who claims preferential tariff treatment on a good under 19 CFR 181.21 to provide, at the request of the port director, a copy of each Certificate of Origin pertaining to the good which is in the possession of the importer. Certain importations are exempted from this requirement under 19 CFR 181.22(d). One of these exemptions, set forth in section 181.22(d)(1)(iii) is for a commercial importation of a good whose value does not exceed $2,500 if a signed statement is attached to the invoice or other documents accompanying the shipment.

CBP has determined that 19 CFR 181.22(d)(1)(iii) should be amended to clarify that the $2,500 value refers to the total value of a shipment and not to the value of the individual goods in a shipment. Accordingly, CBP is proposing to amend 19 CFR 181.22(d)(1)(iii) to clarify that a Certificate of Origin is not required for a commercial importation consisting of originating goods, the total value of which does not exceed $2,500, if the required statement is attached.

Other Technical Corrections

CBP is also proposing to make several other technical corrections to the regulations. In CBP Dec. 05-32, an Interim Rule published in the Federal Register (70 FR 58009) on October 5, 2005, CBP redesignated 19 CFR 12.132 as 102.25. However, there is a reference to § 12.132 in § 181.21(a). Accordingly, CBP is proposing to make a minor conforming amendment to update this reference. In addition, because CBP Dec. 05-32 removed the declaration requirement referenced in §§ 12.130(c) and 12.132, CBP is proposing to remove the entries for these sections in the list of OMB control numbers in § 178.2. CBP is also proposing to amend an incorrect citation to 19 CFR 181.72(a)(2)(iii) in 19 CFR 181.74(a). The correct citation is to § 181.72(a)(3)(iii). In addition, CBP is proposing to amend the address in 19 CFR 181.74(e) for providing notification when the Canadian or Mexican customs administration intends to conduct a NAFTA verification visit in the U.S. in order to determine whether a good imported into the U.S. qualifies as an originating good. The correct address is: “Bureau of Customs and Border Protection, Office of Field Operations, Special Enforcement Division, 1300 Pennsylvania Ave., NW., Washington, DC 20229.” CBP is also proposing to amend the National Commodity Specialist Division (NCSD) address in 19 CFR 181.93(a) for the submission of advance ruling requests under the NAFTA. The correct NCSD address is: “National Commodity Specialist Division, Bureau of Customs and Border Protection, One Penn Plaza, 10th Floor, New York, NY 10119.” This address is also corrected in the list of public reading rooms in 19 CFR 103.1.

Signing Authority

The signing authority for this document falls under 19 CFR 0.1(a)(1).

Paperwork Reduction Act

Because those changes with possible paperwork implications proposed in this document are merely clarifications of existing requirements, there is no need to amend the paperwork burden for the number previously approved by OMB for part 181 of title 19, CFR. The clearance number for part 181 is 1651-0098.

Regulatory Flexibility Act and Executive Order 12866

Pursuant to the provisions of the Regulatory Flexibility Act (6 U.S.C. 601 et seq.), it is certified that the proposed amendments will not have a significant economic impact on a substantial number of small entities. CBP is proposing to merely clarify, consistent with existing law and CBP practice, that an importer is subject to the same declaration requirement that is established for claiming NAFTA duty preference in order to claim the exemption of the MPF for goods that meet a NAFTA rule of origin even when the goods are unconditionally free. CBP is also proposing to merely clarify, consistent with current CBP practice, that a Certificate of Origin is not required for a commercial importation consisting of originating goods, the total value of which does not exceed $2,500, if the required statement is attached. Lastly, CBP is proposing to make other technical corrections to correct two incorrect addresses and an incorrect Code of Federal Regulations citation. For the same reasons, this document does not meet the criteria for a significant regulatory action under Executive Order 12866.

List of Subjects

19 CFR Part 103

• Administrative practice and procedure
• Freedom of information

19 CFR Part 178

• Collections of information
• Paperwork requirements
• Reporting and recordkeeping requirements

19 CFR Part 181

• Canada
• Customs duties and inspection
• Imports
• Mexico
• Trade agreements (North American Free Trade Agreement)

Proposed Amendments to the Regulations

It is proposed to amend 19 CFR parts 103, 178, and 181 as set forth below.

PART 103—AVAILABILITY OF INFORMATION

1. The authority citation for part 103 continues to read as follows:

Authority: 5 U.S.C. 301, 552, 552a; 19 U.S.C. 66, 1624; 31 U.S.C. 9701.

2. Amend § 103.1 by removing the address citation “New York, 6 World Trade Center, New York, New York 10048” and adding in its place the address citation “New York, One Penn Plaza, 10th Floor, New York, NY 10119”.

PART 178—APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

3. The authority citation for part 178 continues to read as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.

4. Amend § 178.2 by removing the entries for 12.130(c) and 12.132.

PART 181—NORTH AMERICAN FREE TRADE AGREEMENT

5. The authority citation for part 181 continues to read as follows:

Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624, 3314.

6. Revise § 181.21(a) to read as follows:

§ 181.21

Filing of claim for preferential tariff treatment upon importation.

(a) Declaration. In connection with a claim for preferential tariff treatment, or for the exemption from the merchandise processing fee, for a good under the NAFTA, the U.S. importer shall make a written declaration that the good qualifies for such treatment. The written declaration may be made by including on the entry summary, or equivalent documentation, the symbol “CA” for a good of Canada, or the symbol “MX” for a good of Mexico, as a prefix to the subheading of the HTSUS under which each qualifying good is classified. Except as otherwise provided in 19 CFR 181.22 and except in the case of a good to which Appendix 6.B to Annex 300-B of the NAFTA applies (see also 19 CFR 102.25), the declaration shall be based on a complete and properly executed original Certificate of Origin, or copy thereof, which is in the possession of the importer and which covers the good being imported.

* * * * *

7. Amend § 181.22(d)(1)(iii) by removing the phrase “of a good whose value”, and adding in its place the phrase “for which the total value of originating goods”.

8. Amend § 181.74 by:

a. In paragraph (a), removing the citation “181.72(a)(2)(iii)” and adding in its place the citation “181.72(a)(3)(iii)”; and

b. In paragraph (e), removing the address citation “Project North Star Coordination Center, P.O. Box 400, Buffalo, New York 14225-0400” and adding in its place the address citation “Bureau of Customs and Border Protection, Office of Field Operations, Special Enforcement Division, 1300 Pennsylvania Ave., NW., Washington, DC 20229”.

9. Amend § 181.93(a) by removing the address citation “National Commodity Specialist Division, United States Customs Service, 6 World Trade Center, New York, NY 10048” and adding in its place the address citation “National Commodity Specialist Division, Bureau of Customs and Border Protection, One Penn Plaza, 10th Floor, New York, NY 10119”.

Dated: August 17, 2006.

Deborah J. Spero,

Acting Commissioner, Customs and Border Protection.

Timothy E. Skud,

Deputy Assistant Secretary of the Treasury.