[Federal Register Volume 62, Number 170 (Wednesday, September 3, 1997)]
[Rules and Regulations]
[Pages 46433-46443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23308]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 7, 10, 148 and 178
[T.D. 97-75]
RIN 1515-AB14
Duty-Free Treatment of Articles Imported From U.S. Insular
Possessions
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document adopts as a final rule, with some modifications,
proposed amendments to the Customs Regulations to clarify and update
the legal requirements and procedures that apply for purposes of
obtaining duty-free treatment on articles imported from
[[Page 46434]]
insular possessions of the United States other than Puerto Rico. The
final regulatory amendments include certain organizational changes to
improve the layout of the regulations and also clarify and update the
personal exemption provisions applicable to returning residents.
EFFECTIVE DATE: October 3, 1997.
FOR FURTHER INFORMATION CONTACT: Monika Rice, Office of Regulations and
Rulings (202-482-7049).
SUPPLEMENTARY INFORMATION:
Background
On July 27, 1993, Customs published in the Federal Register (58 FR
40095) a notice of proposed rulemaking to amend parts 7, 10 and 148 of
the Customs Regulations (19 CFR parts 7, 10 and 148) as regards duty-
free treatment of articles imported from insular possessions of the
United States other than Puerto Rico. The proposed amendments to part 7
included replacement of present Sec. 7.8 by two new Secs. 7.2 and 7.3,
the latter section representing an update and elaboration of the
substantive requirements and procedures for obtaining duty-free
treatment on products of U.S. insular possessions under General Note
3(a)(iv) of the Harmonized Tariff Schedule of the United States
(HTSUS). The proposed Part 10 amendments involved primarily the
transfer to part 7 of a section of the regulations dealing with watches
and watch movements from U.S. insular possessions. The proposed Part
148 amendments involved an updating of the regulations that implement
the personal duty exemption or reduction provisions applicable to
returning residents and other persons arriving from certain U.S.
insular possessions or from Caribbean Basin Initiative (CBI)
beneficiary countries as provided for in Subchapters IV and XVI of
Chapter 98, HTSUS.
With particular regard to the requirements and procedures for
obtaining duty-free treatment under General Note 3(a)(iv), HTSUS, the
July 27, 1993, notice pointed out that, as compared to the regulations
implementing the Generalized System of Preferences (GSP), set forth as
Secs. 10.171-10.178, Customs Regulations (19 CFR 10.171-10.178), and
the regulations implementing the CBI, set forth as Secs. 10.191-10.198,
Customs Regulations (19 CFR 10.191-10.198), Sec. 7.8 did not reflect
all of the provisions of General Note 3(a)(iv), HTSUS, and did not
provide adequate guidance concerning the legal effect of those
provisions, particularly as to the determination of the origin of goods
imported from insular possessions, the meaning of direct shipment to or
from an insular possession, and the application of the maximum foreign
materials content limitation. Thus, subject to variances to reflect a
General Note 3(a)(iv) insular possession context, the proposed Sec. 7.3
text adopted the more detailed approach used in the GSP and CBI
regulations in setting forth, among other things, specific origin
determination language (for example, ``growth or product'',
``substantially transformed'', ``new and different article of
commerce'') applicable to goods from insular possessions and materials
incorporated in such goods (paragraphs (b) and (c)) as well as a
specific rule regarding direct shipment to or from an insular
possession (paragraph (e)).
Discussion of Comments
A total of seven comments were submitted in response to the notice.
All of the commenters generally favored the proposed regulatory
changes, particularly with regard to the reduced documentary burden and
the inclusion of the Commonwealth of the Northern Mariana Islands.
However, some commenters suggested certain changes to the proposed
Sec. 7.3 texts which are discussed in detail below.
Comment: Several commenters indicated that the words ``may be
eligible'' in proposed Sec. 7.3(a) should be replaced with the words
``shall be eligible.'' Otherwise, despite compliance with the
provisions of General Note 3(a)(iv), HTSUS, Customs would have
impermissible discretion in allowing duty-free treatment.
Customs response: Customs disagrees. While goods imported from U.S.
insular possessions which satisfy the requirements and conditions set
forth in General Note 3(a)(iv), HTSUS, ``are exempt from duty'', and
even though proposed Secs. 7.3(a) (1) and (2) state which goods are
eligible for duty-free treatment, documentary requirements were
included in proposed Sec. 7.3(f) for the specific purpose of
demonstrating that the imported goods meet the statutory requirements
for duty-free entry. See Maple Leaf Petroleum, Ltd. v. United States,
25 C.C.P.A. 5, 8, 9, T.D. 48976 (1937), for the proposition that it has
long been the sound policy of our Government that when such grants and
privileges as those involved here were allowed in customs matters, they
were granted only upon the condition that there should be a compliance
with regulations to be prescribed by the Secretary of the Treasury. See
also McDonnell Douglas Corp. v. United States, 75 Cust. Ct. 6 (1975),
C.D. 4604, and General Note 20, HTSUS. Accordingly, Sec. 7.3(a) should
not be revised by substituting the word ``may'' with ``shall.''
Comment: Proposed Sec. 7.3(b)(2) provides that goods shall be
considered the product of an insular possession if they ``became a new
and different article of commerce as a result of processing performed
in the insular possession.'' Two comments suggested including ``a
change in name, character, or use, as a result of an operation
including, but not limited to, assembly, manufacturing, and processing,
performed in the insular possession.'' It was claimed that such a
revision would clarify that a change in any one or more of the three
criteria is sufficient to produce a new and different article of
commerce. This revision would also clarify any ambiguity concerning the
meaning of the word ``processing'', by using the word ``operation'' and
providing three non-exhaustive examples (i.e., assembly, manufacturing,
and processing) to indicate that various methods can be used to bring
about a substantial transformation.
Customs response: Proposed Sec. 7.3(b)(2) sets forth the basic
substantial transformation rule. Customs does not believe that specific
exemplars are necessary to establish how a new and different article of
commerce is created because there are ample court cases and Customs
rulings that explain the substantial transformation rule. Therefore, it
is the opinion of Customs that specific exemplars are not appropriate
for Sec. 7.3(b)(2). However, for the sake of clarity, Customs believes
that the word ``processing'' in Sec. 7.3(b)(2) should be replaced with
the words ``production or manufacture'' which more closely reflect the
terminology used in General Note 3(a)(iv), HTSUS, and in proposed
Sec. 7.3(c)(2). Section 7.3(b)(2) as set forth below has been modified
accordingly.
Comment: Proposed Sec. 7.3(b) should be revised to recognize that
duty-free treatment under General Note 3(a)(iv) is to be afforded to
products deemed to be products of an insular possession pursuant to
U.S. Note 2, Subchapter II, Chapter 98, HTSUS (under which products of
the United States returned to the United States after having been
advanced in value or improved in condition abroad by any process of
manufacture or other means, and imported articles assembled abroad in
whole or in part from U.S. products, are to be treated as foreign
articles), and which otherwise meet the requirements of General Note
3(a)(iv) (but are not necessarily substantially transformed in the
insular possession). Specifically, this commenter recommended inclusion
[[Page 46435]]
of the following as a third origin standard:
(3) The goods were a product of the United States which were
returned to the United States after having been advanced in value or
improved in condition in an insular possession, or assembled in an
insular possession, pursuant to U.S. Note 2, Subchapter II, Chapter
98, HTSUS.
The commenter argued that this revision would clarify that goods
which are not ``wholly obtained or produced'' or ``substantially
transformed'' may still become a product of an insular possession and
be eligible for duty-free treatment under General Note 3(a)(iv), as
determined in Headquarters Ruling Letter (HRL) 557481 dated September
24, 1993, which reconsidered HRL 556381 dated March 2, 1991. In HRL
556381, Customs ruled that certain garments, produced on the U.S.
mainland and screen printed or embroidered in the Virgin Islands using
printing or embroidery materials produced on the U.S. mainland or
Puerto Rico, were not eligible for duty-free treatment under General
Note 3(a)(iv). Although no foreign-origin materials were employed in
these operations, Customs held that the printed or embroidered garments
were not eligible for duty-free treatment under General Note 3(a)(iv)
because they were not ``products of'' the Virgin Islands and had not
undergone a substantial transformation.
In HRL 557481, Customs reconsidered HRL 556381 and determined that,
under the facts, the garments in question were products of the Virgin
Islands and thus eligible for duty-free treatment under General Note
3(a)(iv). Specifically, Customs ruled that under 19 CFR 12.130(c) and
U.S. Note 2, Subchapter II, Chapter 98, HTSUS, the U.S. good returned
must be deemed a product of the non-U.S. jurisdiction in which they
were advanced in value (i.e., the U.S. Virgin Islands). Because the
goods were a product of the Virgin Islands and otherwise met the
requirements of General Note 3(a)(iv), they were entitled to duty-free
treatment under that provision.
Customs response: Customs cannot agree to the regulatory text
change suggested by this commenter. Pursuant to T.D. 90-17, paragraph
(c) of Sec. 12.130, Customs Regulations (19 CFR 12.130), supersedes all
other provisions of Sec. 12.130 with regard to determining the origin
of textile goods. This position, however, has not been extended to
other goods on a general basis. See the May 5, 1995, notice of proposed
rulemaking (discussed below in this document under the Other Changes to
the Regulatory Texts section) in which Customs noted that it has
reconsidered its previously stated position that U.S. Note 2(a),
Subchapter II, Chapter 98, HTSUS, has application for general country
of origin purposes. Therefore, the regulatory text change suggested by
this commenter would have an impermissibly broad effect since it would
apply to all goods rather than only to textile goods.
Comment: It was suggested that Sec. 7.3(c)(2), which twice uses the
phrase ``new and different article of commerce'' to establish the
principle of double substantial transformation, should be followed by
the phrase ``that is, one which underwent a change in name, character,
or use.'' This would ensure a consistent meaning of the term ``new and
different article of commerce'' throughout Sec. 7.3.
Customs response: Customs disagrees, for the same reasons stated
above in response to the comment regarding the use of exemplars to
explain the creation of a new and different article. Customs also notes
that the use of the words ``new and different article of commerce'' in
Sec. 7.3(c)(2), without further explanation, is consistent with the
approach used in the GSP and CBI regulations (see 19 CFR 10.177(a)(2)
and 19 CFR 10.195(a), respectively) which have not given rise to
interpretive problems in this regard.
Comment: General Note 3(a)(iv)(A) provides for the duty-free entry
of goods from an insular possession containing foreign material up to
70 percent of their value, unless they are among the products not
eligible for duty-free entry under the CBI, in which case duty-free
entry is only allowed if the foreign materials do not exceed 50 percent
of the value of the goods. General Note 3(a)(iv)(B) sets forth rules
for identifying materials not to be considered as foreign
(specifically, certain duty-free materials) for purposes of determining
whether goods produced or manufactured in any such insular possession
contain ``foreign materials to the value of more than 70 percent''.
One commenter suggested that Sec. 7.3(c)(3), which defines certain
materials which are not considered as ``foreign materials'' in
determining the 70 percent foreign content limitation, is contrary to
the legislative history of General Note 3(a)(iv) and its predecessor
provisions and is contrary to longstanding practice, since it is not
equally applicable to the 50 percent limitation. This commenter
acknowledged that Sec. 7.3(c)(3) is limited because General Note
3(a)(iv)(B) only refers to the ``70 percent'' value mentioned in
paragraph (A); however, notwithstanding the strict language of
paragraph (B), the commenter suggested that Congress intended that the
rule regarding the use of duty-free foreign materials be equally
applicable to products to which the 50 percent limitation applies. The
commenter set forth the following analysis in support of this position:
Section 3 of the Act of March 3, 1917, Pub. L. 64-389, 39 Stat.
1133 (1917) (``the 1917 Act''), accorded duty-free treatment to
products from the U.S. Virgin Islands as long as the value of the
foreign materials did not exceed 20 percent. In 1950, the 1917 Act was
amended to exclude from ``foreign material'' any material which could
be entered into the United States free of duty. Pub. L. 81-766, 64
Stat. 784 (1950). The purpose of the legislation was to encourage the
establishment of new industries in the U.S. Virgin Islands, thereby
providing increased employment and revenues. S. Rep. No. 2368, 81st
Cong., 2d Sess. 2 (1950). In 1954, the Customs Simplification Act, Pub.
L. 83-768, title IV, section 401, 68 Stat. 1139 (1954), increased the
foreign content limitation to 50 percent and continued the treatment of
materials as not ``foreign'' if they could be entered into the United
States free of duty.
General Headnote 3(a), Tariff Schedules of the United States
(TSUS), effective August 31, 1963, continued the 50 percent foreign
material limitation and the treatment of a material as not foreign if
the material could be entered into the United States free of duty.
Section 214 of the Caribbean Basin Economic Recovery Act (the CBI
statute), Pub. L. 98-67 (1983), amended General Headnote 3(a), TSUS, by
increasing the foreign materials value allowable in insular possession
goods from 50 percent to 70 percent. However, for those goods that were
not entitled to CBI preferential duty treatment, General Headnote 3(a),
TSUS, was further amended to specify a 50 percent foreign materials
value limitation for such products. In amending General Headnote 3(a),
TSUS, to include the 70 percent foreign materials value limitation,
Congress stated that it intended to ``maintain the competitive position
of Puerto Rico and the U.S. insular possessions which might otherwise
be adversely affected by the Caribbean Basin Initiative.'' However,
since CBI-exempt products ``are excluded from duty-free treatment . .
., it is not necessary to increase the foreign content potential under
general headnote 3(a) as an equalizing measure for the insular
possessions. . . .'' H.R. Rep. No. 266, 98th Cong., 1st Sess. 22
(1983), reprinted in 1983 U.S. Code Cong. & Admin. News 645, 663.
[[Page 46436]]
Based on the above, this commenter suggested that under proposed
Sec. 7.3(c)(3), materials should also not be considered foreign
materials for purposes of calculating the 50 percent foreign materials
value limitation (in addition to the 70 percent value provision) if the
materials may be entered into the U.S. free of duty. Therefore, despite
the lack of any reference to the 50 percent value limitation in
paragraph (B) of the present statutory provision, the only logical
reading of paragraph (B), consistent with the congressional intent and
longstanding practice, is to include in Sec. 7.3(c)(3) the 50 percent
foreign materials value reference contained in paragraph (A) of the
statute.
This commenter further suggested that liberally construing this
remedial statute will carry out the congressional intent. See Atchison,
Topeka and Santa Fe Railroad Co. v. Buell, 480 U.S. 557, 561 (1987)
(with a remedial statute, Congress adopts a ``standard of liberal
construction in order to accomplish [Congress'] objects.''); see also
United States v. Carolina Transformer Co., 978 F.2d 832, 838 (4th Cir.
1992) (the provision of a remedial statute ``should be construed
broadly to avoid frustrating the legislative purpose.''). Furthermore,
where the literal interpretation of a statute is inconsistent with the
legislative intent, the words of the statute should give way to the
legislative intent. Florida Department of Banking v. Board of
Governors, 760 F.2d 1135, 1139 (11th Cir. 1985).
Therefore, this commenter suggested that Sec. 7.3(c)(3) be revised
to read as follows:
(3) In the case of imported goods to which the 70 percent or 50
percent foreign materials value limitation applies as set forth in
paragraph (a)(1)(i) of this section, a material which may be
imported into the customs territory of the United States from a
foreign country and entered free of duty either:
Customs response: Customs agrees with the commenter's suggestion to
fill a gap in General Note 3(a)(iv)(B) by these regulations. Although
paragraph (B) of General Note 3(a)(iv), HTSUS, clearly states that in
regard to the 70 percent value, a material shall not be considered a
``foreign material'' if it may be imported into the United States and
entered free of duty, that statutory provision does not address whether
the same ``foreign material'' definition is applicable in the case of
the 50 percent value limitation that applies to CBI-excluded goods
under paragraph (A). However, based on a reading of General Note
3(a)(iv), HTSUS, and its predecessor provisions and the legislative
history relating thereto, it appears that a material which could be
entered into the United States free of duty has never been intended to
be considered ``foreign material'' since the 1950 amendment of the 1917
Act.
As pointed out by the commenter and for the reasons stated in the
comment, section 214(a) of the CBI statute amended General Headnote
3(a)(i), TSUS, by increasing the foreign materials value limitation
from 50 percent to 70 percent for most goods and by retaining the 50
percent foreign materials value limitation for articles not eligible
for CBI preferential treatment. However, while section 214(a) of the
CBI statute also amended General Headnote 3(a)(ii), TSUS, (which
referred to materials not considered foreign if they could be entered
into the United States free of duty) by replacing the 50 percent value
reference with a reference to 70 percent value, a reference to 50
percent value (to cover CBI-excluded goods) was not retained in this
context for reasons that are not apparent from a reading of the
applicable legislative history.
The above-mentioned Congressional intention of maintaining the
competitive viability of the insular possessions is also consistent
with the intent behind paragraphs (C), (D), and (E) of General Note
3(a)(iv), HTSUS, which were added when the GSP and CBI statutes and the
Andean Trade Preference Act (ATPA) were enacted. The legislative
history of what is now General Note 3(a)(iv)(C), HTSUS, indicates that
the designation of beneficiary developing countries under section 502
of the GSP statute (19 U.S.C. 2462) was not intended to impair any
benefits that insular possessions receive by reason of (former) General
Headnote 3(a), TSUS. S. Rep. 93-1298, reprinted in 1974 U.S. Code Cong.
Admin. New. 7186, 7352. ``The Committee strongly believes that the
products of U.S. insular possessions should under no circumstances be
treated less advantageously than those of foreign countries. To the
extent that such products would be entitled to better treatment under
headnote 3(a), than under this title, they should receive treatment
under 3(a).'' Id.
If the ``foreign material'' definition in General Note 3(a)(iv)(B),
HTSUS, is not applied to the 50 percent value limitation, the insular
possessions will receive ``no less favorable'' treatment than CBI
countries since the CBI-excluded goods are dutiable. However, before
the enactment of the CBI, most goods from the insular possessions,
including the ``CBI-excluded'' goods, received duty-free treatment if
the 50 percent value was satisfied, to which the ``foreign material''
definition applied at that time. Therefore, it would seem that if
Congress had intended to remove a benefit existing prior to the CBI, it
would have indicated such intent.
Prior to the amendment of General Headnote 3(a), TSUS, by section
214 of the CBI statute, another noteworthy amendment to this provision
was added by Pub. L. 94-88, title I, section 1, 2, 89 Stat. 433 (1975),
which increased the 50 percent foreign materials value limitation to 70
percent with respect to watches and watch movements because of a
setback in both production and employment in the insular possessions.
When this 70 percent value for watches was inserted into subparagraph
(i) of General Headnote 3(a), subparagraph (ii) thereof remained the
same. Therefore, for purposes of applying the 50 percent value then in
effect, materials were not considered foreign if they could be entered
into the United States free of duty, but no reference was made to the
increased 70 percent value limitation for watches. However, Sec. 7.8(d)
of the Customs Regulations (19 CFR 7.8(d)) was amended to refer both to
the 50 percent value and to the 70 percent value for watches in the
context of determining whether a material was a foreign material.
Therefore, it is the opinion of Customs that since the legislative
history of General Note 3(a)(iv), HTSUS, does not discuss the omission
of a reference to the 50 percent foreign materials value limitation for
CBI-excluded products from paragraph (B), and because it is apparent
that since 1950 materials were not considered ``foreign materials'' in
all respects if they could be entered into the United States free of
duty, the 50 percent foreign materials value limitation should be
referred to in Sec. 7.3(c)(3). Thus, Customs has determined it
appropriate to amend the regulations not because General Note 3 is
``remedial'' legislation which must be liberally construed, as the
commenter suggested, but rather because a strict construction of this
special exemption leads Customs to conclude there is an inadvertent
``gap'' in that note which Congress did not clearly intend to result in
a preclusion of favorable treatment. See, e.g., United States v. Allen,
163 U.S. 499, 503 (1896) (duty exemptions must be strictly construed as
a general principle). The omission of the 50 percent value reference
appears to have been an oversight stemming from the addition of the 70
percent value reference for watches rather than from a clear intention
to remove a benefit in existence since 1950. There is also nothing in
the legislative history
[[Page 46437]]
relating to these amendments which specifically precludes more
favorable treatment for an insular possession good under General Note
3(a)(iv), HTSUS, as compared to the GSP, CBI, or ATPA. In order to
reflect this position and also simplify the text, Sec. 7.3(c)(3) as set
forth below has been modified by removing the ``[I]n the case of * *
*'' clause which is no longer necessary in this regulatory context.
Comment: The ``direct shipment'' standard on goods from U.S.
insular possessions in proposed Sec. 7.3(e) should be the same as in
the case of the CBI, GSP, or ATPA, which allow goods to be transshipped
through third countries under certain conditions. Otherwise,
Sec. 7.3(e) is contrary to the statutory mandate of General Note
3(a)(iv) (C), (D) and (E), HTSUS, that goods from insular possessions
receive no less favorable duty treatment than GSP-, CBI-, or ATPA-
eligible articles. The Customs rationale not to allow exceptions to
direct movement to or from an insular possession through a foreign
territory or country is not compelling since goods from all CBI
countries may be shipped to the United States either by water or air
without passing through intervening countries.
Customs response: Customs agrees with the commenter on both points.
First, none of the CBI countries are land-locked and thus shipment to
the United States would not necessarily require transshipment through a
foreign territory or country. Second, although General Note 3(a)(iv),
HTSUS, is a more liberal provision than the GSP or CBI statutes or the
ATPA, as already noted in this comment discussion, General Note
3(a)(iv) (C), (D) and (E) provide that, subject to the provisions of
sections 503(b) and 504(c) of the GSP statute, section 213 of the CBI
statute, and section 204 of the ATPA, goods imported from an insular
possession of the United States shall receive duty treatment no less
favorable than the treatment afforded such goods when they are imported
from a beneficiary country under the GSP, CBI or ATPA. The GSP and CBI
statutes and the ATPA require that the goods, in order to receive
preferential duty treatment, meet certain qualifications including
direct shipment from the beneficiary country into the United States.
Sections 10.175 and 10.193 of the Customs Regulations (19 CFR 10.175
and 10.193) allow certain exceptions to the direct movement standard.
Therefore, it appears that not allowing any exceptions to the strict
direct shipment standard in the case of goods from insular possessions
would be contrary to General Note 3(a)(iv) (C), (D), and (E), HTSUS.
Accordingly, Sec. 7.3(e) as set forth below has been modified to
include exceptions to the strict direct shipment standard and to
provide for evidence of direct shipment. The modified text is based on
the corresponding CBI regulatory provisions which appear to be more
appropriate in an insular possession context than are the corresponding
GSP regulations, but no reference is made to a waiver of evidence of
direct shipment since simply having provision for not requiring
submission of such evidence is a less burdensome approach.
Comment: One comment concerned the use of the Certificate of Origin
(Customs Form 3229) in the case of goods which incorporate a material
described in General Note 3(a)(iv)(B)(2), HTSUS, which requires
``adequate documentation * * * to show that the material has been
incorporated into such goods during the 18-month period after the date
on which such material is imported into the insular possession.'' The
commenter noted that the Certificate of Origin would require
modification because it does not currently establish the use of the
material within the 18-month period. The commenter also suggested that
the district director be given discretion to waive the Certificate of
Origin or to accept other documentation including a blanket statement
that applies to several entries, since General Note 3(a)(iv)(B)(2),
HTSUS, does not describe ``adequate documentation'' or specifically
require a Certificate of Origin with each shipment.
Customs response: Customs disagrees. While it was recognized in the
notice of proposed rulemaking that the Certificate of Origin must be
revised to reflect all current legal requirements under General Note
3(a)(iv), HTSUS, it is General Note 3(a)(iv)(B)(2), HTSUS, and not the
Certificate of Origin that specifically establishes the requirement for
submission of adequate documentation to show that the material was
incorporated into the goods during the 18-month period after the date
on which it was imported into the insular possession. While General
Note 3(a)(iv)(B)(2), HTSUS, does not define ``adequate documentation'',
it is the position of Customs that the use of the Certificate of Origin
with which importers are already familiar, combined with the Customs
officer's verification at the port of shipment, provide adequate
assurance that the material described in General Note 3(a)(iv)(B)(2),
HTSUS, was, in fact, incorporated in the goods within the specified 18-
month period.
Comment: One comment concerned proposed Sec. 7.3(g) which, in
accordance with existing law, allows warehouse withdrawals of goods for
shipment to any insular possession without the payment of duty, or with
a refund of duty if duties have been paid, but denies drawback of
duties or internal revenue taxes on goods produced in the United States
and shipped to any insular possession. This commenter suggested that
Sec. 7.3(g) should include the restrictions on shipments from foreign
trade zones to insular possessions as specified in HRL 223828 dated
July 1, 1992. That ruling held that merchandise transferred from a
foreign trade zone for shipment to an insular possession is dutiable
when transferred from the zone and that shipments from such a zone to
an insular possession do not meet the exportation requirement of 19
U.S.C. 81c(a).
Customs response: Customs disagrees. In Rothschild & Co. v. United
States, 16 Ct. Cust. App. 422 (1929), it was held that the term
``exportation'' in section 557, Tariff Act of 1922 (the predecessor
provision of section 557, Tariff Act of 1930), did not include
shipments to Guam. As a result of this determination, hearings before
the Ways and Means Committee of the House of Representatives in 1929
resulted in a recommendation that section 557 be amended to provide
that merchandise may be withdrawn for shipment to insular possessions
without the payment of duties. See Mitsubishi International Corp. v.
United States, 55 Cust. Ct. 319, C.D. 2597 (1965). Accordingly, section
557, Tariff Act of 1930, as amended (19 U.S.C. 1557), which permits
merchandise to be entered for warehouse and withdrawn for shipment to
Guam and other named possessions without payment of duties or, if
duties have been paid, with a refund thereof, was the basis for 19 CFR
7.8(f) (the provision which was the basis for proposed Sec. 7.3(g)).
The term ``exportation'' as defined by Sec. 101.1 of the Customs
Regulations (19 CFR 101.1), and as interpreted by the courts, is linked
to a foreign country rather than to the Customs territory of the United
States. Thus, shipments from the United States to a U.S. insular
possession are not exports. Customs is of the opinion that there is no
need to repeat this position in the regulatory provision at issue with
respect to shipments to a U.S. insular possession from a foreign trade
zone located within the United States.
Comment: General Note 3(a)(iv), HTSUS, contains provisions (i.e.,
[[Page 46438]]
paragraphs (C), (D) and (E)), which guarantee no less favorable duty
treatment for goods from the insular possessions than for goods
imported from GSP, CBI or ATPA beneficiary countries. It was suggested
these paragraphs should at least be replicated in the regulations.
Customs response: Customs disagrees. There is little use in simply
duplicating General Notes 3(a)(iv) (C), (D), and (E), HTSUS, in the
regulations where there is no need for an interpretation or other
explanation of the statutory provision. It is clear that the statute,
which controls, requires that goods from insular possessions be granted
no less favorable duty treatment than goods imported from GSP, CBI, or
ATPA beneficiary countries and the regulations set forth in this
document reflect that result-oriented statutory principle.
Comment: One comment questioned the conclusion in the notice of
proposed rulemaking under the heading ``Regulatory Flexibility Act''
that there is no ``major rule'' since a substantial number of small
entities may have significant economic impacts as a result of these
amendments.
Customs response: The regulatory amendments will not have a
significant economic impact on a substantial number of small entities
because these regulations primarily reflect statutory requirements and
administrative practices that have been in place for many years for
purposes of duty-free treatment of articles imported from insular
possessions of the United States.
Other Changes to the Regulatory Texts
In addition to the changes to the proposed regulatory texts
discussed above in connection with the public comments, Customs has
determined that a number of other changes to the proposed texts should
be reflected in this final rule document.
Two of these changes involve proposed Secs. 7.3 (b)(1) and (c)(1)
which referred, respectively, to goods and materials that were ``wholly
obtained or produced * * * within the meaning of Sec. 102.1(e) of this
chapter''. These provisions were included in the proposed texts based
on, and were identified in the document as being subject to final
adoption of, an earlier proposal published in the Federal Register on
September 25, 1991 (56 FR 48448) to set forth, in a new Part 102 of the
Customs Regulations (19 CFR Part 102), uniform rules governing the
determination of the country of origin of imported merchandise.
Subsequently, on January 3, 1994, Customs published two documents in
the Federal Register. The first document, published at 59 FR 110,
consisted of T.D. 94-4 which amended the Customs Regulations on an
interim basis to implement Annex 311 of the North American Free Trade
Agreement (NAFTA); the majority of the T.D. 94-4 regulatory amendments
involved the adoption of a new Part 102 of the Customs Regulations
setting forth the NAFTA Marking Rules. The second document published on
January 4, 1994 (at 59 FR 141) consisted of a notice of proposed
rulemaking setting forth proposed amendments to the scope of interim
Part 102, as well as to other provisions of the Customs Regulations, in
order to establish within Part 102 uniform rules governing the
determination of the country of origin of imported merchandise. The
latter document replaced the September 25, 1991, uniform origin rules
proposal and thus included, among other things, proposed conforming
changes to the GSP and CBI regulations involving appropriate cross-
references to the uniform rules that would be reflected in the amended
Part 102 texts, but no proposed conforming changes to the Part 7
insular possession regulations were included since final action had not
been taken on the regulatory proposals that are the subject of this
document. On May 5, 1995, Customs published a document in the Federal
Register (60 FR 22312) which set forth proposed changes to the interim
regulatory amendments contained in T.D. 94-4 and which republished,
with some changes, the January 4, 1994, uniform origin rule regulatory
proposals, for purposes of further public comment.
On June 6, 1996, Customs published in the Federal Register (61 FR
28932) T.D. 96-48 which adopted as a final rule, with some
modifications, the NAFTA Marking Rules and other interim regulatory
amendments published as T.D. 94-4 on January 3, 1994, but which did not
adopt as a final rule the May 5, 1995, proposals regarding the uniform
origin rule concept (including the proposed amendments to the GSP and
CBI regulations). The Background portion of T.D. 96-48 stated (at 61 FR
28933) that Customs had decided that the proposal to extend the Part
102 regulations to all trade ``should remain under consideration for
implementation at a later date.'' In the light of this deferral of the
decision on whether to apply a uniform method of determining origin to
all trade, it would not be appropriate in this document to adopt the
texts of Secs. 7.3 (b)(1) and (c)(1) as proposed. Accordingly,
Secs. 7.3 (b)(1) and (c)(1) as set forth below have been modified to
remove the references to the Part 102 regulation and, similar to the
present GSP and CBI regulatory approach, to refer instead to goods and
materials that are ``wholly the growth or product'' of the insular
possession. If in the future a final decision is taken to adopt the
proposed uniform method of determining origin for all trade, the
necessary regulatory amendments will include appropriate changes to the
text of Sec. 7.3.
Finally, in order to align on technical corrections made to the
Customs Regulations in T.D. 95-78 (published in the Federal Register on
September 27, 1995, at 60 FR 50020) to reflect the new organizational
structure of Customs, Sec. 7.3 as set forth below has been modified by
inserting ``port director'' in place of each reference to ``district
director''.
Conclusion
Accordingly, based on the comments received and the analysis of
those comments as set forth above, and after further review of this
matter, Customs believes that the proposed regulatory amendments should
be adopted as a final rule with certain changes thereto as discussed
above and as set forth below. This document also includes an
appropriate update of the list of information collection approvals
contained in Sec. 178.2 of the Customs Regulations (19 CFR 178.2).
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that the amendments will not have
a significant economic impact on a substantial number of small
entities. The amendments primarily reflect statutory requirements and
administrative practices that have been in place for many years and,
thus, any economic impact arising out of these amendments would be
negligible at best. Accordingly, they 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 final rule has been
reviewed and approved by the Office of Management and Budget (OMB) in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d))
under control number 1515-0200. An agency may not conduct or sponsor,
and a person is not required to
[[Page 46439]]
respond to, a collection of information unless it displays a valid
control number assigned by OMB.
The collection of information in this final rule is in Sec. 7.3.
This information is required in connection with claims for duty-free
treatment under General Note 3(a)(iv), HTSUS. This information will be
used by Customs to determine whether goods imported from insular
possessions are entitled to duty-free entry under that General Note.
The collection of information is required to obtain a benefit. The
likely respondents are business organizations including importers,
exporters, and manufacturers.
The estimated average burden associated with the collection of
information in this final rule is 11.3 hours per respondent or
recordkeeper. Comments concerning the accuracy of this burden estimate
and suggestions for reducing this burden should be directed to the U.S.
Customs Service, Paperwork Management Branch, Room 6316, 1301
Constitution Avenue, N.W., Washington, D.C. 20229, and to OMB,
Attention: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, D.C. 20503.
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 7
Customs duties and inspection, Imports, Insular possessions.
19 CFR Part 10
Customs duties and inspection, Imports.
19 CFR Part 148
Customs duties and inspection, Imports, Personal exemptions.
19 CFR Part 178
Administrative practice and procedure, Exports, Imports, Reporting
and recordkeeping requirements.
Amendments to the Regulations
Accordingly, for the reasons stated in the preamble, parts 7, 10,
148 and 178, Customs Regulations (19 CFR parts 7, 10, 148 and 178), are
amended as set forth below:
PART 7--CUSTOMS RELATIONS WITH INSULAR POSSESSIONS AND GUANTANAMO
BAY NAVAL STATION
1. The authority citation for part 7 is revised to read as follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1623, 1624; 48 U.S.C. 1406i.
2. Sections 7.2 and 7.3 are added to read as follows:
Sec. 7.2 Insular possessions of the United States other than Puerto
Rico.
(a) Insular possessions of the United States other than Puerto Rico
are also American territory but, because those insular possessions are
outside the customs territory of the United States, goods imported
therefrom are subject to the rates of duty set forth in column 1 of the
Harmonized Tariff Schedule of the United States (HTSUS) except as
otherwise provided in Sec. 7.3 or in part 148 of this chapter. The
principal such insular possessions are the U.S. Virgin Islands, Guam,
American Samoa, Wake Island, Midway Islands, and Johnston Atoll.
Pursuant to section 603(c) of the Covenant to Establish a Commonwealth
of the Northern Mariana Islands in Political Union With the United
States of America, Public Law 94-241, 90 Stat. 263, 270, goods imported
from the Commonwealth of the Northern Mariana Islands are entitled to
the same tariff treatment as imports from Guam and thus are also
subject to the provisions of Sec. 7.3 and of part 148 of this chapter.
(b) Importations into Guam, American Samoa, Wake Island, Midway
Islands, Johnston Atoll, and the Commonwealth of the Northern Mariana
Islands are not governed by the Tariff Act of 1930, as amended, or the
regulations contained in this chapter. The customs administration of
Guam is under the Government of Guam. The customs administration of
American Samoa is under the Government of American Samoa. The customs
administration of Wake Island is under the jurisdiction of the
Department of the Air Force (General Counsel). The customs
administration of Midway Islands is under the jurisdiction of the
Department of the Navy. There is no customs authority on Johnston
Atoll, which is under the operational control of the Defense Nuclear
Agency. The customs administration of the Commonwealth of the Northern
Mariana Islands is under the Government of the Commonwealth.
(c) The Secretary of the Treasury administers the customs laws of
the U.S. Virgin Islands through the United States Customs Service. The
importation of goods into the U.S. Virgin Islands is governed by Virgin
Islands law; however, in situations where there is no applicable Virgin
Islands law or no U.S. law specifically made applicable to the Virgin
Islands, U.S. laws and regulations shall be used as a guide and be
complied with as nearly as possible. Tariff classification of, and
rates of duty applicable to, goods imported into the U.S. Virgin
Islands are established by the Virgin Islands legislature.
Sec. 7.3 Duty-free treatment of goods imported from insular
possessions of the United States other than Puerto Rico.
(a) General. Under the provisions of General Note 3(a)(iv),
Harmonized Tariff Schedule of the United States (HTSUS), the following
goods may be eligible for duty-free treatment when imported into the
customs territory of the United States from an insular possession of
the United States:
(1) Except as provided in Additional U.S. Note 5 to Chapter 91,
HTSUS, and except as provided in Additional U.S. Note 2 to Chapter 96,
HTSUS, and except as provided in section 423 of the Tax Reform Act of
1986, as amended (19 U.S.C. 2703 note), goods which are the growth or
product of any such insular possession, and goods which were
manufactured or produced in any such insular possession from materials
that were the growth, product or manufacture of any such insular
possession or of the customs territory of the United States, or of
both, provided that such goods:
(i) Do not contain foreign materials valued at either more than 70
percent of the total value of the goods or, in the case of goods
described in section 213(b) of the Caribbean Basin Economic Recovery
Act (19 U.S.C. 2703(b)), more than 50 percent of the total value of the
goods; and
(ii) Come to the customs territory of the United States directly
from any such insular possession; and
(2) Goods previously imported into the customs territory of the
United States with payment of all applicable duties and taxes imposed
upon or by reason of importation, provided that:
(i) The goods were shipped from the United States directly to the
insular possession and are returned from the insular possession to the
United States by direct shipment; and
(ii) There was no remission, refund or drawback of such duties or
taxes in connection with the shipment of the goods from the United
States to the insular possession.
(b) Origin of goods. For purposes of this section, goods shall be
considered to be the growth or product of, or manufactured or produced
in, an insular possession if:
[[Page 46440]]
(1) The goods are wholly the growth or product of the insular
possession; or
(2) The goods became a new and different article of commerce as a
result of production or manufacture performed in the insular
possession.
(c) Foreign materials. For purposes of this section, the term
``foreign materials'' covers any material incorporated in goods
described in paragraph (b)(2) of this section other than:
(1) A material which was wholly the growth or product of an insular
possession or of the customs territory of the United States;
(2) A material which was substantially transformed in an insular
possession or in the customs territory of the United States into a new
and different article of commerce which was then used in an insular
possession in the production or manufacture of a new and different
article which is shipped directly to the United States; or
(3) A material which may be imported into the customs territory of
the United States from a foreign country and entered free of duty
either:
(i) At the time the goods which incorporate the material are
entered; or
(ii) At the time the material is imported into the insular
possession, provided that the material was incorporated into the goods
during the 18-month period after the date on which the material was
imported into the insular possession.
(d) Foreign materials value limitation. For purposes of this
section, the determination of whether goods contain foreign materials
valued at more than 70 or 50 percent of the total value of the goods
shall be made based on a comparison between:
(1) The landed cost of the foreign materials, consisting of:
(i) The manufacturer's actual cost for the materials or, where a
material is provided to the manufacturer without charge or at less than
fair market value, the sum of all expenses incurred in the growth,
production, or manufacture of the material, including general expenses,
plus an amount for profit; and
(ii) The cost of transporting those materials to the insular
possession, but excluding any duties or taxes assessed on the materials
by the insular possession and any charges which may accrue after
landing; and
(2) The final appraised value of the goods imported into the
customs territory of the United States, as determined in accordance
with section 402 of the Tariff Act of 1930, as amended (19 U.S.C.
1401a).
(e) Direct shipment--(1) General. For purposes of this section,
goods shall be considered to come to the United States directly from an
insular possession, or to be shipped from the United States directly to
an insular possession and returned from the insular possession to the
United States by direct shipment, only if:
(i) The goods proceed directly to or from the insular possession
without passing through any foreign territory or country;
(ii) The goods proceed to or from the insular possession through a
foreign territory or country, the goods do not enter into the commerce
of the foreign territory or country while en route to the insular
possession or the United States, and the invoices, bills of lading, and
other shipping documents show the insular possession or the United
States as the final destination; or
(iii) The goods proceed to or from the insular possession through a
foreign territory or country, the invoices and other shipping documents
do not show the insular possession or the United States as the final
destination, and the goods:
(A) Remained under the control of the customs authority of the
foreign territory or country;
(B) Did not enter into the commerce of the foreign territory or
country except for the purpose of sale other than at retail, and the
port director is satisfied that the importation into the insular
possession or the United States results from the original commercial
transaction between the importer and the producer or the latter's sales
agent; and
(C) Were not subjected to operations in the foreign territory or
country other than loading and unloading and other activities necessary
to preserve the goods in good condition.
(2) Evidence of direct shipment. 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 goods were
shipped to the United States directly from an insular possession or
shipped from the United States directly to an insular possession and
returned from the insular possession to the United States by direct
shipment within the meaning of paragraph (e)(1) of this section, and
such evidence of direct shipment shall be subject to such verification
as deemed necessary by the port director. Evidence of direct shipment
shall not be required when the port director is otherwise satisfied,
taking into consideration the kind and value of the merchandise, that
the goods qualify for duty-free treatment under General Note 3(a)(iv),
HTSUS, and paragraph (a) of this section.
(f) Documentation. (1) When goods are sought to be admitted free of
duty as provided in paragraph (a)(1) of this section, there shall be
filed with the entry/entry summary a properly completed certificate of
origin on Customs Form 3229, signed by the chief or assistant chief
customs officer or other official responsible for customs
administration at the port of shipment, showing that the goods comply
with the requirements for duty-free entry set forth in paragraph (a)(1)
of this section. Except in the case of goods which incorporate a
material described in paragraph (c)(3)(ii) of this section, a
certificate of origin shall not be required for any shipment eligible
for informal entry under Sec. 143.21 of this chapter or in any case
where the port director is otherwise satisfied that the goods qualify
for duty-free treatment under paragraph (a)(1) of this section.
(2) When goods in a shipment not eligible for informal entry under
Sec. 143.21 of this chapter are sought to be admitted free of duty as
provided in paragraph (a)(2) of this section, the following
declarations shall be filed with the entry/entry summary unless the
port director is satisfied by reason of the nature of the goods or
otherwise that the goods qualify for such duty-free entry:
(i) A declaration by the shipper in the insular possession in
substantially the following form:
I, ____________________ (name) of ____________________
(organization) do hereby declare that to the best of my knowledge
and belief the goods identified below were sent directly from the
United States on ____________, 19____, to ____________________
(name) of ____________________ (organization) on
____________________ (insular possession) via the
____________________ (name of carrier) and that the goods remained
in said insular possession until shipped by me directly to the
United States via the ____________________ (name of carrier) on
____________, 19____.
[[Page 46441]]
----------------------------------------------------------------------------------------------------------------
Marks Numbers Quantity Description Value
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Dated at ________________, this ________ day of ____________,
19____.
Signature:-----------------------------------------------------------
(ii) A declaration by the importer in the United States in
substantially the following form:
I, ____________________ (name), of ____________________
(organization) declare that the (above) (attached) declaration by
the shipper in the insular possession is true and correct to the
best of my knowledge and belief, that the goods in question were
previously imported into the customs territory of the United States
and were shipped to the insular possession from the United States
without remission, refund or drawback of any duties or taxes paid in
connection with that prior importation, and that the goods arrived
in the United States directly from the insular possession via the
____________________ (name of carrier) on ____________, 19____.
----------------------------------------------------------------------
(Date)
----------------------------------------------------------------------
(Signature)
(g) Warehouse withdrawals; drawback. Merchandise may be withdrawn
from a bonded warehouse under section 557 of the Tariff Act of 1930, as
amended (19 U.S.C. 1557), for shipment to any insular possession of the
United States other than Puerto Rico without payment of duty, or with a
refund of duty if the duties have been paid, in like manner as for
exportation to foreign countries. No drawback may be allowed under
section 313 of the Tariff Act of 1930, as amended (19 U.S.C. 1313), on
goods manufactured or produced in the United States and shipped to any
insular possession. No drawback of internal-revenue tax is allowable
under 19 U.S.C. 1313 on goods manufactured or produced in the United
States with the use of domestic tax-paid alcohol and shipped to Wake
Island, Midway Islands or Johnston Atoll.
3. Section 7.8 and footnote 5 thereto are removed.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The general authority citation for part 10 is revised to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484,
1498, 1508, 1623, 1624, 3314.
* * * * *
2. Section 10.181 is redesignated as Sec. 7.4, and newly
redesignated Sec. 7.4 is amended as follows:
a. Paragraph (b) is amended by adding the word ``the'' before the
words ``Department of Commerce''.
b. Paragraph (g), second sentence, is amended by removing the words
``Form ITA-360'' and adding, in their place, the words ``Form ITA-
361''.
c. Paragraph (h) is amended by removing the word ``Department'' and
adding, in its place, the word ``Departments''.
PART 148--PERSONAL DECLARATIONS AND EXEMPTIONS
1. The authority citation for part 148 continues to read in part as
follows:
Authority: 19 U.S.C. 66, 1496, 1498, 1624. The provisions of
this part, except for subpart C, are also issued under 19 U.S.C.
1202 (General Note 20, Harmonized Tariff Schedule of the United
States);
* * * * *
Sections 148.43, 148.51, 148.63, 148.64, 148.74 also issued
under 19 U.S.C. 1321;
* * * * *
Sec. 148.2 [Amended]
2. Section 148.2(b), first sentence, is amended by adding after
``Guam,'' the words ``the Commonwealth of the Northern Mariana
Islands,''.
3. Section 148.12(b)(1)(i) is revised to read as follows:
Sec. 148.12 Oral declarations.
* * * * *
(b) * * *
(1) * * *
(i) The aggregate fair retail value in the country of acquisition
of all accompanying articles acquired abroad by him and of alterations
and dutiable repairs made abroad to personal and household effects
taken out and brought back by him does not exceed:
(A) $400; or
(B) $600 in the case of a direct arrival from a beneficiary country
as defined in Sec. 10.191(b)(1) of this chapter, not more than $400 of
which shall have been acquired elsewhere than in beneficiary countries;
or
(C) $1,200 in the case of a direct or indirect arrival from
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
or the Virgin Islands of the United States, not more than $400 of which
shall have been acquired elsewhere than in such locations except that
up to $600 of which may have been acquired in one or more beneficiary
countries as defined in Sec. 10.191(b)(1) of this chapter;
* * * * *
Sec. 148.17 [Amended]
4. Sections 148.17(b) and (c) are amended by removing the words
``$400 or $800'' and adding, in their place, the words ``$400, $600 or
$1,200''.
Sec. 148.31 [Amended]
5. Section 148.31(a), first sentence, is amended by adding after
``Guam,'' the words ``the Commonwealth of the Northern Mariana
Islands,''.
6. Section 148.31(b) is amended by removing the words ``$400 or
$800'' and adding, in their place, the words ``$400, $600 or $1,200''.
Sec. 148.32 [Amended]
7. Section 148.32(d)(2) is amended by removing the words ``$400 or
$800'' and adding, in their place, the words ``$400, $600 or $1,200''.
8. Section 148.33 is amended by revising paragraphs (a), (b), (d)
and (f) to read as follows:
Sec. 148.33 Articles acquired abroad.
(a) Exemption. Each returning resident is entitled to bring in free
of duty and internal revenue tax under subheadings 9804.00.65,
9804.00.70 and 9804.00.72, and Chapter 98, U.S. Note 3, Harmonized
Tariff Schedule of the United States (19 U.S.C. 1202), articles for his
personal or household use which were purchased or otherwise acquired
abroad merely as an incident of the foreign journey from which he is
returning, subject to the limitations and conditions set forth in this
section and Secs. 148.34-148.38. The aggregate fair retail value in the
country of acquisition of such articles for personal and household use
shall not exceed:
(1) $400, and provided that the articles accompany the returning
resident;
(2) Whether or not the articles accompany the returning resident,
$600 in the case of a direct arrival from a
[[Page 46442]]
beneficiary country as defined in Sec. 10.191(b)(1) of this chapter,
not more than $400 of which shall have been acquired elsewhere than in
beneficiary countries; or
(3) Whether or not the articles accompany the returning resident,
$1,200 in the case of a direct or indirect arrival from American Samoa,
Guam, the Commonwealth of the Northern Mariana Islands, or the Virgin
Islands of the United States, not more than $400 of which shall have
been acquired elsewhere than in such locations except that up to $600
of which may have been acquired in one or more beneficiary countries as
defined in Sec. 10.191(b)(1) of this chapter.
(b) Application to articles of highest rate of duty. The $400, $600
or $1,200 exemption shall be applied to the aggregate fair retail value
in the country of acquisition of the articles acquired abroad which are
subject to the highest rates of duty. If an internal revenue tax is
applicable, it shall be combined with the duty in determining which
rates are highest.
* * * * *
(d) Tobacco products and alcoholic beverages. Cigars, cigarettes,
manufactured tobacco, and alcoholic beverages may be included in the
exemption to which a returning resident is entitled, with the following
limits:
(1) No more than 200 cigarettes and 100 cigars may be included,
except that in the case of American Samoa, Guam, the Commonwealth of
the Northern Mariana Islands and the Virgin Islands of the United
States the cigarette limit is 1,000, not more than 200 of which shall
have been acquired elsewhere than in such locations;
(2) No alcoholic beverages shall be included in the case of an
individual who has not attained the age of 21; and
(3) No more than 1 liter of alcoholic beverages may be included,
except that:
(i) An individual returning directly or indirectly from American
Samoa, Guam, the Commonwealth of the Northern Mariana Islands or the
Virgin Islands of the United States may include in the exemption not
more than 5 liters of alcoholic beverages, not more than 1 liter of
which shall have been acquired elsewhere than in such locations and not
more than 4 liters of which shall have been produced elsewhere than in
such locations; and
(ii) An individual returning directly from a beneficiary country as
defined in Sec. 10.191(b)(1) of this chapter may include in the
exemption not more than 2 liters of alcoholic beverages if at least 1
liter is the product of one or more beneficiary countries.
* * * * *
(f) Remainder not applicable to subsequent journey. A returning
resident who has received a total exemption of less than the $400, $600
or $1,200 maximum in connection with his return from one journey is not
entitled to apply the unused portion of that maximum amount to articles
acquired abroad on a subsequent journey.
Sec. 148.34 [Amended]
9. Section 148.34(a) is amended by removing the words ``$400 or
$800'' wherever they appear and adding, in their place, the words
``$400, $600 or $1,200''.
10. Section 148.35 is amended by revising paragraphs (a) and (b) to
read as follows:
Sec. 148.35 Length of stay for exemption of articles acquired abroad.
(a) Required for allowance of $400, $600 or $1,200 exemption.
Except as otherwise provided in this paragraph or in paragraph (b) of
this section, the $400, $600 or $1,200 exemption for articles acquired
abroad shall not be allowed unless the returning resident has remained
beyond the territorial limits of the United States for a period of not
less than 48 hours. The $400 exemption may be allowed on articles
acquired abroad by a returning resident arriving directly from Mexico
without regard to the length of time the person has remained outside
the territorial limits of the United States.
(b) Not required for allowance of $1,200 exemption on return from
Virgin Islands. The $1,200 exemption applicable in the case of the
arrival of a returning resident directly or indirectly from the Virgin
Islands of the United States may be allowed without regard to the
length of time such person has remained outside the territorial limits
of the United States.
* * * * *
Sec. 148.36 [Amended]
11. Section 148.36 is amended by removing the words ``$400 or
$800'' wherever they appear and adding, in their place, the words
``$400, $600 or $1,200''.
Sec. 148.37 [Amended]
12. Section 148.37 is amended by removing the words ``$400 or
$800'' wherever they appear and adding, in their place, the words
``$400, $600 or $1,200''.
Sec. 148.38 [Amended]
13. Section 148.38 is amended by removing the words ``$400 or
$800'' and adding, in their place, the words ``$400, $600 or $1,200''.
14. Section 148.51 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 148.51 Special exemption for personal or household articles.
(a) * * *
(2) A returning resident who is not entitled to the $400, $600 or
$1,200 exemption for articles acquired abroad under subheading
9804.00.65, 9804.00.70 or 9804.00.72, HTSUS (see Subpart D of this
part).
* * * * *
Sec. 148.64 [Amended]
15. Section 148.64(a), first sentence, is amended by removing the
words ``subheadings 9804.00.30 or 9804.00.70,'' and adding, in their
place, the words ``subheading 9804.00.30, 9804.00.65, 9804.00.70 or
9804.00.72,''.
Sec. 148.74 [Amended]
16. Section 148.74(c)(3) is amended by removing the words
``subheading 9804.00.65 and 9804.00.70,'' and adding, in their place,
the words ``subheading 9804.00.65, 9804.00.70 or 9804.00.72,''.
Sec. 148.101 [Amended]
17. In Sec. 148.101, the sixth sentence is amended by adding after
``Guam,'' the words ``the Commonwealth of the Northern Mariana
Islands,''; and example 2 is amended by removing the figure ``$2,900''
in the example text and adding, in its place, the figure ``$4,900'', by
removing the figure ``$800'' wherever it appears in the example text
and table and adding, in its place, the figure ``$1,200'', by removing
the figure ``$1,600'' in the table column headed ``Fair retail value''
and adding, in its place, the figure ``$2,400'', by removing the figure
``$4,100'' in the table column headed ``Fair retail value'' and adding,
in its place, the figure ``$4,900'', and by removing the figure
``$1,00'' in the table column headed ``Duty'' and adding, in its place,
the figure ``$100''.
18. Section 148.102 is amended by revising paragraphs (a) and (b)
to read as follows:
Sec. 148.102 Flat rate of duty.
(a) Generally. The rate of duty on articles accompanying any
person, including a crewmember, arriving in the United States
(exclusive of duty-free articles and articles acquired in Canada,
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
or the Virgin Islands of the United States) shall be 10 percent of the
fair retail value in the country of acquisition.
(b) American Samoa, Guam, the Northern Mariana Islands, and the
[[Page 46443]]
Virgin Islands. The rate of duty on articles accompanying any person,
including a crewmember, arriving in the United States directly or
indirectly from American Samoa, Guam, the Commonwealth of the Northern
Mariana Islands or the Virgin Islands of the United States (exclusive
of duty-free articles), acquired in these locations as an incident of
the person's physical presence there, shall be 5 percent of the fair
retail value in the location in which acquired.
* * * * *
Sec. 148.104 [Amended]
19. Section 148.104(c) is amended by removing the figure ``$800''
and adding, in its place, the figure ``$1,000''.
Subpart K [Amended]
20. The heading to Subpart K is amended by adding after ``Guam,''
the words ``the Commonwealth of the Northern Mariana Islands,''.
Sec. 148.110 [Amended]
21. In Sec. 148.110, the first paragraph is amended by adding after
``Guam,'' the words ``the Commonwealth of the Northern Mariana
Islands,''; and the second paragraph is amended by adding after
``Guam'' the words ``, the Commonwealth of the Northern Mariana
Islands,''.
Sec. 148.111 [Amended]
22. In Sec. 148.111, the introductory text is amended by adding
after ``Guam,'' the words ``the Commonwealth of the Northern Mariana
Islands,''; and paragraph (a) is amended by removing the figure
``$800'' and adding, in its place, the figure ``$1,200''.
Sec. 148.113 [Amended]
23. Section 148.113(a), first sentence, is amended by removing the
figure ``$800'' and adding, in its place, the figure ``$1,200''.
PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS
1. 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.
2. Section 178.2 is amended by adding a new listing to the table in
numerical order to read as follows:
Sec. 178.2 Listing of OMB control numbers.
------------------------------------------------------------------------
OMB control
19 CFR section Description No.
------------------------------------------------------------------------
* * * * * * *
Sec. 7.3........................ Claim for duty-free 1515-0055
entry of goods imported
from U.S. insular
possessions.
* * * * * * *
------------------------------------------------------------------------
Approved: May 27, 1997.
George J. Weise,
Commissioner of Customs.
[FR Doc. 97-23308 Filed 9-2-97; 8:45 am]
BILLING CODE 4820-02-P
