[Federal Register Volume 81, Number 131 (Friday, July 8, 2016)]
[Proposed Rules]
[Pages 44555-44557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16088]
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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. 81, No. 131 / Friday, July 8, 2016 / Proposed
Rules
[[Page 44555]]
DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR PART 102
[Docket No. USCBP-2016-0041]
RIN 1515-AD78
North American Free Trade Agreement; Preference Override
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security; Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The United States, Canada and Mexico have agreed to liberalize
provisions of the North American Free Trade Agreement (NAFTA)
preference rules of origin that relate to certain goods, including
certain spices. However, such liberalization cannot take effect unless
U.S. Customs and Border Protection (CBP) amends its regulations to
allow the NAFTA preference override to apply to certain spice products
and other food products. This document proposes such an amendment.
DATES: Comments must be received on or before September 6, 2016.
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-2016-0041.
Mail: Trade and Commercial Regulations Branch, Regulations
and Rulings, Office of International Trade, Customs and Border
Protection, 90 K Street NE., 10th Floor, Washington, DC 20229-1177.
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 be inspected during regular business days between the hours of 9
a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch,
Regulations and Rulings, Office of International Trade, Customs and
Border Protection, 90 K Street NE., 10th Floor, Washington, DC.
Arrangements to inspect submitted comments should be made in advance by
calling Mr. Joseph Clark at (202) 325-0118.
FOR FURTHER INFORMATION CONTACT: Monika Brenner, Chief, Valuation and
Special Programs Branch, Regulations and Rulings, Office of
International Trade, (202) 325-0038.
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 rulemaking. Comments that will provide the most assistance to
CBP will reference a specific portion of the proposed rulemaking,
explain the reason for any recommended change, and include data,
information, or authority that support such recommended change. See
ADDRESSES above for information on how to submit comments.
Background
On December 17, 1992, the United States, Canada, and Mexico (the
parties) entered into the North American Free Trade Agreement (NAFTA).
The provisions of the NAFTA were adopted by the United States with
enactment of the North American Free Trade Agreement Implementation
Act, Public Law 103-182, 107 Stat. 2057 (December 8, 1993). Under
Article 401 of the NAFTA, an imported good qualifies as an originating
good of a NAFTA party if: (1) It is wholly obtained or produced in one
or more of the NAFTA parties; (2) it is produced entirely in one or
more of the NAFTA parties exclusively from materials that originate in
those parties; or (3) each of the non-originating materials used in the
production of the good undergoes an applicable change in tariff
classification as a result of production occurring entirely in the
territory of one or more of the parties and satisfies any other
applicable requirement (which may include a regional value-content
requirement). The NAFTA preference change in tariff classification (or
``tariff-shift'') rules are set forth in General Note 12(t) of the
Harmonized Tariff Schedule of the United States (HTSUS).
General Note 12(a), HTSUS, provides that an imported good is
eligible for preferential tariff treatment under the NAFTA only if it
is an originating good of a NAFTA party and it qualifies to be marked
as a good of Canada or Mexico under the rules for determining the
country of origin of a good for purposes of Annex 311 of the NAFTA. The
rules for determining the country of origin for marking in such cases
are included in part 102, CBP regulations (19 CFR part 102). In
situations in which an imported good is determined under Article 401 of
the NAFTA to be originating but fails to qualify as a good of Canada or
Mexico under the other applicable provisions set forth in 19 CFR part
102, the NAFTA preference override in Sec. 102.19 may provide a basis
for enabling the good to qualify as a good of Canada or Mexico. Under
Sec. 102.19, if a good which has NAFTA originating status is not
determined to be a good of Canada or Mexico under Sec. 102.11(a) or
(b) or Sec. 102.21, the country of origin of the good is determined to
be the last NAFTA country in which the good underwent production other
than minor processing, provided that a NAFTA Certificate of Origin has
been completed and signed for the good (emphasis added). ``Production''
is broadly defined in Sec. 102.1(n) as ``growing, mining, harvesting,
fishing, trapping, hunting, manufacturing, processing or assembling a
good.'' ``Minor processing'' is defined in Sec. 102.1(m) and includes
``[p]utting up in measured doses, packing, repacking, packaging,
repackaging.''
[[Page 44556]]
Thus in certain instances Sec. 102.19 allows the originating
status of a good to ``override'' a determination that it is not a good
of Canada or Mexico. In other words, it allows NAFTA preferential
tariff treatment to be granted to certain goods that otherwise would be
ineligible for such treatment due to the General Note 12(a)'s
requirement that originating goods qualify to be marked as goods of
Canada or Mexico under the NAFTA Marking Rules. However, under Sec.
102.19, as it currently reads, minor processing would not be a type of
production that would qualify a good to be labeled as a product of the
country in which the labeling took place and thus would not enable the
good to take advantage of NAFTA tariff preferences.
Explanation of Amendments
Since the NAFTA entered into effect, the three parties to the
Agreement have agreed to liberalizations to the NAFTA preference rules
of origin for various goods. As a result, a lesser degree of processing
in a NAFTA party is required to constitute ``production'' which will
confer originating status to certain non-NAFTA materials. The United
States took steps to implement these changes by amending the NAFTA
preference tariff-shift rules in General Note 12(t), HTSUS, through
Presidential Proclamations 7870 dated February 9, 2005 (published in
the Federal Register on February 14, 2005 (70 FR 7611)), 8067 dated
October 11, 2006 (published in the Federal Register on October 13, 2006
(71 FR 60649)), and 8405 dated August 31, 2009 (published in the
Federal Register on September 2, 2009 (74 FR 45529)).
For spices and certain other food products, Presidential
Proclamation 7870 specifically liberalized various rules of origin in
General Note 12(t) to permit minor processing operations in a NAFTA
party, such as packaging, to confer originating status on a good. For
example, the NAFTA preference rule for tea (heading 0902, HTSUS) was
changed to permit blending and/or packaging to confer NAFTA originating
status. Similarly, changes to the preference rules of origin for
products such as peppers (subheading 0904.12, HTSUS), cloves (heading
0907, HTSUS), poppy seeds (subheading 1207.91, HTSUS), and certain
other spices were also liberalized by Proclamation 7870 to allow these
goods to become NAFTA originating as a result of packaging operations
in a NAFTA party. It is noted that blending is considered to be more
than a minor processing operation for purposes of the NAFTA Marking
Rules. See, for example, CBP Headquarters Ruling Letter (HQ) 561986
dated August 21, 2001.
However, contrary to the intentions of the NAFTA parties, these
goods are not receiving NAFTA preferential tariff treatment when
imported into the United States from Canada or Mexico because they do
not qualify to be marked as goods of Canada or Mexico under the NAFTA
Marking Rules in 19 CFR part 102, as required by General Note 12(a),
HTSUS. This anomalous result stems, in part, from the fact that, in
regard to those goods that obtain originating status as a result of
minor processing in a NAFTA party, the pertinent NAFTA marking rules in
19 CFR 102.20 are more stringent than the comparable liberalized NAFTA
preference rules set forth in General Note 12(t), HTSUS. As discussed
above, the NAFTA preference override provision in Sec. 102.19(a) fails
to resolve this problem since, as discussed above, this provision
overrides a determination that a good is not a good of Canada or Mexico
only in situations in which the good undergoes production other than
minor processing, in a NAFTA country.
CBP notes that 19 CFR 102.17 provides that a foreign material will
not be considered to have undergone an applicable change in tariff
classification specified in Sec. 102.20 or Sec. 102.21 or to have met
any other applicable requirements of those sections merely by reason of
having been subjected to certain specified operations, including
``[s]imple packing, repacking or retail packaging without more than
minor processing.'' This provision clearly is not an impediment to the
proposed amendment set forth in this document as the ``non-qualifying
operations'' specified in Sec. 102.17 relate only to the application
of the rules set forth in Sec. Sec. 102.20 and 102.21 and not to the
NAFTA preference override in Sec. 102.19.
CBP understands that, as a result of actions taken or
interpretations adopted by the Governments of Canada and Mexico, the
above-referenced spices and other food products subject to the NAFTA
liberalizations are receiving NAFTA preferential tariff treatment when
imported from the United States into Canada and Mexico (assuming
compliance with all applicable requirements). To rectify the problem
discussed above with respect to imports from Canada and Mexico, CBP is
proposing to amend Sec. 102.19 by adding a new paragraph (c) to allow
the NAFTA preference override to apply to these specific goods. This
proposed change, if finalized, will give effect to the intentions of
the NAFTA parties by extending NAFTA preferential tariff treatment to
certain goods imported from Canada and Mexico that, under the
liberalized rules of origin in General Note 12(t), are considered NAFTA
originating as a result of minor processing operations (e.g.,
packaging) performed in a NAFTA party.
Statutory and Regulatory Requirements
A. Executive Order 13563 and Executive Order 12866
Executive Orders 13563 and 12866 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rulemaking is not a ``significant regulatory
action,'' under section 3(f) of the Executive Order 12866. Accordingly,
OMB has not reviewed this proposed rule.
B. Regulatory Flexibility Act
This section examines the impact of the rule on small entities as
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as
amended by the Small Business Regulatory Enforcement and Fairness Act
of 1996 (SBREFA). A small entity may be a small business (defined as
any independently owned and operated business not dominant in its field
that qualifies as a small business per the Small Business Act); a small
not-for-profit organization; or a small governmental jurisdiction
(locality with fewer than 50,000 people).
The proposed rule, if finalized, will extend NAFTA preferential
tariff treatment to certain goods imported from Mexico and Canada that
currently are not receiving such treatment, despite the fact that these
goods presently qualify as NAFTA originating under General Note 12(t),
HTSUS. Therefore, the proposed amendment would benefit importers of
such goods from Canada and Mexico by eliminating the customs duties and
merchandise processing fees that presently are due for these
importations. To the extent that this rulemaking affects small
entities, these entities would experience a cost savings. Therefore,
CBP certifies that the proposed rule would not have a significant
economic impact on a substantial number of small entities.
[[Page 44557]]
Paperwork Reduction Act
As there is no collection of information proposed in this document,
the provisions of the Paperwork Reduction Act (44 U.S.C. 3507) are
inapplicable.
Signing Authority
This document is being issued in accordance with Sec. 0.1(a)(1) of
the CBP Regulations (19 CFR 0.1(a)(1)) pertaining to the authority of
the Secretary of the Treasury (or his/her delegate) to approve
regulations related to certain customs revenue functions.
List of Subjects in 19 CFR Part 102
Canada, Customs duties and inspections, Imports, Mexico, Reporting
and recordkeeping requirements, Trade agreements.
Proposed Amendments to the CBP Regulations
For the reasons set forth above, part 102 of title 19 of the Code
of Federal Regulations (19 CFR part 102) is proposed to be amended as
set forth below.
PART 102--RULES OF ORIGIN
0
1. The authority citation for part 102, CBP regulations, continues to
read as follows:
Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized
Tariff Schedule of the United States (HTSUS)), 1624, 3314, 3592.
Sec. 102.19 [Amended]
0
2. In Sec. 102.19:
0
a. Paragraph (a) is amended by adding the words ``or (c)'' after the
words ``paragraph (b)''; and
0
b. Paragraph (c) is added to read as follows:
(c) If a good classifiable under heading 0907, 0908, 0909, or
subheading 0910.11, 0910.12, 0910.30, 0910.99 or 1207.91, HTSUS, is
originating within the meaning of section 181.1(q) of this chapter, but
is not determined under section 102.11(a) or (b) to be a good of a
single NAFTA country, the country of origin of such good is the last
NAFTA country in which that good underwent production, provided that a
Certificate of Origin (see Sec. 181.11 of this Chapter) has been
completed and signed for the good.
R. Gil Kerlikowske,
Commissioner, U.S. Customs and Border Protection.
Approved: July 1, 2016.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2016-16088 Filed 7-7-16; 8:45 am]
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