[Federal Register Volume 59, Number 117 (Monday, June 20, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-14868] [[Page Unknown]] [Federal Register: June 20, 1994] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Customs Service 19 CFR Part 12 [T.D. 94-52] RIN 1515-AB50 North American Free Trade Agreement--Submission of Certificates of Eligibility for Textile and Apparel Goods Under the Tariff Preference Level Provisions AGENCY: U.S. Customs Service, Department of the Treasury. ACTION: Interim rule; solicitation of comments. ----------------------------------------------------------------------- SUMMARY: This document amends the Customs Regulations to require submission of a Certificate of Eligibility in connection with the entry of non-originating textile and apparel goods from Canada or Mexico for which preferential tariff treatment is claimed under the tariff preference level provisions of the North American Free Trade Agreement (NAFTA). Failure to submit the required Certificate of Eligibility will result in a denial of the claim for preferential tariff treatment. This regulatory action is intended to ensure that the NAFTA implementing regulations reflect procedures agreed to by the United States, Canada and Mexico. DATES: Interim rule effective on June 20, 1994; comments must be received on or before August 19, 1994. ADDRESSES: Written comments (preferably in triplicate) may be addressed to the Regulations Branch, Office of Regulations and Rulings, U.S. Customs Service, 1301 Constitution Avenue, NW., Washington, D.C. 20229. Comments submitted may be inspected at the Regulations Branch, Office of Regulations and Rulings, Franklin Court, 1099 14th Street, NW., suite 4000, Washington, D.C. FOR FURTHER INFORMATION CONTACT: Dick Crichton, Office of Trade Operations (202-927-0162). SUPPLEMENTARY INFORMATION: Background On December 17, 1992, the United States, Canada and Mexico entered into the North American Free Trade Agreement (NAFTA), one of the principal purposes of which is to eliminate tariff and other barriers to trade in, and facilitate 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''), Public Law 103-182, 107 Stat. 2057. On December 30, 1993, Customs published in the Federal Register (58 FR 69460) T.D. 94-1 setting forth interim amendments to the Customs Regulations to implement the Customs- related aspects of the NAFTA. Those interim regulations took effect on January 1, 1994, to coincide with the entry into force of the NAFTA. The centerpiece of the NAFTA involves the granting of preferential tariff (duty-free or reduced-duty) treatment on goods imported into a NAFTA country from another NAFTA country. As a general rule, such preferential tariff treatment may only be accorded to goods that satisfy the rules of origin standards set forth in Chapter Four of the NAFTA; such goods are referred to as ``originating'' goods for NAFTA purposes. The NAFTA Chapter Four rules of origin are set forth in section 202 of the Act which is codified at 19 U.S.C. 3332. Under Chapter Three of the NAFTA, Appendix 6.B. to Annex 300-B provides for an exception to the general rule regarding the granting of NAFTA preferential tariff treatment only to originating goods. This exception concerns specified textile and apparel goods which, because of the origin of the materials used to produce the goods in a NAFTA country and/or the nature of the processing used to produce the goods in a NAFTA country, do not meet the Chapter Four rules of origin standards and thus do not qualify as originating goods under the NAFTA. For such non-originating goods, Appendix 6.B. to Annex 300-B provides that they may nevertheless be granted preferential tariff treatment (that is, the duty-free or reduced-duty treatment that would be accorded to the same type of good when it qualifies as an originating good) up to specified annual quantitative ``tariff preference levels'' (TPLs). Once a TPL applicable to a NAFTA country's exports to another NAFTA country has been reached, any further exports of goods of that TPL category to the same NAFTA country during that year may not be accorded NAFTA preferential tariff treatment but rather will be subject to duty at the most-favored-nation rate. The TPL quantitative limits are set forth by category in Schedules 6.B.1. through 6.B.3. of Annex 300-B with reference to imports into each NAFTA country from each of the other NAFTA countries. For U.S. import purposes, the TPL provisions of Appendix 6.B. and Schedules 6.B.1. through 6.B.3. are also set forth in Additional U.S. Notes 3 through 6 to Section XI, HTSUS. The basic procedures for filing a claim for NAFTA preferential tariff treatment, set forth in Sec. 181.21 of the NAFTA implementing regulations (19 CFR 181.21), are generally applicable in the case of goods for which preferential tariff treatment is sought under the TPL provisions described above. However, there is one principal exception to those procedures as regards goods to which Appendix 6.B. to Annex 300-B applies: as stated in paragraph (a) of that section, there is no requirement that the written declaration (which constitutes the claim for preferential tariff treatment) be based on a Certificate of Origin in the possession of the importer. This exception is necessary because a NAFTA Certificate of Origin has reference only to originating goods (that is, goods which comply with the Chapter Four rules of origin standards) and thus does not cover TPL goods which are, by definition, not originating goods. In this regard, Sec. 181.21(a) also contains a cross-reference to Sec. 12.132 (19 CFR 12.132) which was added by T.D. 94-1 to clarify the application of the already-existing Sec. 12.130(f) (19 CFR 12.130(f)) country of origin declaration requirements in the context of textile and apparel goods which are subject to the provisions of Annex 300-B of the NAFTA. Following the publication of T.D. 94-1 and the entry into force of the NAFTA, representatives of the United States, Canada and Mexico continued to have discussions regarding whether additional requirements or procedures should be adopted for purposes of administering the provisions of Annex 300-B of the NAFTA. As a result of those discussions, Canada and Mexico have decided on, and implemented, use of a Certificate of Eligibility as the means for monitoring and identifying export shipments eligible for preferential tariff treatment pursuant to the TPL provisions of Appendix 6.B. to Annex 300-B of the NAFTA. The Certificate of Eligibility, signed by an authorized official of the Canadian or Mexican government, is issued to the Canadian or Mexican exporter for transmittal to the importer of the goods who then would be able to make a claim for preferential tariff treatment based on the Certificate of Eligibility. The United States, Canada and Mexico have agreed that presentation of a properly completed and executed Certificate of Eligibility for Canadian and Mexican exports is a prerequisite to the granting of a claim for preferential tariff treatment under the TPL provisions, and failure to present such a Certificate of Eligibility will result in assessment of duty at the most-favored-nation (that is, non-NAFTA) rate. No action has been taken by the United States to institute use of a Certificate of Eligibility for U.S. exports to Canada and Mexico. In light of the adoption of the above procedures regarding use of the Certificate of Eligibility for Canadian and Mexican exports, Customs has been granting claims for preferential tariff treatment on TPL goods imported from Canada or Mexico only if a properly completed and executed Certificate of Eligibility pertaining to the goods is presented to Customs when the claim is made. In order to ensure that the NAFTA implementing regulations reflect the trilaterally-agreed procedures and provide appropriate guidance to the public regarding U.S. import requirements, this document amends Sec. 12.132 on an interim basis to require submission of a Canadian or Mexican Certificate of Eligibility in connection with a claim for preferential tariff treatment on goods covered by the NAFTA TPL provisions. Customs further believes that this interim amendment should take effect immediately to ensure the greatest procedural benefit to the public, and it is noted in this regard that the post-importation refund procedure under the NAFTA applies only to ``originating'' goods and thus is not an available administrative remedy in a TPL context for a failure to make a claim at the time of importation (see Article 502(3) of the NAFTA, 19 U.S.C. 1520(d) as added by section 206 of the Act, and Subpart D of Part 181 of the NAFTA implementing regulations set forth in T.D. 94-1). Comments Before adopting this interim regulation as a final rule, consideration will be given to any written comments timely submitted to Customs. Comments submitted will be available for public inspection in accordance with the Freedom of Information Act (5 U.S.C. 552), Sec. 1.4, Treasury Department Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs Regulations (19 CFR 103.11(b)), on regular business days between the hours of 9 a.m. and 4:30 p.m. at the Regulations Branch, Office of Regulations and Rulings, U.S. Customs Service, Franklin Court, 1099 14th Street NW., suite 4000, Washington, DC. Inapplicability of Notice and Delayed Effective Date Requirements Pursuant to the provisions of 5 U.S.C. 553(a), public notice is inapplicable to this interim regulation because it is within the foreign affairs function of the United States. A failure to have this regulation in place at the earliest practicable date would provoke undesirable international consequences. In addition, because this regulation sets forth procedures which the public needs to know in order to claim the benefit of a tariff preference under the NAFTA, it is determined pursuant to 5 U.S.C. 553(b)(B), that notice and public procedures are impracticable, unnecessary, and contrary to the public interest. Furthermore, for the above reasons, it is determined that good cause exists under the provisions of 5 U.S.C. 553(d)(1) and (d)(3) for dispensing with a delayed effective date. Executive Order 12866 Because this document involves a foreign affairs function of the United States and implements an international agreement, it is not subject to the provisions of E.O. 12866. Regulatory Flexibility Act Because no notice of proposed rulemaking is required for interim regulations, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply. Drafting Information The principal author of this document was Francis W. Foote, Office of Regulations and Rulings, U.S. Customs Service. However, personnel from other offices participated in its development. List of Subjects in 19 CFR Part 12 Canada, Customs duties and inspection, Marking, Mexico, Reporting and recordkeeping requirements, Textiles and textile products, Trade agreements. Amendment to the Regulations Accordingly, for the reasons stated above, Part 12, Customs Regulations (19 CFR part 12) is amended as set forth below. PART 12--SPECIAL CLASSES OF MERCHANDISE 1. The authority citation for Part 12 continues to read in part as follows: Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202 (General Note 17, Harmonized Tariff Schedule of the United States (HTSUS)), 1624; * * * 2. Section 12.132 is amended by redesignating paragraphs (a), (b), and (c) as paragraphs (1), (2), and (3), designating the introductory text of the section as paragraph (a) introductory text, adding a heading to newly designated paragraph (a), and adding paragraph (b) to read as follows: Sec. 12.132 Textile and apparel goods under the North American Free Trade Agreement. (a) Country of origin declaration. * * * * * * * * (b) Certificate of Eligibility. In connection with a claim for NAFTA preferential tariff treatment involving non-originating textile and apparel goods subject to the tariff preference level provisions of Appendix 6.B. to Annex 300-B of the NAFTA and Additional U.S. Notes 3 through 6 to Section XI, Harmonized Tariff Schedule of the United States, the importer shall submit to Customs a Certificate of Eligibility covering the goods. The Certificate of Eligibility shall be properly completed and signed by an authorized official of the Canadian or Mexican government and shall be presented to Customs at the time the claim for preferential tariff treatment is filed under Sec. 181.21 of this chapter. Failure to timely submit the required Certificate of Eligibility will result in a denial of the claim. Samuel H. Banks, Acting Commissioner of Customs. Approved: June 4, 1994. John P. Simpson, Deputy Assistant Secretary of the Treasury. [FR Doc. 94-14868 Filed 6-17-94; 8:45 am] BILLING CODE 4820-02-P