Watches, watch movements, and jewelry: exemptions Virgin Islands, Guam, American Samoa, and Northern Mariana Islands,
[Federal Register: December 1, 1999 (Volume 64, Number 230)]
[Rules and Regulations]
[Page 67148-67152]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01de99-2]
DEPARTMENT OF COMMERCE
International Trade Administration
DEPARTMENT OF THE INTERIOR
Office of Insular Affairs
[Docket No. 990813222-9309-02]
RIN 0625-AA55
Extend Production Incentive Benefits to Jewelry Manufacturers in the U.S. Insular Possessions
AGENCIES: Import Administration, International Trade Administration, Department of Commerce; Office of Insular Affairs, Department of the Interior.
ACTION: Final rule.
SUMMARY: This action amends the Departments' regulations governing duty-exemption allocations and duty-refund benefits for watch producers in the United States insular possessions (the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands) due to the enactment of Pub. L. 106-36. This law amends additional U.S. notes to chapter 71 of the Harmonized Tariff Schedule of the United States (``HTSUS'') to provide a duty-refund benefit for any article of jewelry within heading 7113 which is the product of the Virgin Islands, Guam, American Samoa or the Northern Mariana Islands in accordance with the new provisions of the note in chapter 71 and additional U.S. note 5 to chapter 91. The rule amends the regulations by changing Title 15 CFR part 303 to include jewelry, creating a Subpart A for the current insular watch and watch movement regulations and a Subpart B for the new regulations pertaining to jewelry duty- refund benefits authorized by Pub. L. 106-36.
EFFECTIVE DATE: December 1, 1999.
FOR FURTHER INFORMATION CONTACT: Faye Robinson, (202) 482-3526.
SUPPLEMENTARY INFORMATION: We published proposed regulatory revisions on August 27, 1999 (64 FR 46872) and invited comments. Referring to the requirement in the proposed section 303.16(a)(5) that a new jewelry firm be ``completely separate from and not associated with, by way of ownership or control'' with other jewelry program participants in a territory, one commenter suggested that we replace ``ownership or control'' with ``ownership and control''. The commenter hoped to be free to have, as
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a new jewelry firm, a non-controlling association with another firm in the territory.
The Departments agree that the language ``completely separate from and not associated with, by way of ownership or control'' may be too restrictive and might have the effect of discouraging widespread participation in the expanded benefits enacted by Congress. A mere association, whether by way of overlapping ownership or of family relationships, may not necessarily disqualify otherwise qualified new firm applicants.
The change suggested by the applicant, however, would not remove this perceived difficulty because both terms in the phrase ``ownership and control'' are modified by the unexceptionable ``completely separate from.'' Nevertheless, in order to evaluate the unique circumstances of each applicant, we have revised the proposed language to include new terminology borrowed from existing fair trade law regulations. The final language will enable the Secretaries to make case-by-case determinations and ensure that the purpose of the restrictions, to prevent circumvention of the statutory 750,000 unit benefit ceiling and the declining duty-refund benefits received after the first 300,000 units, is observed in all instances.
The insular possessions watch industry provision in Sec. 110 of Pub. L. No. 97-446 (96 Stat. 2331) (1983), as amended by Sec. 602 of Pub. L. No. 103-465 (108 Stat. 4991) (1994); additional U.S. Note 5 to chapter 91 of the HTSUS, as amended by Pub. L. 94-241 (90 Stat 263) (1976) requires the Secretary of Commerce and the Secretary of the Interior, acting jointly, to establish a limit on the quantity of watches and watch movements which may be entered free of duty during each calendar year. The law also requires the Secretaries to establish the shares of this limited quantity which may be entered from the Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands (``CNMI''). After the Departments have verified the data submitted on the annual application (Form ITA-334P), the producers' duty-exemption allocations are calculated from the territorial share in accordance with Section 303.14 of the regulations (15 CFR 303.14) and each producer is issued a duty-exemption license. The law further requires the Secretaries to issue duty-refund certificates to each territorial watch and watch movement producer based on the company's duty-free shipments and creditable wages paid during the previous calendar year.
Pub. L. 106-36 authorizes the issuance of a duty-refund certificate to each territorial jewelry producer for any article of jewelry provided for in heading 7113 of the HTSUS which is the product of any such territory based on creditable wages paid and duty-free units shipped into the United States during the previous calendar year. Although the law specifically mentions the U.S. Virgin Islands, Guam and American Samoa, the issuance of the duty-refund certificate would also apply to the CNMI due to the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (Pub. L. 94-241), which states that goods from the CNMI are entitled to the same tariff treatment as imports from Guam. (See also 19 CFR 7.2(a)). The law provides that during the first two years, beginning August 9, 1999 (45 days after the date of enactment), jewelry that is assembled in the territories shall be treated as a product of such territories. Thereafter, in order to be considered a product of such territories, the jewelry must meet the U.S. Customs Service substantial transformation requirements (the jewelry must become a new and different article of commerce as a result of production or manufacture performed in the territory). To receive duty- free treatment, the jewelry must also satisfy the requirements of General Note 3(a)(iv) of the HTSUS and applicable Customs Regulations (19 CFR 7.3).
The law specifies, in addition, that watch producer benefits shall not to be diminished as a consequence of extending duty-refund benefits to jewelry manufacturers. In the event that the aggregate amount of the calculated duty refunds for both watches and jewelry exceeds the total amount available under Pub. L. 97-446, as amended by Pub. L. 103-465, the watch producers shall receive their calculated amounts; the jewelry producers would then receive amounts proportionately reduced from the remainder.
Under the Administrative Procedure Act, 5 U.S.C. 553(d)(1), the effective date of this rule need not be delayed for 30 days because this rule relieves a restriction by making insular jewelry producers eligible to receive a duty-refund benefit similar to the duty-refund benefit insular watch producers receive.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chief Counsel for Regulation at the Department of Commerce has certified to the Chief Counsel for Advocacy, Small Business Administration, that the rule will not have a significant economic impact on a substantial number of small entities. This rulemaking will not affect the five watch companies currently participating in the insular possessions watch program because Pub. L. 106-36 does not allow watch producers' benefits to be reduced as a consequence of extending benefits to jewelry manufacturers. We expect up to five jewelry companies to set up production facilities in the insular possessions in response to the extension to them of existing incentives by Pub. L. 106-36. However, as with watch producers, the duty refund benefit per company does not apply to shipments exceeding 750,000 units of jewelry into the United States per year. The last Census of Manufacturers statistics (1992) indicate that there are 2,180 precious jewelry manufacturers located in the U.S. employing 32,300 employees. Because the insular jewelry industry would represent such a small percentage of the existing U.S. industry and because there is a limit on the benefit extended to insular jewelry producers, the regulations will not have a significant adverse impact on any small business entities. We expect a positive impact in the form of new jobs in the small U.S. insular economies. No comments were received on this certification.
Paperwork Reduction Act
This rulemaking involves new collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 which have been approved under OMB control number 0625-0040 and 0625-0134. The extension of the insular watch program to include the jewelry benefit will require the use of three of the current forms, modified to accommodate jewelry. The public reporting burden for these collection- of-information requirements includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Form ITA-334P, the annual application, would be completed once a year by each jewelry producer and requires one burden hour. Form ITA-360P, the certificate of refund, would also be used once a year and is completed by the Department of Commerce and imposes no burden hours. Form ITA-361P, the request for refund of duties, would normally be used once or twice a year per jewelry producer and takes about 10 minutes to complete.
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Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information unless it displays a currently valid OMB Control Number.
E.O. 12866
It has been determined that the rulemaking is not significant for purposes of Executive Order 12866.
List of Subjects in 15 CFR Part 303
Administrative practice and procedure, American Samoa, Customs duties and inspection, Guam, Imports, Marketing quotas, Northern Mariana Islands, Reporting and recordkeeping requirements, Virgin Islands, Watches and jewelry.
For reasons set forth above, The Departments amend 15 CFR part 303 as follows:
PART 303--WATCHES, WATCH MOVEMENTS AND JEWELRY PROGRAM
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The authority citation for 15 CFR Part 303 is revised to read as follows:
Authority: Pub. L. 97-446, 96 Stat. 2331 (19 U.S.C. 1202, note); Pub. L. 103-465, 108 Stat. 4991; Pub. L. 94-241, 90 Stat. 263 (48 U.S.C. 1681, note); Pub. L. 106-36, 113 Stat. 127,167.
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Revise the heading for part 303 to read as set forth above.
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Designate Sec. 303.1 through 303.14 as subpart A and add a subpart heading as set forth below.
Subpart A--Watches and Watch Movements
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Add subpart B to read as follows:
Subpart B--Jewelry
Sec. 303.15 Purpose. 303.16 Definitions and forms. 303.17 Annual jewelry application. 303.18 Sale and transfer of business. 303.19 Issuance and use of production incentive certificates. 303.20 Duty refund. 303.21 Appeals.
Subpart B--Jewelry
Sec. 303.15 Purpose.
(a) This subpart implements the responsibilities of the Secretaries of Commerce and the Interior (``the Secretaries'') under Pub. L. 106- 36, enacted 25 June 1999 which substantially amended Pub. L. 97-446, enacted 12 January 1983, amended by Pub. L. 89-805, enacted 10 November 1966, amended by Pub. L. 94-88, enacted 8 August 1975, amended by Pub. L. 94-241, enacted 24 March 1976, and amended by Pub. L. 103-465, enacted 8 December 1994.
(b) The amended law provides for the issuance of certificates to insular jewelry producers who have met the requirements of the laws and regulations, entitling the holder (or any transferee) to obtain refunds of duties on watches and watch movements and parts (except discrete watch cases) imported into the customs territory of the United States. The amounts of these certificates may not exceed specified percentages of the producers' verified creditable wages in the insular possessions (90% of wages paid for the production of the first 300,000 duty-free units and declining percentages, established by the Secretaries, of wages paid for incremental production up to 750,000 units by each producer) nor an aggregate annual amount for all certificates exceeding $5,000,000 adjusted for growth by the ratio of the previous year's gross national product to the gross national product in 1982. However, the law specifies that watch producer benefits are not to be diminished as a consequence of extending the duty refund to jewelry manufacturers. In the event that the amount of the calculated duty refunds for watches and jewelry exceeds the total aggregate annual amount that is available, the watch producers shall receive their calculated amounts and the jewelry producers would receive amounts proportionately reduced from the remainder. Refund requests are governed by regulations issued by the Department of the Treasury (see 19 CFR 7.4).
(c) Section 2401(a) of Pub. L. 106-36 and additional U.S. note 5 to chapter 91 of the HTSUS authorize the Secretaries to issue regulations necessary to carry out their duties. The Secretaries may cancel or restrict the certificate of any insular manufacturer found violating the regulations.
Sec. 303.16 Definitions and forms.
(a) Definitions. For purposes of the subpart, unless the context indicates otherwise:
(1) Act means Pub. L. 97-446, enacted 12 January 1983 (19 U.S.C. 1202), 96 Stat. 2329, as amended by Pub. L. 103-465, enacted on 8 December 1994, 108 Stat. 4991 and, as amended by Pub. L. 106-36, enacted on 25 June 1999.
(2) Secretaries means the Secretary of Commerce and the Secretary of the Interior or their delegates, acting jointly.
(3) Director means the Director of the Statutory Import Programs Staff, International Trade Administration, U.S. Department of Commerce.
(4) Sale or transfer of a business means the sale or transfer of control, whether temporary or permanent, over a firm which is eligible for a jewelry program duty-refund to any other firm, corporation, partnership, person or other legal entity by any means whatsoever, including, but not limited to, merger and transfer of stock, assets or voting trusts.
(5) New firm means a jewelry company which has requested in writing to the Secretaries permission to participate in the program. In addition to any other information required by the Secretaries, new firm requests shall include a representation that the company agrees to abide by the laws and regulations of the program, an outline of the company's anticipated economic contribution to the territory (including the number of employees) and a statement as to whether the company is affiliated by ownership or control with any other watch or jewelry company in the insular possessions. The Secretaries will then review the request and make a decision based on the information provided and the economic contribution to the territory. A new jewelry firm may not be affiliated through ownership or control with any other jewelry duty- refund recipient. In assessing whether persons or parties are affiliated, the Secretaries will consider the following factors, among others: stock ownership; corporate or family groupings; franchise or joint venture agreements; debt financing; and close supplier relationships. The Secretaries may not find that control exists on the basis of these factors unless the relationship has the potential to affect decisions concerning production, pricing, or cost. Also, no jewelry duty-refund recipient may own or control more than one watch duty-refund recipient.
(6) Jewelry producer means a company, located in one of the insular territories (see paragraph (a)(8) of this section), that produces jewelry provided for in heading 7113, HTSUS, which meets all the U.S. Customs Service requirements for duty-free entry set forth in General Note 3(a)(iv), HTSUS, and 19 CFR 7.3, and has maintained its eligibility for duty refund benefits by complying with these regulations.
(7) Unit of jewelry means a single article, pair (example: earrings, cufflinks), subassembly or component which is contained in HTSUS heading 7113.
(8) Territories, territorial and insular possessions refers to the insular possessions of the United States (i.e., the U.S. Virgin Islands, Guam,
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American Samoa and the Northern Mariana Islands).
(9) Creditable wages means all wages--up to the amount per person of $38,650--paid to permanent residents of the territories employed in the firm's manufacture of HTSUS heading 7113 articles of jewelry which are a product of the insular possessions and have met the U.S. Customs Service's criteria for duty-free entry into the United States, plus any wages paid for the repair of non-insular HTSUS heading 7113 jewelry up to an amount equal to 50 percent of the firm's total creditable wages. Excluded, however, are wages paid for special services rendered to the firm by accountants, lawyers, or other professional personnel plus any wages paid for the assembly of dutiable jewelry or the repair of dutiable jewelry to the extent that such wages exceed the percentage set forth above. Wages paid to persons engaged in production of jewelry that has entered the U.S. both duty-free and duty-paid may be credited proportionately provided the firm maintains production and payroll records adequate for the Departments' verification of the creditable wages portion (see Sec. 303.17(b)).
(10) Dutiable jewelry includes jewelry which does not meet the requirements for duty-free entry under General Note 3(a)(iv), HTSUS, and 19 CFR 7.3, contains any material which is the product of any country with respect to which Column 2 rates of duty apply or is ineligible for duty-free treatment pursuant to other laws or regulations.
(b) Forms.
(1) ITA--334P ``Annual Application for License to Enter Watches and Watch Movements into the Customs Territory of the United States.'' The Director shall issue instructions for jewelry manufacturers on the completion of the relevant portions of the form. The form must be completed annually by all jewelry producers desiring to receive a duty refund.
(2) ITA--360P ``Certificate of Entitlement to Secure the Refund of Duties on Watches and Watch Movements.'' This document authorizes a territorial jewelry producer to request the refund of duties on imports of watches, watch movements and parts therefor, with certain exceptions, up to a specified value. Certificates may be used to obtain duty refunds only when presented with a properly executed Form ITA- 361P.
(3) ITA--361P ``Request for Refund of Duties on Watches and Watch Movements.'' This form must be completed to obtain the refund of duties authorized by the Director through Form ITA-360P. After authentication by the Department of Commerce, it may be used for the refund of duties on items which were entered into the customs territory of the United States during a specified time period. Copies of the appropriate Customs entries must be provided with this form to establish a basis for issuing the claimed amounts. The forms may also be used to transfer all or part of the producer's entitlement to another party (see Sec. 303.19(c)).
(The information collection requirements in paragraph (b)(1) were approved by the Office of Management and Budget under control number 0625-0040. The information collection requirements in paragraphs (b) (2) and (3) were approved under control number 0625-0134.)
Sec. 303. 17 Annual jewelry application.
(a) Form ITA-334P shall be furnished to producers by January 1 and must be completed and returned to the Director no later than January 31 of each calendar year.
(b) All data supplied are subject to verification by the Secretaries and no duty refund shall be made to producers until the Secretaries are satisfied that the data are accurate. To verify the data, representatives of the Secretaries shall have access to relevant company records including, but not limited to:
(1) Work sheets used to answer all questions on the application form, as specified by the instructions;
(2) Original records from which such data are derived;
(3) Records pertaining to ownership and control of the company;
(4) Records pertaining to all duty-free and dutiable shipments of HTSUS 7113 jewelry, including Customs entry documents;
(5) Records pertaining to corporate income taxes, gross receipts taxes and excise taxes paid by each producer in the territories;
(6) Customs, bank, payroll, and production records;
(7) Records on purchases of components and sales of jewelry, including proof of payment; and
(8) Any other records in the possession of the parent or affiliated companies outside the territory pertaining to any aspect of the producer's jewelry operations.
(c) Data verification shall be performed in the territories, unless other arrangements satisfactory to the Departments are made in advance, by the Secretaries' representatives by the end of February of each calendar year. In the event a company cannot substantiate the data in its application, the Secretaries shall determine which data will be used.
(d) Records subject to the requirements of paragraph (b) of this section, shall be retained for a period of two years following their creation.
Sec. 303.18 Sale or transfer of business.
(a) The sale or transfer of a business together with its duty refund entitlement shall be permitted with prior written notification to the Departments. Such notification shall be accompanied by certifications and representations, as appropriate, that:
(1) The transferee is neither directly nor indirectly affiliated with any other territorial duty refund jewelry recipient in any territory;
(2) The transferee will not modify the jewelry operations in a manner that will significantly diminish its economic contributions to the territory.
(b) At the request of the Departments, the transferee shall permit representatives of the Departments to inspect whatever records are necessary to establish to their satisfaction that the certifications and representations contained in paragraph (a) of this section have been or are being met.
(c) Any transferee who is either unwilling or unable to make the certifications and representations specified in paragraph (a) of this section shall secure the Departments' approval in advance of the sale or transfer of the business. The request for approval shall specify which of the certifications specified in paragraph (a) of this section the firm is unable or unwilling to make, and give reasons why such fact should not constitute a basis for the Departments' disapproval of the sale or transfer.
Sec. 303.19 Issuance and use of production incentive certificates.
(a) Issuance of certificates. (1) Certificates of Entitlement, Form ITA-360, shall be issued before March 1 of each year.
(2) Certificates shall not be issued to more than one jewelry company in the territories owned or controlled by the same corporate entity.
(b) Security and handling of certificates. (1) Certificate holders are responsible for the security of the certificates. The certificates shall be kept at the territorial address of the producer or at another location having the advance approval of the Departments.
(2) All refund requests made pursuant to the certificates shall be entered on the reverse side of the certificate.
(3) Certificates shall be returned by registered, certified or express carrier mail to the Department of Commerce when:
(i) A refund is requested which exhausts the entitlement on the face of the certificate,
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(ii) The certificate expires, or
(iii) The Departments request their return with good cause.
(4) Certificate entitlements may be transferred according to the procedures described in paragraph (c) of this section.
(c) The use and transfer of certificate entitlements. (1) Insular producers issued a certificate may request a refund by executing a Form ITA-361P (see Sec. 303.16(b)(3)) and the instructions on the form). After authentication by the Department of Commerce, Form ITA-361P may be used to obtain duty refunds on watch movements, watches, and parts therefor. Duties on watch cases not containing a movement and on articles containing any material which is the product of a country with respect to which Column 2 rates of duty apply may not be refunded. Articles for which duty refunds are claimed must have entered the customs territory of the United States during the two-year period prior to the issue date of the certificate or during the one-year period the certificate remains valid. Copies of the appropriate Customs entries must be provided with the refund request in order to establish a basis for issuing the claimed amounts. Certification regarding drawback claims and liquidated refunds relating to the presented entries is required from the claimant on the form.
(2) Regulations issued by the U.S. Customs Service, U.S. Department of the Treasury, govern the refund of duties under 19 CFR 7.4. If the Departments receive information from the Customs Service that a producer has made unauthorized use of any official form, they may cancel the affected certificate.
(3) The territorial producer may transfer a portion of all of its certificate entitlement to another party by entering in block C of Form ITA-361P the name and address of the party.
(4) After a Form ITA-361P transferring a certificate entitlement to a party other than the certificate holder has been authenticated by the Department of Commerce, the form may be exchanged for any consideration satisfactory to the two parties. In all cases, authenticated forms shall be transmitted to the certificate holder or its authorized custodian for disposition (see paragraph (b) of this section).
(5) All disputes concerning the use of an authenticated Form ITA- 361P shall be referred to the Departments for resolution. Any party named on an authenticated Form ITA-361P shall be considered an ``interested party'' within the meaning of Sec. 303.21 of this part.
Sec. 303.20 Duty refund.
(a) Territorial jewelry producers are entitled to duty refund certificates only for jewelry that they produce which is provided for in heading 7113, HTSUS, is a product of a territory and otherwise meets the requirements for duty-free entry under General Note 3 (a)(iv), HTSUS, and 19 CFR 7.3.
(1) An article of jewelry is considered to be a product of a territory if:
(i) The article is wholly the growth or product of the territory; or
(ii) The article became a new and different article of commerce as a result of production or manufacture performed in the territories.
(2) Two-year exception. Any article of jewelry provided for in heading 7113, HTSUS, entered or withdrawn from warehouse for consumption during the two-year period beginning August 9, 1999, that is assembled in a territory shall be considered a product of the insular possessions. At the expiration of the two-year period, only jewelry which satisfies either of the criteria set forth in paragraph (a)(1) of this section shall be considered a product of an insular possession.
(b) Calculation of the value of production incentive certificates. (1) The value of each producer's certificate shall equal the producer's average creditable wages per unit shipped free of duty into the United States multiplied by the sum of:
(i) The number of units shipped up to 300,000 units times a factor of 90%; plus
(ii) Incremental units shipped up to 450,000 units times a factor of 85%; plus
(iii) Incremental units shipped up to 600,000 times a factor of 80%; plus
(iv) Incremental shipments up to 750,000 units times a factor of 75%.
(2) The Departments may make adjustments for these data in the manner set forth in Sec. 303.17(c).
Sec. 303.21 Appeals.
(a) Any official decision or action relating to the issuance or use of production incentive certificates may be appealed to the Secretaries by any interested party. Such appeals must be received within 30 days of the date on which the decision was made or the action taken in accordance with the procedures set forth in paragraph (b) of this section. Interested parties may petition for the issuance of a rule, or amendment or repeal of a rule issued by the Secretaries. Interested parties may also petition for relief from the application of any rule on the basis of hardship or extraordinary circumstances resulting in the inability of the petitioner to comply with the rule.
(b) Petitions shall bear the name and post office address of the petitioner and the name and address of the principal attorney or authorized representative (if any) for the party concerned. They shall be addressed to the Secretaries and filedin one original and two copies with the U.S. Department of Commerce, Import Administration, International Trade Administration, Washington, DC 20230, Attention: Statutory Import Programs Staff. Petitions shall contain the following:
(1) A reference to the decision, action or rule which is the subject of the petition;
(2) A short statement of the interest of the petitioner;
(3) A statement of the facts as seen by the petitioner;
(4) The petitioner's argument as to the points of law, policy or fact. In cases where policy error is contended, the alleged error together with the policy the submitting party advocates as the correct one should be described in full;
(5) A conclusion specifying the action that the petitioner believes the Secretaries should take.
(c) The Secretaries may at their discretion schedule a hearing and invite the participation of other interested parties.
(d) The Secretaries shall communicate their decision, which shall be final, to the petitioner by registered, certified or express mail. Joseph A. Spetrini, Acting Assistant Secretary for Import Administration, Department of Commerce. Ferdinand Aranza, Director, Office of Insular Affairs, Department of the Interior.
[FR Doc. 99-30971Filed11-30-99; 8:45 am]
BILLING CODE 3510-DS-P 4310-93-P
