Proposed Changes in Watch, Watch Movement and Jewelry Program for the U.S. Insular Possessions

DEPARTMENT OF COMMERCE

International Trade Administration

DEPARTMENT OF THE INTERIOR

Office of Insular Affairs

15 CFR Part 303

[Docket No. 991228350-9350-01]

RIN 0625-AA55

Proposed Changes in Watch, Watch Movement and Jewelry Program for

the U.S. Insular Possessions

AGENCIES: Import Administration, International Trade Administration,

Department of Commerce; Office of Insular Affairs, Department of the

Interior.

ACTION: Notice of proposed rulemaking and request for comments.

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SUMMARY: The Departments invite public comment on a proposal to amend

the regulations governing duty-exemption allocations for watch

producers and duty-refund benefits for watch and jewelry producers in

the United States insular possessions (the U.S. Virgin Islands, Guam,

American Samoa and the Commonwealth of the Northern Mariana Islands

(``CNMI''). The proposal would amend Subpart A of Title 15 CFR Part 303

by establishing the total quantity and respective territorial shares of

insular watches and watch movements which would be allowed to enter the

United States free of duty during calendar year 2000 and by clarifying

the definition of a new firm for watches. The proposal would also amend

Subparts A and B of 15 CFR 303 by establishing a permanent formula for

the creditable wage ceiling.

DATES: Written comments must be received on or before February 7, 2000.

ADDRESSES: Address written comments to Faye Robinson, Program Manager,

Statutory Import Programs Staff, Room 4211, U.S. Department of

Commerce, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT: Faye Robinson, (202) 482-3526, same

address as above.

SUPPLEMENTARY INFORMATION: 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 Harmonized Tariff Schedule

of the United States (``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 watches and watch movements which may be entered from the

Virgin Islands, Guam, American Samoa and the CNMI. Regulations on the

establishment of these quantities and shares are contained in Sec.

303.3 and 303.4 of Title 15, Code of Federal Regulations (15 CFR 303.3

and 303.4). The Departments propose amending Sec. 303.14(e) to

establish for calendar year 2000 a total quantity of 3,366,000 units

and respective territorial shares as shown in the following table:

Virgin Islands............................................. 1,866,000

Guam....................................................... 500,000

American Samoa............................................. 500,000

CNMI....................................................... 500,000

Compared to the total quantity established for 1999 (63 FR 49666;

September 17, 1998), this amount would be a decrease of 374,000 units.

The proposed Virgin Islands territorial share would be reduced by

374,000 units and the shares for Guam, American Samoa and the CNMI

would not change. The amount we propose for the Virgin Islands is more

than sufficient for the anticipated needs of all the existing

producers.

The enactment of Pub. L. 106-36 amended additional U.S. notes to

chapter 71 of the Harmonized Tariff Schedule of the United States to

provide a duty-refund benefit for any article of jewelry within heading

7113 which is a product of the Virgin Islands, Guam, American Samoa or

the CNMI in accordance with the new provisions of the note in chapter

71 and additional U.S. note 5 to chapter 91. The Departments published

a final rule on December 1, 1999 (64 FR 67149) which amended the

regulations by changing Title 15 CFR Part 303 to include jewelry and

creating a Subpart A for the 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. When we

requested comments on the proposed jewelry regulations, we received a

comment regarding the requirement that a new firm be ``completely

separate from and not associated with, by way of ownership or control''

with other jewelry program participants in the territory. In the final

jewelry rule, we revised the language using new terminology borrowed

from existing fair trade law to clarify the language. To ensure

consistency and clarity, we propose amending Sec. 303.2(a)(5) to

include the new terminology in Subpart A as well.

We also propose establishing a permanent formula for the creditable

wage ceiling for watches and jewelry by amending Sec. 303.2(a)(13),

Sec. 303.14(a)(1)(i) and Sec. 303.16(a)(9), respectively. The

creditable wage ceiling is used in the calculation of the value of the

production incentive certificate (duty refund). We propose establishing

an annual wage ceiling up to an amount equal to 65% of the contribution

and benefit base for Social Security as defined in Sec. 230(c) of the

Social Security Act, as amended (42 U.S.C. 430). Until 1976, the

Departments credited wages up to the contribution and benefit base for

Social Security. In that year, the Departments adopted an independent

ceiling lower than the contribution and benefit base in order to

increase the incentive for the employment and training of territorial

residents in skilled jobs. (see 40 FR 54274 (1975)) Since 1983, the

Departments have revised the ceiling upwards several times to keep pace

with inflation. We now believe that establishing a new ceiling in the

form of a fixed percentage of the contribution and benefit base for

Social Security would serve the public interest. It would assist

producers in better planning expenditures and calculating potential

profits and benefits. This change would also eliminate the need for

periodic rulemaking to adjust the ceiling, provide an annual

incremental increase consistent with the Departments' past policy

objectives, id., and create transparency in the calculation of the

ceiling.

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 proposed rule, if promulgated as final, will

not have a significant economic impact on a substantial number of small

entities. There are currently five watch companies, all of which are

located in the Virgin Islands. Although a reduction of the 2000 Virgin

Islands territorial share of duty-exemption is being proposed, the

reduced amount would still represent more than twice the amount of

duty-exemption used in 1998. The statute does not permit a lower amount

in the year 2000. Similarly, clarifying new entrant affiliation

language and updating the creditable wage ceiling with a permanent

annual mechanism will not impose any cost or have any other

[[Page 732]]

adverse economic effect on the producers.

Paperwork Reduction Act

This proposed rulemaking involves no 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. Collection

activities are currently approved by the Office of Management and

Budget under control numbers 0625-0040 and 0625-0134 and the amendments

will not increase the information burden on the public.

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 proposed 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 record keeping requirements, Virgin

Islands, Watches and jewelry.

For reasons set forth above, The Departments propose to amend 15

CFR Part 303 as follows:

PART 303--WATCHES, WATCH MOVEMENTS AND JEWELRY PROGRAM

1. The authority citation for 15 CFR Part 303 reads 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.

2. Section 303.2(a)(5) is revised to read as follows:

Sec. 303.2 Definitions and forms.

(a) Definitions. Unless the context indicates otherwise:

* * * * *

(5) New firm is a watch firm which may not be affiliated through

ownership or control with any other watch 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 watch duty-refund recipient may

own or control more than one jewelry duty-refund recipient. A new

entrant is a new watch firm which has received an allocation.

* * * * *

3. The first sentence of Sec. 303.2(a)(13) is amended by removing

``up to the amount per person shown in Sec. 303.14(a)(1)(i)'' and

adding ``up to an amount equal to 65% of the contribution and benefit

base for Social Security as defined in the Social Security Act for the

year in which the wages were earned'' in its place.

Sec. 303.14 [Amended]

4. Section 303.14(a)(1)(i) is amended by removing ``, up to a

maximum of $38,650 per person,'' and adding ``, up to an amount equal

to 65% of the contribution and benefit base for Social Security as

defined in the Social Security Act for the year in which the wages were

earned,'' in its place.

5. Section 303.14(e) is amended by removing ``2,240,000'' and

adding ``1,866,000'' in its place.

Sec. 303.16 [Amended]

6. The first sentence of Sec. 303.16(a)(9) is amended by removing

``up to the amount per person of $38,650'' and adding ``up to an amount

equal to 65% of the contribution and benefit base for Social Security

as defined in the Social Security Act for the year in which the wages

were earned'' in its place.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration, Department of

Commerce.

Sandra King,

Acting Director, Office of Insular Affairs, Department of the Interior.

[FR Doc. 00-287 Filed 1-5-00; 8:45 am]

BILLING CODE 3510-DS-P; 4310-93-P