North American Free Trade AgreementSubmission of Certificates of Eligibility for Textile and Apparel Goods Under the Tariff Preference Level Provisions

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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 12

[T.D. 95-98]

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: Customs Service, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: On June 20, 1994, T.D. 94-52 was published in the Federal

Register (59 FR 31519) setting forth an interim amendment to

Sec. 12.132 of 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).

The interim amendment to Sec. 12.132 contained in T.D. 94-52 was

adopted as a final rule without change on September 6, 1995, in T.D.

95-68 (60 FR 46334) which set forth final regulations implementing the

NAFTA. This document discusses the public comments submitted in

response to T.D. 94-52 and makes one clarifying change to the

regulatory text.

EFFECTIVE DATE: November 28, 1995.

FOR FURTHER INFORMATION CONTACT: Dick Crichton, Office of Strategic

Trade (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, 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.

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 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 (no

corresponding Certificate of Eligibility has been adopted for purposes

of U.S. exports to Canada and Mexico). 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 is able to make a claim for preferential

tariff treatment based on the Certificate of Eligibility. The United

States, Canada and Mexico 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. In

furtherance of this agreement, Customs implemented the procedure of

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 reflect the procedures agreed to by the three countries

and implemented by Customs with regard to Canadian and Mexican exports,

on June 20, 1994, Customs published T.D. 94-52 in the Federal Register

(59 FR 31519) for purposes of amending, on an interim basis,

Sec. 12.132 of the Customs

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Regulations (19 CFR 12.132), which had been adopted as an interim

regulation in T.D. 94-4 discussed above, 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. Although the interim regulation took effect on the date

of publication, T.D. 94-52 prescribed a public comment period which

closed on August 19, 1994.

The interim NAFTA regulations set forth in T.D. 94-1 and the

interim amendment to Sec. 12.132 set forth in T.D. 94-52 were adopted

as a final rule in T.D. 95-68 which was published in the Federal

Register on September 6, 1995 (60 FR 46334). Although T.D. 95-68

republished the entire text of interim Sec. 12.132 (that is, the

original text contained in T.D. 94-1 as amended by T.D. 94-52), the

SUPPLEMENTARY INFORMATION portion of T.D. 95-68 stated that Customs

would publish a separate document to specifically address T.D. 94-52,

including any public comments submitted in response thereto.

Discussion of Public Comments

Three comments were received in response to the interim regulation

set forth in T.D. 94-52.

Two of these commenters were primarily concerned with the ability

to file a claim after importation and whether or not there would be a

sufficient time period to make such a claim, particularly when the U.S.

importer is unable to obtain and provide a Certificate of Eligibility

at the time of entry.

While a failure to supply the required Certificate of Eligibility

will preclude the filing of a claim for preferential tariff treatment

and will result in liquidation of the entry at the non-preferential

duty rate, Customs believes that importers in most cases will have

adequate opportunity, following the date of entry, to submit the

Certificate and make the claim when the Certificate is not available at

the time of entry. Customs notes in this regard that the importer may

supply the necessary documentation and make the claim either at any

time prior to final liquidation or in connection with the filing of a

protest within 90 days following final liquidation. Moreover, under

existing procedures, liquidation is delayed for a minimum of 90 days

following the date of entry. Thus, an importer has at least 180 days

from the date of entry in which to file a claim through submission of

the required Certificate of Eligibility. In addition, on a case-by-case

basis, Customs may grant an importer's request for a delay in

liquidation so as to afford the importer additional time to submit the

Certificate and make the claim if the request explains the reason for

the delay in providing the Certificate.

With specific reference to the requirement in Sec. 12.132(b) that

the Certificate of Eligibility ``shall be presented to Customs at the

time the claim for preferential tariff treatment is filed under

Sec. 181.21 of this chapter'', the third commenter objected to adoption

of the interim rule with an immediate effective date. This commenter

stated that the rule should only be implemented after sufficient notice

and opportunity for comment are provided to the importing public in

accordance with the requirements of the Administrative Procedure Act

(APA), arguing that T.D. 94-52 did not set forth an adequate basis for

dispensing with the normal APA advance notice and delayed effective

date procedures.

Customs believes that T.D. 94-52 set forth an adequate

justification, consistent with the provisions of the APA, for

dispensing with the normal advance notice, comment and delayed

effective date requirements of the APA. T.D. 94-52 specifically cited

the foreign affairs function exception to application of the normal APA

rulemaking procedures. To the extent that this commenter believes that

the failure to provide for a delayed effective date limits the

opportunity to obtain preferential tariff treatment on TPL goods that

could be the subject of a claim at the time of entry but for the

absence of a Certificate of Eligibility, Customs would point out that,

as explained in the response to the two other commenters set forth

above, there are alternative procedures that may be followed to ensure

that such treatment is nevertheless accorded to the goods when the

Certificate of Eligibility cannot be presented until after the date of

entry.

Customs notes that the last sentence of paragraph (b) of

Sec. 12.132, which states that ``[f]ailure to timely submit the

required Certificate of Eligibility will result in a denial of the

claim'', could be taken to imply that a claim for preferential tariff

treatment on TPL goods may be made without simultaneous presentation of

the Certificate to Customs. Such a conclusion would be inconsistent

with the wording and intent of the preceding paragraph (b) text as

discussed above in connection with the public comments. Accordingly, in

order to avoid any ambiguity on this point, this document amends

Sec. 12.132 by removing the last sentence of paragraph (b).

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 final regulation because it is within the foreign

affairs function of the United States. The amendment contained in this

document is consistent with procedures agreed to and implemented by the

United States, Canada, and Mexico. In addition, because this amendment

does not involve a substantive change but rather merely clarifies

existing procedures for claiming 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)(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 this rule,

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 set forth 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 20,

Harmonized Tariff Schedule of the United States (HTSUS)), 1624;

* * * * *

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Sec. 12.132 [Amended]

2. In Sec. 12.132, paragraph (b) is amended by removing the last

sentence.

Approved: October 24, 1995.

George J. Weise,

Commissioner of Customs.

Dennis M. O'Connell,

Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 95-29001 Filed 11-27-95; 8:45 am]

BILLING CODE 4820-02-P