Changes in Procedures for the Insular Possessions Watch Program

DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Part 303

DEPARTMENT OF THE INTERIOR

Office of Insular Affairs

[Docket No. 960508126-6126-01]

RIN 0625-AA46

Changes in Procedures for the Insular Possessions Watch Program

AGENCIES: Import Administration, International Trade Administration,

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

Interior.

ACTION: Final rule.

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SUMMARY: This action amends the ITA regulations, which govern duty-

exemption allocations and duty-refund entitlements for watch producers

in the United States' insular possessions (the Virgin Islands, Guam and

American Samoa) and the Northern Mariana Islands. The amendments modify

procedures for completion and use of the ``Permit to Enter Watches and

Watch Movements into the Customs Territory of the United States'' (Form

ITA-340); make the technical changes required by the passage of the

Uruguay Round Agreements Act in 1994; eliminate the mid-year report

(Form ITA-321P); change the percentage creditable towards the duty-

refund of wages for non-91/5 watch and watch movement repairs and raise

one of the percentages in the formula for calculating the duty-refund;

revise 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; remove from the percentage of non-91/5 wages

creditable toward the duty-refund reference to watches and watch

movements which are ineligible for duty-free treatment due only to

value-limit reasons; raise the maximum value of components for watches;

and make other changes necessary to consolidate and simplify the

regulations.

EFFECTIVE DATE: October 30, 1996.

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

SUPPLEMENTARY INFORMATION: We published regulatory revisions in

proposed form on July 22, 1996 (61 FR 37845) and invited comments. We

received no comments.

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 HTS authorizes duty-exemption allocations

and duty-refund entitlements for insular watch program producers. The

following changes amend 15 CFR Part 303 of the regulations.

The procedures for completion and use of the ``Permit to Enter

Watches and Watch Movements into the Customs Territory of the United

States'' (Form ITA-340) are amended by revising Sec. 303.2(b)(3) and

Sec. 303.7(b). The changes will reduce the paperwork associated with

the permit, eliminate the need for Customs to mail a copy of the permit

to the Department of Commerce for all Customs entries made

electronically through the automated broker interface and allow

required permit information to pass between the territorial government

office and watch producers via facsimile, thereby eliminating the

burden of travel to and from the territorial offices. Further details

of the changes were set forth in our July 22, 1996 proposal (61 FR

37845).

Sec. 602 of Public L. 103-465 enacted on December 8, 1994 amended

Pub. L. 97-446.

Authority: Sec. 303.1(a), Sec 303.2(a)(1) and Sec. 303.12(c)(2)

are amended to reflect the new authority for the duty-refund

entitlements for the insular watch program.

The mid-year report (Form ITA-321P) is eliminated by removing Sec.

303.2(b)(4) (Form ITA-321P) and Sec. 303.11 (mid-year reporting

requirement). We also amended Sec. 303.6(f) to clarify the procedures

for requesting annual supplemental allocations and relinquishing units.

A major purpose of the mid-year report was to establish whether

companies required more duty-exemption allocation or wished to

relinquish duty-exemption that had been allocated. These purposes can

be satisfied less formally and without paperwork.

We increased the percentage of wages for the repair of non-91/5

watches and

[[Page 55884]]

watch movements creditable towards the duty-refund to a maximum of

fifty percent of the firm's total creditable wages by amending Sec.

303.2(a)(13) and Sec. 303.14(c)(3). The increase permits producers to

further diversify their operations.

Sec. 303.2(a)(13) is amended by removing eligibility towards the

duty-refund for the assembly of non-91/5 watches and watch movements

(ineligible only due to value-limit reasons). No duty-refunds have ever

been issued on the basis of wages paid for the production of watches

and watch movements because they exceeded regulatory value limits.

Accordingly, we are eliminating this unused provision.

The Departments establish for calendar year 1997 a total quantity

of 4,600,000 units in the following territorial shares:

Virgin Islands--3,100,000

Guam--500,000

American Samoa--500,000

Northern Mariana Islands--500,000

Sec. 303.14(b)(3) is amended by raising the maximum value of

components for duty-free treatment of watches from $175 to $200. This

change will relax the limitation on the value of imported components

that may be used in the assembly of duty-free insular watches. The new

value levels will contribute to offsetting the effects of the declining

dollar and allow the producers wider options in the kinds of watches

they assemble.

Sec. 303.14(c)(1)(iv) sets the incremental percentage for

calculating that part of the duty-refund for producers who have shipped

between 600,000 and 750,000 units free of duty into the United States.

The value of the duty-refund is based on the producer's average

creditable wages per unit shipped free of duty into the United States

multiplied by a factor of 90% for the first 300,000 units and declining

percentages in additional increments to a maximum of 750,000 units. The

amendment raises the 65% increment to 75% and makes each declining

percentage a 5% reduction. This change will add a further incentive for

producers to increase shipments and possibly raise territorial

employment.

The following amendments simplify and consolidate the regulations

and eliminate redundancy:

Remove the concluding text of Sec. 303.6(f), which

required the publication of notices in the Federal Register to invite

new entrants, and amend Sec. 303.8(c)(2), which also related to new

entrant invitations (the regulations contain a standing invitation to

new entrants in Sec. 303.14);

Eliminate Sec. 303.10 (Limitations, requirements,

restriction and prohibitions) and consolidate non-duplicative language

in Sec. 303.14(b);

Eliminate Sec. 303.11;

Amend Sec. 303.12(b)(3) by changing registered mail to

registered, certified or express carrier mail;

Amend Sec. 303.12(c)(1) by changing the reference from

Sec. 303.2(b)(6) to Sec. 303.2(b)(5), due to other changes affecting

the numbering of provisions;

Amend Sec. 303.14(b) by removing references to Sec. 303.10

and incorporating the non-duplicative language of Sec. 303.10 into Sec.

303.14(b); and

Amend Sec. 303.14(c)(2) by replacing a reference to Sec.

303.10(c)(2) with the correct reference (Sec. 303.5(c)) and by removing

Sec. 303.14(c)(3) as redundant.

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 restrictions. The restrictions are relieved by

raising the value-limit on watches which are allowed into the United

States free of duty and raising an incremental percentage on which the

duty-refund is calculated. The rule also relieves the burdensome travel

time involved in obtaining the permit, reduces the paperwork involved

with the permit and eliminates the burden of the mid-year report.

This final rule does not contain policies with Federalism

implications sufficient to warrant preparation of a Federalism

assessment under Executive Order 12612.

Regulatory Flexibility Act. In accordance with the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq., the Assistant General Counsel

for Legislation and Regulation has certified to the Chief Counsel,

Small Business Administration, that the rule will not have a

significant economic impact on a substantial number of small entities.

This is because the purpose and effect of the rulemaking is primarily

to consolidate and simplify the regulations, make technical changes and

reduce paperwork.

Paperwork Reduction Act. This rulemaking involves information

collection activities subject to the Paperwork Reduction Act of 1980,

44 U.S.C. 3501 et seq. which are currently approved by the Office of

Management and Budget under control numbers 0625-0040 and 0625-0134.

The amendments reduce 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.

It has been determined that the final 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, we are amending 15 CFR Part 303 as

follows:

PART 303--[AMENDED]

1. The authority citation for 15 CFR Part 303 is revised to read as

follows:

Authority: Pub. L. 94-241, 90 Stat. 263 (48 U.S.C. 1681, note);

Pub. L. 97-446, 96 Stat. 2331 (19 U.S.C. 1202, note); Pub. L. 103-

465, 108 Stat. 4991.

Sec. 303.1 [Amended]

2. Section 303.1(a) is amended by removing the period at the end of

the first sentence and adding ``, and amended by Pub. L. 103-465,

enacted 8 December 1994.''.

Sec. 303.2 [Amended]

3. Section 303.2(a)(1) is amended by removing the period at the end

of the sentence and adding ``, as amended by Pub. L. 103-465, enacted

on December 8, 1994, 108 Stat. 4991.''.

4. In Sec. 303.2, paragraphs (a)(13) and (b)(3) are revised to read

as follows:

Sec. 303.2 Definitions and forms.

(a) * * *

(13) Creditable wages means all wages--up to the amount per person

shown in Sec. 303.14(a)(1)(i)--paid to permanent residents of the

territories employed in a firm's 91/5 watch and watch movement assembly

operations, plus any wages paid for the repair of non-91/5 watches 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 and for

the repair of non-91/5 watches and movements to the extent that such

wages exceed the foregoing ratio. Wages paid to persons engaged in both

creditable and non-creditable assembly and repair activities may be

credited proportionately provided the firm maintains production and

payroll

[[Page 55885]]

records adequate for the Departments' verification of the creditable

portion.

* * * * *

(b) * * *

(3) ITA-340 ``Permit to Enter Watches and Watch Movements into the

Customs Territory of the United States.'' This form may be obtained, by

producers holding a valid license, from the territorial government or

may be produced by the licensee in an approved computerized format or

any other medium or format approved by the Departments of Commerce and

the Interior. The completed form authorizes duty-free entry of a

specified amount of watches or watch movements at a specified U.S.

Customs port.

* * * * *

5. In Sec. 303.2, paragraph (b)(4) is removed and paragraphs (b)(5)

and (b)(6) are redesignated as paragraphs (b)(4) and (b)(5).

Sec. 303.6 [Amended]

6. Section 303.6(f) introductory text is amended at the beginning

of the second sentence by removing ``The'' and adding ``At the request

of a producer, the''; and in the middle of the fourth sentence by

removing ``invited'' and adding ``considered''.

7. In Sec. 303.6, the concluding text of paragraph (f) is removed.

Sec. 303.7 [Amended]

8. Section 303.7 is amended by revising paragraph (b) to read as

follows:

Sec. 303.7 Issuance of licenses and shipment permits.

* * * * *

(b) Shipment Permit Requirements (ITA-340). (1) Producers may

obtain shipment permits from the territorial government officials

designated by the Governor. Permits may also be produced in any

computerized or other format or medium approved by the Departments. The

permit is for use against a producer's valid duty-exemption license and

a permit must be completed for every duty-free shipment.

(2) Each permit must specify the license and permit number, the

number of watches and watch movements included in the shipment, the

unused balance remaining on the producer's license, pertinent shipping

information and must have the certification statement signed by an

official of the licensee's company. A copy of the completed permit must

be sent electronically or taken to the designated territorial

government officials, no later than the day of shipment, for

confirmation that the producer's duty-exemption license has not been

exceeded and that the permit is properly completed.

(3) The permit (form ITA-340) shall be filed with Customs along

with the other required entry documents to receive duty-free treatment

unless the importer or its representative clears the documentation

through Customs' automated broker interface. Entries made

electronically do not require the submission of a permit to Customs,

but the shipment data must be maintained as part of a producer's

recordkeeping responsibilities for the period prescribed by Customs'

recordkeeping regulations. U.S. Customs Service Import Specialists may

request the documentation they deem appropriate to substantiate claims

for duty-free treatment, allowing a reasonable amount of time for the

importer to produce the permit.

Sec. 303.8 [Amended]

9. In Sec. 303.8, paragraph (c)(2) is revised to read as follows:

Sec. 303.8 Maintenance of duty-exemption entitlements.

* * * * *

(c) * * *

(2) Reallocate the allocation or part thereof to a new entrant

applicant; or

* * * * *

Sec. 303.10 [Removed and Reserved]

10. Section 303.10 is removed and reserved.

Sec. 303.11 [Removed and Reserved]

11. Section 303.11 is removed and reserved.

Sec. 303.12 [Amended]

12. Section 303.12(b)(3) introductory text is amended by adding,

after the word ``registered'', the words ``, certified or express

carrier mail''.

13. Section 303.12(c)(1) is amended by removing from the first

sentence ``Sec. 303.2(b)(6)'' and adding in its place

``Sec. 303.2(b)(5)''.

14. Section 303.12(c)(2) is amended at the end of the first

sentence by removing the period and adding ``, as amended by Public Law

103-465.''

Sec. 303.14 [Amended]

15. In Sec. 303.14, the heading of paragraph (b) and paragraph

(b)(1) and (b)(3) are revised and paragraph (b)(4) is added to read as

follows:

Sec. 303.14 Allocation factors and miscellaneous provisions.

* * * * *

(b) Minimum assembly requirements and prohibition of preferential

supply relationship. (1) No insular watch movement or watch may be

entered free of duty into the customs territory of the United States

unless the producer used 30 or more discrete parts and components to

assemble a mechanical watch movement and 33 or more discrete parts and

components to assemble a mechanical watch.

* * * * *

(3) Watch movements and watches assembled from components with a

value of more than $35 for watch movements and $200 for watches shall

not be eligible for duty-exemption upon entry into the U.S. Customs

territory. Value means the value of the merchandise plus all charges

and costs incurred up to the last point of shipment (i.e., prior to

entry of the parts and components into the territory).

(4) No producer shall accept from any watch parts and components

supplier advantages and preferences which might result in a more

favorable competitive position for itself vis-a-vis other territorial

producers relying on the same supplier. Disputes under this paragraph

may be resolved under the appeals procedures contained in

Sec. 303.13(b).

* * * * *

16. Section 303.14(c)(1)(iv) is amended by removing ``65%'' and

adding ``75%''.

17. Section 303.14(c)(2) is amended by removing

``Sec. 303.10(c)(2)'' and adding in its place ``Sec. 303.5(c)''.

18. Section 303.14(c)(3) is removed.

19. Section 303.14(e) is amended by removing ``3,600,000'' and

adding in its place ``3,100,000''.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration, International

Trade Administration, Department of Commerce.

Allen Stayman,

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

[FR Doc. 96-27862 Filed 10-29-96; 8:45 am]

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