Entry of Softwood Lumber Shipments From Canada

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 12 and 113

[T.D. 97-9]

RIN 1515-AB97

Entry of Softwood Lumber Shipments From Canada

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Interim regulations; solicitation of comments.

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SUMMARY: This document sets forth interim amendments to the Customs

Regulations establishing additional entry requirements applicable to

shipments of softwood lumber from Canada. The interim amendments

involve the collection of certain additional information for purposes

of monitoring and enforcing an agreement between the Governments of the

United States and Canada regarding trade in softwood lumber.

DATES: Interim rule effective February 26, 1997; comments must be

submitted by April 28, 1997.

ADDRESSES: Written comments (preferably in triplicate) may be addressed

to the Regulations Branch, U.S. Customs Service, Franklin Court, 1301

Constitution Avenue, NW., Washington, DC 20229. Comments submitted may

be inspected at the Regulations Branch, Office of Regulations and

Rulings, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington,

DC.

FOR FURTHER INFORMATION CONTACT: Gary Manes, Office of Field Operations

(202-927-1133).

SUPPLEMENTARY INFORMATION:

Background

On May 29, 1996, the United States entered into the Softwood Lumber

Agreement (the Agreement) with Canada under the authority of section

301(c)(1)(D) of the Trade Act of 1974, as amended (19 U.S.C.

2411(c)(1)(D)), which authorizes the United States Trade Representative

(the USTR) to ``enter into binding agreements'' with a foreign country

that commit the foreign country to, inter alia, eliminate any burden or

restriction on U.S. commerce resulting from an act, policy or practice

of the foreign country. The Agreement, which went into effect on April

1, 1996, was specifically intended to provide a satisfactory resolution

to certain acts, policies and practices of the Government of Canada

affecting exports to the United States of softwood lumber which had

been the subject of an investigation initiated by the USTR under

section 302(b)(1)(A) of the Trade Act of 1974, as amended (19 U.S.C.

2412(b)(1)(A)), and which on October 4, 1991, pursuant to section

304(a) of the Trade Act of 1974, as amended (19 U.S.C. 2414(a)), had

been found by the USTR to be unreasonable and to burden or restrict

U.S. commerce. The Agreement is the product of a consultative process

established by the United States and Canada and involving the

participation of the U.S. Government, Canadian federal and provincial

governments and, where appropriate, industries and other interested

parties in both countries.

The Agreement refers specifically to softwood lumber mill products

classified in subheadings 4407.10.00, 4409.10.10, 4409.10.20, and

4409.10.90 of the Harmonized Tariff Schedule of the United States

(HTSUS) that were ``first manufactured'' into a product of one of those

HTSUS subheadings in the Canadian provinces of Ontario, Quebec, British

Columbia or Alberta. The Agreement requires that Canada assess fees on

exports of such softwood lumber in each of the five years following

April 1, 1996, based on the following schedule: (1) For total shipments

up to 14.7 billion board feet, free (no fee); (2) for any amount

shipped in excess of 14.7 billion board feet but not in excess of 15.35

billion board feet, US$50 per thousand board feet in the first year and

with annual adjustments for inflation in subsequent years; and (3) for

any amount shipped in excess of 15.35 billion board feet, US$100 per

thousand board feet and with annual adjustments for inflation in

subsequent years. The Agreement also allows an additional amount of

exports of such softwood lumber in excess of 14.7 billion board feet

without the payment of a fee if the average price of a benchmark

softwood lumber price exceeds a prescribed ``trigger price'' during any

quarterly period. In order to control and monitor exports of softwood

lumber first manufactured in Ontario, Quebec, British Columbia and

Alberta, the Agreement provides that Canada will issue an export permit

for each shipment of such softwood lumber and that Canada will collect

any required fee for amounts of lumber exported in excess of 14.7

billion board feet upon issuance of the export permit.

The Agreement requires the collection of information by Canada in

connection with the issuance of export permits for softwood lumber

first manufactured in Ontario, Quebec, British Columbia and Alberta and

the collection of information by the United States in connection with

import transactions involving such lumber.

With regard to the import end, the Agreement obligates the United

States to require that the U.S. importer provide specific information

in connection with the entry of the lumber under section 484 of the

Tariff Act of 1930, as amended (19 U.S.C. 1484). The information

required to be collected under the Agreement includes the following

three specific data elements which are not already required under the

Customs laws and regulations, the last two of which are required by the

Agreement to be collected as soon as practicable after the entry into

force of the Agreement: (1) The province of first manufacture of the

lumber; (2) the export permit number issued in Canada for the shipment;

and (3) the fee status of the lumber for which the export permit was

issued (whether the lumber in the shipment was attributed to a quantity

to which no fee applies or to a quantity that is subject to the US$50

fee or to a quantity that is subject to the US$100 fee or to a quantity

that is covered by the trigger price mechanism).

In order to facilitate monitoring of the Agreement and in order to

ensure that Canadian exporters have obtained the appropriate permits,

the Agreement also sets forth various cooperative measures which

include the periodic exchange of export and import information

collected by the two countries under the Agreement.

On June 5, 1996, the USTR published a notice in the Federal

Register (61 FR 28626) setting forth its determination that the

Agreement will be subject to the provisions of section 306 of the Trade

Act of 1974, as amended (19 U.S.C. 2416), and that the USTR will

monitor Canadian compliance with the Agreement pursuant to section 306

and will take action under section 301(a) of the Trade Act of 1974, as

amended (19

[[Page 8621]]

U.S.C. 2411(a)), if Canada fails to comply with the Agreement. Noting

that adherence to the terms of the Agreement is vital to the

achievement of its objectives, and consistent with the authority

conferred on the USTR by section 141 of the Trade Act of 1974, as

amended (19 U.S.C. 2171), to coordinate and draw upon the resources of

other Federal agencies in connection with the performance of functions

of the USTR regarding the proper administration and execution of trade

agreement programs (including those arising out of unfair trade

practice cases), the notice stated that the USTR, the Department of

Commerce, Customs, and other agencies as appropriate, will carefully

monitor and vigorously enforce the Agreement and that, to that end,

Customs will provide to the USTR and to the Department of Commerce the

data that Customs collects on imports (including province of origin and

the type of permit) of softwood lumber from Canada.

The purpose of this document is to provide an appropriate

regulatory context for the new requirements resulting from the

Agreement as discussed above. Since those requirements relate to a

special class of imported products, Customs believes that it would be

appropriate to add to Part 12 of the Customs Regulations (19 CFR Part

12) a new Sec. 12.140 to cover the Agreement provisions at issue.

Paragraph (a) of new Sec. 12.140 reflects the basic onus that the

Agreement places on exports of Canadian softwood lumber that are

subject to the export permit and fee requirements and, by implication,

on the U.S. importer (see also the below discussion of the changes to

the bond provisions of Part 113 of the regulations). These paragraph

(a) provisions are necessary to ensure that the basic purpose of the

Agreement (the collection of export fees on appropriate shipments) is

achieved.

Paragraph (b) of new Sec. 12.140 specifies the information required

to be collected pursuant to the Agreement. With regard to data

concerning province of first manufacture, the regulatory text provides

for submission of such data for all entries of softwood lumber products

from Canada (rather than only those products first manufactured in

Ontario, Quebec, British Columbia, or Alberta) because, in order to

effectively determine if lumber is being entered with a false claim of

province or territory of first manufacture so as to contravene the

terms of the Agreement, it is necessary to be able to compare the

entered quantity of lumber not only to the productive capacity of the

claimed province or territory of first manufacture but also to the

productive capacity of other provinces or territories.

Paragraph (c) of new Sec. 12.140 addresses the untimely issuance of

export permit numbers by the Canadian Government. In recognition of the

fact that processing or other procedural delays may arise in connection

with the issuance of export permit numbers, this paragraph provides for

up to 10 additional working days to file the entry summary

documentation setting forth the information required under the

Agreement if the Canadian Government has not issued the export permit

number within the 10-day filing period prescribed in Sec. 142.12(b) or

Sec. 142.23 of the regulations. If the export permit number is not

issued within the maximum 20-working-day period allowed under this

paragraph, the text requires that the entry summary documentation be

filed on the next (21st) business day with surrogate information

inserted in place of the actual data in the export permit number and

export fee payment status fields. The use of surrogate information in

such cases is only intended to enable the importer to effect an entry

summary filing (in particular electronically) and thus does not absolve

an importer from his other responsibilities under the regulatory texts

implementing the Agreement. The provision in this paragraph regarding

the additional 10-working-day period for filing the entry summary

documentation is at this point intended to be a temporary measure, and

the need for retaining this provision within the new regulatory texts

will be reviewed by the United States no later than April 1, 1997, in

the context of a review of the overall operation of the Agreement and

the interim regulations set forth in this document.

Finally, as an interim arrangement, paragraph (d) of new

Sec. 12.140 provides that an importer is not required to declare the

number or type of export permit issued by Canada with respect to

softwood lumber products that are imported into Canada, processed in

Canada, and then exported to the United States; surrogate information

also would be used instead in such cases. This exception to the

paragraph (b) requirements has been included because the Government of

Canada has to date not agreed to issue export permits for such

remanufactured products because it takes the position that they are not

covered by the Agreement; it is the position of the U.S. Government

that such products are covered by the Agreement. Discussions with the

Government of Canada are ongoing to ensure that the export permit and

other requirements of the Agreement will be applied to these

remanufactured products, and the need for retaining this exception

within the new regulatory texts also will be reviewed by the United

States no later than April 1, 1997. The volume of imports of

remanufactured lumber historically has been small and, as a practical

matter, it is expected that any future imports of such products would

only involve certain specialty items. Customs notes that for any import

transaction in which this exception is applied, the U.S. importer must

maintain, and make available for Customs review when requested,

appropriate records to establish that the exception was properly

applied to the imported product. The use of this exception will be

closely examined by Customs, and any filing of false information

regarding the applicability of this exception may give rise to the

assessment of penalties under section 592 of the Tariff Act of 1930, as

amended (19 U.S.C. 1592).

This document also includes amendments to Sec. 113.62 of the

Customs Regulations (19 CFR 113.62) which sets forth the basic

importation and entry bond conditions and consequences of default

thereof. These amendments involve: (1) The addition of a bond condition

as new paragraph (k) to reflect the importer's obligation under

paragraph (a) of new Sec. 12.140; and (2) in redesignated paragraph (l)

(formerly paragraph (k)), the addition of a new paragraph (5) to set

forth the consequences of a default on the new paragraph (k) bond

condition, which would be liquidated damages in an amount equal to the

highest export fee provided for under the Agreement.

In consideration of the fact that the data required under the

regulatory text set forth in this document is required for the entry of

the subject merchandise, the interim ``(a)(1)(A) list'' published in

the Federal Register on July 15, 1996 (61 FR 36956) pursuant to 19

U.S.C. 1509(a)(1)(A) will be modified accordingly.

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

[[Page 8622]]

Street, N.W., 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. The collection of

information provided for in this interim regulation is required under

the terms of the Softwood Lumber Agreement with Canada and is necessary

to ensure effective monitoring of the operation of that Agreement.

Furthermore, for the same reasons and because the collection of this

information is required to begin as soon as practicable after entry

into force of the Softwood Lumber Agreement, 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 interim

regulations, the provisions of the Regulatory Flexibility Act (5 U.S.C.

601 et seq.) do not apply.

Paperwork Reduction Act

This regulation is being issued without prior notice and public

procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).

For this reason, the collection of information contained in this

regulation has been reviewed and, pending receipt and evaluation of

public comments, approved by the Office of Management and Budget in

accordance with the requirements of the Paperwork Reduction Act (44

U.S.C. 3507) under control number 1515-0065.

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless the collection of

information displays a valid control number.

The collection of information in these regulations is in

Sec. 12.140. This information is required in connection with the entry

of certain softwood lumber products from Canada and will be used by the

U.S. Customs Service to administer, and monitor compliance with, the

Softwood Lumber Agreement with Canada. The likely respondents are

business organizations including importers, exporters and

manufacturers.

Estimated total annual reporting and/or recordkeeping burden: 3,000

hours.

Estimated average annual burden per respondent/recordkeeper: 20

hours.

Estimated number of respondents and/or recordkeepers: 150.

Estimated annual number of responses: 350,000.

Comments are invited on: (a) Whether the collection of information

is necessary for the proper performance of the functions of the agency,

including whether the information shall have practical utility; (b) the

accuracy of the agency's estimate of the burden of the collection of

information; (c) ways to enhance the quality, utility, and clarity of

the information to be collected; and (d) ways to minimize the burden of

the collection of information on respondents, including through the use

of automated collection techniques or other forms of information

technology. Comments should be directed to the Office of Management and

Budget, Attention: Desk Officer for the Department of the Treasury,

Office of Information and Regulatory Affairs, Washington, D.C. 20503. A

copy should also be sent to the Regulations Branch, Office of

Regulations and Rulings, U.S. Customs Service, 1301 Constitution

Avenue, N.W., Washington, D.C. 20229.

List of Subjects

19 CFR Part 12

Bonds, Canada, Customs duties and inspection, Entry of merchandise,

Imports, Prohibited merchandise, Reporting and recordkeeping

requirements, Restricted merchandise, Trade agreements.

19 CFR Part 113

Air carriers, Bonds, Customs duties and inspection, Exports,

Foreign commerce and trade statistics, Freight, Imports, Reporting and

recordkeeping requirements, Vessels.

Amendments to the Regulations

Accordingly, Parts 12 and 113, Customs Regulations (19 CFR Parts 12

and 113), are amended as set forth below.

PART 12--SPECIAL CLASSES OF MERCHANDISE

1. The general authority citation for Part 12 continues to read,

and a specific authority citation for Sec. 12.140 is added to read, 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.

* * * * *

Section 12.140 also issued under 19 U.S.C. 1484, 2416(a), 2171.

2. A new center heading and new Sec. 12.140 are added to read as

follows:

Softwood Lumber From Canada

Sec. 12.140 Entry of softwood lumber from Canada.

The requirements set forth in this section are applicable for as

long as the Softwood Lumber Agreement, entered into on May 29, 1996, by

the Governments of the United States and Canada, remains in effect.

(a) Encumbrance regarding export permit and export fee. In the case

of softwood lumber first manufactured into a product classifiable in

subheading 4407.10.00, 4409.10.10, 4409.10.20, or 4409.10.90,

Harmonized Tariff Schedule of the United States (HTSUS), in the

Province of Ontario, Quebec, British Columbia, or Alberta, the

requirement that the Government of Canada issue an export permit and

collect the appropriate export fees under the Softwood Lumber Agreement

attaches to and encumbers the product when it is imported into the

United States. Such imported merchandise remains subject to the

encumbrance until the Government of Canada issues an export permit and

collects the appropriate fees. The merchandise shall be released by

Customs subject to the following conditions: The importer of record

assumes an obligation to ensure within 20 working days of release that

such export permit is issued by the Government of Canada and to provide

sufficient information to satisfy U.S. Customs that the encumbrance no

longer attaches or, if the merchandise remains encumbered at the

expiration of 20 working days, to pay any liquidated damages assessed

under the Customs bond.

(b) Reporting requirements. Except as otherwise provided in

paragraph (d) of this section, in the case of a softwood lumber product

classifiable in HTSUS subheading 4407.10.00, 4409.10.10, 4409.10.20, or

4409.10.90 that is imported from Canada and that was manufactured (that

is, subjected to any processing operation other than mere loading,

unloading or processing necessary to maintain the condition of the

product) in Canada, whether or not such product was previously

subjected to any processing operation outside Canada, the following

information shall be included on the entry summary, Customs Form 7501,

or on an electronic equivalent:

(1) The Canadian province or territory in which the product was

first manufactured; and

[[Page 8623]]

(2) In the case of a product first manufactured into a product

classifiable in HTSUS subheading 4407.10.00, 4409.10.10, 4409.10.20, or

4409.10.90 in the Province of Ontario, Quebec, British Columbia, or

Alberta:

(i) The export permit number issued by the Government of Canada for

the product; and

(ii) An indication of the export fee payment status of the product

for which the permit was issued according to the following categories:

(A) Category A: No payment of an export fee because the exported

product falls within the base amount of 14.7 billion board feet. This

category includes products for which the export permit was issued

without an indication of the export fee status;

(B) Category B: Payment of the export fee applicable to a product

exported in excess of 14.7 billion board feet but not in excess of

15.35 billion board feet;

(C) Category C: Payment of the export fee applicable to a product

exported in excess of 15.35 billion board feet; or

(D) Category D: No payment of an export fee where the product was

exported in excess of 14.7 billion board feet because the average price

of a benchmark softwood lumber price exceeds a prescribed trigger price

during any quarterly period as determined by the Governments of Canada

and the United States. If the issued permit pertains to this category,

the specific quarterly period shall also be indicated on the Customs

Form 7501 or electronic equivalent.

(c) Untimely issuance of export permit. If an export permit for the

product has not been issued by the Government of Canada on or before

the required date for filing the entry summary documentation as

provided in Sec. 142.12(b) or Sec. 142.23 of this chapter, the importer

shall have a maximum of 10 additional working days to file the entry

summary documentation setting forth all of the information specified in

paragraph (b)(2) of this section. If an export permit for the product

has not been issued by the Government of Canada within the maximum time

period specified in this paragraph, the entry summary or electronic

equivalent shall be filed on the next business day and shall be

completed in pertinent part as follows:

(1) The export permit number field shall be completed by inserting

as many eights as are necessary to complete the field; and

(2) The export fee payment status field shall be completed by

inserting an ``A'' followed by two zeros.

(d) Absence of export permit number and fee status data for certain

remanufactured softwood lumber products. In the case of a softwood

lumber mill product classifiable in HTSUS subheading 4407.10.00,

4409.10.10, 4409.10.20, or 4409.10.90 that is imported from Canada and

that was first manufactured in Canada in the Province of Ontario,

Quebec, British Columbia, or Alberta, if no export permit for the

product is issued by the Government of Canada because the product was

previously subjected to processing operations outside Canada, the entry

summary, Customs Form 7501, or an electronic equivalent, shall include

the Canadian province or territory in which the product was first

manufactured and also shall be completed in pertinent part as follows:

(1) The export permit number field shall be completed by inserting

as many nines as are necessary to complete the field; and

(2) The export fee payment status field shall be completed by

inserting an ``A'' followed by two zeros.

PART 113--CUSTOMS BONDS

1. The authority citation for Part 113 continues to read in part as

follows:

Authority: 19 U.S.C. 66, 1623, 1624.

* * * * *

2. Section 113.62 is amended:

a. By redesignating paragraph (k) as paragraph (l);

b. In the penultimate sentence of paragraph (l)(4) of redesignated

paragraph (l), by removing the reference ``paragraph (k)(1)'' and

adding, in its place, the reference ``paragraph (l)(1)''; and

c. By adding a new paragraph (k) and adding a new paragraph (l)(5)

at the end of newly designated paragraph (l) to read as follows:

Sec. 113.62 Basic importation and entry bond conditions.

* * * * *

(k) Agreement to ensure and establish issuance of softwood lumber

export permit and collection of export fees. In the case of a softwood

lumber product imported from Canada that is subject to the requirement

that the Government of Canada issue an export permit pursuant to the

Softwood Lumber Agreement, the principal agrees, as set forth in

Sec. 12.140(a) of this chapter, to assume the obligation to ensure

within 20 working days of release of the merchandise, and establish to

the satisfaction of Customs, that the applicable export permit has been

issued by the Government of Canada.

(l) * * *

(5) If the principal defaults on agreements in the condition set

forth in paragraph (k) of this section only, the obligors agree to pay

liquidated damages equal to $100 per thousand board feet of the

imported lumber.

Approved: February 20, 1997.

George J. Weise,

Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 97-4682 Filed 2-25-97; 8:45 am]

BILLING CODE 4820-02-P