Limit on Duty-Free Insular Watches in Calendar Year 1998

DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Part 303

DEPARTMENT OF THE INTERIOR

Office of Insular Affairs

[Docket No. 971021249-8006-02]

RIN 0625-AA50

Limit on Duty-Free Insular Watches in Calendar Year 1998

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

establish the total quantity and respective territorial shares of

insular watches and watch movements which are allowed to enter the

United States free of duty during calendar year 1998 and make a minor

adjustment to the verification of shipments.

EFFECTIVE DATE: March 9, 1998.

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

SUPPLEMENTARY INFORMATION: We published proposed regulatory revisions

on November 5, 1997 (62 FR 59829) and invited comments. We received

comments from the U.S. Small Business Administration contending that we

had not provided sufficient information for the public to evaluate the

merits of the agencies' certification under the Regulatory Flexibility

Act, and that the proposed reduction in the duty-free allocation

exceeded the statutory limit of no more than 10% a year. We address

these comments below.

With respect to the comment concerning the Regulatory Flexibility

Act, we have included a more detailed explanation, including the nature

of the industry, the number of small firms involved, and the effect, if

any, on those firms from the reduction in the annual duty-exemption

watch allocation. See the ``Regulatory Flexibility Act'' section below.

Regarding the contention that the proposed reduction exceeds the

amount specified by the regulations, we agree and have made the

necessary correction. The limit as to the maximum allowable reduction

became a factor this year because of reductions that had been made in

previous years, a factor which was inadvertently overlooked in the

proposed allocation revisions for calendar year 1998. Section

303.3(b)(2) of the Department Regulations (15 CFR 303.3(b)(2))

specifies that ``the total annual duty-exemption shall not be decreased

by more than 10% of the quantity established for the preceding calendar

year, * * *'' The regulations further stipulate that ``[n]o territorial

share shall be less than 500,000 units.'' 15 CFR 303.4(b). The total

annual duty-exemption for 1997 was 4,600,000 units of which 3,100,000

units were allocated to the Virgin Islands, and 500,000 units to Guam,

American Samoa and the Northern Mariana Islands respectively. See

Changes in Procedures for the Insular Possessions Watch Program, 61 FR

55883 (Oct. 30, 1996). The proposed total annual duty-exemption of

4,100,000 units for calendar year 1998

[[Page 5888]]

would have resulted in a reduction of 10.87 percent from total units

allocated for 1997. Accordingly, we have revised the 1998 duty-

exemption such that the total annual duty-exemption has been reduced by

no more than 10 percent from the preceding year. Because all but the

Virgin Islands have been allocated the minimum allowable units, we have

revised the Virgin Islands annual duty-exemption upwards from the

proposed limit of 2,600,000 units to 2,640,000 units. While this change

for the Virgin Islands represents a decrease of 14.84 percent from the

1997 allocation of 3,100,000 units, the total exemption for all of the

insular possessions and the Northern Mariana Islands is within the

governing 10 percent limit set out in the Departments' Regulation. 15

CFR 303.3(b)(2). As we discuss further in the ``Regulatory Flexibility

Act'' section, we believe these allocations are more than sufficient to

meet the needs of the watch companies subject to these regulations.

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 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 Northern Mariana Islands. 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 establish for calendar year 1998 a total

quantity of 4,140,000 units and respective territorial shares as shown

in the following table:

Virgin Islands............................................. 2,640,000

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

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

Northern Mariana Islands................................... 500,000

The rule also modifies section 303.6(a) by allowing producers to

provide other means of verification satisfactory to the Secretaries

when we are unable to verify shipments through the U.S. Customs

Service.

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 rulemaking affects only

the five watch companies currently participating in the insular

possessions watch program, all of which are located in the Virgin

Islands. In 1996 these companies used less than half of the territorial

share of duty-exemption for the Virgin Islands. Production to date

(according to monthly watch production reports received from the

Government of the Virgin Islands) indicates that these same companies

will again use less than half the territorial share allocated for 1997.

Based on these facts, we conclude that the annual duty-exemption

allocation of 2,640,000 units will more than adequately meet the

aggregate requirements of these Virgin Islands companies for calendar

year 1998. Accordingly, the 1998 annual duty-exemption established for

the Virgin Islands should not impose any cost or have any economic

effect on these small companies.

This action establishes the respective amounts available for

allocation. The allocation itself, based on verified data contained in

the companies' annual applications due by January 31, 1998, will be

published later in 1998, pursuant to 15 CFR 303.5 and 303.6.

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 number 0625-0134. The amendments would have no effect on 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 this rule 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 continues 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. 303.6 [Amended]

2. Section 303.6(a) is amended by adding to the second to last

sentence ``, or verified by other means satisfactory to the

Secretaries,'' after the words U.S. Customs Service.

Sec. 303.14 [Amended]

3. Section 303.14(e) is amended by removing ``3,100,000'' and

adding ``2,640,000'' in its place.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

Allen Stayman,

Director, Office of Insular Affairs.

[FR Doc. 98-2893 Filed 2-4-98; 8:45 am]

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