Implementation and Enforcement of the Outward Processing Program for Textiles and Apparel

COMMITTEE FOR THE IMPLEMENTATION OF TEXTILE AGREEMENTS

Implementation and Enforcement of the Outward Processing Program

for Textiles and Apparel

December 8, 1999.

AGENCY: Committee for the Implementation of Textile Agreements (CITA).

ACTION: Issuing a directive to the Commissioner of Customs setting

forth the requirements for participation in the Outward Processing

Program.

-----------------------------------------------------------------------

[[Page 69747]]

SUMMARY: This notice sets forth the requirements for participating in

the Outward Processing Program for textiles and apparel. Under the

Outward Processing Program, textile products will not be subject to

quantitative restrictions upon importation into the United States if

they either (a) are assembled in a participating country of fabrics

formed and cut in the United States or (b) are cut and assembled in a

participating country of fabric formed in the United States. Products

exported on or after January 1, 2000 may be imported pursuant to the

Outward Processing Program.

EFFECTIVE DATE: January 1, 2000

FOR FURTHER INFORMATION CONTACT: Brian F. Fennessy, International Trade

Specialist, Office of Textiles and Apparel, U.S. Department of

Commerce. (202) 482-3400.

SUPPLEMENTARY INFORMATION:

Authority: Section 204 of the Agricultural Act of 1956, as

amended (7 U.S.C. 1854); Executive Order 11651 of March 2, 1972, as

amended.

On September 10, 1999 the Government of the United States and the

Government of Romania signed a Memorandum of Understanding providing

for an Outward Processing Program for certain wool apparel products. On

September 17, 1999, the Government of the U.S. and the Government of

the Former Yugoslav Republic of Macedonia signed a Memorandum of

Understanding providing for an Outward Processing Program for certain

wool apparel products.

Pursuant to these agreements, products that qualify for Outward

Processing Program treatment will not be subject to quantitative

restrictions. However, products that qualify for Outward Processing

Program treatment must be certified by the participating government and

will be monitored by the U.S. Customs Service. Each shipment must be

certified by the placing of the original square-shaped stamped marking

in blue ink on the front of the commercial invoice.

Outward Processing Program treatment is available for qualifying

wool apparel products exported on or after January 1, 2000. Future

Federal Register notices will indicate qualifying products eligible for

the Outward Processing Program.

General Requirements; Qualifying Products

In order to qualify for Outward Processing Program treatment,

qualifying wool apparel products must meet the following requirements:

(1) the product must be either manufactured from fabric that is

both cut and assembled in a participating country, or from fabric which

is cut in the United States and assembled in a participating country.

The product may be partially cut or partially assembled in either

country, but all assembly and cutting operations must be performed in

either the participating country or the United States. A participating

country is a country with which the United States has entered into a

bilateral agreement regarding the Outward Processing Program;

(2) the product must be assembled or manufactured (that is, both

cut and assembled) from fabric which is formed in the United States;

i.e., all fabric components of the product must be U.S. formed. This

requirement applies to all textile components of the product, including

linings and pocketing, except as provided in (4) below. Greige goods

imported into, and then finished in, the United States are not

considered fabric formed in the United States. Fabric that is woven or

knitted in the United States from yarn is considered U.S. formed;

(3) the importer of the qualifying wool apparel product and the

exporter of the U.S. formed fabric or the component parts must be the

same entity or person;

(4) findings and trimmings of non-U.S. origin may be incorporated

into the product, provided they do not exceed 25 percent of the cost of

the fabric in the product. Findings and trimmings include sewing

thread, hooks and eyes, snaps, buttons, ``bow buds,'' decorative lace

trim, zippers, including zipper tapes, and labels;

(5) upon entry into the United States, the product must be

classified under a subheading of heading 9802 of the Harmonized Tariff

Schedule of the United States (HTS) created to capture such trade

(9802.00.8016) or qualify for the special ``S'' prefix indicating the

item was produced with U.S. formed fabric.

Nothing in these requirements precludes performing any operation in

the United States.

Record keeping Requirements

The following documents shall be maintained and made available for

review by the U.S. Customs Service and CITA:

(1) entry documents made during the quarter;

(2) design style costing sheets or similar documents providing a

complete description of the assembled products;

(3) cutting tickets (if the fabric is cut in the United States),

including the name and location of the cutting facility for those

entries;

(4) mill invoices, including the name of the mill where the fabric

was formed. If the fabric was purchased from a third party, the

participant is responsible for obtaining the mill invoice. The

participant must also obtain a signed statement from a principal at the

mill that the fabric is of U.S. origin. This can be stated directly on

the invoice or on a separate document that relates to each specific

shipment of fabric. Vertically integrated participants, i.e.,

participants that both form and cut fabric, must retain an internal

transfer document or other documentary proof that they formed the

fabric in the United States;

(5) transportation documents if fabric is cut in the United States

(mill to cutting facility; cutting facility to border/assembler); and

(6) export documentation.

The above documents shall be maintained by calendar quarter, by

country, and by category; and shall be retained for three years from

the date of the exportation of the U.S. formed fabric or U.S. formed

and cut fabric. The documents shall be organized and filed (preferably

in a single location) to facilitate U.S. Customs' review.

Enforcement Procedures and Penalties

The U.S. Customs Service shall monitor all shipments entered

pursuant to the Outward Processing Program.

In order to ensure that participants in the Outward Processing

Program comply fully with the requirements set forth in this notice,

Customs will conduct Post Entry Compliance reviews. These reviews will

be conducted for entries made for the first quarter of 2000 and shall

continue for each successive quarter. During the course of such review,

the participant must provide Customs officials with evidence, through

the documents described above, that all products entered under the

Outward Processing Program qualify for Outward Processing Program

treatment.

False or inaccurate representations made in the context of the

Outward Processing Program may result in liability under U.S. laws

prohibiting false or misleading statements, including 18 U.S.C. 1001

and 19 U.S.C. 1592. Moreover, participants may be suspended from

participation in the Outward Processing Program for such

representations, for failing to abide by the Outward Processing

Program's record keeping requirements, or for otherwise violating the

terms of the Program.

In the event of credible evidence that a participant has violated

the terms of the Outward Processing Program, the Chairman of CITA will

notify the participant in writing of the alleged violation. The

participant will have 30 days to respond and/or request a

[[Page 69748]]

meeting with CITA representatives to discuss the alleged violation.

After reviewing the evidence and the participant's response, CITA will

determine whether a violation occurred and what penalty, if any, is

appropriate. Penalties may include temporary or permanent suspension

from participation in the Outward Processing Program. In determining

the appropriate penalty, CITA will consider all relevant factors,

including the seriousness of the violation, previous violations by the

participant, the experience of the participant with the Outward

Processing Program, and the steps taken by the participant to prevent

future violations.

CITA has determined that this action falls within the foreign

affairs exception to the rulemaking provisionsof 5 U.S.C. 553(a)(1).

Troy H. Cribb,

Chairman, Committee for the Implementation of Textile Agreements.

Committee for the Implementation of Textile Agreements

December 8, 1999.

Commissioner of Customs

Department of Treasury, Washington, DC 20229

Dear Commissioner: This directive sets forth the requirements

for participation in the Outward Processing Program for textiles and

apparel and provides for enforcement procedures to ensure that these

requirements are met.

Effective on January 1, 2000, no quantitative restrictions shall

apply to qualifying textile products which are exported from a

participating country to the United States under the Outward

Processing Program for textiles and apparel. However, products that

qualify for Outward Processing Program treatment must be certified

by the participating government and shall be monitored by the U.S.

Customs Service. Each shipment must be certified by the placement of

the original square-shaped stamped marking in blue ink on the front

of the commercial invoice. Qualifying products must be either

manufactured (that is, both cut and assembled) in a participating

country or cut in the United States and assembled in a participating

country and must be assembled or manufactured (that is, both cut and

assembled) from fabric formed in the United States.

General Requirements; Qualifying Products

In order to qualify for Outward Processing Program treatment,

qualifying wool apparel products must meet the following

requirements:

(1) the product must be either manufactured from fabric that is

both cut and assembled in a participating country, or from fabric

which is cut in the United States and assembled in a participating

country. A participating country is a country with which the United

States has entered into a bilateral agreement regarding the Outward

Processing Program;

(2) the product must be assembled or manufactured (that is, both

cut and assembled) from fabric which is formed in the United States;

i.e., all fabric components of the product must be U.S. formed. This

requirement applies to all textile components of the product,

including linings and pocketing except as provided in (4) below.

Greige goods imported into, and then finished in, the United States

are not considered fabric formed in the United States. Fabric that

is woven or knitted in the United States from yarn is considered

U.S. formed;

(3) the importer of the qualifying wool apparel product and the

exporter of the U.S. formed fabric or its component parts must be

the same entity or person;

(4) findings and trimmings of non-U.S. origin may be

incorporated into the product provided they do not exceed 25 percent

of the cost of the fabric in the product. Findings and trimmings

include sewing thread, hooks and eyes, snaps, buttons, ``bow buds,''

decorative lace trim, zippers, including zipper tapes, and labels;

(5) upon entry into the United States, the product must be

classified under a subheading of heading 9802 of the Harmonized

Tariff Schedule of the United States (HTS) created to capture such

trade (9802.00.8016) or qualify for the special ``S'' prefix

indicating the item was produced with U.S. formed fabric.

Nothing in these requirements precludes performing any operation

in the United States.

Record keeping Requirements

Participants are required to retain the following documents for

review by Customs:

(1) entry documents made during the quarter;

(2) design style costing sheets or similar documents providing a

complete description of the assembled products;

(3) cutting tickets (if the fabric is cut in the United States)

including the name and location of the cutting facility for those

entries;

(4) mill invoices, including the name of the mill where the

fabric was formed. If the fabric was purchased from a third party,

the participant is responsible for obtaining the mill invoice. The

participant must also obtain a signed statement from a principal at

the mill that the fabric is of U.S. origin. This can be stated

directly on the invoice or on a separate document that relates to

each specific shipment of fabric. Vertically integrated

participants, i.e., participants that both for and cut fabric must

retain an internal transfer document or other documentary proof that

they formed the fabric in the United States;

(5) transportation documents if fabric is cut in the United

States (mill to cutting facility; cutting facility to border/

assembler); and

(6) export documentation.

The participant is obligated to maintain the above documents by

calendar quarter, by country, and by category, and must retain them

for three years from the date of the exportation of the U.S. formed

fabric or U.S. formed and cut fabric. The documents must be

organized and filed (preferably in a single location) to facilitate

U.S. customs review.

Enforcement Procedures and Penalties

All shipments entered pursuant to the Outward Processing Program

shall be monitored. To facilitate the implementation and enforcement

of the Outward Processing Program, Customs is directed to require

entry/entry-summary procedures for all imports for consumption and

withdrawals from warehouse for consumption under the Outward

Processing Program.

In order to determine that participants in the Outward

Processing Program comply fully with the requirements set forth in

this notice, Customs will conduct Post Entry Compliance reviews.

These reviews will be conducted for entries made for the first

quarter of 2000 and shall continue for each successive quarter.

During the course of such review, the participant must provide

Customs officials with evidence, through the documents described

above, that all products entered under the Outward Processing

Program qualify for Outward Processing Program treatment. Customs

shall inform CITA of any violations of the program.

The Committee for the Implementation of Textile Agreements has

determined that this action falls within the foreign affairs

exception to the rulemaking provisionsof 5 U.S.C. 553(a)(1).

Sincerely,

Troy H. Cribb,

Chairman, Committee for the Implementation of Textile Agreements

[FR Doc. 99-32421 Filed 12-13-99; 8:45 am]

BILLING CODE 3510-DR-F