[Federal Register Volume 60, Number 228 (Tuesday, November 28, 1995)]
[Rules and Regulations]
[Pages 58515-58518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29001]



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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 

[[Page 58517]]
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