[Federal Register Volume 61, Number 141 (Monday, July 22, 1996)]
[Proposed Rules]
[Pages 37845-37848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18427]


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DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Part 303

DEPARTMENT OF THE INTERIOR

Office of Territorial and International Affairs
[Docket No. 960508126-6126-01]
RIN 0625-AA46


Proposed Changes in Procedures for Insular Possessions Watch 
Program

AGENCIES: Import Administration, International Trade Administration, 
Department of Commerce; Office of Territorial and International 
Affairs, Department of the Interior.

ACTION: Proposed rule and request for comments.

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SUMMARY: This action invites public comment on a proposal to amend 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 proposed amendments would 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-9\1/5\ 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 reference to watches and watch 
movements which are only ineligible for duty-free

[[Page 37846]]

treatment due to value-limit reasons from the percentage of non-9\1/5\ 
wages creditable toward the duty-refund; raise the maximum value of 
components for watches; and make other necessary changes to consolidate 
and simplify the regulations.

DATES: Comments must be received on or before August 21, 1996.

ADDRESSES: Address written comments to Faye Robinson, Program Manager, 
Statutory Import Programs Staff, Room 4211, U.S. Department of 
Commerce, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT: Faye Robinson, (202) 482-3526, same 
address as above.

SUPPLEMENTARY INFORMATION: 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 HTS 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. After the Departments have 
verified the data submitted on application Form ITA-334P, the 
producers' duty-exemption allocations are calculated from the 
territorial share in accordance with Section 303.14 of the regulations 
and each producer is issued a duty-exemption license. Section 303.7 
paragraph (b) of the regulations states the procedures for the issuance 
of the ``Permit to Enter Watches and Watch Movements into the Customs 
Territory of the United States'' (``permit'' or ``shipment permit''), 
Form ITA-340, against the producers' duty-exemption licenses. 
Currently, an authorized official of the territorial government issues 
each shipment permit (completed from data supplied by the licensee) and 
certifies that the permit is issued against a valid license and that 
the remaining balance of the license, as shown on the permit, has been 
verified. Under the proposed amendment, the licensed companies would be 
given revised permits for completion and the licensee would have 
responsibility for self-certifying that the permit is issued against a 
valid license and that the remaining balance of the license, as shown 
on the permit, is correct according to company records. The licensee 
would also continue to certify that the watches and watch movements to 
be entered under the permit have been assembled in the U.S. insular 
possessions in compliance with the regulations of the Departments of 
Commerce and the Interior and the U.S. Customs Service, and that they 
meet all U.S. Customs Service requirements for duty-free entry under 
additional U.S. note 5 of chapter 91 of the Harmonized Tariff Schedule 
of the United States. A copy of the signed permit would then be taken 
or sent via facsimile, no later than the day of shipment, to the 
appropriate territorial government officials for recording and 
verification. The completed and signed permit would be filed along with 
the other Customs Service entry paperwork requirements unless the 
importer or its representative transmits the data through the Automated 
Broker Interface (``ABI'') system of the Customs Service. Entries made 
by electronic transmission would not require the submission of a permit 
(Form ITA-340) to Customs, but the permit information would have to be 
maintained by the importer or its authorized agent for the period 
prescribed by Customs' recordkeeping regulations, currently five years. 
The changes in permit procedures are being proposed to eliminate 
paperwork, namely, the submission of Form ITA-340 to Customs with ABI 
entries. Also, the proposed new procedures would allow required permit 
information to pass between the territorial government and the watch 
producers via facsimile, which would eliminate the burden of travel to 
and from the territorial office.
    The permit currently consists of five self-carboned pages with one 
copy to be presented to the U.S. Customs officer at the port of entry 
and then forwarded to the Department of Commerce after entry number, 
date of entry, and port of entry have been added by the Customs 
officer; one copy to be retained by the licensee's broker or agent; one 
copy to be retained by the licensee; one copy to be retained by the 
territorial office; and one copy to be forwarded by the territorial 
office to the Department of Commerce. Under the proposed amendment, the 
revised permit would be a single page document which could be produced 
by the licensee in an approved computerized format or any other medium 
or format approved by the Department of Commerce. On entries made 
through ABI, the licensee would not need to make any copies of the 
original permit if the permit is sent via facsimile or other data 
communications system to the territorial government officials and the 
importer or its authorized agent (otherwise, two copies needed). For 
non-electronic transmission entries filed with Customs officials at the 
port, the original permit would continue to be a required part of the 
paperwork submitted to Customs to receive duty-free treatment. Customs 
would still forward the permit to the Department of Commerce after 
filling in the entry number and date of entry. The licensee, as with 
ABI entries, would need to make a copy of the permit for the 
territorial government and the importer or its authorized agent's 
records only if the permit is not sent via facsimile or other data 
communication system. The territorial government officials would 
continue to send a copy of each permit to the Department of Commerce. 
The proposed revision of the permit would not only reduce the paperwork 
associated with the permit, but would also eliminate the need for 
Customs to mail a copy of the permit to the Department of Commerce for 
all ABI entries.
    Section 602 of Public Law 103-465 enacted on December 8, 1994 
amended Public Law 97-446. The proposed rule would make the necessary 
technical changes to reflect the new authority for the duty-refund 
entitlements for the insular watch program. Changes would be made to 
Authority, Sec. 303.1(a), Sec 303.2((a)(1) and Sec. 303.12(c)(2).
    We also propose eliminating the mid-year report (Form ITA-321P). 
Sec. 303.11 (Mid-year reporting requirement) of the regulations and 
Sec. 303.2(b)(4) (Form ITA-321P) would be removed. 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. Even if the reporting requirement and the associated 
form are eliminated, companies could still request supplemental duty-
free allocations or voluntarily relinquish units in accordance with 
Sec. 303.6(c) and (f). We also propose amending Sec. 303.6(f) in order 
to clarify the procedures for requesting annual supplemental 
allocations and relinquishing units.
    We propose increasing the percentage of wages for the repair of 
non-9\1/5\ watches and 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 
is being proposed to permit producers to further diversify their 
operations.
    Currently, the percentage of wages paid for the repair of non-9\1/
5\ watches and watch movements and for the assembly of non-9\1/5\ 
watches and watch

[[Page 37847]]

movements (ineligible only due to value-limit reasons) which is 
creditable towards the duty-refund is twenty-five percent of the firm's 
other 9\1/5\ creditable wages. 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 propose eliminating this exclusion by amending Sec. 303.2(a)(13).
    Pub. L. 97-446, as amended by Pub. L. 103-465, 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 propose to establish for calendar year 1997 
a total quantity and respective territorial shares as shown in the 
following table:

                                                                        
                                                                        
                                                                        
Virgin Islands..............................................   3,100,000
Guam........................................................     500,000
American Samoa..............................................     500,000
Northern Mariana Islands....................................     500,000
                                                                        

    Compared to the total quantity established for 1994 (59 FR 8847; 
February 24, 1994), this amount would be a decrease of 500,000 units. 
The proposed Virgin Islands territorial share would be reduced by 
500,000 and the shares for Guam, American Samoa and the Northern 
Mariana Islands would not change. The amount we propose for the Virgin 
Islands is more than sufficient for the anticipated needs of all the 
existing producers.
    We also propose raising the maximum value of components for duty-
free treatment of watches from $175 to $200 by amending Sec. 
303.14(b)(3). This change would relax the limitation on the value of 
imported components that may be used in the assembly of duty-free 
insular watches. The proposed value levels would also help offset the 
effects of the declining dollar and allow the producers wider options 
in the kinds of watches they assemble.
    The proposed changes include amending Sec. 303.14(c)(1)(iv), which 
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. Currently 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 of 85%, 80% and 65% up to a maximum of 750,000 units. The 
amendment would raise the 65% increment to 75%. In recent years most 
producers have shipped fewer than 600,000 units. This change would add 
a further incentive for producers to increase shipments which would 
help raise territorial employment.
    The following amendments are being proposed to simplify and 
consolidate the regulations and to eliminate redundancy:
     Remove the concluding text of Sec. 303.6(f) which would 
require the publication of notices in the Federal Register to invite 
new entrants and would 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 Section 303.10 (Limitations, requirements, 
restriction and prohibitions) and would consolidate non-duplicative 
language in Sec. 303.14(b);
     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 proposed changes 
affecting the numbering of provisions;
     Amend Sec. 303.14(b) by removing references to Sec. 303.10 
and incorporating the non-duplicative language in Sec. 303.14(b);
     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; and
     Eliminate Sections 303.10 and 303.11.
    The proposed 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 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. This is because 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 proposed 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 proposed 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, 15 CFR Part 303 is proposed to be 
amended 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.


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 December 8, 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 
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 9\1/5\ watch and watch movement 
assembly operations, plus any wages paid for the repair of

[[Page 37848]]

non-9\1/5\ 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-9\1/5\ 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 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 Section 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.
    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 as 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 new entrant 
applicants; 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 ``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 Pub. L. 
103-465.''.
    15. In Sec. 303.14, the heading of paragraph (b) and paragraphs 
(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 the $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 ``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 ``3,100,000'' in its place.
Paul L. Joffe,
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. 96-18427 Filed 7-19-96; 8:45 am]
BILLING CODE 3510-DS-P and 4310-93-P