[Federal Register Volume 61, Number 211 (Wednesday, October 30, 1996)]
[Rules and Regulations]
[Pages 55883-55885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27862]


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DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Part 303

DEPARTMENT OF THE INTERIOR

Office of Insular Affairs

[Docket No. 960508126-6126-01]
RIN 0625-AA46


Changes in Procedures for the Insular Possessions Watch Program

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 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-91/5 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 from the percentage of non-91/5 wages 
creditable toward the duty-refund reference to watches and watch 
movements which are ineligible for duty-free treatment due only to 
value-limit reasons; raise the maximum value of components for watches; 
and make other changes necessary to consolidate and simplify the 
regulations.

EFFECTIVE DATE: October 30, 1996.

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

SUPPLEMENTARY INFORMATION: We published regulatory revisions in 
proposed form on July 22, 1996 (61 FR 37845) and invited comments. We 
received no comments.
    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 authorizes duty-exemption allocations 
and duty-refund entitlements for insular watch program producers. The 
following changes amend 15 CFR Part 303 of the regulations.
    The 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) are amended by revising Sec. 303.2(b)(3) and 
Sec. 303.7(b). The changes will reduce the paperwork associated with 
the permit, eliminate the need for Customs to mail a copy of the permit 
to the Department of Commerce for all Customs entries made 
electronically through the automated broker interface and allow 
required permit information to pass between the territorial government 
office and watch producers via facsimile, thereby eliminating the 
burden of travel to and from the territorial offices. Further details 
of the changes were set forth in our July 22, 1996 proposal (61 FR 
37845).
    Sec. 602 of Public L. 103-465 enacted on December 8, 1994 amended 
Pub. L. 97-446.

    Authority: Sec. 303.1(a), Sec 303.2(a)(1) and Sec. 303.12(c)(2) 
are amended to reflect the new authority for the duty-refund 
entitlements for the insular watch program.

    The mid-year report (Form ITA-321P) is eliminated by removing Sec. 
303.2(b)(4) (Form ITA-321P) and Sec. 303.11 (mid-year reporting 
requirement). We also amended Sec. 303.6(f) to clarify the procedures 
for requesting annual supplemental allocations and relinquishing units. 
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.
    We increased the percentage of wages for the repair of non-91/5 
watches and

[[Page 55884]]

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 permits producers to 
further diversify their operations.
    Sec. 303.2(a)(13) is amended by removing eligibility towards the 
duty-refund for the assembly of non-91/5 watches and watch movements 
(ineligible only due to value-limit reasons). 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 are eliminating this unused provision.
    The Departments establish for calendar year 1997 a total quantity 
of 4,600,000 units in the following territorial shares:

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

    Sec. 303.14(b)(3) is amended by raising the maximum value of 
components for duty-free treatment of watches from $175 to $200. This 
change will relax the limitation on the value of imported components 
that may be used in the assembly of duty-free insular watches. The new 
value levels will contribute to offsetting the effects of the declining 
dollar and allow the producers wider options in the kinds of watches 
they assemble.
    Sec. 303.14(c)(1)(iv) 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. 
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 to a maximum of 750,000 units. The 
amendment raises the 65% increment to 75% and makes each declining 
percentage a 5% reduction. This change will add a further incentive for 
producers to increase shipments and possibly raise territorial 
employment.
    The following amendments simplify and consolidate the regulations 
and eliminate redundancy:
     Remove the concluding text of Sec. 303.6(f), which 
required the publication of notices in the Federal Register to invite 
new entrants, and 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 Sec. 303.10 (Limitations, requirements, 
restriction and prohibitions) and consolidate non-duplicative language 
in Sec. 303.14(b);
     Eliminate Sec. 303.11;
     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 changes affecting 
the numbering of provisions;
     Amend Sec. 303.14(b) by removing references to Sec. 303.10 
and incorporating the non-duplicative language of Sec. 303.10 into Sec. 
303.14(b); and
     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.
    Under the Administrative Procedure Act, 5 U.S.C. 553(d)(1), the 
effective date of this rule need not be delayed for 30 days because 
this rule relieves restrictions. The restrictions are relieved by 
raising the value-limit on watches which are allowed into the United 
States free of duty and raising an incremental percentage on which the 
duty-refund is calculated. The rule also relieves the burdensome travel 
time involved in obtaining the permit, reduces the paperwork involved 
with the permit and eliminates the burden of the mid-year report.
    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 purpose and effect of 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 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 final 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, we are amending 15 CFR Part 303 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.


Sec. 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 8 December 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 
on 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 91/5 watch and watch movement assembly 
operations, plus any wages paid for the repair of non-91/5 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-91/5 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

[[Page 55885]]

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 Sec. 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.


Sec. 303.7  [Amended]

    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 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 a new entrant 
applicant; 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 in its place 
``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 Public Law 
103-465.''


Sec. 303.14  [Amended]

    15. In Sec. 303.14, the heading of paragraph (b) and paragraph 
(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 $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 in its place ``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 in its place ``3,100,000''.
Robert S. LaRussa,
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. 96-27862 Filed 10-29-96; 8:45 am]
BILLING CODE 3510-DS-P; 4310-93-P