[Federal Register Volume 62, Number 38 (Wednesday, February 26, 1997)]
[Rules and Regulations]
[Pages 8620-8623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4682]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 12 and 113

[T.D. 97-9]
RIN 1515-AB97


Entry of Softwood Lumber Shipments From Canada

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Interim regulations; solicitation of comments.

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

SUMMARY: This document sets forth interim amendments to the Customs 
Regulations establishing additional entry requirements applicable to 
shipments of softwood lumber from Canada. The interim amendments 
involve the collection of certain additional information for purposes 
of monitoring and enforcing an agreement between the Governments of the 
United States and Canada regarding trade in softwood lumber.

DATES: Interim rule effective February 26, 1997; comments must be 
submitted by April 28, 1997.

ADDRESSES: Written comments (preferably in triplicate) may be addressed 
to the Regulations Branch, U.S. Customs Service, Franklin Court, 1301 
Constitution Avenue, NW., Washington, DC 20229. Comments submitted may 
be inspected at the Regulations Branch, Office of Regulations and 
Rulings, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Gary Manes, Office of Field Operations 
(202-927-1133).

SUPPLEMENTARY INFORMATION:

Background

    On May 29, 1996, the United States entered into the Softwood Lumber 
Agreement (the Agreement) with Canada under the authority of section 
301(c)(1)(D) of the Trade Act of 1974, as amended (19 U.S.C. 
2411(c)(1)(D)), which authorizes the United States Trade Representative 
(the USTR) to ``enter into binding agreements'' with a foreign country 
that commit the foreign country to, inter alia, eliminate any burden or 
restriction on U.S. commerce resulting from an act, policy or practice 
of the foreign country. The Agreement, which went into effect on April 
1, 1996, was specifically intended to provide a satisfactory resolution 
to certain acts, policies and practices of the Government of Canada 
affecting exports to the United States of softwood lumber which had 
been the subject of an investigation initiated by the USTR under 
section 302(b)(1)(A) of the Trade Act of 1974, as amended (19 U.S.C. 
2412(b)(1)(A)), and which on October 4, 1991, pursuant to section 
304(a) of the Trade Act of 1974, as amended (19 U.S.C. 2414(a)), had 
been found by the USTR to be unreasonable and to burden or restrict 
U.S. commerce. The Agreement is the product of a consultative process 
established by the United States and Canada and involving the 
participation of the U.S. Government, Canadian federal and provincial 
governments and, where appropriate, industries and other interested 
parties in both countries.
    The Agreement refers specifically to softwood lumber mill products 
classified in subheadings 4407.10.00, 4409.10.10, 4409.10.20, and 
4409.10.90 of the Harmonized Tariff Schedule of the United States 
(HTSUS) that were ``first manufactured'' into a product of one of those 
HTSUS subheadings in the Canadian provinces of Ontario, Quebec, British 
Columbia or Alberta. The Agreement requires that Canada assess fees on 
exports of such softwood lumber in each of the five years following 
April 1, 1996, based on the following schedule: (1) For total shipments 
up to 14.7 billion board feet, free (no fee); (2) for any amount 
shipped in excess of 14.7 billion board feet but not in excess of 15.35 
billion board feet, US$50 per thousand board feet in the first year and 
with annual adjustments for inflation in subsequent years; and (3) for 
any amount shipped in excess of 15.35 billion board feet, US$100 per 
thousand board feet and with annual adjustments for inflation in 
subsequent years. The Agreement also allows an additional amount of 
exports of such softwood lumber in excess of 14.7 billion board feet 
without the payment of a fee if the average price of a benchmark 
softwood lumber price exceeds a prescribed ``trigger price'' during any 
quarterly period. In order to control and monitor exports of softwood 
lumber first manufactured in Ontario, Quebec, British Columbia and 
Alberta, the Agreement provides that Canada will issue an export permit 
for each shipment of such softwood lumber and that Canada will collect 
any required fee for amounts of lumber exported in excess of 14.7 
billion board feet upon issuance of the export permit.
    The Agreement requires the collection of information by Canada in 
connection with the issuance of export permits for softwood lumber 
first manufactured in Ontario, Quebec, British Columbia and Alberta and 
the collection of information by the United States in connection with 
import transactions involving such lumber.
    With regard to the import end, the Agreement obligates the United 
States to require that the U.S. importer provide specific information 
in connection with the entry of the lumber under section 484 of the 
Tariff Act of 1930, as amended (19 U.S.C. 1484). The information 
required to be collected under the Agreement includes the following 
three specific data elements which are not already required under the 
Customs laws and regulations, the last two of which are required by the 
Agreement to be collected as soon as practicable after the entry into 
force of the Agreement: (1) The province of first manufacture of the 
lumber; (2) the export permit number issued in Canada for the shipment; 
and (3) the fee status of the lumber for which the export permit was 
issued (whether the lumber in the shipment was attributed to a quantity 
to which no fee applies or to a quantity that is subject to the US$50 
fee or to a quantity that is subject to the US$100 fee or to a quantity 
that is covered by the trigger price mechanism).
    In order to facilitate monitoring of the Agreement and in order to 
ensure that Canadian exporters have obtained the appropriate permits, 
the Agreement also sets forth various cooperative measures which 
include the periodic exchange of export and import information 
collected by the two countries under the Agreement.
    On June 5, 1996, the USTR published a notice in the Federal 
Register (61 FR 28626) setting forth its determination that the 
Agreement will be subject to the provisions of section 306 of the Trade 
Act of 1974, as amended (19 U.S.C. 2416), and that the USTR will 
monitor Canadian compliance with the Agreement pursuant to section 306 
and will take action under section 301(a) of the Trade Act of 1974, as 
amended (19

[[Page 8621]]

U.S.C. 2411(a)), if Canada fails to comply with the Agreement. Noting 
that adherence to the terms of the Agreement is vital to the 
achievement of its objectives, and consistent with the authority 
conferred on the USTR by section 141 of the Trade Act of 1974, as 
amended (19 U.S.C. 2171), to coordinate and draw upon the resources of 
other Federal agencies in connection with the performance of functions 
of the USTR regarding the proper administration and execution of trade 
agreement programs (including those arising out of unfair trade 
practice cases), the notice stated that the USTR, the Department of 
Commerce, Customs, and other agencies as appropriate, will carefully 
monitor and vigorously enforce the Agreement and that, to that end, 
Customs will provide to the USTR and to the Department of Commerce the 
data that Customs collects on imports (including province of origin and 
the type of permit) of softwood lumber from Canada.
    The purpose of this document is to provide an appropriate 
regulatory context for the new requirements resulting from the 
Agreement as discussed above. Since those requirements relate to a 
special class of imported products, Customs believes that it would be 
appropriate to add to Part 12 of the Customs Regulations (19 CFR Part 
12) a new Sec. 12.140 to cover the Agreement provisions at issue.
    Paragraph (a) of new Sec. 12.140 reflects the basic onus that the 
Agreement places on exports of Canadian softwood lumber that are 
subject to the export permit and fee requirements and, by implication, 
on the U.S. importer (see also the below discussion of the changes to 
the bond provisions of Part 113 of the regulations). These paragraph 
(a) provisions are necessary to ensure that the basic purpose of the 
Agreement (the collection of export fees on appropriate shipments) is 
achieved.
    Paragraph (b) of new Sec. 12.140 specifies the information required 
to be collected pursuant to the Agreement. With regard to data 
concerning province of first manufacture, the regulatory text provides 
for submission of such data for all entries of softwood lumber products 
from Canada (rather than only those products first manufactured in 
Ontario, Quebec, British Columbia, or Alberta) because, in order to 
effectively determine if lumber is being entered with a false claim of 
province or territory of first manufacture so as to contravene the 
terms of the Agreement, it is necessary to be able to compare the 
entered quantity of lumber not only to the productive capacity of the 
claimed province or territory of first manufacture but also to the 
productive capacity of other provinces or territories.
    Paragraph (c) of new Sec. 12.140 addresses the untimely issuance of 
export permit numbers by the Canadian Government. In recognition of the 
fact that processing or other procedural delays may arise in connection 
with the issuance of export permit numbers, this paragraph provides for 
up to 10 additional working days to file the entry summary 
documentation setting forth the information required under the 
Agreement if the Canadian Government has not issued the export permit 
number within the 10-day filing period prescribed in Sec. 142.12(b) or 
Sec. 142.23 of the regulations. If the export permit number is not 
issued within the maximum 20-working-day period allowed under this 
paragraph, the text requires that the entry summary documentation be 
filed on the next (21st) business day with surrogate information 
inserted in place of the actual data in the export permit number and 
export fee payment status fields. The use of surrogate information in 
such cases is only intended to enable the importer to effect an entry 
summary filing (in particular electronically) and thus does not absolve 
an importer from his other responsibilities under the regulatory texts 
implementing the Agreement. The provision in this paragraph regarding 
the additional 10-working-day period for filing the entry summary 
documentation is at this point intended to be a temporary measure, and 
the need for retaining this provision within the new regulatory texts 
will be reviewed by the United States no later than April 1, 1997, in 
the context of a review of the overall operation of the Agreement and 
the interim regulations set forth in this document.
    Finally, as an interim arrangement, paragraph (d) of new 
Sec. 12.140 provides that an importer is not required to declare the 
number or type of export permit issued by Canada with respect to 
softwood lumber products that are imported into Canada, processed in 
Canada, and then exported to the United States; surrogate information 
also would be used instead in such cases. This exception to the 
paragraph (b) requirements has been included because the Government of 
Canada has to date not agreed to issue export permits for such 
remanufactured products because it takes the position that they are not 
covered by the Agreement; it is the position of the U.S. Government 
that such products are covered by the Agreement. Discussions with the 
Government of Canada are ongoing to ensure that the export permit and 
other requirements of the Agreement will be applied to these 
remanufactured products, and the need for retaining this exception 
within the new regulatory texts also will be reviewed by the United 
States no later than April 1, 1997. The volume of imports of 
remanufactured lumber historically has been small and, as a practical 
matter, it is expected that any future imports of such products would 
only involve certain specialty items. Customs notes that for any import 
transaction in which this exception is applied, the U.S. importer must 
maintain, and make available for Customs review when requested, 
appropriate records to establish that the exception was properly 
applied to the imported product. The use of this exception will be 
closely examined by Customs, and any filing of false information 
regarding the applicability of this exception may give rise to the 
assessment of penalties under section 592 of the Tariff Act of 1930, as 
amended (19 U.S.C. 1592).
    This document also includes amendments to Sec. 113.62 of the 
Customs Regulations (19 CFR 113.62) which sets forth the basic 
importation and entry bond conditions and consequences of default 
thereof. These amendments involve: (1) The addition of a bond condition 
as new paragraph (k) to reflect the importer's obligation under 
paragraph (a) of new Sec. 12.140; and (2) in redesignated paragraph (l) 
(formerly paragraph (k)), the addition of a new paragraph (5) to set 
forth the consequences of a default on the new paragraph (k) bond 
condition, which would be liquidated damages in an amount equal to the 
highest export fee provided for under the Agreement.
    In consideration of the fact that the data required under the 
regulatory text set forth in this document is required for the entry of 
the subject merchandise, the interim ``(a)(1)(A) list'' published in 
the Federal Register on July 15, 1996 (61 FR 36956) pursuant to 19 
U.S.C. 1509(a)(1)(A) will be modified accordingly.

Comments

    Before adopting this interim regulation as a final rule, 
consideration will be given to any written comments timely submitted to 
Customs. Comments submitted will be available for public inspection in 
accordance with the Freedom of Information Act (5 U.S.C. 552), 
Sec. 1.4, Treasury Department Regulations (31 CFR 1.4), and 
Sec. 103.11(b), Customs Regulations (19 CFR 103.11(b)), on regular 
business days between the hours of 9 a.m. and 4:30 p.m. at the 
Regulations Branch, Office of Regulations and Rulings, U.S. Customs 
Service, Franklin Court, 1099 14th

[[Page 8622]]

Street, N.W., Suite 4000, Washington, DC.

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 interim regulation because it is within the 
foreign affairs function of the United States. The collection of 
information provided for in this interim regulation is required under 
the terms of the Softwood Lumber Agreement with Canada and is necessary 
to ensure effective monitoring of the operation of that Agreement. 
Furthermore, for the same reasons and because the collection of this 
information is required to begin as soon as practicable after entry 
into force of the Softwood Lumber Agreement, 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 interim 
regulations, the provisions of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.) do not apply.

Paperwork Reduction Act

    This regulation is being issued without prior notice and public 
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). 
For this reason, the collection of information contained in this 
regulation has been reviewed and, pending receipt and evaluation of 
public comments, approved by the Office of Management and Budget in 
accordance with the requirements of the Paperwork Reduction Act (44 
U.S.C. 3507) under control number 1515-0065.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    The collection of information in these regulations is in 
Sec. 12.140. This information is required in connection with the entry 
of certain softwood lumber products from Canada and will be used by the 
U.S. Customs Service to administer, and monitor compliance with, the 
Softwood Lumber Agreement with Canada. The likely respondents are 
business organizations including importers, exporters and 
manufacturers.
    Estimated total annual reporting and/or recordkeeping burden: 3,000 
hours.
    Estimated average annual burden per respondent/recordkeeper: 20 
hours.
    Estimated number of respondents and/or recordkeepers: 150.
    Estimated annual number of responses: 350,000.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the functions of the agency, 
including whether the information shall have practical utility; (b) the 
accuracy of the agency's estimate of the burden of the collection of 
information; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
the collection of information on respondents, including through the use 
of automated collection techniques or other forms of information 
technology. Comments should be directed to the Office of Management and 
Budget, Attention: Desk Officer for the Department of the Treasury, 
Office of Information and Regulatory Affairs, Washington, D.C. 20503. A 
copy should also be sent to the Regulations Branch, Office of 
Regulations and Rulings, U.S. Customs Service, 1301 Constitution 
Avenue, N.W., Washington, D.C. 20229.

List of Subjects

19 CFR Part 12

    Bonds, Canada, Customs duties and inspection, Entry of merchandise, 
Imports, Prohibited merchandise, Reporting and recordkeeping 
requirements, Restricted merchandise, Trade agreements.

19 CFR Part 113

    Air carriers, Bonds, Customs duties and inspection, Exports, 
Foreign commerce and trade statistics, Freight, Imports, Reporting and 
recordkeeping requirements, Vessels.

Amendments to the Regulations

    Accordingly, Parts 12 and 113, Customs Regulations (19 CFR Parts 12 
and 113), are amended as set forth below.

PART 12--SPECIAL CLASSES OF MERCHANDISE

    1. The general authority citation for Part 12 continues to read, 
and a specific authority citation for Sec. 12.140 is added to read, 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.
* * * * *
    Section 12.140 also issued under 19 U.S.C. 1484, 2416(a), 2171.
    2. A new center heading and new Sec. 12.140 are added to read as 
follows:

Softwood Lumber From Canada


Sec. 12.140  Entry of softwood lumber from Canada.

    The requirements set forth in this section are applicable for as 
long as the Softwood Lumber Agreement, entered into on May 29, 1996, by 
the Governments of the United States and Canada, remains in effect.
    (a) Encumbrance regarding export permit and export fee. In the case 
of softwood lumber first manufactured into a product classifiable in 
subheading 4407.10.00, 4409.10.10, 4409.10.20, or 4409.10.90, 
Harmonized Tariff Schedule of the United States (HTSUS), in the 
Province of Ontario, Quebec, British Columbia, or Alberta, the 
requirement that the Government of Canada issue an export permit and 
collect the appropriate export fees under the Softwood Lumber Agreement 
attaches to and encumbers the product when it is imported into the 
United States. Such imported merchandise remains subject to the 
encumbrance until the Government of Canada issues an export permit and 
collects the appropriate fees. The merchandise shall be released by 
Customs subject to the following conditions: The importer of record 
assumes an obligation to ensure within 20 working days of release that 
such export permit is issued by the Government of Canada and to provide 
sufficient information to satisfy U.S. Customs that the encumbrance no 
longer attaches or, if the merchandise remains encumbered at the 
expiration of 20 working days, to pay any liquidated damages assessed 
under the Customs bond.
    (b) Reporting requirements. Except as otherwise provided in 
paragraph (d) of this section, in the case of a softwood lumber product 
classifiable in HTSUS subheading 4407.10.00, 4409.10.10, 4409.10.20, or 
4409.10.90 that is imported from Canada and that was manufactured (that 
is, subjected to any processing operation other than mere loading, 
unloading or processing necessary to maintain the condition of the 
product) in Canada, whether or not such product was previously 
subjected to any processing operation outside Canada, the following 
information shall be included on the entry summary, Customs Form 7501, 
or on an electronic equivalent:
    (1) The Canadian province or territory in which the product was 
first manufactured; and

[[Page 8623]]

    (2) In the case of a product first manufactured into a product 
classifiable in HTSUS subheading 4407.10.00, 4409.10.10, 4409.10.20, or 
4409.10.90 in the Province of Ontario, Quebec, British Columbia, or 
Alberta:
    (i) The export permit number issued by the Government of Canada for 
the product; and
    (ii) An indication of the export fee payment status of the product 
for which the permit was issued according to the following categories:
    (A) Category A: No payment of an export fee because the exported 
product falls within the base amount of 14.7 billion board feet. This 
category includes products for which the export permit was issued 
without an indication of the export fee status;
    (B) Category B: Payment of the export fee applicable to a product 
exported in excess of 14.7 billion board feet but not in excess of 
15.35 billion board feet;
    (C) Category C: Payment of the export fee applicable to a product 
exported in excess of 15.35 billion board feet; or
    (D) Category D: No payment of an export fee where the product was 
exported in excess of 14.7 billion board feet because the average price 
of a benchmark softwood lumber price exceeds a prescribed trigger price 
during any quarterly period as determined by the Governments of Canada 
and the United States. If the issued permit pertains to this category, 
the specific quarterly period shall also be indicated on the Customs 
Form 7501 or electronic equivalent.
    (c) Untimely issuance of export permit. If an export permit for the 
product has not been issued by the Government of Canada on or before 
the required date for filing the entry summary documentation as 
provided in Sec. 142.12(b) or Sec. 142.23 of this chapter, the importer 
shall have a maximum of 10 additional working days to file the entry 
summary documentation setting forth all of the information specified in 
paragraph (b)(2) of this section. If an export permit for the product 
has not been issued by the Government of Canada within the maximum time 
period specified in this paragraph, the entry summary or electronic 
equivalent shall be filed on the next business day and shall be 
completed in pertinent part as follows:
    (1) The export permit number field shall be completed by inserting 
as many eights as are necessary to complete the field; and
    (2) The export fee payment status field shall be completed by 
inserting an ``A'' followed by two zeros.
    (d) Absence of export permit number and fee status data for certain 
remanufactured softwood lumber products. In the case of a softwood 
lumber mill product classifiable in HTSUS subheading 4407.10.00, 
4409.10.10, 4409.10.20, or 4409.10.90 that is imported from Canada and 
that was first manufactured in Canada in the Province of Ontario, 
Quebec, British Columbia, or Alberta, if no export permit for the 
product is issued by the Government of Canada because the product was 
previously subjected to processing operations outside Canada, the entry 
summary, Customs Form 7501, or an electronic equivalent, shall include 
the Canadian province or territory in which the product was first 
manufactured and also shall be completed in pertinent part as follows:
    (1) The export permit number field shall be completed by inserting 
as many nines as are necessary to complete the field; and
    (2) The export fee payment status field shall be completed by 
inserting an ``A'' followed by two zeros.

PART 113--CUSTOMS BONDS

    1. The authority citation for Part 113 continues to read in part as 
follows:

    Authority: 19 U.S.C. 66, 1623, 1624.
* * * * *
    2. Section 113.62 is amended:
    a. By redesignating paragraph (k) as paragraph (l);
    b. In the penultimate sentence of paragraph (l)(4) of redesignated 
paragraph (l), by removing the reference ``paragraph (k)(1)'' and 
adding, in its place, the reference ``paragraph (l)(1)''; and
    c. By adding a new paragraph (k) and adding a new paragraph (l)(5) 
at the end of newly designated paragraph (l) to read as follows:


Sec. 113.62  Basic importation and entry bond conditions.

* * * * *
    (k) Agreement to ensure and establish issuance of softwood lumber 
export permit and collection of export fees. In the case of a softwood 
lumber product imported from Canada that is subject to the requirement 
that the Government of Canada issue an export permit pursuant to the 
Softwood Lumber Agreement, the principal agrees, as set forth in 
Sec. 12.140(a) of this chapter, to assume the obligation to ensure 
within 20 working days of release of the merchandise, and establish to 
the satisfaction of Customs, that the applicable export permit has been 
issued by the Government of Canada.
    (l) * * *
    (5) If the principal defaults on agreements in the condition set 
forth in paragraph (k) of this section only, the obligors agree to pay 
liquidated damages equal to $100 per thousand board feet of the 
imported lumber.

    Approved: February 20, 1997.
George J. Weise,
Commissioner of Customs.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 97-4682 Filed 2-25-97; 8:45 am]
BILLING CODE 4820-02-P