[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Rules and Regulations]
[Pages 40777-40781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19318]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 583

[Docket No. NHTSA-98-5064, Notice 2]
RIN 2127-AH33


Motor Vehicle Content Labeling

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation (DOT).

ACTION: Final rule.

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SUMMARY: This final rule amends the regulation we issued to implement 
the American Automobile Labeling Act. That Act requires passenger motor 
vehicles to be labeled with information about their domestic and 
foreign parts content. Congress amended that Act last year to make a 
number of changes in the labeling requirement. This final rule makes 
the regulation consistent with those changes.

DATES: Effective date: The amendments made in this rule are effective 
June 1, 2000. Manufacturers may voluntarily comply with the amendments 
before that time.
    Petitions for reconsideration: Petitions for reconsideration must 
be received not later than September 27, 1999.

ADDRESSES: Petitions for reconsideration should be submitted to: 
Administrator, National Highway Traffic Safety Administration, 400 
Seventh Street, SW, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For nonlegal issues: Henrietta 
Spinner, Office of Planning and Consumer Programs, National Highway 
Traffic Safety Administration, 400 Seventh Street, SW, Washington, DC 
20590 (202-366-4802).
    For legal issues: Edward Glancy, Office of the Chief Counsel, 
National Highway Traffic Safety Administration, 400 Seventh Street, SW, 
Washington, DC 20590 (202-366-2992).

SUPPLEMENTARY INFORMATION:

Background

    On July 21, 1994, NHTSA published in the Federal Register (59 FR 
37294) a new regulation, 49 CFR part 583, Automobile Parts Content 
Labeling, to implement the American Automobile Labeling Act (AALA). 
That Act, which is codified at 49 U.S.C. 32304, requires passenger 
motor vehicles to be labeled with information about their domestic and 
foreign parts content.
    As part of the NHTSA Reauthorization Act of 1998,1 
Congress amended the AALA to make a number of changes in the labeling 
requirement. The changes are set forth in section 7106(d) of the NHTSA 
Reauthorization Act.
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    \1\ This Act was part of the Transportation Equity Act for the 
21st Century (TEA-21). The full text of TEA-21 and the conference 
report is available on the Web at http://www.fhwa.dot.gov/tea21/.
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    On February 8, 1999, we published in the Federal Register (64 FR 
6021) a notice of proposed rulemaking (NPRM) to amend Part 583 to 
conform it to the amended AALA. We discussed each of the changes made 
by the Congress and the conforming amendments proposed for part 583.
    Three of the changes made by Congress were of particular 
significance. One of these concerned the ``roll-up, roll-down'' 
provision. The original Act specified that, for purposes of determining 
percentage U.S./Canadian parts content, any equipment from outside 
suppliers that was at least 70 percent U.S./Canadian was rolled-up and 
treated as though it were 100 percent U.S./Canadian. Any equipment 
under 70 percent was rolled-down and treated by the Act as though it 
were zero percent U.S./Canadian.
    The 1998 amendments eliminated the ``roll-down'' aspect of this 
provision. While equipment from an outside supplier that is at least 70 
percent U.S./Canadian is still to be valued at 100 percent U.S./
Canadian, any equipment under 70 percent is now valued to the nearest 
five percent. Thus, equipment whose calculated U.S./Canadian content is 
63 percent is now to be valued at 65 percent, instead of zero percent.
    The second of these changes concerned the origin of the engine and 
transmission. The original Act specified that the label must state the 
names of the countries of origin for the engine and for the 
transmission. The Act provided that the determinations of country of 
origin were to be based on the purchase price of materials received at 
individual engine/transmission plants, but were to exclude engine/
transmission assembly costs. The 1998 amendments specified that 
assembly and labor costs incurred for the assembly of engines and 
transmissions are now to be included in making these country of origin 
determinations.
    The third of these changes made permanent a limited, temporary

[[Page 40778]]

provision in the part 583 content calculation procedures giving a 
vehicle manufacturer added flexibility in making content determinations 
in those instances in which outside suppliers have not responded to the 
manufacturer's requests for content information.
    In addition to proposing specific changes to conform Part 583 to 
the amended AALA, we also proposed a change in the format of the 
messages on the label to make them easier to understand. Part 583 
currently requires a brief explanatory note concerning parts content to 
be provided at the end of the label. We proposed to require that this 
note be moved to the middle of the label, directly below the items of 
information for which the note is relevant, i.e., below the specified 
U.S./Canadian Parts Content and Major Sources of Foreign Parts Content.
    We proposed to apply the new requirements to all model year 2000 
carlines that were first offered for sale to ultimate purchasers on or 
after June 1, 1999. Since the changes were relatively straightforward 
and the statutory amendments left us little discretion, we believed the 
vehicle manufacturers could implement the changes needed to comply with 
the new requirements quickly.

Public Comments

    We received public comments from several vehicle manufacturers and 
their associations, and from the National Automobile Dealers 
Association (NADA). Also, pursuant to the Agreement on Technical 
Barriers to Trade, the World Trade Organization (WTO) Secretariat was 
notified of the proposed rule. The European Commission sent comments to 
the WTO Enquiry Point for the United States, which forwarded the 
comments to our Docket. A summary of the more significant comments 
follows.
    Several of the commenters reraised previous criticisms of the basic 
program established by the AALA. However, these comments were not 
within the scope of the NPRM. Moreover, the criticisms were directed to 
the AALA itself.
    Commenters representing nearly all motor vehicle manufacturers 
stated that the proposed effective date of June 1, 1999 provided 
insufficient lead time. The Alliance of Automobile Manufacturers 
(Alliance) stated that its members would face extreme difficulties in 
implementing the proposed changes in such a short period. It stated 
that the elimination of the ``roll-down'' provision will require new, 
detailed certifications from outside suppliers which cannot reasonably 
be prepared and obtained in such a short time frame. The Alliance also 
stated that its member companies may need to adapt their computer 
systems supporting the AALA parts content calculation. The Alliance 
recommended an effective date of June 1, 2000.
    The Association of International Automobile Manufacturers, Inc. 
(AIAM) similarly stated that the proposed effective date was neither 
reasonable nor practicable. That organization stated that auto 
manufacturers and their suppliers require considerable lead time to 
prepare an AALA label. AIAM stated that these preparations can often 
require up to seven months lead time to complete. AIAM provided a chart 
showing a typical AALA compliance schedule, including specific details 
of activities manufacturers must undertake.
    Commenters also made several recommendations to reduce costs. The 
Japan Automobile Manufacturers Association (JAMA) stated that while 
elimination of the ``roll-down'' provision will result in a more 
accurate picture of actual parts content, it will do so at increased 
cost to the outside supplier, and hence to the vehicle manufacturer and 
ultimately the consumer. JAMA stated that one means of addressing this 
cost burden would be to permit suppliers of parts with low U.S./
Canadian content to report that such content is ``minimal'' or 
``negligible'' without the burdensome certification requirements 
otherwise required.
    JAMA noted that the agency had previously stated that it did not 
have authority to permit manufacturers to label vehicles with low U.S./
Canadian content as ``minimal,'' given the statutory requirement for 
manufacturers to provide a specific percentage. That organization 
stated that it believes the agency placed too much emphasis on its 
estimate on Congressional intent with respect to the issue.
    JAMA stated that, at the very least, the agency should permit 
outside suppliers to employ the ``minimal'' concept, allowing vehicle 
manufacturers the option to state that all parts imported from a given 
overseas supplier are all ``non-U.S./Canadian,'' without keeping 
records by the individual part. That organization stated that this 
would serve to reduce the burden and simplify the calculation without 
compromising the integrity of the statute.
    AIAM and Volkswagen made a recommendation with respect to a change 
to the AALA which specifies that the costs of miscellaneous parts 
(e.g., nuts, bolts, windshield wiper fluid, etc.) are now allocated to 
the country where final assembly of the vehicle takes place. These 
parts previously were not considered in making parts content 
calculations. AIAM and Volkswagen stated that it is difficult to 
identify the value of the miscellaneous parts on a particular carline 
and asked that an averaging concept be permitted, e.g., permit 
manufacturers to calculate a total value for all of the miscellaneous 
parts used to produce vehicles at a particular assembly plant and then 
divide that total by the number of vehicles produced.
    One commenter, DaimlerChrysler, objected to the proposal to move 
the explanatory note to the middle of the label. That company stated 
that any change to the content label involves a good deal of 
coordination and programming effort and substantial lead time, and that 
the change would add additional cost and burden with little or no 
tangible benefit.

Agency Decision

    After carefully considering the comments, we have decided to make 
the proposed rule final, but with a later effective date.
    We have decided to establish an effective date of June 1, 2000, as 
recommended by the Alliance, while permitting optional early 
compliance. The proposed effective date of June 1, 1999 was based on an 
assumption that vehicle manufacturers and suppliers had already begun 
to collect the information needed to make the revised calculations 
required by the NHTSA Reauthorization Act of 1998. However, since the 
comments indicated that this was not true in many cases, the agency has 
concluded that a significantly longer leadtime is needed.
    By permitting optional early compliance, vehicle manufacturers 
which are able to comply with the new requirements earlier, including 
for some or all of their model year 2000 vehicles, can do so. We 
recognize that consumers comparing the labels on different model year 
2000 vehicles may sometimes be faced with differing labels. However, 
the changes are sufficiently minor that we do not believe this will 
cause any significant confusion.
    We note that the AALA and part 583 contemplate that U.S./Canadian 
parts content and major sources of foreign parts content are determined 
on a once-a-model-year basis for a particular carline. The June 1, 2000 
effective date means that new model year carlines introduced to the 
public on or after that date must bear the revised labels. New model 
year carlines introduced before

[[Page 40779]]

that date may continue to bear the old labels for the balance of the 
model year, even for vehicles manufactured after June 1, 2000.
    While we have considered JAMA's request to permit suppliers of 
parts with low U.S./Canadian content to report such content as 
``minimal'' or ``negligible'' rather than as a percentage (to the 
nearest five percent), we do not believe that such an exception from 
the express statutory requirements has been justified. Most 
significantly, JAMA has not shown that such an exception would not 
result in a loss of non-trivial benefits. The agency would not have 
authority to create such an exception, absent such a showing. Moreover, 
JAMA has not provided support for its contention that the requirement 
to provide a percentage is burdensome.
    As to the AIAM/Volkswagen request that an averaging concept be 
permitted for calculating the value of miscellaneous parts, we note 
that the proposed rule did not include a procedure for calculating the 
value of these parts. It is our opinion that manufacturers need not 
identify the individual cost of each nut and bolt, but may simply make 
a good faith estimate of the overall value of miscellaneous parts. We 
do not believe it is necessary to state this in the regulatory text 
itself. One way of making such a good faith estimate might be to 
calculate a total value for all of the miscellaneous parts used to 
produce vehicles at a particular assembly plant and then divide that 
total by the number of vehicles produced. However, if substantially 
different vehicles were produced at the same plant, the vehicle 
manufacturer might need to make an adjustment so that the estimated 
value was reasonable for each individual carline.
    While we have considered DaimlerChrysler's arguments against moving 
the explanatory note, we have decided to adopt this proposed change. As 
discussed in the NPRM, we believe that moving the note to the middle of 
the label, directly below the items of information for which the note 
is relevant, will make the label easier to read. While DaimlerChrysler 
stated that there is a cost to making any format change, it did not 
quantify the cost. Given that the label will have to be changed in 
other ways anyway, we believe that any cost impacts for moving the note 
will be negligible.
    As noted earlier, several of the commenters criticized the basic 
requirements of the AALA. NADA stated that the rule is of little value 
to most consumers. AIAM stated that while Congress addressed some of 
its concerns in last year's amendments, it believes the law continues 
to provide misleading and inaccurate information. JAMA argued that the 
statute is costly to implement, burdensome to vehicle manufacturers and 
outside suppliers, and of little interest or use to vehicle purchasers 
in their buying decisions.
    The EC submitted a comment stating:

    The EC thinks that the label is superfluous, it is getting 
harder and harder to determine the real origin of details. Many 
companies manufacture in several countries and they can also be 
owned by several large owners. The new procedure makes it even more 
cumbersome when additional details such as screws and clips must be 
taken into account when determining the origin. The vehicle 
manufacturers must also get a certificate from each large supplier.

    While we understand that a number of parties continue to have 
objections to the current content labeling program, we note that the 
objections are with the underlying statute. Since most of the details 
of the content labeling program are set forth in the AALA, any 
significant changes could only come from the Congress. We do note, 
however, that the extended leadtime provided for today's rule and our 
interpretation that good faith estimates may be made concerning the 
value of miscellaneous parts will help minimize costs.
    We also note that this agency is in the process of conducting an 
evaluation of the AALA. This evaluation is being conducted pursuant to 
Executive Order 12866, Regulatory Planning and Review, which requires 
agencies to conduct periodic evaluations of the effectiveness of its 
existing regulations and programs. This evaluation is listed in the 
April 1999 Semiannual Regulatory Agenda. See 64 FR 21706, April 26, 
1999. We plan to publish the evaluation of the AALA in the summer of 
2000 in the Federal Register and will solicit comments from all 
parties.

Rulemaking Analyses and Notices

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

    We have considered the impact of this rulemaking action under 
Executive Order 12866 and the Department of Transportation's regulatory 
policies and procedures. This rulemaking document was not reviewed by 
the Office of Management and Budget under E.O. 12866, ``Regulatory 
Planning and Review.'' The rulemaking action has been determined not to 
be significant under the Department's regulatory policies and 
procedures.
    This final rule amends 49 CFR part 583 to conform the agency's 
content labeling requirements and calculation procedures to recent 
statutory changes. The changes are so minor that they will not have any 
measurable effect on vehicle prices.
    The change most likely to result in any cost impacts is the one 
requiring outside suppliers to make calculations of U.S./Canadian 
content, to the nearest five percent, for equipment with U.S./Canadian 
content below 70 percent. This will increase compliance costs for some 
outside suppliers. The agency notes that there are about 15,000 
suppliers to vehicle manufacturers. However, many small suppliers 
procure all their materials and components from the same country, and 
will experience negligible costs. NHTSA believes that cost impacts for 
other suppliers will be small and will diminish over time. Somewhat 
higher costs are likely to be experienced the first year as suppliers 
become familiar with the new calculation procedures and incorporate 
them into their programming or other systems. While the agency has 
concluded that the cost impacts will be small, it does not have 
sufficient information to quantify such costs. No commenter quantified 
any of the cost impacts. Because the economic impacts of this proposal 
are so minimal, preparation of a full regulatory evaluation is not 
necessary.

B. Regulatory Flexibility Act

    We have considered the effects of this rulemaking action under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) I hereby certify that 
the final rule will not have a significant economic impact on a 
substantial number of small entities. Therefore, a regulatory 
flexibility analysis is not required for this action. Although certain 
small businesses, such as parts suppliers and some vehicle 
manufacturers, are affected by the regulation, the effect on them is 
minor. The requirements are strictly informational and, as discussed 
above, cost impacts small.

C. National Environmental Policy Act

    We have analyzed this final rule for the purposes of the National 
Environmental Policy Act and determined that it will not have any 
significant impact on the quality of the human environment.

D. Executive Order 12612 (Federalism)

    We have analyzed this final rule in accordance with the principles 
and criteria set forth in Executive Order 12612. We have determined 
that it does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment.

[[Page 40780]]

E. Paperwork Reduction Act

    Information collection requirements established in this final rule 
differ from those approved by the Office of Management and Budget under 
the provisions of the Paperwork Reduction Act (Pub. L. 96-511) and 
assigned OMB Control Number 2127-0573. The current approval will expire 
on June 30, 2001. Since NHTSA believes that the changes will result in 
a small increase in the paperwork burden of this reporting requirement, 
NHTSA will ask OMB for approval to amend OMB Control Number 2127-0573 
to account for any additional information collection burdens imposed on 
the public.

F. Executive Order 12778 (Civil Justice Reform)

    This final rule does not have any retroactive effect. States are 
preempted from promulgating laws and regulations contrary to the 
provisions of this rule. The rule does not require submission of a 
petition for reconsideration or other administrative proceedings before 
parties may file suit in court.

List of Subjects in 49 CFR Part 583

    Imports, Motor vehicles, Labeling, Reporting and recordkeeping 
requirements.

    In consideration of the foregoing, 49 CFR Part 583 is amended as 
follows:

PART 583--AUTOMOBILE PARTS CONTENT LABELING

    1. The authority citation for part 583 continues to read as 
follows:

    Authority: 49 U.S.C. 32304, 40 CFR 1.50, 501.2(f).

    2. Section 583.4 is amended by revising paragraph (b)(7) to read as 
follows:


Sec. 583.4  Definitions.

* * * * *
    (b) * * *
    (7) Passenger motor vehicle equipment means any system, 
subassembly, or component received at the final assembly point for 
installation on, or attachment to, such vehicle at the time of its 
initial shipment by the manufacturer to a dealer for sale to an 
ultimate purchaser. Passenger motor vehicle equipment also includes any 
system, subassembly, or component received by an allied supplier from 
an outside supplier for incorporation into equipment supplied by the 
allied supplier to the manufacturer with which it is allied.
* * * * *
    3. Section 583.5 is amended by revising paragraph (a)(4), (a)(5), 
(b), and (i) to read as follows:


Sec. 583.5  Label requirements.

    (a) * * *
    (4) Country of origin for the engine. The country of origin of the 
passenger motor vehicle's engine (the procedure for making this country 
of origin determination is set forth in Sec. 583.8);
    (5) Country of origin for the transmission. The country of origin 
of the passenger motor vehicle's transmission (the procedure for making 
this country of origin determination is set forth in Sec. 583.8);
* * * * *
    (b) Except as provided in paragraphs (e), (f) and (g) of this 
section, the label required under paragraph (a) of this section shall 
read as follows, with the specified information inserted in the places 
indicated (except that if there are no major sources of foreign parts 
content, omit the section ``Major Sources of Foreign Parts Content''):

Parts Content Information

    For vehicles in this carline:

U.S./Canadian Parts Content: (insert number) %
Major Sources of Foreign Parts Content:
    (Name of country with highest percentage): (insert number) %
    (Name of country with second highest percentage): (insert 
number) %

    Note: Parts content does not include final assembly, 
distribution, or other non-parts costs.

    For this vehicle:

Final Assembly Point: (city, state, country)
Country of Origin:
Engine: (name of country)
Transmission: (name of country)
* * * * *
    (i) Carlines assembled in more than one assembly plant. (1) If a 
carline is assembled in more than one assembly plant, the manufacturer 
may, at its option, add the following additional information at the end 
of the explanatory note specified in paragraph (a)(6) of this section, 
with the specified information inserted in the places indicated:

    Two or more assembly plants produce the vehicles in this 
carline. The vehicles assembled at the plant where this vehicle was 
assembled have a U.S./Canadian parts content of [__]%.

    (2) A manufacturer selecting this option shall divide the carline 
for purposes of this additional information into portions representing 
each assembly plant.
    (3) A manufacturer selecting this option for a particular carline 
shall provide the specified additional information on the labels of all 
vehicles within the carline.
    4. Section 583.6 is amended by revising paragraphs (a), (c)(1)(ii), 
(c)(3)(ii), and (c)(6) to read as follows:


Sec. 583.6  Procedure for determining U.S./Canadian parts content.

    (a) Each manufacturer, except as specified in Sec. 583.5 (f) and 
(g), shall determine the percentage U.S./Canadian Parts Content for 
each carline on a model year basis. This determination shall be made 
before the beginning of each model year. Items of equipment produced at 
the final assembly point (but not as part of final assembly) are 
treated in the same manner as if they were supplied by an allied 
supplier. All value otherwise added at the final assembly point and 
beyond, including all final assembly costs, is excluded from the 
calculation of U.S./Canadian parts content. The country of origin of 
nuts, bolts, clips, screws, pins, braces, gasoline, oil, blackout, 
phosphate rinse, windshield washer fluid, fasteners, tire assembly 
fluid, rivets, adhesives, grommets, and wheel weights, used in final 
assembly of the vehicle, is considered to be the country where final 
assembly of the vehicle takes place.
* * * * *
    (c) * * *
    (1) * * *
    (ii) to otherwise have the actual percent of its value added in the 
United States and/or Canada, rounded to the nearest five percent.
* * * * *
    (3) * * *
    (ii) to otherwise have the actual percent of its value added in the 
United States and/or Canada, rounded to the nearest five percent.
* * * * *
    (6) If a manufacturer or allied supplier requests information in a 
timely manner from one or more of its outside suppliers concerning the 
U.S./Canadian content of particular equipment, but does not receive 
that information despite a good faith effort to obtain it, the 
manufacturer or allied supplier may make its own good faith value added 
determinations, subject to the following provisions:
    (i) The manufacturer or allied supplier shall make the same value 
added determinations as would be made by the outside supplier;
    (ii) The manufacturer or allied supplier shall consider the amount 
of value added and the location in which the value was added for all of 
the stages that the outside supplier would be required to consider;
    (iii) The manufacturer or allied supplier may determine that 
particular value is added in the United States and/

[[Page 40781]]

or Canada only if it has a good faith basis to make that determination;
    (iv) A manufacturer and its allied suppliers may, on a combined 
basis, make value added determinations for no more than 10 percent, by 
value, of a carline's total parts content from outside suppliers;
    (v) Value added determinations made by a manufacturer or allied 
supplier under this paragraph shall have the same effect as if they 
were made by the outside supplier;
    (vi) This provision does not affect the obligation of outside 
suppliers to provide the requested information.
* * * * *
    5. Section 583.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 583.7  Procedure for determining major foreign sources of 
passenger motor vehicle equipment.

    (a) Each manufacturer, except as specified in Sec. 583.5(f) and 
(g), shall determine the countries, if any, which are major foreign 
sources of passenger motor vehicle equipment and the percentages 
attributable to each such country for each carline on a model year 
basis, before the beginning of each model year. The manufacturer need 
only determine this information for the two such countries with the 
highest percentages. Items of equipment produced at the final assembly 
point (but not as part of final assembly) are treated in the same 
manner as if they were supplied by an allied supplier. In making 
determinations under this section, the U.S. and Canada are treated 
together as if they were one (non-foreign) country. The country of 
origin of nuts, bolts, clips, screws, pins, braces, gasoline, oil, 
blackout, phosphate rinse, windshield washer fluid, fasteners, tire 
assembly fluid, rivets, adhesives, grommets, and wheel weights, used in 
final assembly of the vehicle, is considered to be the country where 
final assembly of the vehicle takes place.
* * * * *
    6. Section 583.8 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec. 583.8  Procedure for determining country of origin for engines and 
transmissions (for purposes of determining the information specified by 
Secs. 583.5(a)(4) and 583.5(a)(5) only).

* * * * *
    (b) The value of an engine or transmission is determined by first 
adding the prices paid by the manufacturer of the engine/transmission 
for each component comprising the engine/transmission, as delivered to 
the assembly plant of the engine/transmission, and the fair market 
value of each individual part produced at the plant. The assembly and 
labor costs incurred for the final assembly of the engine/transmission 
are then added to determine the value of the engine or transmission.
* * * * *
    (d) Determination of the total value of an engine/transmission 
which is attributable to individual countries. The value of an engine/
transmission that is attributable to each country is determined by 
adding the total value of all of the components installed in that 
engine/transmission which originated in that country. For the country 
where final assembly of the engine/transmission takes place, the 
assembly and labor costs incurred for such final assembly are also 
added.
* * * * *
    7. Section 583.10 is amended by revising paragraph (a)(5) to read 
as follows:


Sec. 583.10  Outside suppliers of passenger motor vehicle equipment.

    (a) * * *
    (5) For equipment which has less than 70 percent of its value added 
in the United States and Canada,
     (i) The country of origin of the equipment, determined under 
Sec. 583.7(c); and
    (ii) The percent of its value added in the United States and 
Canada, to the nearest 5 percent, determined under Sec. 583.6(c).
* * * * *

    Issued on: July 21, 1999.
Frank Seales, Jr.,
Acting Deputy Administrator.
[FR Doc. 99-19318 Filed 7-27-99; 8:45 am]
BILLING CODE 4910-59-P