[Federal Register Volume 65, Number 194 (Thursday, October 5, 2000)]
[Rules and Regulations]
[Pages 59650-59666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25517]



[[Page 59649]]

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Part VI





Department of the Treasury





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Customs Service



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19 CFR Parts 10 and 163



United States-Caribbean Basin Trade Partnership Act and Caribbean Basin 
Initiative; Final Rule

  Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / 
Rules and Regulations  

[[Page 59650]]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10 AND 163

[T.D. 00-68]
RIN 1515-AC76


United States-Caribbean Basin Trade Partnership Act and Caribbean 
Basin Initiative

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

ACTION: Interim regulations; solicitation of comments.

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SUMMARY: This document sets forth interim amendments to the Customs 
Regulations to implement the trade benefit provisions for Caribbean 
Basin countries contained in Title II of the Trade and Development Act 
of 2000. The trade benefits under Title II, also referred to as the 
United States-Caribbean Basin Trade Partnership Act (the CBTPA), apply 
to Caribbean Basin countries designated by the President and involve 
the entry of specific textile and apparel articles free of duty and 
free of any quantitative restrictions, limitations, or consultation 
levels and the extension of NAFTA duty treatment standards to non-
textile articles that are excluded from duty-free treatment under the 
Caribbean Basin Initiative (CBI) program. The regulatory amendments 
contained in this document reflect and clarify the statutory standards 
for the trade benefits under the CBTPA and also include specific 
documentary, procedural and other related requirements that must be met 
in order to obtain those benefits. Finally, this document also includes 
some interim amendments to the existing Customs Regulations 
implementing the CBI to conform those regulations to previous 
amendments to the CBI statute.

DATES: Interim rule effective October 1, 2000; comments must be 
submitted by December 4, 2000.

ADDRESSES: Written comments may be addressed to, and inspected at, the 
Regulations Branch, U.S. Customs Service, 1300 Pennsylvania Avenue, 
N.W., 3rd Floor, Washington, DC 20229.

FOR FURTHER INFORMATION CONTACT: Operational issues: Cathy Sauceda, 
Office of Field Operations (202-927-4198).
    Legal issues regarding textiles: Cynthia Reese, Office of 
Regulations and Rulings (202-927-1361).
    Other legal issues: Craig Walker, Office of Regulations and Rulings 
(202-927-1116).

SUPPLEMENTARY INFORMATION:

Background

United States-Caribbean Basin Trade Partnership Act

    On May 18, 2000, President Clinton signed into law the Trade and 
Development Act of 2000 (the ``Act''), Public Law 106-200, 114 Stat. 
251. Title II of the Act concerns trade benefits for the Caribbean 
Basin and is referred to in the Act as the ``United States-Caribbean 
Basin Trade Partnership Act'' (the ``CBTPA'').
    Subtitle A of Title II of the Act concerns trade policy for 
Caribbean Basin countries and consists of section 201 (short title), 
section 202 (findings and policy), and section 203 (definitions). 
Subtitle B of Title II of the Act addresses trade benefits for 
Caribbean Basin countries and consists of section 211 (temporary 
provisions to provide additional trade benefits to certain beneficiary 
countries), section 212 (duty-free treatment for certain beverages made 
with Caribbean rum), and section 213 (meetings of trade ministers and 
USTR). This document specifically concerns the additional trade benefit 
provisions of section 211.
    Subsection (a) of section 211 of the Act revises section 213(b) of 
the Caribbean Basin Economic Recovery Act (the CBERA, also referred to 
as the Caribbean Basin Initiative, or CBI, statute codified at 19 
U.S.C. 2701-2707). The CBI is a duty preference program that applies to 
exports from those Caribbean Basin countries that have been designated 
by the President as program beneficiaries. Although the origin and 
related rules for eligibility for duty-free treatment under the CBI are 
similar to those under the older Generalized System of Preferences 
duty-free program (the GSP, Title V of the Trade Act of 1974, codified 
at 19 U.S.C. 2461-2467), the CBI differs from the GSP in a number of 
respects, including the fact that under the CBI all articles are 
eligible for duty-free treatment (that is, they do not have to be 
specially designated as eligible by the President) except those that 
are specifically excluded under the statute. Prior to the amendment 
effected by subsection (a) of section 211 of the Act, section 213(b) of 
the CBI statute was headed ``articles to which duty-free treatment does 
not apply'' and consisted only of a list of specific types of products 
excluded from CBI duty-free treatment.
    As a result of the amendment made by subsection (a) of section 211 
of the Act, section 213(b) of the CBI statute now is headed ``import-
sensitive articles'' and consists of five principal paragraphs. These 
five paragraphs are summarized below.
    Paragraph (1) of amended section 213(b) provides that, subject to 
paragraphs (2) through (5), the duty-free treatment provided under the 
CBI does not apply to the following:
    1. Textile and apparel articles which were not eligible articles 
for purposes of the CBI on January 1, 1994, as the CBI was in effect on 
that date [subparagraph (A)];
    2. Footwear not designated at the time of the effective date of the 
CBI (that is, August 5, 1983) as eligible articles for the purpose of 
the GSP [subparagraph (B)];
    3. Tuna, prepared or preserved in any manner, in airtight 
containers [subparagraph (C)];
    4. Petroleum, or any product derived from petroleum, provided for 
in headings 2709 and 2710 of the Harmonized Tariff Schedule of the 
United States (HTSUS) [subparagraph (D)];
    5. Watches and watch parts (including cases, bracelets, and 
straps), of whatever type including, but not limited to, mechanical, 
quartz digital or quartz analog, if those watches or watch parts 
contain any material which is the product of any country with respect 
to which HTSUS column 2 rates of duty apply [subparagraph (E)]; or
    6. Articles to which reduced rates of duty apply under section 
213(h) (that is, handbags, luggage, flat goods, work gloves, and 
leather wearing apparel that are a product of a CBI beneficiary country 
and that were not designated on August 5, 1983, as eligible articles 
for purposes of the GSP) [subparagraph (F)].
    The content of this new paragraph (1) corresponds to that of entire 
former section 213(b) but with some minor wording changes. Therefore, 
paragraphs (2) through (5) of amended section 213(b), as discussed 
below, are entirely new provisions.
    Paragraph (2) of amended section 213(b) concerns textile and 
apparel products. Paragraph (2)(A) provides, during the ``transition 
period,'' for the application of preferential treatment described in 
paragraph (2)(B) to specific textile and apparel articles. Under 
paragraph (2)(B), ``preferential treatment'' means, except where the 
President takes bilateral emergency action under paragraph (2)(E), that 
the articles in question may enter the United States free of duty and 
free of any quantitative restrictions, limitations, or consultation 
levels. Section 213(b)(5)(D) defines ``transition period'' for purposes 
of section 213(b) as meaning, with respect to a CBTPA beneficiary 
country, the period that

[[Page 59651]]

begins on October 1, 2000, and ends on the earlier of September 30, 
2008, or the date on which a free trade agreement enters into force 
with respect to the United States and the CBTPA beneficiary country. 
Section 213(b)(5)(B) defines ``CBTPA beneficiary country'' for purposes 
of section 213(b) as meaning any ``beneficiary country'' as defined in 
section 212(a)(1)(A) of the CBI statute (19 U.S.C. 2702(a)(1)(A)) which 
the President designates as a CBTPA beneficiary country, taking into 
account the designation criteria specified in sections 212(b) and (c) 
and other appropriate designation criteria including those specified 
under section 213(b)(5)(B). The textile and apparel articles under 
paragraph (2)(A) of section 213(b) to which the preferential treatment 
applies are as follows:
    1. Apparel articles assembled in one or more CBTPA beneficiary 
countries from fabrics wholly formed and cut in the United States, from 
yarns wholly formed in the United States, (including fabrics not formed 
from yarns, if those fabrics are classifiable under heading 5602 or 
5603 of the HTSUS and are wholly formed and cut in the United States) 
that are entered under subheading 9802.00.80 of the HTSUS [paragraph 
(2)(A)(i)(I)];
    2. Apparel articles assembled in one or more CBTPA beneficiary 
countries from fabrics wholly formed and cut in the United States, from 
yarns wholly formed in the United States, (including fabrics not formed 
from yarns, if those fabrics are classifiable under heading 5602 or 
5603 of the HTSUS and are wholly formed and cut in the United States) 
that are entered under Chapter 61 or 62 of the HTSUS, if, after that 
assembly, the articles would have qualified for entry under subheading 
9802.00.80 of the HTSUS but for the fact that the articles were 
embroidered or subjected to stone-washing, enzyme-washing, acid 
washing, perma-pressing, oven-baking, bleaching, garment-dyeing, screen 
printing, or other similar processes [paragraph (2)(A)(i)(II)];
    3. Apparel articles cut in one or more CBTPA beneficiary countries 
from fabric wholly formed in the United States from yarns wholly formed 
in the United States (including fabrics not formed from yarns, if those 
fabrics are classifiable under heading 5602 or 5603 of the HTSUS and 
are wholly formed in the United States), if those articles are 
assembled in one or more of those countries with thread formed in the 
United States [paragraph (2)(A)(ii)];
    4. Apparel articles knit to shape (other than socks provided for in 
heading 6115 of the HTSUS) in a CBTPA beneficiary country from yarns 
wholly formed in the United States, and knit apparel articles (other 
than non-underwear t-shirts) cut and wholly assembled in one or more 
CBTPA beneficiary countries from fabric formed in one or more CBTPA 
beneficiary countries or the United States from yarns wholly formed in 
the United States (including fabrics not formed from yarns, if those 
fabrics are classifiable under heading 5602 or 5603 of the HTSUS and 
are formed in one or more CBTPA beneficiary countries), but subject to 
the application of annual quantitative limits expressed in square meter 
equivalents during the 8-year transition period and with percentage 
increases of those limits in each of the first four years [paragraph 
(2)(A)(iii)(I)];
    5. Non-underwear t-shirts, classifiable under subheadings 
6109.10.00 and 6109.90.10 of the HTSUS, made in one or more CBTPA 
beneficiary countries from fabric formed in one or more CBTPA 
beneficiary countries from yarns wholly formed in the United States, 
but subject to the application of annual quantitative limits expressed 
in dozens and with percentage increases of those limits in each of the 
first four years and with application of a set quantitative limit for 
each year after the fourth year [paragraph (2)(A)(iii)(III)];
    6. Brassieres classifiable under subheading 6212.10 of the HTSUS, 
if both cut and sewn or otherwise assembled in the United States, or 
one or more CBTPA beneficiary countries, or both, but subject to a 
requirement that, in each of seven 1-year periods starting on October 
1, 2001, at least 75 percent of the value of the fabric contained in 
the articles in the preceding year was attributed to fabric components 
formed in the United States (the 75 percent standard rises to 85 
percent for a producer found by Customs to have not met the 75 percent 
standard in the preceding year) [paragraph (2)(A)(iv)];
    7. Apparel articles that are both cut (or knit-to-shape) and sewn 
or otherwise assembled in one or more CBTPA beneficiary countries, from 
fabrics or yarn that is not formed in the United States or in one or 
more CBTPA beneficiary countries, to the extent that apparel articles 
of those fabrics or yarn would be eligible for preferential treatment, 
without regard to the source of the fabrics or yarn, under Annex 401 of 
the North American Free Trade Agreement (NAFTA). (This CBTPA provision 
in effect applies to apparel articles which are originating goods, and 
thus are entitled to preferential duty treatment, under the NAFTA 
tariff shift and related rules based on the fact that the fabrics or 
yarns used to produce them were determined to be in short supply in the 
context of the NAFTA. The fabrics and yarns in question include fine 
count cotton knitted fabrics for certain apparel, linen, silk, cotton 
velveteen, fine wale corduroy, Harris Tweed, certain woven fabrics made 
with animal hairs, certain lightweight, high thread count poly-cotton 
woven fabrics, and certain lightweight, high thread count broadwoven 
fabrics used in the production of men's and boys' shirts--see House 
Report 106-606, 106th Congress, 2d Session, at page 77, which explains 
a substantively identical provision of the African Growth and 
Opportunity Act that is contained in Title I of the Act.) [paragraph 
(2)(A)(v)(I)];
    8. Apparel articles that are both cut (or knit-to-shape) and sewn 
or otherwise assembled in one or more CBTPA beneficiary countries, from 
fabrics or yarn that is not formed in the United States or in one or 
more CBTPA beneficiary countries and that is not described in paragraph 
(2)(A)(v)(I), to the extent that the President has determined that the 
fabric or yarn cannot be supplied by the domestic industry in 
commercial quantities in a timely manner and has proclaimed the 
treatment provided under paragraph (2)(A)(v)(I) [paragraph 
(2)(A)(v)(II)];
    9. A handloomed, handmade, or folklore textile or apparel article 
of a CBTPA beneficiary country that the President and representatives 
of the CBTPA beneficiary country concerned mutually agree upon as being 
a handloomed, handmade, or folklore good of a kind described in section 
2.3(a), (b), or (c) or Appendix 3.1.B.11 of Annex 300-B of the NAFTA 
and that is certified as such by the competent authority of the 
beneficiary country [paragraphs (2)(A)(vi) and (2)(C)];
    10. Textile luggage assembled in a CBTPA beneficiary country from 
fabric wholly formed and cut in the United States, from yarns wholly 
formed in the United States, that is entered under subheading 
9802.00.80 of the HTSUS [paragraph (2)(A)(viii)(I)]; and
    11. Textile luggage assembled from fabric cut in a CBTPA 
beneficiary country from fabric wholly formed in the United States from 
yarns wholly formed in the United States [paragraph (2)(A)(viii)(II)].
    In addition, paragraph (2)(A)(vii) sets forth special rules that 
apply for purposes of determining the eligibility of articles for 
preferential treatment under paragraph (2). These special rules are as 
follows:
    1. Paragraph (2)(A)(vii)(I) sets forth a rule regarding the 
treatment of findings and trimmings. It provides that an article 
otherwise eligible for preferential

[[Page 59652]]

treatment under paragraph (2) will not be ineligible for that treatment 
because the article contains findings or trimmings of foreign origin, 
if those findings and trimmings do not exceed 25 percent of the cost of 
the components of the assembled product. This provision specifies the 
following as examples of findings and trimmings: Sewing thread, hooks 
and eyes, snaps, buttons, ``bow buds,'' decorative lace trim, elastic 
strips (but only if they are each less than 1 inch in width and are 
used in the production of brassieres), zippers (including zipper 
tapes), and labels. However, this provision also provides that sewing 
thread will not be treated as findings or trimmings in the case of an 
article described in paragraph (2)(A)(ii) (because that paragraph 
specifies that the thread used in the assembly of the article must be 
formed in the United States and thus cannot be of ``foreign'' origin).
    2. Paragraph (2)(A)(vii)(II) sets forth a rule regarding the 
treatment of specific interlinings, that is, a chest type plate, 
``hymo'' piece, or ``sleeve header,'' of woven or weft-inserted warp 
knit construction and of coarse animal hair or man-made filaments. 
Under this rule, an article otherwise eligible for preferential 
treatment under paragraph (2) will not be ineligible for that treatment 
because the article contains interlinings of foreign origin, if the 
value of those interlinings (and any findings and trimmings) does not 
exceed 25 percent of the cost of the components of the assembled 
article. This provision also provides for the termination of this 
treatment of interlinings if the President makes a determination that 
United States manufacturers are producing those interlinings in the 
United States in commercial quantities.
    3. Paragraph (2)(A)(vii)(III) sets forth a de minimis rule which 
provides that an article that would otherwise be ineligible for 
preferential treatment under paragraph (2) because the article contains 
fibers or yarns not wholly formed in the United States or in one or 
more CBTPA beneficiary countries will not be ineligible for that 
treatment if the total weight of all those fibers and yarns is not more 
than 7 percent of the total weight of the good. However, this provision 
also states that, notwithstanding the foregoing rule, an apparel 
article containing elastomeric yarns will be eligible for preferential 
treatment under paragraph (2) only if those yarns are wholly formed in 
the United States.
    4. Finally, paragraph (2)(A)(vii)(IV) sets forth a special origin 
rule that provides that an article otherwise eligible for preferential 
treatment under paragraph (2)(A)(i) or paragraph (2)(A)(ii) will not be 
ineligible for that treatment because the article contains nylon 
filament yarn (other than elastomeric yarn) that is classifiable under 
subheading 5402.10.30, 5402.10.60, 5402.31.30, 5402.31.60, 5402.32.30, 
5402.32.60, 5402.41.10, 5402.41.90, 5402.51.00, or 5402.61.00 of the 
HTSUS duty-free from a country that is a party to an agreement with the 
United States establishing a free trade area, which entered into force 
before January 1, 1995.
    Paragraph (3) of amended section 213(b) is entitled ``transition 
period treatment of certain other articles originating in beneficiary 
countries.'' Paragraph (3)(A) provides that, except in the case of any 
article accorded duty-free treatment under U.S. Note 2(b) to Subchapter 
II of Chapter 98 of the HTSUS (that is, certain articles assembled or 
processed in a CBI beneficiary country in whole of components or 
ingredients that are a product of the United States), the tariff 
treatment accorded at any time during the transition period to any 
article referred to in any of subparagraphs (B) through (F) of 
paragraph (1) that is a ``CBTPA originating good'' will be identical to 
the tariff treatment that is accorded at that time under Annex 302.2 of 
the NAFTA to an article described in the same 8-digit subheading of the 
HTSUS that is a good of Mexico and is imported into the United States. 
Section 213(b)(5)(C)(i) defines ``CBTPA originating good'' for purposes 
of section 213(b) as meaning a good that meets the rules of origin for 
a good set forth in Chapter 4 of the NAFTA as implemented pursuant to 
United States law. Section 213(b)(5)(C)(ii) sets forth the following 
rules for applying Chapter 4 of the NAFTA with respect to a CBTPA 
beneficiary country for purposes of section 213(b): (1) Only the United 
States and a CBTPA beneficiary country may be treated as being a party 
to the NAFTA; (2) any reference to trade between the United States and 
Mexico will be deemed to refer to trade between the United States and a 
CBTPA beneficiary country; (3) any reference to a party will be deemed 
to refer to a CBTPA beneficiary country or the United States; and (4) 
any reference to parties will be deemed to refer to any combination of 
CBTPA beneficiary countries or to the United States and one or more 
CBTPA beneficiary countries (or any combination of those countries). In 
the case of handbags, luggage, flat goods, work gloves, and leather 
wearing apparel to which reduced rates of duty apply under section 
213(h), paragraph (3)(B) of section 213(b) provides that, in 
implementing the provisions of paragraph (3)(A), the rate of duty under 
section 213(h) will apply if it is lower than the rate of duty 
resulting under paragraph (3)(A).
    The effect of paragraph (3) of section 213(b) is to provide for the 
application of NAFTA tariff treatment to goods excluded from the CBI, 
except for textile and apparel articles (some of which are separately 
addressed under paragraph (2) of section 213(b) as discussed above). 
Thus, imports of footwear, canned tuna, petroleum and petroleum 
products, watches and watch parts, handbags, luggage, flat goods, work 
gloves, and leather wearing apparel would be eligible for a reduction 
in duty equal to the preference Mexican products enjoy in accordance 
with the staged duty-rate reductions set forth in Annex 302.2 of the 
NAFTA, provided that the merchandise in question meets the origin rules 
for a ``NAFTA originating good'' (in other words, it must meet the 
NAFTA rules of origin set forth in General Note 12 of the HTSUS and in 
the Appendix to Part 181 of the Customs Regulations (19 CFR Part 181)).
    Paragraph (4) of amended section 213(b) is entitled ``Customs 
procedures'' and sets forth regulatory standards for purposes of 
preferential treatment under paragraph (2) or (3). It includes 
provisions relating to import procedures, prescribes a specific factual 
determination that the President must make regarding the implementation 
of certain procedures and requirements by each CBTPA beneficiary 
country, and sets forth responsibilities of Customs and the United 
States Trade Representative regarding the study of, and reporting to 
Congress on, cooperative and other actions taken by each CBTPA 
beneficiary country to prevent transshipment and circumvention in the 
case of textile and apparel goods. The specific provisions under 
paragraph (4) that require regulatory treatment in this document are 
the following:
    1. Paragraph (4)(A)(i) provides that any importer that claims 
preferential treatment under paragraph (2) or (3) must comply with 
customs procedures similar in all material respects to the requirements 
of Article 502(1) of the NAFTA as implemented pursuant to United States 
law, in accordance with regulations promulgated by the Secretary of the 
Treasury. The NAFTA provision referred to in paragraph (4)(A)(i) 
concerns the use of a Certificate of Origin and specifically requires 
that

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the importer (1) make a written declaration, based on a valid 
Certificate of Origin, that the imported good qualifies as an 
originating good, (2) have the Certificate in its possession at the 
time the declaration is made, (3) provide the Certificate to Customs on 
request, and (4) promptly make a corrected declaration and pay any 
duties owing where the importer has reason to believe that a 
Certificate on which a declaration was based contains information that 
is not correct.
    2. Paragraph (4)(B) provides that the Certificate of Origin that 
otherwise would be required pursuant to the provisions of paragraph 
(4)(A)(i) will not be required in the case of an article imported under 
paragraph (2) or (3) if that Certificate of Origin would not be 
required under Article 503 of the NAFTA (as implemented pursuant to 
United States law), if the article were imported from Mexico. Article 
503 of the NAFTA sets forth, with one general exception, three specific 
circumstances in which a NAFTA country may not require a Certificate of 
Origin.

Other Changes to the CBI Program

    Section 235 of the Trade and Tariff Act of 1984 (Public Law 98-573, 
98 Stat. 2948) amended section 213(a) of the CBI statute (19 U.S.C. 
2703(a)) by adding at the end a new paragraph (a)(3) (now paragraph 
(a)(4)). This provision provides that (1) notwithstanding 19 U.S.C. 
1311, the products of a beneficiary country which are imported directly 
from any beneficiary country into Puerto Rico may be entered under bond 
for processing or use in manufacturing in Puerto Rico, and (2) no duty 
will be imposed on the withdrawal from warehouse of the product of that 
processing or manufacturing if, at the time of that withdrawal, the 
product meets the requirements of section 213(a)(1)(B) (that is, the 
CBI 35 percent value-content requirement). In connection with the 
publication of the final CBI implementing regulations (see T.D. 84-237, 
published in the Federal Register at 49 FR 47986 on December 7, 1984), 
Customs noted that this amendment of the CBI statute was intended to 
allow processing or manufacturing in a Customs bonded manufacturing 
warehouse in Puerto Rico at the tail end of the manufacturing process 
so as to enable a product from a CBI beneficiary country to meet the 35 
percent value-content requirement. Customs further noted in T.D. 84-237 
that the amendment resulted in a significant change in the CBI rules of 
origin since an article could be substantially transformed in the 
Puerto Rican warehouse so as to lose its status as a product of a 
beneficiary country but would still be entitled to duty-free treatment 
upon withdrawal from the warehouse provided that (1) the article 
entered in the warehouse was a product of, and was imported directly 
from, a beneficiary country, and (2) the article withdrawn from the 
warehouse meets the 35 percent value-content requirement. Although no 
change was made to the CBI regulatory texts at that time in response to 
this statutory amendment, Customs now believes that it would be 
preferable for purposes of transparency to reflect this aspect of the 
CBI statute within the existing CBI regulatory structure. This document 
therefore includes a conforming amendment to the CBI regulations to 
accomplish this.
    Section 212 of the Customs and Trade Act of 1990 (Public Law 101-
382, 104 Stat. 629) amended section 213 of the CBI statute (1) by 
adding a new subsection (h) which requires the President to proclaim 
specified reductions in the rates of duty on handbags, luggage, flat 
goods, work gloves, and leather wearing apparel that are the product of 
a beneficiary country and that were not designated on August 5, 1983, 
as eligible articles for purposes of the GSP, and (2) by making 
consequential conforming changes to subsection (b) which, as indicated 
above, at that time consisted only of a list of products excluded from 
duty-free treatment under the CBI. Although some of these changes made 
by section 212 of the 1990 Act have been superseded by the changes made 
by subsection (a) of section 211 of the Act as discussed above, the 
basic reduced duty principle reflected in section 213(h) of the CBI 
statute remains intact and warrants regulatory treatment. Accordingly, 
regulatory amendments are included in this document for this purpose.
    Finally, section 215 of the Customs and Trade Act of 1990 amended 
section 213(a) of the CBI statute by adding a new paragraph (5) which 
provides that the duty-free treatment provided for under the CBI will 
apply to an article (other than an article listed in section 213(b)) 
which is the growth, product, or manufacture of the Commonwealth of 
Puerto Rico if (1) the article is imported directly from the 
beneficiary country into the customs territory of the United States, 
(2) the article was by any means advanced in value or improved in 
condition in a beneficiary country, and (3) if any materials are added 
to the article in a beneficiary country, those materials are a product 
of a beneficiary country or the United States. This amendment was 
intended to ensure that a product made in Puerto Rico which is sent to 
a CBI beneficiary country for a minimal amount of processing would be 
eligible for duty-free treatment under the CBI when imported into the 
United States even though the article has not been substantially 
transformed in the CBI beneficiary country (see House Report 101-650, 
101st Congress, 2d Session, at 131). This document includes an 
amendment to the Customs Regulations to prescribe standards for the 
application of this provision.
    In addition, this document includes a number of editorial changes 
to the CBI regulatory texts to conform those texts to the statutory 
changes discussed above.

Section-by-Section Discussion of Interim Amendments

Section 10.191

    The amendments to this section involve the definitions in paragraph 
(b) and include changing various cross-references to ``Sec. 10.198'' to 
reflect the addition of new Secs. 10.198a and 10.198b as discussed 
below. In addition, paragraphs (b)(2)(i) and (b)(2)(ii) are revised, 
and a new paragraph (b)(2)(vi) is added, to reflect subparagraphs 
(1)(A), (B), and (F) of section 213(b) of the CBI statute as amended by 
subsection (a) of section 211 of the Act.

Sections 10.192 and 10.193

    The amendments to these sections involve cross-reference changes 
similar to those made in Sec. 10.191.

Section 10.195

    The amendment to this section involves a revision of paragraph (b) 
(which concerns the addition of value in the U.S. Virgin Islands and in 
the Commonwealth of Puerto Rico) to accommodate the amendment to the 
CBI statute made by section 235 of the Trade and Tariff Act of 1984. 
The amendment consists of the designation of the existing regulatory 
text as paragraph (b)(1) and the addition of a new paragraph (b)(2) to 
cover manufacturing in a bonded warehouse in Puerto Rico after final 
exportation of an article from a beneficiary country. The paragraph 
(b)(2) text clarifies the statutory reference to ``products of'' a 
beneficiary country as meaning products that meet the ``grown, 
produced, or manufactured'' standard set forth in Sec. 10.195(a), 
because the term ``product of'' has been consistently interpreted by 
Customs to refer to products that meet that standard and, since 
Congress is presumed to have known about that interpretation when it 
drafted the statute, Customs believes that this result

[[Page 59654]]

would be consistent with Congressional intent. For the same reason, the 
paragraph (b)(2) text clarifies the meaning of ``imported directly'' 
with reference to the provisions of Sec. 10.193.

New Sec. 10.198a

    This section covers the basic duty reduction principle of section 
213(h) of the CBI statute as added by section 212 of the Customs and 
Trade Act of 1990. The exception clause at the beginning of this new 
section has been included because of the potential effect that 
paragraph (3) of amended section 213(b) would have on the application 
of reduced duty rates under section 213(h)-see new Sec. 10.233 
discussed and set forth below. Although the relevant legislative 
history is silent on the question of what origin and preference rules 
should apply beyond the ``product of'' language of section 213(h), 
Customs does not believe that Congress intended that less stringent 
rules should apply for these import-sensitive products than would apply 
to other products that are eligible for full CBI duty-free treatment. 
Accordingly, this new Sec. 10.198a incorporates by reference the 
``imported directly'' and ``grown, produced, or manufactured'' and 35 
percent value-content requirements of Secs. 10.193 and 10.195.

New Sec. 10.198b

    This section covers the amendment of section 213(a) of the CBI 
statute made by section 215 of the Customs and Trade Act of 1990. 
Contrary to the approach taken in new Sec. 10.198a and except as 
regards the ``imported directly'' requirement, the Sec. 10.198b text 
does not incorporate by reference the normal CBI origin and preference 
regulatory standards because their application here would in some cases 
be inconsistent with the clear wording of the statutory provision in 
question.

New Secs. 10.221 Through 10.227

    These new sections are intended to implement those textile and 
apparel preferential treatment provisions within paragraphs (2), (4) 
and (5) of amended section 213(b) of the CBI statute that relate to 
U.S. import procedures and thus are appropriate for treatment in the 
Customs Regulations.
    Section 10.221 outlines the statutory context for the new sections 
and is self-explanatory.
    Section 10.222 sets forth definitions for various terms used in the 
new regulatory provisions. The following points are noted regarding 
these definitions:
    1. The definition of ``apparel articles,'' by referring to goods 
classifiable in Chapters 61 and 62 and headings 6501, 6502, 6503, and 
6504 and subheadings 6406.99 and 6505.90 of the HTSUS, is intended to 
reflect the scope of apparel under the Agreement on Textiles and 
Clothing annexed to the WTO Agreement and referred to in 19 U.S.C. 
3511(d)(4).
    2. The definition of ``assembled in one or more CBTPA beneficiary 
countries'' is based in part on the definition of ``wholly assembled'' 
in Sec. 102.21(b)(6) of the Customs Regulations (19 CFR 102.21(b)(6)) 
but also adds a reference to thread as a material that is not 
considered to be a component for purposes of the definition. In 
addition, the definition is intended to allow a prior partial assembly 
in the United States, consistent with the overall structure of the 
CBTPA as reflected in the types of operations allowed under the 
program.
    3. The definition of ``CBTPA beneficiary country'' is an adaptation 
of, and for purposes of this context is consistent with, the definition 
contained in section 213(b)(5)(B).
    4. The definition of ``cut in one or more CBTPA beneficiary 
countries'' precludes any cutting operation performed in a country 
other than a CBTPA beneficiary country in accordance with the clear 
language of the statute.
    5. The definition of ``knit-to-shape'' follows the definition in 
Sec. 102.21(b)(3) of the Customs Regulations (19 CFR 102.21(b)(3)).
    6. The definition of ``made in one or more CBTPA beneficiary 
countries'' refers specifically to non-underwear 
t-shirts because the defined expression appears only in paragraph 
(2)(A)(iii)(III) of amended section 213(b) which applies only to non-
underwear t-shirts. Neither the statute nor the legislative history 
provides any explanation for the use of the words ``made in'' in this 
context. Since the statutory text requires that the articles be made in 
the CBTPA region from regionally-formed fabric, and in view of the fact 
that the production of t-shirts from fabric invariably involves both 
cutting of the fabric and assembly of the cut components, Customs 
interprets ``made in'' to refer to cutting and complete assembly.
    7. The definition of ``major parts'' is taken from the definition 
in Sec. 102.21(b)(4) of the Customs Regulations (19 CFR 102.21(b)(4)).
    8. The definition of ``NAFTA'' is the same as that used in section 
112(e)(3) under Title I of the Act and is appropriate for the present 
context because a distinction is made under the statute between the 
original Agreement signed by the United States, Canada, and Mexico 
(which this definition reflects) and the implementation of that 
Agreement under U.S. law.
    9. The definition of ``preferential treatment'' reflects the terms 
of paragraph (2)(B) of amended section 213(b).
    10. The definition of ``wholly assembled in one or more CBTPA 
beneficiary countries'' is intended to ensure, consistent with the 
wording of the statute and the clear meaning of ``wholly'' in this 
context, that all assembly operations (including any initial partial 
assembly or any tail-end assembly operation) will be performed in the 
countries that are the intended beneficiaries of the CBTPA program.
    11. The definition of ``wholly formed'' relies in part on the 
definition of ``fabric-making process'' in Sec. 102.21(b)(2) of the 
Customs Regulations (19 CFR 102.21(b)(2)) and also uses a similar 
approach for yarns and thread because the statute uses these terms with 
reference to fabrics, yarns, and thread. The definition is intended to 
ensure that all processes essential for yarn or thread or fabric 
formation are performed in the United States or CBTPA beneficiary 
countries.
    Section 10.223 identifies the articles to which preferential 
treatment applies under paragraph (2) of amended section 213(b). 
Paragraph (a) identifies the various groups of textile and apparel 
articles described under paragraph (2)(A) of the statute and includes 
in the introductory text an ``imported directly'' requirement, 
consistent with the terms of the implementing Presidential 
Proclamation. Paragraph (b) covers the special rules contained in 
paragraph (2)(A)(vii) of the statute regarding: findings and trimmings; 
interlinings; the de minimis rule; and the rule for nylon filament 
yarn. Paragraph (c) explains what is meant by ``imported directly.'' 
The following specific points are noted regarding these regulatory 
texts:
    1. With regard to paragraph (a)(2), which corresponds to paragraph 
(2)(A)(i)(II) of the statute, Customs notes that the statutory 
provision does not address the issue of whether the embroidery or 
stone-washing and other processes mentioned in that provision (which 
are principally finishing operations normally done after assembly) must 
be done in beneficiary countries. The relevant legislative history does 
not address the issue. The statute could be read to allow these 
processes to be done in a country that is not a CBTPA beneficiary 
country provided that, after these processes are completed, the article 
is returned to a CBTPA beneficiary country for direct

[[Page 59655]]

importation into the United States. However, Customs believes that this 
interpretation would not be compatible with the Congressional finding 
in section 202 of the Act that offering temporary benefits to Caribbean 
Basin countries will, among other things, promote the growth of free 
enterprise and economic opportunity in those neighboring countries, 
because it could have the effect of diverting those finishing 
operations to third countries and thus away from the intended 
beneficiaries under the Act. Customs has determined that limiting the 
performance of those processes to CBTPA beneficiary countries would be 
in accord with the findings of Congress and would be more consistent 
with the intent of the CBTPA program. Accordingly, in paragraph (a)(2) 
of the regulatory text, the words ``in a CBTPA beneficiary country'' 
have been added at the end after ``processes.''
    2. In paragraphs (a)(4) and (a)(5) which correspond to paragraphs 
(2)(A)(iii)(I) and (2)(A)(iii)(III) of the statute, respectively, the 
parenthetical cross-reference and the t-shirt reference have been 
replaced by a reference to ``non-underwear t-shirts'' in order to 
simplify the text and clarify the relationship between the two 
provisions in this regard.
    3. In paragraph (a)(6) which corresponds to paragraph (2)(A)(iv) of 
the statute, specific reference is made to ``brassieres'' in order to 
explain the coverage of the HTSUS provision referred to in the statute.
    4. In paragraph (a)(8), which corresponds to paragraph 
(2)(A)(v)(II) of the statute, no reference has been made at the end to 
treatment provided ``for fabrics and yarn'' because treatment in this 
context must be read in the context of paragraph (2)(A)(v)(I) of the 
statute and therefore can only have reference to articles made from 
fabrics and yarn.
    5. Paragraph (a)(12) reflects the terms of new HTSUS subheading 
9820.11.18 which is set forth in the Annex to the implementing 
Proclamation referred to above.
    6. Paragraph (b)(1) is divided into two parts: Paragraph (b)(1)(i) 
reflects the basic findings, trimmings, interlinings, and de minimis 
rules of paragraphs (2)(A)(vii)(I)-(III) of the statute, and paragraph 
(b)(1)(ii) is intended to clarify the relationship between findings and 
trimmings on the one hand and fibers and yarns on the other hand for 
purposes of applying the 25 percent by value and 7 percent by weight 
limitations under the statute. As regards paragraph (b)(1)(ii), Customs 
believes that some clarification is appropriate in this context because 
sometimes a fiber or yarn may be used in an article as a finding or 
trimming. The statute is ambiguous as to whether an article is 
ineligible if the total weight of all foreign fibers or yarns exceeds 
the 7 percent limit but the value of all foreign findings and trimmings 
does not exceed the 25 percent limit. Thus, the question arises as to 
which limitation should apply. In the absence of any guidance on this 
point in the relevant legislative history, Customs has concluded that 
the best approach is to give precedence to the findings and trimmings 
limitation. Thus, under paragraph (b)(1)(ii) a foreign yarn, for 
example, that is used in an article as a trimming would be subject to 
the 25 percent by value limitation rather than the 7 percent by weight 
limitation. In addition, the following points are noted regarding the 
paragraph (b)(1) texts:
    a. In the first sentence of paragraph (b)(1)(i)(A), the words ``the 
value of'' have been added after the word ``if'' to clarify that it is 
the value of the findings and trimmings that must not exceed the 25 
percent level. In addition, in the second sentence of paragraph 
(b)(1)(i)(A), the comma appearing in the statutory text between 
``decorative lace'' and ``trim'' has been removed to clarify what 
Customs believes to be the intent (see section 112(d)(1)(A) of the Act 
which is essentially identical to paragraph (2)(A)(vii)(I) of the 
statute but employs the expression ``decorative lace trim''). Also in 
the second sentence of paragraph (b)(1)(i)(A), the words ``zippers, 
including zipper tapes and labels'' in paragraph (2)(A)(vii)(I) of the 
statute have been replaced with the words ``zippers (including zipper 
tapes), labels'' because there is no such thing as a ``zipper label'' 
and to ensure proper treatment of labels as findings and trimmings in 
their own right. Customs believes that the wording of these regulatory 
texts in these regards is consistent with the intent of Congress as 
reflected in the explanation of the provision in the relevant 
legislative history (see House Report 106-606, 106th Congress, 2d 
Session, at page 79);
    b. A separate paragraph (b)(1)(i)(C) has been included to allow a 
combination of findings and trimmings and interlinings up to a total of 
25 percent of the cost of the components of the assembled article, 
because Customs believes that was the result intended by Congress by 
the inclusion of the words ``(and any findings and trimmings)'' in 
paragraph (2)(A)(vii)(II)(aa) of the statute; and
    c. The second sentence of paragraph (2)(A)(vii)(III) of the statute 
regarding elastomeric yarns has been included in the regulatory text as 
an exception at the end of paragraph (b)(1)(i)(D), which sets forth the 
de minimis rule, because Customs believes that both the placement and 
the wording of the elastomeric yarn provision in the statute support 
the conclusion that it is intended to operate only as an exception to 
the de minimis rule. The regulatory text refers specifically to any 
apparel article described in ``paragraph (a)(1) through (a)(5)'' 
because those are the only apparel article provisions under Sec. 10.223 
that specify ``yarns wholly formed in the United States.''
    7. In paragraph (b)(2), which sets forth the special rule for nylon 
filament yarn of paragraph (2)(A)(vii)(IV) of the statute, specific 
reference is made to Canada, Mexico, and Israel because those are the 
only countries with which the United States had a free trade agreement 
that entered into force before January 1, 1995.
    8. The explanation of ``imported directly'' in paragraph (c) 
follows the text used in Sec. 10.193 of the CBI implementing 
regulations (19 CFR 10.193) but incorporates editorial changes to 
reflect a CBTPA context.
    Section 10.224 prescribes the use of a Certificate of Origin and 
thus reflects the regulatory mandate contained in paragraph (4)(A)(i) 
of the statute. Paragraph (a) of the regulatory text contains a general 
statement regarding the purpose and preparation of the Certificate of 
Origin and is based in part on Sec. 181.11 of the implementing NAFTA 
regulations (19 CFR 181.11). Paragraph (b) sets forth the form for the 
Certificate of Origin, which is directed toward the specific groups of 
articles described under paragraph (2)(A) of the statute and thus bears 
no substantive relationship to the Certificate of Origin used under the 
NAFTA (which involves different country of origin standards for 
preferential duty treatment). Paragraph (c) sets forth instructions for 
preparation of this Certificate of Origin. It should be noted that the 
Certificate of Origin prescribed under this section has no effect on 
the textile declaration prescribed under Sec. 12.130 of the Customs 
Regulations (19 CFR 12.130) which still must be submitted to Customs in 
accordance with that section even in the case of textile products that 
are entitled to preferential treatment under the CBTPA program.
    Section 10.225 sets forth the procedures for filing a claim for 
preferential treatment. Consistent with the mandate in paragraph 
(4)(A)(i) of the statute for procedures ``similar in all material 
respects to the requirements of Article 502(1) of the NAFTA,'' this 
regulatory text is based on the NAFTA regulatory text contained in 19 
CFR

[[Page 59656]]

181.21, but includes appropriate changes to conform to the current 
context. However, contrary to the NAFTA regulatory text, paragraph (a) 
of Sec. 10.225 does not allow for a declaration based on a copy of an 
original Certificate of Origin.
    Section 10.226 concerns the maintenance of records and submission 
of the Certificate of Origin by the importer and follows the NAFTA 
regulatory text contained in 19 CFR 181.22 but, again, with appropriate 
changes to conform to the current context. The following points are 
noted regarding the regulatory text:
    1. In paragraph (a) which concerns the maintenance of records, 
specific reference is made to ``the provisions of part 163'' which sets 
forth the basic Customs recordkeeping requirements that apply to 
importers and other persons involved in customs transactions. The 
effect is the same as that under the NAFTA Sec. 181.22 text.
    2. Paragraph (b) concerns submission of the Certificate of Origin 
to Customs and thus also relates directly to a requirement contained in 
Article 502(1) of the NAFTA. The text is based on the NAFTA regulatory 
text contained in 19 CFR 181.22(b) but differs from the NAFTA text by 
not specifying a 4-year period for acceptance of the Certificate by 
Customs, because that 4-year period is only relevant in a NAFTA 
context.
    3. Paragraph (c) concerns the correction of defective Certificates 
of Origin and the nonacceptance of blanket Certificates in certain 
circumstances. The text is based on the NAFTA regulatory text contained 
in 19 CFR 181.22(c) but is simplified and does not include any 
reference to NAFTA-type origin verifications which do not apply for 
CBTPA purposes.
    4. Paragraph (d) sets forth the circumstances in which a 
Certificate of Origin is not required. Consistent with the terms of 
paragraph (4)(B) of the statute, this regulatory text follows the terms 
of Article 503 of the NAFTA and the NAFTA regulatory text contained in 
19 CFR 181.22(d).
    Finally, section 10.227 concerns the verification and justification 
of claims for preferential treatment. Paragraph (a) concerns the 
verification of claims by Customs and paragraph (b) prescribes steps 
that a U.S. importer should take in order to support a claim for 
preferential treatment. Although paragraph (a) is derived from 
provisions contained in the GSP regulations (19 CFR 10.173(c)) and in 
the CBI regulations (19 CFR 10.198(c)), the text expands on the GSP/CBI 
approach in the following respects:
    1. In paragraph (a)(1), specific reference is made to the review of 
import-related documents required to be made, kept, and made available 
by importers and other persons under Part 163 of the regulations.
    2. Paragraph (a)(2) sets forth examples of documents and 
information relating to production in a CBTPA beneficiary country that 
Customs may need to review for purposes of verifying a claim for 
preferential treatment.
    3. Finally, paragraph (a)(3) refers to evidence in a CBTPA 
beneficiary country to document the use of U.S. materials in an article 
produced in the CBTPA beneficiary country, because the presence of U.S. 
materials is a key element for many of the articles to which 
preferential treatment applies under the CBTPA. Accordingly, U.S. 
importers must be aware of the fact that their ability to successfully 
claim preferential treatment on their imports may be a function of the 
nature of the records maintained by the CBTPA beneficiary country 
producer not only with regard to the production process but also with 
regard to the source of the materials used in that production.

New Secs. 10.231 Through 10.237

    These new sections are intended to implement those non-textile 
preferential tariff treatment provisions within paragraphs (3), (4) and 
(5) of amended section 213(b) of the CBI statute that relate to U.S. 
import procedures and thus are appropriate for treatment in the Customs 
Regulations. In view of the similarities between paragraphs (2) and (3) 
under the statute, in particular as regards the use of a Certificate of 
Origin and related Customs procedures, the structure and content of new 
Secs. 10.231 through 10.237 are based on the structure and content used 
in this document for the textile provisions of new Secs. 10.221 through 
10.227, but with appropriate changes or variations to reflect the 
paragraph (3) statutory context. The following particular points are 
noted regarding the texts of new Secs. 10.231 through 10.237:
    1. The term ``preferential tariff treatment'' is used throughout 
(rather than ``preferential treatment'') in order to reflect the use of 
the word ``tariff'' as a modifier of ``treatment'' in paragraph (3) of 
the statute. The definition of this term in Sec. 10.232 is based 
primarily on paragraph (3)(A)(i) of the statute.
    2. The definition of ``CBTPA originating good'' in Sec. 10.232 
reflects the terms of paragraph (5)(C)(i) of the statute but refers 
specifically to provisions within the HTSUS and the NAFTA regulations 
to clarify the meaning of the reference in the statute to Chapter 4 of 
the NAFTA ``as implemented pursuant to United States law.''
    3. In Sec. 10.233(a) which identifies the articles eligible for 
preferential tariff treatment under paragraph (3) of the statute, an 
``imported directly'' requirement has been included for the same reason 
stated above in regard to new Sec. 10.223. The remainder of 
Sec. 10.233(a) reflects the terms of paragraphs (3)(A)(i) and (ii) of 
the statute.
    4. Section 10.233(b) sets forth standards for applying the NAFTA 
rules of origin for purposes of determining whether an article 
qualifies as a CBTPA originating good. The regulatory text follows 
paragraph (5)(C)(ii) of the statute.
    5. Section 10.233(c) concerns leather-related goods to which duty 
reductions apply under section 213(h) of the CBERA and specifically 
reflects the terms of paragraph (3)(B) of the statute regarding 
application of the lower rate of duty.
    6. Section 10.234 sets forth the basic NAFTA Certificate of Origin 
requirement. In view of the applicability of the NAFTA rules of origin 
in this context, Customs has determined that the appropriate procedure 
would be to use a modified version of the separate Customs Form used 
for the NAFTA. Accordingly, the Sec. 10.234 text is considerably 
shorter than the text of new Sec. 10.224 because it does not contain 
the text of the Certificate and the instructions for its completion.

Appendix to Part 163

    Finally, this document amends Part 163 of the Customs Regulations 
(19 CFR Part 163) by adding to the list of entry records in the 
Appendix (the interim ``(a)(1)(A) list'') references to the CBTPA 
Textile Certificate of Origin and supporting documentation prescribed 
under new Sec. 10.226 and to the CBTPA Non-textile Certificate of 
Origin and supporting documentation prescribed under new Sec. 10.236.

Comments

    Before adopting these interim regulations as a final rule, 
consideration will be given to any written comments timely submitted to 
Customs, including comments on the clarity of this interim rule and how 
it may be made easier to understand. 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

[[Page 59657]]

Service, 1300 Pennsylvania Avenue, N.W., 3rd Floor, Washington, DC.

Inapplicability of Notice and Delayed Effective Date Requirements 
and the Regulatory Flexibility Act

    Pursuant to the provisions of 5 U.S.C. 553(b)(B), Customs has 
determined that prior public notice and comment procedures on these 
regulations are unnecessary and contrary to the public interest. The 
regulatory changes provide trade benefits to the importing public, in 
some cases implement direct statutory mandates, and are necessary to 
carry out the preferential treatment proclaimed by the President under 
the United States-Caribbean Basin Trade Partnership Act. For the same 
reasons, pursuant to the provisions of 5 U.S.C. 553(d)(1) and (3), 
Customs finds that there is good cause for dispensing with a delayed 
effective date. 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.

Executive Order 12866

    This document does not meet the criteria for a ``significant 
regulatory action'' as specified in E.O. 12866.

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 1515-0226.
    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 interim regulations is in 
Secs. 10.224, 10.225, 10.226, 10.234, 10.235, and 10.236. This 
information conforms to requirements in 19 U.S.C. 2703 and is used by 
Customs to determine whether textile and apparel articles and other 
products imported from designated beneficiary countries are entitled to 
duty-free entry under the United States-Caribbean Basin Trade 
Partnership Act. The likely respondents are business organizations 
including importers, exporters, and manufacturers.
    Estimated annual reporting and/or recordkeeping burden: 18,720 
hours.
    Estimated average annual burden per respondent/recordkeeper: 440 
hours.
    Estimated number of respondents and/or recordkeepers: 42.
    Estimated annual frequency of responses: on occasion.
    Comments on the collection of information should be sent to the 
Office of Management and Budget, Attention: Desk Officer of the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503. A copy should also be sent to the 
Regulations Branch, Office of Regulations and Rulings, U.S. Customs 
Service, 1300 Pennsylvania Avenue, NW., 3rd Floor, Washington, DC 
20229. Comments should be submitted within the time frame that comments 
are due regarding the substance of the interim regulations.
    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 
the information; (c) ways to enhance the quality, utility, and clarity 
of the information to be collected; (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; and (e) estimates of capital or startup costs and costs of 
operations, maintenance, and purchase of services to provide 
information.

Drafting Information

    The principal author of this document was Francis W. Foote, Office 
of Regulations and Rulings, U.S. Customs Service. However, personnel 
from other offices participated in its development.

List of Subjects

19 CFR Part 10

    Assembly, Bonds, Caribbean Basin Initiative, Customs duties and 
inspection, Exports, Imports, Preference programs, Reporting and 
recordkeeping requirements, Trade agreements.

19 CFR Part 163

    Administrative practice and procedure, Customs duties and 
inspection, Imports, Reporting and recordkeeping requirements.

Amendments to the Regulations

    For the reasons set forth in the preamble, Parts 10 and 163, 
Customs Regulations (19 CFR Parts 10 and 163), are amended as set forth 
below.

PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, 
ETC.

    1. The general authority citation for Part 10 continues to read, 
the specific authority citation for Secs. 10.191 through 10.198 is 
revised to read, and a new specific authority citation for Secs. 10.221 
through 10.227 and Secs. 10.231 through 10.237 is added to read, as 
follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 22, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 
1498, 1508, 1623, 1624, 3314;
* * * * *
    Sections 10.191 through 10.198b also issued under 19 U.S.C. 2701 
et seq.;
* * * * *
    Sections 10.221 through 10.227 and Secs. 10.231 through 10.237 
also issued under 19 U.S.C. 2701 et seq.;
* * * * *

    2. The authority citation under the center heading ``CARIBBEAN 
BASIN INITIATIVE'' is removed.

    3. In Sec. 10.191:
    a. Paragraph (b)(1) is amended by removing the reference 
``Sec. 10.198'' and adding, in its place, the reference 
``Sec. 10.198b'';
    b. In the introductory text of paragraph (b)(2), the first sentence 
is amended by adding at the end before the period the words ``or in 
Sec. 10.198b'';
    c. Paragraphs (b)(2)(i) and (b)(2)(ii) are revised;
    d. Paragraph (b)(2)(iv) is amended by removing the reference 
``Chapter 27'' and adding in its place the reference ``headings 2709 
and 2710'';
    e. Paragraphs (b)(2)(vi) through (b)(2)(viii) are redesignated as 
paragraphs (b)(2)(vii) through (b)(2)(ix)
    f. A new paragraph (b)(2)(vi) is added;
    g. Paragraph (b)(3) is amended by removing the reference 
``Sec. 10.198'' and adding, in its place, the reference 
``Sec. 10.198a''; and
    h. Paragraph (b)(4) is amended by removing the reference 
``Sec. 10.198'' and adding, in its place, the reference 
``Sec. 10.198b''.
    The revisions and addition read as follows:


Sec. 10.191  General.

* * * * *
    (b) * * *
    (2) * * *
    (i) Textile and apparel articles which were not eligible articles 
for purposes of the CBI on January 1, 1994, as the CBI was in effect on 
that date.
    (ii) Footwear not designated on August 5, 1983, as eligible 
articles for the purpose of the Generalized System of Preferences under 
Title V, Trade Act

[[Page 59658]]

of 1974, as amended (19 U.S.C. 2461 through 2467).
* * * * *
    (vi) Articles to which reduced rates of duty apply under 
Sec. 10.198a.
* * * * *

    4. In Sec. 10.192, the first sentence is amended by removing the 
reference ``Sec. 10.198'' and adding, in its place, the reference 
``Sec. 10.198b''.

    5. In Sec. 10.193, the introductory text is amended by removing the 
reference Sec. 10.198'' and adding, in its place, the reference 
``Sec. 10.198b''.

    6. In Sec. 10.195, paragraph (b) is revised to read as follows:


Sec. 10.195  Country of origin criteria.

* * * * *
    (b) Commonwealth of Puerto Rico and U.S. Virgin Islands--(1) 
General. For purposes of determining the percentage referred to in 
paragraph (a) of this section, the term ``beneficiary country'' 
includes the Commonwealth of Puerto Rico and the U.S. Virgin Islands. 
Any cost or value of materials or direct costs of processing operations 
attributable to the U.S. Virgin Islands must be included in the article 
prior to its final exportation from a beneficiary country to the United 
States.
    (2) Manufacture in the Commonwealth of Puerto Rico after final 
exportation. Notwithstanding the provisions of 19 U.S.C. 1311, if an 
article from a beneficiary country is entered under bond for processing 
or use in manufacturing in the Commonwealth of Puerto Rico, no duty 
will be imposed on the withdrawal from warehouse for consumption of the 
product of that processing or manufacturing provided that:
    (i) The article entered in the warehouse in the Commonwealth of 
Puerto Rico was grown, produced, or manufactured in a beneficiary 
country within the meaning of paragraph (a) of this section and was 
imported directly from a beneficiary country within the meaning of 
Sec. 10.193; and
    (ii) At the time of its withdrawal from the warehouse, the product 
of the processing or manufacturing in the Commonwealth of Puerto Rico 
meets the 35 percent value-content requirement prescribed in paragraph 
(a) of this section.
* * * * *

    7. New Secs. 10.198a and 10.198b are added under the center heading 
``CARIBBEAN BASIN INITIATIVE'' to read as follows:


Sec. 10.198a  Duty reduction for certain leather-related articles.

    Except as otherwise provided in Sec. 10.233, reduced rates of duty 
as proclaimed by the President will apply to handbags, luggage, flat 
goods, work gloves, and leather wearing apparel that were not 
designated on August 5, 1983, as eligible articles for purposes of the 
Generalized System of Preferences under Title V, Trade Act of 1974, as 
amended (19 U.S.C. 2461 through 2467), provided that the article in 
question at the time it is entered:
    (a) Was grown, produced, or manufactured in a beneficiary country 
within the meaning of Sec. 10.195;
    (b) Meets the 35 percent value-content requirement prescribed in 
Sec. 10.195; and
    (c) Was imported directly from a beneficiary country within the 
meaning of Sec. 10.193.


Sec. 10.198b  Products of Puerto Rico processed in a beneficiary 
country.

    Except in the case of any article described in Sec. 10.191(b)(2)(i) 
through (vi), the duty-free treatment provided for under the CBI will 
apply to an article that is the growth, product, or manufacture of the 
Commonwealth of Puerto Rico and that is by any means advanced in value 
or improved in condition in a beneficiary country, provided that:
    (a) If any materials are added to the article in the beneficiary 
country, those materials consist only of materials that are a product 
of a beneficiary country or the United States; and
    (b) The article is imported directly from the beneficiary country 
into the customs territory of the United States within the meaning of 
Sec. 10.193.

    8. Part 10 is amended by adding a new center heading followed by 
new Secs. 10.221 through 10.227 to read as follows:

Textile and Apparel Articles Under the United States-Caribbean 
Basin Trade Partnership Act

Sec.
10.221   Applicability.
10.222   Definitions.
10.223   Articles eligible for preferential treatment.
10.224   Certificate of Origin.
10.225   Filing of claim for preferential treatment.
10.226   Maintenance of records and submission of Certificate by 
importer.
10.227   Verification and justification of claim for preferential 
treatment.

Textile and Apparel Articles Under the United States-Caribbean 
Basin Trade Partnership Act


Sec. 10.221  Applicability.

    Title II of Public Law 106-200 (114 Stat. 251), entitled the United 
States-Caribbean Trade Partnership Act (CBTPA), amended section 213(b) 
of the Caribbean Basin Economic Recovery Act (the CBERA, 19 U.S.C. 
2701-2707) to authorize the President to extend additional trade 
benefits to countries that have been designated as beneficiary 
countries under the CBERA. Section 213(b)(2) of the CBERA (19 U.S.C. 
2703(b)(2)) provides for the preferential treatment of certain textile 
and apparel articles from CBERA beneficiary countries. The provisions 
of Secs. 10.221-10.227 of this part set forth the legal requirements 
and procedures that apply for purposes of obtaining preferential 
treatment pursuant to CBERA section 213(b)(2).


Sec. 10.222  Definitions.

    When used in Secs. 10.221 through 10.227, the following terms have 
the meanings indicated:
    Apparel articles. ``Apparel articles'' means goods classifiable in 
Chapters 61 and 62 and headings 6501, 6502, 6503, and 6504 and 
subheadings 6406.99 and 6505.90 of the HTSUS.
    Assembled in one or more CBTPA beneficiary countries. ``Assembled 
in one or more CBTPA beneficiary countries'' when used in the context 
of a textile or apparel article has reference to a joining together of 
two or more components (other than thread, decorative embellishments, 
buttons, zippers, or similar components) that occurred in one or more 
beneficiary countries, whether or not a prior joining operation was 
performed on the article or any of its components in the United States.
    CBERA. ``CBERA'' means the Caribbean Basin Economic Recovery Act, 
19 U.S.C. 2701-2707.
    CBTPA beneficiary country. ``CBTPA beneficiary country'' means a 
beneficiary country'' as defined in Sec. 10.191(b)(1) for purposes of 
the CBERA which the President also has designated as a beneficiary 
country for purposes of preferential treatment of textile and apparel 
articles under 19 U.S.C. 2703(b)(2).
    Cut in one or more CBTPA beneficiary countries. ``Cut in one or 
more CBTPA beneficiary countries'' when used with reference to apparel 
articles means that all fabric components used in the assembly of the 
article were cut from fabric in one or more CBTPA beneficiary 
countries.

[[Page 59659]]

    Foreign. ``Foreign'' means of a country other than the United 
States or a CBTPA beneficiary country.
    HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the United 
States.
    Knit-to-shape. The term ``knit-to-shape'' applies to any apparel 
article of which 50 percent or more of the exterior surface area is 
formed by major parts that have been knitted or crocheted directly to 
the shape used in the apparel article, with no consideration being 
given to patch pockets, appliques, or the like. Minor cutting, 
trimming, or sewing of those major parts will not affect the 
determination of whether an apparel article is ``knit-to-shape.''
    Made in one or more CBTPA beneficiary countries. ``Made in one or 
more CBTPA beneficiary countries'' when used with reference to non-
underwear t-shirts means cut in one or more CBTPA beneficiary countries 
and wholly assembled in one or more CBTPA beneficiary countries.
    Major parts. ``Major parts'' means integral components of an 
apparel article but does not include collars, cuffs, waistbands, 
plackets, pockets, linings, paddings, trim, accessories, or similar 
parts or components.
    NAFTA. ``NAFTA'' means the North American Free Trade Agreement 
entered into by the United States, Canada, and Mexico on December 17, 
1992.
    Preferential treatment. ``Preferential treatment'' means entry, or 
withdrawal from warehouse for consumption, in the customs territory of 
the United States free of duty and free of any quantitative 
restrictions, limitations, or consultation levels as provided in 19 
U.S.C. 2703(b)(2).
    Wholly assembled in one or more CBTPA beneficiary countries. 
``Wholly assembled in one or more CBTPA beneficiary countries'' when 
used in the context of a textile or apparel article has reference to a 
joining together of all components (including thread, decorative 
embellishments, buttons, zippers, or similar components) that occurred 
only in one or more CBTPA beneficiary countries.
    Wholly formed. ``Wholly formed,'' when used with reference to yarns 
or thread, means that all of the production processes, starting with 
the extrusion of filament or the spinning of all fibers into yarn or 
both and ending with a yarn or plied yarn, took place in a single 
country, and, when used with reference to fabric(s), means that all of 
the production processes, starting with polymers, fibers, filaments, 
textile strips, yarns, twine, cordage, rope, or strips of fabric and 
ending with a fabric by a weaving, knitting, needling, tufting, 
felting, entangling or other process, took place in a single country.


Sec. 10.223  Articles eligible for preferential treatment.

    (a) General. The preferential treatment referred to in Sec. 10.221 
applies to the following textile and apparel articles that are imported 
directly into the customs territory of the United States from a CBTPA 
beneficiary country:
    (1) Apparel articles assembled in one or more CBTPA beneficiary 
countries from fabrics wholly formed and cut in the United States, from 
yarns wholly formed in the United States, (including fabrics not formed 
from yarns, if those fabrics are classifiable under heading 5602 or 
5603 of the HTSUS and are wholly formed and cut in the United States) 
that are entered under subheading 9802.00.80 of the HTSUS;
    (2) Apparel articles assembled in one or more CBTPA beneficiary 
countries from fabrics wholly formed and cut in the United States, from 
yarns wholly formed in the United States, (including fabrics not formed 
from yarns, if those fabrics are classifiable under heading 5602 or 
5603 of the HTSUS and are wholly formed and cut in the United States) 
that are entered under Chapter 61 or 62 of the HTSUS, if, after that 
assembly, the articles would have qualified for entry under subheading 
9802.00.80 of the HTSUS but for the fact that the articles were 
embroidered or subjected to stone-washing, enzyme-washing, acid 
washing, perma-pressing, oven-baking, bleaching, garment-dyeing, screen 
printing, or other similar processes in a CBTPA beneficiary country;
    (3) Apparel articles (other than articles described in paragraph 
(a)(12) of this section) cut in one or more CBTPA beneficiary countries 
from fabric wholly formed in the United States from yarns wholly formed 
in the United States (including fabrics not formed from yarns, if those 
fabrics are classifiable under heading 5602 or 5603 of the HTSUS and 
are wholly formed in the United States), if those articles are 
assembled in one or more CBTPA beneficiary countries with thread formed 
in the United States;
    (4) Apparel articles knit to shape (other than socks provided for 
in heading 6115 of the HTSUS) in a CBTPA beneficiary country from yarns 
wholly formed in the United States, and knit apparel articles (other 
than non-underwear t-shirts) cut and wholly assembled in one or more 
CBTPA beneficiary countries from fabric formed in one or more CBTPA 
beneficiary countries or the United States from yarns wholly formed in 
the United States (including fabrics not formed from yarns, if those 
fabrics are classifiable under heading 5602 or 5603 of the HTSUS and 
are formed in one or more CBTPA beneficiary countries);
    (5) Non-underwear t-shirts, classifiable under subheadings 
6109.10.00 and 6109.90.10 of the HTSUS, made in one or more CBTPA 
beneficiary countries from fabric formed in one or more CBTPA 
beneficiary countries from yarns wholly formed in the United States;
    (6) Brassieres classifiable under subheading 6212.10 of the HTSUS, 
cut and sewn or otherwise assembled in the United States, or one or 
more CBTPA beneficiary countries, or both;
    (7) Apparel articles that are both cut (or knit-to-shape) and sewn 
or otherwise assembled in one or more CBTPA beneficiary countries, from 
fabrics or yarn that is not formed in the United States or in one or 
more CBTPA beneficiary countries, to the extent that apparel articles 
of those fabrics or yarn would be eligible for preferential treatment, 
without regard to the source of the fabrics or yarn, under Annex 401 of 
the NAFTA;
    (8) Apparel articles that are both cut (or knit-to-shape) and sewn 
or otherwise assembled in one or more CBTPA beneficiary countries, from 
fabrics or yarn that is not formed in the United States or in one or 
more CBTPA beneficiary countries and that is not described in paragraph 
(a)(7) of this section, to the extent that the President has determined 
that the fabrics or yarn cannot be supplied by the domestic industry in 
commercial quantities in a timely manner and has proclaimed the 
preferential treatment provided under paragraph (a)(7) of this section;
    (9) A handloomed, handmade, or folklore textile or apparel article 
of a CBTPA beneficiary country that the President and representatives 
of the CBTPA beneficiary country mutually agree is a handloomed, 
handmade, or folklore article and that is certified as a handloomed, 
handmade, or folklore article by the competent authority of the CBTPA 
beneficiary country;
    (10) Textile luggage assembled in a CBTPA beneficiary country from 
fabric wholly formed and cut in the United States, from yarns wholly 
formed in the United States, that is entered under subheading 
9802.00.80 of the HTSUS;
    (11) Textile luggage assembled from fabric cut in a CBTPA 
beneficiary country from fabric wholly formed in the United States from 
yarns wholly formed in the United States; and
    (12) Knitted or crocheted apparel articles (other than non-
underwear t-

[[Page 59660]]

shirts described in paragraph (a)(5) of this section) cut and wholly 
assembled in one or more CBTPA beneficiary countries or the United 
States from fabrics wholly formed in the United States from yarns 
wholly formed in the United States (including fabrics not formed from 
yarns, if those fabrics are classifiable under heading 5602 or 5603 of 
the HTSUS and are wholly formed in the United States), provided that 
the assembly is with thread formed in the United States.
    (b) Special rules for certain component materials--(1) Foreign 
findings, trimmings, interlinings, fibers and yarns--(i) General. An 
article otherwise described under paragraph (a) of this section will 
not be ineligible for the preferential treatment referred to in 
Sec. 10.221 because the article contains:
    (A) Findings and trimmings of foreign origin, if the value of those 
findings and trimmings does not exceed 25 percent of the cost of the 
components of the assembled article. For purposes of this section 
``findings and trimmings'' include, but are not limited to, hooks and 
eyes, snaps, buttons, ``bow buds,'' decorative lace trim, elastic 
strips (but only if they are each less than 1 inch in width and are 
used in the production of brassieres), zippers (including zipper 
tapes), labels, and sewing thread except in the case of an article 
described in paragraph (a)(3) of this section;
    (B) Interlinings of foreign origin, if the value of those 
interlinings does not exceed 25 percent of the cost of the components 
of the assembled article. For purposes of this section ``interlinings'' 
include only a chest type plate, a ``hymo'' piece, or ``sleeve 
header,'' of woven or weft-inserted warp knit construction and of 
coarse animal hair or man-made filaments;
    (C) Any combination of findings and trimmings of foreign origin and 
interlinings of foreign origin, if the total value of those findings 
and trimmings and interlinings does not exceed 25 percent of the cost 
of the components of the assembled article; or
    (D) Fibers or yarns not wholly formed in the United States or in 
one or more CBTPA beneficiary countries if the total weight of all 
those fibers and yarns is not more than 7 percent of the total weight 
of the article, except in the case of any apparel article described in 
paragraph (a)(1) through (a)(5) of this section containing elastomeric 
yarns which will be eligible for preferential treatment only if those 
yarns are wholly formed in the United States.
    (ii) Treatment of fibers and yarns as findings or trimmings. If any 
fibers or yarns not wholly formed in the United States or one or more 
beneficiary countries are used in an article as a finding or trimming 
described in paragraph (b)(1)(i)(A) of this section, the fibers or 
yarns will be considered to be a finding or trimming for purposes of 
paragraph (b)(1)(i) of this section.
    (2) Special rule for nylon filament yarn. An article otherwise 
described under paragraph (a)(1), (a)(2) or (a)(3) of this section will 
not be ineligible for the preferential treatment referred to in 
Sec. 10.221 because the article contains nylon filament yarn (other 
than elastomeric yarn) that is classifiable under subheading 
5402.10.30, 5402.10.60, 5402.31.30, 5402.31.60, 5402.32.30, 5402.32.60, 
5402.41.10, 5402.41.90, 5402.51.00, or 5402.61.00 of the HTSUS duty-
free from Canada, Mexico or Israel.
    (c) Imported directly defined. For purposes of paragraph (a) of 
this section, the words ``imported directly'' mean:
    (1) Direct shipment from any CBTPA beneficiary country to the 
United States without passing through the territory of any country that 
is not a CBTPA beneficiary country;
    (2) If the shipment is from any CBTPA beneficiary country to the 
United States through the territory of any country that is not a CBTPA 
beneficiary country, the articles in the shipment do not enter into the 
commerce of any country that is not a CBTPA beneficiary country while 
en route to the United States and the invoices, bills of lading, and 
other shipping documents show the United States as the final 
destination; or
    (3) If the shipment is from any CBTPA beneficiary country to the 
United States through the territory of any country that is not a CBTPA 
beneficiary country, and the invoices and other documents do not show 
the United States as the final destination, the articles in the 
shipment upon arrival in the United States are imported directly only 
if they:
    (i) Remained under the control of the customs authority of the 
intermediate country;
    (ii) Did not enter into the commerce of the intermediate country 
except for the purpose of sale other than at retail, and the port 
director is satisfied that the importation results from the original 
commercial transaction between the importer and the producer or the 
producer's sales agent; and
    (iii) Were not subjected to operations other than loading or 
unloading, and other activities necessary to preserve the articles in 
good condition.


Sec. 10.224  Certificate of Origin.

    (a) General. A Certificate of Origin must be employed to certify 
that a textile or apparel article being exported from a CBTPA 
beneficiary country to the United States qualifies for the preferential 
treatment referred to in Sec. 10.221. The Certificate of Origin must be 
prepared by the exporter in the CBTPA beneficiary country in the form 
specified in paragraph (b) of this section. Where the CBTPA beneficiary 
country exporter is not the producer of the article, that exporter may 
complete and sign a Certificate of Origin on the basis of:
    (1) Its reasonable reliance on the producer's written 
representation that the article qualifies for preferential treatment; 
or
    (2) A completed and signed Certificate of Origin for the article 
voluntarily provided to the exporter by the producer.
    (b) Form of Certificate. The Certificate of Origin referred to in 
paragraph (a) of this section must be in the following format:
BILLING CODE 4820-02-P

[[Page 59661]]

[GRAPHIC] [TIFF OMITTED] TR05OC00.001

BILLING CODE 4820-02-P
    (c) Preparation of Certificate. The following rules will apply for 
purposes of completing the Certificate of Origin set forth in paragraph 
(b) of this section:
    (1) Blocks 1 through 5 pertain only to the final article exported 
to the United States for which preferential treatment may be claimed;
    (2) Block 1 should state the legal name and address (including 
country) of the exporter;
    (3) Block 2 should state the legal name and address (including 
country) of the producer. If there is more than one producer, attach a 
list stating the legal name and address (including country) of all 
additional producers. If this information is confidential, it is 
acceptable to state ``available to Customs upon request'' in block 2. 
If the

[[Page 59662]]

producer and the exporter are the same, state ``same'' in block 2;
    (4) Block 3 should state the legal name and address (including 
country) of the importer;
    (5) Block 4 should provide a full description of each article. The 
description should be sufficient to relate it to the invoice 
description and to the description of the article in the international 
Harmonized System. Include the invoice number as shown on the 
commercial invoice or, if the invoice number is not known, include 
another unique reference number such as the shipping order number;
    (6) In block 5, insert the letter that designates the preference 
group which applies to the article according to the description 
contained in the CFR provision cited on the Certificate for that group;
    (7) Blocks 6 through 10 must be completed only when the block in 
question calls for information that is relevant to the preference group 
identified in block 5;
    (8) Block 6 should state the legal name and address (including 
country) of the fabric producer;
    (9) Block 7 should state the legal name and address (including 
country) of the yarn producer;
    (10) Block 8 should state the legal name and address (including 
country) of the thread producer;
    (11) Block 9 should state the name of the folklore article or 
should state that the article is handloomed or handmade;
    (12) Block 10, which should be completed only when preference group 
``G'' is inserted in block 5, should state the name of the fabric or 
yarn that is not formed in the United States or a CBTPA beneficiary 
country or that is not available in commercial quantities in the United 
States;
    (13) Block 16a should reflect the date on which the Certificate was 
completed and signed;
    (14) Block 16b should be completed if the Certificate is intended 
to cover multiple shipments of identical articles as described in block 
4 that are imported into the United States during a specified period of 
up to one year (see Sec. 10.226(b)(4)(ii)). The ``from'' date is the 
date on which the Certificate became applicable to the article covered 
by the blanket Certificate (this date may be prior to the date 
reflected in block 16a). The ``to'' date is the date on which the 
blanket period expires; and
    (15) The Certificate may be printed and reproduced locally. If more 
space is needed to complete the Certificate, attach a continuation 
sheet.


Sec. 10.225  Filing of claim for preferential treatment.

    (a) Declaration. In connection with a claim for preferential 
treatment for a textile or apparel article described in Sec. 10.223, 
the importer must make a written declaration that the article qualifies 
for that treatment. In the case of an article described in 
Sec. 10.223(a)(1) or (a)(10), the written declaration should be made by 
including on the entry summary, or equivalent documentation, the symbol 
``R'' as a prefix to the subheading within Chapter 98 of the HTSUS 
under which the article is classified, and, in the case of any article 
described in Sec. 10.223(a)(2) through (a)(9) and (a)(11), the 
inclusion on the entry summary, or equivalent documentation, of the 
subheading within Chapter 98 of the HTSUS under which the article is 
classified will constitute the written declaration. Except in any of 
the circumstances described in Sec. 10.226(d)(1), the declaration 
required under this paragraph must be based on an original Certificate 
of Origin that has been completed and properly executed in accordance 
with Sec. 10.224, that covers the article being imported, and that is 
in the possession of the importer.
    (b) Corrected declaration. If, after making the declaration 
required under paragraph (a) of this section, the importer has reason 
to believe that a Certificate of Origin on which a declaration was 
based contains information that is not correct, the importer must 
within 30 calendar days after the date of discovery of the error make a 
corrected declaration and pay any duties that may be due. A corrected 
declaration will be effected by submission of a letter or other written 
statement to the Customs port where the declaration was originally 
filed.


Sec. 10.226  Maintenance of records and submission of Certificate by 
importer.

    (a) Maintenance of records. Each importer claiming preferential 
treatment for an article under Sec. 10.225 must maintain in the United 
States, in accordance with the provisions of part 163 of this chapter, 
all records relating to the importation of the article. Those records 
must include the original Certificate of Origin referred to in 
Sec. 10.225(a) and any other relevant documents or other records as 
specified in Sec. 163.1(a) of this chapter.
    (b) Submission of Certificate. An importer who claims preferential 
treatment on a textile or apparel article under Sec. 10.225(a) must 
provide, at the request of the port director, a copy of the Certificate 
of Origin pertaining to the article. A Certificate of Origin submitted 
to Customs under this paragraph:
    (1) Must be in writing or must be transmitted electronically 
pursuant to any electronic data interchange system authorized by 
Customs for that purpose;
    (2) Must be signed by the exporter or by the exporter's authorized 
agent having knowledge of the relevant facts;
    (3) Must be completed either in the English language or in the 
language of the country from which the article is exported. If the 
Certificate is completed in a language other than English, the importer 
must provide to Customs upon request a written English translation of 
the Certificate; and
    (4) May be applicable to:
    (i) A single importation of an article into the United States, 
including a single shipment that results in the filing of one or more 
entries and a series of shipments that results in the filing of one 
entry; or
    (ii) Multiple importations of identical articles into the United 
States that occur within a specified blanket period, not to exceed 12 
months, set out in the Certificate by the exporter. For purposes of 
this paragraph and Sec. 10.224(c)(14), ``identical articles'' means 
articles that are the same in all material respects, including physical 
characteristics, quality, and reputation.
    (c) Correction and nonacceptance of Certificate. If the port 
director determines that a Certificate of Origin is illegible or 
defective or has not been completed in accordance with paragraph (b) of 
this section, the importer will be given a period of not less than five 
working days to submit a corrected Certificate. A Certificate will not 
be accepted in connection with subsequent importations during a period 
referred to in paragraph (b)(4)(ii) of this section if the port 
director determined that a previously imported identical article 
covered by the Certificate did not qualify for preferential treatment.
    (d) Certificate not required--(1) General. Except as otherwise 
provided in paragraph (d)(2) of this section, an importer is not 
required to have a Certificate of Origin in his possession for:
    (i) An importation of an article for which the port director has in 
writing waived the requirement for a Certificate of Origin because the 
port director is otherwise satisfied that the article qualifies for 
preferential treatment;
    (ii) A non-commercial importation of an article; or
    (iii) A commercial importation of an article whose value does not 
exceed US $2,500, provided that, unless waived by the port director, 
the producer, exporter,

[[Page 59663]]

importer or authorized agent includes on, or attaches to, the invoice 
or other document accompanying the shipment the following signed 
statement:

    I hereby certify that the article covered by this shipment 
qualifies for preferential treatment under the CBTPA.
    Check One:

(  ) Producer
(  ) Exporter
(  ) Importer
(  ) Agent

----------------------------------------------------------------------
Name

----------------------------------------------------------------------
Title

----------------------------------------------------------------------
Address

----------------------------------------------------------------------
Signature and Date

    (2) Exception. If the port director determines that an importation 
described in paragraph (d)(1) of this section forms part of a series of 
importations that may reasonably be considered to have been undertaken 
or arranged for the purpose of avoiding a Certificate of Origin 
requirement under Secs. 10.224 through 10.226, the port director will 
notify the importer in writing that for that importation the importer 
must have in his possession a valid Certificate of Origin to support 
the claim for preferential treatment. The importer will have 30 
calendar days from the date of the written notice to obtain a valid 
Certificate of Origin, and a failure to timely obtain the Certificate 
of Origin will result in denial of the claim for preferential 
treatment. For purposes of this paragraph, a ``series of importations'' 
means two or more entries covering articles arriving on the same day 
from the same exporter and consigned to the same person.


Sec. 10.227  Verification and justification of claim for preferential 
treatment.

    (a) Verification by Customs. A claim for preferential treatment 
made under Sec. 10.225, including any statements or other information 
contained on a Certificate of Origin submitted to Customs under 
Sec. 10.226, will be subject to whatever verification the port director 
deems necessary. In the event that the port director for any reason is 
prevented from verifying the claim, the port director may deny the 
claim for preferential treatment. A verification of a claim for 
preferential treatment may involve, but need not be limited to, a 
review of:
    (1) All records required to be made, kept, and made available to 
Customs by the importer or any other person under part 163 of this 
chapter;
    (2) Documentation and other information in a CBTPA beneficiary 
country regarding the country of origin of an article and its 
constituent materials, including, but not limited to, production 
records, information relating to the place of production, the number 
and identification of the types of machinery used in production, and 
the number of workers employed in production; and
    (3) Evidence in a CBTPA beneficiary country to document the use of 
U.S. materials in the production of the article in question, such as 
purchase orders, invoices, bills of lading and other shipping 
documents, and customs import and clearance documents.
    (b) Importer requirements. In order to make a claim for 
preferential treatment under Sec. 10.225, the importer:
    (1) Must have records that explain how the importer came to the 
conclusion that the textile or apparel article qualifies for 
preferential treatment. Those records must include documents that 
support a claim that the article in question qualifies for preferential 
treatment because it is specifically described in one of the provisions 
under Sec. 10.223(a). If the importer is claiming that the article 
incorporates fabric or yarn that was wholly formed in the United 
States, the importer must have records that identify the U.S. producer 
of the fabric or yarn. A properly completed Certificate of Origin in 
the form set forth in Sec. 10.224(b) is a record that would serve these 
purposes;
    (2) Must establish and implement internal controls which provide 
for the periodic review of the accuracy of the Certificates of Origin 
or other records referred to in paragraph (b)(1) of this section;
    (3) Must have shipping papers that show how the article moved from 
the CBTPA beneficiary country to the United States. If the imported 
article was shipped through a country other than a CBTPA beneficiary 
country and the invoices and other documents from the CBTPA beneficiary 
country do not show the United States as the final destination, the 
importer also must have documentation that demonstrates that the 
conditions set forth in Sec. 10.223(c)(3)(i) through (iii) were met; 
and
    (4) Must be prepared to explain, upon request from Customs, how the 
records and internal controls referred to in paragraphs (b)(1) through 
(b)(3) of this section justify the importer's claim for preferential 
treatment.

    9. Part 10 is amended by adding a new center heading followed by 
new Secs. 10.231 through 10.237 to read as follows:

Non-Textile Articles Under the United States-Caribbean Basin Trade 
Partnership Act

Sec.
10.231   Applicability.
10.232   Definitions.
10.233   Articles eligible for preferential tariff treatment.
10.234   Certificate of Origin.
10.235   Filing of claim for preferential tariff treatment.
10.236   Maintenance of records and submission of Certificate by 
importer.
10.237   Verification and justification of claim for preferential 
tariff treatment.

Non-Textile Articles Under the United States-Caribbean Basin Trade 
Partnership Act


Sec. 10.231  Applicability.

    Title II of Public Law 106-200 (114 Stat. 251), entitled the United 
States-Caribbean Trade Partnership Act (CBTPA), amended section 213(b) 
of the Caribbean Basin Economic Recovery Act (the CBERA, 19 U.S.C. 
2701-2707) to authorize the President to extend additional trade 
benefits to countries that have been designated as beneficiary 
countries under the CBERA. Section 213(b)(3) of the CBERA (19 U.S.C. 
2703(b)(3)) provides for special preferential tariff treatment of 
certain non-textile articles that are otherwise excluded from duty-free 
treatment under the CBERA. The provisions of Secs. 10.231-10.237 of 
this part set forth the legal requirements and procedures that apply 
for purposes of obtaining preferential tariff treatment pursuant to 
CBERA section 213(b)(3).


Sec. 10.232  Definitions.

    When used in Secs. 10.231 through 10.237, the following terms have 
the meanings indicated:
    CBERA. ``CBERA'' means the Caribbean Basin Economic Recovery Act, 
19 U.S.C. 2701-2707.
    CBTPA beneficiary country. ``CBTPA beneficiary country'' means a 
beneficiary country'' as defined in Sec. 10.191(b)(1) for purposes of 
the CBERA which the President also has designated as a beneficiary 
country for purposes of preferential duty treatment of articles under 
19 U.S.C. 2703(b)(3).
    CBTPA originating good. ``CBTPA originating good'' means a good 
that meets the rules of origin for a good as set forth in General Note 
12, HTSUS, and in the appendix to part 181 of this chapter and as 
applied under Sec. 10.233(b).
    HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the United 
States.
    NAFTA. ``NAFTA'' means the North American Free Trade Agreement

[[Page 59664]]

entered into by the United States, Canada, and Mexico on December 17, 
1992.
    Preferential tariff treatment. ``Preferential tariff treatment'' 
when used with reference to an imported article means entry, or 
withdrawal from warehouse for consumption, in the customs territory of 
the United States with duty and other tariff treatment that is 
identical to the tariff treatment that would be accorded at that time 
under Annex 302.2 of the NAFTA to an imported article described in the 
same 8-digit subheading of the HTSUS that is a good of Mexico.


Sec. 10.233  Articles eligible for preferential tariff treatment.

    (a) General. The preferential tariff treatment referred to in 
Sec. 10.231 applies to any of the following articles, provided that the 
article in question is a CBTPA originating good, is imported directly 
into the customs territory of the United States from a CBTPA 
beneficiary country, and is not accorded duty-free treatment under U.S. 
Note 2(b), Subchapter II, Chapter 98, HTSUS (see Sec. 10.26):
    (1) Footwear not designated on August 5, 1983, as eligible articles 
for the purpose of the Generalized System of Preferences under Title V, 
Trade Act of 1974, as amended (19 U.S.C. 2461 through 2467);
    (2) Tuna, prepared or preserved in any manner, in airtight 
containers;
    (3) Petroleum, or any product derived from petroleum, provided for 
in headings 2709 and 2710 of the HTSUS;
    (4) Watches and watch parts (including cases, bracelets, and 
straps), of whatever type including, but not limited to, mechanical, 
quartz digital or quartz analog, if those watches or watch parts 
contain any material which is the product of any country with respect 
to which HTSUS column 2 rates of duty apply; and
    (5) Articles to which reduced rates of duty apply under 
Sec. 10.198a, except as otherwise provided in paragraph (c) of this 
section.
    (b) Application of NAFTA rules of origin. In determining whether an 
article is a CBTPA originating good for purposes of paragraph (a) of 
this section, application of the provisions of General Note 12 of the 
HTSUS and the appendix to part 181 of this chapter will be subject to 
the following rules:
    (1) No country other than the United States and a CBTPA beneficiary 
country may be treated as being a party to the NAFTA;
    (2) Any reference to trade between the United States and Mexico 
will be deemed to refer to trade between the United States and a CBTPA 
beneficiary country;
    (3) Any reference to a party will be deemed to refer to a CBTPA 
beneficiary country or the United States; and
    (4) Any reference to parties will be deemed to refer to any 
combination of CBTPA beneficiary countries or to the United States and 
one or more CBTPA beneficiary countries (or any combination involving 
the United States and CBTPA beneficiary countries).
    (c) Duty reductions for leather-related articles. If, after it is 
determined that an article described in paragraph (a)(5) of this 
section qualifies as a CBTPA originating good and is eligible for 
preferential tariff treatment under this section, it is determined that 
the article in question also would otherwise qualify for a reduced rate 
of duty under Sec. 10.198a and that reduced rate of duty is lower than 
the rate of duty that would apply under this section, that lower rate 
of duty will apply to the article for purposes of preferential tariff 
treatment under this section.
    (d) Imported directly defined. For purposes of paragraph (a) of 
this section, the words ``imported directly'' mean:
    (1) Direct shipment from any CBTPA beneficiary country to the 
United States without passing through the territory of any country that 
is not a CBTPA beneficiary country;
    (2) If the shipment is from any CBTPA beneficiary country to the 
United States through the territory of any country that is not a CBTPA 
beneficiary country, the articles in the shipment do not enter into the 
commerce of any country that is not a CBTPA beneficiary country while 
en route to the United States and the invoices, bills of lading, and 
other shipping documents show the United States as the final 
destination; or
    (3) If the shipment is from any CBTPA beneficiary country to the 
United States through the territory of any country that is not a CBTPA 
beneficiary country, and the invoices and other documents do not show 
the United States as the final destination, the articles in the 
shipment upon arrival in the United States are imported directly only 
if they:
    (i) Remained under the control of the customs authority of the 
intermediate country;
    (ii) Did not enter into the commerce of the intermediate country 
except for the purpose of sale other than at retail, and the port 
director is satisfied that the importation results from the original 
commercial transaction between the importer and the producer or the 
producer's sales agent; and
    (iii) Were not subjected to operations other than loading or 
unloading, and other activities necessary to preserve the articles in 
good condition.


Sec. 10.234  Certificate of Origin.

    A Certificate of Origin as specified in Sec. 10.236 must be 
employed to certify that an article described in Sec. 10.233(a)(1) 
through (5) being exported from a CBTPA beneficiary country to the 
United States qualifies for the preferential tariff treatment referred 
to in Sec. 10.231. The Certificate of Origin must be prepared by the 
exporter in the CBTPA beneficiary country. Where the CBTPA beneficiary 
country exporter is not the producer of the article, that exporter may 
complete and sign a Certificate of Origin on the basis of:
    (a) Its reasonable reliance on the producer's written 
representation that the article qualifies for preferential tariff 
treatment; or
    (b) A completed and signed Certificate of Origin for the article 
voluntarily provided to the exporter by the producer.


Sec. 10.235  Filing of claim for preferential tariff treatment.

    (a) Declaration. In connection with a claim for preferential tariff 
treatment for an article described in Sec. 10.233(a)(1) through (5), 
the importer must make a written declaration that the article qualifies 
for that treatment. The written declaration should be made by including 
on the entry summary, or equivalent documentation, the symbol ``R'' as 
a prefix to the subheading of the HTSUS under which the article in 
question is classified. Except in any of the circumstances described in 
Sec. 10.236(d)(1), the declaration required under this paragraph must 
be based on a complete and properly executed original Certificate of 
Origin that covers the article being imported and that is in the 
possession of the importer.
    (b) Corrected declaration. If, after making the declaration 
required under paragraph (a) of this section, the importer has reason 
to believe that a Certificate of Origin on which a declaration was 
based contains information that is not correct, the importer must 
within 30 calendar days after the date of discovery of the error make a 
corrected declaration and pay any duties that may be due. A corrected 
declaration will be effected by submission of a letter or other written 
statement to the Customs port where the declaration was originally 
filed.


Sec. 10.236  Maintenance of records and submission of Certificate by 
importer.

    (a) Maintenance of records. Each importer claiming preferential 
tariff treatment for an article under Sec. 10.235

[[Page 59665]]

must maintain in the United States, in accordance with the provisions 
of part 163 of this chapter, all records relating to the importation of 
the article. Those records must include the original Certificate of 
Origin referred to in Sec. 10.235(a) and any other relevant documents 
or other records as specified in Sec. 163.1(a) of this chapter.
    (b) Submission of Certificate. An importer who claims preferential 
tariff treatment on an article under Sec. 10.235(a) must provide, at 
the request of the port director, a copy of the Certificate of Origin 
pertaining to the article. A Certificate of Origin submitted to Customs 
under this paragraph:
    (1) Must be on Customs Form 450, including privately-printed copies 
of that Form, or, as an alternative to Customs Form 450, in an approved 
computerized format or other medium or format as is approved by the 
Office of Field Operations, U.S. Customs Service, Washington, DC 20229. 
An alternative format must contain the same information and 
certification set forth on Customs Form 450;
    (2) Must be signed by the exporter or by the exporter's authorized 
agent having knowledge of the relevant facts;
    (3) Must be completed either in the English language or in the 
language of the country from which the article is exported. If the 
Certificate is completed in a language other than English, the importer 
must provide to Customs upon request a written English translation of 
the Certificate; and
    (4) May be applicable to:
    (i) A single importation of an article into the United States, 
including a single shipment that results in the filing of one or more 
entries and a series of shipments that results in the filing of one 
entry; or
    (ii) Multiple importations of identical articles into the United 
States that occur within a specified period, not to exceed 12 months, 
set out in the Certificate by the exporter.
    (c) Correction and nonacceptance of Certificate. If the port 
director determines that a Certificate of Origin is illegible or 
defective or has not been completed in accordance with paragraph (b) of 
this section, the importer will be given a period of not less than five 
working days to submit a corrected Certificate. A Certificate will not 
be accepted in connection with subsequent importations during a period 
referred to in paragraph (b)(4)(ii) of this section if the port 
director determined that a previously imported identical article 
covered by the Certificate did not qualify for preferential treatment.
    (d) Certificate not required--(1) General. Except as otherwise 
provided in paragraph (d)(2) of this section, an importer is not 
required to have a Certificate of Origin in his possession for:
    (i) An importation of an article for which the port director has in 
writing waived the requirement for a Certificate of Origin because the 
port director is otherwise satisfied that the article qualifies for 
preferential tariff treatment;
    (ii) A non-commercial importation of an article; or
    (iii) A commercial importation of an article whose value does not 
exceed US$2,500, provided that, unless waived by the port director, the 
producer, exporter, importer or authorized agent includes on, or 
attaches to, the invoice or other document accompanying the shipment 
the following signed statement:

    I hereby certify that the article covered by this shipment 
qualifies for preferential tariff treatment under the CBTPA.

    Check One:
(  ) Producer
(  ) Exporter
(  ) Importer
(  ) Agent
----------------------------------------------------------------------
Name
----------------------------------------------------------------------
Title
----------------------------------------------------------------------
Address
----------------------------------------------------------------------
Signature and Date

    (2) Exception. If the port director determines that an importation 
described in paragraph (d)(1) of this section forms part of a series of 
importations that may reasonably be considered to have been undertaken 
or arranged for the purpose of avoiding a Certificate of Origin 
requirement under Secs. 10.234 through 10.236, the port director will 
notify the importer in writing that for that importation the importer 
must have in his possession a valid Certificate of Origin to support 
the claim for preferential tariff treatment. The importer will have 30 
calendar days from the date of the written notice to obtain a valid 
Certificate of Origin, and a failure to timely obtain the Certificate 
of Origin will result in denial of the claim for preferential tariff 
treatment. For purposes of this paragraph, a ``series of importations'' 
means two or more entries covering articles arriving on the same day 
from the same exporter and consigned to the same person.


Sec. 10.237  Verification and justification of claim for preferential 
tariff treatment.

    (a) Verification by Customs. A claim for preferential tariff 
treatment made under Sec. 10.235, including any statements or other 
information contained on a Certificate of Origin submitted to Customs 
under Sec. 10.236, will be subject to whatever verification the port 
director deems necessary. In the event that the port director for any 
reason is prevented from verifying the claim, the port director may 
deny the claim for preferential tariff treatment. A verification of a 
claim for preferential tariff treatment may involve, but need not be 
limited to, a review of:
    (1) All records required to be made, kept, and made available to 
Customs by the importer or any other person under part 163 of this 
chapter;
    (2) Documentation and other information in a CBTPA beneficiary 
country regarding the country of origin of an article and its 
constituent materials, including, but not limited to, production 
records, information relating to the place of production, the number 
and identification of the types of machinery used in production, and 
the number of workers employed in production; and
    (3) Evidence in a CBTPA beneficiary country to document the use of 
U.S. materials in the production of the article in question, such as 
purchase orders, invoices, bills of lading and other shipping 
documents, and customs import and clearance documents.
    (b) Importer requirements. In order to make a claim for 
preferential tariff treatment under Sec. 10.235, the importer:
    (1) Must have records that explain how the importer came to the 
conclusion that the article qualifies for preferential tariff 
treatment. Those records must include documents that support a claim 
that the article in question qualifies for preferential tariff 
treatment because it meets the applicable rule of origin set forth in 
General Note 12, HTSUS, and in the appendix to part 181 of this 
chapter. A properly completed Certificate of Origin in the form 
prescribed in Sec. 10.236(b) is a record that would serve this purpose;
    (2) Must establish and implement internal controls which provide 
for the periodic review of the accuracy of the Certificate of Origin or 
other records referred to in paragraph (b)(1) of this section;
    (3) Must have shipping papers that show how the article moved from 
the CBTPA beneficiary country to the United States. If the imported 
article was shipped through a country other than a CBTPA beneficiary 
country and the invoices and other documents from the CBTPA beneficiary 
country do not show the United States as the final destination, the 
importer also must have documentation that demonstrates that the 
conditions set forth in

[[Page 59666]]

Sec. 10.233(d)(3)(i) through (iii) were met; and
    (4) Must be prepared to explain, upon request from Customs, how the 
records and internal controls referred to in paragraphs (b)(1) through 
(b)(3) of this section justify the importer's claim for preferential 
tariff treatment.

PART 163--RECORDKEEPING

    1. The authority citation for Part 163 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 
1624.

    2. The Appendix to Part 163 is amended by adding two new listings 
under section IV in numerical order to read as follows:

Appendix to Part 163--Interim (a)(1)(A) List

* * * * *
IV. * * *


Sec. 10.226  CBTPA Textile Certificate of Origin and supporting records


Sec. 10.236  CBTPA Non-textile Certificate of Origin and supporting 
records

* * * * *

Raymond W. Kelly,
Commissioner of Customs.
    Approved: September 29, 2000.
Timothy E. Skud,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 00-25517 Filed 10-2-00; 8:45 am]
BILLING CODE 4820-02-P