[Federal Register Volume 67, Number 196 (Wednesday, October 9, 2002)]
[Rules and Regulations]
[Pages 62880-62884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25654]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10, 163 and 178

[T.D. 02-59]
RIN 1515-AC78


Duty-Free Treatment for Certain Beverages Made With Caribbean Rum

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

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule, with minor revisions, 
the interim rule amending the Customs Regulations that was published in 
the Federal Register on February 9, 2001, as T.D. 01-17. The interim 
rule implemented a change to the Caribbean Basin Economic Recovery Act, 
also known as the Caribbean Basin Initiative (CBI), that enabled 
certain beverages to obtain duty-free entry under specified conditions 
when the beverages were processed in the territory of Canada from rum 
that was the growth, product or manufacture either of a CBI beneficiary 
country or of the U.S. Virgin Islands. This final rule adopts the 
certification and supporting documentation requirements set forth in 
the interim rule that were necessary to establish compliance with the 
statutory law, thereby ensuring that the rum beverages were properly 
entitled to duty-free entry under the CBI.

EFFECTIVE DATE: Final rule effective on October 9, 2002. This final 
rule is applicable to products that are entered or withdrawn from 
warehouse for consumption on or after October 4, 2000.

FOR FURTHER INFORMATION CONTACT: Richard Wallio, Office of Field 
Operations, (202-927-9704).

SUPPLEMENTARY INFORMATION:

Background

    The Caribbean Basin Economic Recovery Act (19 U.S.C. 2701-2707) 
(CBERA) establishes an economic recovery program for nations of the 
Caribbean and Central America. Under

[[Page 62881]]

the CBERA, also referred to as the Caribbean Basin Initiative (CBI), 
the President is authorized to proclaim duty-free treatment for all 
eligible articles of a beneficiary country (19 U.S.C. 2701).
    A beneficiary country under the CBI refers to any country listed in 
19 U.S.C. 2702(b) with respect to which there is in effect a 
proclamation by the President designating the country as a beneficiary 
country for purposes of the CBI (19 U.S.C. 2702(a)(1)(A)). A rule of 
origin specifies under what conditions an article will be considered to 
be a product of a beneficiary country--in brief, the article must be 
wholly the growth, product or manufacture of a beneficiary country, or 
must be a new or different article of commerce that has been grown, 
produced, or manufactured in the beneficiary country (19 U.S.C. 
2703(a)).
    Sections 10.191 through 10.198b of the Customs Regulations (19 CFR 
10.191-10.198b) currently implement the duty-free aspects of the CBI.
    In pertinent part, in order to be entitled to duty-free treatment 
under the CBI, an article otherwise eligible for such treatment must be 
imported directly from a beneficiary country into the customs territory 
of the United States (19 U.S.C. 2703(a)(1)(A); 19 CFR 10.193).
    Before passage of the United States-Caribbean Basin Trade 
Partnership Act (Title II of Pub. L. 106-200, 114 Stat. 275, enacted on 
May 18, 2000) (CBTPA), in the case of rum produced in a beneficiary 
country and then imported into Canada for processing into a rum 
beverage, the beverage would not have been eligible for duty-free 
treatment under the CBI because it was not imported directly from a 
beneficiary country into the United States. At the same time, the 
beverage would also have been ineligible for duty-free treatment under 
the North American Free Trade Agreement Implementation Act (19 U.S.C. 
3301 et seq.) (NAFTA) because the processing it undergoes in Canada 
would not be sufficient to qualify it as a NAFTA originating good (19 
U.S.C. 3332; General Note 12, Harmonized Tariff Schedule of the United 
States (HTSUS); 19 CFR 181.131; and the appendix to 19 CFR part 181).

Beverages Made in Canada With Caribbean Rum; Amendment of CBERA by 
United States-Caribbean Basin Trade Partnership Act

    Section 212 of the CBTPA added a new paragraph (a)(6) to section 
213(a) of the CBERA (19 U.S.C. 2703(a)(6)), in order to provide for 
duty-free entry under specified conditions for certain beverages that 
are produced in the territory of Canada from rum that is the growth, 
product, or manufacture either of a beneficiary country under the CBI 
or of the U.S. Virgin Islands.
    Specifically, under 19 U.S.C. 2703(a)(6), a beverage that is 
imported directly into the customs territory of the United States from 
the territory of Canada and that is classifiable under subheading 
2208.90 or 2208.40, Harmonized Tariff Schedule of the United States 
(HTSUS), is entitled to duty-free entry under the CBERA if such 
beverage is produced in the territory of Canada from rum, provided that 
the rum: (1) Is the growth, product, or manufacture of a beneficiary 
country or of the U.S. Virgin Islands; (2) is imported directly into 
the territory of Canada from a beneficiary country or from the U.S. 
Virgin Islands; and (3) accounts for at least 90 percent by volume of 
the alcoholic content of the beverage.
    Accordingly, by a document published in the Federal Register (66 FR 
9643) on February 9, 2001, as T.D. 01-17, Customs issued an interim 
rule setting forth a new Sec.  10.199 in order to implement the 
provision allowing for duty-free admission for certain beverages 
produced in the territory of Canada from Caribbean rum. Section 10.199 
prescribed the certification and supporting documentary requirements 
and recordkeeping responsibilities that must be observed in order to 
afford duty-free admission for those beverages that properly qualify 
for such treatment, and to otherwise ensure compliance with the 
requirements of the statutory law.
    In addition, the Interim (a)(1)(A) List set forth as an Appendix to 
part 163, Customs Regulations (19 CFR part 163, Appendix), that lists 
the records required for the entry of merchandise, was revised to add a 
reference to the requirement in Sec.  10.199 that an importer possess 
those documents that are necessary for the duty-free entry of the 
beverages, including the declaration of the Canadian processor and 
related supporting information. Also, part 178, Customs Regulations (19 
CFR part 178), containing the list of approved information collections, 
was revised to include an appropriate reference to the documentary 
requirements in Sec.  10.199.

Discussion of Comment

    One comment was received in response to the interim rule. The 
commenter requested clarification as to the effective date for 
according duty-free treatment to those imported beverages that were 
made with Caribbean rum under 19 U.S.C. 2703(a)(6). The interim rule 
stated that it would be applicable to products entered or withdrawn 
from warehouse for consumption on or after February 9, 2001. However, 
the commenter asserted that Presidential Proclamation No. 7351 
specified an effective date of October 2, 2000.

Customs Response

    Presidential Proclamation No. 7351 of October 2, 2000 (65 FR 59329) 
dealt with the implementation of the amendments made to the CBERA by 
the CBTPA. While effective on the date signed (October 2, 2000), the 
Proclamation also made clear that modifications to the HTSUS were 
necessary to implement any preferential tariff treatment afforded by 
the amendments; and that these modifications were set forth in an Annex 
to the Proclamation that would be effective on the date announced by 
the United States Trade Representative (USTR) in a notice to be 
published in the Federal Register. This Annex included HTSUS subheading 
9817.22.05, which was the provision necessary to implement the 
statutory amendment authorizing duty-free treatment for the rum 
beverages (19 U.S.C. 2703(a)(6)).
    The notice setting forth the Annex was published in the Federal 
Register on October 4, 2000, and, in pertinent part, the notice stated 
that it was effective with respect to goods entered, or withdrawn from 
warehouse, for consumption on or after this date of publication (65 FR 
59329, at 59332-59333).
    Therefore, as already indicated above under the EFFECTIVE DATE 
caption, this final rule document will apply to goods entered, or 
withdrawn from warehouse, for consumption on or after October 4, 2000. 
It is observed in this regard, however, that because the interim rule 
in this matter was not published in the Federal Register until February 
9, 2001, Customs, prior to this time, did not accept duty-free entries 
for rum beverages subject to 19 U.S.C. 2703(a)(6).
    Consequently, for entries of eligible rum beverages that were made 
on or after October 4, 2000, and prior to February 9, 2001, importers 
or their agents may make use of either the Supplemental Information 
Letter or Post Entry Amendment procedure prior to liquidation of the 
entry, or they may file a timely protest under 19 U.S.C. 1514, to 
obtain duty-free treatment for these qualifying beverages. Such claims 
must be made at the port where the original entry was filed.

[[Page 62882]]

Relevant HTSUS Subheadings Not Applicable to Liqueurs

    It is noted that the beverages entitled to duty-free treatment 
under 19 U.S.C. 2703(a)(6) are specifically described as spirituous 
beverages and liqueurs classifiable under HTSUS subheading 2208.40 or 
2208.90. However, in further consideration of the interim rule, Customs 
noted that neither of these HTSUS subheadings in fact applies to 
liqueurs. Rather, liqueurs are provided for in HTSUS subheading 2208.70 
which is not included within section 2703(a)(6). Thus, liqueurs are not 
entitled to duty-free treatment under this statutory enactment. For 
this reason, Customs is deleting any reference to liqueurs set forth in 
interim Sec.  10.199 in this final rule. For the sake of editorial 
clarity and convenience, Sec.  10.199, as revised, is republished below 
in its entirety, together with a related revision to the (a)(1)(A) List 
in the Appendix to part 163.

Conclusion

    After careful consideration of the comment received and further 
review of the matter, Customs has concluded that the interim rule 
amending parts 10, 163 and 178, Customs Regulations (19 CFR parts 10, 
163 and 178) that was published in the Federal Register (66 FR 9643) on 
February 9, 2001, as T.D. 01-17, should be adopted as a final rule with 
the modification discussed above.

Inapplicability of Notice and Delayed Effective Date Requirements, the 
Regulatory Flexibility Act, and Executive Order 12866

    Pursuant to the provisions of 5 U.S.C. 553(b)(B), public notice is 
inapplicable to this final rule because it was determined that good 
cause existed for dispensing with prior public notice and comment 
procedures. To this end, the final rule affords a preferential tariff 
benefit to the importing public; it reflects, and provides a necessary 
and reasonable means for enforcing, statutory requirements that are 
already in effect; and it closely parallels existing regulatory 
provisions that implement similar trade preference programs. Also, for 
these same reasons, there is no need for a delayed effective date under 
5 U.S.C. 553(d). Because this document is not subject to the 
requirements of 5 U.S.C. 553, as noted, the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply. Nor 
does this document meet the criteria for a ``significant regulatory 
action'' as specified in E.O. 12866.

Paperwork Reduction Act

    The collection of information involved in this final rule document 
has already been approved by the Office of Management and Budget (OMB) 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) 
and assigned OMB Control Number 1515-0194 (Documentation requirements 
for articles entered under various special tariff treatment 
provisions). This collection includes a claim for duty-free entry of 
eligible articles under the Caribbean Basin Initiative. This rule does 
not present any substantive changes to the existing approved 
information collection. 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 
assigned by OMB.

List of Subjects

19 CFR Part 10

    Customs duties and inspection, Exports, Foreign relations, Imports, 
International traffic, Preference programs, Reporting and recordkeeping 
requirements, Shipments, Trade agreements (Caribbean Basin Initiative, 
Generalized System of Preferences, U.S.-Canada Free Trade Agreement, 
etc.).

19 CFR Part 163

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

19 CFR Part 178

    Administrative practice and procedure, Collections of information, 
Imports, Paperwork requirements, Reporting and recordkeeping 
requirements.

Amendments to the Regulations

    Accordingly, the interim rule amending 9 CFR parts 10, 163, and 178 
which was published at 66 FR 9643, February 9, 2001, is adopted as a 
final rule with the following changes:

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

    1. The general and the relevant specific sectional authority for 
part 10 continue 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 10.199 also issued under 19 U.S.C. 2701 et 
seq.;
* * * * *

    2. Section 10.199 is revised to read as follows:


Sec.  10. 199  Duty-free entry for certain beverages produced in Canada 
from Caribbean rum.

    (a) General. A spirituous beverage that is imported directly from 
the territory of Canada and that is classifiable under subheading 
2208.40 or 2208.90, Harmonized Tariff Schedule of the United States 
(HTSUS), will be entitled, upon entry or withdrawal from warehouse for 
consumption, to duty-free treatment under section 213(a)(6) of the 
Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(a)(6)), also 
known as the Caribbean Basin Initiative (CBI), if the spirituous 
beverage has been produced in the territory of Canada from rum, 
provided that the rum:
    (1) Is the growth, product, or manufacture either of a beneficiary 
country or of the U.S. Virgin Islands;
    (2) Was imported directly into the territory of Canada from a 
beneficiary country or from the U.S. Virgin Islands; and
    (3) Accounts for at least 90 percent of the alcoholic content by 
volume of the spirituous beverage.
    (b) Claim for exemption from duty under CBI. A claim for an 
exemption from duty for a spirituous beverage under section 213(a)(6) 
of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(a)(6)) may 
be made by entering such beverage under subheading 9817.22.05, HTSUS, 
on the entry summary document or its electronic equivalent. In order to 
claim the exemption, the importer must have the records described in 
paragraphs (d), (e), (f) and (g) of this section so that, upon Customs 
request, the importer can establish that:
    (1) The rum used to produce the beverage is the growth, product or 
manufacture either of a beneficiary country or of the U.S. Virgin 
Islands;
    (2) The rum was shipped directly from a beneficiary country or from 
the U.S. Virgin Islands to Canada;
    (3) The beverage was produced in Canada;
    (4) The rum accounts for at least 90% of the alcohol content of the 
beverage; and
    (5) The beverage was shipped directly from Canada to the United 
States.
    (c) Imported directly. For a spirituous beverage imported from 
Canada to qualify for duty-free entry under the CBI, the spirituous 
beverage must be imported directly into the customs territory of the 
United States from

[[Page 62883]]

Canada; and the rum used in its production must have been imported 
directly into the territory of Canada either from a beneficiary country 
or from the U.S. Virgin Islands.
    (1) ``Imported directly'' into the customs territory of the United 
States from Canada means:
    (i) Direct shipment from the territory of Canada to the U.S. 
without passing through the territory of any other country; or
    (ii) If the shipment is from the territory of Canada to the U.S. 
through the territory of any other country, the spirituous beverages do 
not enter into the commerce of any other country while en route to the 
U.S.; or
    (iii) If the shipment is from the territory of Canada to the U.S. 
through the territory of another country, and the invoices and other 
documents do not show the U.S. as the final destination, the spirituous 
beverages in the shipment are imported directly only if they:
    (A) Remained under the control of the customs authority of the 
intermediate country;
    (B) 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 
latter's sales agent; and
    (C) Were not subjected to operations other than loading and 
unloading, and other activities necessary to preserve the products in 
good condition.
    (2) ``Imported directly'' from a beneficiary country or from the 
U.S. Virgin Islands into the territory of Canada means:
    (i) Direct shipment from a beneficiary country or from the U.S. 
Virgin Islands into the territory of Canada without passing through the 
territory of any non-beneficiary country; or
    (ii) If the shipment is from a beneficiary country or from the U.S. 
Virgin Islands into the territory of Canada through the territory of 
any non-beneficiary country, the rum does not enter into the commerce 
of any non-beneficiary country while en route to Canada; or
    (iii) If the shipment is from a beneficiary country or from the 
U.S. Virgin Islands into the territory of Canada through the territory 
of any non-beneficiary country, the rum in the shipment is imported 
directly into the territory of Canada only if it:
    (A) Remained under the control of the customs authority of the 
intermediate country;
    (B) Did not enter into the commerce of the intermediate country 
except for the purpose of sale other than at retail; and
    (C) Was not subjected to operations in the intermediate country 
other than loading and unloading, and other activities necessary to 
preserve the product in good condition.
    (d) Evidence of direct shipment--(1) Spirituous beverages imported 
from Canada. The importer must be prepared to provide to the port 
director, if requested, documentary evidence that the spirituous 
beverages were imported directly from the territory of Canada, as 
described in paragraph (c)(1) of this section. This evidence may 
include documents such as a bill of lading, invoice, air waybill, 
freight waybill, or cargo manifest. Any evidence of the direct shipment 
of these spirituous beverages from Canada into the U.S. may be subject 
to such verification as deemed necessary by the port director.
    (2) Rum imported into Canada from beneficiary country or U.S. 
Virgin Islands. The importer must be prepared to provide to the port 
director, if requested, evidence that the rum used in producing the 
spirituous beverages was imported directly into the territory of Canada 
from a beneficiary country or from the U.S. Virgin Islands, as 
described in paragraph (c)(2) of this section. This evidence may 
include documents such as a Canadian customs entry, Canadian customs 
invoice, Canadian customs manifest, cargo manifest, bill of lading, 
landing certificate, airway bill, or freight waybill. Any evidence of 
the direct shipment of the rum from a beneficiary country or from the 
U.S. Virgin Islands into the territory of Canada for use there in 
producing the spirituous beverages may be subject to such verification 
as deemed necessary by the port director.
    (e) Origin of rum used in production of the spirituous beverage--
(1) Origin criteria. In order for a spirituous beverage covered by this 
section to be entitled to duty-free entry under the CBI, the rum used 
in producing the spirituous beverage in the territory of Canada must be 
wholly the growth, product, or manufacture either of a beneficiary 
country under the CBI or of the U.S. Virgin Islands, or must constitute 
a new or different article of commerce that was produced or 
manufactured in a beneficiary country or in the U.S. Virgin Islands. 
Such rum will not be considered to have been grown, produced, or 
manufactured in a beneficiary country or in the U.S. Virgin Islands by 
virtue of having merely undergone blending, combining or packaging 
operations, or mere dilution with water or mere dilution with another 
substance that does not materially alter the characteristics of the 
product.
    (2) Evidence of origin of rum--(i) Declaration. The importer must 
be prepared to submit directly to the port director, if requested, a 
declaration prepared and signed by the person who produced or 
manufactured the rum, affirming that the rum is the growth, product or 
manufacture of a beneficiary country or of the U.S. Virgin Islands. 
While no particular form is prescribed for the declaration, it must 
include all pertinent information concerning the processing operations 
by which the rum was produced or manufactured, the address of the 
producer or manufacturer, the title of the party signing the 
declaration, and the date it is signed.
    (ii) Records supporting declaration. The supporting records, 
including those production records, that are necessary for the 
preparation of the declaration must also be available for submission to 
the port director if requested. The declaration and any supporting 
evidence as to the origin of the rum may be subject to such 
verification as deemed necessary by the port director.
    (f) Canadian processor declaration; supporting documentation. (1) 
Canadian processor declaration. The importer must be prepared to submit 
directly to the port director, if requested, a declaration prepared by 
the person who produced the spirituous beverage(s) in Canada, setting 
forth all pertinent information concerning the production of the 
beverages. The declaration will be in substantially the following form:
    I, -------- declare that the spirituous beverages here specified 
are the products that were produced by me (us), as described below, 
with the use of rum that was received by me (us); that the rum used in 
producing the beverages was received by me (us) on
    -------- (date), from -------- (name and address of owner or 
exporter in the beneficiary country or in the U.S. Virgin Islands, as 
applicable); and that such rum accounts for at least 90 percent of the 
alcoholic content by volume, as shown below, of each spirituous 
beverage so produced.

------------------------------------------------------------------------
                                                             Alcoholic
                                                            content of
                                       Description of        products;
         Marks and numbers             products and of       alcoholic
                                         processing         content (%)
                                                           attributable
                                                            to rum \1\
------------------------------------------------------------------------
                                    ....................  ..............
                                    ....................  ..............

[[Page 62884]]

 
                                    ....................  ..............
------------------------------------------------------------------------
\1\ The production records must establish, for each lot of beverage
  produced, the quantity of rum the growth, product or manufacture of a
  CBI beneficiary country or of the U.S. Virgin Islands under 19 U.S.C.
  2703(a)(6) that is used in producing the finished beverage; the
  alcoholic content by volume of the finished beverage; and the
  alcoholic content by volume of the finished beverage, expressed as a
  percentage, that is attributable to the qualifying rum. If rum from
  two or more qualifying sources (e.g., rum the growth, product or
  manufacture of a CBI beneficiary country or of the U.S. Virgin Islands
  and other rum the growth, product or manufacture of another CBI
  country) are used in processing the beverage, the alcoholic content
  requirement may be met by aggregating the alcoholic content of the
  finished beverage that is attributable to rum from each of the
  qualifying sources used in processing the finished beverage, as
  reflected in the production records.

Date-------------------------------------------------------------------
Address----------------------------------------------------------------
Signature--------------------------------------------------------------
Title------------------------------------------------------------------

    (2) Availability of supporting documents. The information, 
including any supporting documents and records, necessary for the 
preparation of the declaration, as described in paragraph (f)(1) of 
this section, must be available for submission to the port director, if 
requested. The declaration and any supporting evidence may be subject 
to such verification as deemed necessary by the port director. The 
specific documentary evidence necessary to support the declaration 
consists of those documents and records which satisfactorily establish:
    (i) The receipt of the rum by the Canadian processor, including the 
date of receipt and the name and address of the party from whom the rum 
was received (the owner or exporter in the beneficiary country or the 
U.S. Virgin Islands); and
    (ii) For each lot of beverage produced and included in the 
declaration, the specific identification of the production lot(s) 
involved; the quantity of qualifying rum that is used in producing the 
finished beverage, including a description of the processing and of the 
finished products; the alcoholic content by volume of the finished 
beverage; and the alcoholic content by volume of the finished beverage, 
expressed as a percentage, that is attributable to the qualifying rum.
    (g) Importer system for review of necessary recordkeeping. The 
importer will establish and implement a system of internal controls 
which demonstrate that reasonable care was exercised in its claim for 
duty-free treatment under the CBI. These controls should include tests 
to assure the accuracy and availability of records that establish:
    (1) The origin of the rum;
    (2) The direct shipment of the rum from a beneficiary country or 
from the U.S. Virgin Islands to Canada;
    (3) The alcohol content of the finished beverage imported from 
Canada; and
    (4) The direct shipment of the finished beverage from Canada to the 
United States.
    (h) Submission of documents to Customs. The importer must be 
prepared to submit directly to the port director, if requested, those 
documents and/or supporting records as described in paragraphs (d), (e) 
and (f) of this section, for a period of 5 years from the date of entry 
of the related spirituous beverages under section 213(a)(6) of the 
Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(a)(6)), as 
provided in Sec.  163.4(a) of this chapter. If requested, the importer 
must submit such documents and/or supporting records to the port 
director within 60 calendar days of the date of the request or such 
additional period as the port director may allow for good cause shown.

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 revising the listing for 
Sec.  10.199 under section IV to read as follows:

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

* * * * *
    IV. * * *


Sec.  10.199  Documents, etc. required for duty-free entry of 
spirituous beverages produced in Canada from CBI rum, declaration of 
Canadian processor (plus supporting information).

* * * * *

Robert C. Bonner,
Commissioner of Customs.

    Approved: October 3, 2002.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 02-25654 Filed 10-8-02; 8:45 am]
BILLING CODE 4820-02-P