[Federal Register Volume 68, Number 57 (Tuesday, March 25, 2003)]
[Proposed Rules]
[Pages 14478-14500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6867]



[[Page 14477]]

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Part II





Department of the Treasury





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Customs Service



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19 CFR Parts 10 and 163



Implementation of the Andean Trade Promotion and Drug Eradication Act; 
Proposed Rule

  Federal Register / Vol. 68, No. 57 / Tuesday, March 25, 2003 / 
Proposed Rules  

[[Page 14478]]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 10 and 163

[T.D. 03-16]
RIN 1515-AD19


Implementation of the Andean Trade Promotion and Drug Eradication 
Act

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 Andean 
countries contained in Title XXXI of the Trade Act of 2002. The trade 
benefits under Title XXXI, also referred to as the Andean Trade 
Promotion and Drug Eradication Act (the ATPDEA), apply to Andean 
countries specifically designated by the President for ATPDEA purposes. 
The ATPDEA trade benefits involve the entry of specific apparel and 
other textile articles free of duty and free of any quantitative 
restrictions, limitations, or consultation levels, the extension of 
duty-free treatment to specified non-textile articles normally excluded 
from duty-free treatment under the Andean Trade Preference Act (ATPA) 
program if the President finds those articles to be not import-
sensitive in the context of the ATPDEA, and the entry of certain 
imports of tuna free of duty and free of any quantitative restrictions. 
The regulatory amendments contained in this document reflect and 
clarify the statutory standards for the trade benefits under the ATPDEA 
and also include specific documentary, procedural and other related 
requirements that must be met in order to obtain those benefits.

DATES: Interim rule effective March 25, 2003; comments must be 
submitted by May 27, 2003.

ADDRESSES: Written comments are to be addressed to the U.S. Customs 
Service, Office of Regulations and Rulings, Attention: Regulations 
Branch, 1300 Pennsylvania Avenue, NW., Washington, DC 20229. Submitted 
comments may be inspected at U.S. Customs Service, 799 9th Street, NW., 
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Operational issues regarding textiles: 
Robert Abels, Office of Field Operations (202-927-1959).
    Other operational issues: Leon Hayward, Office of Field Operations 
(202-927-3271). Legal issues regarding textiles: Cynthia Reese, Office 
of Regulations and Rulings (202-572-8790).
    Other legal issues: Craig Walker, Office of Regulations and Rulings 
(202-572-8810).

SUPPLEMENTARY INFORMATION:

Background

Andean Trade Promotion and Drug Eradication Act

    On August 6, 2002, the President signed into law the Trade Act of 
2002 (the ``Act''), Pub. L. 107-210, 116 Stat. 933. Title XXXI of the 
Act concerns trade benefits for Andean countries, is referred to in the 
Act as the ``Andean Trade Promotion and Drug Eradication Act'' (the 
``ATPDEA''), and consists of sections 3101 through 3108. This document 
specifically concerns the trade benefit provisions of section 3103 of 
the Act which is headed ``articles eligible for preferential 
treatment.''
    Subsection (a) of section 3103 of the Act amends section 204 of the 
Andean Trade Preference Act (the ATPA, codified at 19 U.S.C. 3201-
3206). The ATPA is a duty preference program that applies to exports 
from those Andean region countries that have been designated by the 
President as program beneficiaries. The origin and related rules for 
eligibility for duty-free treatment under the ATPA are similar to those 
under the older 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), and, as in the case of the CBI, all 
articles are eligible for duty-free treatment under the ATPA (that is, 
they do not have to be specially designated as eligible by the 
President) except those articles that are specifically excluded under 
the statute.
    The changes to section 204 of the ATPA made by subsection (a) of 
section 3103 of the Act involve the following: (1) The removal of 
section 204(c) which provided for the application of reduced duty rates 
(rather than duty-free treatment) for certain handbags, luggage, flat 
goods, work gloves, and leather wearing apparel, with a consequential 
redesignation of subsections (d) through (g) as (c) through (f), 
respectively; and (2) a revision of section 204(b). Prior to the 
amendment effected by subsection (a) of section 3103 of the Act, 
section 204(b) of the ATPA was headed ``exceptions to duty-free 
treatment'' and consisted only of a list of eight specific products or 
groups of products excluded from ATPA duty-free treatment.
    As a result of the amendment made by subsection (a) of section 3103 
of the Act, section 204(b) of the ATPA now is headed ``exceptions and 
special rules'' and consists of six principal paragraphs. These six 
paragraphs are discussed below.
Paragraphs (1) and (2): Articles That Are Not Import-Sensitive and 
Excluded Articles
    Paragraph (1) of amended section 204(b) is headed ``certain 
articles that are not import-sensitive'' and provides that the 
President may proclaim duty-free treatment under the ATPA for any 
article described in subparagraph (A), (B), (C), or (D) that is the 
growth, product, or manufacture of an ATPDEA beneficiary country, that 
is imported directly into the customs territory of the United States 
from an ATPDEA beneficiary country, and that meets the requirements of 
section 204, if the President determines that the article is not 
import-sensitive in the context of imports from ATPDEA beneficiary 
countries. Subparagraphs (A), (B), (C), and (D) cover, respectively:
    1. Footwear not designated at the time of the effective date of the 
ATPA (that is, December 4, 1991) as eligible articles for the purpose 
of the Generalized System of Preferences (the GSP, Title V of the Trade 
Act of 1974, codified at 19 U.S.C. 2461-2467);
    2. Petroleum, or any product derived from petroleum, provided for 
in headings 2709 and 2710 of the Harmonized Tariff Schedule of the 
United States (HTSUS);
    3. 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
    4. 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 GSP.
    Paragraph (2) of amended section 204(b) is headed ``exclusions'' 
and provides that, subject to paragraph (3), duty-free treatment under 
the ATPA may not be extended to the following:
    1. Textile and apparel articles which were not eligible articles 
for purposes of the ATPA on January 1, 1994, as the ATPA was in effect 
on that date;
    2. Rum and tafia classified in subheading 2208.40 of the HTSUS;
    3. Sugars, syrups, and sugar-containing products subject to over-
quota duty rates under applicable tariff-rate quotas; and

[[Page 14479]]

    4. Tuna prepared or preserved in any manner in airtight containers, 
except as provided in paragraph (4).
    The effect of new paragraphs (1) and (2) is to divide the former 
section 204(b) list of eight types of products excluded from ATPA duty-
free treatment into two groups of four each. The four types of products 
covered by paragraph (1) would no longer be excluded from ATPA duty-
free treatment but rather would be eligible for that treatment, 
provided that the President makes the appropriate negative import 
sensitivity determination. For these products (which include the 
handbags, luggage, flat goods, work gloves, and leather wearing apparel 
to which reduced duty rates previously applied under removed section 
204(c)), the country of origin and value-content and related 
requirements under section 204(a) of the ATPA and the regulations 
thereunder would apply. The four types of products covered by paragraph 
(2) would remain as exclusions from duty-free treatment except as 
otherwise provided in paragraph (3) in the case of certain apparel and 
textile articles and paragraph (4) in the case of certain tuna 
products, and the exclusion in the case of sugar and sugar products has 
been reworded to refer to tariff-rate quota applicability rather than 
HTSUS classification. Paragraphs (3) through (6) of amended section 
204(b), as discussed below, are entirely new provisions.
Paragraph (3): Preferential Treatment of Textile Articles
    Paragraph (3) of amended section 204(b) is headed ``apparel 
articles and certain textile articles.'' Paragraph (3)(A) provides that 
apparel articles that are imported directly into the customs territory 
of the United States from an ATPDEA beneficiary country shall enter the 
United States free of duty and free of any quantitative restrictions, 
limitations, or consultation levels, but only if those articles are 
described in subparagraph (B), which states that the apparel articles 
referred to in subparagraph (A) are the following:
    1. Apparel articles sewn or otherwise assembled in one or more 
ATPDEA beneficiary countries, or the United States, or both, 
exclusively from any one or any combination of the following [clause 
(i)]:
    a. Fabrics or fabric components wholly formed, or components knit-
to-shape, in the United States, from yarns wholly formed in the United 
States or one or more ATPDEA beneficiary countries (including fabrics 
not formed from yarns, if those fabrics are classifiable under heading 
5602 or 5603 of the HTSUS and are formed in the United States). Apparel 
articles shall qualify under this subclause only if all dyeing, 
printing, and finishing of the fabrics from which the articles are 
assembled, if the fabrics are knit fabrics, is carried out in the 
United States. Apparel articles shall qualify under this subclause only 
if all dyeing, printing, and finishing of the fabrics from which the 
articles are assembled, if the fabrics are woven fabrics, is carried 
out in the United States [subclause (I)];
    b. Fabrics or fabric components formed or components knit-to-shape, 
in one or more ATPDEA beneficiary countries, from yarns wholly formed 
in one or more ATPDEA beneficiary countries, if those fabrics 
(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 ATPDEA beneficiary countries) or components are in chief 
value of llama, alpaca, or vicuna [subclause (II)];
    c. Fabrics or yarns, to the extent that apparel articles of those 
fabrics or yarns would be eligible for preferential treatment, without 
regard to the source of the fabrics or yarns, under Annex 401 of the 
North American Free Trade Agreement (NAFTA) [subclause (III)]; and
    d. Fabrics or yarns, to the extent that the President has 
determined that the fabrics or yarns cannot be supplied by the domestic 
industry in commercial quantities in a timely manner and has proclaimed 
the treatment provided under clause (i)(III) [clause (ii)];
    2. Apparel articles sewn or otherwise assembled in one or more 
ATPDEA beneficiary countries from fabrics or from fabric components 
formed or from components knit-to-shape in one or more ATPDEA 
beneficiary countries from yarns wholly formed in the United States or 
one or more ATPDEA beneficiary countries (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 ATPDEA beneficiary 
countries), whether or not the apparel articles are also made from any 
of the fabrics, fabric components formed, or components knit-to-shape 
described in clause (i) (unless the apparel articles are made 
exclusively from any of the fabrics, fabric components formed, or 
components knit-to-shape described in clause (i)). For these articles, 
preferential treatment starts on October 1, 2002, and extends for each 
of the four succeeding 1-year periods, subject to the application of 
annual quantitative limits expressed in square meter equivalents and 
with an equal percentage increase in the limit for each succeeding year 
[clause (iii)];
    3. A handloomed, handmade, or folklore textile or apparel article 
of an ATPDEA beneficiary country that the President and representatives 
of the ATPDEA 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 [clause (iv)]; and
    4. 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 ATPDEA beneficiary countries, or both, but excluding 
articles entered under clause (i), (ii), (iii), or (iv) [clause 
(v)(I)]. However, during each of four 1-year periods starting on 
October 1, 2003, the articles in question are eligible for preferential 
treatment under paragraph (3) only if the aggregate cost of fabrics 
(exclusive of all findings and trimmings) formed in the United States 
that are used in the production of all such articles of a producer or 
an entity controlling production that are entered and eligible under 
clause (v)(I) during the preceding 1-year period is at least 75 percent 
of the aggregate declared customs value of the fabric (exclusive of all 
findings and trimmings) contained in all such articles of that producer 
or entity that are entered and eligible under clause (v)(I) during the 
preceding 1-year period [clause (v)(II)]; the 75 percent standard rises 
to 85 percent for a producer or entity controlling production whose 
articles are found by Customs to have not met the clause (v)(II) 75 
percent standard in the preceding year [clause (v)(III)].
    In addition to the articles described above, paragraph (3)(B) 
provides for preferential treatment of the following non-apparel 
textile articles:
    1. Textile luggage assembled in an ATPDEA 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 [clause (vii)(I)]; and
    2. Textile luggage assembled from fabric cut in an ATPDEA 
beneficiary country from fabric wholly formed in the United States from 
yarns wholly formed in the United States [clause (vii)(II)].
    Clause (vi) under paragraph (3) sets forth special rules that apply 
for purposes of determining the eligibility of articles for 
preferential treatment

[[Page 14480]]

under paragraph (3). These special rules are as follows:
    1. Clause (vi)(I) sets forth a rule regarding the treatment of 
findings and trimmings. It provides that an article otherwise eligible 
for preferential treatment under paragraph (3) 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, zippers (including zipper tapes), 
and labels.
    2. Clause (vi)(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 
(3) 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. Clause (vi)(III) sets forth a de minimis rule which provides 
that an article that would otherwise be ineligible for preferential 
treatment under paragraph (3) because the article contains yarns not 
wholly formed in the United States or in one or more APTDEA beneficiary 
countries will not be ineligible for that treatment if the total weight 
of all those yarns is not more than 7 percent of the total weight of 
the good.
    4. Finally, clause (vi)(IV) sets forth a special origin rule that 
provides that an article otherwise eligible for preferential treatment 
under clause (i) or clause (iii) 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 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 (4): Preferential Treatment of Tuna
    Paragraph (4) of amended section 204(b) concerns the preferential 
treatment of tuna. Paragraph (4)(A) provides for the entry in the 
United States, free of duty and free of any quantitative restrictions, 
of tuna that is harvested by United States vessels or ATPDEA 
beneficiary country vessels, that is prepared or preserved in any 
manner, in an ATPDEA beneficiary country, in foil or other flexible 
airtight containers weighing with their contents not more than 6.8 
kilograms each, and that is imported directly into the customs 
territory of the United States from an ATPDEA beneficiary country. 
Paragraph (4)(B)(i) defines a ``United States vessel'' for purposes of 
paragraph (4)(A) as a vessel having a certificate of documentation with 
a fishery endorsement under chapter 121 of title 46 of the United 
States Code. Paragraph (4)(B)(ii) defines an ``ATPDEA vessel'' for 
purposes of paragraph (4)(A) as a vessel (1) which is registered or 
recorded in an ATPDEA beneficiary country, (2) which sails under the 
flag of an ATPDEA beneficiary country, (3) which is at least 75 percent 
owned by nationals of an ATPDEA beneficiary country or by a company 
having its principal place of business in an ATPDEA beneficiary 
country, of which the manager or managers, chairman of the board of 
directors or of the supervisory board, and the majority of the members 
of those boards are nationals of an ATPDEA beneficiary country and of 
which, in the case of a company, at least 50 percent of the capital is 
owned by an ATPDEA beneficiary country or by public bodies or nationals 
of an ATPDEA beneficiary country, (4) of which the master and officers 
are nationals of an ATPDEA beneficiary country, and (5) of which at 
least 75 percent of the crew are nationals of an ATPDEA beneficiary 
country.
Paragraph (5): Customs Procedures
    Paragraph (5) of amended section 204(b) is entitled ``Customs 
procedures'' and sets forth regulatory standards for purposes of 
preferential treatment under paragraph (1), (3), or (4). 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 ATPDEA beneficiary 
country, and sets forth the responsibility of Customs regarding the 
study of, and reporting to Congress on, cooperative and other actions 
taken by each ATPDEA beneficiary country to prevent transshipment and 
circumvention in the case of textile and apparel goods. The specific 
provisions under paragraph (5) that require regulatory treatment in 
this document are the following:
    1. Paragraph (5)(A)(i) provides that any importer that claims 
preferential treatment under paragraph (1), (3), or (4) 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 
(5)(A)(i) concerns the use of a Certificate of Origin and specifically 
requires that 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 (5)(B) provides that the Certificate of Origin that 
otherwise would be required pursuant to the provisions of paragraph 
(5)(A)(i) will not be required in the case of an article imported under 
paragraph (1), (3), or (4) 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.
Paragraph (6): Definitions
    Paragraph (6) of amended section 204(b) sets forth a number of 
definitions that apply for purposes of section 204(b). These 
definitions include, in paragraph (6)(B), a definition of ``ATPDEA 
beneficiary country'' as any ``beneficiary country,'' as defined in 
section 203(a)(1) of the ATPA, which the President designates as an 
ATPDEA beneficiary country, taking into account the criteria contained 
in sections 203(c) and (d) and other appropriate criteria, including 
those specified under new paragraph (6)(B) of amended section 204(b).
    On October 31, 2002, the President signed Proclamation 7616 
(published in the Federal Register at 67 FR 67283 on

[[Page 14481]]

November 5, 2002) to implement the new trade benefit provisions of 
section 3103 of the Act. The Annex to that Proclamation set forth a 
number of modifications to the HTSUS to accommodate the ATPDEA program, 
and those HTSUS changes were also the subject of a technical 
corrections document prepared by the Office of the United States Trade 
Representative and published in the Federal Register (67 FR 79954) on 
December 31, 2002.
    This document sets forth, on an interim basis, amendments to the 
Customs Regulations to implement those new trade benefit provisions and 
to conform the existing ATPA implementing regulations to those 
statutory changes. These regulatory changes are discussed below.

Section-by-Section Discussion of Interim Amendments

Sections 10.201 and 10.202 and Removal of Sec.  10.208

    In the existing ATPA implementing regulations, Sec.  10.208 is 
removed in order to reflect the removal of paragraph (c) from section 
204 of the ATPA, the cross-reference in the introductory text of Sec.  
10.202 is modified to reflect that removal, and Sec.  10.201 is revised 
to reflect the removal of that reduced-duty provision and to refer to 
new Sec. Sec.  10.241-10.248 and 10.251-10.257 discussed below. In 
addition, paragraph (b) of Sec.  10.202 is amended by recasting the 
list of articles excluded from the ATPA to reflect the terms of 
paragraph (2) of amended section 204(b); the articles listed in 
paragraph (1) of amended section 204(b) are dealt with in new 
Sec. Sec.  10.251-10.257.

New Sec. Sec.  10.241 Through 10.248

    New Sec. Sec.  10.241 through 10.248 are intended to implement 
those apparel and other textile article preferential treatment 
provisions within paragraphs (3), (5) and (6) of amended section 204(b) 
of the ATPA statute that relate to U.S. import procedures.
    Section 10.241 outlines the statutory context for the new sections 
and is self-explanatory.
    Section 10.242 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 6406.99.15 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'' and ``sewn or otherwise 
assembled'' in the context of production in one or more ATPDEA 
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)). However, the definition also allows a prior partial 
assembly in the United States, consistent with the overall structure of 
the ATPDEA as reflected in the types of operations allowed under the 
program.
    3. The definition of ``ATPDEA beneficiary country'' is an 
adaptation of, and for purposes of this context is consistent with, the 
definition contained in section 204(b)(6)(B).
    4. The definition of ``chief value'' is based in part on a 
definition of that term which appeared in the General Headnotes to the 
Tariff Schedules of the United States (TSUS), the predecessor to the 
HTSUS, and also relies on the concept of ``value'' used for purposes of 
the finding, trimmings, and interlinings provisions discussed below in 
connection with Sec.  10.243(c).
    5. The definition of ``cut'' in the context of production in one or 
more ATPDEA beneficiary countries provides that all fabric components 
used in the assembly of an article must be cut in ATPDEA beneficiary 
countries except where cutting and partial assembly takes place in the 
United States prior to cutting and assembly in the beneficiary 
countries. The exception in the case of the United States was included 
to ensure consistency with the definition of ``assembled'' and ``sewn 
and assembled'' discussed above (which, by allowing a partial assembly 
in the United States, implies that some cutting also will take place in 
the United States prior to the partial assembly).
    6. The definition of ``luggage'' is based on the definition 
contained in the headnotes of Subpart D of Schedule 7 of the TSUS (the 
current HTSUS contains no definition of luggage).
    7. The definition of ``NAFTA'' reflects the definition contained in 
section 204(b)(6)(C) of the ATPA.
    8. The expression ``wholly formed'' is dealt with in three 
definitions, one with reference to yarns and another with reference to 
fabrics and the third with reference to fabric components, because each 
of these terms is modified by ``wholly formed'' in one or more 
provisions of the statute that specify production processes that must 
be performed in the United States or ATPDEA beneficiary countries. 
These definitions are intended to ensure that all processes essential 
for yarn, fabric, and fabric component formation are performed in the 
United States or ATPDEA beneficiary countries. The following additional 
points are noted regarding these three definitions:
    a. The definition that relates to fabric(s) is based 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 a similar approach is 
used in the definition that relates to yarns. The definition that 
relates to fabric components requires both formation of the fabric and 
formation of the component from that fabric.
    b. The definition of ``wholly formed'' yarns includes references to 
``drawing to fully orient a filament'' and to ending with a yarn or 
``plied yarn.'' The first reference concerns a production process, 
draw-texturing, that is applied to partially oriented yarn (POY) in 
order to fully orient the filament yarn and thus render it suitable for 
use as a yarn; Customs believes that a filament that requires draw-
texturing cannot be considered to be ``wholly formed'' until that 
process is completed. The reference to ending with a ``plied yarn'' 
reflects the position of Customs that a yarn is completed, that is, 
``wholly formed,'' only when it is in the form in which it will be used 
as a yarn to produce a textile product (for example, a fabric or a 
knit-to-shape component); thus, a single ply yarn that will be joined 
with other single ply yarns to create a plied yarn is not wholly formed 
until the plying procedure is completed.
    c. Except in the case of yarns, each definition refers to various 
production processes that ``took place in a single country.'' A 
different approach is taken in the case of yarns because in several 
instances the article descriptions in the ATPDEA statutory and 
regulatory texts expressly refer to yarns wholly formed in one or more 
ATPDEA beneficiary countries. Thus, the ``wholly formed yarns'' 
definition refers to production processes that took place ``in the 
United States or in one or more ATPDEA beneficiary countries'' in order 
to allow for the sharing of yarn production processes among multiple 
beneficiary countries. For example, in the case of a single yarn formed 
in one beneficiary country and plied with other yarns in a second 
beneficiary country, or in the case of POY extruded in one beneficiary 
country and draw-textured in a second beneficiary country, the plied 
yarn and the draw-textured yarn would meet the ``wholly formed'' 
standard for yarns under the ATPDEA program.
    Section 10.243 identifies the articles to which preferential 
treatment applies under paragraph (3) of amended section

[[Page 14482]]

204(b). Paragraph (a) identifies the various groups of apparel and 
other textile articles described under paragraph (3)(B) of the statute 
and includes in the introductory text an ``imported directly'' 
requirement, consistent with the terms of the statute. Paragraph (b) 
sets forth rules regarding dyeing, printing, finishing, and other 
operations. Paragraph (c) covers the special rules contained in 
paragraph (3)(B)(vi) of the statute involving findings and trimmings 
and interlinings of foreign origin, the de minimis rule for yarns, and 
the rule for nylon filament yarn. Paragraph (d) explains what is meant 
by ``imported directly.'' The following specific points are noted 
regarding these regulatory texts:
    1. Paragraph (a)(1) covers the various groups of apparel articles 
specified in paragraphs (3)(B)(i) and (3)(B)(ii) of the statute for 
preferential treatment individually (rather than in combination). 
Paragraph (a)(1)(i) corresponds to paragraph (3)(B)(i)(I) of the 
statute; paragraph (a)(1)(ii) corresponds to paragraph (3)(B)(i)(II) of 
the statute; paragraph (a)(1)(iii) corresponds to paragraph 
(3)(B)(i)(III) of the statute; and paragraph (a)(1)(iv) corresponds to 
paragraph (3)(B)(ii) of the statute. The following additional points 
are noted regarding these paragraph (a)(1) texts:
    a. The regulatory text in paragraph (a)(1)(i) includes the 
provision in paragraph (3)(B)(i)(I) of the statute that any dyeing, 
printing, or finishing of knit or woven fabrics must take place in the 
United States. However, the regulatory text in this context refers to 
knitted ``or crocheted'' fabrics, in order to reflect tariff and trade 
usage, and also includes a reference to ``fabric components produced 
from fabric'' in order to (1) reflect the fact that apparel articles 
are most often assembled from apparel components rather than from 
fabrics and (2) clarify the Customs position that knitting to shape 
does not create a fabric but rather results in the creation of a 
component that is ready for assembly without having gone through a 
fabric stage.
    b. The regulatory text in paragraph (a)(1)(ii) refers to llama, 
alpaca, ``and/or'' vicu[ntilde]a in order to ensure, consistent with 
what Customs believes is the intent, that these three materials may be 
present either singly or in combination with each other (for example, 
as a blend) for purposes of the chief value concept. It should also be 
noted that imported products containing vicu[ntilde]a are subject to 
specific admissibility requirements under regulations administered by 
the Fish and Wildlife Service of the U.S. Department of the Interior; 
those regulations, set forth in 50 CFR part 17, were recently amended 
by a final rule document published in the Federal Register (67 FR 
37695) on May 30, 2002, and questions regarding the admissibility of 
vicu[ntilde]a products under those regulations should be directed to 
the Fish and Wildlife Service.
    c. Paragraph (a)(1)(iii) covers fabrics and yarns that are 
considered to be in ``short supply'' for purposes of Annex 401 of the 
NAFTA (that is, the fabrics or yarns are not required to be originating 
within the meaning of the NAFTA, if those fabrics or yarns undergo the 
specified tariff shift for that article and that article meets all 
other applicable requirements for an originating good). For example, 
sweaters of wool classified under subheading 6110.11.00 of the HTSUS 
that are knit to shape in a NAFTA country from 40 percent non-
originating silk yarn and 60 percent originating wool yarn may qualify 
as originating goods because a tariff shift from silk yarn is allowed 
by the applicable tariff shift rule, but sweaters knit to shape from 40 
percent originating silk yarn and 60 percent non-originating wool yarn 
will not qualify as originating goods because the non-originating wool 
yarn is classified under a heading (5106) from which a tariff shift is 
not allowed. The paragraph (a)(1)(iii) text also includes a 
parenthetical exclusion reference regarding articles classifiable under 
subheading 6212.10 of the HTSUS (that is, brassieres, which are 
specially treated in paragraph (3)(B)(v)(I) of the statute and 
paragraph (a)(4) of Sec.  10.243 as discussed below). This exclusion 
language is necessary in order to avoid rendering meaningless the 
additional requirements that apply to brassieres under the statute 
(which are covered by Sec.  10.248 as discussed below). Customs notes 
in this regard that the NAFTA Annex 401 rule for articles classified in 
subheading 6212.10 of the HTSUS requires only the performance of 
certain specified production processes (that is, ``both cut (or knit to 
shape) and sewn or otherwise assembled in the territory of one or more 
of the NAFTA parties'') and includes no requirements regarding the 
source of the fabrics or yarns. There is little logic in applying the 
short supply provision to a product where the NAFTA rule makes no 
mention of excluded materials. Thus, Customs believes that brassieres 
of subheading 6212.10, HTSUS, are not covered by paragraph 
(3)(B)(i)(III) of the statute and Sec.  10.243(a)(1)(iii) of the 
regulations.
    2. Paragraph (a)(2) covers combinations of two or more of the 
various groups of apparel articles specified in paragraphs (3)(B)(i) 
and (3)(B)(ii) of the statute. The regulatory text uses the words 
``exclusively from a combination of * * *'' in order to clarify the 
distinction between the combinations allowed under this provision and 
those allowed under the paragraph (a)(7) text discussed below.
    3. Paragraph (a)(3) covers the handloomed, handmade, and folklore 
articles specified in paragraph (3)(B)(iv) of the statute.
    4. Paragraph (a)(4) covers the apparel articles referred to in 
paragraph (3)(B)(v) of the statute and refers specifically to 
``brassieres'' in order to explain the coverage of the HTSUS provision 
referred to in the statute. The regulatory text here reflects only the 
general product description of subclause (I) of paragraph (3)(B)(v) of 
the statute but also includes a cross-reference to new Sec.  10.248, 
discussed below, which treats in detail the 75 and 85 percent U.S.-
formed fabric requirements of subclauses (II) and (III).
    5. Paragraphs (a)(5) and (a)(6) cover the two types of textile 
luggage referred to in paragraphs (3)(B)(vii)(I) and (3)(B)(vii)(II) of 
the statute.
    6. Paragraph (a)(7) covers the apparel articles specified in 
paragraph (3)(B)(iii) of the statute. The text includes a reference to 
articles assembled ``in part but not exclusively'' from any of the 
fabrics or components described in paragraph (a)(1). This language is 
intended, in combination with the use of the word ``exclusively'' in 
paragraph (a)(1), to clarify the effect of the statutory limitation in 
paragraph (3)(B)(iii) regarding the use of fabrics or components 
described in paragraph (3)(B)(i), the intent of which appears to be to 
ensure that there is no overlap (that is, conflict) in product coverage 
between the two statutory provisions at issue.
    7. Paragraph (b)(1) clarifies the Customs position regarding 
dyeing, printing, and finishing operations. In view of the specific 
mention of these processes in regard to knit and woven fabrics in 
paragraph (3)(B)(i)(I) of the statute and Sec.  10.243(a)(1)(i) of the 
regulations, Customs believes that this clarification is necessary to 
explain the status of these processes in other contexts under the 
statute and regulations. The paragraph (b)(1) text provides that these 
processes may be performed on any yarn or fabric or component without 
affecting the eligibility of an article for preferential treatment, 
provided that the dyeing, printing, or finishing is performed only in 
the United States or in an ATPDEA beneficiary country, and subject to 
two conditions. As regards the general

[[Page 14483]]

limitation of these processes to the United States and ATPDEA 
beneficiary countries, Customs believes that this is consistent with 
the overall structure and intent of the ATPDEA which is to benefit U.S. 
and Andean textile producers. The first condition, set forth in 
paragraph (b)(1)(i), reflects the U.S. dyeing, printing, and finishing 
requirement of paragraph (3)(B)(i)(I) of the statute and paragraph 
(a)(1)(i) of the regulatory text as discussed above. The second 
condition, set forth in paragraph (b)(1)(ii), reflects the principle 
that in the case of assembled luggage described in paragraph (a)(5) of 
the regulatory text (paragraph (3)(B)(vii)(I) of the statute), an 
operation that is incidental to the assembly process may be performed 
in an ATPDEA beneficiary country. This provision reflects the terms of 
subheading 9802.00.80, HTSUS, and the regulations under that HTSUS 
provision which include, in 19 CFR 10.16(c), a list of operations not 
considered incidental to assembly.
    8. Paragraph (b)(2) covers post-assembly and other operations (for 
example, embroidering, stone-washing, perma-pressing, garment-dyeing). 
The paragraph provides that these operations will not disqualify an 
otherwise eligible article from preferential treatment, provided that 
the operation is performed in the United States or in an ATPDEA 
beneficiary country and provided that, in the case of assembled luggage 
described in paragraph (a)(5), the operation is incidental to the 
assembly process in an ATPDEA beneficiary country. This paragraph is 
intended to have the same clarifying effect as paragraph (b)(1) 
discussed above.
    9. Paragraph (c)(1) is divided into three parts: Paragraph 
(c)(1)(i) reflects the basic findings, trimmings, interlinings, and de 
minimis rules of paragraphs (3)(B)(vi)(I)-(III) of the statute; 
paragraph (c)(I)(ii) sets forth definitions of the terms ``cost'' and 
``value'' as used in these provisions; and paragraph (c)(1)(iii) is 
intended to clarify the relationship between findings and trimmings on 
the one hand and yarns on the other hand for purposes of applying the 
25 percent by value and 7 percent by weight limitations under the 
statute. The following additional points are noted regarding these 
paragraph (c)(1) texts:
    a. In the first sentence of paragraph (c)(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 
(c)(1)(i)(A), the comma appearing in the statutory text between 
``decorative lace'' and ``trim'' has been removed to avoid an ambiguity 
between the meanings of ``trimmings'' and ``trim.'' Also in the second 
sentence of paragraph (c)(1)(i)(A), the words ``zippers, including 
zipper tapes and labels'' in paragraph (3)(B)(vi)(I) of the statute 
have been replaced with the words ``zippers (including zipper tapes), 
and 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.
    b. A separate paragraph (c)(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 (3)(B)(vi)(II)(aa) of the statute.
    c. The definitions of ``cost'' and ``value'' in paragraph 
(c)(1)(ii) are derived primarily from the regulations that apply to 
components and materials under subheading 9802.00.80, HTSUS (in 
particular, 19 CFR 10.17), and under the ATPA regulations (in 
particular, 19 CFR 10.206(d)(3)).
    d. As regards paragraph (c)(1)(iii), Customs believes that some 
clarification is appropriate in this context because sometimes a 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 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 (c)(1)(iii) a foreign yarn that is used in an article as a 
finding or trimming would be subject to the 25 percent by value 
limitation rather than the 7 percent by weight limitation.
    10. In paragraph (c)(2), which sets forth the special rule for 
nylon filament yarn of paragraph (3)(B)(vi)(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.
    11. The explanation of ``imported directly'' in paragraph (d) 
follows the text used in Sec.  10.204 of the ATPA implementing 
regulations (19 CFR 10.204) but incorporates editorial changes to 
reflect an ATPDEA context.
    Section 10.244 prescribes the use of a Certificate of Origin and 
thus reflects the regulatory mandate contained in paragraph (5)(A)(i) 
of amended section 204(b). 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 (3)(B) of 
amended section 204(b) 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 ATPDEA program.
    Section 10.245 sets forth the procedures for filing a claim for 
preferential treatment. Consistent with the mandate in paragraph 
(5)(A)(i) of amended section 204(b) 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 181.21, but includes appropriate changes to conform to the 
current context.
    Section 10.246 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 set 
forth the basic Customs recordkeeping requirements that apply to 
importers and other persons involved in customs transactions. This 
requirement parallels the NAFTA recordkeeping requirement in Sec.  
181.22.
    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)

[[Page 14484]]

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 
ATPDEA purposes.
    4. Paragraph (d) sets forth the circumstances in which a 
Certificate of Origin is not required. Consistent with the terms of 
paragraph (5)(B) of amended section 204(b), this regulatory text 
follows the terms of Article 503 of the NAFTA and the NAFTA regulatory 
text contained in 19 CFR 181.22(d).
    Section 10.247 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)), in the 
CBI regulations (19 CFR 10.198(c)), and in the ATPA regulations (19 CFR 
10.207(e)), the text expands on the GSP/CBI/ATPA 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 Customs may need to review for 
purposes of verifying a claim for preferential treatment.
    3. Paragraph (a)(3) refers to evidence to document the use of U.S. 
or ATPDEA beneficiary country materials in an article, because the 
presence of those materials is a key element for some of the articles 
to which preferential treatment applies under the ATPDEA. 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, for example by an 
ATPDEA 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.
    Section 10.248 sets forth additional requirements for preferential 
treatment of brassieres described in paragraph (a)(4) of Sec.  10.243 
and is directed specifically to the 75 and 85 percent U.S.-formed 
fabric requirements of subclauses (II) and (III) of paragraph (3)(B)(v) 
of amended section 204(b). The following points are noted regarding 
this regulatory text:
    1. The definitions of ``cost'' and ``declared customs value'' in 
paragraphs (a)(4) and (a)(5) are based in part on principles reflected 
in the Customs Regulations provisions that apply for purposes of 
subheading 9802.00.80, HTSUS (see, in particular, 19 CFR 10.17) and 
under the ATPA see, in particular, 19 CFR 10.206(d)(3)). Moreover, as 
regards the definition of ``declared customs value'' in paragraph 
(a)(5), Customs notes that because the circumstance in which this 
terminology appears in the statute does not relate to a point at which 
a value is normally declared to U.S. Customs, the text includes 
multiple factual circumstances that reflect all conditions under which 
a value of fabric could exist for purposes of comparison to the 
``cost'' (of fabrics formed in the United States) defined in paragraph 
(a)(4).
    2. Paragraph (b)(1) reflects the 75 and 85 percent U.S. fabric 
content requirements of paragraphs (3)(B)(v)(II) and (III) of the 
statute and also requires the U.S. importer to include a specific 
documentation identifier assigned by Customs (see the discussion of 
paragraph (c) below) when filing the claim for preferential treatment. 
Customs considers a specific documentation identifier necessary. The 
following points are noted regarding this paragraph:
    a. Paragraph (b)(1)(i), which concerns the 75 percent requirement 
of paragraph (3)(B)(v)(II) of the statute, refers to articles that are 
``entered as articles described in Sec.  10.243(a)(4),'' whereas 
paragraph (b)(1)(ii), which concerns the 85 percent requirement of 
paragraph (3)(B)(v)(III) of the statute, refers to articles that 
``conform to the production standards set forth in Sec.  
10.243(a)(4).'' The difference in wording is necessary in order to 
enable the 85 percent standard to operate. Customs notes in this regard 
that if the universe of articles that are looked at for purposes of 
assessing compliance with the 85 percent standard is the same as that 
used for purposes of the 75 percent standard (that is, articles that 
were entered under the HTSUS subheading that applies to articles 
described in paragraph (3)(B)(v)(I) of the statute and Sec.  
10.243(a)(4)), it would be impossible after the end of the first year 
of the program (that is, after September 30, 2003) for a new producer 
or entity to enter the program, or for a producer or entity that failed 
to meet the 75 percent standard in the previous year to reenter the 
program. This is because application of the 85 percent standard 
presupposes a failure to have met the 75 percent standard in the 
preceding year, in which case there could not be any entries in the 
next year under the HTSUS subheading that applies to articles described 
in paragraph (3)(B)(v)(I) of the statute and Sec.  10.243(a)(4) against 
which compliance with the 85 percent standard can be determined. The 
wording in paragraph (b)(1)(ii) of the regulatory text, by referring to 
articles that meet the U.S./Andean cutting and assembly production 
requirement (regardless of the HTSUS subheading under which they are 
entered), is intended to avoid this anomalous result.
    b. The specific identifier, which is to be noted on the entry 
summary or warehouse withdrawal, will serve both the importer and 
Customs. The identifier serves the importer as it is a method to 
indicate that the importer has at the time of entry a specific basis 
for claiming preferential treatment--that either the 75 or the 85 
percent requirement has been met in the preceding year--for the 
brassieres being entered and thus will facilitate the entry and 
clearance process. The identifier serves Customs as it is a means by 
which Customs can tie a particular entry to the fact that a producer of 
brassieres or an entity controlling production of brassieres has met 
the 75 or 85 percent requirement. This is essential in view of the fact 
that compliance with the 75 or 85 percent requirement must be 
established by a producer or by an entity controlling production who 
might not be the U.S. importer.
    3. Paragraph (b)(2) sets forth a number of general rules that 
Customs believes apply under paragraphs (b)(1)(i) and (b)(1)(ii) and 
for purposes of preparing and filing the documentation prescribed under 
paragraph (c) by the producer or entity controlling production. 
Paragraph (b)(2) also includes some examples to illustrate the 
application of those rules.
    4. Paragraph (c) provides that, in order for an importer to be able 
to include the distinct and unique identifier on the entry summary or 
warehouse withdrawal as required under paragraph (b)(1)(iii), the 
producer or entity controlling production must have filed with Customs 
a declaration of compliance with the applicable 75 or 85 percent 
requirement. Paragraph (c) further provides that Customs will advise 
the filer of the identifier assigned to that declaration of compliance 
so that

[[Page 14485]]

the filer may provide that number to the appropriate U.S. importers for 
inclusion on current entry summaries or warehouse withdrawals covering 
articles of the producer or entity controlling production in question. 
So that each affected importer might know what the appropriate 
identifier is prior to the arrival of the goods in the United States, 
paragraph (c) provides that the declaration of compliance should be 
filed at least 10 days prior to the date of the first shipment of the 
goods to the United States; Customs believes that this 10-day period 
should afford sufficient time for Customs to assign the identifier to 
the declaration of compliance and provide the identifier to the 
producer or entity controlling production and for the producer or 
entity to then provide it to the appropriate U.S. importer(s). 
Paragraph (c) also provides for the filing of an amended declaration of 
compliance or for following other appropriate procedures if the initial 
filing was based on an estimate because information for the whole year 
was not available at the time of the initial filing and the final data 
differs from the estimate, or if the producer or entity controlling 
production has reason to believe for any other reason that the 
declaration of compliance that was filed contained erroneous 
information. Finally, paragraph (c) identifies the specific Customs 
office at which the filing must take place and prescribes the form the 
declaration of compliance must take and includes instructions for its 
completion.
    5. Paragraph (d) sets forth standards regarding the verification of 
a declaration of compliance and is similar to the rules that apply for 
purposes of verification of ATPDEA preferential treatment claims under 
Sec.  10.247 but with changes to reflect the current context. Paragraph 
(d) also specifies the nature of the accounting books and documents 
that Customs expects to see when verifying the statements made on a 
declaration of compliance. Finally, so that affected U.S. importers 
will know when Customs, after performing a verification of a 
declaration of compliance, has determined that articles of the producer 
or entity controlling production in question failed to meet the 
applicable 75 or 85 percent requirement, paragraph (d) provides that 
Customs will publish a notice of that determination in the Federal 
Register.

New Sec. Sec.  10.251 Through 10.257

    New Sec. Sec.  10.251 through 10.257 are intended to implement 
those non-textile preferential treatment provisions within paragraphs 
(1), (4), (5) and (6) of amended section 204(b) of the ATPA statute 
that relate to U.S. import procedures. In view of the similarities 
between paragraphs (1), (3) and (4) under the statute, in particular as 
regards the use of a Certificate of Origin and related Customs 
procedures, the structure and content of new Sec. Sec.  10.251 through 
10.257 are based on the structure and content used in this document for 
the paragraph (3) textile provisions of new Sec. Sec.  10.241 through 
10.247, but with appropriate changes or variations to reflect the 
paragraphs (1) and (4) statutory context. The following particular 
points are noted regarding the texts of new Sec. Sec.  10.251 through 
10.257:
    1. In Sec.  10.252, the definitions of ``ATPDEA beneficiary country 
vessel'' and ``United States vessel'' (which apply only for purposes of 
preferential treatment of tuna under paragraph (4) of amended section 
204(b)) follow the definitions that appear in paragraph (4)(B) of the 
statute, except that in the first definition the words ``beneficiary 
country'' have been included within the defined term (which in the 
statute reads simply ``ATPDEA vessel'') in order to reflect the wording 
used in the general statutory and regulatory preferential treatment 
rule for tuna.
    2. In Sec.  10.253(a), which identifies the non-textile articles 
eligible for preferential tariff treatment, an ``imported directly'' 
requirement has been included in the introductory text to reflect the 
inclusion of that requirement as a condition of preferential treatment 
in paragraphs (1) and (4) of amended section 204(b). The remainder of 
Sec.  10.253(a) reflects the terms of paragraphs (1)(A)-(D) and (4)(A) 
of the statute.
    3. Section 10.253(b) explains the meaning of ``imported directly.'' 
As in the case of new Sec.  10.243(d) discussed above, the text here 
follows the text used in Sec.  10.204 of the ATPA implementing 
regulations (19 CFR 10.204) but with some editorial changes to reflect 
an ATPDEA context.
    4. Sections 10.253(c) and (d) set forth country of origin criteria 
and value content requirements that apply for purposes of preferential 
treatment for all of the non-textile articles covered by paragraph (1) 
of amended section 204(b), that is, all non-textile articles other than 
tuna to which different standards apply under paragraph (4) of the 
statute. Since paragraph (1) of the statute refers to ``any article 
that * * * meets the requirements of this section,'' Customs believes 
that the country of origin and value content requirements that apply to 
ATPA beneficiary country goods under section 204(a) of the ATPA must 
also apply in the present context. Accordingly, the new Sec. Sec.  
10.253(c) and (d) texts are based on Sec. Sec.  10.205 and 10.206 of 
the ATPA implementing regulations (19 CFR 10.205 and 10.206).
    5. Sections 10.254 through 10.256 follow the basic NAFTA 
Certificate of Origin and preferential treatment claim filing 
procedures (but with modifications to reflect the specific rules that 
apply under amended section 204(b) of the ATPA), including the use of a 
separate Customs Form for the Certificate of Origin rather than setting 
it out in the regulatory texts. Therefore, the Sec.  10.254 text is 
considerably shorter than the text of new Sec.  10.244 discussed above 
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 ATPDEA 
Textile Certificate of Origin prescribed under new Sec.  10.246, the 
ATPDEA Declaration of Compliance for brassieres prescribed under new 
Sec.  10.248, and the ATPDEA Certificate of Origin for tuna and other 
non-textile articles prescribed under new Sec.  10.256.

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.  1.5 of the Treasury Department 
Regulations (31 CFR 1.5), and Sec.  103.11(b) of the 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 Office of Regulations and Rulings, 
U.S. Customs Service, 799 9th Street, NW., Washington, DC. Arrangements 
to inspect submitted comments should be made in advance by calling Mr. 
Joseph Clark at (202) 572-8768.

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

[[Page 14486]]

the preferential treatment proclaimed by the President under the Andean 
Trade Promotion and Drug Eradication Act. Presidential Proclamation 
7616 made that preferential treatment effective with respect to goods 
entered, or withdrawn from warehouse for consumption, as of the date of 
signature, October 31, 2002, and these regulations are needed in order 
for importers to know how to file their claims for preferential 
treatment. 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 1515-0219.
    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 
Sec. Sec.  10.244, 10.245, 10.246, 10.248, 10.254, 10.255, and 10.256. 
This information conforms to requirements in 19 U.S.C. 3203 and is used 
by Customs to determine whether textile and apparel articles and other 
products imported from designated beneficiary countries are entitled to 
preferential treatment under the Andean Trade Promotion and Drug 
Eradication Act. The likely respondents are business organizations 
including importers, exporters, and manufacturers.
    Estimated annual reporting and/or recordkeeping burden: 8,000 
hours.
    Estimated average annual burden per respondent/recordkeeper: 4 
hours.
    Estimated number of respondents and/or recordkeepers: 2,000.
    Estimated annual frequency of responses: 24.
    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., 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

    Andean Trade Preference, Assembly, Bonds, 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 Sec. Sec.  10.201 through 10.207 is 
revised to read, and a new specific authority citation for Sec. Sec.  
10.241 through 10.248 and Sec. Sec.  10.251 through 10.257 is added to 
read, as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 23, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 
1498, 1508, 1623, 1624, 3314;

* * * * *
    Sections 10.201 through 10.207 also issued under 19 U.S.C. 3203;
* * * * *
    Sections 10.241 through 10.248 and Sec. Sec.  10.251 through 
10.257 also issued under 19 U.S.C. 3203.

    2. Section 10.201 is revised to read as follows:


Sec.  10.201  Applicability.

    Title II of Pub. L. 102-182 (105 Stat. 1233), entitled the Andean 
Trade Preference Act (ATPA) and codified at 19 U.S.C. 3201 through 
3206, authorizes the President to proclaim duty-free treatment for all 
eligible articles from any beneficiary country and to designate 
countries as beneficiary countries. The provisions of Sec. Sec.  10.202 
through 10.207 set forth the legal requirements and procedures that 
apply for purposes of obtaining that duty-free treatment for certain 
articles from a beneficiary country which are identified for purposes 
of that treatment in General Note 11, Harmonized Tariff Schedule of the 
United States (HTSUS), and in the ``Special'' rate of duty column of 
the HTSUS. Provisions regarding preferential treatment of apparel and 
other textile articles under the ATPA are contained in Sec. Sec.  
10.241 through 10.248, and provisions regarding preferential treatment 
of tuna and certain other non-textile articles under the ATPA are 
contained in Sec. Sec.  10.251 through 10.257.
    3. In Sec.  10.202, the introductory text is amended by removing 
the reference ``10.208'' and adding, in its place, the reference 
``10.207'', and paragraph (b) is amended by removing paragraphs (b)(1) 
through (b)(8) and adding, in their place, new paragraphs (b)(1) 
through (b)(4) to read as follows:


Sec.  10.202  Definitions.

* * * * *
    (b) * * *
    (1) Textiles and apparel articles which were not eligible articles 
for purposes of the ATPA on January 1, 1994, as the ATPA was in effect 
on that date, except as otherwise provided in Sec. Sec.  10.241 through 
10.248;
    (2) Rum and tafia classified in subheading 2208.40, Harmonized 
Tariff Schedule of the United States;
    (3) Sugars, syrups, and sugar-containing products subject to over-
quota duty rates under applicable tariff-rate quotas; or

[[Page 14487]]

    (4) Tuna prepared or preserved in any manner in airtight 
containers, except as otherwise provided in Sec. Sec.  10.251 through 
10.257.
* * * * *
    4. Section 10.208 is removed.
    5. Part 10 is amended by adding a new center heading followed by 
new Sec. Sec.  10.241 through 10.248 to read as follows:

Apparel and Other Textile Articles Under the Andean Trade Promotion and 
Drug Eradication Act

Sec.
10.241 Applicability.
10.242 Definitions.
10.243 Articles eligible for preferential treatment.
10.244 Certificate of Origin.
10.245 Filing of claim for preferential treatment.
10.246 Maintenance of records and submission of Certificate by 
importer.
10.247 Verification and justification of claim for preferential 
treatment.
10.248 Additional requirements for preferential treatment of 
brassieres.

Apparel and Other Textile Articles Under the Andean Trade Promotion and 
Drug Eradication Act


Sec.  10.241  Applicability.

    Title XXXI of Public Law 107-210 (116 Stat. 933), entitled the 
Andean Trade Promotion and Drug Eradication Act (ATPDEA), amended 
sections 202, 203, 204, and 208 of the Andean Trade Preference Act (the 
ATPA, 19 U.S.C. 3201-3206) to authorize the President to extend 
additional trade benefits to countries that are designated as 
beneficiary countries under the ATPA. Section 204(b)(3) of the ATPA (19 
U.S.C. 3203(b)(3)) provides for the preferential treatment of certain 
apparel and other textile articles from those ATPA beneficiary 
countries which the President designates as ATPDEA beneficiary 
countries. The provisions of Sec. Sec.  10.241 through 10.248 of this 
part set forth the legal requirements and procedures that apply for 
purposes of obtaining preferential treatment pursuant to ATPA section 
204(b)(3) and Subchapter XXI, Chapter 98, HTSUS.


Sec.  10.242  Definitions.

    When used in Sec. Sec.  10.241 through 10.248, 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 6406.99.15 and 6505.90 of the HTSUS.
    Assembled or sewn or otherwise assembled in one or more ATPDEA 
beneficiary countries. ``Assembled'' and ``sewn or otherwise 
assembled'' when used in the context of production of an apparel or 
other textile article in one or more ATPDEA beneficiary countries has 
reference to a joining together of two or more components that occurred 
in one or more ATPDEA beneficiary countries, whether or not a prior 
joining operation was performed on the article or any of its components 
in the United States.
    ATPA. ``ATPA'' means the Andean Trade Preference Act, 19 U.S.C. 
3201-3206.
    ATPDEA beneficiary country. ``ATPDEA beneficiary country'' means a 
``beneficiary country'' as defined in Sec.  10.202(a) for purposes of 
the ATPA which the President also has designated as a beneficiary 
country for purposes of preferential treatment of apparel and other 
textile articles under 19 U.S.C. 3203(b)(3) and which has been the 
subject of a determination by the President or his designee, published 
in the Federal Register, that the beneficiary country has satisfied the 
requirements of 19 U.S.C. 3203(b)(5)(A)(ii).
    Chief value. ``Chief value'' when used with reference to llama, 
alpaca, and vicu[ntilde]a means that the value of those materials 
exceeds the value of any other single textile material in the fabric or 
component under consideration, with the value in each case determined 
by application of the principles set forth in Sec.  10.243(c)(1)(ii).
    Cut in one or more ATPDEA beneficiary countries. ``Cut'' when used 
in the context of production of textile luggage in one or more ATPDEA 
beneficiary countries means that all fabric components used in the 
assembly of the article were cut from fabric in one or more ATPDEA 
beneficiary countries, or were cut from fabric in the United States and 
used in a partial assembly operation in the United States prior to 
cutting of fabric and assembly of the article in one or more ATPDEA 
beneficiary countries, or both.
    Foreign. ``Foreign'' means of a country other than the United 
States or an ATPDEA beneficiary country.
    HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the United 
States.
    Knit-to-shape components. ``Knit-to-shape,'' when used with 
reference to textile components, means components that are knitted or 
crocheted from a yarn directly to a specific shape containing a self-
start edge. Minor cutting or trimming will not affect the determination 
of whether a component is ``knit-to-shape.''
    Luggage. ``Luggage'' means travel goods (such as trunks, hand 
trunks, lockers, valises, satchels, suitcases, wardrobe cases, 
overnight bags, pullman bags, gladstone bags, traveling bags, 
knapsacks, kitbags, haversacks, duffle bags, and like articles designed 
to contain clothing or other personal effects during travel) and brief 
cases, portfolios, school bags, photographic equipment bags, golf bags, 
camera cases, binocular cases, gun cases, occupational luggage cases 
(for example, physicians' cases, sample cases), and like containers and 
cases designed to be carried with the person. The term ``luggage'' does 
not include handbags (that is, pocketbooks, purses, shoulder bags, 
clutch bags, and all similar articles, by whatever name known, 
customarily carried by women or girls). The term ``luggage'' also does 
not include flat goods (that is, small flatware designed to be carried 
on the person, such as banknote cases, bill cases, billfolds, bill 
purses, bill rolls, card cases, change cases, cigarette cases, coin 
purses, coin holders, compacts, currency cases, key cases, letter 
cases, license cases, money cases, pass cases, passport cases, powder 
cases, spectacle cases, stamp cases, vanity cases, tobacco pouches, and 
similar articles).
    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. 3203(b)(3).
    Wholly formed fabric components. ``Wholly formed,'' when used with 
reference to fabric components, means that all of the production 
processes, starting with the production of wholly formed fabric and 
ending with a component that is ready for incorporation into an apparel 
article, took place in a single country.
    Wholly formed fabrics. ``Wholly formed,'' 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.
    Wholly formed yarns. ``Wholly formed,'' when used with reference to 
yarns, means that all of the production processes, starting with the 
extrusion of filament, strip, film, or sheet and including drawing to 
fully orient a filament or slitting a film or sheet into strip, or the 
spinning of all fibers into yarn, or both, and ending with a yarn or

[[Page 14488]]

plied yarn, took place in the United States or in one or more ATPDEA 
beneficiary countries.


Sec.  10.243  Articles eligible for preferential treatment.

    (a) General. Subject to paragraphs (b) and (c) of this section, 
preferential treatment applies to the following apparel and other 
textile articles that are imported directly into the customs territory 
of the United States from an ATPDEA beneficiary country:
    (1) Apparel articles sewn or otherwise assembled in one or more 
ATPDEA beneficiary countries, or in the United States, or in both, 
exclusively from any one of the following:
    (i) Fabrics or fabric components wholly formed, or components knit-
to-shape, in the United States, from yarns wholly formed in the United 
States or in one or more ATPDEA beneficiary countries (including 
fabrics not formed from yarns, if those fabrics are classifiable under 
heading 5602 or 5603 of the HTSUS and are formed in the United States), 
provided that, if the apparel article is assembled from knitted or 
crocheted or woven wholly formed fabrics or from knitted or crocheted 
or woven wholly formed fabric components produced from fabric, all 
dyeing, printing, and finishing of that knitted or crocheted or woven 
fabric or component was carried out in the United States;
    (ii) Fabrics or fabric components formed, or components knit-to-
shape, in one or more ATPDEA beneficiary countries from yarns wholly 
formed in one or more ATPDEA beneficiary countries, if those fabrics 
(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 ATPDEA beneficiary countries) or components are in chief 
value of llama, alpaca, and/or vicu[ntilde]a;
    (iii) Fabrics or yarns, provided that apparel articles (except 
articles classifiable under subheading 6212.10 of the HTSUS) of those 
fabrics or yarns would be considered an originating good under General 
Note 12(t), HTSUS, if the apparel articles had been imported directly 
from Canada or Mexico; or
    (iv) Fabrics or yarns that the President or his designee has 
designated in the Federal Register as fabrics or yarns that cannot be 
supplied by the domestic industry in commercial quantities in a timely 
manner;
    (2) Apparel articles sewn or otherwise assembled in one or more 
ATPDEA beneficiary countries, or in the United States, or in both, 
exclusively from a combination of fabrics, fabric components, knit-to-
shape components or yarns described in two or more of paragraphs 
(a)(1)(i) through (a)(1)(iv) of this section;
    (3) A handloomed, handmade, or folklore apparel or other textile 
article of an ATPDEA beneficiary country that the President or his 
designee and representatives of the ATPDEA 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 ATPDEA beneficiary country;
    (4) Brassieres classifiable under subheading 6212.10 of the HTSUS, 
if both cut and sewn or otherwise assembled in the United States, or in 
one or more ATPDEA beneficiary countries, or in both, other than 
articles entered as articles described in paragraphs (a)(1) through 
(a)(3) and (a)(7) of this section, and provided that any applicable 
additional requirements set forth in Sec.  10.248 are met;
    (5) Textile luggage assembled in an ATPDEA 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;
    (6) Textile luggage assembled in one or more ATPDEA beneficiary 
countries from fabric cut in one or more ATPDEA beneficiary countries 
from fabric wholly formed in the United States from yarns wholly formed 
in the United States; and
    (7) Apparel articles sewn or otherwise assembled in one or more 
ATPDEA beneficiary countries from fabrics or from fabric components 
formed, or from components knit-to-shape, in one or more ATPDEA 
beneficiary countries from yarns wholly formed in the United States or 
in one or more ATPDEA beneficiary countries (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 ATPDEA beneficiary 
countries), including apparel articles sewn or otherwise assembled in 
part but not exclusively from any of the fabrics, fabric components 
formed, or components knit-to-shape described in paragraph (a)(1) of 
this section.
    (b) Dyeing, printing, finishing and other operations--(1) Dyeing, 
printing and finishing operations. Dyeing, printing, and finishing 
operations may be performed on any yarn, fabric, or knit-to-shape or 
other component used in the production of any article described under 
paragraph (a) of this section without affecting the eligibility of the 
article for preferential treatment, provided that the operation is 
performed in the United States or in an ATPDEA beneficiary country and 
not in any other country and subject to the following additional 
conditions:
    (i) In the case of an article described in paragraph (a)(1), 
(a)(2), or (a)(7) of this section that contains a knitted or crocheted 
or woven fabric, or a knitted or crocheted or woven fabric component 
produced from fabric, that was wholly formed in the United States from 
yarns wholly formed in the United States, any dyeing, printing, or 
finishing of that knitted or crocheted or woven fabric or component 
must have been carried out in the United States; and
    (ii) In the case of assembled luggage described in paragraph (a)(5) 
of this section, an operation may be performed in an ATPDEA beneficiary 
country only if that operation is incidental to the assembly process 
within the meaning of Sec.  10.16.
    (2) Other operations. An article described under paragraph (a) of 
this section that is otherwise eligible for preferential treatment will 
not be disqualified from receiving that treatment by virtue of having 
undergone one or more operations such as embroidering, stone-washing, 
enzyme-washing, acid washing, perma-pressing, oven-baking, bleaching, 
garment-dyeing or screen printing, provided that the operation is 
performed in the United States or in an ATPDEA beneficiary country and 
not in any other country. However, in the case of assembled luggage 
described in paragraph (a)(5) of this section, an operation may be 
performed in an ATPDEA beneficiary country without affecting the 
eligibility of the article for preferential treatment only if it is 
incidental to the assembly process within the meaning of Sec.  10.16.
    (c) Special rules for certain component materials--(1) Foreign 
findings, trimmings, interlinings, 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.  10.241 
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, sewing 
thread, hooks and eyes, snaps, buttons, ``bow buds,'' decorative lace 
trim, elastic strips, zippers (including zipper tapes), and labels;
    (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

[[Page 14489]]

``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) Yarns not wholly formed in the United States or in one or more 
ATPDEA beneficiary countries if the total weight of all those yarns is 
not more than 7 percent of the total weight of the article.
    (ii) ``Cost'' and ``value'' defined. The ``cost'' of components and 
the ``value'' of findings and trimmings or interlinings referred to in 
paragraph (c)(1)(i) of this section means:
    (A) The price of the components, findings and trimmings, or 
interlinings when last purchased, f.o.b. port of exportation, as set 
out in the invoice or other commercial documents, or, if the price is 
other than f.o.b. port of exportation:
    (1) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price; or
    (2) If no exportation to an ATPDEA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, less 
the freight, insurance, packing, and other costs incurred in 
transporting the components, findings and trimmings, or interlinings to 
the place of production if included in that price; or
    (B) If the price cannot be determined under paragraph (c)(1)(ii)(A) 
of this section or if Customs finds that price to be unreasonable, all 
reasonable expenses incurred in the growth, production, manufacture, or 
other processing of the components, findings and trimmings, or 
interlinings, including the cost or value of materials and general 
expenses, plus a reasonable amount for profit, and the freight, 
insurance, packing, and other costs, if any, incurred in transporting 
the components, findings and trimmings, or interlinings to the port of 
exportation.
    (iii) Treatment of yarns as findings or trimmings. If any yarns not 
wholly formed in the United States or one or more ATPDEA beneficiary 
countries are used in an article as a finding or trimming described in 
paragraph (c)(1)(i)(A) of this section, the yarns will be considered to 
be a finding or trimming for purposes of paragraph (c)(1)(i) of this 
section.
    (2) Special rule for nylon filament yarn. An article otherwise 
described under paragraph (a)(1)(i) through (iii), (a)(2), or (a)(7) of 
this section will not be ineligible for the preferential treatment 
referred to in Sec.  10.241 because the article contains nylon filament 
yarn (other than elastomeric yarn) that is classifiable in 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 and that 
is entered free of duty from Canada, Mexico, or Israel.
    (d) Imported directly defined. For purposes of paragraph (a) of 
this section, the words ``imported directly'' mean:
    (1) Direct shipment from any ATPDEA beneficiary country to the 
United States without passing through the territory of any country that 
is not an ATPDEA beneficiary country;
    (2) If the shipment is from any ATPDEA beneficiary country to the 
United States through the territory of any country that is not an 
ATPDEA beneficiary country, the articles in the shipment do not enter 
into the commerce of any country that is not an ATPDEA 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 ATPDEA beneficiary country to the 
United States through the territory of any country that is not an 
ATPDEA 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.  10.244  Certificate of Origin.

    (a) General. A Certificate of Origin must be employed to certify 
that an apparel or other textile article being exported from an ATPDEA 
beneficiary country to the United States qualifies for the preferential 
treatment referred to in Sec.  10.241. The Certificate of Origin must 
be prepared by the exporter in the ATPDEA beneficiary country in the 
format specified in paragraph (b) of this section. Where the ATPDEA 
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 8025-01-P

[[Page 14490]]

[GRAPHIC] [TIFF OMITTED] TP25MR03.000

BILLING CODE 8025-01-C
    (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

[[Page 14491]]

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 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 9 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 name of the folklore article or 
should state that the article is handloomed or handmade of handloomed 
fabric;
    (11) Block 9 should be completed if the article described in block 
4 incorporates a fabric or yarn described in preference group C or D 
and should state the name of the fabric or yarn that has been 
considered as being in short supply in the NAFTA or that has been 
designated as not available in commercial quantities in the United 
States. Block 9 also should be completed if preference group E or I 
applies to the article described in block 4 and the article 
incorporates a fabric or yarn described in preference group C or D;
    (12) Block 10 must contain the signature of the exporter or of the 
exporter's authorized agent having knowledge of the relevant facts;
    (13) Block 14 should reflect the date on which the Certificate was 
completed and signed;
    (14) Block 15 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.  10.246(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 14). 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.  10.245  Filing of claim for preferential treatment.

    (a) Declaration. In connection with a claim for preferential 
treatment for an apparel or other textile article described in Sec.  
10.243, the importer must make a written declaration that the article 
qualifies for that treatment. 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.  
10.246(d)(1), the declaration required under this paragraph must be 
based on a Certificate of Origin that has been completed and properly 
executed in accordance with Sec.  10.244, 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.  10.246  Maintenance of records and submission of Certificate by 
importer.

    (a) Maintenance of records. Each importer claiming preferential 
treatment for an article under Sec.  10.245 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 a copy of the Certificate of Origin referred to in Sec.  
10.245(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 an apparel or other textile article under Sec.  10.245(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 
through any electronic data interchange system authorized by Customs 
for that purpose;
    (2) If in writing, 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.  10.244(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;

[[Page 14492]]

    (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 treatment under the ATPDEA.
    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 Sec. Sec.  10.244 through 10.246, 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.  10.247  Verification and justification of claim for preferential 
treatment.

    (a) Verification by Customs. A claim for preferential treatment 
made under Sec.  10.245, including any statements or other information 
contained on a Certificate of Origin submitted to Customs under Sec.  
10.246, 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 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 to document the use of U.S. or ATPDEA beneficiary 
country 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.  10.245, the importer:
    (1) Must have records that explain how the importer came to the 
conclusion that the apparel or other textile 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.  10.243(a). If the importer is claiming that the article 
incorporates fabric or yarn that was wholly formed in the United States 
or in an ATPDEA beneficiary country, the importer must have records 
that identify the producer of the fabric or yarn. A properly completed 
Certificate of Origin in the form set forth in Sec.  10.244(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 ATPDEA beneficiary country to the United States. If the imported 
article was shipped through a country other than an ATPDEA beneficiary 
country and the invoices and other documents from the ATPDEA 
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.  10.243(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 
treatment.


Sec.  10.248  Additional requirements for preferential treatment of 
brassieres.

    (a) Definitions. When used in this section, the following terms 
have the meanings indicated:
    (1) Producer. ``Producer'' means an individual, corporation, 
partnership, association, or other entity or group that exercises 
direct, daily operational control over the production process in an 
ATPDEA beneficiary country.
    (2) Entity controlling production. ``Entity controlling 
production'' means an individual, corporation, partnership, 
association, or other entity or group that is not a producer and that 
controls the production process in an ATPDEA beneficiary country 
through a contractual relationship or other indirect means.
    (3) Fabrics formed in the United States. ``Fabrics formed in the 
United States'' means fabrics that were produced by a weaving, 
knitting, needling, tufting, felting, entangling or other fabric-making 
process performed in the United States.
    (4) Cost. ``Cost'' when used with reference to fabrics formed in 
the United States means:
    (i) The price of the fabrics when last purchased, f.o.b. port of 
exportation, as set out in the invoice or other commercial documents, 
or, if the price is other than f.o.b. port of exportation:
    (A) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price; or
    (B) If no exportation to an ATPDEA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, less 
the freight, insurance, packing, and other costs incurred in 
transporting the fabrics to the place of production if included in that 
price; or
    (ii) If the price cannot be determined under paragraph (a)(4)(i) of 
this section or if Customs finds that price to be unreasonable, all 
reasonable expenses incurred in the growth, production, manufacture, or 
other processing of the fabrics, including the cost or value of 
materials (which includes the cost of non-recoverable scrap generated 
in forming the fabrics) and general expenses, plus a reasonable amount 
for profit, and the freight, insurance, packing, and other costs, if 
any, incurred in transporting the fabrics to the port of exportation.
    (5) Declared customs value. ``Declared customs value'' when used 
with reference to fabric contained in an article means the sum of:

[[Page 14493]]

    (i) The cost of fabrics formed in the United States that the 
producer or entity controlling production can verify; and
    (ii) The cost of all other fabric contained in the article, 
exclusive of all findings and trimmings, determined as follows:
    (A) In the case of fabric purchased by the producer or entity 
controlling production, the f.o.b. port of exportation price of the 
fabric as set out in the invoice or other commercial documents, or, if 
the price is other than f.o.b. port of exportation:
    (1) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price, 
plus expenses for embroidering and dyeing, printing, and finishing 
operations applied to the fabric if not included in that price; or
    (2) If no exportation to an ATPDEA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, plus 
expenses for embroidering and dyeing, printing, and finishing 
operations applied to the fabric if not included in that price, but 
less the freight, insurance, packing, and other costs incurred in 
transporting the fabric to the place of production if included in that 
price;
    (B) In the case of fabric for which the cost cannot be determined 
under paragraph (a)(5)(ii)(A) of this section or if Customs finds that 
cost to be unreasonable, all reasonable expenses incurred in the 
growth, production, or manufacture of the fabric, including the cost or 
value of materials (which includes the cost of non-recoverable scrap 
generated in the growth, production, or manufacture of the fabric), 
general expenses and embroidering and dyeing, printing, and finishing 
expenses, plus a reasonable amount for profit, and the freight, 
insurance, packing, and other costs, if any, incurred in transporting 
the fabric to the port of exportation;
    (C) In the case of fabric components purchased by the producer or 
entity controlling production, the f.o.b. port of exportation price of 
those fabric components as set out in the invoice or other commercial 
documents, less the cost or value of any non-textile materials, and 
less expenses for cutting or other processing to create the fabric 
components other than knitting to shape, that the producer or entity 
controlling production can verify, or, if the price is other than 
f.o.b. port of exportation:
    (1) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price, 
less the cost or value of any non-textile materials, and less expenses 
for cutting or other processing to create the fabric components other 
than knitting to shape, that the producer or entity controlling 
production can verify; or
    (2) If no exportation to an ATPDEA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, less 
the cost or value of any non-textile materials, and less expenses for 
cutting or other processing to create the fabric components other than 
knitting to shape, that the producer or entity controlling production 
can verify, and less the freight, insurance, packing, and other costs 
incurred in transporting the fabric components to the place of 
production if included in that price; and
    (D) In the case of fabric components for which a fabric cost cannot 
be determined under paragraph (a)(5)(ii)(C) of this section or if 
Customs finds that cost to be unreasonable: all reasonable expenses 
incurred in the growth, production, or manufacture of the fabric 
components, including the cost or value of materials (which does not 
include the cost of recoverable scrap generated in the growth, 
production, or manufacture of the fabric components) and general 
expenses, but excluding the cost or value of any non-textile materials, 
and excluding expenses for cutting or other processing to create the 
fabric components other than knitting to shape, that the producer or 
entity controlling production can verify, plus a reasonable amount for 
profit, and the freight, insurance, packing, and other costs, if any, 
incurred in transporting the fabric components to the port of 
exportation.
    (6) Year. ``Year'' means a 12-month period beginning on October 1 
and ending on September 30 but does not include any 12-month period 
that began prior to October 1, 2002.
    (7) Entered. ``Entered'' means entered, or withdrawn from warehouse 
for consumption, in the customs territory of the United States.
    (b) Limitations on preferential treatment--(1) General. During the 
year that begins on October 1, 2003, and during any subsequent year, 
articles of a producer or an entity controlling production that conform 
to the production standards set forth in Sec.  10.243(a)(4) will be 
eligible for preferential treatment only if:
    (i) The aggregate cost of fabrics (exclusive of all findings and 
trimmings) formed in the United States that were used in the production 
of all of those articles of that producer or that entity controlling 
production that are entered as articles described in Sec.  10.243(a)(4) 
during the immediately preceding year was at least 75 percent of the 
aggregate declared customs value of the fabric (exclusive of all 
findings and trimmings) contained in all of those articles of that 
producer or that entity controlling production that are entered as 
articles described in Sec.  10.243(a)(4) during that year; or
    (ii) In a case in which the 75 percent requirement set forth in 
paragraph (b)(1)(i) of this section was not met during a year and 
therefore those articles of that producer or that entity controlling 
production were not eligible for preferential treatment during the 
following year, the aggregate cost of fabrics (exclusive of all 
findings and trimmings) formed in the United States that were used in 
the production of all of those articles of that producer or that entity 
controlling production that conform to the production standards set 
forth in Sec.  10.243(a)(4) and that were entered during the 
immediately preceding year was at least 85 percent of the aggregate 
declared customs value of the fabric (exclusive of all findings and 
trimmings) contained in all of those articles of that producer or that 
entity controlling production that conform to the production standards 
set forth in Sec.  10.243(a)(4) and that were entered during that year; 
and
    (iii) In conjunction with the filing of the claim for preferential 
treatment under Sec.  10.245, the importer records on the entry summary 
or warehouse withdrawal for consumption (Customs Form 7501, column 34), 
or its electronic equivalent, the distinct and unique identifier 
assigned by Customs to the applicable documentation prescribed under 
paragraph (c) of this section.
    (2) Rules of application--(i) General. For purposes of paragraphs 
(b)(1)(i) and (b)(1)(ii) of this section and for purposes of preparing 
and filing the documentation prescribed in paragraph (c) of this 
section, the following rules will apply:
    (A) The articles in question must have been produced in the manner 
specified in Sec.  10.243(a)(4) and the articles in question must be 
entered within the same year;
    (B) Articles that are exported to countries other than the United 
States and are never entered are not to be considered in determining 
compliance with the 75 or 85 percent standard specified in paragraph 
(b)(1)(i) or paragraph (b)(1)(ii) of this section;
    (C) Articles that are entered under an HTSUS subheading other than 
the HTSUS subheading which pertains to articles described in Sec.  
10.243(a)(4) are not to be considered in determining compliance with 
the 75 percent

[[Page 14494]]

standard specified in paragraph (b)(1)(i) of this section;
    (D) For purposes of determining compliance with the 85 percent 
standard specified in paragraph (b)(1)(ii) of this section, all 
articles that conform to the production standards set forth in Sec.  
10.243(a)(4) must be considered, regardless of the HTSUS subheading 
under which they were entered;
    (E) Fabric components and fabrics that constitute findings or 
trimmings are not to be considered in determining compliance with the 
75 or 85 percent standard specified in paragraph (b)(1)(i) or paragraph 
(b)(1)(ii) of this section;
    (F) Beginning October 1, 2003, in order for articles to be eligible 
for preferential treatment in a given year, a producer of, or entity 
controlling production of, those articles must have met the 75 percent 
standard specified in paragraph (b)(1)(i) of this section during the 
immediately preceding year. If articles of a producer or entity 
controlling production fail to meet the 75 percent standard specified 
in paragraph (b)(1)(i) of this section during a year, articles of that 
producer or entity controlling production:
    (1) Will not be eligible for preferential treatment during the 
following year;
    (2) Will remain ineligible for preferential treatment until the 
year that follows a year in which articles of that producer or entity 
controlling production met the 85 percent standard specified in 
paragraph (b)(1)(ii) of this section; and
    (3) After the 85 percent standard specified in paragraph (b)(1)(ii) 
of this section has been met, will again be subject to the 75 percent 
standard specified in paragraph (b)(1)(i) of this section during the 
following year for purposes of determining eligibility for preferential 
treatment in the next year.
    (G) A new producer or new entity controlling production, that is, a 
producer or entity controlling production who did not produce or 
control production of articles that were entered as articles described 
in Sec.  10.243(a)(4) during the immediately preceding year, must first 
establish compliance with the 85 percent standard specified in 
paragraph (b)(1)(ii) of this section as a prerequisite to preparation 
of the declaration of compliance referred to in paragraph (c) of this 
section;
    (H) A declaration of compliance prepared by a producer or by an 
entity controlling production must cover all production of that 
producer or all production that the entity controls for the year in 
question;
    (I) A producer would not prepare a declaration of compliance if all 
of its production is covered by a declaration of compliance prepared by 
an entity controlling production;
    (J) In the case of a producer, the 75 or 85 percent standard 
specified in paragraph (b)(1)(i) or paragraph (b)(1)(ii) of this 
section and the declaration of compliance procedure under paragraph (c) 
of this section apply to all articles of that producer for the year in 
question, even if some but not all of that production is also covered 
by a declaration of compliance prepared by an entity controlling 
production;
    (K) The U.S. importer does not have to be the producer or the 
entity controlling production who prepared the declaration of 
compliance; and
    (L) The exclusion references regarding findings and trimmings in 
paragraph (b)(1)(i) and paragraph (b)(1)(ii) of this section apply to 
all findings and trimmings, whether or not they are of foreign origin.
    (ii) Examples. The following examples will illustrate application 
of the principles set forth in paragraph (b)(2)(i) of this section.

    Example 1.  An ATPDEA beneficiary country producer of articles 
that meet the production standards specified in Sec.  10.243(a)(4) 
in the first year sends 50 percent of that production to ATPDEA 
region markets and the other 50 percent to the U.S. market; the cost 
of the fabrics formed in the United States equals 100 percent of the 
value of all of the fabric in the articles sent to the ATPDEA region 
and 60 percent of the value of all of the fabric in the articles 
sent to the United States. Although the cost of fabrics formed in 
the United States is more than 75 percent of the value of all of the 
fabric used in all of the articles produced, this producer could not 
prepare a valid declaration of compliance because the articles sent 
to the United States did not meet the minimum 75 percent standard.
    Example 2.  A producer sends to the United States in the first 
year three shipments of articles that meet the description in Sec.  
10.243(a)(4); one of those shipments is entered under the HTSUS 
subheading that covers articles described in Sec.  10.243(a)(4), the 
second shipment is entered under the HTSUS subheading that covers 
articles described in Sec.  10.243(a)(7), and the third shipment is 
entered under subheading 9802.00.80, HTSUS. In determining whether 
the minimum 75 percent standard has been met in the first year for 
purposes of entry of articles under the HTSUS subheading that covers 
articles described in Sec.  10.243(a)(4) during the following (that 
is, second) year, consideration must be restricted to the articles 
in the first shipment and therefore must not include the articles in 
the second and third shipments.
    Example 3. A producer in the second year begins production of 
articles that conform to the production standards specified in Sec.  
10.243(a)(4); some of those articles are entered in that year under 
HTSUS subheading 6212.10 and others under HTSUS subheading 
9802.00.80 but none are entered in that year under the HTSUS 
subheading which pertains to articles described in Sec.  
10.243(a)(4) because the 75 percent standard had not been met in the 
preceding (that is, first) year. In this case the 85 percent 
standard applies, and all of the articles that were entered under 
the various HTSUS provisions in the second year must be taken into 
account in determining whether that 85 percent standard has been 
met. If the 85 percent was met in the aggregate for all of the 
articles entered in the second year, in the next (that is, third) 
year articles of that producer may receive preferential treatment 
under the HTSUS subheading which pertains to articles described in 
Sec.  10.243(a)(4).
    Example 4. An entity controlling production of articles that 
meet the description in Sec.  10.243(a)(4) buys for the U.S., 
Canadian and Mexican markets; the articles in each case are first 
sent to the United States where they are entered for consumption and 
then placed in a commercial warehouse from which they are shipped to 
various stores in the United States, Canada and Mexico. 
Notwithstanding the fact that some of the articles ultimately ended 
up in Canada or Mexico, a declaration of compliance prepared by the 
entity controlling production must cover all of the articles rather 
than only those that remained in the United States because all of 
those articles had been entered for consumption.
    Example 5. Fabric is cut and sewn in the United States with 
other U.S. materials to form cups which are joined together to form 
brassiere front subassemblies in the United States, and those front 
subassemblies are then placed in a warehouse in the United States 
where they are held until the following year; during that following 
year all of the front subassemblies are shipped to an ATPDEA 
beneficiary country where they are assembled with elastic strips and 
labels produced in an Asian country and other fabrics, components or 
materials produced in the ATPDEA beneficiary country to form 
articles that meet the production standards specified in Sec.  
10.243(a)(4) and that are then shipped to the United States and 
entered during that same year. In determining whether the entered 
articles meet the minimum 75 or 85 percent standard, the fabric in 
the elastic strips and labels is to be disregarded entirely because 
the strips and labels constitute findings or trimmings for purposes 
of this section, and all of the fabric in the front subassemblies is 
countable because it was all formed in the United States and used in 
the production of articles that were entered in the same year.
    Example 6. An ATPDEA beneficiary country producer's entire 
production of articles that meet the description in Sec.  
10.243(a)(4) is sent to a U.S. importer in two separate shipments, 
one in February and the other in June of the same calendar year; the 
articles shipped in February do not meet the minimum 75 percent 
standard, the articles shipped in June exceed the 85 percent 
standard, and the articles in the two shipments, taken together, do 
meet the 75 percent standard; the articles covered by the February 
shipment are entered for consumption on March 1 of that calendar

[[Page 14495]]

year, and the articles covered by the June shipment are placed in a 
Customs bonded warehouse upon arrival and are subsequently withdrawn 
from warehouse for consumption on November 1 of that calendar year. 
The ATPDEA beneficiary country producer may not prepare a valid 
declaration of compliance covering the articles in the first 
shipment because those articles did not meet the minimum 75 percent 
standard and because those articles cannot be included with the 
articles of the second shipment on the same declaration of 
compliance since they were entered in a different year. However, the 
ATPDEA beneficiary country producer may prepare a valid declaration 
of compliance covering the articles in the second shipment because 
those articles did meet the requisite 85 percent standard which 
would apply for purposes of entry of articles in the following year.
    Example 7. A producer in the second year begins production of 
articles exclusively for the U.S. market that meet the production 
standards specified in Sec.  10.243(a)(4), but the entered articles 
do not meet the requisite 85 percent standard until the third year. 
The producer's articles may not receive preferential treatment 
during the second year because there was no production (and thus 
there were no entered articles) in the immediately preceding (that 
is, first) year on which to assess compliance with the 75 percent 
standard. The producer's articles also may not receive preferential 
treatment during the third year because the 85 percent standard was 
not met in the immediately preceding (that is, second) year. 
However, the producer's articles are eligible for preferential 
treatment during the fourth year based on compliance with the 85 
percent standard in the immediately preceding (that is, third) year.
    Example 8. An entity controlling production (Entity A) uses five 
ATPDEA beneficiary country producers (Producers 1-5), all of which 
produce only articles that meet the description in Sec.  
10.243(a)(4); Producers 1-4 send all of their production to the 
United States and Producer 5 sends 10 percent of its production to 
the United States and the rest to Europe; Producers 1-3 and Producer 
5 produce only pursuant to contracts with Entity A, but Producer 4 
also operates independently of Entity A by producing for several 
U.S. importers, one of which is an entity controlling production 
(Entity B) that also controls all of the production of articles of 
one other producer (Producer 6) which sends all of its production to 
the United States. A declaration of compliance prepared by Entity A 
must cover all of the articles of Producers 1-3 and the 10 percent 
of articles of Producer 5 that are sent to the United States and 
that portion of the articles of Producer 4 that are produced 
pursuant to the contract with Entity A, because Entity A controls 
the production of those articles. There is no need for Producers 1-3 
and Producer 5 to prepare a declaration of compliance because they 
have no production that is not covered by a declaration of 
compliance prepared by an entity controlling production. A 
declaration of compliance prepared by Producer 4 would cover all of 
its production, that is, articles produced for Entity A, articles 
produced for Entity B, and articles produced independently for other 
U.S. importers; a declaration of compliance prepared by Entity B 
must cover that portion of the production of Producer 4 that it 
controls as well as all of the production of Producer 6 because 
Entity B also controls all of the production of Producer 6. Producer 
6 would not prepare a declaration of compliance because all of its 
production is covered by the declaration of compliance prepared by 
Entity B.

    (c) Documentation--(1) Initial declaration of compliance. In order 
for an importer to comply with the requirement set forth in paragraph 
(b)(1)(iii) of this section, the producer or the entity controlling 
production must have filed with Customs, in accordance with paragraph 
(c)(4) of this section, a declaration of compliance with the applicable 
75 or 85 percent requirement prescribed in paragraph (b)(1)(i) or 
(b)(1)(ii) of this section. After filing of the declaration of 
compliance has been completed, Customs will advise the producer or the 
entity controlling production of the distinct and unique identifier 
assigned to that declaration. The producer or the entity controlling 
production will then be responsible for advising each appropriate U.S. 
importer of that distinct and unique identifier for purposes of 
recording that identifier on the entry summary or warehouse withdrawal. 
In order to provide sufficient time for advising the U.S. importer of 
that distinct and unique identifier prior to the arrival of the 
articles in the United States, the producer or the entity controlling 
production should file the declaration of compliance with Customs at 
least 10 calendar days prior to the date of the first shipment of the 
articles to the United States.
    (2) Amended declaration of compliance. If the information on the 
declaration of compliance referred to in paragraph (c)(1) of this 
section is based on an estimate because final year-end information was 
not available at that time and the final data differs from the 
estimate, or if the producer or the entity controlling production has 
reason to believe for any other reason that the declaration of 
compliance that was filed contained erroneous information, within 30 
calendar days after the final year-end information becomes available or 
within 30 calendar days after the date of discovery of the error:
    (i) The producer or the entity controlling production must file 
with the Customs office identified in paragraph (c)(4) of this section 
an amended declaration of compliance containing that final year-end 
information or other corrected information; or
    (ii) If that final year-end information or other corrected 
information demonstrates noncompliance with the applicable 75 or 85 
percent requirement, the producer or the entity controlling production 
must in writing advise both the Customs office identified in paragraph 
(c)(4) of this section and each appropriate U.S. importer of that fact.
    (3) Form and preparation of declaration of compliance--(i) Form. 
The declaration of compliance referred to in paragraph (c)(1) of this 
section may be printed and reproduced locally and must be in the 
following format:

BILLING CODE 8025-01-P

[[Page 14496]]

[GRAPHIC] [TIFF OMITTED] TP25MR03.001

BILLING CODE 8025-01-C
    (ii) Preparation. The following rules will apply for purposes of 
completing the declaration of compliance set forth in paragraph 
(c)(3)(i) of this section:
    (A) In block 1, fill in the year commencing October 1 and ending 
September 30 of the calendar year during which the applicable 75 or 85 
percent standard specified in paragraph (b)(1)(i) or paragraph 
(b)(1)(ii) of this section was met;
    (B) Block 2 should state the legal name and address (including 
country) of the preparer and should also include the preparer's 
importer identification number (see Sec.  24.5 of this chapter), if the 
preparer has one;
    (C) Block 3 should state the legal name and address (including 
country) of the ATPDEA beneficiary country producer if that producer is 
not already identified in block 2. If there is more than one producer, 
attach a list stating the legal name and address (including country) of 
all additional producers;
    (D) Blocks 4 and 5 apply only to articles that were entered during 
the year identified in block 1; and
    (E) In block 7, the signature must be that of an authorized 
officer, employee, agent or other person having knowledge of the 
relevant facts and the date must be the date on which the declaration 
of compliance was completed and signed.
    (4) Filing of declaration of compliance. The declaration of 
compliance referred to in paragraph (c)(1) of this section:
    (i) Must be completed either in the English language or in the 
language of the country in which the articles covered by the 
declaration were produced. If the declaration is completed in a 
language other than English, the producer or the entity controlling 
production must provide to Customs upon request a written English 
translation of the declaration; and
    (ii) Must be filed with the New York Strategic Trade Center, U.S. 
Customs Service, 1 Penn Plaza, New York, New York 10119.
    (d) Verification of declaration of compliance--(1) Verification 
procedure. A declaration of compliance filed under this section will be 
subject to whatever verification Customs deems necessary. In the event 
that Customs for any reason is prevented from verifying the statements 
made on a declaration of compliance, Customs may deny any claim for 
preferential treatment made

[[Page 14497]]

under Sec.  10.245 that is based on that declaration. A verification of 
a declaration of compliance may involve, but need not be limited to, a 
review of:
    (i) All records required to be made, kept, and made available to 
Customs by the importer, the producer, the entity controlling 
production, or any other person under part 163 of this chapter;
    (ii) Documentation and other information regarding all articles 
that meet the production standards specified in Sec.  10.243(a)(4) that 
were exported to the United States and that were entered during the 
year in question, whether or not a claim for preferential treatment was 
made under Sec.  10.245. Those records and other information include, 
but are not limited to, work orders and other production records, 
purchase orders, invoices, bills of lading and other shipping 
documents;
    (iii) Evidence to document the cost of fabrics formed in the United 
States that were used in the production of the articles in question, 
such as purchase orders, invoices, bills of lading and other shipping 
documents, and customs import and clearance documents, work orders and 
other production records, and inventory control records;
    (iv) Evidence to document the cost or value of all fabric other 
than fabrics formed in the United States that were used in the 
production of the articles in question, such as purchase orders, 
invoices, bills of lading and other shipping documents, and customs 
import and clearance documents, work orders and other production 
records, and inventory control records; and
    (v) Accounting books and documents to verify the records and 
information referred to in paragraphs (d)(1)(ii) through (d)(1)(iv) of 
this section. The verification of purchase orders, invoices and bills 
of lading will be accomplished through the review of a distinct audit 
trail. The audit trail documents must consist of a cash disbursement or 
purchase journal or equivalent records to establish the purchase of the 
fabric. The headings in each of these journals or other records must 
contain the date, vendor name, and amount paid for the fabric. The 
verification of production records and work orders will be accomplished 
through analysis of the inventory records of the producer or entity 
controlling production. The inventory records must reflect the 
production of the finished article which must be referenced to the 
original purchase order or lot number covering the fabric used in 
production. In the inventory production records, the inventory should 
show the opening balance of the inventory plus the purchases made 
during the accounting period and the inventory closing balance.
    (2) Notice of determination. If, based on a verification of a 
declaration of compliance filed under this section, Customs determines 
that the applicable 75 or 85 percent standard specified in paragraph 
(b)(1)(i) or paragraph (b)(1)(ii) of this section was not met, Customs 
will publish a notice of that determination in the Federal Register.
    6. Part 10 is amended by adding a new center heading followed by 
new Sec. Sec.  10.251 through 10.257 to read as follows:

Extension of ATPA Benefits to Tuna and Certain Other Non-Textile 
Articles

Sec.
10.251 Applicability.
10.252 Definitions.
10.253 Articles eligible for preferential treatment.
10.254 Certificate of Origin.
10.255 Filing of claim for preferential treatment.
10.256 Maintenance of records and submission of Certificate by 
importer.
10.257 Verification and justification of claim for preferential 
treatment.

Extension of ATPA Benefits to Tuna and Certain Other Non-Textile 
Articles


Sec.  10.251  Applicability.

    Title XXXI of Public Law 107-210 (116 Stat. 933), entitled the 
Andean Trade Promotion and Drug Eradication Act (ATPDEA), amended 
sections 202, 203, 204, and 208 of the Andean Trade Preference Act (the 
ATPA, 19 U.S.C. 3201-3206) to authorize the President to extend 
additional trade benefits to ATPA beneficiary countries that have been 
designated as ATPDEA beneficiary countries. Sections 204(b)(1) and 
(b)(4) of the ATPA (19 U.S.C. 3203(b)(1) and (b)(4)) provide for the 
preferential treatment of certain non-textile articles that were not 
entitled to duty-free treatment under the ATPA prior to enactment of 
the ATPDEA. The provisions of Sec. Sec.  10.251-10.257 of this part set 
forth the legal requirements and procedures that apply for purposes of 
obtaining preferential treatment pursuant to ATPA sections 204(b)(1) 
and (b)(4).


Sec.  10.252  Definitions.

    When used in Sec. Sec.  10.251 through 10.257, the following terms 
have the meanings indicated:
    ATPA. ``ATPA'' means the Andean Trade Preference Act, 19 U.S.C. 
3201-3206.
    ATPDEA beneficiary country. ``ATPDEA beneficiary country'' means a 
``beneficiary country'' as defined in Sec.  10.202(a) for purposes of 
the ATPA which the President also has designated as a beneficiary 
country for purposes of preferential treatment of products under 19 
U.S.C. 3203(b)(1) and (b)(4) and which has been the subject of a 
finding by the President or his designee, published in the Federal 
Register, that the beneficiary country has satisfied the requirements 
of 19 U.S.C. 3203(b)(5)(A)(ii).
    ATPDEA beneficiary country vessel. ``ATPDEA beneficiary country 
vessel'' means a vessel:
    (a) Which is registered or recorded in an ATPDEA beneficiary 
country;
    (b) Which sails under the flag of an ATPDEA beneficiary country;
    (c) Which is at least 75 percent owned by nationals of an ATPDEA 
beneficiary country or by a company having its principal place of 
business in an ATPDEA beneficiary country, of which the manager or 
managers, chairman of the board of directors or of the supervisory 
board, and the majority of the members of those boards are nationals of 
an ATPDEA beneficiary country and of which, in the case of a company, 
at least 50 percent of the capital is owned by an ATPDEA beneficiary 
country or by public bodies or nationals of an ATPDEA beneficiary 
country;
    (d) Of which the master and officers are nationals of an ATPDEA 
beneficiary country; and
    (e) Of which at least 75 percent of the crew are nationals of an 
ATPDEA beneficiary country.
    HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the United 
States.
    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 in the case of tuna described in Sec.  10.253(a)(1) and 
free of duty in the case of any article described in Sec.  
10.253(a)(2).
    United States vessel. ``United States vessel'' means a vessel 
having a certificate of documentation with a fishery endorsement under 
chapter 121 of title 46 of the United States Code.


Sec.  10.253  Articles eligible for preferential treatment.

    (a) General. Preferential treatment applies to any of the following 
articles, provided that the article in question is imported directly 
into the customs territory of the United States from an ATPDEA 
beneficiary country within the meaning of paragraph (b) of this 
section:
    (1) Tuna that is harvested by United States vessels or ATPDEA 
beneficiary country vessels, that is prepared or preserved in any 
manner, in an

[[Page 14498]]

ATPDEA beneficiary country, in foil or other flexible airtight 
containers weighing with their contents not more than 6.8 kilograms 
each; and
    (2) Any of the following articles that the President has determined 
are not import-sensitive in the context of imports from ATPDEA 
beneficiary countries, provided that the article in question meets the 
country of origin and value content requirements set forth in 
paragraphs (c) and (d) of this section:
    (i) Footwear not designated on December 4, 1991, as eligible 
articles for the purpose of the Generalized System of Preferences (GSP) 
under Title V, Trade Act of 1974, as amended (19 U.S.C. 2461 through 
2467);
    (ii) Petroleum, or any product derived from petroleum, provided for 
in headings 2709 and 2710 of the HTSUS;
    (iii) 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
    (iv) 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 GSP.
    (b) Imported directly defined. For purposes of paragraph (a) of 
this section, the words ``imported directly'' mean:
    (1) Direct shipment from any ATPDEA beneficiary country to the 
United States without passing through the territory of any country that 
is not an ATPDEA beneficiary country;
    (2) If the shipment is from any ATPDEA beneficiary country to the 
United States through the territory of any country that is not an 
ATPDEA beneficiary country, the articles in the shipment do not enter 
into the commerce of any country that is not an ATPDEA 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 ATPDEA beneficiary country to the 
United States through the territory of any country that is not an 
ATPDEA 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.
    (c) Country of origin criteria--(1) General. Except as otherwise 
provided in paragraph (c)(2) of this section, an article described in 
paragraph (a)(2) of this section may be eligible for preferential 
treatment if the article is either:
    (i) Wholly the growth, product, or manufacture of an ATPDEA 
beneficiary country; or
    (ii) A new or different article of commerce which has been grown, 
produced, or manufactured in an ATPDEA beneficiary country.
    (2) Exceptions. No article will be eligible for preferential 
treatment by virtue of having merely undergone simple (as opposed to 
complex or meaningful) combining or packaging operations, or mere 
dilution with water or mere dilution with another substance that does 
not materially alter the characteristics of the article. The principles 
and examples set forth in Sec.  10.195(a)(2) will apply equally for 
purposes of this paragraph.
    (d) Value content requirement--(1) General. An article may be 
eligible for preferential treatment only if the sum of the cost or 
value of the materials produced in an ATPDEA beneficiary country or 
countries, plus the direct costs of processing operations performed in 
an ATPDEA beneficiary country or countries, is not less than 35 percent 
of the appraised value of the article at the time it is entered.
    (2) Commonwealth of Puerto Rico, U.S. Virgin Islands and CBI 
beneficiary countries. For the specific purpose of determining the 
percentage referred to in paragraph (d)(1) of this section, the term 
``ATPDEA beneficiary country'' includes the Commonwealth of Puerto 
Rico, the U.S. Virgin Islands, and any CBI beneficiary country as 
defined in Sec.  10.191(b)(1). Any cost or value of materials or direct 
costs of processing operations attributable to the Virgin Islands or 
any CBI beneficiary country must be included in the article prior to 
its final exportation to the United States from an ATPDEA beneficiary 
country as defined in Sec.  10.252.
    (3) Materials produced in the United States. For purposes of 
determining the percentage referred to in paragraph (d)(1) of this 
section, an amount not to exceed 15 percent of the appraised value of 
the article at the time it is entered may be attributed to the cost or 
value of materials produced in the customs territory of the United 
States (other than the Commonwealth of Puerto Rico). The principles set 
forth in paragraph (d)(4)(i) of this section will apply in determining 
whether a material is ``produced in the customs territory of the United 
States'' for purposes of this paragraph.
    (4) Cost or value of materials--(i) ``Materials produced in an 
ATPDEA beneficiary country or countries'' defined. For purposes of 
paragraph (d)(1) of this section, the words ``materials produced in an 
ATPDEA beneficiary country or countries'' refer to those materials 
incorporated in an article which are either:
    (A) Wholly the growth, product, or manufacture of an ATPDEA 
beneficiary country or two or more ATPDEA beneficiary countries; or
    (B) Substantially transformed in any ATPDEA beneficiary country or 
two or more ATPDEA beneficiary countries into a new or different 
article of commerce which is then used in any ATPDEA beneficiary 
country as defined in Sec.  10.252 in the production or manufacture of 
a new or different article which is imported directly into the United 
States. For purposes of this paragraph (d)(4)(i)(B), no material will 
be considered to be substantially transformed into a new or different 
article of commerce by virtue of having merely undergone simple (as 
opposed to complex or meaningful) combining or packaging operations, or 
mere dilution with water or mere dilution with another substance that 
does not materially alter the characteristics of the article. The 
examples set forth in Sec.  10.196(a), and the principles and examples 
set forth in Sec.  10.195(a)(2), will apply for purposes of the 
corresponding context under paragraph (d)(4)(i) of this section.
    (ii) Failure to establish origin. If the importer fails to maintain 
adequate records to establish the origin of a material, that material 
may not be considered to have been grown, produced, or manufactured in 
an ATPDEA beneficiary country or in the customs territory of the United 
States for purposes of determining the percentage referred to in 
paragraph (d)(1) of this section.
    (iii) Determination of cost or value of materials. (A) The cost or 
value of materials produced in an ATPDEA beneficiary country or 
countries or in the customs territory of the United States includes:

[[Page 14499]]

    (1) The manufacturer's actual cost for the materials;
    (2) When not included in the manufacturer's actual cost for the 
materials, the freight, insurance, packing, and all other costs 
incurred in transporting the materials to the manufacturer's plant;
    (3) The actual cost of waste or spoilage, less the value of 
recoverable scrap; and
    (4) Taxes and/or duties imposed on the materials by any ATPDEA 
beneficiary country or by the United States, provided they are not 
remitted upon exportation.
    (B) Where a material is provided to the manufacturer without 
charge, or at less than fair market value, its cost or value will be 
determined by computing the sum of:
    (1) All expenses incurred in the growth, production, or manufacture 
of the material, including general expenses;
    (2) An amount for profit; and
    (3) Freight, insurance, packing, and all other costs incurred in 
transporting the material to the manufacturer's plant.
    (5) Direct costs of processing operations--(i) Items included. For 
purposes of paragraph (d)(1) of this section, the words ``direct costs 
of processing operations'' mean those costs either directly incurred 
in, or which can be reasonably allocated to, the growth, production, 
manufacture, or assembly of the specific merchandise under 
consideration. Those costs include, but are not limited to the 
following, to the extent that they are includable in the appraised 
value of the imported merchandise:
    (A) All actual labor costs involved in the growth, production, 
manufacture, or assembly of the specific merchandise, including fringe 
benefits, on-the-job training, and the cost of engineering, 
supervisory, quality control, and similar personnel;
    (B) Dies, molds, tooling, and depreciation on machinery and 
equipment which are allocable to the specific merchandise;
    (C) Research, development, design, engineering, and blueprint costs 
insofar as they are allocable to the specific merchandise; and
    (D) Costs of inspecting and testing the specific merchandise.
    (ii) Items not included. For purposes of paragraph (d)(1) of this 
section, the words ``direct costs of processing operations'' do not 
include items which are not directly attributable to the merchandise 
under consideration or are not costs of manufacturing the product. 
These include, but are not limited to:
    (A) Profit; and
    (B) General expenses of doing business which either are not 
allocable to the specific merchandise or are not related to the growth, 
production, manufacture, or assembly of the merchandise, such as 
administrative salaries, casualty and liability insurance, advertising, 
and salesmen's salaries, commissions, or expenses.
    (6) Articles wholly the growth, product, or manufacture of an 
ATPDEA beneficiary country. Any article which is wholly the growth, 
product, or manufacture of an ATPDEA beneficiary country as defined in 
Sec.  10.252, and any article produced or manufactured in an ATPDEA 
beneficiary country as defined in Sec.  10.252 exclusively from 
materials which are wholly the growth, product, or manufacture of an 
ATPDEA beneficiary country or countries, will normally be presumed to 
meet the requirement set forth in paragraph (d)(1) of this section.


Sec.  10.254  Certificate of Origin.

    A Certificate of Origin as specified in Sec.  10.256 must be 
employed to certify that an article described in Sec.  10.253(a) being 
exported from an ATPDEA beneficiary country to the United States 
qualifies for the preferential treatment referred to in Sec.  10.251. 
The Certificate of Origin must be prepared by the exporter in the 
ATPDEA beneficiary country. Where the ATPDEA 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 treatment; 
or
    (b) A completed and signed Certificate of Origin for the article 
voluntarily provided to the exporter by the producer.


Sec.  10.255  Filing of claim for preferential treatment.

    (a) Declaration. In connection with a claim for preferential 
treatment for an article described in Sec.  10.253(a), 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 ``J+'' as a 
prefix to the subheading of the HTSUS in which the article in question 
is classified. Except in any of the circumstances described in Sec.  
10.256(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.  10.256  Maintenance of records and submission of Certificate by 
importer.

    (a) Maintenance of records. Each importer claiming preferential 
treatment for an article under Sec.  10.255 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.  
10.255(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 an article under Sec.  10.255(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 449, including privately-printed copies 
of that Form, or, as an alternative to Customs Form 449, 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 449;
    (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

[[Page 14500]]

    (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, ``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, 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 ATPDEA.
    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 Sec. Sec.  10.254 through 10.256, 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.  10.257  Verification and justification of claim for preferential 
treatment.

    (a) Verification by Customs. A claim for preferential treatment 
made under Sec.  10.255, including any statements or other information 
contained on a Certificate of Origin submitted to Customs under Sec.  
10.256, 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 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 to document the use of U.S. or ATPDEA beneficiary 
country 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.  10.255, the importer:
    (1) Must have records that explain how the importer came to the 
conclusion that the 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 meets the 
country of origin and value content requirements set forth in Sec.  
10.253(c) and (d). A properly completed Certificate of Origin in the 
form prescribed in Sec.  10.254(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 ATPDEA beneficiary country to the United States. If the imported 
article was shipped through a country other than an ATPDEA beneficiary 
country and the invoices and other documents from the ATPDEA 
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.  10.253(b)(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.

PART 163--RECORDKEEPING

    7. 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.

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

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

* * * * *
    IV. * * *

Sec.  10.246 ATPDEA Textile Certificate of Origin
Sec.  10.248 ATPDEA Declaration of Compliance for Brassieres
Sec.  10.256 ATPDEA Non-textile Certificate of Origin
* * * * *

Robert C. Bonner,
Commissioner of Customs.

    Approved: February 27, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-6867 Filed 3-24-03; 8:45 am]
BILLING CODE 4820-02-P