[Federal Register Volume 68, Number 189 (Tuesday, September 30, 2003)]
[Rules and Regulations]
[Pages 56166-56173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24796]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Part 10

[CBP Dec. 03-29]
RIN 1515-AD24


Preferential Treatment of Brassieres Under the Caribbean Basin 
Economic Recovery Act

AGENCY: Customs and Border Protection, Department of Homeland Security.

ACTION: Interim regulations; solicitation of comments.

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SUMMARY: This document sets forth interim amendments to one of the 
provisions of the Customs Regulations that implement the trade benefits 
for Caribbean Basin countries contained in section 213(b) of the 
Caribbean Basin Economic Recovery Act (the CBERA). The interim 
regulatory amendments involve the brassieres provision of section 
213(b) and primarily reflect changes made to that statutory provision 
by section 3107 of the Trade Act of 2002. The specific statutory 
changes addressed in this document involve the minimum U.S. material 
content requirements that apply for purposes of preferential treatment 
of brassieres under the CBERA. This document also includes a number of 
other changes to the CBERA implementing regulations for brassieres to 
clarify a number of issues that arose after their original publication.

DATES: Interim rule effective September 30, 2003. Comments must be 
submitted by December 1, 2003.

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

FOR FURTHER INFORMATION CONTACT:
    Operational issues: Robert Abels, Office of Field Operations (202-
927-1959).
    Legal issues: Cynthia Reese, Office of Regulations and Rulings 
(202-572-8790).

SUPPLEMENTARY INFORMATION:

Background

Textile and Apparel Articles Under the Caribbean Basin Economic 
Recovery Act

    The Caribbean Basin Economic Recovery Act (the CBERA, also referred 
to as the Caribbean Basin Initiative, or CBI, statute, codified at 19 
U.S.C. 2701-2707) instituted a duty preference program that applies to 
exports of goods from those Caribbean Basin countries that have been 
designated by the President as program beneficiaries. On May 18, 2000, 
the President signed into law the Trade and Development Act of 2000, 
Public Law 106-200, 114 Stat. 251, which included as Title II the 
United States-Caribbean Basin Trade Partnership Act, or CBTPA. The 
CBTPA provisions included section 211 which amended section 213(b) of 
the CBERA (19 U.S.C. 2703(b)) in order to, among other things, provide 
in new paragraph (2) for the preferential treatment of certain textile 
and apparel articles, specified in subparagraph (A), that had 
previously been excluded from the CBI duty-free program. The 
preferential treatment for those textile and apparel articles under 
paragraph (2)(A) of section 213(b) involves not only duty-free 
treatment but also entry in the United States free of quantitative 
restrictions, limitations, or consultation levels. Paragraph (2)(A) of 
the statute includes, in clause (iv), a specific provision covering 
brassieres from designated CBTPA beneficiary countries.
    On October 2, 2000, the President signed Proclamation 7351 to 
implement the provisions of the CBTPA. This Proclamation, which was 
published in the Federal Register (65 FR 59329) on October 4, 2000, 
modified the Harmonized Tariff Schedule of the United States (HTSUS) 
by, among other things, the addition of a new Subchapter XX to Chapter 
98 to address the majority of the textile and apparel provisions of the 
CBTPA. Within that Subchapter XX, the brassieres provision of paragraph 
(2)(A)(iv) of the CBTPA statute is dealt with in U.S. Note 2(d) and in 
subheading 9820.11.15.
    On October 5, 2000, the U.S. Customs Service (now the Bureau of 
Customs and Border Protection (CBP)) published in the Federal Register 
(65 FR 59650) T.D. 00-68 to amend the Customs Regulations on an interim 
basis in order to set forth basic legal requirements and procedures 
that apply for purposes of obtaining preferential treatment of textile 
and apparel articles pursuant to the provisions added to section 213(b) 
by the CBTPA. Those interim regulations, consisting of Sec. Sec.  
10.221 through 10.227 of the Customs Regulations (19 CFR 10.221 through 
10.227), include, in paragraph (a) of Sec.  10.223, a list of the 
various groups of articles that are eligible for preferential treatment 
under the statute. Paragraph (a)(6) of Sec.  10.223 specifically 
addressed the basic CBTPA brassieres provision of subclause (I) of 
paragraph (2)(A)(iv) of the statute and subheading 9820.11.15 of the 
HTSUS. The regulatory texts set forth in T.D. 00-68 did not address 
subclauses (II) and (III) of paragraph (2)(A)(iv) of the statute and 
U.S. Note 2(d) of Subchapter XX, Chapter 98, HTSUS, because under the 
terms of the statute those provisions applied only to articles entered 
on or after October 1, 2001.
    On October 4, 2001, CBP (as legacy Customs) published in the 
Federal

[[Page 56167]]

Register (66 FR 50534) T.D. 01-74 to amend the Customs Regulations on 
an interim basis in order to implement the terms of subclauses (II) and 
(III) of paragraph (2)(A)(iv) of the statute and U.S. Note 2(d) of 
Subchapter XX, Chapter 98, HTSUS. Those regulatory amendments involved 
primarily the addition of a new Sec.  10.228 which set forth specific 
rules for the application of the minimum 75 and 85 percent U.S. fabric 
component content requirements under subclauses (II) and (III) that 
took effect for purposes of preferential treatment of brassieres 
described in subclause (I) starting on October 1, 2001.

Trade Act of 2002 Amendments

    On August 6, 2002, the President signed into law the Trade Act of 
2002 (the ``Act''), Public Law 107-210, 116 Stat. 933. Section 3107(a) 
of the Act made a number of changes to the textile and apparel 
provisions of paragraph (2)(A) of section 213(b) of the CBERA. The 
amendments made by section 3107(a) of the Act included a revision of 
the brassieres provisions of paragraph (2)(A)(iv) of the statute which 
involved the following textual changes: (1) Subclause (I) was amended 
by the addition of exception language regarding articles covered by 
certain other clauses under paragraph (2)(A); and (2) subclauses (II) 
and (III) were amended by replacing each reference to ``fabric 
components'' with ``fabrics,'' by adding exclusion language regarding 
findings and trimmings after each reference to fabric(s), and by adding 
various references to articles that are ``entered'' and that are 
``eligible'' under clause (iv). The principal effects of the language 
changes within subclauses (II) and (III) were: (1) Adoption of a cost 
or value percentage standard based on a comparison between U.S. fabric 
and all fabric (rather than based on a comparison between U.S. fabric 
components and all fabric) contained in the articles; and (2) removal 
of the requirement that the articles must be both produced and entered 
in the same year. The amended paragraph (2)(A)(iv) text now reads as 
follows:

    (iv) CERTAIN OTHER APPAREL ARTICLES.--(I) GENERAL RULE.--Subject 
to subclause (II), any apparel article classifiable under subheading 
6212.10 of the HTS, except for articles entered under clause (i), 
(ii), (iii), (v), or (vi), if the article is both cut and sewn or 
otherwise assembled in the United States, or one or more CBTPA 
beneficiary countries, or both.
    (II) LIMITATION.--During the 1-year period beginning on October 
1, 2001, and during each of the 6 succeeding 1-year periods, apparel 
articles described in subclause (I) of a producer or an entity 
controlling production shall be eligible for preferential treatment 
under subparagraph (B) 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 that 
producer or entity that are entered and eligible under this clause 
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 this clause 
during the preceding 1-year period.
    (III) DEVELOPMENT OF PROCEDURE TO ENSURE COMPLIANCE.--The United 
States Customs Service shall develop and implement methods and 
procedures to ensure ongoing compliance with the requirement set 
forth in subclause (II). If the Customs Service finds that a 
producer or an entity controlling production has not satisfied such 
requirement in a 1-year period, then apparel articles described in 
subclause (I) of that producer or entity shall be ineligible for 
preferential treatment under subparagraph (B) during any succeeding 
1-year period until the aggregate cost of fabrics (exclusive of all 
findings and trimmings) formed in the United States that are used in 
the production of such articles of that producer or entity entered 
during the preceding 1-year period is at least 85 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 this clause 
during the preceding 1-year period.

    On November 13, 2002, the President signed Proclamation 7626 
(published in the Federal Register at 67 FR 69459 on November 18, 2002) 
which included, among other things, modifications to the HTSUS to 
implement the changes to section 213(b)(2)(A) of the CBERA made by 
section 3107(a) of the Act. Those modifications included an amendment 
of U.S. Note 2(d) to Subchapter XX, Chapter 98, HTSUS, to reflect the 
changes to subclauses (II) and (III) of paragraph (2)(A)(iv) of the 
statute discussed above. The Proclamation further provided that this 
amendment of U.S. Note 2(d) was effective with respect to goods 
entered, or withdrawn from warehouse for consumption, on or after 
October 1, 2002.

Changes to the Interim Regulatory Texts

    As a consequence of the statutory amendments described above and as 
a result of the modifications to the HTSUS made by Proclamation 7626, 
the interim regulatory provisions published in T.D. 01-74 no longer 
reflect the current standards that apply for purposes of preferential 
treatment of brassieres under the CBERA. CBP notes in this regard that 
the effect of the statutory changes requires changes throughout the 
text of interim Sec.  10.228. Moreover, following publication of T.D. 
01-74, some other issues came to the attention of CBP that warrant 
additional changes to the interim Sec.  10.228 text.
    Accordingly, this interim rule document revises interim Sec.  
10.228 in its entirety to reflect the amendments to the statute and to 
clarify or otherwise improve the previously published text. This 
document is limited to the text of interim Sec.  10.228 and therefore 
does not address the change that the Act made to paragraph 
(2)(A)(iv)(I) of the statute; that provision was reflected in Sec.  
10.223(a)(6) within the interim CBTPA regulations published in T.D. 00-
68 referred to above and is discussed in a separate interim rule 
document that addresses the other statutory changes to the CBERA made 
by the Act.
    It is the intention of CBP, after the close of the public comment 
period prescribed in this document, to publish one final rule document 
that addresses the revised Sec.  10.228 provisions contained in this 
document and the other regulatory changes pertaining to brassieres 
under the CBTPA that were published in T.D. 01-74. That final rule 
document will summarize and respond to the public comments previously 
submitted on the changes to Sec. Sec.  10.222 and 10.223(a)(7) 
published in T.D. 01-74 and will also address any comments submitted on 
the revised Sec.  10.228 text set forth in this document. Because CBP 
has significantly modified Sec.  10.228 in this document, CBP will not 
consider or address any public comments previously submitted on the 
text of Sec.  10.228 as published in T.D. 01-74 that have been 
addressed by statutory changes. Any other comments previously submitted 
will be addressed. If a member of the public wishes to have CBP 
consider a new issue involving Sec.  10.228, a new comment setting 
forth that issue may be submitted in accordance with the comment 
procedures prescribed in this document.
    The interim regulatory changes to Sec.  10.228 contained in this 
document are discussed below.

Amendments To Reflect the Statutory Changes

    The changes to Sec.  10.228 set forth in this document that are in 
response to the changes made to paragraph (2)(A)(iv) of the statute by 
section 3107(a) of the Act are as follows:
    1. The definition of ``fabric components formed in the United 
States'' in paragraph (a)(3) has been replaced by a definition of 
``fabrics formed in the United States'' to reflect the fact that 
subclauses (II) and (III) of the statute no longer refer to fabric

[[Page 56168]]

``components.'' Similarly, the definition of ``cost'' in paragraph 
(a)(4) and the definition of ``declared customs value'' in paragraph 
(a)(5) have been modified to refer simply to ``fabrics.''
    2. The following changes have been made to paragraph (b) which 
concerns the 75/85 percent U.S. fabric content requirements for 
preferential treatment in subclauses (II) and (III) of the statute:
    a. In the introductory text of paragraph (b)(1), reference is made 
to the year that begins on ``October 1, 2002'' (rather than ``October 
1, 2001'') to reflect the applicable effective date set forth in 
Proclamation 7626.
    b. Throughout the paragraph (b) texts, all references to U.S.-
formed ``fabric components'' have been replaced by references to U.S.-
formed ``fabric,'' the words ``produced and'' have been removed from 
the expression ``produced and entered,'' and the parenthetical 
reference ``(exclusive of all findings and trimmings)'' has been added 
as appropriate after references to ``fabrics'' and ``fabric.'' These 
changes simply conform the regulatory text to the wording changes in 
the statute.
    c. Paragraph (b)(1)(i), which concerns the 75 percent requirement 
of subclause (II) of the statute, has been changed to refer to articles 
that are ``entered as articles described in Sec.  10.223(a)(6),'' and 
paragraph (b)(1)(ii), which concerns the 85 percent requirement of 
subclause (III) of the statute, has been changed to refer to articles 
that ``conform to the production standards set forth in Sec.  
10.223(a)(6).'' These wording changes are in response to the statutory 
wording changes regarding articles that are ``entered'' and that are 
``eligible'' under clause (iv). The differences in wording in the two 
regulatory texts are necessary in order to enable the 85 percent 
standard to operate. CBP 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 
(2)(A)(iv)(I) of the statute and Sec.  10.223(a)(6)), it would be 
impossible in the first year following the statutory changes (that is, 
starting on October 1, 2002) 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 (2)(A)(iv)(I) of the 
statute and Sec.  10.223(a)(6) against which compliance with the 85 
percent standard can be determined. The wording used in paragraph 
(b)(1)(ii) of the regulatory text (which is also reflected in the 
general statement of the paragraph (b)(1) introductory text and in the 
general rule in paragraph (b)(2)(i)(A)), by referring to articles that 
meet the U.S./Caribbean cutting and assembly production requirement 
(regardless of the HTSUS subheading under which they are entered), is 
intended to avoid this anomalous result.
    d. In the general rules of application set forth in paragraph 
(b)(2)(i), two new subparagraphs (C) and (D) have been added to clarify 
the application of the different regulatory language for the 75 and 85 
percent standards discussed at point c. above, and former subparagraph 
(D) has been removed because it concerned the year of production which 
is no longer relevant under the amended statutory text.
    e. Also in paragraph (b)(2)(i), former subparagraph (C) has been 
redesignated as subparagraph (E) and the text has been modified, and a 
new subparagraph (L) has been added, primarily to reflect that the 
findings and trimmings referred to in the context of brassieres are not 
limited to foreign findings and trimmings.
    f. Also in paragraph (b)(2)(i), former subparagraph (E) has been 
redesignated as subparagraph (G) and the text, which concerns a new 
producer or new entity controlling production, has been revised to 
incorporate the new wording (``entered as articles described in Sec.  
10.223(a)(6)'') of paragraph (b)(1)(i) and to clarify what CBP believes 
is a necessary conclusion under the statutory text, that is, that in 
the described context the producer or entity must first meet the 85 
(rather than the 75) percent standard.
    g. In paragraph (b)(2)(ii), a new Example 2 and a new Example 3 
have been added to cover new subparagraphs (C) and (D) of paragraph 
(b)(2)(i), and Examples 2 through 6 consequently have been redesignated 
as Examples 4 through 8.
    h. Also in paragraph (b)(2)(ii), redesignated Example 6 has been 
revised in order to replace the former ``produced and entered'' in the 
same year scenario with a factual pattern addressing the 75 versus 85 
percent standard and entry in different years.
    i. Also in paragraph (b)(2)(ii), redesignated Example 7 has been 
revised in order to reflect that the 85 percent standard (rather than 
the 75 percent standard) applies to a new producer or entity 
controlling production, as stated in redesignated and revised 
subparagraph (G) of paragraph (b)(2)(i).
    3. In paragraph (c)(3)(i), the text of the declaration of 
compliance has been modified by removing each reference to 
``components'' and by removing the words ``produced and'' before the 
word ``entered'' in blocks 4 and 6, in each case to reflect changes in 
statutory language.
    4. Finally, in paragraph (d)(1)(v), the next to last sentence has 
been modified to state that the inventory records must indicate that 
the required production occurred (rather than ``identify the date of'' 
production), and the last sentence has been modified to refer to 
purchases made during the ``accounting period'' (rather than ``year''), 
because the year of production is not relevant under the amended 
statute.

Other Amendments

    In addition to the changes described above that result from the 
changes made to the statute by section 3107(a) of the Act, CBP has 
included a number of other changes in the revised text of Sec.  10.228 
set forth in this document. These additional changes, which are 
intended to clarify or otherwise improve the interim regulatory texts, 
are as follows:
    1. The definition of ``cost'' in paragraph (a)(4) and the 
definition of ``declared customs value'' in paragraph (a)(5) have been 
revised for purposes of clarity, in particular in order to include 
rules covering cases in which there is no price based on an exportation 
to a CBTPA beneficiary country.
    2. The definition of ``year'' in paragraph (a)(6) has been reworded 
for purposes of clarity.
    3. In Example 1 under paragraph (b)(2)(ii), the words ``in the 
first year'' have been added to the scenario in the first sentence to 
clarify that the year in question is one during which the 75 percent 
standard must be met.
    4. In Example 5 under paragraph (b)(2)(ii), the references to 
foreign origin straps have been replaced by references to ``strips and 
labels'' to ensure that the example is clearly directed to findings and 
trimmings and not to materials that are considered to be components of 
brassieres.
    5. In paragraph (c)(3)(i), the text of the declaration of 
compliance has been modified by replacing the words ``all articles'' 
with ``brassieres'' in blocks 4 through 6 and by simplifying the 
wording within block 6.
    6. Finally, in paragraph (c)(3)(ii), the subparagraph (E) 
instruction for completion of block 6 has been removed

[[Page 56169]]

in light of the simplification of the block 6 text, and former 
subparagraph (F) consequently has been redesignated as (E).

Comments

    Before adopting these interim regulations as a final rule, 
consideration will be given to any written comments timely submitted to 
CBP, 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) 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, Bureau of Customs 
and Border Protection, 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), CBP has 
determined that prior public notice and comment procedures on these 
regulations are unnecessary and contrary to the public interest. The 
regulatory changes provide trade benefits to the importing public, in 
some cases implement direct statutory mandates, and are necessary to 
carry out the preferential treatment and United States tariff changes 
proclaimed by the President under the Caribbean Basin Economic Recovery 
Act. For the same reasons, pursuant to the provisions of 5 U.S.C. 
553(d)(1) and (3), CBP 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

    The collection of information contained in this interim rule has 
previously been reviewed and approved by the Office of Management and 
Budget (OMB) in accordance with the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) under OMB control number 
1515-0226.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.

Signing Authority

    This regulation is being issued in accordance with 19 CFR 
0.1(c)(1).

List of Subjects in 19 CFR Part 10

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

Amendments to the Regulations

0
For the reasons set forth in the preamble, part 10 of the Customs 
Regulations (19 CFR part 10) is amended as set forth below:

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

0
1. The authority citation for part 10 continues to read in part 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 10.221 through 10.228 and Sec. Sec.  10.231 through 
10.237 also issued under 19 U.S.C. 2701 et seq.

0
2. Section 10.228 is revised to read as follows:


Sec.  10.228  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 a 
CBTPA 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 a CBTPA 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 a CBTPA 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 CBP 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:
    (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 a CBTPA 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;

[[Page 56170]]

    (B) In the case of fabric for which the cost cannot be determined 
under paragraph (a)(5)(ii)(A) of this section or if CBP 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 a CBTPA 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 CBP 
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, 2000.
    (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, 2002, and during any subsequent year, 
articles of a producer or an entity controlling production that conform 
to the production standards set forth in Sec.  10.223(a)(6) 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.  10.223(a)(6) 
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.  10.223(a)(6) 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.  10.223(a)(6) 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.  10.223(a)(6) and that were entered during that year; 
and
    (iii) In conjunction with the filing of the claim for preferential 
treatment under Sec.  10.225, 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 CBP 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.  10.223(a)(6) 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.  
10.223(a)(6) are not to be considered in determining compliance with 
the 75 percent 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.  
10.223(a)(6) 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, 2002, 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;

[[Page 56171]]

    (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 which did not produce or 
control production of articles that were entered as articles described 
in Sec.  10.223(a)(6) 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 is not required to 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. A CBTPA beneficiary country producer of articles that 
meet the production standards specified in Sec.  10.223(a)(6) in the 
first year sends 50 percent of that production to CBTPA 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 CBTPA 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.  
10.223(a)(6); one of those shipments is entered under the HTSUS 
subheading that covers articles described in Sec.  10.223(a)(6), the 
second shipment is entered under the HTSUS subheading that covers 
articles described in Sec.  10.223(a)(12), 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.  10.223(a)(6) 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.  
10.223(a)(6); 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.  
10.223(a)(6) 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.  10.223(a)(6).
    Example 4. An entity controlling production of articles that 
meet the description in Sec.  10.223(a)(6) 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 a CBTPA 
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 CBTPA beneficiary country to form articles 
that meet the production standards specified in Sec.  10.223(a)(6) 
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. A CBTPA beneficiary country producer's entire 
production of articles that meet the description in Sec.  
10.223(a)(6) 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 
year, and the articles covered by the June shipment are placed in a 
CBP bonded warehouse upon arrival and are subsequently withdrawn 
from warehouse for consumption on November 1 of that calendar year. 
The CBTPA 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 
CBTPA 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.  10.223(a)(6), but the entered articles 
do not meet the requisite 85 percent standard until the third year; 
the entered articles fail to meet the 75 percent standard in the 
fourth year; and the entered articles do not attain the 85 percent 
standard until the sixth 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

[[Page 56172]]

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. The producer's 
articles may not receive preferential treatment during the fifth 
year because the 75 percent standard was not met in the immediately 
preceding (that is, fourth) year. The producer's articles may not 
receive preferential treatment during the sixth year because the 85 
percent standard has become applicable and was not met in the 
immediately preceding (that is, fifth) year. The producer's articles 
are eligible for preferential treatment during the seventh year 
because the 85 percent standard was met in the immediately preceding 
(that is, sixth) year, and during that seventh year the 75 percent 
standard is applicable for purposes of determining whether the 
producer's articles are eligible for preferential treatment in the 
following (that is, eighth) year.
    Example 8. An entity controlling production (Entity A) uses five 
CBTPA beneficiary country producers (Producers 1-5), all of which 
produce only articles that meet the description in Sec.  
10.223(a)(6); 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 CBP, 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, CBP 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 CBP 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 CBP 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 CBP 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:

   Caribbean Basin Trade Partnership Act Declaration of Compliance for
                               Brassieres
                    (19 CFR 10.223(a)(6) and 10.228)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Year beginning date: October 1, ______.  Official U.S. Customs and
                                             Border Protection Use Only
   Year ending date: September 30, ______.   Assigned number:
                                             ________________
                                             Assignment date:
                                             ________________
2. Identity of preparer (producer or entity controlling production):
 
  Full name and address:                    Telephone number:
                                             ________________
                                            Facsimile number:
                                             ________________
                                            Importer identification
                                             number: ________________
-------------------------------------------
3. If the preparer is an entity controlling production, provide the
 following for each producer:
 
    Full name and address:                  Telephone number:
                                             ________________
                                            Facsimile number:
                                             ________________
-------------------------------------------
4. Aggregate cost of fabrics formed in the United States that were used
 in the production of brassieres that were entered during the year:
 ________________
------------------------------------------------------------------------
5. Aggregate declared customs value of the fabric contained in
 brassieres that were entered during the year: ________________
------------------------------------------------------------------------
6. I declare that the aggregate cost of fabric formed in the United
 States was at least 75 percent (or 85 percent, if applicable under 19
 CFR 10.228(b)(1)(ii)) of the aggregate declared customs value of the
 fabric contained in brassieres entered during the year.
------------------------------------------------------------------------

[[Page 56173]]

 
7. Authorized signature:                    8. Name and title (print or
                                             type):
-------------------------------------------
  ______________                            ............................
Date:                                       ............................
------------------------------------------------------------------------

    (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 CBTPA 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 CBP upon request a written English 
translation of the declaration; and
    (ii) Must be filed with the New York Strategic Trade Center, Bureau 
of Customs and Border Protection, 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 CBP deems necessary. In the event that 
CBP for any reason is prevented from verifying the statements made on a 
declaration of compliance, CBP may deny any claim for preferential 
treatment made under Sec.  10.225 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 
CBP 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.  10.223(a)(6) 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.  10.225. 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.

Robert C. Bonner,
Commissioner of Customs and Border Protection.
    Approved: September 25, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-24796 Filed 9-29-03; 8:45 am]
BILLING CODE 4820-02-P