[Federal Register Volume 70, Number 93 (Monday, May 16, 2005)]
[Rules and Regulations]
[Pages 25774-25778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9494]


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DEPARTMENT OF COMMERCE

International Trade Administration

15 CFR Parts 335 and 340

Docket No: 050406093-5093-01
RIN 0625-AA67


Imports of Certain Worsted Wool Fabric: Implementation of Tariff 
Rate Quota Established Under Title V of the Trade and Development Act 
of 2000.

AGENCY: Department of Commerce, International Trade Administration.

ACTION: Interim Final Rule, Request for Comments

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SUMMARY: The Department of Commerce (``Commerce'') is amending its 
regulation, which governs the establishment of tariff rate quotas (TRQ) 
for a limited quantity of worsted wool fabrics pursuant to Title V of 
the Trade and Development Act of 2000 (``the Act'') as amended by the 
Trade Act of 2002 and the Miscellaneous Trade Act of 2004, (Public law 
108-429). Section 501(e) of the Act requires the President to fairly 
allocate TRQs on the import of certain worsted wool fabric. Section 
504(b) of the Act authorizes the President to modify the limitations on 
worsted wool fabric imports under TRQs. The President has delegated to 
the Secretary of Commerce the authority to allocate the quantity of 
imports under the TRQs (specifically for wool products under HTS 
headings, 9902.51.11 and 9902.51.12) and to determine whether the 
limitations on the quantity of imports under the TRQs should be 
modified. This interim rule is necessary to implement the amendment to 
the Act included in the Miscellaneous Trade Act of 2004, (Public law 
108-429). Principally, this document amends the regulations to specify 
which HTS categories may be allocated as TRQs and to eliminate 
Commerce's authority to modify these quotas.

DATES: This interim final rule is effective May 16, 2005 To be 
considered, written comments must be received by 5:00 p.m. on July 15, 
2005.

ADDRESSES: Comments should be addressed to: James C. Leonard III, 
Deputy Assistant Secretary for Textiles and Apparel, Room 3001, United 
States Department of Commerce, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT: Sergio Botero, Office of Textiles and 
Apparel, U.S. Department of Commerce, (202) 482-4058.

SUPPLEMENTARY INFORMATION:

Background:

    The Act created Harmonized Tariff Schedule of the United States 
(HTS) heading 9902.51.11 and HTS heading 9902.51.12, which established 
two TRQs, providing for temporary reductions for three years in the 
import duties on two categories of worsted wool fabrics suitable for 
use in making suits, suit-type jackets, or trousers: (1) for worsted 
wool fabric with average fiber diameters greater than 18.5 microns, the 
reduction in duty is limited to 2,500,000 square meter equivalents or 
such other quantity proclaimed by the President; and (2) for worsted 
wool fabric with average fiber diameters of 18.5 microns or less, the 
reduction in duty is limited to 1,500,000 square meter equivalents or 
such other quantity proclaimed by the President, respectively. The Act 
required that the TRQs be allocated. More specifically, the President 
must ensure that the TRQs are fairly allocated to persons (including

[[Page 25775]]

firms, corporations, or other legal entities) who cut and sew men's and 
boys' worsted wool suits, suit-type jackets and trousers in the United 
States and who apply for an allocation based on the amount of such 
suits cut and sewn during the prior calendar year.
    The Act required that the President annually consider requests by 
U.S. manufacturers of certain worsted wool apparel to modify the 
limitation on the quantity of fabric that may be imported under the 
TRQs, and granted the President the authority to proclaim modifications 
to the limitations. In determining whether to modify the limitations, 
the President must consider specified U.S. market conditions with 
respect to worsted wool fabric and worsted wool apparel.
    In Presidential Proclamation 7383, of December 1, 2000, the 
President authorized the Secretary of Commerce: (1) to allocate the 
imports of worsted wool fabrics under the TRQs; (2) to annually 
consider requests from domestic manufacturers of worsted wool apparel 
to modify the limitation on the quantity of worsted wool fabrics that 
may be imported under the TRQs; (3) to determine whether the 
limitations on the quantity of imports of worsted wool fabrics under 
the TRQs should be modified and to recommend to the President that 
appropriate modifications be made; and (4) to issue regulations to 
implement relevant provisions of the Act.
    On December 3, 2004, the Act was amended pursuant to the 
Miscellaneous Trade Act of 2004, Public Law 108-429. The amendment 
altered the HTS categories of worsted wool eligible for the TRQs under 
the Act. Specifically, the amendment renumbered HTS heading 9902.51.12 
to HTS heading 9902.51.15. The Miscellaneous Trade Act of 2004 
increased to 5 million square meters from 3.5 million square meters the 
TRQ for worsted wool fabrics with average fiber diameters of 18.5 
microns or less (HTS 9902.51.15, previously numbered HTS 9902.51.12); 
and increased to 5.5 million square meters from 4.5 million square 
meters the TRQ for the worsted wool fabrics with average fiber 
diameters greater than 18.5 microns (9902.51.11).
    The amendment also authorized Commerce to allocate a new HTS 
category, HTS 9902.51.16. This HTS refers to worsted wool fabric with 
average fiber diameters of 18.5 microns or less. The amendment further 
distinguished that HTS 9902.51.16 is for worsted wool for the benefit 
of persons (including firms, corporations, or other legal entities) who 
weave worsted wool fabric in the United States.
    Finally, the Miscellaneous Trade Act of 2004, Public Law 108-429 
repealed Commerce's authorization to determine whether the limitations 
on the quantity of imports of worsted wool fabrics under the TRQs 
should be modified and to recommend to the President that appropriate 
modifications be made.

Part 335

    This interim final rule implements the amendments to the Act by 
revising the language of 15 CFR 335 to indicate that HTS category 
9902.51.12 has been renumbered to 9902.51.15. In addition, for further 
clarification of the definition of 9902.51.15, this HTS heading has 
been revised to include only worsted wool fabric suitable for use in 
making suits, suit type jackets, or trousers with average fiber 
diameters of 18.5 microns or less; for the benefit of persons 
(including firms, corporations, or other legal entities) who cut and 
sew men's and boy's wool suits, suit-type jackets and trousers in the 
United States. Former HTS heading 9902.51.12 was simply defined as 
worsted wool fabric suitable for use in making suits, suit type 
jackets, or trousers with average fiber diameters of 18.5 microns or 
less. Although the regulation indicated in other sections that for both 
HTS headings 9902.51.11 and former 9902.51.12 that the fabric was for 
the benefit of persons (including firms, corporations, or other legal 
entities) who cut and sew men's and boy's wool suits, suit-type jackets 
and trousers in the United States, the definition did not specifically 
include this language. Accordingly, in order to clarify the distinction 
between HTS headings 9902.51.11 and 9902.51.15, which is for the 
benefit of persons who cut and sew men's and boy's wool suits and suit-
like jackets and trousers, and new HTS heading 9902.51.16, which is for 
the benefit of persons who weave wool fabric suitable for use in men's 
and boy's suits, this rule has included additional language in the 
definition of HTS headings 9902.51.11 and 9902.51.15. The allocation 
process for HTS 9902.51.11 and 9902.51.15 remains the same.
    Pursuant to current regulations, allocation of TRQs for 9902.51.11 
and 9902.51.15 is limited to persons who cut and sew three types of 
garments during the calendar year of the application: (1) men's and 
boys' worsted wool suits; (2) men's and boys' worsted wool suit-type 
jackets; and (3) men's and boys' worsted wool trousers. Only 
manufacturers of all three types of garments are eligible for an 
allocation. Pursuant to the current regulations that allocation be 
based on the men's and boys' worsted wool suits cut and sewn during the 
prior calendar year, in allocating the TRQs, only production of men's 
and boys' worsted wool suits will be considered. To be considered, a 
worsted wool garment must contain at least 85 percent by weight worsted 
wool, which is consistent with the definitions of wool fiber and fabric 
in the Act and the Conference Report.
    In order to fairly allocate the TRQs, manufacturers that utilize 
imported worsted wool fabric in production will be provided a greater 
allocation than manufacturers that utilize domestic worsted wool 
fabric. This allows the manufacturers that will actually use the 
imported fabric that is subject to the TRQs to obtain a relatively 
greater share of the fabric, as compared to manufacturers that use only 
domestic fabric. For the purpose of calculating allocations, suit 
production are increased by the ratio of imported fabric used to total 
fabric used in the production of men's and boys' suits. For example, if 
an applicant uses imported fabric for 30 percent of its worsted wool 
suits production, that applicant's suit production level will be 
increased by 30 percent for purposes of calculating the applicant's 
allocation.
    In addition, this interim final rule amends the sections 335.3(c) 
and (d)(2) to establish the allocation process for HTS category 
9902.51.16. For allocation of TRQ for HTS 9902.51.16, the applicant is 
required to submit the quantity and value of the Worsted Wool Fabric 
woven in the United States. This data must indicate actual production 
(not estimates) of Worsted Wool Fabric containing at least 85 percent 
worsted wool fabric by weight with an average diameter of 18.5 microns 
or less. For applications for the 2005 Tariff Rate Quota year, 
production data must be provided for full calendar year 2004. For 
allocations of Tariff Rate Quota years after 2005, production data must 
be provided for the first six months of the year of the application. 
This data will be annualized for the purpose of making Tariff Rate 
Quota allocations. In order to ensure that the TRQs are fully utilized, 
a licensee that will not import the full quantity allocated to it is 
required to surrender the unused allocation to the Department for 
reallocation.
    Section 335.4 is amended to state that for HTS 9902.51.16, the 
Tariff Rate Quota will be allocated based on an applicant's Worsted 
Wool Fabric production, to be consistent with current regulations. The 
allocation process for HTS 9902.51.16 is essentially the same as that 
for HTS 9902.51.11 and 9902.51.15 with the small distinction that the 
allocation

[[Page 25776]]

process in 9902.51.11 and 9902.51.15 takes into consideration the 
amount of imported fabric used by the applicant while the allocation 
process for 9909.51.16 does not because this factor is inapplicable to 
this HTS.
    In addition, Commerce amends Sec.  335.6(e) to change the manner in 
which the unused allocation will be determined to take into 
consideration the extension of the TRQs from 2005 to 2007. Under the 
previous scheme, a Licensee whose unused allocation in two consecutive 
Tariff Rate Quota Years exceeds five percent of the quantity set forth 
in its license would have its allocation reduced in the subsequent 
Tariff Rate Quota Year by a quantity equal to 50 percent of its unused 
allocation from the prior year. Under the new scheme, a Licensee whose 
unused allocation in two or more consecutive Tariff Rate Quota Years 
exceeds five percent of the quantity set forth in its license shall 
have its allocation reduced in the subsequent Tariff Rate Quota Year by 
a quantity equal to 50 percent of its unused allocation from the prior 
year. This change was made as a result of the extension of the TRQs 
from 2005 to 2007. The original TRQ was, by statute, valid for three 
years only (2001-2003) therefore the reduction of the TRQ due to unused 
allocation could only be applied twice during the three year period. 
However, because the program has been extended to 2007, companies may 
now fail to use 95 percent of their TRQ in more than two consecutive 
years. Therefore, Commerce makes this change to clarify that the 
reduction in their allocation during a third, fourth or fifth 
consecutive year will be 50 percent of the unused allocation.

Part 340

    Because the Act repealed Commerce's authorization to determine 
whether the limitations on the quantity of imports of worsted wool 
fabrics under the TRQs should be modified and to recommend to the 
President that appropriate modifications be made, Commerce removes 15 
CFR part 340 in its entirety and removes 15 CFR 335.7 to eliminate the 
modification provisions.

Allocation of HTS 9902.21.11, 9902.21.15, and 9902.51.16

    Section 501(e) of the Act requires that the worsted wool fabrics 
imported under the TRQs be ``fairly allocated'' to persons ``who cut 
and sew men's and boys' worsted wool suits and suit-like jackets and 
trousers in the United States and who apply for an allocation based on 
the amount of such suits cut and sewn during the prior calendar year.'' 
As the Joint Explanation of the Committee of Conference (``Conference 
Report'') makes clear, Congress intended the TRQs to address the duty 
situation faced by U.S. wool suit manufacturers, in which worsted wool 
fabric is subject to considerably higher duties than worsted wool 
suits, a situation compounded by reductions in tariffs on wool suits 
under free trade agreements with Canada and Mexico.
    The Department, promptly upon promulgation of these regulations, 
intends to allocate the increased TRQ amounts for 9902.21.11 and 
9902.21.15. The Department will also begin the process of soliciting 
applications for a license for an allocation of the 2005 TRQs on 
worsted wool fabrics for 9902.51.16. In following years, applications 
will be solicited on or around August 31, in order to allow companies 
to be informed of their allocation as early as possible while still 
allowing an allocation based on previous year production. The 
Department intends to make its determination regarding the allocation 
on or about November 1 and to issue licenses no later than December 31 
of the year preceding the tariff rate quota year.
    Pursuant to regulations, each of the three TRQs will be allocated 
based on previous year production. The products under HTS 9902.51.16 
will be allocated based on production of this type of worsted wool 
fabric, while the tariff rate quota on worsted wool fabric with average 
fiber diameters of 18.5 microns or less (HTS 9902.51.15) will be 
allocated based on production utilizing this type of worsted wool. We 
will also continue to allocate the tariff rate quota on worsted wool 
fabric with average fiber diameters greater than 18.5 microns (HTS 
9902.51.11) based on production utilizing this type of worsted wool.

Classification

    Administrative Procedure Act: The Department of Commerce finds good 
cause, under 5 USC 553(b)(B), to waive the requirement to provide prior 
notice and opportunity for public comment as such requirement is 
impracticable and contrary to the public interest. The new HTS 
categories and allocation system must be implemented as soon as 
possible to allow TRQ recipients to import their products under the new 
HTS categories and allocation system.
    If the new HTS category and allocation system are not implemented 
immediately, TRQ recipients will be required to file amended entries 
with Customs and Border Protection (CBP) in order to get the duty 
benefit. Amended entries are costly and time consuming. To obtain the 
duty benefits under a TRQ from a license issued after wool fabric has 
cleared CBP, a Licensee would need to request its brokers and other 
suppliers to file amended entries on its behalf with CBP in order to 
obtain the duty rebates applicable to the TRQ license. This process is 
time consuming and costly as additional staff would need to be hired 
and extra hours devoted to research and file amended entries. Brokers 
would need to research thousand of shipments (an average of 4,800 
shipments per year were entered under the wool TRQ program from 2001 to 
2004), imported into several different ports, in order to file amended 
entries. Brokers and other suppliers do not always have the resources 
and personnel in order to investigate individual shipments for 
individual companies to file entries retroactively. The average cost 
charged by brokers and suppliers for researching shipments range from 
$100 to $200 to file amended entries, which would in effect nullify the 
duty benefit for small shipments (50 square meters) which make up the 
bulk of the entries for several licensees.
    For the same reasons above, there is good cause to find under 5 
U.S.C. 553(d)(3) to waive the 30-day delay in effectiveness. As stated 
above, the process of researching shipments to file amended entries is 
time consuming and costly. If this regulation is not implemented 
immediately, the costs incurred by TRQ recipients would in effect 
nullify any duty benefits, particularly for those TRQ recipients who 
have small shipments that make up the entries for several licensees.
    While these regulations will be effective upon publication, the 
Department of Commerce hereby solicits comments on these interim 
regulations and will amend them in final regulations if appropriate. 
The Department is particularly interested in comments concerning any 
impact these regulations might have on small-or-medium sized 
businesses.
    Regulatory Flexibility Act: Because notice and comment are not 
required under 5 U.S.C. 553 or any other law, the analytical 
requirements of 5 U.S.C. 601 et seq. are not applicable and have not 
been prepared.
    Executive Order 12866: This rule has been determined to be not 
significant under Executive Order 12866.

Paperwork Reduction Act:

    This proposed rule contains a collection-of-information requirement 
subject to the Paperwork Reduction Act (PRA) which has received 
approval by OMB under control number 0625-0240. Notwithstanding any 
other provision of

[[Page 25777]]

the law, no person is required to respond to, nor shall any person be 
subject to a penalty for failure to comply with, a collection of 
information subject to the requirements of the PRA, unless that 
collection of information displays a currently valid OMB Control 
Number.

Dated: May 5, 2005.
Joseph A. Spetrini
Acting Assistant Secretary for Import Administration.

0
For the reasons stated, 15 CFR. chapter III is amended to read as 
follows:

PART 335--IMPORTS OF WORSTED WOOL FABRIC

0
1. The Authority citation for part 335 is revised to read as follows:

    Authority: Title V of the Trade and Development Act of 2000 
(Public Law No. 106-200) as amended by Trade Act of 2002 and the 
Miscellaneous Trade Act of 2004 (Public Law 108-429), Presidential 
Proclamation No. 7383 (December 1, 2000).



0
2. Sec. 335.1 is revised to read as follows:


Sec. 335.1  Purpose.

    This part sets forth regulations regarding the issuance and effect 
of licenses for the allocation of Worsted Wool Fabric under the TRQs 
established by Section 501 of the Act, including the new HTS categories 
9902.51.15 and 9902.51.16 added by the amended Act.

0
3. Sec. 335.2 is amended by revising the definition of ``Tariff Rate 
Quota or Quotas'' to read as follows:


Sec. 335.2  Definitions.

* * * * *
    Tariff Rate Quota or Quotas means the temporary duty reduction 
provided under Section 501 of the Act for limited quantities of fabrics 
of worsted wool with average diameters greater than 18.5 micron, 
certified by the importer as suitable for use in making suits, suit-
type jackets, or trousers (HTS heading 9902.51.11), and for limited 
quantities of fabrics of worsted wool with average diameters of 18.5 
microns or less, certified by the importer as suitable for use in 
making suits, suit-type jackets, or trousers for the benefit of persons 
(including firms, corporations, or other legal entities) who cut and 
sew men's and boy's wool suits, suit-type jackets and trousers in the 
United States (HTS heading 9902.51.15), and worsted wool fabric with 
average fiber diameters of 18.5 microns or less for the benefit of 
persons (including firms, corporations, or other legal entities) who 
weave worsted wool fabric in the United States (HTS 9902.51.16).
* * * * *

0
4. Sec. 335.3 is amended by removing paragraph (d)(3), redesignating 
paragraphs (d)(4) and (d)(5) as (d)(3) and (d)(4) respectively, and by 
revising paragraphs (c) and (d)(2) as follows:


Sec. 335.3  Applications to receive allocations.

* * * * *
    (c) For applying for TRQs 9902.51.11 or 9902.51.15 during the 
calendar year of the date of the application, an applicant must have 
cut and sewed in the United States all three of the following apparel 
products: Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and 
Worsted Wool Trousers. The applicant may either have cut and sewn these 
products on its own behalf or had another person cut and sew the 
products on the applicant's behalf, provided the applicant owned the 
fabric at the time it was cut and sewn. The application must contain a 
statement to this effect. For applying for TRQ 9902.51.16 during the 
calendar year of the date of the application, an applicant must have 
woven in the United States worsted wool fabrics with average fiber 
diameters of 18.5 microns or less, suitable for use in making suits, 
suit-type jackets, and trousers. The application must contain a 
statement to this effect.
    (d) * * *
    (2)(i) Production. Applicants for TRQs 9902.51.11 and 9902.51.15 
must provide the name and address of each plant or location where 
Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool 
Trousers were cut and sewn or woven by the applicant and the name and 
address of all plants or locations that cut and sewed such products on 
behalf of the applicant. Production data, including the following: the 
quantity and value of the Worsted Wool Suits, Worsted Wool Suit-Type 
Jackets, and Worsted Wool Trousers cut and sewn in the United States by 
applicant, or on behalf of applicant, from fabric owned by applicant. 
This data must indicate actual production (not estimates) of Worsted 
Wool Suits, Worsted Wool Suit-Type Jackets and Worsted Wool Trousers 
containing at least 85 percent worsted wool fabric by weight with an 
average diameter of 18.5 microns or less. This data must also indicate 
actual production (not estimates) of Worsted Wool Suits, Worsted Wool 
Suit-Type Jackets and Worsted Wool Trousers containing at least 85 
percent worsted wool fabric by weight with average diameter greater 
than 18.5 microns. Production data must be provided for the first six 
months of the year of the application. This data will be annualized for 
the purpose of making Tariff Rate Quota allocations.
    (ii) Applicants for TRQ 9902.51.16 must provide the name and 
address of each plant or location where Worsted Wool Fabric was woven 
by the applicant. The quantity and value of the Worsted Wool Fabric 
woven in the United States by applicant. This data must indicate actual 
production (not estimates) of Worsted Wool Fabric containing at least 
85 percent worsted wool fabric by weight with an average diameter of 
18.5 microns or less. For applications for the 2005 Tariff Rate Quota 
year, production data must be provided for full calendar year 2004. For 
allocations of Tariff Rate Quota years after 2005, production data must 
be provided for the first six months of the year of the application. 
This data will be annualized for the purpose of making Tariff Rate 
Quota allocations.
* * * * *

0
5. Section 335.4 is amended by revising paragraphs (a) and (b) as 
follows:


Sec. 335.4  Allocation.

    (a) For HTS 9902.51.11 and HTS 9902.51.15 each Tariff Rate Quota 
will be allocated separately. Allocation will be based on an 
applicant's Worsted Wool Suit production, on a weighted average basis, 
and the proportion of imported Worsted Wool Fabric consumed in the 
production of Worsted Wool Suits. In regards to HTS 9902.51.16 the 
Tariff Rate Quota will be allocated based on an applicant's Worsted 
Wool Fabric production, on a weighted average basis.
    (b) For the purpose of calculating allocations for HTS 9902.51.11 
and HTS 9902.51.15 only, Worsted Wool Suit production will be increased 
by the percentage of imported fabric consumed in the production of 
Worsted Wool Suits to total fabric consumed in this production. For 
example, if an applicant uses 30 percent imported fabric in the 
production of Worsted Wool Suits, that applicant's production level 
will be increased by 30 percent.
* * * * *

0
6. Section 335.6 is amended by revising paragraph (e) as follows:


Sec. 335.6  Surrender, reallocation and license utilization 
requirement.

* * * * *
    (e) A Licensee whose unused allocation in a Tariff Rate Quota Year 
exceeds five percent of the quantity set forth in its license shall be 
subject to having its allocation reduced in the subsequent Tariff Rate 
Quota Year. The subsequent Tariff Rate Quota Year

[[Page 25778]]

allocation will be reduced from the quantity such Licensee would 
otherwise have received by a quantity equal to 25 percent of its unused 
allocation from the prior year. A Licensee whose unused allocation in 
two or more consecutive Tariff Rate Quota Years exceeds five percent of 
the quantity set forth in its license shall have its allocation reduced 
in the subsequent Tariff Rate Quota Year by a quantity equal to 50 
percent of its unused allocation from the prior year.
* * * * *


Sec.  335.7  [Removed]

0
7. Remove section 355.7.

PART 340--MODIFICATION OF THE TARIFF RATE QUOTA LIMITATION ON 
WORSTED WOOL FABRIC IMPORTS. [Removed]

0
8. Remove entire part 340.
[FR Doc.05-9494 Filed 5-13-05; 8:45 am]
BILLING CODE 3510-DSS