[Federal Register Volume 80, Number 27 (Tuesday, February 10, 2015)]
[Rules and Regulations]
[Pages 7303-7318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02720]


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DEPARTMENT OF HOMELAND SECURITY

Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 10, 24, 162, 163, and 178]

[USCBP-2015-0007: CBP Dec. 15-03
RIN 1515-AD59


United States-Australia Free Trade Agreement

AGENCIES:  U.S. Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Interim regulations; solicitation of comments.

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SUMMARY: This rule amends the U.S. Customs and Border Protection 
regulations on an interim basis to implement the preferential tariff 
treatment and other customs-related provisions of the United States-
Australia Free Trade Agreement entered into by the United States and 
the Commonwealth of Australia.

DATES: Interim rule effective February 10, 2015; comments must be 
received by April 13, 2015.

[[Page 7304]]


ADDRESSES: You may submit comments, identified by docket number, by one 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2015-0007.
     Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, Office of International Trade, U.S. Customs and Border 
Protection, 90 K Street NE., 10th Floor, Washington, DC 20229-1177.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to http://www.regulations.gov, including any 
personal information provided. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov. Submitted comments 
may also be inspected during regular business days between the hours of 
9 a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, U.S. Customs 
and Border Protection, 90 K Street NE., 10th Floor, Washington, DC. 
Arrangements to inspect submitted comments should be made in advance by 
calling Mr. Joseph Clark at (202) 325-0118.

FOR FURTHER INFORMATION CONTACT: 
    Textile Operational Aspects: Diane Liberta, Textile Operations 
Branch, Office of International Trade, (202) 863-6241.
    Other Operational Aspects: Katrina Chang, Trade Policy and 
Programs, Office of International Trade, (202) 863-6532.
    Legal Aspects: Yuliya Gulis, Regulations and Rulings, Office of 
International Trade, (202) 325-0042.

SUPPLEMENTARY INFORMATION: 

Public Participation

    Interested persons are invited to participate in this rulemaking by 
submitting written data, views, or arguments on all aspects of the 
interim rule. U.S. Customs and Border Protection (CBP) also invites 
comments that relate to the economic, environmental, or federalism 
effects that might result from this interim rule. Comments that will 
provide the most assistance to CBP in developing these regulations will 
reference a specific portion of the interim rule, explain the reason 
for any recommended change, and include data, information, or authority 
that support such recommended change. See ADDRESSES above for 
information on how to submit comments.

Background

    On May 18, 2004, the United States and Australia (the ``Parties'') 
signed the U.S.-Australia Free Trade Agreement (``AFTA'' or 
``Agreement''). On August 3, 2004, the President signed into law the 
United States-Australia Free Trade Agreement Implementation Act (the 
``Act''), Pub. L. 108-286, 118 Stat. 919 (19 U.S.C. 3805 note), which 
approved and made statutory changes to implement the AFTA. Section 207 
of the Act requires that regulations be prescribed as necessary to 
implement the provisions of the AFTA.
    On December 20, 2004, the President signed Proclamation 7857 
(``Proclamation'') to implement the AFTA. The Proclamation, which was 
published in the Federal Register on December 23, 2004 (69 FR 77133), 
modified the Harmonized Tariff Schedule of the United States 
(``HTSUS'') as set forth in Annexes I and II of Publication 3722 of the 
U.S. International Trade Commission. The modifications to the HTSUS 
included the addition of new General Note 28, incorporating the 
relevant AFTA rules of origin as set forth in the Act, and the 
insertion throughout the HTSUS of the preferential duty rates 
applicable to individual products under the AFTA where the special 
program indicator ``AU'' appears in parenthesis in the ``Special'' rate 
of duty subcolumn. The modifications to the HTSUS also included a new 
Subchapter XIII to Chapter 99 to provide for temporary tariff-rate 
quotas and applicable safeguards implemented by the AFTA, as well as 
modifications to Subchapter XXII of Chapter 98. After the Proclamation 
was signed, CBP issued instructions to the field and the public 
implementing the Agreement by allowing the trade to receive the 
benefits under the AFTA effective on or after January 1, 2005.
    CBP is responsible for administering the provisions of the AFTA and 
the Act that relate to the importation of goods into the United States 
from Australia. Those customs-related AFTA provisions which require 
implementation through regulation include certain tariff and non-tariff 
provisions within Chapter One (Establishment of a Free Trade Area and 
Definitions), Chapter Two (National Treatment and Market Access for 
Goods), Chapter Four (Textiles and Apparel), Chapter Five (Rules of 
Origin), and Chapter Six (Customs Administration).
    Certain general definitions set forth in Chapter One of the AFTA 
have been incorporated into the AFTA implementing regulations. These 
regulations also implement Article 1.2 (General Definitions) and Annex 
1-A (Certain Definitions) of the AFTA. The tariff-related provisions 
within AFTA Chapter Two that require regulatory action by CBP are 
Article 2.6 (Goods re-entered after Repair or Alteration) and Article 
2.12 (Merchandise Processing Fee).
    Chapter Four of the AFTA sets forth provisions relating to trade in 
textile and apparel goods between Australia and the United States under 
the AFTA. Section A of Chapter Five of the AFTA sets forth the rules 
for determining whether an imported good is an originating good of the 
United States or Australia and, as such, is therefore eligible for 
preferential tariff (duty-free or reduced duty) treatment under the 
AFTA as specified in the Agreement and the HTSUS.
    Under AFTA Article 5.1 of Chapter Five (Originating Goods) and 
section 203(b) of the Act, originating goods may be grouped in four 
broad categories: (1) Goods that are wholly obtained or produced 
entirely in one or both of the Parties; (2) goods that are produced 
entirely in one or both of the Parties and that satisfy the product-
specific rules of origin in AFTA Annex 4-A (Textile or Apparel Specific 
Rules of Origin) or Annex 5-A (Specific Rules of Origin); (3) goods 
that are produced entirely in the territory of one or both of the 
Parties exclusively from originating materials; and (4) goods that 
otherwise qualify as originating goods under Chapter 4 or 5 of the 
AFTA. AFTA Article 5.2 (section 203(c) of the Act) provides a de 
minimis criterion. AFTA Article 5.3 (section 203(d) of the Act) allows 
production that takes place in the territory of both Parties to be 
accumulated such that, provided other requirements are met, the 
resulting good is considered originating. AFTA Article 5.4 (section 
203(e) of the Act) sets forth the methods for calculating the regional 
value content of a good. AFTA Article 5.5 (section 203(f) of the Act) 
sets forth the rules for determining the value of materials for 
purposes of calculating the regional value content of a good and 
applying the de minimis criterion. The remaining Articles within 
Section A of Chapter Five consist of additional sub-rules, applicable 
to the originating good concept, involving: Accessories, Spare Parts 
and Tools (Article 5.6; section 203(g) of the Act); Fungible Goods and

[[Page 7305]]

Materials (Article 5.7; section 203(h) of the Act); Packaging Materials 
and Containers for Retail Sale (Article 5.8; section 203(i) of the 
Act); Packing Materials and Containers for Shipment (Article 5.9; 
section 203(j) of the Act); Indirect Materials (Article 5.10; section 
203(k) of the Act); and Third Country Transportation (Article 5.11; 
section 203(l) of the Act (Third Country Operations)). The basic rules 
of origin in Chapter Five of the AFTA are set forth in General Note 28, 
HTSUS, and reflected in the AFTA implementing regulations.
    Section B of Chapter Five sets forth procedures that apply under 
the AFTA in regard to claims for preferential tariff treatment. Section 
C sets forth consultation mechanisms between the Parties. Section D 
discusses the use of the Harmonized System and generally accepted 
accounting principles in determining whether a good is originating 
under the AFTA. Finally, Section E lists the definitions to be used 
within the context of the rules of origin in the Chapter.
    Chapter Six of the AFTA sets forth operational provisions related 
to customs administration under the AFTA.
    The majority of the AFTA implementing regulations set forth in this 
document have been included within new Subpart L in Part 10 of the CBP 
regulations (19 CFR part 10). However, in those cases in which AFTA 
implementation is more appropriate in the context of an existing 
regulatory provision, the AFTA regulatory text has been incorporated in 
an existing Part within the CBP regulations. In addition, this document 
sets forth several cross-references and other consequential changes to 
existing regulatory provisions to clarify the relationship between 
those existing provisions and the new AFTA implementing regulations. 
The regulatory changes are discussed below in the order in which they 
appear in this document.

Discussion of Amendments

Part 10

    Section 10.31(f) concerns temporary importations under bond. It is 
amended by adding references to certain goods originating in Australia 
for which, like goods originating in Canada, Mexico, Singapore, Chile, 
Morocco, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican 
Republic, Costa Rica, Bahrain, Oman, Peru, the Republic of Korea, or 
Colombia, no bond or other security will be required when imported 
temporarily for prescribed uses. The provisions of AFTA Article 2.5 
(Temporary Admission of Goods) are already reflected in existing 
temporary importation bond or other provisions contained in Part 10 of 
the CBP regulations and in Chapter 98 of the HTSUS.

Part 10, Subpart L

General Provisions
    Section 10.721 outlines the scope of new Subpart L, Part 10 of the 
CBP regulations. This section also clarifies that, except where the 
context otherwise requires, the requirements contained in Subpart L, 
Part 10 are in addition to general administrative and enforcement 
provisions set forth elsewhere in the CBP regulations. Thus, for 
example, the specific merchandise entry requirements contained in 
Subpart L, Part 10 are in addition to the basic entry requirements 
contained in Parts 141-143 of the CBP regulations.
    Section 10.722 sets forth definitions of common terms used within 
Subpart L, Part 10. Although the majority of the definitions in this 
section are based on definitions contained in Article 1.2 and Annex 1-A 
of the AFTA, and section 3 of the Act, other definitions have also been 
included to clarify the application of the regulatory texts. Additional 
definitions that apply in a more limited Subpart L, Part 10 context are 
set forth elsewhere with the substantive provisions to which they 
relate.
Import Requirements
    Section 10.723 sets forth the procedure for claiming AFTA 
preferential tariff treatment at the time of entry and, as provided in 
AFTA Article 5.12, states that an importer may make a claim for AFTA 
preferential treatment based on the importer's knowledge or on 
information in the importer's possession that the good qualifies as an 
originating good. Section 10.723 also provides, consistent with AFTA 
Article 5.13, that an importer must promptly and voluntarily correct an 
invalid claim for preferential tariff treatment in order to avoid being 
subject to penalties.
    Section 10.724, which is based on AFTA Article 5.12, requires a 
U.S. importer, upon request, to submit a supporting statement setting 
forth the reasons that the good qualifies as an AFTA originating good 
in connection with the claim. Included in Sec.  10.724 is a provision 
that the supporting statement may be used either for a single 
importation or for multiple importations of identical goods.
    Section 10.725 sets forth certain importer obligations regarding 
the truthfulness of information and documents submitted in support of a 
claim for preferential tariff treatment. Section 10.726 provides that 
the importer's supporting statement is not required for certain non-
commercial or low-value importations.
    Section 10.727 implements AFTA Article 5.14 concerning the 
maintenance of relevant records regarding the imported good.
    Section 10.728, which is based on AFTA Article 5.13, authorizes the 
denial of AFTA tariff benefits if the importer fails to comply with any 
of the requirements under Subpart L, Part 10, CBP regulations.
Rules of Origin
    Sections 10.729 through 10.741 provide the implementing regulations 
regarding the rules of origin provisions of General Note 28, HTSUS, 
Chapters Four and Five of AFTA, and section 203 of the Act.
Definitions
    Section 10.729 sets forth terms that are defined for purposes of 
the rules of origin as found in section 203(n) of the Act and other 
definitions that have been included to clarify the application of the 
regulatory texts.
General Rules of Origin
    Section 10.730 sets forth the basic rules of origin established in 
Article 5.1 of the AFTA, section 203(b) of the Act, and General Note 
28(b), HTSUS. The provisions of Sec.  10.730 apply both to the 
determination of the status of an imported good as an originating good 
for purposes of preferential tariff treatment and to the determination 
of the status of a material as an originating material used in a good 
which is subject to a determination under General Note 28, HTSUS.
    Section 10.730(a), reflecting section 203(b)(1) of the Act, 
specifies those goods that are originating goods because they are 
wholly obtained or produced entirely in the territory of one or both of 
the Parties.
    Section 10.730(b), reflecting section 203(b)(2) of the Act, 
provides that goods that have been produced entirely in the territory 
of one or both of the Parties so that each non-originating material 
undergoes an applicable change in tariff classification and satisfies 
any applicable regional value content or other requirement set forth in 
General Note 28(n) are originating goods. Essential to the rules in 
Sec.  10.730(b) are the specific rules of General Note 28(n), HTSUS, 
which are incorporated by reference.
    Section 10.730(c), reflecting section 203(b)(3) of the Act, 
provides that goods

[[Page 7306]]

that have been produced entirely in the territory of one or both of the 
Parties exclusively from originating materials are originating goods. 
Under Sec.  10.730(d), which implements section 203(b)(4) of the Act, 
goods are considered originating goods if they otherwise qualify as 
originating goods under General Note 28, HTSUS.
Textile and Apparel Goods Classifiable as Goods Put Up in Sets
    Section 10.731, which is based on AFTA Article 4.2.8, provides 
that, notwithstanding the specific rules of General Note 28(n), HTSUS, 
textile and apparel goods classifiable as goods put up in sets for 
retail sale as provided for in General Rule of Interpretation 3, HTSUS, 
will not qualify as originating goods unless each of the goods in the 
set is an originating good or the total value of the non-originating 
goods in the set does not exceed 10 percent of the value of the set.
De Minimis
    Section 10.732, as provided for in AFTA Article 5.2 and section 
203(c) of the Act, sets forth de minimis rules for goods that may be 
considered to qualify as originating goods even though they fail to 
qualify as originating goods under the rules in Sec.  10.730. There are 
a number of exceptions to the de minimis rule set forth in the AFTA 
Annex 5-A (exceptions to Article 5.2) as well as a separate rule for 
textile and apparel goods.
Accumulation
    Section 10.733, which is derived from AFTA Article 5.3 and section 
203(d) of the Act, sets forth the rule by which originating materials 
from the territory of Australia or the United States that are used in 
the production of a good in the territory of the other country will be 
considered to originate in the territory of such other country. In 
addition, this section also establishes that a good that is produced by 
one or more producers in the territory of Australia or the United 
States, or both, is an originating good if the good satisfies all of 
the applicable requirements of the rules of origin of the AFTA.
Value Content
    Section 10.734 reflects AFTA Article 5.4 and section 203(e) of the 
Act concerning the basic rules that apply for purposes of determining 
whether an imported good satisfies a minimum regional value content 
(``RVC'') requirement. Section 10.735, reflecting AFTA Article 5.5 and 
section 203(f) of the Act, sets forth the rules for determining the 
value of a material for purposes of calculating the regional value 
content of a good as well as for purposes of applying the de minimis 
rules.
Accessories, Spare Parts, or Tools
    Section 10.736, as set forth in AFTA Article 5.6 and section 203(g) 
of the Act, specifies the conditions under which a good's standard 
accessories, spare parts, or tools are: (1) Treated as originating 
goods; and (2) disregarded in determining whether all non-originating 
materials undergo an applicable change in tariff classification under 
General Note 28(n), HTSUS.
Fungible Goods and Materials
    Section 10.737, as provided for in AFTA Article 5.7 and section 
203(h) of the Act, sets forth the rules by which ``fungible'' goods or 
materials may be claimed as originating.
Packaging Materials and Packing Materials
    Sections 10.738 and 10.739, which are derived from AFTA Articles 
5.8 and 5.9 and sections 203(i) and (j) of the Act, respectively, 
provide that retail packaging materials and packing materials for 
shipment are to be disregarded with respect to their actual origin in 
determining whether non-originating materials undergo an applicable 
change in tariff classification under General Note 28(n), HTSUS. These 
sections also set forth the treatment of packaging and packing 
materials for purposes of the regional value content requirement of the 
note.
Indirect Materials
    Section 10.740, as set forth in AFTA Article 5.10 and section 
203(k) of the Act, provides that indirect materials, as defined in 
Sec.  10.729(h), are considered to be originating materials without 
regard to where they are produced.
Third Country Transportation
    Section 10.741, which is derived from AFTA Article 5.11 and section 
203(l) of the Act, sets forth the rule that an originating good loses 
its originating status and is treated as a non-originating good if, 
subsequent to production in the territory of one or both of the Parties 
that qualifies the good as originating, the good undergoes production 
outside the territories of the Parties.
Origin Verifications and Determinations
    Section 10.742 implements AFTA Article 5.15 which concerns the 
conduct of verifications to determine whether imported goods are 
originating goods entitled to AFTA preferential tariff treatment and 
the application of origin determinations resulting from such 
verifications. This section also governs the conduct of verifications 
directed to producers of materials that are used in the production of a 
good for which AFTA preferential duty treatment is claimed.
    Section 10.743, as provided for in AFTA Article 4.3 and section 206 
of the Act, sets forth the verification and enforcement procedures 
specifically relating to trade in textile and apparel goods.
    Section 10.744 also implements AFTA Articles 4.3 and 5.15 and 
sections 205 and 206 of the Act, and provides the procedures that apply 
when preferential tariff treatment is denied on the basis of an origin 
verification conducted under Subpart L, Part 10 of the CBP regulations.
Penalties
    Section 10.745 concerns the general application of penalties to 
AFTA transactions and is based on AFTA Article 6.7 and section 205 of 
the Act.
    Section 10.746 implements AFTA Article 5.13.4 with regard to 
exceptions to the application of penalties in the case of an importer 
who promptly and voluntarily makes a corrected claim or supporting 
statement and pays any duties owing. The AFTA's exception to the 
application of penalties is contingent upon the importer correcting the 
claim and paying any duties owing within a period, determined by each 
importing Party, which may not be less than one year from submission of 
the invalid claim.
    Section 10.747 also reflects AFTA Article 5.13.4 and section 205 of 
the Act, and sets forth the circumstances under which the making of a 
corrected claim or supporting statement by an importer will be 
considered to have been done ``promptly and voluntarily.'' Corrected 
claims or certifications that fail to meet these requirements are not 
excepted from penalties, although the importer making the corrected 
claim or supporting statement may, depending on the circumstances, 
qualify for a reduced penalty as a prior disclosure under 19 U.S.C. 
1592(c)(4). Section 10.747(c) also specifies the content of the 
statement that must accompany each corrected claim.
Goods Returned After Repair or Alteration
    Section 10.748 implements AFTA Article 2.6 regarding duty-free 
treatment for goods re-entered after repair or alteration in Australia.

[[Page 7307]]

Part 24

    An amendment is made to Sec.  24.23(c) (19 CFR 24.23(c)), which 
concerns the merchandise processing fee, to implement AFTA Article 2.12 
and section 204 of the Act, to provide that the merchandise processing 
fee is not applicable to goods that qualify as originating goods under 
the AFTA.

Part 162

    Part 162 contains regulations regarding the inspection and 
examination of, among other things, imported merchandise. A cross-
reference is added to Sec.  162.0 (19 CFR 162.0), which is the scope 
section of the part, to refer readers to the additional AFTA records 
maintenance and examination provisions contained in new Subpart L, Part 
10, CBP regulations.

Part 163

    A conforming amendment is made to Sec.  163.1 (19 CFR 163.1) to 
include, as authorized by AFTA Article 5.14, the requirement that the 
importer maintain records and documents necessary to support a claim 
for preferential tariff treatment under the AFTA. Also, the list of 
records and information required for the entry of merchandise appearing 
in the Appendix to Part 163 (commonly known as the (a)(1)(A) list) is 
also amended to add the records and documents necessary to support an 
AFTA claim for preferential tariff treatment.

Part 178

    Part 178 sets forth the control numbers assigned to information 
collections of CBP by the Office of Management and Budget (OMB), 
pursuant to the Paperwork Reduction Act of 1995, Public Law 104-13. The 
list contained in Sec.  178.2 (19 CFR 178.2) is amended to add the 
information collections used by CBP to determine eligibility for a 
tariff preference or other rights or benefits under the AFTA and the 
Act.

Inapplicability of Notice and Delayed Effective Date Requirements

    Under the Administrative Procedure Act (APA) (5 U.S.C. 553), 
agencies generally are required to publish a notice of proposed 
rulemaking in the Federal Register that solicits public comment on the 
proposed regulatory amendments, consider public comments in deciding on 
the content of the final amendments, and publish the final amendments 
at least 30 days prior to their effective date. However, section 
553(a)(1) of the APA provides that the standard prior notice and 
comment procedures do not apply to an agency rulemaking to the extent 
that it involves a foreign affairs function of the United States. CBP 
has determined that these interim regulations involve a foreign affairs 
function of the United States because they implement preferential 
tariff treatment and related provisions of the AFTA. Therefore, the 
rulemaking requirements under the APA do not apply and this interim 
rule will be effective upon publication. However, CBP is soliciting 
comments in this interim rule and will consider all comments received 
before issuing a final rule.

Executive Order 12866 and the Regulatory Flexibility Act

    Executive Order 12866 directs agencies to assess costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). It has been determined that this 
rule is not a significant regulatory action, as defined in section 3(f) 
of Executive Order 12866. Because a notice of proposed rulemaking is 
not required under section 553(b) of the APA for the reasons described 
above, the provisions of the Regulatory Flexibility Act, as amended (5 
U.S.C. 601 et seq.), do not apply to this rulemaking. Accordingly, this 
interim rule is not subject to the regulatory analysis requirements or 
other requirements of 5 U.S.C. 603 and 604.

Paperwork Reduction Act

    The collections of information contained in these regulations have 
previously been reviewed and approved by OMB in accordance with the 
requirements of the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1651-0117, which covers many of the free trade agreement 
requirements that CBP administers. The addition of the AFTA 
requirements will result in an increase in the number of respondents 
and burden hours for this information collection. Under the Paperwork 
Reduction Act, an agency may not conduct or sponsor, and an individual 
is not required to respond to, a collection of information unless it 
displays a valid OMB control number.
    The collections of information in these regulations are in 
Sec. Sec.  10.723, 10.724, and 10.727. This information is required in 
connection with general recordkeeping requirements (Sec.  10.727), as 
well as claims for preferential tariff treatment under the AFTA and the 
Act and will be used by CBP to determine eligibility for tariff 
preference under the AFTA and the Act (Sec. Sec.  10.723 and 10.724). 
The likely respondents are business organizations including importers, 
exporters and manufacturers. The burdens imposed by these regulations 
are:
    Estimated total annual reporting burden: 4,000 hours.
    Estimated number of respondents: 20,000.
    Estimated annual frequency of responses per respondent: 1.
    Estimated average annual burden per response: .2 hours.
    Comments concerning the collections of information and the accuracy 
of the estimated annual burden, and suggestions for reducing that 
burden, should be directed to the Office of Management and Budget, 
Attention: Desk Officer for the Department of the Treasury, Office of 
Information and Regulatory Affairs, Washington, DC 20503. A copy should 
also be sent to the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, U.S. Customs 
and Border Protection, 90 K Street NE., 10th Floor, Washington, DC 
20229-1177.

Signing Authority

    This document is being issued in accordance with Sec.  0.1(a)(1) of 
the CBP regulations (19 CFR 0.1(a)(1)) pertaining to the authority of 
the Secretary of the Treasury (or his/her delegate) to approve 
regulations related to certain customs revenue functions.

List of Subjects

19 CFR Part 10

    Alterations, Bonds, Customs duties and inspection, Exports, 
Imports, Preference programs, Repairs, Reporting and recordkeeping 
requirements, Trade agreements.

19 CFR Part 24

    Accounting, Customs duties and inspection, Financial and accounting 
procedures, Reporting and recordkeeping requirements, Trade agreements, 
User fees.

19 CFR Part 162

    Administrative practice and procedure, Customs duties and 
inspection, Penalties, Trade agreements.

19 CFR Part 163

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

[[Page 7308]]

19 CFR Part 178

    Administrative practice and procedure, Exports, Imports, Reporting 
and recordkeeping requirements.

Amendments to the Regulations

    For the reasons set forth above, chapter I of title 19, Code of 
Federal Regulations (19 CFR chapter I), is amended as set forth below.

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

0
1. The general authority citation for part 10 continues to read and the 
specific authority for new Subpart L is added to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508, 
1623, 1624, 3314.
* * * * *
    Sections 10.721 through 10.748 also issued under 19 U.S.C. 1202 
(General Note 28, HTSUS) and Pub. L. 108-286, 118 Stat. 919 (19 
U.S.C. 3805 note).

0
2. In Sec.  10.31(f), the last sentence is revised to read as follows:


Sec.  10.31  Entry; bond.

* * * * *
    (f) * * * In addition, notwithstanding any other provision of this 
paragraph, in the case of professional equipment necessary for carrying 
out the business activity, trade or profession of a business person, 
equipment for the press or for sound or television broadcasting, 
cinematographic equipment, articles imported for sports purposes and 
articles intended for display or demonstration, if brought into the 
United States by a resident of Canada, Mexico, Singapore, Chile, 
Morocco, Australia, El Salvador, Guatemala, Honduras, Nicaragua, the 
Dominican Republic, Costa Rica, Bahrain, Oman, Peru, the Republic of 
Korea, Colombia, or Panama and entered under Chapter 98, Subchapter 
XIII, HTSUS, no bond or other security will be required if the entered 
article is a good originating, within the meaning of General Notes 12, 
25, 26, 27, 28, 29, 30, 31, 32, 33, 34, and 35, HTSUS, in the country 
of which the importer is a resident.
* * * * *
0
3. Add subpart L to read as follows:
Subpart L--United States-Australia Free Trade Agreement

General Provisions

Sec.
10.721 Scope.
10.722 General definitions.

Import Requirements

10.723 Filing of claim for preferential tariff treatment upon 
importation.
10.724 Supporting statement.
10.725 Importer obligations.
10.726 Supporting statement not required.
10.727 Maintenance of records.
10.728 Effect of noncompliance; failure to provide documentation 
regarding third country transportation.

Rules of Origin

10.729 Definitions.
10.730 Originating goods.
10.731 Textile and apparel goods classifiable as goods put up in 
sets.
10.732 De minimis.
10.733 Accumulation.
10.734 Regional value content.
10.735 Value of materials.
10.736 Accessories, spare parts, or tools.
10.737 Fungible goods and materials.
10.738 Retail packaging materials and containers.
10.739 Packing materials and containers for shipment.
10.740 Indirect materials.
10.741 Third country transportation.

Origin Verifications and Determinations

10.742 Verification and justification of claim for preferential 
treatment.
10.743 Special rule for verifications in Australia of U.S. imports 
of textile and apparel goods.
10.744 Issuance of negative origin determinations.

Penalties

10.745 General.
10.746 Corrected claim or supporting statement.
10.747 Framework for correcting claims or supporting statements.

Goods Returned After Repair or Alteration

10.748 Goods re-entered after repair or alteration in Australia.

Subpart L--United States-Australia Free Trade Agreement

General Provisions


Sec.  10.721  Scope.

    This subpart implements the duty preference and related customs 
provisions applicable to imported goods under the United States-
Australia Free Trade Agreement (the AFTA) signed on May 18, 2004, and 
under the United States-Australia Free Trade Agreement Implementation 
Act (``the Act''), Pub. L. 108-286, 118 Stat. 919 (19 U.S.C. 3805 
note). Except as otherwise specified in this subpart, the procedures 
and other requirements set forth in this subpart are in addition to the 
customs procedures and requirements of general application contained 
elsewhere in this chapter. Additional provisions implementing certain 
aspects of the AFTA and the Act are contained in Parts 24, 162, and 163 
of this chapter.


Sec.  10.722  General definitions.

    As used in this subpart, the following terms will have the meanings 
indicated unless either the context in which they are used requires a 
different meaning or a different definition is prescribed for a 
particular section of this subpart:
    (a) Claim for preferential tariff treatment. ``Claim for 
preferential tariff treatment'' means a claim that a good is entitled 
to the duty rate applicable under the AFTA to an originating good, and 
to an exemption from the merchandise processing fee;
    (b) Claim of origin. ``Claim of origin'' means a claim that a 
textile or apparel good is an originating good or a good of a Party or 
satisfies the non-preferential rules of origin of a Party;
    (c) Customs duty. ``Customs duty'' includes any customs or import 
duty and a charge of any kind imposed in connection with the 
importation of a good, including any form of surtax or surcharge in 
connection with such importation, but does not include any:
    (1) Charge equivalent to an internal tax imposed consistently with 
Article III:2 of GATT 1994 in respect of the like domestic good or in 
respect of goods from which the imported good has been manufactured or 
produced in whole or in part;
    (2) Antidumping or countervailing duty that is applied pursuant to 
a Party's law; or
    (3) Fee or other charge in connection with importation commensurate 
with the cost of services rendered;
    (d) Customs Valuation Agreement. ``Customs Valuation Agreement'' 
means the Agreement on Implementation of Article VII of the General 
Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO 
Agreement;
    (e) Days. ``Days'' means calendar days;
    (f) Enterprise. ``Enterprise'' means any entity constituted or 
organized under applicable law, whether or not for profit, and whether 
privately-owned or governmentally-owned or controlled, including any 
corporation, trust, partnership, sole proprietorship, joint venture, 
association, or similar organization;
    (g) Enterprise of a Party. ``Enterprise of a Party'' means an 
enterprise constituted or organized under a Party's law;
    (h) GATT 1994. ``GATT 1994'' means the General Agreement on Tariffs 
and Trade 1994, contained in Annex 1A to the WTO Agreement;
    (i) Goods of a Party. ``Goods of a Party'' means domestic products 
as these are understood in the GATT 1994 or such goods as the Parties 
determine under the rules of origin as applied in

[[Page 7309]]

the normal course of trade, and includes originating goods of a Party.
    (j) Harmonized System. ``Harmonized System'' means the Harmonized 
Commodity Description and Coding System, including its General Rules of 
Interpretation, Section Notes, and Chapter Notes, as adopted and 
implemented by the Parties in their respective tariff laws;
    (k) Heading. ``Heading'' means the first four digits in the tariff 
classification number under the Harmonized System;
    (l) HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the 
United States as promulgated by the U.S. International Trade 
Commission;
    (m) Identical goods. ``Identical goods'' means goods that are the 
same in all respects relevant to the rule of origin that qualifies the 
goods as originating goods;
    (n) Originating. ``Originating'' means qualifying for preferential 
tariff treatment under the rules of origin set out in AFTA Chapters 
Four (Textiles and Apparel) and Five (Rules of Origin) and General Note 
28, HTSUS;
    (o) Party. ``Party'' means the United States or Australia;
    (p) Person. ``Person'' means a natural person or an enterprise;
    (q) Preferential tariff treatment. ``Preferential tariff 
treatment'' means the duty rate applicable under the AFTA to an 
originating good, and an exemption from the merchandise processing fee;
    (r) Subheading. ``Subheading'' means the first six digits in the 
tariff classification number under the Harmonized System;
    (s) Territory. ``Territory'' means:
    (1) With respect to Australia, the territory of the Commonwealth of 
Australia:
    (i) Excluding all external territories other than the Territory of 
Norfolk Island, the Territory of Christmas Island, the Territory of 
Cocos (Keeling) Islands, the Territory of Ashmore and Cartier Islands, 
the Territory of Heard Island and McDonald Islands, and the Coral Sea 
Islands Territory; and
    (ii) Including Australia's territorial sea, contiguous zone, 
exclusive economic zone, and continental shelf; and
    (2) With respect to the United States:
    (i) The customs territory of the United States, which includes the 
50 states, the District of Columbia, and Puerto Rico;
    (ii) The foreign trade zones located in the United States and 
Puerto Rico; and
    (iii) Any areas beyond the territorial seas of the United States 
within which, in accordance with international law and its domestic 
law, the United States may exercise rights with respect to the seabed 
and subsoil and their natural resources;
    (t) Textile or apparel good. ``Textile or apparel good'' means a 
good listed in the Annex to the Agreement on Textiles and Clothing 
(commonly referred to as ``the ATC''), which is part of the WTO 
Agreement;
    (u) WTO. ``WTO'' means the World Trade Organization; and
    (v) WTO Agreement. ``WTO Agreement'' means the Marrakesh Agreement 
Establishing the World Trade Organization of April 15, 1994.

Import Requirements


Sec.  10.723  Filing of claim for preferential tariff treatment upon 
importation.

    (a) Claim. An importer may make a claim for AFTA preferential 
tariff treatment, including an exemption from the merchandise 
processing fee, based on the importer's knowledge or information in the 
importer's possession that the good qualifies as an originating good. 
The claim is made by including on the entry summary, or equivalent 
documentation, the letters ``AU'' as a prefix to the subheading of the 
HTSUS under which each qualifying good is classified, or by the method 
specified for equivalent reporting via an authorized electronic data 
interchange system.
    (b) Corrected claim. If, after making the claim required under 
paragraph (a) of this section, the importer becomes aware that the 
claim is invalid, the importer must promptly and voluntarily correct 
the claim and pay any duties that may be due. The importer must submit 
a statement either in writing or via an authorized electronic data 
interchange system to the CBP office where the original claim was filed 
specifying the correction (see Sec. Sec.  10.746 and 10.747 of this 
subpart).


Sec.  10.724  Supporting statement.

    (a) Contents. An importer who makes a claim under Sec.  10.723(a) 
of this subpart must submit, at the request of the port director, a 
supporting statement setting forth the reasons that the good qualifies 
as an originating good, including pertinent cost and manufacturing 
data. A statement submitted to CBP under this paragraph:
    (1) Need not be in a prescribed format but must be in writing or 
must be transmitted electronically pursuant to any electronic means 
authorized by CBP for that purpose;
    (2) Must include the following information:
    (i) The legal name, address, telephone, and email address of the 
importer of record of the good;
    (ii) The legal name, address, telephone, and email address of the 
responsible official or authorized agent of the importer signing the 
supporting statement (if different from the information required by 
paragraph (a)(2)(i) of this section);
    (iii) The legal name, address, telephone, and email address of the 
exporter of the good (if different from the producer);
    (iv) The legal name, address, telephone, and email address of the 
producer of the good, if known;
    (v) A description of the good for which preferential tariff 
treatment is claimed, which must be sufficiently detailed to relate it 
to the invoice and the HS nomenclature;
    (vi) The HTSUS tariff classification, to six or more digits, as 
necessary for the specific change in tariff classification rule for the 
good set forth in General Note 28(n), HTSUS;
    (vii) The applicable rule of origin set forth in General Note 28, 
HTSUS, under which the good qualifies as an originating good; and
    (3) Must include a statement, in substantially the following form:

    I certify that:
    The information on this document is true and accurate and I 
assume the responsibility for proving such representations. I 
understand that I am liable for any false statements or material 
omissions made on or in connection with this document;
    I agree to maintain and present upon request, documentation 
necessary to support these representations;
    The goods originated or are considered to have originated in the 
territory of one or more of the Parties, and comply with the origin 
requirements specified for those goods in the United States-
Australia Free Trade Agreement; there has been no further production 
or any other operation outside the territories of the parties, other 
than unloading, reloading, or any other operation necessary to 
preserve the goods in good condition or to transport the goods to 
the United States; and
    This document consists of ___ pages, including all attachments.

    (b) Responsible official or agent. The supporting statement 
required to be submitted under paragraph (a) of this section must be 
signed and dated by a responsible official of the importer or by the 
importer's authorized agent having knowledge of the relevant facts.
    (c) Language. The supporting statement required to be submitted 
under paragraph (a) of this section must be completed in the English 
language.
    (d) Applicability of supporting statement. The supporting statement 
required to be submitted under paragraph (a) of this section may be 
applicable to:
    (1) A single importation of a good into the United States, 
including a single shipment that results in the filing of one

[[Page 7310]]

or more entries and a series of shipments that results in the filing of 
one entry; or
    (2) Multiple importations of identical goods into the United States 
that occur within a specified blanket period, not exceeding 12 months, 
set out in the statement. For purposes of this paragraph, ``identical 
goods'' means goods that are the same in all respects relevant to the 
particular rule of origin that qualifies the goods as originating.


Sec.  10.725  Importer obligations.

    (a) General. An importer who makes a claim under Sec.  10.723(a) of 
this subpart:
    (1) Is responsible for the truthfulness of the claim and of all the 
information and data contained in the supporting statement provided for 
in Sec.  10.724 of this subpart; and
    (2) Is responsible for submitting any supporting documents 
requested by CBP and for the truthfulness of the information contained 
in those documents. If CBP requests the submission of supporting 
documents, CBP will allow for the direct submission by the exporter or 
producer of business confidential or other sensitive information, 
including cost and sourcing information.
    (b) Information provided by exporter or producer. The fact that the 
importer has made a claim or submitted a supporting statement based on 
information provided by an exporter or producer will not relieve the 
importer of the responsibility referred to in the first sentence of 
paragraph (a) of this section.
    (c) Exemption from penalties. An importer will not be subject to 
civil or administrative penalties under 19 U.S.C. 1592 for making an 
invalid claim for preferential tariff treatment or submitting an 
incorrect supporting statement, provided that the importer promptly and 
voluntarily corrects the claim or supporting statement and pays any 
duty owing (see Sec. Sec.  10.746 and 10.747 of this subpart).


Sec.  10.726  Supporting statement not required.

    (a) General. Except as otherwise provided in paragraph (b) of this 
section, an importer will not be required to submit a supporting 
statement under Sec.  10.724 for:
    (1) A non-commercial importation of a good; or
    (2) A commercial importation for which the value of the originating 
goods does not exceed U.S. $2,500.
    (b) Exception. If the port director determines that an importation 
described in paragraph (a) of this section may reasonably be considered 
to have been carried out or planned for the purpose of evading 
compliance with the rules and procedures governing claims for 
preference under the AFTA, the port director will notify the importer 
that for that importation the importer must submit to CBP a supporting 
statement. The importer must submit such a statement within 30 days 
from the date of the notice. Failure to timely submit the supporting 
statement will result in denial of the claim for preferential tariff 
treatment.


Sec.  10.727  Maintenance of records.

    (a) General. An importer claiming preferential tariff treatment for 
a good imported into the United States under Sec.  10.723(a) of this 
subpart must maintain, for five years after the date of importation of 
the good, records and documents necessary to demonstrate that the good 
qualifies as an originating good, including records and documents 
associated with:
    (1) The purchase of, cost of, value of, and payment for, the good;
    (2) Where appropriate, the purchase of, cost of, value of, and 
payment for, all materials, including recovered goods and indirect 
materials, used in the production of the good; and
    (3) Where appropriate, the production of the good in the form in 
which the good was exported.
    (b) Applicability of other recordkeeping requirements. The records 
and documents referred to in paragraph (a) of this section are in 
addition to any other records that the importer is required to prepare, 
maintain, or make available to CBP under Part 163 of this chapter.
    (c) Method of maintenance. The records and documents referred to in 
paragraph (a) of this section must be maintained by importers as 
provided in Sec.  163.5 of this chapter.


Sec.  10.728  Effect of noncompliance; failure to provide documentation 
regarding third country transportation.

    (a) General. If the importer fails to comply with any requirement 
under this subpart, including submission of a complete supporting 
statement prepared in accordance with Sec.  10.724 of this subpart, 
when requested, the port director may deny preferential treatment to 
the imported good.
    (b) Failure to provide documentation regarding third country 
transportation. Where the requirements for preferential treatment set 
forth elsewhere in this subpart are met, the port director nevertheless 
may deny preferential treatment to an originating good if the good is 
shipped through or transshipped in a country other than a Party to the 
AFTA, and the importer of the good does not provide, at the request of 
the port director, evidence demonstrating to the satisfaction of the 
port director that the conditions set forth in Sec.  10.741 of this 
subpart were met.

Rules of Origin


Sec.  10.729  Definitions.

    For purposes of Sec. Sec.  10.729 through 10.741 of this subpart:
    (a) Adjusted value. ``Adjusted value'' means the value determined 
in accordance with Articles 1 through 8, Article 15, and the 
corresponding interpretative notes of the Customs Valuation Agreement, 
adjusted, if necessary, to exclude:
    (1) Any costs, charges, or expenses incurred for transportation, 
insurance and related services incidental to the international shipment 
of the good from the country of exportation to the place of 
importation; and
    (2) The value of packing materials and containers for shipment as 
defined in paragraph (n) of this section;
    (b) Class of motor vehicles. ``Class of motor vehicles'' means any 
one of the following categories of motor vehicles:
    (1) Motor vehicles classified under subheading 8701.20, motor 
vehicles for the transport of 16 or more persons classified under 
subheading 8702.10 or 8702.90, and motor vehicles classified under 
subheading 8704.10, 8704.22, 8704.23, 8704.32, or 8704.90, or heading 
8705 or 8706, HTSUS;
    (2) Motor vehicles classified under subheading 8701.10 or under any 
of subheadings 8701.30 through 8701.90, HTSUS;
    (3) Motor vehicles provided for the transport of 15 or fewer 
persons classified under subheading 8702.10 or 8702.90, HTSUS, or motor 
vehicles classified under subheading 8704.21 or 8704.31; or
    (4) Motor vehicles classified under subheadings 8703.21 through 
8703.90, HTSUS;
    (c) Exporter. ``Exporter'' means a person who exports goods from 
the territory of a Party;
    (d) Fungible goods or materials. ``Fungible goods or materials'' 
means goods or materials, as the case may be, that are interchangeable 
for commercial purposes and the properties of which are essentially 
identical;
    (e) Generally Accepted Accounting Principles. ``Generally Accepted 
Accounting Principles'' means the recognized consensus or substantial 
authoritative support in the territory of a Party, with respect to the 
recording of revenues, expenses, costs, assets, and liabilities, the 
disclosure of information,

[[Page 7311]]

and the preparation of financial statements. These standards may 
encompass broad guidelines of general application as well as detailed 
standards, practices, and procedures;
    (f) Good. ``Good'' means any merchandise, product, article, or 
material;
    (g) Goods wholly obtained or produced entirely in the territory of 
one or both of the Parties. ``Goods wholly obtained or produced 
entirely in the territory of one or both of the Parties'' means:
    (1) Mineral goods extracted in the territory of one or both of the 
Parties;
    (2) Vegetable goods, as such goods are defined in the Harmonized 
System, harvested in the territory of one or both of the Parties;
    (3) Live animals born and raised in the territory of one or both of 
the Parties;
    (4) Goods obtained from hunting, trapping, fishing, or aquaculture 
conducted in the territory of one or both of the Parties;
    (5) Goods (fish, shellfish, and other marine life) taken from the 
sea by vessels registered or recorded with a Party and flying its flag;
    (6) Goods produced exclusively from products referred to in 
paragraph (g)(5) of this section on board factory ships registered or 
recorded with a Party and flying its flag;
    (7) Goods taken by a Party or a person of a Party from the seabed 
or beneath the seabed outside territorial waters, provided that a Party 
has rights to exploit such seabed;
    (8) Goods taken from outer space, provided they are obtained by a 
Party or a person of a Party and not processed in the territory of a 
non-Party;
    (9) Waste and scrap derived from:
    (i) Production in the territory of one or both of the Parties; or
    (ii) Used goods collected in the territory of one or both of the 
Parties, provided such goods are fit only for the recovery of raw 
materials;
    (10) Recovered goods derived in the territory of one or both of the 
Parties from goods that have passed their life expectancy, or are no 
longer useable due to defects, and utilized in the territory of one or 
both of the Parties in the production of remanufactured goods; or
    (11) Goods produced in one or both of the Parties exclusively from 
goods referred to in paragraphs (g)(1) through (9) of this section, or 
from the derivatives of such goods, at any stage of production;
    (h) Indirect Material. ``Indirect material'' means a good used in 
the production, testing, or inspection of another good in the territory 
of one or both of the Parties but not physically incorporated into that 
other good, or a good used in the maintenance of buildings or the 
operation of equipment associated with the production of another good, 
including:
    (1) Fuel and energy;
    (2) Tools, dies, and molds;
    (3) Spare parts and materials used in the maintenance of equipment 
or buildings;
    (4) Lubricants, greases, compounding materials, and other materials 
used in production or used to operate equipment or buildings;
    (5) Gloves, glasses, footwear, clothing, safety equipment, and 
supplies;
    (6) Equipment, devices, and supplies used for testing or inspecting 
the good;
    (7) Catalysts and solvents; and
    (8) Any other good that is not incorporated into the other good but 
the use of which in the production of the other good can reasonably be 
demonstrated to be a part of that production.
    (i) Material. ``Material'' means a good that is used in the 
production of another good;
    (j) Model line. ``Model line'' means a group of motor vehicles 
having the same platform or model name;
    (k) Net cost. ``Net cost'' means total cost minus sales promotion, 
marketing, and after-sales service costs, royalties, shipping and 
packing costs, and non-allowable interest costs that are included in 
the total cost;
    (l) Non-allowable interest costs. ``Non-allowable interest costs'' 
means interest costs incurred by a producer that exceed 700 basis 
points above the applicable official interest rates for comparable 
maturities of the United States or Australia;
    (m) Non-originating good or non-originating material. ``Non-
originating good'' or ``non-originating material'' means a good or 
material, as the case may be, that does not qualify as originating 
under General Note 28, HTSUS, or this subpart;
    (n) Packing materials and containers for shipment. ``Packing 
materials and containers for shipment'' means the goods used to protect 
a good during its transportation to the United States, and does not 
include the packaging materials and containers in which a good is 
packaged for retail sale;
    (o) Producer. ``Producer'' means a person who grows, raises, mines, 
harvests, fishes, traps, hunts, manufactures, processes, assembles or 
disassembles a good;
    (p) Production. ``Production'' means growing, raising, mining, 
harvesting, fishing, trapping, hunting, manufacturing, processing, 
assembling, or disassembling a good;
    (q) Reasonably allocate. ``Reasonably allocate'' means to apportion 
in a manner that would be appropriate under generally accepted 
accounting principles;
    (r) Recovered goods. ``Recovered goods'' means materials in the 
form of individual parts that result from:
    (1) The complete disassembly of goods which have passed their life 
expectancy, or are no longer useable due to defects, into individual 
parts; and
    (2) The cleaning, inspecting, or testing, or other processing that 
is necessary for improvement to sound working condition of such 
individual parts;
    (s) Remanufactured good. ``Remanufactured good'' means an 
industrial good assembled in the territory of a Party that is 
classified in Chapter 84, 85, or 87, or heading 9026, 9031, or 9032, 
HTSUS, other than a good classified in heading 8418 or 8516 or any of 
headings 8701 through 8706, HTSUS, and that:
    (1) Is entirely or partially comprised of recovered goods;
    (2) Has a similar life expectancy to, and meets the same 
performance standards as, a like good that is new; and
    (3) Enjoys a factory warranty similar to a like good that is new;
    (t) Royalties. ``Royalties'' means payments of any kind, including 
payments under technical assistance agreements or similar agreements, 
made as consideration for the use of, or right to use, any copyright, 
literary, artistic, or scientific work, patent, trademark, design, 
model, plan, secret formula or process, excluding those payments under 
technical assistance agreements or similar agreements that can be 
related to specific services such as:
    (1) Personnel training, without regard to where performed; and
    (2) If performed in the territory of one or both of the Parties, 
engineering, tooling, die-setting, software design and similar computer 
services;
    (u) Sales promotion, marketing, and after-sales service costs. 
``Sales promotion, marketing, and after-sales service costs'' means the 
following costs related to sales promotion, marketing, and after-sales 
service:
    (1) Sales and marketing promotion; media advertising; advertising 
and market research; promotional and demonstration materials; exhibits; 
sales conferences, trade shows and conventions; banners; marketing 
displays; free samples; sales, marketing and after-sales service 
literature (product brochures, catalogs, technical literature, price 
lists, service manuals, sales aid information); establishment

[[Page 7312]]

and protection of logos and trademarks; sponsorships; wholesale and 
retail restocking charges; entertainment;
    (2) Sales and marketing incentives; consumer, retailer or 
wholesaler rebates; merchandise incentives;
    (3) Salaries and wages, sales commissions, bonuses, benefits (for 
example, medical, insurance, pension), traveling and living expenses, 
membership and professional fees, for sales promotion, marketing and 
after-sales service personnel;
    (4) Recruiting and training of sales promotion, marketing and 
after-sales service personnel, and after-sales training of customers' 
employees, where such costs are identified separately for sales 
promotion, marketing and after-sales service of goods on the financial 
statements or cost accounts of the producer;
    (5) Product liability insurance;
    (6) Office supplies for sales promotion, marketing and after-sales 
service of goods, where such costs are identified separately for sales 
promotion, marketing and after-sales service of goods on the financial 
statements or cost accounts of the producer;
    (7) Telephone, mail and other communications, where such costs are 
identified separately for sales promotion, marketing and after-sales 
service of goods on the financial statements or cost accounts of the 
producer;
    (8) Rent and depreciation of sales promotion, marketing and after-
sales service offices and distribution centers;
    (9) Property insurance premiums, taxes, cost of utilities, and 
repair and maintenance of sales promotion, marketing and after-sales 
service offices and distribution centers, where such costs are 
identified separately for sales promotion, marketing and after-sales 
service of goods on the financial statements or cost accounts of the 
producer; and
    (10) Payments by the producer to other persons for warranty 
repairs;
    (v) Self-produced material. ``Self-produced material'' means an 
originating material that is produced by a producer of a good and used 
in the production of that good;
    (w) Shipping and packing costs. ``Shipping and packing costs'' 
means the costs incurred in packing a good for shipment and shipping 
the good from the point of direct shipment to the buyer, excluding the 
costs of preparing and packaging the good for retail sale;
    (x) Total cost. ``Total cost'' means all product costs, period 
costs, and other costs for a good incurred in the territory of one or 
both of the Parties. Product costs are costs that are associated with 
the production of a good and include the value of materials, direct 
labor costs, and direct overhead. Period costs are costs, other than 
product costs, that are expensed in the period in which they are 
incurred, such as selling expenses and general and administrative 
expenses. Other costs are all costs recorded on the books of the 
producer that are not product costs or period costs, such as interest. 
Total cost does not include profits that are earned by the producer, 
regardless of whether they are retained by the producer or paid out to 
other persons as dividends, or taxes paid on those profits, including 
capital gains taxes;
    (y) Used. ``Used'' means used or consumed in the production of 
goods; and
    (z) Value. ``Value'' means the value of a good or material for 
purposes of calculating customs duties or for purposes of applying this 
subpart.


Sec.  10.730  Originating goods.

    Except as otherwise provided in this subpart and General Note 28, 
HTSUS, a good imported into the customs territory of the United States 
will be considered an originating good under the AFTA only if:
    (a) The good is wholly obtained or produced entirely in the 
territory of one or both of the Parties;
    (b) The good is produced entirely in the territory of one or both 
of the Parties and:
    (1) Each non-originating material used in the production of the 
good undergoes an applicable change in tariff classification specified 
in General Note 28(n), HTSUS;
    (2) The good otherwise satisfies any applicable regional value 
content or other requirements specified in General Note 28(n), HTSUS; 
or
    (3) The good meets any other requirements specified in General Note 
28(n), HTSUS;
    (c) The good is produced entirely in the territory of one or both 
of the Parties exclusively from originating materials; or
    (d) The good otherwise qualifies as an originating good under 
General Note 28(n), HTSUS.


Sec.  10.731  Textile and apparel goods classifiable as goods put up in 
sets.

    Notwithstanding the specific rules set forth in General Note 28(n), 
HTSUS, textile or apparel goods classifiable as goods put up in sets 
for retail sale as provided for in General Rule of Interpretation 3, 
HTSUS, will not be considered to be originating goods unless each of 
the goods in the set is an originating good or the total value of the 
non-originating goods in the set does not exceed 10 percent of the 
value of the set.


Sec.  10.732  De minimis.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
good that does not undergo a change in tariff classification pursuant 
to General Note 28(n), HTSUS, is an originating good if:
    (1) The value of all non-originating materials used in the 
production of the good that do not undergo the applicable change in 
tariff classification does not exceed 10 percent of the adjusted value 
of the good;
    (2) The value of the non-originating materials described in 
paragraph (a)(1) of this section is included in the value of non-
originating materials for any applicable regional value content 
requirement for the good under General Note 28(n), HTSUS; and
    (3) The good meets all other applicable requirements of General 
Note 28, HTSUS.
    (b) Paragraph (a) does not apply to:
    (1) A non-originating material provided for in Chapter 4, HTSUS, or 
in subheading 1901.90, HTSUS, that is used in the production of a good 
provided for in Chapter 4, HTSUS;
    (2) A non-originating material provided for in Chapter 4, HTSUS, or 
in subheading 1901.90, HTSUS, that is used in the production of a good 
provided for in one of the following HTSUS provisions: subheading 
1901.10, 1901.20 or 1901.90; heading 2105; or subheading 2106.90, 
2202.90 or 2309.90;
    (3) A non-originating material provided for in heading 0805, HTSUS, 
or subheadings 2009.11 through 2009.39, HTSUS, that is used in the 
production of a good provided for in subheadings 2009.11 through 
2009.39, HTSUS, or in subheading 2106.90 or 2202.90, HTSUS;
    (4) A non-originating material provided for in Chapter 15, HTSUS, 
that is used in the production of a good provided for in headings 1501 
through 1508, 1512, 1514 or 1515, HTSUS;
    (5) A non-originating material provided for in heading 1701, HTSUS, 
that is used in the production of a good provided for in headings 1701 
through 1703, HTSUS;
    (6) A non-originating material provided for in Chapter 17, HTSUS, 
or heading 1805, HTSUS, that is used in the production of a good 
provided for in subheading 1806.10, HTSUS;
    (7) A non-originating material provided for in headings 2203 
through 2208, HTSUS, that is used in the

[[Page 7313]]

production of a good provided for in heading 2207 or 2208, HTSUS; or
    (8) A non-originating material used in the production of a good 
provided for in Chapters 1 through 21, HTSUS, unless the non-
originating material is provided for in a different subheading than the 
good for which origin is being determined.
    (c) A textile or apparel good provided for in Chapters 42, 50 
through 63, 70, or 94, HTSUS, that is not an originating good because 
certain fibers or yarns used in the production of the component of the 
good that determines the tariff classification of the good do not 
undergo an applicable change in tariff classification set out in 
General Note 28(n), HTSUS, will nevertheless be considered to be an 
originating good if the total weight of all such fibers or yarns in 
that component is not more than 7 percent of the total weight of that 
component. Notwithstanding the preceding sentence, a textile or apparel 
good containing elastomeric yarns in the component of the good that 
determines the tariff classification of the good will be considered an 
originating good only if such yarns are wholly formed in the territory 
of a Party. For purposes of this paragraph, in the case of a textile or 
apparel good that is a yarn, fabric, or group of fibers, the term 
``component of the good that determines the tariff classification of 
the good'' means all of the fibers in the yarn, fabric, or group of 
fibers.


Sec.  10.733  Accumulation.

    (a) Originating materials from the territory of a Party that are 
used in the production of a good in the territory of another Party will 
be considered to originate in the territory of that other Party.
    (b) A good that is produced in the territory of one or both of the 
Parties by one or more producers is an originating good if the good 
satisfies the requirements of Sec.  10.730 of this subpart and all 
other applicable requirements of General Note 28, HTSUS.


Sec.  10.734  Regional value content.

    (a) General. Except for goods to which paragraph (d) of this 
section applies, where General Note 28(n), HTSUS, sets forth a rule 
that specifies a regional value content test for a good, the regional 
value content of such good must be calculated by the importer, 
exporter, or producer of the good on the basis of the build-down method 
described in paragraph (b) of this section or the build-up method 
described in paragraph (c) of this section.
    (b) Build-down method. Under the build-down method, the regional 
value content must be calculated on the basis of the formula RVC = ((AV 
- VNM)/AV) x 100, where RVC is the regional value content, expressed as 
a percentage; AV is the adjusted value of the good; and VNM is the 
value of non-originating materials that are acquired and used by the 
producer in the production of the good, but does not include the value 
of a material that is self-produced.
    (c) Build-up method. Under the build-up method, the regional value 
content must be calculated on the basis of the formula RVC = (VOM/AV) x 
100, where RVC is the regional value content, expressed as a 
percentage; AV is the adjusted value of the good; and VOM is the value 
of originating materials that are acquired or self-produced and used by 
the producer in the production of the good.
    (d) Special rule for certain automotive goods--(1) General. Where 
General Note 28(n), HTSUS, sets forth a rule that specifies a regional 
value content test for an automotive good provided for in subheadings 
8407.31 through 8407.34 (engines), subheading 8408.20 (diesel engine 
for vehicles), heading 8409 (parts of engines), or any of headings 8701 
through 8705 (motor vehicles), and headings 8706 (chassis), 8707 
(bodies), and 8708 (motor vehicle parts), HTSUS, the regional value 
content of such good must be calculated by the importer, exporter, or 
producer of the good on the basis of the net cost methods described in 
paragraphs (d)(2) through (4) of this section.
    (2) Net cost method. Under the net cost method, the regional value 
content must be calculated on the basis of the formula RVC = ((NC - 
VNM)/NC) x 100, where RVC is the regional value content, expressed as a 
percentage; NC is the net cost of the good; and VNM is the value of 
non-originating materials that are acquired and used by the producer in 
the production of the good, but does not include the value of a 
material that is self-produced. Consistent with the provisions 
regarding allocation of costs set out in generally accepted accounting 
principles, the net cost of the good must be determined by:
    (i) Calculating the total cost incurred with respect to all goods 
produced by the producer of the automotive good, subtracting any sales 
promotion, marketing and after-sales service costs, royalties, shipping 
and packing costs, and non-allowable interest costs that are included 
in the total cost of all such goods, and then reasonably allocating the 
resulting net cost of those goods to the automotive good;
    (ii) Calculating the total cost incurred with respect to all goods 
produced by the producer of the automotive good, reasonably allocating 
the total cost to the automotive good, and then subtracting any sales 
promotion, marketing and after-sales service costs, royalties, shipping 
and packing costs, and non-allowable interest costs that are included 
in the portion of the total cost allocated to the automotive good; or
    (iii) Reasonably allocating each cost that forms part of the total 
costs incurred with respect to the automotive good so that the 
aggregate of these costs does not include any sales promotion, 
marketing and after-sales service costs, royalties, shipping and 
packing costs, or non-allowable interest costs.
    (3) Motor vehicles--(i) General. For purposes of calculating the 
regional value content under the net cost method for an automotive good 
that is a motor vehicle provided for in headings 8701 through 8705, an 
importer, exporter, or producer may average the amounts calculated 
under the formula set forth in paragraph (d)(2) of this section over 
the producer's fiscal year using any one of the categories described in 
paragraph (d)(3)(ii) of this section either on the basis of all motor 
vehicles in the category or only those motor vehicles in the category 
that are exported to the territory of a Party.
    (ii) Categories. The categories referred to in paragraph (d)(3)(i) 
of this section are as follows:
    (A) The same model line of motor vehicles, in the same class of 
vehicles, produced in the same plant in the territory of a Party, as 
the motor vehicle for which the regional value content is being 
calculated;
    (B) The same class of motor vehicles, produced in the same plant in 
the territory of a Party, as the motor vehicle for which the regional 
value content is being calculated; and
    (C) The same model line of motor vehicles produced in the territory 
of a Party as the motor vehicle for which the regional value content is 
being calculated.
    (4) Other automotive goods--(i) General. For purposes of 
calculating the regional value content under the net cost method for 
automotive goods provided for in subheadings 8407.31 through 8407.34, 
subheading 8408.20, heading 8409, 8706, 8707, or 8708, HTSUS, that are 
produced in the same plant, an importer, exporter, or producer may:
    (A) Average the amounts calculated under the formula set forth in 
paragraph (d)(2) of this section over any of the following: The fiscal 
year, or any quarter or month, of the motor vehicle producer

[[Page 7314]]

to whom the automotive good is sold, or the fiscal year, or any quarter 
or month, of the producer of the automotive good, provided the goods 
were produced during the fiscal year, quarter, or month that is the 
basis for the calculation;
    (B) Determine the average referred to in paragraph (d)(4)(i)(A) of 
this section separately for such goods sold to one or more motor 
vehicle producers; or
    (C) Make a separate determination under paragraph (d)(4)(i)(A) or 
(B) for automotive goods that are exported to the territory of a Party.
    (ii) Duration of use. A person selecting an averaging period of one 
month or quarter under paragraph (d)(4)(i)(A) of this section must 
continue to use that method for that category of automotive goods 
throughout the fiscal year.


10.735  Value of materials.

    (a) Calculating the value of materials. For purposes of calculating 
the regional value content of a good under General Note 28(n), HTSUS, 
and for purposes of applying the de minimis (see Sec.  10.732 of this 
subpart) provisions of General Note 28(n), HTSUS, the value of a 
material is:
    (1) In the case of a material imported by the producer of the good, 
the adjusted value of the material;
    (2) In the case of a material acquired by the producer in the 
territory where the good is produced, the value, determined in 
accordance with Articles 1 through 8, Article 15, and the corresponding 
interpretative notes of the Customs Valuation Agreement, of the 
material with reasonable modifications to the provisions of the Customs 
Valuation Agreement as may be required due to the absence of an 
importation by the producer (including, but not limited to, treating a 
domestic purchase by the producer as if it were a sale for exportation 
to the country of importation); or
    (3) In the case of a self-produced material, the sum of:
    (i) All expenses incurred in the production of the material, 
including general expenses; and
    (ii) An amount for profit equivalent to the profit added in the 
normal course of trade.
    (b) Examples. The following examples illustrate application of the 
principles set forth in paragraph (a)(2) of this section:

    Example 1. The producer in Australia purchases material x from 
an unrelated seller in Australia for $100. Under the provisions of 
Article 1 of the Customs Valuation Agreement, transaction value is 
the price actually paid or payable for the goods when sold for 
exportation to the country of importation adjusted in accordance 
with the provisions of Article 8. In order to apply Article 1 to 
this domestic purchase by the producer, such purchase is treated as 
if it were a sale for export to the country of importation. 
Therefore, for purposes of determining the adjusted value of 
material x, the Article 1 transaction value is the price actually 
paid or payable for the goods when sold to the producer in Australia 
($100), adjusted in accordance with the provisions of Article 8. In 
this example, it is irrelevant whether material x was initially 
imported into Australia by the seller (or by anyone else). So long 
as the producer acquired material x in Australia, it is intended 
that the value of material x will be determined on the basis of the 
price actually paid or payable by the producer adjusted in 
accordance with the provisions of Article 8.
    Example 2. Same facts as in Example 1, except that the sale 
between the seller and the producer is subject to certain 
restrictions that preclude the application of Article 1. Under 
Article 2 of the Customs Valuation Agreement, the value is the 
transaction value of identical goods sold for exportation to the 
same country of importation and exported at or about the same time 
as the goods being valued. In order to permit the application of 
Article 2 to the domestic acquisition by the producer, the price 
paid by the producer should be modified so that the value is the 
transaction value of identical goods sold within Australia at or 
about the same time the goods were sold to the producer in 
Australia. Thus, if the seller of material x also sold an identical 
material to another buyer in Australia without restrictions, that 
other sale would be used to determine the adjusted value of material 
x.

    (c) Permissible additions to, and deductions from, the value of 
materials--(1) Additions to originating materials. For originating 
materials, the following expenses, if not included under paragraph (a) 
of this section, may be added to the value of the originating material:
    (i) The costs of freight, insurance, packing, and all other costs 
incurred in transporting the material within or between the territory 
of one or both of the Parties to the location of the producer;
    (ii) Duties, taxes, and customs brokerage fees on the material paid 
in the territory of one or both of the Parties, other than duties and 
taxes that are waived, refunded, refundable or otherwise recoverable, 
including credit against duty or tax paid or payable; and
    (iii) The cost of waste and spoilage resulting from the use of the 
material in the production of the good, less the value of renewable 
scrap or byproducts.
    (2) Deductions from non-originating materials. For non-originating 
materials, if included under paragraph (a) of this section, the 
following expenses may be deducted from the value of the non-
originating material:
    (i) The costs of freight, insurance, packing, and all other costs 
incurred in transporting the material within or between the territory 
of one or both of the Parties to the location of the producer;
    (ii) Duties, taxes, and customs brokerage fees on the material paid 
in the territory of one or both of the Parties, other than duties and 
taxes that are waived, refunded, refundable or otherwise recoverable, 
including credit against duty or tax paid or payable;
    (iii) The cost of waste and spoilage resulting from the use of the 
material in the production of the good, less the value of renewable 
scrap or by-products;
    (iv) The cost of processing incurred in the territory of one or 
both of the Parties in the production of the non-originating material; 
and
    (v) The cost of originating materials used in the production of the 
non-originating material in the territory of one or both of the 
Parties.
    (d) Accounting method. Any cost or value referenced in General Note 
28, HTSUS, and this subpart, must be recorded and maintained in 
accordance with the generally accepted accounting principles applicable 
in the territory of the Party in which the good is produced.


Sec.  10.736  Accessories, spare parts, or tools.

    (a) General. Accessories, spare parts, or tools that are delivered 
with a good and that form part of the good's standard accessories, 
spare parts, or tools will be treated as originating goods if the good 
is an originating good, and will be disregarded in determining whether 
all the non-originating materials used in the production of the good 
undergo an applicable change in tariff classification specified in 
General Note 28(n), HTSUS, provided that:
    (1) The accessories, spare parts, or tools are not invoiced 
separately from the good; and
    (2) The quantities and value of the accessories, spare parts, or 
tools are customary for the good.
    (b) Regional value content. If the good is subject to a regional 
value content requirement, the value of the accessories, spare parts, 
or tools is taken into account as originating or non-originating 
materials, as the case may be, in calculating the regional value 
content of the good under Sec.  10.734 of this subpart.


Sec.  10.737  Fungible goods and materials.

    (a) General. A person claiming that a fungible good or material is 
an originating good may base the claim either on the physical 
segregation of the fungible good or material or by using an inventory 
management method with

[[Page 7315]]

respect to the fungible good or material. For purposes of this section, 
the term ``inventory management method'' means:
    (1) Averaging;
    (2) ``Last-in, first-out;''
    (3) ``First-in, first-out;'' or
    (4) Any other method that is recognized in the Generally Accepted 
Accounting Principles of the Party in which the production is performed 
or otherwise accepted by that country.
    (b) Duration of use. A person selecting an inventory management 
method under paragraph (a) of this section for a particular fungible 
good or material must continue to use that method for that fungible 
good or material throughout the fiscal year of that person.


Sec.  10.738  Retail packaging materials and containers.

    (a) Effect on tariff shift rule. Packaging materials and containers 
in which a good is packaged for retail sale, if classified with the 
good for which preferential tariff treatment under the AFTA is claimed, 
will be disregarded in determining whether all non-originating 
materials used in the production of the good undergo the applicable 
change in tariff classification set out in General Note 28(n), HTSUS.
    (b) Effect on regional value content calculation. If the good is 
subject to a regional value content requirement, the value of such 
packaging materials and containers will be taken into account as 
originating or non-originating materials, as the case may be, in 
calculating the regional value content of the good.

    Example 1.  Australian Producer A of good C imports 100 non-
originating blister packages to be used as retail packaging for good 
C. As provided in Sec.  10.735(a)(1) of this subpart, the value of 
the blister packages is their adjusted value, which in this case is 
$10. Good C has a regional value content requirement. The United 
States importer of good C decides to use the build-down method, RVC 
= ((AV - VNM)/AV) x 100 (see Sec.  10.734(b) of this subpart), in 
determining whether good C satisfies the regional value content 
requirement. In applying this method, the non-originating blister 
packages are taken into account as non-originating. As such, their 
$10 adjusted value is included in the VNM, value of non-originating 
materials, of good C.
    Example 2.  Same facts as in Example 1, except that the blister 
packages are originating. In this case, the adjusted value of the 
originating blister packages would not be included as part of the 
VNM of good C under the build-down method. However, if the U.S. 
importer had used the build-up method, RVC = (VOM/AV) x 100 (see 
Sec.  10.734(c) of this subpart), the adjusted value of the blister 
packaging would be included as part of the VOM, value of originating 
materials.


Sec.  10.739  Packing materials and containers for shipment.

    (a) Effect on tariff shift rule. Packing materials and containers 
for shipment, as defined in Sec.  10.729 (n) of this subpart, are to be 
disregarded in determining whether the non-originating materials used 
in the production of the good undergo an applicable change in tariff 
classification set out in General Note 28(n), HTSUS. Accordingly, such 
materials and containers are not required to undergo the applicable 
change in tariff classification even if they are non-originating.
    (b) Effect on regional value content calculation. Packing materials 
and containers for shipment, as defined in Sec.  10.729(n) of this 
subpart, are to be disregarded in determining the regional value 
content of a good imported into the United States. Accordingly, in 
applying the build-down, build-up, or net cost method for determining 
the regional value content of a good imported into the United States, 
the value of such packing materials and containers for shipment 
(whether originating or non-originating) is disregarded and not 
included in AV, adjusted value, VNM, value of non-originating 
materials, VOM, value of originating materials, or NC, net cost of a 
good.

    Example. Australian Producer A produces good C. Producer A ships 
good C to the U.S. in a shipping container which it purchased from 
Company B in Australia. The shipping container is originating. The 
value of the shipping container determined under section Sec.  
10.735(a)(2) of this subpart is $3. Good C is subject to a regional 
value content requirement. The transaction value of good C is $100, 
which includes the $3 shipping container. The United States importer 
decides to use the build-up method, RVC = (VOM/AV) x 100 (see Sec.  
10.734(c) of this subpart), in determining whether good C satisfies 
the regional value content requirement. In determining the AV, 
adjusted value, of good C imported into the U.S., paragraph (b) of 
this section and the definition of AV require a $3 deduction for the 
value of the shipping container. Therefore, the AV is $97 ($100 - 
$3). In addition, the value of the shipping container is disregarded 
and not included in the VOM, value of originating materials.


Sec.  10.740  Indirect materials.

    An indirect material, as defined in Sec.  10.729(h) of this 
subpart, will be considered to be an originating material without 
regard to where it is produced, and its value will be the cost 
registered in the accounting records of the producer of the good.

    Example. Australian Producer C produces good C using non-
originating material A. Producer C imports non-originating rubber 
gloves for use by workers in the production of good C. Good C is 
subject to a tariff shift requirement. As provided in Sec.  
10.730(b)(1) of this subpart and General Note 28(n), each of the 
non-originating materials in good C must undergo the specified 
change in tariff classification in order for good C to be considered 
originating. Although non-originating material A must undergo the 
applicable tariff shift in order for good C to be considered 
originating, the rubber gloves do not because they are indirect 
materials and are considered originating without regard to where 
they are produced.


Sec.  10.741  Third country transportation.

    (a) General. A good that has undergone production necessary to 
qualify as an originating good under Sec.  10.730 of this subpart will 
not be considered an originating good if, subsequent to that 
production, the good undergoes further production or any other 
operation outside the territories of the Parties, other than unloading, 
reloading, or any other operation necessary to preserve the good in 
good condition or to transport the good to the territory of a Party.
    (b) Documentary evidence. An importer making a claim that a good is 
originating may be required to demonstrate, to CBP's satisfaction, that 
no further production or subsequent operation, other than permitted 
under paragraph (a) of this section, occurred outside the territories 
of the Parties. An importer may demonstrate compliance with this 
section by submitting documentary evidence. Such evidence may include, 
but is not limited to, bills of lading, airway bills, packing lists, 
commercial invoices, receiving and inventory records, and customs entry 
and exit documents.

Origin Verifications and Determinations


Sec.  10.742  Verification and justification of claim for preferential 
treatment.

    (a) Verification. A claim for preferential tariff treatment made 
under Sec.  10.723(a) of this subpart, including any statements or 
other information submitted to CBP in support of the claim, will be 
subject to such verification as the port director deems necessary. In 
the event that the port director is provided with insufficient 
information to verify or substantiate the claim, the port director may 
deny the claim for preferential treatment. A verification of a claim 
for preferential treatment may be conducted by means of one or more of 
the following:
    (1) Requests for information from the importer;
    (2) Written requests for information to the exporter or producer;

[[Page 7316]]

    (3) Requests for the importer to arrange for the exporter or 
producer to provide information directly to CBP;
    (4) Visits to the premises of the exporter or producer in 
Australia, in accordance with procedures that the Parties adopt 
pertaining to the verification; and
    (5) Such other procedures as the Parties may agree.
    (b) Applicable accounting principles. When conducting a 
verification of origin to which Generally Accepted Accounting 
Principles may be relevant, CBP will apply and accept the Generally 
Accepted Accounting Principles applicable in the country of production.


Sec.  10.743  Special rule for verifications in Australia of U.S. 
imports of textile and apparel goods.

    (a) Procedures to determine whether a claim of origin is accurate. 
For the purpose of determining that a claim of origin for a textile or 
apparel good is accurate, CBP may request that the government of 
Australia conduct a verification, regardless of whether a claim is made 
for preferential tariff treatment. While a verification under this 
paragraph is being conducted, CBP, if directed by the President, may 
take appropriate action which may include suspending the application of 
preferential tariff treatment to the textile or apparel good for which 
a claim of origin has been made. If an exporter, producer, or other 
person refuses to consent to a visit as provided for in this paragraph, 
or if CBP is unable to make the determination described in this 
paragraph within 12 months after a request for a verification, or CBP 
makes a negative determination, CBP, if directed by the President, may 
take appropriate action which may include denying the application of 
preferential tariff treatment to the textile or apparel good subject to 
the verification, and to similar goods exported or produced by the 
entity that exported or produced the good.
    (b) Procedures to determine compliance with applicable customs laws 
and regulations of the U.S. For purposes of enabling CBP to determine 
that an exporter or producer is complying with applicable customs laws, 
regulations, and procedures in cases in which CBP has a reasonable 
suspicion that an Australian exporter or producer is engaging in 
unlawful activity relating to trade in textile and apparel goods, CBP 
may request that the government of Australia conduct a verification, 
regardless of whether a claim is made for preferential tariff 
treatment. A ``reasonable suspicion'' for the purpose of this paragraph 
will be based on relevant factual information, including information of 
the type set forth in Article 6.5 of the AFTA, which indicates 
circumvention of applicable laws, regulations or procedures regarding 
trade in textile and apparel goods. While a verification under this 
paragraph is being conducted, CBP, if directed by the President, may 
take appropriate action which may include suspending the application of 
preferential tariff treatment to the textile and apparel goods exported 
or produced by the Australian entity where the reasonable suspicion of 
unlawful activity relates to those goods. If an exporter, producer, or 
other person refuses to consent to a visit as provided for in this 
paragraph, or if CBP is unable to make the determination described in 
this paragraph within 12 months after a request for a verification, or 
makes a negative determination, CBP, if directed by the President, may 
take appropriate action which may include denying the application of 
preferential tariff treatment to any textile or apparel goods exported 
or produced by the entity subject to the verification.
    (c) Assistance by U.S. officials to Australian authorities. U.S. 
officials may undertake or assist in a verification under this section 
by conducting visits in Australia, along with the competent authorities 
of Australia, to the premises of an exporter, producer or any other 
enterprise involved in the movement of textile or apparel goods from 
Australia to the United States.
    (d) Treatment of documents and information provided to CBP. Any 
production, trade and transit documents and other information necessary 
to conduct a verification under this section, provided to CBP by the 
government of Australia consistent with the laws, regulations, and 
procedures of Australia, will be treated as confidential in accordance 
with Article 22.4 of the AFTA (Disclosure of Information).
    (e) Continuation of appropriate action. CBP may continue to take 
appropriate action under paragraph (a) or (b) of this section until it 
receives information sufficient to enable it to make the determination 
described in paragraphs (a) and (b) of this section.


Sec.  10.744  Issuance of negative origin determinations.

    If, as a result of an origin verification initiated under this 
subpart, CBP determines that a claim for preferential tariff treatment 
made under Sec.  10.723(a) of this subpart should be denied, it will 
issue a determination in writing or via an authorized electronic data 
interchange system to the importer that sets forth the following:
    (a) A description of the good that was the subject of the 
verification together with the identifying numbers and dates of the 
import documents pertaining to the good;
    (b) A statement setting forth the findings of fact made in 
connection with the verification and upon which the determination is 
based; and
    (c) With specific reference to the rules applicable to originating 
goods as set forth in General Note 28, HTSUS, and in Sec. Sec.  10.729 
through 10.741 of this subpart, the legal basis for the determination.

Penalties


Sec.  10.745  General.

    Except as otherwise provided in this subpart, all criminal, civil 
or administrative penalties which may be imposed on U.S. importers for 
violations of the customs and related laws and regulations will also 
apply to U.S. importers for violations of the laws and regulations 
relating to the AFTA.


Sec.  10.746  Corrected claim or supporting statement.

    An importer who makes a corrected claim under Sec.  10.723(b) of 
this subpart will not be subject to civil or administrative penalties 
under 19 U.S.C. 1592 for having made an incorrect claim or having 
submitted an incorrect supporting statement, provided that the 
corrected claim or supporting statement is promptly and voluntarily 
made pursuant to the terms set forth in Sec.  10.747 of this subpart.


Sec.  10.747  Framework for correcting claims or supporting statements.

    (a) ``Promptly and voluntarily'' defined. Except as provided for in 
paragraph (b) of this section, for purposes of this subpart, the making 
of a corrected claim or supporting statement will be deemed to have 
been done promptly and voluntarily if:
    (1)(i) Done within one year following the date on which the 
importer made the incorrect claim; or
    (ii) Done later than one year following the date on which the 
importer made the incorrect claim, provided the corrected claim is 
made:
    (A) Before the commencement of a formal investigation, within the 
meaning of Sec.  162.74(g) of this chapter; or
    (B) Before any of the events specified in Sec.  162.74(i) of this 
chapter have occurred; or
    (C) Within 30 days after the importer initially becomes aware that 
the incorrect claim is not valid; and

[[Page 7317]]

    (2) Accompanied by a statement setting forth the information 
specified in paragraph (c) of this section; and
    (3) Accompanied or followed by a tender of any actual loss of 
duties and merchandise processing fees, if applicable, in accordance 
with paragraph (d) of this section.
    (b) Exception in cases involving fraud or subsequent incorrect 
claims. (1) Fraud. Notwithstanding paragraph (a) of this section, an 
importer who acted fraudulently in making an incorrect claim may not 
make a voluntary correction of that claim. For purposes of this 
paragraph, the term ``fraud'' will have the meaning set forth in 
paragraph (C)(3) of Appendix B to Part 171 of this chapter.
    (2) Subsequent incorrect claims. An importer who makes one or more 
incorrect claims after becoming aware that a claim involving the same 
merchandise and circumstances is invalid may not make a voluntary 
correction of the subsequent claims pursuant to paragraph (a) of this 
section.
    (c) Statement. For purposes of this subpart, each corrected claim 
must be accompanied by a statement, submitted in writing or via an 
authorized electronic data interchange system, which:
    (1) Identifies the class or kind of good to which the incorrect 
claim relates;
    (2) Identifies each affected import transaction, including each 
port of importation and the approximate date of each importation;
    (3) Specifies the nature of the incorrect statements or omissions 
regarding the claim; and
    (4) Sets forth, to the best of the person's knowledge, the true and 
accurate information or data which should have been covered by or 
provided in the claim, and states that the person will provide any 
additional information or data which is unknown at the time of making 
the corrected claim within 30 days or within any extension of that 30-
day period as CBP may permit in order for the person to obtain the 
information or data.
    (d) Tender of actual loss of duties. A U.S. importer who makes a 
corrected claim must tender any actual loss of duties at the time of 
making the corrected claim, or within one (1) year thereafter, or 
within any extension of that 1-year period as CBP may allow in order 
for the importer to obtain the information or data necessary to 
calculate the duties owed.

Goods Returned After Repair or Alteration


Sec.  10.748  Goods re-entered after repair or alteration in Australia.

    (a) General. This section sets forth the rules which apply for 
purposes of obtaining duty-free treatment on goods returned after 
repair or alteration in Australia as provided for in subheadings 
9802.00.40 and 9802.00.50, HTSUS. Goods returned after having been 
repaired or altered in Australia, whether or not pursuant to a 
warranty, are eligible for duty-free treatment, provided that the 
requirements of this section are met. For purposes of this section, 
``repairs or alterations'' means restoration, addition, renovation, re-
dyeing, cleaning, re-sterilizing, or other treatment which does not 
destroy the essential characteristics of, or create a new or 
commercially different good from, the good exported from the United 
States. The term ``repair or alternation'' does not include an 
operation or process that transforms an unfinished good into a finished 
good.
    (b) Goods not eligible for duty-free treatment after repair or 
alteration. The duty-free treatment referred to in paragraph (a) of 
this section will not apply to goods which, in their condition as 
exported from the United States to Australia, are incomplete for their 
intended use and for which the processing operation performed in 
Australia constitutes an operation that is performed as a matter of 
course in the preparation or manufacture of finished goods.
    (c) Documentation. The provisions of Sec.  10.8(a) through (c) of 
this part, relating to the documentary requirements for goods entered 
under subheading 9802.00.40 or 9802.00.50, HTSUS, will apply in 
connection with the entry of goods which are returned from Australia 
after having been exported for repairs or alterations and which are 
claimed to be duty free.

PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE

0
4. The general authority citation for Part 24 and specific authority 
for Sec.  24.23 continue to read as follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General 
Note 3(i), Harmonized Tariff Schedule of the United States), 1505, 
1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 9701; Pub. L. 107-296, 
116 Stat. 2135 (6 U.S.C. 1 et seq.).
* * * * *
    Section 24.23 also issued under 19 U.S.C. 3332;
* * * * *

0
5. Section 24.23 is amended by redesignating paragraphs (c)(8) through 
(14) as paragraphs (c)(9) through (15), and adding a new paragraph 
(c)(8) to read as follows:


Sec.  24.23  Fees for processing merchandise.

* * * * *
    (c) * * *
    (8) The ad valorem fee, surcharge, and specific fees provided under 
paragraphs (b)(1) and (b)(2)(i) of this section will not apply to goods 
that qualify as originating goods under Sec.  203 of the United States-
Australia Free Trade Agreement Implementation Act (see also General 
Note 28, HTSUS) that are entered, or withdrawn from warehouse for 
consumption, on or after January 1, 2005.
* * * * *

PART 162--INSPECTION, SEARCH, AND SEIZURE

0
6. The authority citation for part 162 continues to read in part as 
follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1592, 1593a, 1624.
* * * * *

0
7. Section 162.0 is amended by revising the last sentence to read as 
follows:


Sec.  162.0  Scope.

    * * * Additional provisions concerning records maintenance and 
examination applicable to U.S. importers, exporters and producers under 
the U.S.-Chile Free Trade Agreement, the U.S.-Singapore Free Trade 
Agreement, the Dominican Republic-Central America-U.S. Free Trade 
Agreement, the U.S.-Australia Free Trade Agreement, the U.S.-Morocco 
Free Trade Agreement, the U.S.-Peru Trade Promotion Agreement, the 
U.S.-Korea Free Trade Agreement, the U.S.-Panama Trade Promotion 
Agreement, and the U.S.-Colombia Trade Promotion Agreement are 
contained in Part 10, Subparts H, I, J, L, M, Q, R, S and T of this 
chapter, respectively.

PART 163--RECORDKEEPING

0
8. 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.
* * * * *

0
9. Section 163.1 is amended by redesignating paragraphs (a)(2)(ix) 
through (xvii) as paragraphs (a)(2)(x) through (xviii), and adding a 
new paragraph (a)(2)(ix) to read as follows:

[[Page 7318]]

Sec.  163.1  Definitions.

* * * * *
    (a) * * *
    (2) * * *
    (ix) The maintenance of any documentation that the importer may 
have in support of a claim for preferential tariff treatment under the 
United States-Australia Free Trade Agreement (AFTA), including an AFTA 
importer's supporting statement.
* * * * *

0
10. Appendix to Part 163 is amended by adding a listing under section 
IV in numerical order to read as follows:

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

* * * * *
    IV. * * *
    Sec.  10.723-10.727 AFTA records that the importer may have in 
support of an AFTA claim for preferential tariff treatment, 
including an importer's supporting statement.
* * * * *

PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

0
11. The authority citation for part 178 continues to read as follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.


0
12. Section 178.2 is amended by adding new listings for ``Sec. Sec.  
10.723 and 10.724'' to the table in numerical order to read as follows:


Sec.  178.2  Listing of OMB control numbers.

------------------------------------------------------------------------
         19 CFR Section                Description       OMB control No.
------------------------------------------------------------------------
 
                              * * * * * * *
Sec.  Sec.   10.723 and 10.724.  Claim for preferential       1651-0117
                                  tariff treatment
                                  under the US-
                                  Australia Free Trade
                                  Agreement.
 
                              * * * * * * *
------------------------------------------------------------------------

* * * * *

R. Gil Kerlikowske,
Commissioner.
    Approved: February 5, 2015.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2015-02720 Filed 2-9-15; 8:45 am]
BILLING CODE 9111-14-P