[Federal Register Volume 69, Number 229 (Tuesday, November 30, 2004)]
[Rules and Regulations]
[Pages 69511-69523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26359]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 10 and 163

[CBP Dec. 04-40]
RIN 1505-AB42


Preferential Treatment of Brassieres Under the Caribbean Basin 
Economic Recovery Act

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

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule amendments to the Customs 
and Border Protection (CBP) Regulations to implement the standards for 
preferential treatment for brassieres imported from Caribbean Basin 
countries. This rule was initially published as an interim regulation 
in the Federal Register on October 4, 2001, as T.D. 01-74, and later 
amended by T.D. 03-29 published in the Federal Register on September 
30, 2003.
    T.D. 01-74 set forth interim amendments to the CBP Regulations to 
implement those provisions within the United States-Caribbean Basin 
Trade Partnership Act (CBTPA) which established the standards for 
preferential treatment for brassieres imported from CBTPA beneficiary 
countries. T.D. 03-29 amended the brassieres provision set forth in 
T.D. 01-74 to reflect the amendments to section 213(b) of the Caribbean 
Basin Economic Recovery Act (the CBERA) that were made by section 3107 
of the Trade Act of 2002. T.D. 03-29 also included a number of other 
changes to the CBERA implementing regulations for brassieres to clarify 
a number of issues that arose after their original publication.

EFFECTIVE DATES: Final rule effective on December 30, 2004.

FOR FURTHER INFORMATION CONTACT:
    Operational issues: Robert Abels, Office of Field Operations ((202) 
344-1959).
    Legal issues: Cynthia Reese, Office of Regulations and Rulings 
((202) 572-8790).

SUPPLEMENTARY INFORMATION: 

Background

Textile and Apparel Articles Under the Caribbean Basin Economic 
Recovery Act

    The Caribbean Basin Economic Recovery Act (the CBERA, also referred

[[Page 69512]]

to as the Caribbean Basin Initiative, or CBI, statute codified at 19 
U.S.C. 2701-2707) instituted a duty preference program that applies to 
exports of goods from those Caribbean Basin countries that have been 
designated by the President as program beneficiaries. On May 18, 2000, 
the President signed into law the Trade and Development Act of 2000, 
Pub. L. 106-200, 114 Stat. 251, which included as Title II the United 
States-Caribbean Basin Trade Partnership Act, or CBTPA. The CBTPA 
provisions included section 211 which amended section 213(b) of the 
CBERA (19 U.S.C. 2703(b)) in order to, among other things, provide in 
new paragraph (2) for the preferential treatment of certain textile and 
apparel articles, specified in subparagraph (A), that had previously 
been excluded from the CBI duty-free program. The preferential 
treatment for those textile and apparel articles under paragraph (2)(A) 
of section 213(b) involves not only duty-free treatment but also entry 
in the United States free of quantitative restrictions, limitations, or 
consultation levels for all qualifying goods. Paragraph (2)(A) of the 
statute includes, in clause (iv), a specific provision covering 
brassieres from designated CBTPA beneficiary countries.
    On October 2, 2000, the President signed Proclamation 7351 to 
implement the provisions of the CBTPA. This Proclamation, which was 
published in the Federal Register (65 FR 59329) on October 4, 2000, 
modified the Harmonized Tariff Schedule of the United States (HTSUS) 
by, among other things, the addition of a new Subchapter XX to Chapter 
98 to address the majority of the textile and apparel provisions of the 
CBTPA. Within that Subchapter XX, the brassieres provision of paragraph 
(2)(A)(iv) of the CBTPA statute is dealt with in U.S. Note 2(d) and in 
subheading 9820.11.15.
    On October 5, 2000, the U.S. Customs Service (now U.S. Customs and 
Border Protection (CBP)) published in the Federal Register (65 FR 
59650) T.D. 00-68 to amend the Customs and Border Protection (CBP) 
Regulations on an interim basis in order to set forth basic legal 
requirements and procedures that apply for purposes of obtaining 
preferential treatment of textile and apparel articles pursuant to the 
provisions added to section 213(b) by the CBTPA. Those interim 
regulations, consisting of Sec. Sec.  10.221 through 10.227 of the CBP 
Regulations (19 CFR 10.221 through 10.227), include, in paragraph (a) 
of Sec.  10.223, a list of the various groups of articles that are 
eligible for preferential treatment under the statute. Paragraph (a)(6) 
of Sec.  10.223 specifically addressed the basic CBTPA brassieres 
provision of subclause (I) of paragraph (2)(A)(iv) of the statute and 
subheading 9820.11.15 of the HTSUS. The regulatory texts set forth in 
T.D. 00-68 did not address subclauses (II) and (III) of paragraph 
(2)(A)(iv) of the statute and U.S. Note 2(d) of Subchapter XX, Chapter 
98, HTSUS, because under the terms of the statute those provisions 
applied only to articles entered on or after October 1, 2001.
    On October 4, 2001, CBP (as legacy Customs) published in the 
Federal Register (66 FR 50534) T.D. 01-74 to amend the CBP Regulations 
on an interim basis in order to implement the terms of subclauses (II) 
and (III) of paragraph (2)(A)(iv) of the statute and U.S. Note 2(d) of 
Subchapter XX, Chapter 98, HTSUS. Those regulatory amendments involved 
primarily the addition of a new Sec.  10.228 which set forth specific 
rules for the application of the minimum 75 and 85 percent U.S. fabric 
component content requirements under subclauses (II) and (III) that 
took effect for purposes of preferential treatment of brassieres 
described in subclause (I) starting on October 1, 2001.
    T.D. 01-74 also amended the introductory text in Sec.  10.222 to 
account for the newly created Sec.  10.228. In addition, T.D. 01-74 
amended paragraph (a)(7) of Sec.  10.223 to exclude brassieres from the 
apparel articles that are constructed of fabrics or yarns that are 
considered to be in ``short supply'' for purposes of Annex 401 of the 
NAFTA. We note that while T.D. 01-74 amended paragraph (a)(6) of Sec.  
10.223 by adding a proviso at the end to indicate that the requirements 
of new Sec.  10.228 also must be satisfied, paragraph (a)(6) was later 
amended in its entirety by T.D. 03-12, published in the Federal 
Register (68 FR 13827) on March 21, 2003.
    T.D. 01-74 also amended the Appendix to Part 163 of the CBP 
Regulation (19 CFR 163), which sets forth a list of entry records (that 
is, records that are required by statute or regulation for the entry of 
merchandise--the ``(a)(1)(A)'' list), by adding a listing that covers 
the CBTPA declaration of compliance for brassieres.

Trade Act of 2002 Amendments

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

    (iv) Certain Other Apparel Articles.--(I) General Rule.--Subject 
to subclause (II), any apparel article classifiable under subheading 
6212.10 of the HTS, except for articles entered under clause (i), 
(ii), (iii), (v), or (vi), if the article is both cut and sewn or 
otherwise assembled in the United States, or one or more CBTPA 
beneficiary countries, or both.
    (II) Limitation.--During the 1-year period beginning on October 
1, 2001, and during each of the 6 succeeding 1-year periods, apparel 
articles described in subclause (I) of a producer or an entity 
controlling production shall be eligible for preferential treatment 
under subparagraph (B) only if the aggregate cost of fabrics 
(exclusive of all findings and trimmings) formed in the United 
States that are used in the production of all such articles of that 
producer or entity that are entered and eligible under this clause 
during the preceding 1-year period is at least 75 percent of the 
aggregate declared customs value of the fabric (exclusive of all 
findings and trimmings) contained in all such articles of that 
producer or entity that are entered and eligible under this clause 
during the preceding 1-year period.
    (III) Development of Procedure to Ensure Compliance.--The United 
States Customs Service shall develop and implement methods and 
procedures to ensure ongoing compliance with the requirement set 
forth in subclause (II). If the Customs Service finds that a 
producer or an entity controlling production has not satisfied such 
requirement in a 1-year period, then apparel articles described in 
subclause (I) of that producer or entity shall be ineligible for 
preferential treatment under subparagraph (B) during any succeeding 
1-year period until the aggregate cost of fabrics (exclusive of all 
findings and trimmings) formed in the United States that are used in 
the production of such articles of that producer or entity

[[Page 69513]]

entered during the preceding 1-year period is at least 85 percent of 
the aggregate declared customs value of the fabric (exclusive of all 
findings and trimmings) contained in all such articles of that 
producer or entity that are entered and eligible under this clause 
during the preceding 1-year period.

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

Interim Regulatory Amendments in T.D. 03-29

    As a consequence of the statutory amendments described above and as 
a result of the modifications to the HTSUS made by Proclamation 7626, 
the interim regulatory provisions published in T.D. 01-74 no longer 
fully reflected the current standards that apply for purposes of 
preferential treatment of brassieres under the CBERA. In this regard, 
the effect of the statutory changes required changes throughout the 
text of interim Sec.  10.228. Moreover, following publication of T.D. 
01-74, some other issues came to the attention of CBP that warranted 
additional changes to the interim Sec.  10.228 text.
    Accordingly, in T.D. 03-29, CBP set forth an interim rule document 
revising interim Sec.  10.228 in its entirety to reflect the amendments 
to the statute and to clarify or otherwise improve the previously 
published text. T.D. 03-29 was limited to the text of interim Sec.  
10.228 and therefore did not address the change that the Act made to 
paragraph (2)(A)(iv)(I) of the statute; that provision was reflected in 
Sec.  10.223(a)(6) within the interim CBTPA regulations published in 
T.D. 00-68, and later amended by T.D. 03-12, published in the Federal 
Register on March 21, 2003. That change is discussed in a separate 
final rule document that addresses the other statutory changes to the 
CBERA made by the Act.
    The interim regulatory changes to Sec.  10.228 contained in T.D. 
03-29 are restated below.

Amendments To Reflect the Statutory Changes

    The changes to Sec.  10.228 as set forth in T.D. 03-29 in response 
to the changes made to paragraph (2)(A)(iv) of the statute by section 
3107(a) of the Act were as follows:
    1. The definition of ``fabric components formed in the United 
States'' in paragraph (a)(3) was replaced by a definition of ``fabrics 
formed in the United States'' to reflect the fact that subclauses (II) 
and (III) of the statute no longer refer to fabric ``components.'' 
Similarly, the definition of ``cost'' in paragraph (a)(4) and the 
definition of ``declared customs value'' in paragraph (a)(5) were 
modified to refer simply to ``fabrics.''
    2. The following changes were made to paragraph (b) which concerns 
the 75/85 percent U.S. fabric content requirements for preferential 
treatment in subclauses (II) and (III) of the statute:
    a. In the introductory text of paragraph (b)(1), reference was made 
to the year that begins on ``October 1, 2002'' (rather than ``October 
1, 2001'') to reflect the applicable effective date set forth in 
Proclamation 7626.
    b. Throughout the paragraph (b) texts, all references to U.S.-
formed ``fabric components'' were replaced by references to U.S.-formed 
``fabric,'' the words ``produced and'' were removed from the expression 
``produced and entered,'' and the parenthetical reference ``(exclusive 
of all findings and trimmings)'' has been added as appropriate after 
references to ``fabrics'' and ``fabric.'' These changes simply conform 
the regulatory text to the wording changes in the statute.
    c. Paragraph (b)(1)(i), which concerns the 75 percent requirement 
of subclause (II) of the statute, was changed to refer to articles that 
are ``entered as articles described in Sec.  10.223(a)(6),'' and 
paragraph (b)(1)(ii), which concerns the 85 percent requirement of 
subclause (III) of the statute, was changed to refer to articles that 
``conform to the production standards set forth in Sec.  
10.223(a)(6).'' These wording changes are in response to the statutory 
wording changes regarding articles that are ``entered'' and that are 
``eligible'' under clause (iv). The differences in wording in the two 
regulatory texts were necessary in order to enable the 85 percent 
standard to operate. As explained in T.D. 03-29, CBP notes that if the 
universe of articles that are looked at for purposes of assessing 
compliance with the 85 percent standard is the same as that used for 
purposes of the 75 percent standard (that is, articles that were 
entered under the HTSUS subheading that applies to articles described 
in paragraph (2)(A)(iv)(I) of the statute and Sec.  10.223(a)(6)), it 
would be impossible in the first year following the statutory changes 
(that is, starting on October 1, 2002) for a new producer or entity to 
enter the program, or for a producer or entity that failed to meet the 
75 percent standard in the previous year to reenter the program. This 
is because application of the 85 percent standard presupposes a failure 
to have met the 75 percent standard in the preceding year. This would 
mean that there could not be any entries in the next year under the 
HTSUS subheading that applies to articles described in paragraph 
(2)(A)(iv)(I) of the statute and Sec.  10.223(a)(6) against which 
compliance with the 85 percent standard can be determined. The wording 
used in paragraph (b)(1)(ii) of the regulatory text (which is also 
reflected in the general statement of the paragraph (b)(1) introductory 
text and in the general rule in paragraph (b)(2)(i)(A)), by referring 
to articles that meet the U.S./Caribbean cutting and assembly 
production requirement (regardless of the HTSUS subheading under which 
they are entered), is intended to avoid this anomalous result.
    d. In the general rules of application set forth in paragraph 
(b)(2)(i), two new subparagraphs (C) and (D) were added to clarify the 
application of the different regulatory language for the 75 and 85 
percent standards discussed at point c. above, and former subparagraph 
(D) was removed because it concerned the year of production which is no 
longer relevant under the amended statutory text.
    e. Also in paragraph (b)(2)(i), former subparagraph (C) was 
redesignated as subparagraph (E) and the text was modified, and a new 
subparagraph (L) was added, primarily to reflect that the findings and 
trimmings referred to in the context of brassieres are not limited to 
foreign findings and trimmings.
    f. Also in paragraph (b)(2)(i), former subparagraph (E) was 
redesignated as subparagraph (G) and the text, which concerns a new 
producer or new entity controlling production, was revised to 
incorporate the new wording (``entered as articles described in Sec.  
10.223(a)(6)'') of paragraph (b)(1)(i) and to clarify what CBP believes 
is a necessary conclusion under the statutory text, that is, that in 
the described context the producer or entity must first meet the 85 
(rather than the 75) percent standard.
    g. In paragraph (b)(2)(ii), a new Example 2 and a new Example 3 
were added to cover new subparagraphs (C) and (D) of paragraph 
(b)(2)(i), and Examples 2 through 6 consequently

[[Page 69514]]

were redesignated as Examples 4 through 8.
    h. Also in paragraph (b)(2)(ii), redesignated Example 6 was revised 
in order to replace the former ``produced and entered'' in the same 
year scenario with a factual pattern addressing the 75 versus 85 
percent standard and entry in different years.
    i. Also in paragraph (b)(2)(ii), redesignated Example 7 was revised 
in order to reflect that the 85 percent standard (rather than the 75 
percent standard) applies to a new producer or entity controlling 
production, as stated in redesignated and revised subparagraph (G) of 
paragraph (b)(2)(i).
    3. In paragraph (c)(3)(i), the text of the declaration of 
compliance was modified by removing each reference to ``components'' 
and by removing the words ``produced and'' before the word ``entered'' 
in blocks 4 and 6, in each case to reflect changes in statutory 
language.
    4. Finally, in paragraph (d)(1)(v), the next to last sentence was 
modified to state that the inventory records must indicate that the 
required production occurred (rather than ``identify the date of'' 
production), and the last sentence was modified to refer to purchases 
made during the ``accounting period'' (rather than ``year''), because 
the year of production is not relevant under the amended statute.

Other Amendments

    In addition to the changes described above that result from the 
changes made to the statute by section 3107(a) of the Act, CBP also 
included a number of other changes in the revised text of Sec.  10.228 
set forth in T.D. 03-29. These additional changes, which were intended 
to clarify or otherwise improve the previous interim regulatory texts, 
were as follows:
    1. The definition of ``cost'' in paragraph (a)(4) and the 
definition of ``declared customs value'' in paragraph (a)(5) were 
revised for purposes of clarity, in particular in order to include 
rules covering cases in which there is no price based on an exportation 
to a CBTPA beneficiary country.
    2. The definition of ``year'' in paragraph (a)(6) was reworded for 
purposes of clarity.
    3. In Example 1 under paragraph (b)(2)(ii), the words ``in the 
first year'' were added to the scenario in the first sentence to 
clarify that the year in question is one during which the 75 percent 
standard must be met.
    4. In Example 5 under paragraph (b)(2)(ii), the references to 
foreign origin straps were replaced by references to ``strips and 
labels'' to ensure that the example is clearly directed to findings and 
trimmings and not to materials that are considered to be components of 
brassieres.
    5. In paragraph (c)(3)(i), the text of the declaration of 
compliance was modified by replacing the words ``all articles'' with 
``brassieres'' in blocks 4 through 6 and by simplifying the wording 
within block 6.
    6. Finally, in paragraph (c)(3)(ii), the subparagraph (E) 
instruction for completion of block 6 was removed in light of the 
simplification of the block 6 text, and former subparagraph (F) 
consequently was redesignated as (E).
    CBP is now publishing one document that adopts, as a final rule, 
the Sec.  10.228 provisions contained in T.D. 03-29 and the other 
regulatory changes pertaining to brassieres under the CBTPA that were 
published in T.D. 01-74. This final rule document also summarizes and 
responds to the public comments previously submitted on the changes to 
Sec. Sec.  10.222 and 10.223(a)(7) published in T.D. 01-74 and 
addresses the comments submitted on the revised Sec.  10.228 text set 
forth in T.D. 03-29. Because CBP significantly modified Sec.  10.228 in 
T.D. 03-29, CBP did not consider or address any public comments 
previously submitted on the text of Sec.  10.228 as published in T.D. 
01-74 that were addressed by statutory changes.

Discussion of Comments in Response to T.D. 01-74

    A total of 8 commenters responded to the solicitation of public 
comments in the October 4, 2001, interim rule document referred to 
above. The comments submitted are summarized and responded to below. To 
the extent that the comments received regarding Sec.  10.228 were not 
addressed by the changes made in T.D. 03-29, CBP has responded.
    We note that after T.D. 01-74 amended Sec.  10.223(a)(6), T.D. 03-
12 again amended Sec.  10.223(a)(6). Therefore, the change to Sec.  
10.223(a)(6) and the comments submitted regarding that change are 
discussed in a separate final rule document that addresses the other 
statutory changes to the CBERA made by the Trade Act of 2002.

Exclusion of Brassieres From Short Supply Provision

    Six commenters disagree with the amendment to Sec.  10.223(a)(7), 
which excludes brassieres conforming to the description set forth in 
Sec.  10.223(a)(6) from receiving preferential treatment under the 
CBTPA short supply provision found in revised Sec.  213(b)(2)(A)(v)(I) 
of the CBERA (and Sec.  10.223(a)(7)). The specific points made by the 
commenters on this issue are set forth below.
    Comment: There is nothing in the CBTPA or its legislative history 
to support CBP's interpretation in regard to this issue. While Congress 
did create a separate provision for brassieres in the CBTPA, with a 
minimum United States fabric content requirement, there is no evidence 
that Congress also meant to disqualify brassieres made of fabrics that 
have already been determined to be in short supply in the U.S., such as 
silk, from CBTPA eligibility. CBP's interpretation has the absurd 
consequence of precluding a CBTPA producer or entity that make only 
silk brassieres from receiving CBTPA treatment even though no silk is 
made in the United States. Congress intended that the short supply 
provision be applied equally to all garments.
    CBP's Response: As stated in the preamble of the interim 
regulations, Sec.  10.223(a)(7) provides for apparel articles 
constructed of fabrics or yarns which for purposes of Annex 401 of the 
NAFTA are deemed to be in ``short supply.'' There is no list of ``short 
supply'' fabrics or yarns for purposes of NAFTA. The determination of 
these ``short supply'' fabrics or yarns is based upon the various 
provisions of NAFTA and whether, under NAFTA, for the particular 
apparel article at issue, certain fabrics or yarns are explicitly 
permitted to be sourced from outside the NAFTA parties for use in the 
production of an ``originating'' good by omission of the fabrics or 
yarns from the list of excluded materials in the rule of origin for the 
particular apparel article. If sourcing of certain fabrics or yarns 
outside the NAFTA parties is allowed, then those fabrics or yarns are 
deemed to be in ``short supply'' for that apparel article.
    In the case of brassieres under NAFTA, no restrictions or 
limitations apply regarding fabrics or yarns. Fabrics and yarns may be 
sourced from anywhere. The only requirement under Annex 401 is that 
articles classified in subheading 6212.10, HTSUS, must be ``both cut 
(or knit to shape) and sewn or otherwise assembled in the territory of 
one or more of the NAFTA parties.'' CBP does not agree with the 
presumption that since no restrictions exist, then all fabrics or yarns 
must be in ``short supply.'' If that presumption were true, Sec.  
10.223(a)(6) would be rendered meaningless. Accordingly, CBP concludes 
that the amendment to Sec.  10.223(a)(7) of clarifying language to 
exclude articles described in Sec.  10.223(a)(6) is appropriate.
    Comment: If CBP insists that the CBTPA brassiere provision is sui

[[Page 69515]]

generis, standing alone, and must be read divorced from the rest of the 
statute, CBP should make clear that the separate CBTPA provisions 
relating to ``findings and trimmings,'' de minimis, and elastomeric 
yarn also do not apply to brassieres classified in subheading 6212.10, 
HTSUS.
    CBP's Response: CBP disagrees with the assertion that the CBTPA 
provisions relating to ``findings and trimmings,'' de minimis, and 
elastomeric yarn do not apply to brassieres classified in subheading 
6212.10, HTSUS. These provisions of the CBTPA clearly do apply to the 
provision of the CBTPA specific to brassieres, as well as the other 
various provisions described in paragraph (b)(2)(A) of amended section 
213. These special rules refer to eligibility for ``preferential 
treatment under this paragraph.'' The paragraph referred to in these 
contexts is paragraph (b)(2) of amended section 213, and since the 
brassiere provision is part of paragraph (b)(2), there is no doubt 
these ``special rules'' are applicable to goods described in that 
provision.
    Comment: CBTPA provisions that exempt, exclude or deem products 
ineligible for preferential treatment do so by identifying the product 
by HTS [HTSUS] number. Had Congress wanted to exclude brassieres of 
subheading 6212.10, HTSUS, from receiving duty-free treatment under the 
short supply provision found in Sec.  213(b)(2)(A)(v)(I) of the CBERA, 
they would have included a specific provision to that effect. An 
example of a specific limitation in a CBTPA provision is the ``findings 
and trimmings'' provision where by explicit reference it is stated that 
elastic strips are findings and trimmings if ``less than one inch in 
width and used in the production of brassieres.'' In fact, the 
reference to brassieres in the ``findings and trimmings'' provision 
confirms that Congress intended for brassieres to be entitled to 
preference through a variety of CBTPA provisions.
    CBP's Response: This comment has been addressed, in part, in the 
above responses. In addition, however, it is CBP's view that although 
the ``current short supply'' provision in the CBTPA does not encompass 
brassieres based upon the application of the ``short supply'' 
provisions in Annex 401 of the NAFTA, the language in Sec.  
211(b)(2)(A)(v), as written, would allow for the designation of new or 
additional fabrics or yarns as in ``short supply'' for apparel articles 
including brassieres. If, as suggested by the commenter, Congress had 
included language in Sec.  211(b)(2)(A)(v)(I) to exclude brassieres of 
subheading 6212.10, HTSUS, then brassieres would be excluded from 
possible application of 211(b)(2)(A)(v)(II), thus precluding the 
designation of new or additional fabrics or yarns as in ``short 
supply'' for brassiereres.
    Comment: The CBTPA and the Africa Growth and Opportunity Act (AGOA) 
are both part of the Trade and Development Act of 2000. While the CBTPA 
includes both short supply and brassiere provisions, the AGOA contains 
short supply provisions but no separate brassiere provision. CBP's 
instructions to the ports dated September 14, 2001 (TBT-00-023-01) 
state that the AGOA short supply provisions do not apply to brassieres. 
This instruction seems to contradict CBP's logic that the presence of 
the separate CBTPA brassiere provision confirms Congressional intent 
that the Sec.  10.223(a)(7) short supply provision does not apply to 
brassieres of subheading 6212.10, HTSUS. CBP's logic is also called 
into question by the exclusion of brassieres of subheading 6212.10, 
HTSUS, only from the Sec.  10.223(a)(7) provision. If the presence of 
the specific brassiere provision in the CBTPA were construed to exclude 
brassieres from one CBTPA preference provision, it follows that 
brassieres should be excluded from the other CBTPA preference 
provisions (including the Sec.  10.223(a)(8) short supply provision) as 
well.
    CBP's Response: CBP's rationale for clarifying that Sec.  
10.223(a)(7) does not include brassieres of subheading 6212.10, HTSUS, 
is based upon the application of the current ``short supply'' 
provisions in Annex 401 of the NAFTA and the methodology necessary to 
determine fabrics and yarns deemed to be in ``short supply'' for 
purposes of NAFTA. In order to qualify for preferential treatment under 
NAFTA, brassieres need only be cut (or knit to shape) and sewn or 
otherwise assembled in the territory of one or more of the NAFTA 
parties. There is no requirement provided for the sourcing of fabrics 
or yarns used in the production of qualifying brassieres, thus allowing 
fabrics or yarns to be sourced from anywhere. As it would be 
nonsensical to view the rule as establishing all fabrics and yarns to 
be ``short supply'' for brassieres under NAFTA, CBP interprets the rule 
as not designating any fabrics or yarns as ``short supply'' for 
brassieres. Based on that rationale, the instructions to the ports 
dated September 14, 2001 (TBT-00-023-01) stating that the AGOA ``short 
supply'' provision did not apply to brassieres was appropriate. The 
reference by CBP in the interim regulations document to Sec.  
10.223(a)(6) as support for CBP's view that Sec.  10.223(a)(7) does not 
include brassieres of subheading 6212.10, HTSUS, was simply, as stated, 
additional support for the view adopted by CBP. As a result of the 
amendments to the CBTPA brassiere provision in the Trade Act of 2002, 
reliance on Sec.  10.223(a)(6) as support for CBP's view would now seem 
misplaced. However, it was not the basis for that view.
    The primary reason that CBP has concluded that the current ``short 
supply'' provision of the CBTPA does not include brassieres is based 
upon the manner in which ``short supply'' yarns and fabrics are 
determined under the NAFTA as has already been explained above.
    Comment: The fact that the short supply provision of Sec.  
213(b)(2)(A)(v)(I) comes directly after the CBTPA brassieres provision 
suggests that, contrary to CBP's reasoning, Congress intended the short 
supply provision to apply to brassieres of subheading 6212.10, HTSUS.
    CBP's Response: CBP does not believe that the order of the 
statutory provisions in question is persuasive, and CBP disagrees with 
the conclusion of the commenter for the reasons set forth earlier in 
this comment discussion.
    Comment: In support of its interpretation regarding this issue, CBP 
notes that the NAFTA Annex 401 rule for subheading 6212.10, HTSUS, 
includes no designation of fabrics or yarns in short supply. This is a 
misreading of the application of Annex 401 to the CBTPA short supply 
provision. Congress was using the Annex 401 language as the easiest way 
of capturing those fabrics and yarns that are already designated as 
short supply under NAFTA, and not as a re-creation of the basic rule of 
origin under NAFTA.
    CBP's Response: Annex 401 of the NAFTA does not contain a 
convenient list of ``short supply'' fabrics and yarns. Additionally, 
for certain apparel, annex 401 specifies distinct fabrics by technical 
descriptions. The only means by which CBP is able to determine the 
``short supply'' fabrics and yarns currently allowed under the NAFTA 
and thus allowed under the CBTPA is by reviewing the specific rules 
contained in annex 401.

Declaration of Compliance

    Comment: One commenter recommends that Sec.  10.228(c)(1) provide 
that the declaration of compliance be submitted to CBP no later than 30 
days prior to the beginning of the next year (October 1st) to afford 
CBP sufficient time to evaluate the declaration, assign a distinct and 
unique identifier, and

[[Page 69516]]

notify the ports of the identifier. The 10-day time frame currently 
specified in this regulation is unrealistic.
    CBP's Response: CBP does not agree that it is necessary to make any 
change in the specified time frame for filing the Declaration of 
Compliance. CBP notes that the requirement is for submission at least 
10 calendar days prior to the date of the first shipment. The reference 
to the first shipment was intended to accommodate goods shipped after a 
year has already begun, and the change suggested by this commenter 
would remove this flexibility. CBP is still of the opinion that the 10-
day period is the appropriate minimum period needed for processing the 
Declaration of Compliance and giving notice of the distinct and unique 
identifier to the producer or entity controlling production and to the 
importer. However, CBP would not object to submissions made well in 
advance of that 10-day period. It is noted that the regulatory text 
merely sets forth a minimum period and therefore does not preclude 
earlier submissions.
    Comment: Four commenters disagree with the general rule set forth 
in Sec.  10.228(b)(2)(i)(G), providing that a declaration of compliance 
prepared by a producer or by an entity must cover all production of 
that producer or all production that the entity controls. The 
commenters allege that requiring a declaration to cover all of a 
producer's production presents confidentiality problems in situations 
such as presented in Example 6 under Sec.  10.228(b)(2)(ii) where an 
entity controls a portion of a producer's production but the producer 
also operates independently by producing for several U.S. importers. 
The commenters maintain that the entity may be reluctant or may even 
refuse to provide the producer with the fabric cost and value 
information needed for the producer to file its declaration of 
compliance. According to these commenters, the statute does not require 
that production be reported twice, as it would be in this example. The 
commenters suggest that the regulations should provide some method 
through which confidentiality for cost information can be maintained by 
the producer or entity that has this information but still allow each 
party to file a declaration based only on that part of the information 
for which it is directly responsible.
    CBP's Response: In the case of the producer, the Declaration of 
Compliance must include all the production of the producer that meets 
the description of 19 CFR 10.223(a)(6) and is entered in the United 
States. In the case of an entity controlling production, the 
Declaration of Compliance must include all the production that meets 
the description of Sec.  10.223(a)(6) and is entered in the United 
States. These requirements reflect the wording of the statute as 
regards who must bear the burden of meeting the 75 or 85 percent 
standard. The regulatory provisions are intended to encompass all 
possible production scenarios that could arise under the statutory 
framework and therefore include circumstances in which there is an 
overlap as regards information reported by an entity and information 
reported by a producer. Since the suggestion of these commenters would 
lead to a result that is incompatible with the wording of the statute, 
it cannot be adopted.
    With regard to the issue of confidentiality, CBP recognizes that 
there may be legitimate commercial concerns regarding the information 
that must be disclosed between producers and entities controlling 
production in order to demonstrate compliance with the statutory 
requirements. However, CBP believes that confidentiality issues in this 
context are a private commercial matter which must be addressed by the 
private parties directly affected, as part of the process of weighing 
the advantages and disadvantages of participating in this statutory 
preferential tariff program. CBP further believes that it would be 
inadvisable to address those concerns in the manner suggested by these 
commenters because it would result in a reporting requirement that 
would not allow CBP to effectively verify compliance with the statutory 
requirements.

Certificate of Origin

    Comment: Four commenters argue that a Certificate of Origin under 
Sec.  10.224 should not be required for brassieres entered duty-free 
under subheading 9820.11.15, HTSUS. The commenters state that, because 
CBTPA eligibility for brassieres is dictated only by the validity of 
the information on the Declaration of Compliance, a Certificate of 
Origin should be unnecessary when the declaration identifier number is 
on the entry.
    CBP's Response: Paragraph (b)(4)(A)(i) of amended section 213 
provides that ``[a]ny importer that claims preferential treatment under 
paragraph (2) or (3) shall comply with customs procedures similar in 
all material respects to the requirements of Article 502(1) of the 
NAFTA * * *.'' Article 502(1)(a) of the NAFTA obligates each NAFTA 
Party to require an importer that claims preferential tariff treatment 
to make a written declaration based on a valid Certificate of Origin. 
Paragraph (b)(4)(A)(ii) of amended section 213 sets forth certain 
conditions that must be met in order for a CBTPA beneficiary country's 
merchandise ``to qualify for the preferential treatment under paragraph 
(2) or (3) and for a Certificate of Origin to be valid with respect to 
any article for which such treatment is claimed.'' CBP interprets the 
references in paragraph (b)(4)(A)(i) to NAFTA Article 502(10) and in 
paragraph (b)(4)(A)(ii) to a Certificate of Origin to mean that 
Congress intended to require Certificates of Origin for claims of CBTPA 
preferential treatment, including for brassieres. The commenters seem 
to be suggesting that, for brassieres alone, the declaration of 
compliance should replace the Certificate of Origin.
    Furthermore, as a practical matter, the Declaration of Compliance 
cannot effectively replace the CBTPA Textile Certificate of Origin 
provided for under Sec.  10.224 because the latter document contains 
information elements that are not set forth on, or that are useful in 
verifying information provided on, the Declaration of Compliance.

Recordkeeping and Verification Requirements

    Comment: Five commenters allege that the recordkeeping and 
verification requirements set forth in Sec.  10.228(d) are too onerous, 
do not conform to the way most companies maintain their records and are 
not authorized by the CBTPA. The commenters contend that a company 
should not have to create new accounting records to satisfy this 
regulatory provision; they note in this regard that many companies do 
not keep cash disbursement, purchase journals or record the date of 
production. According to these commenters, so long as the producer or 
the entity is able to establish that the 75 or 85 percent standard is 
met in any given year using generally accepted accounting principles, 
the statutory requirement should be satisfied.
    CBP's Response: With regard to the assertion that the Sec.  
10.228(d) recordkeeping requirements (such as the cash disbursement or 
purchase journal) do not conform to the way most companies keep their 
records, CBP notes that the regulatory text does not mandate the 
maintenance of specific types of records. Rather, the regulatory text 
states in this regard that the audit trail documents must consist of a 
cash disbursement or purchase journal ``or equivalent records'' to 
establish the purchase of the fabric or component. Therefore, if a 
company does not maintain a cash disbursement or purchase journal, 
alternative records

[[Page 69517]]

that reflect the purchase of the fabric or component would be 
acceptable.
    The recordkeeping and verification requirements were included in 
Sec.  10.228 so that the trade community would know what CBP would 
expect to see when verifying a claim for preferential treatment of 
brassieres under the CBTPA. These requirements are implicitly 
authorized by the CBTPA because they are directed to the specific 
statutory standards that apply in the case of brassieres under the 
CBTPA and because they are promulgated by the government agency that is 
charged with responsibility for enforcing those statutory standards. 
The basic point to remember is that CBP must be able to verify that the 
requirements of the statute have been met, even if this means that a 
producer must create certain records that were not maintained prior to 
the CBTPA (such as records regarding the date of production, which are 
germane to the year-to-year standard established by the statute). There 
would be no objection to the use of generally accepted accounting 
principles (GAAP) to establish that the 75 or 85 percent standard is 
met, provided that the use of GAAP yields a result that is verifiable 
and that accurately reflects the applicable CBTPA statutory standards.
    Finally, as regards the complaint that the recordkeeping and 
verification requirements are too onerous, CBP would simply note that a 
decision whether to enter into transactions under a duty-preference 
program may require the consideration of a variety of factors, 
including whether the benefits outweigh the business costs that must be 
incurred in order to comply with the requirements of the program.

Comments in Response to T.D. 03-29

    One comment was received in response to the notice of solicitation 
of comments on the interim regulations implementing the Preferential 
Treatment of Brassieres Under the Caribbean Basin Economic Recovery Act 
(68 FR 56166) which appeared in the Federal Register on September 30, 
2003. The comment addressed two concerns with regard to the 
implementing regulations.
    Comment: The first concern expressed by the commenter is with 
regard to the clarity of the regulations as to the entry requirement 
for brassieres entered into the United States in a prior year which are 
considered in the calculation to determine whether the U.S. fabric 
content requirement set forth by Congress has been met in order for 
imported brassieres to qualify for preferential treatment in a 
subsequent year. The commenter is concerned that the language of the 
regulations as drafted suggests that brassieres considered in the 
fabric content calculation must be produced in the same year in which 
they are entered. The regulations contain examples of the application 
of the provisions set forth in the regulations and the commenter 
acknowledges that Example 6, which illustrates that brassieres may be 
produced in one year and entered in a different year, is consistent 
with changes in the brassiere provision enacted by Congress in the 
Trade Act of 2002. However, the commenter seeks further clarification 
and suggests the addition of the phrase ``without regard to the year in 
which the articles were produced'' after the phrase ``within the same 
year'' in Sec.  10.228(b)(2)(i)(A).
    CBP's Response: CBP disagrees with the need for further 
clarification as suggested by the commenter. The language at issue in 
Sec.  10.228(b)(2)(i)(A) clearly addresses the manner of production of 
the brassieres in question and then specifies that the brassieres must 
all be entered in the same year. Example 6 serves to further clarify 
that the production of the brassieres under consideration need not 
occur in the same year as the entry of the brassieres. However, all 
brassieres considered in determining whether brassieres in a subsequent 
year will qualify for preferential treatment must be entered in the 
same program year.
    Comment: The commenter's second concern is that the regulations 
need to be clarified as to the relationship between Sec.  10.223(a)(6), 
the provision specific to brassieres, and other provisions of the 
CBTPA. Specifically, the commenter requests that CBP clarify the 
regulations to provide that brassieres entered under 19 U.S.C. 
2703(b)(2)(A)(i), (ii), (iii), (v), or (vi), which are described in 
Sec.  10.223(a)(1), (2), (3), (4), (7), (8) or (9) of the CBP 
Regulations, are not to be considered in the fabric content calculation 
to determine the eligibility of brassieres for preferential treatment 
in a subsequent year. The commenter suggests as an example that 
brassieres may be entered under the provision for apparel made of 
regionally produced knit fabric, Sec.  10.223(a)(4), or under either 
short supply provision, Sec.  10.223(a)(7) or Sec.  10.223(a)(8), and 
brassieres so entered would not be considered in calculating the fabric 
content to determine if the requisite percentage of U.S. fabric had 
been used to allow for subsequent year preferential treatment.
    CBP's Response: CBP disagrees with the commenter. First, CBP cannot 
agree with the commenter that brassieres entered under other provisions 
of the CBTPA will not be considered for determining eligibility for 
preferential treatment under Sec.  10.223(a)(6). CBP agrees with this 
assertion of the commenter only to the extent that it applies to 
determining whether the 75 percent threshold U.S. fabric content 
requirement has been met. With regard to cases when the 75 percent 
requirement has not been met and a producer or entity controlling 
production must meet the stricter 85 percent U.S. fabric content 
requirement, or in the case of a new producer or entity controlling 
production which did not enter brassieres in the first year of the 
program and must therefore meet the stricter 85 percent U.S. fabric 
content requirement, if CBP does not consider brassieres entered under 
other provisions of the CBTPA, that is, provisions other than Sec.  
10.223(a)(6), a producer or entity controlling production would never 
be able to meet the 85 percent U.S. fabric content requirement.
    Secondly, CBP rejects the commenter's suggestion that brassieres 
currently may be entered under all of the provisions associated with 
the statutory paragraphs identified in 19 U.S.C. 2703(b)(2)(A)(i), 
(ii), (iii), (v), or (vi). Section 10.223(a)(9) of the CBP Regulations 
is associated with 19 U.S.C. 2703(b)(2)(A)(vi) and provides for 
handloomed, hand-made and folklore articles. At this time, this 
provision does not include brassieres as eligible for entry under that 
provision. Therefore, brassieres may not be entered under Sec.  
10.223(a)(9). Likewise, Sec.  10.223(a)(7) and (8), the provisions 
which allow for apparel articles produced from fabrics or yarns 
determined to be in short supply, do not currently include brassieres 
as eligible for entry under those provisions.

Additional Change to the Regulations

    While CBP has not adopted any changes identified and discussed 
above in connection with the public comments, CBP has amended blocks 4-
6 of the declaration of compliance for brassieres by adding exclusion 
language regarding findings and trimmings after each reference to 
fabric(s) as provided for in section 3107(a) of the Act. Additionally, 
wherever the term ``Customs'' appears in the CBP Regulations affected 
by this final rule (i.e. 19 CFR 10.228), it is replaced with the term 
``CBP.''

Conclusion

    After analysis of the comments and further review and consideration 
of the matter, CBP is adopting as a final rule the interim rule set 
forth in T.D. 01-74

[[Page 69518]]

amending Sec.  10.222, paragraph (a)(7) of Sec.  10.223, and the 
Appendix to Part 163 of the CBP Regulations which was published in the 
Federal Register at 66 FR 50534 on October 4, 2001. CBP is also 
adopting as a final rule, with the changes discussed above, the interim 
rule set forth in T.D. 03-29 amending Sec.  10.228 of Part 10 of the 
CBP Regulations which was published in the Federal Register at 68 FR 
56166 on September 30, 2003.
    It is noted that while T.D. 01-74 amended Sec.  10.223(a)(6), T.D. 
03-12 published in the Federal Register at 68 FR 59649 on March 21, 
2003, set forth additional changes to Sec.  10.223(a)(6). Therefore, as 
the changes to Sec.  10.223(a)(6) set forth in T.D. 01-74 were further 
amended, those changes will be finalized in a separate final rule 
document that addresses the other statutory changes to the CBERA made 
by the Act.

Executive Order 12866

    This document does not meet the criteria for a ``significant 
regulatory action'' as specified in E.O. 12866. This rule is limited in 
scope and affects only a small segment of the trade community. 
Moreover, it sets forth the technical requirements for a statutorily 
mandated trade benefits program.

Regulatory Flexibility Act

    As set forth in the preamble, the regulations to implement the 
standards for preferential treatment for brassieres imported from 
Caribbean Basin countries were previously published as interim 
regulations. Those interim regulations provided trade benefits to the 
importing public, implemented direct statutory mandates, and were 
necessary to carry out the preferential treatment and United States 
tariff changes proclaimed by the President under the Caribbean Basin 
Economic Recovery Act. Pursuant to the provisions of 5 U.S.C. 
553(b)(B), CBP issued the regulations as interim rules because it had 
determined that prior public notice and comment procedures on these 
regulations were unnecessary and contrary to the public interest. For 
these reasons, pursuant to the provisions of 5 U.S.C. 553(d)(1) and 
(3), CBP also found that there was good cause for dispensing with a 
delayed effective date. Because no notice of proposed rulemaking was 
required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.) do not apply. Accordingly, this final rule is not subject 
to the regulatory analysis or other requirements of 5 U.S.C. 603 and 
604.

Paperwork Reduction Act

    The collection of information contained in this interim rule has 
previously been reviewed and approved by the Office of Management and 
Budget (OMB) in accordance with the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) under OMB control number 
1651-0083.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.

Signing Authority

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

List of Subjects

19 CFR Part 10

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

19 CFR Part 163

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

Amendments to the Regulations

0
For the reasons stated in the preamble, Part 10 and Part 163 (19 CFR 
Part 10 and 19 CFR Part 163) are amended to read as follows:

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

0
1. The authority citation for Part 10 continues to read in part as 
follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 23, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 
1498, 1508, 1623, 1624, 3314;
* * * * *
    Sections 10.221 through 10.228 and Sec. Sec.  10.231 through 10.237 
also issued under 19 U.S.C. 2701 et seq.

0
2. The introductory text in Sec.  10.222 is republished to read as 
follows:


Sec.  10.222  Definitions.

    When used in Sec. Sec.  10.221 through 10.228, the following terms 
have the meanings indicated:
* * * * *

0
3. In Sec.  10.223, paragraph (a)(7) is republished to read as follows:


Sec.  10.223  Articles eligible for preferential treatment

* * * * *
    (a) * * *
    (7) Apparel articles, other than articles described in paragraph 
(a)(6) of this section, that are both cut (or knit-to-shape) and sewn 
or otherwise assembled in one or more CBTPA beneficiary countries, from 
fabrics or yarn that is not formed in the United States or in one or 
more CBTPA beneficiary countries, to the extent that apparel articles 
of those fabrics or yarn would be eligible for preferential treatment, 
without regard to the source of the fabrics or yarn, under Annex 401 of 
the NAFTA;
* * * * *

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


Sec.  10.228  Additional requirements for preferential treatment of 
brassieres.

    (a) Definitions. When used in this section, the following terms 
have the meanings indicated:
    (1) Producer. ``Producer'' means an individual, corporation, 
partnership, association, or other entity or group that exercises 
direct, daily operational control over the production process in a 
CBTPA beneficiary country.
    (2) Entity controlling production. ``Entity controlling 
production'' means an individual, corporation, partnership, 
association, or other entity or group that is not a producer and that 
controls the production process in a CBTPA beneficiary country through 
a contractual relationship or other indirect means.
    (3) Fabrics formed in the United States. ``Fabrics formed in the 
United States'' means fabrics that were produced by a weaving, 
knitting, needling, tufting, felting, entangling or other fabric-making 
process performed in the United States.
    (4) Cost. ``Cost'' when used with reference to fabrics formed in 
the United States means:
    (i) The price of the fabrics when last purchased, f.o.b. port of 
exportation, as set out in the invoice or other commercial documents, 
or, if the price is other than f.o.b. port of exportation:
    (A) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price; or
    (B) If no exportation to a CBTPA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, less 
the freight, insurance, packing, and other costs incurred in 
transporting the fabrics to the place of production if included in that 
price; or
    (ii) If the price cannot be determined under paragraph (a)(4)(i) of 
this section or if CBP finds that price to be

[[Page 69519]]

unreasonable, all reasonable expenses incurred in the growth, 
production, manufacture, or other processing of the fabrics, including 
the cost or value of materials (which includes the cost of non-
recoverable scrap generated in forming the fabrics) and general 
expenses, plus a reasonable amount for profit, and the freight, 
insurance, packing, and other costs, if any, incurred in transporting 
the fabrics to the port of exportation.
    (5) Declared customs value. ``Declared customs value'' when used 
with reference to fabric contained in an article means the sum of:
    (i) The cost of fabrics formed in the United States that the 
producer or entity controlling production can verify; and
    (ii) The cost of all other fabric contained in the article, 
exclusive of all findings and trimmings, determined as follows:
    (A) In the case of fabric purchased by the producer or entity 
controlling production, the f.o.b. port of exportation price of the 
fabric as set out in the invoice or other commercial documents, or, if 
the price is other than f.o.b. port of exportation:
    (1) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price, 
plus expenses for embroidering and dyeing, printing, and finishing 
operations applied to the fabric if not included in that price; or
    (2) If no exportation to a CBTPA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, plus 
expenses for embroidering and dyeing, printing, and finishing 
operations applied to the fabric if not included in that price, but 
less the freight, insurance, packing, and other costs incurred in 
transporting the fabric to the place of production if included in that 
price;
    (B) In the case of fabric for which the cost cannot be determined 
under paragraph (a)(5)(ii)(A) of this section or if CBP finds that cost 
to be unreasonable, all reasonable expenses incurred in the growth, 
production, or manufacture of the fabric, including the cost or value 
of materials (which includes the cost of non-recoverable scrap 
generated in the growth, production, or manufacture of the fabric), 
general expenses and embroidering and dyeing, printing, and finishing 
expenses, plus a reasonable amount for profit, and the freight, 
insurance, packing, and other costs, if any, incurred in transporting 
the fabric to the port of exportation;
    (C) In the case of fabric components purchased by the producer or 
entity controlling production, the f.o.b. port of exportation price of 
those fabric components as set out in the invoice or other commercial 
documents, less the cost or value of any non-textile materials, and 
less expenses for cutting or other processing to create the fabric 
components other than knitting to shape, that the producer or entity 
controlling production can verify, or, if the price is other than 
f.o.b. port of exportation:
    (1) The price as set out in the invoice or other commercial 
documents adjusted to arrive at an f.o.b. port of exportation price, 
less the cost or value of any non-textile materials, and less expenses 
for cutting or other processing to create the fabric components other 
than knitting to shape, that the producer or entity controlling 
production can verify; or
    (2) If no exportation to a CBTPA beneficiary country is involved, 
the price as set out in the invoice or other commercial documents, less 
the cost or value of any non-textile materials, and less expenses for 
cutting or other processing to create the fabric components other than 
knitting to shape, that the producer or entity controlling production 
can verify, and less the freight, insurance, packing, and other costs 
incurred in transporting the fabric components to the place of 
production if included in that price; and
    (D) In the case of fabric components for which a fabric cost cannot 
be determined under paragraph (a)(5)(ii)(C) of this section or if CBP 
finds that cost to be unreasonable: all reasonable expenses incurred in 
the growth, production, or manufacture of the fabric components, 
including the cost or value of materials (which does not include the 
cost of recoverable scrap generated in the growth, production, or 
manufacture of the fabric components) and general expenses, but 
excluding the cost or value of any non-textile materials, and excluding 
expenses for cutting or other processing to create the fabric 
components other than knitting to shape, that the producer or entity 
controlling production can verify, plus a reasonable amount for profit, 
and the freight, insurance, packing, and other costs, if any, incurred 
in transporting the fabric components to the port of exportation.
    (6) Year. ``Year'' means a 12-month period beginning on October 1 
and ending on September 30 but does not include any 12-month period 
that began prior to October 1, 2000.
    (7) Entered. ``Entered'' means entered, or withdrawn from warehouse 
for consumption, in the customs territory of the United States.
    (b) Limitations on preferential treatment--(1) General. During the 
year that begins on October 1, 2002, and during any subsequent year, 
articles of a producer or an entity controlling production that conform 
to the production standards set forth in Sec.  10.223(a)(6) will be 
eligible for preferential treatment only if:
    (i) The aggregate cost of fabrics (exclusive of all findings and 
trimmings) formed in the United States that were used in the production 
of all of those articles of that producer or that entity controlling 
production that are entered as articles described in Sec.  10.223(a)(6) 
during the immediately preceding year was at least 75 percent of the 
aggregate declared customs value of the fabric (exclusive of all 
findings and trimmings) contained in all of those articles of that 
producer or that entity controlling production that are entered as 
articles described in Sec.  10.223(a)(6) during that year; or
    (ii) In a case in which the 75 percent requirement set forth in 
paragraph (b)(1)(i) of this section was not met during a year and 
therefore those articles of that producer or that entity controlling 
production were not eligible for preferential treatment during the 
following year, the aggregate cost of fabrics (exclusive of all 
findings and trimmings) formed in the United States that were used in 
the production of all of those articles of that producer or that entity 
controlling production that conform to the production standards set 
forth in Sec.  10.223(a)(6) and that were entered during the 
immediately preceding year was at least 85 percent of the aggregate 
declared customs value of the fabric (exclusive of all findings and 
trimmings) contained in all of those articles of that producer or that 
entity controlling production that conform to the production standards 
set forth in Sec.  10.223(a)(6) and that were entered during that year; 
and
    (iii) In conjunction with the filing of the claim for preferential 
treatment under Sec.  10.225, the importer records on the entry summary 
or warehouse withdrawal for consumption (CBP Form 7501, column 34), or 
its electronic equivalent, the distinct and unique identifier assigned 
by CBP to the applicable documentation prescribed under paragraph (c) 
of this section.
    (2) Rules of application--(i) General. For purposes of paragraphs 
(b)(1)(i) and (b)(1)(ii) of this section and for purposes of preparing 
and filing the documentation prescribed in paragraph (c) of this 
section, the following rules will apply:
    (A) The articles in question must have been produced in the manner 
specified

[[Page 69520]]

in Sec.  10.223(a)(6) and the articles in question must be entered 
within the same year;
    (B) Articles that are exported to countries other than the United 
States and are never entered are not to be considered in determining 
compliance with the 75 or 85 percent standard specified in paragraph 
(b)(1)(i) or paragraph (b)(1)(ii) of this section;
    (C) Articles that are entered under an HTSUS subheading other than 
the HTSUS subheading which pertains to articles described in Sec.  
10.223(a)(6) are not to be considered in determining compliance with 
the 75 percent standard specified in paragraph (b)(1)(i) of this 
section;
    (D) For purposes of determining compliance with the 85 percent 
standard specified in paragraph (b)(1)(ii) of this section, all 
articles that conform to the production standards set forth in Sec.  
10.223(a)(6) must be considered, regardless of the HTSUS subheading 
under which they were entered;
    (E) Fabric components and fabrics that constitute findings or 
trimmings are not to be considered in determining compliance with the 
75 or 85 percent standard specified in paragraph (b)(1)(i) or paragraph 
(b)(1)(ii) of this section;
    (F) Beginning October 1, 2002, in order for articles to be eligible 
for preferential treatment in a given year, a producer of, or entity 
controlling production of, those articles must have met the 75 percent 
standard specified in paragraph (b)(1)(i) of this section during the 
immediately preceding year. If articles of a producer or entity 
controlling production fail to meet the 75 percent standard specified 
in paragraph (b)(1)(i) of this section during a year, articles of that 
producer or entity controlling production:
    (1) Will not be eligible for preferential treatment during the 
following year;
    (2) Will remain ineligible for preferential treatment until the 
year that follows a year in which articles of that producer or entity 
controlling production met the 85 percent standard specified in 
paragraph (b)(1)(ii) of this section; and
    (3) After the 85 percent standard specified in paragraph (b)(1)(ii) 
of this section has been met, will again be subject to the 75 percent 
standard specified in paragraph (b)(1)(i) of this section during the 
following year for purposes of determining eligibility for preferential 
treatment in the next year.
    (G) A new producer or new entity controlling production, that is, a 
producer or entity controlling production which did not produce or 
control production of articles that were entered as articles described 
in Sec.  10.223(a)(6) during the immediately preceding year, must first 
establish compliance with the 85 percent standard specified in 
paragraph (b)(1)(ii) of this section as a prerequisite to preparation 
of the declaration of compliance referred to in paragraph (c) of this 
section;
    (H) A declaration of compliance prepared by a producer or by an 
entity controlling production must cover all production of that 
producer or all production that the entity controls for the year in 
question;
    (I) A producer is not required to prepare a declaration of 
compliance if all of its production is covered by a declaration of 
compliance prepared by an entity controlling production;
    (J) In the case of a producer, the 75 or 85 percent standard 
specified in paragraph (b)(1)(i) or paragraph (b)(1)(ii) of this 
section and the declaration of compliance procedure under paragraph (c) 
of this section apply to all articles of that producer for the year in 
question, even if some but not all of that production is also covered 
by a declaration of compliance prepared by an entity controlling 
production;
    (K) The U.S. importer does not have to be the producer or the 
entity controlling production who prepared the declaration of 
compliance; and
    (L) The exclusion references regarding findings and trimmings in 
paragraph (b)(1)(i) and paragraph (b)(1)(ii) of this section apply to 
all findings and trimmings, whether or not they are of foreign origin.
    (ii) Examples. The following examples will illustrate application 
of the principles set forth in paragraph (b)(2)(i) of this section.

    Example 1. A CBTPA beneficiary country producer of articles that 
meet the production standards specified in Sec.  10.223(a)(6) in the 
first year sends 50 percent of that production to CBTPA region 
markets and the other 50 percent to the U.S. market; the cost of the 
fabrics formed in the United States equals 100 percent of the value 
of all of the fabric in the articles sent to the CBTPA region and 60 
percent of the value of all of the fabric in the articles sent to 
the United States. Although the cost of fabrics formed in the United 
States is more than 75 percent of the value of all of the fabric 
used in all of the articles produced, this producer could not 
prepare a valid declaration of compliance because the articles sent 
to the United States did not meet the minimum 75 percent standard.
    Example 2. A producer sends to the United States in the first 
year three shipments of articles that meet the description in Sec.  
10.223(a)(6); one of those shipments is entered under the HTSUS 
subheading that covers articles described in Sec.  10.223(a)(6), the 
second shipment is entered under the HTSUS subheading that covers 
articles described in Sec.  10.223(a)(12), and the third shipment is 
entered under subheading 9802.00.80, HTSUS. In determining whether 
the minimum 75 percent standard has been met in the first year for 
purposes of entry of articles under the HTSUS subheading that covers 
articles described in Sec.  10.223(a)(6) during the following (that 
is, second) year, consideration must be restricted to the articles 
in the first shipment and therefore must not include the articles in 
the second and third shipments.
    Example 3. A producer in the second year begins production of 
articles that conform to the production standards specified in Sec.  
10.223(a)(6); some of those articles are entered in that year under 
HTSUS subheading 6212.10 and others under HTSUS subheading 
9802.00.80 but none are entered in that year under the HTSUS 
subheading which pertains to articles described in Sec.  
10.223(a)(6) because the 75 percent standard had not been met in the 
preceding (that is, first) year. In this case the 85 percent 
standard applies, and all of the articles that were entered under 
the various HTSUS provisions in the second year must be taken into 
account in determining whether that 85 percent standard has been 
met. If the 85 percent was met in the aggregate for all of the 
articles entered in the second year, in the next (that is, third) 
year articles of that producer may receive preferential treatment 
under the HTSUS subheading which pertains to articles described in 
Sec.  10.223(a)(6).
    Example 4. An entity controlling production of articles that 
meet the description in Sec.  10.223(a)(6) buys for the U.S., 
Canadian and Mexican markets; the articles in each case are first 
sent to the United States where they are entered for consumption and 
then placed in a commercial warehouse from which they are shipped to 
various stores in the United States, Canada and Mexico. 
Notwithstanding the fact that some of the articles ultimately ended 
up in Canada or Mexico, a declaration of compliance prepared by the 
entity controlling production must cover all of the articles rather 
than only those that remained in the United States because all of 
those articles had been entered for consumption.
    Example 5. Fabric is cut and sewn in the United States with 
other U.S. materials to form cups which are joined together to form 
brassiere front subassemblies in the United States, and those front 
subassemblies are then placed in a warehouse in the United States 
where they are held until the following year; during that following 
year all of the front subassemblies are shipped to a CBTPA 
beneficiary country where they are assembled with elastic strips and 
labels produced in an Asian country and other fabrics, components or 
materials produced in the CBTPA beneficiary country to form articles 
that meet the production standards specified in Sec.  10.223(a)(6) 
and that are then shipped to the United States and entered during 
that same year. In determining whether the entered articles meet the 
minimum 75 or 85 percent standard, the fabric in the elastic strips 
and labels is to be disregarded entirely because the strips and 
labels constitute findings or trimmings for purposes of this 
section, and all of the fabric

[[Page 69521]]

in the front subassemblies is countable because it was all formed in 
the United States and used in the production of articles that were 
entered in the same year.
    Example 6. A CBTPA beneficiary country producer's entire 
production of articles that meet the description in Sec.  
10.223(a)(6) is sent to a U.S. importer in two separate shipments, 
one in February and the other in June of the same calendar year; the 
articles shipped in February do not meet the minimum 75 percent 
standard, the articles shipped in June exceed the 85 percent 
standard, and the articles in the two shipments, taken together, do 
meet the 75 percent standard; the articles covered by the February 
shipment are entered for consumption on March 1 of that calendar 
year, and the articles covered by the June shipment are placed in a 
CBP bonded warehouse upon arrival and are subsequently withdrawn 
from warehouse for consumption on November 1 of that calendar year. 
The CBTPA beneficiary country producer may not prepare a valid 
declaration of compliance covering the articles in the first 
shipment because those articles did not meet the minimum 75 percent 
standard and because those articles cannot be included with the 
articles of the second shipment on the same declaration of 
compliance since they were entered in a different year. However, the 
CBTPA beneficiary country producer may prepare a valid declaration 
of compliance covering the articles in the second shipment because 
those articles did meet the requisite 85 percent standard which 
would apply for purposes of entry of articles in the following year.
    Example 7. A producer in the second year begins production of 
articles exclusively for the U.S. market that meet the production 
standards specified in Sec.  10.223(a)(6), but the entered articles 
do not meet the requisite 85 percent standard until the third year; 
the entered articles fail to meet the 75 percent standard in the 
fourth year; and the entered articles do not attain the 85 percent 
standard until the sixth year. The producer's articles may not 
receive preferential treatment during the second year because there 
was no production (and thus there were no entered articles) in the 
immediately preceding (that is, first) year on which to assess 
compliance with the 75 percent standard. The producer's articles 
also may not receive preferential treatment during the third year 
because the 85 percent standard was not met in the immediately 
preceding (that is, second) year. However, the producer's articles 
are eligible for preferential treatment during the fourth year based 
on compliance with the 85 percent standard in the immediately 
preceding (that is, third) year. The producer's articles may not 
receive preferential treatment during the fifth year because the 75 
percent standard was not met in the immediately preceding (that is, 
fourth) year. The producer's articles may not receive preferential 
treatment during the sixth year because the 85 percent standard has 
become applicable and was not met in the immediately preceding (that 
is, fifth) year. The producer's articles are eligible for 
preferential treatment during the seventh year because the 85 
percent standard was met in the immediately preceding (that is, 
sixth) year, and during that seventh year the 75 percent standard is 
applicable for purposes of determining whether the producer's 
articles are eligible for preferential treatment in the following 
(that is, eighth) year.
    Example 8. An entity controlling production (Entity A) uses five 
CBTPA beneficiary country producers (Producers 1-5), all of which 
produce only articles that meet the description in Sec.  
10.223(a)(6); Producers 1-4 send all of their production to the 
United States and Producer 5 sends 10 percent of its production to 
the United States and the rest to Europe; Producers 1-3 and Producer 
5 produce only pursuant to contracts with Entity A, but Producer 4 
also operates independently of Entity A by producing for several 
U.S. importers, one of which is an entity controlling production 
(Entity B) that also controls all of the production of articles of 
one other producer (Producer 6) which sends all of its production to 
the United States. A declaration of compliance prepared by Entity A 
must cover all of the articles of Producers 1-3 and the 10 percent 
of articles of Producer 5 that are sent to the United States and 
that portion of the articles of Producer 4 that are produced 
pursuant to the contract with Entity A, because Entity A controls 
the production of those articles. There is no need for Producers 1-3 
and Producer 5 to prepare a declaration of compliance because they 
have no production that is not covered by a declaration of 
compliance prepared by an entity controlling production. A 
declaration of compliance prepared by Producer 4 would cover all of 
its production, that is, articles produced for Entity A, articles 
produced for Entity B, and articles produced independently for other 
U.S. importers; a declaration of compliance prepared by Entity B 
must cover that portion of the production of Producer 4 that it 
controls as well as all of the production of Producer 6 because 
Entity B also controls all of the production of Producer 6. Producer 
6 would not prepare a declaration of compliance because all of its 
production is covered by the declaration of compliance prepared by 
Entity B.

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

[[Page 69522]]



   Caribbean Basin Trade Partnership Act Declaration of Compliance for
                               Brassieres
                    [19 CFR 10.223(a)(6) and 10.228]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Year beginning date: October 1,   Official U.S. Customs and Border
 __.
 Year ending date: September 30,     Protection Use Only
 __.
                                     Assigned number: ____
                                     Assignment date: ____
2. Identity of preparer (producer or entity controlling production):
 Full name and address:              Telephone number: ____
                                     Facsimile number: ____
                                     Importer identification number:
                                      ____
3. If the preparer is an entity controlling production, provide the
 following for each producer:
 Full name and address:              Telephone number: ____
                                     Facsimile number: ____
4. Aggregate cost of fabrics (exclusive of all findings and trimmings)
 formed in the United States that were used in the production of
 brassieres that were entered during the year: ____
5. Aggregate declared customs value of the fabric (exclusive of all
 findings and trimmings) contained in brassieres that were entered
 during the year: ____
6. I declare that the aggregate cost of fabric (exclusive of all
 findings and trimmings) formed in the United States was at least 75
 percent (or 85 percent, if applicable under 19 CFR 10.228(b)(1)(ii)) of
 the aggregate declared customs value of the fabric contained in
 brassieres entered during the year.
7. Authorized signature:             8. Name and title (print or type):
________
Date:
------------------------------------------------------------------------

    (ii) Preparation. The following rules will apply for purposes of 
completing the declaration of compliance set forth in paragraph 
(c)(3)(i) of this section:
    (A) In block 1, fill in the year commencing October 1 and ending 
September 30 of the calendar year during which the applicable 75 or 85 
percent standard specified in paragraph (b)(1)(i) or paragraph 
(b)(1)(ii) of this section was met;
    (B) Block 2 should state the legal name and address (including 
country) of the preparer and should also include the preparer's 
importer identification number (see Sec.  24.5 of this chapter), if the 
preparer has one;
    (C) Block 3 should state the legal name and address (including 
country) of the CBTPA beneficiary country producer if that producer is 
not already identified in block 2. If there is more than one producer, 
attach a list stating the legal name and address (including country) of 
all additional producers;
    (D) Blocks 4 and 5 apply only to articles that were entered during 
the year identified in block 1; and
    (E) In block 7, the signature must be that of an authorized 
officer, employee, agent or other person having knowledge of the 
relevant facts and the date must be the date on which the declaration 
of compliance was completed and signed.
    (4) Filing of declaration of compliance. The declaration of 
compliance referred to in paragraph (c)(1) of this section:
    (i) Must be completed either in the English language or in the 
language of the country in which the articles covered by the 
declaration were produced. If the declaration is completed in a 
language other than English, the producer or the entity controlling 
production must provide to CBP upon request a written English 
translation of the declaration; and
    (ii) Must be filed with the New York Strategic Trade Center, 
Customs and Border Protection, 1 Penn Plaza, New York, New York 10119.
    (d) Verification of declaration of compliance--(1) Verification 
procedure. A declaration of compliance filed under this section will be 
subject to whatever verification CBP deems necessary. In the event that 
CBP for any reason is prevented from verifying the statements made on a 
declaration of compliance, CBP may deny any claim for preferential 
treatment made under Sec.  10.225 that is based on that declaration. A 
verification of a declaration of compliance may involve, but need not 
be limited to, a review of:
    (i) All records required to be made, kept, and made available to 
CBP by the importer, the producer, the entity controlling production, 
or any other person under part 163 of this chapter;
    (ii) Documentation and other information regarding all articles 
that meet the production standards specified in Sec.  10.223(a)(6) that 
were exported to the United States and that were entered during the 
year in question, whether or not a claim for preferential treatment was 
made under Sec.  10.225. Those records and other information include, 
but are not limited to, work orders and other production records, 
purchase orders, invoices, bills of lading and other shipping 
documents;
    (iii) Evidence to document the cost of fabrics formed in the United 
States that were used in the production of the articles in question, 
such as purchase orders, invoices, bills of lading and other shipping 
documents, and customs import and clearance documents, work orders and 
other production records, and inventory control records;
    (iv) Evidence to document the cost or value of all fabric other 
than fabrics formed in the United States that were used in the 
production of the articles in question, such as purchase orders, 
invoices, bills of lading and other shipping documents, and customs 
import and clearance documents, work orders and other production 
records, and inventory control records; and
    (v) Accounting books and documents to verify the records and 
information referred to in paragraphs (d)(1)(ii) through (d)(1)(iv) of 
this section. The verification of purchase orders, invoices and bills 
of lading will be accomplished through the review of a distinct audit 
trail. The audit trail documents must consist of a cash disbursement or 
purchase journal or equivalent records to establish the purchase of the 
fabric. The headings in each of these journals or other records must 
contain the date, vendor name, and amount paid for the fabric. The 
verification of production records and work orders will be accomplished 
through analysis of the inventory records of the producer or entity 
controlling production. The inventory records must reflect the 
production of the finished article which must be referenced to the 
original purchase order or lot number covering the fabric used in 
production. In the inventory production records, the inventory should 
show the opening balance of the inventory plus the purchases made 
during the accounting

[[Page 69523]]

period and the inventory closing balance.
    (2) Notice of determination. If, based on a verification of a 
declaration of compliance filed under this section, CBP determines that 
the applicable 75 or 85 percent standard specified in paragraph 
(b)(1)(i) or paragraph (b)(1)(ii) of this section was not met, CBP will 
publish a notice of that determination in the Federal Register.

PART 163--RECORDKEEPING

0
5. 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
6. In the Appendix to Part 163 the listing under section IV of ``Sec.  
10.228 CBTPA Declaration of Compliance for brassieres'' is republished.
* * * * *

    Approved: November 23, 2004.
Robert C. Bonner,
Commissioner of Customs and Border Protection.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 04-26359 Filed 11-29-04; 8:45 am]
BILLING CODE 4820-02-P