Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4193

by submitting such written data, views

or arguments as they may desire.

Comments that provide the factual basis

supporting the views and suggestions

presented are particularly helpful in

developing reasoned regulatory

decisions on the proposal. Comments

are specifically invited on the overall

regulatory, aeronautical, economic,

environmental, and energy-related

aspects of the proposal.

Communications should identify the

airspace docket number and be

submitted in triplicate to the address

listed above. Commenters wishing the

FAA to acknowledge receipt of their

comments on this notice must submit

with those comments a self-addressed,

stamped postcard on which the

following statement is made:

‘‘Comments to Airspace Docket No. 00–

ASO–1.’’ The postcard will be date/time

stamped and returned to the

commenter. All communications

received before the specified closing

date for comments will be considered

before taking action on the proposed

rule. The proposal contained in this

notice may be changed in light of the

comments received. All comments

submitted will be available for

examination in the Office of the

Regional Counsel for Southern Region,

Room 550, 1701 Columbia Avenue,

College Park, Georgia 30337, both before

and after the closing date for comments.

A report summarizing each substantive

public contact with FAA personnel

concerned with this rulemaking will be

filed in the docket.

Availability of NPRMs

Any person may obtain a copy of this

Notice of Proposed Rulemaking (NPRM)

by submitting a request to the Federal

Aviation Administration, Manager,

Airspace Branch, ASO–520, Air Traffic

Division, P.O. Box 20636, Atlanta,

Georgia 30320. Communications must

identify the notice number of this

NPRM. Persons interested in being

placed on a mailing list for future

NPRMs should also request a copy of

Advisory Circular No. 11–2A which

describes the application procedure.

The Proposal

The FAA is considering an

amendment to part 71 of the Federal

Aviation Regulations (14 CFR Part 71) to

establish Class E airspace at Whitesburg,

KY. A GPS SIAP, helicopter point in

space approach, has been developed for

Whitesburg Appalachian Regional

Hospital, Whitesburg, KY. As a result,

controlled airspace extending upward

from 700 feet AGL is needed to

accommodate the SIAP and for IFR

operations at Whitesburg Appalachian

Regional Hospital. The operating status

of the heliport will change from VFR to

include IFR operations concurrent with

the publication of the SIAP. Class E

airspace designations for airspace areas

extending upward from 700 feet or more

above teh surface are published in

Paragraph 6005 of FAA Order 7400.9G,

dated September 1, 1999, and effective

September 16, 1999, which is

incorporated by reference in 14 CFR

71.1. The Class E airspace designation

listed in this document would be

published subsequently in the Order.

On December 17, 1999, a NPRM was

published in the Federal Register to

amend the Wise, VA, Class E5 airspace,

to include a helicopter point in space

approach which has been developed for

Whitesburg Appalachian Regional

Hospital, Whitesburg, KY, (64 FR

70610). It has been determined that the

Whitesburg Appalachian Regional

Hospital Class E5 airspace area would

not join the Wise, VA, Class E5 airspace.

The FAA has determined that this

proposed regulation only involves an

established body of technical

regulations for which frequent and

routine amendments are necessary to

keep them operationally current. It,

therefore, (1) is not a ‘‘significant

regulatory action’’ under Executive

Order 12866; (2) is not a ‘‘significant

rule’’ under DOT Regulatory Policies

and Procedures (44 FR 11034; February

26, 1979); and (3) does not warrant

preparation of a Regulatory Evaluation

as the anticipated impact is so minimal.

Since this is a routine matter that will

only affect air traffic procedures and air

navigation, it is certified that this rule,

when promulgated, will not have a

significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by Reference,

Navigation (Air).

The Proposed Amendment

In consideration of the foregoing, the

Federal Aviation Administration

proposes to amend 14 CFR part 71 as

follow:

PART 71—DESIGNATION OF CLASS A,

CLASS B, CLASS C, CLASS D, AND

CLASS E AIRSPACE AREAS;

AIRWAYS; ROUTES; AND REPORTING

POINTS

1. The authority citation for Part 71

continues to read as follows:

Authority: 49 U.S.C. 106(g); 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of Federal Aviation

Administration Order 7400.9G, Airspace

Designations and Reporting Points,

dated September 1, 1999, and effective

September 16, 1999, is amended as

follows: Paragraph 6005 Class E airspace

areas extending upward from 700 feet or

more above the surface of the earth.

* * * * *

ASO KY E5 Whitesburg, KY [New]

Whitesburg Appalachian Regional Hospital,

Whitesburg, KY, Point In Space

Coordinates

Lat 37°07′16′′N, long. 82°50′34′′W)

That airspace extending upward from 700

feet above the surface within a 6-mile radius

of the point in space (lat. 37°07′16′′N, long.

82°50′34′′W) serving Whitesburg

Appalachian Regional Hosptial, Whitesburg,

KY.

* * * * *

Issued in College Park, Georgia, on January

12, 2000.

Nancy B. Shelton,

Acting Manager, Air Traffic Division,

Southern Region.

[FR Doc. 00–1816 Filed 1–25–00; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 134

RIN 1515–AC32

Country of Origin Marking

AGENCY: U.S. Customs Service,

Department of the Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document proposes

amendments to restructure and clarify

the country of origin marking rules set

forth in part 134 of the Customs

Regulations. These proposed

amendments do not create any new

marking requirements, but rather clarify

the existing ones. These proposals are

being made to promote the concept of

informed compliance by the trade and

proper field administration of the

statutory requirements.

DATES: Comments must be received on

or before March 27, 2000.

ADDRESSES: Comments may be

submitted to and inspected at the

Regulations Branch, Office of

Regulations and Rulings, U.S. Customs

Service, 1300 Pennsylvania Avenue,

NW., Washington, DC 20229.

FOR FURTHER INFORMATION CONTACT:

Questions with regard to the following

4194 Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules

subject areas may be directed to the

following staff attorneys of the Special

Classification and Marking Branch,

(202) 927–2310: Definitions of

‘‘country,’’ ‘‘country of origin’’ and

‘‘ultimate purchaser’’—Kristen

VerSteeg; Marking of containers—

Monika Brenner; and Marking and

certification requirements for processed

and repackaged articles—Burton

Schlissel.

SUPPLEMENTARY INFORMATION:

Background

Section 304(a) of the Tariff Act of

1930 (hereinafter ‘‘Tariff Act’’), as

amended (19 U.S.C. 1304), provides that

unless excepted, every article of foreign

origin imported into the U.S. shall be

marked in a conspicuous place as

legibly, indelibly, and permanently as

the nature of the article (or its container)

will permit, in such a manner as to

indicate to the ultimate purchaser in the

U.S. the English name of the country of

origin of the article. Part 134, Customs

Regulations (19 CFR part 134),

implements the country of origin

marking requirements and the

exceptions of 19 U.S.C. 1304.

In view of the extensiveness of the

marking requirements and exceptions

under section 304, the regulations

implementing this law by necessity are

very detailed. Over the years Customs

has received comments from various

members of the trade community

expressing difficulty in understanding

their basic obligations under the

marking statute. For example, importers

have expressed difficulty in

understanding when they or their

transferees would be considered the

‘‘ultimate purchaser’’ under section 304,

or when a container would have to be

marked with its own origin.

Acknowledging these types of

concerns and the fact that the current

Customs Regulations may not

sufficiently assist importers in meeting

their statutory obligations, Customs

announced in a Notice of modification

of a country of origin marking ruling

letter published in the Customs Bulletin

(30 Cust. B. & Dec. 14 at 22) on April

3, 1996, that it would undertake a

revision of 19 CFR part 134. In

adherence to this commitment, Customs

is now initiating significant

restructuring and clarification of the

provisions contained in part 134.

Customs believes that these proposals,

which do not create any new marking

requirements, but rather clarify the

existing ones, will promote the concept

of informed compliance by facilitating

compliance by the trade and proper

field administration of the statutory

requirements. Customs is encouraged in

this regard by the trade’s positive

response to its recent amendments

relating to ‘‘marking when name of

country or locality other than country of

origin appears’’ (Treasury Decision

(T.D.) 97–72), which made the

regulations not only less rigid, but more

consistent with Customs current

practices. Below is a description of the

proposed changes set forth in this

document.

I. Restructuring of Part 134

During the course of this review of

part 134, Customs discovered that one

of the major reasons part 134 of the

Customs Regulations is difficult to

follow is due to the order of the

provisions setting forth the marking

requirements and exceptions under the

statute. Presently, the subpart setting

forth ‘‘Exceptions to Marking

Requirements’’ is placed in the

regulatory scheme after the subpart

concerning ‘‘Marking of Containers or

Holders’’. We believe that the logical

sequence would be to place the subpart

pertaining to ‘‘exceptions’’ to the

marking requirements immediately

following the subpart containing the

general marking requirements.

Moreover, since a majority of the

marking requirements for containers

arise in connection with an article that

is excepted from individual marking, we

believe it makes it easier to understand

the statutory requirements and is more

conducive to informed compliance if

the container marking requirements are

set forth in the regulations after both the

general marking requirements and

exceptions for marking of individual

articles. Accordingly, Customs is

proposing that the order of subparts

under part 134 be redesignated so that

current subpart D (‘‘Exceptions to

Marking Requirements’’) is redesignated

as subpart C and current subpart C

(Marking of Containers or Holders) is

redesignated as subpart D.

II. Definition of ‘‘Country’’

The definition of the term ‘‘country’’

is found in ¶134.1(a), Customs

Regulations (19 CFR 134.1(a)). In the

past, Customs has relied upon advice

received from the Department of State in

making determinations regarding the

‘‘country of origin’’ of a good for

marking purposes. For example, based

upon instructions received from the

Department of State, in T.D. 49743,

dated November 10, 1938, Customs held

that, as a result of a change in

jurisdiction from Czechoslovakia to

Germany in the Sudenten areas under

German occupation, products

manufactured in these areas and

exported on or after the date of German

occupation were considered products of

Germany for country of origin marking

purposes. In United States v.

Friedlaender & Co., 27 C.C.P.A. 297

(February 26, 1940); C.A.D. 104 (1940),

the court concurred with Customs

decision that merchandise which had

been exported at a time in which the

Czechoslovakian location of

manufacture was under German

occupation should be marked to

indicate ‘‘Germany’’ as the country of

origin. Subsequently, acting upon

information received from the

Department of State that the boundaries

of Czechoslovakia had been

reestablished as they had existed prior

to the date of occupation by Germany,

Customs held in T.D. 51360, dated

November 30, 1945, that articles

manufactured or produced in

Czechoslovakia after May 8, 1945,

should be regarded as products of

Czechoslovakia and marked

accordingly.

More recently, by letter dated October

24, 1994, the Department of State

notified the Department of the Treasury

that, in view of certain developments,

principally the Israeli-PLO Declaration

of Principles on Interim SelfGovernment Arrangements (signed on

September 13, 1993), the primary

purpose of 19 U.S.C. 1304 would be best

served if goods produced in the West

Bank and Gaza Strip were permitted to

be marked ‘‘West Bank’’ or ‘‘Gaza

Strip.’’ Accordingly, in T.D. 95–25,

published in the Federal Register (60

FR 17067) on April 6, 1995, Customs

notified the public that, unless excepted

from marking, goods produced in the

West Bank or Gaza Strip shall be

marked as ‘‘West Bank’’ or ‘‘Gaza Strip’’

and not contain the words ‘‘Israel,’’

‘‘Made in Israel,’’ ‘‘Occupied TerritoriesIsrael,’’ or words of similar meaning.

Subsequently, upon receipt from advice

from the Department of State that it

considered the West Bank and Gaza

Strip to be one area for political,

economic, legal and other purposes,

Customs notified the public that

acceptable country of origin markings

for goods produced in the territorial

areas known as the West Bank or Gaza

Strip include the following: ‘‘West

Bank/Gaza,’’ ‘‘West Bank/Gaza Strip’’

‘‘West Bank and Gaza,’’ ‘‘West Bank and

Gaza Strip,’’ ‘‘West Bank,’’ ‘‘Gaza’’ and

‘‘Gaza Strip.’’ (See, T.D. 97–16,

published in the Federal Register (62

FR 12269) on March 14, 1997).

Therefore, in light of Customs past

reliance on advice from the Department

of State, Customs is proposing that

§ 134.1(a), of the Customs Regulations

(19 CFR 134.1(a)) be amended to allow

Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4195

greater flexibility to encompass changes

by the Department of State in the

political recognition of territories and

nation-states.

III. Definition of ‘‘Country of Origin’’

On December 8, 1994, the President

signed into law the Uruguay Round

Agreements Act (URAA) (Pub. L. 103–

465, 108 Stat. 4809). Subtitle D of Title

III addresses textiles and includes

section 334 (codified at 19 U.S.C. 3592)

which provides rules of origin for

textiles and apparel products.

Paragraph (a) of section 334 provides

that the Secretary of the Treasury shall

prescribe rules implementing the

principles contained in paragraph (b) for

determining the origin of ‘‘textiles and

apparel products.’’ Accordingly, on

September 5, 1995, Customs published

§ 102.21, Customs Regulations (19 CFR

102.21), in the Federal Register (60 FR

46188), implementing section 334.

Thus, with limited exceptions, effective

July 1, 1996, the country of origin for a

textile or apparel product is determined

by a sequential application of the origin

rules set forth in ¶ 102.21.

Section 334(b)(1) of the URAA sets

forth general principles concerning how

the origin of textile and apparel

products should be determined, stating,

in pertinent part, that the origin rules

set forth in section 334 apply ‘‘for

purposes of the customs laws and the

administration of quantitative

restrictions * * * ’’ There is no dispute

that section 304 of the Tariff Act of 1930

is a customs law. Although the current

language of 19 CFR 134.1(b), which

defines ‘‘country of origin,’’ previously

has been modified to incorporate other

recent legislative action (e.g., the

implementation of the North American

Free Trade Agreement (NAFTA)), no

reference is made to those rules

affecting the determination of origin of

textile and apparel articles. This

document proposes to include such a

reference.

IV. Definition of ‘‘Ultimate Purchaser’’

Section 304 requires that articles of

foreign origin be marked as legibly,

indelibly, and permanently as the

nature of the article will permit to

indicate to the ultimate purchaser in the

United States, the name of the country

of origin. Congressional intent in

enacting the marking statute, was:

that the ultimate purchaser should be able to

know by an inspection of the marking on the

imported goods the country of which the

goods is the product. The evident purpose is

to mark the goods so that at the time of

purchase the ultimate purchaser may, by

knowing where the goods were produced, be

able to buy or refuse to buy them, if such

marking should influence his will. United

States v. Friedlaender & Co., 27 C.C.P.A. 297

at 302; C.A.D. 104 (1940).

The term ‘‘ultimate purchaser’’

currently is defined in § 134.1(d) of the

Customs Regulations (19 CFR 134.1(d))

as ‘‘the last person in the United States

who will receive the article in the form

in which it was imported; however, for

a good of a NAFTA country, the

‘‘ultimate purchaser’’ is the last person

in the United States who purchases the

good in the form in which it was

imported.’’ As an example of ‘‘ultimate

purchaser’’, § 134.1(d) states that a U.S.

manufacturer may be the ‘‘ultimate

purchaser’’ if he subjects the imported

article to a process which results in a

substantial transformation, ‘‘even

though the process may not result in a

new and different article.’’

On the other hand, § 134.35(a)

Customs Regulations (19 CFR 134.35(a)),

which is currently set forth in the

regulations under the subpart covering

‘‘exceptions to marking requirements’’,

applies the principle of the decision in

the case of the United States v. GibsonThomsen Co., Inc., 27 C.C.P.A. 267

(C.A.D. 98) in determining the ultimate

purchaser for non-NAFTA origin

articles. Under this principle, the

manufacturer or processor in the United

States who converts or combines the

imported article into the new and

different article will be considered the

‘‘ultimate purchaser’’ of the imported

article.

In United States v. Gibson-Thomsen

Co., Inc., supra (1940), the court

considered the acceptability of country

of origin marking on imported

merchandise which would be ultimately

obscured by subsequent processing in

the United States. Upon review of the

legislative history of section 304(a),

Tariff Act of 1930, the court found

nothing to indicate that Congress

intended to require that an imported

article used as a material in the

manufacture of a new article with a new

name, character and use be marked so

as to indicate the foreign origin of the

material to the retail purchaser.

Accordingly, the court concluded that

the U.S. processor was the ‘‘ultimate

purchaser’’ of the imported materials

and held that the articles were properly

marked upon importation.

While the incorporation of the

Gibson-Thomsen decision into the

Customs Regulations in general is

appropriate, its placement in the

subpart relating to ‘‘exceptions to the

marking requirements’’ causes

confusion in understanding the marking

statute. The court in Gibson-Thomsen

did not create a new marking exception

to the marking requirements under

section 304(a). Rather, the court

provided an interpretation of when one

of the elements of the marking

requirement is satisfied, i.e., the

requirement that a good be marked until

it reaches the ultimate purchaser in the

U.S.

The example currently cited in

§ 134.1(d)(1), that a manufacturer who

subjects the imported article to a

process may be the ‘‘ultimate

purchaser’’ even though the process

may not result in a new and different

article represents a glaring contradiction

to the new name, character and use test

of Gibson-Thomsen, supra. Therefore,

Customs is proposing to amend the

regulations to clarify that only the

Gibson-Thomsen standard (which

Customs has incorporated into the

NAFTA Marking Rules) will be

applicable for determining whether a

U.S. processor of imported articles

becomes the ‘‘ultimate purchaser’’ for

purposes of section 304. This standard

should be set forth in the definitions

under ‘‘general provisions’’ as opposed

to the subpart pertaining to the

exceptions to marking requirements.

Also problematic for Customs and

importers is the identity of the ‘‘ultimate

purchaser’’ of an article supplied by one

party to another, as a gift or other

distribution outside the context of a

direct purchase transaction. Customs

has consistently ruled that when an

article is provided as a gift or

convenience, the donee or recipient is

the ultimate purchaser and the article

must be individually marked with its

country of origin (See HRL 709964 (May

7, 1979), also published as Customs

Service Decision (C.S.D.) 79–406, 13

Cust. Bull. 1609 (1979), where Customs

held that the ‘‘ultimate purchaser’’ of

imported plastic pencils distributed as

giveaway advertising material was the

donee).

However, in Pabrini, Inc. v. United

States, 630 F. Supp. 360 (CIT 1986), the

court discussed the identity of the

‘‘ultimate purchaser’’ of imported

umbrellas distributed to race track

patrons upon payment of the regular

admission fee. The court observed that,

although Customs had applied the

requirements of the marking statute to

gifts since 1924, the language of the

current statute which specifically

protects an ‘‘ultimate purchaser in the

United States’’ was not adopted until

1938, as part of the Customs

Administrative Act of 1938, chapter

679, section 3, 52 Stat. 1077 (See T.D.

40547, dated December 6, 1924, where

six unmarked clocks purchased abroad

as gifts for friends were denied entry).

The court examined the congressional

history of the 1938 statute and found no

4196 Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules

evidence of congressional intent in the

1938 revision with respect to the

meaning of the ‘‘ultimate purchaser’’,

but noted that the term ‘‘consumer’’ had

been used in colloquy at hearings before

the subcommittee (Pabrini, supra, citing

Customs Administrative Act: Hearings

on H.R. 8099 Before a Subcomm. Of the

Comm. On Finance, United States

Senate, 75th Cong., 3d Sess. 57 (1938)).

Ultimately, the court made no finding

regarding the validity of 19 CFR

134.1(d), but determined that the race

track patrons, by paying the price of

regular admission, were not donees of

gifts, but rather were the ‘‘ultimate

purchasers’’ of the imported umbrellas.

Articles distributed in the context of

an employer-employee relationship

have been treated somewhat differently.

In HRL 732793 (December 29, 1989),

Customs held that the commercial

employer, not the recipient of the gloves

was the ‘‘ultimate purchaser’’ of

disposable string knit gloves sold to the

employer for distribution to their

employees. (See also C.S.D. 89–89

(March 18, 1989); HRL 703319 (May 14,

1974); HRL 729800 (October 10, 1989);

and HRL 734681 (October 16, 1992)).

Finally, there is the dichotomy which

appears in the language of the current

regulations, which provide that the

‘‘ultimate purchaser’’ of an article from

a non-NAFTA country distributed as a

gift is the recipient, but the ‘‘ultimate

purchaser’’ of a similar article which is

a good of a NAFTA country is the

purchaser of the gift (19 CFR

134.1(d)(4)). Thus, in this instance, the

identity of the ‘‘ultimate purchaser’’ is

dependent upon the origin of the article,

permitting disparate resolution for

articles similarly distributed.

Therefore, in view of the absence of

evidence of a contrary legislative intent

or judicial interpretation, Customs is

proposing to consider the ‘‘ultimate

purchaser in the United States’’ for

purposes of section 304(a) as

representing only the person who is the

last purchaser in the United States, as

opposed to the last recipient in the

United States, of the imported article in

all cases regardless of either the origin

of the imported article or the purpose

for which the imported article is

distributed.

Accordingly, in view of the foregoing

discussions, Customs is proposing that

§ 134.35 be removed and that § 134.1(d)

of the Customs Regulations (19 CFR

134.1(d)) be amended.

V. Revision of 19 CFR 134.1(d)

Regarding Textiles

As previously indicated in the

discussion of the definition of ‘‘country

of origin,’’ the country of origin of

textile or apparel products is generally

determined in accordance with the

Uruguay Round Agreements Act

(URAA), supra, section 334 (codified at

19 U.S.C. 3592). A U.S. processor of

foreign textile or apparel products is the

‘‘ultimate purchaser’’ of such articles if

such processing effects a change in the

country of origin (i.e., a ‘‘substantial

transformation’’) of the imported article

under the section 334 rules of origin,

which are implemented under 19 CFR

102.21. Customs has taken this position

in numerous rulings based upon the fact

that—(1) except for determining the

origin of goods processed in Israel,

section 334 applies for all ‘‘origin’’

determinations for purposes of the

‘‘customs laws’’, (2) section 304 of the

Tariff Act is a customs law, and (3) the

origin question in ‘‘ultimate purchaser’’

determinations involving U.S.

processing is whether, as a result of

such processing, the imported article is

still of ‘‘foreign origin’’. See, HRL

559625 (January 19, 1996); See also HRL

559627 (June 27, 1996), and HRL

559760 (July 19, 1996). Therefore, for

textile or apparel products within the

scope of section 334, URAA, § 134.1(d)

is proposed to be amended to expressly

reflect that only § 102.21 rules are

applicable for determining who is the

‘‘ultimate purchaser’’ on the basis of the

post-importation processing in the U.S.

VI. Addition of Definition of ‘‘Usual

Containers’’

Section 304(b) states in part that usual

containers in use as such at the time of

importation shall in no case be required

to be marked to show the country of

their own origin. Currently, the term

‘‘usual container’’ is defined in

§ 134.22(d)(1), Customs Regulations.

Since the statutory exception for section

304(b) applies to all ‘‘usual containers’’

used as such at the time of importation

and not just to usual containers that are

goods of a NAFTA country, to avoid

confusion and promote clarity and

understanding of the general marking

requirements, Customs is proposing that

the regulation establishing the

definition of ‘‘usual container’’ be set

forth in a more general area of part 134.

Accordingly, Customs is proposing that

§ 134.22(d)(1) be removed and the text

of that current section be moved to the

general provisions of subpart A, as a

new § 134.1(l). Other provisions relating

to the marking requirements for usual

containers should continue to be set

forth in the specific subpart for

containers with cross references to the

definition in § 134.1(l) as appropriate.

VII. Articles Usually Combined

Section 134.14(b), Customs

Regulations was promulgated pursuant

to 19 U.S.C. 1304(a)(2) to provide that

the marking on an imported article shall

clearly show that the origin indicated is

that of the imported article only and not

that of any other article with which the

imported article may be combined after

importation. The phrase ‘‘combined

with another article’’ was initially

intended to refer to a combining of an

imported article with another article

without any process of manufacture or

production and in such a manner that

their separate identities are maintained

and do not become integral parts of an

article manufactured or produced in the

U.S. See T.D. 49715 (October 4, 1938).

As various rulings indicate, the scope of

§ 134.14 was expanded from the initial

example provided therein regarding the

combination of an imported article with

a marked bottle. Accordingly, Customs

is proposing to set forth another

example to show that § 134.14 also

refers to situations in which an

imported article is later combined after

importation with another article which

is not necessarily a container.

VIII. Exceptions to Marking

Requirements (Redesignated Subpart C)

1. To clarify that some of the

provisions set forth under current

§ 134.32 pertain to articles that are not

required to be marked under section 304

in the first instance, e.g., as in current

§ 134.32(m) ‘‘products of U.S. exported

and returned’’ or current § 134.32(j)

‘‘articles entered or withdrawn from

warehouse for immediate exportation or

for transportation and exportation’’,

Customs is proposing that the first

paragraph of current § 134.32 be

amended. It is noted that it is proposed

to redesignate current § 134.32 as

§ 134.22.

2. Current § 134.26 (proposed to be

redesignated as § 134.34) discusses

imported articles repacked or

manipulated and current § 134.34

(proposed to be redesignated as

§ 134.24) pertains to certain repacked

articles. In order to clarify the

distinction between these two sections,

Customs is proposing to amend current

§ 134.34 (proposed to be redesignated as

§ 134.24) to make it clear that this

section only applies when both the

articles and their containers are

unmarked as to country of origin at the

time of importation, but are intended to

be repacked into containers that will be

marked with the origin of the imported

articles. Also, Customs is proposing to

add an example to illustrate the

circumstances in which certification

Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4197

requirements may be imposed as part of

the port director’s discretion to

authorize the marking exception under

current § 134.32(d) (proposed to be

redesignated as § 134.22(d)) when the

articles will be repacked after release

from Customs custody.

IX. Marking of Containers—General

Requirements (Redesignated Subpart D)

Certain portions of the container

marking regulations in part 134 which

were promulgated by T.D. 72–262, 37

FR 20318 (1972), do not reflect current

law or are otherwise out-of-date or

unclear. As previously noted in this

document, Customs is proposing that

the definition for ‘‘usual containers’’ be

moved to the General Provisions under

subpart A. As discussed more fully

below, additional modifications are

needed to clarify the general

requirements relating to the marking of

containers. If the following changes are

adopted, current §§ 134.23 and 134.24

will be removed and the provisions

thereof that are not duplicative will be

incorporated into § 134.32 which is

proposed to be a revised and

redesignated version of current § 134.22.

Proposed § 134.32 will set forth the

general requirements and exceptions for

marking all containers.

1. Sections 304(a)(3)(A) through (K) of

the Tariff Act (19 U.S.C. 1304(a)(3)(A)

through (K)) provide for various

circumstances where an article is

excepted from the marking

requirements. Section 304(b) of the

Tariff Act (19 U.S.C. 1304(b)) generally

provides that where an article is

excepted from the marking

requirements, its immediate container

or such other container or containers of

such article as may be prescribed by the

Secretary of the Treasury, shall be

marked to indicate to the ultimate

purchaser the country of origin of such

article. Section 304(b), however, excepts

from marking usual containers in use as

such at the time of importation.

In Bausch & Lomb Inc. v. United

States, 17 CIT 790 (August 5, 1993), the

United States Court of International

Trade noted that while an importer of

foreign origin eyeglass cases could

insert eyeglasses into the cases so that

the cases may be considered as ‘‘usual

containers in use as such at the time of

importation’’ and be excepted from

marking pursuant to 19 U.S.C. 1304(b),

the court stated that since the cases at

issue were empty and were not being

used as usual containers at the time of

importation, the cases were required to

be marked with their own origin at the

time of importation.

It is clear from a reading of 19 U.S.C.

1304(b) that usual containers used as

such at the time of importation are not

required to be marked with their own

country of origin whether or not they

are goods of a NAFTA country.

Therefore, proposed § 134.32 reflects

that (1) any usual container, whether or

not a good of a NAFTA country, which

is used as such at the time of

importation, is not required to be

marked with its own country of origin

and (2) any language pertaining to

whether a usual container is disposable

is not relevant.

2. Currently, § 134.22(a) implements

19 U.S.C. 1304(b) and states that where

an article is excepted from the marking

requirements, the outermost container

or holder in which the article ordinarily

reaches the ultimate purchaser shall be

marked to indicate the country of origin

of the article, whether or not the article

is marked to indicate its country of

origin. Also, current § 134.24(d)(2)

requires the container to be marked with

the country of origin of its contents in

cases where the articles within the

container are marked but the container

is normally sold without being opened

by the ultimate purchaser. To reconcile

the overlap between these two

provisions, the last portion of current

§ 134.22(a) pertaining to whether or not

the article is marked is not set forth in

proposed § 134.32. Current

§ 134.24(d)(1) is also removed because

this section basically contains the same

requirements that are set forth in current

§ 134.22(a) and (e) and repeated in

proposed § 134.32(a) and (c).

3. As stated earlier, in Bausch &

Lomb, supra, the court acknowledged

that a usual container not in use as such

at the time of importation is to be

treated as an article, required to be

marked pursuant to 19 U.S.C. 1304(a),

and is not subject to the exception

under 19 U.S.C. 1304(b). Current

§ 134.22(b), however, requires that a

container or holder which itself is an

imported article, shall be marked with

its own origin in addition to any

marking which may be required to show

the country of origin of its contents.

Current § 134.22(b) also requires,

pursuant to Annex 311 of the NAFTA,

that no such marking is required for any

good of a NAFTA country which is a

usual container.

Therefore, in proposed § 134.32,

Customs is proposing to clarify current

§ 134.22(b) to distinguish between usual

containers used as such at the time of

importation, usual containers not used

as such at the time of importation, and

containers or holders which do not meet

the definition of a ‘‘usual container’’.

The last portion of current § 134.22(b)

pertaining to the exception for usual

containers not in use at the time of

importation which is a good of a

NAFTA country is proposed to be

repeated in proposed § 134.32(c)(2)(i) as

it was promulgated to implement a

provision of the NAFTA Annex 311.

Proposed § 134.32 also reflects the

removal of the last sentence in current

§ 134.22(d)(2) pertaining to a container

which is imported empty. In addition, it

is proposed to not set forth the contents

of current § 134.24(c)(2) in the proposed

revision as it essentially contains the

same requirements as current

§ 134.22(b) (proposed to be contained in

§ 134.32(d)).

4. Currently, § 134.22(b) requires

containers or holders to be marked with

their own country of origin when they

are treated as imported articles under

the Harmonized Tariff Schedule of the

United States (19 U.S.C. 1202). Current

§§ 134.23 and 134.24 provide for the

marking of containers or holders

designed and capable of reuse and those

containers not designed for or capable of

reuse (disposable vs. non-disposable

containers). Customs believes the

confusion created by some of these

provisions stems from the incorrect

premise that there is a necessary

distinction between these categories of

containers and the categories of ‘‘usual’’

versus ‘‘non-usual’’ containers. Since

the statute exempts ‘‘usual’’ containers

from individual marking when in use at

the time of importation, every container

should first be measured against the

definition of ‘‘usual container’’ to see

whether a statutory marking exemption

is applicable. The provisions in current

§§ 134.23 and 134.24, generally do not

provide this approach. To eliminate the

confusion and sometimes totally

unnecessary distinctions drawn

between containers which are

disposable vs. non-disposable and

imported empty vs. imported full,

Customs is proposing to make the

following regulatory changes: (1)

remove current § 134.23(a) since all

usual containers used as such at the

time of importation are excepted from

marking; (2) remove current § 134.23(b)

since the substance of this provision is

already incorporated in the definition of

‘‘usual containers’’, which Customs is

proposing to be moved to subpart A of

part 134; and (3) remove current

§ 134.24(a) since disposable containers

are encompassed within the definition

of ‘‘usual containers’’.

5. Current § 134.22(c) provides that

containers or holders which bear the

name and address of a person or

company in the U.S. which is not the

country of origin shall be marked, in

close proximity to such address, with

the origin of the contents. This section

is analogous to current § 134.46 which,

4198 Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules

prior to its recent amendment, required

an article indicating the name of a

geographic location other than the true

country of origin of the article to be

marked in close proximity and in

comparable size lettering with the

country of origin of the article preceded

by the words ‘‘Made in’’, ‘‘Product of’’,

or words of similar meaning. In a final

rule published August 20, 1997, in the

Federal Register (62 FR 44211, T.D. 97–

72), Customs amended § 134.46 to

require such special marking only if the

name of the geographic location that is

not the country of origin may mislead or

deceive the ultimate purchaser as to the

actual country of origin. Therefore,

Customs is proposing to modify current

§ 134.22(c) (to be redesignated as

§ 134.32(e)) to mirror the new § 134.46.

6. Customs, in order to provide

further clarity, is proposing that the

requirements set forth in current

§§ 134.24(b) and 134.24(c)(1), i.e.,

pertaining to the marking of the

outermost containers of disposable

containers imported empty, be placed

within § 134.32 (the wholly revised and

redesignated § 134.22) which will

provide the general marking

requirements for containers. Customs is

also proposing to move the

requirements of current § 134.24(d)(2)

and (3), to the general rules for marking

containers in § 134.32.

7. Subsection (b) of 19 U.S.C. 1304

provides that where an article is

excepted from the marking requirements

pursuant to 19 U.S.C. 1304(a)(3)(F), (G),

or (H), its usual container also shall not

be subject to the marking requirements.

Furthermore, 19 U.S.C. 1304(j)(1)(C)

generally provides that where an article

that qualifies as a good of a NAFTA

country is excepted from the marking

requirements pursuant to 19 U.S.C.

1304(a)(e)(E) or (I) or 19 U.S.C.

1304(j)(1)(B)(i) or (ii), its ‘‘usual

container’’ shall not be subject to the

marking requirements. Currently,

§ 134.22(e) implements the above

statutory provisions. In order to clarify

when these exceptions for marking

‘‘usual containers’’ are applicable,

Customs is proposing that they be

moved to the same section which sets

forth the circumstances for required

marking of usual containers.

Accordingly, these exceptions are

proposed to be set forth in the wholly

revised and redesignated § 134.32.

X. Marking of Containers—Repacked

and Processed Articles

Currently, § 134.32 contains the

general exceptions to the marking

requirements. See also 19 U.S.C.

1304(a)(3). Among the exceptions are

articles set forth in current § 134.33,

known as the ‘‘J-list.’’

In T.D. 83–155, dated October 24,

1983 (48 FR 33860), Customs amended

part 134 by adding a new section, 19

CFR 134.25, which pertains to the

repacking of ‘‘J-list’’ articles and articles

incapable of being marked. While the

articles subject to these exceptions are

not required to be marked, the

containers or holders of these articles

are subject to the marking requirements.

The new section was added to address

the issue of repacking in the U.S. by the

importer or a subsequent purchaser of

articles excepted from marking, after

release of such articles from Customs

custody. In such cases, it was often

found that the new container in which

the article was repacked for sale to the

ultimate purchaser was not marked,

thus frustrating the intent of Congress

that the ultimate purchaser in the U.S.

be aware of the country of origin of the

article.

To ensure that the importer properly

mark the repacked articles if the

importer does the repacking or that

subsequent repackers are made aware of

their country of origin marking

obligations, § 134.25 currently requires

importers to certify to the port director

that: (a) if the importer does the

repacking, the new container will be

marked to indicate the country of origin

of the article; or (b) if the article is sold

or transferred, the importer will notify

the subsequent repurchaser or repacker,

in writing, at the time of sale or transfer,

that any repacking of the article must

conform to the marking requirements.

In addition, current § 134.25

specifically provides that if the importer

fails to comply with the certification

requirements, the importer may be

subject to assessment of liquidated

damages under 19 CFR 134.54 for

failure to mark or redeliver merchandise

released from Customs custody and

marking duties pursuant to 19 U.S.C.

1304(h). This section further provides

that the importer also may be subject to

a penalty under 19 U.S.C. 1592, if fraud

or negligence is involved.

By T.D. 84–127 dated July 2, 1984 (49

FR 22793), Customs added 19 CFR

134.26 to the regulations which was

intended to cover those situations

involving the repacking of marked

articles in retail containers (e.g., blister

packs) after their release from Customs

custody. As in current 19 CFR 134.25,

§ 134.26 currently requires the importer

to certify to the port director that: (a) if

the importer does the repacking, the

country of origin information appearing

on the article will not be obscured or

concealed, or else the container will be

marked in accordance with applicable

law and regulation; or (b) if the article

is sold or transferred, the importer will

notify the subsequent purchaser or

repacker, in writing, at the time of sale

or transfer, that any repacking of the

article must conform to the marking

requirements. As under current 19 CFR

134.25, under current § 134.26, the

importer may be subject to the

imposition of liquidated damages,

marking duties and penalties for failure

to comply with the notification and

certification requirements.

Current §§ 134.25 and 134.26 were

intended to apply to articles which are

repacked after importation, and the

repacker is not the ‘ultimate purchaser’’

under 19 CFR 134.1(d) as a result of

operations performed in the U.S. In

cases where the repacker is the ultimate

purchaser neither the article nor the

container in which it is repacked is

required to be marked. Consistent with

the foregoing, Customs has frequently

held that ‘‘repacking’’ to an article that

may have been further processed, but

not substantially transformed. See, e.g.,

HRL 734989 (June 23, 1993).

However, the language in current

§ 134.25 is imprecise and does not

convey the intent, as noted, that the

regulations were intended to cover not

only those articles that are subject to

mere repackaging but also articles that

have been processed but not

substantially transformed (or which

have not become a good of the U.S.

under the NAFTA Marking Rules).

Current § 134.26 does cover articles

‘repacked or manipulated’’; however,

this provision similarly fails to indicate

that it is not applicable when the

manipulation results in a substantial

transformation. In addition, the penalty

provisions in both sections do not spell

out the extent of the importer’s statutory

liability, which continues (unless the

notice requirements are satisfied) even

though the article is sold or transferred

to subsequent repackers until the article

reaches the ultimate purchaser.

It is further noted that the heading of

current 19 CFR 134.25 refers only to

certain articles that are excepted from

marking, i.e., J-list articles and articles

incapable of being marked. Since this

provision should encompass all articles

excepted from individual marking but

not from marking on their containers

upon repacking or processing, Customs

is proposing that the title and body of

the provision be amended to reflect that

the certification requirements extend to

such other articles.

Therefore, Customs is proposing

changes consistent with the foregoing

discussion to clarify the scope of current

§§ 134.25 and 134.26, and the extent of

Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4199

the importer’s liability under 19 U.S.C.

1304(a):

In accordance with prior Customs

rulings, these regulations are proposed

to be amended to provide that the term

‘‘repacker’’ shall include a U.S. party

who also processes the articles when

such operations in the U.S. do not

amount to a substantial transformation

(including an origin change under the

NAFTA Marking Rules). This definition

will make clear that there may be more

than one repacker, prior to transfer to an

ultimate purchaser. Examples will

illustrate how the importer’s statutory

liability continues through all repackers

until the article reaches the ultimate

purchaser unless the certification

requirements under the regulations are

satisfied.

The definition of ‘‘repacker’’ is

proposed to be included as paragraph

(b) in both proposed redesignated

§ 134.33 (which consists basically of

current § 134.25) and § 134.34 (which

consists basically of current § 134.26).

Current paragraphs (b), (c), (d), and (e)

of § 134.25 are proposed to become

paragraphs (c), (d), (e) and (f),

respectively, of proposed § 34.33; and

paragraphs (b), (c), (d), (e) and (f) of

current § 134.26 are proposed to become

paragraphs (c), (d), (e), (f), and (g),

respectively, of proposed § 134.34.

Finally, since, as proposed,

paragraphs (b) of both proposed

§§ 134.33 and 134.34 will include a

processor within the definition of

‘‘repacker,’’ the heading of § 134.34 will

reflect that the section covers only

‘‘repacked’’ articles. There is no

necessity for the term ‘‘manipulated’’

included within the heading as it is

currently included within § 134.26.

XI. Removal of 19 CFR 134.47

In a final rule published in the

Federal Register (62 FR 44211) on

August 20, 1997, T.D. 97–72, § 134.46

was amended to ease the requirement

that whenever words appear on

imported articles indicating the name of

a geographic location other than the true

country of origin of the article, the

country of origin marking always must

appear in close proximity and in

comparable size lettering to those words

preceded by the words ‘‘Made in,’’

‘‘Product of,’’ or words of similar

meaning. As a result of this amendment,

the special marking requirements of

§ 134.46 are triggered only if the nonorigin reference ‘‘may mislead or

deceive the ultimate purchaser as to the

actual country of origin.’’

Section 134.47 (19 CFR 134.47)

provides that when as part of a

trademark or trade name or there

appears as part of souvenir marking, the

name of a location in the U.S., or the

words ‘‘United States’’ or ‘‘America’’,

the article shall be legibly,

conspicuously and permanently marked

to indicate the name of the country of

origin of the article preceded by ‘‘Made

in,’’ ‘‘Product of,’’ or other similar

words, in close proximity or in some

other conspicuous location. Unlike

§ 134.46, § 134.47 does not require the

name of the country of origin to appear

in at least a comparable size lettering as

the non-origin reference. Section 134.47

is also less stringent than § 134.46 in

that the latter provision requires the

country of origin to appear ‘‘in close

proximity’’ to the non-origin reference,

while the former provision only requires

that the country of origin appear ‘‘in

close proximity to the U.S. locality

information or in some other

conspicuous location.’’

Customs believes there is no legal or

practical reason for maintaining the

disparity between the special marking

requirements set forth in § 134.47 and

those set forth in § 134.46, as amended

by T.D. 97–72. The purpose of the

requirements in both provisions, when

triggered, is the same: to prevent the

ultimate purchaser from being misled or

deceived as to the actual country of

origin of the article. A reference to a

place other than the country of origin on

an imported article or its container has

the same potential for misleading or

deceiving the ultimate purchaser when

it appears as part of a trademark, trade

name or souvenir marking as when it

does not. Therefore, if such marking

may mislead or deceive the ultimate

purchaser as to the actual country of

origin, it is immaterial that such

marking appears as part of a trademark,

trade name or souvenir marking, and the

special marking requirements of

§ 134.46, should be applicable.

Accordingly, Customs proposes to

remove § 134.47 from the regulations. If

this proposal is adopted, § 134.46, when

triggered, will apply to any non-origin

type reference, including those that are

part of a trademark, trade name or

souvenir marking.

Comments

Before adopting the proposed

amendments, consideration will be

given to any written comments timely

submitted to Customs. Comments

submitted will be available for public

inspection in accordance with the

Freedom of Information Act (5 U.S.C.

552), § 1.4, Treasury Regulations (31

CFR 1.4), and § 103.11(b), Customs

Regulations (19 CFR 103.11(b)), on

regular business days between the hours

of 9:00 a.m. and 4:30 p.m. at the

Regulations Branch, 1300 Pennsylvania

Avenue, NW, Washington, DC 20229.

Regulatory Flexibility Act

Insofar as the proposed amendments

merely clarify existing regulations,

pursuant to the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq.), it is certified that the

amendments, if adopted, will not have

a significant economic impact on a

substantial number of small entities.

Accordingly, the proposed amendments

are not subject to the regulatory analysis

or other requirements of 5 U.S.C. 603

and 604.

Executive Order 12866

The proposed amendments do not

meet the criteria for a ‘‘significant

regulatory action’’ as specified in E.O.

12866.

Drafting Information

The principal author of this document

was Keith B. Rudich, Regulations

Branch, Office of Regulations and

Rulings, U.S. Customs Service.

However, personnel from other offices

participated in its development.

List of Subjects in 19 CFR Part 134

Canada, Country of origin marking,

Customs duties and inspection, Imports,

Labeling, Marking, Mexico, Packaging

and containers, Reporting and

recordkeeping requirements, Trade

agreements.

Proposed Amendment

It is proposed to amend part 134,

Customs Regulations (19 CFR part 134)

as set forth below:

PART 134—COUNTRY OF ORIGIN

MARKING

1. The authority citation for part 134

will continue to read as follows:

Authority: 5 U.S.C. 301, 19 U.S.C. 66,

1202 (General Note 20, Harmonized Tariff

Schedule of the United States), 1304, 1624.

2. Section 134.1 (19 CFR 134.1) is

proposed to be amended by revising

paragraphs (a), (b) and (d) and adding a

new paragraph (l) to read as follows:

§ 134.1 Definitions.

* * * * *

(a) Country. ‘‘Country’’ means the

political entity known as a nation. In

addition, colonies, possessions, or

protectorates outside the boundaries of

the mother county may be considered

separate countries. For other territorial

areas, advice received from the U.S.

Department of State or appropriate

interagency council will be considered

for determining whether a particular

4200 Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules

territorial area should be treated as a

‘‘country’’ for marking purposes.

(b) Country of origin. ‘‘Country of

origin’’ means the country of

manufacture, production, or growth of

any article of foreign origin entering the

United States. Further work or material

added to an article in another country

must effect a substantial transformation

in order to render such other country

the ‘‘country of origin’’ within the

meaning of this part; for a non-textile or

non-apparel good of a NAFTA country,

this determination will be made

pursuant to the NAFTA Marking Rules.

Except when determining whether a

textile or apparel article is a product of

Israel, the country of origin of all textile

or apparel products will be determined

in accordance with the rules set forth in

§ 102.21 of this chapter.

* * * * *

(d) Ultimate purchaser. The ‘‘ultimate

purchaser’’ is generally the last person

in the United States who purchases the

good in the form in which it was

imported.

(1) Where a substantial

transformation of an imported article

has occurred as a result of processing in

the United States.

(i) Non-textile or non-apparel

products of a NAFTA country. If a nontextile or non-apparel good of a NAFTA

country will be used in the United

States in manufacture, the manufacturer

is the ‘‘ultimate purchaser’’ if it subjects

the imported article to a process that

would result in the good becoming a

good of the United States under the

NAFTA Marking Rules. Unless the good

is processed by the importer or on its

behalf, the outermost container of the

good shall be marked in accordance

with this part.

(ii) Non-textile or non-apparel

products other than goods of a NAFTA

country. If a non-textile or non-apparel

imported article other than a good of a

NAFTA country will be used in the

United States in manufacture, the

manufacturer is the ‘‘ultimate

purchaser’’ if the processing results in a

substantial transformation of the

imported article, i.e., the creation of a

new article having a name, character,

and use differing from that of the

imported article, in accordance with the

principle set forth in the case of United

States v. Gibson-Thompson Co., 27

C.C.P.A. 267 (C.A.D. 98).

(iii) Textile or apparel products. If an

imported textile or apparel product will

be processed in the United States, the

processor is the ‘‘ultimate purchaser’’ if

it subjects the imported article to a

process that would result in the good

becoming a good of the United States

under § 102.21 of this chapter.

(2) Where no substantial

transformation of an imported article

has occurred during processing in the

United States.

(i) Non-textile or non-apparel

products of a NAFTA country. If a nontextile or non-apparel good of a NAFTA

country will be used in manufacture in

the U.S. and the manufacturing process

does not result in one of the changes set

forth in the NAFTA Marking Rules as

effecting a change in the article’s

country of origin, the consumer who

purchases the article after processing

will be regarded as the ‘‘ultimate

purchaser’’ and the article shall be

marked in accordance with this part.

(ii) Non-textile or non-apparel

products other than goods of a NAFTA

country. For non-textile or non-apparel

products other than goods of a NAFTA

country, if the manufacturing process

does not result in a substantial

transformation of the imported article,

then the consumer or user of the article

who obtains the article after the

processing will be regarded as the

‘‘ultimate purchaser’’ and the article

must be marked in accordance with this

part.

(iii) Textile or apparel products. If an

imported textile or apparel product will

be further processed in the United

States and the processing does not result

in one of the changes set forth in

§ 102.21 of this title as effecting a

change in the article’s country of origin,

the consumer who purchases the article

after processing will be regarded as the

‘‘ultimate purchaser’’ and the imported

textile or apparel product shall be

marked in accordance with this chapter.

(3) Goods sold at retail. If an article

is to be sold at retail in its imported

form, the purchaser at retail is the

ultimate purchaser. For example, where

an imported screwdriver is repackaged

in the U.S. as part of a tool kit, the

‘‘ultimate purchaser’’ is the retail

purchaser, not the repackager.

(4) Gifts or Samples. If the imported

article is distributed as a gift or sample

free of charge, the last person who

purchases the gift or sample is the

‘‘ultimate purchaser.’’ For example,

where imported printed material is

distributed as part of an unsolicited

mailing, the recipient is not the

‘‘ultimate purchaser.’’

(5) Articles purchased by an

employer.If an imported article is

purchased by an employer on behalf of

an employee, then the employer is the

‘‘ultimate purchaser’’ of the article.

However, if the employee contributes to

the purchase of the imported article,

then the employee is considered the

‘‘ultimate purchaser’’ of the article. For

example, where imported work gloves

are sold to industrial supply

distributors, who sell them to

commercial employers (e.g., meat

cutters, hospitals, restaurant food

handlers) which distribute the gloves to

their employees for use on the premises,

the ‘‘ultimate purchaser’’ of the

imported articles is the commercial

employer.

(l) Usual containers—A ‘‘usual

container’’ means the container in

which a good will ordinarily reach its

ultimate purchaser. Containers which

are not included in the price of the

goods with which they are sold, or

which impart the essential character to

the whole, or which have significant

uses, or lasting value independent of the

contents, will generally not be regarded

as usual containers. However, the fact

that a container is sturdy and capable of

repeated use with its contents does not

preclude it from being considered a

usual container so long as it is the type

of container in which its contents are

ordinarily sold. A usual container may

be any type of container, including one

which is specially shaped or fitted to

contain a specific good or set of goods

such as a camera case or an eyeglass

case, or packing, storage and

transportation materials.

3. It is proposed to amend § 134.14

(19 CFR 134.14) by removing paragraph

(b); redesignating paragraph (c) as

paragraph (b); and adding two examples

following paragraph (a) to read as

follows:

§ 134.14 Articles usually combined.

(a) Articles combined before delivery

to purchaser.

* * * * *

Example 1. A ball point pen of Israeli

origin and metal pen holder of Mexican

origin are packaged together as a set in the

United States. Pursuant to paragraph (a) of

this section, the pen must be marked in such

a manner as to distinguish the Israeli origin

pen from the Mexican component, and it

would be appropriate to mark the set ‘‘Pen

Made in Israel, Holder Made in Mexico’’.

Example 2. Labels and similar articles so

marked that the name of the country of origin

of the label or article is visible after it is

affixed to another article in this country shall

be marked with additional descriptive words

such as ‘‘Label made (or printed) in (name of

country)’’ or words of similar meaning. See

subpart D of this part for marking of bottles,

drums, or other containers.

* * * * *

4. It is proposed to redesignate

subpart C, ‘‘Marking of Containers or

Holders’’, consisting of §§ 134.21

through 134.26 as subpart D. It is

proposed to redesignate §§ 134.21 and

134.22, respectively, as §§ 134.31 and

134.32, remove §§ 134.23 and 134.24,

Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4201

and redesignate §§ 134.25 and 134.26,

respectively, as §§ 134.33 and 134.34.

5. It is proposed to redesignate

subpart D, ‘‘Exceptions to Marking

Requirements’’, consisting of §§ 134.31

through 134.36, as subpart C. It is

proposed to redesignate §§ 134.31

through 134.34, respectively, as

§§ 134.21 through 134.24, remove

§ 134.35, and redesignate § 134.36 as

§ 134.25.

6. It is proposed to amend

redesignated § 134.22 by revising the

introductory paragraph to read as

follows:

§ 134.22 General exceptions to marking

requirements.

The articles described or meeting the

specified conditions set forth below are

either excepted from or are not subject

to the marking requirements (See

subpart D of this part for marking of

containers):

* * * * *

7. It is proposed to amend

redesignated § 134.24 by revising the

heading and introductory paragraph (a)

and adding an example after paragraph

(a)(2) to read as follows:

§ 134.24 Repacked unmarked articles and

containers.

(a) If imported articles or their outside

containers are both not marked with the

origin of the articles at the time of

importation, but the articles are

intended to be repacked into containers

marked with the country of origin of the

articles, an exception under § 134.22(d)

may be authorized in the discretion of

the port director under the following

conditions:

* * * * *

Example. Unmarked surgical pack

wrappers are imported in bulk cartons which

are also not marked, but will be repacked by

the importer into containers for sale

exclusively to hospitals. Since the wrappers

at the time of importation are not

individually marked to indicate their country

of origin or imported in marked containers

that will reach the hospitals (ultimate

purchasers), as a condition for granting an

exception under § 134.22(d) the port director

has discretion to require that—the importer

mark the repacked wrappers under Customs

supervision; or the importer execute a

written certification that the repacked

wrappers will be properly marked and

submit a sample of the remarked wrappers.

* * * * *

8. It is proposed to revise redesignated

§ 134.32 to read as follows:

§ 134.32 General rules for marking of

containers or holders.

(a) Marking the origin of contents—(1)

Contents excepted from marking. Except

as provided in paragraph 134.32(b)(1) of

this section, whenever an article is

excepted from the marking requirements

by subpart C of this part, the outermost

container or holder in which the article

ordinarily reaches the ultimate

purchaser shall be marked to indicate

the country of origin of the article.

Example 1. Dog rawhide bones incapable

of being marked by means of a sticker, dye,

ink, or tag because of their porous, rough,

and uneven texture and potential harm to the

animal are excepted from individual country

of origin marking pursuant to § 134.22(a), but

their outermost container or holder in which

the bones ordinarily reach the ultimate

purchaser shall be marked to indicate the

country origin of the bones.

Example 2. Tomatoes imported from

Mexico are excepted from the country of

origin marking requirements pursuant to

§ 134.23, as J-List articles. When imported in

master containers, these containers must be

marked with the origin of the tomatoes.

Furthermore, if the tomatoes are repacked

into trays for distribution and sale at retail

grocery stores, the trays must be marked with

the origin of the tomatoes.

Example 3. An ancient Turkish statue is

imported into the United States. Pursuant to

§ 134.22(i) it is excepted from individual

country of origin marking requirements. The

container in which the statue reaches the

ultimate purchaser must be marked to

indicate the origin of the statue.

(2) Contents not excepted from

marking. When an article not excepted

from marking is sold in a container or

holder that is normally not opened by

the ultimate purchaser or the marking

on the article is not visible through the

container (e.g., individually wrapped

soap bars or tennis balls in a vacuum

sealed can), the container shall be

marked to indicate the country of origin

of its contents, regardless of whether the

contents are marked.

Example 1. Surgical instruments of foreign

origin are each packed inside opaque sealed

bags, and are sold exclusively to hospitals.

Although the surgical instruments are

individually etched with their country of

origin pursuant to § 134.43(a), since the

ultimate purchasers, i.e., the hospitals cannot

view the marking through the opaque bag,

the outside container in which the hospitals

receive the surgical instruments shall be

marked with the origin of the surgical

instruments.

Example 2. Small statues or figurines are

articles that purchasers typically remove

from their box to examine for damage prior

to purchase. Accordingly, if figurines of

foreign origin are legibly marked with their

country of origin in a conspicuous place,

their unsealed containers do not have to be

marked with the country of origin, provided

the containers themselves do not contain any

markings that would trigger the application

of paragraph (e) of this section 134.32(e).

(b) Exception for marking the origin of

contents—(1) Certain excepted articles.

The outermost container or holder in

which the article ordinarily reaches the

ultimate purchaser is not required to be

marked if:

(i) It is a container or holder of an

article excepted from marking pursuant

to § 134.22(f), (g), or (h); or

(ii) It is a container of a good of a

NAFTA country which is excepted from

marking pursuant to § 134.22(e), (f), (g),

(h), (i), (p), or (q).

Example. A major department store

imports holiday decorations such as artificial

trees, garlands, and wreaths of French-origin,

and ornaments of German-origin only for use

in the decoration of their stores and not for

resale. Provided local port officials are

satisfied that the ultimate purchaser, i.e., the

department store, is aware of the origins of

the decorations and that the decorations will

not be resold in the United States, both the

decorations and their cartons in which the

decorations are packed are excepted from

marking pursuant to § 134.22(f).

(c) Marking of the origin of usual

containers—(1) Usual Container used as

such at the time of importation. A usual

container, as defined in § 134.1(l) which

is in use at the time of importation is not

required to be marked with its own

country of origin regardless whether it

is reusable or not.

Example. Sunglasses of foreign origin are

each packed and imported inside eyeglass

cases of foreign origin. The sunglasses are

marked as to their origin by means of an

adhesive sticker on the lenses. As the

eyeglass cases are considered usual

containers and are used as such at the time

of importation, they are not required to be

marked with their own country of origin

provided local Customs officials at the port

of entry are satisfied that the eyeglass cases

will reach the ultimate purchaser with the

sunglasses packed therein.

(2) Usual container not used as such

at the time of importation. (i) Except for

a good of a NAFTA country, a usual

container, as defined in § 134.1(l),

which is not used as such at the time

of importation shall be marked to

indicate clearly the country of its own

origin, unless the container itself is

excepted from marking under subpart C

of this part. A good of a NAFTA country

which is a usual container is not

required to be individually marked with

its own origin whether or not in use as

a usual container at the time of

importation.

Example. Wooden crates of Mexican and

Guatemalan origin are imported into the

United States by the truckload and stacked

upon each other. Once they are imported,

they are sold to farmers who use them to

transport their Florida tomatoes to market. As

the wooden crates may be considered the

usual containers of tomatoes, but are not

used as such at the time of importation, the

crates of Guatemalan origin each must be

marked to clearly indicate that they are of

Guatemalan origin, such as ‘‘Crate Made in

Guatemala’’. However, since goods of a

4202 Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules

NAFTA country that are usual containers are

not required to be marked, the crates of

Mexican origin that are imported by the

truckload will not be required to be marked,

provided Customs officials at the port of

entry are satisfied that the Mexican crates

will be used as usual containers after

importation.

(ii) Regardless of the origin, if usual

containers not in use as such at the time

of entry are packed and imported in

multiple units (dozens, gross, etc.), only

the outermost container in which the

usual containers reach the ultimate

purchaser in the U.S. needs to be

marked.

Example. Unmarked petri dishes of

Canadian origin are imported inside large

cartons and sold to Biologics Company in the

United States. Biologics who fills the petri

dishes with microorganisms for sale to

various customers in the science community,

is the ultimate purchaser of the dishes. Since

the petri dishes are the usual containers of

microorganisms, but are not used as such at

the time of importation, the large carton

(outer container) in which the petri dishes

are packed and imported must be marked to

indicate their Canadian origin.

(iii) If a usual container is marked

with its own country of origin at the

time of importation and the marking

will be visible after it is filled, the

marking shall clearly indicate that the

named country pertains to the container

only and not the contents. For example,

if bottles, drums, or other containers

imported empty, to be filled in the

United States, are individually marked

with their own origin, they shall be

marked with such words as ‘‘Bottle (or

container) made in (name of country)’’.

(d) Container or holder other than

usual containers. Regardless of origin, a

container or holder considered as an

imported article under the Harmonized

Tariff Schedule of the United States (19

U.S.C. 1202), and not considered a

‘‘usual container’’ as defined in

§ 134.1(l), shall be marked to clearly

indicate the country of its own origin in

addition to any marking which may be

required to show the country of origin

of its contents, except when such

container or holder itself is excepted

from marking under subpart C of this

part.

Example 1. Suntan lotion of French origin

is imported inside a plastic bracelet of

Pakistani origin. Since the bracelet is not a

container in which suntan lotion ordinarily

reaches the ultimate purchaser, the bracelet

is not considered a usual container and must

be marked with its own country of origin,

along with the origin of the suntan lotion if

the origins are not the same. An appropriate

marking would be ‘‘Suntan lotion Made in

France, Bracelet Made in Pakistan’’.

Example 2. Necklaces of Italian origin

illegibly stamped ‘‘Italy’’ are imported into

the United States for retail sale. At the time

of importation, each necklace is packed in a

jewelry box of Taiwanese origin constructed

of a hard-shell plastic covered by a gray

velvet type material. The boxes open and

close with the aid of a hinge, and the inside

of the boxes is covered with a satin material.

As the jewelry boxes are not usual

containers, they must be marked to clearly

indicate their own origin, along with the

origin of the necklaces since the necklaces

themselves are not legibly marked. A

marking such as ‘‘Box Made in Taiwan;

Necklace Made in Italy’’ would be

acceptable.

(e) Marking of containers of imported

articles when a name of country or

locality other than the country of origin

of its contents appears on a container or

holder. In any case in which the words

‘‘United States’’, or ‘‘American’’, the

letters ‘‘U.S.A.’’, any variation of such

words or letters, or the name of any city

or location in the United States, or the

name of any foreign country or locality

other than the country or locality in

which the contents were manufactured

or produced appear on the container,

and those words, letters or names may

mislead or deceive the ultimate

purchaser as to the actual country of

origin of the contents, there shall appear

legibly and permanently in close

proximity to such words, letters or

name, and in at least a comparable size,

the name of the country of origin

preceded by ‘‘Made in’’, ‘‘Product of’’,

or other words of similar meaning.

Example. The Canadian company

‘‘Courrege’’ distributes bracelets of French

origin. The bracelets will be sold in jewelry

boxes containing the words ‘‘Distributed by

Courrege, Ottawa’’, and the bracelets are

legibly stamped ‘‘Made in France’’. As the

words ‘‘Distributed by Courrege, Ottawa’’

may mislead the ultimate purchaser that

Canada is the country of origin, the boxes

must be labeled ‘‘Made in France’’ or similar

words on the same side as the words

‘‘Distributed by Courrege, Ottawa’’ and in at

least a comparable size.

9. It is proposed to amend

redesignated § 134.33 as follows:

a. Revise the heading;

b. Remove in paragraph (a) the words

at the beginning of the first sentence ‘‘If

an article subject to these requirements

is intended to be repacked in new

containers’’ and add in their place the

words ‘‘With the exception of articles

whose containers are not required to be

marked under § 134.32(b) of this part, if

an article listed under § 134.23 or

otherwise excepted from the marking

requirements under § 134.22 is intended

to be repacked in new containers’’

c. Redesignate current paragraphs (b)

through (e), respectively as new

paragraphs (c) through (f);

d. Add a new paragraph (b); and

e. Add three examples following

redesignated paragraph (f).

The revisions and additions read as

follows:

§ 134.33 Containers or holders for

repacked J-list articles and other articles

excepted from marking.

* * * * *

(b) Repacker. A ‘‘repacker’’ means a

person, including the importer, who

repackages an article subject to these

requirements, and includes a person

who processes such article in the U.S.

but as a result of such processing is not

the ultimate purchaser of the article

under 19 CFR 134.1(d). An article may

be repacked more than once before

reaching the ultimate purchaser.

* * * * *

(f) Duties and penalties.

* * * * *

Example 1. The importer enters bulk

packed articles from China which are

incapable of being marked. The articles are

not processed in any way while in the

importer’s possession but are sold to a person

in the U.S. who will repackage the articles

into individual containers without further

processing for sale to retail purchasers. The

importer does not notify the repacker of the

marking requirements and provide the port

director with a certification pursuant to this

section. The articles are excepted from

marking under § 134.22(a) of this part. Since

the containers of the articles are not excepted

from marking under § 134.32(b), and the

transferee is considered a repacker under

paragraph (b) of this section, the importer’s

failure to comply with the certification

requirements may subject him to duties and

penalties as provided under paragraph (e) of

this section. The importer would also be

obligated to comply with the certification

requirements under similar facts if the

articles were on the ‘‘J-list’’ (§ 134.23).

Example 2. The importer enters an article

from Mexico which was produced more than

20 years ago, and in its original packaging

resells it to a person in the U.S. who repacks

it for sale to an ultimate purchaser. Under

§ 134.22(i), the article is excepted from the

marking requirements. In addition, since the

article is a good of a NAFTA country, the

container is also excepted from the marking

requirements pursuant to § 134.32(b).

Therefore, the certification requirements of

this section are not applicable.

Example 3. The importer enters an article

from China which is on the J-list. The

container housing the article is properly

marked with China as the country of origin.

The importer sells the article in its original

packaging to a customer in the U.S. who

processes it and then repacks it for sale to a

third party. The third party in turn processes

the article and repacks it for sale to a retail

customer who consumes the article. The U.S.

processor is not the ultimate purchaser under

19 CFR 134.1(d). Although the importer fails

to follow the certification procedures of this

section and does not notify its immediate

customer of the marking requirements, the

immediate customer repacks the article in

Federal Register / Vol. 65, No. 17 / Wednesday, January 26, 2000 / Proposed Rules 4203

properly marked containers. However, the

third party processor fails to mark the new

container after processing and repacking the

article, as required under 19 U.S.C. 1304. In

this example, the article is excepted from

individual marking but each new container

in which the article is repacked is required

to be marked with the country of origin, until

the article reaches the ultimate purchaser, in

this case, the retail customer. As a result of

the importer’s failure to comply with the

certification requirements of this section the

importer may be subject to the assessment of

marking duties and penalties as provided

under paragraph (e) of this section.

10. It is proposed to amend

redesignated § 134.34 as follows:

a. Revise the heading;

b. Redesignate current paragraphs (b),

(c), (d), (e) and (f), respectively, as new

paragraphs (c), (d), (e), (f) and (g);

c. Add a new paragraph (b); and

d. Add an example after redesignated

paragraph (f).

The revisions and additions will read

as follows:

§ 134.34 Repacked marked articles.

* * * * *

(b) Repacker. A ‘‘repacker’’ means a

person, including the importer, who

repackages an article subject to these

requirements, and includes a person

who processes such article in the U.S.

but, as a result of such processing is not

the ultimate purchaser of the article

under 19 CFR 134.1(d). An article may

be repacked more than once before

reaching the ultimate purchaser.

* * * * *

(f) Duties and penalties.

* * * * *

Example. The importer enters articles from

China which are individually marked with

their country of origin. He sells the articles

in their bulk packaging to a customer in the

U.S. who processes the articles and also

repacks them in bulk for sale to a third party.

The third party repacks them into blister

packs for sale to retail customers. The U.S.

processor is not the ultimate purchaser under

19 CFR 134.1(d). However, the blister

packages obscure the country of origin

marking on the article. Although it is clear

that the articles will be repackaged for retail

sale, the importer fails to follow the

certification procedures of this section and

does not notify its immediate customer of the

marking requirements. In this example,

having reasonable knowledge of the

subsequent repacking of the articles into

retail containers after release from Customs

custody imposes an obligation upon the

importer to notify its U.S. customer of the

marking requirements and to provide the

required certification to the port director.

Since the importer has failed to comply with

the certification requirements of this

provision, and the retail packages obscure

country of origin marking, the importer may

be subject to duties and penalties as provided

under paragraph (f) of this section.

* * * * *

§ 134.47 [Removed]

11. It is proposed that § 134.47 (19

CFR 134.47) be removed.

Raymond W. Kelly,

Commissioner of Customs.

Approved: January 19, 2000.

Dennis M. O’Connell,

Acting Deputy Assistant Secretary of the

Treasury.

[FR Doc. 00–1682 Filed 1–25–00; 8:45 am]

BILLING CODE 4820–02–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–105089–99]

RIN 1545–AX38

Guidance Under Section 356 Relating

to the Treatment of Nonqualified

Preferred Stock and Other Preferred

Stock in Certain Exchanges and

Distributions

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations providing

guidance relating to nonqualified

preferred stock. The proposed

regulations address the effective date of

the definition of nonqualified preferred

stock and the treatment of nonqualified

preferred stock and similar preferred

stock received by shareholders in

certain reorganizations and

distributions. This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Written or electronic comments

and requests to speak (with outlines of

oral comments) at a public hearing

scheduled for 10 a.m., May 31, 2000,

must be received by May 10, 2000.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–105089–99),

Room 5226, Internal Revenue Service,

POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions

may be hand delivered Monday through

Friday between the hours of 8 a.m. and

5 p.m. to: CC:DOM:CORP:R (REG–

105089–99), Courier’s Desk, Internal

Revenue Service, 1111 Constitution

Avenue, NW., Washington, DC.

Alternatively, taxpayers may submit

comments electronically via the Internet

by selecting the ‘‘Tax Regs’’ option on

the IRS Home Page or by submitting

comments directly to the IRS Internet

site at http://www.irs.ustreas.gov/

taxlregs/regslist.html. The public

hearing will be held in the NYU

Classroom, Room 2615, Internal

Revenue Building, 1111 Constitution

Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,

Richard E. Coss, (202) 622–7790;

concerning submissions of comments,

the hearing, and/or to be placed on the

building access list to attend the

hearing, LaNita Van Dyke, (202) 622–

7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR part 1) under

sections 354, 355, 356, and 1036 of the

Internal Revenue Code (the Code).

Section 1014 of the Taxpayer Relief Act

of 1997 (TRA of 1997), Public Law 105–

34, enacted on August 5, 1997, amended

sections 351, 354, 355, 356, and 1036 of

the Code. As amended, these sections,

in general, provide that nonqualified

preferred stock (as defined in section

351(g)(2)) (NQPS) received in an

exchange or distribution will not be

treated as stock or securities but,

instead, will be treated as ‘‘other

property’’ or ‘‘boot.’’ As a result, the

receipt of NQPS in a transaction

occurring after the NQPS provisions are

effective will, unless a specified

exception applies, result in gain (or, in

some instances, loss) recognition.

Section 351(g)(4) provides authority to

issue regulations to carry out the

purposes of these provisions.

Section 351(g)(2)(A) defines NQPS as

preferred stock if (1) the holder has the

right to require the issuer or a related

person to redeem or purchase the stock,

(2) the issuer or a related person is

required to redeem or purchase the

stock, (3) the issuer or a related person

has the right to redeem or purchase the

stock and, as of the issue date, it is more

likely than not that such right will be

exercised, or (4) the dividend rate on the

stock varies in whole or in part (directly

or indirectly) with reference to interest

rates, commodity prices, or other similar

indices. Factors (1), (2), and (3) above

will cause an instrument to be NQPS

only if the right or obligation may be

exercised within 20 years of the date the

instrument is issued and such right or

obligation is not subject to a

contingency which, as of the issue date,

makes remote the likelihood of the

redemption or purchase.

These rights or obligations do not

cause preferred stock to be NQPS in

certain circumstances described in

section 351(g)(2)(C). In one such