This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

3083 

Vol. 72, No. 15 

Wednesday, January 24, 2007 

DEPARTMENT OF COMMERCE 

International Trade Administration 

DEPARTMENT OF THE INTERIOR 

15 CFR Part 303 

[Docket No. 0612243019–7006–01] 

RIN: 0625–AA72 

Changes in the Insular Possessions 

Watch, Watch Movement and Jewelry 

Programs 2006 

AGENCIES: Import Administration, 

International Trade Administration, 

Department of Commerce; Office of 

Insular Affairs, Department of the 

Interior. 

ACTION: Notice of Proposed Rulemaking 

and Request for Comments. 

SUMMARY: The Departments of 

Commerce and the Interior (the 

Departments) propose amending their 

regulations governing watch dutyexemption allocations and the watch 

and jewelry duty-refund benefits for 

producers in the United States insular 

possessions (the U.S. Virgin Islands, 

Guam, American Samoa and the 

Commonwealth of the Northern Mariana 

Islands). The proposed rule would 

amend certain regulations by updating 

the maximum total value of watch 

components per watch that are eligible 

for duty-free entry into the United States 

under the insular program, further 

clarifying the definition of creditable 

and non-creditable wages and fringe 

benefits, providing more details about 

the calculation of mid-year and annual 

duty-refund and verification process, 

and making minor editorial changes. 

DATES: Written comments must be 

received on or before February 23, 2007. 

ADDRESSES: Address written comments 

to Faye Robinson, Director, Statutory 

Import Programs Staff, Room 2104, U.S. 

Department of Commerce, 14th and 

Constitution Ave., NW., Washington, 

DC 20230. 

FOR FURTHER INFORMATION CONTACT: Faye 

Robinson, (202) 482–3526, same address 

as above. 

SUPPLEMENTARY INFORMATION: The 

insular possessions watch industry 

provision in Sec. 110 of Public Law 97– 

446 (96 Stat. 2331) (1983), as amended 

by Section 602 of Public Law 103–465 

(108 Stat. 4991) (1994), and additional 

U.S. Note 5 to chapter 91 of the 

Harmonized Tariff Schedule of the 

United States (‘‘ HTSUS’’), as amended 

by Public Law 94–241 (90 Stat. 263) 

(1976) requires the Secretary of 

Commerce and the Secretary of the 

Interior (‘‘the Secretaries’’), acting 

jointly, to establish a limit on the 

quantity of watches and watch 

movements that may be entered free of 

duty during each calendar year. The law 

also requires the Secretaries to establish 

the shares of this limited quantity that 

may be entered from the Virgin Islands, 

Guam, American Samoa and the 

Commonwealth of the Northern Mariana 

Islands (‘‘CNMI’’). After the 

Departments have verified the data 

submitted on the annual application 

(Form ITA–334P), the producers’ dutyexemption allocations are calculated 

from the territorial share in accordance 

with 15 CFR 303.14 and each producer 

is issued a duty-exemption license. The 

law further requires the Secretaries to 

issue duty-refund certificates to each 

territorial watch and watch movement 

producer based on the company’s dutyfree shipments and creditable wages 

paid during the previous calendar year. 

Public Law 106–36 (113 Stat. 127) 

(1999) authorizes the issuance of a dutyrefund certificate to each territorial 

jewelry producer for any article of 

jewelry provided for in heading 7113 of 

the HTSUS that is the product of any 

such territory. The value of the 

certificate is based on creditable wages 

paid and duty-free units shipped into 

the United States during the previous 

calendar year. Although the law 

specifically mentions the U.S. Virgin 

Islands, Guam and American Samoa, the 

issuance of the duty-refund certificate 

would also apply to the CNMI due to 

the Covenant to Establish a 

Commonwealth of the Northern Mariana 

Islands in Political Union with the 

United States of America (Pub. L. 94– 

241), that states that goods from the 

CNMI are entitled to the same tariff 

treatment as imports from Guam. See 

also 19 CFR 7.2(a). In order to be 

considered a product of such territories, 

the jewelry must meet the U.S. Customs 

Service substantial transformation 

requirements (the jewelry must become 

a new and different article of commerce 

as a result of production or manufacture 

performed in the territory). To receive 

duty-free treatment, the jewelry must 

also satisfy the requirements of General 

Note 3(a)(iv) of the HTSUS and 

applicable Customs Regulations (19 CFR 

7.3). Section 1562 of Public Law 108– 

429 (2004), amended by Public Law 97– 

446, Public Law 103–465 and Public 

Law 106–36 and authorizes extending 

the duty refund benefits to include the 

value of usual and customary health 

insurance, life insurance and pension 

benefits; raising the ceiling on the 

amount of jewelry that qualifies for the 

duty refund benefit; allowing new 

insular jewelry producers to assemble 

jewelry and have such jewelry treated as 

an article of the insular possessions for 

up to 18 months after the jewelry 

company commences assembly 

operations; allowing duty refund 

certificate holders to secure a duty 

refund on any articles that are imported 

into the customs territory of the United 

States by the certificate holder duty 

paid; and providing compensation to 

insular watch producers if tariffs on 

watches and watch movements are 

reduced. 

Comments Received in Response to the 

Advanced Notice of Proposed 

Rulemaking 

The Department’s regulations provide 

that the current total value of watch 

components per watch and watch 

movement that are eligible for duty-free 

entry into the U.S. are $800 per watch 

and $35 per watch movement. See 15 

CFR 303.14(b)(3). On July 25, 2006, the 

Department received a letter from the 

U.S. Virgin Islands Watch & Jewelry 

Manufacturers Association requesting 

that the Department of Commerce 

reexamine the current value limits for 

watches assembled in the U.S. Virgin 

Islands. The Association asserted that 

the rising cost of gold has made it 

difficult to continue production of gold 

watches with the current ceilings in 

place. 

In response to the Association’s 

request, on October 20, 2006, we 

published an advanced notice of 

proposed rulemaking in the Federal 

Register. See Insular Possession Watch, 


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3084 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Proposed Rules 

Watch Movement and Jewelry Programs, 

71 FR 61923 (October 20, 2006). The 

notice requested comments on whether 

to change the maximum value of watch 

components per watch and watch 

movement that are eligible for benefits 

under the program and provide 

comments on four possible options. We 

received comments from four parties: 

The first commenter favored removing 

any restrictions on the value of watch 

components as long as all other program 

requirements are met. 

The second commenter suggested a 

ceiling of $2,000 for watch components 

per watch and $200 for watch 

components per watch movement. 

The third commenter encouraged the 

Departments to significantly increase or 

eliminate the value limits for watches 

and watch movements. 

The fourth commenter urged the 

Departments of Commerce and the 

Interior to eliminate the watch and 

watch movement value limits from the 

regulations. 

In 1983, the passage of Pub. L. 97–446 

added features to the insular 

possessions watch program, which 

included a duty refund provision for 

watch producers. Contained in the 

rulemaking, implementing Pub. L. 97–

446, was the addition of the value limits 

on components for watches and watch 

movements. (See Allocation of Watch 

Quota for Calendar Year 1983 Among 

Watch Producers Located in the Virgin 

Islands, Guam and American Samoa, 48 

FR 17579, April 25, 1983) (‘‘1983 Final 

Rule’’) 

Since 1983, the value limitations have 

been raised on several occasions, most 

recently in 1998 and 2004. Although 

two commenters favored eliminating the 

ceiling all together, we propose raising 

the value limits rather than eliminating 

them because we believe that the 

original policy reasons for maintaining 

the ceiling still have merit in terms of 

domestic and international trade policy. 

In the notice of proposed rulemaking 

(See Allocation of Watch Quota for 

Calendar Year 1983 Among Watch 

Producers Located in the Virgin Islands, 

Guam and American Samoa, 48 FR 

7186, February 18, 1983) for the 1983 

Final Rule, the Departments included 

value limits in response to language 

added by the Senate Finance Committee 

report, which required the Secretaries to 

ensure that work performed in the 

insular possessions adds ‘‘significantly 

to the value of the product.’’ A basic 

tenant of the policy was to stimulate 

employment in the insular possessions 

while not creating disproportionate 

gains for watch producers and 

maintaining the ceiling assures that a 

balance is maintained. Because there 

have been substantial increases in the 

price of gold and the dollar has 

weakened against the Euro and the 

Swiss France, we propose raising the 

maximum total value of watch 

components per watch and watch 

movement that are eligible for duty-free 

entry into the U.S., from $800 to $3,000 

per watch and from $35 to $300 per 

watch movement to account for 

increases in the price of gold as well as 

provide allowances for further 

fluctuation. We believe that the increase 

would provide flexibility to producers 

and has the potential to attract new 

producers and increases in employment 

while maintaining a correlation between 

wages paid to employees and duty 

savings. We, therefore, propose 

increasing the value limits on watches 

and watch movements while 

maintaining the option to further review 

value limits in future years if 

circumstances dictate a change. 

Proposed Amendments 

As discussed above, we propose to 

amend § 303.14(b)(3) by raising the 

maximum total value of watch 

components per watch and watch 

movement that are eligible for duty-free 

entry into the U.S., from $800 to $3,000 

per watch and from $35 to $300 per 

watch movement due to recent increases 

in the price of gold. 

We further propose amending 

§§ 303.1(c) and 303.15(b) to reflect that 

the duty-refunds may now be obtained 

on any articles that entered the customs 

territory of the United States duty paid 

except for any article containing a 

material which is the product of a 

country to which column 2 rates of duty 

apply, pursuant to Pub. L. 108–429. The 

proposed rule would further amend 

§ 303.1(c) by removing the erroneous 

reference to ‘‘Headnote 6’’ and adding 

‘‘additional U.S. note 5 to chapter 91 of 

the HTSUS’’ in its place. 

We also propose amending 

§ 303.2(a)(8) to correct a minor 

typographical error by adding the 

closing parenthesis at the end of the 

sentence and amending § 303.2(a)(10) by 

changing ‘‘watch components’’ to 

‘‘watch movements’’ to more accurately 

define the kind of component. 

Further, we propose amending 

§§ 303.2(a)(13), 303.2(a)(13)(ii), 

303.2(a)(13)(ii)(A), 303.2(a)(13)(ii)(B), 

303.2(a)(14), 303.2(a)(14)(ii), 

303.2(a)(14)(ii)(A), 303.2(a)(14)(ii)(B), 

303.16(a)(9), 303.16(a)(9)(ii), 

303.16(a)(9)(ii)(A), 303.16(a)(9)(ii)(B), 

303.16(a)(10), 303.16(a)(10)(ii), 

303.16(a)(10)(ii)(A) and 

303.16(a)(10)(ii)(B) to further clarify 

which wages, health insurance, life 

insurance and pension benefits are 

creditable in the Departments’

calculation of the duty-refund benefits 

and which are not. 

The proposed rule would also amend 

§§ 303.16(a)(9)(i)(C) and (a)(10)(i)(D) by 

clarifying that two program producers 

may, under certain circumstances, work 

on the same unit of jewelry and receive 

creditable wages and fringe benefits 

proportionally if both producers 

demonstrate that they have met all the 

qualifications of the regulations and 

have records sufficient for the 

Departments’ verification. However, a 

non-program jewelry producer may not 

work together with a program jewelry 

producer on the manufacturing of a 

single article of jewelry and receive 

creditable wages and benefits. 

A further proposal would amend 

§§ 303.12(a)(1), 303.14(c), 303.19(a)(1) 

and 303.20(b) to provide further details 

about the calculation of the mid-year 

duty-refund and annual duty-refund. 

We modified the criteria for the 

calculation of the annual duty-refund to 

include health insurance, life insurance 

and pension benefits, pursuant to Public 

Law 108–429 and modified the criteria 

for the calculation of the mid-year duty 

refund. 

We propose amending the heading to 

§ 303.5(b) to reflect that only verified 

data is used in the calculation of the 

duty-exemptions and duty-refunds. 

Also, we propose amending 

§§ 303.5(b)(5) and 303.17(b)(6) to clarify 

that the payroll information that should 

be available for use in the verification 

includes time cards for each employee. 

We further propose amending 

§§ 303.5(c) and 303.17(c) to specify that 

all data must be available at the time of 

the annual verification and that the 

Departments will not consider further 

data after the verification for the 

particular year has been completed. 

We propose amending §§ 303.13(b) 

and 303.21(b) by changing ‘‘post office 

address’’ to ‘‘address’’ because some 

producers might not have post office 

addresses and express mail carriers 

often will not deliver to a post office 

address. 

Finally, the proposed rule would 

amend §§ 303.2(b)(5) and 303.16(b)(3) 

by adding ‘‘duty paid’’ so it will be 

clearer that the refund of duties is 

specifically on items that entered into 

the Customs territory of the United 

States ‘‘duty paid’’. 

Administrative Law Requirements 

Regulatory Flexibility Act. In 

accordance with the Regulatory 

Flexibility Act, 5 U.S.C. 601 et seq., the 

Chief Counsel for Regulation at the 

Department of Commerce has certified 

to the Chief Counsel for Advocacy, 


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Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Proposed Rules 3085 

Small Business Administration, that the 

proposed rule, if promulgated as final, 

will not have a significant economic 

impact on a substantial number of small 

entities. The majority of the changes are 

being proposed to further clarify the 

definition of creditable and noncreditable wages and fringe benefits, to 

provide more details about the 

calculation of mid-year and annual 

duty-refund and the verification 

process, and to make minor editorial 

changes. There are currently four watch 

companies in the insular watch program 

and four jewelry companies in the 

insular jewelry program, all of which 

are small entities. This rulemaking 

would update the total maximum value 

of watch components per watch that are 

eligible for duty-free entry into the 

United States. Increases in the price of 

gold and a weakened dollar against the 

Euro and Swiss franc have driven up the 

price of gold watch components. 

Therefore, companies are faced with a 

difficult situation because if the value 

limit is exceeded, the watch becomes 

ineligible for the duty-free benefit or the 

duty refund benefit under the program 

due to the fact that the insular 

possessions are outside the Customs 

territory of the United States and the 

watches will not have met the 

regulatory requirements of the program. 

Adoption of this rule would increase the 

maximum value of watch components 

per watch that would be eligible for 

duty-free treatment into the United 

States. This would allow producers to 

increase higher-priced components in 

their watches. As a result, producers 

would realize an economic benefit in 

that they would increase flexibility in 

the types of watches they could 

produce, which may lead to increased 

sales and employment to help the 

insular economy. There would be no 

adverse economic impact from this 

proposed change. 

This proposed rule also would not 

change reporting or recordkeeping 

requirements. The changes in the 

regulations will also not duplicate, 

overlap or conflict with other laws or 

regulations. Consequently, the changes 

are not expected to meet the RFA 

criteria of having a ‘‘significant’’

economic effect on a ‘‘substantial 

number’’ of small entities, as stated in 

5 U.S.C. 603 et seq. Therefore, a 

regulatory flexibility analysis was not 

prepared. 

Paperwork Reduction Act. This 

proposed rulemaking does not contain 

revised collection of information 

requirements subject to review and 

approval by the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act of 1995. Collection 

activities are currently approved by the 

Office of Management and Budget under 

control numbers 0625–0040 and 0625–

0134. 

Not withstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with a collection of information unless 

it displays a currently valid OMB 

control number. 

E.O. 12866. It has been determined 

that the proposed rulemaking is not 

significant for purposes of Executive 

Order 12866. 

List of Subjects in 15 CFR Part 303 

Administrative practice and 

procedure, American Samoa, Customs 

duties and inspection, Guam, Imports, 

Marketing quotas, Northern Mariana 

Islands, Reporting and recordkeeping 

requirements, Virgin Islands, Watches 

and jewelry. 

For reasons set forth above, the 

Departments propose to amend 15 CFR 

part 303 as follows: 

PART 303—WATCHES, WATCH 

MOVEMENTS AND JEWELRY 

PROGRAMS 

1. The authority citation for 15 CFR 

part 303 continues to read as follows: 

Authority: Pub. L. 97–446, 96 Stat. 2331 

(19 U.S.C. 1202, note); Pub. L. 103–465, 108 

Stat. 4991; Pub. L. 94–241, 90 Stat. 263 (48 

U.S.C. 1681, note); Pub. L. 106–36, 113 Stat. 

167; Pub. L. 108–429, 118 Stat. 2582. 

§ 303.1 [Amended] 

2. Section 303.1 is amended as 

follows: 

A. Remove ‘‘on watches and watch 

movements and parts (except discrete 

watch cases) imported into the customs 

territory of the United States.’’ from the 

first sentence of paragraph (c) and add 

‘‘on any article imported into the 

customs territory of the United States 

duty paid except for any article 

containing a material which is the 

product of a country to which column 

2 rates of duty apply.’’ in its place. 

B. Remove ‘‘Headnote 6’’ from the last 

sentence in paragraph (c) and add 

‘‘additional U.S. note 5 to chapter 91 of 

the HTSUS’’ in its place. 

3. Section 303.2 is amended as 

follows: 

A. Remove ‘‘American Samoa) and 

the Northern Mariana Islands.’’ from the 

only sentence in paragraph (a)(8) and 

add ‘‘American Samoa and the Northern 

Mariana Islands).’’ in its place. 

B. Remove ‘‘watch components’’ from 

the only sentence in paragraph (a)(10) 

and add ‘‘watch movements’’ in its 

place. 

C. Amend paragraph (a)(13) 

introductory text by removing ‘‘wages’’

and adding ‘‘wages and associated’’ in 

its place. 

D. Add one new sentence at the end 

of paragraph (a)(13)(ii) introductory text 

as set forth below. 

E. Add one new sentence at the end 

of paragraph (a)(13)(ii)(A) as set forth 

below. 

F. Add one new sentence at the end 

of paragraph (a)(13)(ii)(B) as set forth 

below. 

G. Revise paragraph (a)(14) 

introductory text as set forth below. 

H. Add one new sentence at the end 

of paragraph (a)(14)(ii) introductory text 

as set forth below. 

I. Add one new sentence at the end of 

paragraph (a)(14)(ii)(A) as set forth 

below. 

J. Add one new sentence at the 

beginning of paragraph (a)(14)(ii)(B) as 

set forth below. 

K. Remove ‘‘United States during’’

from the second sentence of paragraph 

(b)(5) and add ‘‘United States duty paid 

during’’ in its place. 

§ 303.2 Definitions and forms. 

(a) * * * 

(13) * * * 

(ii) * * * Only during the time 

employees are earning creditable wages 

are they entitled to health and life 

insurance duty refund benefits under 

the program. 

(A) * * * Only during the time 

employees are earning creditable wages 

are they entitled to health and life 

insurance duty refund benefits under 

the program. 

(B) * * * Only during the time 

employees are earning creditable wages 

are they entitled to pension duty refund 

benefits under the program. 

* * * * * 

(14) Non-creditable wages and 

associated non-creditable fringe benefits 

ineligible for the duty refund benefit 

include, but are not limited to, the 

following: 

* * * * * 

(ii) * * * Any health and life 

insurance costs during the time an 

employee is not earning creditable 

wages. 

(A) * * * Any health and life 

insurance costs during the time an 

employee is not earning creditable 

wages. 

(B) Any pension benefits that were 

not based on associated creditable 

wages. * * * 

* * * * * 

4. Section 303.5 is amended as 

follows: 

A. Revise the section heading to read 

as set forth below. 


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B. Remove ‘‘allocation shall’’ from the 

first sentence of paragraph (b) 

introductory text and add ‘‘allocation or 

duty-refund certificate shall’’ in its 

place. 

C. Remove ‘‘payroll, production 

records’’ from paragraph (b)(5) and add 

‘‘payroll, including time cards, 

production records’’ in its place. 

D. Remove the last sentence of 

paragraph (c) and add two sentences in 

its place as set forth below. 

§ 303.5 Application for annual allocations 

of duty-exemptions and duty-refunds. 

* * * * * 

(c) * * * It is the responsibility of 

each program producer to make the 

appropriate data available to the 

Departments’ officials for the calendar 

year for which the annual verification is 

being performed and no further data, 

from the calendar year for which the 

audit is being completed, will be 

considered for benefits at any time after 

the audit has been completed. In the 

event of discrepancies between the 

application and substantiating data 

before the audit is complete, the 

Secretaries shall determine which data 

will be used in the calculation of the 

duty refund and allocations. 

* * * * * 

§ 303.12 [Amended] 

5. Section 303.12 is amended as 

follows: 

A. Remove ‘‘creditable wages paid 

during’’ from the second sentence in 

paragraph (a)(1) and add ‘‘creditable 

wages, determined from the wages as 

reported on the employer’s first two 

quarterly federal tax returns (941–SS), 

paid during’’ in its place. 

B. Remove ‘‘duty refund will remain 

the same.’’ from the fifth sentence in 

paragraph (a)(1) and add ‘‘duty refund 

will be based on verified creditable 

wages, duty-free shipments into the 

customs territory of the United States, 

creditable health insurance, life 

insurance and pension benefits and the 

duty differential, if watch tariffs have 

been reduced during the calendar year.’’

in its place. 

§ 303.13 [Amended] 

6. Section 303.13 is amended by 

removing ‘‘post office address’’ from the 

first sentence of paragraph (b) and 

adding ‘‘address’’ in its place. 

7. Section 303.14 is amended as 

follows: 

A. Revise the section heading to read 

as set forth below. 

B. In paragraph (b)(3), remove ‘‘35’’

and add ‘‘300’’ in its place; and remove 

‘‘800’’ and add ‘‘3,000’’ in its place. 

C. Revise paragraph (c) to read as 

follows. 

§ 303.14 Allocation factors, duty refund 

calculations and miscellaneous provisions. 

* * * * * 

(c) Calculation of the value of the 

mid-year production incentive 

certificates. (1) The value of each 

producer’s certificate shall equal the 

producer’s average creditable wage per 

unit shipped during the first six months 

of the calendar year multiplied by the 

sum of: 

(i) The number of units shipped up to 

300,000 units times a factor of 90%; 

plus 

(ii) Incremental units shipped up to 

450,000 units times a factor of 85%; 

plus 

(iii) Incremental units shipped up to 

600,000 units times a factor of 80%; 

plus 

(iv) Incremental units shipped up to 

750,000 units times a factor of 75%. 

(2) Calculation of the value of the 

annual production incentive 

certificates. The value of each 

producer’s certificate shall equal the 

producer’s average creditable benefit per 

unit based on creditable wages, health 

insurance, life insurance and pension 

benefits plus any duty differential, if 

applicable, averaged from the amount of 

duty free units shipped during the 

calendar year multiplied by the sum of 

the following to obtain the total verified 

amount of the annual duty-refund per 

company. This amount would then be 

adjusted by deducting the amount of the 

mid-year duty-refund already issued. 

(i) The number of units shipped up to 

300,000 units times a factor of 90%; 

plus 

(ii) Incremental units shipped up to 

450,000 units times a factor of 85%; 

plus 

(iii) Incremental units shipped up to 

600,000 units times a factor of 80%; 

plus 

(iv) Incremental units shipped up to 

750,000 units times a factor of 75%. 

(3) The Departments may make 

adjustments for these data in the 

manner set forth in § 303.5(c). 

* * * * * 

§ 303.15 [Amended] 

8. Section 303.15 is amended by 

removing ‘‘on watches and watch 

movements and parts (except discrete 

watch cases) imported into the customs 

territory of the United States.’’ From the 

first sentence of paragraph (b) and 

adding ‘‘on any article imported into the 

customs territory of the United States 

duty paid except for any article 

containing a material which is the 

product of a country to which column 

2 rates of duty apply.’’ in its place. 

9. Section 303.16 is amended as 

follows: 

A. Amend paragraph (a)(9) 

introductory text by removing ‘‘wages 

and creditable fringe benefits’’ and 

adding ‘‘wages and associated creditable 

fringe benefits and creditable duty 

differentials’ in its place. 

B. Remove ‘‘two producers’’ from the 

first sentence of paragraph (a)(9)(i)(C) 

and add ‘‘two program producers’’ in its 

place. 

C. Add one new sentence at the end 

of paragraph (a)(9)(ii) introductory text 

as set forth below. 

D. Add one new sentence at the end 

of paragraph (a)(9)(ii)(A) as set forth 

below. 

E. Add one new sentence at the end 

of paragraph (a)(9)(ii)(B) as set forth 

below. 

F. Revise paragraph (a)(10) 

introductory text as set forth below. 

G. Add one new sentence at the end 

of paragraph (a)(10)(ii) introductory text 

as set forth below. 

H. Add one new sentence at the end 

of paragraph (a)(10)(ii)(A) as set forth 

below. 

I. Add one new sentence at the 

beginning of paragraph (a)(10)(ii)(B) as 

set forth below. 

J. Remove ‘‘working on the premises 

of the company office and’’ from the 

first sentence of paragraph (a)(10)(i)(D) 

and add ‘‘working on the premises of 

the company office; wages paid to 

employees working with a non-program 

producer to create a single piece of 

HTSUS heading 7113 jewelry whether 

or not it entered the United States free 

of duty; and’’ in its place. 

K. Remove ‘‘United States during’’

from the second sentence of paragraph 

(b)(3) and add ‘‘United States duty paid 

during’’ in its place. 

§ 303.16 Definitions and forms. 

(a) * * * 

(9) * * * 

(ii) * * * Only during the time 

employees are earning creditable wages 

are they entitled to health and life 

insurance duty refund benefits under 

the program. 

(A) * * * Only during the time 

employees are earning creditable wages 

are they entitled to health and life 

insurance duty refund benefits under 

the program. 

(B) * * * Only during the time 

employees are earning creditable wages 

are they entitled to pension duty refund 

benefits under the program. 

* * * * * 

(10) Non-creditable wages and 

associated non-creditable fringe benefits 

ineligible for the duty refund benefit 

include, but are not limited to, the 

following: 

* * * * * 


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(ii) * * * Any health and life 

insurance costs during the time an 

employee is not earning creditable 

wages. 

(A) * * * Any health and life 

insurance costs during the time an 

employee is not earning creditable 

wages. 

(B) Any pension benefits that were 

not based on associated creditable 

wages. * * * 

* * * * * 

10. Section 303.17 is amended as 

follows: 

A. Revise the section heading to read 

as set forth below. 

B. Remove ‘‘payroll, production 

records’’ from paragraph (b)(6) and add 

‘‘payroll, including time cards, 

production records’’ in its place. 

C. Remove the last sentence of 

paragraph (c) and add two sentences in 

its place as set forth below. 

§ 303.17 Application for annual dutyrefunds. 

* * * * * 

(c) * * * It is the responsibility of 

each program producer to make the 

appropriate data available to the 

Departments’ officials for the calendar 

year for which the annual verification is 

being performed and no further data, 

from the calendar year for which the 

audit is being completed, will be 

considered for benefits at any time after 

the audit has been completed. In the 

event of discrepancies between the 

application and substantiating data 

before the audit is complete, the 

Secretaries shall determine which data 

will be used in the calculation of the 

duty refund and allocations. 

* * * * * 

§ 303.19 [Amended] 

11. Section 303.19 is amended as 

follows: 

A. Remove ‘‘creditable wages paid 

during’’ from the second sentence in 

paragraph (a)(1) and add ‘‘creditable 

wages, determined from the wages as 

reported on the employer’s first two 

quarterly federal tax returns (941–SS), 

paid during’’ in its place. 

B. Remove ‘‘duty refund will remain 

the same.’’ from the fifth sentence in 

paragraph (a)(1) and add ‘‘duty refund 

will be based on verified creditable 

wages, duty-free shipments into the 

customs territory of the United States, 

creditable health insurance, life 

insurance and pension benefits and the 

duty differential, if watch tariffs have 

been reduced during the calendar year.’’

in its place. 

12. Section 303.20 is amended as 

follows: 

A. Revise the section heading to read 

as set forth below. 

B. Revise paragraph (b) to read as 

follows. 

§ 303.20 Duty refund calculations and 

miscellaneous provisions. 

* * * * * 

(b) Calculation of the value of the 

mid-year production incentive 

certificates. (1) The value of each 

producer’s certificate shall equal the 

producer’s average creditable wage per 

unit shipped during the first six months 

of the calendar year multiplied by the 

sum of: 

(i) The number of units shipped up to 

300,000 units times a factor of 90%; 

plus 

(ii) Incremental units shipped up to 

450,000 units times a factor of 85%; 

plus 

(iii) Incremental units shipped up to 

600,000 units times a factor of 80%; 

plus 

(iv) Incremental units shipped up to 

750,000 units times a factor of 75%. 

(2) Calculation of the value of the 

annual production incentive 

certificates. The value of each 

producer’s certificate shall equal the 

producer’s average creditable benefit per 

unit based on creditable wages, health 

insurance, life insurance and pension 

benefits plus any duty differential, if 

applicable, averaged from the amount of 

duty free units shipped during the 

calendar year multiplied by the sum of 

the following to obtain the total verified 

amount of the annual duty-refund per 

company. This amount would then be 

adjusted by deducting the amount of the 

mid-year duty-refund already issued. 

(i) The number of units shipped up to 

300,000 units times a factor of 90%; 

plus 

(ii) Incremental units shipped up to 

450,000 units times a factor of 85%; 

plus 

(iii) Incremental units shipped up to 

600,000 units times a factor of 80%; 

plus 

(iv) Incremental units shipped up to 

750,000 units times a factor of 75%. 

(3) The Departments may make 

adjustments for these data in the 

manner set forth in § 303.17(c). 

* * * * * 

§ 303.21 [Amended] 

13. Section 303.21 is amended by 

removing ‘‘post office address’’ from the 

first sentence of paragraph (b) and 

adding ‘‘address’’ in its place. 

Dated: January 18, 2007. 

David Spooner, 

Assistant Secretary for Import 

Administration, Department of Commerce. 

Dated: January 9, 2007. 

Nikolao Pula, 

Director for Insular Affairs, Department of 

the Interior. 

[FR Doc. 07–294 Filed 1–23–07; 8:45 am] 

BILLING CODE 3510–DS–P, 4310–93–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–125632–06] 

RIN 1545–BF83 

Corporate Reorganizations; 

Distributions Under Sections 

368(a)(1)(D) and 354(b)(1)(B); 

Correction Notice 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

by cross-reference to temporary 

regulations; correction notice. 

SUMMARY: This document contains 

corrections to notice of proposed 

rulemaking by cross-reference to 

temporary regulations that was 

published in the Federal Register on 

Tuesday, December 19, 2006 (71 FR 

75898) providing guidance regarding the 

qualification of certain transactions as 

reorganizations described in section 

368(a)(1)(D) where no stock and/or 

securities of the acquiring corporation 

are issued and distributed in the 

transaction. 

FOR FURTHER INFORMATION CONTACT: 

Bruce A. Decker at (202) 622–7550 (not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The notice of proposed rulemaking by 

cross-reference to temporary regulations 

(REG–125632–06) that is the subject of 

these corrections are under sections 368 

and 354 of the Internal Revenue Code. 

Need for Correction 

As published, notice of proposed 

rulemaking by cross-reference to 

temporary regulations (REG–125632–06) 

contains errors that may prove to be 

misleading and are in need of 

clarification. 

Correction of Publication 

Accordingly, the notice of proposed 

rulemaking by cross-reference to 


rmajette on PROD1PC67 with PROPOSALS