10368 Federal Register / Vol. 77, No. 35 / Wednesday, February 22, 2012 / Rules and Regulations 

104 Id. 

alternative empirical data, and did not 

address the number of small advisers 

that would be affected.104

VI. Statutory Authority 

The Commission is adopting 

amendments to rule 205–3 pursuant to 

the authority set forth in section 205(e) 

of the Investment Advisers Act of 1940 

[15 U.S.C. 80b–5(e)]. 

List of Subjects in 17 CFR Part 275 

Reporting and recordkeeping 

requirements, Securities. 

Text of Rules 

■ For the reasons set out in the 

preamble, Title 17, Chapter II of the 

Code of Federal Regulations is amended 

as follows: 

PART 275—RULES AND 

REGULATIONS, INVESTMENT 

ADVISERS ACT OF 1940 

■ 1. The general authority citation for 

Part 275 continues to read as follows: 

Authority: 15 U.S.C. 80b–2(a)(11)(G), 80b– 

2(a)(11)(H), 80b–2(a)(17), 80b–3, 80b–4, 80b– 

4a, 80b–6(4), 80b–6a, 80b–11, unless 

otherwise noted. 

* * * * * 

■ 2. Section 275.205–3 is amended by: 

■ a. Revising paragraph (c); 

■ b. Revising paragraphs (d)(1)(i) and 

(ii); and 

■ c. Adding paragraph (e). 

The revisions and addition read as 

follows: 

§ 275.205–3 Exemption from the 

compensation prohibition of section 

205(a)(1) for investment advisers. 

* * * * * 

(c) Transition rules—(1) Registered 

investment advisers. If a registered 

investment adviser entered into a 

contract and satisfied the conditions of 

this section that were in effect when the 

contract was entered into, the adviser 

will be considered to satisfy the 

conditions of this section; Provided, 

however, that if a natural person or 

company who was not a party to the 

contract becomes a party (including an 

equity owner of a private investment 

company advised by the adviser), the 

conditions of this section in effect at 

that time will apply with regard to that 

person or company. 

(2) Registered investment advisers 

that were previously not registered. If an 

investment adviser was not required to 

register with the Commission pursuant 

to section 203 of the Act (15 U.S.C. 80b– 

3) and was not registered, section 

205(a)(1) of the Act will not apply to an 

advisory contract entered into when the 

adviser was not required to register and 

was not registered, or to an account of 

an equity owner of a private investment 

company advised by the adviser if the 

account was established when the 

adviser was not required to register and 

was not registered; Provided, however, 

that section 205(a)(1) of the Act will 

apply with regard to a natural person or 

company who was not a party to the 

contract and becomes a party (including 

an equity owner of a private investment 

company advised by the adviser) when 

the adviser is required to register. 

(3) Certain transfers of interests. 

Solely for purposes of paragraphs (c)(1) 

and (c)(2) of this section, a transfer of an 

equity ownership interest in a private 

investment company by gift or bequest, 

or pursuant to an agreement related to 

a legal separation or divorce, will not 

cause the transferee to ‘‘become a party’’ 

to the contract and will not cause 

section 205(a)(1) of the Act to apply to 

such transferee. 

(d) * * * 

(1) * * * 

(i) A natural person who, or a 

company that, immediately after 

entering into the contract has at least 

$1,000,000 under the management of 

the investment adviser; 

(ii) A natural person who, or a 

company that, the investment adviser 

entering into the contract (and any 

person acting on his behalf) reasonably 

believes, immediately prior to entering 

into the contract, either: 

(A) Has a net worth (together, in the 

case of a natural person, with assets 

held jointly with a spouse) of more than 

$2,000,000. For purposes of calculating 

a natural person’s net worth: 

(1) The person’s primary residence 

must not be included as an asset; 

(2) Indebtedness secured by the 

person’s primary residence, up to the 

estimated fair market value of the 

primary residence at the time the 

investment advisory contract is entered 

into may not be included as a liability 

(except that if the amount of such 

indebtedness outstanding at the time of 

calculation exceeds the amount 

outstanding 60 days before such time, 

other than as a result of the acquisition 

of the primary residence, the amount of 

such excess must be included as a 

liability); and 

(3) Indebtedness that is secured by the 

person’s primary residence in excess of 

the estimated fair market value of the 

residence must be included as a 

liability; or 

(B) Is a qualified purchaser as defined 

in section 2(a)(51)(A) of the Investment 

Company Act of 1940 (15 U.S.C. 80a– 

2(a)(51)(A)) at the time the contract is 

entered into; or 

* * * * * 

(e) Inflation adjustments. Pursuant to 

section 205(e) of the Act, the dollar 

amounts specified in paragraphs 

(d)(1)(i) and (d)(1)(ii)(A) of this section 

shall be adjusted by order of the 

Commission, on or about May 1, 2016 

and issued approximately every five 

years thereafter. The adjusted dollar 

amounts established in such orders 

shall be computed by: 

(1) Dividing the year-end value of the 

Personal Consumption Expenditures 

Chain-Type Price Index (or any 

successor index thereto), as published 

by the United States Department of 

Commerce, for the calendar year 

preceding the calendar year in which 

the order is being issued, by the yearend value of such index (or successor) 

for the calendar year 1997; 

(2) For the dollar amount in paragraph 

(d)(1)(i) of this section, multiplying 

$750,000 times the quotient obtained in 

paragraph (e)(1) of this section and 

rounding the product to the nearest 

multiple of $100,000; and 

(3) For the dollar amount in paragraph 

(d)(1)(ii)(A) of this section, multiplying 

$1,500,000 times the quotient obtained 

in paragraph (e)(1) of this section and 

rounding the product to the nearest 

multiple of $100,000. 

Dated: February 15, 2012. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–4046 Filed 2–21–12; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

U.S. Customs and Border Protection 

DEPARTMENT OF THE TREASURY 

19 CFR Parts 10 and 163 

[CBP Dec. 12–02; USCBP–2011–0030] 

RIN 1515–AD75 

Duty-Free Treatment of Certain Visual 

and Auditory Materials 

AGENCY: U.S. Customs and Border 

Protection, Department of Homeland 

Security; Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: This document adopts as a 

final rule, without change, the proposed 

amendments to the U.S. Customs and 

Border Protection (CBP) regulations to 

permit an applicant to file the 


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Federal Register / Vol. 77, No. 35 / Wednesday, February 22, 2012 / Rules and Regulations 10369 

documentation required for duty-free 

treatment of certain visual and auditory 

materials of an educational, scientific, 

or cultural character under subheading 

9817.00.40, Harmonized Tariff Schedule 

of the United States (HTSUS), at any 

time prior to the liquidation of the 

entry. This change allots more time for 

the importer to provide the necessary 

certification documentation to CBP and 

serves to align the filing of required 

certification documentation with a 

change in CBP policy that extended the 

liquidation cycle for entries in the 

ordinary course of business from 90 

days to 314 days after the date of entry. 

DATES: Effective date: March 23, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Robert Dinerstein, Valuation and 

Special Programs Branch, Regulations 

and Rulings, Office of International 

Trade, (202) 325–0132. 

SUPPLEMENTARY INFORMATION: 

Background 

On August 19, 2011, U.S. Customs 

and Border Protection (CBP) published 

in the Federal Register (76 FR 51914) a 

proposal to amend title 19 of the Code 

of Federal Regulations (19 CFR) 

regarding the filing of documentation 

for duty-free treatment of certain visual 

and auditory materials of an 

educational, scientific, or cultural 

character under subheading 9817.00.40, 

HTSUS. Specifically, CBP proposed 

amendments to the regulations to 

provide for the suspension of the 

liquidation cycle for entries in the 

ordinary course of business from 90 

days to 314 days after the date of entry, 

or until the required documentation is 

submitted, whichever occurs first. This 

proposal also proposed to make a nonsubstantive change to the listing in the 

Appendix to Part 163 to reflect the State 

Department rather than the abolished 

U.S. Information Agency (USIA). 

CBP solicited comments from the 

public on the proposed rulemaking; 

however, CBP received no comments in 

response to its solicitation in 76 FR 

51914. 

Conclusion 

In light of the fact that no comments 

were submitted in response to CBP’s 

solicitation of public comment, CBP has 

determined to adopt as a final rule the 

proposed amendments in the Notice of 

Proposed Rulemaking published in the 

Federal Register (76 FR 51914) on 

August 19, 2011. 

The Regulatory Flexibility Act and 

Executive Order 12866 

The Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.) requires Federal 

agencies to examine the impact a rule 

will have on small entities. A small 

entity may be: a small business (defined 

as any independently owned and 

operated business not dominant in its 

field that qualifies as a small business 

under the Small Business Act); a small 

not-for-profit organization; or a small 

governmental jurisdiction (locality with 

fewer than 50,000 people). Because 

these amendments provide more time 

for an importer to obtain the State 

Department certificate, CBP certifies 

under 5 U.S.C. 605(b) that the 

amendments will not have a significant 

economic impact on a substantial 

number of small entities. Further, these 

amendments do not meet the criteria for 

a ‘‘significant regulatory action’’ as 

specified in Executive Order 12866. 

Paperwork Reduction Act 

As there are no new collections of 

information in this document, the 

provisions of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3507) are 

inapplicable. 

Signing Authority 

This rulemaking is being issued in 

accordance with 19 CFR 0.1(a)(1), 

pertaining to the authority of the 

Secretary of the Treasury (or his/her 

delegate) to approve regulations related 

to certain CBP revenue functions. 

List of Subjects 

19 CFR Part 10 

Customs duties and inspection, Entry, 

Imports, Preference programs, Reporting 

and recordkeeping requirements, Trade 

agreements. 

19 CFR Part 163 

Administrative practice and 

procedure, Customs duties and 

inspection, Exports, Imports, Reporting 

and recordkeeping requirements, Trade 

agreements. 

Amendments to the CBP Regulations 

For the reasons set forth above, parts 

10 and 163 of title 19 of the Code of 

Federal Regulations (19 CFR parts 10 

and 163) are amended as set forth 

below. 

PART 10—ARTICLES CONDITIONALLY 

FREE, SUBJECT TO A REDUCED 

RATE, ETC. 

■ 1. The general authority citation for 

part 10 continues to read and a specific 

authority is added for § 10.121 as 

follows: 

Authority: 19 U.S.C. 66, 1202 (General 

Note 3(i), Harmonized Tariff Schedule of the 

United States (HTSUS)), 1321, 1481, 1484, 

1498, 1508, 1623, 1624, 3314. 

* * * * * 

Section 10.121 also issued under 19 U.S.C. 

2501. 

* * * * * 

■ 2. Section 10.121(b) is revised to read 

as follows: 

§ 10.121 Visual or auditory materials of an 

educational, scientific, or cultural character. 

* * * * * 

(b) Articles entered under subheading 

9817.00.40, HTSUS, will be released 

from CBP custody prior to submission of 

the document required in paragraph (a) 

of this section only upon the deposit of 

estimated duties with the port director. 

Liquidation of an entry which has been 

released under this procedure will be 

suspended for a period of 314 days from 

the date of entry or until the required 

document is submitted, whichever 

comes first. In the event that 

documentation is not submitted before 

liquidation, the merchandise will be 

classified and liquidated in the ordinary 

course, without regard to subheading 

9817.00.40, HTSUS. 

PART 163—RECORDKEEPING 

■ 3. The authority citation for part 163 

continues to read as follows: 

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

1484, 1508, 1509, 1510, 1624. 

* * * * * 

Appendix to Part 163—[Amended] 

■ 4. Section IV is amended by removing 

the listing ‘‘§ 10.121 Certificate from 

USIA for visual/auditory materials’’ and 

adding in its place the listing ‘‘§ 10.121 

Certificate from the U.S. Department of 

State for visual/auditory materials’’. 

David V. Aguilar, 

Acting Commissioner, U.S. Customs and 

Border Protection. 

Approved: February 16, 2012. 

Timothy E. Skud, 

Deputy Assistant Secretary of the Treasury. 

[FR Doc. 2012–4091 Filed 2–21–12; 8:45 am] 

BILLING CODE 9111–14–P 


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