[Federal Register Volume 74, Number 48 (Friday, March 13, 2009)]
[Proposed Rules]
[Pages 10849-10850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-5481]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Part 10

[USCBP-2008-0105]
RIN 1505-AC07


Cost or Value of Foreign Repairs, Alterations, or Processing

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the U.S. Customs and Border 
Protection (CBP) Regulations to exclude from the dutiable value of 
repairs, alterations, or processing performed abroad on articles 
exported from the United States and returned under subheading 
9802.00.40, 9802.00.50, or 9802.00.60, Harmonized Tariff Schedule of 
the United States (HTSUS), the value of U.S.-origin parts used in the 
foreign repairs, alterations, or processing. The proposed changes would 
provide an incentive to use U.S.-origin parts in the foreign repairs, 
alterations, or processing of articles entered under the above-
referenced HTSUS provisions.

DATES: Comments must be received on or before May 12, 2009.

ADDRESSES: You may submit comments, identified by docket number, by one 
of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2008-0105.
    <bullet> Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, Office of International Trade, U.S. Customs and Border 
Protection, 799 9th Street, NW. (Mint Annex), Washington, DC 20229.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to http://www.regulations.gov, including any 
personal information provided. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov. Submitted comments 
may be inspected during regular business days between the hours of 9 
a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, U.S. Customs 
and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC. 
Arrangements to inspect submitted comments should be made in advance by 
calling Mr. Joseph Clark at (202) 325-0118.

FOR FURTHER INFORMATION CONTACT: Monika Brenner, Regulations and 
Rulings, Office of International Trade, 202-325-0038.

SUPPLEMENTARY INFORMATION: 

Public Participation

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

Background

    Subheadings 9802.00.40 and 9802.00.50, HTSUS, provide a partial 
duty exemption for articles returned to the United States after having 
been exported to be advanced in value or improved in condition by 
repairs or alterations. Subheading 9802.00.40 encompasses articles 
repaired or altered abroad pursuant to a warranty, while subheading 
9802.00.50 encompasses articles repaired or altered abroad other than 
pursuant to a warranty. Articles entitled to classification under these 
tariff provisions are assessed duty based upon the value of the repairs 
or alterations.
    Subheading 9802.00.60, HTSUS, provides a partial duty exemption for 
articles of metal manufactured in the United States that are exported 
for further processing and then returned to the United States for 
further processing. Articles entitled to classification under this 
tariff provision are assessed duty based upon the value of the 
processing performed outside the United States.
    U.S. Note 3(a), subchapter II, Chapter 98, HTSUS, states, in 
pertinent part, that for purposes of subheadings 9802.00.40, 
9802.00.50, and 9802.00.60, HTSUS, the ``value of repairs, alterations, 
processing or other change in condition outside the United States'' is 
the cost to the importer of such change, or if no charge is made, the 
value of such change. Section 10.8 of the CBP regulations (19 CFR 
10.8), which implements subheadings 9802.00.40 and 9802.00.50, provides 
in paragraph (d) that the ``cost or value of repairs or alterations'' 
is limited to the cost or value of the repairs or alterations actually 
performed abroad, which will include all domestic and foreign articles 
furnished for the repairs or alterations, but will not include any of 
the expenses incurred in this country whether by way of engineering 
costs, preparation of plans or specifications, furnishing of tools or 
equipment for doing the repairs or alterations abroad, or otherwise.
    Similarly, Sec.  10.9 of the CBP regulations (19 CFR 10.9(d)), 
which implements subheading 9802.00.60, provides in paragraph (d) that 
the ``cost or value of processing'' is limited to the cost or value of 
the processing actually performed abroad, which will include all 
domestic and foreign articles used in the processing, but will not 
include the exported U.S. metal article or any of the expenses incurred 
in this country whether by way of engineering costs, preparation of 
plans or specifications, furnishing of tools or equipment for doing the 
processing abroad, or otherwise.

[[Page 10850]]

    The words ``which will include all domestic and foreign articles 
furnished for the repairs or alterations'' in Sec.  10.8(d) and the 
words ``which will include all domestic and foreign articles used in 
the processing'' in Sec.  10.9(d) were added to those regulatory 
provisions by T.D. 72-119, which was published in the Federal Register 
on May 2, 1972 (37 FR 8867). Neither T.D. 72-119 nor the notice of 
proposed rulemaking (published in the Federal Register on May 4, 1971 
(36 FR 8312)) which preceded the T.D. included any explanation or 
discussion regarding the above-referenced language added to Sec. Sec.  
10.8(d) and 10.9(d). However, the addition of this language has had the 
effect of requiring the value of U.S.- and foreign-origin parts used in 
the foreign repairs, alterations, or processing to be included in the 
dutiable value of articles entered under subheadings 9802.00.40, 
9802.00.50, and 9802.00.60, HTSUS.

Explanation of Amendments

    As indicated in the above background discussion, there is nothing 
in the underlying statutory provisions (subheadings 9802.00.40, 
9802.00.50, and 9802.00.60 and U.S. Note 3(a), subchapter II, Chapter 
98, HTSUS) that mandates the inclusion of the value of U.S.-origin 
parts in the dutiable value of articles entered under these tariff 
provisions. The policy of requiring the value of U.S.-origin parts to 
be included in dutiable value under these circumstances, as reflected 
in the implementing regulations, clearly provides no incentive to use 
U.S., as opposed to foreign, parts in the foreign repairs, alterations, 
or processing. In order to encourage the use of U.S.-origin parts in 
the foreign repairs, alterations, or processing of articles entered 
under subheading 9802.00.40, 9802.00.50, and 9802.00.60, CBP is 
proposing to amend Sec. Sec.  10.8(d) and 10.9(d) by removing the words 
``domestic and'' in the second sentence of each of these regulatory 
provisions.
    This document also proposes to edit Sec. Sec.  10.8(d) and 10.9(d) 
by replacing the word ``shall'' each place it appears with the word 
``will''.

The Regulatory Flexibility Act and Executive Order 12866

    Pursuant to the provisions of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), it is certified that, if adopted, the proposed 
amendments will not have a significant economic impact on a substantial 
number of small entities. The proposed rule would have the effect of 
excluding the value of U.S.-origin parts from the dutiable value of 
articles entered under subheadings 9802.00.40, 9802.00.50, and 
9802.00.60, HTSUS, thereby providing an incentive to use U.S.-origin 
parts in the foreign repairs, alterations, or processing of articles 
entered under these HTSUS provisions. As a result, it is expected that 
the proposed amendments will have the potential of providing a slight 
economic benefit for U.S. commercial interests. Accordingly, the 
proposed amendments are not subject to the regulatory analysis or other 
requirements of 5 U.S.C. 603 and 604. This document does not meet the 
criteria for a ``significant regulatory action'' as specified in E.O. 
12866.

Signing Authority

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

List of Subjects in 19 CFR Part 10

    Customs duties and inspection, Entry, Imports, Preference Programs, 
Reporting and recordkeeping requirements, Shipments.

Proposed Amendments to the Regulations

    It is proposed to amend part 10 of the CBP Regulations (19 CFR part 
10) 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 as 
follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508, 
1623, 1624. 3314;
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Sec.  10.8  [Amended]

    2. In Sec.  10.8, paragraph (d) is amended by removing the word 
``shall'' each place it appears and adding, in its place, the word 
``will'', and by removing the words ``domestic and'' in the second 
sentence.


Sec.  10.9  [Amended]

    3. In Sec.  10.9, paragraph (d) is amended by removing the word 
``shall'' each place it appears and adding, in its place, the word 
``will'', and by removing the words ``domestic and'' in the second 
sentence.

Jayson P. Ahern,
Acting Commissioner, Customs and Border Protection.
    Approved: March 10, 2009.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. E9-5481 Filed 3-12-09; 8:45 am]
BILLING CODE 9111-14-P