[Federal Register Volume 66, Number 84 (Tuesday, May 1, 2001)]
[Rules and Regulations]
[Pages 21664-21667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10717]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 132 and 163

[T.D. 01-35]
RIN 1515-AC83


Licenses for Certain Worsted Wool Fabrics Subject to Tariff-Rate 
Quota

AGENCY: Customs Service, Department of the Treasury.

ACTION: Interim rule; solicitation of comments.

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SUMMARY: This document amends the Customs Regulations on an interim 
basis to set forth the form and manner by which an importer establishes 
that a valid license, issued under regulations of the U.S. Department 
of Commerce, is in effect for certain worsted wool fabric that is the 
subject of a tariff-rate quota. Such a license is necessary in order to 
enable the importer to claim the in-quota rate of duty on the worsted 
wool fabric.

DATES: Interim rule effective on May 1, 2001. The interim rule is 
applicable to products that are entered, or withdrawn from warehouse, 
for consumption on or after May 1, 2001. Comments must be received on 
or before July 2, 2001.

[[Page 21665]]


ADDRESSES: Written comments may be addressed to and inspected at the 
Regulations Branch, U.S. Customs Service, 1300 Pennsylvania Avenue, 
NW., 3rd Floor, Washington, DC 20229.

FOR FURTHER INFORMATION CONTACT: Erin Riley, Office of Field 
Operations, (202-927-5395).

SUPPLEMENTARY INFORMATION:

Background

    Under section 501 of the Trade and Development Act of 2000 (the 
``Act'') (Pub. L. 106-200, 114 Stat. 251; May 18, 2000), the Harmonized 
Tariff Schedule of the United States (HTSUS) was amended to establish a 
tariff-rate quota for certain worsted wool fabrics that are entered or 
withdrawn from warehouse for consumption, on or afterJanuary 1, 2001.
    Generally, under a tariff-rate quota, the United States applies one 
tariff rate, known as the in-quota rate, to imports of a product up to 
a particular amount, known as the in-quota quantity, and another, 
higher rate, known as the over-quota rate, to imports of a product in 
excess of the given amount. The preferential, in-quota rate would be 
applicable to the product only to the extent that the aggregate in-
quota quantity of the product that is entered or withdrawn for 
consumption is not exceeded during the quota year.
    To establish the tariff-rate quota for worsted wool fabrics, 
subchapter 2 of Chapter 99, HTSUS, was amended by section 501(a) and 
(b) of the Act to add two new subheadings, 9902.51.11 and 9902.51.12, 
respectively.
    The two new subheadings created by section 501(a) and (b) of the 
Act describe certain fabrics of worsted wool provided for in 
subheadings 5111.11.70, 5111.19.60, 5112.11.20 and 5112.19.90, HTSUS. 
Since the passage of the Act, the President issued Presidential 
Proclamation 7383 (December 1, 2000). The Annex to that Presidential 
Proclamation provided, in pertinent part, for the following HTSUS 
substitutions, effective on or after January 1, 2001:
    Subheading 5112.11.20 is replaced by subheadings 5112.11.30 and 
5112.11.60; and
    Subheading 5112.19.90 is replaced by subheadings 5112.19.60 and 
5112.19.95.
    Further, it is noted that HTSUS subheadings 5111.11.70 and 
5111.19.60 do not provide for worsted wool fabric so fabrics described 
in those subheadings would not meet the description of fabrics that 
could fall under the tariff rate quota.
    Accordingly, the tariff rate quota is applicable to certain fabrics 
of worsted wool provided for in subheadings 5112.11.30, 5112.11.60, 
5112.19.60 and 5112.19.95, HTSUS, that are described in and entered 
under subheadings 9902.51.11 and 9902.51.12, HTSUS.

Need for Tariff-Rate Quota for Worsted Wool Fabrics

    Worsted wool fabrics as described in HTSUS subheadings 5112.11.30, 
5112.11.60, 5112.19.60 and 5112.19.95 are subject to a duty rate of 
28.3% ad valorem. However, articles, such as men's suits, that are made 
(cut and sewn) from this fabric, are dutiable at the lower rate of 
18.8% ad valorem.
    By applying a higher tariff rate to the input product, i.e., the 
worsted wool fabric, than to the more labor-intensive and higher-value-
added apparel items that are made from the fabric, the tariff schedule 
in effect provides an incentive for the importation of the finished 
apparel items at the lower rate of duty, to the competitive detriment 
of U.S. suit-makers. Furthermore, this tariff inversion is compounded 
by the additional reduction in tariffs on men's wool suits that are 
made in Canada or Mexico pursuant to the North American Free Trade 
Agreement Implementation Act (NAFTA) (Pub. L. 103-182; December 8, 
1993). In this latter instance, U.S. suit-makers face greater 
competitive disadvantage due to the increased difference in tariff 
between the worsted wool fabric relative to the free rate of duty on 
imports of such suits under NAFTA.
    Consequently, under the tariff-rate quota adopted in this case, the 
tariff on imported worsted wool fabric entered under HTSUS subheading 
9902.51.11 or 9902.51.12 (which includes certain fabric of worsted wool 
provided for in HTSUS subheadings 5112.11.30, 5112.11.60, 5112.19.60 
and 5112.19.95) is reduced in an effort to limit the above-described 
tariff inversion, and the resultant competitive disadvantage, faced by 
U.S. suit-makers in the purchase of such fabric that is intended for 
use in the manufacture of men's and boys' suits, suit-type jackets and 
trousers.

Application of Tariff-Rate Quota Under HTSUS Subheadings 9902.51.11 and 
9902.51.12

    Specifically, under subheading 9902.51.11, which covers those 
worsted wool fabrics having an average fiber diameter greater than 18.5 
micron, the applicable tariff rate is reduced from the current rate of 
28.3% ad valorem to the rate in effect for worsted wool suit-type 
jackets in HTSUS subheading 6203.31.00 (currently, 18.8% ad valorem); 
and, under subheading 9902.51.12, which covers those worsted wool 
fabrics having an average fiber diameter of 18.5 micron or less, the 
applicable tariff rate is reduced from the current U.S. rate of 28.3% 
to a rate equivalent to the Canadian ``most favored nation'' (MFN) rate 
for imports of such fabric (currently, 6%).
    Both subheadings 9902.51.11 and 9902.51.12 also require that the 
worsted wool fabric be certified by the importer as being suitable for 
use in making suits, suit-type jackets, or trousers.
    This tariff-rate quota for worsted wool fabric is to be in effect 
for calendar years 2001, 2002 and 2003. The quota year is thus the 
calendar year (from January 1-December 31, inclusive) in which the 
subject fabric is entered or withdrawn for consumption.
    The in-quota quantities of worsted wool fabric entered under HTSUS 
subheading 9902.51.11 or 9902.51.12 that are eligible for the reduced 
tariffs for each quota year are limited, respectively, to 2.5 million 
square meter equivalents and 1.5 million square meter equivalents (U.S. 
Notes 15 and 16 to subchapter II of Chapter 99, HTSUS, respectively, as 
amended by section 501(d) of the Act). These in-quota quantities may be 
adjusted on an annual basis as provided in section 504(b) of the Act.

Administration of Tariff-Rate Quota by U.S. Department of Commerce

    In implementing the in-quota limits on the quantities of worsted 
wool fabric that may be entered or withdrawn for consumption subject to 
the reduced tariffs afforded by subheadings 9902.51.11 and 9902.51.12, 
the U.S. Department of Commerce has been delegated the authority under 
section 501(e) of the Act to fairly apportion these in-quota quantities 
among those persons, including firms, corporations and other legal 
entities, in the United States, who cut and sew men's and boys' worsted 
wool suits, suit-type jackets and trousers. This delegation of 
authority to the Department of Commerce was effected by Presidential 
Proclamation No. 7383 (December 1, 2000).
    Accordingly, the Department of Commerce has issued regulations 
setting up a program for the allocation of the aggregate in-quota 
quantity established, respectively, for subheadings 9902.51.11 and 
9902.51.12 (15 CFR 335.1-335.7; see Federal Register dated January 22, 
2001 (66 FR 6459)).
    In pertinent part, under this program, the usage of the quota is 
allocated to U.S. suit-makers by virtue of licenses issued to them by 
the Department of Commerce. Each license is issued for a

[[Page 21666]]

stated quantity of fabric and is required to have a unique control 
number. A suit-maker who has been issued such a license (a licensee) 
may enter worsted wool fabric under subheading 9902.51.11 or 9902.51.12 
at the related in-quota rate of duty, up to the amount authorized in 
the license.
    However, if the importer of record is not the licensee, the 
importer must have received an authorization from the licensee to act 
on its behalf, in order to be entitled to the in-quota rate of duty. 
The licensee may only authorize an importer to import fabric under the 
license on its behalf by making such an authorization in writing or by 
an electronic notice to the importer and by providing a copy of such 
authorization to the Department of Commerce. This authorization must 
include the unique control number of the license; it must specifically 
cover the fabric being imported; and it must be in the possession of 
the importer at the time of filing the entry summary or warehouse 
withdrawal for consumption (Customs Form 7501), or its electronic 
equivalent, in order for the importer to be eligible for the applicable 
in-quota rate of duty.
    A licensee may only withdraw an authorization from an importer by 
notifying the importer in writing or by electronic notice and by 
providing a copy of this withdrawal notification to the Department of 
Commerce. It is the responsibility of the licensee to safeguard the use 
of the license issued. Neither the Department of Commerce nor Customs 
is liable for any unauthorized or improper use of the license.

Corresponding Customs Rulemaking

    In accordance with the rulemaking of the Department of Commerce, 
Customs is issuing this interim rule in order to set forth a new 
Sec. 132.18, Customs Regulations (19 CFR 132.18), that prescribes the 
form and manner by which an importer establishes that a valid license 
exists for worsted wool fabric subject to the tariff-rate quota that is 
entered under HTSUS subheading 9902.51.11 or 9902.51.12. In particular, 
the unique control number assigned to the license must be referenced on 
the entry summary or warehouse withdrawal for consumption, or its 
electronic equivalent, in order to entitle the importer to claim the 
in-quota rate of duty on the worsted wool fabric.
    Section 132.18 also makes clear that by claiming the in-quota rate 
of duty for worsted wool fabric that is entered under HTSUS subheading 
9902.51.11 or 9902.51.12, the importer is thus certifying that the 
worsted wool fabric is suitable for use in making suits, suit-type 
jackets, or trousers, as required under these subheadings.
    In addition, this document revises the Interim (a)(1)(A) List set 
forth as an Appendix to part 163, Customs Regulations (19 CFR part 163, 
Appendix) to make reference to the license or written authorization 
required under new Sec. 132.18. The (a)(1)(A) List provides a listing 
of the records and information required for the entry of merchandise.

Comments

    Before adopting this interim regulation as a final rule, 
consideration will be given to any written comments that are timely 
submitted to Customs. Customs specifically requests comments on the 
clarity of this interim rule and how it may be made easier to 
understand. Comments submitted will be available for public inspection 
in accordance with the Freedom of Information Act (5 U.S.C. 552), 
Sec. 1.4, Treasury Department Regulations (31 CFR 1.4), and 
Sec. 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, U.S. Customs Service, 1300 Pennsylvania Avenue, 
NW., 3rd Floor, Washington, DC.

Inapplicability of Notice and Delayed Effective Date Requirements, 
the Regulatory Flexibility Act, and Executive Order 12866

    Pursuant to the provisions of 5 U.S.C. 553(b)(B), Customs has 
determined that good cause exists for dispensing with prior public 
notice and comment procedures for this interim rule. This interim rule 
implements a preferential tariff benefit in favor of the importing 
public; it provides a necessary and reasonable means for carrying out 
this preferential tariff benefit; and it closely parallels existing 
regulatory provisions that implement similar trade preference programs. 
Also, for these same reasons, there is no need for a delayed effective 
date under 5 U.S.C. 553(d). Because no notice of proposed rulemaking is 
required for interim regulations, the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) do not apply. Nor does this 
document meet the criteria for a ``significant regulatory action'' as 
specified in Executive Order 12866.

Paperwork Reduction Act

    The collections of information involved in this interim rule have 
already been approved by the Office of Management and Budget (OMB) in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) 
and assigned OMB ControlNumbers 1515-0065 (Entry summary and 
continuation sheet) and 1515-0124 (General recordkeeping and record 
production requirements). This rule does not make any material change 
to the existing approved information collections.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number assigned by OMB.

List of Subjects

19 CFR Part 132

    Customs duties and inspection, Quotas, Reporting and recordkeeping 
requirements.

19 CFR Part 163

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

Amendments to the Regulations

    Accordingly, parts 132 and 163, Customs Regulations (19 CFR parts 
132 and 163), are amended as set forth below.

PART 132--QUOTAS

    1. The general authority citation for part 132 continues to read, 
and the specific sectional authority under this part is revised to 
read, as follows:

    Authority:  19 U.S.C. 66, 1202 (General Note 22, Harmonized 
Tariff Schedule of the United States (HTSUS)), 1623, 1624.
    Secs. 132.15 through 132.18 also issued under 19 U.S.C. 1202 
(additional U.S. Note 3 to Chapter 2, HTSUS; subchapter III of 
Chapter 99, HTSUS; additional U.S. Note 8 to Chapter 17, HTSUS; and 
subchapter II of Chapter 99, HTSUS, respectively), 1484, 1508.

    2. Part 132 is amended by adding a new Sec. 132.18 to read as 
follows:


Sec. 132.18  License for certain worsted wool fabric subject to tariff-
rate quota.

    (a) Requirement. For worsted wool fabric that is entered under 
HTSUS subheading 9902.51.11 or 9902.51.12, the importer must possess a 
valid license, or a written authorization from the licensee, pursuant 
to regulations of the U.S. Department of Commerce (15 CFR 335.5), in 
order to claim the in-quota rate of duty on the worsted wool fabric at 
the time it is entered or withdrawn from warehouse for consumption. The 
importer must record the distinct and unique 9-character number for the 
license covering the worsted wool fabric on the entry summary or 
warehouse withdrawal for

[[Page 21667]]

consumption (Customs Form 7501, column 34), or its electronic 
equivalent (see paragraph (c)(1) of this section).
    (b) Importer certification. By entering the worsted wool fabric 
under HTSUS subheading 9902.51.11 or 9902.51.12, the importer thus 
certifies that the worsted wool fabric is suitable for use in making 
suits, suit-type jackets, or trousers, as required under these 
subheadings.
    (c) Validity of license.--(1) License number. To be valid, the 
license, or written authorization issued under the license and 
including its unique control number, must meet the requirements of 15 
CFR 335.5, and with respect to the requirement in 15 CFR 335.5(a) that 
the license have a unique control number, the license must have a 
distinct and unique identifying number consisting of 9 characters 
comprised of the following three elements:
    (i) The first character must be a ``W'';
    (ii) The second and third characters must consist of the last 2 
digits of the calendar year for which the license is issued and during 
which it is in effect; and
    (iii) The final 6 characters represent the distinct and unique 
identifier assigned to the license by the Department of Commerce.
    (2) Use of license. A license covering worsted wool fabric that is 
entered under HTSUS subheading 9902.51.11 or 9902.51.12 is in effect, 
and may be used to obtain the applicable in-quota rate of duty for 
fabric that is entered or withdrawn for consumption, only during the 
specific calendar year (January 1--December 31, inclusive) for which 
the license is issued (see 15 CFR 335.2 and 335.5(b) and (d)).
    (d) Retention and production of license or authorization to 
Customs. The license and any written authorization from the licensee to 
the importer are subject to the recordkeeping requirements of part 163 
of this chapter (19 CFR part 163). Specifically, the license and any 
written authorization must be retained for a period of 5 years in 
accordance with Sec. 163.4(a) of this chapter, and must be made 
available to Customs upon request in accordance with Sec. 163.6(a) of 
this chapter.

PART 163--RECORDKEEPING

    1. 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.


    2. The Appendix to part 163 is amended by adding the following new 
listing under section IV in appropriate numerical order to read as 
follows:

Appendix to Part 163--Interim (a)(1)(A) List

* * * * *
    IV. * * *

Sec. 132.18  License, or written authorization, as applicable, for 
worsted wool fabric subject to tariff-rate quota

* * * * *

Charles W. Winwood,
Acting Commissioner of Customs.
    Approved: April 9, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 01-10717 Filed 4-30-01; 8:45 am]
BILLING CODE 4820-02-P