Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Department of Homeland Security

###### Bureau of Customs and Border Protection

###### Department of the Treasury

          - 19 CFR Parts 10, 102, 162, 163, and 178
          - [Docket No. USCBP-2007-0056; CBP Dec. 08-29]
          - RIN 1505-AB76

# AGENCIES:

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

# ACTION:

Final rule.

      ( print page 45352)    

# SUMMARY:

                        This document adopts as a final rule, with some changes, interim amendments to title 19 of the Code of Federal Regulations (“CFR”) which were published in the                         **Federal Register**                         on June 29, 2007, as CBP Dec. 07-51 to implement the preferential tariff treatment and other customs-related provisions of the United States-Morocco Free Trade Agreement signed by the United States and the Kingdom of Morocco.                    

# DATES:

Final Rule effective September 4, 2008.

# FOR FURTHER INFORMATION CONTACT:

*Textile Operational Aspects:*                         Robert Abels, Office of International Trade, (202-863-6503).                    

*Other Operational Aspects:*                         Heather Sykes, Office of International Trade, (202-863-6099).                    

*Legal Aspects:*                         Karen Greene, Office of International Trade, (202-572-8838).                    

# SUPPLEMENTARY INFORMATION:

## Background

On June 15, 2004, the United States and the Kingdom of Morocco (the “Parties”) signed the U.S.-Morocco Free Trade Agreement (“MFTA” or “Agreement”). The stated objectives of the MFTA are to: Encourage expansion and diversification of trade between the Parties; eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties; promote conditions of fair competition in the free trade area; substantially increase investment opportunities in the territories of the Parties; provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory; create effective procedures for the implementation and application of the MFTA, for its joint administration and for the resolution of disputes; and establish a framework for further regional and multilateral cooperation to expand and enhance the benefits of the MFTA.

The provisions of the MFTA were adopted by the United States with the enactment of the United States-Morocco Free Trade Agreement Implementation Act (the “Act”), Public Law 108-302, 118 Stat. 1103 (19 U.S.C. 3805 note), on August 17, 2004. Section 205 of the Act requires that regulations be prescribed as necessary to implement these provisions of the MFTA.

                    On December 22, 2005, the President signed Proclamation 7971 to implement the provisions of the MFTA. The proclamation, which was published in the                     **Federal Register**                     on December 27, 2005 (70 FR 76649), modified the Harmonized Tariff Schedule of the United States (“HTSUS”) as set forth in Annexes I and II of Publication 3721 of the U.S. International Trade Commission. The modifications to the HTSUS included the addition of new General Note 27, incorporating the relevant MFTA rules of origin as set forth in the Act, and the insertion throughout the HTSUS of the preferential duty rates applicable to individual products under the MFTA where the special program indicator “MA” appears in parenthesis in the “Special” rate of duty subcolumn. The modifications to the HTSUS also included a new Subchapter XII to Chapter 99 to provide for temporary tariff rate quotas and applicable safeguards implemented by the MFTA.                

Those customs-related MFTA provisions that require implementation through regulation include certain tariff and non-tariff provisions within Chapter One (Initial Provisions and Definitions), Chapter Two (National Treatment and Market Access for Goods), Chapter Four (Textiles and Apparel), Chapter Five (Rules of Origin), and Chapter Six (Customs Administration).

In Chapter One of the MFTA, certain general definitions in Article 1.3 have been incorporated into the MFTA implementing regulations. In MFTA Chapter Two, Article 2.6 (Goods Re-entered after Repair or Alteration) requires implementation by CBP.

Chapter Four of the MFTA sets forth the measures relating to trade in textile and apparel goods between Morocco and the United States under the MFTA. The provisions within Chapter Four that require regulatory action by CBP are Article 4.3 (Rules of Origin and Related Matters) and Article 4.5 (Definitions).

                    Chapter Five of the MFTA sets forth the rules for determining whether an imported good qualifies as an originating good of the United States or Morocco (MFTA Party) and, as such, is therefore eligible for preferential tariff (duty-free or reduced duty) treatment as specified in the Agreement. Under Article 5.1, originating goods may be grouped in three broad categories: (1) Goods that are wholly the growth, product, or manufacture of one or both of the Parties; (2) goods (other than those covered by the product-specific rules set forth in Annex 4-A or Annex 5-A) that are new or different articles of commerce that have been grown, produced, or manufactured in the territory of one or both of the Parties, and that have a minimum value-content,                     *i.e.*, at least 35 percent of the good's appraised value must be attributed to the cost or value of materials produced in one or both of the Parties plus the direct costs of processing operations performed in one or both of the Parties; and (3) goods that satisfy the product-specific rules set forth in Annex 4-A (textile or apparel goods) or Annex 5-A (certain non-textile or non-apparel goods).                

Article 5.2 explains that the term “new or different article of commerce” means a good that has been substantially transformed from a good or material that is not wholly the growth, product, or manufacture of one or both of the Parties and that has a new name, character, or use distinct from the good or material from which it was transformed. Article 5.3 provides that a good will not be considered to be a new or different article of commerce as the result of undergoing simple combining or packaging operations, or mere dilution with water or another substance that does not materially alter the characteristics of the good. CBP notes that, pursuant to letters of understanding exchanged between the Parties on June 16, 2004, in determining whether a good meets the definition of a “ new or different article of commerce” in § 10.769(i), the United States should be guided by the provisions of part 102 of the CBP regulations (19 CFR part 102).

Article 5.4 provides for the accumulation of production in the territory of one or both of the Parties in determining whether a good qualifies as originating under the MFTA. Articles 5.5 and 5.6 set forth the rules for calculating the value of materials and the direct costs of processing operations, respectively, for purposes of determining whether a good satisfies the 35 percent value-content requirement.

Articles 5.7 through 5.9 consist of additional sub-rules applicable to originating goods, involving retail packaging materials, packing materials for shipment, indirect materials, and transit and transshipment. In addition, Articles 5.10 and 5.11 set forth the procedural requirements that apply under the MFTA, in particular with regard to importer claims for preferential tariff treatment. Article 5.14 provides definitions of certain of the terms used in Chapter Five of the MFTA. The basic rules of origin in Chapter Five of the MFTA are set forth in General Note 27, HTSUS, and in part 102 of title 19 of the Code of Federal Regulations.

Chapter Six sets forth the customs operational provisions related to the implementation and administration of the MFTA.

                    Customs and Border Protection (“CBP”) is responsible for administering the provisions of the MFTA and the Act                           ( print page 45353)                        that relate to the importation of goods into the United States from Morocco. On June 29, 2007, CBP published CBP Dec. 07-51 in the                     **Federal Register**                     (72 FR 35647), setting forth interim amendments to implement the preferential tariff treatment and customs-related provisions of the MFTA. In order to provide transparency and facilitate their use, the majority of the MFTA implementing regulations set forth in CBP Dec. 07-51 were included within new subpart M in part 10 of title 19 of the Code of Federal Regulations (19 CFR subpart M, part 10). However, in those cases in which MFTA implementation was more appropriate in the context of an existing regulatory provision, the MFTA regulatory text was incorporated in an existing part within the CBP regulations.                

Although the interim regulatory amendments were promulgated without prior public notice and comment procedures and took effect on June 29, 2007, CBP Dec. 07-51 provided for the submission of public comments that would be considered before adopting the interim regulations as a final rule. The prescribed public comment period closed on August 28, 2007. No comments were received in response to the solicitation of public comments in CBP Dec. 07-51.

## Changes to the Regulations

The final rulemaking text set forth below incorporates certain changes, as discussed below, which CBP believes are necessary based on further internal review of the interim regulatory text.

### Definition of “New or Different Article of Commerce”

The words “new or different article of commerce” are defined in § 10.769(i) of the interim regulations as a good that has been substantially transformed from a good or material that is not wholly the growth, product, or manufacture of one or both of the Parties and that has a new name, character, or use distinct from the good or material from which it was transformed. This definition has been revised in this final rule document to provide that such an article of commerce “exists when the country of origin of a good which is produced in a Party from foreign materials is determined to be that country under the provisions of §§ 102.1 through 102.21 of” the CBP regulations (19 CFR 102.1 through 102.21). CBP believes that this revised definition is more transparent and is consistent with letters of understanding exchanged between the Parties which provide that, in determining whether a good meets the definition of a “new or different article of commerce,” the United States and Morocco should be guided by the provisions of Part 102 of the CBP regulations.

                    CBP also notes that this revised definition is identical to the definition of the same term set forth in the interim regulations implementing the United States-Bahrain Free Trade Agreement (“BFTA”) (                    *see*                     § 10.809(i), CBP regulations (19 CFR 10.809(i)). The rules of origin set forth in the BFTA (including letters of understanding exchanged between the Parties concerning the interpretation of “new or different article of commerce”) closely parallel those in the MFTA.                

### Other Changes

1. In § 10.761, relating to the scope of Subpart M, the last sentence has been revised to add Part 102 as one of the parts in the CBP regulations that include amendments implementing the MFTA, consistent with the revision to the definition of “new or different article of commerce” in § 10.769(i) discussed above;

2. In § 10.769, the definition of “substantially transformed” (formerly paragraph (o)) has been removed as those words are no longer used in Subpart M as a result of the revision of the definition of “new or different article of commerce” discussed above;

3. In § 10.770, which sets forth the basic MFTA rules of origin, paragraph (a)(2) has been revised to add the words “, as defined in § 10.769(i) of this subpart,” immediately following the words “new or different article of commerce” for clarification purposes;

4. Section 10.785, which concerns verifications conducted in Morocco by Moroccan authorities (at the request of CBP) relating to textile and apparel goods imported into the United States, has been removed in its entirety. CBP believes that the provisions of § 10.785 are unnecessary to the proper implementation of the MFTA as they relate primarily to actions that the Government of Morocco and CBP may take in connection with verifications performed in Morocco. As such, these provisions impose no requirements on U.S. importers of textile or apparel goods or other members of the trade. In addition, CBP notes that the removal of § 10.785 provides consistency between the MFTA implementing regulations and the interim regulations implementing the BFTA, which include no provisions regarding verifications in Bahrain of U.S. imports of textile and apparel products. The verification provisions in the MFTA closely parallel those in the BFTA;

5. As a result of the removal of § 10.785, discussed above, §§ 10.786 through 10.788 of the interim regulatory text have been re-designated as §§ 10.785 through 10.787, respectively; and

6. In § 102.0, relating to the scope of part 102, the third sentence has been revised by adding the words “§ 10.769 of the United States-Morocco Free Trade Agreement regulations and” immediately following the words “new or different article of commerce under”, consistent with the revision of the definition of “new or different article of commerce” discussed above.

## Conclusion

Accordingly, based on the considerations discussed above, CBP believes that the interim regulations published as CBP Dec. 07-51, should be adopted as a final rule with certain changes as discussed above and as set forth below.

## Executive Order 12866

CBP has determined that this document is not a regulation or rule subject to the provisions of Executive Order 12866 of September 30, 1993 (58 FR 51735, October 1993), because it pertains to a foreign affairs function of the United States and implements an international agreement and, therefore, is specifically exempted by section 3(d)(2) of Executive Order 12866.

## Regulatory Flexibility Act

                    CBP Dec. 07-51 was issued as an interim rule rather than a notice of proposed rulemaking because CBP had determined that the interim regulations involve a foreign affairs function of the United States pursuant to § 553(a)(1) of the Administrative Procedure Act. Because no notice of proposed rulemaking was required, the provisions of the Regulatory Flexibility Act, as amended (5 U.S.C. 601*et seq.*), do not apply. Accordingly, this final rule is not subject to the regulatory analysis requirements or other requirements of 5 U.S.C. 603 and 604.                

## Paperwork Reduction Act

The collection of information in this final rule has previously been reviewed and approved by the Office of Management and Budget in accordance with the requirements of the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1651-0117.

                    The collections of information in these regulations are in §§ 10.703 and 10.704. This information is required in connection with claims for preferential tariff treatment and for the purpose of the exercise of other rights under the                           ( print page 45354)                        MFTA and the Act and will be used by CBP to determine eligibility for a tariff preference or other rights or benefits under the MFTA and the Act. The likely respondents are business organizations including importers, exporters, and manufacturers.                

The estimated average annual burden associated with the collection of information in this final rule is 0.2 hours per respondent or record keeper. Under the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.

## Signing Authority

This document is being issued in accordance with § 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 customs revenue functions.

# List of Subjects

### 19 CFR Part 10

      - Alterations
      - Bonds
      - Customs duties and inspection
      - Exports
      - Imports
      - Preference programs
      - Repairs
      - Reporting and recordkeeping requirements
      - Trade agreements

### 19 CFR Part 102

      - Customs duties and inspections
      - Imports
      - Reporting and recordkeeping requirements
      - Rules of origin
      - Trade agreements

### 19 CFR Part 162

      - Administrative practice and procedure
      - Customs duties and inspection
      - Penalties
      - Trade agreements

### 19 CFR Part 163

      - Administrative practice and procedure
      - Customs duties and inspection
      - Export
      - Import
      - Reporting and recordkeeping requirements
      - Trade agreements

### 19 CFR Part 178

      - Administrative practice and procedure
      - Exports
      - Imports
      - Reporting and recordkeeping requirements

## Amendments to the CBP Regulations

Accordingly, the interim rule amending parts 10, 162, 163, and 178 of the CBP regulations (19 CFR parts 10, 162, 163, and 178), which was published at 72 FR 35647 on June 29, 2007, is adopted as a final rule with certain changes as discussed above and as set forth below.

# PART 10—ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC.

1. The general authority citation for Part 10 and the specific authority for Subpart M continue 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;

* * * * *

Sections 10.761 through 10.787 also issued under Public Law 108-302, 118 Stat. 1103 (19 U.S.C. 3805 note).

* * * * *

2. Section 10.761 is amended by revising the last sentence to read as follows: 

§ 10.761 

* * * Additional provisions implementing certain aspects of the MFTA and the Act are contained in Parts 102, 162, and 163 of this chapter.

3. Section 10.769 is amended by revising paragraph (i) and removing paragraph (o). Revised paragraph (i) reads as follows: 

§ 10.769 

* * * * *

                            (i)                             *New or different article of commerce*. A “new or different article of commerce” exists when the country of origin of a good which is produced in a Party from foreign materials is determined to be that country under the provisions of §§ 102.1 through 102.21 of this chapter;                        

* * * * *

§ 10.770 

4. Section 10.770 is amended by adding the words “, as defined in § 10.769(i) of this subpart,” immediately following the words “new or different article of commerce” in paragraph (a)(2). 

§ 10.785 

5. Section 10.785 is removed. 

§§ 10.786 through 10.788 

6. Sections 10.786 through 10.788 are redesignated as §§ 10.785 through 10.787, respectively. 

# PART 102—RULES OF ORIGIN

7. The authority citation for part 102 continues to read as follows: 

Authority:19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624, 3314, 3592.

8. Section 102.0 is amended by revising the third sentence to read as follows: 

§ 102.0 

* * * The rules set forth in §§ 102.1 through 102.21 of this part will also apply for purposes of determining whether an imported good is a new or different article of commerce under § 10.769 of the United States-Morocco Free Trade Agreement regulations and § 10.809 of the United States-Bahrain Free Trade Agreement regulations.* * *

W. Ralph Basham,

Commissioner, U.S. Customs and Border Protection.

Approved: July 31, 2008.

Timothy E. Skud,

Deputy Assistant Secretary of the Treasury.

[FR Doc. E8-17968 Filed 8-4-08; 8:45 am]

BILLING CODE 9111-14-P