[Federal Register Volume 73, Number 163 (Thursday, August 21, 2008)]
[Proposed Rules]
[Pages 49371-49373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19411]


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DEPARTMENT OF COMMERCE

International Trade Administration

DEPARTMENT OF THE INTERIOR

15 CFR Part 303

[Docket No. 080716841-8842-01]
RIN 0625-AA80


Changes in the Insular Possessions Watch, Watch Movement and 
Jewelry Programs 2008

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.

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SUMMARY: The Departments of Commerce and the Interior (the Departments) 
propose to amend their regulations governing watch duty-exemption 
allocations and 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 the regulations by updating the formula 
that is used to calculate the combined amount of individual and family 
health and life insurance per year that is creditable towards the duty 
refund benefit.

DATES: Written comments must be received on or before September 22, 
2008.

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 No. 97-446 (96 Stat. 2331) (1983), 
as amended by section 602 of Public Law No. 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' duty-exemption 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 duty-free shipments and creditable wages paid during the 
previous calendar year.
    Public Law 106-36 (113 Stat. 127) (1999) authorizes the issuance of 
a duty-refund 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

[[Page 49372]]

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 authorizes the 
extension of 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.
    Under the Department of Commerce's regulations, the combined 
creditable amount of individual health and life insurance per year may 
not exceed 100 percent of the ``weighted average'' yearly individual 
federal employee health insurance, and the combined creditable amount 
of family health and life insurance per year may not exceed 120 percent 
of the ``weighted average'' yearly family federal employee health 
insurance. The Department of Commerce's regulations combine the 
creditable amount of health and life insurance into one benefit 
calculation because most program companies purchase health and life 
insurance together in one plan or payment.
    In March 2008, the Department of Commerce received a letter from 
the U.S. Virgin Islands Watch and Jewelry Manufacturers Association 
(V.I.M.A) requesting that we reexamine the methodology for determining 
the health benefit portion of the production incentive certificate 
(``PIC''). The V.I.M.A. stated that its members' health insurance costs 
have outpaced the current formula due to factors including the age of 
the staff and difficulty in getting local medical providers to accept 
the Virgin Islands card health plan. According to the V.I.M.A, the 
health insurance costs of two producers currently exceed the maximum 
allowable reimbursement, even though the health benefit plans remain 
unchanged.
    During the Departments' audit in February 2008, Department 
officials discovered there had been substantial increases in combined 
health and life insurance costs for some program producers and that 
creditable limits had been exceeded for a few employees within two 
companies. One company exceeded the individual creditable limit and the 
other company exceeded the family creditable limit. In light of the 
upward trend in the costs of health and life insurance within the 
industry generally, as discussed above, we have reevaluated the 
creditable limits. Accordingly, we are proposing an increase in the 
formula for determining creditable health and life insurance benefits.

Proposed Amendments

    We propose to amend Sec.  303.2(a)(13)(ii), Sec.  
303.2(a)(13)(ii)(A), Sec.  303.2(a)(14)(ii), Sec.  303.2(a)(14)(ii)(A), 
Sec.  303.16(a)(9)(ii), Sec.  303.16(a)(9)(ii)(A), Sec.  
303.16(a)(10)(ii), and Sec.  303.2(a)(10)(ii)(A) by increasing the 
percentage used to calculate the combined amount of individual and 
family health and life insurance per year that is creditable towards 
the duty refund benefit for watch and jewelry producers. Currently, the 
combined creditable amount of individual health and life insurance per 
year may not exceed 100 percent of the ``weighted average'' yearly 
individual federal employee health insurance, and the combined 
creditable amount of family health and life insurance per year may not 
exceed 120 percent of the ``weighted average'' yearly family federal 
employee health insurance. Under the proposed rule, the combined 
creditable amount of individual health and life insurance per year 
would not exceed 130 percent of the ``weighted average'' yearly 
individual federal employee health insurance, and the combined 
creditable amount of family health and life insurance per year would 
not exceed 150 percent of the ``weighted average'' yearly family 
federal employee health insurance.

Classification

    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, 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.
    There are currently five companies participating in the insular 
watch and jewelry programs. The updating of the formula that is used to 
calculate the combined amount of individual and family health and life 
insurance per year that is creditable towards the duty refund benefit 
is being proposed to compensate for the increase in the cost of health 
insurance in the U.S. Virgin Islands, where all five of the watch and 
jewelry producers are located. Adoption of this rule would benefit 
producers by increasing the maximum amount of combined health and life 
insurance that would be eligible for the duty refund benefit. Under the 
proposed rule, the combined annual creditable amount of individual 
health and life insurance for calendar year 2008 would be increased by 
$1,571 and the combined annual creditable amount of family health and 
life insurance for calendar year 2008 would be increased by $3,567. 
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

[[Page 49373]]

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 record keeping 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.


Sec.  303.2  [Amended]

    2. Section 303.2 is amended as follows:
    A. Remove ``100'' from the first sentence in paragraph (a)(13)(ii) 
and add ``130'' in its place.
    B. Remove ``120'' from the first sentence in paragraph 
(a)(13)(ii)(A) and add ``150'' in its place.
    C. Remove ``100'' from the first sentence in paragraph (a)(14)(ii) 
and add ``130'' in its place.
    D. Remove ``120'' from the first sentence in paragraph 
(a)(14)(ii)(A) and add ``150'' in its place.


Sec.  303.16  [Amended]

    3. Section 303.16 is amended as follows:
    A. Remove ``100'' from the first sentence in paragraph (a)(9)(ii) 
and add ``130'' in its place.
    B. Remove ``120'' from the first sentence in paragraph 
(a)(9)(ii)(A) and add ``150'' in its place.
    C. Remove ``100'' from the first sentence in paragraph (a)(10)(ii) 
and add ``130'' in its place.
    D. Remove ``120'' from the first sentence in paragraph 
(a)(10)(ii)(A) and add ``150'' in its place.

    Dated: August 13, 2008.
David Spooner,
Assistant Secretary for Import Administration, Department of Commerce.
    Dated: August 15, 2008.
Nikolao Pula,
Director, Office of Insular Affairs, Department of the Interior.
[FR Doc. E8-19411 Filed 8-20-08; 8:45 am]
BILLING CODE 3510-DS-P, 4310-93-P