Haitian Hemispheric Opportunity Through Partnership Encouragement Act of 2006, 34365-34376 [07-3101]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• DEPARTMENT OF THE TREASURY
• Bureau of Customs and Border Protection
• Department of Treasury

[Federal Register Volume 72, Number 120 (Friday, June 22, 2007)]
[Rules and Regulations]
[Pages 34365-34376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3101]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 10, 163, and 178

[USCBP-2007-0062]
[CBP Dec. 07-43]
RIN 1505-AB82


Haitian Hemispheric Opportunity Through Partnership Encouragement 
Act of 2006

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

ACTION: Interim regulations; solicitation of comments.

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SUMMARY: This document amends the U.S. Customs and Border Protection 
(``CBP'') regulations on an interim basis to implement the duty-free 
provisions of the Haitian Hemispheric Opportunity through Partnership 
Encouragement (``HOPE'') Act of 2006.

DATES: Interim rule effective June 22, 2007; Comments must be received 
by August 21, 2007.

ADDRESSES: You may submit comments, identified by docket number, by one 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2007-0062.
     Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, U.S. Customs and Border Protection, 1300 Pennsylvania 
Avenue, 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 https://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

[[Page 34366]]

SUPPLEMENTARY INFORMATION section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov. Submitted comments 
may also 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, 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) 572-8768.

FOR FURTHER INFORMATION CONTACT: 
    Textile Operational Aspects: Robert Abels, Office of International 
Trade, (202) 344-1959. Non-textile Operational Aspects: Lori 
Whitehurst, Office of International Trade, (202) 344-2722.
    Legal Aspects: Cynthia Reese, Office of International Trade, (202) 
572-8812, or Alexandra Kalb, Office of International Trade, (202) 572-
8791.

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 
interim rule. CBP also invites comments that relate to the economic, 
environmental, or federalism effects that might result from this 
interim rule. Comments that will provide the most assistance to CBP in 
developing these regulations will reference a specific portion of the 
interim rule, explain the reason for any recommended change, and 
include data, information, or authority that supports such recommended 
change. See ADDRESSES above for information on how to submit comments.

Background

    On December 20, 2006, the President signed into law the Tax Relief 
and Health Care Act of 2006 (``the Act''), Public Law 109-432, 120 
Stat. 2922. Title V of the Act concerns the extension of certain trade 
benefits to Haiti and is referred to in the Act as the ``Haitian 
Hemispheric Opportunity through Partnership Encouragement Act of 2006'' 
(the ``HOPE Act'').
    Section 5002 of the Act amended the Caribbean Basin Economic 
Recovery Act (the CBERA, also referred to the Caribbean Basin 
Initiative, or CBI, statute codified at 19 U.S.C. 2701-2707) by adding 
a new Sec.  213A, entitled ``Special Rules for Haiti'' and codified at 
19 U.S.C. 2703A, to authorize the President to extend additional trade 
benefits to Haiti for a five-year period (ending on December 19, 2011) 
if the President determines that the country meets certain specified 
eligibility conditions and requirements. New Sec.  213A of the CBERA 
consists of six principal subsections, each of which is summarized 
below.
    Subsection (a) of Sec.  213A of the CBERA sets forth definitions of 
several terms used in Sec.  213A, including ``applicable one-year 
period,'' which is used in connection with apparel articles described 
in paragraph (b)(2) of Sec.  213A, and ``enter; entry''.
    Subsection (b) of Sec.  213A specifies the conditions and 
requirements that must be met for certain apparel articles from Haiti 
to receive duty-free treatment. The apparel articles that may receive 
duty-free treatment under this subsection if they are imported directly 
from Haiti are as follows:
    1. Apparel articles of a producer or entity controlling production 
that are wholly assembled or knit-to-shape in Haiti from any 
combination of fabrics, fabric components, components knit-to-shape, 
and yarns, provided a specified value-content requirement is met during 
an applicable one-year period, either on the basis of individual 
entries or an annual aggregation calculation, and subject to the 
application of annual quantitative limits expressed in square meter 
equivalents for each of the five applicable one-year periods 
[paragraphs (1) and (2) of subsection (b)];
    2. Apparel articles classifiable in Chapter 62 of the Harmonized 
Tariff Schedule of the United States (``HTSUS'') (certain woven apparel 
articles), other than articles classifiable in subheading 6212.10 of 
the HTSUS (brassieres), as in effect on December 20, 2006, that are 
wholly assembled or knit-to-shape in Haiti but do not qualify for duty-
free treatment under paragraphs (1) and (2) of subsection (b) because 
they fail to meet the applicable value-content requirement, with duty-
free treatment for such articles ending on December 19, 2009, and 
subject to the application of annual quantitative limits in addition to 
the quantitative limits that apply to apparel articles under paragraphs 
(1) and (2) of subsection (b) [paragraph (4) of subsection (b)]; and
    3. Articles classifiable in heading 6212.10 of the HTSUS 
(brassieres) that are both cut and sewn or otherwise assembled in Haiti 
or the United States, or both, without regard to the source of the 
fabric or components from which the articles are made, subject to the 
application of the quantitative limits that apply to apparel articles 
under paragraphs (1) and (2) of subsection (b) [paragraph (5) of 
subsection (b)].
    Paragraph (3) of subsection (b) sets forth the quantitative limits 
that apply during each of the five applicable one-year periods with 
respect to apparel articles of a producer or entity controlling 
production under paragraphs (1) and (2) of subsection (b).
    Subsection (c) of Sec.  213A of the CBERA provides for the duty-
free treatment of any article classifiable in subheading 8544.30.00 of 
the HTSUS (wiring sets), as in effect on December 20, 2006, that is the 
product or manufacture of Haiti and is imported directly from Haiti 
into the customs territory of the United States, provided a specified 
value-content requirement is met.
    Subsection (d) of new Sec.  213A sets forth certain eligibility 
requirements that Haiti must meet as a prerequisite for articles to 
receive duty-free treatment under this section. This subsection 
requires that the President determine whether Haiti meets these 
requirements within 90 days after the date of enactment of the HOPE Act 
(or by March 20, 2007).
    Subsection (e) of Sec.  213A provides that preferential tariff 
treatment for apparel articles under this section shall not apply 
unless the President certifies to Congress that Haiti is meeting 
certain conditions, such as the adoption of an effective visa system, 
that are primarily intended to avoid illegal transshipment situations.
    Subsection (f) of Sec.  213A provides that the President shall 
issue regulations to carry out this section not later than 180 days 
after the date of enactment of the HOPE Act. As the HOPE Act was signed 
on December 20, 2006, implementing regulations are due by June 20, 
2007. Section 213A(f) further provides that the President shall consult 
with the Committee on Ways and Means of the House of Representatives 
and the Committee on Finance of the Senate in preparing such 
regulations. CBP has consulted with the Committee on Ways and Means and 
the Committee on Finance regarding these implementing regulations.
    On March 19, 2007, the President signed Proclamation 8114 to 
implement the provisions of the HOPE Act, among other purposes. The 
Proclamation, which was published in the Federal Register on March 22, 
2007 (72 FR 13655), included determinations by the President that Haiti 
(1) Meets the eligibility requirements set forth in Sec.  213A(d) of 
the CBERA and (2) is meeting the conditions set forth in Sec.  213A(e). 
The Proclamation also modified subchapter XX of Chapter 98 of the 
Harmonized Tariff Schedule of the United States (``HTSUS'') as set 
forth in Annex 1 to the Proclamation. The

[[Page 34367]]

modifications to the HTSUS included the creation of new subheadings 
encompassing the various articles that are eligible for duty-free 
treatment under the HOPE Act.
    The HOPE Act provisions that require implementation through 
regulation include subsections (a) through (c) of Sec.  213A of the 
CBERA. In order to provide transparency and facilitate their use, the 
implementing regulations set forth in this interim rulemaking have been 
included within new Subpart O in Part 10 of the CBP regulations (Title 
19 Code of Federal Regulations). The regulatory amendments are 
discussed below in the order in which they appear in this document.

Discussion of Amendments

Part 10, Subpart O

    Section 10.841 outlines the statutory context for Subpart O, Part 
10 and is self-explanatory.
    Section 10.842 sets forth definitions of various terms used in 
Subpart O, Part 10. Although certain of the definitions in this section 
are based on definitions contained in the HOPE Act, other definitions 
have also been included to clarify the application of the regulatory 
texts. Additional definitions that apply in a more limited Subpart O, 
Part 10 context are set forth elsewhere with the substantive provisions 
to which they relate.
    Section 10.843 identifies the articles to which duty-free treatment 
applies under new Sec.  213A of the CBERA and includes any required 
production standards.
    Section 10.844 sets forth the basic conditions and requirements 
that apply for purposes of meeting the applicable value-content 
requirements for apparel articles of a producer or entity controlling 
production, as described in paragraph (b)(2) of Sec.  213A, and for 
wiring sets, as described in subsection (c) of the statute.
    Paragraph (a)(1) of Sec.  10.844, which is based on subparagraphs 
(b)(2)(A) and (b)(2)(E)(i) of Sec.  213A, concerns the value-content 
requirement for apparel articles, as described in paragraph (b)(2) of 
Sec.  213A, of a producer or entity controlling production. Paragraph 
(a)(1) specifies that, except as provided in Sec.  10.844(a)(2), 
individual entries of apparel articles will be eligible for duty-free 
treatment only if those meet the applicable value-content percentage 
for that year. The applicable percentage is 50 percent for each of the 
first three applicable one-year periods (December 20, 2006, through 
December 19, 2007, December 20, 2007, through December 19, 2008, and 
December 20, 2008, through December 19, 2009), 55 percent for the 
fourth applicable one-year period (December 20, 2009, through December 
19, 2010), and 60 percent for the fifth applicable one-year period 
(December 20, 2010, through December 19, 2011). The value-content 
requirement is based upon a comparison between the sum of certain 
material and direct processing costs incurred in Haiti and one or more 
eligible countries (as specified in Sec.  10.844(c)) and the declared 
customs value (appraised value) of the article.
    Paragraph (a)(2) of Sec.  10.844, which reflects paragraph 
(b)(2)(D) of Sec.  213A, provides that the applicable value-content 
requirement for apparel articles of a producer or entity controlling 
production that are entered during an applicable one-year period may 
also be met on the basis of an annual aggregation calculation (as an 
alternative to meeting this requirement on an individual entry basis). 
Paragraph (a)(2) also reflects the statute's requirement that certain 
entries of apparel articles be excluded from the annual aggregation 
calculation, unless, in certain instances, the producer or entity 
controlling production elects to include those entries.
    Paragraph (a)(3) of Sec.  10.844 provides that the annual 
aggregation method elected to be used by a producer or entity 
controlling production for purposes of meeting the applicable value-
content requirement must be consistently applied to all apparel 
articles of that producer or entity controlling production that are 
certified as being subject to the aggregation method during that 
applicable one-year period. This paragraph further provides that in the 
absence of an election by the producer or entity controlling production 
to use the annual aggregation method in an applicable one-year period, 
all apparel articles of the producer or entity controlling production 
must be entered under the individual entry method during that 
applicable one-year period.
    Paragraph (a)(4) of Sec.  10.844, which is based in part on 
paragraph (b)(2)(F)(ii) of Sec.  213A, sets forth the circumstances 
under which CBP will deny duty-free treatment to apparel articles of a 
producer or entity controlling production when the requirements for 
such treatment are not met in an applicable one-year period. Paragraph 
(a)(4) also provides for the application of an increased value-content 
percentage requirement as a consequence of apparel articles of a 
producer or entity controlling production for which a duty-free claim 
has been made failing to meet the requirements for duty-free treatment 
in an applicable one-year period, or of a producer or entity 
controlling production entering into the duty-free program after the 
initial applicable one-year period and electing to use the annual 
aggregation method. In situations in which apparel articles are 
required to meet the increased value-content percentage in an 
applicable one-year period, paragraph (a)(4) provides that the importer 
of such articles must notify CBP that the increased percentage has been 
met by submitting a declaration of compliance.
    Paragraph (a)(5) of Sec.  10.844 implements paragraph (b)(2)(G) of 
Sec.  213A relating to the inclusion of the cost of certain fabrics or 
yarns in short supply in the value-content requirement for apparel 
articles of a producer or entity controlling production.
    Paragraph (b) of Sec.  10.844, which is derived from paragraph (c) 
of Sec.  213A, sets forth the value-content requirement that must be 
met for wiring sets from Haiti to receive duty-free treatment.
    Paragraph (c) of Sec.  10.844 reflects the definition of 
``countries'' found in paragraph (b)(2)(C) of Sec.  213A, as used in 
the value-content requirements for apparel articles of a producer or 
entity controlling production and wiring sets.
    Paragraph (d) of Sec.  10.844 concerns the cost or value of 
materials that may be applied toward meeting the value-content 
requirements for apparel articles of a producer or entity controlling 
production and for wiring sets (see paragraphs (b)(2)(A)(i) and 
(c)(1)(A) of Sec.  213A). Paragraph (d)(1) defines the term ``materials 
produced in Haiti or one or more eligible countries'', as used in the 
value-content requirement for apparel articles of a producer or entity 
controlling production, based upon the rules for determining the 
country of origin of apparel articles set forth in Sec.  102.21 of the 
CBP regulations (19 CFR 102.21). The same term, as it is used in the 
value-content requirement for wiring sets, is defined in paragraph (d) 
in a manner similar to the approach taken in Sec.  10.196(a) of CBP's 
CBERA regulations.
    Paragraph (d)(2) of Sec.  10.844 relates to the calculation of the 
cost or value of materials for purposes of the value-content 
requirements for apparel articles and wiring sets. Paragraph (d)(2)(i), 
which closely parallels Sec.  10.196(c) of CBP's CBERA regulations, 
sets forth the cost elements to be included in the calculation of the 
cost or value of materials. Paragraph (d)(2)(ii), which relates only to 
the value-content requirement for apparel articles, implements 
paragraphs (b)(2)(B) and (b)(2)(D)(iii) of Sec.  213A, by requiring a 
deduction for the cost or value of any

[[Page 34368]]

``foreign materials,'' as defined in Sec.  10.842(h) of these interim 
regulations and paragraph (b)(2)(E)(ii) of Sec.  213A.
    Paragraph (e) of Sec.  10.844 implements paragraph (b)(2)(A)(ii) of 
Sec.  213A by defining ``direct costs of processing operations'' as set 
forth in 19 U.S.C. 2703(a)(3).
    Section 10.845 reflects paragraph (b)(2)(F)(iii) of Sec.  213A 
relating to the requirements and procedures that apply for purposes of 
obtaining retroactive application of duty-free treatment for apparel 
articles of a producer or entity controlling production that (1) Are 
ineligible for duty-free treatment during an applicable one-year period 
because the requirements for such treatment were not met during the 
preceding period, and (2) satisfy the increased value-content 
percentage in that applicable one-year period.
    Section 10.846 defines the term ``imported directly'' based upon 
the manner in which the same term is defined in Sec.  10.193 of CBP's 
CBERA regulations.
    Section 10.847 sets forth the procedure for claiming duty-free 
treatment at the time of entry for articles eligible for such treatment 
under the HOPE Act. This section also provides that if an importer has 
reason to believe that a duty-free claim is incorrect, the importer 
must promptly correct the claim and pay any duties owing.
    Section 10.848 provides that an importer claiming duty-free 
treatment for apparel articles, as described in paragraph (b)(2) of 
Sec.  213A, that are entered in the aggregate during an applicable one-
year period must submit to CBP a declaration of compliance with the 
applicable value-content requirement within 30 days following the end 
of the applicable one-year period. Section 10.848 also sets forth the 
consequences of failing to comply with this requirement, and describes 
the information that the declaration of compliance must include.
    Section 10.849 sets forth certain importer obligations regarding 
the truthfulness of information and documents submitted in support of a 
claim for duty-free treatment under Subpart O of Part 10, CBP 
regulations. This section also states that an importer who makes a 
claim for duty-free treatment is deemed to have certified that the 
article qualifies for such treatment.
    Section 10.850 provides that a claim for duty-free treatment under 
Subpart O of Part 10, CBP regulations, will be subject to such 
verification as CBP deems necessary. This section also sets forth the 
circumstances under which CBP may deny a claim based on the results of 
the verification. Finally, this section specifies the types of records, 
documents, and other information that CBP may review when verifying the 
statements and information included on a declaration of compliance.

Part 163

    The Appendix to Part 163 of the CBP regulations (19 CFR Part 163), 
which sets forth a list of records and information required for the 
entry of merchandise (commonly known as the (a)(1)(A) list) has been 
modified to include the HOPE Act declaration of compliance.

Part 178

    Part 178 sets forth the control numbers assigned to information 
collections of CBP by the Office of Management and Budget, pursuant to 
the Paperwork Reduction Act of 1995, Pub. L. 104-13. The list contained 
in Sec.  178.2 is amended to add the information collections used by 
CBP to determine eligibility of articles for duty-free treatment under 
the HOPE Act.

Inapplicability of Notice and Delayed Effective Date Requirements

    Under Sec.  553 of the Administrative Procedure Act (``APA'') (5 
U.S.C. 553), agencies amending their regulations generally are required 
to publish a notice of proposed rulemaking in the Federal Register that 
solicits public comment on the proposed amendments, consider public 
comments in deciding on the final content of the final amendments, and 
publish the final amendments at least 30 days prior to their effective 
date. However, Sec.  553(b)(B) of the APA provides that notice and 
public procedure are not required when an agency for good cause finds 
them impracticable, unnecessary, or contrary to the public interest. 
CBP has determined that providing prior notice and public procedure for 
these interim regulations would be impracticable, unnecessary, and 
contrary to the public interest for the reasons explained below.
    Pursuant to Annex 1 of Presidential Proclamation 8114 dated March 
19, 2007 (72 FR 13655), the HOPE Act tariff benefits became effective 
for wiring units from Haiti that were entered, or withdrawn from 
warehouse for consumption, on or after January 4, 2007, and for certain 
apparel articles from Haiti that were entered, or withdrawn from 
warehouse for consumption, on or after March 20, 2007. An important 
function of these regulations is to assist importers in determining 
whether their merchandise satisfies the applicable production standards 
and complex value-content requirements that must be met to qualify for 
preferential tariff treatment under the HOPE Act. Given the Act's 
complicated statutory scheme, this rulemaking assists in clarifying the 
applicable rules by providing definitions of numerous terms that are 
not defined in the statute and by providing illustrative examples 
regarding certain of these rules. In addition, these amendments set 
forth the procedures that must be followed by importers to claim the 
benefits of tariff preference under the HOPE Act, including the 
specific information that must be submitted in connection with those 
claims, to ensure the timely and accurate processing of their claims by 
CBP as well as to protect the revenue against false claims. The interim 
regulations also inform importers of the types of records and 
information that may be the subject of a CBP verification.
    As previously stated in the Background portion of this document, 
subsection (f) of Sec.  213A of the CBERA (as added by Sec.  5002 of 
the Act) provides that the President shall issue regulations to carry 
out this section not later than 180 days after the date of enactment of 
the HOPE Act (December 20, 2006). The good cause exception set forth in 
Sec.  553(b)(B) of the APA applies when there is a statutorily imposed 
deadline combined with other relevant factors such as a complicated 
statutory scheme or a compelling need for rapid implementation of the 
regulation. In this case the statutorily imposed 180 day deadline in 
the HOPE Act, coupled with the complex statutory framework, constitute 
a recognized basis to invoke the good cause exception. In addition, CBP 
is soliciting comments in this interim rule and will consider all 
comments it receives before issuing a final rule.
    Finally, Sec. Sec.  553(d)(3) of the APA permit agencies to make a 
rule effective less than 30 days after publication if the rule grants 
or recognizes an exemption or relieves a restriction, or when the 
agency finds that good cause exists for dispensing with a delayed 
effective date. As these regulations implement the tariff preference 
provisions of the HOPE Act and thus grant an exemption from normal duty 
rates for qualifying articles, a delayed effective date is not 
required. Moreover, pursuant to Sec.  553(d)(3) of the APA, for the 
reasons described above, CBP finds that good cause exists to make these 
regulations effective without a delayed effective date.

[[Page 34369]]

Executive Order 12866 and Regulatory Flexibility Act

    This document does not meet the criteria for a ``significant 
regulatory action'' as specified in Executive Order 12866 of September 
30, 1993 (58 FR 51735, October 1993). In addition, because a notice of 
proposed rulemaking is not required under section 553(b) of the APA for 
the reasons described above, CBP notes that the provisions of the 
Regulatory Flexibility Act, as amended (5 U.S.C. 601 et seq.), do not 
apply to this rulemaking. Accordingly, CBP also notes that this interim 
rule is not subject to the regulatory analysis requirements or other 
requirements of 5 U.S.C. 603 and 604.

Paperwork Reduction Act

    These regulations are being issued without prior notice and public 
procedure pursuant to the APA, as described above. For this reason, the 
collections of information contained in these regulations have been 
reviewed and, pending receipt and evaluation of public comments, 
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 1651-0129.
    The collections of information in these regulations are in Sec.  
10.847 (claim for duty-free treatment) and Sec. Sec.  10.844(a)(4)(v) 
and 10.848 (declaration of compliance). This information is required in 
connection with certain claims for duty-free treatment under the HOPE 
Act and will be used by CBP to determine eligibility for preferential 
tariff treatment under that Act. The likely respondents are business 
organizations including importers, exporters and manufacturers.
    Estimated total annual reporting burden: 1,333 hours.
    Estimated average annual burden per respondent: 39.2 hours.
    Estimated number of respondents: 34.
    Estimated annual frequency of responses: 117.6.
    Comments concerning the collections of information and the accuracy 
of the estimated annual burden, and suggestions for reducing that 
burden, should be directed to the Office of Management and Budget, 
Attention: Desk Officer for the Department of the Treasury, Office of 
Information and Regulatory Affairs, Washington, DC 20503. A copy should 
also be sent to the Trade and Commercial Regulations Branch, 
Regulations and Rulings, U.S. Customs and Border Protection, 1300 
Pennsylvania Avenue, NW. (Mint Annex), Washington, DC 20229.

Signing Authority

    This document is being issued 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 customs revenue functions.

List of Subjects

19 CFR Part 10

    Customs duties and inspection, Imports, Preference programs, 
Reporting and recordkeeping requirements.

19 CFR Part 163

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

19 CFR Part 178

    Administrative practice and procedure, Collections of information, 
Imports, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, chapter I of title 19, Code of Federal Regulations (19 CFR 
chapter I), is amended as set forth below.

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

0
1. The general authority citation for Part 10 continues to read, and 
the specific authority for new Subpart O is added, 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 10.841 through 10.850 also issued under 19 U.S.C. 
2703A.

0
2. Subparts K through N to part 10 are added and reserved.

Subparts K through N--[Added and Reserved]

0
3. Part 10, CBP regulations, is amended by adding a new Subpart O to 
read as follows:
Subpart O--Haitian Hemispheric Opportunity through Partnership 
Encouragement Act of 2006
Sec.
10.841 Applicability.
10.842 Definitions.
10.843 Articles eligible for duty-free treatment.
10.844 Value-content requirement.
10.845 Retroactive application of duty-free treatment for certain 
apparel articles.
10.846 Imported directly.
10.847 Filing of claim for duty-free treatment.
10.848 Declaration of compliance.
10.849 Importer obligations.
10.850 Verification of claim for duty-free treatment.

Subpart O--Haitian Hemispheric Opportunity Through Partnership 
Encouragement Act of 2006


Sec.  10.841  Applicability.

    Title V of Public Law 109-432, entitled the Haitian Hemispheric 
Opportunity through Partnership Encouragement Act of 2006 (HOPE Act), 
amended the Caribbean Basin Economic Recovery Act (the CBERA, 19 U.S.C. 
2701-2707) by adding a new section 213A (19 U.S.C. 2703A) to authorize 
the President to extend additional trade benefits to Haiti. Section 
213A of the CBERA provides for the duty-free treatment of certain 
apparel articles and certain wiring sets from Haiti. The provisions of 
this subpart set forth the legal requirements and procedures that apply 
for purposes of obtaining duty-free treatment pursuant to CBERA section 
213A.


Sec.  10.842  Definitions.

    As used in this subpart, the following terms have the meanings 
indicated unless either the context in which they are used requires a 
different meaning or a different definition is prescribed for a 
particular section of this subpart:
    (a) Apparel articles. ``Apparel articles'' means goods classifiable 
in Chapters 61 and 62 and headings 6501, 6502, 6503, and 6504 and 
subheadings 6406.99.15 and 6505.90 of the HTSUS;
    (b) Applicable one-year period. ``Applicable one-year period'' 
means each of the following one-year periods:
    (1) Initial applicable one-year period. ``Initial applicable one-
year period'' means the period beginning on December 20, 2006, and 
ending on December 19, 2007;
    (2) Second applicable one-year period. ``Second applicable one-year 
period'' means the period beginning on December 20, 2007, and ending on 
December 19, 2008;
    (3) Third applicable one-year period. ``Third applicable one-year 
period'' means the period beginning on December 20, 2008, and ending on 
December 19, 2009;
    (4) Fourth applicable one-year period. ``Fourth applicable one-year 
period'' means the period beginning on December 20, 2009, and ending on 
December 19, 2010; and
    (5) Fifth applicable one-year period. ``Fifth applicable one-year 
period'' means the period beginning on

[[Page 34370]]

December 20, 2010, and ending on December 19, 2011;
    (c) Customs territory of the United States. ``Customs territory of 
the United States'' means the 50 states, the District of Columbia, and 
Puerto Rico;
    (d) Declared customs value. ``Declared customs value'' means the 
appraised value of an imported article determined in accordance with 
section 402 of the Tariff Act of 1930, as amended (19 U.S.C. 1401a);
    (e) Enter; entry. ``Enter'' and ``entry'' refer to the entry, or 
withdrawal from warehouse for consumption, in the customs territory of 
the United States;
    (f) Entity controlling production. ``Entity controlling 
production'' means an individual, corporation, partnership, 
association, or other entity or group that is not a producer and that 
controls the production process in Haiti through a contractual 
relationship or other indirect means;
    (g) Fabric component. ``Fabric component'' means a component cut 
from fabric to the shape or form of the component as it is used in the 
apparel article;
    (h) Foreign material. ``Foreign material'' means a material not 
produced in Haiti or any eligible country described in Sec.  10.844(c);
    (i) HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the 
United States;
    (j) Knit-to-shape articles. ``Knit-to-shape,'' when used with 
reference to apparel articles, means any apparel article of which 50 
percent or more of the exterior surface area is formed by major parts 
that have been knitted or crocheted directly to the shape used in the 
apparel article, with no consideration being given to patch pockets, 
appliques, or the like. Minor cutting, trimming, or sewing of those 
major parts will not affect the determination of whether an apparel 
article is ``knit-to-shape'';
    (k) Knit-to-shape components. ``Knit-to-shape,'' when used with 
reference to textile components, means components that are knitted or 
crocheted from a yarn directly to a specific shape, that is, the shape 
or form of the component as it is used in the apparel article, 
containing at least one self-start edge. Minor cutting or trimming will 
not affect the determination of whether a component is ``knit-to-
shape'';
    (l) Major parts. ``Major parts'' means integral components of an 
apparel article but does not include collars, cuffs, waistbands, 
plackets, pockets, linings, paddings, trim, accessories, or similar 
parts or components;
    (m) Producer. ``Producer'' means an individual, corporation, 
partnership, association, or other entity or group that exercises 
direct, daily operational control over the production process in Haiti;
    (n) Self-start edge. ``Self-start edge,'' when used with reference 
to knit-to-shape components, means a finished edge which is finished as 
the component comes off the knitting machine. Several components with 
finished edges may be linked by yarn or thread as they are produced 
from the knitting machine;
    (o) Subheading. ``Subheading'' means the first six digits in the 
tariff classification number under the HTSUS;
    (p) Wholly assembled in Haiti. ``Wholly assembled in Haiti'' means 
that all of the components of the apparel article (including thread, 
decorative embellishments, buttons, zippers, or similar components) 
were joined together in Haiti; and
    (q) Wholly the growth, product, or manufacture. ``Wholly the 
growth, product, or manufacture,'' when used with reference to Haiti or 
one or more eligible countries described in Sec.  10.844(c) of this 
subpart, refers both to any article which has been entirely grown, 
produced, or manufactured in Haiti or one or more eligible countries 
described in Sec.  10.844(c) of this subpart and to all materials 
incorporated in an article which have been entirely grown, produced, or 
manufactured in Haiti or one or more eligible countries described in 
Sec.  10.844(c) of this subpart.


Sec.  10.843  Articles eligible for duty-free treatment.

    The duty-free treatment referred to in Sec.  10.841 applies to the 
following articles that are imported directly from Haiti into the 
customs territory of the United States:
    (a) Certain apparel articles. Apparel articles of a producer or 
entity controlling production that are wholly assembled or knit-to-
shape in Haiti from any combination of fabrics, fabric components, 
components knit-to-shape, and yarns, subject to the applicable 
quantitative limits set forth in U.S. Note 6(g), Subchapter XX, Chapter 
98, HTSUS, and provided that the applicable value-content requirement 
set forth in Sec.  10.844(a) of this subpart is met through the use of:
    (1) The individual entry method (see Sec.  10.844(a)(1) of this 
subpart); or
    (2) The annual aggregation method (see Sec.  10.844(a)(2) of this 
subpart).
    (b) Certain woven apparel articles. Apparel articles classifiable 
in Chapter 62 of the HTSUS (other than articles classifiable in 
subheading 6212.10 of the HTSUS), as in effect on December 20, 2006, 
that are wholly assembled or knit-to-shape in Haiti from any 
combination of fabrics, fabric components, components knit-to-shape, 
and yarns, but do not qualify for duty-free treatment under paragraph 
(a) of this section because they fail to meet the applicable value-
content requirement set forth in Sec.  10.844(a) of this subpart, 
subject to the applicable quantitative limits set forth in U.S. Note 
6(h), Subchapter XX, Chapter 98, HTSUS;
    (c) Brassieres. Any article classifiable in subheading 6212.10 of 
the HTSUS, that is both cut and sewn or otherwise assembled in Haiti or 
the United States, or both, without regard to the source of the fabric 
or components from which the article is made, subject to the 
quantitative limits set forth in U.S. Note 6(g), Subchapter XX, Chapter 
98, HTSUS; and
    (d) Wiring sets. Any article classifiable in subheading 8544.30.00 
of the HTSUS, as in effect on December 20, 2006, that is the product or 
manufacture of Haiti, provided the article satisfies the value-content 
requirement set forth in Sec.  10.844(b) of this subpart. For purposes 
of this paragraph, the term ``product or manufacture of Haiti'' refers 
to an article that is either:
    (1) Wholly the growth, product, or manufacture of Haiti; or
    (2) A new or different article of commerce that has been grown, 
produced, or manufactured in Haiti;


Sec.  10.844  Value-content requirement.

    (a) Certain apparel articles--(1) General. Except as provided in 
paragraph (a)(2) of this section, apparel articles described in Sec.  
10.843(a) of this subpart will be eligible for duty-free treatment only 
if, for each entry of such articles in the applicable one-year period 
for which a duty-free claim is made for such articles under Sec.  
10.847(a) of this subpart, the sum of the cost or value of the 
materials produced in Haiti or one or more eligible countries described 
in paragraph (c) of this section, or any combination thereof, plus the 
direct costs of processing operations performed in Haiti or one or more 
eligible countries described in paragraph (c) of this section, or any 
combination thereof, is not less than (as applicable):
    (i) 50 percent or more of the declared customs value of the 
articles entered during the initial applicable one-year period, the 
second applicable one-year period, and the third applicable one-year 
period;
    (ii) 55 percent or more of the declared customs value of the 
articles entered during the fourth applicable one-year period; and

[[Page 34371]]

    (iii) 60 percent or more of the declared customs value of the 
articles entered during the fifth applicable one-year period.
    (2) Annual aggregation--(i) Initial applicable one-year period. In 
the initial applicable one-year period, the applicable value-content 
requirement set forth in paragraph (a)(1) of this section may also be 
met for apparel articles of a producer or an entity controlling 
production that are entered during the initial applicable one-year 
period and for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart by aggregating the cost or value of materials 
and the direct costs of processing operations, as those terms are used 
in paragraph (a)(1) of this section, with respect to all apparel 
articles of that producer or entity controlling production that are 
wholly assembled or knit-to-shape in Haiti and are entered during the 
initial applicable one-year period (except as provided in paragraph 
(a)(2)(iii) of this section).
    (ii) Other applicable one-year periods. In each of the second, 
third, fourth, and fifth applicable one-year periods, the applicable 
value-content requirement set forth in paragraph (a)(1) of this section 
may also be met for apparel articles of a producer or an entity 
controlling production that are entered during the applicable one-year 
period and for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart by aggregating the cost or value of materials 
and the direct costs of processing, as those terms are used in 
paragraph (a)(1) of this section, with respect to all apparel articles 
of that producer or entity controlling production that are wholly 
assembled or knit-to-shape in Haiti and are entered during the 
preceding applicable one-year period (except as provided in paragraph 
(a)(2)(iii) of this section).
    (iii) Exclusions from annual aggregation calculation. (A) The entry 
of a woven apparel article receiving duty-free treatment under Sec.  
10.843(b) of this subpart is not to be included in an annual 
aggregation under paragraph (a)(2)(i) or (a)(2)(ii) of this section.
    (B) The entry of brassieres receiving duty-free treatment under 
Sec.  10.843(c) is not to be included in an annual aggregation under 
paragraph (a)(2)(i) or (a)(2)(ii) of this section unless the producer 
or entity controlling production elects, at the time the annual 
aggregation calculation is made, to include such entry in the 
aggregation.
    (C) The entry of an apparel article that is wholly assembled or 
knit-to-shape in Haiti and that is receiving preferential tariff 
treatment under any provision of law other than section 213A of the 
CBERA (19 U.S.C. 2703A) or is subject to the rate of duty set forth in 
the ``General'' subcolumn of column 1 of the HTSUS is not to be 
included in an annual aggregation under paragraph (a)(2)(i) or 
(a)(2)(ii) of this section unless the producer or entity controlling 
production elects, at the time the annual aggregation calculation is 
made, to include such entry in the aggregation.
    (3) Election to use the annual aggregation method for an applicable 
one-year period. A producer or entity controlling production that 
elects to use the annual aggregation method for purposes of meeting the 
applicable value-content requirement set forth in paragraph (a)(1) of 
this section during an applicable one-year period must continue to use 
that method for all apparel articles of that producer or entity 
controlling production that are certified as articles described in 
Sec.  10.843(a) of this subpart during that applicable one-year period 
(see Sec.  10.847(b) of this subpart). Unless a producer or entity 
controlling production elects to use the annual aggregation method with 
respect to an applicable one-year period, all apparel articles of the 
producer or entity controlling production for which duty-free treatment 
is claimed under Sec.  10.847(a) of this subpart must be entered under 
the individual entry method during that applicable one-year period.
    (4) Failure to meet applicable requirements.--(i) Initial 
applicable one-year period. If CBP determines that apparel articles of 
a producer or entity controlling production that are entered as 
articles described in Sec.  10.843(a) of this subpart during the 
initial applicable one-year period have not met the requirements of 
Sec.  10.843(a) of this subpart or the applicable value-content 
requirement set forth in paragraph (a)(1) of this section, then:
    (A) All apparel articles of the producer or entity controlling 
production for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart that are entered under the annual aggregation 
method during that initial applicable one-year period will be denied 
duty-free treatment;
    (B) Those apparel articles of the producer or entity controlling 
production for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart that are entered on an individual entry basis 
and that fail to meet the requirements of Sec.  10.843(a)(1) of this 
subpart or the applicable value-content requirement set forth in 
paragraph (a)(1) of this section during that initial applicable one-
year period will be denied duty-free treatment. However, apparel 
articles of the producer or entity controlling production for which 
duty-free treatment is claimed under Sec.  10.847(a) of this subpart 
that are entered on an individual entry basis prior to an election 
being made by the producer or entity controlling production to use the 
annual aggregation method will be considered to have met the applicable 
value-content requirement if that requirement is met through 
application of the individual entry method; and
    (C) All apparel articles of the producer or entity controlling 
production for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart, whether entered on an individual entry or 
annual aggregation basis, will be not be eligible for duty-free 
treatment during the succeeding applicable one-year periods until the 
increased percentage in the value-content requirement specified in 
paragraph (a)(4)(iii) of this section has been met by all the apparel 
articles of that producer or entity controlling production that are 
wholly assembled or knit-to-shape in Haiti and are entered during the 
immediately preceding applicable one-year period, unless the articles 
qualify for tariff benefits pursuant to the provisions of Sec.  10.845 
of this subpart.
    (ii) Other applicable one-year periods. If CBP determines that 
apparel articles of a producer or entity controlling production that 
are entered as articles described in Sec.  10.843(a) of this subpart 
during any applicable one-year period following the initial applicable 
one-year period have not met the requirements of Sec.  10.843(a) or the 
applicable value-content requirement set forth in paragraph (a) of this 
section, then:
    (A) Those apparel articles of the producer or entity controlling 
production for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart that are entered on an individual entry basis 
and that fail to meet the requirements of Sec.  10.843(a)(1) or the 
applicable value-content requirement set forth in paragraph (a)(1) of 
this subpart during that applicable one-year period will be denied 
duty-free treatment; and
    (B) All apparel articles of the producer or entity controlling 
production for which duty-free treatment is claimed under Sec.  
10.847(a) of this subpart, whether entered on an individual entry or 
annual aggregation basis, will not be eligible for duty-free treatment 
during the succeeding applicable one-year periods until the increased 
percentage in the value-content requirement specified in paragraph 
(a)(4)(iii) of this section has

[[Page 34372]]

been met by all the apparel articles of that producer or entity 
controlling production that are wholly assembled or knit-to-shape in 
Haiti and are entered during the immediately preceding applicable one-
year period, unless the articles qualify for tariff benefits pursuant 
to the provisions of Sec.  10.845 of this subpart.
    (iii) Increased percentage. For apparel articles of a producer or 
entity controlling production to meet the increased percentage referred 
to in paragraphs (a)(4)(i)(C) and (a)(4)(ii)(B) of this section, the 
sum of the cost or value of the materials produced in Haiti or one or 
more eligible countries described in paragraph (c) of this section, or 
any combination thereof, plus the direct costs of processing operations 
performed in Haiti or one or more eligible countries described in 
paragraph (c) of this section, or any combination thereof, must not be 
less than the applicable percentage under paragraph (a)(1) of this 
section, plus 10 percent, of the aggregate declared customs value of 
all apparel articles of that producer or entity controlling production 
that are wholly assembled or knit-to-shape in Haiti and are entered 
during the immediately preceding applicable one-year period. Once the 
increased value-content percentage has been met for the articles of a 
producer or entity controlling production that are entered during an 
applicable one-year period, the articles of that producer or entity 
controlling production that are entered during the next succeeding 
applicable one-year period will be subject to the applicable value-
content percentage specified in paragraph (a)(1) of this section.
    (iv) Articles of a new producer or entity controlling production. A 
new producer or entity controlling production that elects to use the 
annual aggregation method for purposes of meeting the applicable value-
content requirement must first meet the increased value-content 
percentage specified in paragraph (a)(4)(iii) of this section as a 
prerequisite to receiving duty-free treatment during a succeeding 
applicable one-year period. For purposes of this paragraph, a ``new 
producer or entity controlling production'' is a producer or entity 
controlling production that did not produce or control production of 
articles that were entered as articles described in Sec.  10.843(a) 
during the immediately preceding applicable one-year period.

    Example 1. A Haitian producer begins production of apparel 
articles that meet the description in Sec.  10.843(a) of this 
subpart during the second applicable one-year period and elects to 
use the annual aggregation method for each applicable one-year 
period. The producer's articles entered during the second applicable 
one-year period meet a value-content percentage of 55%; articles 
entered during the third applicable one-year period meet a value-
content percentage of 65%; and articles entered during the fourth 
applicable one-year period meet a value-content percentage of 55%. 
The producer's articles may not receive duty-free treatment during 
the second applicable one-year period because there was no 
production (and thus no entered articles) during the immediately 
preceding period (the initial applicable one-year period) on which 
to assess compliance with the applicable value-content requirement. 
The producer's articles also may not receive duty-free treatment 
during the third applicable one-year period because the increased 
value-content percentage requirement (50% plus 10% = 60%) was not 
met in the immediately preceding period (the second applicable one-
year period). However, the producer's articles are eligible for 
duty-free treatment during the fourth applicable one-year period 
based on compliance with the 60% value-content percentage 
requirement in the immediately preceding period (the third 
applicable one-year period). The producer's articles also are 
eligible for duty-free treatment during the fifth applicable one-
year period based on compliance with the 55% value-content 
percentage requirement in the immediately preceding period (the 
fourth applicable one-year period).
    Example 2. Same facts as in example 1, except that the producer 
elects to use the individual entry method for purposes of meeting 
the applicable value-content requirement for each applicable one-
year period. The producer's articles entered during the second 
applicable one-year period are eligible for duty-free treatment 
because these articles meet the requisite 50% value-content 
requirement. The producer's articles also may receive duty-free 
treatment during the third, fourth, and fifth applicable one-year 
periods based on compliance with the applicable value-content 
requirements for each of those periods set forth in paragraph (a)(1) 
of this section.

    (v) Notification of compliance with the increased percentage--(A) 
General. If apparel articles of a producer or entity controlling 
production are required to meet the increased value-content percentage 
described in paragraph (a)(4)(iii) of this section, either because of 
failure to meet the requirements of Sec.  10.843(a) or the applicable 
value-content requirement set forth in paragraph (a) of this section in 
an applicable one-year period, or because the producer or entity 
controlling production is a new producer or entity controlling 
production, as defined in paragraph (a)(4)(iv) of this section, that 
elects to use the annual aggregation method, the importer of such 
articles must notify CBP that the increased percentage has been met in 
an applicable one-year period by submitting to CBP the declaration of 
compliance described in Sec.  10.848 of this subpart within 30 days 
following the end of the applicable one-year period. An importer that 
is required to submit a declaration of compliance under this paragraph 
must submit such a declaration for each importer of record 
identification number used by that importer. A declaration of 
compliance required under this paragraph must be sent to the address 
set forth in Sec.  10.848(a) of this subpart.
    (B) Contents. A declaration of compliance required under paragraph 
(a)(4)(v)(A) of this section must include, in addition to the 
information specified in Sec.  10.848(c) of this subpart, a statement 
as to whether the increased value-content percentage was required 
because the apparel articles failed to meet the production standards or 
the applicable value-content requirement or because the producer or 
entity controlling production was a new producer or entity controlling 
production that elected to use the annual aggregation method.
    (C) Effect of noncompliance. If an importer fails to submit to CBP 
the declaration of compliance required under paragraph (a)(4)(v)(A) of 
this section within 30 days following the end of the applicable one-
year period during which the increased value-content percentage was met 
for apparel articles of a producer or entity controlling production, 
CBP may deny duty-free treatment to all apparel articles, as described 
in Sec.  10.843(a) of this subpart, of that producer or entity 
controlling production that are entered by that importer during the 
next succeeding applicable one-year period. Additionally, the timely 
submission of a declaration of compliance is a prerequisite for a 
producer or entity controlling production to request retroactive 
application of duty-free treatment under Sec.  10.845 of this subpart 
for apparel articles that meet the increased value-content percentage 
during an applicable one-year period. However, the submission of a 
declaration of compliance is not a substitute for filing a request for 
liquidation or reliquidation of an entry for which retroactive duty-
free treatment is sought under Sec.  10.845 of this subpart.
    (5) Inclusion of the cost of fabrics or yarns not available in 
commercial quantities in value-content requirement. For purposes of 
meeting the applicable value-content requirement set forth in paragraph 
(a) of this section, either in regard to individual entries or entries 
entered in the aggregate, the following costs may be included:

[[Page 34373]]

    (i) The cost of fabrics or yarns to the extent that apparel 
articles of such fabrics or yarns would be eligible for preferential 
treatment, without regard to the source of the fabrics or yarns, under 
Annex 401 of the NAFTA; and
    (ii) The cost of fabrics or yarns (without regard to their source) 
that are designated as not being available in commercial quantities for 
purposes of:
    (A) Section 213(b)(2)(A)(v) of the CBERA (19 U.S.C. 
2703(b)(2)(A)(v));
    (B) Section 112(b)(5) of the African Growth and Opportunity Act (19 
U.S.C. 3721(b)(5));
    (C) Section 204(b)(3)(B)(i)(III) or 204(b)(3)(B)(ii) of the Andean 
Trade Preference Act (19 U.S.C. 3203(b)(3)(B)(i)(III) or 
3203(b)(3)(B)(ii)); or
    (D) Any other provision, relating to determining whether a textile 
or apparel article is an originating good eligible for preferential 
treatment, of a law that implements a free trade agreement that enters 
into force under the Bipartisan Trade Promotion Authority Act of 2002.
    (b) Wiring sets. An article described in Sec.  10.843(d) of this 
subpart will be eligible for duty-free treatment during the five-year 
period ending on December 19, 2011, only if the sum of the cost or 
value of the materials produced in Haiti or one or more eligible 
countries described in paragraph (c) of this section, or any 
combination thereof, plus the direct costs of processing operations 
performed in Haiti or the United States, or both, is not less than 50 
percent of the declared customs value of the article.
    (c) Eligible countries described. As used in this section, the term 
``eligible countries'' includes:
    (1) The United States;
    (2) Israel, Canada, Mexico, Jordan, Singapore, Chile, Australia, 
Morocco, Bahrain, El Salvador, Honduras, Nicaragua, Guatemala, 
Dominican Republic, and any other country that is a party to a free 
trade agreement with the United States that is in effect on December 
20, 2006, or that enters into force under the Bipartisan Trade 
Promotion Authority Act of 2002 (19 U.S.C. 3801 et seq.); and
    (3) The designated beneficiary countries listed in General Notes 11 
(Andean Trade Preference Act), 16 (African Growth and Opportunity Act), 
and 17 (Caribbean Basin Trade Partnership Act) of the HTSUS.
    (d) Cost or value of materials--(1) Materials produced in Haiti or 
one or more eligible countries described in paragraph (c) of this 
section defined--(i) Certain apparel articles. As used in paragraph (a) 
of this section, the words ``materials produced in Haiti or one or more 
eligible countries described in paragraph (c) of this section'' refer 
to those materials incorporated into an article that are either:
    (A) Wholly obtained or produced, within the meaning of Sec.  
102.1(g) of this chapter, in Haiti or one or more eligible countries 
described in paragraph (c) of this section; or
    (B) Determined to originate in Haiti or one or more eligible 
countries described in paragraph (c) of this section by application of 
the provisions of Sec.  102.21 of this chapter.
    (ii) Wiring sets. As used in paragraph (b) of this section, the 
words ``materials produced in Haiti or one or more eligible countries 
described in paragraph (c) of this section'' refer to those materials 
incorporated into an article that are either:
    (A) Wholly the growth, product, or manufacture of Haiti or one or 
more eligible countries described in paragraph (c) of this section; or
    (B) Substantially transformed in Haiti or one or more eligible 
countries described in paragraph (c) of this section into a new or 
different article of commerce which is then used in Haiti in the 
production of a new or different article of commerce that is imported 
into the United States.
    (2) Determination of cost or value of materials--(i) Costs 
included. (A) For purposes of paragraphs (a) and (b) of this section, 
and subject to paragraphs (d)(2)(i)(B) and (d)(2)(ii) of this section, 
the cost or value of materials produced in Haiti or one or more 
eligible countries described in paragraph (c) of this section includes:
    (1) The manufacturer's actual cost for the materials;
    (2) When not included in the manufacturer's actual cost for the 
materials, the freight, insurance, packing, and all other costs 
incurred in transporting the materials to the manufacturer's plant;
    (3) The actual cost of waste or spoilage, less the value of 
recoverable scrap; and
    (4) Taxes and/or duties imposed on the materials by Haiti or one or 
more eligible countries described in paragraph (c) of this section, 
provided they are not remitted upon exportation.
    (B) Where a material is provided to the manufacturer without 
charge, or at less than fair market value, its cost or value will be 
determined by computing the sum of:
    (1) All expenses incurred in the growth, production, or manufacture 
of the material, including general expenses;
    (2) An amount for profit; and
    (3) Freight, insurance, packing, and all other costs incurred in 
transporting the material to the manufacturer's plant.
    (ii) Costs deducted in regard to certain apparel articles. For 
purposes of paragraph (a) of this section, in calculating the cost or 
value of materials produced in Haiti or one or more eligible countries 
described in paragraph (c) of this section, either in regard to 
individual entries or entries entered in the aggregate, deductions are 
to be made for the cost or value of:
    (A) Any foreign materials used in the production of the apparel 
articles in Haiti; and
    (B) Any foreign materials used in the production of the materials 
produced in Haiti or one or more eligible countries described in 
paragraph (c) of this section.
    (e) Direct costs of processing operations--(1) Items included. As 
used in paragraphs (a) and (b) of this section, the words ``direct 
costs of processing operations'' mean those costs either directly 
incurred in, or which can be reasonably allocated to, the growth, 
production, manufacture, or assembly of the specific articles under 
consideration. Such costs include, but are not limited to the 
following, to the extent that they are includable in the appraised 
value of the imported articles:
    (i) All actual labor costs involved in the growth, production, 
manufacture, or assembly of the specific articles, including fringe 
benefits, on-the-job training, and the cost of engineering, 
supervisory, quality control, and similar personnel;
    (ii) Dies, molds, tooling, and depreciation on machinery and 
equipment which are allocable to the specific articles;
    (iii) Research, development, design, engineering, and blueprint 
costs insofar as they are allocable to the specific articles; and
    (iv) Costs of inspecting and testing the specific articles.
    (2) Items not included. The words ``direct costs of processing 
operations'' do not include items that are not directly attributable to 
the articles under consideration or are not costs of manufacturing the 
product. These include, but are not limited to:
    (i) Profit; and
    (ii) General expenses of doing business that either are not 
allocable to the specific articles or are not related to the growth, 
production, manufacture, or assembly of the articles, such as 
administrative salaries, casualty and liability insurance, advertising, 
and salesmen's salaries, commissions, or expenses.

[[Page 34374]]

Sec.  10.845  Retroactive application of duty-free treatment for 
certain apparel articles.

    (a) General. Notwithstanding 19 U.S.C. 1514 or any other provision 
of law, if apparel articles, as described in Sec.  10.843(a) of this 
subpart, of a producer or entity controlling production are ineligible 
for duty-free treatment in an applicable one-year period because the 
apparel articles of the producer or entity controlling production did 
not meet the requirements of Sec.  10.843(a) of this subpart or the 
applicable value-content requirement set forth in Sec.  10.844(a) of 
this subpart, and the apparel articles of the producer or entity 
controlling production satisfy the increased value-content percentage 
set forth in Sec.  10.844(a)(4)(iii) of this subpart in that same 
applicable one-year period, the entry of any such articles made during 
that applicable one-year period will be liquidated or reliquidated free 
of duty, and CBP will refund any customs duties paid with respect to 
such entry, with interest accrued from the date of entry, provided that 
the conditions and requirements set forth in paragraph (b) of this 
section are met.
    (b) Conditions and requirements. The conditions and requirements 
referred to in paragraph (a) of this section are as follows:
    (1) The articles in such entry would have received duty-free 
treatment if they had satisfied the requirements of Sec.  10.843(a) and 
the applicable value-content requirement set forth in Sec.  10.844(a) 
of this subpart;
    (2) A declaration of compliance with the increased value-content 
percentage is submitted to CBP within 30 days following the end of the 
applicable one-year period during which the increased percentage is met 
(see Sec.  10.844(a)(4)(v) of this subpart); and
    (3) A request for liquidation or reliquidation with respect to such 
entry is filed with CBP before the 90th day after CBP determines and 
notifies the importer that the apparel articles of the producer or 
entity controlling production satisfy the increased value-content 
percentage set forth in Sec.  10.844(a)(4)(iii) of this subpart during 
that applicable one-year period.

    Example. A Haitian producer of articles that meet the 
description in Sec.  10.843(a) of this subpart begins exporting 
those articles to the United States during the initial applicable 
one-year period and elects to use the annual aggregation method for 
purposes of meeting the applicable value-content requirement. The 
articles entered during that initial period meet a value-content 
percentage of 48%, while articles entered during the second 
applicable one-year period meet a value-content percentage of 62%. 
The producer's articles may not receive duty-free treatment during 
the initial applicable one-year period because the requisite 50% 
value-content requirement was not met. The producer's articles also 
are ineligible for d