NAFTA: Merchandise Processing Fee Exemption and Technical Corrections, 52780-52783 [07-4551]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• U.S. Customs and Border Protection
• DEPARTMENT OF THE TREASURY
• Department of Treasury

[Federal Register Volume 72, Number 179 (Monday, September 17, 2007)]
[Rules and Regulations]
[Pages 52780-52783]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-4551]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 103, 178, and 181

[USCBP-2006-0090; CBP Dec. 07-76]
RIN 1505-AB58


NAFTA: Merchandise Processing Fee Exemption and Technical 
Corrections

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

ACTION: Final rule.

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SUMMARY: This document amends the U.S. Customs and Border Protection 
(CBP) regulations to clarify that, in order to claim the exemption from 
the merchandise processing fee (MPF) for merchandise that is considered 
``originating'' and qualifies to be marked as products of Canada or 
Mexico under the provisions of the NAFTA, an importer is subject to the 
same declaration requirement that is established for obtaining NAFTA 
duty preference, even if the merchandise is unconditionally free. In 
addition, this document amends the regulations to clarify that a 
Certificate of Origin is not required for a commercial importation for 
which the total value of originating goods does not exceed $2,500. 
Lastly, this document remedies two incorrect addresses and an incorrect 
Code of Federal Regulations citation, and incorporates non-substantive 
amendments to certain sections in the regulations to reflect the 
nomenclature changes effected by the transfer of CBP to the Department 
of Homeland Security and the reorganization of certain offices in CBP 
pursuant to the ``Security and Accountability for Every Port Act of 
2006'' (or the ``Safe Port Act''), as well as certain other minor 
editorial changes.

DATES: Effective Date: The amendments set forth in this document are 
effective on October 17, 2007.

FOR FURTHER INFORMATION CONTACT: Seth Mazze, Trade Agreements Branch, 
Office of International Trade, (202) 344-2634.

SUPPLEMENTARY INFORMATION: 

Background

    On December 17, 1992, the United States, Canada, and Mexico entered 
into the North American Free-Trade Agreement (NAFTA). The stated 
objectives of the NAFTA include the elimination of barriers to trade 
in, and the facilitation of the cross-border movement of, goods and 
services between the territories of the countries. The provisions of 
the NAFTA were adopted by the United States with the enactment of the 
North American Free Trade Agreement Implementation Act (the ``Act'', 19 
U.S.C. 3301-3473). On September 6, 1995, U.S. Customs and Border 
Protection (CBP) published Treasury Decision (T.D.) 95-68 (North 
American Free Trade Agreement) in the Federal Register (60 FR 46333), 
adopting amendments to the regulations in title 19 of the Code of 
Federal Regulations (CFR) in order to implement customs-related aspects 
of the NAFTA. The final rule went into effect on October 1, 1995.
    Pursuant to sections 403(1) and 411 of the Homeland Security Act of 
2002, Pub. L. 107-296 (the ``HSA''), the United States Customs Service 
and certain of its functions were transferred from the Department of 
the Treasury to the Department of Homeland Security effective March 1, 
2003. In addition, pursuant to section 1502 of the HSA, the ``Customs 
Service'' was renamed as the ``Bureau of Customs and Border 
Protection.'' Subsequently, on April 23, 2007, a Notice was published 
in the Federal Register (72 FR 20131) to inform the public that the 
name of the Bureau of Customs and Border Protection had been changed by 
the Department of Homeland Security to ``U.S. Customs and Border 
Protection (CBP)'', effective March 31, 2007.
    On August 23, 2006, a Notice of Proposed Rulemaking was published 
in the Federal Register (71 FR 49391; the NPRM) by CBP that proposed to 
amend the regulations to clarify the requirements for claiming the 
merchandise processing fee (MPF) under the NAFTA and to effect several 
technical changes, as set forth below.

Merchandise Processing Fee (MPF) Exemption

    As a means of recouping administrative expenses for the processing 
of imported shipments, CBP charges a MPF, as provided for in 19 U.S.C. 
58c. However, under 19 U.S.C. 58c(b)(10)(B), for goods qualifying under 
the rules of origin set out in 19 U.S.C. 3332, the fee may not be 
charged with respect to goods that qualify to be marked as goods of 
Canada or of Mexico

[[Page 52781]]

(pursuant to Annex 311 of the NAFTA). In order to make a claim for 
NAFTA duty preference, an importer must make a declaration. The same 
declaration is also used for purposes of claiming the MPF exemption. 
That is, the importer must place the appropriate special program 
indicator (e.g., ``CA'' for goods of Canada and ``MX'' for goods of 
Mexico) opposite the good on the entry form, or in the appropriate 
location in an electronic filing.
    The NPRM addressed situations in which an importer of an 
originating good does not have a duty preference incentive to make the 
required NAFTA declaration upon entry because the Normal Trade 
Relations rate of duty on the good is free (i.e., the good is 
unconditionally duty free). Consistent with existing law and practice, 
the NPRM proposed to amend 19 CFR 181.21(a) to clarify that in order to 
claim the MPF exemption for unconditionally free goods from a NAFTA 
country, an importer of an originating good must place the appropriate 
special program indicator opposite the good on the entry form even if 
the importer is not actually claiming NAFTA preference for duty 
purposes.

Exemption From Providing Certificate of Origin

    Section 181.22(b) of title 19, CFR (19 CFR 181.22(b)), requires an 
importer who claims preferential tariff treatment on a good under 19 
CFR 181.21 to provide, at the request of the port director, a copy of 
each Certificate of Origin pertaining to the good which is in the 
possession of the importer. However, certain importations are exempted 
from this requirement under 19 CFR 181.22(d). One of these exemptions, 
set forth in Sec.  181.22(d)(1)(iii), is for a commercial importation 
of a good whose value does not exceed $2,500, as long as a signed 
statement is attached to the invoice or other documents accompanying 
the shipment.
    In the NPRM, CBP proposed to amend the regulations to clarify that 
the $2,500 value refers to the total value of a shipment and not to the 
value of the individual goods in a shipment. In this regard, CBP 
specifically proposed to amend 19 CFR 181.22(d)(1)(iii) in order to 
clarify that a Certificate of Origin is not required for a commercial 
importation consisting of originating goods, the total value of which 
does not exceed $2,500, if the required statement is attached.

Other Technical Corrections

    In the NPRM, CBP also proposed to make several other technical 
corrections to the regulations. In CBP Dec. 05-32, an Interim Rule 
published in the Federal Register (70 FR 58009) on October 5, 2005, CBP 
redesignated 19 CFR 12.132 as Sec.  102.25. However, there is a 
reference to Sec.  12.132 in Sec.  181.21(a). Accordingly, CBP proposed 
to make a minor conforming amendment to update this reference. In 
addition, because CBP Dec. 05-32 removed the declaration requirement 
referenced in Sec. Sec.  12.130(c) and 12.132, CBP proposed to remove 
the entries for these sections in the list of OMB control numbers in 
Sec.  178.2. CBP also proposed to amend an incorrect citation to 19 CFR 
181.72(a)(2)(iii) in 19 CFR 181.74(a). The correct citation is to Sec.  
181.72(a)(3)(iii). In addition, CBP proposed to amend the address in 19 
CFR 181.74(e) for providing notification when the Canadian or Mexican 
customs administrations intend to conduct a NAFTA verification visit in 
the United States in order to determine whether a good imported into 
the United States qualifies as an originating good. Since the 
publication of the NPRM on August 23, 2006, some divisions, functions, 
and personnel from the Office of Field Operations were transferred by 
the Commissioner of CBP into the Office of International Trade pursuant 
to the authority under section 402 of the Safe Port Act (Pub. L. 109-
347) (October 13, 2006). The correct address is: ``U.S. Customs and 
Border Protection, Office of International Trade, Commercial Targeting 
and Enforcement, 1300 Pennsylvania Ave. NW., Washington, DC 20229.'' 
CBP also proposed to amend the National Commodity Specialist Division 
(NCSD) address in 19 CFR 181.93(a) for purposes of submitting advance 
ruling requests under the NAFTA. The correct address is: ``National 
Commodity Specialist Division, U.S. Customs and Border Protection, One 
Penn Plaza, 10th Floor, New York, NY 10119.'' This address is also 
corrected in the list of public reading rooms in 19 CFR 103.1. In 
addition, CBP is expanding the declaration and other documentation on a 
claim for preferential treatment in Sec.  181.21 to include electronic 
versions of such documents in CBP's continuing effort to modernize its 
procedures under the authority granted by Customs Modernization 
provisions in the North American Free Trade Agreement Implementation 
Act (commonly referred to as the ``Customs Mod Act''), Pub. L. 103-182, 
107 Stat. 2057, 2170 (December 8, 1993).
    Comments were solicited on the Notice of Proposed Rulemaking. The 
comment period closed on October 23, 2006.

Discussion of Comments

    One comment was received in response to the solicitation and a 
description of the comment received and CBP's analysis are set forth 
below.

Comment

    The commenter, a Canadian manufacturer, stated that changing the 
MPF requirements would only increase the costs associated with 
importing goods into the United States and result in delays during 
importation. The commenter further noted that additional documentary 
requirements would increase administrative costs for CBP as well as for 
importers and brokers, and would ultimately result in less money being 
recouped. In addition, the commenter suggested that fees should be 
based strictly on the country of origin as declared and that routine 
audits and requests for information should be relied upon to monitor 
importers that do not follow the guidelines.

CBP's Response

    CBP is not changing the requirements for claiming the MPF 
exemption. Rather, consistent with existing law and practice, CBP is 
merely clarifying that an importer is subject to the same declaration 
requirement that is established for claiming NAFTA duty preference in 
order to claim the exemption of the MPF for goods that are eligible for 
preferential duty treatment under the NAFTA. As a clarification of 
existing law and practice, CBP believes that the amended regulation 
will serve to facilitate entry by providing certainty under the stated 
circumstances and will not result in either increased costs or delays 
during importation. With respect to the commenter's suggestion that the 
MPF should be based strictly on the country of origin of imported 
merchandise, it is CBP's position that this approach is not consistent 
with existing statutory law and is outside the scope of this 
rulemaking.
    No comments were received regarding the other amendments proposed 
in the NPRM.

Conclusion

    After review of the comment and further consideration, CBP has 
decided to adopt the proposed rule published on August 23, 2006, 
without substantive changes, but with the additional modifications set 
forth below.

Additional Changes to the Regulations

    The final regulations incorporate non-substantive amendments to 
Sec. Sec.  181.21, 181.22, 181.74, and 181.93 of the CFR to reflect the 
nomenclature changes effected by the transfer of CBP to the

[[Page 52782]]

Department of Homeland Security and the subsequent change of name in 
the Federal Register notice of April 23, 2007. As discussed above, the 
final regulation also reflects the reorganization of CBP by the Safe 
Port Act with the creation of the new Office of International Trade by 
updating the address and new office in 19 CFR 181.74(e). In addition, 
the language of Sec.  181.21(a) has been edited to replace ``shall'' 
with ``must.'' In an effort to reflect the modernization of procedures 
under the Customs Mod Act, Sec.  181.21(a) has also been edited by 
replacing the reference to ``written declaration'' with reference to 
``formal declaration'' and a reference to ``electronic submissions'' 
has been added to the second sentence.

Executive Order 12866 and Regulatory Flexibility Act

    This rule is not considered to be a significant regulatory action 
under Executive Order 12866. Accordingly, a regulatory assessment is 
not required.
    It is certified, pursuant to the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), that the regulatory amendments 
set forth in this final rule will not have a significant economic 
impact on a substantial number of small entities. The rule merely 
clarifies that, consistent with existing law and CBP practice, an 
importer is subject to the same declaration requirement that is 
established for claiming NAFTA duty preference in order to claim the 
exemption of the MPF for goods that are eligible for preferential duty 
treatment under the NAFTA. CBP is also clarifying, consistent with 
current CBP practice, that a Certificate of Origin is not required for 
a commercial importation consisting of originating goods, the total 
value of which does not exceed $2,500, if the required statement is 
attached. Lastly, this document remedies two incorrect addresses and an 
incorrect Code of Federal Regulations citation, and incorporates non-
substantive amendments to certain sections in the regulations to 
reflect the nomenclature changes effected by the transfer of CBP to the 
Department of Homeland Security and the reorganization of certain 
offices in CBP by the Safe Port Act as well as certain other minor 
editorial changes.

Paperwork Reduction Act

    Because the changes with possible paperwork implications set forth 
in this document are merely clarifications of existing requirements, 
there is no need to amend the paperwork burden for the number 
previously approved by OMB for part 181 of 19 CFR. The clearance number 
for part 181 is 1651-0098.

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 103

    Administrative practice and procedure, Freedom of information.

19 CFR Part 178

    Collections of information, Paperwork requirements, Reporting and 
recordkeeping requirements.

19 CFR Part 181

    Canada, Customs duties and inspection, Imports, Mexico, Trade 
agreements (North American Free-Trade Agreement).

Amendments to the CBP Regulations

0
For the reasons set forth above, parts 103, 178, and 181 of title 19 of 
the Code of Federal Regulations (19 CFR parts 103, 178, and 181) are 
amended as set forth below.

PART 103--AVAILABILITY OF INFORMATION

0
1. The authority citation for part 103 continues to read in part as 
follows:

    Authority: 5 U.S.C. 301, 552, 552a; 19 U.S.C. 66, 1624; 31 
U.S.C. 9701.
* * * * *


Sec.  103.1  [Amended]

0
2. Amend Sec.  103.1 by removing the address citation ``New York, 6 
World Trade Center, New York, New York 10048'' and adding in its place 
the address citation ``New York, One Penn Plaza, 10th Floor, New York, 
NY 10119.''

PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

0
3. The authority citation for part 178 continues to read as follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 1624; 44 U.S.C. 3501 et seq.


Sec.  178.2  [Amended]

0
4. Amend Sec.  178.2 by removing the entries for Sec. Sec.  12.130(c) 
and 12.132.

PART 181--NORTH AMERICAN FREE TRADE AGREEMENT

0
5. The authority citation for part 181 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.
* * * * *

0
6. In Sec.  181.21:
0
a. Paragraph (a) is revised.
0
b. Paragraph (b) is amended by removing the word ``Customs'' and, in 
its place, adding the term ``CBP''.


Sec.  181.21   Filing of claim for preferential tariff treatment upon 
importation.

    (a) Declaration. In connection with a claim for preferential tariff 
treatment, or for the exemption from the merchandise processing fee, 
for a good under the NAFTA, the U.S. importer must make a formal 
declaration that the good qualifies for such treatment. The declaration 
may be made by including on the entry summary, or equivalent 
documentation, including electronic submissions, the symbol ``CA'' for 
a good of Canada, or the symbol ``MX'' for a good of Mexico, as a 
prefix to the subheading of the HTSUS under which each qualifying good 
is classified. Except as otherwise provided in 19 CFR 181.22 and except 
in the case of a good to which Appendix 6.B to Annex 300-B of the NAFTA 
applies (see also 19 CFR 102.25), the declaration must be based on a 
complete and properly executed original Certificate of Origin, or copy 
thereof, which is in the possession of the importer and which covers 
the good being imported.
* * * * *


Sec.  181.22  [Amended]

0
7. In Sec.  181.22:
0
a. Paragraph (b) introductory text is amended by removing the word 
``Customs'' the first instance it appears and, in its place, adding the 
term ``CBP''.
0
b. In paragraph (b)(1), the three references to ``Customs Form 434'' 
are removed and references to ``CBP Form 434'' are added in their 
place; the reference to the ``Office of Field Operations, U.S. Customs 
Service'' is removed and the reference ``Office of International Trade, 
U.S. Customs and Border Protection'' is added in its place.
0
c. Paragraph (b)(4) is amended by removing the word ``Customs'' and, in 
its place, adding the term ``CBP''.
0
d. Paragraph (d)(1)(iii) is amended by removing the phrase ``of a good 
whose value'', and the phrase ``for which the total value of 
originating goods'' is added in its place.

[[Page 52783]]

Sec.  181.74  [Amended]

0
8. In Sec.  181.74:
0
a. Paragraph (a) is amended by removing the citation to 
``181.72(a)(2)(iii)'' and adding in its place the citation to 
``181.72(a)(3)(iii)'', and by removing the word ``Customs'' and, in its 
place, adding the term ``CBP''.
0
b. Paragraphs (b) and (c) are amended by removing the term ``Customs'' 
each place it appears and, in its place, adding the term ``CBP''.
0
c. In paragraph (d) introductory text, the reference to ``Customs 
officer'' is removed and the term ``CBP officer'' is added in its 
place; and the two references to ``Customs'' which follow are removed 
and in each instance the term ``CBP'' is added in its place.
0
d. Paragraph (e)(1) is amended, in the second sentence following the 
heading, by removing the word ``Customs'' and, in its place, adding the 
term ``CBP'', and by removing the address citation ``Project North Star 
Coordination Center, P.O. Box 400, Buffalo, New York 14225-0400'', and, 
in its place, adding the address citation ``U.S. Customs and Border 
Protection, Office of International Trade, Commercial Targeting and 
Enforcement, 1300 Pennsylvania Ave., NW., Washington, DC 20229''.
0
e. Paragraph (e)(2) is amended by removing the phrase ``Customs may'', 
and adding in its place the phrase ``CBP may''.


Sec.  181.93  [Amended]

0
9. In Sec.  181.93:
0
a. In paragraph (a), the two references to ``Commissioner of Customs'' 
are removed and in each instance references to ``Commissioner of U.S. 
Customs and Border Protection'' are added in its place, and the address 
citation ``National Commodity Specialist Division, United States 
Customs Service, 6 World Trade Center, New York, NY 10048'' is removed 
and the address citation ``National Commodity Specialist Division, U.S. 
Customs and Border Protection, One Penn Plaza, 10th Floor, New York, NY 
10119'' is added in its place.
0
b. Paragraphs (b)(1)(i), (b)(1)(ii), (b)(3), (b)(4), (b)(5)(i)(A), and 
(d) are amended by removing the word ``Customs'' each place it appears 
and, in its place, adding the term ``CBP''.

Jayson P. Ahern,
Acting Commissioner, U.S. Customs and Border Protection.
    Approved: September 10, 2007.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 07-4551 Filed 9-14-07; 8:45 am]
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