United States-Bahrain Free Trade Agreement, 58511-58522 [07-5062]

Agencies

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

[Federal Register Volume 72, Number 199 (Tuesday, October 16, 2007)]
[Rules and Regulations]
[Pages 58511-58522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-5062]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR PARTS 10, 24, 102, 162, 163, and 178

USCBP-2007-0063
CBP Dec. 07-81
RIN 1505-AB81


United States-Bahrain Free Trade Agreement

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 preferential 
tariff treatment and other customs-related provisions of the United 
States-Bahrain Free Trade Agreement entered into by the United States 
and the Kingdom of Bahrain.

DATES: Interim rule effective October 16, 2007; comments must be 
received by December 17, 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-2007-0063.
     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 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.
    Other Operational Aspects: Seth Mazze, Office of International 
Trade, (202) 344-2634.
    Audit Aspects: Mark Hanson, Office of International Trade, (202) 
863-3065.
    Legal Aspects: Holly Files, Office of International Trade, (202) 
572-8817.

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 
will reference a specific portion of the interim rule, explain the 
reason for any recommended change, and include data, information, or 
authority that support such recommended change. See ADDRESSES above for 
information on how to submit comments.

Background

    On September 14, 2004, the United States and the Kingdom of Bahrain 
(the ``Parties'') signed the U.S.-Bahrain Free Trade Agreement 
(``BFTA'' or ``Agreement''). The stated objectives of the BFTA include 
creating new employment opportunities and raising the standard of 
living for the citizens of the Parties by liberalizing and expanding 
trade between them; enhancing the competitiveness of the enterprises of 
the Parties in global markets; establishing clear and mutually 
advantageous rules governing trade between the Parties; eliminating 
bribery and corruption in international trade and investment; fostering 
creativity and innovation by improving technology and enhancing the 
protection and enforcement of intellectual property rights; 
strengthening the development and enforcement of labor and 
environmental laws and policies; and establishing an expanded free 
trade area in the Middle East, thereby contributing to economic 
liberalization and development in the region.

[[Page 58512]]

    The provisions of the BFTA were adopted by the United States with 
the enactment of the United States-Bahrain Free Trade Agreement 
Implementation Act (the ``Act''), Public Law 109-169, 119 Stat. 3581 
(19 U.S.C. 3805 note), on January 11, 2006. Section 205 of the Act 
requires that regulations be prescribed as necessary.
    On July 27, 2006, the President signed Proclamation 8039 to 
implement the provisions of the BFTA. The proclamation, which was 
published in the Federal Register on August 1, 2006 (71 FR 43635), 
modified the Harmonized Tariff Schedule of the United States 
(``HTSUS'') as set forth in Annexes I and II of Publication 3830 of the 
U.S. International Trade Commission. The modifications to the HTSUS 
included the addition of new General Note 30, incorporating the 
relevant BFTA rules of origin as set forth in the Act, and the 
insertion throughout the HTSUS of the preferential duty rates 
applicable to individual products under the BFTA where the special 
program indicator ``BH'' appears in parenthesis in the ``Special'' rate 
of duty subcolumn. The modifications to the HTSUS also included a new 
Subchapter XIV to Chapter 99 to provide for temporary tariff rate 
quotas and applicable safeguards implemented by the BFTA.
    U.S. Customs and Border Protection (``CBP'') is responsible for 
administering the provisions of the BFTA and the Act that relate to the 
importation of goods into the United States from Bahrain. Those 
customs-related BFTA provisions that require implementation through 
regulation include certain tariff and non-tariff provisions within 
Chapter One (Initial Provisions and Definitions), Chapter Two (National 
Treatment and Market Access for Goods), Chapter Three (Textiles and 
Apparel), Chapter Four (Rules of Origin), and Chapter Five (Customs 
Administration).
    These implementing regulations incorporate certain general 
definitions set forth in Article 1.3 of the BFTA. These regulations 
also implement Article 2.6 (Goods Re-entered After Repair or 
Alteration) of Chapter Two of the BFTA.
    Chapter Three of the BFTA sets forth the measures relating to trade 
in textile and apparel goods between Bahrain and the United States 
under the BFTA. The provisions within Chapter Three that require 
regulatory action by CBP are Article 3.2 (Rules of Origin and Related 
Matters), Article 3.3 (Customs Cooperation), and Article 3.4 
(Definitions).
    Chapter Four of the BFTA sets forth the rules for determining 
whether an imported good qualifies as an originating good of the United 
States or Bahrain (BFTA Party) and, as such, is therefore eligible for 
preferential tariff (duty-free or reduced duty) treatment as specified 
in the Agreement. Under Article 4.1, originating goods may be grouped 
in three broad categories: (1) Goods that are wholly the growth, 
product, or manufacture of one or both of the Parties; (2) goods (other 
than those covered by the product-specific rules set forth in Annex 3-A 
or Annex 4-A) that are new or different articles of commerce that have 
been grown, produced, or manufactured in the territory of one or both 
of the Parties, and that have a minimum value-content, i.e., at least 
35 percent of the good's appraised value must be attributed to the cost 
or value of materials produced in one or both of the Parties plus the 
direct costs of processing operations performed in one or both of the 
Parties; and (3) goods that satisfy the product-specific rules set 
forth in Annex 3-A (textile or apparel goods) or Annex 4-A (certain 
non-textile or non-apparel goods).
    Article 4.2 explains that the term ``new or different article of 
commerce'' means a good that has been substantially transformed from a 
good or material that is not wholly the growth, product, or manufacture 
of one or both of the Parties and that has a new name, character, or 
use distinct from the good or material from which it was transformed. 
Article 4.3 provides that a good will not be considered to be a new or 
different article of commerce as the result of undergoing simple 
combining or packaging operations, or mere dilution with water or 
another substance that does not materially alter the characteristics of 
the good.
    Article 4.4 provides for the accumulation of production in the 
territory of one or both of the Parties in determining whether a good 
qualifies as originating under the BFTA. Articles 4.5 and 4.6 set forth 
the rules for calculating the value of materials and the direct costs 
of processing operations, respectively, for purposes of determining 
whether a good satisfies the 35 percent value-content requirement.
    Articles 4.7 through 4.9 consist of additional sub-rules applicable 
to originating goods, involving retail packaging materials, packing 
materials for shipment, indirect materials, and transit and 
transshipment. In addition, Articles 4.10 and 4.11 set forth the 
procedural requirements that apply under the BFTA, in particular with 
regard to importer claims for preferential tariff treatment. Article 
4.14 provides definitions of certain terms used in Chapter Four of the 
BFTA. The basic rules of origin in Chapter Four of the BFTA are set 
forth in General Note 30, HTSUS.
    Chapter Five sets forth the customs operational provisions related 
to the implementation and administration of the BFTA.
    In order to provide transparency and facilitate their use, the 
majority of the BFTA implementing regulations set forth in this 
document have been included within new Subpart N in Part 10 of the CBP 
regulations (19 CFR Part 10). However, in those cases in which BFTA 
implementation is more appropriate in the context of an existing 
regulatory provision, the BFTA regulatory text has been incorporated in 
an existing Part within the CBP regulations. In addition, this document 
sets forth several cross-references and other consequential changes to 
existing regulatory provisions to clarify the relationship between 
those existing provisions and the new BFTA implementing regulations. 
The regulatory changes are discussed below in the order in which they 
appear in this document.

Discussion of Amendments

Part 10

    Section 10.31(f) concerns temporary importations under bond. It is 
amended by adding references to certain goods originating in Bahrain 
for which, like goods originating in Canada, Mexico, Singapore, Chile, 
and Morocco, no bond or other security will be required when imported 
temporarily for prescribed uses. The provisions of BFTA Article 2.5 
(temporary admission of goods) are already reflected in existing 
temporary importation bond or other provisions contained in Part 10 of 
the CBP regulations and in Chapter 98 of the HTSUS.

Part 10, Subpart N

General Provisions
    Section 10.801 outlines the scope of new Subpart N, Part 10. This 
section also clarifies that, except where the context otherwise 
requires, the requirements contained in Subpart N, Part 10 are in 
addition to general administrative and enforcement provisions set forth 
elsewhere in the CBP regulations. Thus, for example, the specific 
merchandise entry requirements contained in Subpart N, Part 10 are in 
addition to the basic entry requirements contained in Parts 141-143 of 
the CBP regulations.
    Section 10.802 sets forth definitions of common terms used in 
multiple contexts or places within Subpart N,

[[Page 58513]]

Part 10. Although the majority of the definitions in this section are 
based on definitions contained in Article 1.3 of the BFTA and Sec.  3 
of the Act, other definitions have also been included to clarify the 
application of the regulatory texts. Additional definitions which apply 
in a more limited Subpart N, Part 10 context are set forth elsewhere 
with the substantive provisions to which they relate.
Import Requirements
    Section 10.803 sets forth the procedure for claiming BFTA tariff 
benefits at the time of entry.
    Section 10.804, as provided in BFTA Article 4.10(b), requires a 
U.S. importer, upon request, to submit a declaration setting forth all 
pertinent information concerning the growth, production, or manufacture 
of the good. Included in Sec.  10.804 is a provision that the 
declaration may be used either for a single importation or for multiple 
importations of identical goods.
    Section 10.805 sets forth certain importer obligations regarding 
the truthfulness of information and documents submitted in support of a 
claim for preferential tariff treatment under the BFTA. As provided in 
BFTA Article 4.10(a), this section states that a U.S. importer who 
makes a claim for preferential tariff treatment for a good is deemed to 
have certified that the good qualifies for such treatment.
    Section 10.806 provides that the importer's declaration is not 
required for certain non-commercial or low-value importations.
    Section 10.807 implements the portion of BFTA Article 4.10 
concerning the maintenance of records necessary for the preparation of 
the declaration.
    Section 10.808, which is based on BFTA Article 4.11.1, provides for 
the denial of BFTA tariff benefits if the importer fails to comply with 
any of the requirements of Subpart N, Part 10, CBP regulations.
Rules of Origin
    Sections 10.809 through 10.817 provide the implementing regulations 
regarding the rules of origin provisions of General Note 30, HTSUS, 
Article 3.2 and Chapter Four of the BFTA, and Sec.  202 of the Act.
Definitions
    Section 10.809 sets forth terms that are defined for purposes of 
the rules of origin. CBP notes that, pursuant to letters of 
understanding exchanged between the Parties on September 14, 2004, in 
determining whether a good meets the definition of a ``new or different 
article of commerce'' in paragraph (i) of Sec.  10.809, the United 
States should be guided by the provisions of Part 102 of the CBP 
regulations (19 CFR Part 102).
General Rules of Origin
    Section 10.810 includes the basic rules of origin established in 
Article 4.1 of the BFTA, section 202(b) of the Act, and General Note 
30(b), HTSUS.
    Paragraph (a) of Sec.  10.810 sets forth the three basic categories 
of goods that are considered originating goods under the BFTA. 
Paragraph (a)(1) of Sec.  10.810 specifies those goods that are 
considered originating goods because they are wholly the growth, 
product, or manufacture of one or both of the Parties. Paragraph (a)(2) 
provides that goods are considered originating goods if they: (1) Are 
new or different articles of commerce that have been grown, produced, 
or manufactured in the territory of one or both of the Parties as 
determined by application of the provisions of Sec.  102.1 through 
Sec.  102.21 of the CBP regulations (19 CFR 102.1 102.21); (2) are 
classified in HTSUS provisions that are not covered by the product-
specific rules set forth in General Note 30(h), HTSUS; and (3) meet a 
35 percent domestic-content requirement. Finally, paragraph (a)(3) 
states that goods are considered originating goods if: (1) They are 
classified in HTSUS provisions that are covered by the product-specific 
rules set forth in General Note 30(h), HTSUS; (2) each non-originating 
material used in the production of the good in the territory of one or 
both of the Parties undergoes an applicable change in tariff 
classification or otherwise satisfies the requirements specified in 
General Note 30(h), HTSUS; and (3) the goods meet any other 
requirements specified in General Note 30, HTSUS.
    Paragraph (b) of Sec.  10.810 sets forth the basic rules that apply 
for purposes of determining whether a good satisfies the 35 percent 
domestic-content requirement referred to in Sec.  10.810(a)(2).
    Paragraph (c) of Sec.  10.810 implements Article 4.3 of the BFTA, 
relating to the simple combining or packaging or mere dilution 
exceptions to the ``new or different article of commerce'' requirement 
of Sec.  10.810(a)(2). Since the language in Article 4.3 of the BFTA 
(and Sec.  202(i)(7)(B) of the Act) is nearly identical to the language 
found in Sec.  213(a)(2) of the Caribbean Basin Economic Recovery Act 
(``CBERA'') (19 U.S.C. 2703(a)(2)), Sec.  10.810(c) incorporates by 
reference the examples and principles set forth in Sec.  10.195(a)(2) 
of CBP's implementing CBERA regulations.
Originating Textile or Apparel Goods
    Section 10.811(a), as provided for in Article 3.2.6 of the BFTA, 
sets forth a de minimis rule for certain textile or apparel goods that 
may be considered to qualify as originating goods even though they fail 
to satisfy the applicable change in tariff classification set out in 
General Note 30(h). This paragraph also includes an exception to the de 
minimis rule.
    Section 10.811(b), which is based on Article 3.2.7 of the BFTA, 
sets forth a special rule for textile or apparel goods classifiable 
under General Rule of Interpretation 3, HTSUS, as goods put up in sets 
for retail sale.
Accumulation
    Section 10.812, which is derived from BFTA Article 4.4, sets forth 
the rule by which originating goods or materials from the territory of 
a Party that are used in the production of a good in the territory of 
the other Party will be considered to originate in the territory of 
such other Party. In addition, this section also establishes that a 
good or material that is produced by one or more producers in the 
territory of one or both of the Parties is an originating good or 
material if the article satisfies all of the applicable requirements of 
the rules of origin of the BFTA.
Value of Materials
    Section 10.813 implements Article 4.5 of the BFTA, relating to the 
calculation of the value of materials that may be applied toward 
satisfaction of the 35 percent value-content requirement.
Direct Costs of Processing Operations
    Section 10.814, which reflects Article 4.6 of the BFTA, sets forth 
provisions regarding the calculation of direct costs of processing 
operations for purposes of the 35 percent value-content requirement.
Packaging and Packing Materials and Containers for Retail Sale and for 
Shipment
    Section 10.815 is based on Article 4.7 of the BFTA and provides 
that retail packaging materials and packing materials for shipment are 
to be disregarded in determining whether a good qualifies as 
originating under the BFTA, except to the extent that the value of such 
packaging and packing materials may be included for purposes of meeting 
the 35 percent value-content requirement.
Indirect Materials
    Section 10.816, which is derived from Article 4.8 of the BFTA, 
provides that indirect materials will be disregarded in determining 
whether a good qualifies as

[[Page 58514]]

an originating good under the BFTA, except to the extent that the cost 
of such indirect materials may be included toward satisfying the 35 
percent value-content requirement.
Imported Directly
    Section 10.817(a) sets forth the basic rule, found in Article 4.1 
of the BFTA, that a good must be imported directly from the territory 
of a Party into the territory of the other Party to qualify as an 
originating good under the BFTA. This paragraph further provides that, 
as set forth in Article 4.9 of the BFTA, a good will not be considered 
to be imported directly if, after exportation from the territory of a 
Party, the good undergoes production, manufacturing, or any other 
operation outside the territories of the Parties, other than certain 
minor operations.
    Paragraph (b) of Sec.  10.817 provides that an importer making a 
claim for preferential tariff treatment under the BFTA may be required 
to demonstrate, through the submission of documentary evidence, that 
the ``imported directly'' requirement was satisfied.
Tariff Preference Level
    Section 10.818 sets forth the procedures for claiming BFTA tariff 
benefits for non-originating fabric, apparel, or made-up goods entitled 
to preference under an applicable tariff preference level (``TPL'').
    Section 10.819, which is based on Articles 3.2.8(a) through 
3.2.8(d), describes the non-originating fabric, apparel, and made-up 
goods that are eligible for TPL claims under the BFTA.
    Section 10.820 is based on Article 3.2.10 of the BFTA and 
establishes that, at the written request of the Government of Bahrain, 
CBP will require an importer claiming preferential treatment on a non-
originating cotton or man-made fiber good specified in Sec.  10.819 to 
submit a certificate of eligibility.
    Section 10.821 reflects Article 3.2.11 of the BFTA. Paragraph (a) 
of Sec.  10.821 provides that an importer claiming preferential 
treatment on a non-originating cotton or man-made fiber good specified 
in Sec.  10.819 must submit, at the request of the port director, a 
declaration setting forth all pertinent production information. 
Paragraph (b) of Sec.  10.821 requires that an importer must retain all 
records relied upon to prepare the declaration for a period of five 
years.
    Section 10.822 establishes that non-originating fabric or apparel 
goods are entitled to preferential tariff treatment under an applicable 
TPL only if they are imported directly from the territory of a Party 
into the territory of the other Party.
    Section 10.823 provides for the denial of a TPL claim if the 
importer fails to comply with any applicable requirement under Subpart 
N, Part 10, CBP regulations, including the failure to provide 
documentation, when requested by CBP, establishing that the good was 
imported directly from the territory of a Party into the territory of 
the other Party.
Origin Verifications and Determinations
    Sections 10.824 implements BFTA Article 4.11.2 by providing that a 
claim for BFTA preferential tariff treatment, including any information 
submitted in support of the claim, will be subject to such verification 
as CBP deems necessary. This section further sets forth the 
circumstances under which a claim may be denied based on the results of 
the verification.
    Section 10.825 implements BFTA Article 4.11.3 by providing that CBP 
will issue a determination to the importer when CBP determines that a 
claim for BFTA preferential tariff treatment should be denied based on 
the results of a verification. This section also prescribes the 
information required to be included in the determination.
Penalties
    Section 10.826 concerns the general application of penalties to 
BFTA transactions and is based on BFTA Article 5.9.
Goods Returned After Repair or Alteration
    Section 10.827 implements BFTA Article 2.6 regarding duty treatment 
of goods re-entered after repair or alteration in Bahrain.

Part 24

    A paragraph is added to Sec.  24.23(c), which concerns the 
merchandise processing fee (MPF) to implement Sec.  203 of the Act, 
providing that the MPF is not applicable to goods that qualify as 
originating goods as provided for under Sec.  202 of the Act.

Part 102

    Part 102 contains regulations regarding the rules for determining 
the country of origin of imported goods for various purposes. Section 
102.0, which sets forth the scope of Part 102, is amended to notify 
readers that the rules of Sec. Sec.  102.1 through 102.21 will be used 
for purposes of determining whether a good is considered a new and 
different article of commerce under the BFTA.

Part 162

    Part 162 contains regulations regarding the inspection and 
examination of, among other things, imported merchandise. A cross-
reference is added to Sec.  162.0, which is the scope section of the 
part, to refer readers to the additional BFTA records maintenance and 
examination provisions contained in new Subpart N, Part 10, CBP 
regulations.

Part 163

    A conforming amendment is made to Sec.  163.1 to include the 
maintenance of any documentation that the importer may have in support 
of a claim for preference under the BFTA as an activity for which 
records must be maintained. Also, the list or records and information 
required for the entry of merchandise appearing in the Appendix to Part 
163 (commonly known as the (a)(1)(A) list)) is also amended to add the 
BFTA records that the importer may have in support of a BFTA claim for 
preferential tariff treatment.

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, Public Law 104-13. The list 
contained in Sec.  178.2 is amended to add the information collections 
used by CBP to determine eligibility for a tariff preference or other 
rights or benefits under the BFTA and the Act.

Inapplicability of Notice and Delayed Effective Date Requirements

    Under section 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, section 553(a)(1) of the APA provides that the standard 
prior notice and comment procedures do not apply to an agency 
rulemaking that involves the foreign affairs function of the United 
States. CBP has determined that these interim regulations involve a 
foreign affairs function of the United States, as they implement 
preferential tariff treatment and related provisions of the BFTA. 
Therefore, the rulemaking requirements under the APA do not apply and 
this interim rule will be effective upon publication. However, CBP is 
soliciting comments in this interim rule and will consider all comments 
it receives before issuing a final rule.

[[Page 58515]]

Executive Order 12866 and Regulatory Flexibility Act

    CBP has determined that this document is not a regulation or rule 
subject to the provisions of Executive Order 12866 of September 30, 
1993 (58 FR 51735, October 1993), because it pertains to a foreign 
affairs function of the United States and implements an international 
agreement, as described above, and therefore is specifically exempted 
by section 3(d)(2) of Executive Order 12866. 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 Administrative Procedure Act (5 U.S.C. 553). 
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 1651-0130.
    The collections of information in these regulations are in 
Sec. Sec.  10.803, 10.804, 10.818, and 10.821. This information is 
required in connection with claims for preferential tariff treatment 
and for the purpose of the exercise of other rights under the BFTA and 
the Act and will be used by CBP to determine eligibility for a tariff 
preference or other rights or benefits under the BFTA and the Act. The 
likely respondents are business organizations including importers, 
exporters and manufacturers.
    Estimated total annual reporting burden: 100 hours.
    Estimated average annual burden per respondent: 12 minutes.
    Estimated number of respondents: 500.
    Estimated annual frequency of responses: 1.
    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

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

19 CFR Part 24

    Financial and accounting procedures.

19 CFR Part 102

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

19 CFR Part 162

    Administrative practice and procedure, Customs duties and 
inspection, Penalties, Trade agreements.

19 CFR Part 163

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

19 CFR Part 178

    Administrative practice and procedure, Exports, Imports, Reporting 
and recordkeeping requirements.

Amendments to the CBP Regulations

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 N 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 10.801 through 10.829 also issued under 19 U.S.C. 1202 
(General Note 30, HTSUS) and Pub. L. 109-169, 119 Stat. 3581 (19 U.S.C. 
3805 note).

0
2. In Sec.  10.31, paragraph (f), the last sentence is revised to read 
as follows:


Sec.  10.31  Entry; bond.

* * * * *
    (f) * * * In addition, notwithstanding any other provision of this 
paragraph, in the case of professional equipment necessary for carrying 
out the business activity, trade or profession of a business person, 
equipment for the press or for sound or television broadcasting, 
cinematographic equipment, articles imported for sports purposes and 
articles intended for display or demonstration, if brought into the 
United States by a resident of Canada, Mexico, Chile, Singapore, 
Morocco, or Bahrain and entered under Chapter 98, Subchapter XIII, 
HTSUS, no bond or other security will be required if the entered 
article is a good originating, within the meaning of General Notes 12, 
25, 26, 27 and 30, HTSUS, in the country of which the importer is a 
resident.
* * * * *

0
3. Part 10, CBP regulations, is amended by adding Subpart N to read as 
follows:
Subpart N--United States-Bahrain Free Trade Agreement

General Provisions

Sec.
10.801 Scope.
10.802 General definitions.

Import Requirements

10.803 Filing of claim for preferential tariff treatment upon 
importation.
10.804 Declaration.
10.805 Importer obligations.
10.806 Declaration not required.
10.807 Maintenance of records.
10.808 Effect of noncompliance; failure to provide documentation 
regarding transshipment.

Rules of Origin

10.809 Definitions.
10.810 Originating goods.
10.811 Textile or apparel goods.
10.812 Accumulation.
10.813 Value of materials.
10.814 Direct costs of processing operations.
10.815 Packaging and packing materials and containers for retail 
sale and for shipment.
10.816 Indirect materials.
10.817 Imported directly.

[[Page 58516]]

Tariff Preference Level

10.818 Filing of claim for tariff preference level.
10.819 Goods eligible for tariff preference claims.
10.820 Certificate of eligibility.
10.821 Declaration.
10.822 Transshipment of non-originating fabric or apparel goods.
10.823 Effect of non-compliance; failure to provide documentation 
regarding transshipment of non-originating fabric or apparel goods.

Origin Verifications and Determinations

10.824 Verification and justification of claim for preferential 
treatment.
10.825 Issuance of negative origin determinations.

Penalties

10.826 Violations relating to the BFTA.

Goods Returned After Repair or Alteration

10.827 Goods re-entered after repair or alteration in Bahrain.

Subpart N--United States-Bahrain Free Trade Agreement

General Provisions


Sec.  10.801  Scope.

    This subpart implements the duty preference and related customs 
provisions applicable to imported goods under the United States-Bahrain 
Free Trade Agreement (the BFTA) signed on September 14, 2004, and under 
the United States-Bahrain Free Trade Agreement Implementation Act (the 
Act; 119 Stat. 3581). Except as otherwise specified in this subpart, 
the procedures and other requirements set forth in this subpart are in 
addition to the customs procedures and requirements of general 
application contained elsewhere in this chapter. Additional provisions 
implementing certain aspects of the BFTA and the Act are contained in 
Parts 24, 102, 162, and 163 of this chapter.


Sec.  10.802  General definitions.

    As used in this subpart, the following terms will 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) Claim of origin. ``Claim of origin'' means a claim that a good 
is an originating good or a good of a Party;
    (b) Claim for preferential tariff treatment. ``Claim for 
preferential tariff treatment'' means a claim that a good is entitled 
to the duty rate applicable under the BFTA to an originating good or 
other good specified in the BFTA, and to an exemption from the 
merchandise processing fee;
    (c) Customs Valuation Agreement. ``Customs Valuation Agreement'' 
means the Agreement on Implementation of Article VII of the General 
Agreement on Tariffs and Trade 1994, which is part of the WTO 
Agreement;
    (d) Customs duty. ``Customs duty'' includes any customs or import 
duty and a charge of any kind imposed in connection with the 
importation of a good, including any form of surtax or surcharge in 
connection with such importation, but does not include any:
    (1) Charge equivalent to an internal tax imposed consistently with 
Article III:2 of the GATT 1994; in respect of like, directly 
competitive, or substitutable goods of the Party, or in respect of 
goods from which the imported good has been manufactured or produced in 
whole or in part;
    (2) Antidumping or countervailing duty; and
    (3) Fee or other charge in connection with importation commensurate 
with the cost of services rendered;
    (e) Days. ``Days'' means calendar days;
    (f) Enterprise. ``Enterprise'' means any entity constituted or 
organized under applicable law, whether or not for profit, and whether 
privately-owned or governmentally-owned, including any corporation, 
trust, partnership, sole proprietorship, joint venture, or other 
association;
    (g) Foreign material. ``Foreign material'' means a material other 
than a material produced in the territory of one or both of the 
Parties;
    (h) GATT 1994. ``GATT 1994'' means the General Agreement on Tariffs 
and Trade 1994, which is part of the WTO Agreement;
    (i) Good. ``Good'' means any merchandise, product, article, or 
material;
    (j) Harmonized System. ``Harmonized System (HS)'' means the 
Harmonized Commodity Description and Coding System, including its 
General Rules of Interpretation, Section Notes, and Chapter Notes, as 
adopted and implemented by the Parties in their respective tariff laws;
    (k) Heading. ``Heading'' means the first four digits in the tariff 
classification number under the Harmonized System;
    (l) HTSUS. ``HTSUS'' means the Harmonized Tariff Schedule of the 
United States as promulgated by the U.S. International Trade 
Commission;
    (m) Originating. ``Originating'' means a good qualifying under the 
rules of origin set forth in General Note 30, HTSUS, and BFTA Chapter 
Three (Textiles and apparel) or Chapter Four (Rules of Origin);
    (n) Party. ``Party'' means the United States or the Kingdom of 
Bahrain;
    (o) Person. ``Person'' means a natural person or an enterprise;
    (p) Preferential tariff treatment. ``Preferential tariff 
treatment'' means the duty rate applicable under the BFTA to an 
originating good and an exemption from the merchandise processing fee;
    (q) Subheading. ``Subheading'' means the first six digits in the 
tariff classification number under the Harmonized System;
    (r) Textile or apparel good. ``Textile or apparel good'' means a 
good listed in the Annex to the Agreement on Textiles and Clothing 
(commonly referred to as ``the ATC''), which is part of the WTO 
Agreement;
    (s) Territory. ``Territory'' means:
    (1) With respect to Bahrain, the territory of Bahrain as well as 
the maritime areas, seabed, and subsoil over which Bahrain exercises, 
in accordance with international law, sovereignty, sovereign rights, 
and jurisdiction; and
    (2) With respect to the United States,
    (i) The customs territory of the United States, which includes the 
50 states, the District of Columbia, and Puerto Rico,
    (ii) The foreign trade zones located in the United States and 
Puerto Rico, and
    (iii) Any areas beyond the territorial seas of the United States 
within which, in accordance with international law and its domestic 
law, the United States may exercise rights with respect to the seabed 
and subsoil and their natural resources; and
    (t) WTO Agreement. ``WTO Agreement'' means the Marrakesh Agreement 
Establishing the World Trade Organization of April 15, 1994.

Import Requirements


Sec.  10.803  Filing of claim for preferential tariff treatment upon 
importation.

    An importer may make a claim for BFTA preferential tariff treatment 
for an originating good by including on the entry summary, or 
equivalent documentation, the symbol ``BH'' as a prefix to the 
subheading of the HTSUS under which each qualifying good is classified, 
or by the method specified for equivalent reporting via an authorized 
electronic data interchange system.


Sec.  10.804  Declaration.

    (a) Contents. An importer who claims preferential tariff treatment 
for a good under the BFTA must submit to CBP, at the request of the 
port director, a declaration setting forth all pertinent information 
concerning the growth, production, or manufacture of the good. A 
declaration submitted to CBP under this paragraph:
    (1) Need not be in a prescribed format but must be in writing or 
must be transmitted electronically pursuant to

[[Page 58517]]

any electronic means authorized by CBP for that purpose;
    (2) Must include the following information:
    (i) The legal name, address, telephone, and e-mail address (if any) 
of the importer of record of the good;
    (ii) The legal name, address, telephone, and e-mail address (if 
any) of the responsible official or authorized agent of the importer 
signing the declaration (if different from the information required by 
paragraph (a)(2)(i) of this section);
    (iii) The legal name, address, telephone and e-mail address (if 
any) of the exporter of the good (if different from the producer);
    (iv) The legal name, address, telephone and e-mail address (if any) 
of the producer of the good (if known);
    (v) A description of the good, which must be sufficiently detailed 
to relate it to the invoice and HS nomenclature, including quantity, 
numbers, invoice numbers, and bills of lading;
    (vi) A description of the operations performed in the growth, 
production, or manufacture of the good in territory of one or both of 
the Parties and, where applicable, identification of the direct costs 
of processing operations;
    (vii) A description of any materials used in the growth, 
production, or manufacture of the good that are wholly the growth, 
product, or manufacture of one or both of the Parties, and a statement 
as to the value of such materials;
    (viii) A description of the operations performed on, and a 
statement as to the origin and value of, any materials used in the 
article that are claimed to have been sufficiently processed in the 
territory of one or both of the Parties so as to be materials produced 
in one or both of the Parties, or are claimed to have undergone an 
applicable change in tariff classification specified in General Note 
30(h), HTSUS; and
    (ix) A description of the origin and value of any foreign materials 
used in the good that have not been substantially transformed in the 
territory of one or both of the Parties, or have not undergone an 
applicable change in tariff classification specified in General Note 
30(h), HTSUS;
    (3) Must include a statement, in substantially the following form:

    ``I certify that:
    The information on this document is true and accurate and I 
assume the responsibility for proving such representations. I 
understand that I am liable for any false statements or material 
omissions made on or in connection with this document;
    I agree to maintain and present upon request, documentation 
necessary to support these representations;
    The goods comply with all the requirements for preferential 
tariff treatment specified for those goods in the United States-
Bahrain Free Trade Agreement; and
    This document consists of ------ pages, including all 
attachments.''

    (b) Responsible official or agent. The declaration must be signed 
and dated by a responsible official of the importer or by the 
importer's authorized agent having knowledge of the relevant facts.
    (c) Language. The declaration must be completed in the English 
language.
    (d) Applicability of declaration. The declaration may be applicable 
to:
    (1) A single importation of a good into the United States, 
including a single shipment that results in the filing of one or more 
entries and a series of shipments that results in the filing of one 
entry; or
    (2) Multiple importations of identical goods into the United States 
that occur within a specified blanket period, not exceeding 12 months, 
set out in the declaration. For purposes of this paragraph, ``identical 
goods'' means goods that are the same in all respects relevant to the 
production that qualifies the goods for preferential tariff treatment.


Sec.  10.805  Importer obligations.

    (a) General. An importer who makes a claim for preferential tariff 
treatment under Sec.  10.803 of this subpart:
    (1) Will be deemed to have certified that the good is eligible for 
preferential tariff treatment under the BFTA:
    (2) Is responsible for the truthfulness of the information and data 
contained in the declaration provided for in Sec.  10.804 of this 
subpart; and
    (3) Is responsible for submitting any supporting documents 
requested by CBP and for the truthfulness of the information contained 
in those documents. CBP will allow for the direct submission by the 
exporter or producer of business confidential or other sensitive 
information, including cost and sourcing information.
    (b) Information provided by exporter or producer. The fact that the 
importer has made a claim for preferential tariff treatment or prepared 
a declaration based on information provided by an exporter or producer 
will not relieve the importer of the responsibility referred to in 
paragraph (a) of this section.


Sec.  10.806  Declaration not required.

    (a) General. Except as otherwise provided in paragraph (b) of this 
section, an importer will not be required to submit a declaration under 
Sec.  10.804 of this subpart for:
    (1) A non-commercial importation of a good; or
    (2) A commercial importation for which the value of the originating 
goods does not exceed U.S. $2,500.
    (b) Exception. If the port director determines that an importation 
described in paragraph (a) of this section may reasonably be considered 
to have been carried out or planned for the purpose of evading 
compliance with the rules and procedures governing claims for 
preference under the BFTA, the port director will notify the importer 
that for that importation the importer must submit to CBP a 
declaration. The importer must submit such a declaration within 30 days 
from the date of the notice. Failure to timely submit the declaration 
will result in denial of the claim for preferential tariff treatment.


Sec.  10.807  Maintenance of records.

    (a) General. An importer claiming preferential tariff treatment for 
a good under Sec.  10.803 of this subpart must maintain, for five years 
after the date of the claim for preferential tariff treatment, all 
records and documents necessary for the preparation of the declaration.
    (b) Applicability of other recordkeeping requirements. The records 
and documents referred to in paragraph (a) of this section are in 
addition to any other records required to be made, kept, and made 
available to CBP under Part 163 of this chapter.
    (c) Method of maintenance. The records and documents referred to in 
paragraph (a) of this section must be maintained by importers as 
provided in Sec.  163.5 of this chapter.


Sec.  10.808  Effect of noncompliance; failure to provide documentation 
regarding transshipment.

    (a) General. If the importer fails to comply with any requirement 
under this subpart, including submission of a complete declaration 
under Sec.  10.804 of this subpart, when requested, the port director 
may deny preferential tariff treatment to the imported good.
    (b) Failure to provide documentation regarding transshipment. Where 
the requirements for preferential tariff treatment set forth elsewhere 
in this subpart are met, the port director nevertheless may deny 
preferential treatment to a good if the good is shipped through or 
transshipped in the territory of a country other than a Party, and the 
importer of the good does not provide, at the request of the port 
director, evidence demonstrating to the satisfaction of the port 
director that the good was imported directly from the territory of a 
Party into the territory of the other Party (see Sec.  10.817 of this 
subpart).

[[Page 58518]]

Rules of Origin


Sec.  10.809  Definitions.

    For purposes of Sec. Sec.  10.809 through 10.817:
    (a) Exporter. ``Exporter'' means a person who exports goods from 
the territory of a Party;
    (b) Generally Accepted Accounting Principles. ``Generally Accepted 
Accounting Principles'' means the recognized consensus or substantial 
authoritative support in the territory of a Party, with respect to the 
recording of revenues, expenses, costs, assets, and liabilities, the 
disclosure of information, and the preparation of financial statements. 
These standards may encompass broad guidelines of general application 
as well as detailed standards, practices, and procedures;
    (c) Good. ``Good'' means any merchandise, product, article, or 
material;
    (d) Goods wholly the growth, product, or manufacture of one or both 
of the Parties. ``Goods wholly the growth, product, or manufacture of 
one or both of the Parties'' means:
    (1) Mineral goods extracted in the territory of one or both of the 
Parties;
    (2) Vegetable goods, as such goods are defined in the HTSUS, 
harvested in the territory of one or both of the Parties;
    (3) Live animals born and raised in the territory of one or both of 
the Parties;
    (4) Goods obtained from live animals raised in the territory of one 
or both of the Parties;
    (5) Goods obtained from hunting, trapping, or fishing in the 
territory of one or both of the parties;
    (6) Goods (fish, shellfish, and other marine life) taken from the 
sea by vessels registered or recorded with a party and flying its flag;
    (7) Goods produced from goods referred to in paragraph (d)(5) of 
this section on board factory ships registered or recorded with that 
Party and flying its flag;
    (8) Goods taken by a Party or a person of a Party from the seabed 
or beneath the seabed outside territorial waters, provided that a Party 
has rights to exploit such seabed;
    (9) Goods taken from outer space, provided they are obtained by a 
Party or a person of a Party and not processed in the territory of a 
non-Party;
    (10) Waste and scrap derived from:
    (i) Production or manufacture in the territory of one or both of 
the Parties, or
    (ii) Used goods collected in the territory of one or both of the 
Parties, provided such goods are fit only for the recovery of raw 
materials;
    (11) Recovered goods derived in the territory of a Party from used 
goods, and utilized in the territory of that Party in the production of 
remanufactured goods; and
    (12) Goods produced in the territory of one or both of the Parties 
exclusively from goods referred to in paragraphs (d)(1) through (d)(10) 
of this section, or from their derivatives, at any stage of production;
    (e) Importer. Importer means a person who imports goods into the 
territory of a Party;
    (f) Indirect material. ``Indirect material'' means a good used in 
the growth, production, manufacture, testing, or inspection of a good 
but not physically incorporated into the good, or a good used in the 
maintenance of buildings or the operation of equipment associated with 
the growth, production, or manufacture of a good, including:
    (1) Fuel and energy;
    (2) Tools, dies, and molds;
    (3) Spare parts and materials used in the maintenance of equipment 
and buildings;
    (4) Lubricants, greases, compounding materials, and other materials 
used in the growth, production, or manufacture of a good or used to 
operate equipment and buildings;
    (5) Gloves, glasses, footwear, clothing, safety equipment, and 
supplies;
    (6) Equipment, devices, and supplies used for testing or inspecting 
the good;
    (7) Catalysts and solvents; and
    (8) Any other goods that are not incorporated into the good but the 
use of which in the growth, production, or manufacture of the good can 
reasonably be demonstrated to be a part of that growth, production, or 
manufacture;
    (g) Material. ``Material'' means a good, including a part or 
ingredient, that is used in the growth, production, or manufacture of 
another good that is a new or different article of commerce that has 
been grown, produced, or manufactured in one or both of the Parties;
    (h) Material produced in the territory of one or both of the 
Parties. ``Material produced in the territory of one or both of the 
Parties'' means a good that is either wholly the growth, product, or 
manufacture of one or both of the Parties, or a new or different 
article of commerce that has been grown, produced, or manufactured in 
the territory of one or both of the Parties;
    (i) New or different article of commerce. A ``new or different 
article of commerce'' exists when the country of origin of a good which 
is produced in a Party from foreign materials is determined to be that 
country under the provisions of Sec. Sec.  102.1 through 102.21 of this 
chapter;
    (j) Non-originating material. ``Non-originating material'' means a 
material that does not qualify as originating under this subpart or 
General Note 30, HTSUS;
    (k) Packing materials and containers for shipment. ``Packing 
materials and containers for shipment'' means the goods used to protect 
a good during its transportation to the United States, and does not 
include the packaging materials and containers in which a good is 
packaged for retail sale;
    (l) Recovered goods. ``Recovered goods'' means materials in the 
form of individual parts that result from:
    (1) The complete disassembly of used goods into individual parts; 
and
    (2) The cleaning, inspecting, testing, or other processing of those 
parts as necessary for improvement to sound working condition;
    (m) Remanufactured good. ``Remanufactured good'' means an 
industrial good that is assembled in the territory of a Party and that:
    (1) Is entirely or partially comprised of recovered goods;
    (2) Has a similar life expectancy to, and meets the same 
performance standards as, a like good that is new; and
    (3) Enjoys the factory warranty similar to that of a like good that 
is new;
    (n) Simple combining or packaging operations. ``Simple combining or 
packaging operations'' means operations such as adding batteries to 
electronic devices, fitting together a small number of components by 
bolting, gluing, or soldering, or packing or repacking components 
together.


Sec.  10.810  Originating goods.

    (a) General. A good will be considered an originating good under 
the BFTA when imported directly from the territory of a Party into the 
territory of the other Party only if:
    (1) The good is wholly the growth, product, or manufacture of one 
or both of the Parties;
    (2) The good is a new or different article of commerce, as defined 
in Sec.  10.809(i) of this subpart, that has been grown, produced, or 
manufactured in the territory of one or both of the Parties, is 
provided for in a heading or subheading of the HTSUS that is not 
covered by the product-specific rules set forth in General Note 30(h), 
HTSUS, and meets the value-content requirement specified in paragraph 
(b) of this section; or
    (3) The good is provided for in a heading or subheading of the 
HTSUS covered by the product-specific rules set forth in General Note 
30(h), HTSUS, and:

[[Page 58519]]

    (i)(A) Each of the non-originating materials used in the production 
of the good undergoes an applicable change in tariff classification 
specified in General Note 30(h), HTSUS, as a result of production 
occurring entirely in the territory of one or both of the Parties; or
    (B) The good otherwise satisfies the requirements specified in 
General Note 30(h), HTSUS; and
    (ii) The good meets any other requirements specified in General 
Note 30, HTSUS.
    (b) Value-content requirement. A good described in paragraph (a)(2) 
of this section will be considered an originating good under the BFTA 
only if the sum of the value of materials produced in one or both of 
the Parties, plus the direct costs of processing operations performed 
in one or both of the Parties, is not less than 35 percent of the 
appraised value of the good at the time the good is entered into the 
territory of the United States.
    (c) Combining, packaging, and diluting operations. For purposes of 
this subpart, a good will not be considered a new or different article 
of commerce by virtue of having undergone simple combining or packaging 
operations, or mere dilution with water or another substance that does 
not materially alter the characteristics of the good. The principles 
and examples set forth in Sec.  10.195(a)(2) of this part will apply 
equally for purposes of this paragraph.


Sec.  10.811  Textile or apparel goods.

    (a) De minimis.--(1) General. Except as provided in paragraph 
(a)(2) of this section, a textile or apparel good that is not an 
originating good under the BFTA because certain fibers or yarns used in 
the production of the component of the good that determines the tariff 
classification of the good do not undergo an applicable change in 
tariff classification set out in General Note 30(h), HTSUS, will be 
considered to be an originating good if the total weight of all such 
fibers is not more than seven percent of the total weight of that 
component.
    (2) Exception. A textile or apparel good containing elastomeric 
yarns in the component of the good that determines the tariff 
classification of the good will be considered to be an originating good 
only if such yarns are wholly formed in the territory of a Party.
    (b) Textile or apparel goods put up in sets. Notwithstanding the 
specific rules specified in General Note 30(h), HTSUS, textile or 
apparel goods classifiable as goods put up in sets for retail sale as 
provided for in General Rule of Interpretation 3, HTSUS, will not be 
considered to be originating goods under the BFTA unless each of the 
goods in the set is an originating good or the total value of the non-
originating goods in the set does not exceed ten percent of the 
appraised value of the set.


Sec.  10.812  Accumulation.

    (a) An originating good or material produced in the territory of 
one or both of the Parties that is incorporated into a good in the 
territory of the other Party will be considered to originate in the 
territory of the other Party.
    (b) A good that is grown, produced, or manufactured in the 
territory of one or both of the Parties by one or more producers is an 
originating good if the good satisfies the requirements of Sec.  10.810 
of this subpart and all other applicable requirements of General Note 
30, HTSUS.


Sec.  10.813  Value of materials.

    (a) General. For purposes of Sec.  10.810(b) of this subpart and, 
except as provided in paragraph (b) of this section, the value of a 
material produced in the territory of one or both of the Parties 
includes the following:
    (1) The price actually paid or payable for the material by the 
producer of the good;
    (2) The freight, insurance, packing and all other costs incurred in 
transporting the material to the producer's plant, if such costs are 
not included in the price referred to in paragraph (a)(1) of this 
section;
    (3) The cost of waste or spoilage resulting from the use of the 
material in the growth, production, or manufacture of the good, less 
the value of recoverable scrap; and
    (4) Taxes or customs duties imposed on the material by one or both 
of the Parties, if the taxes or customs duties are not remitted upon 
exportation from the territory of a Party.
    (b) Exception. If the relationship between the producer of a good 
and the seller of a material influenced the price actually paid or 
payable for the material, or if there is no price actually paid or 
payable by the producer for the material, the value of the material 
produced in the territory of one or both of the Parties includes the 
following:
    (1) All expenses incurred in the growth, production, or manufacture 
of the material, including general expenses;
    (2) A reasonable amount for profit; and
    (3) The freight, insurance, packing, and all other costs incurred 
in transporting the material to the producer's plant.


Sec.  10.814  Direct costs of processing operations.

    (a) Items included. For purposes of Sec.  10.810(b) of this 
subpart, the words ``direct costs of processing operations'', with 
respect to a good, mean those costs either directly incurred in, or 
that can be reasonably allocated to, the growth, production, or 
manufacture of the good in the territory of one or both of the Parties. 
Such costs include, to the extent they are includable in the appraised 
value of the good when imported into a Party, the following:
    (1) All actual labor costs involved in the growth, production, or 
manufacture of the specific good, including fringe benefits, on-the-job 
training, and the costs of engineering, supervisory, quality control, 
and similar personnel;
    (2) Tools, dies, molds, and other indirect materials, and 
depreciation on machinery and equipment that are allocable to the 
specific good;
    (3) Research, development, design, engineering, and blueprint 
costs, to the extent that they are allocable to the specific good;
    (4) Costs of inspecting and testing the specific good; and
    (5) Costs of packaging the specific good for export to the 
territory of the other Party.
    (b) Items not included. For purposes of Sec.  10.810(b) of this 
subpart, the words ``direct costs of processing operations'' do not 
include items that are not directly attributable to the good or are not 
costs of growth, production, or manufacture of the good. These include, 
but are not limited to:
    (1) Profit; and
    (2) General expenses of doing business that are either not 
allocable to the good or are not related to the growth, production, or 
manufacture of the good, such as administrative salaries, casualty and 
liability insurance, advertising, and salesmen's salaries, commissions, 
or expenses.


Sec.  10.815  Packaging and packing materials and containers for retail 
sale and for shipment.

    Packaging materials and containers in which a good is packaged for 
retail sale and packing materials and containers for shipment are to be 
disregarded in determining whether a good qualifies as an originating 
good under Sec.  10.810 of this subpart and General Note 30, HTSUS, 
except to the extent that the value of such packaging and packing 
materials and containers may be included in meeting the value-content 
requirement specified in Sec.  10.810(b) of this subpart.

[[Page 58520]]

Sec.  10.816  Indirect materials.

    Indirect materials are to be disregarded in determining whether a 
good qualifies as an originating good under Sec.  10.810 of this 
subpart and General Note 30, HTSUS, except that the cost of such 
indirect materials may be included in meeting the value-content 
requirement specified in Sec.  10.810(b) of this subpart.


Sec.  10.817  Imported directly.

    (a) General. To qualify as an originating good under the BFTA, a 
good must be imported directly from the territory of a Party into the 
territory of the other Party. For purposes of this subpart, the words 
``imported directly'' mean:
    (1) Direct shipment from the territory of a Party into the 
territory of the other Party without passing through the territory of a 
non-Party; or
    (2) If the shipment passed through the territory of a non-Party, 
the good, upon arrival in the territory of a Party, will be considered 
to be ``imported directly'' only if the good:
    (i) Remained under the control of the customs authority of the non-
Party; and
    (ii) Did not undergo production, manufacturing, or any other 
operation outside the territories of the Parties, other than unloading, 
reloading, or any other operation necessary to preserve the good in 
good condition or to transport the good to the territory of a Party. 
Operations that may be performed outside the territories of the Parties 
include inspection, removal of dust that accumulates during shipment, 
ventilation, spreading out or drying, chilling, replacing salt, sulfur 
dioxide, or aqueous solutions, replacing damaged packing materials and 
containers, and removal of units of the good that are spoiled or 
damaged and present a danger to the remaining units of the good, or to 
transport the good to the territory of a Party.
    (b) Documentary evidence. An importer making a claim for 
preferential tariff treatment under the BFTA for an originating good 
may be required to demonstrate, to CBP's satisfaction, that the good 
was ``imported directly'' from the territory of a Party into the 
territory of the other Party, as that term is defined in paragraph (a) 
of this section. An importer may demonstrate compliance with this 
section by submitting documentary evidence. Such evidence may include, 
but is not limited to, bills of lading, airway bills, packing lists, 
commercial invoices, receiving and inventory records, and customs entry 
and exit documents.

Tariff Preference Level


Sec.  10.818  Filing of claim for tariff preference level.

    A fabric, apparel, or made-up good described in Sec.  10.819 of 
this subpart that does not qualify as an originating good under Sec.  
10.810 of this subpart may nevertheless be entitled to preferential 
tariff treatment under the BFTA under an applicable tariff preference 
level (TPL). To make a TPL claim, the importer must include on the 
entry summary, or equivalent documentation, the applicable subheading 
in Chapter 99 of the HTSUS (9914.99.20) immediately above the 
applicable subheading in Chapter 52 through Chapter 63 of the HTSUS 
under which each non-originating fabric or apparel good is classified.


Sec.  10.819  Goods eligible for tariff preference claims.

    The following goods are eligible for a TPL cla