Haitian Hemispheric Opportunity Through Partnership Encouragement Acts of 2006 and 2008, 56715-56729 [E8-23008]

Agencies

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

[Federal Register Volume 73, Number 190 (Tuesday, September 30, 2008)]
[Rules and Regulations]
[Pages 56715-56729]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23008]


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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

[Docket No. USCBP-2007-0062; CBP Dec. 08-24]
RIN 1505-AB82


Haitian Hemispheric Opportunity Through Partnership Encouragement 
Acts of 2006 and 2008

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

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule, with some changes, 
interim amendments to title 19 of the Code of Federal Regulations which 
were published in the Federal Register on June 22, 2007, as CBP Dec. 
07-43 to implement the duty-free provisions of the Haitian Hemispheric 
Opportunity through Partnership Encouragement (``HOPE I'') Act of 2006. 
The regulatory amendments adopted as a final rule in this document 
include changes necessitated by enactment of the Haitian Hemispheric 
Opportunity through Partnership Encouragement (``HOPE II'') Act of 
2008.

DATES: This final rule is effective on September 30, 2008.

FOR FURTHER INFORMATION CONTACT: Textile Operational Aspects: Robert 
Abels, Office of International Trade, (202) 863-6503.
    Other Operational Aspects: Heather Sykes, Office of International 
Trade, (202) 863-6099.
    Legal Aspects: Cynthia Reese, Office of International Trade, (202) 
572-8812, or Craig Walker, Office of International Trade, (202) 572-
8836.

SUPPLEMENTARY INFORMATION:

Background

    On June 22, 2007, interim regulations were promulgated to implement 
the duty-free provisions of the Haitian Hemispheric Opportunity through 
Partnership Encouragement (``HOPE I'') Act of 2006. The regulatory 
amendments adopted as a final rule in this document include changes 
necessitated by the June 18, 2008 enactment of the Haitian Hemispheric 
Opportunity through Partnership Encouragement (``HOPE II'') Act of 
2008. Detailed information on both the HOPE I and HOPE II Acts follows.

Haitian Hemispheric Opportunity Through Partnership Encouragement Act 
of 2006

    On December 20, 2006, the President signed into law the Tax Relief 
and Health Care Act of 2006 (``the 2006 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'' 
(``HOPE I Act'').
    Section 5002 of the Act amended the Caribbean Basin Economic 
Recovery Act (the CBERA, also referred to as the Caribbean Basin 
Initiative, or CBI, statute codified at 19 U.S.C. 2701-2707) by adding 
a new section 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. As created by the 
HOPE I Act, section 213A of the CBERA consisted of six principal 
subsections, each of which is summarized below.
    Subsection (a) of section 213A of the CBERA set forth definitions 
of several terms used in section 213A. Subsection (b) of section 213A 
specified the conditions and requirements that must be met for certain 
apparel articles from Haiti to receive duty-free treatment. Subsection 
(c) of section 213A of the CBERA provided for the duty-free treatment 
of any article classifiable in subheading 8544.30.00 of the Harmonized 
Tariff Schedule of the United States (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 section 213A set forth certain eligibility 
requirements that Haiti must meet as a prerequisite for articles to 
receive duty-free treatment under this section. This subsection 
required that the President determine whether Haiti met these 
requirements within 90 days after the date of enactment of the HOPE Act 
(or by March 20, 2007).
    Subsection (e) of section 213A (redesignated as subsection (f) by 
HOPE II Act) provided 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 section 213A (redesignated as subsection (g) by 
HOPE II Act) provided 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. Section 213A(f) further provided 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 consulted with the Committee on Ways 
and Means and the Committee on Finance regarding the implementing 
interim regulations.
    For a more detailed description of the statutory provisions set 
forth in the HOPE I Act, please see CBP Dec. 07-43.
    On March 19, 2007, the President signed Proclamation 8114 to 
implement the provisions of the HOPE I 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 section 213A(d) of 
the CBERA and (2) is meeting the conditions set forth in section 
213A(e) (redesignated as section 213A(f) by HOPE II). 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 56716]]

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.
    On June 22, 2007, Customs and Border Protection (``CBP'') published 
in the Federal Register (72 FR 34365) as CBP Dec. 07-43 an interim rule 
setting forth amendments to title 19 of the Code of Federal Regulations 
(``CFR'') to implement the duty-free provisions of the HOPE I Act set 
forth in subsections (a) through (c) of section 213A of the CBERA. As 
the HOPE Act was signed on December 20, 2006, implementing regulations 
were due on June 20, 2007 by subsection (f) of section 213A of the 
CBERA. In order to provide transparency and facilitate their use, the 
interim implementing regulations were included within new subpart O in 
part 10 of the CBP regulations (19 CFR part 10, subpart O). Action to 
adopt these interim regulations as a final rule was withheld pending 
anticipated action on the part of Congress to amend the underlying 
statutory provisions in the Food, Conservation and Energy Act of 2008 
(Haiti HOPE II Act).
    Although the interim regulatory amendments were promulgated without 
prior public notice and comment procedures and took effect on June 22, 
2007, CBP Dec. 07-43 provided for the submission of public comments 
that would be considered before adopting the interim regulations as a 
final rule. The prescribed public comment period closed on August 21, 
2007. A discussion of the comments received by CBP is set forth below.

Haitian Hemispheric Opportunity Through Partnership Encouragement Act 
of 2008

    On May 21, 2008, the Food, Conservation and Energy Act of 2008 
(Pub. L. 110-234) (``2008 Act'') became law when Congress overrode the 
President's veto of this legislation. Part I, Subtitle D, Title XV of 
the 2008 Act, referred to in the Act as the Haitian Hemispheric 
Opportunity through Partnership Encouragement Act of 2008 (HOPE II 
Act), amended certain provisions of section 213A of the CBERA. The HOPE 
II Act amendments that require implementation through regulation by CBP 
are set forth in section 15402 of the 2008 Act, which amended 
subsections (a) and (b) of section 213A of the CBERA concerning the 
textile and apparel articles to which preferential tariff treatment 
applies under this program. A summary of the principal substantive 
amendments to section 213A(b) effected by section 15402 of the 2008 Act 
are set forth below.
    1. Section 213A(a) was amended by adding definitions of the terms 
``imported directly from Haiti or the Dominican Republic'', ``knit-to-
shape'', and ``wholly assembled''. It is noted that the statutory 
``knit-to-shape'' definition requires no change to the interim 
regulatory text as this definition is nearly identical to the 
definition of the same term set forth in the interim regulations (see 
19 CFR 10.842(j)). The remaining two new statutory definitions 
referenced above require changes to the interim regulatory text.
    2. Re-designated section 213A(b)(1)(A) (formerly 231A(b)(1) under 
the HOPE I Act) was amended to provide that apparel articles of a 
producer or entity controlling production may be imported directly from 
Haiti or the Dominican Republic. Under the HOPE I Act, such articles 
were required to be imported directly from Haiti.
    3. Re-designated section 213A(b)(1)(B)(iv)(IV) (formerly 
213A(b)(2)(D)(iv) under the HOPE I Act), was amended by deleting 
references to specific apparel articles (i.e., woven articles and 
brassieres) that may or may not be included in the annual aggregation 
calculation for purposes of meeting the applicable value-content 
requirement for apparel articles of a producer or entity controlling 
production. This provision now states, more generally, that entries of 
apparel articles receiving preferential treatment under any provision 
of law (other than under section 213A(b)(1)) or are subject to the 
``General'' subcolumn of column 1 of the HTSUS are not included in the 
annual aggregation calculation unless the producer or entity 
controlling production elects to include those entries.
    4. Re-designated section 213A(b)(1)(C) (formerly section 213A(b)(3) 
under the HOPE I Act), was amended by revising the annual quantitative 
limits for the third through the fifth applicable 1-year periods that 
apply to apparel articles of a producer or entity controlling 
production. The amendments to this provision do not require changes to 
the interim regulatory text.
    5. Former section 213A(b)(4), which set forth the conditions and 
requirements that must be met for certain woven apparel articles of 
chapter 62 of the HTSUS from Haiti to receive duty-free treatment, was 
removed and a new section 213A(b)(2) was added. This new provision 
provides for the duty-free treatment of any knit article of chapter 61 
(subject to certain exclusions) or any woven article of chapter 62 of 
the HTSUS that is wholly assembled, or knit-to-shape, in Haiti from any 
combination of fabrics, fabric components, components knit-to-shape, or 
yarns and is imported directly from Haiti or the Dominican Republic, 
without regard to the source of the fabric, fabric components, 
components knit-to-shape, or yarns from which the article is made, 
subject to certain specified quantitative limitations. The exclusions 
from the special rule for articles of chapter 61 of the HTSUS include 
certain T-shirts, singlets, sweatshirts, and pullovers for men or boys. 
The duty-free treatment provided for in new section 213A(b)(2) is 
effective from October 1, 2008, through September 30, 2018.
    6. Former section 213A(b)(5), which set forth the conditions and 
requirements that must be met for articles of subheading 6212.10, HTSUS 
(brassieres), to receive duty-free treatment was removed and a new 
section 213A(b)(3) was added, which provides for the duty-free 
treatment of certain apparel articles (including brassieres) and other 
articles set forth below. The duty-free treatment provided for in new 
section 213A(b)(3) is effective from October 1, 2008, through September 
30, 2018, and is not subject to quantitative limitations. The articles 
to which this provision applies are as follows:
    a. Articles of subheading 6212.10, HTSUS (brassieres), that are 
wholly assembled, or knit-to-shape, in Haiti from any combination of 
fabrics, fabric components, components knit-to-shape, or yarns and are 
imported directly from Haiti or the Dominican Republic, without regard 
to the source of the fabric, fabric components, components knit-to-
shape, or yarns from which the article is made;
    b. Any of the following apparel articles that is wholly assembled, 
or knit-to-shape, in Haiti from any combination of fabrics, fabric 
components, components knit-to-shape, or yarns and is imported directly 
from Haiti or the Dominican Republic, without regard to the source of 
the fabric, fabric components, components knit-to-shape, or yarns from 
which the article is made:
    (i) Any apparel article that is of a type listed in chapter rule 3, 
4, or 5 for chapter 61 of the HTSUS (as such chapter rules are 
contained in section A of the Annex to Presidential Proclamation 8213 
of December 20, 2007) as being excluded from the scope of such chapter 
rule, except that, for purposes of this provision, reference in such 
chapter rules to subheading

[[Page 56717]]

6104.12.00, HTSUS, is deemed to refer to subheading 6104.19.60, HTSUS; 
and
    (ii) Any apparel article (other than articles of subheading 6212.10 
of the HTSUS) that is of a type listed in chapter rule 3(a), 4(a), or 
5(a) for chapter 62 of the HTSUS, as such chapter rules are contained 
in paragraph 9 of section A of the Annex to Presidential Proclamation 
8213 of December 20, 2007;
    c. Articles of subheading 4202.12, 4202.22, 4202.32, or 4202.92, 
HTSUS that are wholly assembled in Haiti and are imported directly from 
Haiti or the Dominican Republic, without regard to the source of the 
fabric, components, or materials from which the article is made;
    d. Articles of heading 6501, 6502, or 6504, or subheading 6505.90, 
HTSUS, that are wholly assembled, knit-to-shape, or formed in Haiti 
from any combination of fabrics, fabric components, components knit-to-
shape, or yarns and are imported directly from Haiti or the Dominican 
Republic, without regard to the source of the fabric, fabric 
components, components knit-to-shape, or yarns from which the article 
is made; and
    e. Any of the following apparel articles that is wholly assembled, 
or knit-to-shape, in Haiti from any combination of fabrics, fabric 
components, components knit-to-shape, or yarns and is imported directly 
from Haiti or the Dominican Republic, without regard to the source of 
the fabric, fabric components, components knit-to-shape, or yarns from 
which the article is made:
    (i) Pajama bottoms and other sleepwear for women and girls, of 
cotton, of subheading 6208.91.30, HTSUS, or of man-made fibers, of 
subheading 6208.92.00, HTSUS; and
    (ii) Pajama bottoms and other sleepwear for girls, of other textile 
materials, of subheading 6208.99.20 HTSUS.
    7. Section 213A(b) was amended by adding a new paragraph (4) which 
provides for the duty-free treatment of apparel articles that are 
wholly assembled, or knit-to-shape, in Haiti from any combination of 
fabrics, fabric components, components knit-to-shape, or yarns, without 
regard to the source of the fabric, fabric components, components knit-
to-shape, or yarns from which the articles are made, if such apparel 
articles are accompanied by an earned import allowance certificate 
issued by the Department of Commerce reflecting the amount of credits 
equal to the total square meter equivalents of such apparel articles 
and the articles are imported directly from Haiti or the Dominican 
Republic. The duty-free treatment provided for in new section 
213A(b)(4) is effective from October 1, 2008, through September 30, 
2018, and is not subject to quantitative limitations.
    8. Section 213A(b) was further amended by adding a new paragraph 
(5) that provides for the duty-free treatment of apparel articles that 
are wholly assembled, or knit-to-shape, in Haiti from any combination 
of fabrics, fabric components, components knit-to-shape, or yarns, 
without regard to the source of the fabrics, fabric components, 
components knit-to-shape, or yarns from which the article is made, if 
the fabrics, fabric components, components knit-to-shape, or yarns 
comprising the component that determines the tariff classification of 
the article are of any of the fabrics or yarns set forth below and the 
articles are imported directly from Haiti or the Dominican Republic. 
The duty-free treatment provided for in new section 213A(b)(5) is 
effective from October 1, 2008, through September 30, 2018, and is not 
subject to quantitative limitations.
    a. 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 
North American Free Trade Agreement (NAFTA); or
    b. Fabrics or yarns, to the extent that such fabrics or yarns are 
designated as not being available in commercial quantities for purposes 
of:
    (i) Section 213(b)(2)(A)(v) of the CBERA (19 U.S.C. 
2703(b)(2)(A)(v));
    (ii) Section 112(b)(5) of the African Growth and Opportunity Act 
(19 U.S.C. 3721(b)(5));
    (iii) 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)(II) or 
3203(b)(3)(B)(ii)); or
    (iv) 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 entered into 
by the United States that is in effect at the time the claim for 
preferential tariff treatment is made.

Regulatory Amendments To Reflect Changes Made by the HOPE II Act

    As noted earlier, this final rule incorporates in the regulatory 
text certain statutory changes made to section 213A of the CBERA by the 
HOPE II Act. Because these changes to the interim regulatory text, 
described below, are not interpretative in nature but closely reflect 
the language of the statute, they are included in this final rule 
without need for comment. Section 15407 of the 2008 Act provides that 
regulations necessary to carry out section 15402 must be issued not 
later than September 30, 2008, and section 15412 of the 2008 Act 
provides that section 15402 shall take effect on October 1, 2008, and 
shall apply to articles entered, or withdrawn from warehouse for 
consumption, on or after that date.
    1. The heading to 19 CFR part 10, subpart O has been revised to add 
a reference to the HOPE II Act;
    2. Section 10.841, regarding the applicability of subpart O, has 
been revised to add a reference to the HOPE II Act;
    3. In Sec.  10.842(p), the definition of ``wholly assembled in 
Haiti'' has been revised to conform to the statutory definition of the 
term set forth in the HOPE II Act;
    4. As a result of the amendments to section 213A of the CBERA 
effected by the HOPE II Act, all of the textile and apparel articles to 
which duty-free treatment applies under this program must be ``imported 
directly from Haiti or the Dominican Republic.'' Under the HOPE I Act, 
all eligible articles were required to be ``imported directly from 
Haiti''. However, no change was made by the HOPE II Act to the 
``imported directly'' requirement for articles eligible for duty-free 
treatment under section 213A(c) of the CBERA (wiring sets). Therefore, 
those articles must continue to be ``imported directly from Haiti''. 
Accordingly, the introductory text to Sec.  10.843, which sets forth a 
list of the articles to which duty-free treatment applies under this 
program, has been revised to reflect this disparity in treatment 
between textile and apparel articles on the one hand and wiring sets on 
the other with regard to the ``imported directly'' requirement;
    5. Section 10.843 has been further amended to reflect the new and 
revised categories of textile and apparel articles that are eligible 
for duty-free treatment under the HOPE II Act;
    6. In Sec.  10.844, relating to the value-content requirement for 
apparel articles of a producer or entity controlling production:
    a. Paragraph (a)(2)(iii) has been revised to reflect the new 
statutory language (see section 213A(b)(1)(B)(iv)(IV) of the CBERA) 
concerning exclusions from the annual aggregation calculation;
    b. Paragraph (a)(5)(ii)(D) has been revised to replace the words 
``under the Bipartisan Trade Promotion Authority Act of 2002'' with the 
words ``with respect to the United States'' to conform to an amendment 
to re-designated

[[Page 56718]]

section 213A(b)(1)(B)(vii)(I)(bb)(DD) of the CBERA (formerly section 
213A(b)(2)(G)(i)(II)(dd)) by the HOPE II Act; and
    c. Paragraph (c)(2) has been revised to replace the words ``under 
the Bipartisan Trade Promotion Authority Act of 2002 (19 U.S.C. 3801 et 
seq.)'' with the word ``thereafter'' to conform to an amendment to re-
designated section 213A(b)(1)(B)(iii)(II) of the CBERA (formerly 
section 213A(b)(2)(C)(ii)) by the HOPE II Act;
    7. Section 10.846, relating to the ``imported directly'' 
requirement, has been revised to reflect the statutory definition of 
the term ``imported directly from Haiti or the Dominican Republic'' 
created by the HOPE II Act (see section 213A(a)(3) of the CBERA). As 
noted previously, while the ``imported directly from Haiti or the 
Dominican Republic'' requirement applies to all textile and apparel 
articles eligible for duty-free treatment under this program, it does 
not apply to articles eligible for duty-free treatment under section 
213A(c) of the CBERA (wiring sets). Those articles must continue to be 
``imported directly from Haiti''. Therefore, Sec.  10.846 has been 
further revised to clarify that wiring sets are subject to the 
``imported directly from Haiti'' requirement, as those words are 
currently defined in Sec.  10.846 of the interim rule. However, 
consistent with the statutory definition of ``imported directly from 
Haiti or the Dominican Republic'', the definition of ``imported 
directly from Haiti'' has been altered by removing the words ``provided 
that the articles are imported as a result of the original commercial 
transaction between the importer and the producer or the producer's 
sales agent'', as set forth in current Sec.  10.846(a)(3)(ii) of the 
interim rule; and
    8. Section 10.847(a), concerning the filing of claims for duty-free 
treatment for articles described in Sec.  10.843, has been revised to 
set forth the new subheadings within Subchapter XX of Chapter 98 of the 
HTSUS under which the new categories of textile and apparel articles 
created by HOPE II are classified.
    This final rule document addresses the comments submitted in 
response to the interim rulemaking published as CBP Dec. 07-43 and 
adopts, as a final rule, the HOPE I Act implementing regulations 
contained in the interim rule document with changes reflecting the 
statutory amendments made by the HOPE II Act as well as other changes 
identified below in the discussion of public comments received.

Discussion of Comments in Response to CBP Dec. 07-43

    A total of 8 commenters responded to the solicitation of public 
comments on the interim regulations set forth in CBP Dec. 07-43. It is 
noted that these comments were received prior to the recent statutory 
changes effected by the HOPE II Act. To the extent that the comments 
received were unaffected by these subsequent changes, CBP has 
responded. References in this comment discussion to the ``HOPE Act'' 
are intended to refer to the HOPE program in general.

General Comments Regarding Interpretation and Implementation of the 
HOPE Act

    1. Comment: Five commenters pointed out that section 5004 of the 
Act expresses the ``sense of the Congress that the executive branch * * 
* should interpret, implement, and enforce'' the preference provisions 
under the HOPE Act for textile and apparel articles ``broadly in order 
to expand trade by maximizing opportunities for imports of such 
articles from Haiti.'' In view of this statement of the intent of 
Congress, these commenters urged that the HOPE Act final regulations be 
interpreted and issued in a manner that will expand, and not restrict, 
trade with Haiti.
    CBP's Response: CBP is cognizant of Congressional desire that the 
HOPE Act benefit Haiti to the maximum extent possible and that the 
executive branch, in matters subject to interpretation, choose the 
interpretation most beneficial to Haiti that is legally supportable. 
CBP endeavored to adhere to this mandate while drafting regulations to 
implement the specific language of the statute which created special 
tariff preference provisions for Haiti within the existing framework of 
the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701 et 
seq.).
    2. Comment: One commenter indicated that as ``the textile and 
apparel trade has the highest fraud content of any manufactured good'', 
it is imperative that the regulations implementing the HOPE Act be 
written in a way that provides for meaningful and effective customs 
enforcement while allowing for the flow of legitimate trade. The 
commenter stated that the interim regulations are a reasonable approach 
to achieving this objective and commended CBP for its efforts in this 
regard. This commenter also stated that it was very encouraged to see 
an emphasis on importer requirements throughout the HOPE regulations as 
importers of textile products should be held more accountable for their 
transactions and the preference claims made on goods they import into 
the United States. In addition, this commenter expressed strong support 
for the ``penalty provisions'' set forth in the HOPE I Act implementing 
regulations (e.g., denial of duty-free treatment for failure to meet 
applicable requirements and the imposition of an increased value-
content percentage requirement under certain circumstances) and stated 
that, through these provisions, CBP has built in very strong incentives 
for compliance.
    CBP's Response: CBP appreciates the comment as it always strives to 
balance the goals of effective enforcement while facilitating the flow 
of legitimate commerce.
    3. Comment: One commenter noted that the interim regulations were 
issued some months after the commencement of the first statutory 
applicable year and urged CBP to issue the final regulations on an 
expeditious basis so that companies may rely on clear, transparent, and 
predictable rules to conduct business with Haiti.
    CBP's Response: CBP notes that the date of enactment of the HOPE I 
Act (December 20, 2006) marked the beginning of the first of five one-
year periods during which certain apparel articles from Haiti may be 
eligible for duty-free treatment under the Act. However, the Haiti Act 
preference program for apparel articles was implemented by Presidential 
Proclamation effective with respect to goods entered, or withdrawn from 
warehouse, on or after March 20, 2007 (see Proclamation 8114 dated 
March 19, 2007, published in the Federal Register on March 22, 2007 (72 
FR 13655)). CBP awaited the publication of Presidential Proclamation 
8114 so that its interim regulations would be complete. The interim 
regulations implementing the HOPE I Act were required to be issued not 
later than 180 days after December 20, 2006, and the interim 
regulations were published in the Federal Register on June 22, 2007.
    CBP notes that issuance of this final rule was delayed pending 
anticipated action on the part of Congress to amend the underlying 
statutory provisions which resulted in the HOPE II Act.
    4. Comment: One commenter urged that the visa system for the HOPE 
program be deployed in such a way that it facilitates trade and does 
not impose additional hurdles or burdens for Haitian exporters or U.S. 
importers. This commenter indicated that it had heard reports that, due 
to problems in the administration of the visa system, several companies 
have been unable to export goods to the United States.

[[Page 56719]]

    CBP's Response: The HOPE Act requires the establishment of a visa 
system to ensure that only those apparel articles that meet the 
applicable requirements for preferential tariff treatment under the Act 
receive the benefits of that treatment. An effective visa system 
affords Haiti the ability to administer and enforce the program with 
respect to exports of apparel articles to the United States and allows 
the United States to monitor imports of such articles from that 
country. CBP does not believe that the HOPE Act visa system currently 
in place is too complex or imposes unreasonable burdens on Haitian 
exporters or U.S. importers. It is noted that the Haitian government 
has not communicated to CBP that it is experiencing difficulties in 
implementing the visa system.

Definitions

    5. Comment: Six of the commenters asserted that the definition of 
``wholly assembled in Haiti'' set forth in Sec.  10.842(p) of the 
interim regulations is overly restrictive in that it requires that all 
of the components of the article (including minor components) be joined 
together in Haiti. Five of these commenters stated that this phrase 
must be read in the light of the clear intent of the legislation to 
provide for non-origin conferring events and operations to be performed 
within HOPE Act eligible countries. Four commenters suggested that the 
definition of the phrase should follow the more liberal definition set 
forth in Sec.  102.21(b)(6) of the CBP regulations, which would allow 
minor parts to be added in eligible countries other than Haiti. One of 
these commenters recommended that the HOPE Act preference provisions be 
more broadly applied to textile and apparel articles from Haiti or the 
designated beneficiary countries as long as the key assembly operations 
are performed in Haiti.
    CBP's Response: The definition of ``wholly assembled in Haiti'' set 
forth in Sec.  10.842(p) has been revised in this final rule document 
to conform to the statutory definition of that term set forth in the 
HOPE II Act (see section 213A(a)(5) of the CBERA). CBP believes that 
this statutory and resulting regulatory change addresses these 
commenters' concerns.
    6. Comment: One commenter stated that the definitions should make 
clear that not all cutting and sewing is required in Haiti and that, 
specifically, cutting and sewing operations performed in the United 
States would not disqualify a garment.
    CBP's Response: Although the HOPE Act requires apparel articles of 
a producer or entity controlling production to be wholly assembled or 
knit-to-shape in Haiti (as those terms are defined in section 213A(a) 
of the CBERA), it allows the materials (e.g., fabric components) from 
which the articles are made to be produced anywhere. See section 
213A(b)(1)(B)(i)(I) and section 213A(b)(1)(B)(ii)((I) of the CBERA. 
``Fabric component'' is defined in Sec.  10.842(g) of the HOPE Act 
implementing regulations as ``a component cut from fabric to the shape 
or form of the component as it is used in the apparel article.'' 
Therefore, CBP believes it is clear from the statute and the 
implementing regulations that cutting operations may be performed 
outside of Haiti.
    In regard to sewing, CBP believes that the revised definition of 
``wholly assembled in Haiti'' set forth in Sec.  10.842(p) of this 
final rule document, which conforms to the statutory definition of that 
term set forth in the HOPE II Act, addresses the commenter's concerns.

Annual Aggregation

    7. Comment: Five commenters stated that the final regulations 
should clarify, through the use of specific examples, the application 
of the annual aggregation method in meeting the value-content 
requirement for apparel articles that are wholly assembled or knit-to-
shape in Haiti. Three of these commenters raised certain specific 
issues regarding the annual aggregation method by offering the exact 
same scenarios and questions as follows:
    a. Haitian Producer A elects to use the annual aggregation method 
in the initial applicable one-year period, and also elects, pursuant to 
Sec.  10.844(a)(2)(iii)(C) of the interim regulations, to include in 
the aggregation calculation entries of apparel articles receiving 
preferential tariff treatment under other preference programs as well 
as articles subject to a Normal Trade Relations (NTR) rate of duty. 
Producer A ships to the United States four shipments during the initial 
applicable one-year period (all are entered during that period). The 
first shipment of apparel (qualifying for preference under the 
Caribbean Basin Trade Partnership Act (CBTPA)) has an appraised value 
of $100,000 and meets a value-content percentage (under Sec.  
10.844(a)) of 80%. The second shipment of apparel is wholly assembled 
in Haiti, has an appraised value of $100,000, and meets a value-content 
percentage of 40%. The third shipment is wholly assembled in Haiti, has 
an appraised value of $50,000, and meets a value-content percentage of 
0%. The last shipment is wholly assembled in Haiti, has an appraised 
value of $20,000, and meets a value-content requirement of 80%. Taken 
together, the four shipments have an appraised value of $270,000 and 
meet a value-content percentage of 50.4%. Will all apparel goods that 
are shipped to the U.S. in the last three shipments by Producer A 
qualify for duty-free treatment under the HOPE Act?
    b. Importer D, an entity controlling production, purchases apparel 
articles that are wholly assembled in Haiti from Producers A, B, and C 
and enters those articles during the initial applicable one-year 
period. Importer D elects to use the annual aggregation method during 
that period. The three producers also produce apparel for other U.S. 
importers and each producer elects to use the annual aggregation 
method. The total appraised value of the apparel purchased by Importer 
D from the three producers and entered during the initial applicable 
one-year period is $300,000, and these shipments meet a value-content 
percentage of 51.7%. However, the value-content percentage met by all 
the apparel that is wholly assembled in Haiti by Producer C and entered 
(including the apparel imported by Importer D) during the initial 
applicable one-year period is 49%. Does the failure of Producer C to 
meet the applicable value-content requirement for the apparel that it 
produces during this period affect the preferential status of the 
apparel articles produced by Producer C and imported by Importer D?
    CBP's Response: Based on the facts presented in the first scenario, 
the apparel articles that were wholly assembled in Haiti and shipped to 
the U.S. in the last three shipments by Producer A would qualify for 
duty-free treatment under the HOPE Act, as the applicable value-content 
requirement for the initial applicable one-year period (50%) would be 
met. This conclusion assumes that: (1) The CBTPA-eligible apparel 
articles in the first shipment (that were included in the annual 
aggregation calculation at the election of the producer) were wholly 
assembled or knit-to-shape in Haiti, as required by Sec.  
10.844(a)(2)(iii)(C); and (2) the articles in the last three shipments 
satisfy all other applicable requirements set forth in subpart O, part 
10, CBP regulations (e.g., declaration of compliance and ``imported 
directly'' requirements).
    In regard to the facts set forth in the second scenario, pursuant 
to section 213A(b)(1)(iv)(I) of the CBERA and Sec.  10.844(a)(2)(i) of 
the interim regulations, in determining whether apparel articles of a 
producer or entity

[[Page 56720]]

controlling production that are entered under the annual aggregation 
method in the initial applicable one-year period satisfy the applicable 
value-content requirement (50%) in that period, ``all apparel articles 
of that producer or entity controlling production that are wholly 
assembled or knit-to-shape in Haiti and are entered in the initial 
applicable one-year period'' must be considered. Thus, for the entity 
controlling production in this scenario (Importer D), the apparel 
articles that must be considered are those that are purchased by 
Importer D from Producers A, B, and C and entered during the initial 
applicable one-year period. As all of the articles, in the aggregate, 
purchased by Importer D from the three producers and entered during the 
initial applicable one-year period satisfy the 50% value-content 
requirement, all of these articles are entitled to duty-free treatment 
under the HOPE Act, assuming all other applicable requirements are met.
    With respect to Producer C, the apparel articles that must be 
considered in determining compliance with the 50% value-content 
requirement under the annual aggregation method are all those articles 
that are wholly assembled or knit-to-shape in Haiti by Producer C and 
entered in the initial applicable one-year period. In this scenario, 
all of the articles, in the aggregate, that are wholly assembled by 
Producer C and entered during the initial applicable one-year period 
(including the articles sold to Importer D) do not satisfy the 50% 
value-content requirement. However, the failure of Producer C to meet 
the value-content requirement under these circumstances should not and 
will not affect the duty-free status of the articles purchased by 
Importer D from Producer C since, as noted above, the cumulative total 
of all of the articles whose production is controlled by Importer D (an 
entity controlling production) meets the 50% value-content requirement. 
Therefore, the consequences of Producer C's failure to meet the 50% 
value-content requirement include the denial of duty-free treatment for 
all articles that are wholly assembled by Producer C and entered during 
the initial applicable one-year period, except for those articles sold 
by Producer C to Importer D. CBP is amending Sec.  10.844(a)(4) in this 
final rule to clarify the circumstances under which this exception 
applies by adding a new paragraph (a)(4)(iii) to Sec.  10.844, 
resulting in the re-designation of current paragraphs (a)(4)(iii) 
through (a)(4)(v) as paragraphs (a)(4)(iv) through (a)(4)(vi), 
respectively.
    CBP notes that, pursuant to Sec.  10.844(a)(4)(i)(C), an additional 
consequence of Producer C's failure to meet the value-content 
requirement in the initial applicable one-year period would be that 
articles wholly assembled by Producer C and entered during succeeding 
applicable one-year periods will be ineligible for duty-free treatment 
until the appropriate increased value-content requirement has been met, 
except to the extent the articles retroactively qualify for preference 
under Sec.  10.845.
    CBP agrees with the commenters that additional examples should be 
included in the HOPE Act implementing regulations to clarify the 
application of the annual aggregation method. Therefore, CBP is 
amending paragraph (a)(2)(iii) and new paragraph (a)(4)(iii) of Sec.  
10.844 by adding two examples (one in each paragraph) patterned after 
the two scenarios presented by the commenters.
    8. Comment: Three commenters stated that the interim regulations 
(specifically, Sec.  10.844(a)) are unclear regarding whether a 
producer or entity controlling production may elect to use the 
individual entry method during an applicable one-year period and then 
switch to the annual aggregation method for the following year. 
Assuming that a producer or entity controlling production may use the 
individual entry method during the first applicable one-year period and 
then elect to use the annual aggregation method during the second 
applicable one-year period, two of these commenters asked whether it 
would be necessary to submit a declaration of compliance following the 
end of the first applicable one-year period. One commenter stated that 
Sec.  10.844(a)(3) ``seems to imply'' that once an election is made to 
use the annual aggregation method, use of the individual entry method 
is foreclosed for any subsequent one-year period.
    CBP's Response: There is nothing in the HOPE Act or the 
implementing interim regulations (including Sec.  10.844(a)(3)) that 
would preclude a producer or entity controlling production from 
electing to use either the annual aggregation or individual entry 
method during one applicable one-year period and then switching to the 
other method during the subsequent one-year period. This assumes, of 
course, that all applicable requirements are met during the applicable 
one-year period preceding the period in which the switch is to be made. 
The underlying purpose of Sec.  10.844(a)(3), as set forth in the 
interim rule, is to make it clear that, regardless of the method chosen 
for a particular period, that method must be used for all articles of a 
producer or entity controlling production during that period. As 
recommended by these commenters, CBP is amending Sec.  10.844(a)(3) in 
this final rule document to clarify that a producer or entity 
controlling production may elect to use the individual entry or annual 
aggregation method in any applicable one-year period and then switch to 
the other method during the next one-year period.
    In response to the question posed by two of the commenters, CBP 
believes that a declaration of compliance must be submitted following 
the end of any applicable one-year period in which the individual entry 
method is used if an election is made to use the annual aggregation 
method during the next applicable one-year period. As section 
203A(b)(1)(B)(iv)(II) of the CBERA and Sec.  10.844(a)(2)(ii) of the 
interim regulations make clear, an election to use the annual 
aggregation method in the second, third, fourth, or fifth applicable 
one-year period is conditioned on compliance with the applicable value-
content requirement by all apparel articles of the producer or entity 
controlling production, in the aggregate, that are entered during the 
previous applicable one-year period. Thus, an importer may enter 
articles under the annual aggregation method in each of the second 
through fifth applicable one-year periods only if it can assure CBP 
through the submission of a declaration of compliance, as set forth in 
Sec.  10.848, that the aggregate total of all apparel articles of the 
producer or entity controlling production met the applicable value-
content requirement during the previous applicable one-year period. 
This is true even if all articles of the producer or entity controlling 
production were entered under the individual entry method during that 
previous applicable one-year period. CBP is amending Sec.  10.848 in 
this final rule document to specifically address this issue.
    9. Comment: Five commenters noted that Sec.  10.844(a)(2)(iii)(C) 
of the interim regulations permits apparel articles receiving 
preferential tariff treatment under any provision of law other than the 
HOPE Act to be included in the annual aggregation calculation (at the 
election of the producer or entity controlling production). However, 
these commenters objected to the requirement in the regulation that the 
apparel articles must be ``wholly assembled'' in Haiti. According to 
the commenters, this is an impermissible expansion of the statutory 
language ``that sets another hurdle for Haitian goods for qualification 
of merchandise otherwise

[[Page 56721]]

produced in Haiti.'' Several of these commenters stated that this 
additional requirement seems excessive considering that these other 
preference programs (e.g., CBTPA) do not require ``such a wholly 
assembled definition.''
    CBP's Response: CBP notes initially that Sec.  10.844(a)(2)(iii) 
has been amended in this final rule document to conform to an amendment 
to section 213A(b)(1)(B)(iv)(IV) of the CBERA by the HOPE II Act 
(deleting specific references to woven apparel articles and 
brassieres). However, amended Sec.  10.844(a)(2)(iii) continues to 
require that the referenced apparel articles must be ``wholly assembled 
or knit-to-shape'' in Haiti.
    CBP maintains that if the statute is read as a whole, the rationale 
for the ``wholly assembled or knit-to-shape'' requirement in Sec.  
10.844(a)(2)(iii) becomes clear. Annual aggregation applies to apparel 
articles of a producer or entity controlling production that enter 
during an applicable one-year period and is calculated by aggregating 
certain costs incurred with respect to all apparel articles of that 
producer or entity controlling production that are wholly assembled, or 
knit-to-shape, in Haiti and entered during the first year of the 
program or, for subsequent years, entered during the preceding year. 
See section 213A(b)(1)(B)(iv)(I) and (II) of the CBERA. Paragraph (IV) 
of section 213A(b)(1)(B)(iv) clarifies that the universe of apparel 
articles wholly assembled, or knit-to-shape, in Haiti to be included in 
the calculation of all apparel articles so produced in Haiti and 
entered during the year under consideration is not to include entries 
of apparel articles receiving preferential treatment under any 
provision of law other than section 213A(b)(1) or entries of apparel 
articles subject to the Normal Trade Relations ``general'' rate of 
duty, unless the producer or entity controlling production elects to 
include such entries. In other words, the phrase ``all apparel 
articles'' for purposes of section 213A(b)(1)(B)(iv)(I) and (II) is 
defined in section 213A(b)(1)(B)(iv)(IV). Defining the scope of ``all 
apparel articles'' does not relieve the articles from the requirements 
of section 213A(b)(1)(B)(iv)(I) and (II) that they be wholly assembled, 
or knit-to-shape in Haiti. The commenters are mistaken in their belief 
that CBP is expanding the statutory language to construct a ``hurdle'' 
for Haitian goods. CBP is merely reading the statute as a whole and 
recognizes that section 213A(b)(1)(B)(iv)(IV) serves to clarify 
Congressional intent regarding the scope of the words ``all apparel 
articles'', as used in section 213A(b)(1)(B)(iv)(I) and (II).
    10. Comment: One commenter stated that the final regulations should 
make it clear that an entity controlling production and a manufacturer 
will not both be penalized if one of the parties fails to meet its 
annual aggregation percentage requirement and they are not exclusively 
producing for or importing from each other. Another commenter indicated 
that the failure of a producer (electing to use the annual aggregation 
method) to meet the applicable value-content requirement in a 
particular year should not be ``transferred'' to U.S. importers who 
take appropriate steps to ensure that their imported goods satisfy the 
value-content requirement.
    CBP's Response: CBP has previously addressed in this comment 
discussion the circumstances under which the failure of an entity 
controlling production and/or a producer to meet the applicable value-
content requirement under the annual aggregation method in a particular 
one-year period will affect the duty-free status of the apparel 
articles that they control or produce in situations in which they do 
not exclusively produce for or import from each other. As previously 
indicated, CBP is amending Sec.  10.844(a)(4) in this final rule to 
clarify this matter.
    CBP disagrees with the second commenter's assertion that the 
failure of a producer to meet the applicable value-content requirement 
under the annual aggregation method should not be ``transferred'' to 
U.S. importers who take appropriate steps to ensure that their imported 
goods satisfy the value-content requirement. All U.S. importers of 
apparel articles for which preferential tariff treatment is sought 
under the HOPE Act are required to exercise reasonable care to ensure 
that those articles are in fact entitled to such treatment. Thus, if a 
producer fails to meet the applicable value-content percentage in a 
particular one-year period, all importers who purchase apparel articles 
from that producer will be subject to rate advances due to the failure 
of the articles to satisfy the applicable HOPE Act requirements.
    11. Comment: One commenter stated that it was unable to find any 
Congressional intent or statutory language that supports the 
requirement in Sec.  10.844(c) of the interim regulations that there be 
an ``irreversible election'' to use the annual aggregation method. It 
was this commenter's understanding, as the HOPE I Act bill was being 
drafted, that a producer or entity controlling production could choose 
to use the aggregate or individual entry method in such a way and at 
such time as to maximize the duty-free benefit of the program. In 
addition, this commenter complained that the interim regulations 
provide no information as to how such an election is to be made so that 
it may take legal effect, and that the regulations do not make clear 
that CBTPA-type operations count toward the aggregate value-content 
requirement, assuming the apparel product is wholly assembled in Haiti.
    CBP's Response: CBP disagrees with the commenter's assertion that 
there is no statutory authority for the requirement in Sec.  10.844(c) 
that a producer or entity controlling production that elects to use the 
annual aggregation method during an applicable one-year period must 
continue to use that method for all its qualifying apparel articles 
throughout that period. Section 203A(b)(1)(B)(iv) of the CBERA provides 
that the use of the annual aggregation method in an applicable one-year 
period involves aggregating costs with respect to ``all apparel 
articles'' of the producer or entity controlling production that are 
entered during the applicable one-year period (initial period for an 
election in that period and preceding period for an election in 
subsequent periods). Consequently, allowing a producer or entity 
controlling production to elect to use the annual aggregation method 
for some of its apparel articles that are entered during an applicable 
one-year period and use the individual entry method for other articles 
entered during the same period would be inconsistent with the clear 
wording of the statute.
    Regarding the other points made by the commenter, paragraphs (a)(2) 
and (b) of Sec.  10.847 set forth the procedure for filing a claim for 
duty-free treatment for apparel articles described in Sec.  10.843(a) 
when an election has been made by the producer or entity controlling 
production (through the use of a certification to that effect) to use 
the annual aggregation method. Section 10.844(a)(2)(iii) addresses an 
election to include in the annual aggregation calculation an entry of 
apparel articles receiving duty-free treatment under another preference 
program (such as the CBTPA), provided the articles are wholly assembled 
or knit-to-shape in Haiti.

Increased Value-Content Percentage

    12. Comment: Three commenters objected to CBP's interpretation and 
application of the statutory increased value-content percentage 
requirement (see section 213A(b)(1)(B)(vi)(II) of the CBERA), as 
reflected in Sec.  10.844(a)(4)(iii) of the interim

[[Page 56722]]

regulations (now Sec.  10.844(a)(4)(iv)) and Example 1 under Sec.  
10.844(a)(4)(iv) (now Sec.  10.844(a)(4)(v)). These commenters contend 
that the words ``plus ten percent'' in the statute mean that ten 
percent is to be applied against the applicable percentage to arrive at 
the increased value-content percentage (e.g., 50% + 10% of 50%= 55%). 
According to these commenters, CBP has adopted a more strict (and, in 
fact, an erroneous) interpretation of the words ``plus ten percent'' by 
actually adding 10 percentage points to the applicable percentage 
(e.g., 50% + 10%= 60%) in calculating the increased value-content 
percentage. Another commenter alleges, without further elaboration, 
that Sec.  10.844(a)(4)(iii) (now Sec.  10.844(a)(4)(iv)) is 
inconsistent in delineating the increased value-content percentages.
    CBP's Response: CBP disagrees with the commenters' interpretation 
of section 213A(b)(1)(B)(vi)(II) of the CBERA, which sets forth the 
increased-value content percentage requirement. This provision states, 
in pertinent part, that if a producer or entity controlling production 
is not in compliance with the statutory requirements in an applicable 
one-year period, then apparel articles of that producer or entity 
controlling production shall be ineligible for preferential treatment 
during any succeeding period until the sum of the relevant costs ``is 
not less than the applicable percentage under clause (v)(I), plus 10 
percent, of the aggregate declared customs value of all apparel 
articles of that producer or entity controlling production * * *.'' The 
words ``plus 10 percent'' are set off by commas and clearly refer to 
the words ``the aggregate declared customs value''--not ``the 
applicable percentage.'' Therefore, in CBP's opinion, Sec.  
10.844(a)(4)(iii) (now Sec.  10.844(a)(4)(iv)) and Example 1 under 
Sec.  10.844(a)(4)(iv) (now Sec.  10.844(a)(4)(v)) are correct in 
requiring that the increased value content percentage be determined by 
adding 10 percent to the applicable percentage--not by applying 10 
percent against the applicable percentage and then adding that result 
to the applicable percentage. Had Congress intended the latter meaning, 
CBP believes that Congress would have used statutory language to 
clearly accomplish that intent.
    In regard to the assertion that Sec.  10.844(a)(4)(iii) (now Sec.  
10.844(a)(4)(iv)) is ``inconsistent in delineating the increased value-
content percentages'', CBP cannot discern any inconsistency in this 
provision, which CBP notes closely follows the statutory language in 
Sec.  213A(b)(1)(B)(vi)(II) of the CBERA.

New Producer or Entity Controlling Production

    13. Comment: Five commenters disagreed with the requirement in 
Sec.  10.844(a)(4)(iv) of the interim regulations (now Sec.  
10.844(a)(4)(v)) that a new producer or entity controlling production 
(one who did not participate in the program during the preceding 
applicable one-year period) that elects to use the annual aggregation 
method must first meet an increased value-content percentage during the 
first year of participation before beginning to receive duty-free 
treatment during the next applicable one-year period. These commenters 
maintained that this requirement unjustifiably and unfairly penalizes 
new entrants to the program and is inconsistent with the language and 
goals of the HOPE Act.
    CBP's Response: CBP believes it is constrained by the statutory 
language to require that new entrants to the program (in the second 
through fifth applicable one-year periods) that elect to use the annual 
aggregation method must first meet an increased value-content 
percentage during the first year of participation before becoming 
eligible for preference during the next applicable one-year period. As 
noted previously in this comment discussion, section 
213A(b)(1)(B)(vi)(II) of the CBERA conditions use of the annual 
aggregation method during each of the second through fifth applicable 
one-year periods on compliance with the applicable value-content 
requirement by all qualifying apparel articles of the producer or 
entity controlling production that are entered during the previous 
applicable one-year period. A new entrant obviously cannot meet the 
applicable value-content requirement during the previous applicable 
one-year period if there was no production (and therefore no entries) 
during that previous year. As a result of a new entrant's inability to 
meet the applicable value-content requirement during the previous year, 
section 213A(b)(1)(B)(vi)(II) of the CBERA requires that apparel 
articles of the producer or entity controlling production be treated as 
ineligible for preferential treatment until the year after those 
articles meet the increased value-content percentage requirement. The 
statute sets forth no exception to the increased value-content 
percentage requirement for articles of a new producer or entity 
controlling production.
    CBP notes that in the context of somewhat similar statutory 
language in section 213(b)(2)(A)(iv)(II) and (III) of the CBERA (19 
U.S.C. 2703(b)(2)(A)(iv)(II) and (III)), relating to the preferential 
treatment of brassieres from designated Caribbean Basin countries under 
the United States-Caribbean Basin Trade Partnership Act (CBTPA), CBP 
determined that a new producer or entity controlling production must 
first establish compliance with a higher value-content percentage (85% 
rather than 75%) as a prerequisite to receiving preferential treatment 
(see Sec.  10.228(b)(2)(i)(G) and Example 7 under Sec.  
10.228(b)(2)(ii) of the CBP regulations (19 CFR 10.228(b)(2)(i)(G) and 
10.228(b)(2)(ii))). Thus, Sec.  10.844(a)(4)(iv) of the HOPE I Act 
implementing regulations (now Sec.  10.844(a)(4)(v)) and Sec.  
10.228(b)(2)(i)(G) of the CBTPA implementing regulations are consistent 
in their treatment of new producers and entities controlling production 
under those programs.
    14. Comment: One commenter stated that in the final regulations, 
Sec.  10.844(a)(4)(iv) (now Sec.  10.844(a)(4)(v)) should clarify that 
a new producer or entity controlling production that elects to use the 
individual entry method is not subject to an increased value-content 
percentage requirement.
    CBP's Response: Although Example 2 under Sec.  10.844(a)(4)(iv) 
(now Sec.  10.844(a)(4)(v)) indirectly addresses this issue, CBP agrees 
with the commenter that the text of the regulation itself should be 
amended to reflect that apparel articles of a new producer or entity 
controlling production electing to use the individual entry method are 
not subject to the requirement of first meeting the increased value-
content percentage as a prerequisite to receiving preferential 
treatment during the first year of participation in the program or in 
succeeding years. Therefore, Sec.  10.844(a)(4)(iv) (now Sec.  
10.844(a)(4)(v)) is being amended in this final rule document to 
clarify this point.

Eligible Countries

    15. Comment: Four commenters suggested that Sec.  10.844(c)(3) of 
the interim regulations should specify the designated beneficiary 
countries (under the Andean Trade Preference Act, African Growth and 
Opportunity Act, and Caribbean Basin Trade Partnership Act) that 
qualify as ``eligible countries'' for purposes of the HOPE program, 
rather than merely referring the reader to the HTSUS General Notes 
under which the designated beneficiary countries are listed. In 
addition, these commenters stated that this regulation should clarify 
whether qualifying inputs from these designated beneficiary

[[Page 56723]]

countries will continue to be eligible under the HOPE program should 
these other preference programs subsequently expire.
    CBP's Response: Section 213A(b)(1)(B)(iii) of the CBERA specifies 
that certain material and processing costs incurred in the following 
countries may be counted toward meeting the applicable value-content 
percentage requirement: (1) The United States; (2) any country that is 
a party to a free trade agreement with the United States that is in 
effect on the date of the enactment of the HOPE Act, or that enters 
into force thereafter; (3) any country designated as a beneficiary 
country under the CBTPA; (4) any country designated as a beneficiary 
country under the African Growth and Opportunity Act (AGOA); and (5) 
any country designated as a beneficiary country under the Andean Trade 
Preference Act (ATPA).
    Only the countries referenced in (2) above (parties to a free trade 
agreement in effect as of the date of enactment of the HOPE Act) are 
subject to a specific effective date insofar as determining whether 
qualifying material or processing costs from such countries may be 
counted under the HOPE Act. As the countries referenced in (3), (4), 
and (5) above (relating to CBTPA, AGOA, and ATPA) are not subject to an 
effective date, CBP believes it was the intent of Congress that a 
determination regarding a country's status as a beneficiary country 
under these programs should be made at the time a claim for 
preferential tariff treatment is filed under the HOPE Act. For example, 
if a country loses its designated beneficiary country status under one 
of these programs as of July 1, 2008, material and processing costs 
incurred in that country may no longer be counted toward meeting the 
applicable HOPE Act value-content requirement effective for apparel 
articles entered on or after that date.
    With respect to these commenters' suggestion that Sec.  
10.844(c)(3) of the HOPE I Act implementing regulations should specify 
the designated beneficiary countries under the CBTPA, AGOA, and ATPA, 
CBP prefers not to identify each of these countries in this regulatory 
provision as changes in their status as beneficiary countries would 
require repeated amendments to the regulation. CBP believes that the 
regulation's cross-reference to the listings of designated beneficiary 
countries in General Notes 11 (ATPA), 16 (AGOA), and 17 (CBTPA) of the 
HTSUS is sufficient as these listings are easily accessible at https://
www.usitc.gov/tata/hts/bychapter/0800gntoc.htm.

Direct Costs of Processing Operations

    16. Comment: One commenter stated that Sec.  10.844(e) of the 
interim regulations should be amended to include as a ``direct cost of 
processing operation'' the cost of packaging materials (such as labels, 
hangtags, and bags) if such materials are required to be included with 
the article. This commenter also asked that ``direct costs of 
processing operations'' include the cost of any post production 
procedures, such as mending or finishing that may be needed to present 
the finished article for sale. According to this commenter, the 
definition of the term ``wholly assembled'' in Sec.  10.842(p) of the 
interim regulations could be interpreted as precluding such operations, 
contrary to the intent of the statute.
    CBP's Response: Because the HOPE Act includes no definition of the 
words ``direct costs of processing operations'', CBP based the 
definition set forth in Sec.  10.844(e) of the interim regulations on 
the definition of the same term found in section 213(a)(3) of the CBERA 
(19 U.S.C. 2703(a)(3)) and Sec.  10.197 of the CBP's CBERA implementing 
regulations (19 CFR 10.197). CBP believes that determinations regarding 
whether specific costs not mentioned in Sec.  10.844(e), such as those 
referenced by the commenter, qualify as ``direct cost of processing 
operations'' should best be made on a case-by-case basis pursuant to 
CBP's administrative rulings program (see part 177 of the CBP 
regulations (19 CFR part 177)).

Imported Directly

    17. Comment: Six commenters maintained that Sec.  10.846 of the 
interim regulations sets forth an unnecessarily strict construction of 
the statutory ``imported directly'' requirement, thereby placing 
untenable restrictions on the process of shipping goods to the United 
States via intermediary countries, contrary to the intent of Congress. 
Five of these commenters noted that the ``imported directly'' rules set 
forth in Sec.  10.846 are similar to rules applied to certain other 
preference programs, and that interpretative rulings issued by CBP have 
concluded that the prohibition relating to the ``entry into commerce'' 
of an intermediate country means that the goods may not be 
``manipulated'' in that country. These commenters stated that, by so 
doing, CBP has not permitted operations (other than loading or 
unloading or other activities necessary to preserve the goods in good 
condition) even in a bonded warehouse and even where ``the invoices, 
bills of lading, and other shipping documents show the United States as 
the final destination.'' According to these commenters, this is an 
incorrect interpretation under the other preference programs and would 
be particularly so under the HOPE program.
    CBP's Response: Although the HOPE I Act included no definition of 
the term ``imported directly'', the HOPE II Act included a definition 
of ``imported directly from Haiti or the Dominican Republic'' (see 
section 213A(a)(3) of the CBERA). Section 10.846 has been amended to 
conform to this statutory definition.
    With respect to the concerns expressed by some of the comme