Country of Origin of Textile and Apparel Products, 14575-14584 [2011-6253]

Download as PDF 14575 Rules and Regulations Federal Register Vol. 76, No. 52 Thursday, March 17, 2011 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. DEPARTMENT OF HOMELAND SECURITY U.S. Customs and Border Protection DEPARTMENT OF THE TREASURY 19 CFR Parts 12, 102, 141, 144, 146, and 163 [CBP Dec. 11–09; USCBP–2005–0009] RIN 1515–AD57 (Formerly RIN 1505–AB60) Country of Origin of Textile and Apparel Products U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury. ACTION: Final rule. AGENCY: This document adopts as a final rule, with some changes, interim amendments to title 19 of the Code of Federal Regulations (‘‘CFR’’) to revise, update, and consolidate the Customs and Border Protection (‘‘CBP’’) regulations relating to the country of origin of textile and apparel products. The regulatory amendments adopted as a final rule in this document reflect changes brought about, in part, by the expiration on January 1, 2005, of the Agreement on Textiles and Clothing (‘‘ATC’’) and the resulting elimination of quotas on the entry of textile and apparel products from World Trade Organization (‘‘WTO’’) members. The primary regulatory change consists of the elimination of the requirement that a textile declaration be submitted for all importations of textile and apparel products. In addition, to improve the quality of reporting of the identity of the manufacturer of imported textile and apparel products, this document adopts as a final rule an amendment requiring importers to identify the manufacturer of such products through a manufacturer identification code (‘‘MID’’). wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 SUMMARY: VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 DATES: Final rule effective March 17, 2011. FOR FURTHER INFORMATION CONTACT: Operational aspects: Roberts Abels, Textile Operations, Office of International Trade, (202) 863–6503. Legal aspects: Cynthia Reese, Tariff Classification and Marking Branch, Office of International Trade, (202) 325– 0046. SUPPLEMENTARY INFORMATION: Background On January 1, 2005, the Agreement on Textiles and Clothing (‘‘ATC’’) expired. The ATC was the successor agreement to the Multifiber Arrangement Regarding International Trade in Textiles (‘‘MFA’’) which governed international trade in textiles and apparel through the use of quantitative restrictions. The ATC provided for the integration of textiles and clothing into the General Agreement on Tariffs and Trade (‘‘GATT’’) regime over a 10-year transition period. With the conclusion of the 10-year period, the integration was complete and the ATC thus expired. As of January 1, 2005, textile and apparel products of World Trade Organization members are no longer subject to quantitative restrictions for entry of such products into the United States. By letter dated February 11, 2005, the Chairman of CITA requested that CBP review the regulations relating to the country of origin of textile and apparel products set forth in § 12.130 of the CBP regulations (19 CFR 12.130) and recommend appropriate changes in light of the conclusion of the 10-year transition period for the integration of the textile and apparel sector into GATT 1994 to ensure ongoing enforcement of trade in textiles and apparel. By letter dated February 23, 2005, CBP responded to CITA’s request. CITA agreed by letter dated May 4, 2005, that § 12.130 should be amended at this time and responded to the recommendations offered by CBP in response to CITA’s solicitation of February 11, 2005. By letter dated July 28, 2005, the Department of the Treasury, pursuant to the authority retained by the Department of the Treasury over the customs revenue functions defined in the Homeland Security Act, and pursuant to section 204 of the Agricultural Act of 1956, as amended, as that authority is delegated by Executive PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 Order 11651 of March 3, 1972, and Executive Order 12475 of May 9, 1984, and in accordance with the policy guidance, recommendation and direction provided by the Chairman of CITA in his letter of May 4, 2005, authorized and directed the Department of Homeland Security to promulgate, as immediately effective regulations, amendments to the CBP regulations regarding the country of origin of textiles and textile products, including elimination of the textile declaration and requiring that importers provide the identity of the manufacturer. Accordingly, on October 5, 2005, CBP published CBP Dec. 05–32 in the Federal Register (70 FR 58009) setting forth interim amendments to the CBP regulations relating to the country of origin of textile and apparel products. In addition to revising and updating the provisions of § 12.130, CBP Dec. 05–32 re-designated § 12.130 as new §§ 102.22 and 102.23(b) and (c) to consolidate the rules of origin for textiles and apparel products for all countries in Part 102 of the CBP regulations. Similarly, §§ 12.131 and 12.132, which set forth certain procedural matters regarding the entry of textile and apparel products, were also revised and updated and, as part of the consolidation of the textile regulations, re-designated as new §§ 102.24 and 102.25, respectively. The interim amendments were effective on the date that the interim rule was published in the Federal Register (October 5, 2005). For a more comprehensive discussion of these interim regulatory amendments, please see CBP Dec. 05–32. One of the principal regulatory changes effected by CBP Dec. 05–32 was the elimination of the requirement that a textile declaration accompany importations of textile and apparel products. The interim rule document stated that this will reduce the paperwork burden on importers and is consistent with the movement toward paperless entries. In addition, the interim amendments included a requirement that importers of textile and apparel products identify on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in all electronic data submissions that require identification of the manufacturer, the manufacturer of such products through a manufacturer identification code (MID) constructed E:\FR\FM\17MRR1.SGM 17MRR1 14576 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 from the name and address of the entity performing the origin-conferring operations. CBP Dec. 05–32 stated that this requirement resulted from guidance provided by CITA and the Department of the Treasury, and that it applied to all entries of textile or apparel products listed in § 102.21(b)(5) of the CBP regulations. The interim rule document explained that this requirement will assist CBP in verifying the origin of imported textile and apparel products, thereby enabling CBP to better enforce trade in textile and apparel products. CBP Dec. 05–32 noted that importers of all goods are required to provide either a manufacturer or shipper identification code at the time of entry. The MID requirement for textile or apparel goods described above differs from the identification code required for all products in that the MID must identify the manufacturer (i.e., the entity performing the origin-conferring operations with respect to the imported product). Although the interim regulatory amendments were promulgated without prior public notice and comment procedures and took effect on October 5, 2005, CBP Dec. 05–32 provided for the submission of public comments which would be considered before adoption of the interim regulations as a final rule, and the prescribed public comment period closed on December 5, 2005. A discussion of the comments received by CBP is set forth below. Discussion of Comments A total of 26 commenters responded to the solicitation of public comments on the interim regulations set forth in CBP Dec. 05–32. Nearly all of the commenters supported the elimination of the textile declaration, although 24 of the commenters expressed opposition to or raised concerns or questions regarding the interim rule’s requirement that entries of textile and apparel goods identify the manufacturer of the goods through a manufacturer identification code (MID). The comments are discussed below. Comment: Thirteen of the commenters objected to the fact that the interim rule became effective immediately upon publication in the Federal Register and, as a result, failed to provide any advance notice to the trade community of the change in the MID requirement for textile and apparel products. These commenters emphasized that because a change of this significance has impacts on many levels of trade, prior notice is necessary to afford importers and other supply chain participants sufficient time to fully understand the new MID VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 requirement and to establish procedures to meet the requirement. One commenter stated that the adoption of the interim rule without a ‘‘phase-in’’ period is not in conformity with the principle of ‘‘informed compliance’’ and that members of the trade community believe that business certainty is imperative for good trade compliance. CBP’s Response: CBP fully understands the concerns expressed by the commenters regarding the interim rule’s immediate effective date. It was in response to these concerns that CBP decided to delay enforcement of the new requirement, as discussed in more detail below. CBP will continue to work with the trade community to ensure that this regulatory change results in as little disruption to the flow of legitimate trade as possible. Comment: Although several commenters noted that CBP delayed enforcement of the new MID requirement until November 18, 2005, ten commenters urged that CBP delay implementation and/or enforcement of the revised MID requirement beyond that date to allow importers and other trade participants adequate time to track the required MID information and incorporate it into their logistic systems. Four commenters recommended a six-month phase-in period, two commenters suggested a delay of 90 days in enforcing the new MID requirement, one commenter suggested a one-year delay (until October 5, 2006) in implementing and enforcing the requirement, and one commenter recommended a delay in enforcement until the final rule is published. Two other commenters stated that the final rule in regard to the MID requirement should provide the public with advance notice of any changes. CBP’s Response: The interim regulations took effect on the date of publication of CBP Dec. 05– 32 (October 5, 2005). However, cognizant of the challenges facing some importers in complying with the new MID requirement, CBP advised the importing community by administrative notice (TBT–05–029 dated October 20, 2005) posted on the cbp.gov Web site that it was delaying enforcement of the requirement until November 18, 2005. CBP believed at that time that a further delay in the implementation and/or enforcement of the MID requirement was unwarranted. The requirement now has been in place for an extended period of time, and it appears that few importers are experiencing problems complying with the requirement. PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 Regarding the request by several commenters for advance notice of any changes in the MID requirement effected by the final rule, CBP is making two changes to the MID requirement, as discussed later in this comment analysis. However, these changes limit the scope of the MID requirement and, therefore, reduce the burden on the importer. This final rule is effective upon publication in the Federal Register. Comment: One commenter stated that with respect to merchandise that was procured before the interim rule was published, importers were not on notice that the new MID would be required to make entry. Therefore, according to the commenter, it would be a violation of the Due Process Clause of the U.S. Constitution for CBP to penalize importers (or their customs brokers) for failing to present accurate MIDs when the merchandise was procured prior to publication of the interim rule. The commenter further suggested that CBP implement and publish a policy of nonenforcement with respect to this merchandise. CBP’s Response: As noted earlier in this comment discussion, CBP informed the importing community by administrative notice posted on the cbp.gov Web site that CBP was delaying enforcement of the new MID requirement until November 18, 2005. With respect to imported textile or apparel goods that may have been purchased prior to October 5, 2005 (but were entered on or after November 18, 2005), CBP believes that the nearly sixweek delay in enforcement afforded these importers sufficient time and notice to enable them to ascertain the identity of the manufacturers of their goods (if not already known) for purposes of constructing accurate MIDs in compliance with § 102.23(a). For this reason, CBP declines to implement a policy of non-enforcement with respect to such merchandise. However, in determining whether, or to what extent, penalties should be assessed in instances in which importers of textile or apparel goods fail to present accurate MIDs, CBP port directors will take into consideration the circumstances of each case, including the importer’s use of reasonable care in attempting to determine the information necessary to comply with the new MID requirement. Comment: One commenter stated that requiring the change in the MID requirement is a major rule change that should have been the subject of a notice of proposed rulemaking and pre-implementation comment in conformance with the E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations mandates of the Administrative Procedure Act (APA). According to this commenter, the interim rule’s conclusion that the foreign affairs exception of the APA applies is incorrect (rendering the interim regulations null and void) for two main reasons. First, the notion that the new MID requirement is centrally aimed at enforcing textile restraint agreements with China is belied by the fact that the requirement applies to textile goods from all countries. Second, CBP’s authority to promulgate regulations relating to the country of origin of textile products derives from a delegation of congressional authority (section 334 of the Uruguay Round Agreements Act) and is no longer within the discretion of the Executive Branch. CBP’s Response: CBP promulgated these regulations pursuant to section 204 of the Agricultural Act of 1956, as amended, and as directed by the Department of the Treasury. They were issued as ‘‘immediately effective interim regulations’’ because they involve a foreign affairs function of the United States. Section 334 of the Uruguay Round Agreements Act sets forth rules for determining the origin of textile products and authorizes the issuance of regulations to implement those rules. However, section 334(b) begins with the words ‘‘[e]xcept as otherwise provide for by statute’’ and proceeds to provide principles by which the origin of textile products is to be determined ‘‘for purposes of the customs laws and the administration of quantitative restrictions.’’ Section 204 of the Agricultural Act of 1956, as amended, is broader in scope than section 334 and provides for the issuance of regulations relevant to the enforcement of any textile agreement. The enactment of section 334 of the Uruguay Round Agreements Act did not eliminate the President’s authority under section 204 of the Agricultural Act of 1956 to regulate the importation of textile products. Regarding the commenter’s reference to the textile restraint agreement with China, CBP notes that the United StatesChina Memorandum of Understanding dated November 8, 2005, has expired. However, CBP noted in the interim rule that ‘‘by improving the proper reporting of the country of origin of textile imports, these interim regulations [including the MID requirement] will facilitate enforcement and administration of the various bilateral and multilateral free trade agreements with which the United States is a party by helping to ensure VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 that only those textile products that are entitled to trade benefits receive those benefits.’’ Textile and apparel products may receive preferential tariff treatment under the various free trade agreements (FTAs) as originating goods (i.e., goods that meet the applicable rules of origin) or, under certain FTAs, as nonoriginating goods that nevertheless qualify for preference under tariff preference levels (TPLs). TPLs negotiated by the President under certain FTAs limit the quantity of textile and apparel products that may receive preferential tariff treatment when they fail to qualify as originating goods under the applicable rules of origin. In view of the continuing proliferation of free trade agreements between the United States and numerous other countries around the world, CBP believes that it is entirely appropriate to apply the new MID requirement to textile and apparel products imported into the United States from all countries. Comment: Eleven commenters complained that the new MID requirement places an undue burden on importers and exporters because of: (1) Significantly increased paperwork and associated costs to importers in terms of the size (number of pages) of typical entries, especially in regard to consolidated shipments sourced from multiple manufacturers and multiple countries (requiring MID codes on a line-by-line basis); (2) increased paperwork and costs to collect, track, report, and store data for the first time relating to the actual manufacturer; (3) costs involved in reprogramming exporter and importer systems to capture manufacturer information; (4) additional costs to buyers and sellers when shipments are refused entry by CBP due to incorrect MID information; and (5) exorbitant costs and physical obstacles associated with segregating fungible goods that previously were commingled in inventory without reference to the manufacturer. One commenter alleged that the new MID requirement is more of a burden on importers than the textile declaration that was just eliminated. CBP’s Response: Based on discussions with the trade community and from a review of the textile declarations submitted over the years, CBP believes that most importers were aware of the name of the entity producing their goods and were providing this information to CBP prior to implementation of the new MID requirement. For these companies, there has been little, if any, additional expense or burden associated with complying with the new requirement. CBP understands that there are some PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 14577 companies that face challenges in complying with the new regulation. However, CBP worked closely with the trade community before implementing the interim regulations and believes that the elimination of the paper textile declaration, which was a required document for nearly all textile shipments to the United States, is a benefit to most firms. The elimination of the paper textile declaration has allowed importers to complete paperless entry filing, thereby facilitating trade in textiles and wearing apparel. CBP believes that the overall tradeoff between the elimination of the textile declaration and the initiation of the new MID requirement is of benefit to the majority of importers. CBP recognizes that expenditures may be necessary to comply with the new rule with respect to fungible goods that are commingled in inventory. But, consistent with common business practices, many companies already know the identity of their suppliers/producers and the quantity of products purchased from each for accounts payable purposes. Comment: Two commenters stated the new MID requirement for textile and apparel goods is having a severe and unjustifiable impact upon the ability of the EU and Swiss textile and apparel industries to sell their products into the U.S. market. According to these commenters, this unexpected new requirement is creating significant problems, and a growing number of companies are having their products blocked at Customs, thus imposing huge costs on them and placing several on the verge of bankruptcy through their inability to deliver products on time to their U.S. customers. CBP’s Response: Although the interim regulations were immediately effective, CBP recognized the challenges facing some importers in complying with the new regulations and accordingly delayed enforcement to permit companies to fully implement the requirements. However, as previously indicated, CBP no longer requires the submission of a paper textile declaration that was traditionally completed by the manufacturer. The elimination of the textile declaration should expedite the processing of textile entries. The textile declaration required information on manufacturing processes that could only be obtained by contacting the manufacturer. CBP believes that providing the MID constructed from the name and address of the manufacturer is a less intrusive and onerous undertaking than describing the production process E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 14578 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations which was a requirement of the textile declaration. Comment: Two commenters questioned whether the new MID requirement is in conformity with ‘‘WTO common practice’’ because the requirement appears to be: (1) Stricter and more cumbersome than the previous one that regulated textile and apparel imports during the Multi Fiber Arrangement (MFA) and the subsequent WTO Agreement on Textile and Clothing (ATC); and (2) inapplicable to a few country suppliers who have privileged relations with the U.S. A third commenter stated that the new requirement may be in contradiction to the goals of Article 2 of the WTO Agreement on rules of origin, such as ‘‘not to create unnecessary obstacles to trade.’’ This commenter asked whether certain free trade partners of the U.S. are exempt from the new MID requirement. CBP’s Response: CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary) require importers of all goods (textile and non-textile products) to provide a MID at the time of entry in blocks 26 and 13, respectively. Prior to publication of the interim amendments, importers of all goods had the option of constructing the MID from the name and address of the manufacturer, shipper or exporter. However, effective October 5, 2005, importers of textile and apparel products have been required to construct the MID from the manufacturer only, and not from the exporter or shipper (unless that entity is also the manufacturer). Prior to this change, many importers were already constructing the MID from the name and address of the manufacturer. Only in cases in which importers of textile products were constructing the MID from the shipper or exporter (who was not also the manufacturer) have importers been required to provide a different MID. The MID requirement for textile and apparel goods was created, in part, to facilitate trade into the United States by compensating for the elimination of the paper textile declaration. Comment: A commenter stated that the new MID requirement will generate fewer paperless entries, contrary to CBP’s stated goal of a paperless environment. Another commenter stated that it was his understanding that the Automated Invoice Interface (AII) module of ACS/ ABI is capable of only handling one MID per commercial invoice. This commenter also indicated that it is his understanding that the AII module is mandatory for Remote Location Filing VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 (RLF), and that, under the new MID requirement, an entry will need to show as many MIDs as there are actual manufacturers of the goods in the shipment. The commenter asked whether ‘‘CBP is capable of accepting multiple MID codes per invoice for AII/ RLF purposes,’’ and, if the answer is no, whether the new requirement is defeating the push toward automation. CBP’s Response: The ‘‘AII’’ module, utilized for electronic invoices, is capable of handling more than one MID per invoice. For example, if there are three lines on an invoice, each line could be transmitted separately with a different MID for each. If a broker needs assistance with the AII module, he or she should contact their ABI Client Representative. Also, it should be noted that the AII module is separate from the line data transmitted for purposes of CBP Forms 3461 and 7501. The RLF program allows for multiple line entries and a broker would be able to transmit a different MID for each line on the entry/entry summary. Comment: Two commenters addressed whether the information collections set forth in this interim rule meet the requirements of the Paperwork Reduction Act (44 U.S.C. 3507). One commenter contended that the estimates of the annual burden associated with these information collections, as published in the Federal Register, greatly understate the additional level of burden and cost placed on companies as a result of this interim rule. The second commenter stated that because the interim rule ‘‘results in a tremendous increased burden on importers with regard to the quantity and content of the information to be collected,’’ the rule violates the basic principles of the Act. CBP’s Response: CBP consulted closely with many parties before the issuance of this regulation. Although some importers may find it necessary to increase their data collections, CBP believes that those importers who already had knowledge of the manufacturer of their goods will have a significantly-reduced information collection burden due to the elimination of the textile declaration. In estimating the annual burden associated with the collection of information set forth in the interim rule, CBP took into account that many U.S. importers of textile and apparel products already knew the name and address of the entity performing the origin-conferring operations with respect to their goods. Comment: PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 Eight commenters provided examples of situations in which they allege it will be impossible or extremely difficult for importers of textile and apparel goods to comply with the requirement that entries identify the entity that performed the origin-conferring operations through a MID. Several of these commenters indicated that requiring the identification of the manufacturer in these situations in effect imposes a barrier to trade. The examples provided include: a. Cross-border trade, especially between the U.S. and Canada, involving re-imports/re-exports, such as when clothing from the U.S. is cleaned, repaired, or altered in Canada and returned to the U.S. (or vice-versa). Cross-border trade in which a company is three or four steps removed from the importer of the goods into the NAFTA territory and is unable to determine the manufacturer due to the commingling of the goods in inventory by parties in the chain of commerce both within and outside the NAFTA territory; b. Fungible goods, such as parts and trimmings, that are procured from multiple manufacturers and are commingled in inventory without reference to the manufacturer; c. Fabric purchased from a middleman who has no information on the identity of the weaver of the fabric for a myriad of reasons such as the unavailability of records due to the passage of time or because the manufacturer has gone out of business; d. Mail orders of textile and apparel items by U.S. retail customers; e. Textile products sourced from vendors who subcontract to a ‘‘cottage industry,’’ primarily involving individuals working from their homes; f. Textile and apparel goods entered into a bonded warehouse or foreign trade zone and not intended to be sold or used in the U.S.; g. Clothing contributed for charitable purposes from outside the U.S.; and h. Textile and apparel articles imported as sets. CBP’s Response: For the most part, U.S. importers should be aware of their supply chain and, therefore, should know the identity of the manufacturer of their goods. If an agent or seller is unwilling to provide the importer with the identity of the manufacturer, the importer should question the security of that transaction and/or the legality of the production process. However, CBP recognizes that there may be instances in which the importer, despite the use of reasonable care, is unable to determine the identity of the entity that performed the originconferring operations with respect to E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations certain imported goods. Under these circumstances, importers must be able to demonstrate to the CBP port director the use of reasonable care in attempting to determine the information required to comply with the MID regulation. Although the importer technically may be in violation of § 102.23(a) for not providing the required MID in these rare instances, CBP port directors will take into account the importer’s use of reasonable care in determining whether to assess penalties. The following examples are offered to provide guidance as to when a port director may consider not pursuing penalties: • Antique Persian carpets are imported from a European dealer. The importer has a statement from the dealer claiming that the dealer has no idea who produced each carpet. • Six one-of-a-kind dresses purchased at retail at a South American boutique are imported into the United States. The importer offers correspondence showing that the boutique owner does not know the entities that produced the 6 dresses being imported. • An importer purchases vintage World War II uniforms on a trip to Eastern Europe. Most of the uniforms were surplus with no visible signs of wear and, therefore, not eligible for entry as worn clothing under heading 6309, HTSUS. The importer, due in part to historical interest, asks the shop owner for the identity of the manufacturer. The shop owner is unable to provide any information relating to the production of the uniforms, even after checking various records, including relevant invoices, packing slips, and shipping documents. Together, the shop owner and the eventual importer verify that neither the surplus goods nor the boxes in which they are packed contain information on the manufacturer. The following examples are offered to provide guidance as to when a port director may consider pursuing penalties: • An importer states to CBP that his agent located in Asia does not wish to disclose the name of the manufacturer for fear of being cut out of future business. • A particular style of flannel bed sheets formed from Asian cloth is imported from Europe. Pursuant to the origin rules in § 102.21, the sheets are a product of the country where the cloth was formed. Because the goods were purchased from Europe, the importer believes it is ‘‘too difficult’’ to request the necessary origin information from the European supplier. Comment: VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 Ten commenters raised business confidentiality concerns regarding the new MID requirement for textile and apparel products. Five of these commenters pointed out that where the seller is not the manufacturer of the imported goods but an intermediary, the seller may be reluctant, or even refuse, to disclose information regarding its sources for fear that the importer will bypass the seller in future transactions by going directly to the manufacturer to purchase goods. Five of the commenters also expressed concern that identifying the manufacturer on entry documents increases the risk of the disclosure of proprietary business information (product sources) to competitors. In this regard, several commenters indicated that there was some confusion in the trade as to whether the interim rule requires the submission of the name and address of the manufacturer in addition to the MID to provide CBP the means to verify the accuracy of the MID provided. One commenter suggested the use of a confidential MID system using random codes that are known only to CBP and the exporter. Another commenter expressed concern that part of CBP’s justification in requiring the MID is to enable CBP to provide specific information to foreign customs administrations concerning foreign entities violating customs laws. CBP’s Response: Regarding the concern that an intermediary may be reluctant or even refuse to disclose the identity of its suppliers, CBP incorporates by reference the response to the immediatelypreceding comment above. The objectives of the regulatory changes are to assist in the enforcement of U.S. textile laws and to facilitate the movement of textile trade into the United States. The MID requirement has allowed CBP to eliminate the paper textile declaration, thereby permitting the electronic processing of entries. The textile and apparel MID requirement involves providing the Manufacture Identification Code on appropriate entry documentation. There is no requirement that the name and address of the manufacturer appear on the commercial invoice or other entry documentation. However, CBP has the right to verify the accuracy of all information provided by importers by requesting and reviewing additional records and documentation. CBP can provide assurances that the U.S. Government and its employees are prohibited from disclosing business confidential information pursuant to the Trade Secrets Act (18 U.S.C. 1905). In addition, § 552(b)(4) of the Freedom of Information Act, as amended, provides an exemption from the disclosure by the PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 14579 U.S. Government of ‘‘trade secrets and commercial or financial information obtained from a person and privileged or confidential.’’ CBP considers all information provided in connection with the entry process to be confidential (see 19 CFR 103.34 and 103.35) and as such it is for official use only. CBP, however, reserves the right, pursuant to 19 U.S.C. 1628, to exchange this information with foreign customs and law enforcement agencies, as appropriate, for law enforcement purposes on a limited case-by-case basis. Comment: Four commenters recommended that, because informal entries were exempt from the textile declaration requirement, CBP similarly should provide an exemption from the MID requirement for non-commercial shipments for personal use as well as goods entered on informal entries. CBP’s Response: CBP fully appreciates the concerns regarding the MID requirement for personal use shipments and has consulted with CITA regarding this matter. In a letter dated April 13, 2006, the Chairman of CITA concurred with CBP’s suggested exclusion of personal use shipments from the MID requirements of § 102.23(a). Accordingly, § 102.23(a) has been amended in this final rule document to provide that the MID must reflect the entity performing the origin-conferring operations only with respect to commercial importations. As a result of this change, all personal use shipments subject to formal or informal entry procedures will be excepted from the MID requirement set forth in § 102.23(a), while all commercial shipments, whether covered by formal or informal entries, will continue to be subject to this requirement. CBP wishes to clarify that this exemption relates only to the requirement that the MID be constructed from the entity performing the originconferring operations. Importers of personal use shipments must continue to provide a MID (a required data element on CBP Forms 3461 and 7501), but the MID may be constructed from the manufacturer, shipper, or exporter. Comment: Nine commenters urged CBP to allow the MID to be constructed from entities other than those performing the originconferring operations in situations in which it is impossible or extremely difficult to ascertain the identity of the manufacturer. One commenter indicated that such situations would include when the seller refuses to provide the identity of the manufacturer for E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 14580 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations business proprietary reasons. Two of the commenters stated that the MID required by the interim rule should be constructed using the ‘‘best information available,’’ which may be the name and address of the shipper, buying or selling agent, or seller, provided the parties to the transaction have used reasonable care to determine the identity of the true manufacturer. Two commenters suggested that in situations in which there are multiple manufacturers for a single shipment (e.g., fungible goods), importers should be able to describe the manufacturer as ‘‘multi’’ or ‘‘multiple’’ on the CBP Form 7501. Two commenters recommended that CBP maintain the use of textile declarations, coupled with the former requirements for MID completion, as an alternative to the new MID requirement. CBP’s Response: Requiring the MID to be identified on entries of textile and apparel goods to be constructed from the entity performing the origin-conferring operations better enables CBP to enforce U.S. textile laws and trade agreements as well as facilitate trade in textile and apparel products. Regarding fungible goods, importers should use reasonable care in constructing the MID for each shipment, but, as always, should work closely with the CBP port director in cases involving extraordinary circumstances. For example, if an importer purchases from a company with a unique inventory system, this information should be discussed with the port director to ensure that an acceptable yet accurate reporting of required information is provided. Comment: Two commenters indicated that it should be sufficient for CBP purposes for importers to provide the country of origin of imported textile and apparel goods on entry documents without also having to identify the manufacturer through the MID requirement. According to these commenters, CBP may request additional information regarding the manufacturer of the goods as part of a post-entry verification. One of these commenters proposed, as a practical alternative to the new MID requirement, that CBP permit importers to identify the MID of one actual producer (rather than all producers) in each separate country. As part of this proposal, CBP could request the ‘‘identity of manufacturers on a countryby-country basis, or by entry if it deems the information necessary for enforcement purposes.’’ CBP’s Response: CBP wishes to remind these commenters that the basic MID VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 requirement is not new. Importers of virtually all goods (textile and nontextile products) have been required for some time to submit a MID at the time of entry. The instructions on completing the CBP Form 7501 clearly indicate that when an entry summary covers merchandise from more than one manufacturer, the word ‘‘MULTI’’ should be recorded in block 13, and column 28 should reflect the MID corresponding to each line item. CBP continues to believe that the MID requirement for both textile and nontextile products is an important tool in facilitating the correct reporting of the origin of imported goods. Comment: Eight commenters recommended that CBP grant exceptions to the new MID requirement. Six of these commenters noted that the primary function of the new requirement (according to CBP) is to assist CBP in properly enforcing the international textile restraint agreements to which the U.S. is a party. Consistent with that purpose, these commenters asked that CBP limit the new MID requirement to products that are still subject to quantitative restraints under bilateral textile agreements or due to safeguard actions. One commenter expressed concern that the new MID requirement may apply to a wide variety of products that are not traditionally considered textile and apparel products (e.g., valves with mesh fabric filters, jump ropes, hats, and footwear). Other commenters suggested that exemptions from the MID requirement should be granted for goods of NAFTA and CAFTA–DR countries, goods entered under subheadings 9802.00.40, .50, .80, and .90, HTSUS, goods previously imported, exported, and then returned, products integrated prior to 2000 (consistent with the November 8, 2005, Memorandum of Understanding with the People’s Republic of China), as well as merchandise sold in duty-free stores. CBP’s Response: As noted above, the objectives of the interim amendments are to assist in the enforcement of U.S. textile laws and facilitate the movement of legitimate trade in textiles into the United States. Since illegal trade may be disguised as products of virtually any country, it would be of little help in enforcing the trade laws to require the MID only for products of certain countries. CBP has discovered illegal trade from dozens of countries, including some of our free trade agreement partners. Although the scope of textile and apparel goods subject to the new MID requirement closely parallels the scope of products formerly subject to the textile declaration requirement, CBP is PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 sympathetic to the concerns regarding the wide range of products covered by § 102.23(a). In an April 13, 2006, letter to CBP, CITA indicated that it concurred with CBP’s proposal to limit the scope of products for which the MID is required to textile and apparel goods classified within Section XI of the Harmonized Tariff Schedule of the United States (HTSUS), and any 10-digit HTSUS number outside Section XI with a three-digit textile category number assigned to the specific subheading. Section 102.23(a), which previously provided that the MID requirement applied to textile or apparel products listed in § 102.21(b)(5), has been amended in this final rule document to effect the above change. This amendment excludes from the scope of the MID requirement products such as umbrellas, seat belts, parachutes, watchstraps, and doll clothing. With respect to the commenters’ requested exemption for goods classified in subheading 9802.00.40, .50, .80, or .90, HTSUS, the MID for goods classified in Chapter 98, HTSUS, must be constructed from the entity performing the origin-conferring operations only if the Statistical Notes for the specific Chapter 98 subheading require the reporting of the associated Chapter 1–97 10-digit statistical number and that Chapter 1–97 number falls within the scope of the MID requirement set forth in amended § 102.23(a). Thus, if a good is classified in a Chapter 98 subheading and that subheading either does not require the reporting of the associated Chapter 1–97 number or the associated Chapter 1–97 number falls outside the scope of the MID requirement in § 102.23(a), then the MID may be constructed from the manufacturer, shipper, or exporter. Comment: Five commenters questioned the usefulness of the new MID requirement for security targeting purposes. Four of these commenters maintained that since the shipper is the last party in the supply chain to handle the product prior to export to the U.S., the identity of the shipper rather than that of the manufacturer is the better source of security targeting data. Two of the commenters pointed out that the MID is not a reliable tool in enforcement actions because of the many potential variations in MID construction—names and addresses of companies may be written and abbreviated in many different ways. CBP’s Response: While CBP appreciates the commenters’ concerns regarding security issues, the objectives of the interim regulations do not include using E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations the MID to improve CBP’s security targeting efforts. That said, it should be noted that the manufacturer generally is the last party in the supply chain to load the goods into the shipping container, which usually is just as important a consideration from a security standpoint as the last party that handles the container. In addition, CBP is aware of the potential variations in MID construction and is considering ways to address this problem. However, it is important to recognize that these variations may occur regardless of whether the MID is reported as the manufacturer or as the shipper. Comment: Three commenters stated that the new MID requirement for textile and apparel products should conform to the rule for all other products so as to permit the identification of either the manufacturer or the shipper. One commenter described the new requirement as ‘‘discriminatory’’ and questioned why the criteria for the MID for textiles is far more stringent than for other products which pose a greater threat to the health and safety of U.S. citizens, such as food or spare parts for cars or airplanes. Another commenter observed that, for trade data collection purposes, MIDs for textile and apparel products now will represent completely different parties (manufacturers) from MIDs for other products (shippers or exporters). CBP’s Response: In many cases, importers of textile and apparel goods were already constructing the MID from the manufacturer prior to the change in the MID requirement. CBP would also note that few, if any, non-textile products have the origin restrictions that exist for textile and apparel products. CBP will carefully evaluate the results of the change in the MID requirement for textile and apparel products before determining whether the same change also should be made for all non-textile products. Comment: Five commenters pointed out that the instructions for block 13 (‘‘Manufacturer I.D.’’) on the CBP Form 7501 provide that for ‘‘purposes of this code, the manufacturer should be construed to refer to the invoicing party or parties (manufacturers or other direct suppliers).’’ Therefore, according to these commenters, the new MID requirement for textile and apparel products set forth in the interim rule conflicts with the CBP Form 7501. Two of these commenters stated that this discrepancy will result in confusion and uncertainty in the trading community. CBP’s Response: VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 CBP agrees that there should be no discrepancy between the requirements of § 102.23(a) and the instructions for the completion of CBP Form 7501. Therefore, the instruction notice for completing CBP Form 7501 has been amended to conform to the requirements of § 102.23(a) and posted to the cbp.gov Web site (see http:// www.cbp.gov/xp/cgov/import/ cargo_summary/cbp7501/). Comment: Two commenters expressed the view that CBP will have difficulty determining whether the MID for textile and apparel goods is constructed correctly, especially in the case of ‘‘home textiles’’ (where the seller is rarely the manufacturer) and in situations in which the seller is a trading company. One of these commenters inquired as to the type of documentation that will be required to enable CBP to enforce the new MID requirement. This commenter stated that ‘‘since there are no definitions of what is acceptable proof,’’ there likely will be inconsistent enforcement around the country. CBP’s Response: If CBP officials choose to verify the accuracy of MID information, these officials will request and review additional documentation and records for that purpose. What is ‘‘acceptable proof’’ will depend on the type of product being imported, as the originconferring operations will differ from product to product. For example, for most apparel, the MID reflects the firm assembling the garment, while for many home textile products such as bed sheets, the MID reflects the firm that formed the fabric. While sewing records would be appropriate in verifying MID information in the former situation, a mill certificate would be appropriate in the latter situation. We appreciate the concern for consistency and offer as guidance that, after CBP determines the origin-conferring operation for a particular textile product, it will request and review commercially available manufacturing documentation appropriate to the product involved, such as commercial invoices, sewing tickets, and spinning or mill certificates. Comment: Two commenters recommended that, as part of its final rule, CBP update the ‘‘Formal Entry List,’’ or TBT–01–036, most recently issued on August 31, 2001. Both commenters suggested that the Formal Entry List exempt all noncommercial shipments from the requirement of filing a formal entry to help clarify that the new MID requirement applies only to formal entries of commercial shipments. One of PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 14581 these commenters also recommended that the Formal Entry List be modified to require formal entries only for commercial shipments valued over $250. The second commenter also suggested that the List have a single value limit, not less than the value limit set forth in 19 U.S.C. 1321. However, this commenter stated the value limit set forth in section 1321 should be increased from $200 to $500. CBP’s Response: By way of background, TBT–01–036 dated August 31, 2001, is a CBP textile information issuance to the trade community that updated two lists of tariff numbers for which the submission of a formal entry is required. One list relates to tariff numbers for which a formal entry is required for commercial shipments only, regardless of value (pursuant to 19 CFR 143.22). The second list relates to tariff numbers for which a formal entry is required if the shipment is valued in excess of $250 (pursuant to 19 CFR 143.21(a)). TBT– 01–036 indicates that if a tariff number is on both lists, the requirement for formal entry regardless of value takes priority. CBP appreciates the recommendations of these commenters regarding the Formal Entry List and is reviewing and evaluating the potential impact of the suggested changes. However, CBP does not believe that this final rule document, which is concerned with the country of origin of textile and apparel products, is the appropriate vehicle for implementing changes relating to the types of merchandise that may be entered under informal entry. Any such changes that CBP decides to pursue affecting 19 CFR Part 143 will be the subject of a separate rulemaking. In regard to the suggestion that CBP should clarify that the new MID requirement applies only to formal entries of commercial shipments, CBP notes (as previously pointed out in this comment discussion) that § 102.23(a) has been amended in this final rule document to provide that the MID must reflect the entity performing the originconferring operations only with respect to commercial importations. Thus, effective upon publication of this document in the Federal Register, all personal use shipments subject to formal or informal entry procedures will be excepted from the MID requirement set forth in § 102.21(a), while all commercial shipments (covered by formal or informal entries) will continue to be subject to this requirement. Comment: A commenter stated that he was unaware of any Customs statute that requires a U.S. importer to know the E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 14582 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations manufacturer of textile and apparel products so long as the importer can demonstrate that it acted with ‘‘reasonable care’’ to enter, classify, and value the imported goods, as well as determine the application of other legal requirements (e.g., requirements of other government agencies affecting admissibility). CBP’s Response: The commenter is correct that there is no customs statute that requires a U.S. importer to know the manufacturer of his/her product. However, in accordance with the direction provided by the Chairman of CITA and pursuant to section 204 of the Agricultural Act of 1956, as amended, as that authority is delegated by Executive Orders 11651 and 12475, and with direction from the Department of the Treasury, CBP is requiring the U.S. importer to provide the manufacturer’s identification code for entries of textile and apparel products to help enforce trade in textile and apparel products. Comment: A commenter stated that the new MID requirement for textile and apparel articles is poorly defined. The commenter indicated that, while it is reasonably easy to use the country of origin rules in § 102.21, CBP regulations, to ascertain the correct country of origin of a good, the rules are difficult to use in determining the specific ‘‘origin-conferring operation’’ for purposes of complying with the new MID requirement. Three examples were provided: 1. While § 102.21(c)(1) clearly defines country of origin as ‘‘the single country, territory, or insular possession in which the good was wholly obtained or produced,’’ the rule does not identify the origin-conferring operation (e.g., growing the cotton, spinning the thread, weaving the cloth, or cutting and sewing the final product). 2. Regarding the rule set forth in § 102.21(e)(2) (‘‘the country of origin of the good is the country, territory, or insular possession in which the fabric comprising the good was both dyed and printed when accompanied by two or more of the following operations: * * *’’), how is the entity performing the origin-conferring operation to be determined if more than one manufacturer performs these operations within one country? For example, if one company prints and dyes while a second company shrinks and fulls, which is the origin-conferring entity? 3. In a situation involving a single textile item consisting of fabrics made by multiple weavers, which of the weavers is the origin-conferring entity? VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 Is it the one that wove the largest piece of fabric? CBP’s Response: With regard to determining the entity who performed the origin-conferring operations for particular goods, importers may request and obtain a determination from CBP on that issue, provided sufficient information is furnished to enable CBP to make such a determination. Generally, however, one can look to the rules of origin for textile and apparel products set forth in § 102.21 (or the statutory source of those rules, 19 U.S.C. 3592) or § 102.22 (for products of Israel) and discern which operation will be the origin-conferring operation for the good at issue. For instance, in the first example above, assuming that the product is one that, if it had been produced in more than one country, would derive its origin from where it is wholly assembled, the assembler would be the entity that performed the origin-conferring operation. The second example above is more difficult. Assuming that the good is subject to the rule set forth in § 102.21(e)(2), CBP believes that the entity performing the last or final step of these origin-conferring operations would be considered the originconferring entity. For example, the dyeing, printing, shrinking, and fulling must all occur in a single country for origin to be conferred in that country. The origin-conferring process is not complete until the last of the required or necessary steps is completed. Therefore, it is the last manufacturer to complete the origin-conferring steps who is to be considered the originconferring entity. However, the determination of the origin-conferring entity may vary depending on the specific facts involved and the product at issue. An importer should seek a ruling from CBP in cases of uncertainty of the entity to be considered the originconferring entity. As for the third example, CBP is unable to determine the originconferring entity without more specific information regarding the ‘‘single textile item’’ involved. Comment: A commenter asked whether, in constructing a MID for companies located in amalgamated cities in Quebec (e.g., Montreal, Quebec City, Hull), an importer should use the amalgamated location or the location of any former townships within said location. CBP’s Response: Consistent with the rules for constructing the MID set forth in the Appendix to Part 102, if the location is indeed an amalgamated city, it would be PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 appropriate to use such a location (such as Montreal) rather than a former township. Comment: A commenter inquired as to whether the new MID requirement applies to marked/mutilated textile samples. The commenter noted in this regard that such goods are accorded tariff treatment based upon their classification in subheading 9811.00.60, HTSUS, and that this subheading is not within the HTSUS provisions defining the scope of textile or apparel products set forth in 19 CFR 102.21(b)(5). Another commenter recommended that the term ‘‘samples,’’ as used in interim § 102.24(a) be defined to exclude samples classifiable in subheading 9811.00.60, HTSUS. According to this commenter, ‘‘[t]ariff samples are not subject to duty or quantitative restraints and there is no purpose in denying the informal entry procedure to them.’’ CBP’s Response: Subheading 9811.00.60 does not fall within the scope of the MID requirement set forth in amended § 102.23(a) and, because subheading 9811.00.60 does not require a 10-digit statistical reporting number, the MID for goods classified in this provision need not be constructed from the entity performing the origin-conferring operations. Samples that are referred to in 19 CFR 102.24(a) are not intended to include samples classifiable in subheading 9811.00.60. Comment: A commenter recommended that the final rule include a definition of the term ‘‘manufacturer’’ to clarify that the manufacturer is the entity that performs the origin-conferring operations. This commenter also noted that the Memorandum of Understanding (MOU) with the People’s Republic of China includes a requirement for a visa transmission, and that a manufacturer’s identification code is one of the data elements that must appear on the visa transmission. The commenter stated that since the MID on the visa transmission may not reflect the entity performing the origin-conferring operations, there may be a discrepancy between the MID on the visa transmission and the MID on the entry documentation. In this regard, the commenter recommended that interim § 102.23(a) be amended in the final rule to clarify that such a discrepancy will not be the cause of an entry rejection. CBP’s Response: The first suggested clarification is unnecessary as § 102.23(a) specifically requires that the MID be ‘‘constructed from the name and address of the entity E:\FR\FM\17MRR1.SGM 17MRR1 wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations performing the origin-conferring operations.’’ Pursuant to the MOU with China, an MID must be transmitted via the Electronic Visa Information System (ELVIS). The MOU closely parallels § 102.23(a) by providing that the MID is to be constructed from ‘‘the name of the entity performing the origin-conferring operations.’’ Therefore, while there is no reason to expect a discrepancy between the MID reported on the visa transmission and the MID reported on entry documentation, CBP recognizes that there may be instances in which the two MIDs do not match. CBP will not reject an entry if there is a discrepancy between the two MIDs if the MID identified pursuant to 102.23(a) accurately reflects the name and address of the entity performing the originconferring operations. Comment: A commenter noted that, for goods produced in the NAFTA territories, a different conclusion regarding the country of origin of a good may be reached when applying the NAFTA preference override provision in 19 CFR 102.19 rather than the rules set forth in 19 CFR 102.21. Because § 102.19 takes precedence in such a situation, the commenter recommended that the final rule clarify that, in determining the entity performing the origin-conferring operations for purposes of the MID requirement, the NAFTA preference override provision in § 102.19 should be taken into consideration. CBP’s Response: The clarification sought by the commenter is unnecessary. Section 102.21(c) clearly states that in determining the country of origin of a textile or apparel product by application of paragraphs (c)(1) through (c)(5) of § 102.21, where appropriate ‘‘the additional requirements or conditions of §§ 102.12 through 102.19 of this part’’ are to be applied. Comment: A commenter inquired regarding a situation involving sewing thread made of spun polyester fiber where the fiber is produced in China but the yarn is spun, twisted, dyed, and finished in Mexico. The commenter stated that although the sewing thread would be considered to be of Chinese origin for purposes of NAFTA, it appears that the MID should reflect the Mexican supplier since the ‘‘major transformation is done in Mexico.’’ CBP’s Response: Section 102.23(a) provides that the entity performing the origin-conferring operations is to be determined by application of the rules of origin set forth in 102.21 (or § 102.22 for products VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 of Israel). Applying the rules in § 102.21 to the example provided, if the fiber referenced by the commenter is staple fiber, the origin of the sewing thread would be the country in which the fiber was spun into yarn, i.e., Mexico. However, if the fiber referenced by the commenter is extruded filament, the origin of the thread would be the country in which the filament was extruded, i.e., China. It should be emphasized that these determinations are made by application of the country of origin rules set forth in § 102.21 and not by the NAFTA preference rules set forth in General Note 12, HTSUS. Comment: A commenter requested clarification regarding whether post office boxes may be used in constructing the MID, and, if so, suggested that an example of a MID constructed, in part, from a P.O. Box would be helpful. This commenter also stated that there has been some confusion as to whether Kowloon should be reflected in the MID as the city. The commenter suggested that inserting an example in paragraph 7 of the Appendix to Part 102 where the factory is located in Kowloon would help eliminate the confusion. CBP’s Response: As stated in paragraph 4 of the Appendix to Part 102, a post office box number (the first four numbers) is to be used in constructing the MID if it contains the largest number on the street address line. CBP agrees that it would be helpful to include an example in paragraph 7 of the Appendix showing the use of a P.O. Box number. With respect to whether Kowloon (in Hong Kong) should be reflected in the MID as the city, paragraph 5 of the Appendix provides that the last characters in the MID are derived from the first three letters in the city name. Paragraph 5 clearly states that, for city-states, the first three letters are to be taken from the country name and gives an example of ‘‘HON’’ for Hong Kong. CBP agrees with the commenter that it would be helpful to include in paragraph 7 an example of a manufacturer in Kowloon. The following example, using both a post office box number and a manufacturer in Kowloon, has been added to the examples in paragraph 7 of the Appendix to Part 102: A.B.C. Company, 55–5 Hung To Road, P.O. Box 1234, Kowloon, Hong Kong. The MID is HKABCCOM1234HON. Conclusion Accordingly, based on the analysis of the comments received, CBP has determined that the interim regulations published as CBP Dec. 05–32 should be adopted as a final rule with certain PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 14583 changes as discussed above and as set forth below. The changes to the interim regulatory text effected by this final rule document are as follows: 1. In § 102.23(a), paragraph (a), relating to the manufacturer identification code (MID), has been revised to limit the MID requirement to commercial importations of textile and apparel goods classified within Section XI, HTSUS, and any 10-digit HTSUS number outside of Section XI with a three-digit textile category number assigned to the specific subheading; and 2. In the Appendix to Part 102, which sets forth rules for constructing the MID: a. Paragraph 1 has been revised to reflect the limitation in the scope of the MID requirement set forth in amended § 102.23(a); and b. Paragraph 7 has been revised by adding a new example that illustrates the use of a post office box number as well as a manufacturer located in Kowloon, Hong Kong. Inapplicability of Notice and Delayed Effective Date Requirements Under the Administrative Procedure Act (‘‘APA’’) (5 U.S.C. 553), agencies generally are required to publish final amendments at least 30 days prior to their effective date. However, §§ 553(d)(1) and (d)(3) of the APA exempt agencies from the requirement of publishing notice of final rules at least 30 days prior to their effective date when a substantive rule grants or recognizes an exemption or relieves a restriction and when the agency finds that good cause exists for not meeting the advance publication requirement. As discussed earlier, the only changes to the interim regulations effected by this final rule involve limiting the scope of the MID requirement for textile and apparel products and adding a new example to clarify the proper construction of the MID. Accordingly, it has been determined that this final rule grants an exemption and relieves restrictions and that good cause exists for dispensing with a delayed effective date. Executive Order 12866 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, therefore, is specifically exempted by section 3(d)(2) of Executive Order 12866. Regulatory Flexibility Act CBP Dec. 05–32 was issued as an interim rule rather than as a notice of E:\FR\FM\17MRR1.SGM 17MRR1 14584 Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules and Regulations proposed rulemaking because CBP had determined that: (1) The interim regulations involve a foreign affairs function of the United States pursuant to § 553(a)(1) of the APA; and (2) prior public notice and comment procedures on these regulations were impracticable, unnecessary, and contrary to the public interest pursuant to § 553(b)(B) of the APA. Because no notice of proposed rulemaking was required, the provisions of the Regulatory Flexibility Act, as amended (5 U.S.C. 601 et seq.), do not apply to this rulemaking. Accordingly, this final rule is not subject to the regulatory analysis requirements or other requirements of 5 U.S.C. 603 and 604. Paperwork Reduction Act The collections of information in these regulations (the identification of the manufacturer on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary)) have been previously reviewed and 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 numbers 1651–0024 and 1651–0022, respectively. These regulations clarify that the manufacturer to be identified on entries of textile and apparel products must consist of the entity performing the origin-conferring operations. An agency may not conduct or sponsor and an individual is not required to respond to a collection of information unless it displays a valid OMB control number. Signing Authority This document is being issued in accordance with § 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. wwoods2 on DSK1DXX6B1PROD with RULES_PART 1 List of Subjects in 19 CFR Part 102 Customs duties and inspections, Imports, Reporting and recordkeeping requirements, Rules of origin, Trade agreements. Amendments to the Regulations Accordingly, the interim rule amending parts 12, 102, 141, 144, 146, and 163 of the CBP regulations (19 CFR parts 12, 102, 141, 144, 146 and 163), which was published at 70 FR 58009 on October 5, 2005, is adopted as a final rule with certain changes as discussed above and set forth below. PART 102—RULES OF ORIGIN 1. The general authority citation for part 102 continues to read as follows: ■ VerDate Mar<15>2010 11:10 Mar 16, 2011 Jkt 223001 Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624, 3314, 3592. 2. Section 102.23 is amended by revising paragraph (a) to read as follows: ■ § 102.23 Origin and manufacturer identification. (a) Textile or apparel product manufacturer identification. All commercial importations of textile or apparel products must identify on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in all electronic data transmissions that require identification of the manufacturer, the manufacturer of such products through a manufacturer identification code (MID) constructed from the name and address of the entity performing the origin-conferring operations pursuant to § 102.21 or § 102.22 of this part, as applicable. The code must be accurately constructed using the methodology set forth in the Appendix to this part, including the use of the two-letter International Organization for Standardization (ISO) code for the country of origin of such products. When a single entry is filed for products of more than one manufacturer, the products of each manufacturer must be separately identified. Importers must be able to demonstrate to CBP their use of reasonable care in determining the manufacturer. If an entry filed for such merchandise fails to include the MID properly constructed from the name and address of the manufacturer, the port director may reject the entry or take other appropriate action. For purposes of this paragraph, ‘‘textile or apparel products’’ means goods classifiable in Section XI, Harmonized Tariff Schedule of the United States (HTSUS), and goods classifiable in any 10-digit HTSUS number outside of Section XI with a three-digit textile category number assigned to the specific subheading. * * * * * ■ 3. The Appendix to part 102 is amended by revising paragraph 1 and by adding a new example at the end of paragraph 7. Revised paragraph 1 and the addition to paragraph 7 read as follows: Appendix to Part 102—Textile and Apparel Manufacturer Identification Rules for Constructing the Manufacturer Identification Code (MID) 1. Pursuant to § 102.23(a) of this part, all commercial importations of textile or apparel products, as defined in that paragraph, must identify on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in all electronic data transmissions that require identification of PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 the manufacturer, the manufacturer of such products through a manufacturer identification code (MID) constructed from the name and address of the entity performing the origin-conferring operations. The MID may be up to 15 characters in length, with no spaces inserted between the characters. * * * * * 7. * * * A.B.C. COMPANY, 55–5 Hung To Road, P.O. Box 1234, Kowloon, Hong Kong; HKABCCOM1234HON. Alan Bersin, Commissioner, U.S. Customs and Border Protection. Approved: March 14, 2011. Timothy E. Skud, Deputy Assistant Secretary of the Treasury. [FR Doc. 2011–6253 Filed 3–16–11; 8:45 am] BILLING CODE 9111–14–P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R08–OAR–2006–0952; FRL–9246–4] Approval and Promulgation of Air Quality Implementation Plans; Montana; Attainment Plan for Libby, MT PM2.5 Nonattainment Area and PM10 State Implementation Plan Revisions Environmental Protection Agency (EPA). ACTION: Final rule. AGENCY: EPA is approving the State Implementation Plan (SIP) revision submitted by the State of Montana on March 26, 2008. Montana submitted this SIP revision to meet Clean Air Act requirements for attaining the 1997 annual fine Particulate Matter (PM2.5) national ambient air quality standard (NAAQS) for the Libby nonattainment area. The plan revision, herein called an ‘‘attainment plan,’’ includes an attainment demonstration, an analysis of Reasonably Available Control Technology and Reasonably Available Control Measures (RACT/RACM), baseyear and projection year emission inventories, and contingency measures. The requirement for a Reasonable Further Progress (RFP) plan is satisfied because Montana projected that attainment with the 1997 annual PM2.5 NAAQS will occur in the Libby nonattainment area by April 2010. In addition, EPA is also approving revisions to the Lincoln County Air Pollution Control Program submitted by Montana on June 26, 2006, for inclusion into Libby’s attainment plan for purposes of the 1987 PM10 NAAQS. SUMMARY: E:\FR\FM\17MRR1.SGM 17MRR1

Agencies

[Federal Register Volume 76, Number 52 (Thursday, March 17, 2011)]
[Rules and Regulations]
[Pages 14575-14584]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6253]



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Federal Register / Vol. 76, No. 52 / Thursday, March 17, 2011 / Rules 
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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 12, 102, 141, 144, 146, and 163

[CBP Dec. 11-09; USCBP-2005-0009]
RIN 1515-AD57 (Formerly RIN 1505-AB60)


Country of Origin of Textile and Apparel Products

AGENCY: U.S. 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 
(``CFR'') to revise, update, and consolidate the Customs and Border 
Protection (``CBP'') regulations relating to the country of origin of 
textile and apparel products. The regulatory amendments adopted as a 
final rule in this document reflect changes brought about, in part, by 
the expiration on January 1, 2005, of the Agreement on Textiles and 
Clothing (``ATC'') and the resulting elimination of quotas on the entry 
of textile and apparel products from World Trade Organization (``WTO'') 
members. The primary regulatory change consists of the elimination of 
the requirement that a textile declaration be submitted for all 
importations of textile and apparel products. In addition, to improve 
the quality of reporting of the identity of the manufacturer of 
imported textile and apparel products, this document adopts as a final 
rule an amendment requiring importers to identify the manufacturer of 
such products through a manufacturer identification code (``MID'').

DATES: Final rule effective March 17, 2011.

FOR FURTHER INFORMATION CONTACT: Operational aspects: Roberts Abels, 
Textile Operations, Office of International Trade, (202) 863-6503.
    Legal aspects: Cynthia Reese, Tariff Classification and Marking 
Branch, Office of International Trade, (202) 325-0046.

SUPPLEMENTARY INFORMATION: 

Background

    On January 1, 2005, the Agreement on Textiles and Clothing 
(``ATC'') expired. The ATC was the successor agreement to the 
Multifiber Arrangement Regarding International Trade in Textiles 
(``MFA'') which governed international trade in textiles and apparel 
through the use of quantitative restrictions. The ATC provided for the 
integration of textiles and clothing into the General Agreement on 
Tariffs and Trade (``GATT'') regime over a 10-year transition period. 
With the conclusion of the 10-year period, the integration was complete 
and the ATC thus expired. As of January 1, 2005, textile and apparel 
products of World Trade Organization members are no longer subject to 
quantitative restrictions for entry of such products into the United 
States.
    By letter dated February 11, 2005, the Chairman of CITA requested 
that CBP review the regulations relating to the country of origin of 
textile and apparel products set forth in Sec.  12.130 of the CBP 
regulations (19 CFR 12.130) and recommend appropriate changes in light 
of the conclusion of the 10-year transition period for the integration 
of the textile and apparel sector into GATT 1994 to ensure ongoing 
enforcement of trade in textiles and apparel. By letter dated February 
23, 2005, CBP responded to CITA's request. CITA agreed by letter dated 
May 4, 2005, that Sec.  12.130 should be amended at this time and 
responded to the recommendations offered by CBP in response to CITA's 
solicitation of February 11, 2005. By letter dated July 28, 2005, the 
Department of the Treasury, pursuant to the authority retained by the 
Department of the Treasury over the customs revenue functions defined 
in the Homeland Security Act, and pursuant to section 204 of the 
Agricultural Act of 1956, as amended, as that authority is delegated by 
Executive Order 11651 of March 3, 1972, and Executive Order 12475 of 
May 9, 1984, and in accordance with the policy guidance, recommendation 
and direction provided by the Chairman of CITA in his letter of May 4, 
2005, authorized and directed the Department of Homeland Security to 
promulgate, as immediately effective regulations, amendments to the CBP 
regulations regarding the country of origin of textiles and textile 
products, including elimination of the textile declaration and 
requiring that importers provide the identity of the manufacturer.
    Accordingly, on October 5, 2005, CBP published CBP Dec. 05-32 in 
the Federal Register (70 FR 58009) setting forth interim amendments to 
the CBP regulations relating to the country of origin of textile and 
apparel products. In addition to revising and updating the provisions 
of Sec.  12.130, CBP Dec. 05-32 re-designated Sec.  12.130 as new 
Sec. Sec.  102.22 and 102.23(b) and (c) to consolidate the rules of 
origin for textiles and apparel products for all countries in Part 102 
of the CBP regulations. Similarly, Sec. Sec.  12.131 and 12.132, which 
set forth certain procedural matters regarding the entry of textile and 
apparel products, were also revised and updated and, as part of the 
consolidation of the textile regulations, re-designated as new 
Sec. Sec.  102.24 and 102.25, respectively. The interim amendments were 
effective on the date that the interim rule was published in the 
Federal Register (October 5, 2005). For a more comprehensive discussion 
of these interim regulatory amendments, please see CBP Dec. 05-32.
    One of the principal regulatory changes effected by CBP Dec. 05-32 
was the elimination of the requirement that a textile declaration 
accompany importations of textile and apparel products. The interim 
rule document stated that this will reduce the paperwork burden on 
importers and is consistent with the movement toward paperless entries.
    In addition, the interim amendments included a requirement that 
importers of textile and apparel products identify on CBP Form 3461 
(Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in 
all electronic data submissions that require identification of the 
manufacturer, the manufacturer of such products through a manufacturer 
identification code (MID) constructed

[[Page 14576]]

from the name and address of the entity performing the origin-
conferring operations. CBP Dec. 05-32 stated that this requirement 
resulted from guidance provided by CITA and the Department of the 
Treasury, and that it applied to all entries of textile or apparel 
products listed in Sec.  102.21(b)(5) of the CBP regulations. The 
interim rule document explained that this requirement will assist CBP 
in verifying the origin of imported textile and apparel products, 
thereby enabling CBP to better enforce trade in textile and apparel 
products.
    CBP Dec. 05-32 noted that importers of all goods are required to 
provide either a manufacturer or shipper identification code at the 
time of entry. The MID requirement for textile or apparel goods 
described above differs from the identification code required for all 
products in that the MID must identify the manufacturer (i.e., the 
entity performing the origin-conferring operations with respect to the 
imported product).
    Although the interim regulatory amendments were promulgated without 
prior public notice and comment procedures and took effect on October 
5, 2005, CBP Dec. 05-32 provided for the submission of public comments 
which would be considered before adoption of the interim regulations as 
a final rule, and the prescribed public comment period closed on 
December 5, 2005. A discussion of the comments received by CBP is set 
forth below.

Discussion of Comments

    A total of 26 commenters responded to the solicitation of public 
comments on the interim regulations set forth in CBP Dec. 05-32. Nearly 
all of the commenters supported the elimination of the textile 
declaration, although 24 of the commenters expressed opposition to or 
raised concerns or questions regarding the interim rule's requirement 
that entries of textile and apparel goods identify the manufacturer of 
the goods through a manufacturer identification code (MID). The 
comments are discussed below.
    Comment:
    Thirteen of the commenters objected to the fact that the interim 
rule became effective immediately upon publication in the Federal 
Register and, as a result, failed to provide any advance notice to the 
trade community of the change in the MID requirement for textile and 
apparel products. These commenters emphasized that because a change of 
this significance has impacts on many levels of trade, prior notice is 
necessary to afford importers and other supply chain participants 
sufficient time to fully understand the new MID requirement and to 
establish procedures to meet the requirement. One commenter stated that 
the adoption of the interim rule without a ``phase-in'' period is not 
in conformity with the principle of ``informed compliance'' and that 
members of the trade community believe that business certainty is 
imperative for good trade compliance.
    CBP's Response:
    CBP fully understands the concerns expressed by the commenters 
regarding the interim rule's immediate effective date. It was in 
response to these concerns that CBP decided to delay enforcement of the 
new requirement, as discussed in more detail below. CBP will continue 
to work with the trade community to ensure that this regulatory change 
results in as little disruption to the flow of legitimate trade as 
possible.
    Comment:
    Although several commenters noted that CBP delayed enforcement of 
the new MID requirement until November 18, 2005, ten commenters urged 
that CBP delay implementation and/or enforcement of the revised MID 
requirement beyond that date to allow importers and other trade 
participants adequate time to track the required MID information and 
incorporate it into their logistic systems. Four commenters recommended 
a six-month phase-in period, two commenters suggested a delay of 90 
days in enforcing the new MID requirement, one commenter suggested a 
one-year delay (until October 5, 2006) in implementing and enforcing 
the requirement, and one commenter recommended a delay in enforcement 
until the final rule is published. Two other commenters stated that the 
final rule in regard to the MID requirement should provide the public 
with advance notice of any changes.
    CBP's Response:
    The interim regulations took effect on the date of publication of 
CBP Dec. 05-32 (October 5, 2005). However, cognizant of the challenges 
facing some importers in complying with the new MID requirement, CBP 
advised the importing community by administrative notice (TBT-05-029 
dated October 20, 2005) posted on the cbp.gov Web site that it was 
delaying enforcement of the requirement until November 18, 2005. CBP 
believed at that time that a further delay in the implementation and/or 
enforcement of the MID requirement was unwarranted. The requirement now 
has been in place for an extended period of time, and it appears that 
few importers are experiencing problems complying with the requirement.
    Regarding the request by several commenters for advance notice of 
any changes in the MID requirement effected by the final rule, CBP is 
making two changes to the MID requirement, as discussed later in this 
comment analysis. However, these changes limit the scope of the MID 
requirement and, therefore, reduce the burden on the importer. This 
final rule is effective upon publication in the Federal Register.
    Comment:
    One commenter stated that with respect to merchandise that was 
procured before the interim rule was published, importers were not on 
notice that the new MID would be required to make entry. Therefore, 
according to the commenter, it would be a violation of the Due Process 
Clause of the U.S. Constitution for CBP to penalize importers (or their 
customs brokers) for failing to present accurate MIDs when the 
merchandise was procured prior to publication of the interim rule. The 
commenter further suggested that CBP implement and publish a policy of 
non-enforcement with respect to this merchandise.
    CBP's Response:
    As noted earlier in this comment discussion, CBP informed the 
importing community by administrative notice posted on the cbp.gov Web 
site that CBP was delaying enforcement of the new MID requirement until 
November 18, 2005. With respect to imported textile or apparel goods 
that may have been purchased prior to October 5, 2005 (but were entered 
on or after November 18, 2005), CBP believes that the nearly six-week 
delay in enforcement afforded these importers sufficient time and 
notice to enable them to ascertain the identity of the manufacturers of 
their goods (if not already known) for purposes of constructing 
accurate MIDs in compliance with Sec.  102.23(a). For this reason, CBP 
declines to implement a policy of non-enforcement with respect to such 
merchandise. However, in determining whether, or to what extent, 
penalties should be assessed in instances in which importers of textile 
or apparel goods fail to present accurate MIDs, CBP port directors will 
take into consideration the circumstances of each case, including the 
importer's use of reasonable care in attempting to determine the 
information necessary to comply with the new MID requirement.
    Comment:
    One commenter stated that requiring the change in the MID 
requirement is a major rule change that should have been the subject of 
a notice of proposed rulemaking and pre-implementation comment in 
conformance with the

[[Page 14577]]

mandates of the Administrative Procedure Act (APA). According to this 
commenter, the interim rule's conclusion that the foreign affairs 
exception of the APA applies is incorrect (rendering the interim 
regulations null and void) for two main reasons. First, the notion that 
the new MID requirement is centrally aimed at enforcing textile 
restraint agreements with China is belied by the fact that the 
requirement applies to textile goods from all countries. Second, CBP's 
authority to promulgate regulations relating to the country of origin 
of textile products derives from a delegation of congressional 
authority (section 334 of the Uruguay Round Agreements Act) and is no 
longer within the discretion of the Executive Branch.
    CBP's Response:
    CBP promulgated these regulations pursuant to section 204 of the 
Agricultural Act of 1956, as amended, and as directed by the Department 
of the Treasury. They were issued as ``immediately effective interim 
regulations'' because they involve a foreign affairs function of the 
United States.
    Section 334 of the Uruguay Round Agreements Act sets forth rules 
for determining the origin of textile products and authorizes the 
issuance of regulations to implement those rules. However, section 
334(b) begins with the words ``[e]xcept as otherwise provide for by 
statute'' and proceeds to provide principles by which the origin of 
textile products is to be determined ``for purposes of the customs laws 
and the administration of quantitative restrictions.'' Section 204 of 
the Agricultural Act of 1956, as amended, is broader in scope than 
section 334 and provides for the issuance of regulations relevant to 
the enforcement of any textile agreement.
    The enactment of section 334 of the Uruguay Round Agreements Act 
did not eliminate the President's authority under section 204 of the 
Agricultural Act of 1956 to regulate the importation of textile 
products.
    Regarding the commenter's reference to the textile restraint 
agreement with China, CBP notes that the United States-China Memorandum 
of Understanding dated November 8, 2005, has expired.
    However, CBP noted in the interim rule that ``by improving the 
proper reporting of the country of origin of textile imports, these 
interim regulations [including the MID requirement] will facilitate 
enforcement and administration of the various bilateral and 
multilateral free trade agreements with which the United States is a 
party by helping to ensure that only those textile products that are 
entitled to trade benefits receive those benefits.'' Textile and 
apparel products may receive preferential tariff treatment under the 
various free trade agreements (FTAs) as originating goods (i.e., goods 
that meet the applicable rules of origin) or, under certain FTAs, as 
non-originating goods that nevertheless qualify for preference under 
tariff preference levels (TPLs). TPLs negotiated by the President under 
certain FTAs limit the quantity of textile and apparel products that 
may receive preferential tariff treatment when they fail to qualify as 
originating goods under the applicable rules of origin. In view of the 
continuing proliferation of free trade agreements between the United 
States and numerous other countries around the world, CBP believes that 
it is entirely appropriate to apply the new MID requirement to textile 
and apparel products imported into the United States from all 
countries.
    Comment:
    Eleven commenters complained that the new MID requirement places an 
undue burden on importers and exporters because of: (1) Significantly 
increased paperwork and associated costs to importers in terms of the 
size (number of pages) of typical entries, especially in regard to 
consolidated shipments sourced from multiple manufacturers and multiple 
countries (requiring MID codes on a line-by-line basis); (2) increased 
paperwork and costs to collect, track, report, and store data for the 
first time relating to the actual manufacturer; (3) costs involved in 
reprogramming exporter and importer systems to capture manufacturer 
information; (4) additional costs to buyers and sellers when shipments 
are refused entry by CBP due to incorrect MID information; and (5) 
exorbitant costs and physical obstacles associated with segregating 
fungible goods that previously were commingled in inventory without 
reference to the manufacturer. One commenter alleged that the new MID 
requirement is more of a burden on importers than the textile 
declaration that was just eliminated.
    CBP's Response:
    Based on discussions with the trade community and from a review of 
the textile declarations submitted over the years, CBP believes that 
most importers were aware of the name of the entity producing their 
goods and were providing this information to CBP prior to 
implementation of the new MID requirement. For these companies, there 
has been little, if any, additional expense or burden associated with 
complying with the new requirement. CBP understands that there are some 
companies that face challenges in complying with the new regulation. 
However, CBP worked closely with the trade community before 
implementing the interim regulations and believes that the elimination 
of the paper textile declaration, which was a required document for 
nearly all textile shipments to the United States, is a benefit to most 
firms. The elimination of the paper textile declaration has allowed 
importers to complete paperless entry filing, thereby facilitating 
trade in textiles and wearing apparel. CBP believes that the overall 
tradeoff between the elimination of the textile declaration and the 
initiation of the new MID requirement is of benefit to the majority of 
importers. CBP recognizes that expenditures may be necessary to comply 
with the new rule with respect to fungible goods that are commingled in 
inventory. But, consistent with common business practices, many 
companies already know the identity of their suppliers/producers and 
the quantity of products purchased from each for accounts payable 
purposes.
    Comment:
    Two commenters stated the new MID requirement for textile and 
apparel goods is having a severe and unjustifiable impact upon the 
ability of the EU and Swiss textile and apparel industries to sell 
their products into the U.S. market. According to these commenters, 
this unexpected new requirement is creating significant problems, and a 
growing number of companies are having their products blocked at 
Customs, thus imposing huge costs on them and placing several on the 
verge of bankruptcy through their inability to deliver products on time 
to their U.S. customers.
    CBP's Response:
    Although the interim regulations were immediately effective, CBP 
recognized the challenges facing some importers in complying with the 
new regulations and accordingly delayed enforcement to permit companies 
to fully implement the requirements. However, as previously indicated, 
CBP no longer requires the submission of a paper textile declaration 
that was traditionally completed by the manufacturer. The elimination 
of the textile declaration should expedite the processing of textile 
entries. The textile declaration required information on manufacturing 
processes that could only be obtained by contacting the manufacturer. 
CBP believes that providing the MID constructed from the name and 
address of the manufacturer is a less intrusive and onerous undertaking 
than describing the production process

[[Page 14578]]

which was a requirement of the textile declaration.
    Comment:
    Two commenters questioned whether the new MID requirement is in 
conformity with ``WTO common practice'' because the requirement appears 
to be: (1) Stricter and more cumbersome than the previous one that 
regulated textile and apparel imports during the Multi Fiber 
Arrangement (MFA) and the subsequent WTO Agreement on Textile and 
Clothing (ATC); and (2) inapplicable to a few country suppliers who 
have privileged relations with the U.S. A third commenter stated that 
the new requirement may be in contradiction to the goals of Article 2 
of the WTO Agreement on rules of origin, such as ``not to create 
unnecessary obstacles to trade.'' This commenter asked whether certain 
free trade partners of the U.S. are exempt from the new MID 
requirement.
    CBP's Response:
    CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry 
Summary) require importers of all goods (textile and non-textile 
products) to provide a MID at the time of entry in blocks 26 and 13, 
respectively. Prior to publication of the interim amendments, importers 
of all goods had the option of constructing the MID from the name and 
address of the manufacturer, shipper or exporter. However, effective 
October 5, 2005, importers of textile and apparel products have been 
required to construct the MID from the manufacturer only, and not from 
the exporter or shipper (unless that entity is also the manufacturer). 
Prior to this change, many importers were already constructing the MID 
from the name and address of the manufacturer. Only in cases in which 
importers of textile products were constructing the MID from the 
shipper or exporter (who was not also the manufacturer) have importers 
been required to provide a different MID. The MID requirement for 
textile and apparel goods was created, in part, to facilitate trade 
into the United States by compensating for the elimination of the paper 
textile declaration.
    Comment:
    A commenter stated that the new MID requirement will generate fewer 
paperless entries, contrary to CBP's stated goal of a paperless 
environment. Another commenter stated that it was his understanding 
that the Automated Invoice Interface (AII) module of ACS/ABI is capable 
of only handling one MID per commercial invoice. This commenter also 
indicated that it is his understanding that the AII module is mandatory 
for Remote Location Filing (RLF), and that, under the new MID 
requirement, an entry will need to show as many MIDs as there are 
actual manufacturers of the goods in the shipment. The commenter asked 
whether ``CBP is capable of accepting multiple MID codes per invoice 
for AII/RLF purposes,'' and, if the answer is no, whether the new 
requirement is defeating the push toward automation.
    CBP's Response:
    The ``AII'' module, utilized for electronic invoices, is capable of 
handling more than one MID per invoice. For example, if there are three 
lines on an invoice, each line could be transmitted separately with a 
different MID for each. If a broker needs assistance with the AII 
module, he or she should contact their ABI Client Representative. Also, 
it should be noted that the AII module is separate from the line data 
transmitted for purposes of CBP Forms 3461 and 7501. The RLF program 
allows for multiple line entries and a broker would be able to transmit 
a different MID for each line on the entry/entry summary.
    Comment:
    Two commenters addressed whether the information collections set 
forth in this interim rule meet the requirements of the Paperwork 
Reduction Act (44 U.S.C. 3507). One commenter contended that the 
estimates of the annual burden associated with these information 
collections, as published in the Federal Register, greatly understate 
the additional level of burden and cost placed on companies as a result 
of this interim rule. The second commenter stated that because the 
interim rule ``results in a tremendous increased burden on importers 
with regard to the quantity and content of the information to be 
collected,'' the rule violates the basic principles of the Act.
    CBP's Response:
    CBP consulted closely with many parties before the issuance of this 
regulation. Although some importers may find it necessary to increase 
their data collections, CBP believes that those importers who already 
had knowledge of the manufacturer of their goods will have a 
significantly-reduced information collection burden due to the 
elimination of the textile declaration. In estimating the annual burden 
associated with the collection of information set forth in the interim 
rule, CBP took into account that many U.S. importers of textile and 
apparel products already knew the name and address of the entity 
performing the origin-conferring operations with respect to their 
goods.
    Comment:
    Eight commenters provided examples of situations in which they 
allege it will be impossible or extremely difficult for importers of 
textile and apparel goods to comply with the requirement that entries 
identify the entity that performed the origin-conferring operations 
through a MID. Several of these commenters indicated that requiring the 
identification of the manufacturer in these situations in effect 
imposes a barrier to trade. The examples provided include:
    a. Cross-border trade, especially between the U.S. and Canada, 
involving re-imports/re-exports, such as when clothing from the U.S. is 
cleaned, repaired, or altered in Canada and returned to the U.S. (or 
vice-versa). Cross-border trade in which a company is three or four 
steps removed from the importer of the goods into the NAFTA territory 
and is unable to determine the manufacturer due to the commingling of 
the goods in inventory by parties in the chain of commerce both within 
and outside the NAFTA territory;
    b. Fungible goods, such as parts and trimmings, that are procured 
from multiple manufacturers and are commingled in inventory without 
reference to the manufacturer;
    c. Fabric purchased from a middleman who has no information on the 
identity of the weaver of the fabric for a myriad of reasons such as 
the unavailability of records due to the passage of time or because the 
manufacturer has gone out of business;
    d. Mail orders of textile and apparel items by U.S. retail 
customers;
    e. Textile products sourced from vendors who subcontract to a 
``cottage industry,'' primarily involving individuals working from 
their homes;
    f. Textile and apparel goods entered into a bonded warehouse or 
foreign trade zone and not intended to be sold or used in the U.S.;
    g. Clothing contributed for charitable purposes from outside the 
U.S.; and
    h. Textile and apparel articles imported as sets.
    CBP's Response:
    For the most part, U.S. importers should be aware of their supply 
chain and, therefore, should know the identity of the manufacturer of 
their goods. If an agent or seller is unwilling to provide the importer 
with the identity of the manufacturer, the importer should question the 
security of that transaction and/or the legality of the production 
process. However, CBP recognizes that there may be instances in which 
the importer, despite the use of reasonable care, is unable to 
determine the identity of the entity that performed the origin-
conferring operations with respect to

[[Page 14579]]

certain imported goods. Under these circumstances, importers must be 
able to demonstrate to the CBP port director the use of reasonable care 
in attempting to determine the information required to comply with the 
MID regulation. Although the importer technically may be in violation 
of Sec.  102.23(a) for not providing the required MID in these rare 
instances, CBP port directors will take into account the importer's use 
of reasonable care in determining whether to assess penalties.
    The following examples are offered to provide guidance as to when a 
port director may consider not pursuing penalties:
     Antique Persian carpets are imported from a European 
dealer. The importer has a statement from the dealer claiming that the 
dealer has no idea who produced each carpet.
     Six one-of-a-kind dresses purchased at retail at a South 
American boutique are imported into the United States. The importer 
offers correspondence showing that the boutique owner does not know the 
entities that produced the 6 dresses being imported.
     An importer purchases vintage World War II uniforms on a 
trip to Eastern Europe. Most of the uniforms were surplus with no 
visible signs of wear and, therefore, not eligible for entry as worn 
clothing under heading 6309, HTSUS. The importer, due in part to 
historical interest, asks the shop owner for the identity of the 
manufacturer. The shop owner is unable to provide any information 
relating to the production of the uniforms, even after checking various 
records, including relevant invoices, packing slips, and shipping 
documents. Together, the shop owner and the eventual importer verify 
that neither the surplus goods nor the boxes in which they are packed 
contain information on the manufacturer.
    The following examples are offered to provide guidance as to when a 
port director may consider pursuing penalties:
     An importer states to CBP that his agent located in Asia 
does not wish to disclose the name of the manufacturer for fear of 
being cut out of future business.
     A particular style of flannel bed sheets formed from Asian 
cloth is imported from Europe. Pursuant to the origin rules in Sec.  
102.21, the sheets are a product of the country where the cloth was 
formed. Because the goods were purchased from Europe, the importer 
believes it is ``too difficult'' to request the necessary origin 
information from the European supplier.
    Comment:
    Ten commenters raised business confidentiality concerns regarding 
the new MID requirement for textile and apparel products. Five of these 
commenters pointed out that where the seller is not the manufacturer of 
the imported goods but an intermediary, the seller may be reluctant, or 
even refuse, to disclose information regarding its sources for fear 
that the importer will bypass the seller in future transactions by 
going directly to the manufacturer to purchase goods. Five of the 
commenters also expressed concern that identifying the manufacturer on 
entry documents increases the risk of the disclosure of proprietary 
business information (product sources) to competitors. In this regard, 
several commenters indicated that there was some confusion in the trade 
as to whether the interim rule requires the submission of the name and 
address of the manufacturer in addition to the MID to provide CBP the 
means to verify the accuracy of the MID provided. One commenter 
suggested the use of a confidential MID system using random codes that 
are known only to CBP and the exporter. Another commenter expressed 
concern that part of CBP's justification in requiring the MID is to 
enable CBP to provide specific information to foreign customs 
administrations concerning foreign entities violating customs laws.
    CBP's Response:
    Regarding the concern that an intermediary may be reluctant or even 
refuse to disclose the identity of its suppliers, CBP incorporates by 
reference the response to the immediately-preceding comment above.
    The objectives of the regulatory changes are to assist in the 
enforcement of U.S. textile laws and to facilitate the movement of 
textile trade into the United States. The MID requirement has allowed 
CBP to eliminate the paper textile declaration, thereby permitting the 
electronic processing of entries. The textile and apparel MID 
requirement involves providing the Manufacture Identification Code on 
appropriate entry documentation. There is no requirement that the name 
and address of the manufacturer appear on the commercial invoice or 
other entry documentation. However, CBP has the right to verify the 
accuracy of all information provided by importers by requesting and 
reviewing additional records and documentation. CBP can provide 
assurances that the U.S. Government and its employees are prohibited 
from disclosing business confidential information pursuant to the Trade 
Secrets Act (18 U.S.C. 1905). In addition, Sec.  552(b)(4) of the 
Freedom of Information Act, as amended, provides an exemption from the 
disclosure by the U.S. Government of ``trade secrets and commercial or 
financial information obtained from a person and privileged or 
confidential.'' CBP considers all information provided in connection 
with the entry process to be confidential (see 19 CFR 103.34 and 
103.35) and as such it is for official use only. CBP, however, reserves 
the right, pursuant to 19 U.S.C. 1628, to exchange this information 
with foreign customs and law enforcement agencies, as appropriate, for 
law enforcement purposes on a limited case-by-case basis.
    Comment:
    Four commenters recommended that, because informal entries were 
exempt from the textile declaration requirement, CBP similarly should 
provide an exemption from the MID requirement for non-commercial 
shipments for personal use as well as goods entered on informal 
entries.
    CBP's Response:
    CBP fully appreciates the concerns regarding the MID requirement 
for personal use shipments and has consulted with CITA regarding this 
matter. In a letter dated April 13, 2006, the Chairman of CITA 
concurred with CBP's suggested exclusion of personal use shipments from 
the MID requirements of Sec.  102.23(a). Accordingly, Sec.  102.23(a) 
has been amended in this final rule document to provide that the MID 
must reflect the entity performing the origin-conferring operations 
only with respect to commercial importations. As a result of this 
change, all personal use shipments subject to formal or informal entry 
procedures will be excepted from the MID requirement set forth in Sec.  
102.23(a), while all commercial shipments, whether covered by formal or 
informal entries, will continue to be subject to this requirement.
    CBP wishes to clarify that this exemption relates only to the 
requirement that the MID be constructed from the entity performing the 
origin-conferring operations. Importers of personal use shipments must 
continue to provide a MID (a required data element on CBP Forms 3461 
and 7501), but the MID may be constructed from the manufacturer, 
shipper, or exporter.
    Comment:
    Nine commenters urged CBP to allow the MID to be constructed from 
entities other than those performing the origin-conferring operations 
in situations in which it is impossible or extremely difficult to 
ascertain the identity of the manufacturer. One commenter indicated 
that such situations would include when the seller refuses to provide 
the identity of the manufacturer for

[[Page 14580]]

business proprietary reasons. Two of the commenters stated that the MID 
required by the interim rule should be constructed using the ``best 
information available,'' which may be the name and address of the 
shipper, buying or selling agent, or seller, provided the parties to 
the transaction have used reasonable care to determine the identity of 
the true manufacturer. Two commenters suggested that in situations in 
which there are multiple manufacturers for a single shipment (e.g., 
fungible goods), importers should be able to describe the manufacturer 
as ``multi'' or ``multiple'' on the CBP Form 7501. Two commenters 
recommended that CBP maintain the use of textile declarations, coupled 
with the former requirements for MID completion, as an alternative to 
the new MID requirement.
    CBP's Response:
    Requiring the MID to be identified on entries of textile and 
apparel goods to be constructed from the entity performing the origin-
conferring operations better enables CBP to enforce U.S. textile laws 
and trade agreements as well as facilitate trade in textile and apparel 
products.
    Regarding fungible goods, importers should use reasonable care in 
constructing the MID for each shipment, but, as always, should work 
closely with the CBP port director in cases involving extraordinary 
circumstances. For example, if an importer purchases from a company 
with a unique inventory system, this information should be discussed 
with the port director to ensure that an acceptable yet accurate 
reporting of required information is provided.
    Comment:
    Two commenters indicated that it should be sufficient for CBP 
purposes for importers to provide the country of origin of imported 
textile and apparel goods on entry documents without also having to 
identify the manufacturer through the MID requirement. According to 
these commenters, CBP may request additional information regarding the 
manufacturer of the goods as part of a post-entry verification. One of 
these commenters proposed, as a practical alternative to the new MID 
requirement, that CBP permit importers to identify the MID of one 
actual producer (rather than all producers) in each separate country. 
As part of this proposal, CBP could request the ``identity of 
manufacturers on a country-by-country basis, or by entry if it deems 
the information necessary for enforcement purposes.''
    CBP's Response:
    CBP wishes to remind these commenters that the basic MID 
requirement is not new. Importers of virtually all goods (textile and 
non-textile products) have been required for some time to submit a MID 
at the time of entry. The instructions on completing the CBP Form 7501 
clearly indicate that when an entry summary covers merchandise from 
more than one manufacturer, the word ``MULTI'' should be recorded in 
block 13, and column 28 should reflect the MID corresponding to each 
line item. CBP continues to believe that the MID requirement for both 
textile and non-textile products is an important tool in facilitating 
the correct reporting of the origin of imported goods.
    Comment:
    Eight commenters recommended that CBP grant exceptions to the new 
MID requirement. Six of these commenters noted that the primary 
function of the new requirement (according to CBP) is to assist CBP in 
properly enforcing the international textile restraint agreements to 
which the U.S. is a party. Consistent with that purpose, these 
commenters asked that CBP limit the new MID requirement to products 
that are still subject to quantitative restraints under bilateral 
textile agreements or due to safeguard actions. One commenter expressed 
concern that the new MID requirement may apply to a wide variety of 
products that are not traditionally considered textile and apparel 
products (e.g., valves with mesh fabric filters, jump ropes, hats, and 
footwear). Other commenters suggested that exemptions from the MID 
requirement should be granted for goods of NAFTA and CAFTA-DR 
countries, goods entered under subheadings 9802.00.40, .50, .80, and 
.90, HTSUS, goods previously imported, exported, and then returned, 
products integrated prior to 2000 (consistent with the November 8, 
2005, Memorandum of Understanding with the People's Republic of China), 
as well as merchandise sold in duty-free stores.
    CBP's Response:
    As noted above, the objectives of the interim amendments are to 
assist in the enforcement of U.S. textile laws and facilitate the 
movement of legitimate trade in textiles into the United States. Since 
illegal trade may be disguised as products of virtually any country, it 
would be of little help in enforcing the trade laws to require the MID 
only for products of certain countries. CBP has discovered illegal 
trade from dozens of countries, including some of our free trade 
agreement partners. Although the scope of textile and apparel goods 
subject to the new MID requirement closely parallels the scope of 
products formerly subject to the textile declaration requirement, CBP 
is sympathetic to the concerns regarding the wide range of products 
covered by Sec.  102.23(a). In an April 13, 2006, letter to CBP, CITA 
indicated that it concurred with CBP's proposal to limit the scope of 
products for which the MID is required to textile and apparel goods 
classified within Section XI of the Harmonized Tariff Schedule of the 
United States (HTSUS), and any 10-digit HTSUS number outside Section XI 
with a three-digit textile category number assigned to the specific 
subheading. Section 102.23(a), which previously provided that the MID 
requirement applied to textile or apparel products listed in Sec.  
102.21(b)(5), has been amended in this final rule document to effect 
the above change. This amendment excludes from the scope of the MID 
requirement products such as umbrellas, seat belts, parachutes, 
watchstraps, and doll clothing.
    With respect to the commenters' requested exemption for goods 
classified in subheading 9802.00.40, .50, .80, or .90, HTSUS, the MID 
for goods classified in Chapter 98, HTSUS, must be constructed from the 
entity performing the origin-conferring operations only if the 
Statistical Notes for the specific Chapter 98 subheading require the 
reporting of the associated Chapter 1-97 10-digit statistical number 
and that Chapter 1-97 number falls within the scope of the MID 
requirement set forth in amended Sec.  102.23(a). Thus, if a good is 
classified in a Chapter 98 subheading and that subheading either does 
not require the reporting of the associated Chapter 1-97 number or the 
associated Chapter 1-97 number falls outside the scope of the MID 
requirement in Sec.  102.23(a), then the MID may be constructed from 
the manufacturer, shipper, or exporter.
    Comment:
    Five commenters questioned the usefulness of the new MID 
requirement for security targeting purposes. Four of these commenters 
maintained that since the shipper is the last party in the supply chain 
to handle the product prior to export to the U.S., the identity of the 
shipper rather than that of the manufacturer is the better source of 
security targeting data. Two of the commenters pointed out that the MID 
is not a reliable tool in enforcement actions because of the many 
potential variations in MID construction--names and addresses of 
companies may be written and abbreviated in many different ways.
    CBP's Response:
    While CBP appreciates the commenters' concerns regarding security 
issues, the objectives of the interim regulations do not include using

[[Page 14581]]

the MID to improve CBP's security targeting efforts. That said, it 
should be noted that the manufacturer generally is the last party in 
the supply chain to load the goods into the shipping container, which 
usually is just as important a consideration from a security standpoint 
as the last party that handles the container. In addition, CBP is aware 
of the potential variations in MID construction and is considering ways 
to address this problem. However, it is important to recognize that 
these variations may occur regardless of whether the MID is reported as 
the manufacturer or as the shipper.
    Comment:
    Three commenters stated that the new MID requirement for textile 
and apparel products should conform to the rule for all other products 
so as to permit the identification of either the manufacturer or the 
shipper. One commenter described the new requirement as 
``discriminatory'' and questioned why the criteria for the MID for 
textiles is far more stringent than for other products which pose a 
greater threat to the health and safety of U.S. citizens, such as food 
or spare parts for cars or airplanes. Another commenter observed that, 
for trade data collection purposes, MIDs for textile and apparel 
products now will represent completely different parties 
(manufacturers) from MIDs for other products (shippers or exporters).
    CBP's Response:
    In many cases, importers of textile and apparel goods were already 
constructing the MID from the manufacturer prior to the change in the 
MID requirement. CBP would also note that few, if any, non-textile 
products have the origin restrictions that exist for textile and 
apparel products. CBP will carefully evaluate the results of the change 
in the MID requirement for textile and apparel products before 
determining whether the same change also should be made for all non-
textile products.
    Comment:
    Five commenters pointed out that the instructions for block 13 
(``Manufacturer I.D.'') on the CBP Form 7501 provide that for 
``purposes of this code, the manufacturer should be construed to refer 
to the invoicing party or parties (manufacturers or other direct 
suppliers).'' Therefore, according to these commenters, the new MID 
requirement for textile and apparel products set forth in the interim 
rule conflicts with the CBP Form 7501. Two of these commenters stated 
that this discrepancy will result in confusion and uncertainty in the 
trading community.
    CBP's Response:
    CBP agrees that there should be no discrepancy between the 
requirements of Sec.  102.23(a) and the instructions for the completion 
of CBP Form 7501. Therefore, the instruction notice for completing CBP 
Form 7501 has been amended to conform to the requirements of Sec.  
102.23(a) and posted to the cbp.gov Web site (see http://www.cbp.gov/xp/cgov/import/cargo_summary/cbp7501/).
    Comment:
    Two commenters expressed the view that CBP will have difficulty 
determining whether the MID for textile and apparel goods is 
constructed correctly, especially in the case of ``home textiles'' 
(where the seller is rarely the manufacturer) and in situations in 
which the seller is a trading company. One of these commenters inquired 
as to the type of documentation that will be required to enable CBP to 
enforce the new MID requirement. This commenter stated that ``since 
there are no definitions of what is acceptable proof,'' there likely 
will be inconsistent enforcement around the country.
    CBP's Response:
    If CBP officials choose to verify the accuracy of MID information, 
these officials will request and review additional documentation and 
records for that purpose. What is ``acceptable proof'' will depend on 
the type of product being imported, as the origin-conferring operations 
will differ from product to product. For example, for most apparel, the 
MID reflects the firm assembling the garment, while for many home 
textile products such as bed sheets, the MID reflects the firm that 
formed the fabric. While sewing records would be appropriate in 
verifying MID information in the former situation, a mill certificate 
would be appropriate in the latter situation. We appreciate the concern 
for consistency and offer as guidance that, after CBP determines the 
origin-conferring operation for a particular textile product, it will 
request and review commercially available manufacturing documentation 
appropriate to the product involved, such as commercial invoices, 
sewing tickets, and spinning or mill certificates.
    Comment:
    Two commenters recommended that, as part of its final rule, CBP 
update the ``Formal Entry List,'' or TBT-01-036, most recently issued 
on August 31, 2001. Both commenters suggested that the Formal Entry 
List exempt all non-commercial shipments from the requirement of filing 
a formal entry to help clarify that the new MID requirement applies 
only to formal entries of commercial shipments. One of these commenters 
also recommended that the Formal Entry List be modified to require 
formal entries only for commercial shipments valued over $250. The 
second commenter also suggested that the List have a single value 
limit, not less than the value limit set forth in 19 U.S.C. 1321. 
However, this commenter stated the value limit set forth in section 
1321 should be increased from $200 to $500.
    CBP's Response:
    By way of background, TBT-01-036 dated August 31, 2001, is a CBP 
textile information issuance to the trade community that updated two 
lists of tariff numbers for which the submission of a formal entry is 
required. One list relates to tariff numbers for which a formal entry 
is required for commercial shipments only, regardless of value 
(pursuant to 19 CFR 143.22). The second list relates to tariff numbers 
for which a formal entry is required if the shipment is valued in 
excess of $250 (pursuant to 19 CFR 143.21(a)). TBT-01-036 indicates 
that if a tariff number is on both lists, the requirement for formal 
entry regardless of value takes priority.
    CBP appreciates the recommendations of these commenters regarding 
the Formal Entry List and is reviewing and evaluating the potential 
impact of the suggested changes. However, CBP does not believe that 
this final rule document, which is concerned with the country of origin 
of textile and apparel products, is the appropriate vehicle for 
implementing changes relating to the types of merchandise that may be 
entered under informal entry. Any such changes that CBP decides to 
pursue affecting 19 CFR Part 143 will be the subject of a separate 
rulemaking.
    In regard to the suggestion that CBP should clarify that the new 
MID requirement applies only to formal entries of commercial shipments, 
CBP notes (as previously pointed out in this comment discussion) that 
Sec.  102.23(a) has been amended in this final rule document to provide 
that the MID must reflect the entity performing the origin-conferring 
operations only with respect to commercial importations. Thus, 
effective upon publication of this document in the Federal Register, 
all personal use shipments subject to formal or informal entry 
procedures will be excepted from the MID requirement set forth in Sec.  
102.21(a), while all commercial shipments (covered by formal or 
informal entries) will continue to be subject to this requirement.
    Comment:
    A commenter stated that he was unaware of any Customs statute that 
requires a U.S. importer to know the

[[Page 14582]]

manufacturer of textile and apparel products so long as the importer 
can demonstrate that it acted with ``reasonable care'' to enter, 
classify, and value the imported goods, as well as determine the 
application of other legal requirements (e.g., requirements of other 
government agencies affecting admissibility).
    CBP's Response:
    The commenter is correct that there is no customs statute that 
requires a U.S. importer to know the manufacturer of his/her product. 
However, in accordance with the direction provided by the Chairman of 
CITA and pursuant to section 204 of the Agricultural Act of 1956, as 
amended, as that authority is delegated by Executive Orders 11651 and 
12475, and with direction from the Department of the Treasury, CBP is 
requiring the U.S. importer to provide the manufacturer's 
identification code for entries of textile and apparel products to help 
enforce trade in textile and apparel products.
    Comment:
    A commenter stated that the new MID requirement for textile and 
apparel articles is poorly defined. The commenter indicated that, while 
it is reasonably easy to use the country of origin rules in Sec.  
102.21, CBP regulations, to ascertain the correct country of origin of 
a good, the rules are difficult to use in determining the specific 
``origin-conferring operation'' for purposes of complying with the new 
MID requirement. Three examples were provided:
    1. While Sec.  102.21(c)(1) clearly defines country of origin as 
``the single country, territory, or insular possession in which the 
good was wholly obtained or produced,'' the rule does not identify the 
origin-conferring operation (e.g., growing the cotton, spinning the 
thread, weaving the cloth, or cutting and sewing the final product).
    2. Regarding the rule set forth in Sec.  102.21(e)(2) (``the 
country of origin of the good is the country, territory, or insular 
possession in which the fabric comprising the good was both dyed and 
printed when accompanied by two or more of the following operations: * 
* *''), how is the entity performing the origin-conferring operation to 
be determined if more than one manufacturer performs these operations 
within one country? For example, if one company prints and dyes while a 
second company shrinks and fulls, which is the origin-conferring 
entity?
    3. In a situation involving a single textile item consisting of 
fabrics made by multiple weavers, which of the weavers is the origin-
conferring entity? Is it the one that wove the largest piece of fabric?
    CBP's Response:
    With regard to determining the entity who performed the origin-
conferring operations for particular goods, importers may request and 
obtain a determination from CBP on that issue, provided sufficient 
information is furnished to enable CBP to make such a determination. 
Generally, however, one can look to the rules of origin for textile and 
apparel products set forth in Sec.  102.21 (or the statutory source of 
those rules, 19 U.S.C. 3592) or Sec.  102.22 (for products of Israel) 
and discern which operation will be the origin-conferring operation for 
the good at issue. For instance, in the first example above, assuming 
that the product is one that, if it had been produced in more than one 
country, would derive its origin from where it is wholly assembled, the 
assembler would be the entity that performed the origin-conferring 
operation.
    The second example above is more difficult. Assuming that the good 
is subject to the rule set forth in Sec.  102.21(e)(2), CBP believes 
that the entity performing the last or final step of these origin-
conferring operations would be considered the origin-conferring entity. 
For example, the dyeing, printing, shrinking, and fulling must all 
occur in a single country for origin to be conferred in that country. 
The origin-conferring process is not complete until the last of the 
required or necessary steps is completed. Therefore, it is the last 
manufacturer to complete the origin-conferring steps who is to be 
considered the origin-conferring entity. However, the determination of 
the origin-conferring entity may vary depending on the specific facts 
involved and the product at issue. An importer should seek a ruling 
from CBP in cases of uncertainty of the entity to be considered the 
origin-conferring entity.
    As for the third example, CBP is unable to determine the origin-
conferring entity without more specific information regarding the 
``single textile item'' involved.
    Comment:
    A commenter asked whether, in constructing a MID for companies 
located in amalgamated cities in Quebec (e.g., Montreal, Quebec City, 
Hull), an importer should use the amalgamated location or the location 
of any former townships within said location.
    CBP's Response:
    Consistent with the rules for constructing the MID set forth in the 
Appendix to Part 102, if the location is indeed an amalgamated city, it 
would be appropriate to use such a location (such as Montreal) rather 
than a former township.
    Comment:
    A commenter inquired as to whether the new MID requirement applies 
to marked/mutilated textile samples. The commenter noted in this regard 
that such goods are accorded tariff treatment based upon their 
classification in subheading 9811.00.60, HTSUS, and that this 
subheading is not within the HTSUS provisions defining the scope of 
textile or apparel products set forth in 19 CFR 102.21(b)(5). Another 
commenter recommended that the term ``samples,'' as used in interim 
Sec.  102.24(a) be defined to exclude samples classifiable in 
subheading 9811.00.60, HTSUS. According to this commenter, ``[t]ariff 
samples are not subject to duty or quantitative restraints and there is 
no purpose in denying the informal entry procedure to them.''
    CBP's Response:
    Subheading 9811.00.60 does not fall within the scope of the MID 
requirement set forth in amended Sec.  102.23(a) and, because 
subheading 9811.00.60 does not require a 10-digit statistical reporting 
number, the MID for goods classified in this provision need not be 
constructed from the entity performing the origin-conferring 
operations. Samples that are referred to in 19 CFR 102.24(a) are not 
intended to include samples classifiable in subheading 9811.00.60.
    Comment:
    A commenter recommended that the final rule include a definition of 
the term ``manufacturer'' to clarify that the manufacturer is the 
entity that performs the origin-conferring operations. This commenter 
also noted that the Memorandum of Understanding (MOU) with the People's 
Republic of China includes a requirement for a visa transmission, and 
that a manufacturer's identification code is one of the data elements 
that must appear on the visa transmission. The commenter stated that 
since the MID on the visa transmission may not reflect the entity 
performing the origin-conferring operations, there may be a discrepancy 
between the MID on the visa transmission and the MID on the entry 
documentation. In this regard, the commenter recommended that interim 
Sec.  102.23(a) be amended in the final rule to clarify that such a 
discrepancy will not be the cause of an entry rejection.
    CBP's Response:
    The first suggested clarification is unnecessary as Sec.  102.23(a) 
specifically requires that the MID be ``constructed from the name and 
address of the entity

[[Page 14583]]

performing the origin-conferring operations.''
    Pursuant to the MOU with China, an MID must be transmitted via the 
Electronic Visa Information System (ELVIS). The MOU closely parallels 
Sec.  102.23(a) by providing that the MID is to be constructed from 
``the name of the entity performing the origin-conferring operations.'' 
Therefore, while there is no reason to expect a discrepancy between the 
MID reported on the visa transmission and the MID reported on entry 
documentation, CBP recognizes that there may be instances in which the 
two MIDs do not match. CBP will not reject an entry if there is a 
discrepancy between the two MIDs if the MID identified pursuant to 
102.23(a) accurately reflects the name and address of the entity 
performing the origin-conferring operations.
    Comment:
    A commenter noted that, for goods produced in the NAFTA 
territories, a different conclusion regarding the country of origin of 
a good may be reached when applying the NAFTA preference override 
provision in 19 CFR 102.19 rather than the rules set forth in 19 CFR 
102.21. Because Sec.  102.19 takes precedence in such a situation, the 
commenter recommended that the final rule clarify that, in determining 
the entity performing the origin-conferring operations for purposes of 
the MID requirement, the NAFTA preference override provision in Sec.  
102.19 should be taken into consideration.
    CBP's Response:
    The clarification sought by the commenter is unnecessary. Section 
102.21(c) clearly states that in determining the country of origin of a 
textile or apparel product by application of paragraphs (c)(1) through 
(c)(5) of Sec.  102.21, where appropriate ``the additional requirements 
or conditions of Sec. Sec.  102.12 through 102.19 of this part'' are to 
be applied.
    Comment:
    A commenter inquired regarding a situation involving sewing thread 
made of spun polyester fiber where the fiber is produced in China but 
the yarn is spun, twisted, dyed, and finished in Mexico. The commenter 
stated that although the sewing thread would be considered to be of 
Chinese origin for purposes of NAFTA, it appears that the MID should 
reflect the Mexican supplier since the ``major transformation is done 
in Mexico.''
    CBP's Response:
    Section 102.23(a) provides that the entity performing the origin-
conferring operations is to be determined by application of the rules 
of origin set forth in 102.21 (or Sec.  102.22 for products of Israel). 
Applying the rules in Sec.  102.21 to the example provided, if the 
fiber referenced by the commenter is staple fiber, the origin of the 
sewing thread would be the country in which the fiber was spun into 
yarn, i.e., Mexico. However, if the fiber referenced by the commenter 
is extruded filament, the origin of the thread would be the country in 
which the filament was extruded, i.e., China. It should be emphasized 
that these determinations are made by application of the country of 
origin rules set forth in Sec.  102.21 and not by the NAFTA preference 
rules set forth in General Note 12, HTSUS.
    Comment:
    A commenter requested clarification regarding whether post office 
boxes may be used in constructing the MID, and, if so, suggested that 
an example of a MID constructed, in part, from a P.O. Box would be 
helpful. This commenter also stated that there has been some confusion 
as to whether Kowloon should be reflected in the MID as the city. The 
commenter suggested that inserting an example in paragraph 7 of the 
Appendix to Part 102 where the factory is located in Kowloon would help 
eliminate the confusion.
    CBP's Response:
    As stated in paragraph 4 of the Appendix to Part 102, a post office 
box number (the first four numbers) is to be used in constructing the 
MID if it contains the largest number on the street address line. CBP 
agrees that it would be helpful to include an example in paragraph 7 of 
the Appendix showing the use of a P.O. Box number. With respect to 
whether Kowloon (in Hong Kong) should be reflected in the MID as the 
city, paragraph 5 of the Appendix provides that the last characters in 
the MID are derived from the first three letters in the city name. 
Paragraph 5 clearly states that, for city-states, the first three 
letters are to be taken from the country name and gives an example of 
``HON'' for Hong Kong. CBP agrees with the commenter that it would be 
helpful to include in paragraph 7 an example of a manufacturer in 
Kowloon.
    The following example, using both a post office box number and a 
manufacturer in Kowloon, has been added to the examples in paragraph 7 
of the Appendix to Part 102: A.B.C. Company, 55-5 Hung To Road, P.O. 
Box 1234, Kowloon, Hong Kong. The MID is HKABCCOM1234HON.

Conclusion

    Accordingly, based on the analysis of the comments received, CBP 
has determined that the interim regulations published as CBP Dec. 05-32 
should be adopted as a final rule with certain changes as discussed 
above and as set forth below. The changes to the interim regulatory 
text effected by this final rule document are as follows:
    1. In Sec.  102.23(a), paragraph (a), relating to the manufacturer 
identification code (MID), has been revised to limit the MID 
requirement to commercial importations of textile and apparel goods 
classified within Section XI, HTSUS, and any 10-digit HTSUS number 
outside of Section XI with a three-digit textile category number 
assigned to the specific subheading; and
    2. In the Appendix to Part 1