North American Free Trade Agreement; Preference Override, 44555-44557 [2016-16088]

Download as PDF 44555 Proposed Rules Federal Register Vol. 81, No. 131 Friday, July 8, 2016 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. DEPARTMENT OF HOMELAND SECURITY U.S. Customs and Border Protection DEPARTMENT OF THE TREASURY 19 CFR PART 102 [Docket No. USCBP–2016–0041] RIN 1515–AD78 North American Free Trade Agreement; Preference Override U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury. ACTION: Notice of proposed rulemaking. AGENCY: The United States, Canada and Mexico have agreed to liberalize provisions of the North American Free Trade Agreement (NAFTA) preference rules of origin that relate to certain goods, including certain spices. However, such liberalization cannot take effect unless U.S. Customs and Border Protection (CBP) amends its regulations to allow the NAFTA preference override to apply to certain spice products and other food products. This document proposes such an amendment. SUMMARY: Comments must be received on or before September 6, 2016. ADDRESSES: You may submit comments, identified by docket number, by one of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments via docket number USCBP–2016–0041. • Mail: Trade and Commercial Regulations Branch, Regulations and Rulings, Office of International Trade, Customs and Border Protection, 90 K Street NE., 10th Floor, Washington, DC 20229–1177. Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http:// asabaliauskas on DSK3SPTVN1PROD with PROPOSALS DATES: VerDate Sep<11>2014 17:45 Jul 07, 2016 Jkt 238001 www.regulations.gov, including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the ‘‘Public Participation’’ heading of the SUPPLEMENTARY INFORMATION section of this document. Docket: For access to the docket to read background documents or comments received, go to http:// www.regulations.gov. Submitted comments may be inspected during regular business days between the hours of 9 a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, Regulations and Rulings, Office of International Trade, Customs and Border Protection, 90 K Street NE., 10th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Mr. Joseph Clark at (202) 325–0118. FOR FURTHER INFORMATION CONTACT: Monika Brenner, Chief, Valuation and Special Programs Branch, Regulations and Rulings, Office of International Trade, (202) 325–0038. SUPPLEMENTARY INFORMATION: Public Participation Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of the proposed rule. CBP also invites comments that relate to the economic, environmental, or federalism effects that might result from this proposed rulemaking. Comments that will provide the most assistance to CBP will reference a specific portion of the proposed rulemaking, explain the reason for any recommended change, and include data, information, or authority that support such recommended change. See ADDRESSES above for information on how to submit comments. Background On December 17, 1992, the United States, Canada, and Mexico (the parties) entered into the North American Free Trade Agreement (NAFTA). The provisions of the NAFTA were adopted by the United States with enactment of the North American Free Trade Agreement Implementation Act, Public Law 103–182, 107 Stat. 2057 (December 8, 1993). Under Article 401 of the NAFTA, an imported good qualifies as PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 an originating good of a NAFTA party if: (1) It is wholly obtained or produced in one or more of the NAFTA parties; (2) it is produced entirely in one or more of the NAFTA parties exclusively from materials that originate in those parties; or (3) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification as a result of production occurring entirely in the territory of one or more of the parties and satisfies any other applicable requirement (which may include a regional value-content requirement). The NAFTA preference change in tariff classification (or ‘‘tariffshift’’) rules are set forth in General Note 12(t) of the Harmonized Tariff Schedule of the United States (HTSUS). General Note 12(a), HTSUS, provides that an imported good is eligible for preferential tariff treatment under the NAFTA only if it is an originating good of a NAFTA party and it qualifies to be marked as a good of Canada or Mexico under the rules for determining the country of origin of a good for purposes of Annex 311 of the NAFTA. The rules for determining the country of origin for marking in such cases are included in part 102, CBP regulations (19 CFR part 102). In situations in which an imported good is determined under Article 401 of the NAFTA to be originating but fails to qualify as a good of Canada or Mexico under the other applicable provisions set forth in 19 CFR part 102, the NAFTA preference override in § 102.19 may provide a basis for enabling the good to qualify as a good of Canada or Mexico. Under § 102.19, if a good which has NAFTA originating status is not determined to be a good of Canada or Mexico under § 102.11(a) or (b) or § 102.21, the country of origin of the good is determined to be the last NAFTA country in which the good underwent production other than minor processing, provided that a NAFTA Certificate of Origin has been completed and signed for the good (emphasis added). ‘‘Production’’ is broadly defined in § 102.1(n) as ‘‘growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.’’ ‘‘Minor processing’’ is defined in § 102.1(m) and includes ‘‘[p]utting up in measured doses, packing, repacking, packaging, repackaging.’’ E:\FR\FM\08JYP1.SGM 08JYP1 44556 Federal Register / Vol. 81, No. 131 / Friday, July 8, 2016 / Proposed Rules Thus in certain instances § 102.19 allows the originating status of a good to ‘‘override’’ a determination that it is not a good of Canada or Mexico. In other words, it allows NAFTA preferential tariff treatment to be granted to certain goods that otherwise would be ineligible for such treatment due to the General Note 12(a)’s requirement that originating goods qualify to be marked as goods of Canada or Mexico under the NAFTA Marking Rules. However, under § 102.19, as it currently reads, minor processing would not be a type of production that would qualify a good to be labeled as a product of the country in which the labeling took place and thus would not enable the good to take advantage of NAFTA tariff preferences. asabaliauskas on DSK3SPTVN1PROD with PROPOSALS Explanation of Amendments Since the NAFTA entered into effect, the three parties to the Agreement have agreed to liberalizations to the NAFTA preference rules of origin for various goods. As a result, a lesser degree of processing in a NAFTA party is required to constitute ‘‘production’’ which will confer originating status to certain nonNAFTA materials. The United States took steps to implement these changes by amending the NAFTA preference tariff-shift rules in General Note 12(t), HTSUS, through Presidential Proclamations 7870 dated February 9, 2005 (published in the Federal Register on February 14, 2005 (70 FR 7611)), 8067 dated October 11, 2006 (published in the Federal Register on October 13, 2006 (71 FR 60649)), and 8405 dated August 31, 2009 (published in the Federal Register on September 2, 2009 (74 FR 45529)). For spices and certain other food products, Presidential Proclamation 7870 specifically liberalized various rules of origin in General Note 12(t) to permit minor processing operations in a NAFTA party, such as packaging, to confer originating status on a good. For example, the NAFTA preference rule for tea (heading 0902, HTSUS) was changed to permit blending and/or packaging to confer NAFTA originating status. Similarly, changes to the preference rules of origin for products such as peppers (subheading 0904.12, HTSUS), cloves (heading 0907, HTSUS), poppy seeds (subheading 1207.91, HTSUS), and certain other spices were also liberalized by Proclamation 7870 to allow these goods to become NAFTA originating as a result of packaging operations in a NAFTA party. It is noted that blending is considered to be more than a minor processing operation for purposes of the NAFTA Marking Rules. See, for example, CBP Headquarters VerDate Sep<11>2014 17:45 Jul 07, 2016 Jkt 238001 Ruling Letter (HQ) 561986 dated August 21, 2001. However, contrary to the intentions of the NAFTA parties, these goods are not receiving NAFTA preferential tariff treatment when imported into the United States from Canada or Mexico because they do not qualify to be marked as goods of Canada or Mexico under the NAFTA Marking Rules in 19 CFR part 102, as required by General Note 12(a), HTSUS. This anomalous result stems, in part, from the fact that, in regard to those goods that obtain originating status as a result of minor processing in a NAFTA party, the pertinent NAFTA marking rules in 19 CFR 102.20 are more stringent than the comparable liberalized NAFTA preference rules set forth in General Note 12(t), HTSUS. As discussed above, the NAFTA preference override provision in § 102.19(a) fails to resolve this problem since, as discussed above, this provision overrides a determination that a good is not a good of Canada or Mexico only in situations in which the good undergoes production other than minor processing, in a NAFTA country. CBP notes that 19 CFR 102.17 provides that a foreign material will not be considered to have undergone an applicable change in tariff classification specified in § 102.20 or § 102.21 or to have met any other applicable requirements of those sections merely by reason of having been subjected to certain specified operations, including ‘‘[s]imple packing, repacking or retail packaging without more than minor processing.’’ This provision clearly is not an impediment to the proposed amendment set forth in this document as the ‘‘non-qualifying operations’’ specified in § 102.17 relate only to the application of the rules set forth in §§ 102.20 and 102.21 and not to the NAFTA preference override in § 102.19. CBP understands that, as a result of actions taken or interpretations adopted by the Governments of Canada and Mexico, the above-referenced spices and other food products subject to the NAFTA liberalizations are receiving NAFTA preferential tariff treatment when imported from the United States into Canada and Mexico (assuming compliance with all applicable requirements). To rectify the problem discussed above with respect to imports from Canada and Mexico, CBP is proposing to amend § 102.19 by adding a new paragraph (c) to allow the NAFTA preference override to apply to these specific goods. This proposed change, if finalized, will give effect to the intentions of the NAFTA parties by extending NAFTA preferential tariff treatment to certain goods imported PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 from Canada and Mexico that, under the liberalized rules of origin in General Note 12(t), are considered NAFTA originating as a result of minor processing operations (e.g., packaging) performed in a NAFTA party. Statutory and Regulatory Requirements A. Executive Order 13563 and Executive Order 12866 Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rulemaking is not a ‘‘significant regulatory action,’’ under section 3(f) of the Executive Order 12866. Accordingly, OMB has not reviewed this proposed rule. B. Regulatory Flexibility Act This section examines the impact of the rule on small entities as required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996 (SBREFA). A small entity may be a small business (defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act); a small notfor-profit organization; or a small governmental jurisdiction (locality with fewer than 50,000 people). The proposed rule, if finalized, will extend NAFTA preferential tariff treatment to certain goods imported from Mexico and Canada that currently are not receiving such treatment, despite the fact that these goods presently qualify as NAFTA originating under General Note 12(t), HTSUS. Therefore, the proposed amendment would benefit importers of such goods from Canada and Mexico by eliminating the customs duties and merchandise processing fees that presently are due for these importations. To the extent that this rulemaking affects small entities, these entities would experience a cost savings. Therefore, CBP certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities. E:\FR\FM\08JYP1.SGM 08JYP1 Federal Register / Vol. 81, No. 131 / Friday, July 8, 2016 / Proposed Rules Paperwork Reduction Act As there is no collection of information proposed in this document, the provisions of the Paperwork Reduction Act (44 U.S.C. 3507) are inapplicable. 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. List of Subjects in 19 CFR Part 102 Canada, Customs duties and inspections, Imports, Mexico, Reporting and recordkeeping requirements, Trade agreements. Proposed Amendments to the CBP Regulations For the reasons set forth above, part 102 of title 19 of the Code of Federal Regulations (19 CFR part 102) is proposed to be amended as set forth below. PART 102—RULES OF ORIGIN 1. The authority citation for part 102, CBP regulations, continues to read as follows: ■ Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States (HTSUS)), 1624, 3314, 3592. § 102.19 [Amended] 2. In § 102.19: a. Paragraph (a) is amended by adding the words ‘‘or (c)’’ after the words ‘‘paragraph (b)’’; and ■ b. Paragraph (c) is added to read as follows: (c) If a good classifiable under heading 0907, 0908, 0909, or subheading 0910.11, 0910.12, 0910.30, 0910.99 or 1207.91, HTSUS, is originating within the meaning of section 181.1(q) of this chapter, but is not determined under section 102.11(a) or (b) to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production, provided that a Certificate of Origin (see § 181.11 of this Chapter) has been completed and signed for the good. asabaliauskas on DSK3SPTVN1PROD with PROPOSALS ■ ■ R. Gil Kerlikowske, Commissioner, U.S. Customs and Border Protection. Approved: July 1, 2016. Timothy E. Skud, Deputy Assistant Secretary of the Treasury. [FR Doc. 2016–16088 Filed 7–7–16; 8:45 am] BILLING CODE P VerDate Sep<11>2014 17:45 Jul 07, 2016 Jkt 238001 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 301 [REG–109086–15] RIN 1545–BN50 Premium Tax Credit NPRM VI Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. AGENCY: This document contains proposed regulations relating to the health insurance premium tax credit (premium tax credit) and the individual shared responsibility provision. These proposed regulations affect individuals who enroll in qualified health plans through Health Insurance Exchanges (Exchanges, also called Marketplaces) and claim the premium tax credit, and Exchanges that make qualified health plans available to individuals and employers. These proposed regulations also affect individuals who are eligible for employer-sponsored health coverage and individuals who seek to claim an exemption from the individual shared responsibility provision because of unaffordable coverage. Although employers are not directly affected by rules governing the premium tax credit, these proposed regulations may indirectly affect employers through the employer shared responsibility provisions and the related information reporting provisions. DATES: Written (including electronic) comments and requests for a public hearing must be received by September 6, 2016. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–109086–15), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–109086– 15), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (REG– 109086–15). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Shareen Pflanz, (202) 317–4727; concerning the submission of comments and/or requests for a public hearing, Oluwafunmilayo Taylor, (202) 317–6901 (not toll-free calls). SUPPLEMENTARY INFORMATION: SUMMARY: PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 44557 Paperwork Reduction Act The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by September 6, 2016. Comments are specifically requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility; How the quality, utility, and clarity of the information to be collected may be enhanced; How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. The collection of information in these proposed regulations is in § 1.36B–5. The collection of information is necessary to reconcile advance payments of the premium tax credit and determine the allowable premium tax credit. The collection of information is required to comply with the provisions of section 36B of the Internal Revenue Code (Code). The likely respondents are Marketplaces that enroll individuals in qualified health plans. The burden for the collection of information contained in these proposed regulations will be reflected in the burden on Form 1095–A, Health Insurance Marketplace Statement, which is the form that will request the information from the Marketplaces in the proposed regulations. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Background Beginning in 2014, under the Patient Protection and Affordable Care Act, E:\FR\FM\08JYP1.SGM 08JYP1

Agencies

[Federal Register Volume 81, Number 131 (Friday, July 8, 2016)]
[Proposed Rules]
[Pages 44555-44557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16088]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 81, No. 131 / Friday, July 8, 2016 / Proposed 
Rules

[[Page 44555]]



DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR PART 102

[Docket No. USCBP-2016-0041]
RIN 1515-AD78


North American Free Trade Agreement; Preference Override

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

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The United States, Canada and Mexico have agreed to liberalize 
provisions of the North American Free Trade Agreement (NAFTA) 
preference rules of origin that relate to certain goods, including 
certain spices. However, such liberalization cannot take effect unless 
U.S. Customs and Border Protection (CBP) amends its regulations to 
allow the NAFTA preference override to apply to certain spice products 
and other food products. This document proposes such an amendment.

DATES: Comments must be received on or before September 6, 2016.

ADDRESSES: You may submit comments, identified by docket number, by one 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2016-0041.
     Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, Office of International Trade, Customs and Border 
Protection, 90 K Street NE., 10th Floor, Washington, DC 20229-1177.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to http://www.regulations.gov, including any 
personal information provided. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov. Submitted comments 
may be inspected during regular business days between the hours of 9 
a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, Customs and 
Border Protection, 90 K Street NE., 10th Floor, Washington, DC. 
Arrangements to inspect submitted comments should be made in advance by 
calling Mr. Joseph Clark at (202) 325-0118.

FOR FURTHER INFORMATION CONTACT: Monika Brenner, Chief, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of 
International Trade, (202) 325-0038.

SUPPLEMENTARY INFORMATION:

Public Participation

    Interested persons are invited to participate in this rulemaking by 
submitting written data, views, or arguments on all aspects of the 
proposed rule. CBP also invites comments that relate to the economic, 
environmental, or federalism effects that might result from this 
proposed rulemaking. Comments that will provide the most assistance to 
CBP will reference a specific portion of the proposed rulemaking, 
explain the reason for any recommended change, and include data, 
information, or authority that support such recommended change. See 
ADDRESSES above for information on how to submit comments.

Background

    On December 17, 1992, the United States, Canada, and Mexico (the 
parties) entered into the North American Free Trade Agreement (NAFTA). 
The provisions of the NAFTA were adopted by the United States with 
enactment of the North American Free Trade Agreement Implementation 
Act, Public Law 103-182, 107 Stat. 2057 (December 8, 1993). Under 
Article 401 of the NAFTA, an imported good qualifies as an originating 
good of a NAFTA party if: (1) It is wholly obtained or produced in one 
or more of the NAFTA parties; (2) it is produced entirely in one or 
more of the NAFTA parties exclusively from materials that originate in 
those parties; or (3) each of the non-originating materials used in the 
production of the good undergoes an applicable change in tariff 
classification as a result of production occurring entirely in the 
territory of one or more of the parties and satisfies any other 
applicable requirement (which may include a regional value-content 
requirement). The NAFTA preference change in tariff classification (or 
``tariff-shift'') rules are set forth in General Note 12(t) of the 
Harmonized Tariff Schedule of the United States (HTSUS).
    General Note 12(a), HTSUS, provides that an imported good is 
eligible for preferential tariff treatment under the NAFTA only if it 
is an originating good of a NAFTA party and it qualifies to be marked 
as a good of Canada or Mexico under the rules for determining the 
country of origin of a good for purposes of Annex 311 of the NAFTA. The 
rules for determining the country of origin for marking in such cases 
are included in part 102, CBP regulations (19 CFR part 102). In 
situations in which an imported good is determined under Article 401 of 
the NAFTA to be originating but fails to qualify as a good of Canada or 
Mexico under the other applicable provisions set forth in 19 CFR part 
102, the NAFTA preference override in Sec.  102.19 may provide a basis 
for enabling the good to qualify as a good of Canada or Mexico. Under 
Sec.  102.19, if a good which has NAFTA originating status is not 
determined to be a good of Canada or Mexico under Sec.  102.11(a) or 
(b) or Sec.  102.21, the country of origin of the good is determined to 
be the last NAFTA country in which the good underwent production other 
than minor processing, provided that a NAFTA Certificate of Origin has 
been completed and signed for the good (emphasis added). ``Production'' 
is broadly defined in Sec.  102.1(n) as ``growing, mining, harvesting, 
fishing, trapping, hunting, manufacturing, processing or assembling a 
good.'' ``Minor processing'' is defined in Sec.  102.1(m) and includes 
``[p]utting up in measured doses, packing, repacking, packaging, 
repackaging.''

[[Page 44556]]

    Thus in certain instances Sec.  102.19 allows the originating 
status of a good to ``override'' a determination that it is not a good 
of Canada or Mexico. In other words, it allows NAFTA preferential 
tariff treatment to be granted to certain goods that otherwise would be 
ineligible for such treatment due to the General Note 12(a)'s 
requirement that originating goods qualify to be marked as goods of 
Canada or Mexico under the NAFTA Marking Rules. However, under Sec.  
102.19, as it currently reads, minor processing would not be a type of 
production that would qualify a good to be labeled as a product of the 
country in which the labeling took place and thus would not enable the 
good to take advantage of NAFTA tariff preferences.

Explanation of Amendments

    Since the NAFTA entered into effect, the three parties to the 
Agreement have agreed to liberalizations to the NAFTA preference rules 
of origin for various goods. As a result, a lesser degree of processing 
in a NAFTA party is required to constitute ``production'' which will 
confer originating status to certain non-NAFTA materials. The United 
States took steps to implement these changes by amending the NAFTA 
preference tariff-shift rules in General Note 12(t), HTSUS, through 
Presidential Proclamations 7870 dated February 9, 2005 (published in 
the Federal Register on February 14, 2005 (70 FR 7611)), 8067 dated 
October 11, 2006 (published in the Federal Register on October 13, 2006 
(71 FR 60649)), and 8405 dated August 31, 2009 (published in the 
Federal Register on September 2, 2009 (74 FR 45529)).
    For spices and certain other food products, Presidential 
Proclamation 7870 specifically liberalized various rules of origin in 
General Note 12(t) to permit minor processing operations in a NAFTA 
party, such as packaging, to confer originating status on a good. For 
example, the NAFTA preference rule for tea (heading 0902, HTSUS) was 
changed to permit blending and/or packaging to confer NAFTA originating 
status. Similarly, changes to the preference rules of origin for 
products such as peppers (subheading 0904.12, HTSUS), cloves (heading 
0907, HTSUS), poppy seeds (subheading 1207.91, HTSUS), and certain 
other spices were also liberalized by Proclamation 7870 to allow these 
goods to become NAFTA originating as a result of packaging operations 
in a NAFTA party. It is noted that blending is considered to be more 
than a minor processing operation for purposes of the NAFTA Marking 
Rules. See, for example, CBP Headquarters Ruling Letter (HQ) 561986 
dated August 21, 2001.
    However, contrary to the intentions of the NAFTA parties, these 
goods are not receiving NAFTA preferential tariff treatment when 
imported into the United States from Canada or Mexico because they do 
not qualify to be marked as goods of Canada or Mexico under the NAFTA 
Marking Rules in 19 CFR part 102, as required by General Note 12(a), 
HTSUS. This anomalous result stems, in part, from the fact that, in 
regard to those goods that obtain originating status as a result of 
minor processing in a NAFTA party, the pertinent NAFTA marking rules in 
19 CFR 102.20 are more stringent than the comparable liberalized NAFTA 
preference rules set forth in General Note 12(t), HTSUS. As discussed 
above, the NAFTA preference override provision in Sec.  102.19(a) fails 
to resolve this problem since, as discussed above, this provision 
overrides a determination that a good is not a good of Canada or Mexico 
only in situations in which the good undergoes production other than 
minor processing, in a NAFTA country.
    CBP notes that 19 CFR 102.17 provides that a foreign material will 
not be considered to have undergone an applicable change in tariff 
classification specified in Sec.  102.20 or Sec.  102.21 or to have met 
any other applicable requirements of those sections merely by reason of 
having been subjected to certain specified operations, including 
``[s]imple packing, repacking or retail packaging without more than 
minor processing.'' This provision clearly is not an impediment to the 
proposed amendment set forth in this document as the ``non-qualifying 
operations'' specified in Sec.  102.17 relate only to the application 
of the rules set forth in Sec. Sec.  102.20 and 102.21 and not to the 
NAFTA preference override in Sec.  102.19.
    CBP understands that, as a result of actions taken or 
interpretations adopted by the Governments of Canada and Mexico, the 
above-referenced spices and other food products subject to the NAFTA 
liberalizations are receiving NAFTA preferential tariff treatment when 
imported from the United States into Canada and Mexico (assuming 
compliance with all applicable requirements). To rectify the problem 
discussed above with respect to imports from Canada and Mexico, CBP is 
proposing to amend Sec.  102.19 by adding a new paragraph (c) to allow 
the NAFTA preference override to apply to these specific goods. This 
proposed change, if finalized, will give effect to the intentions of 
the NAFTA parties by extending NAFTA preferential tariff treatment to 
certain goods imported from Canada and Mexico that, under the 
liberalized rules of origin in General Note 12(t), are considered NAFTA 
originating as a result of minor processing operations (e.g., 
packaging) performed in a NAFTA party.

Statutory and Regulatory Requirements

A. Executive Order 13563 and Executive Order 12866

    Executive Orders 13563 and 12866 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rulemaking is not a ``significant regulatory 
action,'' under section 3(f) of the Executive Order 12866. Accordingly, 
OMB has not reviewed this proposed rule.

B. Regulatory Flexibility Act

    This section examines the impact of the rule on small entities as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as 
amended by the Small Business Regulatory Enforcement and Fairness Act 
of 1996 (SBREFA). A small entity may be a small business (defined as 
any independently owned and operated business not dominant in its field 
that qualifies as a small business per the Small Business Act); a small 
not-for-profit organization; or a small governmental jurisdiction 
(locality with fewer than 50,000 people).
    The proposed rule, if finalized, will extend NAFTA preferential 
tariff treatment to certain goods imported from Mexico and Canada that 
currently are not receiving such treatment, despite the fact that these 
goods presently qualify as NAFTA originating under General Note 12(t), 
HTSUS. Therefore, the proposed amendment would benefit importers of 
such goods from Canada and Mexico by eliminating the customs duties and 
merchandise processing fees that presently are due for these 
importations. To the extent that this rulemaking affects small 
entities, these entities would experience a cost savings. Therefore, 
CBP certifies that the proposed rule would not have a significant 
economic impact on a substantial number of small entities.

[[Page 44557]]

Paperwork Reduction Act

    As there is no collection of information proposed in this document, 
the provisions of the Paperwork Reduction Act (44 U.S.C. 3507) are 
inapplicable.

Signing Authority

    This document is being issued in accordance with Sec.  0.1(a)(1) of 
the CBP Regulations (19 CFR 0.1(a)(1)) pertaining to the authority of 
the Secretary of the Treasury (or his/her delegate) to approve 
regulations related to certain customs revenue functions.

List of Subjects in 19 CFR Part 102

    Canada, Customs duties and inspections, Imports, Mexico, Reporting 
and recordkeeping requirements, Trade agreements.

Proposed Amendments to the CBP Regulations

    For the reasons set forth above, part 102 of title 19 of the Code 
of Federal Regulations (19 CFR part 102) is proposed to be amended as 
set forth below.

PART 102--RULES OF ORIGIN

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1. The authority citation for part 102, CBP regulations, continues to 
read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States (HTSUS)), 1624, 3314, 3592.


Sec.  102.19  [Amended]

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2. In Sec.  102.19:
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a. Paragraph (a) is amended by adding the words ``or (c)'' after the 
words ``paragraph (b)''; and
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b. Paragraph (c) is added to read as follows:
    (c) If a good classifiable under heading 0907, 0908, 0909, or 
subheading 0910.11, 0910.12, 0910.30, 0910.99 or 1207.91, HTSUS, is 
originating within the meaning of section 181.1(q) of this chapter, but 
is not determined under section 102.11(a) or (b) to be a good of a 
single NAFTA country, the country of origin of such good is the last 
NAFTA country in which that good underwent production, provided that a 
Certificate of Origin (see Sec.  181.11 of this Chapter) has been 
completed and signed for the good.

R. Gil Kerlikowske,
Commissioner, U.S. Customs and Border Protection.
    Approved: July 1, 2016.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2016-16088 Filed 7-7-16; 8:45 am]
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