Imports of Certain Worsted Wool Fabric; Implementation of Tariff Rate Quota Established Under Title V of the Trade and Development Act of 2000

Federal RegisterJan 22, 2001

66 Fed. Reg. 6459 (Jan. 22, 2001)

AGENCY:

Department of Commerce, International Trade Administration.

ACTION:

Interim Final Rule; Request for Comments.

SUMMARY:

The Department of Commerce is issuing interim regulations implementing Section 501(e) and Section 504(b) of the Trade and Development Act of 2000 (“the Act“). Section 501(e) requires the President to fairly allocate tariff rate quotas on the import of certain worsted wool fabrics, tariff rate quotas which were established by Sections 501(a) and 501(b) of the Act. Section 504(b) authorizes the President to modify the limitations on worsted wool fabric imports under the tariff rate quotas. The President has delegated to the Secretary of Commerce the authority to allocate the quantity of imports under the tariff rate quotas and to determine whether the limitations on the quantity of imports under the tariff rate quotas should be modified.

DATES:

This interim final rule is effective January 22, 2001. To be considered, written comments must be received by 5:00 p.m. on March 23, 2001.

ADDRESSES:

Comments should be addressed to: Deputy Assistant Secretary for Textiles, Apparel and Consumer Goods Industries, Room 3001, United States Department of Commerce, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT:

Sergio Botero, Office of Textiles and Apparel, U.S. Department of Commerce, (202) 482-4058.

SUPPLEMENTARY INFORMATION:

Background

The Act creates two tariff rate quotas, providing for temporary reductions for three years in the import duties on two categories of worsted wool fabrics suitable for use in making suits, suit-type jackets, or trousers: (1) for worsted wool fabric with average fiber diameters greater than 18.5 microns (new Harmonized Tariff Schedule of the United States (HTS) heading 9902.51.11), the reduction in duty is limited to 2,500,000 square meter equivalents or such other quantity proclaimed by the President; and (2) for worsted wool fabric with average fiber diameters of 18.5 microns or less (new HTS heading 9902.51.12), the reduction is limited to 1,500,000 square meter equivalents or such other quantity proclaimed by the President.

The Act requires that the tariff rate quotas be allocated. More specifically, the President must ensure that the tariff rate quotas are fairly allocated to persons (including firms, corporations, or other legal entities) who cut and sew men's and boys' worsted wool suits, suit-type jackets and trousers in the United States and who apply for an allocation based on the amount of such suits cut and sewn during the prior calendar year.

The Act requires that the President annually consider requests by U.S. manufacturers of certain worsted wool apparel to modify the limitation on the quantity of fabric that may be imported under the tariff rate quotas, and grants the President the authority to proclaim modifications to the limitations. In determining whether to modify the limitations, the President must consider specified U.S. market conditions with respect to worsted wool fabric and worsted wool apparel.

In Presidential Proclamation 7383, of December 1, 2000, the President authorized the Secretary of Commerce: (1) to allocate the imports of worsted wool fabrics under the tariff rate quotas; (2) to annually consider requests from domestic manufacturers of worsted wool apparel to modify the limitation on the quantity of worsted wool fabrics that may be imported under the tariff rate quotas; (3) to determine whether the limitations on the quantity of imports of worsted wool fabrics under the tariff rate quotas should be modified and to recommend to the President that appropriate modifications be made; and (4) to issue regulations to implement relevant provisions of the Act.

The Presidential Proclamation authorizing the Department of Commerce to issue regulations to implement these provisions was issued on December 1, 2000. Pursuant to the Act, the tariff rate quotas entered into force on January 1, 2001. Thus, there is good cause to find that in order to meet the statutory implementation date and to ensure that importers receive the benefit of the reduction in tariff rate as soon as possible, the otherwise applicable notice and comment procedures are impracticable and contrary to the public interest under 5 U.S.C. 553(b)(B). Moreover, for the same reason, there is good cause to find that the effective date of this rule should not be delayed until 30 days after its publication under 5 U.S.C. 553(d)(3). While these interim regulations will be effective upon publication, the Department of Commerce hereby solicits comments on these interim regulations and will amend them in final regulations if appropriate. The Department is particularly interested in comments concerning any impact these regulations might have on small or medium sized businesses.

This interim rule contains information collection requirements subject to the Paperwork Reduction Act (PRA). These information collection requirements cannot be implemented until they have received PRA approval from the Office of Management and Budget (OMB); a request for approval on an emergency basis is pending, and when approval is provided, notice will be published in the Federal Register. In addition, the collection will be submitted to OMB for permanent approval under the PRA. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA unless that collection of information displays a currently valid OMB control number. The information collected will be used by the Department to allocate the tariff rate quota among U.S. manufacturers and to determine whether the tariff rate quota limitations should be modified. Responses to the collection of information are required for a manufacturer to receive an allocation of the tariff rate quota, to submit a request for a modification, and to comment on such a request. Confidentiality of information will be handled in accordance with §§ 335.3(e) and 340.5(b). Records substantiating information provided in an application to receive an allocation must be retained. It is estimated that the annual public burden for the collection will average: (1) seven hours per application for an allocation of a tariff rate quota; (2) one hour per application for a reallocation; (3) 24 hours per request for a modification of a limitation on the tariff rate quotas; and (4) 24 hours for comments on such a request. This includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Office of Management and Budget, Washington, DC, 20503 (Attention: ITA Desk Officer).

Part 335

Section 501(e) of the Act requires that the worsted wool fabrics imported under the tariff rate quotas be “fairly allocated“ to persons “who cut and sew men's and boys' worsted wool suits and suit-like jackets and trousers in the United States and who apply for an allocation based on the amount of such suits cut and sewn during the prior calendar year.” As the Joint Explanation of the Committee of Conference (“Conference Report”) makes clear, Congress intended the tariff rate quotas to address the duty situation faced by U.S. wool suit manufacturers, in which worsted wool fabric is subject to considerably higher duties than worsted wool suits, a situation compounded by reductions in tariffs on wool suits under free trade agreements with Canada and Mexico.

The Department, promptly upon promulgation of these interim regulations, intends to begin the process of soliciting applications for a license for an allocation of the 2001 tariff rate quotas on worsted wool fabrics. In following years, applications will be solicited on or around August 31, in order to allow companies to be informed of their allocation as early as possible while still allowing an allocation based on previous year production. The Department intends to make its determination regarding the allocation on or about November 1 and to issue licenses no later than December 31 of the year preceding the tariff rate quota year.

Each of the two tariff rate quotas will be allocated based on previous year production utilizing the worsted wool fabric that is the subject of the tariff rate quota. That is, the tariff rate quota on worsted wool fabric with average fiber diameters greater than 18.5 microns (HTS 9902.51.11) will be allocated based on production utilizing this type of worsted wool fabric, while the tariff rate quota on worsted wool fabric with average fiber diameters of 18.5 microns or less (HTS 9902.51.12) will be allocated based on production utilizing this type of worsted wool.

In 2000, in tracking purchases of worsted wool fabric and production of worsted wool apparel, most manufacturers did not maintain records regarding the micron count of the worsted wool fabric. Therefore, it is necessary to provide an alternative method for manufacturers to report 2000 production information in order to fairly allocate the two tariff rate quotas. For purposes of reporting 2000 production, the interim regulations permit manufacturers to estimate the micron count of the worsted wool fabric used in production based on the value of the worsted wool fabric used, as value is the best proxy for micron count. The regulations provide values to be used to report estimated 2000 production if micron count is not available.

For reporting subsequent year production information, applicants will be required to report production based on micron count of the worsted wool fabric, and in order to receive an allocation of the 2002 tariff rate quotas, manufacturers must begin tracking purchases and production utilizing micron count no later than January 1, 2001. In order to utilize micron count for purposes of allocating the 2002 tariff rate quotas, to utilize the most current data possible for all years, and to meet the statutory requirement that the allocation be based on production during the prior calendar year, each tariff rate quota will be allocated based on production during the first six months of the previous calendar year, annualized.

Pursuant to the statutory requirement, allocation will be limited to persons who cut and sew three types of garments during the calendar year of the application: (1) men's and boys' worsted wool suits; (2) men's and boys' worsted wool suit-type jackets; and (3) men's and boys' worsted wool trousers. Only manufacturers of all three types of garments will be eligible for an allocation. Pursuant to the statutory requirement that allocation be based on the men's and boys' worsted wool suits cut and sewn during the prior calendar year, in allocating the tariff rate quotas, only production of men's and boys' worsted wool suits will be considered. To be considered, a worsted wool garment must contain at least 85 percent by weight worsted wool, which is consistent with the definitions of wool fiber and fabric in the Act and the Conference Report.

In order to fairly allocate the tariff rate quotas, manufacturers that utilize imported worsted wool fabric in production will be provided a greater allocation than manufacturers that utilize domestic worsted wool fabric. This will allow the manufacturers that will actually use the imported fabric that is subject to the tariff rate quotas to obtain a relatively greater share of the fabric, as compared to manufacturers that use only domestic fabric. For the purpose of calculating allocations, suit production will be increased by the ratio of imported fabric used to total fabric used in the production of men's and boys' suits. For example, if an applicant uses imported fabric for 30 percent of its worsted wool suits production, that applicant's suit production level will be increased by 30 percent for purposes of calculating the applicant's allocation.

In order to ensure that the tariff rate quotas are fully utilized, a licensee that will not import the full quantity allocated to it is required to surrender the unused allocation to the Department for reallocation. The quantity surrendered will be reallocated to licensees that apply for a reallocation on the same basis as the original allocation. A licensee that does not surrender unused allocation and fails to import at least 95 percent of the quantity allocated will be penalized in the subsequent year by a reduction in its allocation proportionate to the amount unused.

Part 340

Section 504(b) of the Act requires the President to consider, on an annual basis, requests by U.S. manufacturers of certain worsted wool apparel to modify the limit on importation under the tariff rate quotas. As the Act requires the consideration of such requests “on an annual basis,” the first petition process, for the modification of the 2001 tariff rate quotas, will take place promptly, and a petition process will take place for each subsequent year the tariff rate quotas are in effect. Each year, the Department will cause to be published in the Federal Register a notice soliciting requests by U.S. manufacturers for modification of the limit for the following year. The Department will then cause to be published in the Federal Register a notice soliciting comments by any interested person, including U.S. manufacturers of worsted wool fabric, wool yarn, wool top and wool fiber, regarding the requested modification or modifications. In order to allow manufacturers and other interested persons to submit the most current data possible and to allow the Department to make its determination prior to January 1, manufacturers will have 15 days to submit a request and interested persons will have 20 days to submit comments.

Within 30 days of the end of the period for receiving public comments regarding requested modification or modifications, the Department will make a determination whether the limitations should be modified and recommend to the President that appropriate modification be made. The determination and recommendation will be based on the U.S. market conditions, particularly those factors set forth in the Act.

Dated: January 17, 2001.

Norman Y. Mineta,

Secretary, United States Department of Commerce.

List of Subjects

15 CFR Part 335

Imports
Quotas
Reporting and Recordkeeping
Tariffs
Textiles

15 CFR Part 340

Imports
Quotas
Reporting and Recordkeeping
Tariffs
Textiles

For the reasons stated in the preamble, 15 CFR Parts 335 and 340 are added to state as follows:

PART 335—IMPORTS OF WORSTED WOOL FABRIC

335.1: Purpose.
335.2: Definitions.
335.3: Applications to receive allocation.
335.4: Allocation.
335.5: Licenses.
335.6: Surrender, reallocation and license utilization requirement.
335.7: Modifications of the limitation.

Authority: Title V Pub. L. 106-200, 114 Stat. 299; Presidential Proclamation 7383 (December 1, 2000).

§ 335.1

Purpose.

This part sets forth regulations regarding the issuance and effect of licenses for the allocation of Worsted Wool Fabric under the Tariff Rate Quotas established by Section 501 of the Act.

§ 335.2

Definitions.

For purposes of these regulations and the forms used to implement them:

The Act means the Trade and Development Act of 2000 (Public Law No. 106-200, 114 Stat 251).

The Department means the United States Department of Commerce.

HTS means the Harmonized Tariff Schedule of the United States.

Imports subject to Tariff Rate Quotas are defined by date of presentation as defined in 19 CFR 132.1(d) and 19 CFR 132.11(a).

Licensee means an applicant for an allocation of the Tariff Rate Quotas that receives an allocation and a license.

Production means cutting and sewing garments in the United States.

Tariff Rate Quota or Quotas means the temporary duty reduction provided under Section 501 of the Act for limited quantities of fabrics of worsted wool with average diameters greater than 18.5 micron, certified by the importer as suitable for use in making suits, suit-type jackets, or trousers (HTS heading 9902.51.11), and for limited quantities of fabrics of worsted wool with average diameters of 18.5 microns or less, certified by the importer as suitable for use in making suits, suit-type jackets, or trousers (HTS heading 9902.51.12).

Tariff Rate Quota Year means a calendar year for which the Tariff Rate Quotas are in effect.

Worsted Wool Fabric means fabric containing at least 85 percent by weight worsted wool.

Worsted Wool Suits means men's and boys' worsted wool suits, containing at least 85 percent by weight worsted wool fabric.

Worsted Wool Suit-Type Jackets mean men's and boys' worsted wool suit-type jackets, containing at least 85 percent by weight worsted wool fabric.

Worsted Wool Trousers means men's and boys' worsted wool trousers, containing at least 85 percent by weight worsted wool fabric.

§ 335.3

Applications to receive allocation.

(a) In each year prior to a Tariff Rate Quota Year, the Department will cause to be published a Federal Register notice soliciting applications to receive an allocation of the Tariff Rate Quotas.

(b) An application for a Tariff Rate Quota allocation must be received, or postmarked by the U.S. Postal Service, within 30 calendar days after the date of publication of the Federal Register notice soliciting applications.

(c) During the calendar year of the date of the application, an applicant must have cut and sewed in the United States all three of the following apparel products: Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool Trousers. The applicant may either have cut and sewn these products on its own behalf or had another person cut and sew the products on the applicant's behalf, provided the applicant owned the fabric at the time it was cut and sewn. The application must contain a statement to this effect.

(d) An applicant must provide the following information in the format set forth in the application form provided by the Department:

(1) Identification. Applicant's name, address, telephone number, fax number, and federal tax identification number; name of person submitting the application, and title, or capacity in which the person is acting for the applicant.

(2) Production. Name and address of each plant or location where Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool Trousers were cut and sewn by the applicant and the name and address of all plants or locations that cut and sewed such products on behalf of the applicant. Production data, including the following: the quantity and value of the Worsted Wool Suits, Worsted Wool Suit-Type Jackets, and Worsted Wool Trousers cut and sewn in the United States by applicant, or on behalf of applicant, from fabric owned by applicant. This data must indicate actual production (not estimates) of Worsted Wool Suits, Worsted Wool Suit-Type Jackets and Worsted Wool Trousers containing at least 85 percent worsted wool fabric by weight with an average diameter of 18.5 microns or less. This data must also indicate actual production (not estimates) of Worsted Wool Suits, Worsted Wool Suit-Type Jackets and Worsted Wool Trousers containing at least 85 percent worsted wool fabric by weight with average diameter greater than 18.5 microns. Production data must be provided for the first six months of the year of the application. This data will be annualized for the purpose of making Tariff Rate Quota allocations.

(3) 2000 Production Data. For applications for the 2001 Tariff Rate Quota Year, if production data is not available by micron count, the following method of estimating micron count will be accepted: To estimate production of Worsted Wool Suits, Worsted Wool Suit-Type Jackets and Worsted Wool Trousers made from worsted wool fabric with average diameter 18.5 microns or less, use a value of $8.50 per square meter (f.o.b. plant) or more for such garments made from domestic fabric and $12.50 per square meter (c.i.f. duty paid landed value) or more for such garments made from imported fabric. To estimate production of such garments made from worsted wool fabric with average diameter greater than 18.5 microns, use a value of less than $8.50 per square meter (f.o.b. plant) for such garments made from domestic fabric and less than $12.50 (c.i.f. duty paid landed value) per square meter for such garments made from imported fabric.

(4) Worsted Wool Fabric. Data indicating the quantity and value of the Worsted Wool Fabric used in reported production.

(5) Certification. A statement by the applicant (if a natural person), or on behalf of applicant, by an employee, officer or agent, with personal knowledge of the matters set out in the application, certifying that the information contained therein is complete and accurate, signed and sworn before a Notary Public, and acknowledging that false representations to a federal agency may result in criminal penalties under federal law.

(e) Confidentiality. Any business confidential information provided pursuant to this section that is marked business confidential will be kept confidential and protected from disclosure to the full extent permitted by law.

(f) Record Retention: The applicant shall retain records substantiating the information provided in § 335.3(d)(2), (3), and (4) for a period of 3 years and the records must be made available upon request by an appropriate U.S. government official.

§ 335.4

Allocation.

(a) Each Tariff Rate Quota (HTS 9902.51.11 and HTS 9902.51.12) will be allocated separately. Allocation will be based on an applicant's Worsted Wool Suit production, on a weighted average basis, and the proportion of imported Worsted Wool Fabric consumed in the production of Worsted Wool Suits.

(b) For the purpose of calculating allocations, Worsted Wool Suit production will be increased by the percentage of imported fabric consumed in the production of Worsted Wool Suits to total fabric consumed in this production. For example, if an applicant uses 30 percent imported fabric in the production of Worsted Wool Suits, that applicant's production level will be increased by 30 percent.

(c) The Department will cause to be published in the Federal Register its determination to allocate the Tariff Rate Quotas and will notify applicants of their respective allocation as soon as possible. Promptly thereafter, the Department will issue licenses.

§ 335.5

Licenses.

(a) Each Licensee will receive a license, which will include a unique control number. The license is subject to the surrender and reallocation provisions in § 335.6.

(b) A license may be exercised only for fabric entered for consumption, or withdrawn from warehouse for consumption, during the Tariff Rate Quota Year specified in the license. A license will be debited on the basis of date of entry for consumption or withdrawal from warehouse for consumption.

(c) A Licensee may import fabric certified by the importer as suitable for use in making suits, suit-type jackets, or trousers under the appropriate Tariff Rate Quota as specified in the license (i.e., under the Tariff Rate Quota for fabric of worsted wool with average fiber diameters greater than 18.5 micron or the Tariff Rate Quota for fabric of worsted wool with average fiber diameters of 18.5 micron or less) up to the quantity specified in the license subject to the Tariff Rate Quota duty rate. Only a Licensee or an importer authorized by a Licensee will be permitted to import fabric under the Tariff Rate Quotas and to receive the Tariff Rate Quota duty rate.

(d) The term of a license shall be the Tariff Rate Quota Year for which it is issued. Fabric may be entered or withdrawn from warehouse for consumption under a license only during the term of that license. The license cannot be used for fabric entered or withdrawn from warehouse for consumption after December 31 of the year of the term of the license.

(e) The importer of record of fabric entered or withdrawn from warehouse for consumption under a license must be the Licensee or an importer authorized by the Licensee to act on its behalf. If the importer of record is the Licensee, the importer must possess the license at the time of filing the entry summary or warehouse withdrawal for consumption (Customs Form 7501).

(f) A Licensee may only authorize an importer to import fabric under the license on its behalf by making such an authorization in writing or by electronic notice to the importer and providing a copy of such authorization to the Department. A Licensee may only withdraw authorization from an importer by notifying the importer, in writing or by electronic notice, and providing a copy to the Department.

(g) The written authorization must include the unique number of the license, must specifically cover the type of fabric imported, and must be in the possession of the importer at the time of filing the entry summary or warehouse withdrawal for consumption (Customs Form 7501), or its electronic equivalent, in order for the importer to obtain the applicable Tariff Rate Quota duty rate.

(h) It is the responsibility of the Licensee to safeguard the use of the license issued. The Department and the U.S. Customs Service will not be liable for any unauthorized or improper use of the license.

§ 335.6

Surrender, reallocation and license utilization requirement.

(a) Not later than September 30 of each Tariff Rate Quota Year, a Licensee that will not import the full quantity granted in a license during the Tariff Rate Quota Year shall surrender the allocation that will not be used to the Department for purposes of reallocation through a written or electronic notice to the Department, including the license control number and the amount being surrendered. The surrender shall be final, and shall apply only to that Tariff Rate Quota Year.

(b) For purposes of this section, “unused allocation” means the amount by which the quantity set forth in a license, including any additional amount received pursuant to paragraph (d) of this section, exceeds the quantity entered under the license, excluding any amount surrendered pursuant to paragraph (a) of this section.

(c) The Department will notify Licensees of any amount surrendered and the application period for requests for reallocation. A Licensee that has imported, or intends to import, a quantity of Worsted Wool Fabric exceeding the quantity set forth in its license may apply to receive additional allocation from the amount to be reallocated. The application shall state the maximum amount of additional allocation the applicant will be able to use.

(d) The amount surrendered will be reallocated to Licensees that have applied for reallocation. The entire amount surrendered will be reallocated pro-rata among applicants based on the applicant's share of the annual allocation, but will not exceed the amount set forth in the reallocation application as the maximum amount able to be used.

(e) A Licensee whose unused allocation in a Tariff Rate Quota Year exceeds five percent of the quantity set forth in its license shall be subject to having its allocation reduced in the subsequent Tariff Rate Quota Year. The subsequent Tariff Rate Quota Year allocation will be reduced from the quantity such Licensee would otherwise have received by a quantity equal to 25 percent of its unused allocation from the prior year. A Licensee whose unused allocation in two consecutive Tariff Rate Quota Years exceeds five percent of the quantity set forth in its license shall have its allocation reduced in the subsequent Tariff Rate Quota Year by a quantity equal to 50 percent of its unused allocation from the prior year.

(f) No penalty will be imposed under paragraph (e) of this section if the Licensee demonstrates to the satisfaction of the Department that the unused allocation resulted from breach by a carrier of its contract of carriage, breach by a supplier of its contract to supply the fabric, act of God, or force majeure.

§ 335.7

Modifications of the Limitation.

In the event the limitation on the quantity of imports of Worsted Wool Fabric under the Tariff Rate Quotas is increased, the increase will be allocated on the same basis as the rest of the Tariff Rate Quotas. Licenses will be issued or adjusted accordingly.

PART 340—MODIFICATION OF THE TARIFF RATE QUOTA LIMITATION ON WORSTED WOOL FABRIC IMPORTS

340.1: Purpose.
340.2: Definitions.
340.3: Requests for modification.
340.4: Comments regarding requested modification.
340.5: Requests for modification and comments.
340.6: Requests for additional information.
340.7: Determination.

Authority: Pub. L. 106-200, 114 Stat. 299; Presidential Proclamation 7383 (December 1, 2000).

§ 340.1

Purpose.

This part sets forth regulations regarding the procedures for considering requests to modify the limitations on the quantity of imports of fabrics of worsted wool under the Tariff Rate Quotas established by Section 501 of the Act. Section 504 of the Act requires annual consideration of such requests made by U.S. manufacturers of certain apparel products made of Worsted Wool Fabrics and grants the authority to modify the limitations.

§ 340.2