35422 Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules

DEPARTMENT OF HOMELAND 2021–00X25 by one of the following country of origin of merchandise SECURITY methods: determines the rate of duty, • Federal eRulemaking Portal at admissibility, quota, eligibility for U.S. Customs and Border Protection http://www.regulations.gov. Follow the procurement by government agencies, instructions for submitting comments. and marking requirements. There are DEPARTMENT OF THE TREASURY • Mail: Due to COVID–19-related various rules of origin for goods restrictions, CBP has temporarily imported into the customs territory of 19 CFR Parts 102 and 177 suspended its ability to receive public the United States, generally referred to comments by mail. as ‘‘preferential’’ and ‘‘non-preferential’’ [USCBP–2021–0025] Instructions: All submissions received rules of origin. ‘‘Preferential’’ rules are must include the agency name and those that apply to merchandise to RIN 1515–AE63 docket number for this rulemaking. All determine eligibility for special Non-Preferential Origin Determinations comments received will be posted treatment, including reduced or zero for Merchandise Imported From without change to http:// tariff rates, under various trade Canada or Mexico for Implementation www.regulations.gov, including any agreements or duty preference of the Agreement Between the United personal information provided. For legislation, e.g., Generalized System of States of America, the United Mexican detailed instructions on submitting Preferences. ‘‘Non-preferential’’ rules States, and Canada (USMCA) comments and additional information are those that generally apply for all on the rulemaking process, see the other purposes.1 CBP uses the AGENCY: U.S. Customs and Border ‘‘Public Participation’’ heading of the substantial transformation standard to Protection, Department of Homeland SUPPLEMENTARY INFORMATION section of determine the country of origin of goods Security; Department of the Treasury. this document. for non-preferential purposes. For a ACTION: Notice of proposed rulemaking; Docket: For access to the docket to substantial transformation to occur, ‘‘a request for comments. read background documents or new and different article must emerge, comments received, go to http:// ‘having a distinctive name, character or SUMMARY: This document proposes to www.regulations.gov. Due to the use.’’’ Anheuser-Busch Brewing Ass’n v. amend the U.S. Customs and Border relevant COVID–19-related restrictions, United States, 207 U.S. 556, 562 (1908) Protection (CBP) regulations regarding CBP has temporarily suspended on-site (quoting Hartranft v. Wiegmann, 121 non-preferential origin determinations public inspection of the public U.S. 609, 615 (1887)). for merchandise imported from Canada comments. CBP applies two different methods for or Mexico. Specifically, this document determining if merchandise has been FOR FURTHER INFORMATION CONTACT: proposes that CBP will apply certain substantially transformed. One method Operational Aspects: Queena Fan, tariff-based rules of origin in the CBP involves case-by-case adjudication, Director, USMCA Center, Office of regulations for all non-preferential relying primarily on tests articulated in Trade, U.S. Customs and Border determinations made by CBP, judicial precedent and past Protection, (202) 738–8946 or usmca@ specifically, to determine when a good administrative rulings. The other cbp.dhs.gov. imported from Canada or Mexico has method consists of codified rules in part Legal Aspects: Craig T. Clark, been substantially transformed resulting 102 of title 19 of the Code of Federal Director, Commercial and Trade in an article with a new name, Regulations (19 CFR part 102) (referred Facilitation Division, Regulations and character, or use. For consistency, this to as the part 102 rules), which are Rulings, Office of Trade, U.S. Customs document also proposes to modify the primarily expressed through specified and Border Protection, (202) 325–0276 CBP regulations for certain country of differences in the Harmonized Tariff or [email protected]. origin determinations for government Schedule of the United States (HTSUS) procurement. Collectively, the proposed SUPPLEMENTARY INFORMATION: classification of the good and its materials. This method is often referred amendments in this notice of proposed I. Public Participation rulemaking (NPRM) are intended to to as the ‘‘change in tariff classification’’ Interested persons are invited to reduce administrative burdens and participate in this rulemaking by 1 inconsistency for non-preferential origin The term ‘‘non-preferential purposes’’ generally submitting written data, views, or refers to purposes set forth in laws, regulations, and determinations for merchandise arguments on all aspects of this notice administrative determinations of general imported from Canada or Mexico for application applied to determine the country of of proposed rulemaking (NPRM). U.S. purposes of the implementation of the origin of goods not related to the granting of tariff Customs and Border Protection (CBP) Agreement Between the United States of preferences pursuant to a trade agreement or a trade also invites comments that relate to the preference program such as the Generalized System America, the United Mexican States, economic, environmental, or federalism of Preferences. Non-preferential purposes include and Canada (USMCA). Elsewhere in this antidumping and countervailing duties; safeguard effects that might result from this issue of the Federal Register, CBP is measures; origin marking requirements; and any proposed rule. Comments that will publishing an interim final rule to discriminatory quantitative restrictions or tariff provide the most assistance to CBP will quotas. They also include rules of origin used for amend various regulations to implement reference a specific portion of the trade statistics and for determining eligibility for the USMCA for preferential tariff government procurement. See, e.g., Art. I, Uruguay NPRM, explain the reason for any treatment claims. The interim final rule Round Agreement on Rules of Origin. They do not recommended change, and include data, amends the CBP regulations, inter alia, include the rules of origin used to determine information or authority that support eligibility for preferential tariff treatment under to apply certain tariff-based rules of such recommended change. trade agreements unless otherwise explicitly origin for determining the country of specified in those agreements. Notwithstanding the origin for the marking of goods imported II. Background above, under Title VII of the Tariff Act of 1930, as from Canada or Mexico. amended, merchandise within the scope of the The country of origin of merchandise Department of Commerce’s antidumping and/or DATES: Comments must be received by imported into the customs territory of countervailing duty proceedings may be associated August 5, 2021. with a country of origin (for purposes of the scope the United States (the fifty states, the of antidumping/countervailing duties) that is ADDRESSES: You may submit comments, District of Columbia, and Puerto Rico) is different from the country of origin determined by identified by docket number USCBP– important for several reasons. The CBP for other purposes.

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules 35423

or ‘‘tariff shift’’ method. Both the case- the Federal Register (CBP Dec. 20–11) States-Bahrain Free Trade Agreement by-case and tariff shift methods are amending 19 CFR part 181 and adding regulations. intended to produce the same a new part 182 of title 19 of the CFR (19 Unlike the NAFTA, the USMCA does determinations as to origin because both CFR part 182) containing several not refer to a marking requirement, apply the same substantial USMCA provisions, including the except with regard to certain transformation standard. Uniform Regulations regarding rules of agricultural goods. For certain CBP first promulgated the part 102 origin (appendix A to part 182). See 85 agricultural goods, the USMCA does rules in 1994 to fulfill the commitment FR 39690 (July 1, 2020). contain a requirement that a good must of the United States under Annex 311 of In another IFR published elsewhere in first qualify to be marked as a good of the North American Free Trade this issue of the Federal Register Canada or Mexico in order to receive Agreement (NAFTA), which required (‘‘Agreement Between the United States preferential tariff treatment under the the parties to establish rules for of America, the United Mexican States, USMCA. For most goods, only the determining whether a good is a good of and Canada (USMCA) Implementing general Uniform Regulations regarding a NAFTA party (i.e., the United States, Regulations Related to the Marking rules of origin set forth in Appendix A Mexico, or Canada). In contrast to the Rules, Tariff-rate Quotas, and Other of part 182 of title 19 (19 CFR part 182) case-by-case method, the part 102 rules USMCA Provisions’’ (RIN 1515–AE56)), and the product-specific rules of origin were intended to provide for more CBP is amending the CBP regulations to contained in General Note 11, HTSUS, certainty, transparency, and consistency include additional USMCA are needed to determine whether a good in application of origin decisions. They implementing regulations in 19 CFR is an originating good under the codify, rather than constitute an part 182 and to amend other portions of USMCA and therefore is eligible to alternative to, the substantial title 19 of the CFR. The IFR includes receive preferential tariff treatment. transformation standard and are amendments to parts 102 and 134 of The Secretary of the Treasury has intended to implement the standard title 19 of the CFR (19 CFR parts 102 general rulemaking authority, pursuant consistently.2 and 134) to apply the rules of origin set to 19 U.S.C. 1304 and 1624, to make forth in 19 CFR part 102 for determining such regulations as may be necessary to Country of Origin Marking the country of origin for the marking of carry out the provisions of section Requirements for Imported Merchandise goods imported from Canada or Mexico. 304(a) of the Tariff Act of 1930, as From Canada or Mexico Pursuant to the Those amendments facilitate the amended, related to the country of Agreement Between the United States of transition from the NAFTA to the origin requirements for imported America, the United Mexican States, USMCA by maintaining the status quo articles of foreign origin. The and Canada (USMCA) 3 for country of origin for marking Department of the Treasury and CBP On November 30, 2018, the ‘‘Protocol determinations. have concluded that extending Replacing the North American Free Non-Preferential Origin Determinations application of the well-established part Trade Agreement with the Agreement for Merchandise Imported From Canada 102 rules to goods imported from the Between the United States of America, or Mexico USMCA countries of Canada and the United Mexican States, and Canada’’ Mexico will provide continuity for the (the Protocol) was signed to replace the Although the NAFTA Implementation importing community because those NAFTA. Section 601 of the United Act was repealed by the USMCA Act as rules have been applied to all imports States-Mexico-Canada Agreement of July 1, 2020, the part 102 rules from these countries since 1994.4 The Implementation Act (USMCA Act), remain in 19 CFR part 102 and are importing community has made Public Law 116–113, 134 Stat. 11 (19 applicable for country of origin marking extensive efforts to comply with the part U.S.C. Chapter 29), repealed the North determinations for goods imported from 102 rules and CBP has significant American Free Trade Agreement Canada or Mexico under the USMCA experience in applying those rules to Implementation Act (NAFTA (pursuant to the IFR, being concurrently imported merchandise from Canada and published, as explained above). The part Implementation Act), Public Law 103– Mexico. The part 102 rules, as codified, 102 rules, specifically §§ 102.21 through 182, 107 Stat. 2057 (19 U.S.C. 3301 et are a reliable, simplified, and 102.25, are also to be used by CBP to seq.), as of the date that the USMCA standardized method for CBP when determine the country of origin of entered into force, July 1, 2020. The determining the country of origin for textile and apparel products (imported NAFTA provisions set forth in part 181 customs purposes. of title 19 of the CFR (19 CFR part 181) from all countries except from Israel When promulgating the part 102 rules and in General Note 12, Harmonized (see 19 CFR 102.22)), including the in 1994, the U.S. Customs Service (now Tariff Schedule of the United States administration of quantitative CBP) explained: restrictions, if applicable. (HTSUS), continue to apply to goods . . . the long history of the substantial entered for consumption, or withdrawn After the part 102 rules were promulgated in 1994, the rules were transformation rule, [and] its administration from warehouse for consumption, prior has not been without problems. These to July 1, 2020. On July 1, 2020, CBP subsequently amended to also include problems devolve from the fact that published an interim final rule (IFR) in references to specific U.S. trade application of the substantial transformation agreements that incorporated those rules rule is on a case-by-case basis and often 2 See ‘‘Rules for Determining the Country of as part of the determination for trade involves subjective judgments as to what Origin of a Good for Purposes of Annex 311 of the preference eligibility, i.e., for preference North American Free Trade Agreement; Rules of purposes. For example, as indicated in 4 This rule does not apply for purposes of Origin Applicable to Imported Merchandise,’’ 60 FR the scope provision for part 102, the determining whether merchandise is subject to the 22312, 22314 (May 5, 1995), citing, in part, ‘‘Rules scope of antidumping and countervailing duty of Origin Applicable to Imported Merchandise,’’ 59 rules set forth in §§ 102.1 through proceedings under Title VII of the Tariff Act of FR 141 (Jan. 3, 1994). 102.21 also apply for purposes of 1930, as amended, as such determinations fall 3 The Agreement Between the United States of determining whether an imported good under the authority of the Department of America, the United Mexican States, and Canada is is a new or different article of commerce Commerce. Specifically, notwithstanding a CBP the official name of the USMCA treaty. Please be country of origin determination, that merchandise aware that, in other contexts, the same document under § 10.769 of the United States- may be subject to the scope of antidumping and/ is also referred to as the United States-Mexico- Morocco Free Trade Agreement or countervailing duty proceedings associated with Canada Agreement. regulations and § 10.809 of the United a different country.

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS 35424 Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules

constitutes a new and different article or as This means that importers of goods from ‘‘Buy American’’ restrictions in U.S. law to whether processing has resulted in a new Canada and Mexico are subject to two and practice for products from eligible name, character, and use. As a result, different non-preferential origin countries. As noted in 19 CFR 177.21, application of the substantial transformation determinations for imported the subpart is intended to be applied rule has remained essentially non-systematic in that a judicial or administrative merchandise: One for marking; and, consistent with the Federal Acquisition determination in one case more often than another for determining origin for other Regulation (48 CFR chapter 1) and the not has little or no bearing on another case purposes. Consequently, these importers Defense Acquisition Regulations System involving a different factual pattern. Thus, must also potentially comply with (48 CFR chapter 2). It is also noted that while judicial and administrative decisions requirements to declare two different Chapter 13 of the USMCA provides that involving the substantial transformation rule countries of origin for the same the United States will apply the same may have some value as restatements or imported good (e.g., Canada and China). rules of origin to Mexican imports for refinements of the basic rule, they are often This burdens importers with government procurement as it does for of little assistance in resolving individual cases involving the myriad of issues or tests unnecessary additional requirements, other trade. The United States has the that have arisen, such as the distinction creates inconsistency, and reduces same obligation to Canada under Article between producer’s goods and consumer’s transparency. IV:5 of the WTO Agreement on goods, the significance of further To address these burdens, CBP is Government Procurement. While the manufacturing or finishing operations, and proposing to amend the scope section of substantial transformation standard the issue of dedication to use. The very fact part 102 of title 19 of the CFR so that already applies by statute (19 U.S.C. that the substantial transformation rule has the substantial transformation standard 2518(4)(B)), CBP’s proposed application been the subject of a large number of judicial will be applied consistently across all of the part 102 rules to make these and administrative determinations is testament to the basic problem: The case-by- non-preferential origin determinations substantial transformation case approach, involving application of the that CBP makes for merchandise determinations would ensure the rule based on specific sets of facts, has led imported from Canada and Mexico. This consistency of CBP determinations for to varied case-specific interpretations of the purpose is accomplished by adding new goods imported from Mexico and basic rule, resulting in a lack of predictability language to the scope provision of the Canada. The proposed regulatory which in turn has engendered a significant part 102 rules. The proposed regulatory change will specifically provide that, degree of uncertainty both within Customs change will obviate the need for when making country of origin and in the trade community as regards the importers of merchandise from Canada determinations for purposes of subpart effect that a particular type of processing should have on an origin determination. and Mexico wishing to comply with the B of part 177, the part 102 rules will be various laws that require CBP origin applied by CBP to determine whether ‘‘Rules for Determining the Country of determinations from having to request goods imported into the United States Origin of a Good for Purposes of Annex multiple non-preferential country of from Canada or Mexico previously 311 of the North American Free Trade origin determinations from CBP for a underwent a substantial transformation Agreement,’’ 59 FR 110, 141 (January 3, particular good. The proposed in Canada or Mexico. The proposed 1994). regulatory change also means that CBP regulatory change would not affect the Importers of goods from Canada and will no longer need to issue rulings with origin determinations other agencies Mexico are well-versed in the part 102 multiple non-preferential origin make related to procurement. rules, and the greater specificity and determinations goods imported from transparency those rules provide will Canada or Mexico, and there will no III. Discussion of Proposed facilitate the determination of eligibility longer be rulings that conclude that a Amendments for USMCA tariff preferences for certain good imported from Canada or Mexico Pursuant to 19 U.S.C. 4535(a), the agricultural goods, as noted above. has two different origins under the Secretary of the Treasury has the Accordingly, to make the transition USMCA (i.e., one for marking and one authority to prescribe such regulations from the NAFTA to the USMCA as for other, customs non-preferential as may be necessary to implement the smooth as possible for the importing purposes). CBP’s application of the part USMCA. Section 103(b)(1) of the community, CBP is amending 19 CFR 102 rules would not, however, affect USMCA Act (19 U.S.C. 4513(b)(1)) parts 102 and 134, in the IFR similar determinations made by other requires that initial regulations concurrently published today, to agencies, such as the Department of necessary or appropriate to carry out the continue application of the part 102 Commerce’s scope determinations in actions required by or authorized under rules to determine the country of origin antidumping or countervailing duty the USMCA Act or proposed in the for marking purposes of a good proceedings (see 19 CFR 351.225), Statement of Administrative Action imported from Canada or Mexico. determinations by the Agricultural approved under 19 U.S.C. 4511(a)(2) to CBP has not previously applied the Marketing Service under the Country of implement the USMCA shall, to the part 102 rules for non-preferential origin Origin Labeling (‘‘COOL’’) law (see 7 maximum extent feasible, be prescribed determinations involving goods CFR part 65), or origin determinations within one year after the date on which imported from Canada and Mexico other made by other agencies for purposes of the USMCA enters into force. The than for textile products and for government procurement under the Secretary also has general rulemaking purposes of determining country of Federal Acquisition Regulation (see 48 authority, pursuant to 19 U.S.C. 1304 origin marking. CBP has, instead, used CFR chapter 1). and 1624, to make such regulations as case-by-case adjudication for other non- CBP is also proposing to make may be necessary to carry out the preferential origin determinations. CBP corresponding edits to part 177 of title provisions of the Tariff Act of 1930, as makes such non-preferential origin 19 of the CFR, which sets forth the amended, related to the country of determinations for purposes such as requirements for various types of origin requirements for imported admissibility, quota, procurement by administrative rulings. Specifically, articles of foreign origin. The Secretary government agencies, and application of subpart B of part 177 applies to the also has authority under 19 U.S.C. 1502 duties imposed under sections 301 to issuance of country of origin advisory to regulate the procedures for issuing 307 of the Trade Act of 1974, as rulings and final determinations relating binding rulings, and 19 U.S.C. amended (19 U.S.C. 2411–2417, to government procurement for 2515(b)(1) requires the Secretary to commonly referred to as ‘‘Section 301’’). purposes of granting waivers of certain make rulings and determinations as to

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules 35425

substantial transformation under 19 be used as a factor to determine The USMCA, which recently U.S.C. 2518(4)(B). preferential trade treatment, such as superseded the NAFTA, was generally CBP is proposing to amend the scope eligibility under various trade silent as to how the country of origin provision in 19 CFR part 102 to apply agreements and special duty preference should be determined for goods the substantial transformation standard legislation, like the Generalized System imported from Canada and Mexico for consistently across country of origin of Preferences. The country of origin of marking and other non-preferential determinations CBP makes for imported imported goods is also used to purposes. However, CBP is concurrently goods from the USMCA countries of determine non-preferential trade publishing an IFR in this issue of the Canada and Mexico for non-preferential treatment, such as admissibility, Federal Register that, among other 5 purposes. Specifically, CBP proposes to marking, and trade relief.7 Importers things, continues to apply the existing amend section 102.0 to extend the scope must exercise reasonable care in part 102 rules for determining the of part 102 to state that the rules set determining the country of origin of country of origin for marking of goods forth in §§ 102.1 through 102.18 and their goods and often make this imported from Canada or Mexico. In 102.20 are intended to apply to CBP’s determination on their own. However, this proposed rule, CBP proposes to country of origin determinations for some importers may seek advice from expand the scope of the part 102 rules non-preferential purposes for goods CBP to determine the country of origin to provide that those rules are also to be imported from Canada and Mexico. for their goods for preferential and/or generally applicable for all other (i.e., CBP is also proposing to amend non-preferential purposes. subpart B of 19 CFR part 177 to add a CBP applies two methods for other than marking) non-preferential cross-reference to clarify that, for determining the country of origin of origin determinations made by CBP for ‘‘country of origin’’ in § 177.22(a), the imports for non-preferential purposes, goods imported from the USMCA determination pursuant to 19 U.S.C. as stated above. One method involves countries of Canada and Mexico. CBP’s 2515(b)(1) as to whether an article has case-by-case adjudication to determine application of the part 102 rules would been substantially transformed into a whether the goods have been not, however, affect similar new and different article of commerce substantially transformed in a particular determinations made by other agencies, with a name, character, or use distinct country, relying primarily on judicial such as the Department of Commerce’s from that of the article or articles from precedent and past administrative scope determinations in antidumping or which it was so transformed, for rulings. The other method consists of countervailing duty proceedings (see 19 purposes of granting waivers of certain codified rules in part 102 of title 19 of CFR 351.225). ‘‘Buy American’’ restrictions, must be the Code of Federal Regulations (19 CFR With this regulatory change, all non- made using the rules set forth in part 102) (referred to as the part 102 preferential country of origin §§ 102.1 through 102.18 and 102.20 of rules), which are also used to determine determinations by CBP for goods title 19 of the CFR for goods from whether the goods have been imported from Canada or Mexico would Canada and Mexico. substantially transformed, but are be based on substantial transformation IV. Statutory and Regulatory Authority primarily expressed through specific pursuant to the tariff shift rules required changes in the Harmonized Tariff by 19 CFR part 102. This would A. Executive Orders 13563 and 12866 Schedule of the United States (HTSUS) eliminate the need for some importers of Executive Orders 13563 and 12866 classification, often referred to as a products from Canada or Mexico to ‘‘tariff shift.’’ Both the case-by-case and direct agencies to assess the costs and request two different non-preferential tariff shift methods implement the benefits of available regulatory determinations—one for country of substantial transformation standard and alternatives and, if regulation is origin marking and one for case-by-case are intended to lead to the same result. necessary, to select regulatory adjudication for other non-preferential approaches that maximize net benefits Prior to the USMCA, under the NAFTA, country of origin marking purposes—to confirm CBP’s treatment (including potential economic, of their imports and avoid potentially environmental, public health and safety determinations were made using the NAFTA marking rules codified in 19 different determinations. The effects, distributive impacts, and rulemaking would also eliminate the equity). Executive Order 13563 CFR part 102 that specify whether a need for some importers to comply with emphasizes the importance of good imported from Canada or Mexico requirements to declare two different quantifying both costs and benefits, of that is not entirely of Canadian or countries of origin for the same reducing costs, of harmonizing rules, Mexican origin has been substantially and of promoting flexibility. This transformed through processes that imported good (e.g., Canada and China). rulemaking is a ‘‘significant regulatory resulted in changes in the tariff CBP is proposing these changes to action,’’ although not an economically classification (i.e., tariff shifts) in simplify and standardize country of significant regulatory action, under Canada or Mexico. To determine the origin determinations by CBP for all section 3(f) of Executive Order 12866. country of origin of goods imported non-preferential purposes for goods Accordingly, the Office of Management from Canada or Mexico for other non- imported from Canada or Mexico. preferential purposes (i.e., purposes and Budget (OMB) has reviewed this Population Affected by Rule regulation. other than marking), CBP employed case-by-case adjudication to determine This rulemaking would directly affect Background and Purpose of Rule whether such goods were substantially certain importers of goods from Canada All merchandise of foreign origin transformed in those NAFTA countries. and Mexico and the U.S. Government imported into the United States must These different non-preferential country (particularly CBP). In fiscal year (FY) generally be marked with its country of of origin-determination methods 2019, 38,832 importers 8 made 2.6 required some importers to determine origin, and it is subject to a country of million non-NAFTA-preference entries origin determination by CBP.6 The and declare two different countries of country of origin of imported goods may origin for the same imported good (e.g., 8 Based on unique importer of record (IOR) Canada and China). numbers of importers who entered goods in FY 5 See supra footnote 4. 2019. In some cases, multiple IOR numbers 6 See 19 U.S.C. 1304 and 19 CFR part 134. 7 See supra footnote 4. correspond to the same entity.

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS 35426 Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules

of goods from Canada and Mexico.9 All under the current practice have been new rule compared to historical and of these entries were subject to non- inconsistent.11 In such instances, current practice and any related effects preferential country of origin marking importers may also need to adjust their on revenue. requirements, while some of these goods business practices to ensure that they Benefits of Rule were also subject to other non- properly use the part 102 rules for all preferential country of origin non-preferential country of origin Besides costs and revenue impacts, determinations, like trade remedies, that purposes when the goods are sourced this rulemaking would introduce involve case-by-case adjudication. from Canada or Mexico under this benefits to importers and the U.S. Around the same time, in FY 2020 and proposed rule. These same importers Government. Importers must exercise the start of FY 2021, CBP issued 52 must also ensure that they use case-by- reasonable care when determining the rulings determining the origin of goods case adjudications for any goods country of origin for their goods, which imported from Canada and Mexico for sourced outside of Canada or Mexico can include researching previous case- non-preferential purposes.10 These that are subject to non-preferential by-case adjudications on substantial rulings, except for those involving the treatment. The extent of these costs on transformation. This rulemaking would importation of certain textile and importers is unknown, but likely to be enhance the consistency of country of apparel products, employed case-by- minimal. CBP requests public comments origin marking and non-preferential case adjudication to determine whether on these costs and any other costs of country of origin determinations for such goods were substantially this rule to importers. This rule would goods imported from Canada and transformed in Canada or Mexico or not introduce costs to CBP. Mexico. All determinations made by other countries. In addition to costs, applying the part CBP would be based on substantial In the future, CBP projects that 102 (tariff shift) rules of origin rather transformation through application of around 38,832 importers would than case-by-case adjudications to the part 102 rules. This change would continue to make around 2.6 million determine the origin for other non- allow importers of goods from Canada entries of goods from Canada and preferential purposes could lead to trade and Mexico to comply with just one Mexico that are subject to non- policy outcomes different from non-preferential country of origin preferential trade treatment, with or historical and current practice. If an determination made by CBP for their without this rule, each year. An importer’s goods are subject to goods rather than two. unknown share of these importers inconsistent origin determinations The overall benefit to importers of would enter goods subject to non- under the current practice, this complying with just one country of marking-related non-preferential proposed rule may lead to a change in origin determination method from CBP treatment. CBP also projects that about non-preferential payments from for their goods from Canada and Mexico 52 case-by-case non-preferential country importers to the U.S. Government, is unknown. Some importers who of origin determinations would be which would result in an equal change require CBP ruling requests to requested and issued each year in the in U.S. Government revenue. The determine the country of origin for non- absence of this rulemaking based on the number of instances where an importer preferential purposes would enjoy historical number of case-by-case would receive a different non- greater benefits from the transition to adjudications. This rulemaking would preferential country of origin just one non-preferential determination eliminate such case-by-case determination under this rulemaking method. As previously described, determination requests and the issuance compared to current practice would importers of goods from Canada and of such rulings. likely be low, especially considering Mexico must currently request two both methods apply the same country of origin rulings from CBP if Costs and Revenue Impacts of Rule substantial transformation standard and they cannot determine the country of This rulemaking may introduce are intended to reach the same results. origin for non-preferential purposes— changes in non-preferential payments The specific effects of these different one for country of origin marking and from importers to the U.S. Government. determinations on revenue are one for case-by-case adjudication for In addition, there may be minimal costs unknown. Any change in payments other non-preferential purposes. CBP for some importers, as discussed in this from importers to the U.S. Government estimates that a case-by-case section. Changing from case-by-case as a result of this rulemaking are determination request takes an importer adjudications for other non-preferential considered transfers rather than costs or at least 8 hours on average to request, benefits as they are moving money from origin purposes to part 102’s tariff shift at a time cost of $250.96 per request one part of society to another.12 CBP rules may impose some costs on according to an importer’s average requests public comments on the importers with goods from Canada and hourly time value of $31.37.13 Based on Mexico. Importers who switch from potential number of instances where a using these two determination methods good would be treated differently under 13 CBP bases this $31.37 loaded wage rate on the for non-preferential origin purposes to trade remedy laws and relief under the Bureau of Labor Statistics’ (BLS) 2020 median just the part 102 rules with this hourly wage rate for Cargo and Freight Agents 11 As an example, if an importer has an inventory ($21.04), which CBP assumes best represents the rulemaking may, for example, incur tracking system that identifies the non-marking, wage for importers, multiplied by the ratio of BLS’ some one-time, minor costs to adjust non-preferential country of origin for its goods from average 2020 total compensation to wages and their inventory tracking systems and Canada and Mexico based on existing case-by-case salaries for Office and Administrative Support Automated Commercial Environment adjudication rules, with this rule, that importer may occupations (1.4912), the assumed occupational need to revise the system to ensure that it identifies group for importers, to account for non-salary (ACE) entries to reflect the part 102- the goods based on the part 102 rules if the importer employee benefits. Source of median wage rate: based non-marking, non-preferential is importing goods subject to inconsistent origin U.S. Bureau of Labor Statistics. Occupational country of origin for their goods in those determinations under the current practice. Employment Statistics, ‘‘May 2020 National cases where origin determinations 12 As described in OMB Circular A–4, transfer Occupational Employment and Wage Estimates payments occur when ‘‘. . . monetary payments United States- Median Hourly Wage by Occupation from one group [are made] to another [group] that Code- Occupation Code 43–5011.’’ Updated March 9 These goods were not eligible for the do not affect total resources available to society.’’ 31, 2020. Available at https://www.bls.gov/oes/ generalized system of preferences. Examples of transfer payments include payments 2020/may/oes_nat.htm. Accessed June 1, 2021. The 10 Based on data from October 1, 2019, to for insurance and fees paid to a government agency total compensation to wages and salaries ratio is December 16, 2020. for services that an agency already provides. equal to the calculated average of the 2020 quarterly

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules 35427

this time cost and the historical average classification determinations in place of classifications in place of case-by-case of about 52 case-by-case adjudication case-by-case adjudications, the benefits adjudications, the benefits of this requests for non-preferential country of of this rulemaking to importers would rulemaking to CBP would be lower. origin determinations for goods be lower. CBP requests public Net Impact of Rule imported from Canada and Mexico, CBP comments on any other benefits of this estimates that importers would save at rulemaking to importers. In summary, this rulemaking would least $13,050 in research time costs each As previously stated, CBP issued 52 introduce costs, revenue changes, and year from no longer submitting case-by- non-preferential determinations benefits to importers and the U.S. case adjudication requests to CBP for adjudicated on a case-by-case basis for Government. Some importers, for their non-preferential country of origin goods imported from Canada and example, whose goods are subject to requests for goods from Canada and Mexico from October 2019 to December inconsistent origin determinations Mexico. These requests may impose an 2020. This rulemaking would eliminate under the current practice, may incur unknown amount of additional time and the need for CBP to make such case-by- minor costs to adjust their inventory resource costs on importers from an case determinations for similar goods tracking systems, ACE entries, and importer’s gathering of information for imported from Canada and Mexico in business practices to reflect the new the process and drafting the request, the future. The current method for CBP country of origin determination for which could be avoided with this to determine country of origin on a case- other non-preferential purposes, as rulemaking. by-case basis for non-preferential described above. Transitioning to the Furthermore, CBP’s country of origin purposes is generally more time and proposed tariff shift system could also determinations sometimes result in an resource-intensive than the tariff-shift lead to an increase or decrease in non- imported good being determined to be a method. For CBP, country of origin preferential payments from importers, product of Canada or Mexico for some determinations for non-preferential which would lead to an equal increase customs purposes and a good of a third purposes based on case-by-case or decrease in revenue to the U.S. country for other purposes. This adjudications are highly individual, Government. The exact amounts of rulemaking would eliminate these fact-intensive exercises. This these costs and revenue changes are different determinations, which would rulemaking would largely make it easier unknown, but they should be small standardize country of origin for CBP to administer rules of origin for considering the tariff shift methodology determinations for non-preferential non-preferential country of origin implements the same substantial purposes for goods imported from the determinations for goods imported from transformation standard as the existing USMCA countries of Canada and Canada and Mexico by employing the case-by-case method. Additionally, the Mexico. CBP’s application of the part codified part 102 rules for both country rule would implement a simpler, 102 rules would not, however, affect of origin marking and other non- standardized administration system for similar determinations made by other preferential purposes. By eliminating country of origin determinations made agencies, such as the Department of the need for importers to request non- by CBP for all non-preferential purposes Commerce’s scope determinations in preferential case-by-case determinations for goods imported from Canada and antidumping or countervailing duty of their goods from Canada and Mexico, Mexico that would save importers and proceedings (see 19 CFR 351.225). This CBP would save an average of 5 hours the U.S. Government time and standardized approach would provide to 40 hours currently dedicated to each resources. Importers could save at least additional benefits to importers, but the case-by-case adjudication. This would an estimated $13,050 in time costs extent of these benefits is unknown. translate to a time cost saving of annually from this rulemaking, while CBP requests public comments on the between $494.90 and $3,959.20 based the U.S. Government could save benefits of this change to importers. on a CBP attorney’s average hourly time between $25,735 and $205,878 in time Although this rulemaking would value of $98.98.14 CBP estimates that costs each year. Overall, CBP believes eliminate the need for some importers to with this proposed rule, CBP would no this rulemaking’s benefits would request case-by-case country of origin longer have to make 52 case-by-case outweigh the costs. determinations for non-preferential rulings determining the origin of goods B. Regulatory Flexibility Act purposes, it may require such importers imported from Canada or Mexico for The Regulatory Flexibility Act (RFA; to now request classification non-preferential purposes according to determinations for their goods imported 5 U.S.C. 601 et. seq.), as amended by the historical data. Considering these Small Business Regulatory Enforcement from Canada and Mexico. The extent of forgone determinations and the average these new classification requests is and Fairness Act of 1996, requires time cost per determination, CBP would agencies to assess the impact of unknown. To the extent that importers save approximately $25,735 to $205,878 would need to request additional regulations on small entities. A small per year from this rulemaking. These entity may be a small business (defined benefits would represent time cost estimates (shown under Mar., June, Sep., Dec.) of as any independently owned and savings to CBP rather than budgetary operated business not dominant in its the total compensation cost per hour worked for savings, meaning that CBP could use the Office and Administrative Support occupations field that qualifies as a small business ($28.8875) divided by the calculated average of the savings to perform other agency per the Small Business Act); a small not- 2020 quarterly estimates (shown under Mar., June, missions, such as facilitating trade. As Sep., Dec.) of wages and salaries cost per hour for-profit organization; or a small previously stated, this rulemaking may governmental jurisdiction (locality with worked for the same occupation category increase requests for classifications of ($19.3725). Source of total compensation to wages fewer than 50,000 people). and salaries ratio data: U.S. Bureau of Labor goods imported from Canada and This rulemaking proposes to expand Statistics. Employer Costs for Employee Mexico, though the extent of these the scope of the 19 CFR part 102 rules Compensation. Employer Costs for Employee requests is unknown. To the extent that Compensation Historical Listing March 2004– to provide that those rules are to be December 2020, ‘‘Table 3. Civilian workers, by CBP would need to conduct additional generally applicable to all non- occupational group: employer costs per hours preferential country of origin worked for employee compensation and costs as a 14 CBP bases this wage on the FY 2019 salary, percentage of total compensation, 2004–2020.’’ benefits, and non-salary costs (i.e., fully loaded determinations made by CBP for goods March 2021. Available at https://www.bls.gov/web/ wage) of the national average of CBP attorney imported from the USMCA countries of ecec/ececqrtn.pdf. Accessed June 1, 2021. positions. Canada and Mexico. With this change,

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS 35428 Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules

country of origin marking and all other The Regulatory Flexibility Act does up less than one percent of the value of non-preferential country of origin not specify thresholds for economic their importations. In addition, trade determinations made by CBP for goods significance but instead gives agencies members have expressed that the non- imported from Canada or Mexico would flexibility to determine the appropriate monetized benefits of operating under a be based on substantial transformations threshold for a particular rule. Changing single set of rules well outweigh the occurring with tariff shifts as defined from case-by-case adjudications for minimal costs to comply with this under part 102. CBP’s application of the other non-preferential origin purposes rulemaking. Therefore, CBP certifies part 102 rules would not, however, to part 102’s tariff shift rules may that this rulemaking, if finalized, will affect similar determinations made by impose some costs on importers with not have a significant economic impact other agencies, such as the Department goods from Canada and Mexico. on a substantial number of small of Commerce’s scope determinations in Importers who switch from using these entities. CBP welcomes comments on antidumping or countervailing duty two determination methods for non- this conclusion. proceedings (see 19 CFR 351.225). preferential origin purposes to just the C. Paperwork Reduction Act In FY 2019, 38,832 importers 15 made part 102 rules with this rulemaking may 2.6 million non-NAFTA-preference incur some one-time, minor costs to The Paperwork Reduction Act of 1995 entries of goods from Canada and adjust their inventory tracking systems (44 U.S.C. 3507(d)) requires that CBP Mexico, valued at $155 billion.16 All of and Automated Commercial consider the impact of paperwork and these entries were subject to non- Environment entries to reflect the part other information collection burdens preferential country of origin marking 102-based non-marking-related, non- imposed on the public. CBP has requirements, while some were also preferential country of origin for their determined that there is no collection of subject to other non-preferential country goods. As an example, if an importer information that requires a control of origin determinations, like trade has an inventory tracking system that number assigned by the Office of remedies, that involve case-by-case identifies the non-marking, non- Management and Budget. preferential country of origin for its adjudication. CBP does not have precise Signing Authority data on the number of importers who goods from Canada and Mexico based entered goods from Canada and Mexico on existing case-by-case adjudication This rulemaking is being issued in that were subject to country of origin rules, with this rulemaking, that accordance with 19 CFR 0.1(a)(1), requirements for marking and another importer may need to revise the system pertaining to the authority of the non-preferential purpose that would be to ensure that it identifies the goods Secretary of the Treasury (or that of his affected by this rulemaking. Based on based on the part 102 rules if the or her delegate) to approve regulations available FY 2019 data on goods from importer is importing goods subject to related to certain customs revenue Canada and Mexico subject to part 102 inconsistent origin determinations functions. rules for marking and that involve case- under the current practice. These List of Subjects by-case adjudication for the non- determinations should match the preferential purposes of Section 201 and country of origin determinations that 19 CFR Part 102 Section 232 duties and quotas, as well importers must already make for non- Canada, Customs duties and as the 38,832 importers who entered preferential marking purposes. inspections, Imports, Mexico, Reporting non-NAFTA preference goods from According to representatives of the and recordkeeping requirements, Trade Canada and Mexico in FY 2019, CBP Commercial Operations Advisory agreements. Committee, these costs will be estimates that this rulemaking could 19 CFR Part 177 affect between approximately 10,000 approximately $2,000-$3,000 per and 38,832 unique importers entering company. Administrative practice and Some importers who source the same goods from the USMCA countries of procedure, Customs duties and goods from Canada or Mexico and Canada and Mexico each year. These inspection, Government procurement, another country may also need to adjust importers would range from individual Reporting and recordkeeping their business practices to ensure that buyers (households or businesses) to requirements. they properly use the part 102 rules for large businesses across many different customs non-preferential country of Proposed Amendments to the industries. Some industries and origin purposes when the good is Regulations businesses may be more affected than sourced from Canada or Mexico once For the reasons given above, it is others, depending on the ultimate this rulemaking is in effect and use case- proposed to amend parts 102 and 177 as country of origin determination and the by-case adjudications for any goods set forth below: classification of the merchandise being sourced outside of Canada or Mexico imported. The exact number of small that are subject to non-preferential PART 102—RULES OF ORIGIN importers affected by this rulemaking is treatment. According to representatives unknown. However, according to a of the Commercial Operations Advisory ■ 1. The general authority citation for separate CBP analysis, the vast majority Committee, these costs are minimal. For part 102 is revised to read as follows: of importers are classified as small mid to large companies, these costs Authority: 19 U.S.C. 66, 1202 (General businesses. Because this rulemaking would total at most $2,000 to $3,000 Note 3(i), Harmonized Tariff Schedule of the would directly affect importers and the (note that this is in addition to a similar United States), 1624, 3592, 4513. vast majority of importers are small estimate above). Smaller companies ■ 2. Amend § 102.0 by revising the businesses, the rule could affect a would have smaller costs. second sentence and adding four substantial number of small entities. CBP does not believe that these costs, sentences after the second sentence to a maximum of $4,000–$6,000, would read as follows: 15 Based on unique importer of record numbers of have a significant economic impact on importers who entered goods in FY 2019. In some importers, including those considered § 102.0 Scope. cases, multiple IOR numbers correspond to the same entity. small under the RFA. The annual value * * * For goods imported into the 16 These goods were not eligible for the of importations average $4 million per United States from Canada or Mexico Generalized System of Preferences. importer, so these one-time costs make and entered for consumption, or

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules 35429

withdrawn from warehouse for Commissioner, having reviewed and ADDRESSES: For reasons of Government consumption, before [EFFECTIVE DATE approved this document, is delegating efficiency, comments must be submitted OF FINAL RULE], these specific the authority to electronically sign this through the Federal eRulemaking Portal purposes are: country of origin marking; document to Robert F. Altneu, who is at www.regulations.gov. To submit determining the rate of duty and staging the Director of the Regulations and comments via www.regulations.gov, category applicable to originating textile Disclosure Law Division for CBP, for enter docket number PTO–P–2021–0006 and apparel products as set out in purposes of publication in the Federal on the homepage and click ‘‘Search.’’ Section 2 (Tariff Elimination) of Annex Register. The site will provide a search results 300–B (Textile and Apparel Goods) page listing all documents associated under NAFTA; and determining the rate Robert F. Altneu, with this docket. Find a reference to this of duty and staging category applicable Director, Regulations & Disclosure Law notice and click on the ‘‘Comment to an originating good as set out in Division, Regulations & Rulings, Office of Now!’’ icon, complete the required Trade, U.S. Customs and Border Protection. Annex 302.2 (Tariff Elimination) under fields, and enter or attach your NAFTA. CBP will determine the Approved: comments. Attachments to electronic country of origin for all non-preferential Timothy E. Skud, comments will be accepted in ADOBE® purposes for goods imported into the Deputy Assistant Secretary of the Treasury. portable document format or ® United States from Canada or Mexico [FR Doc. 2021–14265 Filed 7–1–21; 11:15 am] MICROSOFT WORD format. Because and entered for consumption, or BILLING CODE 9111–14–P comments will be made available for withdrawn from warehouse for public inspection, information that the consumption, on or after [EFFECTIVE submitter does not desire to make DATE OF FINAL RULE], using the rules public, such as an address or phone set forth in §§ 102.1 through 102.18 and DEPARTMENT OF COMMERCE number, should not be included in the 102.20. The rules in this part regarding Patent and Trademark Office comments. goods wholly obtained or produced in a Visit the Federal eRulemaking Portal website (www.regulations.gov) for country are intended to apply 37 CFR Part 1 consistently for all such purposes. The additional instructions on providing rules in this part which determine when [Docket No. PTO–P–2021–0006] comments via the portal. If electronic a good becomes a new and different submission of comments is not feasible article or a new or different article of RIN 0651–AD53 due to lack of access to a computer and/ commerce as a result of manufacturing or the internet, please contact the processes in a given country are also Standard for Presentation of USPTO using the contact information intended to apply consistently for all Nucleotide and Amino Acid Sequence below for special instructions. Listings Using XML (eXtensible purposes where this requirement exists FOR FURTHER INFORMATION CONTACT: for ‘‘country of origin’’ or ‘‘product of’’ Markup Language) in Patent Mary C. Till, Senior Legal Advisor, determinations made by CBP for goods Applications To Implement WIPO Office of Patent Legal Administration, imported from Canada or Mexico. The Standard ST.26; Incorporation by Office of the Deputy Commissioner for rules in this part do not affect similar Reference Patents, by email at Mary.Till@ determinations made by other agencies, AGENCY: United States Patent and uspto.gov; or Ali Salimi, Senior Legal such as the Department of Commerce’s Trademark Office, Department of Advisor, Office of Patent Legal scope determinations in antidumping or Commerce. Administration, Office of the Deputy countervailing duty proceedings (see 19 Commissioner for Patents, by email at ACTION: Notice of proposed rulemaking. CFR 351.225). * * * [email protected]. Contact via SUMMARY: The United States Patent and telephone at 571–272–7704 for special PART 177—ADMINISTRATIVE Trademark Office (USPTO or Office) is instructions on submission of RULINGS proposing to revise the rules of practice comments. ■ 3. The general authority citation for for submitting biological sequence data SUPPLEMENTARY INFORMATION: part 177 is revised to read as follows: associated with disclosures of nucleotide and amino acid sequences in Table of Contents Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff patent applications by incorporating by I. Background Schedule of the United States), 1502, 1624, reference the provisions of Standard a. Summary of Changes 1625, 2515. ST.26 into the USPTO rules. Other b. Introduction conforming changes to accommodate for c. Standard ST.26 ■ 4. Amend § 177.22 by adding a d. Benefits sentence to the end of paragraph (a) to proposed new rules of practice based on e. WIPO Authoring and Validation Tool read as follows: the new standard are also included. (WIPO Sequence) These proposed amendments would f. Applicability § 177.22 Definitions. apply to international and national II. Discussion of Specific Rules (a) * * * (For goods imported into the applications filed on or after January 1, III. Rulemaking Considerations United States after processing in Canada 2022. In addition to simplifying the I. Background or Mexico and entered for consumption, process for applicants filing in multiple or withdrawn from warehouse for countries, a requirement to submit a a. Summary of Changes consumption, on or after [EFFECTIVE single sequence listing in eXtensible Standard ST.26 is the new DATE OF FINAL RULE], substantial Mark-up Language (XML) format will international standard developed by the transformation will be determined using result in better preservation, World Intellectual Property the rules set forth in §§ 102.1 through accessibility, and sorting of the Organization (WIPO) and member states 102.18 and 102.20.) submitted sequence data for the public. and adopted by the same. Under * * * * * DATES: Comments must be received by Standard ST.26, patent applications that Troy A. Miller, the Senior Official September 7, 2021 to ensure contain disclosures of nucleotides and/ Performing the Duties of the consideration. or amino acid sequence(s) must present

VerDate Sep<11>2014 16:39 Jul 02, 2021 Jkt 253001 PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 E:\FR\FM\06JYP1.SGM 06JYP1 jbell on DSKJLSW7X2PROD with PROPOSALS