(a) Definitions. In this section the following definitions apply:

(1) Lower duty rate. The term “lower duty rate” means the duty rate as codified in the 2014 HTS that would have been applicable to qualifying worsted wool fabric of the kind described in subheadings 9902.51.11, 9902.51.15, and 9902.51.16 of the 2014 HTS prior to the expiration of the Wool TRQ on December 31, 2014.

(2) Eligible person—

(i) In general. The term “eligible person” means a manufacturer (or a successor-in-interest to the manufacturer) in the U.S. or in a Foreign-Trade Zone authorized under the Foreign-Trade Zones Act of 1934 (19 U.S.C. 81a-81u) during the calendar year immediately preceding the payment that:

(A) Imported qualifying worsted wool fabric; and

(B) Used the imported qualifying worsted wool fabric directly or had another person use the qualifying worsted wool fabric providing the eligible person owned the qualifying worsted wool fabric at the time it was used:

(1) In the case of wool of the kind described in subheadings 9902.51.11 or9902.51.15 of the 2014 HTS, to produce worsted wool suits, suit-type jackets and trousers for men and boys; or

(2) In the case of wool fabric of the kind described in subheading 9902.51.16 of the 2014 HTS, used such wool fabric in manufacturing.

(ii) Successor-in-interest. If a person satisfies the criteria for becoming a successor-in-interest to an eligible person under paragraph (a)(4) of this section, the person shall succeed to the status of the eligible person and become eligible for the payment.

(3) Qualifying worsted wool fabric. The term “qualifying worsted wool fabric” means imported worsted wool fabric containing at least 85% by weight worsted wool of the kind described in subheadings 9902.51.11, 9902.51.15, or 9902.51.16 of the 2014 HTS that, during the calendar year immediately preceding the payment was:

(i) Imported by an eligible person in the U.S.; and

(ii) Used by the eligible person in the U.S.

(A) In the case of wool fabric of the kind described in subheadings 9902.51.11 or 9902.51.15 of the HTS, to produce worsted wool suits, suit-type jackets and trousers for men and boys; or

(B) In the case of wool fabric of the kind described in subheading 9902.51.16 of the HTS, was used in manufacturing.

(4) Successor-in-interest. The term “successor-in-interest” means a person that is eligible to claim a payment under this section as if the person were the original eligible person, without regard to section 3727, title 31, United States Code because of—

(i) An assignment of the claim;

(ii) An assignment of the original eligible person's right to manufacture under the same trade name; or

(iii) A reorganization of the eligible person.

(b) Purposes. The purposes of a TRQ monetization payment are to provide an eligible person—

(1) Compensation for termination of the TRQ for qualifying worsted wool fabric; and

(2) A payment that is equivalent to the amount the eligible person would have saved during the calendar year for imports of qualifying worsted wool fabric if the lower duty rate under the applicable 2014 HTS subheading(s) of a qualifying worsted wool fabric were in effect.

(c) Calculation of monetized TRQ payment. A payment will be established by calculating, as provided in paragraphs (c)(1) through (4) of this section, the savings that would have been realized by the eligible person for imports of qualifying worsted wool fabric of the kind described in one of the three subheadings 9902.51.11, 9902.51.15, or 9902.51.16 of the 2014 HTS (as applicable), had the lower duty rate been in effect.

(1) Payment formula. Except as provided in paragraph (c)(2) of this section, a payment shall be calculated by

(i) Establishing the reported dollar value of imported worsted wool fabric, for each of the 2014 HTS subheadings of worsted wool fabric, during the calendar year immediately preceding the payment;

(ii) Subtracting the duty rate (converted to numeric value) for each applicable 2014 HTS subheading of worsted wool fabric that would have been paid in calendar year 2014 from the duty rate (converted to numeric value) that was actually paid in the calendar year immediately preceding the payment;

(iii) For each applicable 2014 HTS subheading of worsted wool fabric, multiplying the numeric values described in paragraphs (c)(1)(i) and (ii) of this section; and

(iv) Adding each product obtained in paragraph (c)(1)(iii) of this section.

(2) Exception for 2015 payment. In the case of the payment to be made in 2015, for purposes of the calculation component described in paragraph (c)(1)(ii) of this section the duty rate applicable in 2015 shall be deemed the duty rate actually paid in 2014. The reason for this exception for the 2015 payment is that 2014 is both the last year in which the lower duty rate was still in effect, and is also the calendar year immediately preceding the payment (the payment is in 2015). As a result, for the 2015 payment, a proxy is necessary for the higher duty rate in the calendar year immediately preceding the payment.

(3) 2015 payment. A payment in 2015 shall be calculated by

(i) Establishing the reported dollar value of imported worsted wool fabric during the calendar year immediately preceding the payment under the 2014 HTS subheading of worsted wool fabric;

(ii) Subtracting the lower duty rate (converted to numeric value) that would have been applicable to the 2014 HTS subheading of worsted wool fabric from the duty rate applicable to that HTS subheading in 2015 (converted to numeric value);

(iii) Multiplying the numeric values described in paragraphs (c)(3)(i) and (ii) of this section); and(iv) Adding the product obtained in paragraph (c)(3)(iii) of this section to the product obtained for every applicable subheading of worsted wool fabric.

(4) 2016-2019 payments. A payment in each of years 2016-2019 shall be calculated by

(i) Establishing the reported dollar value of imported worsted wool fabric during the calendar year immediately preceding the payment under the 2014 HTS subheading of worsted wool fabric;

(ii) Subtracting the lower duty rate (converted to numeric value) that would have been applicable to the 2014 HTS subheading of worsted wool fabric from the duty rate applicable to the calendar year preceding the payment (converted to numeric value);

(iii) Multiplying the numeric values described in paragraphs (c)(4)(i) and (ii) of this section; and

(iv) Adding the product obtained in paragraph (c)(3)(iii) of this section to the product obtained for every applicable subheading of worsted wool fabric.

(d) Annual affidavit—(1) In general. An eligible person applying for a payment under this section shall comply with all applicable reporting requirements of this section and of §1471.10.

(2) Specific business information—(i) Imports and production.—An eligible person shall, for the entire calendar year immediately preceding the payment, report the actual dollar value and the actual quantity of

(A) Imports into the U.S. of qualifying worsted wool fabric (square meters); and

(B) The qualifying worsted wool fabric used by the eligible person in the U.S.

(1) In the case of wool of the kind described in subheadings 9902.51.11 or 9902.51.15 of the 2014 HTS, to produce worsted wool suits, suit-type jackets and trousers for men and boys (units); or

(2) In the case of wool of the kind described in subheading 9902.51.16 of the 2014 HTS, such wool that was manufactured (square meters).

(ii) Direct and indirect importers—(A) In general. Eligible persons that import qualifying worsted wool fabric through a third party broker are considered to be indirect importers of the qualifying worsted wool fabric. Persons that directly import qualifying worsted wool fabric and pay the import duty for such wool are considered to be direct importers of the qualifying worsted wool fabric.

(B) Reported dollar value. Eligible persons must state in their annual affidavit whether, in the calendar year immediately preceding the payment, they were direct or indirect importers, and the dollar value of the imported qualifying worsted wool fabric. The reported dollar value of such imports by indirect importers will be subject to a 10% reduction.

(C) Affirmation. An eligible person shall annually affirm in the affidavit that, in the calendar year immediately preceding the payment, in the U.S., the eligible person:

(1) Directly or indirectly imported the qualifying worsted wool fabric into the U.S.;

(2) Used that fabric to produce in the U.S. worsted wool suits, suit jackets, and trousers for men and boys (or, in the case of qualifying worsted wool fabric of the kind described in the 2014 HTS subheading 9902.51.16, for manufactured in the U.S.); and

(3) Imported qualifying worsted wool fabric from the country of origin identified in the affidavit.

(iii) Import documentation—(A) Direct imports. Applicable to the calendar year immediately preceding payment, an eligible person that directly imported qualifying worsted wool fabric is required to submit to FAS as part of the affidavit package scanned copies of CBP Form 7501 “Entry Summary” for the relevant calculations made in the affidavit.

(B) Indirect imports. Applicable to the calendar year immediately preceding payment, an eligible person that indirectly imported qualifying worsted wool fabric is required to submit to FAS as part of the affidavit package invoices from third party brokers as required in the affidavit.

(3) Production of garments or manufacturing of qualifying worsted wool fabric—(i) Production of garments—(A) In general. When reporting the annual dollar value and quantity of imported qualifying worsted wool fabric, an eligible person may either have cut and sewn the wool on its own behalf or had another person cut and sew the wool on behalf of the eligible person, provided the eligible person owned the wool at the time it was cut and sewn.

(B) Applicability. This paragraph applies to wool of the kind described in subheadings 9902.51.11 and 9902.51.15 of the 2014 HTS.

(ii) Manufacturing of qualifying worsted wool fabric— (A) In general. When reporting the annual dollar value and quantity of imported qualifying worsted wool fabric, an eligible person may either have manufactured the wool on its own behalf or had another person manufacture the wool on behalf of the eligible person, provided the eligible person owned the wool at the time of manufacture.

(B) Applicability. This paragraph applies to wool of the kind described in subheading 9902.51.16 of the 2014 HTS.

[80 FR 12327, Mar. 9, 2015, as amended at 81 FR 81660, Nov. 18, 2016]