(a) Items included in the direct costs of processing operations. As used in Sec. 10.176, the words ``direct costs of processing operations'' means those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration. Such costs include, but are not limited to:
(1) All actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
(2) Dies, molds, tooling, and depreciation on machinery and equipment which are allocable to the specific merchandise;
(3) Research, development, design, engineering, and blueprint costs insofar as they are allocable to the specific merchandise; and
(4) Costs of inspecting and testing the specific merchandise.
(b) Items not included in the direct costs of processing operations. Those items which are not included within the meaning of the words ``direct costs of processing operations'' are those which are not directly attributable to the merchandise under consideration or are not ``costs'' of manufacturing the product. These include, but are not limited to:
(1) Profit; and
(2) General expenses of doing business which are either not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise, such as administrative salaries, casualty and liability insurance, advertising, and salesmen's salaries, commissions, or expenses. [T.D. 76-2, 40 FR 60049, Dec. 31, 1975] Sec. 10.178a Special duty-free treatment for sub-Saharan African countries.
(a) General. Section 506A of the Trade Act of 1974 (19 U.S.C. 2466a) authorizes the President to provide duty-free treatment for certain articles otherwise excluded from duty-free treatment under the Generalized System of Preferences (GSP) pursuant to section 503(b)(1)(B) through (G) of the Trade Act of 1974 (19 U.S.C. 2463(b)(1)(B) through (G)) and authorizes the President to designate a country listed in section 107 of the African Growth and Opportunity Act (19 U.S.C. 3706) as an eligible beneficiary sub-Saharan African country for purposes of that duty-free treatment.
(b) Eligible articles. The duty-free treatment referred to in paragraph (a) of this section will apply to any article within any of the following classes of articles, provided that the article in question has been designated by the President for that purpose and is the growth, product, or manufacture of an eligible beneficiary sub-Saharan African country and meets the requirements specified or referred to in paragraph (d) of this section:
(1) Watches, except those watches entered after June 30, 1989, that the President specifically determines, after public notice and comment, will not cause material injury to watch or watch band, strap, or bracelet manufacturing and assembly operations in the United States or the United States insular possessions;
(2) Certain electronic articles;
(3) Certain steel articles;
(4) Footwear, handbags, luggage, flat goods, work gloves, and leather wearing apparel which were not eligible articles for purposes of the GSP on January 1, 1995, as the GSP was in effect on that date;
(5) Certain semimanufactured and manufactured glass products; and
(6) Any other articles which the President determines to be import-sensitive in the context of the GSP.
(c) Claim for duty-free treatment. A claim for the duty-free treatment referred to in paragraph (a) of this section must be made by placing on the entry document the symbol ``D'' as a prefix to the subheading of the Harmonized Tariff Schedule of the United States for each article for which duty-free treatment is claimed;
(d) Origin and related rules. The provisions of Sec. Sec. 10.171, 10.173, and 10.175 through 10.178 will apply for purposes of duty-free treatment under this section. However, application of those provisions in the context of this section will be subject to the following rules:
(1) The term ``beneficiary developing country,'' wherever it appears, means ``beneficiary sub-Saharan African country;'
(2) In the GSP declaration set forth in Sec. 10.173(a)(1)(i), the column heading ``Materials produced in a beneficiary developing country or members of the same association'' should read ``Material produced in a beneficiary sub-Saharan African country, a former beneficiary sub-Saharan African country, or the U.S.;''
(3) The provisions of Sec. 10.175(c) will not apply; and
(4) For purposes of determining compliance with the 35 percent value content requirement set forth in Sec. 10.176(a):
(i) An amount not to exceed 15 percent of the appraised value of the article at the time it is entered may be attributed to the cost or value of materials produced in the customs territory of the United States, and the provisions of Sec. 10.177 will apply for purposes of identifying materials produced in the customs territory of the United States and the cost or value of those materials; and
(ii) The cost or value of materials included in the article that are produced in more than one beneficiary sub-Saharan African country or former beneficiary sub-Saharan African country may be applied without regard to whether those countries are members of the same association of countries.
(5) As used in this paragraph, the term ``former beneficiary sub-Saharan African country'' means a country that, after being designated by the President as a beneficiary sub-Saharan African country under section 506A of the Trade Act of 1974 (19 U.S.C. 2466a), ceased to be designated as such a beneficiary sub-Saharan African country by reason of its entering into a free trade agreement with the United States.
(e) Importer requirements. In order to make a claim for duty-free treatment under this section, the importer:
(1) Must have records that explain how the importer came to the conclusion that the article qualifies for duty-free treatment;
(2) Must have records that demonstrate that the importer is claiming that the article qualifies for duty-free treatment because it is the growth of a beneficiary sub-Saharan African country or because it is the product of a beneficiary sub-Saharan African country or because it is the manufacture of a beneficiary sub-Saharan African country. If the importer is claiming that the article is the growth of a beneficiary sub-Saharan African country, the importer must have records that indicate that the product was grown in that country, such as a record of receipt from a farmer whose crops are grown in that country. If the importer is claiming that the article is the product of, or the manufacture of, a beneficiary sub-Saharan African country, the importer must have records that indicate that the manufacturing or processing operations reflected in or applied to the article meet the country of origin rules set forth in Sec. 10.176(a) and paragraph (d) of this section. A properly completed GSP declaration in the form set forth in Sec. 10.173(a)(1) is one example of a record that would serve this purpose;
(3) Must establish and implement internal controls which provide for the periodic review of the accuracy of the declarations or other records referred to in paragraph (e)(2) of this section;
(4) Must have shipping papers that show how the article moved from the beneficiary sub-Saharan African country to the United States. If the imported article was shipped through a country other than a beneficiary sub- Saharan African country and the invoices and other documents from the beneficiary sub-Saharan African country do not show the United States as the final destination, the importer also must have documentation that demonstrates that the conditions set forth in Sec. 10.175(d)(1) through (3) were met;
(5) Must have records that demonstrate the cost or value of the materials produced in the United States and the cost or value of the materials produced in a beneficiary sub-Saharan African country or countries and the direct costs of processing operations incurred in the beneficiary sub-Saharan African country that were relied upon by the importer to determine that the article met the 35 percent value content requirement set forth in Sec. 10.176(a) and paragraph (c) of this section. A properly completed GSP declaration in the form set forth in Sec. 10.173(a)(1) is one example of a record that would serve this purpose; and
(6) Must be prepared to produce the records referred to in paragraphs (e)(1), (e)(2), (e)(4), and (e)(5) of this section within 30 days of a request from Customs and must be prepared to explain how those records and the internal controls referred to in paragraph (e)(3) of this section justify the importer's claim for duty-free treatment. [T.D. 00-67, 65 FR 59675, Oct. 5, 2000, as amended by CBP Dec. 14-07, 79 FR 30392, May 27, 2014]
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