Tobacco; Importer Assessments

SUMMARY: This rule provides, with respect to tobacco, authority to

implement changes for the budget deficit marketing assessment (BDMA),

sometimes referred to as a ``nonrefundable marketing assessment,''

which is provided for in 7 CFR 1464.11 and 7 CFR 1464.102. The rule is

needed because of the enactment of Section 422 of the Uruguay Round

Agreements Act (P.L. No. 103-465). That section provides for

modifications to the BDMA in the event that the President should issue

a proclamation establishing a tariff-rate quota (TRQ) pursuant to

Article 28 of the General Agreement on Tariffs and Trade (GATT). As

yet, no such quota has been issued. However, this rule will allow for

rapid implementation of the Section 422 modifications if a TRQ is

issued. The modifications provided for in Section 422 are, with respect

to imported tobacco, a restriction of the BDMA to certain tobaccos and

a change in the BDMA rate. For covered domestic tobaccos, Section 422

would extend the term of coverage through the 1998 crops; otherwise,

Section 422 would not change the application of the BDMA to domestic

tobacco.

DATES: Effective Date: April 20, 1995.

Comment Date: Comments must be received on or before May 22, 1995,

in order to be assured of consideration.

ADDRESSES: Interested persons are invited to submit written comments to

the Director, Tobacco and Peanuts Division, Consolidated Farm Service

Agency (CFSA), United States Department of Agriculture (USDA), P.O. Box

2415, Washington, D.C. 20013-2415, telephone 202-720-7413. All written

comments will be available for public inspection in room 5750, South

Building, U.S. Department of Agriculture, 14th St. and Independence

Avenue SW., Washington, DC, between 8 a.m. and 5 p.m., Monday through

Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Gary Wheeler, Tobacco Marketing

Specialist, Tobacco and Peanuts Division, CFSA, at the address listed

above, telephone 202-720-7562.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not-significant for purposes of

Executive Order 12866 and therefore has not been reviewed by OMB.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable to this rule since the Commodity Credit Corporation (CCC) is

not required by 5 U.S.C. 553 or any other provision of law to publish a

notice of proposed rulemaking with respect to the subject matter of

this rule.

Federal Assistance Program

The title and number of the Federal Assistance Program, as found in

the Catalog of Federal Domestic Assistance, to which this rule applies

are: Commodity Loans and Purchases--10.051.

Environmental Evaluation

It has been determined by an environmental evaluation that this

action will have no significant impact on quality of the human

environment. Therefore, neither an environmental assessment nor an

environmental impact statement is needed.

Executive Order 12372

This program/activity is not subject to the provisions of Executive

Order 12372 which requires intergovernmental consultation with State

and local officials. See the notice related to 7 CFR part 3015, subpart

V published at 48 FR 2915 (June 24, 1983).

Executive Order 12778

This interim rule has been reviewed in accordance with Executive

Order 12778. The provisions of this interim rule are not retroactive

and preempt state laws to the extent that such laws are inconsistent

with the provisions of this interim rule. Before any legal action is

brought regarding determinations made under provisions of 7 CFR part

1464, the administrative appeal provisions set forth at 7 CFR part 780

must be exhausted.

Paperwork Reduction Act

The information collection requirements contained in these

regulations (7 CFR part 1464) have been previously approved by the

Office of Management and Budget (OMB) and assigned OMB No. 0560-0148.

Background

A. Pre-1993 Coverage of Domestic Tobacco

The BDMAs for tobacco are also known as ``nonrefundable marketing

assessment'' and are provided for in 7 CFR part 1464 and in particular

in 7 CFR 1464.11 and 7 CFR 1464.102.

The BDMAs, for tobacco, are provided for in current law in Sections

106(g) and 106(h) of the Agricultural Act of 1949, as amended (1949

Act). Before 1993, only domestic tobacco was covered and only those

domestic tobaccos for which price support was in effect by reason of

the approval by producers of production controls.

The per pound BDMA rate that applies to domestic tobacco is the

amount which equals 1% of the per pound national price support level

for each kind of tobacco. For domestic tobacco, half of the BDMA is

paid by the producer; the other half is paid by the first purchaser of

the tobacco. The first purchaser either purchases the tobacco from the

producer or obtains the tobacco by a purchase from the price support

loan inventory.

Tobacco crops are divided into crop years based on the year of

production. There is likewise assigned a marketing year for each crop.

The marketing year for all but flue-cured tobacco runs from October 1

of the calendar year in which the crop is produced through September 30

of the following year. For flue-cured tobacco, the crop year runs for

the 12-month period that begins on July 1 of the year of production.

[[Page 19666]]

B. 1993 Extension of BDMAs to Imported Tobacco

In 1993, Congress enacted the Omnibus Budget Reconciliation Act of

1993, Pub. L. 103-66 (1993 Act). The 1993 Act extended the BDMA to all

imported tobacco. Implementing rules were published in 7 CFR part 1464.

Pursuant to the statute, the rules set the per pound BDMA rate on

imported tobacco at a uniform amount equal to the average per pound

total (producer and purchaser) BDMA for domestic burley and flue-cured

tobacco applicable at the time of the entry of the imported tobacco

into the commerce of the United States. The 1993 Act also extended ``no

net cost assessments'' (NNCAs) to imported tobacco. However, the

imported tobacco NNCAs apply only to imported flue-cured and imported

burley tobacco.

C. Remittances of BDMAs

By law, BDMA payments are remitted to the CCC of USDA.

D. Coverage of Crop Years

But for new statutory law, described below, the term of the

domestic BDMA ends with the 1995 crops. That for the imported tobacco

ends with the 1998 crops.

E. Provisions of the Uruguay Round Agreements Act (URAA)

The 1993 Act measures described above and the other 1993 measures

led to a challenge under GATT by countries that export tobacco to the

United States. This led to on-going negotiations to establish a TRQ

under Article 28 of GATT.

Countries have operated for many years under longstanding GATT

provisions sometimes referred to as ``GATT 1947.'' However, recent

negotiations among many nations on new, broad-based ``Uruguay Round

Agreements'' were completed. The GATT, as so modified, is sometimes

referred to as ``GATT 1994.'' This development led in turn to enactment

by Congress of the ``Uruguay Round Agreements Act'' (URAA).

URAA Sections 421-423 contain tobacco provisions. Section 422

contains provisions dealing with the BDMA. However, those provisions

are not effective unless and until a tobacco TRQ should be proclaimed

by the President.

Specifically, Section 422 would revise Section 106 of the 1949 Act

to provide that effective for each of the 1994 through 1998 crops of

tobacco for which price support is made available under the 1949 Act,

each producer and purchaser of such tobacco, and each importer of the

same kind of tobacco shall remit to the CCC a non-refundable marketing

assessment (BDMA). Section 106(g), as it would be revised by Section

422, provides further that the non-refundable marketing assessment

(that is, the BDMA) would be an amount equal to:

(1) in the case of a producer or purchaser of domestic tobacco, .5%

of the national price support level for each such crop; and

(2) in the case of an importer of tobacco, 1 percent of the

national price support level for the same kind of tobacco.

Accordingly, Section 422, if and when it becomes effective, would

limit the imported BDMA to imports with the same or similar

characteristics as a price-supported (and BDMA-subject) domestic kind.

Also, the rate for imported tobacco would change to that equal to the

full amount of the BDMA for the corresponding domestic kind rather than

be equal to a burley and flue-cured average.

Further, Section 422(c) allows the President to waive the

application to imported tobacco of the BDMA or the NNCA if the

President determines that the waiver is necessary or appropriate

pursuant to an international agreement entered into by the United

States.

As indicated, however, the provisions of Section 422 are not yet

effective. That lack of current effectiveness is set out in Section

422(e). That section provides that Section 422 and the amendments made

by it will be effective only beginning on the effective date of the

Presidential proclamation establishing a TRQ pursuant to Article 28 of

the GATT 1947 or the GATT 1994 with respect to tobacco. There is no

such TRQ at this time.

F. Need for a Currently Effective Rule

It has been determined that an interim rule should be issued at

this time so that there may be an immediate effectiveness under 7 CFR

part 1464 of the BDMA modifications upon the proclamation by the

President of a triggering TRQ.

G. Current Coverage of the Domestic BDMA

As indicated, Section 422 would tie the imported tobacco BDMA to

domestic kinds that pay a BDMA. Those domestic kinds are those that are

subject to price support. They are listed below. In the parentheses

following each kind are three figures separated by slashes. The first

figure is the current per pound national price support level. The

second is the amount which would constitute 1% of the support level and

thus the full per pound imported BDMA rate for the same kind or that

having similar characteristics of a domestic quota kind. The third

figure is the second figure expressed as an amount per kilogram. The

list of price supported domestic tobaccos, with those three figures for

each, is as follows:

(1) flue-cured tobacco ($1.583/$0.015830/$0.034899);

(2) burley ($1.714/$0.017140/$0.037787);

(3) Virginia fire-cured ($1.407/$0.014070/$0.031019);

(4) Kentucky-Tennessee fire-cured ($1.483/$0.014830/$0.032694);

(5) dark air-cured ($1.273/$0.012730/$0.028065);

(6) Virginia sun-cured ($1.245/$0.012450/$0.027447);

(7) cigar filler and binder ($1.084/$0.010840/$0.023899); and

(8) Puerto Rico cigar filler ($0.844/$0.008440/$0.018607).

H. Description of Provisions and Effect of The Interim Rule

Under the interim rule:

(1) Effectiveness of the new regime. The new BDMA provisions would

be effective only upon: (i) the proclamation by the President of a

triggering TRQ and (ii) a determination and announcement by the

Executive Vice President of CCC (Executive Vice President) that the TRQ

had been proclaimed and that the new BDMA provisions are in effect.

(2) Timing of calculation of amount due. The amount due under the

new regime would be determined based on the date of entry of the

tobacco into the commerce of the United States as determined in

accordance with existing rules.

(3) Effect on prior importations. Any tobacco entered prior to the

effective date of the new regime would be subject to the old regime.

The inauguration of the new regime will not effect liabilities under

the old regime.

(4) Waivers. The rule allows adjustments to be made as might be

required due to an exercise of the President's Section 422(c) waiver

authority.

(5) Mixed lots. Mixed lots (containing differing kinds of tobacco)

would be handled as they are for the NNCA. The importer would be

responsible for establishing and certifying to the composition of the

lot. To the extent that the lot's composition could not be determined,

the lot would be considered to be assessable in its entirety at the

highest applicable rate.

(6) Exemption of certain tobaccos. Tobaccos which have distinct

characteristics such as oriental tobacco and are commonly treated in

the trade as a different ``kind'' of tobacco would [[Page 19667]] be,

in the new regime, free of the BDMA.

(7) Burden of proof. Unlike the old regime, the new regime does not

cover all imported tobacco. The importer would have the burden of

establishing that the tobacco was not subject to the BDMA or is subject

to a lower rate. Importers of all kinds of tobacco, including exempt

tobaccos, would be required to maintain all records relevant to the

application of the assessments and its exemptions. Such records would

be subject to inspection as under the old regime. As under the old

regime, failures to keep proper records could be considered as evidence

of a failure to make proper payments.

(8) Authority of the Director of the Tobacco and Peanuts Division.

The Director of the Tobacco and Peanuts Division (Director), CFSA,

would have the authority to resolve disputes, request information, and

establish additional accounting procedures if needed.

(9) Rate on imported tobacco. In accordance with the Section 422,

the BDMA rate on imported tobacco would be the lowest rate for a

domestic tobacco which is the same kind.

(10) Kinds of tobacco. Tobacco could be considered the same kind

if, discounting for the place of production, it is classified as the

same kind for customs purposes, has similar characteristics, or is

treated as the same kind of tobacco in the industry.

(11) Extension of the domestic BDMA. The domestic BDMA would be

extended through the 1998 crops if a TRQ is issued.

(12) Changes in coverage of the imported BDMA. If the list of

domestic tobaccos subject to the BDMA changes, the coverage of the

imported BDMA would also change accordingly. In any case, the BDMA rate

for imported tobacco will change based on changes in the price support

level for relevant domestic tobaccos. The applicable rate will, as

indicated above, be based on the time of the entry of the tobacco into

the commerce of the United States.

(13) Additional rule changes. It is anticipated that if and when a

TRQ is issued, the rules would be revised to reflect the new regime

only. However, as indicated, this will not affect liabilities under the

old regime.

I. Current Effectiveness and Comments

This rule is being issued as an interim rule without prior public

comment as the change in the BDMA is mandated by law and a delay in

implementation would be contrary to the public interest, including the

public interest in the administration of foreign trade policy.

Comments both favorable and unfavorable to the rule are solicited.

Further consideration of the rule, upon the receipt of the comments,

could lead to modifications in the rule.

List of Subjects in 7 CFR Part 1464

Assessments, Loan program, Agriculture, Price support program,

Tobacco, Warehouses.

For the reasons set forth in the preamble, 7 CFR part 1464 is

amended as follows:

PART 1464--TOBACCO

1. The authority citation for part 1464 continues to read as

follows:

Authority: 7 U.S.C. 1421, 1423, 1441, 1445, 1445-1, and 1445-2;

15 U.S.C. 714b, 714c.

2. Section 1464.11 is amended by adding a new paragraph (f) to read

as follows:

Sec. 1464.11 Nonrefundable marketing assessment.

* * * * *

(f) The term for the application of the assessment provided for in

this section shall be extended through the 1998 crops if the President

issues a Presidential proclamation establishing a tariff-rate quota

pursuant to Article XXVIII of the GATT 1947 or GATT 1994 with respect

to tobacco. Accordingly, in the event that such a proclamation is

issued all obligations which otherwise would terminate with the 1995

crop under this section shall apply equally for subsequent crops

through the 1998 crops.

3. Section 1464.102 is amended by adding new paragraphs (c) and (d)

to read as follows:

Sec. 1464.102 Budget deficit marketing assessment.

* * * * *

(c) Modification of the coverage and rate for imported tobacco. (1)

Notwithstanding the provisions of paragraphs (a) and (b) of this

section, the coverage, rates and obligations applicable to imported

tobacco under this section shall be as provided in paragraph (d) of

this section if:

(i) the President establishes a tariff-rate quota for tobacco; and

(ii) it is determined and announced by the Executive Vice President

that a modification of the assessments is being made accordingly

pursuant to Section 422 of Pub. L. 103-465.

(2) The effective date of the modification provided for in

paragraph (c)(1) of this section shall be the date announced by the

Executive Vice President consistent with the provisions of Pub. L. 103-

465.

(3) (i) For entries of imported tobacco into the United States

prior to the effective date for assessment modifications announced by

the Executive Vice President under this paragraph, the rates and

coverage of the assessment shall be as provided for in paragraphs (a)

and (b) of this section.

(ii) For entries of imported tobacco into the United States after

the effective date for assessment modifications announced by the

Executive Vice President under this paragraph, the rates and coverage

of the assessment shall be as provided for in paragraph (d) of this

section.

(d) Rates and coverage of the modified assessment. If a

modification of the assessments otherwise provided for in this section

is announced by the Executive Vice President as provided for in

paragraph (c) of this section then:

(1) Imports of tobacco under this section shall apply only to the

same kind or tobacco having similar characteristics to a price-

supported domestic kind, or considered in the trade to be the same or

similar ``kind'', as a domestic tobacco which is, at the time the

tobacco is entered into the commerce of the United States, currently

subject to an assessment under Sec. 1464.11.

(2) If the tobacco is subject to an assessment under paragraph

(d)(1) of this section, then the assessment shall be paid by the

importer and remitted to CCC. The amount due for each pound of subject

tobacco, shall be the amount equal to 1% of the national price support

level that applies for the current marketing year for the corresponding

domestic kind of tobacco.

(3) It shall be the responsibility of all importers to establish

that imported tobacco is not covered by the BDMA or not subject to a

higher BDMA rate than that which is assessed or paid.

(4) In the case of the entry of mixed lots (containing tobacco of

different kinds) the importer shall be required to certify to the

composition of the lot. In the absence of such certification or in the

absence of sufficient evidence to indicate the relevant kind of tobacco

for purposes of administration of this section, then the importer shall

be liable for the assessment as the highest possible relevant rate for

all such tobacco.

(5) Importers of all tobacco, including those which are not subject

to the modified BDMA, shall maintain sufficient records to demonstrate

compliance with the obligations of this section.

(6) Disputes involving the application of the assessment shall be

resolved by the Director.

[[Page 19668]] Signed at Washington, D.C. on April 10, 1995.

Bruce R. Weber,

Acting Executive Vice President, Commodity Credit Corporation.

[FR Doc. 95-9454 Filed 4-19-95; 8:45 am]

BILLING CODE 3410-05-P