Sugar to be Imported and Re-Exported in Refined Form or in Sugar Containing Products, or Used for the Production of Polyhydric Alcohol

DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR PART 1530

[Rin 0551-AA39]

Sugar to be Imported and Re-Exported in Refined Form or in Sugar

Containing Products, or Used for the Production of Polyhydric Alcohol

AGENCY: Foreign Agricultural Service (FAS), USDA.

ACTION: Final rule.

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SUMMARY: This final rule supersedes the regulation at 7 CFR part 1530,

which governs the importation of world priced raw sugar and its

subsequent re-export as refined sugar, or as an ingredient in sugar

containing products, or its use in the production of certain polyhydric

alcohols.

EFFECTIVE DATE: This final rule is effective February 12, 1999.

ADDRESSES: U.S. Department of Agriculture, Foreign Agricultural

Service, Import Policies and Programs Division, 1400 Independence

Avenue, SW., Stop 1021, Washington, DC 20250-1021.

FOR FURTHER INFORMATION CONTACT: Stephen Hammond, Division Director,

Import Policies and Programs Division, U.S. Department of Agriculture,

Foreign Agricultural Service, 1400 Independence Avenue, SW., Stop 1021,

Washington, DC 20250-1021. Telephone: 202720-2916.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule is issued in conformance with Executive Order

12866. The Administrator of the Foreign Agricultural Service (FAS) has

determined that this rule is ``not economically significant.''

Therefore, except for requirements under the Paperwork Reduction Act of

1995, the rule has not been reviewed by the Office of Management and

Budget. The Administrator, FAS, has determined that the provisions of

this final rule will not: (1) Result in an annual effect on the economy

of $100 million or more; (2) adversely affect, in a material way, the

economy, a sector of the economy, productivity, competition, jobs, the

environment, public health or safety, or State, local, or tribal

governments or communities; or (3) regulate issues of human health,

human safety, or the environment. Further, the Administrator has

determined that the rule does not:

(1) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency; (2) materially alter the

budgetary impact of entitlement, grants, user fees, or loan programs,

or the rights and obligations of recipients; or (3) raise novel legal

or policy issues arising out of legal mandates, the President's

priorities, or the principles set forth in Executive Order 12866.

Regulatory Flexibility Act

The Regulatory Flexibility Act ensures that regulatory and

information requirements are tailored to the size and nature of small

businesses, small organizations, and small governmental jurisdictions.

This final rule will not have a significant economic impact on a

substantial number of small entities. Participation in the programs is

voluntary. Direct and indirect costs are small as a percentage of

revenue and in terms of absolute costs. The minimal regulatory

compliance requirements are scaled to impact large and small businesses

equally, and the programs improve businesses' cash flow and liquidity.

National Environmental Policy Act

The Administrator has determined that this action will not have a

significant effect on the quality of the human environment. Therefore,

neither an Environmental Assessment nor an Environmental Impact

Statement is necessary for this rule.

Executive Orders 12372 and 12875, and the Unfunded Mandates Reform

Act (Pub. L. 104-4)

These Executive Orders and Public Law 104-4 require

intergovernmental review of programs. Neither the Refined Sugar Re-

Export Program, the Sugar Containing Products Re-Export Program, nor

the Polyhydric Alcohol Program impose an unfunded mandate or any other

requirement on State, local or Tribal governments. Further, the

programs are national in scope and involve a power delegated to the

United States by the Constitution. Accordingly, these programs are not

subject to the provisions of either Executive Order 12372, or Executive

Order 12875, or the Unfunded Mandates Reform Act, Pub. L. 104-4.

Executive Order 12612

Executive Order 12612 requires implications of ``federalism'' be

considered in the development of regulations. The Administrator

certifies that this final rule has been reviewed in light of Executive

Order 12612 and that it is consistent with the principles, criteria,

and requirements stated in sections 2 through 5 of this Executive

Order. The Administrator further certifies that this rule would impose

no additional cost or burden on the States, nor affect the States'

abilities to discharge traditional State governmental functions.

Executive Order 12606

Executive Order 12606 requires that government action include

consideration of maintaining stability and strengthening the family.

The

[[Page 7060]]

Administrator, FAS, has determined, under the principles and criteria

established in Executive Order 12606, that this rule will have no

effect on the family.

Executive Order 12630

This Executive Order requires careful evaluation of governmental

actions that interfere with constitutionally protected property rights.

This rule does not interfere with any property rights and, therefore,

does not need to be evaluated on the basis of the criteria outlined in

Executive Order 12630.

Background

This final rule revises the regulations at 7 CFR part 1530, which

govern the importation of world priced raw sugar and its subsequent re-

export as refined sugar, or as an ingredient in sugar containing

products, or its use in the production of certain polyhydric alcohols.

In order to encourage public input into the revision of this

regulation, USDA published a proposed rule in the Federal Register on

August 6, 1996 (61 FR 40749) requesting public comment through October

7, 1996. USDA received comments from 21 respondents: 6 industry

associations; five agents representing some 27 private entities; and

the remainder, private concerns with vested interests in the outcome of

the regulation review. Most of the comments focused on license limits,

information reporting, time-frames for reporting, use of bonds versus

civil penalties, and program definitions.

Discussion of Comments

The comments focused on twelve issue areas. The relevant section

number in the final rule is included in parenthesis where applicable.

The focus areas were as follows:

License Balance and Limits (Sec. 1530.105)

A majority of respondents spoke to the issue of license limits,

with all opposed to at least some facet of the proposed changes. Many

respondents spoke of an increased likelihood of market manipulation

under the proposed limit changes. Other respondents suggested that the

changes limited flexibility of participants to take advantage of world

market conditions. Because of the lack of support from any of the

respondents regarding the proposed changes in license limits, the final

rule leaves the license limits currently in use unchanged for refiners

and sugar containing product manufacturers, except for the inclusion of

a consolidated license for sugar containing product manufacturers.

Polyhydric alcohol producer license limits were made consistent with

sugar containing product manufacturer license limits to further

simplify the program.

Time Period Allowed to Export Sugar Imported Under Program Provisions

(Sec. 1530.105)

Respondents were evenly split between those in favor and those

opposed to lengthening the time permitted by refiners to export program

sugar, from 90 days to 18 months. Those opposed expressed concerns that

under an 18 month period, imported sugar could remain in the United

States for as long as 3 years. These respondents made the argument that

under the regulations, a refiner would have 18 months to transfer

imported sugar to a manufacturer, who has 18 months to export it in

sugar containing products, which could lead to market manipulation. The

respondents supporting the proposed change in the upper license limit

for refiners did not support the proposed reduction in the positive

balance limit. As a result, FAS retained the existing license limits

and export periods for refiners and for sugar containing product

manufacturers. FAS also made polyhydric alcohol producer time-use

requirements consistent with the limitations for sugar containing

product manufacturers. However, to facilitate the elimination of

redundant reporting of transfers, the length of time to report

transfers was extended from 10 to 90 days.

Reporting Requirements (Sec. 1530.109)

A majority of the respondents welcomed the proposed changes;

however, some expressed concern that FAS had actually increased the

reporting burden. Some respondents suggested that FAS was not requiring

enough information and not making it available to the public. In the

final rule, FAS reduced the number of reporting fields for

manufacturers from 14 (as proposed), to 6. This change does not,

however, reduce the quantity or quality of the information used to make

important tariff-rate quota decisions. FAS will provide participants

the database format for reporting and/or the database software to

facilitate reporting.

Some respondents suggested that the proposed reporting burden did

not take into account the commercial reality of availability of certain

export documentation. FAS added the Documentation Agreement, which

provides program participants an opportunity to participate in the

process of determining the documentation that both the licensee and the

Licensing Authority will agree is sufficient to demonstrate proof of

export.

Phase-in Period (Sec. 1530.114)

Three respondents asked that FAS either include a method for

transferring existing contracts to the new system, or allow these

contracts to continue to operate under the previous rule. Their reason

was that refiners typically forward contract for raw sugar for period

of up to 18 months, and some of these contracts could be in violation

of the new rule. Program participants will be allowed to place all

existing contracts under the procedures of this final rule during a

period of 24 months from the effective date of the rule.

Bonding Requirements (Sec. 1530.107)

The majority of persons commenting on this issue favored retaining

the bonding requirements as a deterrent to fraud and/or other non-

compliance with the regulations. Most respondents suggested that the

bonding requirement had deterred program violations. Many respondents

spoke against using civil penalties as an alternative for the bond

requirement. FAS retained the bonding requirements and eliminated the

proposed civil penalties. In the final rule, to provide greater

flexibility for participants, FAS has also provided for the use of a

letter of credit as an alternative to a bond.

Impact of North American Free-Trade Agreement (Sec. 1530.105(h))

Most respondents on this issue expressed concerns about the impact

the North American Free-Trade Agreement (NAFTA) on the importation of

Mexican sugar under the rule. Several respondents requested that the

provision be extended to sugar containing products exports to Mexico.

The final rule allows a refiner to import Mexican raw sugar for further

refining without the quantity affecting the refiner's license balance

as long as the sugar is re-exported within 30 days of entry. If 30 days

pass without re-export, the Licensing Authority will charge the entry

against the refiner's license. The NAFTA does not contain a provision

that would permit FAS to extend this provision to sugar containing

products.

Definitions of Terms Relating to the Sugar Containing Products Re-

export Program (Sec. 1530.101)

The table below lists the issues raised by the respondents, as well

as FAS'' response in the final rule.

[[Page 7061]]

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Respondent Issue Final Rule

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``Refiner'' should be limited to only The final rule defines a

those firms which refine sugar. refiner as ``any person . .

. refines raw cane sugar .

. .''

``Sugar containing products'' should not The new definition is

be restricted to human food only. Sugar expanded to include all

containing pet food and non-food products sugar containing products

should be included. except those normally

marketed by cane sugar

refiners.

``Co-packer'' should be expanded to A co-packer is now defined

include firms that duplicate the product as ``a person that adds

line of the parent company, produce some value to a licensed

items of the parent firm's product line, manufacturer's product, or

or produce ingredients. produces a product for

export by the licensed

manufacturer, but does not

at any time own any of the

program sugar used as an

ingredient in the final

product.''

``Agent,'' ``licensee,'' ``transfer,'' These terms are clearly

``notice of transfer,'' and ``export, use defined in this rule. FAS

and quarterly report'' are terms which did not define ``use''

need clarification. because of the self-

explanatory nature of the

word.

Include a separate definition for The definition of export is

``export.''. provided in the final rule.

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Polarization (Sec. 1530.109)

Two respondents requested that FAS include a provision to allow for

polarization adjustments. The rule requires that raw sugar entering the

U.S. Customs Territory be reported on a metric ton, raw value basis.

The initial and final polarization, and final weight (when available)

for entries of raw sugar are required in Sec. 1530.109. Another

respondent requested that the definition of white sugar as having 99.5

degree polarity should be waived for raw sugar which is imported under

the Refined Sugar Re-export Program. FAS did not address the

international definition of raw sugar in the final regulation.

Polyhydric Alcohol Program (Sec. 1530.114)

One respondent stated that the rule should contain a provision

concerning how outstanding balances are to be treated at the time the

final rule is effective. Since license balances will continue under the

final rule, no special treatment is needed. Another respondent

requested that FAS require the licensee to certify that the polyhydric

alcohol will be used for non-food products only. By the FAS definition,

any polyhydric alcohol, except polyhydric alcohol produced by

distillation or polyhydric alcohol used as a substitute for sugar as a

sweetener in human food, can be produced with program sugar. Therefore,

an additional certification would be redundant.

Export of Raw Cane Sugar

One respondent requested that FAS include a provision to permit the

entry of raw cane sugar (classified under subheading 1701.11.20 in the

Harmonized Tariff Schedule of the United States (HTS)) if the imported

sugar is to be substituted for domestically-produced raw cane sugar

that has been or will be exported. The final regulation permits a

refiner to import raw sugar in anticipation of exports of refined sugar

or the transfer of refined sugar to sugar containing product

manufacturers or polyhydric alcohol producers.

Beet Sugar

Three respondents requested that FAS include beet sugar refiners as

eligible participants in the Refined Sugar Re-export Program. One

respondent stated that FAS should limit participation to cane sugar

refiners only. In the final regulation, FAS continued to limit

participation in the Refined Sugar Re-Export Program to cane sugar

refiners, because the initial purpose of the program, which was to

enhance cane sugar refiners' throughput after the imposition of

restrictive raw sugar quotas and subsequent tariff-rate quotas, has not

changed with the implementation of this regulation.

Other Issues Related to the Sugar Containing Products Re-export Program

A respondent requested that a manufacturer of a product which is

100 percent sugar, for instance, sugar put into paste form, to which

dye is added, should be able to export the product under the rule's

provisions for sugar containing products. The definition of sugar

containing product in the final regulation addresses this question by

incorporating all sugar containing products except those normally

marketed by refiners.

Another respondent requested that FAS publish a list of licensees

under the Sugar Containing Products Re-export Program, and suggested

that if a firm acted in good faith based upon the information contained

in the list, it should not be held liable for any transactions that

fell outside program limits. FAS maintains a list of program

participants, but does not provide any other information about the

companies on that list. Program participants are held responsible in

the final rule to ensure that the program refined sugar and sugar in

sugar containing products are exported from the U.S. Customs Territory.

Two other respondents requested a provision for a 5.0 percent loss

allowance for refined sugar (with 100 percent polarity) used in

manufacturing sugar containing products. These respondents claimed that

the license balance system did not account for

[[Page 7062]]

sugar lost in the normal manufacturing process. Most respondents,

however, did not object to the removal of the loss provision in the

proposed regulation. In the final rule FAS does not provide credit for

sugar lost in the manufacturing process.

FAS collapsed the regulations for the Refined Sugar Re-Export

Program, the Sugar Containing Products Re-Export Program and the

Polyhydric Alcohol Program into one rule.

Where possible the terms and conditions for each program were

unified in order to simplify and facilitate use of the rule.

List of Subjects in 7 CFR Part 1530

Agricultural commodities, Sugar, Imports, Procedural rules, Appeal

procedures, Reporting and record keeping requirements.

Final Rule

Accordingly, the regulations at 7 CFR part 1530 are revised to read

as follows:

PART 1530--THE REFINED SUGAR RE-EXPORT PROGRAM, THE SUGAR

CONTAINING PRODUCTS RE-EXPORT PROGRAM, AND THE POLYHYDRIC ALCOHOL

PROGRAM

Sec.

1530.100 General statement.

1530.101 Definitions.

1530.102 Nature of the license.

1530.103 License eligibility.

1530.104 Application for a license.

1530.105 Terms and conditions.

1530.106 License charges and credits.

1530.107 Bond or letter of credit requirements.

1530.108 Revocation or surrender of licenses.

1530.109 Reporting.

1530.110 Records, certification, and documentation.

1530.111 Enforcement and penalties.

1530.112 Administrative appeals.

1530.113 Waivers.

1530.114 Implementation.

1530.115 Paperwork Reduction Act assigned number.

Authority: Additional U.S. note 6 to chapter 17 of the

Harmonized Tariff Schedule of the United States (19 U.S.C. 1202); 19

U.S.C. 3314; Proc. 6641, 58 FR 66867, 3 CFR, 1994 Comp., p. 172;

Proc. 6763, 60 FR 1007, 3 CFR, 1995 Comp., p. 146.

Sec. 1530.100 General statement.

This part provides regulations for the Refined Sugar Re-Export

Program, the Sugar Containing Products Re-Export Program, and the

Polyhydric Alcohol Program. Under these provisions, refiners may enter

raw sugar unrestricted by the quantitative limit established for the

raw sugar tariff-rate quota or the requirements of certificates of

quota eligibility provided for in 15 CFR part 2011, as long as

licensees under the programs export an equivalent quantity of refined

sugar, either as refined sugar or as an ingredient in sugar containing

products, or use the refined sugar in the production of certain

polyhydric alcohols.

Sec. 1530.101 Definitions.

Affiliated persons means two or more persons where one or more of

said persons directly or indirectly controls or has the power to

control the other(s), or, a third person controls or has the power to

control the others. Indications of control include, but are not limited

to: interlocking management or ownership, identity of interests among

family members, shared facilities and equipment, and common use of

employees.

Agent means a person who represents the licensee in any program

transaction. An agent shall not, at any time, own any of the product

produced by the program licensee. Agents may include brokers, shippers,

freight forwarders, expediters, and co-packers.

Bond or letter of credit means an insurance agreement pledging

surety for the entry of foreign sugar without the required re-export

within the program guidelines.

Certain polyhydric alcohols means any polyhydric alcohol, except

polyhydric alcohol produced by distillation or polyhydric alcohol used

as a substitute for sugar as a sweetener in human food.

Co-packer means a person who adds value to a licensed

manufacturer's product, or produces a product for export by a licensed

manufacturer.

Date of entry means the date raw sugar enters the U.S. Customs

Territory.

Date of export means the date refined sugar or sugar containing

products are exported from the U.S. Customs Territory, or, if exported

to a restricted foreign trade zone, the date shown on the U.S. Customs

Service form designating the product as restricted for export.

Date of transfer means the date that ownership of program sugar is

conveyed from a refiner to a manufacturer or producer licensee.

Day means calendar day. When the day for complying with an

obligation under this part falls on a weekend or Federal holiday, the

obligation may be completed on the next business day.

Documentation agreement means a signed and notarized letter from a

licensee specifying certain documentation that the licensee shall

obtain and maintain on file before said licensee requests from USDA

updating of a license balance.

Enter or entry means importation into the U.S. Customs Territory,

or withdrawal from warehouse for consumption, as those terms are used

by the U.S. Customs Service.

Export means the conveyance (shipment) of sugar or a sugar

containing product from a licensee under this part to a country outside

the U.S. Customs Territory, or to a restricted foreign trade zone.

Licensing Authority means a person designated by the Director,

Import Policies and Programs Division, Foreign Agricultural Service,

USDA.

Manufacturer means a person who produces or causes to be produced

on their behalf a sugar containing product for export under the

provisions of this part.

Person means any individual, partnership, corporation, association,

estate, trust, or any other business enterprise or legal entity.

Program sugar means sugar that has been charged or credited to the

license of a licensee in conformity with the provisions of this part.

Program transaction means an appropriate entry, transfer, use, or

export of program sugar.

Refined sugar means any product that is produced by a refiner by

refining raw cane sugar and that can be marketed as commercial,

industrial or retail sugar.

Refiner means any person in the U.S. Customs Territory that refines

raw cane sugar through affination or defecation, clarification, and

further purification by absorption or crystallization.

Sugar containing product means any product, other than those

products normally marketed by cane sugar refiners, that is produced

from refined sugar or to which refined sugar has been added as an

ingredient.

Transfer means the transfer of legal title of program sugar from a

licensed refiner to a licensed manufacturer of a sugar containing

product or a licensed producer of certain polyhydric alcohols for the

production of sugar containing products or the production of certain

polyhydric alcohols.

Unique number means a tracking number established by a licensee for

a transaction (entry, transfer, export, or use). A unique number is

established for a transaction to or from a specific country or

licensee. The unique number is also assigned by the licensee to a file

that contains all of the supporting documentation for the transaction

for which it was established. The unique number is the means by which

program transactions will be tracked.

[[Page 7063]]

Sec. 1530.102 Nature of the license.

(a) A person who wishes to participate in the Refined Sugar Re-

export Program, the Sugar Containing Products Re-export Program, or the

Polyhydric Alcohol Program must first obtain a license from the USDA,

through the Licensing Authority.

(b) A license under the Refined Sugar Re-export Program permits a

refiner to enter raw cane sugar under subheading 1701.11.20 of the HTS,

and export an equivalent quantity of refined sugar onto the world

market or transfer an equivalent quantity of refined sugar to licensees

under the Sugar Containing Products Re-export Program or the Polyhydric

Alcohol Program.

(c) A license under the Sugar Containing Products Re-export Program

or Polyhydric Alcohol Program permits licensees to receive transfers

and export an equivalent quantity of sugar as an ingredient in sugar

containing products, or use an equivalent quantity of sugar in the

production of certain polyhydric alcohols.

(d) All refining, manufacturing, and production shall be

accomplished in the U.S. Customs Territory, and within time-frames and

quantity limitations prescribed in this part. Program sugar and non-

program sugar are substitutable.

(e) A licensee must establish a bond or a letter of credit in favor

of the U.S. Department of Agriculture to charge program sugar in

anticipation of the export or transfer of refined sugar, the export of

sugar in sugar containing products, or the production of certain

polyhydric alcohols.

Sec. 1530.103 License eligibility.

(a) A raw cane sugar refiner, a manufacturer of sugar containing

products, or a producer of certain polyhydric alcohols, that owns and

operates a facility within the U.S. Customs Territory, is eligible for

a license to participate in the Refined Sugar Re-export Program, the

Sugar Containing Products Re-export Program, or the Polyhydric Alcohol

Program, respectively.

(b) No person may apply for or hold more than one license,

including a license held by an affiliated person.

(c) Notwithstanding paragraph (b) of this section, a person who

owns one or more wholly-owned subsidiary corporations manufacturing

sugar containing products or producing certain polyhydric alcohols,

which would otherwise qualify for an individual license, is eligible

for a consolidated license to cover the program transactions and other

program activities of both the parent corporation and the subsidiary

corporation(s). The program transactions and other program activities

of the subsidiary corporation(s) covered by a consolidated license

shall be treated as the activities of the corporation holding the

consolidated license.

(d) Notwithstanding paragraph (c) of this section, each wholly-

owned subsidiary manufacturing sugar containing products or producing

certain polyhydric alcohols may establish a license for program

activities instead of the parent corporation establishing a

consolidated license. The sum total of license limits for the parent

corporation and its wholly-owned subsidiary corporation(s) shall not

exceed the quantitative limits established in Sec. 1530.105 of this

part.

Sec. 1530.104 Application for a license.

(a) A person seeking a license shall apply in writing to the

Licensing Authority and shall submit the following information:

(1) The name and address of the applicant;

(2) The address at which the applicant will maintain the records

required under Sec. 1530.110;

(3) The address(es) of the applicant's processing plant(s),

including any wholly-owned subsidiary(s) and plant(s) in the case of a

consolidated license, and including those of any co-packer(s);

(4) In the case of a refined sugar product, the polarity of the

product and the formula proposed by the refiner for calculating the

refined sugar in the product;

(5) In the case of a sugar containing product, the percentage of

refined sugar (100 degree polarity), on a dry weight basis, contained

in such product(s);

(6) In the case of polyhydric alcohol, the quantity of refined

sugar used producing certain polyhydric alcohols; and

(7) A certification explaining that the applicant is not affiliated

with any other licensee, or explaining any affiliations, should they

exist.

(b) A documentation agreement must be concluded with the Licensing

Authority.

(c) If any of the information required by paragraph (a) of this

section changes, the licensee shall promptly apply to the Licensing

Authority to amend the application to include such changes.

Sec. 1530.105 Terms and conditions.

(a) A licensed refiner (refiner) shall, not later than 90 days

after entering a quantity of raw cane sugar under subheading 1701.11.20

of the HTS, export or transfer an equivalent quantity of refined sugar

if the entry results in a positive license balance.

(b) A licensed sugar containing products manufacturer

(manufacturer) or a licensed polyhydric alcohol producer (producer)

shall, not later than 18 months from the date of transfer of a quantity

of refined sugar from a refiner, export an equivalent quantity of

refined sugar as an ingredient in a sugar containing product if the

transfer results in a positive license balance, or use an equivalent

quantity of refined sugar in the production of certain polyhydric

alcohols if the transfer results in a positive license balance,

respectively.

(c) Notwithstanding paragraphs (a) and (b) of this section,

licensees may receive credit for the exportation or transfer of refined

sugar, the exportation of a sugar containing product, or the production

of certain polyhydric alcohols prior to the corresponding date of entry

of raw cane sugar or the date of transfer of refined sugar.

(d) Licensees are encouraged to submit monthly program transaction

reports, but shall report no later than 90 days from the date of entry,

transfer, export, or use.

(e) A refiner may enter raw sugar, or a manufacturer or producer

may receive a transfer of refined sugar, in anticipation of the

transfer or export of refined sugar (refiner), the export of sugar in

sugar containing products (manufacturer) or the production of a

polyhydric alcohol (producer) not to exceed the value of a bond or

letter of credit, which must be established pursuant to Sec. 1530.107

of this part. The value of a bond or letter of credit shall not exceed

the license limits established in this section.

(f) A refiner shall not exceed a license balance of 50,000 metric

tons, raw value for the sum of all charges and credits.

(g) A refiner may enter raw sugar from Mexico and re-export, within

30 days of entry, refined sugar to Mexico without a charge against the

refiner's license balance. If the refined sugar is not re-exported to

Mexico within 30 days of entry, the license shall be charged the

quantity that has not been re-exported.

(h) A manufacturer or a producer shall not exceed a license balance

of 10,000 short tons, refined value for the sum of all charges and

credits.

(i) A manufacturer's or a producer's consolidated license balance,

or the sum of a parent company and wholly-owned subsidiary license

balances if held separately, shall not exceed a license balance of

25,000 short tons, refined value for the sum of all charges and

credits.

(j) For the purposes of the programs governed by this part, sugar

is fully substitutable. The refined sugar transferred, exported, or

used does not

[[Page 7064]]

need to be the same sugar produced by refining raw sugar entered under

subheading 1701.11.20 of the HTS.

(k) A licensee may use an agent to carry out the requirements of

participation in the program. The licensee must retain ownership of and

responsibility for the product until exported from the U.S. Customs

Territory, to a restricted foreign trade zone, or used in the

production of certain polyhydric alcohols, and must establish and

maintain sufficient documentation, as agreed in the documentation

agreement pursuant to Sec. 1530.110, to substantiate export of the

product or the production of certain polyhydric alcohols.

(l) A license may be assigned only with the written permission of

the Licensing Authority and subject to such terms and conditions as the

Licensing Authority may impose.

(m) The Licensing Authority may impose such conditions, limitations

or restrictions in connection with the use of a license at such time

and in such manner as the Licensing Authority, at his or her

discretion, determines to be necessary or appropriate to achieve the

purposes of the relevant program.

Sec. 1530.106 License charges and credits.

(a) A license shall be charged or credited for the quantity of

sugar entered, transferred, exported, or used, adjusted to a dry weight

basis. Refiner quantities shall be adjusted to raw value, using the

formulas set forth in paragraphs (a) (1), (2), and (3) of this section.

Manufacturer and producer quantities shall be adjusted to 100 degrees

polarity on a dry weight basis.

(1) To adjust the raw value for sugar with a polarization of less

than 92 degrees, divide the total sugar content by 0.972 (polarization

x outturn weight/.972).

(2) To adjust the raw value for sugar with polarization of 92

degrees or above, multiply the polarization times 0.0175, subtract

0.68, and multiply the difference by the outturn weight (((polarization

x 0.0175)-0.68) x outturn weight).

(3) To determine the quantity of refined sugar that must be

transferred or exported to equal a corresponding quantity of entered

raw sugar charged to a license, divide the quantity of entered raw

sugar by 1.07 (raw quantity/1.07).

Sec. 1530.107 Bond or letter of credit requirements

(a) The licensee may charge program sugar in anticipation of the

transfer or export of refined sugar, the export of sugar in sugar

containing products, or the production of certain polyhydric alcohols,

if the licensee establishes a performance bond or a letter of credit

with the U.S. Department of Agriculture, which meets the criteria set

forth in this section.

(b) The bond or letter of credit may cover entries made either

during the period of time specified in the bond (a term bond) or for a

specified entry (a single entry bond).

(c) Only the licensee who will refine the sugar, manufacture the

sugar containing product, or produce certain polyhydric alcohols may be

the principal on the bond or letter of credit covering such sugar to be

re-exported or used in the production of certain polyhydric alcohols.

The surety or sureties shall be among those listed by the Secretary of

the Treasury as acceptable on Federal bonds.

(d) The obligation under the bond or letter of credit shall be made

effective no later than the date of entry of the sugar for refiners or

the date of transfer of the corresponding sugar for manufacture into a

sugar containing product or certain polyhydric alcohols.

(e) The amount of the bond or letter of credit shall be equal to 20

cents per pound of sugar to be entered under the license.

(f) If a licensee fails to qualify for credit to a license within

the specified time period of the date of export or use of corresponding

sugar in an amount sufficient to offset the charge to the license for

that corresponding sugar, payment shall be made to the U.S. Treasury.

The payment shall be equal to the difference between the Number 11

contract price and the Number 14 contract price (New York Coffee, Sugar

and Cocoa Exchange) in effect on the last market day before the date of

entry of the sugar or the last market day before the end of the period

during which export or use was required, whichever difference is

greater. The difference shall be multiplied by the quantity of refined

sugar, converted to raw value, that should have been exported in

compliance with this part. If there was not a Number 11, or a Number 14

contract price for the relevant market day, the Licensing Authority may

estimate such price as he or she deems appropriate.

Sec. 1530.108 Revocation or surrender of licenses.

(a) A license may be revoked upon written notice by the Licensing

Authority.

(b) A licensee may surrender a license when the sum of all credits

is equal to or greater than the sum of all charges.

Sec. 1530.109 Reporting.

(a) A licensee may submit as often as monthly for charges and

credits against a license balance, but must submit at least a quarterly

report to the Licensing Authority not later than 90 days after the

earliest transaction in the report for which credits or charges are

being submitted. The licensee need not report when there have not been

transactions during the reporting period.

(b) Reports may be submitted by e-mail, U.S. mail, private courier,

or in person, but must be in an integrated database format acceptable

to the Licensing Authority. A copy of this format may be obtained from

the Licensing Authority. Applicants unable to submit a report in the

specified electronic format may seek a temporary waiver to permit them

to submit the report on paper.

(c) The reports must include the following for all program

transactions:

(1) A unique number associated with the transaction;

(2) The date of the entry, transfer (only a refiner shall report

transfers to the Licensing Authority), export, or use;

(3) The quantity of program sugar entered, transferred, exported as

refined sugar, or used in the production of certain polyhydric

alcohols;

(4) The licensee's license number, or if a transfer is being

reported, the licensee's license number as well as the transfer

recipient's license number;

(5) The country of origin (entry of raw sugar) or final destination

(refined exports), using the exact country code designated in the HTS;

and

(6) The initial and final polarization, and final weight (when

available) for entries of raw sugar.

(d) Licensees have an affirmative and continuing duty to maintain

the accuracy of the information contained in previously submitted

reports.

(1) The licensee shall immediately notify the Licensing Authority

and promptly request that previously claimed credits be charged back

upon discovery that previously claimed exports of refined sugar,

refined sugar in sugar containing products, or refined sugar used in

the production of polyhydric alcohol were re-entered into the U.S.

Customs Territory without substantial transformation, not used in the

production of certain polyhydric alcohols, made under a false

underlying proof of export, or made but previously submitted exports do

not otherwise satisfy the requirements of regulations or the

documentation agreement.

(2) Charge backs shall be as of the date of the erroneously claimed

credit.

[[Page 7065]]

Sec. 1530.110 Records, certification, and documentation.

(a) A licensee shall establish a documentation agreement with the

Licensing Authority before submitting for credit against a license. The

licensee shall propose to the Licensing Authority a list of documents

to substantiate entries, transfers, exports, or use as appropriate. The

Licensing Authority shall consider the licensee's proposal to assure

that it provides that a program transaction is fully substantiated, and

shall then respond in writing to the licensee in a timely fashion

outlining any deficiencies. Once agreed, the licensee shall submit a

notarized letter specifying the documents to be maintained on file and

certifying that the charges and credits made pursuant to Sec. 1530.106

will be kept on file, identifiable by a unique number, and available

for inspection pursuant to Sec. 1530.110.

(b) For all transactions, the documentation shall:

(1) Substantiate the information required in Sec. 1530.109 (c), and

the completion of the reported transaction;

(2) Establish the buyer and seller specifications for a

transaction;

(3) Include all U.S. Customs forms submitted in the entry or export

process;

(4) Provide the correct telephone numbers and addresses of any

agents, consignees, foreign purchasers, and non-vessel operating common

carriers used in completing the transaction;

(5) Indicate the port of entry or export for the program

transaction;

(6) Provide the percentage of sugar in a sugar containing product

or certain polyhydric alcohols; and

(7) Provide the name of export carrier, vessel name, and container

number.

(c) The licensee shall maintain the documentation established in

the documentation agreement for 5 years from the date of such program

transaction.

(d) Upon request, the licensee shall make the records, outlined by

the documentation agreement and identified (associated) by the unique

number assigned by the licensee to the program transaction as reported

to the Licensing Authority for posting against a license balance,

available for inspection and copying by the Licensing Authority, the

Compliance Review Staff of the Foreign Agricultural Service, and/or the

Office of the Inspector General, USDA, the U.S. Department of Justice,

or any U.S. Government regulatory or investigative office.

Sec. 1530.111 Enforcement and penalties.

(a) The Licensing Authority may revoke credits granted on a license

if the credits granted do not meet the requirements set forth in the

regulations of this part, or if the licensee does not voluntarily

charge back credits erroneously claimed in accordance with these

regulations. The Licensing Authority may also recommend revocation of a

license, if the licensee has been in violation of Sec. 1530.109 (c) of

this part.

(b) The Administrator of the Foreign Agricultural Service, USDA,

may suspend or revoke a license upon recommendation of the Licensing

Authority. Suspension of a license will be governed by 7 CFR part 3017,

subpart D and debarment will be governed by 7 CFR part 3017, subpart C.

Sec. 1530.112 Administrative appeals.

(a) The licensee may appeal the Licensing Authority's determination

by filing a written notice of appeal, signed by the licensee or the

licensee's agent, with the Director, Import Policies and Programs

Division, Foreign Agricultural Service (Director), or his or her

designee. The decision on such an appeal shall be made by the Director,

and will be governed by Sec. 3017.515 of this title. The appeal must be

filed not later than 30 days after the date of the Licensing

Authority's determination, and shall contain the licensee's written

argument.

(b) The licensee may request an informal hearing. The Director

shall arrange a place and time for the hearing, except that it shall be

held within 30 days of the filing date of the notice of appeal if the

licensee so requests.

(c) The licensee may be represented by counsel, and shall have full

opportunity to present any relevant evidence, documentary or

testimonial. The Director may permit other individuals to present

evidence at the hearing and the licensee shall have an opportunity to

question those witnesses.

(d) The licensee may request a verbatim transcript of the hearing,

and shall be responsible for arranging for a professional reporter and

shall pay all attendant expenses.

(e) The Director shall make the determination on appeal, and may

affirm, reverse, modify or remand the Licensing Authority's

determination. The Director shall notify the licensee in writing of the

determination on appeal and of the basis thereof. The determination on

appeal exhausts the licensee's administrative remedies.

Sec. 1530.113 Waivers.

Upon written application of the licensee or at the discretion of

the Licensing Authority, and for good cause, the Licensing Authority

may extend the period for transfer, export, or production, and/or may

temporarily increase a maximum license limit, may extend the period for

submitting regularly scheduled reports, or may temporarily waive or

modify any other requirement imposed by this part if the Licensing

Authority determines that such a waiver will not undermine the purpose

of the relevant program or adversely affect domestic sugar policy

objectives. The Licensing Authority may specify additional requirements

or procedures in place of the requirements or procedures waived or

modified.

Sec. 1530.114 Implementation.

Current program participants may qualify under this rule upon

concluding a documentation agreement with the Licensing Authority, but

must conclude a documentation agreement within 24 months of the

effective date of this rule. Participant license balances, as of the

effective date of this rule, shall continue under this rule.

Sec. 1530.115 Paperwork Reduction Act assigned number.

Licensees are not required to respond to requests for information

unless the form for collecting information displays a currently valid

Office of Management and Budget (OMB) control number. OMB has approved

the information collection requirements contained in this part in

accordance with 44 U.S.C. chapter 35. OMB number 0551-0015 has been

assigned and will expire November 30, 1999.

Signed at Washington, DC on February 5, 1999.

Timothy J. Galvin,

Acting Administrator, Foreign Agricultural Service.

[FR Doc. 99-3500 Filed 2-11-99; 8:45 am]

BILLING CODE 3410-10-P