Cotton Board Rules and Regulations: Adjusting Supplemental Assessment on Imports (2009 Amendments)

AGENCY:

Agricultural Marketing Service, USDA.

ACTION:

Proposed rule.

SUMMARY:

The Agricultural Marketing Service (AMS) is proposing to amend the Cotton Board Rules and Regulations by increasing the value assigned to imported cotton for calculating supplemental assessments collected for use by the Cotton Research and Promotion Program. An amendment is required to adjust the assessments collected on imported cotton and the cotton content of imported products to be the same as those paid on domestically produced cotton. In addition, AMS proposes to add and change Harmonized Tariff Schedule (HTS) statistical reporting numbers that were amended since the last assessment adjustment.

DATES:

Comments must be received on or before May 11, 2009.

ADDRESSES:

Interested persons are invited to submit written comments concerning this proposed rule to Shethir M. Riva, Chief, Research and Promotion Staff, Cotton and Tobacco Programs, AMS, USDA, Stop 0224, 1400 Independence Ave., SW., Room 2637-S, Washington, DC 20250-0224. Comments should be submitted in triplicate. Comments may also be submitted electronically through http:///www.regulations.gov . All comments received will be made available for public inspection at Cotton and Tobacco Programs, AMS, USDA, Stop 0224, 1400 Independence Ave., SW., Room 2637-S, Washington, DC 20250-0224 during regular business hours. A copy of this notice may be found at: http://www.regulations.gov .

FOR FURTHER INFORMATION CONTACT:

Shethir M. Riva, Chief, Research and Promotion Staff, Cotton and Tobacco Programs, AMS, USDA, Stop 0224, 1400 Independence Ave., SW., Room 2637-S, Washington, DC 20250-0224, telephone (202) 720-6603, facsimile (202) 690-1718, or e-mail at Shethir.Riva@ams.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

The Office of Management and Budget has waived the review process required by Executive Order 12866 for this action.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect. This proposed rule would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Cotton Research and Promotion Act (7 U.S.C. 2101-2118) (Act) provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 12 of the Act, any person subject to an order may file with the Secretary of Agriculture (Secretary) a petition stating that the order, any provision of the plan, or any obligation imposed in connection with the order is not in accordance with law and requesting a modification of the order or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. After the hearing, the Secretary would rule on the petition. The Act provides that the District Court of the United States in any district in which the person is an inhabitant, or has his principal place of business, has jurisdiction to review the Secretary's ruling, provided a complaint is filed within 20 days from the date of the entry of ruling.

Background

Amendments to the Act were enacted by Congress under Subtitle G of Title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-624, 104 Stat. 3909, November 28, 1990). These amendments contained two provisions that authorized changes in the funding procedures for the Cotton Research and Promotion Program.

These provisions are: (1) The assessment of imported cotton and cotton products; and (2) termination of the right of cotton producers to demand a refund of assessments.

As amended, the Cotton Research and Promotion Order (7 CFR part 1205) (Order) was approved by producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in the Federal Register on December 10, 1991 (56 FR 64470). A proposed rule implementing the amended Order was published in the Federal Register on December 17, 1991 (56 FR 65450). Implementing rules were published on July 1 and 2, 1992, (57 FR 29181) and (57 FR 29431), respectively.

This proposed rule would increase the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)). The total value is determined by a two-part assessment. The first part of the assessment is levied on the weight of cotton produced or imported at a rate of $1 per bale of cotton, which is equivalent to 500 pounds, or $1 per 226.8 kilograms of cotton. The second value is used to calculate the supplemental assessments on imported cotton and the cotton content of imported products. Supplemental assessments are levied at a rate of five-tenths of one percent of the value of domestically produced cotton, imported cotton, and the cotton content of imported products. The supplement assessment is combined with the per bale equivalent to determine the total value and assessment of the imported cotton or cotton-containing products.

Section 1205.510(b)(2) of the Cotton Research and Promotion Rules and Regulations provides for assigning the calendar year weighted average price received by U.S. farmers for Upland cotton to represent the value of imported cotton. This is so that the assessment on domestically produced cotton and the assessment on imported cotton and the cotton content of imported products is the same. The source for the average price statistic is Agricultural Prices, a publication of the National Agricultural Statistics Service (NASS) of the Department of Agriculture. Use of the weighted average price figure in the calculation of supplemental assessments on imported cotton and the cotton content of imported products will yield an assessment that is the same as assessments paid on domestically produced cotton.

The current value of imported cotton as published in the Federal Register (73 FR 69521) for the purpose of calculating assessments on imported cotton is $0.009874 per kilogram. Using the Average Weighted Priced received by U.S. farmers for Upland cotton for the calendar year 2008, the new value of imported cotton is $0.01088 per kilogram or $0.001006 per kilogram more than the previous value.

An example of the complete assessment formula and how the figures are obtained is as follows:

One bale is equal to 500 pounds.

One kilogram equals 2.2046 pounds.

One pound equals 0.453597 kilograms.

One Dollar per Bale Assessment Converted to Kilograms

A 500-pound bale equals 226.8 kg. (500 × .453597).

$1 per bale assessment equals $0.002000 per pound or $0.2000 per pound (1/500) or $0.004409 per kg. or $0.4409 cents per kg. (1/226.8).

Supplemental Assessment of 5/10 of One Percent of the Value of the Cotton Converted to Kilograms

The 2008 calendar year weighted average price received by producers for Upland cotton is $0.587 per pound or $1.294 per kg. (0.587 × 2.2046).

Five-tenths of one percent of the average price in kg. equals $0.006471 per kg. (1.294 × .005).

Total Assessment

The total assessment per kilogram of raw cotton is obtained by adding the $1 per bale equivalent assessment of $0.004409 per kg. and the supplemental assessment $0.006471 per kg. which equals $0.010880 per kg.

The current assessment on imported cotton is $0.009874 per kilogram of imported cotton. The proposed assessment is $0.01088, an increase of $0.001006 per kilogram. This increase reflects the increase in the Average Weighted Price of Upland Cotton Received by U.S. Farmers during the period January through December 2008.

Since the value of cotton is the basis of the supplemental assessment calculation and the figures shown in the right hand column of the Import Assessment Table in section 1205.510(b)(3) are a result of such a calculation, the figures in this table have been revised. These figures indicate the total assessment per kilogram due for each HTS statistical reporting number subject to assessment.

AMS also compared the current import assessment table with the U.S. International Trade Commission's (ITC) 2009 HTS and identified HTS statistical reporting numbers that have been changed or amended by ITC. The HTS statistical reporting number that currently appears in section 1205.510(b)(3) is listed below on the left side of the table with the new proposed HTS statistical reporting number on the right side of the table. The new proposed numbers corresponds with the same ITC category, but with the amended number as it appears in ITC's HTS.

In addition, AMS removed HTS statistical reporting numbers from section 1205.510(b)(3) that were no longer in the ITC official HTS on November 19, 2008 (73 FR 69521), and has worked with ITC to identify the new corresponding HTS statistical reporting numbers that ITC is using in the 2009 HTS. In many instances, the number is a replacement of a previous number and has no impact on the physical properties or cotton content of the product involved. In other instances, the HTS statistical reporting numbers were expanded and are now represented by two HTS statistical reporting numbers. Below on the left are the numbers removed on November 19, 2008 (73 FR 69521), and on the right are the proposed numbers that ITC currently is using and whose categories correspond to the previously removed HTS statistical reporting numbers from 1205.510(b)(3).

A 30-day comment period is provided to comment on the changes to the Cotton Board Rules and Regulations proposed herein. This period is deemed appropriate because this proposal would increase the assessments paid by importers under the Cotton Research and Promotion Order. An amendment is required to adjust the assessments collected on imported cotton and the cotton content of imported products to be the same as those paid on domestically produced cotton. Accordingly, the change proposed in this rule, if adopted, should be implemented as soon as possible.

Regulatory Flexibility Act and Paperwork Reduction Act

In accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, AMS has examined the economic impact of this rule on small entities. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such action so that small businesses will not be unduly or disproportionately burdened. The Small Business Administration defines, in 13 CFR part 121, small agricultural producers as those having annual receipts of no more than $750,000 and small agricultural service firms (importers) as having receipts of no more than $7,000,000. An estimated 13,000 importers are subject to the rules and regulations issued pursuant to the Cotton Research and Promotion Order. Most are considered small entities as defined by the Small Business Administration.

This proposed rule would only affect importers of cotton and cotton-containing products and would raise the assessments paid by the importers under the Cotton Research and Promotion Order. The current assessment on imported cotton is $0.009874 per kilogram of imported cotton. The proposed assessment is $0.01088, which was calculated based on the 12-month average of monthly weighted average prices received by U.S. cotton farmers. Section 1205.510, “Levy of assessments”, provides “the rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” In addition, section 1205.510 provides that the 12-month average of monthly weighted average prices received by U.S. farmers will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton.

Under the Cotton Research and Promotion Program, assessments are used by the Cotton Board to finance research and promotion programs designed to increase consumer demand for Upland cotton in the United States and international markets. In 2008, producer assessments totaled $29.2 million and importer assessments totaled $25.9 million. According to the Cotton Board, should the volume of cotton products imported into the U.S. remain at the same level in 2009, one could expect the increased assessment to generate approximately $10.8 million.

Importers with line-items appearing on U.S. Customs and Border Protection documentation with value of the cotton contained therein results of an assessment of two dollars ($2.00) or less will not be subject to assessments. In addition, imported cotton and products may be exempt from assessment if the cotton content of products is U.S. produced, cotton other than Upland, or imported products that are eligible to be labeled as 100 percent organic under the National Organic Program (7 CFR part 205) and who is not a split operation.

There are no Federal rules that duplicate, overlap, or conflict with this rule.

In compliance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) which implement the Paperwork Reduction Act (PRA) (44 U.S.C. Chapter 35) the information collection requirements contained in the regulation to be amended have been previously approved by OMB and were assigned control number 0581-0093. This rule does not result in a change to the information collection and recordkeeping requirements previously approved.

List of Subjects in 7 CFR Part 1205

• Advertising
• Agricultural research
• Cotton
• Marketing agreements
• Reporting and recordkeeping requirements

For the reasons set forth in the preamble 7 CFR part 1205 is proposed to be amended as follows:

PART 1205—COTTON RESEARCH AND PROMOTION

1. The authority citation for part 1205 continues to read as follows:

Authority: 7 U.S.C. 2101-2118.

2. In § 1205.510, paragraph (b)(2) and the table in paragraph (b)(3)(ii) are revised to read as follows: