[Federal Register Volume 59, Number 71 (Wednesday, April 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8801]
[[Page Unknown]]
[Federal Register: April 13, 1994]
VOL. 59, NO. 71
Wednesday, April 13, 1994
DEPARTMENT OF AGRICULTURE
Agricultural Stabilization and Conservation Service
7 CFR Part 708
End-Use Certificate System
AGENCY: Agricultural Stabilization and Conservation Service, USDA.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Agricultural Stabilization and Conservation Service (ASCS)
of the Department of Agriculture gives notice that it is currently
planning to issue a proposed rule to implement U.S. end-use
certificates for commodities imported from any foreign country or
instrumentality that requires end-use certificates. The proposed action
is in accordance with section 321(f) of the North American Free Trade
Agreement (NAFTA) Implementation Act (the Act) which requires such
action be taken by the Secretary of Agriculture. The primary purpose of
the U.S. end-use certificate requirement is to help ensure that foreign
agricultural commodities are not used in U.S. Government-assisted
export programs. ASCS requests comments and suggestions from the public
on the alternatives and issues that need to be addressed in
implementing such a proposal including, but not limited to, those
issues mentioned in this notice. Supporting data for comments are
requested.
DATES: Comments should be submitted on or before May 13, 1994 to be
assured of consideration.
ADDRESSES: Comments should be sent to the Deputy Administrator,
Commodity Operations, ASCS, P.O. Box 2415, Washington, DC 20013-2415.
All written comments received in response to this advance notice will
be available for public inspection in room 5755, South Building, 14th
Street and Independence Avenue SW., Washington, DC between 8 a.m. and 5
p.m., Monday through Friday, except holidays.
FOR FURTHER INFORMATION CONTACT: Steve Gill, Chief, Inventory
Management Branch, Commodity Operations Division, ASCS, P.O. Box 2415,
Washington, DC 20013-2415; phone 202-720-6500.
SUPPLEMENTARY INFORMATION:
I. Background
Section 321(f) of the Act established an end-use certificate
requirement for wheat and barley imported into the U.S. from any
foreign country, such as Canada, or instrumentality that requires end-
use certificates for imports that are products of the U.S. The primary
purpose of the U.S. end-use certificate requirement is to help ensure
that foreign produced agricultural commodities are not used in U.S.
Government-assisted export programs. The Act is not specific regarding
the type of end-use certificate system to be implemented or the
information to be collected. The Secretary of Agriculture is directed
to issue regulations regarding the information to be provided in end-
use certificates. The information could include type of commodity,
class, quantity, country of origin, importer of the commodity, and the
end-use of the commodity, if known at the time of importation of the
commodity.
As a means of protecting the interests of U.S. agricultural
producers, the Act provides that the Secretary may, after consulting
with domestic producers and reporting to the Congress, suspend end-use
certificate requirements if the requirements have directly resulted in
the reduction of:
(1) Income to U.S. producers of agricultural commodities, or
(2) Competitiveness of U.S. agricultural commodities in world
export markets.
If a foreign country or instrumentality that requires end-use
certificates eliminates its system, the Secretary is to suspend the
U.S. end-use certificate requirement 30 calendar days after the
suspension by the foreign country or instrumentality.
Further, the Act provides that it shall be a violation of 18 U.S.C.
1001 for a person to engage in fraud or knowingly violate Section
321(f) or applicable regulations.
As of this date, only Canada requires end-use certificates on U.S.
grain entering the country.
Current statutes provide that only commodities produced in the U.S.
may be considered eligible for use in U.S. Government-assisted export
programs. These programs have proved to be an important vehicle for
developing commercial export markets, meeting humanitarian food needs,
and spurring economic and agricultural growth in developing countries.
In essence, the programs help U.S. agricultural producers by developing
and expanding export markets for their commodities and improving the
competitiveness of those commodities in world markets. For example, in
the case of wheat, approximately 80 percent of U.S. wheat exported in
recent years was done so under at least one of USDA's export programs.
Given that the U.S. is striving toward a free and fair environment for
the trade of agricultural commodities in North America (e.g., through
NAFTA and Uruguay Round of the General Agreement on Tariffs and Trade
(GATT)), the Congress, recognizing the important role that U.S.
Government-assisted export programs play in the U.S. economy, has
approved legislation which endeavors to ensure the integrity of such
programs.
The main question this notice poses is:
What type of end-use certificate system will best accomplish the
objective of helping ensure that foreign agricultural commodities are
not used in U.S. Government-assisted export programs while still
maintaining compatibility with the grain merchandising system of the
U.S.?
Are current handling and reporting requirements such that the
gathering of additional information on the use of imported grain will
be sufficient to meet U.S. origin requirements of Government-assisted
export programs? Or are more stringent handling requirements necessary
to ensure that imported grain will not be used in U.S. Government-
assisted export programs? While one of several alternative systems
could be implemented, all systems have advantages and disadvantages.
Thus, consideration must be given to the effects such a system will
have on U.S. producers, importers, warehouses, grain handlers, millers,
processors, exporters, feedlot operators, and ultimately, U.S.
consumers.
II. U.S. Grain System vs. Canadian Grain System
Because Canada is the only country currently requiring end-use
certificates, a comparison of the U.S. and Canadian marketing systems
is helpful. The handling and distribution of grain in the U.S. is based
on blending various grades and qualities from different locations to
reach the quality attributes desired by the buyer. The Canadian grain
handling and distribution system is quite different. That system
preserves the origin and, in some cases, the variety of Canadian grain.
Blending and commingling different lots of grain are not part of normal
commercial practices in Canada.
III. Canadian End-Use System
The Canadian end-use system reflects their marketing system. The
Government of Canada (GOC) requires that U.S. milling wheat and barley
imported into Canada be accompanied by an end-use certificate. This is
to ensure that non-Canadian grain does not become commingled with
Canadian grain.
The GOC position is that it wants to protect Canada's strict
varietal licensing system which has been designed to select what they
view as superior quality grain varieties. In addition, mirroring U.S.
concern, the GOC wants to avoid any concern that U.S. grain might take
advantage of GOC domestic or export programs, such as the Western Grain
Transportation Act.
When a U.S. grain exporter wants to ship grain to Canada, an end-
user (the consignee) must be identified. The U.S. grain must be
consigned directly to a milling, manufacturing, brewing, distilling, or
other processing facility for consumption at that facility. Three
months after the Canadian consignee receives the imported U.S. grain,
the consignee is required to file quarterly reports until the imported
grain has been fully consumed as a food or feed ingredient. After the
grain has arrived at the location specified in the end-use certificate,
it must be stored and handled separately and cannot be moved or used
for any other purpose than that specified in the end-use certificate
without the permission of the GOC.
Grain imported into Canada for direct feed-use must be
``denatured'' before it can be transported across the border. GOC
regulations define ``denatured'' as any lot containing at least 10
percent permanently colored kernels.
IV. Alternatives for a U.S. End-Use System
What type of end-use certificate system will best accomplish the
objective of helping ensure that foreign agricultural commodities are
not used in U.S. Government-assisted export programs while still
maintaining compatibility with the grain merchandising system of the
U.S.?
Should a U.S. end-use system be patterned after the Canadian end-
use system and, if so, in what way? Should a U.S. end-use system simply
adopt the Canadian provisions? Or, in that the Canadian system reflects
the Canadian marketing system, should the U.S. adopt an end-use system
that also reflects the U.S. marketing system?
The key issue separating the following alternatives involves the
issue of commingling vs. separate storage (i.e., identity preservation)
of imported and U.S. origin grain. In brief, the proposed alternatives
are as follow:
(1) Allow commingling of imported and U.S. grain. Require that a
certificate which collects all relevant information be issued at the
U.S. border on imported grain. Continue (or modify) current ASCS rules
and policies that help ensure that foreign agricultural commodities are
not used in U.S. Government-assisted programs.
(2) Allow commingling of imported and U.S. grain. Require that the
commingled imported and U.S. grain be stored separately from U.S.
origin grain until delivered to the end-user.
(3) Prohibit commingling of imported and U.S. grain. Require that
imported grain be stored separately from U.S. origin grain until
delivered to the end-user.
The following provides additional information on the proposed
alternatives. Variations on these alternatives may also be considered.
(1) ASCS could implement a ``border certificate'' system in which,
as the agricultural commodity crosses the U.S. border, the importer
would complete a form identifying the various required information
elements. Under this scenario, certificates would be issued and
collected at the border. ASCS could compile data, publish reports, and
perform compliance checks based on the information collected. This
alternative would be the simplest of the alternatives to operate and
administer. It would not impose any additional burden on the U.S. grain
handling sector.
(2) ASCS could implement a system which tracks commingled grain.
This scenario would allow foreign agricultural commodities to be
blended and commingled with U.S. commodities under the requirement that
all lots containing commingled U.S. and foreign agricultural
commodities be tracked, with a complete paper-trail, throughout the
entire U.S. commodity system. This alternative would permit the
blending and commingling of U.S. and Canadian grain, but only under the
condition that all lots containing even a trace amount of Canadian
grain be identified and tracked through the grain system. For example,
if one ton of Canadian wheat was imported and blended with 10 tons of
U.S. wheat, that entire lot would have to be identified as commingled
U.S.-Canadian wheat and tracked to the final user since that 11 tons of
commingled U.S.-Canadian wheat would not be eligible for use in
Government-assisted export programs. If the commingled lot were further
blended with another 19 tons, and then split into two separate lots of
15 tons--the identifying paperwork would have to accompany both lots
through the rest of the marketing chain. To make this alternative work,
ASCS would have to be able to require that the identity of the
commingled grain be preserved on all commercial sales documents, such
as invoices and bills of lading, from the first point where the U.S.
and Canadian grain is commingled through each subsequent sale, i.e.,
from the point of commingling through the remainder of the U.S.
marketing chain to the processor, feedlot, brewer, distiller, or
exporter.
(3) ASCS could implement an ``identity preservation'' system--an
end-use certificate system that preserves the identity and origin of
the commodity as it moves through each step of the marketing chain by
requiring separate handling and storage. Only the end-user, such as a
flour miller, would be allowed to commingle U.S. and imported
commodities. Of course, if the flour were being purchased by the
Commodity Credit Corporation (CCC) for use in a Government-assisted
program, domestic origin requirements would prevail subjecting the
miller to compliance reviews by ASCS. This alternative would give a
high level of assurance that Canadian grain was not entering the U.S.
Government-assisted programs and provide large amounts of information
on quantity and quality of Canadian grain entering the U.S.
V. Current ASCS Rules and Policies
Any end-use certificate system should be designed to supplement or
broaden the use of current ASCS rules and policies used to procure
commodities for donation or sale under the Food for Progress, Pub. L.
480 Titles II and III, and section 416(b) foreign food assistance
programs, as well as for domestic food assistance programs. Under these
programs, the physical commingling of U.S. origin grain with non-U.S.
origin grain is allowed provided that at the time of delivery to CCC
the grain merchant has a sufficient quantity and quality of U.S. origin
grain available at the location where loading occurred to account for
the grain sold to CCC. The grain merchant's accounting records and
supporting documents must demonstrate such availability and reduction
in the stocks of U.S. origin grain. ASCS monitors the compliance of
CCC's contractors through the selection and review of a number of
contracts each quarter. The domestic origin reviews are performed by
the Kansas City Commodity Office, ASCS. It is the responsibility of the
CCC contractor to adequately maintain documents to establish the origin
of the commodity. Failure of CCC's contractors to establish or
otherwise maintain adequate records which verify the U.S. origin of the
commodity or product delivered to CCC may be cause for suspension or
debarment from bidding on future CCC contracts.
VI. Compliance Costs
It is ASCS' intent that costs associated with verifying end-use
certificate compliance will be borne by entities importing the grain.
Such costs will likely be assessed at the time of issuance of each end-
use certificate.
VII. Summary
Many variations of the aforementioned alternatives are possible.
ASCS invites interested persons to submit written comments and
supporting data with regard to the establishment of an end-use
certificate system for the U.S. Comments are specifically invited on
the following issues:
A. General Issue
What type of end-use certificate system will best accomplish the
objective of helping ensure that foreign agricultural commodities are
not used in U.S. Government-assisted export programs while still
maintaining compatibility with the grain merchandising system of the
U.S.?
B. Operational Issues
1. What information should be collected on an end-use certificate?
2. How can ASCS minimize paperwork and reporting requirements
associated with end-use certificates?
3. How should ASCS enforce requirements under an end-use
certificate system?
4. Should all imported grain be covered by certificates or should
some types of grain--such as wheat and barley used for livestock feed--
be exempted?
5. Should imported grain be stored separately from domestically-
produced grain (i.e., identity preserved)?
C. Economic Impacts
(a) General
1. Will end-use certificates under the different alternatives
significantly change U.S. import levels for wheat and barley, or will
they mainly increase reporting, handling, and/or storage requirements?
2. What modifications, if any, of current procedures of the grain
merchandising system will be required under the alternative end-use
certificate systems, and what economic impacts--costs or benefits--will
any such modifications have?
(b) Specific
1. What are the potential economic impacts--positive or negative--
of imports and the alternative end-use certificate systems on costs,
income, and employment of:
a. Local elevators;
b. Other local businesses and rural communities;
c. Importers, merchandisers, regional and other warehouses;
d. Millers, bakers, and processors;
e. Feedlots and the livestock sector;
f. U.S. grain and livestock producers; and
g. U.S. consumers?
2. What are the potential impacts--positive or negative--of imports
and the alternative end-use certificate systems on U.S. Government
programs and outlays?
3. What are the potential impacts on others, if any, not listed
above?
Signed at Washington, DC on April 7, 1994.
Bruce R. Weber,
Acting Administrator, Agricultural Stabilization and Conservation
Service.
[FR Doc. 94-8801 Filed 4-12-94; 8:45 am]
BILLING CODE 3410-05-P