[Federal Register Volume 61, Number 12 (Thursday, January 18, 1996)]
[Proposed Rules]
[Pages 1233-1252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-329]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 61, No. 12 / Thursday, January 18, 1996 / 
Proposed Rules  

[[Page 1233]]


DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 6


Dairy Tariff-Rate Import Quota Licensing

AGENCY: Office of the Secretary, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would supersede Import Regulation 1, 
Revision 7, which governs the administration of the import licensing 
system for certain dairy products which are subject to in-quota tariff 
rates established in the Harmonized Tariff Schedule of the United 
States resulting from the entry into force of certain provisions in the 
Uruguay Round Agreement.

DATES: Comments should be received on or before March 18, 1996 to be 
assured of consideration. Comments on the change in information 
collection should be received on or before March 18, 1996 to be assured 
of consideration.

ADDRESSES: Comments should be sent to Richard Warsack, Dairy Import 
Quota Manager, Import Policies and Programs Division, Room 5531-S, 
Foreign Agricultural Service, U.S. Department of Agriculture, 14th and 
Independence Avenue SW., Agricultural Box 1021, Washington, DC 20250-
1021. All comments received will be available for public inspection in 
room 5541-S at the above address.

FOR FURTHER INFORMATION CONTACT: Diana Wanamaker, Group Leader, Import 
Programs Group, Import Policies and Programs Division, room 5531-S, 
Foreign Agricultural Service, U.S. Department of Agriculture, 14th and 
Independence Avenue SW., Washington, DC 20250, or telephone (202) 720-
2916.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule is issued in conformance with Executive Order 
12866. It has been determined to be economically significant for the 
purposes of E.O. 12866 and, therefore, has been reviewed by the Office 
of Management and Budget (OMB).

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule since the Office of the Secretary 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.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Environmental Evaluation

    It has been determined by an environmental evaluation that this 
action will not have a significant impact on the quality of the human 
environment. Therefore, neither an Environmental Assessment nor an 
Environmental Impact Statement is needed.

Paperwork Reduction Act

    In accordance with provisions of the Paperwork Reduction Act of 
1995, the Department intends to amend the current information 
collection approved by the Office of Management and Budget (OMB) under 
OMB control number 0551-0001, expiring June 30, 1997.
    Since this proposed rule provides for a substantial revision of the 
existing Import Regulation, the currently approved information 
collection needs to be amended to support the proposed rule. 
Specifically, for the 1997 quota year and each quota year thereafter, 
the amended ``certification'' form FAS-922 (Rev. 1-96) must be 
submitted to the Department by applicants requesting historical, 
nonhistorical rank-order lottery, and/or designated importer licenses 
within the application period specified in the proposed rule. This form 
requests applicants to certify that they are either importers, 
designated importers, manufacturers, or exporters of certain dairy 
products and that they meet the eligibility requirements of the 
proposed rule. In addition, importers and exporters must submit the 
supporting documentation required by Sec. 6.23 and Sec. 6.24 of the 
proposed rule as proof of eligibility for an import license. The 
proposed amendments to the form consist of technical changes in the 
text which reflect technical changes in the proposed rule.
    In addition, for the 1997 quota year and each quota year 
thereafter, applicants for nonhistorical licenses must submit amended 
application form FAS-922A (Rev. 1-96). This form requires applicants to 
identify requests for nonhistorical rank-order licenses to import 
cheese by cheese types and supplying country, and/or to import 
noncheese dairy articles by the type of noncheese article. The 
currently approved application form is being amended to limit its 
applicability to requests for nonhistorical licenses, and to require 
applicants to rank order their preferences for licenses to import 
cheese in descending order of preference, as is currently done for 
certain noncheese dairy articles.
    The estimated total annual burden in the OMB inventory for the 
currently approved information collection is 425 hours for the 1996 
quota year. For the 1997 quota year and each quota year thereafter, the 
estimated total annual burden is being reduced by 50 hours to 375 
hours. The estimated reduction is based largely on the elimination of a 
separate ``certification'' form for historical licenses, elimination of 
the requirement that applicants for historical licenses must submit an 
application form, and strengthened eligibility requirements and 
increased disciplines in the proposed rule.
    The estimated public reporting burden for the amended information 
collection for 1997 quota year and each quota year thereafter is set 
forth in the table below.

------------------------------------------------------------------------
                                                            FAS-922, FAS-
                        Form No. *                              922A    
------------------------------------------------------------------------
Estimated No. of respondents..............................        500   
Estimated responses per respondent........................          1   
Estimated hours per response..............................           .75
Estimated total annual burden in hours....................        375   
------------------------------------------------------------------------
* 922 and 922A are one form.                                            

    Copies of this information collection can be obtained from Pamela 
Hopkins, the Agency Information Collection Coordinator, at (202) 720-
6713.

[[Page 1234]]

    The Department requests comments regarding the accuracy of the 
burden estimate, ways to minimize the burden, including the use of 
automated collection techniques or other forms of information 
technology, or any other aspect of the collection of information. 
Comments should be submitted in accordance with the Dates and Addresses 
sections above. All comments will be summarized and included in the 
request for OMB approval, and will also become a matter of public 
record.

Executive Order 12778

    This proposed rule has been reviewed under Executive Order 12778. 
The provisions of this proposed rule would have preemptive effect with 
respect to any state or local laws, regulations, or policies which 
conflict with such provisions or which otherwise impede their full 
implementation. The proposed rule would not have retroactive effect.

Background

    This proposed rule would govern the administration of the import 
licensing system for certain dairy products which are subject to in-
quota tariff rates proclaimed in the Harmonized Tariff Schedule of the 
United States (HTS).
    Prior to the conclusion of the Uruguay Round negotiations, the 
regime governing the importation of certain articles of cheese and 
other dairy products into the United States was a system of absolute 
quotas imposed pursuant to section 22 of the Agricultural Adjustment 
Act of 1933, as amended. Prior versions of the Import Regulation, 
including Revision 7, as amended, established licensing systems 
pursuant to which the privilege of importing the subject articles was 
allocated among importers.
    During the course of the Uruguay Round negotiations, the GATT 
Contracting Parties agreed that all systems of absolute quotas for the 
importation of agricultural products would be eliminated and would be 
converted, through a process known as tariffication, to tariff-based 
systems. For articles that had previously been subject to absolute 
quotas, countries were permitted to implement systems of tariff-rate 
quotas. A tariff-rate quota is a system whereby the importation of an 
article is subject to a two-tiered tariff. A specified volume--commonly 
referred to as the ``in-quota amount''--is subject to the applicable 
low ``in-quota'' rate of duty; all imports beyond that amount are 
subject to the applicable higher, ``over-quota'' rate of duty.
    This proposed rule, which would be Revision 8 of the Import 
Regulation, would implement a tariff-rate quota licensing system for 
the importation of certain articles of cheese and other dairy products. 
It is also intended to incorporate a number of administrative 
improvements. The Import Regulation has not been substantially updated 
since Revision 7 took effect in 1979.
    In order to ensure public participation in the rulemaking process 
at an early stage, and prior to the conclusion of the Uruguay Round, 
the Department published an Advance Notice of Proposed Rulemaking 
(ANPR) in the Federal Register on June 2, 1994 (59 Fed. Reg. 28495), 
soliciting public comment with respect to various ways in which the 
Import Regulation might be improved to provide greater economic and 
administrative efficiencies. The Department also held a public hearing 
on March 10, 1995, during which public witnesses had the opportunity to 
present their views and proposals for revision of the Import 
Regulation. Further comments have also been received from the public in 
response to the Interim Rule published on January 6, 1995 (60 Fed. Reg. 
1989-1996 amending Revision 7).
    Comments were received in response to the ANPR from 42 entities: 
four of them were trade associations; two, foreign exporting entities; 
two, representatives of foreign governments; and the remainder, 
importers or their legal counsel, most of them participants in the 
existing import licensing program. Their comments focussed most heavily 
on the allocation of in-quota quantities of cheese, although several 
commentors had extensive comments on dairy articles other than cheese. 
Most were directed at the problems with the existing license system. 
Generally the solutions proposed to address them were adjustments to 
the licensing system of varying scope. Many commentors proposed that a 
revision of the rule deal with the lack of continuity and inadequate 
availability of license to small businesses and recent entrants. Their 
proposals ranged from creating set-asides for permanent new licenses 
for certain categories of business or preventing companies which hold 
more than a specified amount of license from obtaining any more, to 
reduction or non-issuance of historical licenses which are not fully 
utilized or, subsequent to license globalization, not utilized in the 
country for which they were originally issued. A number proposed 
eliminating the provision for exporting countries to designate 
importers for license. A number of comments encouraged the tightening 
of eligibility and performance requirements (particularly in regard to 
sales-in-transit) to eliminate license-holders who broker licenses, 
while others expressed the fear that such action would work against 
small businesses. One commentor indicated all in-quota quantities which 
were increased by more than 500 metric tons in the Uruguay Round should 
be licensed. On the other hand, five entities proposed eliminating 
import licensing, four of them suggesting they should be replaced with 
some form of required exporting country control, while one suggested 
raising the duty in lieu of licenses.
    At the March 10, 1995 public hearing, ten entities gave testimony 
and seven submitted rebuttal briefs subsequent to the hearing. The 
substance of the testimony and of the rebuttal briefs paralleled the 
responses submitted to the ANPR. Much of it dealt with the specifics of 
reforming the existing licensing system. An additional entity proposed 
eliminating the licensing system entirely.
    Comments received by the Department in response to the ANPR, at the 
public hearing, and in response to the Interim Rule which was published 
on January 6 have generally supported the following recommendations for 
revision of the Import Regulation: (1) Formulation of clearer and more 
uniform eligibility requirements; (2) the establishment of clearer and 
more uniform criteria for license use and minimal levels of utilization 
for all license types; (3) an increase in the availability and 
conditions of license to new entrants; and (4) refined provisions 
governing suspension or revocation of licenses.
    In developing this proposed rule and in response to the comments 
received from the public, the Department considered three alternatives 
for revision of the Import Regulation. The system of auctioning 
importing licenses was not considered because the Statement of 
Administrative Action accompanying the Uruguay Round Agreements Act 
stated that imports of dairy products subject to TRQs would not be 
administered through such a system. The three alternatives that were 
considered are as follows:
    (A) First-Come, First-Served. This alternative would eliminate 
licensing for all dairy product imports except those quantities of 
cheese products which have been subject to designation by exporting 
countries and those which will be subject to designation as a result of 
the Uruguay Round Bilateral Memoranda of Understanding that implement 
the Agreement. Imports would occur at the in-quota duty rate until the 
in-quota quantities were filled, at which point the over-quota duty 
rate would be charged any further imports 

[[Page 1235]]
for the rest of the quota period. This could be done on an annual or 
quarterly basis. Six entities supported some variation of this type of 
import system, four on condition it was accompanied by required 
exporting country controls. Commentors felt such a system would be less 
of an interference with the market and specific trade relationships 
than the existing system. While most of the other commentors who 
focussed on modifying the license system did not address or 
specifically oppose a first-come, first-served system, their comments 
frequently referenced the need for licenses in order to ensure the 
continuity necessary for them to invest in the marketing and 
distribution of imported product. Two commentors specifically stated 
that not licensing the in-quota quantities of the TRQs allocated to 
Mexico under the North American Free-Trade Agreement was a mistake for 
that reason.
    (B) Rank-Order Lottery. This alternative would provide for a rank-
order lottery for all licenses to be issued for all quantities not 
designated, like that which already exists for certain dairy products 
other than cheese. Quantities currently designated (including any new 
Uruguay Round quantities) would continue to be so. While the concept of 
a rank-order lottery to replace the existing random lottery was 
suggested by comments received in response to the ANPR, extending such 
an approach beyond the existing lottery quantities was not suggested in 
any comments or testimony. Generally comments regarding the use of a 
lottery to allocate license were negative, because of the lack of 
continuity and insufficient license quantities such a system engenders. 
These comments were directed at the existing random lottery and for the 
quantities which are currently subject to it, rather than a rank-order 
lottery which would cover roughly two-thirds of the in-quota amounts. A 
comment received in response to the interim rule published on January 
6, which implemented a rank-order lottery for dairy products other than 
cheese, suggested that it would lead to entities receiving licenses 
which were too small and of insufficient product coverage to permit 
market development or longer term trading relationships, while the 
entity which originally suggested the concept supported it as more fair 
than a completely random approach.
    (C) Mixed License System. This alternative would retain a modified 
mixed licensing system, but make a number of significant changes which 
will redefine eligibility in terms of higher performance standards and 
streamline and improve administration of the system in response to 
comments and recommendations received from the public, including 
current license holders. Most of the comments received favored some 
form of modifying the licensing system which would provide certainty of 
license receipt to existing businesses and new entrants who are 
regularly engaged in the importation or use of dairy products.
    The Department believes the third alternative would be the most 
effective approach for revising the Import Regulation, and this 
proposed rule has been developed accordingly. Neither of the other 
alternatives would provide a longer or more certain planning horizon 
for entities in the importing business as desired by most of the 
commentors. Among the primary factors which make the third alternative 
preferable to the other two are: compared to a first-come, first-served 
system, it would provide greater certainty to importing businesses that 
they will be able to import at the in-quota duty throughout the year, 
would be less distortive of competition between designated importers 
and all others, and would better maintain the traditional importing 
pattern, wherein more than half of the imports enter in the second half 
of the calendar year; it does not have the disadvantage of the lottery 
system of severely disrupting the business of the larger existing 
entities and potentially mismatching licenses with the needs of a 
particular entity.
    An economic impact analysis, which discusses the effects of the 
three alternatives in greater detail, has been prepared and can be 
obtained from Richard Warsack, Dairy Import Quota Manager, Import 
Policies and Programs Division, room 5531-S, Foreign Agricultural 
Service, U.S. Department of Agriculture, 14th and Independence Avenue, 
SW, Agricultural Box 1021, Washington, DC 20250-1021. While this 
proposed rule is based on the third alternative, the Department invites 
comments from the public on all three alternatives, as well as on the 
provisions of the proposed rule itself.
    The proposed rule is designed to address a number of specific 
industry concerns which have been expressed during the ANPR, public 
hearing, and Interim Rule stages of the Department's review of the 
dairy import licensing system. These include the difficulty for new 
businesses to establish themselves in the dairy import business; the 
ease with which licenses can be obtained by persons not regularly in 
the business of importing, which in turn diminishes what is available 
to newcomers or existing businesses; the apparent lack of due process 
in the license suspension and revocation procedures; the limited 
provisions for action subsequent to a determination that a licensee has 
violated a provision of the rule; the manner in which transfers of 
license between persons take place subsequent to a sale of the entire 
dairy products business related to the licenses; the inability of the 
industry to avail themselves to immediate delivery of Customs 
procedures; and certain other technical aspects of the rule.
    The Department invites comments on the eligibility and performance 
requirements in the proposal. We would be interested in the costs and 
unintended market consequences to importers of these new requirements 
as follows: (1) The higher volume and/or more frequent shipment 
requirements than exist under the current rule; (2) the higher volume 
of manufacturing required for applicants who seek eligibility on the 
basis of being a manufacturer; (3) the requirement for direct shipments 
to qualify for eligibility; (4) the limitation on the proportion of 
license activity which may be made on the basis of purchases in 
transit; (5) the requirement that licensees whose eligibility is based 
on manufacturing, use the bulk of what they import in their own 
facility; and (6) the provision for permanently reducing historical 
licenses of those who surrender license in three consecutive or three 
years out of five.
    This proposed rule retains the current practice of not permitting 
the sale of individual licenses and introduces a limitation on the use 
of sales-in-transit. The Department invites comment on this approach. 
Should the Department make it more difficult for persons not regularly 
in the business of importing dairy products to obtain or keep a 
license, effectively restricting a secondary market? How could this be 
best accomplished and enforced? What are the benefits and costs of 
doing so? With regard to sales-in-transit, what are their commercial 
advantages and what are the costs and benefits of a limitation on their 
use? Or should the Department encourage the development of a secondary 
market? Should it allow the sale of individual licenses on an annual 
basis, and if so how? What would the costs and benefits be?
    In furtherance of the Administration's initiative on regulatory 
reform, the proposed rule has also been substantially rewritten to be 
clearer and more concise. Unnecessary definitions have been eliminated 
and the rule has been substantially shortened, made more internally 
consistent, and more compatible with other provisions of law. 

[[Page 1236]]
The public is invited to provide its comments on all of these proposed 
changes and to suggest further improvements.

Definitions

    In the proposed Revision 8, many definitions from Revision 7 are 
deleted and others are added, modified, or amended to deal with changes 
in the operational parts of the rule or to update them. The definition 
of ``cheese and cheese products'' is amended to conform with 
classifications in the HTS, and a definition of ``dairy products'' is 
added. A definition of ``sale-in-transit'' is added in order to clarify 
eligibility criteria which will take effect for the 1997 quota year 
(specifically: (1) Eligibility qualifying entries may not be based on 
sales-in-transit and (2) no more than 25 percent of a licensee's total 
licensed entries in the quota year preceding that for which application 
is being made may be based on sales-in-transit). One comment proposed 
that the definition of ``date of entry'' and ``enter'' be amended to 
conform to U.S. Customs Service regulations. The definition of ``date 
of entry'' is eliminated and the term ``enter'' or ``entry'' is so 
defined since this proposed rule permits the U.S. Customs Service rules 
regarding entry for TRQ's to govern the entry of articles subject to 
this regulation. While the term ``entrepreneurial use'' is no longer 
found in the definition section, the eligibility requirements of 
Sec. 6.23 and the provisions of Sec. 6.27, ``Limitations on license 
use'', replace and expand the concept. A definition of ``process'' or 
``processing'' is added to clarify the eligibility requirements and 
limitations on use of a license. Other definitions, not discussed here, 
are also deleted, added or modified.

License Requirement and Exceptions

    The change to a TRQ from an absolute quota requires that a license 
be obtained only to enter articles at the applicable duty for in-quota 
quantities under the TRQ. Over-quota duty treatment effectively 
replaces the former prohibition of imports for articles in excess of 
the absolute quota. Amounts entering without a license receive the 
applicable over-quota duty treatment. Thus the section on prohibitions 
and restrictions on imports in Revision 7 would be renamed in the 
proposed Revision 8 and include exceptions to the requirement for a 
license under certain prescribed conditions. Two entities suggested 
that the level of imports allowed under this exception be raised. The 
provision for this exception as found in Revision 7, as amended by the 
Interim Rule dated January 6, 1995 is not changed substantively in this 
proposed rule since it conforms to the exclusions in General Note 15 of 
the HTS, including the limit on entry for personal use of not more than 
five kilograms (changing the limit of ``not over $25'' in Revision 7). 
In response to a question in the comments, the term ``importer'' as 
used in this section continues to mean individuals who import the 
article whether or not they are persons in the business of importing, 
and ex-quota import permits will continue to be issued in a timely 
manner.

Changes in the Licensing Structure

    Changes in the licensing structure are proposed to streamline the 
administration of the program, provide more uniform eligibility and 
performance requirements, and facilitate license use. There would be 
three license types under Revision 8 as proposed: (1) Appendix 1 
historical licenses; (2) Appendix 2 nonhistorical rank-order lottery 
licenses; and (3) Appendix 3 designated licenses. The following table 
indicates how the licenses currently issued under Revision 7 would be 
issued under Revision 8. The proposed Appendices to Revision 8 are 
based on license type rather than the implementation date of the quota 
or tariff-rate quota.

                                                   License Changes: Revision 7 Compared to Revision 8                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
           REV. 7  App. 1                REV. 7  App. 2          REV. 7  App. 3          REV. 8  App. 1         REV. 8  App. 2         REV. 8  App. 3   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Historical license--pre-Tokyo Round  Historical license-     ......................  Historical license.                                                
                                      Tokyo Round.                                                                                                      
Non-Historical license--pre-Tokyo                                                                                                                       
 Round.                                                                                                                                                 
                                     Supplementary           Supplementary           .....................  .....................  Designated license-  
                                      designated license--    designated license--                                                  Tokyo Round and     
                                      Tokyo Round.            Uruguay Round.                                                        Uruguay Round.      
                                     Supplementary lottery   Supplementary lottery   .....................  Non-Historical rank-                        
                                      license--Tokyo Round.   license--Uruguay                               order lottery                              
                                                              Round.                                         license..                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In summary, the basic changes are as follows:
    (1) Appendix 1 (Revision 8) historical licenses would include all 
license amounts issued as historical and nonhistorical licenses under 
Revision 7, subject to any reduction requirements. Licensees who 
currently have more than one historical license for the same article 
from the same country, or one or more historical and a nonhistorical 
license, would have those license amounts combined into a single 
historical license, provided they remain eligible for such license.
    (2) Appendix 2 (Revision 8) nonhistorical rank-order lottery 
licenses would include all license amounts issued as supplementary 
lottery licenses under Revision 7, any Uruguay Round increments not 
designated by exporting countries and any amounts obtained through 
reductions or revocations of historical license. License amounts 
resulting from such reductions or revocations would be permanently 
shifted to Appendix 2 from Appendix 1.
    (3) Appendix 3 (Revision 8) designated licenses would include all 
license amounts for which importers will be designated by the 
government of the exporting country. Governments who designate 
importers would be required to designate separately for quantities 
resulting from the Tokyo Round and from the Uruguay Round. Cumulative 
license amounts for an article may be shifted between Appendix 2 and 
Appendix 3 to reflect changes in exporting countries' decisions 
regarding the designation of importers. Changes in the Appendices, as 
well as changes from additional Uruguay Round increments taking effect, 
would be announced cumulatively in the Federal Register. 

[[Page 1237]]


Eligibility

    The proposed section on establishing eligibility (Sec. 6.23) has 
been revised to try to ensure that the licenses will be awarded to 
bona-fide import/distribution or manufacturing operations who will use 
the imports under license in such distribution and manufacturing 
facilities. The Department received numerous comments on the scarcity 
of available license for new and growing businesses. Raising the 
eligibility requirements, and increasing the economic risk an applicant 
must take to become eligible, is intended to be a disincentive to 
persons applying for license primarily for their value and not for 
distributing or processing the imported product. The result should be a 
decrease in the number of applicants for the reduced number of larger 
licenses that result from the new allocation provisions in this 
proposed rule. In general, the changes to eligibility reflect comments 
which endorsed raising eligibility requirements and tightening 
manufacturers' eligibility. The new eligibility requirements would be 
implemented for the 1997 quota year.
    The proposed revisions for establishing eligibility by license type 
are as follows:
    (1) For historical licenses--Appendix 1--(where eligibility was 
originally established at the time that quotas were imposed under 
Section 22), eligibility for 1997 license would be based on: (1) 
Receipt of 1996 historical license under Revision 7; (2) meeting the 
same performance threshold as applicants for nonhistorical rank-order 
lottery licenses under Revision 8; and (3) meeting the utilization 
requirements of the proposed rule. Eligibility in 1997 for existing 
(Revision 7) nonhistorical licenses converted to historical licenses, 
would also be based on 1996 receipt of such licenses, subject to the 
utilization requirements of this proposed regulation. In quota years 
subsequent to 1997, historical licenses would continue to be allocated 
at the 1997 level, subject to a 90 percent utilization requirement and 
a reduction provision based on the frequency of license surrenders. 
This revision would no longer provide for temporary reductions of 
historical licenses, which means that other historical licensees would 
no longer benefit from reallocation of such reductions of other 
historical licenses. A licensee would not be eligible for a historical 
license if the utilization requirements are not met and that license 
amount would be moved to Appendix 2 (nonhistorical rank-order lottery 
licenses).
    Requiring that applicants for historical license annually meet the 
same threshold as all other licensees to reestablish their eligibility 
is one of several major changes from the current rule which are 
intended to create greater equity in the granting of license and to 
reduce the ability of persons to acquire licenses solely for the 
purpose of brokering them. Over time it should also serve to increase 
the quantities available for Appendix 2 nonhistorical rank-order 
licenses.
    Two comments proposed that a certain portion of the Uruguay Round 
increment for butter be granted to persons holding historical licenses 
for butter. Since historical licenses for butter date as far back as 
1953 and are not necessarily a good indicator of current interest in 
marketing butter, this rule provides instead that butter licenses 
issued as nonhistorical rank-order lottery licenses in the 1996 and 
1997 quota years be converted to historical licenses in the subsequent 
quota year if they are utilized at 95 percent or more. This is the only 
instance where new historical licenses would be created, in an attempt 
to provide the continuity required to encourage the importation and 
marketing of specialty product rather than commodity butter. Persons 
issued such converted historical licenses in the 1997 or 1998 quota 
year would not be eligible for nonhistorical rank-order licenses for 
butter in those quota years or any year thereafter so long as they are 
issued a historical butter license converted in this manner. This is an 
exception to the general rule that historical licensees may also apply 
for nonhistorical license. It would be imposed because these licenses 
will be significantly larger than the existing historical butter 
licenses and receipt of such a new historical butter license would be 
an exception to the treatment provided for other Uruguay Round dairy 
product increases. In 1998 and thereafter, licenses for Uruguay Round 
increments for butter would remain in the rank-order lottery.
    Several other comments were received with regard to eligibility for 
historical license, the implementation of which would not be not 
feasible for administrative reasons and because of the limited 
availability of tariff-rate quota amounts. One comment questioned the 
basis for historical license amounts, proposed that the basis be 
reviewed, and that any resultant amounts which might be taken from the 
historical licenses be divided between manufacturers and distributors. 
Another suggested that small businesses, in operation for five years, 
be placed on a priority list for selection as historical licensees. Two 
stated that no new licenses should be given to historical licensees, 
and another, that unused historical licenses should be converted to 
supplementary licenses with importers determined by exporting 
countries.
    (2) For nonhistorical rank-order lottery licenses--Appendix 2--for 
cheese or cheese products, eligibility would be established for the 
1997 and subsequent quota years for persons who apply as importers by 
having entered at least 57 metric tons of cheese, or, for those who 
apply as manufacturers by being listed as a processor in Section II of 
``Dairy Plants Surveyed and Approved for USDA Grading Services'' and 
having processed at least 450 metric tons of cheese during the 
September 1 through August 31 period preceding the year for which 
application for license is made. An alternative importer eligibility 
threshold is proposed which would allow small businesses or those 
seeking licenses smaller than some of the minimum sizes established in 
this regulation to qualify for license: the threshold weight is 
significantly lower, but it requires multiple shipments spread 
throughout the year. Eligibility must be established for each quota 
year. For non-cheese dairy products, qualifying shipments may include 
dairy products other than cheese and exporters will also be permitted 
to apply.
    The changes from the existing eligibility criteria, which were 
largely based on comments received, are: (1) The level of imports (or 
in the case of non-cheese articles, also exports) required; (2) the 
elimination beginning with the 1997 quota year of entries based on 
sales-in-transit (including from warehouse) and warehouse withdrawals 
as acceptable transactions for eligibility; and (3) the requirement 
that manufacturers seeking eligibility for cheese license must process 
cheese. All of these are aimed at narrowing eligibility to those 
persons who directly purchase cheese to either market and distribute it 
or to use it in their own processing operations.
    (3) The third category of license proposed is that designated by 
the government of the exporting country--Appendix 3. These licenses are 
similar to the supplementary preferred importer licenses under Revision 
7. The quantities to be designated consist of the portion of Tokyo-
Round increments eligible for designation in 1996 as well as Uruguay 
Round market access increases for which governments have notified the 
Licensing Authority of their intent to designate. To be eligible to 

[[Page 1238]]
receive designated licenses an applicant would have to meet the same 
requirements as an applicant for nonhistorical rank-order licenses, 
much as an applicant for designated license under Revision 7 must meet 
the nonhistorical eligibility requirements.
    The designation provisions of this proposed rule are in part a 
carryover from Revision 7 and in part the implementation of the 
bilateral memoranda of understanding which resulted from the Uruguay 
Round Agreements. Of the ten entities that commented on designation, 
four suggested eliminating the concept; one recommended that it be 
limited to entities not owned by foreign governmental bodies; several 
did not approve of designation for the new quantities resulting from 
the Uruguay Round; two considered designation a second best option if 
export country certification was not an option; it was also suggested 
that designation by exporting countries be extended to include non-
cheese products.
    Other comments regarding eligibility requirements were as follows: 
there was concern that performance levels not be increased to levels 
detrimental to persons handling small volumes, or be set at levels 
higher than the amount of license some persons receive. The proposed 
alternative threshold should accomodate most of those situations. Four 
comments suggested that in lieu of import licenses, exporting countries 
should control trade via export certificates, an idea which goes beyond 
what was agreed in the Uruguay Round.
    A number of additional suggestions were not incorporated for 
administrative reasons or can be handled through other provisions. Some 
of these were: firms should be given seniority status for licenses 
based on date of incorporation; eligibility should be based on periodic 
audits rather than imports or manufacturing; and past performance 
should show more than one customer. One comment suggested requiring 
submission of customs invoices with applications. The Department 
believes that the proposed requirement that eligibility qualifying 
entries be direct imports (not in-transit or warehouse purchases or 
warehouse withdrawals) as of the 1997 quota year responds to that 
concern. Opinions varied on: basing eligibility on sales; limiting the 
size of a given licensee's licenses for imports from a single country; 
and requiring experience in the cheese business to be able to apply for 
a license.

Conditions Under Which Eligibility May Not be Established: Insufficient 
Utilization; Affiliation and Association

    Under previous revisions of this rule one of the conditions for 
continued eligibility was the fulfillment of a license utilization 
level. The requirement varied by license type. In this rule a 
utilization requirement is made a condition to establish eligibility 
annually. Further, it is made uniform across all license types and the 
level is raised from 85 to 90 percent, to take effect in the 1996 quota 
year for establishing eligibility for the 1997 quota year.
    As proposed in this rule, to establish eligibility for a license 
for the 1997 and subsequent quota years, a licensee must have utilized 
90 percent of the license amount not surrendered by September 1 for the 
same article from the same country. The license amount not surrendered 
would include any additional amounts issued to a licensee as a result 
of any reallocations beginning in the 1996 quota year. If 90 percent 
utilization is not achieved, then that license for an article from a 
country would not be issued to that licensee in the following year. As 
a consequence of the proposed eligibility requirement for historical 
licenses that such a license must have been issued to that licensee in 
the previous year, a person who is not issued a historical license 
because of insufficient use in the previous quota year would not be 
eligible for that historical license in any subsequent quota year. A 
nonhistorical rank-order lottery license or designated license would 
not be issued to the license-holder for the quota year subsequent to 
that in which the utilization level was not met.
    The proposed rule would provide more specific criteria under which 
the utilization requirement may be waived than does Revision 7. Only 
breach of suppliers' or carriers' contracts, or force majeure 
situations would be considered. Further, an exemption is proposed for 
historical and nonhistorical licenses where the country on the license 
permits an export monopoly to control exports. This would replace the 
provision in Revision 7 which gives the Licensing Authority the ability 
to globalize a person's license or waive the utilization requirement if 
that person can demonstrate discrimination by a country. It is intended 
to provide an administratively simpler means to achieve a level playing 
field for importers and exporters.
    This proposed rule would introduce a further eligibility 
requirement: a ceiling on the licensed volume which may be entered 
based on sales-in-transit (including purchases from warehouse in the 
United States). It is the Departments's view that the ability of 
licensees to purchase all of their product in transit or from warehouse 
encourages the practice of license brokerage. If a licensee's licensed 
volume entered based on such indirect purchases in a quota year exceeds 
25 percent of total licensed licensed volume entered, then such 
licensee would not be eligible for any licenses in the following year. 
The information necessary to make such determinations would be obtained 
at the time each entry is made under the requirements of Sec. 6.29. The 
conditions for waiving this eligibility requirement would be the same 
as those for failure to use 90 percent of the license amount or license 
amount not surrendered, as stated above. Further, the documentation 
required with respect to sales-in-transit (including from warehouse in 
the United States), is delineated in Sec. 6.29 in greater detail than 
in Revision 7 to require evidence that the licensee has title to the 
product at the time of entry.
    Nine commentors had views on action regarding sales-in-transit. 
Four indicated that some limitation could or should be placed on them. 
The suggestions ranged from allowing 80 percent of entries to only 25 
percent of entries to be based on sales-in-transit. One comment called 
for banning sales-in-transit unless the licensee who made a purchase in 
transit is the end-user. An additional two comments indicated they were 
a necessary practice and should be retained. The Department proposes 
that the more stringent limitation is the best way to ensure that 
licensees import licensed dairy products for their own entrepreneurial 
use. Suggestions that sales-in-transit by subsidiaries or agents of the 
exporter not be counted in any limitation were not incorporated in this 
proposal because of the difficulty of administering such an exemption 
and the potential for evading the sale-in-transit limitation.
    Four comments suggested that if licensees frequently underutilize 
their license (in varying degrees), they should be subject to a penalty 
or forfeit the licenses or some portion thereof. The Department does 
not have statutory authority to assess a monetary penalty, but would 
provide in this proposal, for a gradual reduction of a historical 
license for which there is a surrender (1) in three consecutive years, 
or (2) in three years out of five. In the first case the historical 
license would be reduced to the average amount of an article entered in 
the three years in which the surrender took place; in the second, to 

[[Page 1239]]
the average amount of the article entered during the five years.
    The Licensing Authority would not issue nonhistorical licenses for 
the same article from the same country to applicants who are affiliated 
or associated. The proposed provisions covering affiliation and 
association have been shortened but cover substantially the same 
interrelationships among companies as those of Revision 7. Employees of 
a company are explicitly defined as being associated with it, limiting 
the types of licenses they may receive, although not completely barring 
them from eligibility as one commentor suggested. The reference to 
remote contingent exemptions is deleted but would be considered upon 
presentation to the Licensing Authority, and options to purchase stock 
would no longer be considered as determining affiliation because 
administratively it is impossible to enforce. Despite a comment to 
raise the level of co-ownership with respect to affiliation to a range 
of between 15 to 25 percent, it is the Department's view that 5 percent 
is appropriate given the limited license amounts available.

Applications for License

    Section 6.24 is modified to include a revised application period 
from September 1 through October 15, beginning in quota year 1997. It 
should be noted that the postmark no longer has a bearing on a person's 
position in the lottery. The first day of the application period is 
intended only to prevent receipt of applications prior to the time the 
Licensing Authority can handle them. Given the technology available to 
process the applications, it is no longer necessary to have a three-
month application period. Further, the proposed rule specifically 
states that applications must be complete in order to be accepted by 
that date.

Allocation of Licenses

    A broad range of comments was received on allocating existing 
licenses and licenses for the Uruguay Round quantities. Four comments 
stated that auctioning should not be used. Opinions varied on whether 
to: eliminate designated and supplementary licenses; distinguish 
between industrial and table cheese; prevent license use for industrial 
cheese; or permit licensees to hold more than one supplementary 
license. Ten entities commented on the lack of continuity as a major 
problem with the lottery licenses--the only ones available to new 
entrants on a regular basis, short of a purchase of the complete assets 
attendant to the business of a company which holds license for the 
articles covered by this rule.
    In the proposed changes to the allocation procedures of Revision 7, 
the Department has taken into account the wide array of comments 
received regarding the allocation of the annual in-quota quantities 
under the TRQ. The proposed allocation rules are:
    (1) Historical Licenses--For an existing historical license, the 
license amount in 1997 would be the Basic Annual Allocation used by the 
Licensing Authority in 1996, subject to the eligibility requirements of 
the proposed rule. In subsequent quota years the license amount would 
not exceed the amount issued for 1996. For an existing nonhistorical 
license (Revision 7), the license amount for the 1997 quota year would 
be the same amount issued in 1996, subject to the eligibility 
requirements of the proposed rule. The license amounts from historical 
licenses that are not used at least 90 percent or whose use does not 
meet the other requirements of the proposed rule would be issued under 
the rank-order lottery (Appendix 2) as of the 1997 quota year. If a 
licensee held more than one historical license, or one or more 
historical licenses and one nonhistorical license for the same article 
from the same country in 1996 and would be eligible for those same 
licenses in 1997, the licensee would be issued a single historical 
license at a combined level determined through the above procedures.
    (2) Nonhistorical rank-order lottery licenses--The significant 
number of comments proposing more continuity in license allocation and 
comments supporting the greater fairness of a rank-order lottery 
system, introduced in the Interim Rule of January 6, 1995 for certain 
non-cheese articles, led the Department to propose extending it to 
those quantities of cheese not held in historical or designated 
licenses (notwithstanding an opposing comment that it would introduce 
greater volatility and trade in low-price merchandise). The rank-order 
lottery would consist of a series of random draws on the basis of 
licensee-expressed rankings. Once a licensee has received a 
nonhistorical license, it would not be issued another until all other 
applicants have received one nonhistorical license of their choice, 
provided their choices have not already been completely issued. Under 
the proposed Revision 8, licenses would be allocated on the basis of 
minimum shares with proration of any excess, if such occurs. Therefore, 
no license maximum would be required for nonhistorical rank-order 
lottery licenses. The proposed rule would not change the size of the 
existing historical and designated licenses, but would increase the 
minimum size of most nonhistorical rank-order lottery licenses from 
that of the equivalent supplementary licenses, to make them more 
economically viable, and for ease of administration. The minimum size 
of licenses would in most cases be more than double the size under 
Revision 7. This would result in a decrease from the approximately 680 
licenses which were awarded in 1994 under the lottery provisions of 
Revision 7 to approximately 291 licenses for the same quantity of 
cheese. Some Uruguay Round TRQ amounts will be added to this quantity 
from the countries who do not designate, as would the amounts which are 
available for global access. The rank-order lottery, while not a 
guarantee of continuity of license, should increase the odds of 
receiving a license for the same article in consecutive years. A 
detriment, as pointed out in a comment to the interim rule, is that a 
licensee would not receive as great a variety of licenses. With respect 
to license size, four comments suggested that they be made larger, 
three comments stated they should not be changed, and one comment 
proposed that the minimum size of non-cheese licenses be increased to 
at least 100 metric tons. Since the TRQ amounts are fixed, the system 
must balance the size of license with the large number of requests for 
license. The minimum license levels in this proposed regulation are 
deemed reasonable in this context.
    Under Revision 7, a historical licensee is generally ineligible for 
nonhistorical license of the same article from the same country, but is 
eligible for supplementary lottery license. The Department has proposed 
making the new nonhistorical rank-order lottery licenses available to 
all eligible licensees, subject to the limitations of the rules of 
attribution in Sec. 6.23(c) (3)-(5). The rank-order provision would 
prevent any one licensee from randomly getting significantly more 
nonhistorical licenses than another.
    A significant number of suggestions for providing renewability or 
increasing continuity in the receipt of nonhistorical licenses had to 
be rejected because of the limited quantities available for allocation. 
For lottery license allocation, one comment suggested that if 85 
percent of an entire license is used (as opposed to 85 percent of the 
license retained at the end of the year) the licensee should receive 
that same license the next year. Another suggested that licenses be 
made available to companies on a rotating 

[[Page 1240]]
basis over a period of years and two comments proposed licenses be made 
available for longer than one year. While the latter proposals might 
extend a business' planning horizon, it is doubtful that a business 
would make or increase investments on the basis of licenses it knows 
may be unavailable after 2, 3, 4, or 5 years--whatever multiple year 
term might be provided. Two comments suggested a license exchange so 
that licensees could swap licenses. Administrative difficulties make 
this unfeasible.
    With respect specifically to the new Uruguay Round cheese 
quantities, two comments suggested that 50 percent of the non-
designated licenses be granted to importers of non-quota cheese. 
However, virtually all of the cheese is likely to be designated. In 
many cases the non-quota cheese importers are the same companies as the 
license holders and the size of their license portfolio ranges from 
small to large. Thus, such a proposal is not likely to give substantial 
advantage to smaller businesses who find it difficult to increase the 
size and continuity of their licenses. Another comment stated that 
Uruguay Round quantities not yet designated by a country should be 
issued through a lottery. This recommendation is contained in the 
proposed rule. The following specific recommendations were also 
submitted: three comments proposed the Uruguay Round increments in 
cheese should be equally split among license types; one felt that the 
licenses should be issued equally to manufacturers and importer 
distributors; and one stated that 50 percent of the licenses should be 
issued to businesses created after 1979. Other more complex formulas 
were also submitted for allocating licenses.
    (3) Designated licenses--Revision 8 would incorporate Uruguay Round 
commitments on designated importers, provide a deadline for designation 
by foreign governments, submission of the specific information required 
by the Licensing Authority, and a deadline for notification of the 
Licensing Authority by an exporting country if it intends to begin or 
cease designating importers in the following quota year.

Surrender and Reallocation

    Revision 8 would move the surrender date from October 1 to 
September 1 beginning with the 1996 quota year, on the basis of several 
comments. This would also entail moving the period forward for 
requesting additional amounts from September 1-September 15 to August 
1-August 15. Three comments suggested that requests for additional 
license and the surrender of license be made one month earlier so as to 
allow for earlier reallocation and better conditions for the shipment 
of product in time for the end of the year. Two entities commented that 
the current time frame was more appropriate as a September 1 date was 
too early for decisions on non-use. We are particularly interested in 
further comments on this provision in light of the increase in the 
utilization level required to reestablish eligibility in the following 
year, and the potential for loss of historical license if that level is 
not met.
    Surrendered licenses would be reallocated in a manner similar to 
the method used for initial allocation of nonhistorical licenses (i.e., 
a rank-order lottery). However, the minimum license level would be 
smaller.
    One comment suggested that those who use 95 percent of their 
combined license and reallocated quantities be given priority the 
following year for reallocated amounts. The administrative complexity 
of this proposal would slow down the reallocation process, defeating at 
least in part the earlier surrender-reallocation period proposed.

Limitations on the Use of Licenses

    Historically, an important goal of the licensing system has been to 
grant licenses to those businesses which will employ them for their own 
entrepreneurial use. It is not the goal of the system to award licenses 
to license brokers who obtain licenses for the use by a third party. 
This proposed rule reiterates the requirement that a licensee must use 
its licenses in its own dairy importing or manufacturing business. This 
is further reflected in the proposed limitation on sales-in-transit to 
remain eligible for license in Sec. 6.23 and in the proposed 
requirement that licensees who are eligible on the basis of 
manufacturer status use a minimum of 75 percent of the licensed imports 
in their own processing operations in the United States. This 
requirement should better implement the original intent of the 
provision introduced in Revision 7, to give manufacturers who have no 
importing history the opportunity to have direct access to imported 
inputs. Manufacturers would be expected to be able to document that 
they have used 75 percent of their licensed imports in their own plant. 
Another comment suggesting that importers must sell to more than two 
unaffiliated or unassociated companies unless the importer of record 
uses more than 50 percent of such imports in its own processing 
facility, was viewed as a restriction whose intent could be 
circumvented and has therefore not been incorporated into the proposed 
rule.

Transfer of License

    Several changes have been proposed for the provisions affecting 
transfer of license upon sale or conveyence of a business involving 
articles covered by this regulation. Licenses would be transferred by 
the Licensing Authority to the person who has acquired a business 
involving articles covered by this regulation, including complete 
transfer of attendant assets, for the remainder of the quota year. In 
subsequent quota years the person who has acquired the business could 
reestablish eligibility for the historical licenses as provided in 
Sec. 6.23 and also apply for nonhistorical and designated license. The 
entries made under the licenses by the original licensee during the 
year in which the sale or conveyence is made would be considered as 
having been made by the person acquiring the business for the purpose 
of establishing eligibility. In line with comments received, all 
licenses would be permitted to be transferred to the person acquiring 
the business in an asset purchase approved by the Licensing Authority 
(as is now the case for those changes in ownership resulting from a 
stock transfer). As a result, the person acquiring the business could, 
under this revision, hold any duplicate nonhistorical rank-order 
lottery licenses for the remainder of the quota year for which they are 
issued. The person acquiring the business and any affiliates would be 
eligible for only one such nonhistorical rank-order lottery license in 
subsequent years. If the existing provision remained in effect, 
nonhistorical amounts which could not be transferred through an asset 
purchase would be held by the Licensing Authority until the 
reallocation of surrendered amounts made in the fall of any given quota 
year.
    With respect to the requirement that the ``total assets'' related 
to the business be transferred in order for the Licensing Authority to 
transfer the licenses, one comment stated that it is onerous and 
proposed the test be ``substantially all of the assets.'' In the 
Department's view, the one-time burden is reasonable in view of the 
benefits of the transfer to both parties of the transaction. In 
addition, one comment suggested that a company be able to sell a 
particular portion of its import business, and that licenses be 
transferred on the basis of such a sale. The complexity of attempting 
to define and audit the requirement of a partial transfer makes the 
suggestion unfeasible. 

[[Page 1241]]

    In response to long-standing industry requests and a comment 
received, the proposed rule provides for the Licensing Authority to 
review, prior to its execution, a proposed contract for an asset 
purchase for compliance with the requirement for conveying assets 
attendant to the importing business. The prior submission of the 
documents of conveyence would be made mandatory. The submission would 
have to be received by the Licensing Authority at least 20 working days 
before the conveyence takes place. Any alteration found in the 
documents ultimately submitted would require a further determination. 
Also proposed is a provision permitting an escrow clause in the 
contract, but such escrow could only be returned if the Licensing 
Authority determined that it will not transfer the licenses to the 
buyer. Experience has caused the Department to propose a new 
requirement for timely reporting and submission of the actual documents 
conveying the assets of a company, with non-compliance leading to 
suspension or revocation of license.

Use of Licenses

    This section has been simplified and made more uniform for the 
various types of entry. The intent of the proposed document 
requirements is to ensure that at the time of entry the licensee is the 
owner and importer of record of the licensed product, as is already 
required under Revision 7.
    One entity proposed replacing the through-bill-of-lading 
requirement with a certificate of origin requirement so that the 
license could be used to import cheese produced in a specific country 
from another part of the world. This would increase the difficulty of 
enforcing the country of origin requirements of the tariff-rate quotas.
    In response to industry requests which pre-dated the ANPR, and in 
conformance with Customs rules on tariff-rate quotas, the proposed rule 
would provide for the use of immediate delivery for articles covered by 
it.

Records and Inspection

    Proposed Revision 8 would extend the two-year period for retaining 
records for a quota year to five years after the end of a quota year. 
Five years is standard for other Department regulations. It would also 
require that all documentation related to transactions which establish 
a licensee's eligibility be maintained for that period. It would 
further clarify that documents must be made available to all officials 
of the Department. Failure to provide information would be a violation 
subject to suspension and revocation under Sec. 6.31.

Suspension and Revocation of License Eligibility

    These proposed provisions have been entirely rewritten. They would 
provide greater clarity regarding grounds for suspension or revocation; 
give the Licensing Authority greater discretion as to the severity of 
the action to be taken (by allowing partial or complete suspension or 
revocation of the licenses held by a person); ensure that a decision to 
revoke the ability to apply for license extends to the individual who 
has violated the Import Regulation (or other government rule) as well 
as to the named licensee; and provide for suspension and the 
opportunity for a hearing prior to revocation--as proposed in a 
recommendation received. It has been the Department's policy in recent 
years to provide the opportunity for a hearing before revocation 
administratively, even though Revision 7 only provides for an appeal 
hearing after revocation. One comment proposed monetary fines for 
certain infractions of the rule. The Department has no authority for 
such action. Another stated that the licenses of a person violating the 
Import Regulation or any Customs rules should be returned to the 
lottery, and two others stated that a person be made ineligible for 
licenses only upon conviction of wrongdoing. Persons found to be 
violating the Import Regulation or Customs rules and regulations 
applicable to the Import Regulation would be subject to Sec. 6.31 
proceedings.
    The proposed rule provides for a single administrative appeal of 
determinations by the Licensing Authority to the Director of the Import 
Policies and Programs Division, Foreign Agricultural Service, or his or 
her designee. The Department believes that the two levels provided in 
Revision 7 are duplicative and potentially burdensome for the licensee. 
The rule would also require that the licensee exhaust its 
administrative remedies before pursuing any other remedy.

Globalization of Licenses

    The section on country of origin adjustments found in Revision 7 
would be renamed to reflect the action which the Licensing Authority 
actually takes when it determines that entries of an article from a 
country will fall short of that country's allocated amount as indicated 
in Appendices 1, 2 and 3, i.e., to globalize the remaining balance (or 
an appropriate portion thereof) of licenses for an article from a 
country. It would also continue the provision in the current interim 
rule which implements the U.S. Uruguay Round commitment to obtain the 
consent of the exporting country's government prior to globalization of 
the TRQ amounts granted in Uruguay Round. While this section does not 
specifically state that importers may request globalization and that 
when they do they must supply information which would show to the best 
of their ability the reasons why a supplying country will not be able 
to fill its quota allocation, this provision would be implemented by 
the Licensing Authority as it has been in the past. Further, such 
requests must be submitted no later than August 1.
    This section does not reflect the comments received on this issue 
which would be administratively difficult to implement or where the 
existing provisions are not considered deficient by the Department. 
Several comments recommended some form of automatic or semi-automatic 
country-of-origin adjustment if a supplying country had a poor record 
of filling a TRQ in several consecutive years, and another proposed 
that evaporated and sweetened/condensed milk be excluded from this 
provision. One comment proposed that the provision permitting the 
Licensing Authority to make a license-specific country-of-origin 
adjustment (or waive the 85 percent utilization requirement) upon 
determination that an exporting country has discriminated as to price 
or availability be strengthened. The comment further recommended 
provisions describing statutory export monopolies who export primarily 
industrial type cheeses as anti-competitive, and, based on such a 
description, revoking the exporting country's ability to designate 
importers for license. The Department has instead provided in Sec. 6.23 
an exemption to the 90 percent utilization requirement for licenses 
where the product is purchased from an export monopoly.

License Fee

    Proposed Revision 8 would require that license fee payments be made 
by certified check or money order to minimize the Department's burden 
in handling returned checks, and would continue the provision for 
automatic suspension of licenses for non-payment of the fee by May 15. 
It further states that revocation procedures would begin immediately 
upon suspension. It is the Department's intent to enforce this 
vigorously. There would be no grace period beyond the May 15 postmark 
date, and late payment would continue 

[[Page 1242]]
to lead to suspension and revocation procedures.
    Two comments were submitted stating that the fee was too high, one 
suggested it be based on the amount of licenses received, another said 
it should be eliminated. The fee is required by an OMB Directive and 
must be based on the cost of services rendered, not on the size of the 
license. Another comment proposed splitting the fee into two payments 
(a fee for processing the license and a fee for the license) in order 
to discourage frivolous applications. This would double the 
Department's processing, handling, and monitoring of payments and in 
the Department's view would not be a sufficient disincentive to reduce 
applications significantly.

Adjustment of Appendices

    This section has been added to clarify that historical licenses 
which are not issued to a licensee who has not met the eligibility 
provisions of Sec. 6.23 or whose license has been revoked or 
permanently surrendered would be moved to Appendix 2 for nonhistorical 
rank-order licenses. The Licensing Authority would provide the 
opportunity to apply for such licenses if the transfer to Appendix 2 
added an article or an article from a country not previously listed 
under that Appendix.

Miscellaneous

    A provision has been added that all submissions required by mail in 
this regulation would have to be made by registered or certified mail 
with a postmarked receipt, and proper postage affixed. This is intended 
to assure timely delivery and provide a means to verify that the 
postmark deadline is met.

Appendices

    Several comments addressed the types of cheeses under TRQ and the 
contents of TRQ articles. Some welcomed the consolidation of licenses 
for Italian-type and Edam and Gouda cheeses and recommended further 
consolidation. Another comment suggested the mix of cheese be adjusted 
to minimize the impact on domestic producers. One comment proposed 
changing the tariff-rate quotas for evaporated and sweetened/condensed 
milk to make them equal. These formulations are part of the Uruguay 
Round Agreement and cannot be changed through regulatory action. They 
would require legislative authority and in some cases renegotiation of 
the Agreement.
    Two comments recommended extending licensing to other non-cheese 
dairy products, particularly those where the TRQ increased by more than 
500 metric tons. The Department will be monitoring imports to determine 
if further licensing is needed.

List of Subjects in 7 CFR Part 6

    Agricultural commodities, Cheese, Dairy products, Imports, 
Reporting and recordkeeping requirements.

Proposed Rule

    Accordingly, for the reasons described in the preamble, 7 CFR Part 
6 Subpart--Tariff Rate Quotas Secs. 6.20-6.34 and Appendix 1, Appendix 
2 and Appendix 3 thereto, is revised to read as follows:

Subpart--Dairy Tariff-Rate Import Quota Licensing

    Authority: Additional U.S. Notes 6, 7, 8, 12, 14, 16-23 and 25 
to Chapter 4 and General Note 15 of the Harmonized Tariff Schedule 
of the United States (19 U.S.C. 1202), Pub. L. 97-258, 96 Stat. 
1051, as amended (31 U.S.C. 9701), and secs. 103 and 404, Pub. L. 
103-465, 108 Stat. 4819.


Sec. 6.20  Introduction.

    (a) Presidential Proclamation 6763 of December 23, 1994 (3 CFR, 
1994 Comp., p. 147), modified the Harmonized Tariff Schedule of the 
United States affecting the import regime for certain articles of dairy 
products. The Proclamation terminated quantitative restrictions that 
had been imposed pursuant to section 22 of the Agricultural Adjustment 
Act of 1933, as amended (7 U.S.C. 624); proclaimed tariff-rate quotas 
for such articles pursuant to Public Law 103-465; and specified which 
of such articles may be entered only by or for the account of a person 
to whom a license has been issued by the Secretary of Agriculture.
    (b) Effective January 1, 1995, the prior regime of absolute quotas 
for certain dairy products was replaced by a system of tariff-rate 
quotas. The articles subject to licensing under the new tariff-rate 
quotas are listed in Appendices 1, 2, and 3 of this subpart. The 
provisions of this subpart are effective on [effective date of the 
final rule]. Licenses are issued pursuant to its provisions for the 
1997 and subsequent quota years. These licenses permit the holder to 
import specified quantities of the subject articles into the United 
States at the applicable in-quota rate of duty. If an importer has no 
license for an article subject to a tariff-rate quota, such importer is 
required, with certain exceptions, to pay the applicable over-quota 
rate of duty.
    (c) The Secretary of Agriculture has determined that this subpart, 
to the fullest extent practicable, results in fair and equitable 
allocation of the right to import articles subject to such tariff-rate 
quotas. The subpart also maximizes utilization of the tariff-rate 
quotas for such articles, taking due account of any special factors 
which may have affected or may be affecting the trade in the articles 
concerned.


Sec. 6.21  Definitions.

    As used in this subpart and the Appendices thereto, the following 
terms mean:
    Cheese or cheese products--Articles in headings 0406, 1901.90.34 
and 1901.90.36 of the Harmonized Tariff Schedule.
    Commercial entry--Any entry except those made by or for the account 
of the United States Government or for a foreign government, for the 
personal use of the importer or for sampling, taking orders, research, 
or the testing of equipment.
    Country--Country of origin as determined in accordance with Customs 
rules and regulations, except that ``EC-12'' and ``Other Countries'' 
shall each be treated as a country.
    Customs--The United States Customs Service.
    Dairy products--Articles in headings 0401 through 0406, margarine 
cheese listed under headings 1901.90.34 and 1901.90.36, ice cream 
listed under heading 2105, and casein listed under heading 3501 of the 
Harmonized Tariff Schedule.
    Department--The United States Department of Agriculture.
    EC 12--Belgium, Denmark, the Federal Republic of Germany, France, 
Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain 
and the United Kingdom.
    Enter or Entry--To make or making entry for consumption, or 
withdrawal from warehouse for consumption in accordance with Customs 
regulations and procedures.
    Harmonized Tariff Schedule or HTS--The Harmonized Tariff Schedule 
of the United States.
    Licensee--A person to whom a license has been issued under this 
subpart.
    Licensing Authority--The Dairy Import Quota Manager, Import 
Policies and Programs Division, Foreign Agricultural Service, U.S. 
Department of Agriculture.
    Other countries--Countries not listed by name as having separate 
tariff-rate quota allocations for an article in the Additional U.S. 
Notes to Chapter 4 of the Harmonized Tariff Schedule.
    Person--An individual, firm, corporation, partnership, association, 
trust, estate or other legal entity.
    Postmark--The postage cancellation mark or date applied by the 
United 

[[Page 1243]]
States Postal Service. This does not include the date on ``same day or 
next day'' mail delivered by the U.S. Postal Service (also known as 
Express Mail), on metered postage affixed by the applicant, or on mail 
delivered by private entities.
    Process or Processing--Any additional preparation of a dairy 
product, such as melting, grating, shredding, cutting and wrapping, or 
blending with any additional ingredient.
    Quota article--One of the products listed in Appendices 1, 2, or 3 
of this subpart which are the same as those described in Additional 
U.S. Notes 6, 7, 8, 12, 14, 16-23 and 25 to Chapter 4 of the Harmonized 
Tariff Schedule.
    Quota year--The 12-month period beginning on January 1 of a given 
year.
    Sale-in-transit--Any sale prior to entry that is not a direct sale, 
including from a warehouse in the United States. A direct sale means a 
sale by the exporter in a foreign country of an article to the licensee 
or person seeking license.
    Tariff-rate quota amount or TRQ amount--The amount of an article 
subject to the applicable in-quota rate of duty established under a 
tariff-rate quota.
    United States--The customs territory of the United States, which is 
limited to the fifty states, the District of Columbia, and Puerto Rico.


Sec. 6.22  Requirement for a license.

    (a) General rule. A person who seeks to enter, or cause to be 
entered, an article shall obtain a license, in accordance with this 
subpart, except as provided in paragraph (b) of this section.
    (b) Exceptions. Licenses are not required if:
    (1) The article is imported by or for the account of any agency of 
the U.S. Government;
    (2) The article is imported for the personal use of the importer, 
provided that the net weight does not exceed 5 kilograms in any one 
shipment;
    (3) The article imported will not enter the commerce of the United 
States and is imported as a sample for taking orders, for exhibition, 
for display or sampling at a trade fair, for research, for testing of 
equipment; or for use by embassies of foreign governments. Written 
approval of the Licensing Authority shall be obtained prior to entry, 
and the importer of record (or a broker or agent acting on its behalf) 
shall provide to the Licensing Authority, prior to the release of such 
articles, the appropriate Customs documentation identifying the 
article, quantity to be imported, its location, intended use, an entry 
number and the importer of record. The Licensing Authority may also 
require as a condition of import that the article be destroyed or re-
exported after such use; or
    (4) Such person pays the applicable over-quota rate of duty.


Sec. 6.23  Eligibility to apply for a license.

    (a) In general. To apply for any license, a person shall have:
    (1) A business office, and be doing business, in the United States, 
and
    (2) An agent in the United States for service of process.
    (b) Eligibility for the 1997 and subsequent quota years. (1) 
Historical licenses (Appendix 1). Any person issued a historical or 
nonhistorical license for the 1996 quota year for an article may apply 
for a historical license (Appendix 1) for the same article from the 
same country for the 1997 and subsequent quota years, if such person 
was, during the 12-month period ending August 31 prior to the quota 
year, either:
    (i) Where the article is cheese or cheese product,
    (A) The owner of and importer of record for at least three separate 
commercial entries of cheese or cheese products totalling not less than 
57,000 kilograms net weight, each of the three entries not less than 
2,000 kilograms net weight, excluding entries made on the basis of a 
sale-in-transit to the applicant and warehouse withdrawals;
    (B) The owner of and importer of record for at least eight separate 
commercial entries of cheese or cheese products totalling not less than 
19,000 kilograms net weight, each of the eight entries not less than 
450 kilograms net weight, excluding entries made on the basis of a 
sale-in-transit to the applicant and warehouse withdrawals, with a 
minimum of two entries in each of at least three quarters during that 
period; or
    (C) The owner or operator of a plant listed in Section II of the 
most current issue of ``Dairy Plants Surveyed and Approved for USDA 
Grading Service'' and had processed or packaged at least 450,000 
kilograms of cheese or cheese products in its own plant in the United 
States; or
    (ii) Where the article is not cheese or cheese product,
    (A) The owner of and importer of record for at least three separate 
commercial entries of dairy products totalling not less than 57,000 
kilograms net weight, each of the three entries not less than 2,000 
kilograms net weight, excluding entries made on the basis of a sale-in-
transit to the applicant and warehouse withdrawals;
    (B) The owner of and importer of record for at least eight separate 
commercial entries of dairy products totalling not less than 19,000 
kilograms net weight, each of the eight entries not less than 2,000 
kilograms net weight, excluding entries made on the basis of a sale-in-
transit to the applicant and warehouse withdrawals, with a minimum of 
two entries in each of at least three quarters during that period;
    (C) The owner or operator of a plant listed in the most current 
issue of ``Dairy Plants Surveyed and Approved for USDA Grading 
Service'' and had manufactured, processed or packaged at least 450,000 
kilograms of dairy products in its own plant in the United States; or
    (D) The exporter of dairy products in the quantities and number of 
shipments required under paragraphs (b)(1)(ii) (A) or (B) of this 
section.
    (2) Certain butter. A person issued a nonhistorical license for 
butter for the 1996 or 1997 quota year may annually apply for a 
historical license (Appendix 1) for the same quantity of butter for the 
subsequent quota year and each year thereafter, provided that such 
person has used at least 95 percent of the license issued for the 
previous quota year and meets the requirements of paragraph (b)(1)(ii) 
of this section. However, if a person is issued a historical license 
pursuant to this paragraph, that person may not apply for a 
nonhistorical license for butter for any quota year in which that 
historical license is issued to that person.
    (3) Nonhistorical licenses for cheese or cheese products (Appendix 
2). A person may annually apply for a nonhistorical license for cheese 
or cheese products (Appendix 2) for the 1997 quota year and each quota 
year thereafter if such person meets the requirements of paragraph 
(b)(1)(i) of this section.
    (4) Nonhistorical licenses for articles other than cheese or cheese 
products (Appendix 2). A person may annually apply for a nonhistorical 
license for articles other than cheese or cheese products (Appendix 2) 
for the 1997 quota year and each quota year thereafter if such person 
meets the requirements of paragraph (b)(1)(ii) of this section.
    (5) Designated license (Appendix 3). A person may annually apply 
for a designated license (Appendix 3) for the 1997 quota year and for 
each quota year thereafter, provided that such person meets the 
requirements of paragraph (b)(1)(i) of this section, and provided 
further that the government of the country has designated such person 
for such license. The designating country 

[[Page 1244]]
shall submit its selection of designated importers in writing directly 
to the Licensing Authority not later than October 31 prior to the 
beginning of the quota year.
    (c) Exceptions. (1) A licensee that fails in a quota year to enter 
at least 90 percent of the amount of an article permitted under a 
license, shall not be eligible to receive a license for the same 
article from the same country for the next quota year. For the purpose 
of this paragraph, the amount of an article permitted under the license 
will exclude any amounts surrendered pursuant to Sec. 6.26(a), but will 
include any additional allocations received pursuant to Sec. 6.26(b). 
This paragraph will not apply, however:
    (i) Where the licensee demonstrates to the satisfaction of the 
Licensing Authority that the failure resulted from breach by a carrier 
of its contract of carriage, breach by a supplier of its contract to 
supply the article, act of God or force majeure; or
    (ii) To historical and nonhistorical licenses where the country 
specified on the license maintains or permits an export monopoly to 
control the product concerned. For the purpose of this paragraph, 
``export monopoly'' means a privilege vested in one or more persons 
consisting in the exclusive right to carry on the exportation of an 
article of dairy products from a country to the United States. The 
Licensing Authority may publish a notice in the Federal Register 
indicating which countries export an article or articles through such a 
monopoly, and revise it as necessary.
    (2) A licensee who enters more than 25 percent of the total amount 
entered under its licenses on the basis of sales-in-transit, shall not 
be eligible to receive any license in the following year. This 
paragraph will not apply, however, where the licensee demonstrates to 
the satisfaction of the Licensing Authority that it exceeded that level 
as a result of breach by a carrier of its contract of carriage, breach 
by a supplier of its contract to supply the article, act of God or 
force majeure.
    (3) The Licensing Authority will not issue a nonhistorical license 
(Appendix 2) for an article from a country during a quota year to an 
applicant who is affiliated with another applicant to whom the 
Licensing Authority is issuing a non-historical license for the same 
article from the same country for that quota year. Further, the 
Licensing Authority will not issue a nonhistorical license for butter 
to an applicant who is affiliated with another applicant to whom the 
Licensing Authority is issuing a historical butter license of 57,000 
kilograms or greater. For the purpose of this paragraph, an applicant 
will be deemed affiliated with another applicant if:
    (i) The applicant is the spouse, brother, sister, parent, or 
grandchild of such other applicant;
    (ii) The applicant is the spouse, brother, sister, parent or 
grandchild of an individual who owns or controls such other applicant;
    (iii) The applicant is owned or controlled by the spouse, brother, 
sister, parent, or grandchild of an individual who owns or controls 
such other applicant;
    (iv) Both applicants are 5 percent or more owned or controlled, 
directly or indirectly, by the same person;
    (v) The applicant, or a person who owns or controls the applicant, 
benefits from a trust that controls such other applicant.
    (4) The Licensing Authority will not issue a nonhistorical license 
(Appendix 2) for an article from a country during a quota year to an 
applicant who is associated with another applicant to whom the 
Licensing Authority is issuing a nonhistorical license for the same 
article from the same country for that quota year. Further, the 
Licensing Authority will not issue a nonhistorical license for butter 
to an applicant who is associated with another applicant to whom the 
Licensing Authority is issuing a historical butter license for 57,000 
kilograms or greater. For the purpose of this paragraph, an applicant 
will be deemed associated with another applicant if:
    (i) The applicant is an employee of, or is controlled by an 
employee of, such other applicant;
    (ii) The applicant economically benefits, directly or indirectly, 
from the use of the license issued to such other applicant.
    (5) The Licensing Authority will not issue a nonhistorical license 
for an article from a country, for which the applicant receives a 
designated license.


Sec. 6.24  Application for a license.

    (a) Application for license shall be made on forms provided by the 
Licensing Authority and shall be duly notarized and mailed in 
accordance with Sec. 6.36(b). All parts of the application shall be 
completed. Beginning with the 1997 quota year the application shall be 
postmarked no earlier than September 1 and no later than October 15 of 
the year preceding that for which license application is made. The 
Licensing Authority will not accept incomplete or unpostmarked 
applications.
    (b)(1) Where the applicant seeks to establish eligibility on the 
basis of imports, applications shall include:
    (i) Customs Form 7501 showing the applicant as the importer of 
record, and
    (ii) The commercial invoice or bill of sale showing the applicant 
as the owner and the original consignee for the number and level of 
entries required under Sec. 6.23, during the 12-month period ending 
August 31 prior to the quota year for which license is being sought.
    (2) Where the applicant seeks to establish eligibility on the basis 
of exports, applications shall include.
    (i) Census Form 7525 or a copy of the electronic submission of such 
form, and
    (ii) The commercial invoice or bill of sale for the quantities and 
number of exports required under Sec. 6.23, during the 12-month period 
ending August 31 prior to the quota year for which license is being 
sought.
    (c) An applicant requesting more than one nonhistorical license 
must rank order these requests by the applicable Additional U.S. Note 
number. Cheese and cheese products must be ranked separately from dairy 
articles which are not cheese or cheese products.


Sec. 6.25  Allocation of licenses.

    (a) Historical licenses for the 1997 quota year (Appendix 1). (1) A 
person issued a historical license for the 1996 quota year will be 
issued a historical license for the 1997 quota year in an amount equal 
to the Basic Annual Allocation level used by the Licensing Authority 
for the 1996 quota year provided that such person meets the 
requirements of Sec. 6.23(b)(1) and Sec. 6.23(c).
    (2) A person issued a nonhistorical license for the 1996 quota year 
will be issued a historical license for the 1997 quota year for the 
same quantity as the license for the 1996 quota year, provided that 
such person meets the requirements of Sec. 6.23.
    (3) If a person was issued more than one historical license, or one 
or more historical licenses and a nonhistorical license, for the same 
article from the same country for the 1996 quota year, such person will 
be issued a single historical license for the 1997 quota year, the 
amount of which shall be determined in accordance with paragraphs (1) 
and (2) above.
    (b) Historical licenses for the 1998 and subsequent quota years 
(Appendix 1). A person issued a historical license for the 1997 quota 
year will be issued a historical license in the same amount for the 
same article from the same country for the 1998 quota year and for each 
subsequent quota year except that: 

[[Page 1245]]

    (1) Beginning with the 1998 quota year, a person who has 
surrendered a portion of such historical license in each of the prior 
three quota years will thereafter be issued a license in an amount 
equal to the average annual quantity entered during those three quota 
years; and
    (2) Beginning with the quota year 2000, a person who has 
surrendered a portion of such historical license in at least three of 
the prior five quota years will thereafter be issued a license in an 
amount equal to the average annual quantity entered during those five 
quota years.
    (c) Nonhistorical licenses (Appendix 2). The Licensing Authority 
will allocate nonhistorical licenses on the basis of a rank-order 
lottery system, which will operate as follows:
    (1) The minimum license size shall be:
    (i) Where the article is cheese or cheese product:
    (A) The total amount available for nonhistorical license where such 
amount is less than 9,500 kilograms;
    (B) 9,500 kilograms where the total amount available for 
nonhistorical license is between 9,500 kilograms and 500,000 kilograms, 
inclusive;
    (C) 19,000 kilograms where the total amount available for 
nonhistorical license is between 500,001 kilograms and 1,000,000 
kilograms,inclusive;
    (D) 38,000 kilograms where the total amount available for 
nonhistorical license is greater than 1,000,000 kilograms; or
    (E) An amount less than the minimum license size established in 
paragraphs (c)(1)(i) (A) through (D) of this section, if requested by 
the licensee;
    (ii) Where the article is not cheese or cheese product:
    (A) The total amount available for nonhistorical license where such 
amount is less than 19,000 kilograms;
    (B) 19,000 kilograms where the total amount available for 
nonhistorical license is between 19,000 kilograms and 550,000 
kilograms, inclusive;
    (C) 38,000 kilograms where the total amount available for 
nonhistorical license is between 550,001 kilograms and 1,000,000 
kilograms, inclusive; and
    (D) 57,000 kilograms where the total amount available for 
nonhistorical license is greater than 1,000,000 kilograms;
    (E) An amount less than the minimum license sizes established in 
paragraphs (c)(1)(ii) (A) through (D) of this section, if requested by 
the licensee.
    (2) Taking into account the order of preference expressed by each 
applicant, as required by Sec. 6.24(c), the Licensing Authority will 
allocate licenses for an article from a country by a series random 
draws. A license of minimum size will be issued to each applicant in 
the order established by such draws until the total amount of such 
article in Appendix 2 has been allocated. An applicant that receives a 
license for an article will be removed from the pool for subsequent 
draws until every applicant has been allocated at least one license, 
provided that the licenses for which they applied are not already fully 
allocated. Any amount remaining after the random draws which is less 
than the applicable minimum license size may, at the discretion of the 
Licensing Authority, be prorated equally among the licenses awarded for 
that article.
    (d) Designated licenses (Appendix 3). (1) With respect to an 
article listed in Appendix 3, the government of the applicable country 
may, not later than October 31 prior to the beginning of a quota year, 
submit directly and in writing to the Licensing Authority:
    (i) The names and addresses of the importers that it is designating 
to receive licenses; and
    (ii) The amount, in percentage terms, of such article for which 
each such importer is being designated. Where quantities for 
designation result from both Tokyo Round and Uruguay Round concessions, 
the designations should be made in terms of each.
    (2) To the extent practicable, the Licensing Authority will issue 
designated licenses to those importers, and in those amounts, indicated 
by the government of the applicable country, provided that the importer 
designated meets the eligibility requirements set forth in Sec. 6.23. 
Consistent with the international obligations of the United States, the 
Licensing Authority may disregard a designation if the Licensing 
Authority determines that the person designated is not eligible for any 
of the reasons set forth in Sec. 6.23(c) (1) or (2).
    (3) If a government of a country which negotiated in the Uruguay 
Round for the right to designate importers has not done so, but 
determines to designate importers for the next quota year, it shall 
indicate its intention to do so directly and in writing to the 
Licensing Authority not later than July 1 prior to the beginning of 
such next quota year. Furthermore, if a government that has designated 
importers for a quota year determines that it will not continue to 
designate importers for the next quota year, it shall so indicate 
directly and in writing to the Licensing Authority, not later than July 
1 prior to such next quota year.


Sec. 6.26  Surrender and reallocation.

    (a) If a licensee determines that it will not enter the entire 
amount of an article permitted under its license, such licensee shall 
surrender its license right to enter the amount that it does not intend 
to enter. Surrender shall be made to the Licensing Authority in 
writing, mailed in accordance with Sec. 6.36(b) and postmarked not 
later than September 1. Any surrender shall be final and shall be only 
for that quota year, except as provided in Sec. 6.25(b). The amount of 
the license not surrendered shall be subject to the license use 
requirements of Sec. 6.23(c) (1) and (2).
    (b) For each quota year, the Licensing Authority will, to the 
extent practicable, reallocate any amounts surrendered.
    (c) Any person who has been issued a license for a quota year may 
apply to receive additional license, or addition to an existing license 
for a portion of the amount being reallocated. The application shall be 
submitted to the Licensing Authority by mail postmarked not later than 
August 15, in accordance with Sec. 6.36(b), and shall specify:
    (1) The name and control number of the applicant;
    (2) The article and country being requested, the applicable 
Additional U.S. Note number and, if more than one article is requested, 
a rank-order by Additional U.S. Note number; and
    (3) If applicable, the number of the license issued to the 
applicant for that quota year permitting entry of the same article from 
the same country.
    (d) The Licensing Authority will reallocate surrendered amounts 
among applicants as follows:
    (1) The minimum license size, or addition to an existing license, 
will be the total amount of the article from a country surrendered, or 
10,000 kilograms, whichever is less;
    (2) Minimum size licenses, or additions to an existing license, 
will be allocated among applicants requesting articles on the basis of 
the rank-order lottery system described in Sec. 6.25(c);
    (3) If there is any amount of an article from a country left after 
minimum size licenses have been issued, the Licensing Authority may 
allocate the remainder in any manner it determines equitable among 
applicants who have requested that article; and
    (4) No amount will be reallocated to a licensee who has surrendered 
a portion of its license for the same article from the same country 
during that quota year;
    (e) However, if the government of an exporting country chooses to 
designate eligible importers for surrendered amounts under Appendix 3, 
the Licensing Authority shall issue the 

[[Page 1246]]
licenses in accordance with Sec. 6.25(d)(2), provided that the 
government of the exporting country notifies the Licensing Authority of 
its designations no later than September 1. Such notification shall 
contain the names and addresses of the importers that it is designating 
and the amount in percentage terms of such article for which each 
importer is being designated. In such case the requirements of 
paragraph (c) of this section shall not apply.


Sec. 6.27  Limitations on use of license.

    (a) A licensee shall not use its license to import articles for the 
benefit of another person, nor shall it permit any other person to use 
such license.
    (b) A person who is eligible as a manufacturer or processor, 
pursuant to Sec. 6.23, shall process at least 75 percent of its 
licensed imports in such person's own facilities and maintain the 
records necessary to so substantiate.


Sec. 6.28  Transfer of license.

    (a) If a licensee sells or conveys its business involving articles 
covered by this subpart to another person, including the complete 
transfer of the attendant assets, the Licensing Authority will transfer 
to such other person the historical, nonhistorical or designated 
license issued for that quota year. Such sale or conveyence must be 
unconditional, except that it may be in escrow with the sole condition 
for return of escrow being that the Licensing Authority determines that 
such sale does not meet the requirements of this paragraph.
    (b) The parties seeking transfer of license shall give written 
notice to the Licensing Authority of the intended sale or conveyence 
described in paragraph (a) of this section by mail as required in 
Sec. 6.36(b). The notice must be received by the Licensing Authority at 
least 20 working days prior to the intended consummation of the sale or 
conveyence. Such written notice shall include copies of the documents 
of sale or conveyence. The Licensing Authority will review the 
documents for compliance with the requirement of paragraph (a) of this 
section and advise the parties of its findings. The parties shall have 
the burden of demonstrating the sale or conveyence, and complete 
transfer of assets to the satisfaction of the Licensing Authority. 
Within 15 days of the consummation of the sale or conveyence, the 
parties shall mail copies of the final documents to the Licensing 
Authority, in accordance with Sec. 6.36(b). The Licensing Authority 
will not transfer the licenses unless the documents are submitted in 
accordance with this paragraph.
    (c) For the purposes of Sec. 6.23 the person to whom a business is 
sold or conveyed shall be deemed to be the person to whom the 
historical licenses were issued during the quota year in which the sale 
or conveyence occurred. In all other respects, that person's 
eligibility to apply for a license for any subsequent quota year will 
be determined in accordance with Sec. 6.23.
    (d) For the purposes of this subpart, the entries made under such 
licenses by the original licensee during the year in which the sale or 
conveyence is made, shall be considered as having been made by the 
person to whom the business was sold or conveyed.


Sec. 6.29  Use of licenses.

    (a) An article entered under a license shall be the article 
produced in the country specified on the license.
    (b) An article entered or withdrawn from warehouse for consumption 
under a license must be entered in the name of the licensee as the 
importer of record by the licensee or its agent, and must be owned by 
the licensee at the time of such entry.
    (c) If the article entered or withdrawn from warehouse for 
consumption was purchased by the licensee through a direct sale from a 
foreign supplier, the licensee shall present, at the time of entry:
    (1) A true and correct copy of a through bill-of-lading from the 
country; and
    (2) A commercial invoice or bill of sale from the seller, showing 
the quantity and value of the product, the date of purchase and the 
country.
    (d) If the article entered was purchased by the licensee via sale-
in-transit, the licensee shall present, at the time of entry:
    (1) A true and correct copy of a through bill-of-lading endorsed by 
the original consignee of the goods;
    (2) A certified copy of the commercial invoice or bill of sale from 
the foreign supplier to the original consignee of the goods; and
    (3) A commercial invoice or bill of sale from the original 
consignee to the licensee.
    (e) If the article entered was purchased by the licensee in 
warehouse, the licensee shall present, at the time of entry:
    (1) Customs Form 7501 endorsed by the original consignee of the 
goods;
    (2) A certified copy of the commercial invoice or bill of sale from 
the foreign supplier to the original consignee of the goods; and
    (3) A commercial invoice or bill of sale from the original 
consignee to the licensee.
    (f) The Licensing Authority may waive the requirements of 
paragraphs (c), (d) or (e) of this section, if it determines that 
because of strikes, lockouts or other unusual circumstances, compliance 
with those requirements would unduly interfere with the entry of such 
articles.
    (g) Nothing in this subpart shall prevent the use of immediate 
delivery in accordance with the provisions of Customs regulations 
relating to tariff-rate quotas.


Sec. 6.30  Record maintenance and inspection.

    A licensee shall retain all records relating to its purchases, 
sales and transactions governed by this subpart, including all records 
necessary to establish the licensee's eligibility, for five years 
subsequent to the end of the quota year in which such purchases, sales 
or transactions occurred. During that period, the licensee shall, upon 
reasonable notice and during ordinary hours of business, grant 
officials of the U.S. Department of Agriculture full and complete 
access to the licensee's premises to inspect, audit or copy such 
records.


Sec. 6.31  Suspension or revocation of a license.

    (a) The Licensing Authority may determine to suspend or revoke a 
license for a quota year, or not to issue a license to a person for no 
more than three subsequent quota years, for any of the following 
reasons:
    (1) Failure to pay a license fee in accordance with Sec. 6.33;
    (2) Submission of false or misleading information in connection 
with an application or with the use of a license;
    (3) Indictment or conviction for a felony which indicates moral 
turpitude, lack of business integrity or business honesty;
    (4) Violation of a provision of this subpart; or
    (5) Ownership, control or management by, or employment of, a person 
whose license has been suspended or revoked or who has been debarred or 
suspended from contracting with the government or from participating in 
U.S. Government programs.
    (b) The Licensing Authority shall determine whether to suspend or 
revoke a license and shall give written notice of such determination to 
the licensee. Where the Licensing Authority determines that adequate 
grounds exist, the notice shall state that the license has been 
suspended, shall give a plain and concise explanation of the factual 
basis and grounds for the determination, shall 

[[Page 1247]]
specify the length of revocation proposed and a date on which such 
revocation will become effective if there is no appeal, and shall 
advise the licensee of its right to appeal the determination, including 
its right to a hearing.
    (c) Any action taken by the Licensing Authority to suspend or 
revoke a license is without prejudice to the rights of the U.S. 
Government to pursue any other available legal recourse, civil, 
criminal or administrative.
    (d) A licensee whose license is suspended or revoked is required to 
exhaust its administrative remedies before pursuing any other remedy.


Sec. 6.32  Administrative appeals.

    (a) General. This section provides for administrative appeal of a 
determination by the Licensing Authority to suspend or revoke a 
license. The decision on such appeal shall be made by the Director, 
Import Policies and Programs Division, Foreign Agricultural Service 
(``Director''), or his or her designee.
    (b) Filing of appeal. 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. The appeal 
may be filed by mail, postmarked no later than 30 calendar days after 
the date of the Licensing Authority's determination, in accordance with 
Sec. 6.36(b), or filed directly in the office of the Director. If the 
licensee files the notice of appeal directly with the office of the 
Director, two copies must be submitted. Both copies will be date-
stamped by the office of the Director and one copy will be returned to 
the licensee. The licensee may make a written submission of its 
position at the time it files its appeal. If the licensee does not 
timely appeal, any suspension or revocation proposed will take effect 
in accordance with the Licensing Authority's determination. If the 
licensee seeks a hearing, it shall so request in its notice of appeal. 
The licensee may request that the hearing be scheduled within 30 days 
of the postmark date of its notice of appeal.
    (c) Appeal process and hearing. (1) Ordinarily, hearings will be 
held only at the request of the licensee. If no hearing is requested, 
the Director will make his or her determination on the basis of written 
submission and any other available information. The hearing shall be 
held at the place and time determined by the Director, except that it 
shall be held within 30 days of the postmark date of the notice of 
appeal if the licensee so requests.
    (2) Hearings will be conducted by the Director in a manner as 
informal as practicable, consistent with the principles of fundamental 
fairness.
    (3) The licensee may be represented by counsel.
    (4) The licensee shall have full opportunity to present any 
relevant evidence, documentary or testimonial, and to make argument in 
support of its position. The Director may permit other individuals to 
present evidence at the hearing, and the licensee shall have an 
opportunity to question those witnesses.
    (5) If requested, the Director shall make available to the licensee 
all documentation considered by the Director in reaching its 
determination.
    (6) A verbatim transcript of the hearing may be made at the 
direction of the Director, or at the request of the licensee. If the 
licensee requests a transcript be made, it shall be responsible for 
arranging for a professional reporter and shall pay all attendant 
expenses.
    (d) Determination on appeal. 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 
therefore. The determination on appeal exhausts the licensee's 
administrative remedies.


Sec. 6.33  Globalization of licenses.

    If the Licensing Authority determines that entries of an article 
from a country are likely to fall short of that country's allocated 
amount as indicated in Appendices 1, 2, and 3, the Licensing Authority 
may permit, with the approval of the Office of the United States Trade 
Representative, the applicable licensees to enter the remaining balance 
or a portion thereof from any country during that quota year. Requests 
for consideration of such adjustments must be submitted to the 
Licensing Authority no later than August 1. The Licensing Authority 
will obtain prior consent for such an adjustment of licenses from the 
government of the exporting country for quantities in accordance with 
the Uruguay Round commitment of the United States.


Sec. 6.34  License fee.

    (a) A fee will be assessed each quota year for each license to 
defray the Department's costs of administering the licensing system. To 
the extent practicable, the fee will be announced by the Licensing 
Authority in a notice published in the Federal Register no later than 
August 31 of the year preceding the quota year for which the fee is to 
be assessed.
    (b) The license fee for each license is due and payable in full by 
mail, postmarked no later than May 15 of the year for which the license 
is issued, in accordance with Sec. 6.36(b). The fee for any license 
issued after May 15 of any quota year is due and payable in full by 
mail, postmarked no later than 30 days from the date of issuance of the 
license, in accordance with Sec. 6.36(b). Fee payments shall be made by 
certified check or money order payable to the Treasurer of the United 
States.
    (c) If the license fee is not paid by the final payment date, the 
Licensing Authority will suspend that license and begin revocation 
procedures. If, after granting opportunity for an administrative 
appeal, the Licensing Authority determines that a person has not paid 
its fee as required by this paragraph and there is no indication that 
non-payment was for reasons beyond that person's control, the Licensing 
Authority will revoke the license for the remainder of the quota year 
and will not issue to such person a license for the same article from 
the same country for the next quota year. Where the license at issue is 
a historical license, this will result, pursuant to Sec. 6.23(c), in 
the person's loss of historical eligibility for such license.
    (d) Prior to the final payment date, licensees may elect not to 
accept certain licenses issued to them; however, the Licensing 
Authority must be so notified by mail, postmarked no later than the May 
15 payment deadline, in accordance with Sec. 6.36(b).


Sec. 6.35  Adjustment of Appendices.

    (a) Whenever a historical license (Appendix 1) is not issued to an 
applicant pursuant to the provisions of Sec. 6.23 or subsequent to the 
permanent surrender to or revocation of such license by the Licensing 
Authority, the amount of such license will be transferred to Appendix 
2.
    (b) The cumulative annual transfers to Appendix 2 made in 
accordance with paragraph (a) of this section will be published in a 
Notice in the Federal Register. If such a transfer results in the 
addition of a new article, or an article from a country not previously 
listed in Appendix 2, the Licensing Authority shall afford all eligible 
applicants for that quota year the opportunity to apply for a license 
for such article.


Sec. 6.36  Miscellaneous.

    (a) If any deadline date in this subpart falls on a Saturday, 
Sunday or a Federal holiday, then the deadline shall be the next 
business day. 

[[Page 1248]]

    (b) All submissions required by mail in this subpart shall be by 
registered or certified mail, return receipt requested, with a 
postmarked receipt, with the proper postage affixed and properly 
addressed to the Dairy Import Licensing Group, AG Box 1021, Import 
Policies and Programs Division, Foreign Agricultural Service, U.S. 
Department of Agriculture, Washington D.C. 20250-1021.


Sec. 6.37  Supersedure of Import Regulation 1, Revision 7.

    This subpart supersedes the provisions of Import Regulation 1, 
Revision 7. With respect to any violation of the provisions of that 
regulation by a licensee prior to [the effective date of the final 
rule] the provisions of that Regulation will be deemed to continue in 
full force. Any determination of the Licensing Authority to suspend or 
revoke a license for a violation of a provision of that Regulation 
shall be in accordance with Sec. 6.31 of this subpart. Any 
administrative appeal shall be conducted in accordance with Sec. 6.32 
of this subpart.

   Appendix 1--Articles Subject to the Historical Provisions of Import  
  Regulation 1, Revision 8, and Respective Annual Tariff-Rate In-Quota  
                   Quantities For Each Quota Year.\1\                   
------------------------------------------------------------------------
                                                        1997 Historical 
                                                        tariff-rate in- 
        Article by additional U.S. note number           quota quantity 
                                                          (kilograms)   
------------------------------------------------------------------------
                 NON-CHEESE ARTICLES                                    
BUTTER (Note 6)......................................            320,689
    EU...............................................             96,161
    NEW ZEALAND......................................            150,593
    OTHER COUNTRIES..................................             73,935
DRIED SKIM MILK (Note 7).............................            819,641
    AUSTRALIA........................................            600,076
    CANADA...........................................            219,565
DRIED WHOLE MILK (Note 8)............................              3,175
    NEW ZEALAND......................................              3,175
DRIED BUTTERMILK AND WHEY (Note 12)..................            224,981
    CANADA...........................................            161,161
    NEW ZEALAND......................................             63,820
                                                      ------------------
      TOTAL: NON-CHEESE ARTICLES.....................          1,368,486
                   CHEESE ARTICLES                                      
CHEESE AND SUBSTITUTES FOR CHEESE (EXCEPT CHEESE NOT                    
 CONTAINING COW'S MILK AND SOFT RIPENED COW'S MILK                      
 CHEESE, CHEESE (EXCEPT COTTAGE CHEESE) CONTAINING                      
 0.5 PERCENT OR LESS BY WEIGHT OF BUTTERFAT AND                         
 ARTICLES WITHIN THE SCOPE OF OTHER IMPORT QUOTAS                       
 PROVIDED FOR IN THIS SUBCHAPTER)                                       
    (Note 16)........................................         26,016,085
      ARGENTINA......................................              7,690
      AUSTRALIA......................................            541,170
      AUSTRIA........................................            369,747
      CANADA.........................................          1,141,000
      SWITZERLAND....................................            652,841
      EU.............................................         15,032,240
      FINLAND........................................            814,903
      ISRAEL.........................................             79,696
      ICELAND........................................            294,000
      NORWAY.........................................            150,000
      NEW ZEALAND....................................          4,815,472
      POLAND.........................................            936,224
      PORTUGAL.......................................            129,309
      SWEDEN.........................................            915,473
      OTHER COUNTRIES................................            136,320
BLUE-MOLD CHEESE (EXCEPT STILTON PRODUCED IN THE                        
 UNITED KINGDOM) AND CHEESE AND SUBSTITUTES FOR                         
 CHEESE CONTAINING, OR PROCESSED FROM, BLUE-MOLD                        
 CHEESE:                                                                
    (Note 17)........................................          2,366,029
    ARGENTINA........................................              2,000
    EU...............................................          2,364,028
    OTHER COUNTRIES..................................                  1
CHEDDAR CHEESE, AND CHEESE AND SUBSTITUTES FOR CHEESE                   
 CONTAINING, OR PROCESSED FROM, CHEDDAR CHEESE:                         
    (Note 18)........................................          4,183,856
      AUSTRALIA......................................            984,499
      EU.............................................            263,000
      NEW ZEALAND....................................          2,796,468
      OTHER COUNTRIES................................            139,889
AMERICAN-TYPE CHEESE, INCLUDING COLBY, WASHED CURD                      
 AND GRANULAR CHEESE (BUT NOT INCLUDING CHEDDAR) AND                    
 CHEESE AND SUBSTITUTES FOR CHEESE CONTAINING, OR                       
 PROCESSED FROM, SUCH AMERICAN- TYPE CHEESE:                            
    (Note 19)........................................          3,065,553
      AUSTRALIA......................................            880,998
      EU.............................................            254,000
      NEW ZEALAND....................................         1,761,999 

[[Page 1249]]
                                                                        
      OTHER COUNTRIES................................            168,556
EDAM AND GOUDA CHEESE, AND CHEESE AND SUBSTITUTES FOR                   
 CHEESE CONTAINING, OR PROCESSED FROM, EDAM AND GOUDA                   
 CHEESE:                                                                
    (Note 20)........................................          5,606,402
      ARGENTINA......................................            125,000
      EU.............................................          5,248,000
      SWEDEN.........................................             41,000
      NORWAY.........................................            167,000
      OTHER COUNTRIES................................             25,402
ITALIAN-TYPE CHEESES, MADE FROM COW'S MILK, (ROMANO                     
 MAKE FROM COW'S MILK, REGGIANO, PARMESAN, PROVOLONE,                   
 PROVOLETTI AND SBRINZ AND GOYA, NOT IN ORIGINAL                        
 LOAVES) AND CHEESE AND SUBSTITUTES FOR CHEESE                          
 CONTAINING, OR PROCESSED FROM, SUCH ITALIAN-TYPE                       
 CHEESES, WHETHER OR NOT IN ORIGINAL LOAVES:                            
    (Note 21)........................................          6,733,376
      ARGENTINA......................................          4,125,483
      EU.............................................          2,594,829
      OTHER COUNTRIES................................             13,064
SWISS OR EMMENTHALER CHEESE OTHER THAN WITH EYE                         
 FORMATION, GRUYERE-PROCESS CHEESE AND CHEESE AND                       
 SUBSTITUTES FOR CHEESE CONTAINING, OR PROCESSED                        
 FROM, SUCH CHEESES:                                                    
    (Note 22)........................................          6,120,089
      AUSTRIA........................................            778,994
      SWITZERLAND....................................          1,421,787
      EU.............................................          3,091,475
      FINLAND........................................            748,000
      OTHER COUNTRIES................................             79,833
CHEESE AND SUBSTITUTES FOR CHEESE, CONTAINING 0.5                       
 PERCENT OF LESS BY WEIGHT OF BUTTERFAT, PROVIDED FOR                   
 IN (EXCEPT ARTICLES WITHIN THE SCOPE OF OTHER IMPORT                   
 QUOTAS PROVIDED FOR IN THIS SUBCHAPTER), AND                           
 MARGARINE CHEESE:                                                      
    (Note 23)........................................          4,181,944
      EU.............................................          3,882,352
      POLAND.........................................            174,907
      SWEDEN.........................................            124,684
      OTHER COUNTRIES................................                  1
SWISS OR EMMENTHALER CHEESE WITH EYE FORMATION:                         
    (Note 25)........................................         20,258,803
      ARGENTINA......................................              9,115
      AUSTRIA........................................          5,004,491
      AUSTRALIA......................................            209,698
      SWITZERLAND....................................          1,747,315
      EU.............................................          3,736,262
      FINLAND........................................          5,477,074
      ISRAEL.........................................             27,000
      ICELAND........................................            149,999
      NORWAY.........................................          3,812,573
      OTHER COUNTRIES................................             85,276
                                                      ------------------
      TOTAL: CHEESE ARTICLES.........................        78,532,137 
------------------------------------------------------------------------
\1\ This appendix combines articles for which historical and            
  nonhistorical licenses were issued under Appendix 1 and Appendix 2 of 
  Import Regulation 1, Revision 7 and for which USDA issued annual      
  import licenses identified by the numeric identification prefix 1, 2, 
  or 3.                                                                 



 Appendix 2--Articles Subject to the Nonhistorical Provisions of Import 
  Regulation 1, Revision 8, and Respective Annual Tariff-Rate In-Quota  
                   Quantities for Each Quota Year \1\                   
------------------------------------------------------------------------
                                                              1997      
                                                         Nonhistorical  
        Article by Additional U.S. Note number          tariff-rate in- 
                                                         quota quantity 
                                                          (kilograms)   
------------------------------------------------------------------------
                 NON-CHEESE ARTICLES                                    
BUTTER (Note 6)......................................      \2\ 4,856,311
DRIED SKIM MILK (Note 7).............................          2,041,359
DRIED WHOLE MILK (Note 8)............................          1,548,125
BUTTER SUBSTITUTES CONTAINING OVER 45% OF BUTTERFAT                     
 AND BUTTEROIL (Note 14).............................          4,520,500
                                                      ------------------
      TOTAL: NON-CHEESE ARTICLES.....................         12,966,295

[[Page 1250]]
                                                                        
                   CHEESE ARTICLES                                      
CHEESE AND SUBSTITUTES FOR CHEESE (EXCEPT CHEESE NOT                    
 CONTAINING COW'S MILK AND SOFT RIPENED COW'S MILK                      
 CHEESE, CHEESE (EXCEPT COTTAGE CHEESE) CONTAINING                      
 0.5 PERCENT OR LESS BY WEIGHT OF BUTTERFAT AND                         
 ARTICLES WITHIN THE SCOPE OF OTHER IMPORT QUOTAS                       
 PROVIDED FOR IN THIS SUBCHAPTER):                                      
    (Note 16)........................................          5,436,075
      EU.............................................          5,070,760
      OTHER COUNTRIES................................             65,315
      ANY............................................            300,000
BLUE-MOLD CHEESE (EXCEPT STILTON PRODUCED IN THE                        
 UNITED KINGDOM) AND CHEESE AND SUBSTITUTES FOR                         
 CHEESE CONTAINING, OR PROCESSED FROM, BLUE-MOLD                        
 CHEESE:                                                                
    (Note 17)........................................            154,972
      EU.............................................            114,972
      CHILE..........................................             40,000
CHEDDAR CHEESE, AND CHEESE AND SUBSTITUTES FOR CHEESE                   
 CONTAINING, OR PROCESSED FROM, CHEDDAR CHEESE:                         
    (Note 18)........................................            210,000
      CHILE..........................................            110,000
      ANY............................................            100,000
ITALIAN-TYPE CHEESES, MADE FROM COW'S MILK, (ROMANO                     
 MAKE FROM COW'S MILK, REGGIANO, PARMESAN, PROVOLONE,                   
 PROVOLETTI AND SBRINZ AND GOYA, NOT IN ORIGINAL                        
 LOAVES) AND CHEESE AND SUBSTITUTES FOR CHEESE                          
 CONTAINING, OR PROCESSED FROM, SUCH ITALIAN-TYPE                       
 CHEESES, WHETHER OR NOT IN ORIGINAL LOAVES:                            
    (Note 21)........................................          1,037,171
      EU.............................................            787,171
      ROMANIA........................................            250,000
SWISS OR EMMENTHALER CHEESE OTHER THAN WITH EYE                         
 FORMATION, GRUYERE-PROCESS CHEESE AND CHEESE AND                       
 SUBSTITUTES FOR CHEESE CONTAINING, OR PROCESSED                        
 FROM, SUCH CHEESES:                                                    
    (Note 22)........................................            533,525
      EU.............................................            533,525
CHEESE AND SUBSTITUTES FOR CHEESE, CONTAINING 0.5                       
 PERCENT OF LESS BY WEIGHT OF BUTTERFAT, PROVIDED FOR                   
 IN (EXCEPT ARTICLES WITHIN THE SCOPE OF OTHER IMPORT                   
 QUOTAS PROVIDED FOR IN THIS SUBCHAPTER), AND                           
 MARGARINE CHEESE:                                                      
    (Note 23)........................................            117,648
      EU.............................................            117,648
SWISS OR EMMENTHALER CHEESE WITH EYE FORMATION:                         
    (Note 25)........................................          2,263,738
      EU.............................................          2,263,783
                                                      ------------------
      TOTAL: CHEESE ARTICLES.........................         9,753,129 
------------------------------------------------------------------------
\1\ This appendix includes (1) articles for which supplementary lottery 
  licenses were issued under Appendix 2 of Import Regulation 1, Revision
  7 in 1995, and (2) increased quantities of certain articles as        
  provided for in the Uruguay Round Trade Agreements Act (Public Law 103-
  465). The articles and quantities included in this appendix for       
  certain cheese may be modified as provided in Sec.  6.25(d)(3).       
\2\ Butter licenses issued as nonhistorical licenses for quota years    
  1996 and 1997 will be converted to historical licenses in the         
  following quota year as provided in Sec.  6.23(a)(2).                 



 Appendix 3.--Articles Subject to the Designated Importer Provisions of 
 Import Regulation 1, Revision 8, and Respective Annual Tariff-Rate In- 
                Quota Quantities For Each Quota Year \1\                
------------------------------------------------------------------------
                                                        1997 Designated 
                                                        tariff-rate in- 
        Article by additional U.S. note number           quota quantity 
                                                          (kilograms)   
------------------------------------------------------------------------
CHEESE AND SUBSTITUTES FOR CHEESE (EXCEPT CHEESE NOT                    
 CONTAINING COW'S MILK AND SOFT RIPENED COW'S MILK                      
 CHEESE, CHEESE (EXCEPT COTTAGE CHEESE) CONTAINING                      
 0.5 PERCENT OR LESS BY WEIGHT OF BUTTERFAT) AND                        
 ARTICLES WITHIN THE SCOPE OF OTHER TARIFF-RATE                         
 QUOTAS PROVIDED FOR IN THIS SUBCHAPTER:                                
    (Note 16)........................................         14,877,699
      ARGENTINA......................................             92,310
      AUSTRALIA......................................          1,633,830
      AUSTRIA........................................            553,253
      SWITZERLAND....................................            817,159
      EU.............................................            900,000
      FINLAND........................................            485,097
      ISRAEL.........................................            593,304
      ICELAND........................................             29,000
      NEW ZEALAND....................................         6,506,528 

[[Page 1251]]
                                                                        
      POLAND.........................................            300,000
      PORTUGAL.......................................            223,691
      SWEDEN.........................................            143,527
      COSTA RICA.....................................          1,550,000
      CZECH REPUBLIC.................................            200,000
      SLOVAK REPUBLIC................................            600,000
      URUGUAY........................................            250,000
BLUE-MOLD CHEESE (EXCEPT STILTON PRODUCED IN THE                        
 UNITED KINGDOM) AND CHEESE AND SUBSTITUTES FOR                         
 CHEESE CONTAINING, OR PROCESSED FROM, BLUE-MOLD                        
 CHEESE:                                                                
    (Note 17)........................................            200,000
      EU.............................................            150,000
      CZECH REPUBLIC.................................             50,000
CHEDDAR CHEESE, AND CHEESE AND SUBSTITUTES FOR CHEESE                   
 CONTAINING, OR PROCESSED FROM, CHEDDAR CHEESE:                         
    (Note 18)........................................          4,244,033
      AUSTRALIA......................................            840,501
      EU.............................................            500,000
      NEW ZEALAND....................................          2,853,532
      CZECH REPUBLIC.................................             50,000
AMERICAN-TYPE CHEESE, INCLUDING COLBY, WASHED CURD                      
 AND GRANULAR CHEESE (BUT NOT INCLUDING CHEDDAR) AND                    
 CHEESE AND SUBSTITUTES FOR CHEESE CONTAINING, OR                       
 PROCESSED FROM, SUCH AMERICAN-TYPE CHEESE:                             
    (Note 19)........................................            407,003
      AUSTRALIA......................................            119,002
      EU.............................................             50,000
      NEW ZEALAND....................................            238,001
EDAM AND GOUDA CHEESE, AND CHEESE AND SUBSTITUTES FOR                   
 CHEESE CONTAINING, OR PROCESSED FROM, EDAM AND GOUDA                   
 CHEESE:                                                                
    (Note 20)........................................            710,000
      ARGENTINA......................................            110,000
      AUSTRIA........................................            200,000
      EU.............................................            300,000
      CZECH REPUBLIC.................................            100,000
ITALIAN-TYPE CHEESES, MADE FROM COW'S MILK (ROMANO                      
 MADE FROM COW'S MILK, REGGIANO, PARMESAN, PROVOLONE,                   
 PROVOLETTI AND SBRINZ AND GOYA), AND CHEESE AND                        
 SUBSTITUTES FOR CHEESE CONTAINING, OR PROCESSED                        
 FROM, SUCH ITALIAN-TYPE CHEESES, WHETHER OR NOT IN                     
 ORIGINAL LOAVES:                                                       
    (Note 21)........................................          5,285,517
      ARGENTINA......................................          2,257,517
      EU.............................................            350,000
      URUGUAY........................................          1,178,000
      HUNGARY........................................            400,000
      POLAND.........................................          1,325,000
SWISS OR EMMENTHALER CHEESE OTHER THAN WITH EYE                         
 FORMATION, GRUYERE-PROCESS CHEESE AND CHEESE AND                       
 SUBSTITUTES FOR CHEESE CONTAINING, OR PROCESSED                        
 FROM, SUCH CHEESES:                                                    
    (Note 22)........................................          1,011,219
      AUSTRIA........................................            181,006
      EU.............................................            150,000
      SWITZERLAND....................................            428,213
      FINLAND........................................            252,000
CHEESE AND SUBSTITUTES FOR CHEESE, CONTAINING 0.5                       
 PERCENT OR LESS BY WEIGHT OF BUTTERFAT, PROVIDED FOR                   
 IN (EXCEPT ARTICLES WITHIN THE SCOPE OF OTHER IMPORT                   
 QUOTAS PROVIDED FOR IN THIS SUBCHAPTER), AND                           
 MARGARINE CHEESE:                                                      
    (Note 23)........................................          1,175,316
      SWEDEN.........................................            125,316
      ISRAEL.........................................             50,000
      NEW ZEALAND....................................          1,000,000
SWISS OR EMMENTHALER CHEESE WITH EYE FORMATION:                         
    (Note 25)........................................         10,992,735
      ARGENTINA......................................             70,885
      AUSTRIA........................................          1,345,509
      AUSTRALIA......................................            290,302
      CANADA.........................................             70,000
      SWITZERLAND....................................          1,782,685
      EU.............................................            350,000
      FINLAND........................................          2,722,926
      ICELAND........................................            150,001
      NORWAY.........................................          3,070,427
      CZECH REPUBLIC.................................           400,000 

[[Page 1252]]
                                                                        
      HUNGARY........................................            400,000
      SWEDEN.........................................            300,000
                                                      ------------------
      TOTAL: CHEESE ARTICLES.........................        38,903,522 
------------------------------------------------------------------------
\1\ This Appendix includes articles for which countries of origin       
  designate importers. The articles and quantities included in this     
  appendix for certain cheese may be modified as provided in Sec.       
  6.25(d)(3).                                                           


    Signed at Washington, DC on January 2, 1996.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 96-329 Filed 1-17-96; 8:45 am]
BILLING CODE 3410-10-P