[Federal Register Volume 61, Number 91 (Thursday, May 9, 1996)]
[Rules and Regulations]
[Pages 21053-21065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11602]



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DEPARTMENT OF AGRICULTURE
7 CFR Part 1280

[No. LS-95-010]


Sheep Promotion Research, and Information Program: Rules and 
Regulations

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule implements provisions of a Sheep and Wool 
Promotion, Research, Education, and Information Order (Order), which 
will establish a national, industry-funded sheep and wool promotion, 
research, and information program. This final rule establishes the 
collection and remittance process, puts into effect the reporting 
requirements, identifies and establishes the Harmonized Tariff Schedule 
(HTS) classification numbers, conversion factors, and assessment rates 
for imported sheep, sheep meat, wool, and wool products subject to 
assessment, establishes procedures for calculating, collecting, and 
remitting assessments on imported sheep, sheep meat, wool, and wool 
products and establishes the basis for excluding certain imported sheep 
and sheep products from assessment. Because the

[[Page 21054]]

Sheep Promotion, Research, and Information Act of 1994 (Act) provides 
that imported raw wool will be exempted from the collecting provisions, 
imported raw wool is not subject to assessment.

EFFECTIVE DATE: This final rule will become effective July 1, 1996.

FOR FURTHER INFORMATION CONTACT:
Ralph L. Tapp, Chief; Marketing Programs Branch; Livestock and Seed 
Division; Agricultural Marketing Service (AMS), USDA, Room 2606-S; P.O. 
Box 96456; Washington, DC 20090-6456, telephone number 202/720-1115.

SUPPLEMENTARY INFORMATION: Prior document in this proceeding: Proposed 
Rule--Sheep Promotion and Research Program: Rules and Regulations--60 
Federal Register (FR) 51737 (October 3, 1995).

Regulatory Impact Analysis

Executive Orders 12866 and 12778 and the Regulatory Flexibility Act

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866 and therefore has not been reviewed 
by the Office of Management and Budget (OMB).
    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. It is not intended to have a retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies unless they present an irreconcilable conflict with this rule.
    The Act provides that any person subject to the Order may file with 
the Secretary a petition stating that the Order, any provision of the 
Order, or any obligation imposed in connection with the Order is not in 
accordance with the law, and requesting a modification of the Order or 
an exemption from certain provisions or obligations of the Order. The 
petitioner will have the opportunity for a hearing on the petition. 
Thereafter, the Secretary will issue a decision on the petition. The 
Act provides that the district court of the United States in any 
district in which the petitioner resides or carries on business has 
jurisdiction to review the Secretary's decision, if the petitioner 
files a complaint for that purpose not later than 20 days after the 
date of the entry of the Secretary's decision. The petitioner must 
exhaust his or her administrative remedies before he or she can 
initiate any such proceeding in the district court.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.), AMS has considered the economic 
impact of this final action on small entities. The purpose of RFA is to 
fit regulatory actions to the scale of businesses subject to such 
actions in order that small businesses will not be unduly burdened.
    There are an estimated 87,350 domestic sheep producers and feeders 
and an estimated 700 remittance persons who will be subject to the 
rules and regulations issued pursuant to the Order. There are also an 
estimated 9,000 importers who will become subject to these rules and 
regulations. Nearly every sheep producer, feeder, and importer will be 
classified as a small business under the criteria established by the 
Small Business Administration (13 CFR Sec. 121.601).
    The Act provides for the establishment of a coordinated program of 
promotion and research designed to strengthen the sheep industry's 
position in the marketplace and to maintain and expand foreign and 
domestic markets and uses for sheep and sheep products. This program 
will be financed by assessments on domestic and imported sheep and 
sheep products which includes wool and wool products. Pursuant to the 
Act, an Order approved in referendum was published on May 2, 1996, in 
the Federal Register (XX FR XXXXX). The final Order became effective on 
May 3, 1996, except for provisions concerning assessments. Those Order 
provisions become effective July 1, 1996.
    This final rule establishes the collection and remittance process, 
puts into effect the reporting requirements of an Order, identifies and 
establishes HTS classification numbers, conversion factors, and 
assessment rates for imported sheep and sheep products (sheep meat, 
wool, and wood products) subject to the assessment, establishes 
procedures for calculating, collecting, and remitting assessments on 
imported sheep, sheep meat, wool, and wool products and establishes the 
basis for excluding certain imported sheep and sheep products from 
assessment. Because the Act exempts imported raw wool from the 
collecting provisions, imported raw wool is not a subject to 
assessment.
    This final rule will implement applicable Order provisions in the 
manner provided therein. Accordingly, the Administrator of AMS has 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities.

Paperwork Reduction

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
Chapter 35), OMB has approved the information collection and 
recordkeeping requirements contained in Part 1280 for domestic 
producers, feeders, handlers, and processors of sheep and wool, and 
assigned control number 0581-0093.
    Based on comparable research and promotion programs, it should 
require approximately 0.5 hours per response for producers, feeders, 
handlers, and persons other than the person making payment to the 
producer, feeder, or handler, to complete a reporting form on a monthly 
basis.
    For importers, the Department of Agriculture (Department) intends 
to rely to a great extent on records maintained by the U.S. Customs 
Service (Customs) and by importers under Customs's requirements for its 
administration and enforcement of the provisions of the final 
regulations.
    Any person subject to the assessment, collection, and remittance 
provisions of the Act and the Order would be expected to maintain and 
make available to the Secretary such books and records as necessary to 
carry out the provisions of the Order and these regulations. Such books 
and records must be maintained for at least 2 years beyond the fiscal 
period of their applicability.

Background

    The Act (7 U.S.C. 7101-7111) enacted on October 22, 1994, 
authorizes the Secretary to establish a national sheep and wool 
promotion, research, education, and information program designed to 
strengthen the sheep industry's position in the marketplace, to 
maintain and expand existing domestic and foreign markets and uses for 
sheep and sheep products and to develop new markets and uses for sheep 
and sheep products. The program will be funded by assessments on 
domestic sheep producers, sheep feeders, and exporters of live sheep 
and greasy wool of 1 cent per pound on live sheep sold and 2 cents per 
pound on greasy wool sold. Importers will be assessed 1 cent per pound 
on live sheep imported and the equivalent of 1 cent per pound of live 
sheep for sheep products imported as well as 2 cents per pound of 
degreased wool or the equivalent of degreased wool for wool and wool 
products imported. Imported raw wool will be exempt from assessments. 
Each person who processes or causes to be processed sheep or sheep 
products of that person's own production and markets the processed 
products will be assessed the equivalent of 1 cent per pound of live 
sheep sold or 2 cents per pound of greasy wool sold. All assessment 
rates may be adjusted in accordance with applicable provisions of the 
Act.

[[Page 21055]]

    The Order requires that each person who makes payment to a sheep 
producer, feeder, or handler of sheep or sheep products be a collecting 
person who collects the assessment from the producer, feeder, or 
handler of sheep or sheep products and passes the collected assessment 
on to the subsequent purchaser pursuant to the Act. Any person who buys 
domestic live sheep or greasy wool for processing must collect the 
assessment from the producer, feeder, or handler and remit it to the 
National Sheep Promotion, Research, and Information Board (Board). Any 
person who processes or causes to be processed sheep or sheep products 
of the person's own production and markets the processed products is 
required to pay an assessment and to remit that assessment to the 
Board. Any person who exports live sheep or greasy wool is required to 
pay an assessment and to remit it to the Board at the time of export. 
Finally, each person who imports sheep and sheep products, other than 
imported raw wool, is required to pay an assessment. Customs will 
collect the assessments on imported sheep and sheep products upon 
importation and forward them to AMS for disbursement to the Board.
    The Order further defines a collecting person as any person who is 
responsible for collecting an assessment pursuant to the Act, the 
Order, and these regulations, including processors and any other 
persons who are required to remit assessments to the Board, except that 
a collecting person who is a market agency, i.e., commission merchant, 
auction market, or livestock market in the business of receiving such 
sheep or sheep products for sale on commission for or on behalf of a 
producer or feeder, shall pass the collected assessment on to the 
subsequent purchaser pursuant to the Act, the Order and these 
regulations.
    For the purposes of the collection of assessments on imported sheep 
and sheep products by Customs, the Harmonized Tariff Schedule (HTS) 
classification numbers published by the United States International 
Trade Commission (USITC) will be used to identify imported sheep and 
sheep products that are subject to the assessment. The HTS 
classification system identifies each category of imported sheep, sheep 
meat, wool, and products that contain wool fiber by a 10-digit 
classification number and provides a brief description of the imported 
product that corresponds to the various classification numbers. 
Additionally, the HTS classification number may be further divided into 
multiple fiber categories for products that contain a blend of fibers.
    In determining which HTS classification numbers are assessed under 
this final rule, the Department's primary objectives were to meet the 
intent of the Act by maximizing participation of imported sheep, sheep 
meat, wool, and wool products in the assessment collection provisions 
of the Act and to minimize the burden of administering those 
provisions. To make certain these objectives would be met, the 
Department reviewed 5 years, 1989-1993, of historical import data for 
sheep, sheep meat, wool and products containing wool fibers from the 
Bureau of Census of the U.S. Department of Commerce. These data are 
available on CD-ROM, entitled ``International Harmonized System 
Commodity Classification by Country by Customs District.'' The 
Department analyzed the total volume of imported sheep, sheep meat, 
wool, and wool products subject to the assessment by identifying the 
HTS classification numbers and corresponding conversion factors.
    The Department identified over 700 HTS classification numbers 
during a review of the import library published by the Department's 
Economic Research Service (ERS). The Department has determined that of 
the approximately 700 HTS classification numbers, slightly more than 
600 are considered active or potentially subject to assessment. These 
numbers are continually updated, deleted, or expanded, thereby 
eliminating existing HTS categories or creating new ones. Based on the 
projected revenue for imported sheep and sheep products, from the 
slightly more than 600 active HTS classification numbers for sheep and 
sheep products, the Department identified in the October 3, 1995, 
Federal Register (60 FR 51737) 340 HTS classification numbers that 
account for over 99 percent of the total projected import revenues. 
Accordingly, the Department has limited the collection of assessments 
to this lower level, thereby not including a significant number of low-
volume HTS categories.
    Limiting the number of imported sheep and sheep products that would 
be subject to assessments would reduce the administrative cost and 
burden on Customs and importers, and would reduce administrative costs 
to the Board, while allowing the Board to collect the vast majority of 
potential import assessments consistent with the Act.
    The USITC recently published an updated list of all of the HTS 
classification numbers. Some HTS classification numbers published in 
the October 3, 1995, proposed rule have been changed and one has been 
divided into two numbers. In light of the recent update, the Department 
has expanded the HTS classification numbers that will be subject to the 
assessment from 340, as initially proposed, to 341. Therefore, the 
following revisions to Table I, Imported Sheep and Sheep Products 
Assessment Table, used in the sheep and wool promotion, research and 
information program were necessary:

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               Old number                    New number                            Comment                      
----------------------------------------------------------------------------------------------------------------
5703100000..............................        5703100020  Use same conversion factor.                         
                                                5703100080      Do.                                             
5705002010..............................        5705002005      Do.                                             
6104591000..............................        6104591005      Do.                                             
6115199020..............................        6115198020      Do.                                             
6115932910..............................        6115939010      Do.                                             
6204693020..............................        6204696020      Do.                                             
----------------------------------------------------------------------------------------------------------------

    Because import assessments are based on a live-weight equivalent 
for imported sheep meat and degreased wool, or its equivalent for wool 
and wool products, the Department has decided to use conversion factors 
developed and published by ERS to convert imported sheep products to 
the required live-weight equivalents, degreased wool, or degreased wool 
equivalents, to determine the amount of assessment due on each HTS 
category upon importation. These conversion factors are available for 
the over 700 HTS classification numbers and are updated and maintained 
as an import library. For sheep meat, these conversion factors take 
into account removal of bone, weight lost in processing or cooking, and 
the nonsheep components of the sheep products. For wool and products

[[Page 21056]]

containing wool fibers, these conversion factors take into account 
fiber loss during processing, fabric trim loss, and cutting loss for 
wool, and other non-sheep components of wool and wool products. The 
Department has decided to use these conversion factors for calculating 
the assessment because calculating carcass equivalents and wool content 
for each individual product before entry would be both costly and 
impractical.
    The factors for calculating the assessment on imported sheep, sheep 
meat, wool, and products containing wool fiber include the (1) HTS 
classification number, (2) conversion factor, (3) assessment rate as 
established under the Act, and (4) dressing percentage. Based on a 9-
year average, 1980-1989, the average dressing percentage for sheep in 
the United States is 50.2 percent, as published by ERS in the 1992 
edition of Conversion Factors, Weights and Measures of Agricultural 
Commodities and Their Products.
    Imported live sheep require no conversion because each animal will 
be assessed based on its live weight.
    Examples of calculating the assessment on sheep, sheep meat, wool, 
and products containing wool fibers are as follows:

Example I

Live Sheep
    To calculate the assessment for live sheep, an importer would 
multiply the total weight of imported live sheep by 1 cent per pound. 
The following example illustrates a typical calculation for imported 
live sheep:

HTS 0104100000, Live sheep:                                             
  Live Weight...........................       125 lbs                  
  Assessment rate.......................   x   $0.01/lb                 
                                              --------------------------
      Assessment........................       $1.25                    
                                                                        

Examples II and III

Sheep Meat
    To calculate the assessment for imported sheep meat, an importer 
would (1) multiply the total weight of imported sheep meat by the 
conversion to determine the total carcass weight equivalent, then (2) 
divide the total carcass weight equivalent by 50.2 percent to calculate 
the live animal equivalent, and (3) multiply the live animal equivalent 
by 1 cent per pound. The following examples illustrate two typical 
sheep meat calculations:
1. Sheep Meat (Bone-in)

HTS 0204100000, Carcasses and half                                      
 carcasses of lamb, fresh or chilled:                                   
  Net Weight...........................       1,000 lbs                 
  Conversion factor....................   x   1.00                      
                                             ---------------------------
  Carcass weight equivalent............   =   1,000 lbs                 
  Average dressing percent.............