[Federal Register Volume 62, Number 55 (Friday, March 21, 1997)]
[Proposed Rules]
[Pages 13546-13551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6732]
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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.
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Federal Register / Vol. 62, No. 55 / Friday, March 21, 1997 /
Proposed Rules
[[Page 13546]]
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 723
RIN 0560-AE96
Amendment to the Tobacco Marketing Quota Regulations
AGENCY: Farm Service Agency, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes improving the administration of the tobacco
marketing quota and price support program by amending program
regulations to: provide for making quota ``inequity adjustments'' on a
``common ownership unit'' basis rather than strictly on a ``farm''
basis; eliminate unduly restrictive deadlines for the mailing of
certain quota notices; permit, for burley and flue-cured tobacco,
disaster transfers to be made by cash lessees, from cash rented farms,
without the owner's signature; provide greater flexibility in the
setting of penalty amounts for burley and flue-cured tobacco
violations; eliminate a provision that requires yearly publication in
the Federal Register of certain routine and noncontroversial penalty
computations; remove regulations governing the 1994-calendar year only
``domestic marketing assessment'', which was applicable to the use by
certain cigarette manufacturers of set percentages of domestic tobacco;
codify certain statutory provisions concerning, and penalties related
to, setting burley and flue-cured tobacco quotas; and add several
technical changes, including changes to reflect a recent reorganization
of the Department of Agriculture.
DATES: Comments must be received by May 20, 1997 to be assured of
consideration.
ADDRESSES: Submit comments on the proposed rule to: Director, Tobacco
and Peanuts Division, USDA, FSA, STOP 0514, P.O. Box 2415, Washington,
DC 20013-2415. Comments may be faxed to 202-690-2298. All written
submissions made pursuant to this rule will be made available for
public inspection in Room 5750 South Building, USDA, between the hours
of 8:15 a.m. and 4:45 p.m., during regular Federal workdays.
FOR FURTHER INFORMATION CONTACT: Verner Grise, Director, Tobacco and
Peanuts Analysis Staff, Tobacco and Peanuts Division, USDA, FSA, STOP
0514, P.O. Box 2415, Washington, DC 20013-2415, telephone 202-720-5291.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be not significant and
therefore was not reviewed by OMB under Executive Order 12866.
Regulatory Flexibility Act
The Regulatory Flexibility Act is not applicable to this proposed
rule since the Farm Service Agency (FSA) is not required by 5 U.S.C.
553 or any other provision of law to publish a notice of proposed rule
making with respect to the subject matter of this rule.
Federal Assistance Program
The title and number of the Federal Assistance Program, as found in
the Catalog of Federal Domestic Assistance, to which this rule applies
are: Commodity Loans and Purchases--10.051.
Environmental Evaluation
It has been determined by an environmental evaluation that this
action will have no significant impact on the quality of the human
environment. Therefore, neither an environmental assessment nor an
environmental impact statement is needed.
Executive Order 12372
This activity is not subject to the provisions of Executive Order
12372, which requires intergovernmental consultation with State and
local officials. See the notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115 (June 24, 1983).
Executive Order 12988
This proposed rule has been reviewed in accordance with Executive
Order 12988. The provisions of this proposed rule are not retroactive
and preempt State laws to the extent that such laws are inconsistent
with the provisions of this proposed rule. Before any legal action is
brought regarding determinations made under provisions of 7 CFR part
723, the administrative appeal provisions set forth at 7 CFR Part 780
and 7 CFR Part 711, as applicable, must be exhausted.
Paperwork Reduction Act
This proposed rule does not contain new or revised information
collection requirements that require approval by OMB under the
Paperwork Reduction Act (44 U.S.C. 3507 et seq). The information
collections required in 7 CFR Part 723 have previously been cleared
under OMB control number 0560-0058.
Background and Discussion
The tobacco marketing quota and price support program is operated
by the Department of Agriculture pursuant to provisions of the
Agricultural Adjustment Act of 1938, as amended (the 1938 Act) and the
Agricultural Act of 1949, as amended (the 1949 Act). This proposed rule
would, as described below, modify tobacco marketing quota regulations
in 7 CFR Part 723. Related price support regulations are codified in 7
CFR Part 1464.
1. Allocation of Inequity Adjustments
The 1938 Act permits the FSA, out of limited national reserves, to
make so-called ``inequity adjustments'' in old farm allotments or
quotas in order to alleviate quota disparities between farms in a
county. Current rules, at Sec. 723.210, call for those adjustments to
be made by ``farm'' as that term is defined for FSA commodity support
purposes. However, for tobacco, there may, in effect, be ``farms''
within a farm when there are different common ownership units within
the farm. For that reason, to allow for greater equity, it is proposed
that the rules be modified to allow local FSA committees to choose, at
their discretion, to make inequity adjustments by common ownership
units in which case the quota adjustment would inure to the common
ownership unit rather than to the whole farm. The rule would also add,
in Sec. 723.104, a definition of ``common ownership unit'' to
facilitate the administration of the proposed change for allocating
inequity adjustments and the transfer of quota by sale.
[[Page 13547]]
2. Mailing Notices of Farm Acreage Allotments and Marketing Quotas
Current rules, in Sec. 723.213, require that quota notices be
mailed by a certain date if the quota is to be modified because of a
violation, a revision or adjustment in the allotment or quota for the
farm, or a farm reconstitution. The deadline is April 1 for farms in
Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.
Otherwise, the deadline is May 1. Those dates are not suitable in all
instances since there may be transfers affecting the quota which have
not occurred by those dates. For that reason, and because the
regulation is strictly a matter of agency procedure, it is proposed
that these deadlines be removed from the regulations. Because of the
special considerations that accompany reductions for violations, it
would remain the agency's intention with respect to notices concerning
reductions in quota because of violations to meet the same deadlines as
those that are now in the regulations.
3. Approval of Disaster Lease and Transfer Agreements--Cash Rented
Farms
Burley and flue-cured tobacco are different from other kinds of
tobacco in that they are subject to quotas on a poundage basis. All
other tobaccos are limited by acreage only. Burley tobacco is limited
by pounds only and flue-cured tobacco is limited both by acres and
pounds. With respect to burley and flue-cured tobacco, disaster
transfers of quota pounds can be made during the harvest season if,
despite the producer's best efforts, the quota is not fully produced
because of a natural disaster. Currently, all such transfers require
the farm owner to sign the transfer documents. This rule proposes
amending Sec. 723.216 to provide that such owner's signature is not
needed when the farm is cash-rented or leased by the farm operator.
This would reflect that the owner does not have an interest in the
current year's tobacco crop or marketing quota. This would effectively
and conclusively, presume that the farm operator or tobacco producer
has paid for the quota for the current year to use to market the crop
or, as the case may be, to disaster lease and transfer the unused quota
from the farm.
4. Producer Penalty Calculations
Penalties can be assessed against producers under the 1938 Act for
excess marketings and other offenses. Section 314 of the 1938 Act
provides that the penalty rate is equal to 75 percent of the average
market price for the kind of tobacco for the immediately preceding
marketing year. That rate is applied, then, to the penalty quantity of
tobacco. Generally, under section 314, that quantity is the amount of
the excess marketings. However, section 317(g) of the 1938 Act
provides, for the poundage quota tobaccos (burley and flue-cured) only,
that no penalty shall be due or collected until 103 percent of the
marketing quota has been marketed except that where a producer falsely
identifies, or fails to account for the disposition of any tobacco, the
Secretary, in lieu of assessing and collecting penalties based on the
actual marketings of excess tobacco, may elect to assess a penalty
computed by multiplying the full penalty rate by an amount of tobacco
equal to 25 percent of the farm's effective marketing quota plus the
farm yield for the number of acres harvested in excess of the farm
acreage allotment. Thus for burley and flue-cured tobacco, two possible
standards exist for determining the penalty quantity: (1) The excess-
over-103-percent standard (``the 103-percent standard'') and (2) the
25-percent-of-quota standard (``the 25-percent standard''). In some
cases, however, the producer may have no excess marketings, but may
have mis-marketed a small number of pounds on the farm's marketing card
in which case the 25-percent standard may produce a penalty which a
local FSA committee could feel is too harsh. This could lead, by use of
the 103-percent standard, to no penalty at all which could be too
lenient. Given that the use of the full 25-percent-of-quota standard is
strictly discretionary, it would appear to follow that, in cases where
the 25-percent standard could otherwise be applied, the Secretary could
choose a penalty quantity ``up to'' 25-percent. Changing Sec. 723.409
to add that flexibility is proposed in this notice. This would, if
adopted, allow the penalty quantity to be, more appropriately, the
actual amount of pounds in violation, which could better reflect the
relative significance of different violations. This amendment will not
affect the penalty quantity for buyers, dealers, or warehouse
operators. Tobacco buyers, dealers, warehouse operators, and others
will be required to collect the full penalty rate for each pound of
invalid or suspicious marketings. In the event of an over-collection,
the penalty can be refunded.
5. Elimination of Publication in the Federal Register of Certain
Mathematical Computations
Also, it is proposed, with respect to penalties, that Sec. 723.308
be modified to remove the provision that requires publication in the
Federal Register of the penalty rate calculations for the individual
kinds of tobacco. Those rates are mathematical calculations based on
market prices and the amounts should be, within a very close amount,
well known by interested parties based on their knowledge of market
conditions. As in the past, effective notice will be provided by press
release. Further information, if needed, can be obtained by inquiry.
For these reasons, publication in the Federal Register does not appear
to be necessary.
6. Removal of Regulations Concerning the 1994 Domestic Marketing
Assessment for Manufacturers Whose Use of Domestic Tobacco Fell Below
75 Percent
This rule also proposes removing the regulations that currently
appear in Subpart E, as those regulations deal with an assessment that
only applied with respect to activities which occurred in calendar year
1994. Specifically, budget legislation enacted in 1993 provided for a
``domestic marketing assessment'' (DMA) to be applied to certain
manufacturers of cigarettes if their use of domestic tobacco did not,
for certain cigarettes, over a calendar year, amount to 75 percent of
their total tobacco use. Later legislation limited the application of
the DMA to activities occurring in calendar year 1994. Accordingly, it
does not appear worthwhile to continue the codification of the DMA
regulations. Removal of the rules will not, however, affect liabilities
with respect to the DMA for activities occurring in calendar year 1994.
7. Codification of Regulations Dealing With Establishing the National
Marketing Quotas for Burley and Flue-Cured Tobacco
It is also proposed that a new subpart be added to codify
provisions dealing with the annual establishment of the burley and
flue-cured tobacco national marketing quotas. The quotas for burley and
flue-cured tobaccos, unlike the allotments for other supported
tobaccos, are set, as provided for by statute, in a manner that takes
into account pre-announced purchase intentions of certain cigarette
manufacturers. Specifically, the calculation takes into account the
purchase intentions of those cigarette manufacturers who meet the 1938
Act definition of a ``domestic manufacturer of cigarettes'' by
producing at least 1 percent of the cigarettes produced and sold in the
United States. The 1938 Act provides, under section 317 for flue-cured
tobacco, and section 319 for burley
[[Page 13548]]
tobacco, that the quota for each kind is the amount, computed
separately which, with an allowance for the Secretary to make a
discretionary upward or downward adjustment of up to 3 percent in the
total, equals the sum of: (1) The aggregate, for the upcoming year, of
the stated intentions of the manufacturers to purchase eligible tobacco
of the relevant kind from regular auction markets, producers, or from
the inventories of the relevant producer loan associations; (2) the
average annual exports of that kind of domestic tobacco for the past 3
years; and (3) the amount the Secretary deems, in his discretion, is
needed to adjust the current inventories of the producer loan
associations to establish stocks at the reserve stock level for the
respective kind of tobacco. The reserve stock level is defined in
section 301 of the 1938 Act to be, for burley tobacco, the greater of
50 million pounds or 15 percent of the previous year's quota. For flue-
cured tobacco that level is defined to be the greater of 100 million
pounds or 15 percent of the previous year's quota. Section 319 of the
1938 Act provides, however, that the reserve stock level downward
adjustment for burley tobacco may not exceed the greater of 35 million
pounds or 50 percent of the quantity by which loan inventories exceed
the reserve stock level. Section 320A of the 1938 Act requires that the
statement of purchase intentions be filed by all manufacturers who meet
the ``domestic manufacturer of cigarettes'' definition and provides
that if a manufacturer fails to file such a statement the Secretary
must estimate the purchases for the manufacturer based on the
manufacturer's previous submissions. The statements of intention are
due before the marketing year. Section 320A of the 1938 Act sets
December 1 as the deadline for flue-cured purchase intentions. For
burley, section 320A sets January 15 as the deadline. Also, section
320A contains confidentiality provisions to protect the statements
filed by manufacturers.
Further, section 320B of the 1938 Act provides that cigarette
manufacturers must report their tobacco purchases at the end of the
year so that a comparison can be made with their statement of
intentions. Under section 320B, the manufacturer must pay a per pound
penalty, equal to twice the purchaser's share of the no-net-cost
assessment rate for the relevant marketing year, if their purchases do
not amount to 90 percent of their stated intentions. Section 320B
provides that the penalty will be assessed on the full amount of the
shortage except that 320B also provides that the statements of
intention will be adjusted downward if producers do not, counting price
support loan placements, produce, in the aggregate, the total national
quota for the relevant kind of tobacco (burley or flue-cured) for the
relevant marketing year.
These provisions have been in place for many years. This rule
proposes, however, to codify current policy to allow for comment and
modification as needed. As with current practice, the rule provides for
counting indirect and direct purchases for statement of purchase
intentions and for calculations of compliance with those intentions.
Also, the rule, for these purposes, as with current practice, specifies
that purchases of leaf, stems, trimmings, and scrap tobacco for export
should be excluded from the purchase intentions and from the purchases
that are countable toward meeting the manufacturer's obligations.
8. Technical Changes in the Regulations
This rule would also make certain technical changes, including
changing references from ``ASC'' to ``FSA'' to reflect that under a
recent reorganization, many of the functions of the former Agricultural
Stabilization and Conservation Service are now handled by the USDA's
Farm Service Agency.
List of Subjects in 7 CFR Part 723
Acreage allotments, Dealers, Domestic cigarette manufacturers,
Marketing quotas, Penalties, Tobacco
Proposed Rule
For the reasons set forth in the preamble, it is proposed that 7
CFR Part 723 be amended as follows:
PART 723--TOBACCO
1. The authority citation for 7 CFR part 723 continues to read as
follows:
Authority: 7 U.S.C. 1301, 1311-1314, 1314-1, 1314b, 1314b-1,
1314b-2, 1314c, 1314d, 1314e, 1314f, 1314i, 1315, 1316, 1362, 1363,
1372-75, 1377-1379, 1421, 1445-1 and 1445-2.
2. Section 723.104 is to be amended by adding definitions for
``common ownership unit'', ``Farm Service Agency'', and ``FSA'' in
their proper alphabetical order to read as follows:
Sec. 723.104 Definitions.
Common ownership unit. A common ownership unit is a distinguishable
part of a farm, consisting of one or more tracts of land with the same
owners as determined by FSA.
Farm Service Agency. An agency within the U.S. Department of
Agriculture.
FSA. The Farm Service Agency.
* * * * *
3. Section 723.210 is amended by adding a new paragraph (d) to read
as follows:
Sec. 723.210 Corrections of errors and adjusting inequities in acreage
allotments and marketing quotas for old farms.
* * * * *
(d) Making certain adjustments on a common ownership unit basis.
Notwithstanding other provisions of this section, inequity adjustments
may be allotted by common ownership unit rather than by farm when it is
determined by the county FSA committee that the making of the
determination on that basis provides greater equity.
Sec. 723.213 [Amended]
4. Section 723.213 is amended by removing paragraph (c) and
redesignating paragraph (d) as paragraph (c).
5. Section 723.216(a) is amended by revising paragraph (a)
introductory text and by revising paragraphs (a)(2)(ii)(A) and
(a)(2)(iii)(A), to read as follows:
Sec. 723.216 Transfers of tobacco acreage allotment or marketing quota
by sale, lease, or owner.
(a) General. The allotment or quota established for a farm may be
transferred to another farm to the extent provided for in this section.
For transfers by sale, common ownership units on a farm may be
considered to be separate farms. Transfers are not permitted for cigar
binder (types 54 and 55) tobacco allotments.
* * * * *
(2) * * *
(ii) * * *
(A) Leases. The owner and operator of the transferring farm and the
owner or operator of the receiving farm. For leases made under the
disaster provisions of this section, the signature of the owner will
not be required if the FSA determines that the farm is cash leased for
the current crop year and that the owner does not share in the crop.
* * * * *
(iii) * * *
(A) Leases. The owner of the transferring farm and the owner or
operator of the receiving farm. For leases made under the disaster
provisions of this section, the signature of the owner will not be
required if the FSA determines that the farm is cash leased for the
crop year and that the owner does not share in the crop.
* * * * *
[[Page 13549]]
Sec. 723.308 [Amended]
6. Section 723.308 is amended by adding ``and announced annually''
after ``determined'' in the first sentence and removing the second
sentence.
7. Section 723.409 is amended by revising paragraphs (a), (b),
(e)(1), (e)(2) introductory text, and (f) and by removing paragraph
(g), such that the revised paragraphs in Sec. 723.409 will read as
follows:
Sec. 723.409 Producer violations, penalties, false identification and
related issues.
(a) Generally--(1) Circumstances in which penalties are due. A
penalty shall be due on all marketings from a farm which are:
(i) in excess of the applicable quota or allotment;
(ii) made without a valid marketing card;
(iii) made under circumstances where the buyer or dealer, or their
agents, know, or have reason to know, that the tobacco was, or is,
marketed in a manner which by itself or in combination with other
marketings is designed to, or has the effect of, defeating the purposes
of the tobacco price support and production adjustment program,
avoiding marketing quota limitations, or otherwise avoiding provision
of this part or part 1464;
(iv) falsely identified; or,
(v) marketings for which the producer fails to make a proper
account as required by the provisions of this part.
(2) Amount of the penalty. The amount of the penalty shall be the
amount computed by multiplying the penalty rate by the penalty
quantity.
(3) Penalty rate. The penalty rate for purposes of this section is
that rate which is computed as the penalty rate per pound for the
applicable kind of tobacco under Sec. 723.308, except to the extent
that a converted penalty rate may be used as provided for in this
section.
(4) Penalty quantity. The quantity of tobacco that is determined by
the county FSA committee to be subject to penalty, provided further
that:
(i) For burley and flue-cured tobacco, the penalty quantity for
purposes of this section shall be the amount of marketings from the
farm in excess of 103 percent of the farm's effective marketing quota
for that year, except that if the violation involves false
identification or a failure to account for tobacco, the FSA may, in its
discretion, depending on the nature of the violations, use as the
penalty quantity an amount up to 25 percent of the farm's effective
marketing quota plus 100 percent of the farm yield on any excess
acreage for the farm (acreage planted in excess of the allotted acres,
as estimated or determined).
(ii) For tobaccos other than burley and flue-cured tobacco, the
penalty quantity shall be the amount of marketings from the farm in
excess of the farm's marketing quota provided further, that in order to
aid in the collection of the penalty the FSA shall endeavor, to the
extent practicable, to apply the penalty to all of the farm's
marketings by converting the full penalty rate to a converted
proportionate penalty rate which rate may be identified on the
producer's marketing card and collected and remitted accordingly. In
making the calculation of the converted penalty rate, the agency shall
take into account any carryover tobacco applicable for the farm. If an
erroneous penalty rate is shown on the marketing card, then the
producer of the tobacco and the producer who marketed the tobacco shall
be liable for any balance due.
(5) Limitations on reduced penalty quantities. No penalty shall, to
the extent that there is discretion to do otherwise, be assessed at an
amount which is less than the amount equal to the full penalty rate
multiplied by the full number of pounds that are, or are estimated to
be, subject to penalty, unless it is determined by the county FSA
committee, with the concurrence of the State FSA committee, that all of
the following exist with respect to such violation:
(i) The violation was inadvertent and unintentional;
(ii) All of the farm's production has been accounted for and there
are no excess marketings for which there are penalties outstanding;
(iii) The records for all involved farms have been corrected to
show the marketings involved; and
(iv) The false identification or failure to account did not give
the producer an advantage under the program.
(6) Effect of improper, invalid, deceptive or unaccounted for
marketings on penalty quantity calculation. Any marketing made without
a valid marketing card, falsely-identified, or unaccounted for in
accordance with the requirements of this part, or made under
circumstances which are designed to, or have the effect of, defeating
the purpose of the tobacco marketing quota and price support program,
avoiding any limitation on marketings, avoiding a penalty, or avoiding
compliance with, or the requirements of, any regulation under this part
or under part 1464, shall be considered an excess marketing of tobacco.
Further, such marketings shall, unless shown to the satisfaction of the
county FSA committee to be otherwise, be considered, where relevant, to
be in excess of 103 percent of the applicable marketing quota for the
farm, and shall be subject to a penalty at the full penalty rate for
each pound so marketed.
(7) Pledging of tobacco by an ineligible producer. In addition to
any other circumstances in which a penalty may be assessed under this
part, the marketing or pledging for a price support loan of any tobacco
when the producer is not considered to be an ``eligible producer''
under the provisions of part 1464 of this title, shall be considered to
be a false identification of tobacco and shall be dealt with
accordingly. This remedy shall be in addition to all others as may
apply.
(8) Failures to make certain reports. If any producer who
manufactures tobacco products from tobacco produced by or for such
person fails to make the report required by Sec. 729.408, or otherwise
required by this part, or makes a false report, the producer shall be
deemed to have failed to account for the disposition of tobacco
produced on the farms(s) involved. The filing of a report by a producer
under Sec. 723.408 of this part which the State FSA committee finds to
be incomplete or incorrect shall constitute a failure to account for
the disposition of tobacco produced on the farm.
(b) Special provisions for tobacco buyers, dealers, and warehouse
operators and others who acquire tobacco.
(1) Notwithstanding the provisions of paragraph (a) of this
section, a dealer, buyer or warehouse operator shall collect an amount
of penalty equal to the applicable per pound penalty rate times the
quantity of tobacco acquired or handled by the buyer, dealer or
warehouse operator when the tobacco is not identified with a valid
producer marketing card, the tobacco is being sold under suspicious
circumstances, or when there is any reason to suspect the tobacco may
be subject to penalty. The provisions of this paragraph apply to all
purchases by a dealer, buyer or warehouse operator including those from
another dealer, buyer or warehouse operator. The dealer, buyer,
warehouse operator, or their agent, shall also collect the full amount
of the marketing quota penalty for each pound of tobacco involved in
any case in which a buyer, dealer or warehouse operator knows, or has
to reason to suspect, that the marketing is, or has been, made without
a proper marketing card or is, or has been, made with a card which the
dealer, buyer, warehouse operator, or their agents have reason to
suspect, is not a valid marketing or is made under
[[Page 13550]]
circumstances which give cause to suspect that the marketing is not
valid or is made in derogation of the tobacco marketing quota and price
support program.
(2) The amount of penalty collected may be deducted from the
proceeds of the sale of the tobacco. All such penalty collections shall
be the responsibility of each buyer dealer, or warehouse operator
involved, and their agents, and shall be remitted to FSA as provided
for in this part.
(3) The collection and remittance of penalty shall be in addition
to any other obligations that such person may have to collect other
amounts, including other penalties or assessments due on such
marketings.
(4) If a penalty is collected and remitted by a buyer, dealer, or
warehouse operator that is shown not to be due or only partially due,
then the overpayment shall be refunded to the appropriate party. It is
the responsibility of the person that collected the penalty and the
person that sold the tobacco involved to show to the satisfaction of
the FSA that such penalty is not due in the full amount collected.
* * * * *
(e) * * *
(1) For amounts of $100 or less, the county FSA committee, and
(2) For amounts over $100, the county FSA committee with approval
of the State FSA committee determines that each of the following
conditions is applicable:
* * * * *
(f) Refusal to contribute required assessments. A marketing penalty
at the full rate per pound is due on each pound of tobacco marketed
from a farm when the farm operator or producers refuse to pay no-net-
cost or marketing assessments as provided in part 1464 of this title.
In all such cases, the farm from which the tobacco has been produced
shall be considered to have a marketing quota of zero pounds and an
allotment of zero acres.
9. Part 723 subpart E is revised to read as follows:
Subpart E--Establishing Burley and Flue-Cured Tobacco National
Marketing Quotas
Sec.
723.501 Scope.
723.502 Definitions.
723.503 Establishing the quotas.
723.504 Manufacturer's intentions; penalties.
Sec. 723.501 Scope.
This subpart sets out regulations for setting annual national
marketing quotas for burley and flue-cured tobacco based on the
purchase intentions of certain manufacturers of cigarettes and on other
factors. It also sets out penalty provisions for manufacturers who fail
to purchase, within the tolerances set in this part, the amount of
domestic tobacco, by kind, reflected in the stated intention as
accounted for in accordance with this subpart.
Sec. 723.502 Definitions.
In addition to the definitions set forth at Sec. 723.104, the
definitions set forth in this section shall be applicable for purposes
of administering the provisions of this subpart.
CCC. The Commodity Credit Corporation, an instrumentality of the
USDA.
Domestic manufacturer. A domestic manufacturer of cigarettes.
Domestic manufacturer of cigarettes. A manufacturer who, as
determined by the Director, produces and sells more than 1 percent of
the cigarettes produced and sold in the United States annually.
Price support inventory. The inventory of tobacco which, with
respect to a particular kind of tobacco, has been pledged as collateral
for a price support loan made by CCC through a producer-owned
cooperative marketing association.
Producer-owned cooperative marketing associations. Those
associations, or their successors, which by law act as agents for
producers for price support loans for tobacco, and which were, as of
January 1, 1996, for burley and flue-cured tobacco, the Burley Tobacco
Growers Cooperative Association, the Burley Stabilization Corporation,
and the Flue-Cured Tobacco Cooperative Stabilization Corporation.
Unmanufactured tobacco. Stemmed and unstemmed leaf tobacco, stems,
trimmings, and scrap tobacco.
Sec. 723.503 Establishing the quotas.
(a) General. Subject to the 3 percent adjustment provided for in
paragraph(b) of this section, the annual marketing quotas for burley
and flue-cured tobacco shall be calculated for each marketing year for
each kind separately as follows:
(1) Domestic manufacturer purchase intentions. First, for each kind
and year, the Director shall calculate the aggregate relevant purchaser
intentions as declared or set under this section.
(2) Exports. Next, the Director shall add to the total determined
under paragraph(a)(1) of this section the amount which is equal to the
Director's determination of the average quantity of exported domestic
leaf tobacco of the applicable kind for the past 3 marketing years. For
this purpose, exports include unmanufactured tobacco only, including,
but not limited to, stemmed and unstemmed leaf tobacco, stems,
trimmings, and scrap tobacco, and excludes tobacco contained in
manufactured products including, but not limited to cigarettes, cigars,
smoking tobacco, chewing tobacco, snuff and semi-processed bulk smoking
tobacco. The quantity of exports for the most recent year, as needed,
may be estimated.
(3) Reserve stock level adjustment. The Director may then adjust
the total calculated by adding the sums of paragraph(a)(1) and (a)(2)
of this section, by making such adjustment which the Director, in his
discretion, determines necessary to maintain inventory levels held by
producer loan associations for burley and flue-cured tobacco at the
reserve stock level. For burley tobacco, the reserve stock level for
these purposes is the larger of 50 million pounds farm sales weight or
15 percent of the previous year's national marketing quota. For flue-
cured tobacco, the reserve stock level for these purposes is the larger
of 100 million pounds farm sales weight or 15 percent of the previous
year's national marketing quota. Any adjustment under this clause shall
be discretionary taking into account supply conditions; however, for
burley tobacco no downward adjustment under this clause may exceed the
larger of 35 million pounds (farm sales weight) or 50 percent of the
amount by which loan inventories exceed the reserve stock level.
(b) Additional 3 percent adjustment. The amount otherwise
calculated under paragraph(a) of this section may be adjusted by the
Director by 3 percent of the total. This adjustment is discretionary
and may be made irrespective of whether any adjustment has been made
under paragraph(a)(3), of this section and may be made to the extent
the Director deems such an adjustment is in the best interest of the
program.
(c) Dates of announcement. For flue-cured tobacco, the quota
determination should be announced by December 15 preceding the
marketing year. For burley, the announcement should be made by February
1 preceding the marketing year.
Sec. 723.504 Manufacturers' intentions; penalties.
(a) Generally. Each domestic manufacturer shall, for each marketing
year, for burley and flue-cured tobacco separately, submit a statement
of its intended purchases of eligible tobacco
[[Page 13551]]
by the dates prescribed in paragraph (d)of this section; further, at
the end of the marketing year, each such manufacturer shall submit a
statement of its actual countable purchases of eligible tobacco for
that marketing year, by kind, for burley and flue-cured tobacco. For
these purposes, countable purchases of eligible tobacco shall be as
defined in, and determined under, paragraph (b) of this section. If a
domestic manufacturer fails to file a statement of intentions, the
Director shall declare the amount which will be considered that
manufacturer's intentions for the marketing year. That declaration by
the Director shall be based on the domestic manufacturer's previous
reports or such other information as is deemed appropriate by the
Director in the Director's discretion. Notice of the amount so declared
shall be forwarded to the domestic manufacturer. If the domestic
manufacturer fails to file a year-end report or files an inaccurate or
incomplete report, then the Director may deem that the manufacturer has
no purchases to report or take such other action as the Director
believes is appropriate to fulfill the goals of this section.
Intentions and purchases of countable tobacco will be compared for
purposes of determining whether a penalty is due from the domestic
manufacturer.
(b) Eligible tobacco for statements of intentions and countable
purchases toward those intentions. For reports and determinations under
this section, eligible tobacco for purposes of determining the
countable purchases under paragraph (a) of this section will be
unmanufactured domestic tobacco of the relevant kind for use to
manufacture, for domestic or foreign consumption, cigarettes, semi-
processed bulk smoking tobacco, and other tobacco products. Eligible
tobacco for these purposes does not include tobacco purchased for
export as leaf tobacco, stems, trimmings, or scrap. Countable purchases
of eligible tobacco shall include purchases of eligible tobacco made by
domestic manufacturers directly from the producers, from a regular
auction market, or from the price support loan inventory and shall also
include purchases by the manufacturer where the manufacturer purchases
or acquires the tobacco from dealers or buyers who purchased the
tobacco for the domestic manufacturer during the relevant marketing
year directly from a producer, at a regular auction market, or from the
price support loan inventory.
(c) Weight basis and nature of reports. The weight basis used for
all reports and comparisons shall be a farm sales weight basis unless
the Director permits otherwise and all reports will be considered to
have been made on that basis unless the report clearly states
otherwise. Submitted reports shall be deemed to cover countable
purchases of eligible tobacco only.
(d) Due dates and addresses for reports. For flue-cured tobacco the
domestic manufacturer's statement of intentions shall be submitted by
December 1 before the marketing year and the year-end report shall be
submitted by August 20 following the end of the marketing year. Those
dates for burley tobacco are January 15 and November 20, respectively.
Reports shall be mailed or delivered to the Director, Tobacco and
Peanuts Division, STOP 0514, P.O. Box 2415, Washington, DC 20013-2415.
(e) Penalties. A domestic manufacturer shall be liable for a
penalty equal to twice the purchaser's no-net-cost assessment rate per
pound for the applicable kind of tobacco for the relevant marketing
year, if the manufacturer's purchases of either burley or flue-cured
tobacco for the marketing year do not equal or exceed, as determined by
the Director, 90 percent of their stated purchase intentions for that
kind of tobacco for the relevant marketing year. The Director shall
adjust the domestic manufacturer's intentions, however, to the extent,
that producers have not produced the full amount of the national quota
for the relevant marketing year for the particular kind of tobacco. The
burden of establishing all purchases shall be with the domestic
manufacturer and the Director may, in the case of indirect purchases
for the manufacturer, require that the manufacturer obtain verification
of the purchases by the dealer who made the purchase from the producer,
at a regular auction market, or from the price support loan inventory,
in order to assure that the tobacco was countable tobacco. The Director
may require such additional information as determined needed to enforce
this subpart.
(f) Penalty notice and penalty remittance. Penalties will be
assessed after notice and an opportunity for a hearing before the
Director. Remittances are to be made to the CCC and will be credited to
the applicable producer loan association's no-net-cost fund or account
as provided for in part 1464 of this title.
(g) Maintenance and examination of records. Each domestic
manufacturer shall keep all relevant records of purchases, by kind, of
burley and flue-cured tobacco for a period of at least 3 years. The
Director, Office of Inspector General, or other duly authorized
representative of the United States may examine such records, receipts,
computer files, or other information held by a domestic manufacturer
that may be used to verify or audit such manufacturer's reports. The
reasonable cost of such examination or audit may be charged to the
domestic manufacturer who is the subject of the examination or audit.
All records examined or received under this part by officials of the
Department of Agriculture shall be kept confidential to the extent
required by law.
Secs. 723.1 through 723.504 [Amended]
10. Part 723 sections 723.1 through 723.504 are further amended by
removing ``ASC'' wherever it appears and substituting ``FSA'' in its
place.
Signed at Washington, DC, on March 11, 1997.
Bruce R. Weber,
Administrator, Farm Service Agency
[FR Doc. 97-6732 Filed 3-20-97; 8:45 am]
BILLING CODE 3410-05-M