[Federal Register Volume 65, Number 103 (Friday, May 26, 2000)]
[Rules and Regulations]
[Pages 34039-34040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13290]



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 Rules and Regulations
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  Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Rules 
and Regulations  

[[Page 34039]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 29

[Docket No. TB-00-10]
RIN 0581-AB87


Tobacco Fees and Charges for Mandatory Inspection; Fee Increase

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Tobacco Inspection Act requires the Secretary to fix and 
collect fees and charges for inspection and certification, and other 
services, including administrative and supervisory costs, at designated 
tobacco auction markets in all tobacco producing areas. The fees 
collected must, as nearly as possible, cover the Department's costs of 
performing these services and also maintain a reserve sufficient to 
cover program financial liabilities. This interim final rule will 
increase the fee from $.0083 to $.0100 per pound to cover the increased 
cost of operating the tobacco inspection program and maintain the 
operating reserve. The last increase in the fee was in 1995. This 
increase does not affect the fees for import, export, or permissive 
tobacco inspection.

DATES: Effective May 30, 2000; comments received by June 26, 2000, will 
be considered prior to issuance of a final rule.

ADDRESSES: Send comments to John P. Duncan III, Deputy Administrator, 
Tobacco Programs, Agricultural Marketing Service (AMS), United States 
Department of Agriculture (USDA), AG 0280, Room 502 Annex Building, PO 
Box 96456, Washington, DC 20090-6456. Comments will be made available 
for public inspection at this location during regular business hours.

FOR FURTHER INFORMATION CONTACT: John P. Duncan III, Deputy 
Administrator, Tobacco Programs, AMS, USDA, AG 0280, Room 502 Annex 
Building, PO Box 96456, Washington, DC 20090-6456; telephone: (202) 
205-0567; Fax: (202) 205-0235.

SUPPLEMENTARY INFORMATION:

A. Executive Order 12866

    This 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.

B. Regulatory Flexibility Act

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), full consideration has been 
given to the potential economic impact upon small business. All tobacco 
warehouses and producers fall within the confines of ``small business'' 
which are defined by the Small Business Administration (13 CFR 121.201) 
as those having annual receipts of less than $500,000 and small 
agricultural service firms are defined as those whose annual receipts 
are less than $3,500,000. There are approximately 360 tobacco 
warehouses and approximately 170,000 producers and most warehouses and 
producers may be classified as small entities. The AMS has determined 
that this action would not have a significant economic impact on a 
substantial number of small entities.
    The Tobacco Inspection Act of 1935, as amended, (7 U.S.C. 511-
511q), requires the Secretary to fix and collect fees and charges for 
inspection and certification of quota tobacco, and other services, 
including administrative and supervisory costs, at designated tobacco 
auction markets in all tobacco producing areas. The fees collected 
must, as nearly as possible, cover the Department's costs of performing 
these services.
    The AMS annually reviews its user fee programs to determine if the 
fees are adequate. The most recent review determined that the existing 
fee schedule would result in significant losses in crop years 2000 and 
2001 and leave the program with inadequate reserve balances. Due to 
reductions in tobacco quotas and increases in the sale of tobacco 
through contract sales, obligations for the 2000 crop-year are 
estimated at $11,607,000 and revenues are expected to reach only 
$6,843,000, for a loss of $4,764,000 and a reduction in the operating 
reserve to $4,738,000. If the same level of service and fee structure 
continues for the 2001 crop-year the estimated loss would exceed 
$6,154,000 and the operating reserve would drop to a negative 
$1,416,000.
    The major items affecting obligations are Federally mandated 
increases in salaries and benefits, travel costs, and other 
administrative costs. Revenue depends on the amount of tobacco sold on 
the designated auction markets. Production quotas for tobacco were 
reduced by 228.6 million pounds in 1998, 330.7 million pounds in 1999, 
and 318.7 million pounds in 2000. This is a total decrease of 878 
million pounds in production quotas since 1997. The amount of tobacco 
graded in 1998 was 1.56 billion pounds, 1.31 billion pounds in 1999, 
and 938 million pounds is estimated in 2000. Contract sales of tobacco 
will further reduce the amount graded by about 235 million pounds in 
2000. Based on these figures, the current fee level will not generate 
the amount of revenue sufficient to maintain the level of inspection 
services requested and maintain funds in the program's reserve account. 
An analysis of available data indicates that a fee of $.0100 per pound 
effective for the 2000 crop-year would increase revenue by $1,277,000 
and bring the operating reserve up to $6,014,000. The requested fee 
increase was recommended by the National Advisory Committee for Tobacco 
Inspection Services at its meeting on April 20, 2000. This committee is 
made up of representatives of producer interest groups, appointed by 
the Secretary of Agriculture, to advise on the level of services and 
user fee rate. This fee increase represents the minimum level needed to 
cover costs for the 2000 crop-year. In the future, AMS will continue to 
review the program to ensure that fees are adequate. Accordingly, we 
believe that the impact of the fee increase would not be significant on 
users of the inspection and certification services.

C. Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This action is not intended to

[[Page 34040]]

have retroactive effect. This rule will not preempt any State or local 
laws, regulations, policies, unless they present an irreconcilable 
conflict with this rule. There are no administrative procedures that 
must be exhausted prior to any judicial challenge to the provisions of 
this rule.

Background

    The Secretary of Agriculture is authorized by the Tobacco 
Inspection Act of 1935, as amended, 7 U.S.C. 511-511q et seq., to fix 
and collect fees and charges for inspection and certification of quota 
tobacco, and other services, including administrative and supervisory 
costs, at designated tobacco auction markets in all tobacco producing 
areas. The fees collected must, as nearly as possible, cover the 
Department's costs of performing these services.
    The AMS regularly reviews programs to determine if fees are 
adequate and if costs are reasonable. This interim final rule will 
increase the fees and charges assessed by the AMS for the mandatory 
inspection and certification of producer tobacco sold at designated 
auction markets throughout the tobacco producing areas.
    The AMS conducted a recent review of the financial status of this 
program to determine whether the fee is sufficient. Revenue for the 
1999 crop-year was approximately $11,419,000. Obligations for the 
period are approximately $11,508,000. At the current fee level, 
insufficient revenue would be generated to meet the costs of the 
inspection program and to replace funds that had to be used from the 
program's reserve account. The major factors affecting obligations are 
mandatory increases in Federal salaries and benefits, travel 
allowances, and other administrative costs since 1995. An analysis of 
data available to the AMS indicates that a fee of $.0100 per pound 
would cover expenses and maintain a reserve that would meet any 
reasonable contingency.
    Due to an estimated 43 percent reduction in tobacco to be inspected 
and 20-30 percent of tobacco being sold through contract sales, 
obligations for the 2000 crop-year are estimated at $11,607,000 and 
revenues are expected to reach only $6,843,000, for a loss of 
$4,764,000 and a reduction in the operating reserve to $4,738,000. If 
the same level of service and fee structure continues for the 2001 
crop-year the estimated loss would exceed $6,154,000 and the operating 
reserve would drop to a negative $1,416,000.
    Revenue depends on the amount of tobacco sold on the designated 
auction markets. Production quotas for tobacco were reduced by 228.6 
million pounds in 1998, 330.7 million pounds in 1999, and 318.7 million 
pounds in 2000. This is a total decrease of 878 million pounds of 
tobacco since 1997. Also, contract sales of tobacco will further reduce 
the amount graded by about 235 million pounds in 2000. Based on these 
figures, the current fee level will not generate the amount of revenue 
sufficient to maintain the level of inspection services requested and 
maintain funds in the program's reserve account. An analysis of 
available data indicates that a fee of $.0100 per pound effective for 
the 2000 crop-year would increase revenue by $1,277,000 and bring the 
operating reserve up to $6,014,000.
    Information on program income and expenses was presented to the 
National Advisory Committee for Tobacco Inspection Services at its 
meeting on February 17, 2000, in Raleigh, North Carolina, and again on 
April 20, 2000, in Washington, D.C. The National Advisory Committee, 
which is made up of 14 representatives from tobacco producer interest 
groups and appointed by the Secretary of Agriculture, was established 
by law in 1981 to advise the Secretary on the level of services needed 
and the fees necessary to cover those services. By a majority vote, the 
Committee adopted a motion to recommend to the Secretary an increase in 
the fee to $.0100 per pound.
    It is hereby found and determined upon good cause that it is 
impracticable, unnecessary, and contrary to the public interest to give 
preliminary notice prior to putting this rule into effect and that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because: (1) The 2000 
flue-cured marketing season will begin about July 17 and this action is 
needed, as soon as possible, so as to treat all types of tobacco on an 
equal basis for the 2000 crop-year; (2) the National Advisory Committee 
recommended the fee increase by a majority vote; and (3) this interim 
final rule provides a 30-day comment period, and all comments timely 
received will be considered prior to finalization of this rule.

List of Subjects in 7 CFR Part 29

    Administrative practice and procedure, Advisory committees, 
Government publications, Imports, Pesticides and pests, Reporting and 
recordkeeping requirements, Tobacco.

    For reasons set forth in the preamble, 7 CFR part 29 is amended as 
follows:

PART 29--TOBACCO INSPECTION

    1. The authority citation for part 29, subpart B continues to read 
as follows:

    Authority: 7 U.S.C. 511m and 511r.


Sec. 29.123  [Amended]

    2. In Sec. 29.123, paragraph (a) is amended by removing the words 
``$.0083 per pound'' and adding the words ``$.0100 per pound'' in their 
place.

    Dated: May 22, 2000.
Kathleen A. Merrigan,
Administrator, Agricultural Marketing Service.
[FR Doc. 00-13290 Filed 5-25-00; 8:45 am]
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