[Federal Register Volume 67, Number 3 (Friday, January 4, 2002)]
[Proposed Rules]
[Pages 526-530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-186]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1464

RIN 0560-AG51


Tobacco Marketing Quotas, Acreage Allotments and Production 
Adjustment

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: This proposed rule would amend the tobacco marketing quota 
regulations by making it a requirement that burley tobacco producers 
designate the specific warehouse, dealer or receiving station at which 
they will sell their tobacco in order to qualify for price support and 
marketing cards. The tobacco marketing quota regulations currently 
require that only flue-cured tobacco producers, as a condition of 
price-support, designate the warehouses at which they will market their 
tobacco and the amounts to be marketed at each designated location. 
These amendments will provide warehouse operators, the Agriculture 
Marketing Service (AMS) and others accurate information when planning 
for a tobacco auction marketing year.

DATES: Comments concerning the contents of the proposed rule must be 
submitted by January 22, 2002, to be assured of consideration. Comments 
concerning the information collection must be submitted by March 5, 
2002.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to Director, Tobacco and 
Peanuts Division, FSA, USDA, 1400 Independence Avenue, SW., room 5750-
S, STOP 0514, Washington, DC 20250-0514; Fax: (202) 690-2298. All 
comments will be made available for public inspection in the Office of 
the Director during regular business hours.

FOR FURTHER INFORMATION CONTACT: Ann Wortham, Agricultural Program 
Specialist, Tobacco and Peanuts Division, United States Department of 
Agriculture (USDA), 1400 Independence Avenue, SW., STOP 0514, 
Washington, DC 20250-0514, telephone (202) 720-2715.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866 and 
has been determined to be significant and was reviewed by OMB.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because USDA is not required by 5 U.S.C. 553 or 
any

[[Page 527]]

other provision of law to publish a notice of proposed rulemaking with 
respect to the subject matter of this rule.

Federal Assistance Programs

    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-10.0514.

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 program is not subject to the provisions of Executive Order 
12372, which require 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).

Unfunded Mandates

    The provisions of Title II of the Unfunded Mandates Reform Act of 
1995 are not applicable to this rule because the USDA 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.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, this notice 
announces the Commodity Credit Corporations's (CCC) intention to 
request an extension of a currently approved information collection. 
This information will be used in support of the Tobacco Marketing Quota 
Program. Producers must agree to inform the Farm Service Agency (FSA) 
of the locations at which they will sell their tobacco and the number 
of pounds of that tobacco that will be sold at each location using form 
FSA-808, ``Designation of Burley Tobacco Sales and Request for 
Marketing Cards'' to collect the data.
    Title: Designation of Burley Tobacco Sales and Request for 
Marketing Cards.
    OMB #: 0560-0217.
    Type of Request: Extension of a currently approved information 
collection.
    Expiration Date: 3/31/02.
    Abstract: The information is necessary to promote, foster, and 
maintain an orderly marketing of burley tobacco in a swiftly changing 
market environment. Historically, 99 percent of all burley tobacco has 
been marketed at auction warehouses where the tobacco has been graded 
by AMS personnel and where price-support has been offered.
    However, between the 2000 marketing season and the current, 2001, 
marketing season, and based on figures that have become recently 
available through the designation period for flue-cured tobacco (the 
second major cigarette-producing tobacco), FSA predicts that as much as 
80 percent of the 2001 crop of burley tobacco will not be sold at 
auction warehouses.
    The figures compiled at the close of the flue-cured designation 
period showed that 79 percent of that tobacco would bypass the 
traditional auction system. This change has resulted in the known 
closing of up to 25 flue-cured tobacco warehouses and in an AMS 
reduction-in-force that has cost the jobs of more than 50 tobacco 
graders. It is expected that nearly half the existing flue-cured 
warehouses may be out of business by the end of the 2001 market season.
    Without the collection of designation information for burley 
tobacco, FSA will not know where the tobacco will be sold or how many 
pounds will be sold outside the traditional auction market system. 
Warehouse operators who, in the past, have handled almost all of any 
year's crop, will not have the information needed to keep their 
businesses open; and AMS will not know how to schedule the grading of 
burley tobacco.
    Estimate of Respondent Burden: Public reporting burden for this 
collection of information is estimated to average .25 hours per 
response.
    Respondents: Farm operators, farm operators' authorized agents, or 
any producers who have an interest in the tobacco to be marketed.
    Estimated number of Respondents: 150,000.
    Estimated Number of Annual Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 1.25 hours. This 
estimate includes 60 minutes travel time for applicants to the local 
USDA service center office for those respondents who choose not to file 
the information electronically.
    Proposed topics for comment include: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of burden, including 
the validity of the methodology and assumptions used; (c) ways to 
enhance the quality, utility, and clarity of the information collected; 
and (d) ways to minimize the burden of the collection of the 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. 
Comments concerning the information collection must be sent to the Desk 
Office for Agriculture, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Washington, DC 20503, and to Ann 
Wortham, Agricultural Program Specialist, USDA-FSA-TPD-TB, STOP 0514, 
1400 Independence Ave., SW., Washington, DC 20250-0514; E-mail Ann 
[email protected]; or facsimile (202) 2690-4917. Copies of the 
information collection may be obtained from Ms. Wortham at the above 
address.
    All responses to this notice will be summarized and included in the 
request for OMB approval. All comments will also become a matter of 
public record.

Background

    Currently, AMS, working with local trade boards or with tobacco 
warehouse associations, schedules the days on which auction sales are 
to take place at designated auction markets, equitably distributing 
sales opportunity among the warehouses based on floor space or 
performance or both.
    Because of the recent high volume of direct contract purchases, the 
current manner of determining sales time no longer appears to be 
feasible. It is necessary to collect marketing-intention information on 
burley tobacco in the same manner that marketing-intention information 
has been collected on flue-cured tobacco since 1974.
    In order to implement a successful burley tobacco designation 
program, producers were allowed to designate pounds to specific 
warehouses beginning June 1, 2001, as recommended by the Burley Tobacco 
Advisory Committee (Committee).
    The 39-member committee was established by the Secretary in 1990 to 
provide information essential to the orderly marketing of burley 
tobacco. At a meeting in June, 2000, the Committee passed a motion that 
would affect the method of determining the number of days on which 
auction sales would be allowed to take place at each tobacco auction 
warehouse. The Committee's motion, to establish a Grower Designation 
Program for burley tobacco similar to the long standing Flue-cured 
Tobacco Warehouse Designation Program, followed an announcement in 
early 2000 by a major cigarette

[[Page 528]]

manufacturer that it would contract with burley tobacco growers to buy 
tobacco directly from them at central buying points known as receiving 
stations, essentially acting as a dealer and bypassing the traditional 
auction market system.
    The Flue-cured Tobacco Warehouse Designation Program requires that 
each flue-cured farm operator designate to which warehouse(s) that 
farm's tobacco will be presented for sale and the number of pounds of 
tobacco that will be marketed at each designated location. Such 
designations provide information vital to the equitable scheduling 
among warehouses of the day(s) on which each location can hold an 
auction sale and the number of pounds that can be sold on each of those 
scheduled days. This information also allows AMS to schedule personnel 
to grade such tobacco when it is presented for sale. Designation is a 
condition of price support eligibility for flue-cured tobacco growers.
    For the 2000 market year FSA had no advance information regarding 
the volume of burley tobacco that individual burley growers had placed 
under private contract with the buying company because such information 
was contained in individual and private contracts between grower and 
company; and thus did not know how much tobacco would bypass the 
traditional auction warehouse market system.
    The buying company announced early in 2001 that it would 
dramatically expand its direct purchase program. It would contract to 
purchase both burley and flue-cured tobacco rather than just burley; 
and it would purchase these kinds of tobacco from receiving stations in 
Florida, Georgia, Kentucky, North Carolina, South Carolina, Tennessee 
and Virginia rather than just Kentucky and Tennessee.
    Seven other leaf-buying companies followed this announcement with 
announcements of their own: they, too, would contract with individual 
burly and flue-cured tobacco growers to buy their crops direct. 
Currently there are eight companies with stated intentions of buying 
both burley and flue-cured tobacco at 72 established receiving stations 
in seven states.
    On May 7, 2001, following the close of the flue-cured initial 
designation period, FSA received a report that predicted a need for a 
major information collection effort regarding burley tobacco: seventy-
nine percent of the 2001 flue-cured tobacco available for sale has been 
designated to receiving stations.
    The FSA judges that a comparable percentage of burley will be sold 
during 2001 at receiving stations. However, with no designation program 
in place there is no way to collect the information that is vital to 
the industry, to the warehouses where burley tobacco has historically 
been marketed, and to USDA, in particular AMS, which is immediately 
impacted by the lack of such data. From the historic 1 percent of sales 
that occurred outside the auction market system, there is the 
possibility that much of the burley tobacco crop will go elsewhere. 
This is a sudden change in only one market season. The FSA did not have 
figures to make such a deduction until after the end of flue-cured 
designation and the compilations of figures collected from flue-cured 
growers nationwide.
    All eligible burley tobacco growers may avail themselves of the 
auction market system. However, only the growers/sellers and buyers 
involved in non-auction sale and purchase transactions know the amount 
of tobacco that will be involved in these private transactions. Without 
a burley designation program in place neither the buying companies, 
AMS, nor the warehouses will have any information concerning how much 
tobacco will be available for sale by auction, because they will not 
have information about what tobacco won't be available for sale by 
auction.
    USDA is concerned with the effects that nonauction sales will have 
on the orderly marketing of tobacco and that large quantities of direct 
sales could be disruptive to the orderly process of marketing burley 
tobacco. The Grower Designation Program is necessary for the 2001 
orderly marketing of burley tobacco. USDA's implementation of the 
burley tobacco Grower Designation Program will track market volumes and 
thereby enable the AMS to implement a process of remobilizing its 
downsized workforce.
    FSA began collecting data through burley designations from growers 
voluntarily on June 1, 2001 in order to have data for planning the 
warehouse system needs prior to September 1, 2001. Although burley 
farmers may wait until the effective date of this rule to submit their 
information, they are encouraged to report now to facilitate the 
marketing of their crops. They may make changes during scheduled 
redesignation periods. The comment period has been limited to 15 days 
in order that this schedule can be met and accordingly serve the 
emergency needs of warehouse operators, dealers and producers.
    This proposed rule would amend the tobacco marketing quota 
regulations by requiring that burley tobacco producers designate the 
specific warehouse, dealer or contract buying point at which they will 
market their tobacco in order to qualify for price support and the 
issuance of a marketing card. Producers would have the option to make 
changes during scheduled redesignation periods.
    Burley and flue-cured tobacco that is produced for market is sold 
on a nationwide market and moves almost wholly in interstate and 
foreign commerce from the producer to the ultimate consumer. The 
Agricultural Adjustment Act of 1938 as amended (the Act) gave to the 
Secretary of Agriculture the responsibility for the promotion and 
maintenance of an orderly flow of tobacco in commerce. The means by 
which producers market these tobaccos has changed more in the past 12 
months than in the past 50 years.
    Until recently, approximately 97% of both burley and flue-cured 
tobacco was delivered to a warehouse, sometimes weeks in advance of a 
sale date. There the tobacco was either sold at auction with payment of 
the highest bid going to the producer or placed in storage as USDA loan 
security with payment of a price support advance against the loan going 
to the producer.
    There has been a strong USDA presence in the auction market venue. 
Obvious (and physically present) at an auction warehouse on each sales 
day are the marketing recorder and the tobacco grader. Not so obvious 
are the cooperative marketing associations that act on behalf of their 
producer members by entering into annual loan agreements with USDA in 
order to secure the money that is used to make price support available 
to producers through auction warehouses. The warehouses have, in turn, 
contracted with an association in order to make price support advances 
to producers on behalf of the association and also to store the loan 
tobacco on which price support advances have been made. The checks and 
balances inherent in the warehouse venue have provided USDA with many 
methods to audit the flow of tobacco into commerce. The following are 
examples.

1. Marketing Recorders

    Review warehouse records and reports for maintenance, completeness, 
and accuracy;
    Report deficiencies in warehouse reports and records;
    Record on the marketing card each producer sale of tobacco;
    Collect producer payments, penalties, liens, or levies;

[[Page 529]]

2. Graders

    Inspect tobacco presented for sale, determining and then applying 
quality standards and assigning a grade to the tobacco to establish the 
amount of price support available for each lot;
    Collect and submit of grade/pounds information for statistical 
purposes such as using the distribution of grades sold in one market 
year in order to establish the grade loan rates for the following 
market year;
    Work with the warehouse sale supervisor, providing information on 
the daily pound limit-for-sale for an orderly scheduling of sales of 
producer tobacco;

3. Associations/Warehouses

    Verify that tobacco for which a price support advance has been made 
and which has been placed under loan is indeed eligible for price 
support;
    Arrange for shipment of loan tobacco for processing (such as to a 
stemmery) where it is then containerized and returned to storage; and
    Maintain inventory loan tobacco until its ultimate sale to a leaf 
buying company.
    In other words, in the traditional auction venue, the entrance into 
and passage through commerce of tobacco--from the producer to the 
ultimate consumer--is carefully monitored, with the scheduling of sales 
the most important factor in guaranteeing that the tobacco is marketed 
in an orderly manner. Since 1974, flue-cured producers have informed 
USDA by way of a designation program of where they would market their 
tobacco. This designation information has been provided to associations 
so that sale time might be scheduled at auction warehouses; and to 
assure that tobacco graders and market recorders are available at those 
times. Designation further provides statistical information to USDA 
about the total number of pounds that will be presented for sale in 
order to provide an audit trail for reconciliation with the pounds that 
are ultimately sold. That the designation program was already in place 
for flue-cured tobacco accounts in large part for the orderly marketing 
of this kind of tobacco during the recently ended market year when, 
instead of almost all of the flue-cured crop going as usual to auction 
for sale or price support, almost all the tobacco went to a non-auction 
venue with almost no USDA presence (only a market recorder).
    With the information provided by producer designation, USDA knew 
how much flue-cured tobacco was scheduled to be sold at auction and how 
much was scheduled to be sold at non-auction. And this information has 
provided USDA with methods of meeting the requirements set out in the 
Act of monitoring the commercial flow of tobacco and assuring that no 
more than the established national quota was presented for sale, thus 
preserving the supply and demand intentions provided for in the Act.
    Until the last 12 months, monitoring the movement of burley tobacco 
from farm into commerce has been straightforward because almost all of 
it was sold at auction. The approximately 3 percent of burley tobacco 
that was sold outside the auction warehouse venue did not jeopardize 
USDA's mandate to monitor and insure an orderly marketing of this crop. 
Burley warehouses are predominantly family owned and run operations, 
many for generations, so there has developed a close and often personal 
relationship between warehouse staff and the producers who sell there, 
providing an accommodating business-to-customer framework intended to 
assure that the same customers (producers selling tobacco) return to 
the same warehouse year after year. Annual sales time at burley auction 
warehouses, which has been determined by using a ``previous 5 years'' 
formula, has changed little in the past 50 years because of this method 
of doing business. Just as warehouse operations passed down from one 
generation to another, so too did the marketing relationships of 
producers.
    If a disruption in this long-standing method of scheduling burley 
tobacco sales had occurred as it did in the flue-cured marketing venue 
in the early 1970's, a sales designation program would have been 
necessary for burley tobacco as well.
    However, no such disruption in the burley tobacco venue occurred 
until recently, and the disruption has been dramatic enough to 
necessitate a designation program to monitor the flow of burley tobacco 
to sales location. In 2000 a traditional 97% of burley was sold in the 
long-established auction warehouse venue; in 2001 approximately 80% of 
burley tobacco will have been sold at non-auction locations and at 
present USDA has no method of knowing where or when this tobacco will 
enter into commerce or if it will do so in an orderly manner.

List of Subjects in 7 CFR Part 1464

    Imports, Tobacco.
    Accordingly, 7 CFR part 1464 is proposed to be amended as follows:

PART 1464--TOBACCO

    1. The authority citation for part 1464 continues to read as 
follows:

    Authority: 7 U.S.C. 1421, 1423, 1441, 1445, 1445-1; 1445-2; 15 
U.S.C. 714b, 714c; Pub. L. 106-78, Pub. L. 106-113, Stat. 1135 and 
Pub. L. 106-224.

    2. Revise Sec. 1464.2 (b)(2) introductory text, (b)(2)(ii), 
(b)(2)(iii), (b)(2)(iv), (b)(2)(v) and (b)(2)(vii) to read as follows:


Sec. 1464.2  Availability of price support.

* * * * *
    (b) * * *
    (2) Special requirements for flue-cured and burley tobacco. Price 
support will be available only on flue-cured and burley tobacco that 
has been designated for sale at specific warehouses by the producer 
under the following conditions:
* * * * *
    (ii) Producer designation of warehouses. Producers will be 
required, as a condition of price support, to designate the warehouses 
at which they will market their tobacco.
    (A) For flue-cured tobacco such designations may be at any 
warehouse or warehouses in any market within a radius of 100 miles from 
the county seat of the county in which the farm is located, or if such 
farm is physically within two counties, then from the county seat of 
the county in which the county FSA office administering that farm is 
located. To the extent there are less than eight markets within such 
radius, any warehouse or warehouses in any of the eight markets nearest 
to the county seat may be designated. A producer may obtain price 
support only in a warehouse that the producer has designated, and at 
each such warehouse only with respect to the quantity of tobacco 
designated for sale at such warehouse.
    (B) For burley tobacco such designations may be at any warehouse or 
warehouses in any burley market.
    (iii) When producer designations shall be made. Producers must 
designate the warehouse(s) at which they will market their tobacco 
during a period that shall be announced beforehand by the local county 
FSA office. Unless extended by the Deputy Administrator, the period for 
making designations shall be before May 31 each year for flue-cured 
tobacco and August 31 each year for burley tobacco. Producers who lease 
quota or whose farm is reconstituted (the combining or dividing of a 
farm due to a change in operation) after such period may designate the 
warehouse(s) at which their tobacco will be marketed according to 
procedures to be

[[Page 530]]

established by the Deputy Administrator, Farm Programs, FSA. Producers 
who have designated warehouses that cease to operate or cease to have 
tobacco inspection or price support available may change their 
designations at any time after such occurrences. Producers who have 
designated warehouses whose inspection services have been temporarily 
suspended for any reason for the equivalent of at least one sales day 
may change their designation at any time after such occurrences. 
Redesignation (changes in warehouse(s) designated or in pounds 
designated to a warehouse) or designations for farms that have not 
previously designated tobacco may be made by producers during the five 
business days ending on the first Friday of each month during the flue-
cured or burley, as applicable, tobacco marketing season. Such 
redesignation or initial designation shall be made on any one day of 
each redesignation period. Such redesignation or initial designation 
shall be effective on the second Monday following the Friday on which 
the redesignation period ends.
    (iv) Form and content of designations. For flue-cured tobacco a 
designation shall be made for each warehouse at which a producer 
desires to market tobacco by executing a form provided by the county 
FSA office. The producer will be required to indicate on such form the 
name of the warehouse or warehouses designated by the producer and the 
pounds of flue-cured tobacco the producer desires to sell at such 
warehouse as well as any other information required to be stated on 
such form. For burley tobacco a designation shall be made for each 
warehouse, receiving station or dealer at which a producer desires to 
market tobacco by executing a form provided by the county FSA office. 
The producer will be required to indicate on such form the name of the 
warehouse(s), receiving station(s) or dealer(s) designated by the 
producer and the pounds of burley tobacco the producer desires to sell 
at such warehouse, receiving station or dealer as well as any other 
information required to be stated on such form.
    (v) Entering designation information. For flue-cured tobacco, the 
warehouse code number of the warehouse the producer has designated will 
be indicated on the farm marketing card. For burley tobacco, the 
warehouse, receiving station, or dealer code number of the warehouse, 
receiving station or dealer the producer has designated will be 
indicated on the farm marketing card. If an effective date is 
determined in accordance with paragraph (b)(2)(iii) of this section, 
such effective date will be shown on the farm marketing card. For flue-
cured tobacco, if the producer has not designated a warehouse, a 
warehouse code will not be shown on the marketing card. Changes in 
designation by the producer shall be accomplished by the producer 
returning the marketing card to the county FSA office and requesting 
the transfer of any unmarketed pounds of flue-cured or burley tobacco 
shown on any marketing card to another eligible warehouse, receiving 
station or dealer, if applicable.
* * * * *
    (vii) Availability of designation information. Each county FSA 
office shall send designations received to the Flue-Cured Tobacco 
Cooperative Stabilization Corporation, Raleigh, North Carolina for 
flue-cured tobacco, Burley Tobacco Growers Cooperative Association, 
Lexington, Kentucky and Burley Stabilization Corporation, Knoxville, 
Tennessee for burley tobacco, following each designation period and 
each period for changing designations. That association(s) shall inform 
the Flue-Cured Tobacco Advisory Committee or the Burley Tobacco 
Advisory Committee, as applicable, of the pounds designated to each 
warehouse and the pounds of any undesignated or nonauction tobacco 
that, for the purpose of recommending opening dates and selling 
schedules in accordance with part 29 of this title, is available for 
apportioning for sale at each warehouse. That association also shall 
furnish each warehouse the name and address of the producers who 
designated the warehouse, the pounds each designated and the pounds 
that represent 103 percent of the marketing quota of each such 
producer. The Director, Tobacco and Peanuts Division, shall furnish 
each receiving station the name and address of the producers who 
designated the receiving station, the pounds each designated and the 
pounds that represent 103% of the marketing quota of each such 
producer.
* * * * *
    3. Revise Sec. 1464.7(d) to read as follows:


Sec. 1464.7  Eligible producer

    (a) * * *
    (b) * * *
    (c) * * *
    (d) In addition to meeting all other requirements that apply 
elsewhere, including (but not limited to) the warehouse designation 
provisions of Sec. 1464.2, must not be ineligible, in accordance with 
part 1400 of this title, to receive price support payments, loans and 
benefits.
* * * * *
    4. Revise Sec. 1464.10 (i)(1)(i), (i)(2) and (i)(3)(i) to read as 
follows:


Sec. 1464.10  No-net-cost tobacco fund or account.

* * * * *
    (i) * * *
    (1) * * *
    (i) From any dealer, receiving station official or warehouse 
operator who acquired the tobacco involved from the producer; or
* * * * *
    (2) A dealer, receiving station official or warehouse operator may 
deduct the amount of any producer contribution or assessment from the 
price paid to the producer for such tobacco.
    (3) * * *
    (i) From the dealer, receiving station official or warehouse 
operator who acquired the tobacco involved from the producer; or
* * * * *

    Signed at Washington, DC, on December 21, 2001.
James R. Little,
Executive Vice-President, Commodity Credit Corporation.
[FR Doc. 02-186 Filed 1-3-02; 8:45 am]
BILLING CODE 3410-05-P