[Federal Register Volume 67, Number 100 (Thursday, May 23, 2002)]
[Rules and Regulations]
[Pages 36079-36081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12892]



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 Rules and Regulations
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  Federal Register / Vol. 67, No. 100 / Thursday, May 23, 2002 / Rules 
and Regulations  

[[Page 36079]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 29

[Docket No. TB-02-11]


Tobacco Inspection; Mandatory Grading

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments and notice of 
referenda results.

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SUMMARY: Pursuant to the requirements of section 759 of the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act for 2002 (Appropriations Act), 
referenda were conducted during the periods of March 11-15, 2002, and 
March 18-22, 2002, among producers of each type of tobacco eligible for 
price support. A majority of producers favored mandatory grading for 
flue-cured tobacco, types 11, 12, 13, 14; burley tobacco, type 31; 
Kentucky-Tennessee fire-cured tobacco, types 22 and 23; Virginia fire-
cured tobacco, type 21; Virginia sun-cured tobacco, type 37; and dark 
air-cured tobacco, types 35 and 36. This interim final rule amends the 
regulations to provide mandatory grading for these types of tobacco. 
Producers of cigar filler and binder tobacco, types 42, 43, 44, 53, 54, 
and 55 did not approve mandatory grading. This rule will also reduce 
the fee for mandatory inspection from $0.01 per pound to $0.009 per 
pound.

DATES: Effective May 24, 2002; comments received by July 22, 2002 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), STOP 0280, 1400 Independence Avenue, 
SW., Washington, DC 20250-0280. Comments will be available for public 
inspection at this location during regular business hours between 8 
a.m. and 4:30 p.m., Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: John P. Duncan III, Deputy 
Administrator, Tobacco Programs, AMS, USDA, STOP 0280, 1400 
Independence Avenue, SW., Washington, DC 20250-0280; telephone number 
(202) 205-0567.

SUPPLEMENTARY INFORMATION: In accordance with Section 759 of the 
Appropriations Act (Pub. L. 107-76; 7 U.S.C. 511s), USDA conducted 
referenda among producers of each kind of tobacco that is eligible for 
price support under the Agricultural Act of 1949 (7 U.S.C. 1421 et 
seq.) to determine whether a majority of producers of a kind of tobacco 
voting in the referendum favored the mandatory grading of that kind of 
tobacco.
    A notice of referenda was published in the Federal Register on 
March 5, 2002 (67 FR 9895) together with a final rule establishing 
procedures for the referenda. The USDA's Farm Service Agency (FSA) 
certified the results of the referenda on March 27, 2002, and April 3, 
2002.
    A majority of producers voting in the referenda favored the 
mandatory grading of flue-cured tobacco, types 11, 12, 13, and 14; 
burley tobacco, type 31; Kentucky-Tennessee fire-cured tobacco, types 
22 and 23; Virginia fire-cured tobacco, type 21; Virginia sun-cured 
tobacco, type 37; and dark air-cured tobacco, types 35 and 36.
    Producers of cigar filler and binder tobacco, types 42, 43, 44, 53, 
54, and 55 did not approve mandatory grading.
    The Appropriations Act provided that, if a majority of the 
producers voting in the referenda favored the mandatory grading of that 
kind, USDA was directed to ensure that the kind of tobacco is graded at 
the time of sale for the 2002 and subsequent marketing years. The USDA 
was also directed to establish user fees for any such inspections. To 
the maximum extent practicable, these fees must be established, 
collected, and used in the same manner as user fees for the grading of 
tobacco sold at auction authorized under the Tobacco Inspection Act (7 
U.S.C. 511 et seq.).
    In this interim final rule, AMS is amending 7 CFR part 29, subpart 
B, regulations, to provide for mandatory grading at places other than 
designated tobacco auction markets. The regulations prior to the 
effective date of this interim rule only required grading of tobacco 
that was sold at auction on designated markets as set forth in 
 29.8001. The regulations are amended in this rule to include 
producer tobacco sold at locations (receiving stations) where tobacco 
is offered for marketing or shipment into commerce, other than at 
designated auction markets. Additionally, the regulations are amended, 
at subpart B, to reference the implementing authority contained in the 
Appropriations Act. The Tobacco Inspection Act will continue to be 
referenced for kinds of tobacco sold at auction on designated markets 
not required under the Appropriations Act.
    In the past, producers sold almost all of their tobacco at auction 
on designated markets. Last year, most producer tobacco was sold under 
contract and was delivered to receiving stations operated by buying 
concerns. Some of this tobacco was graded under the permissive grading 
program.
    This rule adds a definition of ``receiving station'' as meaning 
``Points at which producer tobacco is offered for marketing (other than 
sale at auction on a designated market), including tobacco auction 
warehouses, packing houses, prizeries, or places where tobacco is 
handled or stored.'' This definition is intended to be flexible enough 
to cover the circumstances in which producer tobacco may be marketed.
    Also, the regulations are amended to provide for proper display of 
tobacco, adequate space to perform inspections at receiving stations 
and the issuance of an inspection certificate. The requirements are 
similar to those at auction markets but are flexible because conditions 
will differ at the receiving stations. When the tobacco is inspected or 
graded by the receiver, the tobacco must be made available for 
mandatory inspection at the same time and at the same location within 
the receiving station. In order to provide a meaningful service to 
growers, who are paying for the inspection service, it is necessary to 
require the proper display of the tobacco and to require that the 
mandatory inspection be conducted at the same time and under the same 
conditions as

[[Page 36080]]

any other inspections, and that the results be readily available to the 
producer. It is also necessary to provide that, as at auction markets, 
no one may interfere with the inspector in the process of grading 
tobacco.
    The user fee for mandatory inspection of tobacco was increased from 
$.0083 to $.0100 per pound in 2001 to cover the costs of performing 
grading services and to maintain an adequate reserve to cover program 
financial responsibilities. During the 2001 crop-year, the Department 
only graded 31 percent of the total amount of tobacco marketed. 
However, with the adoption of mandatory grading of all tobacco, except 
cigar types, approximately 98 percent of tobacco marketed will require 
federal grading for the 2002 and subsequent crop years.
    As a result of resources being more efficiently utilized over a 
larger geographical area and the additional revenue generated, the 
Department will reduce the user fee from $.010 to $.009 per pound. The 
reduced fee was recommended by the National Advisory Committee for 
Tobacco Inspection Services at its meeting on April 16, 2002.
    The AMS reviews its user fee programs annually to determine if fees 
are adequate. The most recent review determined that the existing fee 
schedule was more than adequate for the 2002 crop-year and would exceed 
the target level for the operating reserve balances.
    Due to an estimated 69 percent increase in tobacco to be inspected 
for the 2002 crop-year, obligations are estimated at $10,152,000 and 
revenues are expected to be $8,503,000 for a loss of $1,649,000. An 
analysis of available data indicates that a fee of $.009 per pound 
would result in maintaining the operating reserve balance at $6,279,000 
for the 2002 crop-year and $4,357,000 for the 2003 crop-year which is 
adequate to meet financial obligations.
    Pursuant to 5 U.S.C. 553, it is also found and determined that good 
cause exists for not postponing the effective date of this rule until 
30 days after publication in the Federal Register because the tobacco 
marketing season will begin on July 1 and this action is needed, as 
soon as possible, to fulfill the requirements of the statute to 
implement mandatory grading for the 2002 marketing season. Operators of 
receiving stations need to know as soon as possible what requirements 
they must meet so that orderly marketing is not disrupted. Billing 
systems and programs must be in place at receiving stations and auction 
markets to apply the reduced fees at the beginning of the marketing 
season. This interim final rule provides a 60-day comment period, and 
all comments timely received will be considered prior to the 
finalization of this rule.

Executive Order 12866 and 12988

    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.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This action is not intended to have retroactive effect. 
The rule will not exempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.

Regulatory Flexibility Act and Paperwork Reduction Act

    In conformance with the provisions of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.), 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 12.201) 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 about 190 tobacco warehouses and about 450,000 
tobacco producers. There will also be about 35 receiving stations, most 
of which will be operated under contract at former tobacco auction 
warehouses and a few of which will be operated at tobacco auction 
warehouses. These would also be small businesses. It has been 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. The requirements of this 
rule are the minimum necessary for the implementation of the 
requirements of the Appropriations Act for the mandatory inspection of 
tobacco. The provisions are similar, but somewhat more flexible, that 
the requirements for the inspection and certification of tobacco sold 
at auction on designated markets, which have previously been determined 
not to have a significant economic impact on a substantial number of 
small entities.
    The information collection requirements that appear in Part 29 have 
been previously approved by the Office of Management and Budget under 
OMB Control No. 0581-0056.

List of Subjects in 7 CFR Part 29

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


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

PART 29--TOBACCO INSPECTION

Subpart B--Regulations

    1. The authority citation for subpart B is revised to read as 
follows:

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


    2. Section 29.40 is revised to read as follows:


 29.40  Mandatory inspection.

    Inspection authorized or required under section 5 of the Act or 
Section 759 of the Appropriations Act.

    3. A new  29.41 is added under the undesignated 
centerheading ``Definitions'' to read as follows:


 29.41  The Appropriations Act.

    The Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies Appropriations Act for 2002 (Pub. L. 107-76).

    4. A new  29.42 is added under the undesignated 
centerheading ``Definitions'' to read as follows:


 29.42  Receiving station.

    Points at which producer tobacco is offered for marketing (other 
than sale at auction on a designated market), including tobacco auction 
warehouses, packing houses, prizeries, or places where tobacco is 
handled or stored.

    5. Section 29.71 is revised to read as follows:


 29.71  Mandatory inspection.

    Mandatory inspection consists of:
    (a) Inspecting and certifying tobacco under the Act on designated 
markets before it is offered for sale at auction; or
    (b) Inspecting and certifying tobacco at receiving stations under 
the Appropriations Act at the time the tobacco is delivered for sale.

    6. Section 29.72 is revised to read as follows:


 29.72  Where mandatory inspection is required.

    (a) Auction. All tobacco offered for sale at auction on a market 
designated in accordance with the Act and  29.73 shall be 
inspected and certificated under the Act upon the date specified by the 
Secretary in public notice of such designation, and thereafter, except 
when

[[Page 36081]]

the requirement of such inspection and certification is temporarily 
suspended by the Deputy Administrator in accordance with the Act and 
the regulations in this subpart.
    (b) Other. Tobacco of the kinds specified below offered for sale by 
the producers thereof at receiving stations shall be inspected and 
certificated under the Appropriations Act at the time of delivery and 
prior to change of ownership. The specified kinds are flue-cured 
tobacco, types 11, 12, 13, and 14; burley tobacco, type 31; Kentucky-
Tennessee fire-cured tobacco, types 22 and 23; Virginia fire-cured 
tobacco, type 21; Virginia sun-cured tobacco, type 37; and dark air-
cured tobacco, types 35 and 36.
    7. In  29.75, paragraph (a) is revised and a new paragraph 
(e) is added to read as follows:


 29.75  Accessibility of tobacco.

    (a) All tobacco subject to mandatory inspection shall be made 
readily accessible for inspection.
* * * * *
    (e) Each receiving station operator shall make tobacco accessible 
to the inspector for proper examination including any necessary display 
in adequate light for determination of grade, class, type, or other 
characteristics.

    8. A new  29.75c is added to read as follows:


 29.75c  Display of tobacco at receiving stations.

    Each lot of tobacco delivered for sale at receiving stations and 
transferred to a conveyor system for unloading shall maintain a 
distance between adjacent lots of not less than 18 inches during the 
inspection process. The platform area used for examination with a 
conveyor system shall be a minimum of 4  x  4 feet. Any lots of tobacco 
displayed in a manner other than a conveyor system shall maintain a 
minimum clearance of 18 inches on all sides. If the tobacco is 
inspected or graded by the recipient, it shall be made available for 
mandatory inspection at the same time and location within the receiving 
station.

    9. Section 29.81 is revised to read as follows:


 29.81  Interference with inspectors.

    (a) Auction. (1) No person, including the owner, producer, 
warehouseman, purchaser, agent, or employee thereof shall attempt, in 
any manner, to influence an inspector with respect to the grade 
designation of tobacco, or impede, in any manner, an inspector while 
the inspector is in the process of grading tobacco on the warehouse 
auction floor, or ask any question or discuss any matter pertaining to 
the grading of tobacco while the inspector is grading any tobacco on 
the warehouse auction floor. While inspectors are engaged in grading 
the day's sale, all requests for information concerning the grade 
designation on or requests to review the grade of any lot of tobacco 
shall be made only to the head grader or to the market supervisor 
grader.
    (2) In the event that the head grader or market supervisor grader 
determines that a person has violated any provision of this section, 
inspection ticket(s) if already issued on the lot(s) of unsold tobacco 
involved shall be null and void and no further inspection shall be 
performed on such lot(s) offered for sale by the warehouseman in whose 
premises the violation occurred until the next regularly-scheduled sale 
for such warehouse: Provided, That if violation consists of talking to 
the inspector while he/she is grading the tobacco, a warning shall be 
given on first offense and penalty provisions shall apply on any 
subsequent offense. A reduction in daily sales for any warehouse 
resulting from a violation of this section shall not prevent the 
maximum number of lots or pounds allotted per day per set of buyers 
from being sold in a designated market.
    (b) Other. No person, including the owner, producer, receiving 
station operator, purchaser, agent, or employee thereof shall attempt, 
in any manner, to influence an inspector with respect to the grade 
designation of tobacco, or impede, in any manner, an inspector while 
the inspector is in the process of grading tobacco.
    (c) Administrative Remedies. The provisions of this section shall 
not preclude the application of other administrative remedies or the 
institution of criminal proceedings in appropriate cases as provided by 
the Act.

    10. In  29.123, paragraph (a) is revised to read as 
follows:


 29.123  Fees and charges.

* * * * *
    (a) Mandatory inspection. The inspection and certification fee is 
$0.009 per pound. The fee shall be paid by sellers of tobacco and 
assessed against the warehouse or receiving station operator 
irrespective of ownership or interest in the tobacco. When the 
warehouse or receiving station operator pays the Department, it is 
presumed the fee was collected from the seller. Inspection and related 
services shall be suspended or denied if the warehouse or receiving 
station operator fails to pay the fees and charges imposed under this 
section. The fee shall be based on total poundage of tobacco inspected 
and sold during each calendar month. The fee shall be due and payable 
on the first day of the immediately following month and on the day 
immediately following the last sale each marketing year. Mandatory 
inspection and certification services shall take precedence over 
permissive inspections, other than reinspections.
* * * * *

    Dated: May 17, 2002.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 02-12892 Filed 5-22-02; 3:21 pm]
BILLING CODE 3410-02-P