[Federal Register Volume 67, Number 223 (Tuesday, November 19, 2002)]
[Rules and Regulations]
[Pages 69659-69660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29031]



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 Rules and Regulations
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  Federal Register / Vol. 67, No. 223 / Tuesday, November 19, 2002 / 
Rules and Regulations  

[[Page 69659]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 29

[Docket No. TB-02-11]
RIN 0581-AC20


Tobacco Inspection; Mandatory Grading

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Agriculture (USDA) is adopting, as a 
final rule, without change, an interim final rule that amended the 
regulations to provide mandatory grading for kinds of tobacco approved 
by a majority of producers voting in the mandatory grading referenda 
and to reduce the fee for mandatory grading from $.01 per pound to 
$.009 per pound.

EFFECTIVE DATE: November 20, 2002.

FOR FURTHER INFORMATION CONTACT: John P. Duncan III, Deputy 
Administrator, Tobacco Programs, Agricultural Marketing Service (AMS), 
U.S. Department of Agriculture (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.).
    The USDA published in the Federal Register on May 23, 2002 (67 FR 
36079) an interim final rule and notice of referenda results to amend 
the regulations to provide 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. The interim final rule also reduced the fee for mandatory 
inspection from $0.01 per pound to $0.009 per pound. The USDA requested 
comments on the interim final rule and the comment period expired on 
July 22, 2002. One comment was received from a tobacco purchasing 
company. The respondent stated that the purchasing companies should be 
allowed to establish their own operating hours to properly serve the 
growers, requested that all USDA employees be required to sign in at 
the receiving station's main office prior to beginning work, and all 
USDA employees be required to wear identification at all times. The 
USDA has flexible work schedules that can ordinarily accommodate 
purchasing companies establishing their own operating hours. Any 
grading services required to be performed outside of a regular work 
schedule, such as overtime and holidays, would be assessed to the 
purchasing company. The USDA implemented a program for the 2002 
marketing season that requires grading personnel to wear picture 
identification cards and safety vests while performing grading services 
at receiving stations, and USDA personnel will notify any receiving 
station's main office of their arrival whenever this is requested.
    This rule amended 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 the interim 
rule only required grading of tobacco that was sold at auction on 
designated markets as set forth in Sec.  29.8001. The regulations were 
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 were 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 added 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 were amended to provide for proper display of 
tobacco, adequate space to perform inspections at receiving stations 
and the issuance of

[[Page 69660]]

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 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 fee 
is reduced 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 previous 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.

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

    Accordingly, the interim final rule amending 7 CFR part 29 which 
was published at 67 FR 36079 on May 23, 2002, is adopted as a final 
rule without change.

    Dated: November 8, 2002.
A. J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-29031 Filed 11-18-02; 8:45 am]
BILLING CODE 3410-02-P