[Federal Register Volume 70, Number 8 (Wednesday, January 12, 2005)]
[Proposed Rules]
[Pages 2034-2053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-475]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1205

[Doc. No. CN-04-001]


Cotton Board Rules and Regulations: Adjusting Supplemental 
Assessment on Imports (2004 Amendments)

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) is proposing to amend 
the Cotton Board Rules and Regulations by adjusting the total rate of 
assessment per kilogram for imported cotton collected for use by the 
Cotton Research and Promotion Program. The proposed total rate of 
assessment would be calculated by adding together the $1 per bale 
equivalent assessment and the supplemental assessment, and adjusting 
the sum to account for the estimated amount of U.S. cotton contained in 
imported textile products. The proposed adjustment would reduce the 
assessable portion of the cotton content of imported textile products 
by the estimated average amount of U.S. cotton contained therein. 
Exemptions and refunds would continue to be provided for importers 
wishing to document the U.S. cotton content of specific goods. The 
proposed rule would continue to ensure that the total assessment 
collected on imported cotton and the cotton content of imported 
products remain similar to those paid on domestically produced cotton, 
and that the U.S. cotton content of imported products is not subject to 
more than one assessment.

DATES: Comments must be received on or before March 14, 2005.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule to Whitney Rick, Assistant to the Deputy 
Administrator, Cotton Program, Agricultural Marketing Service, USDA, 
1400 Independence Ave., SW., STOP 0224 Washington, DC 20250-0224. 
Comments should be submitted in triplicate. Comments may also be 
submitted electronically to: http://[email protected] or 
http://www.regulations.gov. All comments should reference the docket 
number and the date and page number of this issue of the Federal 
Register. All comments received will be made available for public 
inspection at Cotton Program, AMS, USDA, Room 2641-S, 1400 Independence 
Ave., SW., Washington, DC 20250 during regular business hours. A copy 
of this notice may be found at: http://www.ams.usda.gov/cotton/rulemaking.htm.

FOR FURTHER INFORMATION CONTACT: Whitney Rick, Assistant to the Deputy 
Administrator, Cotton Program, AMS, USDA, 1400 Independence Ave., SW., 
Stop 0224, Washington, DC 20250-0224, telephone (202) 720-2259, 
facsimile (202) 690-1718, or e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget has waived the review process 
required by Executive Order 12866 for this action.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect. 
This proposed rule would not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Cotton Research and Promotion Act provides that administrative 
proceedings must be exhausted before parties may file suit in court. 
Under Section 12 of the Act, any person subject to an order may file 
with the Secretary a petition stating that the order, any provision of 
the plan, or any obligation imposed in connection with the order is not 
in accordance with law and requesting a modification of the order or to 
be exempted therefrom. Such person is afforded the opportunity for a 
hearing on the petition. After the hearing, the Secretary would rule on 
the petition. The Act provides that the District Court of the United 
States in any district in which the person is an inhabitant, or has his 
principal place of business, has jurisdiction to review the Secretary's 
ruling, provided a complaint is filed within 20 days from the date of 
the entry of ruling.

Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 et seq.) AMS has considered the economic impact 
of this action on small entities and has determined that its 
implementation will not have a

[[Page 2035]]

significant economic impact on a substantial number of small 
businesses.
    There are an estimated 10,000 importers who are presently subject 
to rules and regulations issued pursuant to the Cotton Research and 
Promotion Order. The majority of these importers are small businesses 
under the criteria established by the Small Business Administration.
    The proposed rule would reduce the total rate of assessment per 
kilogram for imported cotton products collected for use by the Cotton 
Research and Promotion Program. The proposed total rate of assessment 
would be calculated by adding together the $1 per bale equivalent 
assessment and the supplemental assessment, and adjusting the sum to 
account for the estimated amount of U.S. cotton contained in imported 
textile products. The proposed adjustment to the sum would reduce the 
assessable portion of the cotton content of imported products by 22.2 
percent, the current average estimated by AMS of U.S. cotton contained 
therein. The proposed total rate of assessment per kilogram for 
imported raw cotton and cotton textile products would be calculated 
using the following formula:

1. One Dollar per Bale Assessment Converted to Kilograms

    A 500 pound bale equals 226.8 kg. (500 x .453597). $1 per bale 
assessment equals $0.002000 per pound (1/500) or $0.004409 per kg. (1/
226.8).

2. Supplemental Assessment of \5/10\ of One Percent of the Value of the 
Cotton Converted to Kilograms

    The 2003 calendar year weighted average price received by producers 
for Upland cotton is $0.55 per pound or $1.2125 per kg. (0.55 x 
2.2046). Five tenths of one percent of the average price in kg. equals 
$0.006063 per kg. (1.2125 x .005).

3. Adjustment for U.S. Cotton Content of Imported Products

    The adjustment for the U.S. cotton content of assessed imports is 
obtained by multiplying the sum of Nos. 1 and 2 above by the U.S. 
cotton share of total net cotton textile imports (0.222) which equals 
$0.002325 per kilogram ($0.010472 per kg. x 0.222). Subtracting this 
amount from the sum of Nos. 1 and 2 above would equal the proposed 
total rate of assessment for imported products of $0.008147 per 
kilogram ($0.010472 per kg. - $0.002325 per kg. = $0.008147).
    The current total rate of assessment on imported raw cotton and 
imported cotton products is $0.008267 per kilogram. The proposed rule 
would increase the assessment on raw cotton to $0.010472, an increase 
of $0.002205. Even though the assessment would be raised for imported 
raw cotton, the increase is small and will not significantly affect 
small businesses. The proposed rule would decrease the total rate of 
assessment for imported cotton products to $0.008147 per kilogram, a 
decrease of $0.00012 per kilogram from last year. The proposed rule 
would not have a significant economic impact on a substantial number of 
importers of cotton and cotton-containing products because importers 
would be paying a small increase on imported raw cotton and a reduced 
rate of total assessment on imported cotton products.

Paperwork Reduction

    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act (PRA) (44 U.S.C. 3501 et seq.) the information collection 
requirements contained in the regulation to be amended have been 
previously approved by OMB and were assigned control number 0581-0093.

Background

    The Cotton Research and Promotion Act (Act), as amended, 7 U.S.C. 
2101 et seq., was enacted by Congress in 1966. Congress intended the 
Act to:

[E]nable the establishment of an orderly procedure for the 
development, financing through adequate assessments on all cotton 
marketed in the United States and on imports of cotton, and carrying 
out an effective and continuous coordinated program of research and 
promotion designed to strengthen cotton's competitive position and 
to maintain and expand domestic and foreign markets and uses for 
United States cotton.

    7 U.S.C. 2101.

    The Act authorizes the Secretary of the Department of Agriculture 
to issue a Cotton Research and Promotion Order. An amended Order was 
approved by producers and importers voting in a referendum held July 
17-26, 1991. The amended Order was published in the Federal Register on 
December 10, 1991 (56 FR 64470). A proposed rule implementing the 
amended Order was published in the Federal Register on December 17, 
1991 (56 FR 65450). Implementing rules were published on July 1 and 2, 
1992, (57 FR 29181) and (57 FR 29431), respectively. The Order imposes 
an assessment on the production and importation of cotton in order to 
pay for the generic research and promotion projects authorized by the 
Act. The assessment consists of two parts, an assessment of $1 per bale 
of cotton or per bale equivalent of cotton containing products, and a 
supplemental assessment tied to the value of cotton.
    The Act requires the Secretary to establish procedures to ensure 
that U.S. (upland) cotton content of imported products is not subject 
to more than one assessment. Under the current procedures established 
in the regulations, an importer may receive an exemption from paying 
the assessment or a reimbursement of the assessment paid by submitting 
sufficient documentation to the Board to verify the U.S. cotton content 
of the products to be imported or already imported. Because foreign 
mills frequently mix U.S. cotton with other cottons when formulating 
cotton yarns and fabrics, the ability of importers, except those 
purchasing products from mills that use only U.S. cotton, to verify 
through documentation the U.S. cotton content of the products they are 
importing may be limited.
    AMS believes that changes in the composition of U.S. cotton use and 
the upcoming completion of the removal of all U.S. import quotas on 
textile manufactures as outlined in the Agreement on Textile and 
Clothing necessitates a change to its current regulatory procedures for 
ensuring that U.S. (upland) cotton content of imported products is not 
subject to more than one assessment. Prior to the 2001/2002 crop year, 
the majority of U.S. (upland) cotton (58 percent in the 2000/2001 crop 
year) was consumed domestically by U.S. mills. Starting with the 2001/
2002 crop year, a majority of U.S. cotton was exported (67 percent in 
2003/2004). AMS expects this shift in the composition of U.S. cotton 
use to continue into the foreseeable future and that the ending of U.S. 
textile quotas will lead to an increase in the amount of U.S. cotton 
returning to the United States in cotton product imports. AMS, 
therefore, believes that it is appropriate at this time to make an 
adjustment to the total rate of assessment to account for the amount of 
U.S. cotton content of imported textile products.
    The estimated amount of U.S. cotton contained in total assessable 
cotton imports would be calculated by multiplying the U.S. cotton 
export share of foreign mill use adjusted for location by assessable 
imports. Adjusting the average amount of U.S. cotton contained in total 
cotton imports for location would ensure that the U.S. cotton content 
of total cotton imports would properly account for differences among 
supplying countries with respect to U.S. cotton's share of their cotton 
mill use and in their share of U.S. cotton product imports.

[[Page 2036]]

    AMS will use regularly published statistics on U.S. exports by 
destination (Weekly Export Sales Report), the world's textile usage of 
cotton by country (Foreign Agricultural Service Cotton Circular) and 
the raw cotton equivalent contained in imports and exports of textile 
manufactures by country (Cotton & Wool Outlook) in the calculations of 
the U.S. content of U.S. imports of processed cotton products. AMS 
would determine the percentage of U.S. cotton contained in total 
assessable cotton imports as follows:
    Step 1. Define six non-U.S. cotton product supply regions: (i) 
North America: Bahamas, Belize, Canada, Costa Rica, Dominican Republic, 
El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, 
Panama, (ii) South America: Argentina, Brazil, Chile, Colombia, 
Ecuador, Peru, Venezuela, (iii) Asia: China, Hong Kong, Israel, Japan, 
Malaysia, Philippines, Saudi Arabia, Singapore, South Korea, Sri Lanka, 
Taiwan, United Arab Emirates, (iv) Europe: Belgium, France, Germany, 
Ireland, Italy, Netherlands, Poland, Spain, Turkey, (v) Oceania: 
Australia, and (vi) Africa: Ivory Coast, Morocco, Nigeria, South 
Africa. These six regions coincide with the six regions used by the 
USDA's Economic Research Service in its reporting of U.S. cotton 
textile imports.
    Step 2. Calculate the U.S. cotton share of foreign mill use for 
each region by dividing total U.S. exports of raw cotton to each region 
by total mill consumption of raw cotton in that region. This would 
represent an approximation of the percentage of U.S. cotton contained 
in all cotton products imported into the United States from that 
region. For the purpose of this calculation, U.S. cotton content 
contained in a region's cotton products is uniformly distributed across 
each product manufactured in that region.
    Under the proposed rule, AMS examined the most current data 
available and determined that U.S. cotton's share of non-U.S. mill use 
for each region was as follows: North America, 100.0 percent; South 
America, 16.0 percent; Asia, 9.9 percent; Europe, 11.6 percent; Oceana, 
0.0 percent; and Africa, 0.2 percent. These shares were obtained by 
dividing U.S. exports of raw cotton to each region by total cotton mill 
use in each region. The specific calculations are shown in Table 1.

                      Table 1.--Tabulation of U.S. Cotton Export Share of Foreign Mill Use
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                                                                                    Raw cotton
                                                                                    mill use--      U.S. cotton
                             Region                                U.S. exports     million 480    share of raw
                                                                   of raw cotton    lb. Bales--     cotton mill
                                                                                                        use
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North America...................................................           2.842           2.767       \a\ 1.000
South America...................................................           0.833           5.207           0.160
Asia............................................................           6.481          65.254           0.099
Europe..........................................................           1.757          15.103           0.116
Oceana..........................................................           0.000           0.125           0.000
Africa..........................................................           0.006           2.876          0.002
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\a\ North America share capped at 1.000.

    Step 3. Determine total imports of assessable cotton for each 
region by subtracting the total cotton content of U.S. exports of 
processed cotton products in raw cotton equivalents to each region from 
the total cotton content of U.S. imports of processed cotton products 
from that region in raw cotton equivalents. The net result (net 
imports) of processed cotton products provides an approximation of the 
amount of cotton coming into the United States from each region that is 
not being exempted or receiving a refund.
    Under the proposed rule, AMS examined the most current data 
available and determined that processed cotton imports into the U.S. 
totaled 9,232 \1\ million pounds (North America, 3,116 million pounds; 
South America, 242 million pounds, Asia, 4,770 million pounds, Europe, 
684 million pounds, Oceania, 41 million pounds, and Africa, 378 million 
pounds. U.S. processed cotton exports for the same time period and 
regions totaled 2,317 \1\ million pounds (North America, 2,151 million 
pounds; South America, 45 million pounds; Asia 64 million pounds; 
Europe 45 million pounds; Oceania 5 million pounds; and Africa, 7 
million pounds). Subtracting U.S. exports from U.S. imports results in 
total net imports of 6,915 \1\ million pounds (North America, 965 
pounds; South America, 197 million pounds; Asia, 4,706 million pounds; 
Europe, 639 million pounds; Oceana, 36 million pounds; and Africa, 371 
million pounds.
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    \1\ Total does not equal sum of regions due to rounding.
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    Step 4. Adjust the U.S. cotton content of imports for location by 
multiplying the U.S. cotton share of foreign mill use for each region 
by that region's share of total imports of assessable cotton and then 
totaling-up the result obtained across all the regions. The share of 
total imports of assessed cotton products is calculated by dividing the 
total assessed cotton contained in each regions' imports as discussed 
in Step 3 above by the sum of all regions' imports of assessed cotton.
    Step 5. The percentage of U.S. cotton contained in assessable 
imports is then used to calculate the assessable content of imported 
cotton products by multiplying the cotton content of each imported 
product by the percentage of U.S. cotton contained in total assessable 
imports and subtracting that amount from the cotton content of imported 
products (assessable cotton content = cotton content per HTS code - 
(cotton content per HTS code x proportion of U.S. cotton contained in 
U.S. imports) where the proportion of U.S. cotton contained in U.S. 
imports equals the percentage of U.S. cotton contained in assessable 
imports divided by 100).
    Using the above method and the most current data available to AMS, 
the proposed rule would lower the total amount of assessments paid by 
importers for imported textile products by approximately 22.2 percent 
from the total amount of assessments paid by importers using current 
procedures. Raw cotton import assessments would increase by 26.7 
percent based on the established formula. Exemptions and

[[Page 2037]]

refunds would continue to be provided for importers wishing to document 
the U.S. cotton content of specific goods.
    The $1 per bale of cotton or per bale equivalent of cotton 
containing products, and the supplemental assessment would continue to 
be calculated the same way. The $1 per bale of cotton or per bale 
equivalent of cotton containing products assessment is levied on the 
weight of cotton produced or imported at a rate of $1 per bale of 
cotton which is equivalent to 500 pounds or $1 per 226.8 kilograms of 
cotton.
    The supplemental assessment is levied at a rate of five-tenths of 
one percent of the value of domestically produced cotton, imported 
cotton, and the cotton content of imported products. AMS assigns the 
calendar year weighted average price received by U.S. farmers for 
Upland cotton to represent the value of imported cotton. The current 
value of imported cotton as published in the Federal Register (68 FR 
27898) on May 22, 2003, for the purpose of calculating supplemental 
assessments on imported cotton is $0.7716 per kilogram. This number was 
calculated using the annual weighted average price received by farmers 
for Upland cotton during the calendar year 2002 which was $0.35 per 
pound and multiplying by the conversion factor 2.2046. Using the 
Average Weighted Price Received by U.S. farmers for Upland cotton for 
the calendar year 2003, which is $0.55 per pound, the new value of 
imported cotton is $1.2125 per kilogram. The proposed value is $.4409 
per kilogram more than the previous value.
    The U.S. cotton share of total net imported products is 
approximated at 0.222. This figure was obtained by multiplying U.S. 
cotton's share of each region's mill use by that region's share of 
assessable cotton imports. The U.S. content of assessable cotton 
imports for each supply region is shown in Table 2.

                Table 2.--Tabulation of U.S. Cotton Share of Total Assessable U.S. Cotton Imports
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                                                                                                    U.S. cotton
                                                                   U.S. share of   Region share      share of
                             Region                                foreign mill    of assessable    assessable
                                                                        use       cotton imports      imports
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North America...................................................           1.000           0.140           0.140
South America...................................................           0.160           0.028           0.004
Asia............................................................           0.099           0.681           0.067
Europe..........................................................           0.116           0.092           0.011
Oceana..........................................................           0.000           0.005           0.000
Africa..........................................................           0.002           0.054           0.000
                                                                 -----------------
    Total.......................................................            N.A.           1.000           0.222
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    An example of the complete assessment formula and how the various 
figures are obtained is as follows:
    One bale is equal to 500 pounds.
    One kilogram equals 2.2046 pounds.
    One pound equals 0.453597 kilograms.

1. One Dollar per Bale Assessment Converted to Kilograms

    A 500 pound bale equals 226.8 kg. (500 x .453597).
    $1 per bale assessment equals $0.002000 per pound (1/500) or 
$0.004409 per kg. (1/226.8).

2. Supplemental Assessment of \5/10\ of One Percent of the Value of the 
Cotton Converted to Kilograms

    The 2003 calendar year weighted average price received by producers 
for Upland cotton is $0.55 per pound or $1.2125 per kg. (0.55 x 
2.2046).
    Five tenths of one percent of the average price in kg. equals 
$0.006063 per kg. (1.2125 x .005).

3. Total Rate of Assessment

    The total rate of assessment per kilogram of raw cotton is 
$0.010472 per kg. (obtained by adding the $1 per bale equivalent 
assessment of $0.004409 per kg., and the supplemental assessment 
$0.006063 per kg.), and making an adjustment of 0.222 for the U.S. 
cotton content of assessed imported textile products. The proposed 
total rate of assessment for imported cotton would be $0.008147 per 
kilogram. The current total rate of assessment on imported cotton is 
$0.008267 per kilogram. The proposed rule would decrease the total rate 
of assessment on imported cotton products to $0.008147 per kilogram, a 
decrease of $0.00012 per kilogram from last year.
    The figures shown in the right hand column of the Import Assessment 
Table 1205.510(b)(3) are a result of such a calculation, and have been 
revised accordingly. These figures indicate the total assessment per 
kilogram due for each Harmonized Tariff Schedule (HTS) number subject 
to assessment.
    A sixty-day comment period is provided to comment on the changes to 
the Cotton Board Rules and Regulations proposed herein. This period is 
deemed appropriate because this proposal would adjust the assessments 
paid by importers on imported raw cotton and cotton products under the 
Cotton Research and Promotion Order, by increasing the assessment on 
raw cotton and reducing the total rate of assessment for imported 
cotton products. These proposed changes would ensure that the total 
assessment collected on imported cotton and the cotton content of 
imported products remain similar to those paid on domestically produced 
cotton, and that the U.S. cotton content of imported products is not 
subject to more than one assessment.
    Accordingly, the change proposed in this rule, if adopted, should 
be implemented as soon as possible.

List of Subjects in 7 CFR Part 1205

    Advertising, Agricultural research, Cotton, Marketing agreements, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble 7 CFR part 1205 is 
proposed to be amended as follows:

PART 1205--COTTON RESEARCH AND PROMOTION

    1. The authority citation for part 1205 continues to read as 
follows:

    Authority: 7 U.S.C. 2101-2118.

    2. In Sec.  1205.510, paragraph (b)(2) and the table in paragraph 
(b)(3)(ii) are revised to read as follows:


Sec.  1205.510  Levy of assessments.

* * * * *
    (b) * * * (2) The 12-month average of monthly weighted average 
prices received by U.S. farmers will be calculated annually. Such 
weighted average will be used as the value of imported cotton for the 
purpose of levying the supplemental assessment on

[[Page 2038]]

imported cotton and will be expressed in kilograms. The value of 
imported cotton for the purpose of levying the supplemental assessment 
is $1.2125 per kilogram. The total rate of assessment for imported raw 
cotton is $0.010472, and the total rate of assessment for imported 
cotton products is $0.008147 per kilogram.
    (3) * * *
    (ii) * * *
BILLING CODE 3410-02-P

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* * * * *

    Dated: January 5, 2005.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-475 Filed 1-11-05; 8:45 am]
BILLING CODE 3410-02-C