[Federal Register Volume 71, Number 174 (Friday, September 8, 2006)]
[Proposed Rules]
[Pages 53051-53052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14881]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / 
Proposed Rules  

[[Page 53051]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1435

RIN 0560-AH53


Sugar Program Definitions

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Commodity Credit Corporation (CCC) is soliciting comments 
and views on whether to revise the regulations at 7 CFR part 1435 for 
the purpose of regulating the marketing of sugar derived from imported 
beet thick juice.

DATES: Comments on this rule must be submitted by November 7, 2006 to 
be assured consideration.

ADDRESSES: CCC invites interested persons to submit comments on this 
advanced notice of proposed rule. Comments may be submitted by any of 
the following methods:
    E-mail: Send comments to [email protected].
    Mail: Submit comments to: Director, Dairy and Sweeteners Analysis 
Group (DSAG), Farm Service Agency (FSA), United States Department of 
Agriculture (USDA), STOP 0516, 1400 Independence Avenue, SW., 
Washington, DC 20250-0516.
    Fax: Submit comments by facsimile transmission to (202) 690-1480.
    Hand Delivery or Courier: Deliver comments to the above address.
    Federal eRulemaking Portal: Go to  http://www.regulations.gov. 
Follow the online instructions for submitting comments.
    Comments may be inspected in the Office of the Director, DSAG, FSA, 
USDA, Room 3752-S South Building, Washington, DC, between 8 a.m. and 
4:30 p.m. Monday through Friday, except holidays. A copy of this 
advanced notice of proposed rule is available on the DSAG Web site at 
http://www.fsa.usda.gov/ao/epas/dsa.htm.

FOR FURTHER INFORMATION CONTACT: Barbara Fecso at (202) 720-4146, or 
via e-mail at [email protected]. Persons with disabilities who 
require alternative means for communication (Braille, large print, 
audiotape, etc.) should contact the USDA Target Center at (202) 720-
2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    Generally, the Department of Homeland Security, Customs and Border 
Protection (Customs) is responsible for implementation of those 
statutes that regulate the importation of items into the United States, 
including the importation of sugar and sugar containing products. 
Included in these responsibilities is the collection of duties on sugar 
and sugar containing products. In contrast, the Department of 
Agriculture's (USDA) Commodity Credit Corporation (CCC) is responsible 
for the implementation of domestic programs that regulate the marketing 
of sugar derived from sugar beets and sugarcane under the Agricultural 
Adjustment Act of 1938 (the 1938 Act). While Customs and USDA both 
engage in activities with respect to sugar and sugar containing 
products, the definitions used by both agencies are not the same in all 
respects. As discussed more fully below, some parties believe that USDA 
should revise the manner in which these provisions of the 1938 Act are 
administered, primarily to foreclose what they perceive to be 
inequities that result, in part, from the differences in the treatment 
of a product generally referred to as ``thick juice.'' ``Thick juice'' 
as used in this document refers to a product that is derived from sugar 
beets by concentrating purified sugar beet juice through evaporation 
prior to the crystallization phase in the production of refined sugar 
from sugar beets. Ultimately, ``thick juice'' is further refined and 
is, in most cases, refined to a point that it is considered refined 
sugar, for example, sugar of the type purchased in the grocery store 
for table use.
    Thick juice is not the only imported sugar product defined 
differently by USDA and Customs. Cane syrup and molasses are analogous 
products to beet thick juice but these products are produced during 
sugarcane processing. Imported cane syrup and molasses yield about 
30,000 tons of refined sugar per year, compared to about 35,000 tons of 
refined sugar from imported sugar beet thick juice.
    With respect to the importation of Canadian thick juice at entry 
into the United States for purposes of levying applicable duties, 
Customs does not consider this product sugar and, therefore, it is 
subject to a duty of 0.00 cents per pound under 1702.90.4000 of the 
Harmonized Tariff Schedule of the United States (HTSUS). Likewise, 
Customs also does not consider imported cane syrups and cane molasses 
products sugar and, therefore, applies a duty of 0.00 cents per pound 
under 1703.10.3000 of the HTSUS. Also subject to a duty of 0.00 cents 
are sugar beets imported into the United States under 1212.91.0000 of 
the HTSUS. Conversely, sugar, which does not include thick juice, cane 
syrup, or molasses imported from Canada, or elsewhere (other than 
Mexico), that exceeds the ``duty free'' quantity allocated to each 
country each year by the United States is subject to a duty of 16.669 
cents per pound under 1701.99.5000 of the HTSUS. Each year (on a fiscal 
year basis) the United States specifies the quantity of sugar that may 
enter the United States from each country at a ``duty free,'' or a 
substantially reduced duty, consistent with the obligations of the 
United States under World Trade Organization (WTO) commitments, and 
obligations under regional agreements, such as the North American Free 
Trade Agreement (NAFTA), or bilateral trade agreements. Those 
quantities that enter at no duty, or the reduced duty, are referred to 
as ``in quota'' quantities and other entries above those quantities are 
referred to as ``out of quota'' amounts.
    The Farm Security and Rural Investment Act of 2002 amended the 1938 
Act to provide for a very strict marketing regime that would be in 
place for each of the 2002 through 2007 crop years. See 7 U.S.C. 1359aa 
et seq. Under this regime, processors of sugar beets and sugarcane are 
limited in the amount of sugar that they may market for human 
consumption, without the imposition of a penalty, based upon formulae 
in the 1938 Act. With respect to cane sugar, only sugar derived from 
domestically produced sugarcane is subject to these provisions. Any 
cane sugar that enters

[[Page 53052]]

the United States as either ``in quota'' or ``out of quota'' sugar is, 
clearly, not domestically produced and hence, not subject to these 
provisions.
    Conversely, sugar derived from imported sugar beets is subject to 
such restrictions. This differentiation in treatment is required by 
section 359b(b)(1) of the 1938 Act which provides, in part, that: ``By 
the beginning of each crop year, the Secretary shall establish for that 
crop year appropriate allotments under section 359c for the marketing 
by processors of sugar processed from sugar beets and from domestically 
produced sugarcane * * *'' 7 U.S.C. 1359bb(b)(1).
    Taking into consideration the provisions of section 359b(b)(1), 
there is no basis, in the view of USDA, to subject sugar derived from 
imported cane syrup or molasses to the domestic sugar allotment 
provisions of that Act. Thus, although both imported sugarcane and 
sugar beet intermediary products are circumventing strict Federal 
regulatory control, the law gives USDA no discretion to regulate the 
imported cane intermediary products, cane syrup, and molasses.
    With respect to sugar beets, CCC is currently administering this 
provision by treating the first sale of domestically produced thick 
juice as the point of the first marketing of sugar that is contained in 
this product. Accordingly, a U.S. entity that processes sugar beets to 
a point that thick juice is produced but elects to stop further 
processing of that product into refined sugar and, instead, sells that 
product to another entity has marketed sugar for the purposes of 
administering the domestic allotment provisions of the 1938 Act. Thus, 
this marketing is charged against the processor's allocation.
    Similarly, CCC has viewed the first sale of sugar that is contained 
in thick juice produced by a Canadian processor as occurring when the 
product is sold in Canada to a buyer. To the extent that such product 
is further refined in Canada or in the United States, this thick juice, 
or the refined sugar made from it, has not been subject to provisions 
of the 1938 Act.
    A portion of the domestic sugar industry has requested that CCC 
make the marketing of sugar produced from imported thick juice subject 
to the provisions of the 1938 Act that restrict the marketings of sugar 
by sugar beet processors. These interests make two arguments to support 
their position that such marketings of sugar derived from imported 
thick juice should be counted against an individual processor's 
marketing allocation: (1) Sugar produced from imported sugar beets is 
charged against a processor's allocation, and (2) the sale of 
domestically-produced thick juice is charged against a processor's 
allocation.
    Before proceeding to consideration of whether this proposal should 
be adopted, as adoption of this proposal will affect not only those 
entities who are currently importing thick juice into the United States 
but also all entities subject to marketing allotments, CCC is seeking 
information from interested parties on their views of the impacts of 
such action. CCC specifically seeks the views of these parties on the 
following issues:
    1. Imported ``thick juice'' is a source of sugar in the United 
States and, thus, CCC reduces the Overall Allotment Quantity (OAQ) 
determined under the 1938 Act to account for this supply. If such 
imports were curtailed in total, CCC would increase the OAQ and divide 
the OAQ between the sugarcane and sugar beet sectors as provided in 
that Act; sugarcane processors, in aggregate, would receive 45.65 
percent of this increase and sugar beet processors 54.35 percent. Is 
this a desirable result?
    2. Is it equitable to regulate the sale of sugar derived from 
imported sugar beet thick juice, when USDA is prohibited, by statute, 
from regulating the sale of refined sugar derived from its cane 
counterparts, cane syrup, and cane molasses?
    3. As opposed to a total curtailment of the importation of ``thick 
juice,'' CCC believes that it is more likely that any entity that is 
currently engaged in such imports and further processing will avail 
themselves of the provisions of the 1938 Act that allow a new entrant 
to the market for sugar derived from sugar beets to obtain a marketing 
allocation based upon their actions in processing this product over the 
past several years. This means that the sugar beet sector's 54.35 
percent of the OAQ would be distributed among a larger number of beet 
processors. Previously, CCC has denied an entity's request for an 
allocation under these new entrant provisions based upon the 
determination by CCC that the entity was not processing sugar beets or 
related products, but simply engaged in the further refinement of 
sugar. Is this a desirable result?
    4. To the extent a rationale is developed by CCC, should CCC 
regulate the sale of sugar derived from imported sugar beet products, 
including thick juice, by considering these products to be a feedstock 
in the production of sugar and not a type of sugar as currently 
provided for in 7 CFR 1435.2? By making this change, sugar derived from 
these imported products would be charged against the processor's 
allocation when the product is marketed. But, domestically-produced 
thick juice has been considered to be sugar for purposes of 
administration of the domestic sugar allotment program by CCC and not a 
feedstock. Accordingly, is there a rational basis to consider imported 
thick juice to be a feedstock and to consider domestically-produced 
thick juice as sugar, and is such rationale consistent with the 
obligations of the United States under WTO and NAFTA commitments, 
specifically those WTO provisions dealing with issues of national 
treatment?
    5. Should CCC redefine both domestically-produced and imported 
thick juice to be a feedstock in the production of sugar and not sugar 
for purposes of administering the 1938 Act? CCC believes, that under 
this approach, entities that further refine thick juice will avail 
themselves of the new entrant provisions of the domestic sugar 
allotment program in order to obtain a marketing allocation. This would 
likely diminish the marketing allocations of existing holders of 
marketing allocations because the quantity of domestic thick juice is 
significantly larger than the quantities of imported thick juice. 
Furthermore, this approach of changing the definition of domestically-
produced thick juice from a type of sugar to a feedstock used in the 
production of sugar could be problematic in that CCC may need to adjust 
the marketing history of some of, or all of, those entities that 
produce refined beet sugar.

    Signed in Washington, DC, on August 4, 2006.
Glen L. Keppy,
Acting Executive Vice President, Commodity Credit Corporation.
 [FR Doc. E6-14881 Filed 9-7-06; 8:45 am]
BILLING CODE 3410-05-P