[Federal Register Volume 75, Number 237 (Friday, December 10, 2010)]
[Rules and Regulations]
[Pages 76921-76923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31061]



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  Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / 
Rules and Regulations  

[[Page 76921]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1463

RIN 0560-AH30


Tobacco Transition Payment Program; Tobacco Transition 
Assessments

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule; technical amendment.

-----------------------------------------------------------------------

SUMMARY: The Commodity Credit Corporation (CCC) is modifying the 
regulations for the Tobacco Transition Payment Program (TTPP) to 
clarify, consistent with current practice and as required by the Fair 
and Equitable Tobacco Reform Act of 2004 (FETRA), that the allocation 
of tobacco manufacturer and importer assessments among the six classes 
of tobacco products will be determined using constant tax rates so as 
to assure that adjustments continue to be based solely on changes in 
the gross domestic volume of each class. This means that CCC will 
continue to determine tobacco class allocations using the Federal 
excise tax rates that applied in fiscal year 2005. These are the same 
tax rates used when TTPP was implemented and must be used to ensure, 
consistent with FETRA, that changes in the relative class assessments 
are made only on the basis of changes in volume, not changes in tax 
rates. This technical amendment does not change how the TTPP is 
implemented by CCC, but rather clarifies the wording of the regulation 
to directly address this point.

DATES: Effective Date: December 10, 2010.

FOR FURTHER INFORMATION CONTACT: Jane Reed, Economic and Policy 
Analysis Staff, Farm Service Agency (FSA); phone: (202) 720-6782, e-
mail: [email protected]. Persons with disabilities or who require 
alternative means for communication (Braille, large print, audio tape, 
etc.) should contact the U.S. Department of Agriculture (USDA) Target 
Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION: FETRA (7 U.S.C. 518-519a), which was 
contained in the American Jobs Creation Act of 2004 (Pub. L. 108-357) 
authorizes TTPP, sometimes called the ``tobacco buyout'' program. Under 
TTPP, eligible former tobacco quota holders and tobacco producers 
receive payments in 10 annual installments in fiscal years 2005 through 
2014. To fund TTPP, CCC collects quarterly assessments from domestic 
manufacturers and importers of tobacco products. FETRA specifies the 
methodology for determining quarterly assessments.
    As specified in FETRA and the TTPP regulations, the assessments are 
allocated among six statutorily-specified classes of tobacco products: 
Cigarettes, cigars, snuff, roll-your-own, chewing, and pipe. FETRA 
specifies further the initial relative percentages that each class will 
pay of the total assessment levied each year of the program. Analysis 
by USDA determined that the initial allocation in FETRA was calculated 
using tax data and volumes published by the Treasury Department's 
Alcohol and Tobacco Tax and Trade Bureau (TTB). Specifically, it 
appeared that Congress used calendar year 2003 relevant tobacco class 
volume amounts (volume measured by using number of sticks for 
cigarettes and cigars, pounds for the other classes) from the published 
TTB data and multiplied those numbers by the then-applicable maximum 
excise tax rate. In this way, each class' volume was converted from 
differing bases (sticks and pounds) to a tax dollar figure. The tax 
figures were added together for a six-class total. Each class' 
allocation was then its percentage contribution to the six-class total 
of excise taxes and that percentage was then specified in section 625 
of Pub. L. 108-357 (7 U.S.C. 518d) as each class' initial percentage of 
the overall allocation for TTPP.
    The allocation of the total annual assessment needed to fund TTPP 
among the six classes is commonly referred to as Step A of the 
assessment process; Step B is the division of assessments within each 
class of that class' share among the manufacturers or importers of 
products in that particular class. This technical amendment only 
addresses Step A.
    The initial percentage assigned to cigarette tobacco in FETRA was 
96.331 percent, as specified in 7 U.S.C. 518d(c)(1). That allocation, 
and the allocation to the other five classes, was not intended to be 
permanent. Rather, as specified in 7 U.S.C. 518d(c)(2), it was provided 
in FETRA that for subsequent fiscal years, the Secretary would 
periodically adjust the percentage of the total amount required under 
subsection (b) to be assessed against, and paid by, the manufacturers 
and importers of each class of tobacco product specified in paragraph 
(1) to reflect changes in the share of gross domestic volume held by 
that class of tobacco product.
    Thus, FETRA provides a specified restriction for adjustments to the 
Step A allocations to reflect changes in the share of gross domestic 
volume only, not changes in tax rates.
    The current regulation in 7 CFR 1463.5(a) specifies that ``the 
national assessment will be divided by CCC among each class of tobacco 
based upon CCC's determination of each class's share of the excise 
taxes paid. The value of the excise taxes paid for each class of 
tobacco will be based upon the reports filed by domestic manufacturers 
and importers of tobacco products with the Department of the Treasury 
and the Department of Homeland Security * * *''
    Excise taxes paid are based on the volume of tobacco calculated 
from those reports, consistent with FETRA's intent to base any changes 
in the Step A allocations on changes in gross domestic volume. To 
assure the correctness of the result, a constant tax rate must be used, 
but the regulation is silent on which rates will be used. Until 2009, 
the point was moot in any event because the excise rates were, until 
then, unchanged. However, on April 1, 2009, Congress changed tobacco 
excise tax rates with the passage of the Children's Health Insurance 
Program Reauthorization Act of 2009 (Pub. L. 111-3) and a question has 
been raised subsequently about which rates would be used for the 
calculation. The regulation is being clarified accordingly to address 
that question specifically. As specified in this technical amendment, 
CCC will continue to use the ``old'' rates

[[Page 76922]]

(the rates that were in effect when the program was established) for 
the Step A adjustments because otherwise the adjustments would be for 
changes in the tax rates instead of changes in volume.
    Changing the Step A allocations based on changes in excise tax 
rates would not be consistent with FETRA. If, for example, there were 
only two classes of products and for some reason the tax rate of one 
doubled but the volumes of the two classes remained exactly the same, 
then the Step A shares of the two classes would change dramatically if 
the new tax rates were used even though there had been no change in the 
volumes. That would not be consistent with FETRA because there would be 
an adjustment that was not based on a change in volume. The new tax 
rates, adopted in 2009, were proportionately raised more for cigars and 
roll-your-own tobacco than for the other classes, and if the new tax 
rates were used, the assessment for cigars and for roll-your-own 
tobacco would be adjusted to a percentage that would be much higher 
than if the adjustments are based only on changes in volume. In the 
meantime, those for cigarettes and some other classes would be much 
lower, independent of any changes in volume, and contrary to FETRA. In 
the case of cigars, the assessment would be nearly triple.
    The continued use of the old rates has been reflected in 
calculations for Step A adjustments published on the FSA website both 
in the fall of 2009 and this year. CCC will, however, continue to make 
adjustments based on changes in volume and, in fact, because of those 
adjustments the cigarette share of the assessments has declined from 
the original 96.3 percent to 91.57 percent for the upcoming year. As 
the published calculations show, a class' individual percentage volume 
decline or increase is not necessarily equal to the decline or increase 
in its proportion of the total among classes. The following 
hypothetical example is intended to demonstrate why this occurs: Assume 
there were just two categories of products and one had a volume of 100 
and the other had a volume of 1, so that the larger category's 
proportion of the total volume, 100/101, would be over 99 percent. 
Assume next that the first category had a 50 percent decline in volume 
down to 50 units while the other stayed constant at 1. The new total 
volume would be 51 for the two categories. The larger category's 
proportion of the total volume (50 of 51) would still be over 98 
percent despite the 50 percent decline in its volume. Again, this is a 
hypothetical example and the actual numbers used in the actual agency 
calculations are set out in the published calculations.
    This amendment ensures that the regulation is clear and remains 
consistent with FETRA. Because this is a clarification only, and 
because this action is exempt from notice and comment rulemaking as 
specified in 7 U.S.C. 519a, this action is taken without prior public 
comment, although there have been public inquiries about this issue.
    This amendment also corrects the authority for part 1463 to refer 
to the United States Code citation for FETRA, rather than the public 
law citation.

Executive Order 12866

    This technical amendment did not require Office of Management and 
Budget (OMB) designation under Executive Order 12866, ``Regulatory 
Planning and Review,'' and therefore OMB has not reviewed this rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553). This rule is not subject to the Regulatory Flexibility Act 
since CCC is not required to publish a notice of proposed rulemaking 
for this rule. This action is exempt from notice and comment rulemaking 
(7 U.S.C. 519a).

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and FSA regulations 
for compliance with NEPA (7 CFR part 799). The rule change is a 
technical amendment and is solely administrative in nature. Therefore, 
FSA has determined that NEPA does not apply to this Final Rule and no 
environmental assessment or environmental impact statement will be 
prepared.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial assistance and direct Federal 
development. This rule neither provides Federal financial assistance or 
direct Federal development; it does not provide either grants or 
cooperative agreements. Therefore this program is not subject to 
Executive Order 12372.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, ``Civil 
Justice Reform.'' This rule would not preempt State and or local laws, 
and regulations, or policies unless they present an irreconcilable 
conflict with this rule. Before any judicial action may be brought 
concerning the provisions of this rule, appeal provisions of 7 CFR 
parts 11 and 780 would need to be exhausted. This rule would not 
preempt a State or tribal government law, including any State or tribal 
government liability law.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, on the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    This rule has been reviewed for compliance with Executive Order 
13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' The policies contained in this rule do not have tribal 
implications that preempt tribal law. FSA continues to consult with 
Tribal officials to have a meaningful consultation and collaboration on 
the development and strengthening of CCC regulations.

Unfunded Mandates

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local, or tribal governments, in the 
aggregate, or to the private sector. UMRA generally

[[Page 76923]]

requires agencies to consider alternatives and adopt the more cost 
effective or least burdensome alternative that achieves the objectives 
of the rule. This rule contains no Federal mandates as defined by Title 
II of UMRA for State, local, or tribal governments or for the private 
sector. Therefore, this rule is not subject to the requirements of 
sections 202 and 205 of UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule under the Small Business Regulatory 
Enforcement Fairness Act of 1996, (Pub. L. 104-121, SBREFA). Therefore, 
CCC is not required to delay the effective date for 60 days from the 
date of publication to allow for Congressional review and this rule is 
effective on the date of publication in the Federal Register.

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, 
is:
    Tobacco Transition Payment Program--10.085.

Paperwork Reduction Act

    These regulations are exempt from the requirements of the Paperwork 
Reduction Act (44 U.S.C. Chapter 35), as specified in section 642 of 
Pub. L. 108-357 (7 U.S.C. 519a), which provides that these regulations, 
which are necessary to implement TTPP, be promulgated and administered 
without regard to the Paperwork Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 1463

    Agriculture, Agricultural commodities, Acreage allotments, 
Marketing quotas, Price support programs, Tobacco, Tobacco transition 
payments.


0
For the reasons discussed in the preamble, this rule amends 7 CFR part 
1463 as follows:

PART 1463--2005-2014 TOBACCO TRANSITION PAYMENT PROGRAM

0
1. The authority citation for part 1463 is revised to read as follows:

    Authority:  7 U.S.C. 518-519a, 714b, and 714c.


Sec.  1463.5  [Amended]

0
2. Amend paragraph (a), first sentence, by adding the words ``using for 
all years the tax rates that applied in fiscal year 2005'' at the end.

    Signed in Washington, DC, on December 7, 2010.
Jonathan W. Coppess,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 2010-31061 Filed 12-9-10; 8:45 am]
BILLING CODE 3410-05-P