[Federal Register Volume 79, Number 246 (Tuesday, December 23, 2014)]
[Proposed Rules]
[Pages 76919-76927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29807]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
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.
========================================================================
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 /
Proposed Rules
[[Page 76919]]
DEPARTMENT OF AGRICULTURE
Foreign Agricultural Service
7 CFR Part 6
RIN 0551-AA82
Dairy Tariff-Rate Import Quota Licensing Program
AGENCY: Foreign Agricultural Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would amend the regulation that provides
for the issuance of licenses to import certain dairy articles under
tariff-rate quotas (TRQs) as set forth in the Harmonized Tariff
Schedule of the United States. The three most significant changes to
the rule would be to suspend for an additional seven years, the
historical license reduction provision, which currently expires with
the beginning of quota year 2016; to modify procedures for collecting
licensing fees in order to better align the fee collection to the costs
of administering the program; and to exclusively use electronic
communications in the application, reporting and payment processes. The
expected outcome from the implementation of the proposed changes would
be to allow license holders to adjust to changing market conditions
impacting the dairy sector; increase the Department's ability to more
closely align cost recovery with the actual costs of administering the
program; and allow the Department to reduce lag times, minimize paper
files, and increase the efficiency of the program operations.
DATES: Submit comments on this proposed rule on or before February 23,
2015.
ADDRESSES: Comments should include the Regulation Identifier Number
(RIN) and volume, date, and page number of this issue of the Federal
Register. You may submit comments by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov.
Follow the online instructions for submitting comments.
Mail, hand delivery, or courier: Abdelsalam El-Farra, Agricultural
Marketing Specialist, Sugar and Dairy Branch, Import Programs and
Export Reporting Division, Office of Trade Programs, Foreign
Agricultural Service, U.S. Department of Agriculture, Room 5526, 1400
Independence Avenue SW., Washington, DC 20250-1021, (202) 720-9439; fax
(202) 720-0876; [email protected].
Comments will be available for inspection online at
www.regulations.gov and at the mail address listed above between 8 a.m.
and 4:30 p.m., Monday through Friday, except holidays.
FOR FURTHER INFORMATION CONTACT: Abdelsalam El-Farra, Agricultural
Marketing Specialist, Sugar and Dairy Branch, Import Programs and
Export Reporting Division, Office of Trade Programs, Foreign
Agricultural Service, U.S. Department of Agriculture, (202) 720-9439;
fax (202) 720-0876; [email protected].
SUPPLEMENTARY INFORMATION:
Executive Order 12866
The proposed rule has been determined to be not significant under
E.O. 12866 and has been reviewed by the Office of Management and
Budget.
Regulatory Flexibility Act
The Regulatory Flexibility Act ensures that regulatory and
information requirements are tailored to the size and nature of small
businesses, small organizations, and small governmental jurisdictions.
This proposed rule will not have a significant economic impact on small
businesses participating in the program.
Executive Order 12988
This proposed rule has been reviewed under Executive Order 12988.
The provisions of this proposed rule would not have a preemptive effect
with respect to any State or local laws, regulations, or policies which
conflict with such provision or which otherwise impede their full
implementation. The proposed rule would not have a retroactive effect.
Before any judicial action may be brought forward regarding this
proposed rule, all administrative remedies must be exhausted.
National Environmental Policy Act
The Administrator has determined that this action will not have a
significant effect on the quality of the human environment. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is necessary for this rule.
Unfunded Mandates Reform Act (Pub. L. 104-4)
Public Law 104-4 requires consultation with state and local
officials and Indian tribal governments. This proposed rule does not
impose an unfunded mandate or any other requirement on state, local, or
tribal governments. Accordingly, these programs are not subject to the
provisions of the Unfunded Mandates Reform Act.
Executive Order 12630
This Executive Order requires careful evaluation of governmental
actions that interfere with constitutionally protected property rights.
This rule does not interfere with any property rights and, therefore,
does not need to be evaluated on the basis of the criteria outlined in
Executive Order 12630.
Government Paperwork Elimination Act
The United States Department of Agriculture (USDA) is committed to
compliance with the Government Paperwork Elimination Act, which
requires Government agencies, in general, to provide the public the
option of submitting information or transacting business electronically
to the maximum extent possible.
Background
The Foreign Agricultural Service (FAS), under a delegation of
authority from the Secretary of Agriculture, administers the Dairy
Tariff-Rate Import Quota Licensing regulation codified at 7 CFR 6.20
through 6.37 that provides for the issuance of licenses to import
certain dairy articles under tariff-rate quotas (TRQs) as set forth in
certain notes in Chapter 4 of the Harmonized Tariff Schedule of the
United States. These dairy articles may only be entered into the United
States at the low-tier tariff by or for the account of a person, as
defined in the regulation, to whom
[[Page 76920]]
such licenses have been issued and only in accordance with the terms
and conditions of the regulation. Licenses are issued on a calendar
year basis, and each license authorizes the licensee to import a
specified quantity and type of dairy article from a specified country
of origin.
Under TRQs, a low tariff rate, commonly referred to as the in-quota
rate, applies to imports up to a specified quantity. A higher tariff
rate, commonly referred to as the over-quota rate, applies to any
imports in excess of that amount. No license is required to import
products at the over-quota tariff rate.
USDA issues three types of licenses: Historical, nonhistorical
(lottery), and designated. For all three license types, the current
regulation provides that persons must apply each year between September
1 and October 15. Historical and designated licensees may apply for
lottery licenses, subject to certain limitations, if they are
affiliated or associated with another company holding a license for
that same item from the same country of origin. Licensees may fail to
qualify for a license for a specific item from a specific country in
the following year, if they do not meet certain requirements. Licensees
must (i) apply for the license each year, (ii) pay an annual fee, and
(iii) have imported at least 85 percent of the final license amount
from the previous year. To avoid ineligibility due to the 85 percent
rule, licensees may surrender up to 100 percent of the license, but
must import 85 percent of any quantity not surrendered. Section
6.25(b)(1)(i) of the regulation currently provides that beginning with
the 2016 quota year, any historical licensee who surrenders more than
50 percent of the license amount for the same item from the same
country during at least three of the most recent five years will be
issued a license thereafter in an amount equal to the average amount
imported under that license for those five quota years.
This proposed rule would provide historical license holders
additional time to adjust to changing market conditions by suspending
the Sec. 6.25(b)(1)(i) provision through the end of quota year 2022.
The proposed rule would provide that reporting, payment, and
application for licenses be made only by electronic submission in order
to reduce the use of paper and streamline operations. Additionally, the
rule proposes to modify procedures for collecting licensing fees in
order to better align the fee collection with the costs of
administering the program.
The current regulations allow applicants to apply for a license,
generating administrative costs for the USDA, and then choose not to
pay for the license, thus resulting in non-recovered administrative
expenses. The proposed rule would impose financial consequences for
such non-payment, which should increase USDA's ability to recover
program expenses.
The proposed rule does not make any modifications to the appendices
to this subpart.
Discussion of Comments
On February 6, 2013, USDA published in the Federal Register (78 FR
8434) an advanced notice of proposed rulemaking (ANPR) soliciting
comment on all aspects of the current dairy import licensing rule.
Specifically, USDA invited comment on the following questions: (1) Does
the historical and nonhistorical license system still serve a purpose?
(2) Should any provisions of the current regulation be modified in
light of significant advances in technology and telecommunications? (3)
Should methods be developed for issuing licenses that would increase
competition among importers? (4) Should licenses be auctioned or issued
on another basis? (5) Should Sec. 6.25(b)(1)(i) regarding historical
license reductions be eliminated, revised, or indefinitely suspended?
(6) Should the basis upon which license fees are assessed be changed
from the current flat-fee per license? (7) Should the deadlines for the
surrender and reallocation of licenses in Sec. 6.26 be changed to
allow earlier reallocations? USDA received comments from 46
respondents, all of whom hold licenses and receive an economic benefit
from the program or represent license holders who benefit from the
program. The 46 respondents consisted of: 33 private importers; 7
associations; 3 foreign governments; and 3 other private concerns with
vested interests in the outcome of the regulation review.
Many of the comments were general in nature, focusing on the
following three themes: Support for the current program, administrative
management of the program, and the allocation of licenses. Below is a
summary of their comments by respondents who addressed the seven
specific questions posed in the ANPR including the relevant section
number in the current rule where applicable.
Does the historical and nonhistorical license system still serve a
purpose? (Sec. Sec. 6.20 through 6.23)
Of the 39 respondents who commented on this issue, 32 supported
continuation of a license system. Respondents claimed that the system
supports the importer's ability to develop distribution networks;
ensures adequate food safety; allows the license holder to foster
investment in distribution systems, brand identity and marketing; and
supports consumer choice, competition and the development of domestic
artisan products. Seven respondents commented that the system no longer
served any purpose, stating that the system increases the difficulty of
obtaining licenses by new entrants; supports a growing concentration of
historical license in fewer hands; and adds additional costs and
burdens; and acts as an impediment to free trade. One respondent
proposed abolishing the license systems. A quota-holding foreign
government proposed revisions such as: Combining all three licenses
types; allowing the exporting nation to manage its quotas; implementing
a first-come-first-serve system for eligible importers; phasing out the
category of nonhistorical licenses in favor of designated licenses; and
combining historical and designated licenses into a single category.
Upon consideration of all comments supporting and opposing the
current licensing system, no changes to the fundamental structure of
the licensing system are proposed at this time.
Should any provisions of the current regulation be modified in light of
significant advances in technology and telecommunications? (Sec. Sec.
6.24 through 6.26; Sec. Sec. 6.32 through 6.34)
Of the 21 respondents who commented on this issue, 16 favored
technological improvements that would allow the streamlining of the
application process and improved administrative processes that would
allow an earlier reallocation. Five respondents opposed to modifying
the current regulation cite the success of the current program as it
is.
The Department recognizes the desire for a more technologically
advanced and streamlined reporting system for administering licenses,
reallocations, surrenders, applications, reporting and payment of fees.
The Department is currently working to implement the February 19, 2014
Executive Order--Streamlining the Export/Import Process for America's
Businesses--calling for the completion of the International Trade Data
System (ITDS) by December 2016. The USDA, Foreign Agricultural Service,
is mandated to be a Participating Government Agency (PGA) of the
Automated Commercial Exchange (ACE) project of the International Trade
Data System. Over the next two years, the Department will be required
to re-
[[Page 76921]]
program and update the dairy import licensing computer systems, in
order to comply with the Federal Government's Single Window Initiative
for all trade agencies. The Department will be making fundamental
changes to the computer systems, which will take several years to
accomplish. Without these structural changes to the underlying computer
systems, required as part of the ITDS project, USDA would not be able
to implement most of the other changes proposed in the comments, such
as changing the dates by which fees are due or by which reallocation of
licenses may be issued. At an appropriate time and once the computer
systems have been moved to the ACE platform, the Department will again
request comments for additional improvements and changes to the
program.
The Department proposes moving to strictly electronic
communications in the application, reporting and payment processes to
streamline operations, reduce the need for paper and to increase the
efficiency of the program. The proposed change toward greater
electronic submissions in the application, allocation, reporting and
payment process will allow USDA to reduce lag-times, minimize paper
files, streamline operations and increase the efficiency of the program
operations.
Should methods be developed for issuing licenses that would increase
competition among importers? (Sec. 6.25)
Of the 21 respondents who commented on this issue, 15 opposed
increasing competition among importers, citing that the most
significant competition comes from other premium cheeses and that
increasing competition among importers would weaken the system and
reduce the incentive to invest in the necessary marketing, distribution
network, and food safety. The six respondents favoring increased
competition were divided in their approach. One proposed to eliminate
the licensing system altogether; another proposed implementing a first-
come-first-served system; and one proposed to combine categories,
giving greater influence over the quotas to the foreign countries.
At this time, the Department does not propose any changes that
directly alter the level of competition among importers.
Should licenses be auctioned or issued on another basis? (Sec. 6.25)
Of the 33 respondents who commented on this issue, none supported
auctioning licenses. The two associations and foreign government that
responded to this question commented that auctioning licenses would
lead to a decrease in the fill rates. The Department does not propose
any change to the existing basis for issuing licenses.
Should Sec. 6.25(b)(1)(i), regarding the historical license reduction
provision, be eliminated, revised, or indefinitely suspended? (Sec.
6.25)
Of the 39 respondents who commented on this issue, 37 were licenses
holders or associations who supported the elimination of Sec.
6.25(b)(1)(i). A common theme of these comments was that market forces
outside their control have prevented them from importing the volumes
required to prevent license reductions, and they believe they should
not be penalized for market forces beyond their control. Thirty-three
respondents stated that Sec. 6.25(b)(1)(i) threatens their business of
importing specialty cheeses. One respondent supported changing the
basis for this provision to 50 percent of the overall TRQ fill rate; in
other words, if a licensee's fill rate was above the industry average
fill rate, no license reduction would occur.
The Department previously suspended Sec. 6.25(b) three times: In
1999 for five years, in 2008 for two years, and in 2010 for five more
years. The association representing historical licensees argues that
the use of the term ``suspend'' is not appropriate. They argue that
once the suspension period is over and the provision comes back into
force, the previous five years are used as a basis for calculating
historical license amounts, i.e., tracking is not suspended.
Nonetheless the Department will continue to use the term
``suspension,'' because even though tracking occurs, the license
reductions themselves are suspended.
The two respondents commenting in favor of maintaining Sec.
6.25(b)(1)(i) cite the benefits of moving TRQ amounts from the
historical to the lottery category, where it is available to other
applicants. They stated that historical licenses have become
increasingly concentrated in fewer companies, and claim that it is
increasingly difficult for new companies to enter the dairy importing
business due to the difficulty of obtaining licenses. One respondent
questioned why only certain importers should have access to historical
licenses while others are effectively barred from holding such
licenses, many of which were issued in the 1950s.
Significant market changes have occurred in the U.S. and global
dairy markets in the past five years. The United States has been
transformed from being a net importer of dairy products to being a
large net exporter. Many of the unfilled licenses are types of cheese
for which demand has diminished or for which U.S. production has
increased, leading to reduced import demand. There have been policy
changes in major dairy exporting countries, in some cases reducing
export supply. For the majority of dairy products subject to
significant historical license reductions in recent years, if they had
been in force, a transfer of the license from the historical to the
lottery category would not have resulted in an increased TRQ fill rate.
Nonetheless, the basic concept of the historical license reduction
provision--that some mechanism be in place to provide for at least the
potential movement of license from the historical to the lottery
category--serves a public purpose. Therefore, the Department believes
that this provision needs to be retained. However, to allow more time
for adjustments to these new market conditions, the Department proposes
suspending the Sec. 6.25(b)(1)(i) provision for an additional seven
years, through the 2022 quota year, and the provision would come back
into effect for 2023.
Should the basis upon which license fees are assessed be changed from
the current flat-fee per license?
Of the 15 respondents who commented on this issue, eight commented
that the current flat fee system is adequate, simple, and
straightforward, while seven respondents supported a change. Those
supporting a change cited an issue of equity, preferring to charge a
fee based on the size of the licenses.
The basis for the fee is to recover the costs of administering the
dairy licensing program. The cost of administering each license is the
same, whether the license quantity is small or large. Therefore, the
Department will retain keeping the same fee for each license. Under the
current regulation, eligible parties can request and be awarded a
license and then decide not to pay for it, thus forfeiting the license.
The administrative costs are incurred during the application,
eligibility determination, and allocation process, as well as in
administering the license after it is issued. Therefore, the Department
proposes to require payment of the fee for each license requested and
awarded, instead of the current system where the fee can be avoided if
the license is returned. To ensure compliance with this provision, an
applicant who fails to pay all fees for all licenses requested and
awarded will forfeit all licenses.
[[Page 76922]]
Should the deadlines for the surrender and reallocation of licenses in
section 6.26 be changed to allow earlier reallocations?
Of the 21 respondents who commented on this issue, 19 supported an
early as possible surrender and reallocation date, citing that more
time is needed to make the commercial arrangements necessary to utilize
the reallocated quantities. The other two respondents found the current
timeline adequate.
The Department seriously considered many options for changing the
dates for surrender and reallocation, but given the interaction of the
surrender and reallocation process with other timelines, such as for
fee payments, it is not feasible to accommodate an earlier surrender
and reallocation period within the current reporting system. The
Department will make no modification to deadlines for the surrender and
allocation process.
Summary of Proposed Changes to Rule
The following is a summary of the proposed substantive changes to
the current regulation:
The name of the program has been corrected throughout the document
to read ``Dairy Tariff-Rate Quota Import Licensing.''
References to the process used for the initial allocation of
licenses, which took place based on the 1997 quota year, have been
removed throughout this proposed rule due to the fact that current
allocations are now based on the preceding quota year. References to
the 1997 quota year allocations are removed from the following
sections: Sec. Sec. 6.20(b), 6.23(b)(2), 6.23(b)(3), 6.23(b)(4),
6.23(b)(5), 6.25(a)(1), 6.25(a)(2), 6.25(a)(3), and 6.26(f).
Section 6.21 Definitions has been updated to include several
modifications. The definition of ``Article other than cheese or cheese
products'' now specifies that the article is a dairy product. The
definition of ``EC'' no longer lists the current members, because new
members may be added at any time. Therefore, the definition of ``EC''
is defined to be those countries listed in Additional U.S. Note 2 to
Chapter 4 of the Harmonized Tariff Schedule, because this is published
annually and maintained current. ``Customs'' has been replaced
throughout the proposed rule with ``CBP'' which stands for Customs and
Border Protection. The definition of ``Licensing Authority'' removes
reference to a specific USDA division. The definition of ``Other
Countries'' deletes the reference to the Harmonized Tariff Schedule.
The definition of ``Postmark'' is deleted from this section, given that
physical mail will no longer be accepted. This proposed rule would
require that all communications, applications, reporting and payment
will be made electronically as designated by the Licensing Authority.
Therefore, references to physical mail, postmarks, mailing addresses,
or physical locations have been deleted throughout the rule. The
references to physical mail delivery that have been deleted are found
in the following sections: Sec. Sec. 6.24(a), 6.24(b)(1), 6.24(c),
6.25(d)(1), 6.26(a), 6.26(c), 6.28(b), 6.33(b), 6.33(c), 6.35(b), and
6.36(b). Additionally, a valid email address is now being required for
eligibility. The requirement for an email address has been added to
Sec. 6.23(a)(3).
Section 6.22(b) was deleted from the rule because these references
to General Note 15 provisions of the HTS are not covered, nor in any
way affected, by the dairy import licensing program.
Section 6.24(c) was deleted because it primarily applied to mailed
hardcopy applications. The information submitted through the current
electronic application system obviates the need for submitting this
additional information.
Section 6.25(a)(1) through (3) was deleted because the historic
allocation process is no longer relevant. New quota year allocations
are made based on the preceding year's allocations and usage.
Section 6.25(b)(1)(i) extends the date of the suspension of the
historical licenses reduction provision for an additional seven years,
expiring with the beginning of quota year 2023.
Section 6.25(d)(1)(ii) requires, for Appendix 3 allocations, that
countries designate the allocations of specific articles to importers
in kilograms. This requirement will reduce any disputes arising from
converting percentages into weights.
Section 6.26(c) was rewritten to clarify the surrender and
allocation process for persons who were issued an import license for a
cheese or cheese product article versus a person who was issued an
import license for an article other than cheese or cheese products.
Section 6.28(b) requires that all license holders who intend to
convey their business and are requesting USDA to transfer a license,
submit the required documentation by email. The option to send
documents via physical mail or courier is no longer available.
Section 6.33(b) tightens the timeline for making payments and
requires payment in full within 10 days from the date of the issuance
of the license, rather than the current 30 day period. This change
would allow USDA to accelerate some of its administrative functions of
operating the licensing program because the use of electronic payment
does not require the longer lag time necessary for processing paper
checks.
Section 6.33(c) requires that an applicant who applies for and is
issued a license pay for all licenses issued, or a hold will be placed
on all licenses of such applicant. If after receiving a warning letter
via email from the Licensing Authority, the applicant does not pay in
full within 10 days for all licenses issued, then all licenses issued
to the licensee, paid or unpaid, will be revoked.
Section 6.33(d) is deleted pursuant to the previous clause (Sec.
6.33(c)) and no longer permits licensees not to accept or pay for
certain licenses issued to them. The cost of administering the
licensing program is incurred by USDA during the application and
allocation process; therefore, applicants will be required to pay for
licenses issued in accordance with Sec. 6.33(c) or have all licenses
revoked.
List of Subjects in 7 CFR Part 6
Agricultural commodities, Dairy, Cheese, Imports, Procedural rules,
Application requirements, Tariff-rate Quota, Reporting and
recordkeeping requirements.
Accordingly, for reasons described in the preamble, 7 CFR part 6 is
proposed to be amended as follows:
PART 6--IMPORT QUOTAS AND FEES
Subpart--Dairy Tariff-Rate Quota Import Licensing
0
1. The authority citation for Subpart--Dairy Tariff-Rate Quota Import
Licensing continues to read as follows:
Authority: Additional U.S. Notes 6, 7, 8, 12, 14, 16-23 and 25
to Chapter 4 and General Note 15 of the Harmonized Tariff Schedule
of the United States (19 U.S.C. 1202), Pub. L. 97-258, 96 Stat.
1051, as amended (31 U.S.C. 9701), and secs. 103 and 404, Pub. L.
103-465, 108 Stat. 4819 (19 U.S.C. 3513 and 3601).
0
2. The heading for ``Subpart--Dairy Tariff-Rate Import Quota
Licensing'' is revised to read as set forth above.
0
3. Sections 6.20 through 6.36 are revised to read as follows:
* * * * *
6.20 Introduction.
6.21 Definitions.
6.22 Requirement for a license.
6.23 Eligibility to apply for a license.
6.24 Application for a license.
6.25 Allocation of licenses.
6.26 Surrender and reallocation.
6.27 Limitations on use of license.
6.28 Transfer of license.
[[Page 76923]]
6.29 Use of licenses.
6.30 Record maintenance and inspection.
6.31 Debarment and suspension.
6.32 Globalization of licenses.
6.33 License fee.
6.34 Adjustment of appendices.
6.35 Correction of errors.
6.36 Miscellaneous.
* * * * *
Sec. 6.20 Introduction.
(a) Presidential Proclamation 6763 of December 23, 1994, modified
the Harmonized Tariff Schedule of the United States affecting the
import regime for certain articles of dairy products. The Proclamation
terminated quantitative restrictions that had been imposed pursuant to
section 22 of the Agricultural Adjustment Act of 1933, as amended (7
U.S.C. 624); proclaimed tariff-rate quotas for such articles pursuant
to Pub. L. 103-465; and specified which of such articles may be entered
only by or for the account of a person to whom a license has been
issued by the Secretary of Agriculture.
(b) Effective January 1, 1995, the prior regime of absolute quotas
for certain dairy products was replaced by a system of tariff-rate
quotas. The articles subject to licensing under the tariff-rate quotas
are listed in Appendices 1, 2, and 3 of this subpart. Licenses permit
the holder to import specified quantities of the subject articles into
the United States at the applicable in-quota rate of duty. If an
importer has no license for an article subject to licensing, such
importer will, with certain exceptions, be required to pay the
applicable over-quota rate of duty.
(c) The Secretary of Agriculture has determined that this subpart
will, to the fullest extent practicable, result in fair and equitable
allocation of the right to import articles subject to such tariff-rate
quotas. The subpart will also maximize utilization of the tariff-rate
quotas for such articles, taking due account of any special factors
which may have affected or may be affecting the trade in the articles
concerned.
Sec. 6.21 Definitions.
As used in this subpart and the appendices thereto, the following
terms are defined as follows:
Article. One of the products listed in Appendices 1, 2, or 3, which
are the same as those described in Additional U.S. Notes 6, 7, 8, 12,
14, 16-23 and 25 to Chapter 4 of the Harmonized Tariff Schedule.
Article other than cheese or cheese products. Any article that is a
dairy product, but not a cheese or cheese product.
CBP. United States Customs and Border Protection, U.S. Department
of Homeland Security.
Cheese or cheese products. Articles in headings 0406, 1901.90.34,
and 1901.90.36 of the Harmonized Tariff Schedule.
Commercial entry. Any entry except those made by or for the account
of the United States Government or for a foreign government, for the
personal use of the importer or for sampling, taking orders, research,
or the testing of equipment.
Country. Country of origin as determined in accordance with CBP
rules and regulations, except that ``EC'', and ``Other countries''
shall each be treated as a country.
Dairy products. Articles in headings 0401 through 0406, margarine
cheese listed under headings 1901.90.34 and 1901.90.36, ice cream
listed under heading 2105, and casein listed under heading 3501 of the
Harmonized Tariff Schedule.
Department. The United States Department of Agriculture.
EC. Those countries listed in Additional U.S. Note 2 to Chapter 4
of the Harmonized Tariff Schedule.
Enter or Entry. To make or making entry for consumption, or
withdrawal from warehouse for consumption in accordance with CBP
regulations and procedures.
Harmonized Tariff Schedule or HTS. The Harmonized Tariff Schedule
of the United States.
Licensee. A person to whom a license has been issued under this
subpart.
Licensing Authority. Any officer or employee of the U.S. Department
of Agriculture designated to act in this position by the Director of
the Division charged with managing the Dairy Tariff-Rate Quota Import
Licensing System.
Other countries. Countries not listed by name as having separate
tariff-rate quota allocations for an article.
Person. An individual, firm, corporation, partnership, association,
trust, estate or other legal entity.
Process or processing. Any additional preparation of a dairy
product, such as melting, grating, shredding, cutting and wrapping, or
blending with any additional ingredient.
Quota year. The 12-month period beginning on January 1 of a given
year.
Tariff-rate quota amount or TRQ amount. The amount of an article
subject to the applicable in-quota rate of duty established under a
tariff-rate quota.
United States. The customs territory of the United States, which is
limited to the 50 states, the District of Columbia, and Puerto Rico.
Sec. 6.22 Requirement for a license.
A person who seeks to enter, or cause to be entered an article as a
commercial entry, shall obtain a license, in accordance with this
subpart.
Sec. 6.23 Eligibility to apply for a license.
(a) In general. To apply for any license, a person shall have:
(1) A business office, and be doing business, in the United States,
and
(2) An agent in the United States for service of process, and
(3) An email address to be used for correspondence regarding
licensing activities and reports.
The licensee shall at all times maintain a valid email address with
the Licensing Authority.
(b) Eligibility for 2014 and subsequent quota years. (1) Historical
licenses (Appendix 1). A person issued a historical license for an
article for the current quota year may apply for a historical license
(Appendix 1) for the next quota year for the same article from the same
country, if such person was, during the 12-month period ending August
31 prior to the quota year, either:
(i) Where the article is cheese or cheese product,
(A) The owner of and importer of record for at least three separate
commercial entries of cheese or cheese products totaling not less than
57,000 kilograms net weight, each of the three entries not less than
2,000 kilograms net weight;
(B) The owner of and importer of record for at least eight separate
commercial entries of cheese or cheese products, from at least eight
separate shipments, totaling not less than 19,000 kilograms net weight,
each of the eight entries not less than 450 kilograms net weight, with
a minimum of two entries in each of at least three quarters during that
period; or
(C) The owner or operator of a plant listed in Section II or listed
in Section I as a processor of cheese of the most current issue of
``Dairy Plants Surveyed and Approved for USDA Grading Service'' and had
processed or packaged at least 450,000 kilograms of cheese or cheese
products in its own plant in the United States; or
(ii) Where the article is not cheese or cheese product,
(A) The owner of and importer of record for at least three separate
commercial entries of dairy products totaling not less than 57,000
kilograms net weight, each of the three entries not less than 2,000
kilograms net weight;
(B) The owner of and importer of record for at least eight separate
commercial entries of dairy products, from at least eight separate
shipments,
[[Page 76924]]
totaling not less than 19,000 kilograms net weight, each of the eight
entries not less than 450 kilograms net weight, with a minimum of two
entries in each of at least three quarters during that period;
(C) The owner or operator of a plant listed in the most current
issue of ``Dairy Plants Surveyed and Approved for USDA Grading
Service'' and had manufactured, processed or packaged at least 450,000
kilograms of dairy products in its own plant in the United States; or
(D) The exporter of dairy products in the quantities and number of
shipments required under (A) or (B) above.
(2) Nonhistorical licenses for cheese or cheese products (Appendix
2). A person may annually apply for a nonhistorical license for cheese
or cheese products (Appendix 2) if such person meets the requirements
of paragraph (b)(1)(i) of this section.
(3) Nonhistorical licenses for articles other than cheese or cheese
products (Appendix 2). A person may annually apply for a nonhistorical
license for articles other than cheese or cheese products (Appendix 2)
if such person meets the requirements of paragraph (b)(1)(ii) of this
section.
(4) Designated license (Appendix 3). A designated license may be
issued to a person who has applied for a license, has met the
requirements of paragraph (b)(1)(i) of this section, and is designated
by the government of a country for such license according to Sec.
6.25(d).
(c) Exceptions. (1) A licensee that fails in a quota year to enter
at least 85 percent of the amount of an article permitted under a
license shall not be eligible to receive a license for the same article
from the same country for the next quota year. For the purpose of this
paragraph, the amount of an article permitted under the license will
exclude any amounts surrendered pursuant to Sec. 6.26(a), but will
include any additional allocations received pursuant to Sec. 6.26(b).
(2) Paragraph (c)(1) of this section will not apply where the
licensee demonstrates to the satisfaction of the Licensing Authority
that the failure resulted from breach by a carrier of its contract of
carriage, breach by a supplier of its contract to supply the article,
act of God or force majeure.
(3) Paragraph (c)(1) of this section may not apply in the case of
historical or nonhistorical licenses, where the licensee demonstrates
to the satisfaction of the Licensing Authority that the country
specified on the license maintains or permits an export monopoly to
control the dairy articles concerned and the licensee petitions the
Licensing Authority to waive this requirement. The licensee shall
submit evidence that the country maintains an export monopoly as
defined in this paragraph. For the purposes of this paragraph ``export
monopoly'' means a privilege vested in one or more persons consisting
of the exclusive right to carry on the exportation of any article of
dairy products from a country to the United States.
(4) The Licensing Authority will not issue a nonhistorical license
(Appendix 2) for an article from a country during a quota year to an
applicant who is affiliated with another applicant to whom the
Licensing Authority is issuing a non-historical license for the same
article from the same country for that quota year. Further, the
Licensing Authority will not issue a nonhistorical license for butter
to an applicant who is affiliated with another applicant to whom the
Licensing Authority is issuing a historical butter license of 57,000
kilograms or greater. For the purpose of this paragraph, an applicant
will be deemed affiliated with another applicant if:
(i) The applicant is the spouse, brother, sister, parent, child or
grandchild of such other applicant;
(ii) The applicant is the spouse, brother, sister, parent, child or
grandchild of an individual who owns or controls such other applicant;
(iii) The applicant is owned or controlled by the spouse, brother,
sister, parent, child or grandchild of an individual who owns or
controls such other applicant.
(iv) Both applicants are 5 percent or more owned or directly or
indirectly controlled, by the same person;
(v) The applicant, or a person who owns or controls the applicant,
benefits from a trust that controls such other applicant.
(5) The Licensing Authority will not issue a nonhistorical license
(Appendix 2) for an article from a country during a quota year to an
applicant who is associated with another applicant to whom the
Licensing Authority is issuing a nonhistorical license for the same
article from the same country for that quota year. Further, the
Licensing Authority will not issue a nonhistorical license for butter
to an applicant who is associated with another applicant to whom the
Licensing Authority is issuing a historical butter license for 57,000
kilograms or greater. For the purpose of this paragraph, an applicant
will be deemed associated with another applicant if:
(i) The applicant is an employee of, or is controlled by an
employee of, such other applicant;
(ii) The applicant manages or is managed by such other applicant,
or economically benefits, directly or indirectly, from the use of the
license issued to such other applicant.
(6) The Licensing Authority will not issue a nonhistorical license
for an article from a country during a quota year, for which the
applicant receives a designated license.
Sec. 6.24 Application for a license.
(a) Application for license shall be made on electronic forms
designated for the purpose by the Licensing Authority. All parts of the
application shall be completed. The application shall be transmitted no
earlier than September 1 and no later than midnight October 15 of the
year preceding that for which license application is made. The
Licensing Authority will not accept incomplete applications.
(b)(1) Where the applicant seeks to establish eligibility on the
basis of imports, applications shall include identification of entries
sufficient to establish the applicant as the importer of record of
entries required under Sec. 6.23, during the 12-month period ending
August 31 prior to the quota year for which license is being sought.
(2) Where the applicant seeks to establish eligibility on the basis
of exports, applications shall include:
(i) Census Form 7525 or a copy of the electronic submission of such
form, and
(ii) The commercial invoice or bill of sale for the quantities and
number of export shipments required under Sec. 6.23, during the 12-
month period ending August 31 prior to the quota year for which license
is being sought.
(c) An applicant requesting more than one nonhistorical license
must rank order these requests by the applicable Additional U.S. Note
number. Cheese and cheese products must be ranked separately from dairy
articles other than cheese or cheese products.
Sec. 6.25 Allocation of licenses.
(a) Licensing Authority. The Licensing Authority will issue
historical, nonhistorical and designated licenses.
(b) Historical licenses for the 2014 and subsequent quota years
(Appendix 1). A person issued a historical license for the current
quota year will be issued a historical license in the same amount for
the same article from the same country for the next quota year except
that beginning with the 2023 quota year, a person who has surrendered
more than 50 percent of such historical license in at least three of
the prior 5 quota years will thereafter be issued a license in an
amount equal to the
[[Page 76925]]
average annual quantity entered during those 5 quota years.
(c) Nonhistorical licenses (Appendix 2). The Licensing Authority
will allocate nonhistorical licenses on the basis of a rank-order
lottery system, which will operate as follows:
(1) The minimum license size shall be:
(i) Where the article is cheese or cheese product:
(A) The total amount available for nonhistorical license where such
amount is less than 9,500 kilograms;
(B) 9,500 kilograms where the total amount available for
nonhistorical license is between 9,500 kilograms and 500,000 kilograms,
inclusive;
(C) 19,000 kilograms where the total amount available for
nonhistorical license is between 500,001 kilograms and 1,000,000
kilograms, inclusive;
(D) 38,000 kilograms where the total amount available for
nonhistorical license is greater than 1,000,000 kilograms; or
(E) An amount less than the minimum license size established in
paragraphs (c)(1)(i) (A) through (D) of this section, if requested by
the licensee;
(ii) Where the article is not cheese or cheese product:
(A) The total amount available for nonhistorical license where such
amount is less than 19,000 kilograms;
(B) 19,000 kilograms where the total amount available for
nonhistorical license is between 19,000 kilograms and 550,000
kilograms, inclusive;
(C) 38,000 kilograms where the total amount available for
nonhistorical license is between 550,001 kilograms and 1,000,000
kilograms, inclusive; and
(D) 57,000 kilograms where the total amount available for
nonhistorical license is greater than 1,000,000 kilograms;
(E) An amount less than the minimum license sizes established in
paragraphs (c)(1)(i) (A) through (D) of this section, if requested by
the licensee.
(2) Taking into account the order of preference expressed by each
applicant, as required by Sec. 6.24(c), the Licensing Authority will
allocate licenses for an article from a country by a series of random
draws. A license of minimum size will be issued to each applicant in
the order established by such draws until the total amount of such
article in Appendix 2 has been allocated. An applicant that receives a
license for an article will be removed from the pool for subsequent
draws until every applicant has been allocated at least one license,
provided that the licenses for which they applied are not already fully
allocated. Any amount remaining after the random draws which is less
than the applicable minimum license size may, at the discretion of the
Licensing Authority, be prorated equally among the licenses awarded for
that article.
(d) Designated licenses (Appendix 3). (1) With respect to an
article listed in Appendix 3, the government of the applicable country
may, not later than October 31 prior to the beginning of a quota year,
submit directly by email to the Licensing Authority:
(i) The names, addresses and emails of the importers that it is
designating to receive licenses; and
(ii) The amount, in kilograms, of such article for which each such
importer is being designated. Where quantities for designation result
from both Tokyo Round concessions and Uruguay Round concessions, the
designations should be made in terms of each.
(2) To the extent practicable, the Licensing Authority will issue
designated licenses to those importers, and in those amounts, indicated
by the government of the applicable country, provided that the importer
designated meets the eligibility requirements set forth in Sec. 6.23.
Consistent with the international obligations of the United States, the
Licensing Authority may disregard a designation if the Licensing
Authority determines that the person designated is not eligible for any
of the reasons set forth in Sec. 6.23(c)(1) or (2).
(3) If a government of a country which negotiated in the Uruguay
Round for the right to designate importers has not done so, but
determines to designate importers for the next quota year, it shall
indicate its intention to do so directly and in writing to the
Licensing Authority not later than July 1 prior to the beginning of
such next quota year. Furthermore, if a government that has designated
importers for a quota year determines that it will not continue to
designate importers for the next quota year, it shall so indicate
directly and in writing to the Licensing Authority, not later than July
1 prior to such next quota year.
Sec. 6.26 Surrender and reallocation.
(a) If a licensee determines that it will not enter the entire
amount of an article permitted under its license, such licensee shall
surrender its license right to enter the amount that it does not intend
to enter. Surrender shall be made to the Licensing Authority no later
than October 1. Any surrender shall be final and shall be only for that
quota year, except as provided in Sec. 6.25(b). The amount of the
license not surrendered shall be subject to the license use
requirements of Sec. 6.23(c)(1).
(b) For each quota year, the Licensing Authority will, to the
extent practicable, reallocate any amounts surrendered.
(c) Any person who qualified for or was issued a cheese or cheese
product license for a quota year may apply to receive additional
license, or addition to an existing license for a portion of the amount
being reallocated. A person who did not qualify for a cheese or cheese
product license for a quota year, but qualified only for a license for
articles other than cheese or cheese products, may only apply to
receive an additional license for articles other than cheese or cheese
products, or addition to an existing license for articles other than
cheese or cheese products for a portion of the amount being
reallocated. The application shall be submitted to the Licensing
Authority no earlier than September 1 and not later than September 15,
and shall specify:
(1) The name and control number of the applicant;
(2) The article and country being requested, the applicable HTS
Additional U.S. Note number and, if more than one article is requested,
a rank-order by Additional U.S. Note number; and
(3) If applicable, the number of the license issued to the
applicant for that quota year permitting entry of the same article from
the same country.
(d) The Licensing Authority will reallocate surrendered amounts
among applicants as follows:
(1) The minimum license size, or addition to an existing license,
will be the total amount of the article from a country surrendered, or
10,000 kilograms, whichever is less;
(2) Minimum size licenses, or additions to an existing license,
will be allocated among applicants requesting articles on the basis of
the rank-order lottery system described in Sec. 6.25(c);
(3) If there is any amount of an article from a country left after
minimum size licenses have been issued, the Licensing Authority may
allocate the remainder in any manner it determines equitable among
applicants who have requested that article; and
(4) No amount will be reallocated to a licensee who has surrendered
a portion of its license for the same article from the same country
during that quota year unless all other licensees applying for a
reallocated quantity have been allocated a license;
(e) However, if the government of an exporting country chooses to
designate eligible importers for surrendered amounts under Appendix 3,
the Licensing Authority shall issue the licenses in accordance with
Sec. 6.25(d)(2), provided that the government of the
[[Page 76926]]
exporting country notifies the Licensing Authority of its designations
no later than September 1. Such notification shall contain the names
and addresses of the importers that it is designating and the amount in
percentage terms of such article for which each importer is being
designated. In such case the requirements of paragraph (c) of this
section shall not apply.
Sec. 6.27 Limitations on use of license.
(a) A licensee shall not obtain or use a license for speculation,
brokering, or offering for sale, or permit any other person to use the
license for profit.
(b) A licensee who is eligible as a manufacturer or processor,
pursuant to Sec. 6.23, shall process at least 75 percent of its
licensed imports in such person's own facilities and maintain the
records necessary to so substantiate.
Sec. 6.28 Transfer of license.
(a) If a licensee sells or conveys its business involving articles
covered by this subpart to another person, including the complete
transfer of the attendant assets, the Licensing Authority will transfer
to such other person the historical, nonhistorical or designated
license issued for that quota year. Such sale or conveyance must be
unconditional, except that it may be in escrow with the sole condition
for return of escrow being that the Licensing Authority determines that
such sale does not meet the requirements of this paragraph.
(b) The parties seeking transfer of license shall give written
notice to the Licensing Authority of the intended sale or conveyance
described in paragraph (a) of this section by email. The notice must be
received by the Licensing Authority at least 20 working days prior to
the intended consummation of the sale or conveyance. Such written
notice shall include copies of the documents of sale or conveyance. The
Licensing Authority will review the documents for compliance with the
requirements of paragraph (a) of this section and advise the parties in
writing of its findings by the end of the 20-day period. The parties
shall have the burden of demonstrating to the satisfaction of the
Licensing Authority that the contemplated sale or conveyance complies
with the requirements of paragraph (a) of this section. Within 15 days
of the consummation of the sale or conveyance, the parties shall email
the final documents to the Licensing Authority. The Licensing Authority
will not transfer the licenses unless the documents are submitted in
accordance with this paragraph.
(c) The eligibility for a license of a person to whom a business is
sold or conveyed will be determined for the next quota year in
accordance with Sec. 6.23. For the purposes of Sec. 6.23(b)(1) the
person to whom a business is sold or conveyed shall be deemed to be the
person to whom the historical licenses were issued during the quota
year in which the sale or conveyance occurred. Further, for the
purposes of Sec. 6.23(b) and (c), the entries made under such licenses
by the original licensee during the year in which the sale of
conveyance is made, shall be considered as having been made by the
person to whom the business was sold or conveyed.
Sec. 6.29 Use of licenses.
(a) An article entered under a license shall be an article produced
in the country specified on the license.
(b) An article entered or withdrawn from warehouse for consumption
under a license must be entered in the name of the licensee as the
importer of record by the licensee or its agent, and must be owned by
the licensee at the time of such entry.
(c) If the article entered or withdrawn from warehouse for
consumption was purchased by the licensee through a direct sale from a
foreign supplier, the licensee shall present, at the time of entry:
(1) A true and correct copy of a through bill of lading from the
country; and
(2) A commercial invoice or bill of sale from the seller, showing
the quantity and value of the product, the date of purchase and the
country; or
(3) Where the article was entered into warehouse by the foreign
supplier, CBP Form 7501 endorsed by the foreign supplier, and the
commercial invoice.
(d) If the article entered was purchased by the licensee via sale-
in-transit, the licensee shall present, at the time of entry:
(1) A true and correct copy of a through bill of lading endorsed by
the original consignee of the goods;
(2) A certified copy of the commercial invoice or bill of sale from
the foreign supplier to the original consignee of the goods; and
(3) A commercial invoice or bill of sale from the original
consignee to the licensee.
(e) If the article entered was purchased by the licensee in
warehouse, the licensee shall present, at the time of entry:
(1) CBP Form 7501 endorsed by the original consignee of the goods;
(2) A certified copy of the commercial invoice or bill of sale from
the foreign supplier to the original consignee of the goods; and
(3) A commercial invoice or bill of sale from the original
consignee to the licensee.
(f) The Licensing Authority may waive the requirements of
paragraphs (c), (d) or (e), if it determines that because of strikes,
lockouts or other unusual circumstances, compliance with those
requirements would unduly interfere with the entry of such articles.
(g) Nothing in this subpart shall prevent the use of immediate
delivery in accordance with the provisions of CBP regulations relating
to tariff-rate quotas.
Sec. 6.30 Record maintenance and inspection.
A licensee shall retain all records relating to its purchases,
sales and transactions governed by this subpart, including all records
necessary to establish the licensee's eligibility, for five years
subsequent to the end of the quota year in which such purchases, sales
or transactions occurred. During that period, the licensee shall, upon
reasonable notice and during ordinary hours of business, grant
officials of the U.S. Department of Agriculture full and complete
access to the licensee's premises to inspect, audit or copy such
records.
Sec. 6.31 Debarment and suspension.
The provisions in 7 CFR part 3017--Governmentwide Debarment and
Suspension (Nonprocurement) and Government Requirements for Drug-Free
Workplace (Grants), subparts A through E, apply to this subpart.
Sec. 6.32 Globalization of licenses.
If the Licensing Authority determines that entries of an article
from a country are likely to fall short of that country's allocated
amount as indicated in appendices 1, 2, and 3, the Licensing Authority
may permit, with the approval of the Office of the United States Trade
Representative, the applicable licensees to enter the remaining balance
or a portion thereof from any country during that quota year. Requests
for consideration of such adjustments must be submitted to the
Licensing Authority no later than September 1. The Licensing Authority
will obtain prior consent for such an adjustment of licenses from the
government of the exporting country for quantities in accordance with
the Uruguay Round commitment of the United States. No globalization
requests will be considered prior to April 1 of each year.
Sec. 6.33 License fee.
(a) A fee will be assessed each quota year for each license to
defray the Department's costs of administering the
[[Page 76927]]
licensing system. To the extent practicable, the fee will be announced
by the Licensing Authority in a notice published in the Federal
Register no later than August 31 of the year preceding the quota year
for which the fee is assessed.
(b) The license fee for each license issued is due and payable in
full no later than March 15 of the year for which the license is
issued. The fee for any license issued after March 15 of any quota year
is due and payable in full no later than 10 days from the date of
issuance of the license. Fee payments are payable to the Treasurer of
the United States and shall be made utilizing the electronic software
designated for the purpose by the Licensing Authority as provided in
Sec. 6.36(b).
(c) If the license fees for all licenses issued to a licensee are
not paid by the final payment date, a hold will be placed on the use of
all licenses issued to the licensee and no articles will be permitted
entry under those licenses. The Licensing Authority shall send a
warning letter by email advising the licensee that if payment is not
made in accordance with Sec. 6.36(b) and received within 10 calendar
days from the date of the email, all licenses issued to that licensee
will be revoked. Where the license at issue is a historical license,
this will result, pursuant to Sec. 6.23(b), in the person's loss of
historical eligibility for such license.
Sec. 6.34 Adjustment of appendices.
(a) Whenever a historical license (Appendix 1) is not issued to an
applicant pursuant to the provisions of Sec. 6.23, is permanently
surrendered or is revoked by the Licensing Authority, the amount of
such license will be transferred to Appendix 2.
(b) The cumulative annual transfers to Appendix 2 made in
accordance with paragraph (a) will be published in the Federal
Register. If a transfer results in the addition of a new article, or an
article from a country not previously listed in Appendix 2, the
Licensing Authority shall afford all eligible applicants for that quota
year the opportunity to apply for a license for such article.
Sec. 6.35 Correction of errors.
(a) If a person demonstrates, to the satisfaction of the Licensing
Authority, that errors were made by officers or employees of the United
States Government, the Licensing Authority will review and rectify the
errors to the extent permitted under this subpart.
(b) To be considered, a person must provide sufficient
documentation regarding the error to the Licensing Authority by email,
not later than August 31 of the calendar year following the calendar
year in which the error was alleged to have been committed.
(c) If the error resulted in the loss of a historical license by a
license holder, the Licensing Authority will transfer the amount of
such license from Appendix 2 to Appendix 1 in order to provide for the
issuance of such license in the calendar year following the calendar
year for which the license was revoked. The cumulative annual transfers
to Appendix 1 in accordance with this paragraph will be published in
the Federal Register.
Sec. 6.36 Miscellaneous.
(a) If any deadline date in this subpart falls on a Saturday,
Sunday, or a Federal holiday, then the deadline shall be the next
business day.
(b) All applications and fee payments required under this subpart
shall be made utilizing the electronic software designated for this
purpose by the Licensing Authority, and official correspondence with
the Licensing Authority, except as provided under Sec. 6.28(b), shall
be by email.
Sec. 6.37 [Removed]
0
4. Section 6. 37 is removed.
Dated: August 21, 2014.
Philip C. Karsting,
Administrator, Foreign Agricultural Service.
[FR Doc. 2014-29807 Filed 12-22-14; 8:45 am]
BILLING CODE 3410-10-P