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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1205

[Doc. #AMS-CN-11-0091]

Cotton Board Rules and Regulations: Adjusting Supplemental Assessment on Imports

AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
SUMMARY: The Agricultural Marketing Service (AMS) is amending the Cotton Board Rules and Regulations by increasing the value assigned to imported cotton for calculating supplemental assessments collected for use by the Cotton Research and Promotion Program. An amendment is required to adjust the assessments collected on imported cotton and the cotton content of imported products to be the same as those paid on domestically produced cotton. In addition, AMS is changing the Harmonized Tariff Schedule (HTS) statistical reporting numbers that were amended since the last assessment adjustment.
DATES: Effective Date:September 27, 2012.
FOR FURTHER INFORMATION CONTACT: Shethir M. Riva, Chief, Research and Promotion Staff, Cotton and Tobacco Programs, AMS, USDA, 100 Riverside Parkway, Suite 101, Fredericksburg, Virginia 22406, telephone (540) 361-2726, facsimile (540) 361-1199, or email atShethir.Riva@ams.usda.gov.
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 rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect.

The Cotton Research and Promotion Act (7 U.S.C. 2101-2118) (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 of Agriculture (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.

Background Import Assessment

Amendments to the Act were enacted by Congress under Subtitle G of Title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-624, 104 Stat. 3909, November 28, 1990). These amendments contained two provisions that authorized changes in the funding procedures for the Cotton Research and Promotion Program.

These provisions are: (1) The authority to assess imported cotton and cotton products; and (2) the termination of the right of cotton producers to demand a refund of assessments.

As amended, the Cotton Research and Promotion Order (7 CFR part 1205) (Order) was approved by cotton producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in theFederal Registeron December 10, 1991, (56 FR 64470). A proposed rule implementing the amended Order was published in theFederal Registeron December 17, 1991, (56 FR 65450). Implementing rules were published on July 1 and 2, 1992, (57 FR 29181) and (57 FR 29431), respectively.

This rule increases the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)). The total value of assessments levied is determined using a two-part assessment. The first part of the assessment is levied on the weight of cotton imported at a rate of $1 per 500-pound bale of cotton or $1 per 226.8 kilograms of cotton. The second part of the assessment—known as the supplemental assessment—is levied at a rate of5/10of one percent of the value of imported raw cotton or the cotton content of imported cotton-containing products. The supplemental assessment is combined with the per bale equivalent to determine the total value and assessment of the imported cotton or imported cotton-containing products.

Section 1205.510(b)(2) of the Cotton Research and Promotion Rules and Regulations provides for the calendar year weighted average price received by U.S. farmers for Upland cotton to represent the value of domestically produced cotton, imported raw cotton and the cotton content of imported cotton-containing products. Use of the same weighted average price ensures that assessments paid on domestically produced cotton and assessments on imported cotton are the same. The source of price statistics isAgricultural Prices,a publication of the National Agricultural Statistics Service (NASS) of the Department of Agriculture.

The current value of imported cotton as published in theFederal Register(76 FR 54078) for the purpose of calculating assessments on imported cotton is $0.012665 per kilogram. Using the Average Weighted Price received by U.S. farmers for Upland cotton for the calendar year 2011, the new value of imported cotton is $0.014109 per kilogram.

An example of the complete assessment formula and how the 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.

One Dollar per Bale Assessment Converted to Kilograms

A 500-pound bale equals 226.8 kg. (500 × .453597).

$1 per bale assessment equals $0.002000 per pound or $0.2000 cents per pound (1/500) or $0.004409 per kg. or $0.4409 cents per kg. (1/226.8).

Supplemental Assessment of5/10of One Percent of the Value of the Cotton Converted to Kilograms

The 2011 calendar year weighted average price received by producers for Upland cotton is $0.880 per pound or $1.940 per kg. (0.880 × 2.2046).

5/10of one percent of the average price in kg. equals $0.009700 per kg. (1.940 × .005).

Total Assessment

The total assessment per kilogram of raw cotton is obtained by adding the $1 per bale equivalent assessment of $0.004409 per kg. and the supplemental assessment $0.009700 per kg. which equals $0.014109 per kg.

The current assessment on imported cotton is $0.012665 per kilogram of imported cotton. The new assessment is $0.014109, an increase of $0.001444 per kilogram. This increase reflects the increase in the average weighted price of Upland Cotton Received by U.S. Farmers during the period January through December 2011. The Import Assessment Table in section 1205.510(b)(3) indicates the conversion factors used to estimate cotton equivalent quantities and the total assessment per kilogram due for each HTS number subject to assessment. Since the weighted average price of cotton that serves as the basis of the supplemental assessment calculation has changed, total assessment rates reported in this table have been revised.

HTS Codes

AMS also compared the current import assessment table with the U.S. International Trade Commission's (ITC) 2012 HTS and information from U.S. Customs and Border Protection and identified HTS statistical reporting numbers that have been updated and removed. In addition, AMS contacted USDA's Economic Research Service, who provided the updated cotton conversion factors for the new or updated HTS codes.

Summary of Comments

A proposed rule was published on June 12, 2012, with a comment period of June 12, 2012, through July 12, 2012 (77 FR 34855). AMS received three comments from interested organizations representing segments of the cotton or manufacturing industry. All comments received are available for public inspection at Cotton and Tobacco Programs, AMS, USDA, 100 Riverside Parkway, Suite 101, Fredericksburg, Virginia, 22406, during regular business hours. Comments may also be found athttp://www.regulations.gov.

One commenter, who represents the national trade organization representing the U.S. raw cotton industry and its membership includes producers, inners, warehousemen, cottonseed crushers and dealers, private and cooperative merchants, and textile manufacturers, supported the proposed rule and the formula developed by the Food, Agriculture, Conservation and Trade Act of 1990. This commenter urged AMS to expeditiously implement the new rate in order to properly assess imported cotton and cotton containing products at the new rate.

Two other commenters did not support the increased assessment. One of the opposing commenters, who represents 200 retailers, product manufacturers, and service suppliers, questioned the need for another increase after the increase in 2011 and stated that this increase would further escalate costs and unfairly burden many companies within the cotton supply chain. This commenter cited that this increase combined with the 2011 increase would add an additional 30 percent to the fee that retailers pay for imported cotton, costing up to hundreds of thousands of dollars a year per company.

Section 1205.510, “Levy of assessments,” provides “the rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” In addition, section 1205.510 provides that the 12-month average of monthly weighted average prices received by U.S. farmers will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton. AMS used the 2011 price statistics found in Agricultural Prices, a publication of the National Agricultural Statistics Service of the Department of Agriculture, to calculate the average weighted price and convert it to arrive at the new rate of 1.4109 cents per kilogram. Therefore, AMS has made no changes to the proposed rule based on this comment.

The other opposing commenter, whose organization represents the entire spectrum of international trade across all industry sectors, stated its concern that the importer fee was paid into the U.S. Treasury where only a portion of the money collected is appropriated for its stated purpose. The commenter stated its belief that the balance of such funds is often used to offset budget deficits or designated for other uses. In addition, the commenter stated that it is difficult for companies to absorb any increased costs. No monies are transferred into the general fund of the U.S. Treasury. All funds collected by the Board are used for the Cotton Research and Promotion Program in accordance with the Act. Assessments on domestic cotton production and cotton imports are maintained by the Cotton Board, who is charged with administering the Cotton Research and Promotion Program.

Regulatory Flexibility Act and Paperwork Reduction Act

In accordance with the Regulatory Flexibility Act (RFA) [5 U.S.C. 601-612], AMS examined the economic impact of this rule on small entities. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such action so that small businesses will not be unduly or disproportionately burdened. The Small Business Administration defines, in 13 CFR part 121, small agricultural producers as those having annual receipts of no more than $750,000 and small agricultural service firms (importers) as having receipts of no more than $7,000,000. An estimated 13,000 importers are subject to the rules and regulations issued pursuant to the Cotton Research and Promotion Order. Most are considered small entities as defined by the Small Business Administration.

This final rule only affects importers of cotton and cotton-containing products, and it raises the assessments paid by the importers under the Cotton Research and Promotion Order. The current assessment on imported cotton is $0.012665 per kilogram, which is equivalent to 1.088 cents per kilogram, of imported cotton. The new assessment is $0.014109 which is equivalent to 1.4109 cents per kilogram and was calculated based on the 12-month average of monthly weighted average prices received by U.S. cotton farmers. Section 1205.510, “Levy of assessments,” provides “the rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” In addition, section 1205.510 provides that the 12-month average of monthly weighted average prices received by U.S. farmers will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton. AMS used the 2010 price statistics found inAgricultural Prices,a publication of the National Agricultural Statistics Service of the Department of Agriculture, to calculate the average weighted price and convert it to arrive at the new rate of 1.4109 cents per kilogram as detailed in the Background section.

Under the Cotton Research and Promotion Program, assessments are used by the Cotton Board to financeresearch and promotion programs designed to increase consumer demand for Upland cotton within the United States and international markets. In 2010 (the last audited year), producer assessments totaled $46.5 million and importer assessments totaled $38.1 million. According to the Cotton Board, should the volume of cotton products imported into the U.S. remain at the same level in 2011, one could expect the increased assessment to generate approximately $8,309,158 in additional revenue.

Importers with line-items appearing on U.S. Customs and Border Protection documentation with value of the cotton contained therein results of an assessment of two dollars ($2.00) or less will not be subject to assessments. In addition, imported cotton and products may be exempt from assessment if the cotton content of products is U.S. produced, cotton other than Upland, or imported products that are eligible to be labeled as 100 percent organic under the National Organic Program (7 CFR part 205) and who is not a split operation.

There are no Federal rules that duplicate, overlap, or conflict with this rule.

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. chapter 35) the information collection requirements contained in the regulation that needed to be amended have been previously approved by OMB and were assigned control number 0581-0093. This rule does not result in a change to the information collection and recordkeeping requirements previously approved.

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 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 § 1205.510, paragraph (b)(2) and the table in paragraph (b)(3)(ii) are revised to read as follows:
§ 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 imported cotton and will be expressed in kilograms. The value of imported cotton for the purpose of levying this supplemental assessment is 1.4109 cents per kilogram.

(3) * * *

(ii) * * *

Import Assessment Table (Raw Cotton Fiber) HTS No. Conv. Factor Cents/kg. 5007106010 0.2713 0.3828 5007106020 0.2713 0.3828 5007906010 0.2713 0.3828 5007906020 0.2713 0.3828 5112904000 0.1085 0.1531 5112905000 0.1085 0.1531 5112909010 0.1085 0.1531 5112909090 0.1085 0.1531 5201000500 0 1.4109 5201001200 0 1.4109 5201001400 0 1.4109 5201001800 0 1.4109 5201002200 0 1.4109 5201002400 0 1.4109 5201002800 0 1.4109 5201003400 0 1.4109 5201003800 0 1.4109 5204110000 1.0526 1.4852 5204190000 0.6316 0.8911 5204200000 1.0526 1.4852 5205111000 1 1.4109 5205112000 1 1.4109 5205121000 1 1.4109 5205122000 1 1.4109 5205131000 1 1.4109 5205132000 1 1.4109 5205141000 1 1.4109 5205142000 1 1.4109 5205151000 1 1.4109 5205152000 1 1.4109 5205210020 1.044 1.4729 5205210090 1.044 1.4729 5205220020 1.044 1.4729 5205220090 1.044 1.4729 5205230020 1.044 1.4729 5205230090 1.044 1.4729 5205240020 1.044 1.4729 5205240090 1.044 1.4729 5205260020 1.044 1.4729 5205260090 1.044 1.4729 5205270020 1.044 1.4729 5205270090 1.044 1.4729 5205280020 1.044 1.4729 5205280090 1.044 1.4729 5205310000 1 1.4109 5205320000 1 1.4109 5205330000 1 1.4109 5205340000 1 1.4109 5205350000 1 1.4109 5205410020 1.044 1.4729 5205410090 1.044 1.4729 5205420021 1.044 1.4729 5205420029 1.044 1.4729 5205420090 1.044 1.4729 5205430021 1.044 1.4729 5205430029 1.044 1.4729 5205430090 1.044 1.4729 5205440021 1.044 1.4729 5205440029 1.044 1.4729 5205440090 1.044 1.4729 5205460021 1.044 1.4729 5205460029 1.044 1.4729 5205460090 1.044 1.4729 5205470021 1.044 1.4729 5205470029 1.044 1.4729 5205470090 1.044 1.4729 5205480020 1.044 1.4729 5205480090 1.044 1.4729 5206110000 0.7368 1.0396 5206120000 0.7368 1.0396 5206130000 0.7368 1.0396 5206140000 0.7368 1.0396 5206150000 0.7368 1.0396 5206210000 0.7692 1.0853 5206220000 0.7692 1.0853 5206230000 0.7692 1.0853 5206240000 0.7692 1.0853 5206250000 0.7692 1.0853 5206310000 0.7368 1.0396 5206320000 0.7368 1.0396 5206330000 0.7368 1.0396 5206340000 0.7368 1.0396 5206350000 0.7368 1.0396 5206410000 0.7692 1.0853 5206420000 0.7692 1.0853 5206430000 0.7692 1.0853 5206440000 0.7692 1.0853 5206450000 0.7692 1.0853 5207100000 0.9474 1.3366 5207900000 0.6316 0.8911 5208112020 1.0852 1.5311 5208112040 1.0852 1.5311 5208112090 1.0852 1.5311 5208114020 1.0852 1.5311 5208114040 1.0852 1.5311 5208114060 1.0852 1.5311 5208114090 1.0852 1.5311 5208116000 1.0852 1.5311 5208118020 1.0852 1.5311 5208118090 1.0852 1.5311 5208124020 1.0852 1.5311 5208124040 1.0852 1.5311 5208124090 1.0852 1.5311 5208126020 1.0852 1.5311 5208126040 1.0852 1.5311 5208126060 1.0852 1.5311 5208126090 1.0852 1.5311 5208128020 1.0852 1.5311 5208128090 1.0852 1.5311 5208130000 1.0852 1.5311 5208192020 1.0852 1.5311 5208192090 1.0852 1.5311 5208194020 1.0852 1.5311 5208194090 1.0852 1.5311 5208196020 1.0852 1.5311 5208196090 1.0852 1.5311 5208198020 1.0852 1.5311 5208198090 1.0852 1.5311 5208212020 1.0852 1.5311 5208212040 1.0852 1.5311 5208212090 1.0852 1.5311 5208214020 1.0852 1.5311 5208214040 1.0852 1.5311 5208214060 1.0852 1.5311
5208214090 1.0852 1.5311 5208216020 1.0852 1.5311 5208216090 1.0852 1.5311 5208224020 1.0852 1.5311 5208224040 1.0852 1.5311 5208224090 1.0852 1.5311 5208226020 1.0852 1.5311 5208226040 1.0852 1.5311 5208226060 1.0852 1.5311 5208226090 1.0852 1.5311 5208228020 1.0852 1.5311 5208228090 1.0852 1.5311 5208230000 1.0852 1.5311 5208292020 1.0852 1.5311 5208292090 1.0852 1.5311 5208294020 1.0852 1.5311 5208294090 1.0852 1.5311 5208296020 1.0852 1.5311 5208296090 1.0852 1.5311 5208298020 1.0852 1.5311 5208298090 1.0852 1.5311 5208312000 1.0852 1.5311 5208314020 1.0852 1.5311 5208314040 1.0852 1.5311 5208314090 1.0852 1.5311 5208316020 1.0852 1.5311 5208316040 1.0852 1.5311 5208316060 1.0852 1.5311 5208316090 1.0852 1.5311 5208318020 1.0852 1.5311 5208318090 1.0852 1.5311 5208321000 1.0852 1.5311 5208323020 1.0852 1.5311 5208323040 1.0852 1.5311 5208323090 1.0852 1.5311 5208324020 1.0852 1.5311 5208324040 1.0852 1.5311 5208324060 1.0852 1.5311 5208324090 1.0852 1.5311 5208325020 1.0852 1.5311 5208325090 1.0852 1.5311 5208330000 1.0852 1.5311 5208392020 1.0852 1.5311 5208392090 1.0852 1.5311 5208394020 1.0852 1.5311 5208394090 1.0852 1.5311 5208396020 1.0852 1.5311 5208396090 1.0852 1.5311 5208398020 1.0852 1.5311 5208398090 1.0852 1.5311 5208412000 1.0852 1.5311 5208414000 1.0852 1.5311 5208416000 1.0852 1.5311 5208418000 1.0852 1.5311 5208421000 1.0852 1.5311 5208423000 1.0852 1.5311 5208424000 1.0852 1.5311 5208425000 1.0852 1.5311 5208430000 1.0852 1.5311 5208492000 1.0852 1.5311 5208494010 1.0852 1.5311 5208494020 1.0852 1.5311 5208494090 1.0852 1.5311 5208496010 1.0852 1.5311 5208496020 1.0852 1.5311 5208496030 1.0852 1.5311 5208496090 1.0852 1.5311 5208498020 1.0852 1.5311 5208498090 1.0852 1.5311 5208512000 1.0852 1.5311 5208514020 1.0852 1.5311 5208514040 1.0852 1.5311 5208514090 1.0852 1.5311 5208516020 1.0852 1.5311 5208516040 1.0852 1.5311 5208516060 1.0852 1.5311 5208516090 1.0852 1.5311 5208518020 1.0852 1.5311 5208518090 1.0852 1.5311 5208521000 1.0852 1.5311 5208523020 1.0852 1.5311 5208523035 1.0852 1.5311 5208523045 1.0852 1.5311 5208523090 1.0852 1.5311 5208524020 1.0852 1.5311 5208524035 1.0852 1.5311 5208524045 1.0852 1.5311 5208524055 1.0852 1.5311 5208524065 1.0852 1.5311 5208524090 1.0852 1.5311 5208525020 1.0852 1.5311 5208525090 1.0852 1.5311 5208591000 1.0852 1.5311 5208592015 1.0852 1.5311 5208592025 1.0852 1.5311 5208592085 1.0852 1.5311 5208592095 1.0852 1.5311 5208594020 1.0852 1.5311 5208594090 1.0852 1.5311 5208596020 1.0852 1.5311 5208596090 1.0852 1.5311 5208598020 1.0852 1.5311 5208598090 1.0852 1.5311 5209110020 1.0309 1.4545 5209110025 1.0309 1.4545 5209110035 1.0309 1.4545 5209110050 1.0309 1.4545 5209110090 1.0309 1.4545 5209120020 1.0309 1.4545 5209120040 1.0309 1.4545 5209190020 1.0309 1.4545 5209190040 1.0309 1.4545 5209190060 1.0309 1.4545 5209190090 1.0309 1.4545 5209210020 1.0309 1.4545 5209210025 1.0309 1.4545 5209210035 1.0309 1.4545 5209210050 1.0309 1.4545 5209210090 1.0309 1.4545 5209220020 1.0309 1.4545 5209220040 1.0309 1.4545 5209290020 1.0309 1.4545 5209290040 1.0309 1.4545 5209290060 1.0309 1.4545 5209290090 1.0309 1.4545 5209313000 1.0309 1.4545 5209316020 1.0309 1.4545 5209316025 1.0309 1.4545 5209316035 1.0309 1.4545 5209316050 1.0309 1.4545 5209316090 1.0309 1.4545 5209320020 1.0309 1.4545 5209320040 1.0309 1.4545 5209390020 1.0309 1.4545 5209390040 1.0309 1.4545 5209390060 1.0309 1.4545 5209390080 1.0309 1.4545 5209390090 1.0309 1.4545 5209413000 1.0309 1.4545 5209416020 1.0309 1.4545 5209416040 1.0309 1.4545 5209420020 0.9767 1.3780 5209420040 0.9767 1.3780 5209420060 0.9767 1.3780 5209420080 0.9767 1.3780 5209430030 1.0309 1.4545 5209430050 1.0309 1.4545 5209490020 1.0309 1.4545 5209490040 1.0309 1.4545 5209490090 1.0309 1.4545 5209513000 1.0309 1.4545 5209516015 1.0852 1.5311 5209516025 1.0852 1.5311 5209516032 1.0852 1.5311 5209516035 1.0852 1.5311 5209516050 1.0852 1.5311 5209516090 1.0852 1.5311 5209520020 1.0852 1.5311 5209520040 1.0852 1.5311 5209590015 1.0852 1.5311 5209590025 1.0852 1.5311 5209590040 1.0852 1.5311 5209590060 1.0852 1.5311 5209590090 1.0852 1.5311 5210114020 0.6511 0.9187 5210114040 0.6511 0.9187 5210114090 0.6511 0.9187 5210116020 0.6511 0.9187 5210116040 0.6511 0.9187 5210116060 0.6511 0.9187 5210116090 0.6511 0.9187 5210118020 0.6511 0.9187 5210118090 0.6511 0.9187 5210191000 0.6511 0.9187 5210192020 0.6511 0.9187 5210192090 0.6511 0.9187 5210194020 0.6511 0.9187 5210194090 0.6511 0.9187 5210196020 0.6511 0.9187 5210196090 0.6511 0.9187 5210198020 0.6511 0.9187 5210198090 0.6511 0.9187 5210214020 0.6511 0.9187 5210214040 0.6511 0.9187 5210214090 0.6511 0.9187 5210216020 0.6511 0.9187 5210216040 0.6511 0.9187 5210216060 0.6511 0.9187 5210216090 0.6511 0.9187 5210218020 0.6511 0.9187 5210218090 0.6511 0.9187 5210291000 0.6511 0.9187 5210292020 0.6511 0.9187 5210292090 0.6511 0.9187 5210294020 0.6511 0.9187 5210294090 0.6511 0.9187 5210296020 0.6511 0.9187 5210296090 0.6511 0.9187