[Federal Register: January 12, 2005 (Volume 70, Number 8)]
[Proposed Rules]
[Page 2034-2053]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja05-15]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1205
[Doc. No. CN-04-001]
Cotton Board Rules and Regulations: Adjusting Supplemental
Assessment on Imports (2004 Amendments)
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Agricultural Marketing Service (AMS) is proposing to amend
the Cotton Board Rules and Regulations by adjusting the total rate of
assessment per kilogram for imported cotton collected for use by the
Cotton Research and Promotion Program. The proposed total rate of
assessment would be calculated by adding together the $1 per bale
equivalent assessment and the supplemental assessment, and adjusting
the sum to account for the estimated amount of U.S. cotton contained in
imported textile products. The proposed adjustment would reduce the
assessable portion of the cotton content of imported textile products
by the estimated average amount of U.S. cotton contained therein.
Exemptions and refunds would continue to be provided for importers
wishing to document the U.S. cotton content of specific goods. The
proposed rule would continue to ensure that the total assessment
collected on imported cotton and the cotton content of imported
products remain similar to those paid on domestically produced cotton,
and that the U.S. cotton content of imported products is not subject to
more than one assessment.
DATES: Comments must be received on or before March 14, 2005.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rule to Whitney Rick, Assistant to the Deputy
Administrator, Cotton Program, Agricultural Marketing Service, USDA,
1400 Independence Ave., SW., STOP 0224 Washington, DC 20250-0224.
Comments should be submitted in triplicate. Comments may also be
submitted electronically to: http:http://www.cottoncomments@usda.gov">//www.cottoncomments@usda.gov or
http://www.regulations.gov. All comments should reference the docket
number and the date and page number of this issue of the Federal
Register. All comments received will be made available for public
inspection at Cotton Program, AMS, USDA, Room 2641-S, 1400 Independence
Ave., SW., Washington, DC 20250 during regular business hours. A copy
of this notice may be found at: http://www.ams.usda.gov/cotton/rulemaking.htm
.
FOR FURTHER INFORMATION CONTACT: Whitney Rick, Assistant to the Deputy
Administrator, Cotton Program, AMS, USDA, 1400 Independence Ave., SW.,
Stop 0224, Washington, DC 20250-0224, telephone (202) 720-2259,
facsimile (202) 690-1718, or e-mail at whitney.rick@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 proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. It is not intended to have retroactive effect.
This proposed rule would not preempt any State or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Cotton Research and Promotion Act provides that administrative
proceedings must be exhausted before parties may file suit in court.
Under Section 12 of the Act, any person subject to an order may file
with the Secretary a petition stating that the order, any provision of
the plan, or any obligation imposed in connection with the order is not
in accordance with law and requesting a modification of the order or to
be exempted therefrom. Such person is afforded the opportunity for a
hearing on the petition. After the hearing, the Secretary would rule on
the petition. The Act provides that the District Court of the United
States in any district in which the person is an inhabitant, or has his
principal place of business, has jurisdiction to review the Secretary's
ruling, provided a complaint is filed within 20 days from the date of
the entry of ruling.
Regulatory Flexibility Act
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.) AMS has considered the economic impact
of this action on small entities and has determined that its
implementation will not have a
[[Page 2035]]
significant economic impact on a substantial number of small
businesses.
There are an estimated 10,000 importers who are presently subject
to rules and regulations issued pursuant to the Cotton Research and
Promotion Order. The majority of these importers are small businesses
under the criteria established by the Small Business Administration.
The proposed rule would reduce the total rate of assessment per
kilogram for imported cotton products collected for use by the Cotton
Research and Promotion Program. The proposed total rate of assessment
would be calculated by adding together the $1 per bale equivalent
assessment and the supplemental assessment, and adjusting the sum to
account for the estimated amount of U.S. cotton contained in imported
textile products. The proposed adjustment to the sum would reduce the
assessable portion of the cotton content of imported products by 22.2
percent, the current average estimated by AMS of U.S. cotton contained
therein. The proposed total rate of assessment per kilogram for
imported raw cotton and cotton textile products would be calculated
using the following formula:
1. One Dollar per Bale Assessment Converted to Kilograms
A 500 pound bale equals 226.8 kg. (500 x .453597). $1 per bale
assessment equals $0.002000 per pound (1/500) or $0.004409 per kg. (1/
226.8).
2. Supplemental Assessment of \5/10\ of One Percent of the Value of the
Cotton Converted to Kilograms
The 2003 calendar year weighted average price received by producers
for Upland cotton is $0.55 per pound or $1.2125 per kg. (0.55 x
2.2046). Five tenths of one percent of the average price in kg. equals
$0.006063 per kg. (1.2125 x .005).
3. Adjustment for U.S. Cotton Content of Imported Products
The adjustment for the U.S. cotton content of assessed imports is
obtained by multiplying the sum of Nos. 1 and 2 above by the U.S.
cotton share of total net cotton textile imports (0.222) which equals
$0.002325 per kilogram ($0.010472 per kg. x 0.222). Subtracting this
amount from the sum of Nos. 1 and 2 above would equal the proposed
total rate of assessment for imported products of $0.008147 per
kilogram ($0.010472 per kg. - $0.002325 per kg. = $0.008147).
The current total rate of assessment on imported raw cotton and
imported cotton products is $0.008267 per kilogram. The proposed rule
would increase the assessment on raw cotton to $0.010472, an increase
of $0.002205. Even though the assessment would be raised for imported
raw cotton, the increase is small and will not significantly affect
small businesses. The proposed rule would decrease the total rate of
assessment for imported cotton products to $0.008147 per kilogram, a
decrease of $0.00012 per kilogram from last year. The proposed rule
would not have a significant economic impact on a substantial number of
importers of cotton and cotton-containing products because importers
would be paying a small increase on imported raw cotton and a reduced
rate of total assessment on imported cotton products.
Paperwork Reduction
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act (PRA) (44 U.S.C. 3501 et seq.) the information collection
requirements contained in the regulation to be amended have been
previously approved by OMB and were assigned control number 0581-0093.
Background
The Cotton Research and Promotion Act (Act), as amended, 7 U.S.C.
2101 et seq., was enacted by Congress in 1966. Congress intended the
Act to:
[E]nable the establishment of an orderly procedure for the
development, financing through adequate assessments on all cotton
marketed in the United States and on imports of cotton, and carrying
out an effective and continuous coordinated program of research and
promotion designed to strengthen cotton's competitive position and
to maintain and expand domestic and foreign markets and uses for
United States cotton.
7 U.S.C. 2101.
The Act authorizes the Secretary of the Department of Agriculture
to issue a Cotton Research and Promotion Order. An amended Order was
approved by producers and importers voting in a referendum held July
17-26, 1991. The amended Order was published in the Federal Register on
December 10, 1991 (56 FR 64470). A proposed rule implementing the
amended Order was published in the Federal Register on December 17,
1991 (56 FR 65450). Implementing rules were published on July 1 and 2,
1992, (57 FR 29181) and (57 FR 29431), respectively. The Order imposes
an assessment on the production and importation of cotton in order to
pay for the generic research and promotion projects authorized by the
Act. The assessment consists of two parts, an assessment of $1 per bale
of cotton or per bale equivalent of cotton containing products, and a
supplemental assessment tied to the value of cotton.
The Act requires the Secretary to establish procedures to ensure
that U.S. (upland) cotton content of imported products is not subject
to more than one assessment. Under the current procedures established
in the regulations, an importer may receive an exemption from paying
the assessment or a reimbursement of the assessment paid by submitting
sufficient documentation to the Board to verify the U.S. cotton content
of the products to be imported or already imported. Because foreign
mills frequently mix U.S. cotton with other cottons when formulating
cotton yarns and fabrics, the ability of importers, except those
purchasing products from mills that use only U.S. cotton, to verify
through documentation the U.S. cotton content of the products they are
importing may be limited.
AMS believes that changes in the composition of U.S. cotton use and
the upcoming completion of the removal of all U.S. import quotas on
textile manufactures as outlined in the Agreement on Textile and
Clothing necessitates a change to its current regulatory procedures for
ensuring that U.S. (upland) cotton content of imported products is not
subject to more than one assessment. Prior to the 2001/2002 crop year,
the majority of U.S. (upland) cotton (58 percent in the 2000/2001 crop
year) was consumed domestically by U.S. mills. Starting with the 2001/
2002 crop year, a majority of U.S. cotton was exported (67 percent in
2003/2004). AMS expects this shift in the composition of U.S. cotton
use to continue into the foreseeable future and that the ending of U.S.
textile quotas will lead to an increase in the amount of U.S. cotton
returning to the United States in cotton product imports. AMS,
therefore, believes that it is appropriate at this time to make an
adjustment to the total rate of assessment to account for the amount of
U.S. cotton content of imported textile products.
The estimated amount of U.S. cotton contained in total assessable
cotton imports would be calculated by multiplying the U.S. cotton
export share of foreign mill use adjusted for location by assessable
imports. Adjusting the average amount of U.S. cotton contained in total
cotton imports for location would ensure that the U.S. cotton content
of total cotton imports would properly account for differences among
supplying countries with respect to U.S. cotton's share of their cotton
mill use and in their share of U.S. cotton product imports.
[[Page 2036]]
AMS will use regularly published statistics on U.S. exports by
destination (Weekly Export Sales Report), the world's textile usage of
cotton by country (Foreign Agricultural Service Cotton Circular) and
the raw cotton equivalent contained in imports and exports of textile
manufactures by country (Cotton & Wool Outlook) in the calculations of
the U.S. content of U.S. imports of processed cotton products. AMS
would determine the percentage of U.S. cotton contained in total
assessable cotton imports as follows:
Step 1. Define six non-U.S. cotton product supply regions: (i)
North America: Bahamas, Belize, Canada, Costa Rica, Dominican Republic,
El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua,
Panama, (ii) South America: Argentina, Brazil, Chile, Colombia,
Ecuador, Peru, Venezuela, (iii) Asia: China, Hong Kong, Israel, Japan,
Malaysia, Philippines, Saudi Arabia, Singapore, South Korea, Sri Lanka,
Taiwan, United Arab Emirates, (iv) Europe: Belgium, France, Germany,
Ireland, Italy, Netherlands, Poland, Spain, Turkey, (v) Oceania:
Australia, and (vi) Africa: Ivory Coast, Morocco, Nigeria, South
Africa. These six regions coincide with the six regions used by the
USDA's Economic Research Service in its reporting of U.S. cotton
textile imports.
Step 2. Calculate the U.S. cotton share of foreign mill use for
each region by dividing total U.S. exports of raw cotton to each region
by total mill consumption of raw cotton in that region. This would
represent an approximation of the percentage of U.S. cotton contained
in all cotton products imported into the United States from that
region. For the purpose of this calculation, U.S. cotton content
contained in a region's cotton products is uniformly distributed across
each product manufactured in that region.
Under the proposed rule, AMS examined the most current data
available and determined that U.S. cotton's share of non-U.S. mill use
for each region was as follows: North America, 100.0 percent; South
America, 16.0 percent; Asia, 9.9 percent; Europe, 11.6 percent; Oceana,
0.0 percent; and Africa, 0.2 percent. These shares were obtained by
dividing U.S. exports of raw cotton to each region by total cotton mill
use in each region. The specific calculations are shown in Table 1.
Table 1.--Tabulation of U.S. Cotton Export Share of Foreign Mill Use
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Raw cotton
mill use-- U.S. cotton
Region U.S. exports million 480 share of raw
of raw cotton lb. Bales-- cotton mill
use
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North America................................................... 2.842 2.767 \a\ 1.000
South America................................................... 0.833 5.207 0.160
Asia............................................................ 6.481 65.254 0.099
Europe.......................................................... 1.757 15.103 0.116
Oceana.......................................................... 0.000 0.125 0.000
Africa.......................................................... 0.006 2.876 0.002
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\a\ North America share capped at 1.000.
Step 3. Determine total imports of assessable cotton for each
region by subtracting the total cotton content of U.S. exports of
processed cotton products in raw cotton equivalents to each region from
the total cotton content of U.S. imports of processed cotton products
from that region in raw cotton equivalents. The net result (net
imports) of processed cotton products provides an approximation of the
amount of cotton coming into the United States from each region that is
not being exempted or receiving a refund.
Under the proposed rule, AMS examined the most current data
available and determined that processed cotton imports into the U.S.
totaled 9,232 \1\ million pounds (North America, 3,116 million pounds;
South America, 242 million pounds, Asia, 4,770 million pounds, Europe,
684 million pounds, Oceania, 41 million pounds, and Africa, 378 million
pounds. U.S. processed cotton exports for the same time period and
regions totaled 2,317 \1\ million pounds (North America, 2,151 million
pounds; South America, 45 million pounds; Asia 64 million pounds;
Europe 45 million pounds; Oceania 5 million pounds; and Africa, 7
million pounds). Subtracting U.S. exports from U.S. imports results in
total net imports of 6,915 \1\ million pounds (North America, 965
pounds; South America, 197 million pounds; Asia, 4,706 million pounds;
Europe, 639 million pounds; Oceana, 36 million pounds; and Africa, 371
million pounds.
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\1\ Total does not equal sum of regions due to rounding.
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Step 4. Adjust the U.S. cotton content of imports for location by
multiplying the U.S. cotton share of foreign mill use for each region
by that region's share of total imports of assessable cotton and then
totaling-up the result obtained across all the regions. The share of
total imports of assessed cotton products is calculated by dividing the
total assessed cotton contained in each regions' imports as discussed
in Step 3 above by the sum of all regions' imports of assessed cotton.
Step 5. The percentage of U.S. cotton contained in assessable
imports is then used to calculate the assessable content of imported
cotton products by multiplying the cotton content of each imported
product by the percentage of U.S. cotton contained in total assessable
imports and subtracting that amount from the cotton content of imported
products (assessable cotton content = cotton content per HTS code -
(cotton content per HTS code x proportion of U.S. cotton contained in
U.S. imports) where the proportion of U.S. cotton contained in U.S.
imports equals the percentage of U.S. cotton contained in assessable
imports divided by 100).
Using the above method and the most current data available to AMS,
the proposed rule would lower the total amount of assessments paid by
importers for imported textile products by approximately 22.2 percent
from the total amount of assessments paid by importers using current
procedures. Raw cotton import assessments would increase by 26.7
percent based on the established formula. Exemptions and
[[Page 2037]]
refunds would continue to be provided for importers wishing to document
the U.S. cotton content of specific goods.
The $1 per bale of cotton or per bale equivalent of cotton
containing products, and the supplemental assessment would continue to
be calculated the same way. The $1 per bale of cotton or per bale
equivalent of cotton containing products assessment is levied on the
weight of cotton produced or imported at a rate of $1 per bale of
cotton which is equivalent to 500 pounds or $1 per 226.8 kilograms of
cotton.
The supplemental assessment is levied at a rate of five-tenths of
one percent of the value of domestically produced cotton, imported
cotton, and the cotton content of imported products. AMS assigns the
calendar year weighted average price received by U.S. farmers for
Upland cotton to represent the value of imported cotton. The current
value of imported cotton as published in the Federal Register (68 FR
27898) on May 22, 2003, for the purpose of calculating supplemental
assessments on imported cotton is $0.7716 per kilogram. This number was
calculated using the annual weighted average price received by farmers
for Upland cotton during the calendar year 2002 which was $0.35 per
pound and multiplying by the conversion factor 2.2046. Using the
Average Weighted Price Received by U.S. farmers for Upland cotton for
the calendar year 2003, which is $0.55 per pound, the new value of
imported cotton is $1.2125 per kilogram. The proposed value is $.4409
per kilogram more than the previous value.
The U.S. cotton share of total net imported products is
approximated at 0.222. This figure was obtained by multiplying U.S.
cotton's share of each region's mill use by that region's share of
assessable cotton imports. The U.S. content of assessable cotton
imports for each supply region is shown in Table 2.
Table 2.--Tabulation of U.S. Cotton Share of Total Assessable U.S. Cotton Imports
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U.S. cotton
U.S. share of Region share share of
Region foreign mill of assessable assessable
use cotton imports imports
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North America................................................... 1.000 0.140 0.140
South America................................................... 0.160 0.028 0.004
Asia............................................................ 0.099 0.681 0.067
Europe.......................................................... 0.116 0.092 0.011
Oceana.......................................................... 0.000 0.005 0.000
Africa.......................................................... 0.002 0.054 0.000
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Total....................................................... N.A. 1.000 0.222
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An example of the complete assessment formula and how the various
figures are obtained is as follows:
One bale is equal to 500 pounds.
One kilogram equals 2.2046 pounds.
One pound equals 0.453597 kilograms.
1. One Dollar per Bale Assessment Converted to Kilograms
A 500 pound bale equals 226.8 kg. (500 x .453597).
$1 per bale assessment equals $0.002000 per pound (1/500) or
$0.004409 per kg. (1/226.8).
2. Supplemental Assessment of \5/10\ of One Percent of the Value of the
Cotton Converted to Kilograms
The 2003 calendar year weighted average price received by producers
for Upland cotton is $0.55 per pound or $1.2125 per kg. (0.55 x
2.2046).
Five tenths of one percent of the average price in kg. equals
$0.006063 per kg. (1.2125 x .005).
3. Total Rate of Assessment
The total rate of assessment per kilogram of raw cotton is
$0.010472 per kg. (obtained by adding the $1 per bale equivalent
assessment of $0.004409 per kg., and the supplemental assessment
$0.006063 per kg.), and making an adjustment of 0.222 for the U.S.
cotton content of assessed imported textile products. The proposed
total rate of assessment for imported cotton would be $0.008147 per
kilogram. The current total rate of assessment on imported cotton is
$0.008267 per kilogram. The proposed rule would decrease the total rate
of assessment on imported cotton products to $0.008147 per kilogram, a
decrease of $0.00012 per kilogram from last year.
The figures shown in the right hand column of the Import Assessment
Table 1205.510(b)(3) are a result of such a calculation, and have been
revised accordingly. These figures indicate the total assessment per
kilogram due for each Harmonized Tariff Schedule (HTS) number subject
to assessment.
A sixty-day comment period is provided to comment on the changes to
the Cotton Board Rules and Regulations proposed herein. This period is
deemed appropriate because this proposal would adjust the assessments
paid by importers on imported raw cotton and cotton products under the
Cotton Research and Promotion Order, by increasing the assessment on
raw cotton and reducing the total rate of assessment for imported
cotton products. These proposed changes would ensure that the total
assessment collected on imported cotton and the cotton content of
imported products remain similar to those paid on domestically produced
cotton, and that the U.S. cotton content of imported products is not
subject to more than one assessment.
Accordingly, the change proposed in this rule, if adopted, should
be implemented as soon as possible.
List of Subjects in 7 CFR Part 1205
Advertising, Agricultural research, Cotton, Marketing agreements,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble 7 CFR part 1205 is
proposed to be amended as follows:
PART 1205--COTTON RESEARCH AND PROMOTION
1. The authority citation for part 1205 continues to read as
follows:
Authority: 7 U.S.C. 2101-2118.
2. In Sec. 1205.510, paragraph (b)(2) and the table in paragraph
(b)(3)(ii) are revised to read as follows:
Sec. 1205.510 Levy of assessments.
* * * * *
(b) * * * (2) The 12-month average of monthly weighted average
prices received by U.S. farmers will be calculated annually. Such
weighted average will be used as the value of imported cotton for the
purpose of levying the supplemental assessment on
[[Page 2038]]
imported cotton and will be expressed in kilograms. The value of
imported cotton for the purpose of levying the supplemental assessment
is $1.2125 per kilogram. The total rate of assessment for imported raw
cotton is $0.010472, and the total rate of assessment for imported
cotton products is $0.008147 per kilogram.
(3) * * *
(ii) * * *
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* * * * *
Dated: January 5, 2005.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-475 Filed 1-11-05; 8:45 am]
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