[Federal Register Volume 70, Number 63 (Monday, April 4, 2005)]
[Rules and Regulations]
[Pages 17150-17166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6455]



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Part II





Department of Agriculture





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Farm Service Agency



7 CFR Part 723



Commodity Credit Corporation

7 CFR Parts 1463 and 1464



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Tobacco Transition Payment Program; Final Rule

Federal Register / Vol. 70, No. 63 / Monday, April 4, 2005 / Rules 
and Regulations

[[Page 17150]]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 723

Commodity Credit Corporation

7 CFR Parts 1463 and 1464

RIN 0560-AH30


Tobacco Transition Payment Program

AGENCY: Commodity Credit Corporation and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This rule provides regulations for the Tobacco Transition 
Payment Program (TTPP), as required by Title VI of the American Jobs 
Creation Act of 2004 (the 2004 Act), ending the tobacco marketing quota 
and price support loan programs. The TTPP will provide payments over a 
ten-year period to quota holders and producers of quota tobacco to help 
them make the transition from the federally-regulated program. This 
rule also removes from the Code of Federal Regulations obsolete tobacco 
program provisions at 7 CFR parts 723 and 1464.

DATES: Effective Date: This rule will be effective March 30, 2005, 
except for the removal of 7 CFR parts 723 and 1464, which will be 
effective November 1, 2005.

FOR FURTHER INFORMATION CONTACT: Ann Wortham, Tobacco Division, Farm 
Service Agency (FSA), United States Department of Agriculture (USDA), 
Stop 0514, 1400 Independence Ave., SW., Washington, DC 20250-0514. 
Phone: (202) 720-2715; e-mail: [email protected]. Persons with 
disabilities who require alternative means for communication (Braille, 
large print, audio tape, etc.) should contact the USDA Target Center at 
(202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Notice and Comment

    Section 642(b) of the 2004 Act requires that these regulations be 
promulgated without regard to the notice and comment provisions of 5 
U.S.C. 553 or the Statement of Policy of the Secretary of Agriculture 
effective July 24, 1971, (36 FR 13804) relating to notices of proposed 
rulemaking and public participation in rulemaking. These regulations 
are thus issued as final.

Background

General Overview

    Sections 611 through 613 of the American Jobs Creation Act of 2004 
(Pub. L. 108-357; the 2004 Act) repeal the tobacco marketing quota and 
related price support programs authorized by Title III of the 
Agricultural Adjustment Act of 1938 (the 1938 Act) and the Agricultural 
Act of 1949. This action is effective at the end of the 2004 marketing 
years established for the respective kinds of tobacco that are subject 
to such quotas. The regulations used to administer the marketing quota 
program are codified at 7 CFR part 723 and the price support loan 
program regulations are codified at 7 CFR part 1464.
    Sections 621 through 624 of the 2004 Act provide for transitional 
payments to tobacco quota holders and producers. Eligible tobacco quota 
holders and producers will receive payments under this program in 10 
installments in each of the 2005 through 2014 fiscal years (FYs). To 
the extent practical, the Commodity Credit Corporation (CCC) intends to 
make the FY 2005 payment between June and September of 2005, and 
subsequent payments during January of each FY.
    Transition payments will be based on the Basic Quota Levels (BQLs) 
determined for each farm, and then for quota holders' ownership shares 
in the farm and producers' shares in the risk of producing quota 
tobacco on the farm during the years 2002, 2003 and 2004. For example, 
if a quota holder is the sole owner of a farm to which quota was 
assigned for the 2002 marketing year, the BQL established for that farm 
will also be the BQL for that quota holder. Similarly, if the quota 
holder has only a one-third ownership share in the farm, that quota 
holder's BQL will be one third of the BQL established for the farm.
    Sections 625 through 627 of the 2004 Act provide for the 
establishment of assessments on certain domestic manufacturers and 
importers of tobacco products in order to fund the TTPP. The 
regulations relating to the manner in which the assessment provisions 
of the 2004 Act are to be administered are set forth in 7 CFR part 1463 
subpart A.
    TTPP contract payments are made by CCC and have the same 
contractual sanctity as other CCC payments. Accordingly, while the 
source of the funding is primarily derived from assessments levied upon 
manufacturers and importers of tobacco products, the obligation arising 
from these contracts that accrues to CCC is the same as for any other 
CCC contract.

Eligible Quota Holders

Payments

    Generally, this rule provides for payments to be made to persons 
who owned farms on October 22, 2004 for which tobacco quota was 
assigned for the 2004 marketing year. Payments to such persons, or 
quota holders, are based on the marketing quota assigned to the farm 
for the 2002 marketing year, as provided by 7 CFR part 723. The payment 
rate is $7 per pound of eligible quota, to be paid in equal 
installments over 10 years.
    Generally, this rule also provides for payments to producers of 
quota tobacco. Overmarketings and undermarketings play a part in 
calculating burley and flue-cured producer BQL. They are both 
conditions that are the result of an action in one year that cause 
temporary quota adjustments the following year.
    Overmarketings are tobacco pounds sold during a marketing year in 
excess of a farm's effective marketing quota for that year. The excess 
pounds of tobacco sold in one year are deducted from the next year's 
marketing quota for that farm.
    Undermarketings for burley or flue-cured tobacco are tobacco that 
could have been sold during a marketing year but were not. There are 
two categories of undermarketings: actual and effective. Actual 
undermarketings are the pounds of tobacco by which the effective quota 
is more than the pounds of tobacco marketed during a marketing year. 
Effective undermarketings are the smaller of the actual undermarketings 
or the sum of the previous year's basic quota on the farm plus pounds 
that were temporarily transferred to that farm for the previous year.
    The BQL calculation must consider in what year these over/under 
pounds were originally assigned to a farm because under the former 
tobacco program marketing quotas were adjusted each year by a national 
factor determined by CCC to account for changes in supply and demand. 
Because payments are to be based on 2002 quota levels, the quotas for 
each year must be adjusted to the 2002 level. For example, 
undermarketings that are carried forward from 2002 to 2003 are pounds 
that were already at the 2002 level. Therefore, in calculating 2003 BQL 
these 2002 undermarketings are deducted from the 2003 marketings; the 
BQL factor is applied to the remaining 2003 marketings to bring them to 
the 2002 level; and then the 2002 undermarketings are added back into 
the process. The adjustment process is more fully described in the 
Eligible

[[Page 17151]]

Quota Producers section of this Preamble.
    The 2004 Act specifically addresses the situation where permanent 
transfers of tobacco-marketing quota were initiated prior to October 
22, 2004, but not completed as of that date. Accordingly, in the case 
of the incomplete transfer of an entire farm, where the quota 
distribution has not been agreed upon, CCC has determined that the 
eligible tobacco quota holder will be considered to be the person 
contractually bound to purchase the entire farm. Similarly, the 2004 
Act provides that where there was in existence on October 21, 2004, an 
agreement for the permanent transfer of the tobacco quota, but the 
transfer was not completed by October 21, 2004, the owner of the farm 
to which the tobacco quota was to be transferred will be considered to 
be the eligible tobacco quota holder.
    If a written agreement was initiated before October 22, 2004 for 
the purchase of all or a portion of a farm, the transition payment will 
be disbursed as specified in the agreement so long as the resulting 
distribution is consistent with the 2004 Act. If a written agreement 
was initiated before October 22, 2004 for the purchase of all or a 
portion of a farm and the agreement specified the distribution of the 
farm's tobacco quota and the parties to the agreement do not concur 
about the manner in which such quota would be assigned to the different 
portions of the farm, payments will be made in a fair and equitable 
manner as determined by CCC taking into account any incomplete 
permanent transfer of such quota. Where there was a sale of part of the 
farm not yet completed by October 22, 2004, CCC will divide the 
disputed quota taking into account the ratio of cropland on the unsold 
portion of the farm to the cropland on the portion of the farm subject 
to the purchase contract.

Disputes

    In the event there is a dispute regarding the determination of 
which persons are eligible quota holders on a farm, no payment to any 
quota holder on that farm will be made until all parties have agreed or 
until all administrative appeals have been exhausted. Also, if a farm 
is determined eligible for a permanent tobacco quota and all or part of 
that farm is sold after October 22, 2004, the tobacco quota attributed 
to the owner of the farm as of October 22, 2004 cannot be transferred 
for purposes of determining a TTPP payment. In addition, consistent 
with the manner in which CCC administers other commodity programs, a 
person who holds a life-estate interest in a farm with a tobacco quota 
will be considered the owner of the farm in determining who is an 
eligible tobacco quota holder. A person with a remainder interest, any 
other contingent interest, or any equitable interest as a creditor or 
otherwise in such farm or marketing quota will not be considered to be 
an owner of the farm for purposes of determining a TTPP payment. If 
such a person believes that a private sales transaction did not take 
into account these statutory and regulatory provisions, a private 
resolution of such a dispute must be undertaken by the parties to the 
contract; neither FSA nor CCC will participate in the resolution of 
such matter.
    There may have been transfers of farms that were not reported to 
FSA, or incomplete transfers of tobacco quotas and farms as of October 
22, 2004. Accordingly, in order to ensure that only persons who meet 
the requirements of the 2004 Act receive a TTPP payment, and to reduce 
debt collection efforts with respect to persons who improperly 
represented their eligibility status to CCC, CCC will require program 
participants to make certain representations regarding whether the 
tobacco quota or their farm had been transferred to another person.
    This rule provides that if a person who is not the tobacco quota 
holder for a farm, as identified in FSA records, submits a TTPP 
contract or other written claim to CCC before May 31, 2005, no payments 
will be made with respect to such farm until CCC has determined the 
eligibility status of each claimant and any other person who may be 
eligible to receive the payment. This 60-day period is intended to 
provide an opportunity for anyone who should have reported to FSA under 
7 CFR part 723, but did not (1) claim ownership in a farm or tobacco 
quota or; (2) transfer ownership of a farm or tobacco quota. If a 
contract or written claim is submitted to CCC after May 31, 2005, and 
either, the first TTPP payment is made to the tobacco quota holder 
identified in FSA records, or collected by CCC of FSA by administrative 
offset or other action, additional payments will not be made on the 
subject TTPP contract until CCC can determine the status of the 
competing claimants. The rule also provides that if a contract or other 
written claim is provided to CCC by May 31, 2005 by two or more persons 
for the same tobacco quota used to calculate a TTPP payment, no payment 
will be issued until CCC determines the eligibility status of each 
claimant. Therefore, in anticipation of disputes concerning assignment 
of a farm marketing quota for purposes of determining the TTPP payment, 
any person who intends to enter into a TTPP contract is advised to 
visit the USDA service center in the county where the farm is located 
to make corrections or changes to records that relate to the farm.

Quota Holder Assignments and Successor in Interest Contracts

    Any quota holder may assign the payment to another party, using the 
correct CCC form, so long as the consideration for the assignment is 
greater than or equal to the discounted value based on the discount 
rate established by CCC, except that special provision will be made for 
assignments between immediate family members and persons who purchased 
a tobacco marketing quota prior to October 22, 2004 and, in accordance 
with 7 CFR part 723, placed the quota on anther person's farm, prior to 
such date, with consent of the owner. The discount rate will be 
established by CCC at the prime rate plus two percentage points rounded 
to the nearest whole number.
    Any quota holder may execute a successor in interest contract for 
their TTPP payments, except the 2005 payment, by using the correct CCC 
form, and subject to the following conditions: (1) The quota holder 
must not be subject to the payment offset provisions of the Debt 
Collection Improvement Act of 1996 as a result of a debt to any agency 
of the United States; (2) Consideration for the succession to TTPP 
payments must be greater than or equal to the discounted value of the 
remaining payment stream based on the discount rate established by CCC, 
except that special provision will be made for assignments between 
immediate family members and persons who purchased a tobacco marketing 
quota prior to October 22, 2004 and, in accordance with 7 CFR part 723, 
placed the quota on anther person's farm, prior to such date, with 
consent of the owner; and (3) For payments to be issued the following 
January for the 2006 and successive year payments, the successor must 
file a successor in interest contract no later than November 1 of the 
preceding year.
    Once it has been determined that a tobacco quota holder is eligible 
for a payment under this rule, and CCC has executed a TTPP contract 
with such quota holder, the person may sell all or a portion of his 
farm and still receive the TTPP payments. CCC will not execute a TTPP 
contract with a person who was the buyer of the farm in a transaction 
that took place after October 22, 2004 unless the seller who had 
previously been determined by CCC to

[[Page 17152]]

be an eligible quota holder has executed a successor in interest 
contract, using the correct CCC form, in which the seller transfers all 
rights and obligations to the successor party, as approved by CCC.

Eligible Quota Producers

    Generally, this rule provides for payments to persons who produced 
a crop or part of a crop of tobacco subject to a marketing quota in one 
or more of the 2002, 2003, and 2004-crop years. The Secretary will 
establish a base quota level (BQL) for each producer based on the 2002 
marketing year effective quota produced on the farm each of the years 
2002, 2003 and 2004. Marketing quota temporarily leased to a farm under 
disaster conditions will not be included in the receiving farm 
producer's BQL. The total payment of $3 per pound of eligible quota is 
to be paid at a rate of \1/3\ that rate, or $1 per pound, for each of 
the years 2002, 2003 and 2004 in which the producer shared in the risk 
of producing the quota tobacco.
    Where two or more persons shared in the risk of producing the same 
quota pound (for flue-cured and burley tobaccos only--effective 
undermarketings) the pound shall not be included in the producer's BQL 
for the year the effective undermarketing was suffered. Effective 
undermarketings are carried forward from the year suffered to the 
farm's next established marketing quota. These pounds were not factored 
when determining the national basic quota for the applicable year under 
7 CFR part 723.
    Actual undermarketings (flue-cured and burley tobacco only) that 
were not allowed to be carried forward to the farm's next established 
quota may be included in the producer's BQL where suffered to the 
extent the pounds were considered planted as defined under this 
subpart.
    For burley tobacco, effective undermarketing pounds that were 
reduced under 7 CFR 723.206(c) in the 2004 marketing year will be 
included in the 2003 marketing year producer's BQL to the extent the 
quota was considered planted as defined under this subpart during the 
2003 marketing year.
    Overmarketings (flue-cured and burley only) exist when a farm 
markets in excess of the farm's effective quota established under 7 CFR 
part 723 and are deducted from the farm's next established marketing 
quota. To the extent the farm marketed penalty-free, these quota pounds 
will be included in the producer's BQL for the year in which the pounds 
were actually marketed, except in the 2004 marketing year. 
Overmarketings will be excluded from the 2004 marketing year producer's 
BQL because these pounds were not deducted from the farm's next 
established marketing quota.
    For flue-cured and burley farms that temporarily leased quota 
pounds from the farm during the marketing year under disaster 
conditions these pounds will be included in the transferring farm's 
producer BQL and reduced from the receiving farm's producer BQL for the 
applicable year.
    For tobaccos other than flue-cured and burley, marketing quotas 
were established under 7 CFR part 723 in acreage allotments. The 
acreage allotments will be converted to poundage quotas for purposes of 
determining the producer's BQL. In order to convert 2002 basic 
allotments established under 7 CFR part 723 to poundage quotas the 
allotment established will be multiplied by the farm's three-year 
average yield for the 2001, 2002 and 2003 crop years.
    For all tobaccos for which temporary transfers of marketing quota 
were allowed under 7 CFR part 723 the producer's BQL will be adjusted 
to consider these pounds. An upward adjustment will be made to the 
receiving farm producer's BQL and a downward adjustment will be made to 
the transferring farm producer's BQL for each applicable year.
    In order to calculate the producer's BQL for 2003 and 2004 
marketing years, the BQL must be converted to the equivalent of the 
2002 effective quota (flue-cured and burley) or the 2002 basic quota 
(tobaccos other than flue-cured and burley) level. This conversion will 
reverse the national marketing quota adjustments made by the Secretary 
for each applicable year. For this reason each producer's BQL for 2003 
and 2004 will be broken down between basic quota pounds (adjusted 
annually by the Secretary) and effective undermarketing pounds (pounds 
for which two or more persons may have been at risk). Basic quota 
pounds will be adjusted using the BQL adjustment factor for the 
applicable kind of tobacco as shown in Table 1. The adjustment factor 
was determined for 2003 by dividing one by the national factor 
determined by FSA under 7 CFR part 723 for 2003 and, for 2004 by 
dividing one by the product of the national factor for 2003 times the 
national factor for 2004. The BQL factor, when applied to the 2003 or 
2004 basic quota, will equate those years' basic quotas to the 2002 
basic quota level. Effective undermarketings in the 2003 marketing year 
will not be adjusted because they were carried forward from the 2002 
marketing year at the 2002 basic quota level. Effective undermarketings 
for the 2004 marketing year will be adjusted to the 2002 basic quota 
level using the 2003 adjustment factor shown in Table 1. These pounds 
were adjusted in 2003 from the 2002 level and will be factored to the 
2002 basic quota level.
    For burley farms where temporary transfers (not including disaster 
transfers) were approved, the receiving farm will be apportioned 
undermarketing pound history by dividing the transferring farm's prior 
year undermarketing pounds by the transferring farm's effective quota 
(before any temporary transfers) to determine a factor for 
apportionment of undermarketing pounds.
    The receiving farm's share of undermarketing pounds will be 
determined by multiplying the transferring farm's apportionment factor 
by the receiving farms pounds leased from the transferring farm. The 
result will be subtracted from the total pounds leased into the 
receiving farm so the applicable BQL adjustment factor (Table 1) can be 
applied. The adjusted undermarketings leased to the receiving farm will 
be added to the receiving farm producer's BQL and subtracted from the 
transferring farm producer's BQL.

          Table 1.--National Factors and BQL Adjustment Factors
------------------------------------------------------------------------
       Kind of Tobacco                              2003         2004
------------------------------------------------------------------------
Burley (type 31).............  National Factor      .889        1.05
                               BQL Adjustment    \1\          \2\
                                Factor.            1.124860     1.071295
Flue-Cured (types 11-14).....  National Factor      .905         .895
                               BQL Adjustment   \1\1.104970   \2\
                                Factor.                         1.234570
Fire-Cured (type 21).........  National Factor     1.00         1.00
                               BQL Adjustment   \1\ 1.00     \2\ 1.00
                                Factor.
Fire-Cured (types 22-23).....  National Factor     1.02         1.03

[[Page 17153]]

 
                               BQL Adjustment    \1\.980392   \2\.951837
                                Factor.
Dark Air-Cured (types 35-36).  National Factor     1.05         1.03
                                Factor.
                               BQL Adjustment.   \1\.952381   \2\.924640
Va Sun-Cured (type 37).......  National Factor     1.00         1.00
                               BQL Adjustment   \1\ 1.00     \2\ 1.00
                                Factor.
Cigar Filler/Binder (types 42- National Factor     1.12          .95
 44 and 54-55).
                               BQL Adjustment    \1\.892900   \2\.939800 
                                Factor.
------------------------------------------------------------------------
\1\ 2003 BQL adjustment factors were determined by dividing 1 by the
  2003 national factor for the applicable kind of tobacco.
\2\ 2004 BQL adjustment factors were determined by dividing 1 by the
  product of the 2003 national factor times the 2004 national factor for
  the applicable kind of tobacco.

    Examples of BQL calculations are illustrated below.

Farm Example 1

    Example 1 shows the BQL calculation for a single flue-cured 
producer for a farm that had no under-or over-marketings from a 
previous year, no temporary transfers (disaster), and marketed the 
entire effective quota for each of the years 2002, 2003 and 2004.

                                    Farm Example 1.--Flue-Cured Tobacco Farm
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                                                                       2002            2003            2004
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Basic Quota................................................   +            1,000             905             810
Effective Undermarketings (previous year)..................   +                0               0               0
Overmarketings (previous year).............................   -                0               0               0
Lease Transfer To..........................................   +                0               0               0
Lease Transfer From........................................   -                0               0               0
Effective Quota............................................   =            1,000             905             810
Disaster Lease Transfer To.................................   -                0               0               0
Disaster Lease Transfer From...............................   +                0               0               0
TTPP Effective Quota (w/disaster leases)...................   =            1,000             905             810
Actual Marketings..........................................  ...           1,000             905             810
Overmarketings.............................................  ...               0               0               0
Actual Undermarketings.....................................  ...               0               0               0
Effective Undermarketings..................................  ...               0               0               0
BQL Adjustment Factor......................................   x         1.000000        1.104970        1.234570
Farm BQL...................................................   =            1,000           1,000           1,000
Producer Share.............................................   x            1.000           1.000           1.000
                                                                 -----------------
    Total Payments.........................................   =           $1,000          $1,000          $1,000
----------------------------------------------------------------------------------------------------------------

Farm Example 2

    Example 2 shows the BQL calculation for a single burley producer 
for a farm that had temporary transfers (not disaster) in 2002, 2003 
and 2004. This farm did not have any under-or over-marketings from a 
previous year.

                                      Farm Example 2.--Burley Tobacco Farm
----------------------------------------------------------------------------------------------------------------
                                                                       2002            2003            2004
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Basic Quota................................................   +            1,000             889             933
Effective Undermarketings (previous year)..................   +                0               0               0
Overmarketings (previous year).............................   -                0               0               0
Lease Transfer To..........................................   +                0               0               0
Lease Transfer From........................................   -              500             500             500
Effective Quota............................................   =              500             389             433
Disaster Lease Transfer To.................................   -                0               0               0
Disaster Lease Transfer From...............................   +                0               0               0
TTPP Effective Quota (w/disaster leases)...................   =              500             389             433
Actual Marketings..........................................  ...             500             389             433
Overmarketings.............................................  ...               0               0               0
Actual Undermarketings.....................................  ...               0               0               0
Effective Undermarketings..................................  ...               0               0               0
BQL Adjustment Factor......................................   x         1.000000        1.124860        1.071295
BQL........................................................   =              500             438             464
Producer share.............................................   x            1.000           1.000           1.000
                                                                 -----------------
    Total Payments.........................................   =             $500            $438            $464
----------------------------------------------------------------------------------------------------------------


[[Page 17154]]

Farm Example 3:

    Example 3 shows the BQL calculation for a single burley producer 
for a farm that had undermarketings from a previous year. In this 
example it is important to understand the separation of basic quota 
pounds from undermarketing pounds that are necessary in order to 
convert the 2003 or 2004 effective marketing quota to the applicable 
2002 effective marketing quota level. As shown in this example the 
burley farm's basic quota for 2002 was 1,000 pounds and effective 
undermarketings (from 2001 marketing year) carried forward were 100 
pounds. No temporary adjustments for leasing took place. The farm's 
2002 effective quota was determined to be 1,100 pounds. The farm 
actually marketed 1,025 pounds which resulted in 75 pounds of actual 
undermarketings. Because the actual undermarketings are less than 
effective undermarketings brought forward from the 2001 marketing 
year all 75 pounds would be considered effective undermarketing in 
determining the farm's 2003 effective quota. Since the 75 pounds of 
effective undermarketings are included in both the 2002 and 2003 
effective quota for the farm, the 75 pounds will be deducted from 
the producers BQL determined for 2002. In this case the producer's 
BQL for 2002 would be 1,025 pounds and the payment would be 
calculated as 1,025 pounds BQL multiplied by $1, or $1,025 for the 
producer with a 100-percent share in the 2002 crop.
    In calculating the producer's BQL for the 2003 crop year the 
farm's marketing quota must be divided between basic quota pounds 
and undermarketings. This example shows the farm's basic quota was 
reduced from the 2002 marketing year (1,000 pounds) to the 2003 (889 
pounds) marketing year. The farm has previous year effective 
undermarketings from 2002 (75 pounds). So that no pound is paid 
twice, the farm's actual marketings will be considered as the 
primary factor in determining the risk in production for the 2003 
marketing year. Effective undermarketings will be deducted from the 
actual marketings so that the appropriate BQL adjustment factor from 
Table 1 can be applied to the basic quota. After adjusting the 
actual marketings to the 2002 effective quota level, the farm's 
adjusted marketing quota may, to the extent the quota was considered 
planted under this subpart, be adjusted upward to include the 
previous year effective undermarketing quota pounds in the 
producer's BQL.
    The 2003 BQL calculation was performed as follows: 2002 
effective undermarketings brought forward to 2003 marketing quota 
(75 pounds) are deducted from the farm's 2003 actual marketings (914 
pounds). This is the necessary step to establish the farm's basic 
quota pounds so they can be adjusted to the 2002 basic quota level 
(839 pounds will be adjusted by the BQL adjustment factor of 1.12486 
from Table 1). Once the 2002 basic quota level has been determined 
(944 pounds) the results must be adjusted to include the 2002 
effective undermarketings (75 pounds). In this example the 
producer's BQL would be 1,019 pounds (944 pounds basic quota plus 75 
pounds effective undermarketings) and the payment would be 
calculated as 1,019 pounds BQL multiplied by $1, or $1,019 for the 
producer with a 100-percent share in the 2003 crop.
    In calculating the producer's BQL for the 2004 crop year the 
farm's marketing quota at the 2002 effective quota level the farm's 
effective quota must be divided between basic quota pounds and 
undermarketings. This example shows the farm's basic quota was 
increased from the 2003 marketing year (889 pounds) to the 2004 (993 
pounds) marketing year, however the adjustment was still less than 
the 2002 marketing year (1,000 pounds) established for the farm. The 
farm's effective undermarketings from 2003 (50 pounds) will be 
deducted from the farm's basic quota (933 pounds) in order to 
convert the basic quota pounds to the 2002 basic quota level (933 
pounds will be adjusted by the BQL adjustment factor of 1.071295 in 
Table 1). Once the 2002 basic quota level has been determined (1,000 
pounds) the results must be adjusted to include the 2003 effective 
undermarketings (50 pounds will be adjusted by the BQL adjustment 
factor of 1.12486 from Table 1 or 56 pounds). The producer's 2004 
BQL would be 1,056 pounds (1,000 pounds basic quota plus 56 pounds 
effective undermarketings) and the payment would be calculated as 
1,056 pounds BQL multiplied by $1 or $1,056 for the producer with a 
100 percent share in the 2004 crop. Since 2004 effective 
undermarketings and overmarketings will not be considered in 
establishing future year marketing quotas (program was repealed 
beginning with the 2005 crop year by the 2004 Act) the actual 
undermarketings suffered will be paid to the producer at risk during 
2004 crop year on the farm. Similarly, had this farm overproduced 
and marketed in excess of the 2004 effective quota penalty-free, 
those pounds would not be considered in calculating the producer's 
BQL for 2004 because they could not be deducted from the next 
established marketing quota for the farm.

                                      Farm Example 3.--Burley Tobacco Farm
----------------------------------------------------------------------------------------------------------------
                                                                       2002            2003            2004
----------------------------------------------------------------------------------------------------------------
Basic Quota................................................   +            1,000             899             933
Effective Undermarketings (previous year)..................   +              100              75              50
Overmarketings (previous year).............................   -                0               0               0
Lease Transfer To..........................................   +                0               0               0
Lease Transfer From........................................   -                0               0               0
Effective Quota............................................   -             1100             964             983
Disaster Lease Transfer To.................................   -                0               0               0
Disaster Lease Transfer From...............................   +                0               0               0
TTPP Effective Quota.......................................   -             1100             964             983
Actual Marketings..........................................  ...            1025             914             983
Overmarketings.............................................  ...               0               0               0
Actual Undermarketings.....................................  ...              75              50               0
Effective Undermarketings..................................  ...              75              50               0
BQL Adjustment Factor......................................   x   ..............        1.124860        1.071295
Farm BQL...................................................   =            1,025           1,019           1,056
Producer share.............................................   x            1.000           1.000           1.000
                                                                 -----------------
    Total Payments.........................................   =           $1,025          $1,019          $1,056
----------------------------------------------------------------------------------------------------------------

Farm Example 4

    Example 4 shows the BQL calculation for a single flue-cured 
producer for a farm that had a temporary transfer (disaster) each of 
the years 2002, 2003 and 2004. This farm did not have any under- or 
over-marketings from a previous year.


[[Page 17155]]



                                    Farm Example 4.--Flue-Cured Tobacco Farm
----------------------------------------------------------------------------------------------------------------
                                                                       2002            2003            2004
----------------------------------------------------------------------------------------------------------------
Basic Quota................................................   +            1,000             905             810
Effective Undermarketings (previous year)..................   +                0               0               0
Overmarketings (previous year).............................   -                0               0               0
Effective Quota............................................   =                0               0               0
Disaster Lease to..........................................   -                0               0               0
Disaster Lease from........................................   +            1,000             905             810
TTPP Effective Quota (w/disaster leases)...................   =            1,000             905             810
Actual Marketings..........................................  ...               0               0               0
Overmarketings.............................................  ...               0               0               0
Actual Undermarketings.....................................  ...               0               0               0
Effective Undermarketings..................................  ...               0               0               0
BQL Adjustment Factor......................................   x           1.0000        1.104970        1.234570
Farm BQL...................................................   =            1,000           1,000           1,000
Producer share.............................................   x            1.000           1.000           1.000
                                                                 -----------------
    Total Payments.........................................  ...          $1,000          $1,000          $1,000
----------------------------------------------------------------------------------------------------------------

Farm Example 5

    Example 5 shows the BQL calculation for a single dark air-cured 
producer for a farm that had a temporary transfer to the farm each 
of the years 2002, 2003 and 2004.


                                  Farm Example 5.--Dark Air-Cured Tobacco Farm
----------------------------------------------------------------------------------------------------------------
                                                                       2002            2003            2004
----------------------------------------------------------------------------------------------------------------
Basic Allotment (acres)....................................   +             3.52            3.70            3.81
Temporary Leased to........................................   +             1.00            1.00            1.00
Temporary Leased from......................................   -                0               0               0
Effective Allotment (acres)................................   =             4.52            4.70            4.81
BQL Adjustment Factor......................................   x           1.0000          1.0497         1.23457
Effective Allotment at the 2002 Level......................   =             4.52            4.48            4.45
Farm's 2001-03 Average Yield (lbs./acre)...................   x            3,037           3,037           3,037
TTPP Effective Quota (Farm's Allotment Converted to Pounds)   =           13,727          13,606          13,515
Farm BQL...................................................   =           13,727          13,606          13,515
Producer Share.............................................   x            1.000           1.000           1.000
                                                                 -----------------
    Total Payments.........................................   =          $13,727         $13,606         $13,515
----------------------------------------------------------------------------------------------------------------

Multiple Producers on a Farm

    The 2004 Act provides that when more than one producer shared in 
the risk of producing tobacco on a farm in one or more of the 2002, 
2003, and 2004 crop years, the producer may divide the payment on the 
farm in such manner as is fair and equitable. The producer must divide 
the payment in the same manner as all other CCC farm program payments 
are made by taking into consideration the degree to which a producer 
was at risk in the production of the crop in each of those three years. 
Subject to the preceding adjustment to reflect each producer's share in 
the production of each of the three crop years, a producer who produced 
tobacco in one of those years will receive \1/3\ of the payment 
determined for the producers on the farm; a producer who produced 
tobacco in two of those years will receive \2/3\ of the payment; and a 
producer who produced tobacco in all three years will receive all of 
the payment.

Disputes

    In the event there is a dispute regarding the determination of 
which persons are eligible quota producers on a farm, no payment to a 
quota producer on such farm will be made until all parties have agreed 
or until all administrative appeals have been exhausted.
    Producer share information on the TTPP contract shall be obtained 
from FSA-578 reported shares. Producers may change share percentages; 
however all producers on the farm for the applicable year must agree 
with the division of quota shares, not to exceed 100 percent. If 
producers are unable to agree with the share percentages, no payments 
to a quota producer on such farm will be made until all administrative 
appeals have been exhausted.

Producer Assignments and Successor in Interest Contracts

    Any producer may assign the payment to another party, using the 
correct CCC form, so long as the consideration for the assignment is 
greater than or equal to the discounted value using the discount rate 
established by the CCC, except that special provision will be made for 
assignments between immediate family members, and persons who purchased 
a tobacco marketing quota prior to October 22, 2004 and, in accordance 
with 7 CFR part 723, placed the quota on another person's farm, prior 
to such date, with consent of the owner. The discount rate established 
by CCC will be equal to the prime rate plus two percentage points, 
rounded to the nearest whole number (for .5 and above, the rate will be 
rounded up).
    Any producer may execute a successor in interest contract (except 
that the producer may not execute a successor in interest contract for 
the 2005 TTPP payment) using the correct CCC form, so long as the 
consideration for the successor in interest contract is greater than or 
equal to the discounted value using the discount rate

[[Page 17156]]

established by CCC, except that special provision will be made for 
successor in interest contracts between immediate family members and 
persons who purchased a tobacco marketing quota prior to October 22, 
2004 and, in accordance with 7 CFR part 723, placed the quota on 
another person's farm, prior to such date, with consent of the owner. 
The discount rate established by USDA will be equal to the prime rate 
plus two percentage points, rounded to the nearest whole number (for .5 
and above, round up). In order for a successor in interest contract to 
be effective for the successive year payments, the successor must file 
such contract no later than November 1 for such contract to be 
effective for the following year and successive year payments. In no 
case will CCC approve a successor in interest contract if the producer 
is indebted to any agency of the United States and would be subject to 
the offset of payment provisions of the Debt Collection Improvement Act 
of 1996.

Deadlines

    In summary, this rule contains two important time periods: (1) The 
program enrollment period which begins on March 14, 2005 and ends on 
June 17, 2005; and (2) the 60-calendar-day period from March 30, 2005 
to May 31, 2005, which is the time in which a person not identified in 
FSA records as a tobacco quota holder or tobacco producer on a specific 
farm may submit a written claim under the program.
    Late-filed applications will be accepted. However, if a person 
makes application after June 17, 2005, that person will not receive the 
2005 TTPP payment. For subsequent payments, late-filed applications 
must be filed by November 1 in order to receive payments January of the 
next year. Applicants will not be eligible to receive payments 
otherwise issued in previous years.

Refunds of Importer Assessments

    This final rule also provides for a Subpart C--Miscellaneous 
Provisions, so that CCC may set forth regulations needed in the 
administration of tobacco-related activities. This subpart contains, at 
this time, one provision relating to the manner in which refunds 
relating to assessments paid in the 2004 and prior marketing years by 
importers of flue-cured and burley tobacco may be submitted. CCC has 
allowed refunds to be made under 7 CFR 1464.105. New 7 CFR 1463.201 
provides that CCC will no longer accept requests for refunds after 
August 1, 2005 for flue-cured tobacco and November 1, 2005 for burley 
tobacco. This action is necessitated by the need to terminate the 
operation of the tobacco price support programs and to provide for the 
transfer of flue-cured and burley tobacco pledged as collateral for CCC 
price support loans to cooperative marketing associations as provided 
for in section 641 of the 2004 Act.

Removal of Previous Tobacco Program Regulations

    Effective November 1, 2005, this rule also will remove 7 CFR parts 
723 and 1464, which provide the regulations for the tobacco marketing 
quota and price support programs, because they will no longer be needed 
after the termination of the program, as required by the 2004 Act. 
Removal of the parts is delayed until November 1, 2005 to allow 
completion of program activities.

Clarification of Tobacco Transition Assessment Program Regulations

    This rule makes several clarifications in the regulations governing 
the Tobacco Transition Assessments published February 10, 2005 (70 FR 
7007). The definitions of class of tobacco and market share are revised 
for clarity; Sec.  1463.7(c) is revised regarding the division of class 
assessment to individual entities; and Sec.  1463.8(b) is revised 
regarding the notification of assessments.
    As provided in Sec.  1463.7(a), the amount of a quarterly 
assessment owed by a domestic manufacturer or importer of tobacco 
products that must be remitted to CCC by the end of such quarter is 
based upon the application of the manufacturer's or importer's adjusted 
market share (which is such entity's share of the market in the 
immediately preceding calendar year quarter) to the amount of the 
national assessment that has been allocated to one of the six specified 
tobacco product sectors under Sec.  1463.5. The obligation of the 
manufacturer or importer to make the payment is determined by its 
actions in the quarter immediately preceding the quarter in which the 
payment is due. Accordingly, this amount must be remitted to CCC 
whether or not the manufacturer or importer is engaged in the removal 
of tobacco or tobacco products into commerce in the calendar year 
quarter in which it receives notification of the amount of assessment 
owed at the end of such quarter. Section 1463.7 has been revised by 
adding paragraph (f) to make this provision clearer.

Cost/Benefit Assessment

    The 2004 Act addresses major changes in the market for tobacco and 
the structure of the tobacco industry in general. The 2004 Act repeals 
marketing quotas, acreage allotments and price support loan programs 
for tobacco.
    Largely because of the CCC price support program, domestic tobacco 
is higher-priced than imported tobacco, and to maintain demand the 
domestic market has been isolated from cheaper imports. Over the past 
several years, import restrictions have been reduced and demand for 
domestic tobacco declined in favor of cheaper imports. Thus, to 
maintain a balance between supply and demand, formulas provided in the 
1938 Act reduced the amount of tobacco that could be grown for the 
domestic market. Between 1997 and 2002 there was a 50-percent decline 
in marketing quotas. The continued decline of quotas cast doubt on the 
continued viability of the quota and price support system, and elicited 
nationwide support repeal of the statutory authority for the program 
and for compensation for the lost value of tobacco quotas.
    The number of farms growing tobacco in the United States declined 
from 512,000 in 1954 to 56,977 in 2002. Besides quota reductions, the 
decline in farm numbers resulted from the lease and transfer of quota 
between farms, within counties and across county lines. Also, 
innovation and technology have reduced labor requirements and changed 
the economies of scale for tobacco farming in general.
    CCC is required to dispose of accumulated tobacco loan stocks. Any 
losses associated with such disposition are to be covered through 
assessments against tobacco manufacturers and importers. While the 
total amount of CCC uncommitted stocks cannot be known with certainty 
before the conclusion of the marketing year, uncommitted stocks 
amounted to about 261 million pounds on December 31, 2004. The 2004 Act 
requires that a portion of the loan stocks of each kind of tobacco be 
disposed of by the associations, which have entered into loan 
agreements with the CCC, in an amount determined by dividing their no-
net-cost accounts by the list price of the loan stocks. Any stocks not 
transferred to the associations will be sold by CCC. The total of 
payments to quota owners and producers is about $9.6 billion (discussed 
below), leaving approximately $540 million of the total $10.14 billion 
maximum allowed assessments available to cover CCC losses on loan 
stocks and other eligible expenses. CCC will determine the list price 
of the loan stocks based upon the approved grade loan rate for green 
weight tobacco. Then the amounts in

[[Page 17157]]

the no-net-cost accounts will be divided by this price to determine the 
quantities to distribute to the associations.
    The expected impacts on tobacco quota holders, producers, and 
production as a result of these regulations are pervasive. Elimination 
of the tobacco program leaves remaining producers with no government 
price support for future production. In the absence of price support, 
tobacco producers will be subject to lower prices and increased price 
volatility. Although actual results cannot be determined, it is 
reasonable to assume that credit to finance production may be more 
difficult to obtain, and farmers will be reluctant to produce tobacco 
without written contracts from tobacco manufacturers that, in order to 
mitigate price risk, clearly establish the quantity of tobacco to be 
purchased and the price to be paid. Contract production, already 
representing a large portion of U.S. tobacco production, will likely 
increase. In the short run, tobacco prices should fall and the number 
of producers will decline. Income from quota rental, which was about 
$325 million in the flue-cured producing area in 1997, will be 
altogether eliminated. However, considering that quota values have 
declined in anticipation of additional reductions or program 
elimination, the $7-per-pound rate in the Act is in the range of quota 
values estimated by several research colleges. Payments to quota 
owners, based upon known payment rates and applicable quota levels, are 
estimated at about $6.7 billion.
    Tobacco producers eligible for payments under the 2004 Act are 
estimated to receive about $2.9 billion, based upon the specified 
payment rate and known quota amounts. However, it is possible that, as 
a result of the transition payments, tobacco producers and quota owners 
may not receive the remaining Phase II payments of about $2.6 billion. 
Phase II payments were established in July 1999 in the National Tobacco 
Grower Settlement Trust Agreement, which provided for payments of $5.15 
billion over 12 years to compensate tobacco growers and quota holders 
for reductions in tobacco production and sales resulting from the 
Master Tobacco Settlement reached in November 1998. The Fair and 
Equitable Tobacco Reform Act does not refer to Phase II, and the 
ongoing litigation regarding the agreements does not involve the 
Federal Government. However, the Phase II agreement provides that if 
future agreements provide compensation to producers for quota 
reductions or losses in production, then there is to be a dollar-for-
dollar offset against Phase II payments.
    Producers remaining in tobacco production are likely to experience 
increased efficiencies as a result of the 2004 Act. Removal of location 
restrictions will facilitate consolidation into larger and more 
efficient operations, while quota rents will be eliminated. While 
tobacco prices are expected to fall by 25 percent or more in the short 
run, over the longer term U.S. tobacco production is expected to 
recover from its recent downward trend. With domestically grown tobacco 
becoming available at lower prices, there will be reduced incentives to 
import foreign tobacco and U.S.-origin tobacco will be more competitive 
in the world market. U.S. tobacco prices should begin to recover after 
a few years and those producers remaining in the sector should see U.S. 
tobacco area and production increase well above levels of recent years.
    The impact of the tobacco transition payment program on U.S. 
cigarette consumption is expected to be minimal, but cigarette 
consumption is expected to continue to decline as smokers find it 
increasingly difficult to smoke and more restrictions are imposed on 
places where they can smoke. The transition payments will result in the 
collection of approximately $10.14 billion from tobacco manufacturers 
and importers over a 10-year period, or about $1.014 billion annually. 
Manufacturers and importers are expected to pass these costs on to 
consumers of tobacco products and increase sales prices. Tobacco 
product demand is much more inelastic than supply. The price elasticity 
of demand for cigarettes is between -0.4 and -0.75, meaning that a 1-
percent rise in the price of cigarettes reduces consumption by an 
estimated 0.4 percent to 0.75 percent. The average retail price of 
cigarettes is $3.8066 per pack and a 4.8-cent-per-pack increase in the 
price would equate to a 1.3-percent rise in the retail price. Thus, 
consumers are not expected to reduce consumption of tobacco products 
considerably due to the expected increases in tobacco prices 
attributable to the tobacco transition payments.

Executive Order 12866

    This final rule has been determined to be economically significant 
under Executive Order 12866 and has been reviewed by the Office of 
Management and Budget (OMB). A cost-benefit assessment was completed 
and is summarized above.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because neither the Secretary of Agriculture nor CCC is required by 5 
U.S.C. 553 or any other law to publish a notice of proposed rulemaking 
for the subject matter of this rule.

Environmental Review

    The environmental impacts of this rule have been considered under 
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 
seq., the regulations of the Council on Environmental Quality (40 CFR 
parts 1500-1508), and FSA regulations for compliance with NEPA, 7 CFR 
part 799. An Environmental Evaluation was completed and it was 
determined that the proposed action does not have the potential to 
significantly impact the quality of the human environment and, 
therefore, the rule is categorically excluded from further review under 
NEPA. A copy of the environmental evaluation is available for 
inspection and review upon request.

Executive Order 12778

    This final rule has been reviewed in accordance with Executive 
Order 12778. This final rule preempts State laws that are inconsistent 
with its provisions, but the rule is not retroactive. Before any 
judicial action may be brought concerning this rule, all administrative 
remedies must be exhausted.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires intergovernmental consultation with State and local officials. 
See the notice related to 7 CFR part 3015, subpart V, published at 48 
FR 29115 (June 24, 1983).

Federal Assistance Program

    The title and number of the Federal assistance program as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies, 
are: Commodity Loans and Purchases--10.051.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because neither the Secretary of Agriculture nor 
CCC is required by 5 U.S.C. 553 or any other law to publish a notice of 
proposed rulemaking for the subject matter of this rule. Also, the rule 
imposes no mandates as defined in UMRA.

[[Page 17158]]

Small Business Regulatory Enforcement Fairness Act of 1996

    Section 642(c) of the 2004 Act requires that the Secretary use the 
authority in section 808 of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121 (SBREFA), which allows an 
agency to forgo SBREFA's usual 60-day Congressional Review delay of the 
effective date of a major regulation if the agency finds that there is 
a good cause to do so. Accordingly, this rule is effective upon the 
date of filing for public inspection by the Office of the Federal 
Register.

Paperwork Reduction Act

    Section 642(b) of the 2004 Act requires that these regulations be 
promulgated and the program administered without regard to the 
Paperwork Reduction Act. This means that the information to be 
collected from the public to implement these programs and the burden, 
in time and money, the collection of the information would have on the 
public do not have to be approved by the Office of Management and 
Budget or be subject to the normal requirement for a 60-day public 
comment period.

Government Paperwork Elimination Act

    CCC is committed to compliance with the Government Paperwork 
Elimination Act and the Freedom to E-File Act, which require Government 
agencies in general, and the FSA in particular, to provide the public 
the option of either submitting information or transacting business 
electronically to the maximum extent possible. Because of the need to 
publish the regulations for this program quickly, the forms and other 
information collection activities required by participation in the TTPP 
are not yet fully implemented in a way that would allow the public to 
conduct business with FSA electronically. Accordingly, applications for 
this program may be submitted at the FSA county offices in person, by 
mail, or by facsimile.

List of Subjects

7 CFR Part 723

    Acreage allotments, Cigarettes, Marketing quotas, Penalties, 
Reporting and recordkeeping requirements.

7 CFR Part 1463

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

7 CFR Part 1464

    Loan programs--tobacco, Price support programs--tobacco, Reporting 
and recordkeeping requirements.

0
Accordingly, 7 CFR chapters VII and XIV are amended as follows:

CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

PART 723--[REMOVED]

0
1. Remove 7 CFR part 723.

CHAPTER XIV--COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE

PART 1463--2005-2014--TOBACCO TRANSITION PROGRAM

0
2. The authority citation for part 1463 continues to read as follows:

    Authority: 7 U.S.C. 714b and 714c; and Title VI of Pub. L. 108-
357.

Subpart A--Tobacco Transition Assessments

0
3. In Sec.  1463.3, revise the definitions for class of tobacco and 
market share to read as follows:


Sec.  1463.3  Definitions.

* * * * *
    Class of tobacco means each of the following types of tobacco and 
tobacco products for which taxes are required to be paid for the 
removal of such into domestic commerce: cigarettes; cigars; snuff; 
roll-your-own tobacco; chewing tobacco; and pipe tobacco.
* * * * *
    Market share means the share of each domestic manufacturer and 
importer of a class of tobacco product, to the fourth decimal place, of 
the total volume of domestic sales of the class of tobacco product in 
the base period. Such sales shall be determined by CCC by using the 
total volume of such class of tobacco product that is removed into 
domestic commerce in the base period.
* * * * *

0
4. Amend Sec.  1463.7 by revising paragraphs (b) and (c) and adding 
paragraph (d) to read as follows:


Sec.  1463.7  Division of class assessment to individual entities.

* * * * *
    (b) For purposes of determining the volume of domestic sales of 
each class of tobacco products and for each entity, such sales shall be 
based upon the reports filed by domestic manufacturers and importers of 
tobacco with the Department of Treasury and the Department of Homeland 
Security and shall correspond to the quantity of the tobacco product 
that is removed into domestic commerce by each such entity:
    (1) For cigarettes and cigars, on the number of cigarettes and 
cigars reported on such reports;
    (2) For all other classes of tobacco, on the number of pounds of 
those products.
    (c) In determining the adjusted market share of each manufacturer 
or importer of a class of tobacco products, except for cigars, CCC will 
determine to the fourth decimal place an entity's share of excise taxes 
paid of that class of tobacco product during the immediately prior 
calendar year quarter. With respect to cigars, CCC will determine the 
adjusted market share for each manufacturer or importer of a class of 
tobacco products based on the number of such products removed into 
domestic commerce.
    (d) The amount of a quarterly assessment owed by a domestic 
manufacturer or importer of tobacco products that must be remitted to 
CCC by the end of a calendar year quarter is based upon the application 
of the manufacturer's or importer's adjusted market share to the amount 
of the national assessment that has been allocated to one of the six 
specified tobacco product sectors under Sec.  1463.5. As provided in 
Sec.  1463.3, this adjusted market share is determined by the actions 
of such manufacturer or importer in a prior calendar year quarter. 
Accordingly, this amount must be remitted to CCC whether or not the 
manufacturer or importer is engaged in the removal of tobacco or 
tobacco products into commerce in the calendar year quarter in which it 
receives notification of the amount of assessment owed to CCC.

0
5. Revise Sec.  1463.8(b)(5) and (b)(6) to read as follows:


Sec.  1463.8  Notification of assessments.

* * * * *
    (b) * * *
    (5) The volume of gross sales of each class of tobacco that CCC has 
allocated to the domestic manufacturer or importer of tobacco products 
for the purposes of determining such entity's adjusted market share. 
The volume of gross sales of each class of tobacco allocated to such an 
entity shall correspond to the quantity of the tobacco product that is 
removed into domestic commerce by each such entity;
    (6) The total volume of gross sales of each class of tobacco that 
CCC has allocated to a class of tobacco, within the gross domestic 
volume determined for use in a fiscal year, that was used for the 
purpose of determining a tobacco manufacturer's or tobacco importer's 
adjusted market share. The total volume of gross sales of each such 
class of

[[Page 17159]]

tobacco shall correspond to the total quantity of the tobacco product 
that is removed into domestic commerce.
* * * * *

0
6. Amend part 1463 by adding Subparts B and C, to read as follows:
Subpart B--Tobacco Transition Payment Program
Sec.
1463.100 General.
1463.101 Administration.
1463.102 Definitions.
1463.103 Eligible quota holder.
1463.104 Eligible tobacco producer.
1463.105 Base quota levels for eligible quota holders.
1463.106 Base quota levels for eligible tobacco producers.
1463.107 Payment to eligible quota holders.
1463.108 Payment to eligible tobacco producers.
1463.109 Contracts.
1463.110 Misrepresentation and scheme or device.
1463.111 Offsets and assignments.
1463.112 Successor in interest contracts.
1463.113 Issuance of payments in event of death.
1463.114 Appeals.
Subpart C--Miscellaneous Provisions
1463.201 Refunds of importer assessments.

Subpart B--Tobacco Transition Payment Program


Sec.  1463.100  General.

    (a) The Commodity Credit Corporation (CCC) will make payments to 
tobacco quota holders and tobacco producers as provided in this subpart 
with respect to farms for which a tobacco marketing quota had been 
established by the Farm Service Agency (FSA). To be eligible for a 
payment, such person must meet all provisions of this part; submit to 
CCC an application provided by CCC to enter into a contract for 
payment; and submit other information as may be required by CCC. 
Payments will be made by CCC annually over a 10-year period.
    (b) As provided in this part, a tobacco quota holder or tobacco 
producer who is not the subject of an outstanding claim established by 
the United States may, under the terms and conditions established by 
CCC and with the prior approval of CCC, enter into a successor in 
interest contract with another person or entity. Upon approval by CCC, 
all rights and obligations of the quota holder or producer, with 
respect to payments made by CCC under this part, will be terminated and 
transferred to the successor party.
    (c) As provided in this part, a tobacco quota holder or tobacco 
producer who may, under the terms and conditions established by CCC, 
and with the prior approval of CCC, may assign the right to receive a 
payment to be made under this part by executing an assignment as 
provided in Sec.  1463.111.
    (d) Notwithstanding any other provision of this chapter, the 
provisions of 7 CFR parts 723 and 1464 shall not be applicable to the 
2005 and subsequent crops and the 2005 and subsequent marketing years.


Sec.  1463.101  Administration.

    (a) The program will be administered under the general supervision 
of the Executive Vice President, CCC, and shall be carried out by FSA 
State and county committees (State and county committees).
    (b) State and county committees and their representatives and 
employees have no authority to modify or waive provisions of this 
subpart.
    (c) The State committee shall take any action required by the 
regulations of this subpart that has not been taken by the county 
committee. The State committee shall also:
    (1) Correct, or require a county committee to correct, any action 
taken by such county committee that is not in accordance with this 
subpart; or
    (2) Require a county committee to withhold taking any action that 
is not in accordance with this subpart.
    (d) No provision or delegation herein to a State or county 
committee shall preclude the Executive Vice President, CCC, or 
designee, from determining any question arising under the program or 
from reversing or modifying any determination made by a State or county 
committee. Further, the Executive Vice-President, CCC, or designee, may 
modify any deadline in this subpart to the extent doing so is 
determined to be appropriate and consistent with the purposes of the 
program.
    (e) A representative of CCC may execute a contract for a transition 
payment only under the terms and conditions of this part, and as 
determined and announced by the Executive Vice President, CCC. Any 
contract that is not executed in accordance with such terms and 
conditions, including any purported execution prior to the date 
authorized by the Executive Vice President, CCC, is null and void and 
shall not be considered to be a contract between CCC and any person 
executing the contract.


Sec.  1463.102  Definitions.

    The definitions in this section shall apply for all purposes of 
administering the Tobacco Transition Payment Program (TTPP) authorized 
by this subpart.
    Act means the Fair and Equitable Tobacco Reform Act of 2004.
    Actual marketings means tobacco that was disposed of in raw or 
processed form by voluntary or involuntary sale, barter, or exchange, 
or by gift between living persons.
    Actual undermarketings means the amount by which the effective 
quota is more than the amount of tobacco marketed.
    Assignee means the person designated by a tobacco quota holder or 
tobacco producer on the correct CCC form to receive a payment to be 
made by CCC under this subpart.
    Assignor means the owner of a farm, or a producer on a farm, who 
has been determined by CCC to be eligible for a payment under this 
subpart and who has elected to assign to another person on the correct 
CCC form, the payment to be made by CCC under this subpart.
    Average production yield means, for each kind of tobacco, other 
than burley (type 31) and flue-cured (types 11-14), the average of the 
production of a kind of tobacco in a county, on a per-acre basis, for 
the 2001, 2002, and 2003 crop years. For quota holders only, if no 
records are available to provide the average production of a kind of 
tobacco in a county, the average yield will be the production yield 
established by the National Agricultural Statistical Service of the 
Department of Agriculture (NASS) for the 2002 marketing year for the 
applicable kind of tobacco.
    Basic allotment means the factored allotment plus and minus 
permanent adjustments.
    Basic quota means the factored quota plus permanent adjustments.
    Base Quota Level (BQL) means the payment pounds as determined under 
this subpart.
    Calendar year means the twelve-months from January 1 through 
December 31.
    Claim means any amount of money determined by any Federal agency to 
be owed by a tobacco quota holder or a tobacco producer to the United 
States, or any agency or instrumentality thereof, that has been the 
subject of a completed debt collection activity that is in compliance 
with the Debt Collection Improvement Act of 1996.
    Considered planted means tobacco that was planted but failed to be 
produced as a result of a natural disaster, as determined by CCC.
    Contract means a Tobacco Transition Payment Quota Holder Contract, 
a Tobacco Transition Payment Producer Contract, a Tobacco Transition 
Payment Quota Holder Successor In Interest Contract, or a Tobacco 
Transition

[[Page 17160]]

Payment Producer Successor In Interest Contract.
    Contract payment means a payment made under a contract entered into 
under this subpart.
    Dependent means an offspring child who is under 18 years of age.
    Disaster lease means, as approved by FSA, a written transfer by 
lease under certain natural disaster conditions of flue-cured or burley 
tobacco when the transferring farm has suffered a loss of production 
due to drought, excessive rain, hail, wind, tornado, or other natural 
disasters. A disaster transfer of flue-cured tobacco must have occurred 
after June 30 and on or before November 15. A disaster transfer of 
burley tobacco must have occurred after July 1 and on or before 
February 16 of the following calendar year.
    Effective allotment means the basic farm allotment plus or minus 
temporary adjustments.
    Effective quota means the current year farm marketing quota plus or 
minus any temporary quota adjustments.
    Effective undermarketings means the smaller of the actual 
undermarketings or the sum of the previous year's basic quota plus 
pounds of quota temporarily transferred to the farm for the previous 
year.
    Eligible quota holder means only a person who, as of October 22, 
2004, has either a fee simple interest or life estate interest in the 
farm for which FSA established a farm basic marketing quota for the 
2004 marketing year. An eligible quota holder does not include any 
other person who: claims a lien, security interest or other similar 
equitable interest in the farm or in any personal asset of the owner of 
the farm or a producer on the farm; has a remainder interest or any 
other contingent interest in the farm or in any personal asset of the 
owner of the farm or a producer on the farm; or who may have caused any 
such marketing quota to have been transferred to the farm.
    Eligible tobacco producer means an owner, operator, landlord, 
tenant, or sharecropper who shared in the risk of producing tobacco on 
a farm where tobacco was produced, or considered planted, pursuant to a 
tobacco poundage quota or acreage allotment assigned to the farm for 
the 2002, 2003 or 2004 marketing years and who otherwise meets the 
requirements in Sec.  1463.104.
    Experimental tobacco means tobacco grown by or under the direction 
of a publicly-owned agricultural experiment station for experimental 
purposes.
    Factored allotment means allotment that has been factored to equate 
it to the 2002 basic allotment level.
    Factored quota means quota that has been factored to equate it to 
the 2002 basic quota level.
    Family member means a parent; grandparent or other direct lineal 
ancestor; child or other direct lineal descendent; spouse; or sibling 
of a tobacco quota holder or tobacco producer.
    Farm means a farm as defined in part 718 of this title.
    Fiscal year means the twelve-month period from October 1 through 
September 30.
    Marketing year means, for flue-cured tobacco, the period beginning 
July 1 of the current year and ending June 30 of the following year. 
For kinds of tobacco other than flue-cured, the period beginning 
October 1 of the current year and ending September 30 of the following 
year.
    NASS means the National Agricultural Statistics Service of USDA.
    New farm means a farm for which a basic marketing quota was 
established for the 2003 or 2004 year from the national reserve that is 
set aside for such purposes from the national marketing quota 
established for the applicable year for the kind of tobacco.
    Overmarketings means the pounds by which the pounds marketed exceed 
the effective farm marketing quota.
    Permanent quota adjustments means adjustments made by FSA under 
part 723 of this title for:
    (1) Old farm adjustments from reserve;
    (2) Pounds of quota transferred to the farm from the eminent domain 
pool;
    (3) Pounds of quota transferred to or from the farm by sale; or
    (4) Pounds of forfeited quota.
    Secretary means the Secretary of the United States Department of 
Agriculture.
    Share in the risk of production means having a direct financial 
interest in the successful production of a crop of tobacco through 
ownership of a direct share in the actual proceeds derived from the 
marketing of the crop, which share is conditional upon the success of 
that marketing.
    Successor party means the means the person who has assumed all 
rights and obligations of a quota holder or tobacco producer arising 
under this part by executing a TTPP contract.
    Temporary quota adjustments means adjustments made by FSA under 
part 723 of this title for:
    (1) Effective undermarketings;
    (2) Overmarketings from any prior year;
    (3) Reapportioned quota from quota released from farms in the 
eminent domain pool;
    (4) Quota transferred by lease or by owner, for all kinds of 
tobacco except flue-cured and cigar tobacco; except for flue-cured 
disaster lease;
    (5) Violations of the provisions of part 723 of this title and part 
1464 of this chapter.
    Tobacco means the following kinds of tobacco: Burley tobacco (type 
31); cigar-filler and cigar binder tobacco (types 42, 43, 44, 53, 54, 
and 55); dark air-cured tobacco (types 35 and 36), fire-cured tobacco 
(types 21, 22 and 23); flue-cured tobacco (types 11, 12, 13 and 14); 
and Virginia sun-cured tobacco (type 37).
    TTPP effective quota means effective quota plus or minus temporary 
adjustments because of disaster lease and transfer and before 
adjustment to the 2002 level for establishment of BQL.
    United States includes any agency and instrumentality thereof.


Sec.  1463.103  Eligible quota holder.

    (a) CCC will make a payment under this subpart to a person 
determined by CCC to be an eligible quota holder, as defined in Sec.  
1463.102.
    (b) The wetlands and highly erodible land provisions of part 12 of 
this title, the controlled substance provisions of part 718 of this 
title, and the payment limitation provisions of part 1400 of this 
chapter shall not be applicable to payments made under this part to an 
eligible quota holder.


Sec.  1463.104  Eligible tobacco producer.

    (a) CCC will make a payment under this subpart to a person 
determined by CCC to be an eligible tobacco producer, as defined in 
Sec.  1463.102.
    (b) The wetlands and highly erodible land provisions of part 12 of 
this title and the controlled substance provisions of part 718 of this 
title shall be applicable to payments made under this part to an 
eligible tobacco producer. However, the payment limitation provisions 
of part 1400 of this chapter shall not be applicable to payments made 
under this part to an eligible tobacco producer.
    (c) For purposes of determining if an eligible tobacco producer has 
shared in the risk of producing a crop in the 2002, 2003, or 2004 crop 
years, CCC will consider evidence presented by a producer that 
includes, but is not limited to: written leases; contracts for the 
purchase of tobacco; crop insurance documents; or receipts for the 
purchase of items used in the production of tobacco.


Sec.  1463.105  Base quota levels for eligible quota holders.

    (a) The BQL is determined separately for each kind of tobacco for 
each farm

[[Page 17161]]

for which a 2004 basic marketing year quota was established under part 
723 of this title. Any marketing quota assigned by FSA to a new farm in 
2003 or 2004, other than through transfer from another farm, shall not 
be considered when determining the BQL.
    (b) For burley tobacco quota holders BQL is established according 
to the following table, except as adjusted under paragraph (e) of this 
section:
    (1) Farm BQL. The 2004 basic quota, multiplied by the BQL 
adjustment factor 1.071295. (Note: The factor adjusts the 2004 basic 
quota to the 2002 basic quota level.)
    (2) Quota holder BQL. The farm BQL multiplied by the quota holder's 
ownership share in the farm. (Note: In the case of undivided tract 
ownership, BQL must be distributed among the tract quota holders by the 
tract owners.)
    (c) For flue-cured tobacco quota holders the BQL is established 
according to the following table, except as adjusted under paragraph 
(e) of this section:
    (1) Farm BQL. The 2004 basic quota, multiplied by the BQL 
adjustment factor 1.23457. (Note: The factor adjusts the 2004 basic 
quota to the 2002 level.)
    (2) Quota holder BQL. The farm BQL multiplied by the quota holder's 
ownership share in the farm. (Note: In the case of undivided tract 
ownership, BQL must be distributed among the tract quota holders by the 
tract owner.)
    (d) For quota holders of all other kinds of tobacco the BQL is 
established according to the following table, except as adjusted under 
paragraph (e) of this section:
    (1) Farm BQL. The basic allotment established for the farm in 2002 
multiplied by the county average production yield. The following NASS 
yields are to be used for any county without production:
    (i) Fire-cured (type 21)--1746 lbs.
    (ii) Fire-cured (types 22-23)--2676 lbs.
    (iii) Dark Air-cured (types 35-36)--2475 lbs.
    (iv) Virginia Sun-cured (type 37)--1502 lbs.
    (v) Cigar Filler/Binder (types 42-44, 54, 55)--2230 lbs.
    (2) Quota holder BQL. The farm BQL multiplied by the quota holder's 
ownership share in the farm. (Note: In the case of undivided tract 
ownership, BQL must be distributed among the tract quota holders by the 
tract owner.)
    (e)(1) CCC will divide the BQL for the farm between the parties to 
the agreement as CCC determines to be fair and equitable, taking into 
consideration the proportionate amounts of cropland sold, if:
    (i) On or before October 22, 2004, the owner of a farm had entered 
into an agreement for the sale of all or a portion of a farm for which 
a farm marketing quota was established for the 2004 marketing year; and
    (ii) Such agreement had not been fulfilled or terminated prior to 
that date; and
    (iii) The parties to the agreement are unable to agree to the 
disposition of the contract payment to be made with respect to the 
farm.
    (2) If, on or before October 22, 2004, the owner of a farm had 
entered into an agreement for the permanent transfer of all or a 
portion of a tobacco marketing quota and the transfer had not been 
completed by such date, the owner of the farm to which such quota was 
to be transferred shall be considered to be the owner of the marketing 
quota for the purposes of this subpart. The BQL's for the transferring 
farm and the receiving farm will be adjusted to reflect this transfer.
    (f) Any tobacco marketing quota preserved under part 1410 of this 
chapter as the result of the enrollment of a farm in the Conservation 
Reserve Program shall be included in the determination of the BQL of 
the farm.


Sec.  1463.106  Base quota levels for eligible tobacco producers.

    (a) BQL is determined separately, for each of the years 2002, 2003 
and 2004, for each kind of tobacco and for each farm for which a 2002 
farm marketing quota had been established under part 723 of this title.
    (b) The BQL for producers of burley tobacco is established as 
follows:
    (1) The 2002-crop year BQL for burley producers is the 2002 
effective quota pounds actually marketed, adjusted for disaster lease 
and transfer, and considered-planted undermarketings and 
overmarketings. The BQL is then multiplied by the producer's share in 
the 2002 crop to determine the producer's 2002 BQL. The adjustments for 
disaster lease and transfer and considered-planted undermarketings and 
overmarketings are made as follows:
    (i) Disaster-leased pounds are added to the marketings of the 
transferring farm and deducted from the marketings of the receiving 
farm;
    (ii) Considered-planted pounds are added to the farm's actual 
marketings, and includes only undermarketings that were not part of the 
farm's 2003 effective quota.
    (iii) Pounds actually marketed as overmarketings and sold penalty-
free are added to the farm BQL after the BQL adjustment factor of 
1.12486 has been applied to the overmarketed pounds.
    (2) The 2003-crop year BQL for burley producers is the 2003 
effective quota pounds actually marketed, adjusted for disaster lease 
and transfer and considered-planted undermarketings and overmarketings, 
as follows:
    (i) Disaster leases are added to the marketings of the transferring 
farm and deducted from the marketings of receiving farm.
    (ii) Considered-planted pounds are added to the farm's actual 
marketings, and includes only undermarketings that were not part of the 
farm's 2004 effective quota.
    (iii) Pounds actually marketed as overmarketings and sold penalty-
free are added to the farm BQL after the BQL adjustment factor of 
1.071295 has been applied to the overmarketed pounds.
    (iv) After these adjustments the BQL is calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Subtract all 2002 undermarketings from the 2003
                      marketings, including undermarketings from the
                      parent farm in any special tobacco combinations.
                      Leased pounds are apportioned undermarketing
                      history by dividing the transferring farm's
                      undermarketings by the transferring farm's
                      effective quota, before any temporary transfers,
                      resulting in the percentage of undermarketings
                      that were leased.
2..................  Multiply the 2003 marketings remaining after Step 1
                      times 1.12486 (the 2003-BQL adjustment factor).
3..................  Add the undermarketings that were subtracted in
                      Step 1 to the sum of Step 2 to determine the farm
                      2003 BQL.
4..................  Multiply the sum from Step 3 times the producer's
                      share in the 2003 crop to determine the producer's
                      2003 BQL.
------------------------------------------------------------------------

    (3) The 2004-crop year BQL for burley producers is the 2004 
effective quota before disaster lease and transfer is calculated as 
follows:

[[Page 17162]]



------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Subtract all 2003 undermarketings from the 2004
                      effective quota, including undermarketings from
                      the parent farm in any special tobacco
                      combinations. Leased pounds are apportioned
                      undermarketing history by dividing the
                      transferring farm's undermarketings by the
                      transferring farm's effective quota, before any
                      temporary transfers, resulting in the percentage
                      of undermarketings that were leased.
2..................  Multiply the 2004 effective quota remaining after
                      Step 1 times 1.071295 (the 2004 BQL adjustment
                      factor).
3..................  Multiply the undermarketings that were subtracted
                      in Step 1 times 1.12486 (the 2003 BQL adjustment
                      factor).
4..................  Add the effective quota from Step 2 to the
                      undermarketings in Step 3 to determine the farm
                      2004 BQL.
5..................  Multiply the sum from Step 4 times the producer's
                      share in the 2004 crop to determine the producer's
                      2004 BQL.
------------------------------------------------------------------------

    (c) The BQL for producers of flue-cured tobacco is established by 
year, as follows:
    (1) The 2002-crop year BQL for flue-cured producers is the 
effective 2002 quota actually marketed, adjusted for disaster lease and 
transfer and considered-planted undermarketings and overmarketings. The 
BQL is then multiplied by the producer's share in the 2002 crop to 
determine the producer's 2002 BQL. Adjustments for disaster lease and 
transfer and considered-planted undermarketings and overmarketings are 
calculated as follows:
    (i) Disaster-leased pounds are added to the marketings of the 
transferring farm and deducted from the marketings of the receiving 
farm;
    (ii) Considered-planted pounds are added to the farm's actual 
marketings, and include only undermarketings that were not part of the 
farm's 2003 effective quota.
    (iii) Pounds actually marketed as overmarketings and sold penalty-
free are added to the farm BQL after the BQL adjustment factor of 
1.10497 has been applied to the overmarketed pounds.
    (2) The 2003-crop year BQL for flue-cured producers is the 2003 
effective quota actually marketed, adjusted for disaster lease and 
transfer and considered-planted undermarketings and overmarketings, as 
follows:
    (i) Disaster leases are added to the marketings of the transferring 
farm and deducted from the marketings of the receiving farm.
    (ii) Considered-planted pounds are added to the farm's actual 
marketings, and includes only undermarketings that were in not part of 
the farm's 2004 effective quota.
    (iii) Pounds actually marketed as overmarketings and sold penalty-
free are added to the farm BQL after the BQL adjustment factor of 
1.23457 has been applied to the overmarketed pounds.
    (iv) After these adjustments the BQL is calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Subtract all 2002 undermarketings from the 2003
                      marketings, including undermarketings from the
                      parent farm in any special tobacco combinations.
2..................  Multiply the 2003 marketings remaining after Step 1
                      times 1.10497 (the 2003 BQL adjustment factor).
3..................  Add the undermarketings that were subtracted in
                      Step 1 to the sum of Step 2 to determine the farm
                      2003 BQL.
4..................  Multiply the sum from step 3 times the producer's
                      share in the 2003 crop to determine the producer's
                      2003 BQL.
------------------------------------------------------------------------

    (3) The 2004-crop year BQL for flue-cured producers is the 2004 
effective quota before disaster lease and transfer. The 2004 BQL is 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Subtract all 2003 undermarketings from the 2004
                      effective quota, including undermarketings from
                      the parent farm in any special tobacco
                      combinations.
2..................  Multiply the 2004 effective quota remaining after
                      Step 1 times 1.23457 (the 2004 BQL adjustment
                      factor).
3..................  Multiply the undermarketings that were subtracted
                      in Step 1 times 1.10497 (the 2003 BQL adjustment
                      factor).
4..................  Add the effective quota from Step 2 to the
                      undermarketings in Step 3 to determine the farm
                      2004 BQL.
5..................  Multiply the sum from Step 4 times the producer's
                      share in the 2004 crop to determine the producer's
                      2004 BQL.
------------------------------------------------------------------------

    (d) The BQL for producers of cigar filler and binder tobacco is 
established by years, as follows:
    (1) The 2002-crop year BQL for cigar filler and binder tobaccos is 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2004 farm base pounds total.
2..................  Multiply any 2002 special tobacco combination acres
                      times the 2002-equivalence factor of 1.000.
3..................  Multiply the sum from Step 2 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2002 farm special tobacco combination pounds
                      total.
4..................  Add the sum from Step 1 to the sum from Step 3 to
                      get the 2004 farm BQL total.
5..................  Multiply the sum from Step 4 times the producer's
                      share in the 2002 crop to get the producer 2002
                      BQL.
------------------------------------------------------------------------


[[Page 17163]]

    (2) The 2003-crop year BQL for cigar filler and binder tobaccos is 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2003 farm base pounds total.
2..................  Multiply any 2003 special tobacco combination acres
                      times the 2003 BQL adjustment factor of 0.8929.
3..................  Multiply the sum from Step 2 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2003 farm special tobacco combination pounds
                      total.
4..................  Add the sum from Step 1 to the sum from Step 3 to
                      get the 2003 farm BQL total.
5..................  Multiply the sum from Step 4 times the producer's
                      share in the 2003 crop to get the producer 2003
                      BQL.
------------------------------------------------------------------------

    (3) The 2004-crop year BQL for cigar-filler and binder tobaccos is 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2004 farm base pounds total.
2..................  Multiply any 2004 special tobacco combination acres
                      times the 2004 BQL adjustment factor of 0.9398.
3..................  Multiply the sum from Step 2 times the farm's
                      average yield for 2001, 2002, and 2004 to get the
                      2003 farm special tobacco combination pounds
                      total.
4..................  Add the sum from Step 1 to the sum from Step 3 to
                      get the 2004 farm BQL total.
5..................  Multiply the sum from Step 4 times the producer's
                      share in the 2004 crop to get the producer 2004
                      BQL.
------------------------------------------------------------------------

    (e) The BQL's for producers of all kinds of tobacco other than 
burley, flue-cured and cigar filler and binder, are established by 
year, as follows.
    (1) The 2002-crop year BQL's for these kinds of tobaccos are 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2002 farm base pounds total.
2..................  Multiply any 2002 special tobacco combination acres
                      times the farm's average yield for 2001, 2002, and
                      2003 to get the 2002 special tobacco combinations
                      pounds total.
3..................  Add the sum from Step 1 to the sum from Step 2.
4..................  Multiply any 2002 acres leased to or from the farm
                      times the farm's average yield for 2001, 2002, and
                      2003 to get the 2002 lease pounds total. Then, to
                      the sum from either:
                       (i) Step 3, add pounds leased to the farm to get
                        the farm 2002 BQL total
                       (ii)Step 3, subtract pounds leased from the farm
                        to get the farm 2002 BQL total.
5..................  Multiply the result from Step 4 times the
                      producer's share in the 2002 crop to get the
                      producer 2002 BQL.
------------------------------------------------------------------------

    (2) The 2003-crop year BQL's for these kinds of tobaccos are 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2003 farm base pounds total.
2..................  Multiply any 2003 special tobacco combinations
                      acres times the applicable 2003 BQL adjustment
                      factor:
                       (i) Fire-cured (type 21)--1.0000
                       (ii) Fire-cured (types 22-23)--.980392
                       (iii) Dark Air-cured (35-36)--.952381
                       (iv) Virginia Sun-cured (type 37) 1.0000
3..................  Multiply the sum from Step 2 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2003 farm special tobacco combination pounds
                      total.
4..................  Add the sum from Step 1 to the sum from Step 3.
5..................  Multiply any 2003 acres leased times the applicable
                      2003 BQL adjustment factor:
                       (i) Fire-cured (type 21) 1.0000
                       (ii) Fire-cured (types 22-23)--.980392
                       (iii) Dark Air-cured (35-36)--.952381
                       (iv) Virginia Sun-cured (type 37) 1.0000
6..................  Multiply the sum from Step 5 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2003 lease pounds total.
7..................  To the sum from Step 4 either:
                       (i) Add pounds from Step 6 leased to the farm to
                        get the farm 2003 BQL total
                       (ii) Subtract pounds from Step 6 leased from the
                        farm to get the farm 2003 BQL total.

[[Page 17164]]

 
8..................  Multiply the sum from Step 7 times the producer's
                      share in the 2003 crop to get the producer 2003
                      BQL total.
------------------------------------------------------------------------

    (3) The 2004-crop year BQL's for these kinds of tobaccos are 
calculated as follows:

------------------------------------------------------------------------
        Step                             Calculation
------------------------------------------------------------------------
1..................  Multiply the 2002 farm's basic allotment times the
                      farm's average yield for 2001, 2002, and 2003 to
                      get the 2004 farm base pounds total.
2..................  Multiply any 2004 special tobacco combinations
                      acres times the applicable 2004 BQL adjustment
                      factor:
                       (i) Fire-cured (type 21) 1.0000
                       (ii) Fire-cured (types 22-23)--.951837
                       (iii) Dark Air-cured (35-36)--.94264
                       (iv) Virginia Sun-cured (type 37) 1.0000
3..................  Multiply the sum from Step 2 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2004 farm special tobacco combination pounds
                      total.
4..................  Add the sum from Step 1 to the sum from Step 3.
5..................  Multiply any 2004 acres leased times the applicable
                      2004 BQL adjustment factor:
                       (i) Fire-cured (type 21) 1.0000
                       (ii) Fire-cured (types 22-23)--.951837
                       (iii) Dark Air-cured (35-36)--.92464
                       (iv) Virginia Sun-cured (type 37) 1.0000
6..................  Multiply the sum from Step 5 times the farm's
                      average yield for 2001, 2002, and 2003 to get the
                      2004 lease pounds total.
7..................  To the sum from Step 4 either:
                       (i) Add pounds from Step 6 leased to the farm to
                        get the farm 2004 BQL total
                       (ii) Subtract pounds from Step 6 leased from the
                        farm to get the farm 2004 BQL total.
8..................  Multiply the sum from Step 7 times the producer's
                      share in the 2004 crop to get the producer 2004
                      BQL total.
------------------------------------------------------------------------

Sec.  1463.107  Payment to eligible quota holders.

    (a) The total amount of contract payments that may be made to an 
eligible quota holder shall be the product obtained by multiplying:


$7.00 per pound x the BQL for the quota holder as determined under 
Sec.  1463.105 for each kind of tobacco

    (b) During each of the fiscal years 2005 through 2014, CCC will 
make a payment to each eligible quota holder in an amount equal to 10 
percent of the total amount due under a contract entered into under 
this subpart, except that in the case an application was filed after 
June 17, 2005, the applicant will receive only the TTPP payments that 
have not been made as of the date the contract is approved. However, in 
order for the contract participant to receive the 2005 TTPP payment an 
application to enter into a TTPP contract must be filed no later than 
June 17, 2005. CCC may, in its discretion, extend any deadline set 
forth in this paragraph. However, CCC will make the FY 2005 payment 
between June and September of 2005, and subsequent payments will be 
made in January, to the extent practicable, of each FY.


Sec.  1463.108  Payment to eligible tobacco producers.

    (a) Subject to paragraph (b) of this section, the total amount of 
contract payments that may be made to an eligible tobacco producer 
shall be the product obtained by multiplying:


$3.00 per pound x the BQL for the producer determined under Sec.  
1463.106 for each kind of tobacco

    (b) Payments to an eligible producer shall be equal to:
    (1) For an eligible producer that produced tobacco that was 
marketed or considered by CCC as planted under a marketing quota in all 
of the 2002, 2003, and 2004 marketing years, 100 percent of the rate 
specified in paragraph (a) of this section;
    (2) For an eligible producer that produced tobacco that was 
marketed or considered by CCC as planted under a marketing quota in any 
two of the 2002, 2003, and 2004 marketing years, 2/3 of the rate 
specified in paragraph (a) of this section; and
    (3) For an eligible producer that produced tobacco that was 
marketed, or considered by CCC as planted under a marketing quota in 
any one of the 2002, 2003, and 2004 marketing years, 1/3 of the rate 
specified in paragraph (a) of this section.
    (c) During each of the fiscal years 2005 through 2014, CCC will 
make a payment to each eligible producer in an amount equal to 10 
percent of the total amount due under a contract entered into under 
this subpart except that in the case an application was filed after 
June 17, 2005, the applicant will receive only the TTPP payments that 
have not been made as of the date the contract is approved. However, in 
order for the contract participant to receive the 2005 TTPP payment, an 
application to enter into a TTPP contract must be filed no later than 
June 17, 2005. CCC may, in its discretion, extend any deadline set 
forth in this paragraph. However, CCC will make the FY 2005 payment 
between June and September of 2005, and subsequent payments will be 
made in January, to the extent practical, of each FY.


Sec.  1463.109  Contracts.

    (a) CCC will enter into a contract with eligible tobacco quota 
holders and producers. To the extent a person has filed such a contract 
with CCC, but a final administrative decision has not been made with 
respect to such person's status as an eligible quota holder or tobacco 
producer prior to the final enrollment date, CCC will enter into such a 
contract only upon the issuance of a final determination of eligibility 
and the passing of any deadline for any administrative appeal under 
parts 780 and 11 of this title.
    (b)(1) If contracts or other written claims are provided to CCC by 
June 3, 2005, by two or more persons with respect to the same tobacco 
BQL used to calculate a program payment, CCC will not issue such 
payment until CCC has determined the eligibility status of each 
claimant.

[[Page 17165]]

    (2) If CCC has made a payment to a person after June 3, 2005, a 
person who is not an eligible holder or producer, as identified on FSA 
records, for such farm, or claims to be an eligible tobacco holder or 
producer and submits a contract or other written claim with CCC for the 
same quota used to issue the initial payment, CCC will issue no further 
payments for such farm until CCC has determined the eligibility status 
of each person who has submitted a contract or other written claim for 
such farm and the occurrence of the repayment of the initial payment 
made by CCC.


Sec.  1463.110  Misrepresentation and scheme or device.

    A person must refund all payments received on all contracts entered 
into under this subpart, plus interest as determined in accordance with 
part 1403 of this chapter, and pay to CCC liquidated damages as 
specified in the contract, if CCC determines the person has:
    (a) Erroneously represented any fact affecting a program 
determination made in accordance with this subpart;
    (b) Adopted any scheme or device that tends to defeat the purpose 
of the program; or
    (c) Made any fraudulent representation affecting a program 
determination made in accordance with this subpart.


Sec.  1463.111  Offsets and assignments.

    (a) TTPP payments made to any person under this subpart shall be 
made without regard to questions of title under State law and without 
regard to any claim or lien against the tobacco quota, tobacco 
marketing allotment, or the farm for which a tobacco quota had been 
established under part 723 of this title by any creditor or any other 
person.
    (b) The provisions of part 1404 of this title shall not apply to 
this part.
    (c) A quota holder or tobacco producer who is eligible to receive a 
payment under this part may assign a payment, or a portion thereof, to 
be made under this part to another person using the correct CCC form. 
Such an assignment will become effective upon approval by CCC. In order 
to provide for the orderly issuance of payments under this part, CCC 
may limit, in its sole discretion, the number of assignments that may 
be made with respect to a contract.
    (d)(1) CCC will establish, after consultation with the Department 
of the Treasury, a discount rate that reflects the value of any 
remaining payments due under this part if such payments were to be made 
as a lump sum payment in the current year. Unless there is 
consideration for such contract in an amount equal to or greater than 
the discounted value of the payments, subject to the assignment, based 
on the discount rate established for such payments by CCC, CCC will not 
approve any assignment other than to:
    (i) A family member; or
    (ii) A party who had purchased a tobacco marketing quota prior to 
October 22, 2004 and had placed the quota on a farm with the owner's 
consent prior to that date in the manner that had been prescribed by 
FSA under part 723 of this chapter.
    (2) The discount rate established by CCC will be determined by 
adding 200 basis points to the prime lending rate, as determined by 
CCC. If this sum is a fraction of a number, CCC will round the discount 
rate to the nearest whole number. Rounding of a half percent will be to 
the next higher whole number.
    (e) CCC will issue a payment to an assignee only to the extent and 
amount of payment that CCC would otherwise have issued to the quota 
holder or producer in the absence of the assignment. In accordance with 
part 1403 of this title, any claim owed by the assignor to the United 
States will be deducted from any payment made under this part prior to 
the issuance of the payment to the assignee.
    (f) CCC will report to the Internal Revenue Service any payment 
assigned under this section as income earned by the assignor.


Sec.  1463.112  Successor in interest contracts.

    (a) A quota holder or tobacco producer who is eligible to receive a 
payment under this part, and for whom a claim has not been established 
by the United States, may enter into a successor in interest contract 
with another party using the correct CCC form. Such successor in 
interest contract will become effective upon approval by CCC, and will 
not include the 2005 payment. Only one such successor in interest 
contract may be entered into by a quota holder or tobacco producer with 
respect to a farm for each kind of tobacco.
    (b) Annually, CCC will establish, after consultation with the 
Department of the Treasury, a discount rate that reflects the value of 
any remaining payments due under this part if such payments were to be 
made as a lump sum payment in the current year. This discount rate will 
be determined as provided in Sec.  1463.111(d)(2). Unless there is 
consideration for such contract in an amount equal to or greater than 
the discounted value of the payments, subject to the successor in 
interest or contract, based on the discount rate established for such 
payments by CCC, CCC will not approve any succession in interest 
contract other than to:
    (1) A family member; or
    (2) A party who had purchased a tobacco marketing quota prior to 
October 22, 2004 and had placed the quota on a farm with the owner's 
consent prior to that date in the manner that had been prescribed by 
FSA under part 723 of this chapter.
    (c) CCC will issue a payment, except the 2005 payment, to a 
successor party only if such party is otherwise in compliance with all 
other applicable regulations, which includes for successors to producer 
contracts only the wetlands and highly erodible land provisions of part 
12 of this chapter. In accordance with part 1403 of this title, any 
claim owed by the successor party to the United States will be deducted 
from any payment made under this part prior to the issuance of the 
payment to the successor party.
    (d) CCC will report to the Internal Revenue Service any payment 
made under a successor in interest contract as income earned by the 
successor party.


Sec.  1463.113  Issuance of payments in event of death.

    If a quota holder or tobacco producer who is eligible to receive a 
payment under this subpart dies, the right to receive payments shall be 
transferred to the estate of the quota holder or tobacco producer 
unless such person is survived by a spouse or one or more dependents, 
in which case the right to receive the payments shall be transferred to 
the surviving spouse.


Sec.  1463.114  Appeals.

    A person may obtain reconsideration and review of any adverse 
determination made under this subpart in accordance with the appeal 
regulations found at parts 11 and 780 of this title.

Subpart C--Miscellaneous Provisions


Sec.  1463.201  Refunds of importer assessments.

    Assessments paid on imported flue-cured or burley tobacco under 
sections 106A and 106B of the Agricultural Act of 1949 with respect to 
imports in the 2004 and prior marketing years may be refunded by CCC in 
accordance with the provisions of 7 CFR 1464.105 that were in effect 
prior to March 30, 2005, so long as such request for refunds are filed 
in accordance with such part no later than:
    (a) August 1, 2005 for flue-cured tobacco; and

[[Page 17166]]

    (b) November 1, 2005 for burley tobacco.

PART 1464--[REMOVED]

0
7. Remove part 1464.

    Signed at Washington, DC, March 29, 2005.
James R. Little,
Administrator, Farm Service Agency, and Executive Vice-President, 
Commodity Credit Corporation.
[FR Doc. 05-6455 Filed 3-30-05; 12:10 pm]
BILLING CODE 3410-05-U