[Code of Federal Regulations]
[Title 7, Volume 7]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR723.311]

[Page 148-149]
 
                          TITLE 7--AGRICULTURE
 
                            CHAPTER VII--FARM
                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE
 
PART 723--TOBACCO--Table of Contents
 
 Subpart C--Tobacco Subject to Quota, Exemptions From Quotas, Marketing 
                  Cards, and General Penalty Provisions
 
Sec. 723.311  Lien for penalty; liability of persons who are affiliated with indebted person or who permit the indebted person to use their identification card.

    (a) Lien on tobacco. Until the amount of any marketing quota penalty 
imposed under this part is paid, a lien shall exist in favor of the 
United States for the amount of the penalty on:
    (1) The tobacco with respect to which such penalty is incurred; and
    (2) Any other tobacco subject to marketing quotas in which the 
person liable for payment of the penalty has an interest and which is 
marketed in the same or a subsequent marketing year.
    (b) Lien precedence. The lien, described in paragraph (a) of this 
section, attaches at the time that the penalty is assessed. As to third 
parties, in the event of a lack of actual notice of the lien, then 
notice shall be deemed to occur when:
    (1) In the case of indebted producers, the debt is entered on the 
debt record maintained by the county FSA office of the county in which 
the tobacco was grown;
    (2) In the case of an indebted warehouse operator, the debt is 
entered on the debt record of the State FSA office for the State in 
which the warehouse is located; and
    (3) In the case of an indebted dealer, the debt is entered on the 
debt record of the State FSA office for the State in

[[Page 149]]

which the dealer is required to file reports.
    (c) Availability of list of marketing quota penalty debts. Each 
county and State FSA office shall maintain a list of tobacco marketing 
penalty debts which have been entered on the debt record in their 
office. The list shall be available for examination upon request by any 
interested person.
    (d) Liability for penalty owed by another person. (1) When a penalty 
in excess of $10,000 is incurred under this part by an entity, all 
persons who have a substantial ownership interest in the entity shall be 
jointly and severally liable with the entity for the payment of such 
penalty, unless it is demonstrated to the satisfaction of the Deputy 
Administrator that the violation was inadvertent. Substantial ownership 
interest shall be deemed to be any ownership interest greater than ten 
percent.
    (2) A dealer or warehouse operator who permits an indebted person to 
use such dealer's or warehouse operator's identification card to market 
tobacco shall be liable for the amounts due by the indebted person to 
the United States under this part up to the amount of the value of the 
tobacco so marketed. In addition, unless the Deputy Administrator 
determines otherwise, any persons or person, who as a warehouse operator 
or dealer becomes affiliated with any person who at the time of 
affiliation is indebted under this part to the United States, shall be 
liable for the amount of the debt owed to the United States by the 
person with whom such person or persons become affiliated up to the 
amount of the value of any tobacco which is marketed by such affiliated 
warehouse operator or dealer during the time of the affiliation with the 
indebted person. Affiliation may include any relationship in which the 
parties have a common interest in tobacco, or in an enterprise or entity 
involved in the marketing, processing, or handling of tobacco, or where 
the parties both hold a position of responsibility or ownership in such 
an enterprise or entity, or where there is common ownership of a 
business involved in the transaction. A warehouse operator or dealer may 
also be considered to be affiliated with an indebted person when such 
warehouse operator or dealer is associated with a person who is both:
    (i) An employee or otherwise authorized to buy and sell tobacco for 
such warehouse operator or dealer; and
    (ii) An indebted person or at the time of indebtedness incurred by 
an entity was a substantial owner or an officer of the indebted entity.

Affiliation may also be deemed to occur where parties have traded in 
tobacco under circumstances which indicate that there may be a lack of 
arm's length trading between the parties such as where the parties 
engage in casual or undocumented transactions in significant quantities 
of tobacco, or where the parties have traded in tobacco with each other 
without a movement of the tobacco, or where there is a trading in 
tobacco without documentation of a significant exchange of money, or 
other circumstances which indicate an affiliation. Where questions of 
affiliation arise, it shall be the burden on the parties involved to 
show that trading in such tobacco was conducted in accordance with 
normal trade practices and was not part of a scheme or device to avoid 
payments of sums due the United States or the CCC.
    (e) TMQ lien notation. Upon notification that a TMQ lien has been 
established, the producer marketing card (MQ-76) or dealer 
identification card (MQ-79-2) shall be returned immediately to the 
issuing office for recording the TMQ lien. Failure to immediately return 
the applicable card will result in FSA notifying all registered 
warehouse operators and dealers of the TMQ lien information and of their 
responsibilities for collecting the TMQ lien. The card shall be promptly 
returned to the producer or dealer after it is annotated with the TMQ 
lien.

[57 FR 43581, Sept. 21, 1992]