[Federal Register Volume 63, Number 54 (Friday, March 20, 1998)]
[Rules and Regulations]
[Pages 13481-13482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7171]
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Rules and Regulations
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Federal Register / Vol. 63, No. 54 / Friday, March 20, 1998 / Rules
and Regulations
[[Page 13481]]
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DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Part 6
Dairy Tariff-Rate Import Quota Licensing
AGENCY: Office of the Secretary, USDA.
ACTION: Determination on historical license reductions.
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SUMMARY: The Department of Agriculture has determined that provisions
of the Dairy Tariff-Rate Import Quota Licensing Regulation with respect
to the issuance of reduced historical import licenses based on license
surrenders of more than 50 percent will be suspended, in light of
market conditions, and shall not apply for a period of five years.
DATES: Effective March 20, 1998, 7 CFR 6.25(b)(1)(i) and (b)(1)(ii) are
suspended.
FOR FURTHER INFORMATION CONTACT: Diana Wanamaker, Group Leader, Import
Policies and Programs Division, Foreign Agricultural Service, 1400
Independence Avenue, SW., Stop 1029, Washington, DC 20250-1029 or
telephone (202) 720-2916.
SUPPLEMENTARY INFORMATION:
Determination: The Foreign Agricultural Service (FAS), under a
delegation of authority from the Secretary of Agriculture, 7 CFR 2.43,
has determined pursuant to 7 CFR 6.25(b)(2), to suspend the historical
license reduction provisions of 7 CFR 6.25(b)(1)(i) and 6.25(b)(1)(ii)
for a five-year period, in light of U.S. import market conditions for
cheese. At the end of the five-year suspension, beginning in quota year
2004, if more than 50 percent of a historical license is surrendered in
each of the three prior quota years (i.e., 2001-2003), that license
will be issued in an amount equal to the average amount entered in
those years. Beginning in quota year 2006, if more than 50 percent of a
historical license is surrendered in at least three of the five prior
quota years (i.e., 2001-2005), that license will be issued in an amount
equal to the average amount entered in those years. FAS has determined
that a principal underlying cause of changing U.S. import market
conditions is the European Union's (the EU's) progressive
implementation of its Uruguay Round export subsidy reduction commitment
which, in quota year 1997, began to have a direct impact on trade flows
of EU cheese to the U.S. market resulting in reduced U.S. imports and
increased historical license surrenders. FAS has further determined
that a five-year suspension of the historical license reduction
requirement, until the Uruguay Round export subsidy reductions are
completed in the year 2000, is warranted under Sec. 6.25(b)(2) to allow
time for historical licensees to adjust to changing U.S. import market
conditions.
Backgound
The Dairy Tariff-Rate Import Quota Licensing Regulation at 7 CFR
6.25(b)(2) provides that prior to 1999, the Secretary of Agriculture
may determine that the requirements in Secs. 6.25(b)(1)(i) and
6.25(b)(1)(ii) to reduce permanently the quantity of historical license
based on license surrenders of more than 50 percent in three
consecutive quota years or three out of five quota years, ``shall not
apply in light of market conditions.'' The Department requested public
comments in a notice of proposed rulemaking published on October 15,
1997 (62 FR 53580-81 and 62 FR 55184), on possible options for the
implementation of the historical license reduction requirement,
including possible recision, suspension, or delay of this requirement,
and requested comments on current dairy import market conditions that
should be considered with respect to implementation of Sec. 6.25(b)(2).
Public comments were submitted by 37 entities during the comment period
from October 15, 1997, to November 28, 1997.
Historical License Surrenders and Market Conditions: In 1997,
surrenders of historical licenses for cheese, in which the quantity
surrendered exceeded 50 percent of a license amount, reached 12,302
metric tons; compared to 1,980 metric tons in 1996, and 5,163 metric
tons in 1995. Surrenders of historical licenses for EU cheese accounted
for over 60 percent of 1997 historical license surrenders of 12,302
metric tons. In previous years, historical license surrenders were
based, in part, on supply shortages and currency situations. However,
the 1997 increase in historical license surrenders can be attributed
principally to the EU's implementation of its Uruguay Round commitment
to reduce the quantity of cheese exported under subsidy.
Under Uruguay Round export subsidy disciplines, the EU's export
subsidy ceiling for cheese is scheduled to decrease each fiscal year
(FY) from 426,500 tons in FY 1995 (July-June) to 321,300 tons in FY
2000. The EU administers its export subsidy reduction program by
setting monthly export subsidy allocations equal to prorated amounts of
the annual export subsidy ceiling, and issuing export licenses for
subsidized cheese shipments by destination. In October 1997, to avoid
exceeding its export subsidy limit, the EU adjusted subsidies for
various cheeses and lowered subsidies by 20 percent for cheese exports
destined for the United States. EU subsidy cuts during the 1997 quota
year were sufficient to raise EU prices of various cheeses to levels
that impeded EU cheese sales to U.S. historical licenses. In
particular, prices of EU industrial-grade cheeses rose above U.S.
prices for comparable cheese (i.e., domestic barrel Cheddar cheese),
thereby removing the economic incentive to import. In addition to EU
export subsidy reductions, the 1998 merger of the license allocations
for Austria, Finland, and Sweden into an EU-15 allocation added
approximately 21,000 metric tons of EU historical licenses for cheese.
In view of rapid and significant changes in U.S. import market
conditions for EU cheeses beginning in 1997, FAS has determined that
temporary suspension of the historical license reduction requirement is
justified through the year 2000. The overriding purpose of the five-
year suspension is to provide adequate time for historical licensees of
EU cheeses to adjust to changing market conditions, to find alternative
suppliers of cheese in the EU, and to develop new markets to enable
importers to fully utilize their historical licenses for EU cheese. The
suspension is consistent with the intent of the U.S.-EU Uruguay Round
bilateral
[[Page 13482]]
agreement on maximizing utilization of U.S. licenses for EU cheese.
Summary of Public Comments: Comments, views, and recommendations
were submitted by 32 importers holding historical licenses; three
members of Congress; and two trade associations. Submissions by most
historical licensees stressed that substantial business investments
rely on historical import licenses, and permanent reductions can cause
significant harm to employees, distributors, customers, and the
survival of many businesses. Most historical licensees supported
immediate elimination of the historical license reduction requirement.
Certain other historical licensees supported either: (1) the permanent
reduction and reallocation of historical licenses in order to provide
new entrants and growing businesses a greater opportunity to import
cheese; or (2) postponement of the historical license reduction
requirement to provide time for adjustment to and analysis of changing
market conditions. Comments submitted by the members of Congress and
trade associations favored elimination of the historical license
reduction requirement based on market conditions.
With respect to market conditions, the members of Congress stated
that, under current circumstances, surrenders of historical licenses
result from market conditions beyond an importer's control. Historical
licensees and the trade associations identified the following market
conditions as causes of historical license surrenders: (1) lack of
exportable supply; (2) non-competitive foreign prices (resulting in
some cases from foreign export administration decisions, and currency
fluctuations); (3) low-quality or high-priced foreign products; and (4)
foreign export monopolies which can affect license utilization through
supply and price controls.
Signed at Washington, D.C. on March 13, 1998.
Timothy J. Galvin,
Acting Administrator, Foreign Agricultural Service.
[FR Doc. 98-7171 Filed 3-19-98; 8:45 am]
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