[Federal Register Volume 61, Number 197 (Wednesday, October 9, 1996)]
[Rules and Regulations]
[Pages 53002-53015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25866]
[[Page 53001]]
_______________________________________________________________________
Part III
Department of Agriculture
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
7 CFR Part 6
Dairy Tariff-Rate Import Quota Licensing; Final Rule
Federal Register / Vol. 61, No. 197 / Wednesday, October 9, 1996 /
Rules and Regulations
[[Page 53002]]
DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Part 6
Dairy Tariff-Rate Import Quota Licensing
AGENCY: Office of the Secretary, USDA.
ACTION: Final rule.
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SUMMARY: This final rule supersedes Import Regulation 1, Revision 7,
which governs the administration of the import licensing system for
certain dairy products which are eligible for in-quota tariff rates
established in the Harmonized Tariff Schedule of the United States
resulting from the entry into force of certain provisions in the
Uruguay Round Agreement.
EFFECTIVE DATE: This final rule is effective October 9, 1996.
FOR FURTHER INFORMATION CONTACT: Diana Wanamaker, STOP 1021, U.S.
Department of Agriculture, 1400 Independence Avenue, S.W., Washington,
D.C. 20250-1021, or telephone (202) 720-2916.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule is issued in conformance with Executive Order
12866. It has been determined to be economically significant for the
purposes of E.O. 12866 and, therefore, has been reviewed by the Office
of Management and Budget (OMB).
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this final rule since the Office of the Secretary is not
required by 5 U.S.C. 553 or any other provision of law to publish a
notice of proposed rulemaking with respect to the subject matter of
this rule.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372, which requires intergovernmental consultation with State and
local officials. See notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115 (June 24, 1983).
Environmental Evaluation
It has been determined by an environmental evaluation that this
action will not have a significant impact on the quality of the human
environment. Therefore, neither an Environmental Assessment nor an
Environmental Impact Statement is needed.
Paperwork Reduction Act
In accordance with provisions of the Paperwork Reduction Act of
1995, the Department amended the information collection approved by the
Office of Management and Budget (OMB) under OMB control number 0551-
0001. Since this final rule provides for a substantial revision of the
existing Import Regulation, the current information collection was
amended to support the final rule. The information collection consists
of an application for dairy import licenses, a certification that the
applicant meets the eligibility requirements of Sec. 6.23 and
documentation which supports that certification as required under
Sec. 6.24. The total burden is estimated to be 375 hours. Copies of
this information collection can be obtained from Pamela Hopkins, the
Agency Information Collection Coordinator, at (202) 720-6173.
Executive Order 12778
This final rule has been reviewed under Executive Order 12778. The
provisions of this final rule would have preemptive effect with respect
to any state or local laws, regulations, or policies which conflict
with such provisions or which otherwise impede their full
implementation. The final rule would not have retroactive effect.
Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L.
104-121, 5 U.S.C. 801-808)
Further, a determination has been made that a delay in the
implementation of this rule would be contrary to the public interest
such that the Small Business Regulatory Enforcement Fairness Act of
1996 (Pub. L. 104-121, 5 U.S.C. Secs. 801-808) is not applicable to
this rule. If the effective date for this rule were delayed 60 days,
the reform of the dairy licensing system would be delayed by an entire
year since the rule must be in place prior to the application period
for the next year's licenses.
Background
This final rule revises Import Regulation 1, Revision 7, which
governs the administration of the import licensing system for certain
dairy products which are eligible for in-quota tariff rates proclaimed
in the Harmonized Tariff Schedule of the United States (HTS). In order
to encourage public participation in the rulemaking process, the
Department published an Advance Notice of Proposed Rulemaking (ANPR) in
the Federal Register on June 2, 1994 (59 FR 28495) with a public
comment period which ended on August 2, 1994, and held a public hearing
on March 10, 1995. The Department solicited further comments from the
public in response to the interim rules published in the Federal
Register on January 6, 1995 (60 FR 1989), May 2, 1995 (60 FR 21425),
and September 13, 1995 (60 FR 47453) which made certain modifications
to the existing rule (Revision 7) and implemented Uruguay Round
Agreement commitments for the 1995 and 1996 quota years. Comments
received in response to the ANPR and the Interim Rules as well as
written testimony and briefs submitted to the Department with respect
to the public hearing were addressed in the proposed rule which was
published in the Federal Register on January 18, 1996 (61 FR 1233).
The proposed rule substantially revised the existing rule to
incorporate Uruguay Round Agreement commitments relating to increased
market access for dairy articles; effected changes to the Harmonized
Tariff Schedule of the United States pursuant to Presidential
Proclamation 6763 of December 23, 1994; and reformed the regulatory
process to update, strengthen, and simplify the requirements of the
regulation. USDA encouraged interested persons to submit their
comments, views, and suggestions on the proposed rule during a 60-day
comment period which closed on March 18, 1996.
USDA received comments from 52 entities: two trade associations;
seven representatives of foreign governments; seven Congressional
representatives; three foreign exporting entities; and the remainder,
importers or their legal counsel, nearly all of them participants in
the existing import licensing program. In general, the comments focused
on: strengthened eligibility requirements (Sec. 6.23), particularly the
proposed increase in the license utilization requirement; the uniform
application of provisions with respect to noncompliance with this
requirement and the restriction on sales-in-transit; a broad range of
issues related to allocation of licenses for in-quota quantities of
dairy products; and transfer of license eligibility (Sec. 6.28).
Discussion of Major Comments
In General
A number of comments received argued that the proposed rule
contained requirements that were ``retroactive'' and, therefore, could
not legally be applied. The argument advanced was that USDA would be
establishing eligibility for license, at least in part, on the past
performance of the importers (e.g., the importers' utilization of its
[[Page 53003]]
license in the past), and new performance requirements could not
legally be based on past transactions.
USDA disagrees. The consequences of these provisions occur only in
the future. Further, the import licensing system has always been based,
at least in part, on importer's past performance. The fundamental basis
for historical license is that those eligible for such licenses are
persons who, at some time in the past, were actively engaged in the
business of importing cheese. There is nothing ``retroactive'' about
such an eligibility rule and, equally, nothing retroactive about the
eligibility rules or performance requirements proposed.
Definitions (Sec. 6.21)
In the proposed rule, USDA made a number of changes to the
definitions in the existing regulation to conform to changes proposed
in the operational provisions of the rule. The final rule incorporates
most of these proposed changes with several additional modifications
suggested in comments received from the public. USDA replaced the term
``quota article'' with the term ``article'' to be consistent with the
terminology in the Harmonized Tariff System; added a definition of ``EC
15'' to reflect the recent accession of Finland, Sweden and Austria
into the European Union; revised the definition of ``postmark'' to make
it clear that all U.S. Postal Service deliveries including ``same day''
service, express service and priority mail are included; and deleted
the term ``sales-in-transit'' which became unnecessary when the rules
on limiting use of this practice were deleted from Sec. 6.23 in the
final rule.
USDA decided not to adopt several recommendations made in the
comments. Some commentors suggested that USDA develop special
definitions for the terms ``authorized agent,'' ``any country,'' and
``force majeure.'' USDA sees no need for special definitions for these
terms since the regulation uses the terms as they would ordinarily and
customarily be understood. Special definitions are appropriate only
where a term does not have a commonly understood meaning. One commentor
also suggested that USDA define the term ``Basic Annual Allocation''
(``BAA''); however, because BAA will cease to have any function in the
regulatory scheme after the allocation of 1997 historical licenses,
USDA determined that there is no purpose in developing such a
definition.
Eligibility (Sec. 6.23)
USDA had proposed certain eligibility criteria to ensure that
import licenses would be issued only to bona fide import/distribution
or manufacturing concerns that would use the dairy articles imported in
their own business operations. USDA received numerous comments on this
section of the proposed rule.
In general, most comments received from the dairy industry
supported USDA's proposal to strengthen eligibility requirements. One
commentor, however, suggested that eligibility requirements be made
gradually more stringent rather than all at once. Two commentors
expressed concerns that small businesses might have difficulty in
meeting these more stringent requirements and recommended that USDA
make no changes in this area or even make the eligibility requirements
less stringent. Several comments approved USDA's attempt to impose
uniform eligibility standards for all license types; two comments
suggested that USDA go even further and establish identical eligibility
criteria for both cheese and non-cheese dairy products.
The comments received also contained a variety of other comments
expressing widely divergent views on the eligibility provisions of the
proposed regulation. For example, some comments favored issuing
licenses only to importers and excluding exporters altogether, while
others argued that exporters should be eligible to apply for cheese
licenses as well as non-cheese licenses. One commentor wanted USDA to
exclude historical license holders altogether from eligibility for
nonhistorical licenses and to make nonhistorical licenses renewable in
some unspecified way.
Most commentors expressed misgivings about USDA's proposal to
increase the license utilization requirement from the previous 85
percent to the proposed 90 percent. They were especially concerned that
this more stringent eligibility criterion would apply to applicants for
historical licenses because failure to utilize 90 percent of a license
amount in a single year would effectively result in permanent
ineligibility to apply for that historical license. Commentors
contended that they could lose eligibility not through their own fault,
but because of economic conditions beyond their control such as
fluctuating exchange rates, unavailability of supply or foreign
government policy. These comments appear to have some empirical
support: USDA took note of the increasingly complex international
market situation, and of the fact that average quota utilization rates
had declined from approximately 93 percent during the 1990-94 period to
87 percent during 1995.
On a similar issue, several commentors argued that the proposal to
require 95 percent utilization for conversion of a Revision 8
nonhistorical butter license to a historical license was too stringent
and that the level should be reduced to be in line with utilization
requirements applicable to other dairy products. Several commentors
objected to the provision in the proposed rule that would prohibit
persons who hold such converted historical butter licenses from also
applying for nonhistorical butter licenses.
Other comments with respect to butter licenses varied widely. Two
commentors argued that there should be no historical licenses for
butter. Another proposed that USDA issue historical licenses for butter
in amounts 200 percent of the license amounts utilized during the 1997
and 1998 quota years, although that commentor failed to indicate how
such license increases could be achieved given the limited quantities
available for allocation under the tariff-rate quota.
Several comments were directed to the proposed rule's provisions
governing applicant eligibility based on its status as a manufacturer.
One comment argued that the rules were cumbersome and that USDA would
find them hard to enforce. Two commentors recommended that USDA
eliminate the requirement that a manufacturer be listed in the USDA
publication of Dairy Plants Surveyed and Approved for USDA Grading
Service (``Dairy Plants''). Two comments agreed with the use of ``Dairy
Plants'' listings as a criterion for eligibility, but argued that USDA
should limit eligibility to plants listed in Section I of that
publication, and exclude ``packagers'' listed in Section II. Two
comments suggested that the 75 percent processing requirement be moved
from Sec. 6.27(b) of the proposed rule to section Sec. 6.23 and become
a requirement for establishing eligibility, but did not explain how
applicants could certify as to future behavior.
Ten comments were received on the proposed rule's provisions with
respect to export monopolies. Essentially, the proposed rule relieved
licensees of certain utilization requirements if the licensee must
purchase its dairy articles from an export monopoly. Three comments
argued that the provision discriminated against certain countries and
that there was no evidence that export monopolies disadvantaged license
holders. On the other hand, several comments favored the provision,
stating that it recognized legitimate concerns about the economic power
that
[[Page 53004]]
export monopolies could exercise in the marketplace. Two comments
suggested that the Office of the Trade Representative, rather than
USDA, make the export monopoly determination.
Nearly all comments received discussed the proposed rule's
treatment of ``sales-in-transit.'' Most comments asked that USDA either
remove, or provide exemptions from, the limitations on sales-in-
transit. The comments stressed the commercial advantages of using
sales-in-transit where an importer's requirements are less than a
single container load; for importing higher-valued table cheeses; and
for facilitating just-on-time deliveries. The comments also questioned
whether the restrictions in the regulations would be effective in
addressing suspected license misuse.
Several comments addressed the provisions of the proposed rule with
respect to ``associated'' or ``affiliated'' persons. These provisions
are intended to continue USDA's longstanding policy of ensuring wider
distribution of licenses and of preventing groups of related persons
from controlling unduly large proportions of the lottery licenses for
specific dairy articles (nonhistorical and supplementary licenses under
Revision 7). Because the proposed rule contemplated the conversion of
certain (Revision 7) nonhistorical licenses to historical licenses,
USDA had increased concern about concentration of lottery licenses and
so proposed to further tighten the rules with respect to associated or
affiliated persons. The comments received expressed uncertainty about
the meaning of the ``economic benefits'' test included in the proposed
rule and sought further clarification.
A number of comments were also received with respect to designated
licenses. Several commentors complained that foreign governments were
not meeting notification deadlines for importers. Two commentors
opposed the provisions in the proposed rule that prohibit importers
with designated licenses from also receiving nonhistorical licenses for
the same article. Two foreign governments asked that the proposed rule
be revised to permit them to redesignate importers during a quota year,
a practice that is currently prohibited except where licenses are
surrendered or revoked. Other comments suggested that USDA totally
eliminate designated licenses; limit designation to entities not owned
or controlled by foreign governments; replace designated licenses with
certificates of quota eligibility that could be allocated by the
exporting country; or permit designation with respect to non- cheese
products.
Based on comments received, USDA has incorporated the following
modifications in the final rule:
(1) Importer Eligibility--USDA has made three changes to the
proposed rule. First, USDA will consider entries based on sales-in-
transit or warehouse withdrawal in determining applicant eligibility.
The limitations in the proposed rule on the use of sales-in-transit
have been eliminated. Second, in cases where an importer seeks to
qualify on the basis of at least eight entries of dairy products, the
final rule clarifies that such entries must be made from ``separate''
shipments. Third, for non-cheese dairy product eligibility based on at
least eight entries, the final rule reduces the minimum weight for each
entry from ``not less than 2,000 kilograms'' to ``not less than 450
kilograms'' consistent with the way in which the rule treats entries of
cheese.
(2) Manufacturer Eligibility--The final rule includes an
eligibility criterion in addition to those proposed in
Sec. 6.23(b)(1)(i)(C). Under the final rule, an entity will also be
eligible to apply for a license as a manufacturer if it owns or
operates a plant listed as a ``processor'' of cheese in Section I of
the most current issue of the USDA publication Dairy Plants Surveyed
and Approved for USDA Grading Service.
(3) Certain Butter--The proposed rule provided that a person issued
a nonhistorical license during the 1996 and 1997 quota years would be
eligible to apply for an historical license thereafter if it satisfied
certain criteria, including having utilized at least 95 percent of its
license amount during the previous year. Persons receiving historical
licenses under this provision could not also be issued nonhistorical
licenses.
The final rule makes three changes. First, the quota years upon
which eligibility will be determined have been changed from 1996 and
1997 to 1997 and 1998. This is because the nonhistorical licenses
issued for 1996 are smaller than those that will be issued under the
final rule for 1997 and 1998. Second, the proposed 95 percent
utilization requirement has been reduced in the final rule to 90
percent. Third, the final rule incorporates an exception to the
prohibition on historical license holders also receiving a
nonhistorical license. Under the final rule, if all applicants that do
not hold a converted historical license for butter have been issued a
nonhistorical license and there is still such butter license available,
a holder of a converted historical butter license may be eligible to
receive a nonhistorical license for some or all of that remaining
butter.
(4) Exceptions--Section 6.23(c) of the proposed rule established
certain exceptions, i.e., circumstances under which an applicant would
not be determined eligible to receive a license to import. The final
rule makes four changes to the proposed rule in this respect.
First, the proposed rule would have excluded from license
eligibility a person who failed to enter at least 90 percent of the
amount of an article permitted under a license during the previous
quota year. The final rule reduces the threshold from ``at least 90
percent'' to ``at least 85 percent.'' This is the same threshold that
had been applicable under the existing rule.
Second, the proposed rule contained an exception to an exception,
i.e., it provided that the 90 percent utilization rule (now changed to
85 percent in the final rule) would not apply where the licensee was
dealing with an export monopoly. Under the proposed rule, USDA would
have published a list of countries that operated or permitted export
monopolies and provided an exception where countries on that list were
specified on an import license. USDA has determined, however, that this
is not a sufficiently flexible approach to this problem, particularly
since, in the future, countries that have an export monopoly may
discontinue this practice, or countries currently without an export
monopoly could create one. Therefore, although the final rule maintains
the export monopoly exception, the provision regarding publication of a
list of countries has been deleted. Instead, a licensee may petition
USDA to apply the exception and will be required to provide information
regarding the alleged export monopoly. An ``export monopoly'' means a
privilege vested in one or more persons consisting of the exclusive
right to carry on the exportation of any article of dairy products from
a country to the United States.
Third, the proposed rule would have excluded from license
eligibility a person who during the previous quota year had entered
more than 25 percent of its license amount through sales-in-transit or
warehouse withdrawal. The final rule eliminates this provision and
permits unrestricted use of sales-in-transit or warehouse withdrawal
without affecting license eligibility.
Fourth, the proposed rule provided that certain persons would be
ineligible for a nonhistorical license if they were either affiliated
with or associated with persons who had applied for such a license. The
final rule identifies two
[[Page 53005]]
additional classes of persons who will be deemed ineligible for
nonhistorical licenses: children of an applicant for a nonhistorical
license (who will be considered ``affiliates''); and persons who manage
or are managed by applicants (who will be deemed to be ``associated''
with such applicants).
USDA did not make any changes to the ``economics benefits'' test
incorporated in the proposed rule. USDA's intent, in establishing this
test, is that it apply to regular, joint business relationships where
one licensee consistently purchases primarily for the other's use,
where one licensee manages the other's portfolio, or where imports of
the two licensees are regularly commingled for sale to third parties.
Applications for License (Sec. 6.24)
The final rule changes the application period for the 1997 quota
year to October 10 through October 31. Beginning in the 1998 quota
year, the application period will be September 1 through October 15 of
each quota year. In response to several comments, the final rule has
been revised to simplify certain documentation requirements. An
applicant seeking to establish eligibility as an importer will be
required to submit Customs Forms 7501, but will not be required to
submit commercial invoices or bills of sale showing the applicant as
the owner and the original consignee for the number and level of
entries required under Sec. 6.23. USDA has determined that the
requirement to submit commercial invoices or bills of sale is no longer
necessary because the provision prohibiting consideration of sale-in-
transit entries as a basis for eligibility has been eliminated. In
addition, where the applicant is applying on the basis of at least
eight separate shipments, the applicant will be required to submit (1)
the required Customs or Census forms and commercial invoices where
specified for eight shipments, (2) a certification that the remaining
required documents are on file at its premises, and (3) in the case
where the shipments are imports, a list of the entry numbers, dates of
entry and volumes on those documents; or, in the case where the
shipments are exports, a list of the dates of export and volumes on
those documents.
One comment suggested that Customs Forms 7505 and 3416 be accepted
in lieu of a Customs Form 7501. However, Form 7505 is no longer used
and all entries require a Form 7501, which provides more information
than Form 3461. Requiring Form 7501 for all imports will be simpler and
will ease both the application process and program administration.
Allocation of Licenses (Sec. 6.25)
USDA received a broad range of comments concerning the allocation
of both existing licenses and licenses for the Uruguay Round
quantities. Most commentors agreed that there should be higher minimum
license sizes than provided in the existing rule and a rank-order
lottery for allocating nonhistorical licenses for cheese. USDA has
taken into account the comments received and has modified the proposed
rule as follows:
(1) Historical licenses--Approximately half of the comments
discussed Sec. 6.25(b) which deals with allocation of historical
licenses in 1998 and subsequent years, and revises the existing rule so
that a license that is being consistently underutilized will be
permanently reduced. The proposed rule would have required that a
licensee who surrendered a portion of a license in three consecutive
years, or in at least three of five consecutive years, would thereafter
be issued a license in an amount equal to the average annual quantity
entered during that period. The final rule makes several changes.
First, USDA will permanently reduce the amount of a historical
license only if a licensee surrenders more than 50 percent of a license
over three consecutive years or three out of five years. Second, this
rule will apply only to surrenders beginning with the 1996 quota year.
Third, the final rule provides the Secretary of Agriculture with
discretion not to implement this provision in 1999, when it would first
take effect, if he deems it inappropriate in light of market
conditions.
Under the previous rule, there was no consequence for surrendering
license amounts. Commentors opposed to the provisions that would
permanently reduce the amount of an historical license allege that the
provision would violate the licensee's property rights. However,
licensees do not acquire property rights in historical licenses; a
license is an annual allocation of permission to import under the
tariff-rate quota, and can be modified for public policy reasons. In
light of the small amounts of license available to new entrants or
others who wish to increase imports of a given article, USDA determined
that it was sound public policy to reallocate license amounts that were
consistently not being used. The provision in the final rule should
increase the amount available in the nonhistorical pool while giving
historical license holders a fair opportunity to demonstrate that they
are using their licenses. The amount by which an historical license is
permanently reduced will be transferred to Appendix 2--nonhistorical
licenses. Some commentors were concerned that downturns in foreign
supplies available for export to the United States or proposed
limitation on sales-in-transit would lead to extensive reductions in
historical licenses. However, the final rule, which changes the trigger
level for reduction to surrenders exceeding 50 percent of a license,
should assuage these concerns.
(2) Nonhistorical licenses--Two commentors submitted virtually
identical proposals suggesting that eligible applicants who have no
historical license for a particular dairy article from a particular
country, or have an historical license which is smaller than the
minimum license size for a particular article, should be given priority
in the lottery. Another commentor opposed this proposal. USDA has
determined that this proposal would result in only marginal
improvement, if any, for small license holders. While, in theory, a new
entrant or small license holder might be more likely to receive the
license of its choice if some historical license holders were
eliminated from bidding for that license during the first round, the
actual probability could just as easily decrease. No historical license
holder would be entirely eliminated from the first round, because none
of the licensees hold historical licenses larger than the lottery
minimum for every one of the items in the lottery. Thus holders of one
or several historical licenses larger than the lottery minimum can
simply indicate their preference for other cheese types which they
might otherwise not have chosen.
One commentor suggested USDA immediately increase the size of the
lottery license pool by taking from current historical licensees 50
percent of their license volume. The Department finds no justification
for arbitrarily taking away 50 percent of an historical license under
current circumstances. Under the final rule, the pool of nonhistorical
lottery licenses will instead be gradually increased because of the
impact of higher eligibility and utilization standards on historical
licensees.
Certain commentors objected in principle to a rank-order lottery
system. One preferred continuing the random lottery system, arguing
that it gave importers a better chance to receive greater amounts of
license. Another commentor criticized the use of any lottery system as
impeding long-term commercial relationships and hindering market
development for specialized dairy products. The final rule maintains
[[Page 53006]]
the rank-order lottery system because, although it does not guarantee
continuity of license, it should increase an applicant's odds of
receiving a license for the same article in consecutive years.
A commentor asked whether it will be possible to get a license
which is smaller than the minimum cited in the rule. Sections
6.25(c)(1)(i)(E) and 6.25(c)(1)(ii)(E) of the final rule provide for
such situations.
(3) Designated licenses--The comments submitted on license
allocation were the same as those submitted with respect to eligibility
for a designated license under Sec. 6.23.
Surrender and Reallocation (Sec. 6.26)
The final rule provides that the final date for surrendering
licenses will be October 1 and the application date for reallocation
will be not later than September 15. The proposed rule would have
advanced these dates one month. Five commentors expressed concerns that
the proposed dates were too early given the new requirements of
Revision 8. In addition, the final rule modifies Sec. 6.26(d)(4) to
allow a licensee who has surrendered part of a license to be issued a
reallocated amount for the same article from the same country if all
other licensees applying for a reallocated quantity of that article
have been allocated a license. One commentor proposed that a provision
should be made for new applications from new eligible applicants
immediately following the first round of reallocations. The tight time
frame for license reallocation, just two and a half months before the
end of the quota year, does not permit another application period to
establish eligibility.
Limitations on Use of License (Sec. 6.27)
Numerous comments criticized as vague the provision in the proposed
rule that prohibited use of a license for the benefit of another
person. That provision, Sec. 6.27(a), has been rewritten in the final
rule to be more specific, and states that a licensee shall not obtain
or use a license for speculation, brokering, or offering for sale, or
permit any other person to use the license for profit.
Several commentors questioned the need for the requirement that
manufacturer licensees use a minimum of 75 percent of their licensed
imports in their own processing operations in the United States. This
requirement applies to persons who apply on the basis of being
manufacturers under Sec. 6.23(b)(1)(i)(C), Sec. 6.23(b)(1)(ii)(C), or
Sec. 6.23(b) (3), (4), or (5). The provision for manufacturer
eligibility was introduced in Revision 7, and was intended to give
manufacturers who had no history of imports the opportunity to have
direct access to imported dairy products for use in manufacturing. If a
manufacturer also wishes to participate in the cheese distribution
business in a manner which does not first subject imports under license
to processing as defined in Sec. 6.21, then it can apply for a license
on the basis of imports or exports in the preceding year in accordance
with the criteria established in Sec. 6.23.
Transfer of License (Sec. 6.28)
Six comments recommended that USDA make the provisions of the
proposed rule governing the acquisition and transfer of eligibility
more flexible. Two comments included specific proposals. Based on
comments received, USDA made several technical changes in the final
rule.
Specifically, the final rule provides that after the Licensing
Authority receives written notice of intent to sell or convey, it will
respond within 20 days. The Licensing Authority may require additional
information in order to make a determination. The parties to the sale
or conveyance must demonstrate that the sale or conveyance complies
with the requirements of paragraph Sec. 6.28(a). In addition,
Sec. 6.28(c) and (d) have been combined and redrafted for greater
clarity. Section 6.28(c) provides that USDA will, (1) for purposes of
establishing historical eligibility, deem the person to whom the
business was sold or conveyed to be the person to whom transferred
historical licenses were issued in the preceding year and (2) will
credit entries made by the person who sells or conveys the business to
the person to whom the business is sold or conveyed. The person to whom
the business is sold or conveyed must meet the required utilization
levels to remain eligible in the following year, but will not be held
responsible for pre-sale violations committed by the person who sold or
conveyed the business.
Two comments suggested revising Sec. 6.28 to permit the transfer of
some but not all of the licenses held by a person when it sells one of
the dairy product import businesses it operates. The recommendation is
that USDA permit such a transfer if the business sold had maintained
separate facilities at a separate location from those of the rest of
the seller's businesses for at least three years prior to the proposed
sale. USDA is studying this proposal but will not incorporate the
recommendation into the final rule at this time. USDA could consider
this proposed change as an amendment to the final rule at some future
date.
Use of Licenses (Sec. 6.29)
The final rule also contains a provision that had been
inadvertently left out of the proposed rule. Section 6.29(c)(3) was
added and provides that if an article was placed in a warehouse by a
foreign supplier and then sold to a licensee, the licensee must
present, at time at time of entry, Customs Form 7501 endorsed by the
foreign supplier and the commercial invoice.
Two comments proposed replacing the through-bill-of-lading
requirement with a certificate of origin requirement to allow importers
the flexibility to source products in the most efficient manner. USDA
is currently reviewing this proposal to determine what impact it might
have with respect enforcing the country of origin allocations of the
tariff-rate quotas.
Record Maintenance and Inspection (Sec. 6.30)
One comment argued that a three-year rather than a five-year record
keeping requirement would be more manageable for a small business. The
final rule maintains the proposed five-year requirement which is
standard under other Department regulations. Another commentor proposed
that recordkeeping be limited only to entries of articles under
license. The final rule requires that the records with respect to all
transactions covered by this regulation be retained for five years
subsequent to the end of the quota year in which the purchase, sale, or
transaction occurred. This has been deemed necessary for the
enforcement of this regulation. Failure to maintain documentation would
be a violation of the regulation subject to suspension or debarment
under Sec. 6.31.
Debarment and suspension (Sec. 6.31)
On January 4, 1996, the Department of Agriculture published a final
rule, 61 FR 250, governing nonprocurement debarment and suspension,
which became effective on February 5, 1996, subsequent to the
publication of the Dairy Tariff-Rate Import Quota proposed rule. The
Department's new nonprocurement debarment and suspension regulations
now apply to all persons who have participated, are currently
participating or may reasonably be expected to participate in
transactions under Federal nonprocurement programs and, for the first
time, covers dairy import quota licensing.
The USDA nonprocurement debarment and suspension regulation accords
with Executive Order 12549
[[Page 53007]]
which requires that, to the extent permitted by law, all Executive
departments and agencies participate in a government-wide system for
nonprocurement debarment and suspension. A person who is debarred or
suspended is excluded from all Federal programs and activities.
Debarment or suspension of a person participating in the dairy import
licensing system will have a government-wide effect.
Therefore, Sec. 6.31 ``Suspension or revocation of a license,'' and
Sec. 6.32 ``Administrative appeals'' are deleted from the proposed rule
and a new Sec. 6.31 ``Debarment and suspension'' has been inserted into
the final rule. The new Sec. 6.31 simply refers to the Department's
nonprocurement debarment and suspension regulations at 7 CFR part 3017.
Globalization of Licenses (Sec. 6.32)
Section 6.33 ``Globalization of Licenses'' of the proposed rule has
been revised and renumbered as Sec. 6.32. The final rule, in response
to comments, makes September 1 the final date for requesting a
globalization rather than August 1 as was proposed. One commentor
proposed that all licenses be fully globalized, eliminating the
Licensing Authority's discretion to globalize only a portion thereof.
Two commentors recommended automatic or semi-automatic globalization if
a supplying country has a poor record of filling a TRQ or does not fill
a specific percent of its total TRQ allocation by a specific date.
Another commentor, however, argued that USDA should not globalize any
licenses until after the license surrender and reallocation process has
been completed. This would delay consideration of globalization until
late October. The final rule does not reflect these comments. Most
would be inconsistent with U.S. obligations to consult with and/or seek
the consent of foreign governments regarding requests for
globalization, while the suggestion to globalize in October would not
provide importers sufficient time to seek alternative sources.
License Fee (Sec. 6.33)
Section 6.34 ``License fee'' of the proposed rule has been revised
and renumbered as Sec. 6.33. One commentor was confused about why
Sec. 6.31(a)(1) of the proposed rule provided that a license could be
suspended or revoked for failure to pay a license fee in accordance
with Sec. 6.34, when Sec. 6.34 itself contained an identical provision.
USDA agrees that this was unnecessary and confusing and so Sec. 6.31
has been totally revised, as discussed earlier. There is no longer any
reference to the failure to pay a license fee. Failure to pay a license
fee is dealt with in the new Sec. 6.33 which provides that if a license
fee is not paid by the final payment date, the license will be put on
hold and a warning letter will be issued. If payment is not postmarked
or received within 21 days of the date of the warning letter, the
license will be revoked.
In general, commentors recognized the necessity and fairness of the
fee. Individual commentors argued variously that the fee: was too high;
should be based on the amount of licenses received; should be
eliminated; or should be split into two separate payments, one for the
processing applications and another upon receipt of the license. These
issues were previously addressed in the background section of the
proposed rule. The fee is required by an Office of Management and
Budget Directive and must be based on the cost of services rendered,
not on the size of the license. One comment also requested that the
method of calculating the fee, which was included in Revision 7, be
reinserted in the rule and that the date of the annual Federal Register
Notice be moved back to July 31 as proposed. The method of calculation
of the fee will appear in the Federal Register as in the past. The date
will remain August 31 as its relationship to the application period
remains the same as under Revision 7.
Adjustment of Appendices (Sec. 6.34)
Section 6.35 of the proposed rule--``Adjustment of Appendices'' has
been revised and renumbered as Sec. 6.34. In response to comments,
Appendices 1, 2, and 3 have been combined into a single table for
easier retrieval of information on TRQ allocations. This table will
list the in-quota TRQ quantities in parallel columns by license type
(Appendices 1, 2, and 3) for each dairy article by Additional U.S. Note
number. The table will also show allocations by countries of origin,
where applicable.
A further comment proposed that Sec. 6.34(a) be modified to permit
any reductions in or revocations of historical licenses for any reason
in the 1997 and 1998 quota years be reallocated among other historical
licenses (for that article and supplying country) which are less than
19,000 kilograms in size, rather than moving those amounts to Appendix
2 for the lottery. There will be no reductions of historical licenses
in those years. Any revoked licenses will be transferred to Appendix 2
for nonhistorical licenses which may be applied for by any license
holder.
List of Subjects in 7 CFR Part 6
Agricultural commodities, Cheese, Dairy products, Imports,
Reporting and recordkeeping requirements.
Final Rule
Accordingly, 7 CFR part 6 subpart--Tariff Rate Quotas Secs. 6.20-
6.33 and Appendix 1, Appendix 2, and Appendix 3 thereto, are revised to
read as follows:
Subpart--Dairy Tariff-Rate Import Quota Licensing
Sec.
6.20 Introduction.
6.21 Definitions.
6.22 Requiremtnt for a license.
6.23 Eligibility to apply for a license.
6.24 Application for a license.
6.25 Allocation of licenses.
6.26 Surrender and reallocation.
6.27 Limitations on use of license.
6.28 Transfer of license.
6.29 Use of licenses.
6.30 Record maintenance and inspection.
6.31 Debarment and suspension.
6.32 Globalization of licenses.
6.33 License fee.
6.34 Adjustment of Appendices.
6.35 Miscellaneous.
6.36 Supersedure of Import Regulation 1, Revision 7.
Appendices 1,2, and 3 to Subpart--Dairy Tariff-Rate Import Quota
Licensing.
Subpart--Dairy Tariff-Rate Import Quota Licensing
Authority: Additional U.S. Notes 6, 7, 8, 12, 14, 16-23 and 25
to Chapter 4 and General Note 15 of the Harmonized Tariff Schedule
of the United States (19 U.S.C. 1202), Pub. L. 97-258, 96 Stat.
1051, as amended (31 U.S.C. 9701), and secs. 103 and 404, Pub. L.
103-465, 108 Stat. 4819 (19 U.S.C. 3513 and 3601).
Sec. 6.20 Introduction.
(a) Presidential Proclamation 6763 of December 23, 1994, modified
the Harmonized Tariff Schedule of the United States affecting the
import regime for certain articles of dairy products. The Proclamation
terminated quantitative restrictions that had been imposed pursuant to
section 22 of the Agricultural Adjustment Act of 1933, as amended (7
U.S.C. 624); proclaimed tariff-rate quotas for such articles pursuant
to Pub. L. 103-465; and specified which of such articles may be entered
only by or for the account of a person to whom a license has been
issued by the Secretary of Agriculture.
(b) Effective January 1, 1995, the prior regime of absolute quotas
for certain dairy products was replaced by a system of tariff-rate
quotas. The articles subject to licensing under the new tariff-rate
quotas are listed in Appendices 1, 2, and 3 of this subpart. Licenses
will be issued pursuant to the provisions of this
[[Page 53008]]
subpart for the 1997 and subsequent quota years. These licenses will
permit the holder to import specified quantities of the subject
articles into the United States at the applicable in-quota rate of
duty. If an importer has no license for an article subject to a tariff-
rate quota, such importer will, with certain exceptions, be required to
pay the applicable over-quota rate of duty.
(c) The Secretary of Agriculture has determined that this subpart
will, to the fullest extent practicable, result in fair and equitable
allocation of the right to import articles subject to such tariff-rate
quotas. The subpart will also maximize utilization of the tariff-rate
quotas for such articles, taking due account of any special factors
which may have affected or maybe affecting the trade in the articles
concerned.
Sec. 6.21 Definitions.
As used in this subpart and the Appendices thereto, the following
terms mean:
``Article''--One of the products listed in Appendices 1, 2, or 3
which are the same as those described in Additional U.S. Notes 6, 7, 8,
12, 14, 16-23 and 25 to Chapter 4 of the Harmonized Tariff Schedule.
``Customs''--The United States Customs Service.
``Country''--Country of origin as determined in accordance with
Customs rules and regulations, except that ``EC 12'', ``EC 15'', and
``Other countries'' shall each be treated as a country.
``Cheese or cheese products''--Articles in headings 0406,
1901.90.34, and 1901.90.36 of the Harmonized Tariff Schedule.
``Commercial entry''--Any entry except those made by or for the
account of the United States Government or for a foreign government,
for the personal use of the importer or for sampling, taking orders,
research, or the testing of equipment.
``Dairy products''--Articles in headings 0401 through 0406,
margarine cheese listed under headings 1901.90.34 and 1901.90.36, ice
cream listed under heading 2105, and casein listed under heading 3501
of the Harmonized Tariff Schedule.
``Department''--The United States Department of Agriculture.
``EC 12''--Belgium, Denmark, the Federal Republic of Germany,
France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
Spain, and the United Kingdom.
``EC 15''--Austria, Belgium, Denmark, the Federal Republic of
Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden and the United Kingdom.
``Enter'' or ``Entry''--To make or making entry for consumption, or
withdrawal from warehouse for consumption in accordance with Customs
regulations and procedures.
``Harmonized Tariff Schedule'' or ``HTS''--The Harmonized Tariff
Schedule of the United States.
``Licensee''--A person to whom a license has been issued under this
subpart.
``Licensing Authority''--The Dairy Import Quota Manager, Import
Policies and Programs Division, Foreign Agricultural Service, U.S.
Department of Agriculture.
``Other countries''--Countries not listed by name as having
separate tariff-rate quota allocations for an article in the Additional
U.S. Notes to Chapter 4 of the Harmonized Tariff Schedule.
``Person''--An individual, firm, corporation, partnership,
association, trust, estate or other legal entity.
``Postmark''--The postage cancellation mark or date applied by the
United States Postal Service. This does not include the date on metered
postage affixed by the applicant, or on mail delivered by private
entities.
``Process'' or ``Processing''--Any additional preparation of a
dairy product, such as melting, grating, shredding, cutting and
wrapping, or blending with any additional ingredient.
``Quota year''--The 12-month period beginning on January 1 of a
given year.
``Tariff-rate quota amount'' or ``TRQ amount''--The amount of an
article subject to the applicable in-quota rate of duty established
under a tariff-rate quota.
``United States''--The customs territory of the United States,
which is limited to the 50 states, the District of Columbia, and Puerto
Rico.
Sec. 6.22 Requirement for a license.
(a) General rule. A person who seeks to enter, or cause to be
entered, an article shall obtain a license, in accordance with this
subpart, except as provided in paragraph (b).
(b) Exceptions. Licenses are not required if:
(1) The article is imported by or for the account of any agency of
the U.S. Government;
(2) The article is imported for the personal use of the importer,
provided that the net weight does not exceed five kilograms in any one
shipment;
(3) The article imported will not enter the commerce of the United
States and is imported as a sample for taking orders, for exhibition,
for display or sampling at a trade fair, for research, for testing of
equipment; or for use by embassies of foreign governments. Written
approval of the Licensing Authority shall be obtained prior to entry,
and the importer of record (or a broker or agent acting on its behalf)
shall provide to the Licensing Authority, prior to the release of such
articles, the appropriate Customs documentation identifying the
article, quantity to be imported, its location, intended use, an entry
number and the importer of record. The Licensing Authority may also
require as a condition of import that the article be destroyed or re-
exported after such use; or
(4) Such person pays the applicable over-quota rate of duty.
Sec. 6.23 Eligibility to apply for a license.
(a) In general. To apply for any license, a person shall have:
(1) a business office, and be doing business, in the United States,
and
(2) an agent in the United States for service of process.
(b) Eligibility for the 1997 and subsequent quota years.
(1) Historical licenses (Appendix 1). Any person issued a
historical or nonhistorical license for the 1996 quota year for an
article may apply for a historical license (Appendix 1) for the same
article from the same country for the 1997 and subsequent quota years,
if such person was, during the 12-month period ending August 31 prior
to the quota year, either:
(i) where the article is cheese or cheese product,
(A) the owner of and importer of record for at least three separate
commercial entries of cheese or cheese products totaling not less than
57,000 kilograms net weight, each of the three entries not less than
2,000 kilograms net weight,
(B) the owner of and importer of record for at least eight separate
commercial entries of cheese or cheese products, from at least eight
separate shipments, totaling not less than 19,000 kilograms net weight,
each of the eight entries not less than 450 kilograms net weight, with
a minimum of two entries in each of at least three quarters during that
period; or
(C) the owner or operator of a plant listed in Section II or listed
in Section I as a processor of cheese of the most current issue of
``Dairy Plants Surveyed and Approved for USDA Grading Service'' and had
processed or packaged at least 450,000 kilograms of cheese or cheese
products in its own plant in the United States; or
(ii) where the article is not cheese or cheese product,
[[Page 53009]]
(A) the owner of and importer of record for at least three separate
commercial entries of dairy products totaling not less than 57,000
kilograms net weight, each of the three entries not less than 2,000
kilograms net weight;
(B) the owner of and importer of record for at least eight separate
commercial entries of dairy products, from at least eight separate
shipments, totaling not less than 19,000 kilograms net weight, each of
the eight entries not less than 450 kilograms net weight, with a
minimum of two entries in each of at least three quarters during that
period;
(C) the owner or operator of a plant listed in the most current
issue of ``Dairy Plants Surveyed and Approved for USDA Grading
Service'' and had manufactured, processed or packaged at least 450,000
kilograms of dairy products in its own plant in the United States; or
(D) the exporter of dairy products in the quantities and number of
shipments required under (A) or (B) above.
(2) Certain butter. A person issued a nonhistorical license for
butter for the 1997 or 1998 quota year may annually apply for a
historical license (Appendix 1) for the same quantity of butter for the
subsequent quota year and each year thereafter, provided that such
person has used at least 90 percent of the original license issued for
the previous quota year and meets the requirements of paragraph
(b)(1)(ii). However, if a person is issued a historical license
pursuant to this paragraph, that person may not be issued a
nonhistorical license for butter for any quota year in which that
historical license is issued to that person, unless applicants who do
not hold such a license have all been issued such a nonhistorical
license.
(3) Nonhistorical licenses for cheese or cheese products (Appendix
2). A person may annually apply for a nonhistorical license for cheese
or cheese products (Appendix 2) for the 1997 quota year and each quota
year thereafter if such person meets the requirements of paragraph
(b)(1)(i) of this section.
(4) Nonhistorical licenses for articles other than cheese or cheese
products (Appendix 2). A person may annually apply for a nonhistorical
license for articles other than cheese or cheese products (Appendix 2)
for the 1997 quota year and each quota year thereafter if such person
meets the requirements of paragraph (b)(1)(ii).
(5) Designated license (Appendix 3). A person may annually apply
for a designated license (Appendix 3) for the 1997 quota year and for
each quota year thereafter, provided that such person meets the
requirements of paragraph (b)(1)(i), of this section and provided
further that the government of the country has designated such person
for such license. The designating country shall submit its selection of
designated importers in writing directly to the Licensing Authority not
later than October 31 prior to the beginning of the quota year.
(c) Exceptions.
(1) A licensee that fails in a quota year to enter at least 85
percent of the amount of an article permitted under a license, shall
not be eligible to receive a license for the same article from the same
country for the next quota year. For the purpose of this paragraph, the
amount of an article permitted under the license will exclude any
amounts surrendered pursuant to Sec. 6.26(a), but will include any
additional allocations received pursuant to Sec. 6.26(b).
(2) Paragraph (c)(1) of this section will not apply where the
licensee demonstrates to the satisfaction of the Licensing Authority
that the failure resulted from breach by a carrier of its contract of
carriage, breach by a supplier of its contract to supply the article,
act of God or force majeure.
(3) Paragraph (c)(1) of this section may not apply in the case of
historical or nonhistorical licenses, where the licensee demonstrates
to the satisfaction of the Licensing Authority that the country
specified on the license maintains or permits an export monopoly to
control the dairy articles concerned and the licensee petitions the
Licensing Authority to waive this requirement. The licensee shall
submit evidence that the country maintains an export monopoly as
defined in this paragraph. For the purposes of this paragraph ``export
monopoly'' means a privilege vested in one or more persons consisting
of the exclusive right to carry on the exportation of any article of
dairy products from a country to the United States.
(4) The Licensing Authority will not issue a nonhistorical license
(Appendix 2) for an article from a country during a quota year to an
applicant who is affiliated with another applicant to whom the
Licensing Authority is issuing a non-historical license for the same
article from the same country for that quota year. Further, the
Licensing Authority will not issue a nonhistorical license for butter
to an applicant who is affiliated with another applicant to whom the
Licensing Authority is issuing a historical butter license of 57,000
kilograms or greater. For the purpose of this paragraph, an applicant
will be deemed affiliated with another applicant if:
(i) the applicant is the spouse, brother, sister, parent, child or
grandchild of such other applicant;
(ii) the applicant is the spouse, brother, sister, parent, child or
grandchild of an individual who owns or controls such other applicant;
(iii) the applicant is owned or controlled by the spouse, brother,
sister, parent, child or grandchild of an individual who owns or
controls such other applicant.
(iv) both applicants are 5 percent or more owned or directly or
indirectly controlled, by the same person;
(v) the applicant, or a person who owns or controls the applicant,
benefits from a trust that controls such other applicant.
(5) The Licensing Authority will not issue a nonhistorical license
(Appendix 2) for an article from a country during a quota year to an
applicant who is associated with another applicant to whom the
Licensing Authority is issuing a nonhistorical license for the same
article from the same country for that quota year. Further, the
Licensing Authority will not issue a nonhistorical license for butter
to an applicant who is associated with another applicant to whom the
Licensing Authority is issuing a historical butter license for 57,000
kilograms or greater. For the purpose of this paragraph, an applicant
will be deemed associated with another applicant if:
(i) the applicant is an employee of, or is controlled by an
employee of, such other applicant;
(ii) the applicant manages or is managed by such other applicant,
or economically benefits, directly or indirectly, from the use of the
license issued to such other applicant.
(6) The Licensing Authority will not issue a nonhistorical license
for an article from a country, for which the applicant receives a
designated license.
Sec. 6.24 Application for a license.
(a) Application for license shall be made on forms provided by the
Licensing Authority and shall be duly notarized and mailed in
accordance with Sec. 6.35(b). All parts of the application shall be
completed. For the 1997 quota year, applications should be postmarked
no earlier than October 10 and no later than October 31. For the 1998
and subsequent quota years, the application shall be postmarked no
earlier than September 1 and no later than October 15 of the year
preceding that for which license application is made. The Licensing
Authority will not accept incomplete or unpostmarked applications.
[[Page 53010]]
(b)(1) Where the applicant seeks to establish eligibility on the
basis of imports, applications shall include Customs Form 7501 showing
the applicant as the importer of record of entries required under
Sec. 6.23, during the 12-month period ending August 31 prior to the
quota year for which license is being sought.
(2) Where the applicant seeks to establish eligibility on the basis
of exports, applications shall include:
(i) Census Form 7525 or a copy of the electronic submission of such
form, and
(ii) The commercial invoice or bill of sale for the quantities and
number of export shipments required under Sec. 6.23, during the 12-
month period ending August 31 prior to the quota year for which license
is being sought.
(c) However, if the applicant is applying on the basis of more than
eight shipments, the application shall include:
(1) the required documentary evidence for eight shipments;
(2) a signed certification that the remaining required documents
are on file at the applicant's premises; and
(3)(i) if the application is made on the basis of imports, a
listing of the entry numbers, dates of entry and volumes on those
remaining documents; or
(ii) if the application is made on the basis of exports, a listing
of the dates of export and volumes on those documents.
(d) An applicant requesting more than one nonhistorical license
must rank order these requests by the applicable Additional U.S. Note
number. Cheese and cheese products must be ranked separately from dairy
articles which are not cheese or cheese products.
Sec. 6.25 Allocation of licenses.
(a) Historical licenses for the 1997 quota year (Appendix 1).
(1) A person issued a historical license for the 1996 quota year
will be issued a historical license for the 1997 quota year in an
amount equal to the Basic Annual Allocation level used by the Licensing
Authority for the 1996 quota year provided that such person meets the
requirements of Sec. 6.23(b)(1) and Sec. 6.23(c).
(2) A person issued a nonhistorical license for the 1996 quota year
will be issued a historical license for the 1997 quota year for the
same quantity as the license for the 1996 quota year, provided that
such person meets the requirements of Sec. 6.23.
(3) If a person was issued more than one historical license, or one
or more historical licenses and a nonhistorical license, for the same
article from the same country for the 1996 quota year, such person will
be issued a single historical license for the 1997 quota year, the
amount of which shall be determined in accordance with paragraphs, (a)
(1) and (2) of this section.
(b) Historical licenses for the 1998 and subsequent quota years
(Appendix 1).
(1) A person issued a historical license for the 1997 quota year
will be issued a historical license in the same amount for the same
article from the same country for the 1998 quota year and for each
subsequent quota year except that:
(i) beginning with the 1999 quota year, a person who has
surrendered more than 50 percent of such historical license in each of
the prior three quota years will thereafter be issued a license in an
amount equal to the average annual quantity entered during those three
quota years; and
(ii) beginning with the quota year 2001, a person who has
surrendered more than 50 percent of such historical license in at least
three of the prior five quota years will thereafter be issued a license
in an amount equal to the average annual quantity entered during those
five quota years.
(2) However, prior to the beginning of the 1999 quota year, the
Secretary of Agriculture may determine that the exceptions in
paragraphs (b)(1) (i) and (ii) of this section shall not apply in light
of market conditions.
(c) Nonhistorical licenses (Appendix 2). The Licensing Authority
will allocate nonhistorical licenses on the basis of a rank-order
lottery system, which will operate as follows:
(1) The minimum license size shall be:
(i) Where the article is cheese or cheese product:
(A) the total amount available for nonhistorical license where such
amount is less than 9,500 kilograms;
(B) 9,500 kilograms where the total amount available for
nonhistorical license is between 9,500 kilograms and 500,000 kilograms,
inclusive;
(C) 19,000 kilograms where the total amount available for
nonhistorical license is between 500,001 kilograms and 1,000,000
kilograms, inclusive;
(D) 38,000 kilograms where the total amount available for
nonhistorical license is greater than 1,000,000 kilograms; or
(E) an amount less than the minimum license size established in
paragraphs (c)(1)(i) (A) through (D) of this section, if requested by
the licensee;
(ii) Where the article is not cheese or cheese product:
(A) the total amount available for nonhistorical license where such
amount is less than 19,000 kilograms;
(B) 19,000 kilograms where the total amount available for
nonhistorical license is between 19,000 kilograms and 550,000
kilograms, inclusive;
(C) 38,000 kilograms where the total amount available for
nonhistorical license is between 550,001 kilograms and 1,000,000
kilograms, inclusive; and
(D) 57,000 kilograms where the total amount available for
nonhistorical license is greater than 1,000,000 kilograms;
(E) an amount less than the minimum license sizes established in
paragraphs (c)(1)(i) (A) through (D) of this section, if requested by
the licensee.
(2) Taking into account the order of preference expressed by each
applicant, as required by Sec. 6.24(c), the Licensing Authority will
allocate licenses for an article from a country by a series of random
draws. A license of minimum size will be issued to each applicant in
the order established by such draws until the total amount of such
article in Appendix 2 has been allocated. An applicant that receives a
license for an article will be removed from the pool for subsequent
draws until every applicant has been allocated at least one license,
provided that the licenses for which they applied are not already fully
allocated. Any amount remaining after the random draws which is less
than the applicable minimum license size may, at the discretion of the
Licensing Authority, be prorated equally among the licenses awarded for
that article.
(d) Designated licenses (Appendix 3).
(1) With respect to an article listed in Appendix 3, the government
of the applicable country may, not later than October 31 prior to the
beginning of a quota year, submit directly and in writing to the
Licensing Authority:
(i) the names and addresses of the importers that it is designating
to receive licenses; and
(ii) the amount, in percentage terms, of such article for which
each such importer is being designated. Where quantities for
designation result from both Tokyo Round concessions and Uruguay Round
concessions, the designations should be made in terms of each.
(2) To the extent practicable, the Licensing Authority will issue
designated licenses to those importers, and in those amounts, indicated
by the government of the applicable country, provided that the importer
designated meets the eligibility requirements set forth in Sec. 6.23.
Consistent with the international obligations of the United States, the
Licensing Authority may
[[Page 53011]]
disregard a designation if the Licensing Authority determines that the
person designated is not eligible for any of the reasons set forth in
Sec. 6.23(c) (1) or (2).
(3) If a government of a country which negotiated in the Uruguay
Round for the right to designate importers has not done so, but
determines to designate importers for the next quota year, it shall
indicate its intention to do so directly and in writing to the
Licensing Authority not later than July 1 prior to the beginning of
such next quota year. Furthermore, if a government that has designated
importers for a quota year determines that it will not continue to
designate importers for the next quota year, it shall so indicate
directly and in writing to the Licensing Authority, not later than July
1 prior to such next quota year.
Sec. 6.26 Surrender and reallocation.
(a) If a licensee determines that it will not enter the entire
amount of an article permitted under its license, such licensee shall
surrender its license right to enter the amount that it does not intend
to enter. Surrender shall be made to the Licensing Authority in
writing, mailed in accordance with Sec. 6.35(b) and postmarked no later
than October 1. Any surrender shall be final and shall be only for that
quota year, except as provided in Sec. 6.25(b). The amount of the
license not surrendered shall be subject to the license use
requirements of Sec. 6.23(c)(1).
(b) For each quota year, the Licensing Authority will, to the
extent practicable, reallocate any amounts surrendered.
(c) Any person who has been issued a license for a quota year may
apply to receive additional license, or addition to an existing license
for a portion of the amount being reallocated. The application shall be
submitted to the Licensing Authority by mail postmarked no earlier than
September 1 and not later than September 15, in accordance with
Sec. 6.35(b), and shall specify:
(1) The name and control number of the applicant;
(2) The article and country being requested, the applicable
Additional U.S. Note number and, if more than one article is requested,
a rank-order by Additional U.S. Note number; and
(3) If applicable, the number of the license issued to the
applicant for that quota year permitting entry of the same article from
the same country.
(d) The Licensing Authority will reallocate surrendered amounts
among applicants as follows:
(1) The minimum license size, or addition to an existing license,
will be the total amount of the article from a country surrendered, or
10,000 kilograms, whichever is less;
(2) Minimum size licenses, or additions to an existing license,
will be allocated among applicants requesting articles on the basis of
the rank-order lottery system described in Sec. 6.25(c);
(3) If there is any amount of an article from a country left after
minimum size licenses have been issued, the Licensing Authority may
allocate the remainder in any manner it determines equitable among
applicants who have requested that article; and
(4) No amount will be reallocated to a licensee who has surrendered
a portion of its license for the same article from the same country
during that quota year unless all other licensees applying for a
reallocated quantity have been allocated a license;
(e) However, if the government of an exporting country chooses to
designate eligible importers for surrendered amounts under Appendix 3,
the Licensing Authority shall issue the licenses in accordance with
Sec. 6.25(d)(2), provided that the government of the exporting country
notifies the Licensing Authority of its designations no later than
September 1. Such notification shall contain the names and addresses of
the importers that it is designating and the amount in percentage terms
of such article for which each importer is being designated. In such
case the requirements of paragraph (c) of this section shall not apply.
(f) Except for paragraph (a), the provisions of Sec. 6.26 for
surrendered and reallocated tariff-rate quota shares do not apply for
the 1996 quota year. Reissued tariff-rate quota shares for licenses
surrendered during 1996 will be made pursuant to the provisions in
effect for the 1996 quota year (Sec. 6.26(f)(2) as contained in 7 CFR
subtitle A, revised as of January 1, 1996).
Sec. 6.27 Limitations on use of license.
(a) A licensee shall not obtain or use a license for speculation,
brokering, or offering for sale, or permit any other person to use the
license for profit.
(b) A licensee who is eligible as a manufacturer or processor,
pursuant to Sec. 6.23, shall process at least 75 percent of its
licensed imports in such person's own facilities and maintain the
records necessary to so substantiate.
Sec. 6.28 Transfer of license.
(a) If a licensee sells or conveys its business involving articles
covered by this subpart to another person, including the complete
transfer of the attendant assets, the Licensing Authority will transfer
to such other person the historical, nonhistorical or designated
license issued for that quota year. Such sale or conveyance must be
unconditional, except that it may be in escrow with the sole condition
for return of escrow being that the Licensing Authority determines that
such sale does not meet the requirements of this paragraph.
(b) The parties seeking transfer of license shall give written
notice to the Licensing Authority of the intended sale or conveyance
described in paragraph (a) by mail as required in Sec. 6.35(b). The
notice must be received by the Licensing Authority at least 20 working
days prior to the intended consummation of the sale or conveyance. Such
written notice shall include copies of the documents of sale or
conveyance. The Licensing Authority will review the documents for
compliance with the requirements of paragraph (a) of this section and
advise the parties in writing of its findings by the end of the 20-day
period. The parties shall have the burden of demonstrating to the
satisfaction of the Licensing Authority that the contemplated sale or
conveyance complies with the requirements of paragraph (a) of this
section. Within 15 days of the consummation of the sale or conveyance,
the parties shall mail copies of the final documents to the Licensing
Authority, in accordance with Sec. 6.35(b). The Licensing Authority
will not transfer the licenses unless the documents are submitted in
accordance with this paragraph.
(c) The eligibility for a license of a person to whom a business is
sold or conveyed will be determined for the next quota year in
accordance with Sec. 6.23. For the purposes of Sec. 6.23(b)(1) the
person to whom a business is sold or conveyed shall be deemed to be the
person to whom the historical licenses were issued during the quota
year in which the sale or conveyance occurred. Further, for the
purposes of Sec. 6.23 (b) and (c), the entries made under such licenses
by the original licensee during the year in which the sale of
conveyance is made, shall be considered as having been made by the
person to whom the business was sold or conveyed.
Sec. 6.29 Use of licenses.
(a) An article entered under a license shall be an article produced
in the country specified on the license.
(b) An article entered or withdrawn from warehouse for consumption
under a license must be entered in the name of the licensee as the
importer of record by the licensee or its agent, and must be owned by
the licensee at the time of such entry.
[[Page 53012]]
(c) If the article entered or withdrawn from warehouse for
consumption was purchased by the licensee through a direct sale from a
foreign supplier, the licensee shall present, at the time of entry:
(1) A true and correct copy of a through bill of lading from the
country; and
(2) A commercial invoice or bill of sale from the seller, showing
the quantity and value of the product, the date of purchase and the
country; or
(3) Where the article was entered into warehouse by the foreign
supplier, Customs Form 7501 endorsed by the foreign supplier and the
commercial invoice.
(d) If the article entered was purchased by the licensee via sale-
in-transit, the licensee shall present, at the time of entry:
(1) A true and correct copy of a through bill of lading endorsed by
the original consignee of the goods;
(2) A certified copy of the commercial invoice or bill of sale from
the foreign supplier to the original consignee of the goods; and
(3) A commercial invoice or bill of sale from the original
consignee to the licensee.
(e) If the article entered was purchased by the licensee in
warehouse, the licensee shall present, at the time of entry:
(1) Customs Form 7501 endorsed by the original consignee of the
goods;
(2) A certified copy of the commercial invoice or bill of sale from
the foreign supplier to the original consignee of the goods; and
(3) A commercial invoice or bill of sale from the original
consignee to the licensee.
(f) The Licensing Authority may waive the requirements of
paragraphs (c), (d) or (e), if it determines that because of strikes,
lockouts or other unusual circumstances, compliance with those
requirements would unduly interfere with the entry of such articles.
(g) Nothing in this subpart shall prevent the use of immediate
delivery in accordance with the provisions of Customs regulations
relating to tariff-rate quotas.
Sec. 6.30 Record maintenance and inspection.
A licensee shall retain all records relating to its purchases,
sales and transactions governed by this subpart, including all records
necessary to establish the licensee's eligibility, for five years
subsequent to the end of the quota year in which such purchases, sales
or transactions occurred. During that period, the licensee shall, upon
reasonable notice and during ordinary hours of business, grant
officials of the U.S. Department of Agriculture full and complete
access to the licensee's premises to inspect, audit or copy such
records.
Sec. 6.31 Debarment and suspension.
7 CFR part 3017--Governmentwide Debarment and Suspension
(Nonprocurement) and Government Requirements for Drug-Free Workplace
(Grants), Subparts A through E, applies to this subpart.
Sec. 6.32 Globalization of licenses.
If the Licensing Authority determines that entries of an article
from a country are likely to fall short of that country's allocated
amount as indicated in Appendices 1, 2, and 3, the Licensing Authority
may permit, with the approval of the Office of the United States Trade
Representative, the applicable licensees to enter the remaining balance
or a portion thereof from any country during that quota year. Requests
for consideration of such adjustments must be submitted to the
Licensing Authority no later than September 1. The Licensing Authority
will obtain prior consent for such an adjustment of licenses from the
government of the exporting country for quantities in accordance with
the Uruguay Round commitment of the United States.
Sec. 6.33 License fee.
(a) A fee will be assessed each quota year for each license to
defray the Department's costs of administering the licensing system. To
the extent practicable, the fee will be announced by the Licensing
Authority in a notice published in the Federal Register no later than
August 31 of the year preceding the quota year for which the fee is
assessed.
(b) The license fee for each license issued is due and payable in
full by mail, postmarked no later than May 1 of the year for which the
license is issued, in accordance with Sec. 6.35(b). The fee for any
license issued after May 1 of any quota year is due and payable in full
by mail, postmarked no later than 30 days from the date of issuance of
the license, in accordance with Sec. 6.35(b). Fee payments shall be
made by certified check or money order payable to the Treasurer of the
United States.
(c) If the license fee is not paid by the final payment date, a
hold will be placed on the use of the license and no articles will be
permitted entry under that license. The Licensing Authority shall send
a warning letter by certified mail, return receipt requested, advising
the licensee that if payment is not mailed in accordance with
Sec. 6.35(b) or received within 21 days from the date of the letter,
that the license will be revoked. Where the license at issue is a
historical license, this will result, pursuant to Sec. 6.23(b), in the
person's loss of historical eligibility for such license.
(d) Licensees may elect not to accept certain licenses issued to
them; however, the Licensing Authority must be so notified by mail,
postmarked no later than the May 1, in accordance with Sec. 6.35(b).
Sec. 6.34 Adjustment of Appendices.
(a) Whenever a historical license (Appendix 1) is not issued to an
applicant pursuant to the provisions of Sec. 6.23, is permanently
surrendered or is revoked by the Licensing Authority, the amount of
such license will be transferred to Appendix 2.
(b) The cumulative annual transfers to Appendix 2 made in
accordance with paragraph (a) will be published in the Federal
Register. If a transfer results in the addition of a new article, or an
article from a country not previously listed in Appendix 2, the
Licensing Authority shall afford all eligible applicants for that quota
year the opportunity to apply for a license for such article.
Sec. 6.35 Miscellaneous.
(a) If any deadline date in this subpart falls on a Saturday,
Sunday or a Federal holiday, then the deadline shall be the next
business day.
(b) All submissions required by mail in this subpart shall be by
registered or certified mail, return receipt requested, with a
postmarked receipt, with the proper postage affixed and properly
addressed to the Dairy Import Licensing Group, STOP 1021, U.S.
Department of Agriculture, 1400 Independence Avenue S.W., Washington
D.C. 20250-1021.
Sec. 6.36 Supersedure of Import Regulation 1, Revision 7.
This subpart will supersede the provisions of Import Regulation 1,
Revision 7 heretofore in effect (Secs. 6.20 through 6.33 and appendices
1 through 3 as contained in 7 CFR subtitle A revised as of January 1,
1996). With respect to any violation of the provisions of that
regulation by a licensee prior to the effective date hereof, the
provisions of that regulation will be deemed to continue in full force;
however, the debarment and suspension of Sec. 6.31 of this subpart
shall apply with respect to any violation of that regulation.
[[Page 53013]]
Appendices 1, 2, and 3 to Subpart--Dairy Tariff-Rate Import Quota Licensing
[Articles subject to Appendix 1, Historical Licenses; Appendix 2, Nonhistorical Licenses; and Appendix 3,
Designated Importer Licenses for Each Quota Year]
----------------------------------------------------------------------------------------------------------------
Appendix 3--Designated
Article by additional U.S. note number and country of Appendix 1 Appendix 2 -------------------------
origin (historical) (nonhistorical) (Tokyo (Uruguay
Round) Round)
----------------------------------------------------------------------------------------------------------------
Non-Cheese Articles
(3)1997 Tariff Rate Quota In-Quota Quantity
(kilograms)
Butter (Note 6)........................................ 320,689 4,856,311 ........... ...........
EC................................................. 96,161 ............... ........... ...........
New Zealand........................................ 150,593 ............... ........... ...........
Other Countries.................................... 73,935 ............... ........... ...........
Any Country........................................ ............ 4,856,311 ........... ...........
Dried Skim Milk (Note 7)............................... 819,641 2,041,359 ........... ...........
Australia.......................................... 600,076 ............... ........... ...........
Canada............................................. 219,565 ............... ........... ...........
Any Country........................................ ............ 2,041,359 ........... ...........
Dried Whole Milk (Note 8).............................. 3,175 1,548,125 ........... ...........
New Zealand........................................ 3,175 ............... ........... ...........
Any Country........................................ ............ 1,548,125 ........... ...........
Dried Buttermilk/Whey (Note 12)........................ 224,981 ............... ........... ...........
Canada............................................. 161,161 ............... ........... ...........
New Zealand........................................ 63,820 ............... ........... ...........
Butter Substitutes containing over 45 percent of
butterfat and/or butteroil (Note 14).................. ............ 5,420,500 ........... ...........
Any Country........................................ ............ 5,420,500 ........... ...........
--------------------------------------------------------
Total: Non-Cheese Articles..................... 1,368,486 13,866,295 ........... ...........
========================================================
Cheese Articles
Cheese and substitutes for cheese (except cheese not
containing cow's milk and soft ripened cow's milk
cheese, cheese (except cottage cheese) containing 0.5
percent or less by weight of butterfat and articles
within the scope of other import quotas provided for
in this subchapter) (Note 16)......................... 25,896,207 5,574,524 9,661,128 5,198,000
Argentina.......................................... 7,690 ............... 92,310 ...........
Australia.......................................... 535,628 5,542 758,830 875,000
Canada............................................. 1,122,831 18,169 ........... ...........
Costa Rica......................................... ............ ............... ........... 1,550,000
Czech Republic..................................... ............ ............... ........... 200,000
EC;................................................ 17,194,649 5,137,783 1,132,568 1,173,000
of which:
Austria.................................... 369,747 ............... 280,253 273,000
Finland.................................... 778,593 36,310 485,097 ...........
Portugal................................... 129,309 ............... 223,691 ...........
Sweden..................................... 915,473 ............... 143,527 ...........
Israel............................................. 79,696 ............... 593,304 ...........
Iceland............................................ 294,000 ............... 29,000 ...........
New Zealand........................................ 4,779,186 36,286 6,506,528 ...........
Norway............................................. 150,000 ............... ........... ...........
Poland............................................. 936,224 ............... ........... 300,000
Slovak Republic.................................... ............ ............... ........... 600,000
Switzerland........................................ 659,983 11,429 548,588 250,000
Uruguay............................................ ............ ............... ........... 250,000
Other Countries.................................... 136,320 65,315 ........... ...........
Any Country........................................ ............ 300,000 ........... ...........
Blue-mold cheese (except Stilton produced in the United
Kingdom) and cheese and substitutes for cheese
containing, or processed from, Blue-mold cheese (Note
17)................................................... 2,366,029 154,972 ........... 200,000
Argentina.......................................... 2,000 ............... ........... ...........
EC................................................. 2,364,028 114,972 ........... 150,000
Chile.............................................. ............ 40,000 ........... ...........
Czech Republic..................................... ............ ............... ........... 50,000
Other Countries.................................... 1 ............... ........... ...........
Cheddar Cheese, and cheese and substitutes for cheese
containing, or processed from, Cheddar cheese (Note
18)................................................... 4,096,752 297,104 519,033 3,725,000
Australia.......................................... 965,795 18,704 215,501 625,000
Chile.............................................. ............ 110,000 ........... ...........
Czech Republic..................................... ............ ............... ........... 50,000
EC................................................. 263,000 ............... ........... 500,000
New Zealand........................................ 2,728,068 68,400 303,532 2,550,000
Other Countries.................................... 139,889 ............... ........... ...........
Any Country........................................ ............ 100,000 ........... ...........
American-type cheese, including Colby, washed curd and
granular cheese (but not including Cheddar) and cheese
and substitutes for cheese containing or processed
from such American-type cheese (Note 19).............. 3,001,796 63,757 357,003 50,000
Australia.......................................... 867,129 13,869 119,002 ...........
[[Page 53014]]
EC................................................. 240,392 13,608 ........... 50,000
New Zealand........................................ 1,725,719 36,280 238,001 ...........
Other Countries.................................... 168,556 ............... ........... ...........
Edam and Gouda cheese, and cheese and substitutes for
cheese containing, or processed from, Edam and Gouda
cheese (Note 20)...................................... 5,593,856 12,546 ........... 710,000
Argentina.......................................... 125,000 ............... ........... 110,000
Czech Republic..................................... ............ ............... ........... 100,000
EC;................................................ 5,283,546 5,454 ........... 500,000
of which:
Austria.................................... ............ ............... ........... 200,000
Sweden..................................... 41,000 ............... ........... ...........
Norway............................................. 159,908 7,092 ........... ...........
Other Countries.................................... 25,402 ............... ........... ...........
Italian-type cheeses, made from cow's milk, (Romano
made from cow's milk, Reggiano, Parmesan, Provolone,
Provoletti and Sbrinz and Goya, not in original
loaves) and cheese and substitutes for cheese
containing, or processed from, such Italian-type
cheeses, whether or not in original loaves (Note 21).. 6,701,591 818,956 795,517 4,965,000
Argentina.......................................... 4,095,986 29,497 367,517 1,890,000
EC................................................. 2,592,541 789,459 ........... 350,000
Hungary............................................ ............ ............... ........... 400,000
Poland............................................. ............ ............... ........... 1,325,000
Romania............................................ ............ ............... ........... 250,000
Uruguay............................................ ............ ............... 428,000 750,000
Other Countries.................................... 13,064 ............... ........... ...........
Swiss or Emmenthaler cheese other than with eye
formation, Gruyere-process cheese and cheese and
substitutes for cheese containing, or processed from,
such cheeses (Note 22)................................ 6,050,188 601,126 823,519 190,000
EC;................................................ 4,555,608 596,386 393,006 190,000
of which:
Austria.................................... 760,070 18,924 141,006 40,000
Finland.................................... 743,176 4,824 252,000 ...........
Switzerland........................................ 1,414,747 4,740 430,513 ...........
Other Countries.................................... 79,833 ............... ........... ...........
Cheese and substitutes for cheese, containing 0.5
percent or less by weight of butterfat (except
articles within the scope of other tariff-rate import
quotas provided for in this subchapter), and margarine
cheese (Note 23)...................................... 4,117,992 181,600 1,175,316 ...........
EC;................................................ 3,943,084 181,600 ........... ...........
of which:
Sweden..................................... 124,684 ............... 125,316 ...........
Israel............................................. ............ ............... 50,000 ...........
New Zealand........................................ ............ ............... 1,000,000 ...........
Poland............................................. 174,907 ............... ........... ...........
Other Countries.................................... 1 ............... ........... ...........
Swiss or Emmenthaler cheese with eye formation (Note
25)................................................... 19,480,205 2,817,126 9,557,945 1,660,000
Argentina.......................................... 9,115 ............... 70,885 ...........
Australia.......................................... 209,698 ............... 290,302 ...........
Canada............................................. ............ ............... 70,000 ...........
Czech Republic..................................... ............ ............... ........... 400,000
Hungary............................................ ............ ............... ........... 400,000
EC;................................................ 13,896,912 2,579,916 4,003,172 760,000
of which:
Austria.................................... 4,940,643 59,111 1,280,246 110,000
Finland.................................... 5,454,349 22,725 2,722,926 ...........
Sweden..................................... ............ ............... ........... 300,000
Iceland............................................ 149,999 ............... 150,001 ...........
Israel............................................. 27,000 ............... ........... ...........
Norway............................................. 3,481,310 174,000 3,227,690 ...........
Switzerland....................................... 1,620,895 63,210 1,745,895 100,000
Other Countries.................................... 85,276 ............... ........... ...........
--------------------------------------------------------
Total: Cheese Articles......................... 77,304,616 10,521,711 22,889,461 16,698,000
----------------------------------------------------------------------------------------------------------------
[[Page 53015]]
Signed at Washington, D.C. on October 2, 1996.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 96-25866 Filed 10-4-96; 3:39 pm]
BILLING CODE 3410-10-P
