[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Proposed Rules]
[Pages 8434-8435]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02530]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 78, No. 25 / Wednesday, February 6, 2013 / 
Proposed Rules

[[Page 8434]]



DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR Part 6

RIN 0551-AA82


Dairy Tariff-Rate Import Quota Licensing Program

AGENCY: Foreign Agricultural Service, USDA.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: Request for public comment on the Dairy Tariff-Rate Import 
Quota Licensing Program.

DATES: We will consider comments that we receive by April 8, 2013.

ADDRESSES: We invite you to submit comments as requested in this 
notice. In your comment, include the Regulation Identifier Number (RIN) 
and volume, date, and page number of this issue of the Federal 
Register. You may submit comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail, hand delivery, or courier: Abdelsalam El-Farra, 
Agricultural Marketing Specialist, Sugar and Dairy Branch, Import 
Programs and Export Reporting Division, Office of Trade Programs, 
Foreign Agricultural Service, U.S. Department of Agriculture, Room 
5526, 1400 Independence Avenue SW., Washington, DC 20250-1021, (202) 
720-9439; fax (202) 720-0876; Abdelsalam.El-Farra@fas.usda.gov.
    Comments will be available for inspection online at 
www.regulations.gov and at the mail address listed above between 8:00 
a.m. and 4:30 p.m., Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Abdelsalam El-Farra, Agricultural 
Marketing Specialist, Sugar and Dairy Branch, Import Programs and 
Export Reporting Division, Office of Trade Programs, Foreign 
Agricultural Service, U.S. Department of Agriculture, (202) 720-9439; 
fax (202) 720-0876; Abdelsalam.El-Farra@fas.usda.gov.

SUPPLEMENTARY INFORMATION: 

Background

    The Foreign Agricultural Service (FAS), under a delegation of 
authority from the Secretary of Agriculture, administers the Dairy 
Tariff-Rate Import Quota Licensing regulation codified at 7 CFR 6.20-
6.37 that provides for the issuance of licenses to import certain dairy 
articles under tariff-rate quotas (TRQs) as set forth in the Harmonized 
Tariff Schedule of the United States. These dairy articles may only be 
entered into the United States at the low-tier tariff by or for the 
account of a person, as defined in the regulation, to whom such 
licenses have been issued and only in accordance with the terms and 
conditions of the regulation. Licenses are issued on a calendar year 
basis, and each license authorizes the licensee to import a specified 
quantity and type of dairy article from a specified country of origin.
    TRQs replaced Section 22 import quotas for dairy products on 
January 1, 1995, as a result of the implementation by the United States 
of Uruguay Round Agreement on Agriculture. Under these TRQs, a low 
tariff rate, commonly referred to as the in-quota rate, applies to 
imports up to a specified quantity. A higher tariff rate, commonly 
referred to as the over-quota rate, applies to any imports in excess of 
that amount. High-tier tariff rates were reduced by 15 percent over the 
6 years following Uruguay Round Agreement implementation in 1995, while 
quantities subject to low-tier rates were increased gradually over that 
same period. TRQ rates and quantities vary by product. For dairy 
products subject to TRQs, an import license issued by USDA is generally 
required to bring in items at the in-quota tariff rate. No license is 
required to import products at the over-quota tariff rate.
    USDA issues three types of licenses: historical, nonhistorical 
(lottery), and designated. For all three license types, the current 
regulation provides that persons must apply every year between 
September 1 and October 15.
    (1) Historical licenses originated in 1950s and are reissued each 
year only to importers who originally qualified by importing the 
product during representative base periods. If an importer with a 
historical license meets all requirements, the license will be issued 
to the same importer for the following year.
    (2) Nonhistorical (lottery) licenses are available each year to any 
qualified applicant. Lottery licenses were first issued in the late 
1960s, and expanded when the United State implemented the Uruguay Round 
Agreement. Applicants for the lottery licenses have no guarantee that 
they will receive the same license every year, or that they will 
receive any license in any given year.
    (3) Designated licenses are issued to importers nominated by a 
foreign government or entity to which the United States has granted the 
right to designate an allocation. The licenses are then issued by USDA 
to the designated importer, so long as the designated importer has 
qualified for that year.

                                        2012 Dairy Import License Amounts
                                                   (Kilograms)
----------------------------------------------------------------------------------------------------------------
                                                                   Nonhistorical
                                                    Historical       (lottery)      Designated         Total
----------------------------------------------------------------------------------------------------------------
NON-CHEESE ARTICLES.............................       4,737,167      17,127,614               0      21,864,781
CHEESE ARTICLES.................................      63,170,778      24,729,865      47,685,145     135,585,788
                                                 ---------------------------------------------------------------
    Total.......................................      67,907,945      41,857,479      47,685,145     157,450,569
----------------------------------------------------------------------------------------------------------------


[[Page 8435]]

    Historical and designated licensees may apply for lottery licenses, 
subject to certain limitations if they are affiliated or associated 
with another licensee holding a license for that same item from the 
same country of origin. Licensees may fail to qualify for a license for 
a specific item from a specific country in the following year if they 
do not meet certain requirements. Licensees must (i) Apply for the 
license each year, (ii) pay an annual fee, and (iii) have imported at 
least 85 percent of the final license amount from the previous year. To 
avoid ineligibility due to the 85 percent rule, licensees may surrender 
up to 100 percent of the license, but must import 85 percent of any 
quantity not surrendered.
    Section 6.25(b)(i) of the Dairy Tariff-Rate Import Quota Licensing 
Program regulation currently provides, beginning with the 2016 quota 
year, an additional import requirement which applies only to historical 
licensees, that any historical licensee who surrenders more than 50 
percent of the license amount for the same item from the same country 
during at least three of the most recent five years will be issued a 
license thereafter, in an amount equal to the average amount imported 
under that license for those five quota years.
    The only non-technical modifications to the program since 1996 have 
been temporary suspensions of the provision in section 6.25(b) 
providing for the reduction in the license amount. Citing changed 
market conditions, including reduced export subsidies from the European 
Union, USDA temporarily suspended the provision three times: for five 
years from 1998-2002, for two years from 2009 to 2010, and most 
recently for five years from 2011 to 2015.
    Upon promulgating the Dairy Tariff-Rate Import Quota Licensing 
Program regulation in 1996, the Secretary of Agriculture determined 
that this regulation resulted to the fullest extent practicable in a 
fair and equitable allocation of the right to import dairy products 
subject to licensing. The regulation also maximized the utilization of 
the tariff-rate quotas for such articles, taking due account of any 
special factors which may have affected or may be affecting the trade 
in the products. Regarding section 6.25(b), in light of the small 
number of licenses 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 and the 6.25(b) reduction provision would increase the 
amount available in the non-historical pool, while still giving 
historical licensees a fair opportunity to demonstrate that they are 
using their licenses.
    Many stakeholders, particularly importers holding historical 
licenses, believe that section 6.25(b)(i) no longer serves its original 
purpose and have requested its elimination. They point out that in the 
last decade, for those items with low fill-rates, the non-historical 
license fill-rates are no higher than the historical license fill-
rates. Stakeholders have also proposed as an alternative to eliminating 
section 6.25(b)(i), that the standard against which historical license 
fill-rates are measured should not be 50 percent, but rather the 
industry overall average fill-rate for each year. Under this type of 
rule, a historical license for a particular item would only be reduced 
if the licensee imported less than 50 percent of the industry's average 
imports of that item for three out of the most recent five years.
    The U.S. dairy market has changed a great deal since the Dairy 
Tariff-Rate Import Quota Licensing Program regulation was promulgated 
in 1996. In the intervening years there have been significant advances 
in technology and telecommunications, and certain processes such as 
issuing new or reallocated licenses can now be managed in less time. 
Stakeholders have requested changes to some of the timelines and 
deadlines in the current regulation. For example, some would prefer 
that reallocation be done prior to October 1 of each year. Permitting 
reallocation earlier in the year would provide more time to identify 
supplies and arrange shipping and handling for entry into U.S. Customs 
territory before the quota year ends on December 31.
    Some stakeholders have requested a review of the method for 
calculating the annual fee, which is currently levied per license, but 
could be levied in other ways such as per kilogram. A small number of 
importers control a large percentage of the quota allocations. These 
import licenses enable the licensee to import certain dairy products at 
the lower in-quota tariff-rate and, under the current licensing 
program, much of this value likely accrues to these licensed importers, 
due to the extent of control they have over imported dairy products 
subject to licensing. Given the length of time since the initial 
historical allocations were made almost 60 years ago, suggestions have 
been made that a more equitable license allocation system could be 
implemented.
    USDA is requesting public comment on all of the issues mentioned 
above, or on any other part of the regulation at 7 CFR part 6, 
Subpart--Dairy Tariff-Rate Import Quota Licensing. In particular, 
comments are invited on these questions:
    (1) Does the historical and nonhistorical license system still 
serve a purpose?
    (2) Should any provisions of the current regulation be modified in 
light of significant advances in technology and telecommunications?
    (3) Should methods be developed for issuing licenses that would 
increase competition among importers?
    (4) Should licenses be auctioned or issued on another basis?
    (5) Should section 6.25(b)(i) regarding historical license 
reductions be eliminated, revised, or indefinitely suspended?
    (6) Should the basis upon which license fees are assessed be 
changed from the current flat-fee per license?
    (7) Should the deadlines for the surrender and reallocation of 
licenses in section 6.26 be changed to allow earlier reallocations?

    Dated: January 31, 2013.
Suzanne E. Heinen,
Administrator, Foreign Agricultural Service.
[FR Doc. 2013-02530 Filed 2-5-13; 8:45 am]
BILLING CODE 3410-10-P