[Federal Register: February 12, 1999 (Volume 64, Number 29)]
[Rules and Regulations]
[Page 7059-7065]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe99-2]

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DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR PART 1530

[Rin 0551-AA39]

Sugar to be Imported and Re-Exported in Refined Form or in Sugar
Containing Products, or Used for the Production of Polyhydric Alcohol

AGENCY: Foreign Agricultural Service (FAS), USDA.

ACTION: Final rule.

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SUMMARY: This final rule supersedes the regulation at 7 CFR part 1530,
which governs the importation of world priced raw sugar and its
subsequent re-export as refined sugar, or as an ingredient in sugar
containing products, or its use in the production of certain polyhydric
alcohols.

EFFECTIVE DATE: This final rule is effective February 12, 1999.

ADDRESSES: U.S. Department of Agriculture, Foreign Agricultural
Service, Import Policies and Programs Division, 1400 Independence
Avenue, SW., Stop 1021, Washington, DC 20250-1021.

FOR FURTHER INFORMATION CONTACT: Stephen Hammond, Division Director,
Import Policies and Programs Division, U.S. Department of Agriculture,
Foreign Agricultural Service, 1400 Independence Avenue, SW., Stop 1021,
Washington, DC 20250-1021. Telephone: 202<radical>720-2916.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule is issued in conformance with Executive Order
12866. The Administrator of the Foreign Agricultural Service (FAS) has
determined that this rule is ``not economically significant.''
Therefore, except for requirements under the Paperwork Reduction Act of
1995, the rule has not been reviewed by the Office of Management and
Budget. The Administrator, FAS, has determined that the provisions of
this final rule will not: (1) Result in an annual effect on the economy
of $100 million or more; (2) adversely affect, in a material way, the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities; or (3) regulate issues of human health,
human safety, or the environment. Further, the Administrator has
determined that the rule does not:
    (1) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency; (2) materially alter the
budgetary impact of entitlement, grants, user fees, or loan programs,
or the rights and obligations of recipients; or (3) raise novel legal
or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in Executive Order 12866.

Regulatory Flexibility Act

    The Regulatory Flexibility Act ensures that regulatory and
information requirements are tailored to the size and nature of small
businesses, small organizations, and small governmental jurisdictions.
This final rule will not have a significant economic impact on a
substantial number of small entities. Participation in the programs is
voluntary. Direct and indirect costs are small as a percentage of
revenue and in terms of absolute costs. The minimal regulatory
compliance requirements are scaled to impact large and small businesses
equally, and the programs improve businesses' cash flow and liquidity.

National Environmental Policy Act

    The Administrator has determined that this action will not have a
significant effect on the quality of the human environment. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is necessary for this rule.

Executive Orders 12372 and 12875, and the Unfunded Mandates Reform
Act (Pub. L. 104-4)

    These Executive Orders and Public Law 104-4 require
intergovernmental review of programs. Neither the Refined Sugar Re-
Export Program, the Sugar Containing Products Re-Export Program, nor
the Polyhydric Alcohol Program impose an unfunded mandate or any other
requirement on State, local or Tribal governments. Further, the
programs are national in scope and involve a power delegated to the
United States by the Constitution. Accordingly, these programs are not
subject to the provisions of either Executive Order 12372, or Executive
Order 12875, or the Unfunded Mandates Reform Act, Pub. L. 104-4.

Executive Order 12612

    Executive Order 12612 requires implications of ``federalism'' be
considered in the development of regulations. The Administrator
certifies that this final rule has been reviewed in light of Executive
Order 12612 and that it is consistent with the principles, criteria,
and requirements stated in sections 2 through 5 of this Executive
Order. The Administrator further certifies that this rule would impose
no additional cost or burden on the States, nor affect the States'
abilities to discharge traditional State governmental functions.

Executive Order 12606

    Executive Order 12606 requires that government action include
consideration of maintaining stability and strengthening the family.
The

[[Page 7060]]

Administrator, FAS, has determined, under the principles and criteria
established in Executive Order 12606, that this rule will have no
effect on the family.

Executive Order 12630

    This Executive Order requires careful evaluation of governmental
actions that interfere with constitutionally protected property rights.
This rule does not interfere with any property rights and, therefore,
does not need to be evaluated on the basis of the criteria outlined in
Executive Order 12630.

Background

    This final rule revises the regulations at 7 CFR part 1530, which
govern the importation of world priced raw sugar and its subsequent re-
export as refined sugar, or as an ingredient in sugar containing
products, or its use in the production of certain polyhydric alcohols.
In order to encourage public input into the revision of this
regulation, USDA published a proposed rule in the Federal Register on
August 6, 1996 (61 FR 40749) requesting public comment through October
7, 1996. USDA received comments from 21 respondents: 6 industry
associations; five agents representing some 27 private entities; and
the remainder, private concerns with vested interests in the outcome of
the regulation review. Most of the comments focused on license limits,
information reporting, time-frames for reporting, use of bonds versus
civil penalties, and program definitions.

Discussion of Comments

    The comments focused on twelve issue areas. The relevant section
number in the final rule is included in parenthesis where applicable.
The focus areas were as follows:

License Balance and Limits (Sec. 1530.105)

    A majority of respondents spoke to the issue of license limits,
with all opposed to at least some facet of the proposed changes. Many
respondents spoke of an increased likelihood of market manipulation
under the proposed limit changes. Other respondents suggested that the
changes limited flexibility of participants to take advantage of world
market conditions. Because of the lack of support from any of the
respondents regarding the proposed changes in license limits, the final
rule leaves the license limits currently in use unchanged for refiners
and sugar containing product manufacturers, except for the inclusion of
a consolidated license for sugar containing product manufacturers.
Polyhydric alcohol producer license limits were made consistent with
sugar containing product manufacturer license limits to further
simplify the program.

Time Period Allowed to Export Sugar Imported Under Program Provisions
(Sec. 1530.105)

    Respondents were evenly split between those in favor and those
opposed to lengthening the time permitted by refiners to export program
sugar, from 90 days to 18 months. Those opposed expressed concerns that
under an 18 month period, imported sugar could remain in the United
States for as long as 3 years. These respondents made the argument that
under the regulations, a refiner would have 18 months to transfer
imported sugar to a manufacturer, who has 18 months to export it in
sugar containing products, which could lead to market manipulation. The
respondents supporting the proposed change in the upper license limit
for refiners did not support the proposed reduction in the positive
balance limit. As a result, FAS retained the existing license limits
and export periods for refiners and for sugar containing product
manufacturers. FAS also made polyhydric alcohol producer time-use
requirements consistent with the limitations for sugar containing
product manufacturers. However, to facilitate the elimination of
redundant reporting of transfers, the length of time to report
transfers was extended from 10 to 90 days.

Reporting Requirements (Sec. 1530.109)

    A majority of the respondents welcomed the proposed changes;
however, some expressed concern that FAS had actually increased the
reporting burden. Some respondents suggested that FAS was not requiring
enough information and not making it available to the public. In the
final rule, FAS reduced the number of reporting fields for
manufacturers from 14 (as proposed), to 6. This change does not,
however, reduce the quantity or quality of the information used to make
important tariff-rate quota decisions. FAS will provide participants
the database format for reporting and/or the database software to
facilitate reporting.
    Some respondents suggested that the proposed reporting burden did
not take into account the commercial reality of availability of certain
export documentation. FAS added the Documentation Agreement, which
provides program participants an opportunity to participate in the
process of determining the documentation that both the licensee and the
Licensing Authority will agree is sufficient to demonstrate proof of
export.

Phase-in Period (Sec. 1530.114)

    Three respondents asked that FAS either include a method for
transferring existing contracts to the new system, or allow these
contracts to continue to operate under the previous rule. Their reason
was that refiners typically forward contract for raw sugar for period
of up to 18 months, and some of these contracts could be in violation
of the new rule. Program participants will be allowed to place all
existing contracts under the procedures of this final rule during a
period of 24 months from the effective date of the rule.

Bonding Requirements (Sec. 1530.107)

    The majority of persons commenting on this issue favored retaining
the bonding requirements as a deterrent to fraud and/or other non-
compliance with the regulations. Most respondents suggested that the
bonding requirement had deterred program violations. Many respondents
spoke against using civil penalties as an alternative for the bond
requirement. FAS retained the bonding requirements and eliminated the
proposed civil penalties. In the final rule, to provide greater
flexibility for participants, FAS has also provided for the use of a
letter of credit as an alternative to a bond.

Impact of North American Free-Trade Agreement (Sec. 1530.105(h))

    Most respondents on this issue expressed concerns about the impact
the North American Free-Trade Agreement (NAFTA) on the importation of
Mexican sugar under the rule. Several respondents requested that the
provision be extended to sugar containing products exports to Mexico.
The final rule allows a refiner to import Mexican raw sugar for further
refining without the quantity affecting the refiner's license balance
as long as the sugar is re-exported within 30 days of entry. If 30 days
pass without re-export, the Licensing Authority will charge the entry
against the refiner's license. The NAFTA does not contain a provision
that would permit FAS to extend this provision to sugar containing
products.

Definitions of Terms Relating to the Sugar Containing Products Re-
export Program (Sec. 1530.101)

    The table below lists the issues raised by the respondents, as well
as FAS'' response in the final rule.

[[Page 7061]]

------------------------------------------------------------------------
             Respondent  Issue                       Final  Rule
------------------------------------------------------------------------
``Refiner'' should be limited to only       The final rule defines a
 those firms which refine sugar.             refiner as ``any person . .
                                             . refines raw cane sugar .
                                             . .''
``Sugar containing products'' should not    The new definition is
 be restricted to human food only. Sugar     expanded to include all
 containing pet food and non-food products   sugar containing products
 should be included.                         except those normally
                                             marketed by cane sugar
                                             refiners.
``Co-packer'' should be expanded to         A co-packer is now defined
 include firms that duplicate the product    as ``a person that adds
 line of the parent company, produce some    value to a licensed
 items of the parent firm's product line,    manufacturer's product, or
 or produce ingredients.                     produces a product for
                                             export by the licensed
                                             manufacturer, but does not
                                             at any time own any of the
                                             program sugar used as an
                                             ingredient in the final
                                             product.''
``Agent,'' ``licensee,'' ``transfer,''      These terms are clearly
 ``notice of transfer,'' and ``export, use   defined in this rule. FAS
 and quarterly report'' are terms which      did not define ``use''
 need clarification.                         because of the self-
                                             explanatory nature of the
                                             word.
Include a separate definition for           The definition of export is
 ``export.''.                                provided in the final rule.
------------------------------------------------------------------------

Polarization (Sec. 1530.109)

    Two respondents requested that FAS include a provision to allow for
polarization adjustments. The rule requires that raw sugar entering the
U.S. Customs Territory be reported on a metric ton, raw value basis.
The initial and final polarization, and final weight (when available)
for entries of raw sugar are required in Sec. 1530.109. Another
respondent requested that the definition of white sugar as having 99.5
degree polarity should be waived for raw sugar which is imported under
the Refined Sugar Re-export Program. FAS did not address the
international definition of raw sugar in the final regulation.

Polyhydric Alcohol Program (Sec. 1530.114)

    One respondent stated that the rule should contain a provision
concerning how outstanding balances are to be treated at the time the
final rule is effective. Since license balances will continue under the
final rule, no special treatment is needed. Another respondent
requested that FAS require the licensee to certify that the polyhydric
alcohol will be used for non-food products only. By the FAS definition,
any polyhydric alcohol, except polyhydric alcohol produced by
distillation or polyhydric alcohol used as a substitute for sugar as a
sweetener in human food, can be produced with program sugar. Therefore,
an additional certification would be redundant.

Export of Raw Cane Sugar

    One respondent requested that FAS include a provision to permit the
entry of raw cane sugar (classified under subheading 1701.11.20 in the
Harmonized Tariff Schedule of the United States (HTS)) if the imported
sugar is to be substituted for domestically-produced raw cane sugar
that has been or will be exported. The final regulation permits a
refiner to import raw sugar in anticipation of exports of refined sugar
or the transfer of refined sugar to sugar containing product
manufacturers or polyhydric alcohol producers.

Beet Sugar

    Three respondents requested that FAS include beet sugar refiners as
eligible participants in the Refined Sugar Re-export Program. One
respondent stated that FAS should limit participation to cane sugar
refiners only. In the final regulation, FAS continued to limit
participation in the Refined Sugar Re-Export Program to cane sugar
refiners, because the initial purpose of the program, which was to
enhance cane sugar refiners' throughput after the imposition of
restrictive raw sugar quotas and subsequent tariff-rate quotas, has not
changed with the implementation of this regulation.

Other Issues Related to the Sugar Containing Products Re-export Program

    A respondent requested that a manufacturer of a product which is
100 percent sugar, for instance, sugar put into paste form, to which
dye is added, should be able to export the product under the rule's
provisions for sugar containing products. The definition of sugar
containing product in the final regulation addresses this question by
incorporating all sugar containing products except those normally
marketed by refiners.
    Another respondent requested that FAS publish a list of licensees
under the Sugar Containing Products Re-export Program, and suggested
that if a firm acted in good faith based upon the information contained
in the list, it should not be held liable for any transactions that
fell outside program limits. FAS maintains a list of program
participants, but does not provide any other information about the
companies on that list. Program participants are held responsible in
the final rule to ensure that the program refined sugar and sugar in
sugar containing products are exported from the U.S. Customs Territory.
    Two other respondents requested a provision for a 5.0 percent loss
allowance for refined sugar (with 100 percent polarity) used in
manufacturing sugar containing products. These respondents claimed that
the license balance system did not account for

[[Page 7062]]

sugar lost in the normal manufacturing process. Most respondents,
however, did not object to the removal of the loss provision in the
proposed regulation. In the final rule FAS does not provide credit for
sugar lost in the manufacturing process.
    FAS collapsed the regulations for the Refined Sugar Re-Export
Program, the Sugar Containing Products Re-Export Program and the
Polyhydric Alcohol Program into one rule.
    Where possible the terms and conditions for each program were
unified in order to simplify and facilitate use of the rule.

List of Subjects in 7 CFR Part 1530

    Agricultural commodities, Sugar, Imports, Procedural rules, Appeal
procedures, Reporting and record keeping requirements.

Final Rule

    Accordingly, the regulations at 7 CFR part 1530 are revised to read
as follows:

PART 1530--THE REFINED SUGAR RE-EXPORT PROGRAM, THE SUGAR
CONTAINING PRODUCTS RE-EXPORT PROGRAM, AND THE POLYHYDRIC ALCOHOL
PROGRAM

Sec.
1530.100 General statement.
1530.101 Definitions.
1530.102 Nature of the license.
1530.103 License eligibility.
1530.104 Application for a license.
1530.105 Terms and conditions.
1530.106 License charges and credits.
1530.107 Bond or letter of credit requirements.
1530.108 Revocation or surrender of licenses.
1530.109 Reporting.
1530.110 Records, certification, and documentation.
1530.111 Enforcement and penalties.
1530.112 Administrative appeals.
1530.113 Waivers.
1530.114 Implementation.
1530.115 Paperwork Reduction Act assigned number.

    Authority: Additional U.S. note 6 to chapter 17 of the
Harmonized Tariff Schedule of the United States (19 U.S.C. 1202); 19
U.S.C. 3314; Proc. 6641, 58 FR 66867, 3 CFR, 1994 Comp., p. 172;
Proc. 6763, 60 FR 1007, 3 CFR, 1995 Comp., p. 146.

Sec. 1530.100  General statement.

    This part provides regulations for the Refined Sugar Re-Export
Program, the Sugar Containing Products Re-Export Program, and the
Polyhydric Alcohol Program. Under these provisions, refiners may enter
raw sugar unrestricted by the quantitative limit established for the
raw sugar tariff-rate quota or the requirements of certificates of
quota eligibility provided for in 15 CFR part 2011, as long as
licensees under the programs export an equivalent quantity of refined
sugar, either as refined sugar or as an ingredient in sugar containing
products, or use the refined sugar in the production of certain
polyhydric alcohols.

Sec. 1530.101  Definitions.

    Affiliated persons means two or more persons where one or more of
said persons directly or indirectly controls or has the power to
control the other(s), or, a third person controls or has the power to
control the others. Indications of control include, but are not limited
to: interlocking management or ownership, identity of interests among
family members, shared facilities and equipment, and common use of
employees.
    Agent means a person who represents the licensee in any program
transaction. An agent shall not, at any time, own any of the product
produced by the program licensee. Agents may include brokers, shippers,
freight forwarders, expediters, and co-packers.
    Bond or letter of credit means an insurance agreement pledging
surety for the entry of foreign sugar without the required re-export
within the program guidelines.
    Certain polyhydric alcohols means any polyhydric alcohol, except
polyhydric alcohol produced by distillation or polyhydric alcohol used
as a substitute for sugar as a sweetener in human food.
    Co-packer means a person who adds value to a licensed
manufacturer's product, or produces a product for export by a licensed
manufacturer.
    Date of entry means the date raw sugar enters the U.S. Customs
Territory.
    Date of export means the date refined sugar or sugar containing
products are exported from the U.S. Customs Territory, or, if exported
to a restricted foreign trade zone, the date shown on the U.S. Customs
Service form designating the product as restricted for export.
    Date of transfer means the date that ownership of program sugar is
conveyed from a refiner to a manufacturer or producer licensee.
    Day means calendar day. When the day for complying with an
obligation under this part falls on a weekend or Federal holiday, the
obligation may be completed on the next business day.
    Documentation agreement means a signed and notarized letter from a
licensee specifying certain documentation that the licensee shall
obtain and maintain on file before said licensee requests from USDA
updating of a license balance.
    Enter or entry means importation into the U.S. Customs Territory,
or withdrawal from warehouse for consumption, as those terms are used
by the U.S. Customs Service.
    Export means the conveyance (shipment) of sugar or a sugar
containing product from a licensee under this part to a country outside
the U.S. Customs Territory, or to a restricted foreign trade zone.
    Licensing Authority means a person designated by the Director,
Import Policies and Programs Division, Foreign Agricultural Service,
USDA.
    Manufacturer means a person who produces or causes to be produced
on their behalf a sugar containing product for export under the
provisions of this part.
    Person means any individual, partnership, corporation, association,
estate, trust, or any other business enterprise or legal entity.
    Program sugar means sugar that has been charged or credited to the
license of a licensee in conformity with the provisions of this part.
    Program transaction means an appropriate entry, transfer, use, or
export of program sugar.
    Refined sugar means any product that is produced by a refiner by
refining raw cane sugar and that can be marketed as commercial,
industrial or retail sugar.
    Refiner means any person in the U.S. Customs Territory that refines
raw cane sugar through affination or defecation, clarification, and
further purification by absorption or crystallization.
    Sugar containing product means any product, other than those
products normally marketed by cane sugar refiners, that is produced
from refined sugar or to which refined sugar has been added as an
ingredient.
    Transfer means the transfer of legal title of program sugar from a
licensed refiner to a licensed manufacturer of a sugar containing
product or a licensed producer of certain polyhydric alcohols for the
production of sugar containing products or the production of certain
polyhydric alcohols.
    Unique number means a tracking number established by a licensee for
a transaction (entry, transfer, export, or use). A unique number is
established for a transaction to or from a specific country or
licensee. The unique number is also assigned by the licensee to a file
that contains all of the supporting documentation for the transaction
for which it was established. The unique number is the means by which
program transactions will be tracked.

[[Page 7063]]

Sec. 1530.102  Nature of the license.

    (a) A person who wishes to participate in the Refined Sugar Re-
export Program, the Sugar Containing Products Re-export Program, or the
Polyhydric Alcohol Program must first obtain a license from the USDA,
through the Licensing Authority.
    (b) A license under the Refined Sugar Re-export Program permits a
refiner to enter raw cane sugar under subheading 1701.11.20 of the HTS,
and export an equivalent quantity of refined sugar onto the world
market or transfer an equivalent quantity of refined sugar to licensees
under the Sugar Containing Products Re-export Program or the Polyhydric
Alcohol Program.
    (c) A license under the Sugar Containing Products Re-export Program
or Polyhydric Alcohol Program permits licensees to receive transfers
and export an equivalent quantity of sugar as an ingredient in sugar
containing products, or use an equivalent quantity of sugar in the
production of certain polyhydric alcohols.
    (d) All refining, manufacturing, and production shall be
accomplished in the U.S. Customs Territory, and within time-frames and
quantity limitations prescribed in this part. Program sugar and non-
program sugar are substitutable.
    (e) A licensee must establish a bond or a letter of credit in favor
of the U.S. Department of Agriculture to charge program sugar in
anticipation of the export or transfer of refined sugar, the export of
sugar in sugar containing products, or the production of certain
polyhydric alcohols.

Sec. 1530.103  License eligibility.

    (a) A raw cane sugar refiner, a manufacturer of sugar containing
products, or a producer of certain polyhydric alcohols, that owns and
operates a facility within the U.S. Customs Territory, is eligible for
a license to participate in the Refined Sugar Re-export Program, the
Sugar Containing Products Re-export Program, or the Polyhydric Alcohol
Program, respectively.
    (b) No person may apply for or hold more than one license,
including a license held by an affiliated person.
    (c) Notwithstanding paragraph (b) of this section, a person who
owns one or more wholly-owned subsidiary corporations manufacturing
sugar containing products or producing certain polyhydric alcohols,
which would otherwise qualify for an individual license, is eligible
for a consolidated license to cover the program transactions and other
program activities of both the parent corporation and the subsidiary
corporation(s). The program transactions and other program activities
of the subsidiary corporation(s) covered by a consolidated license
shall be treated as the activities of the corporation holding the
consolidated license.
    (d) Notwithstanding paragraph (c) of this section, each wholly-
owned subsidiary manufacturing sugar containing products or producing
certain polyhydric alcohols may establish a license for program
activities instead of the parent corporation establishing a
consolidated license. The sum total of license limits for the parent
corporation and its wholly-owned subsidiary corporation(s) shall not
exceed the quantitative limits established in Sec. 1530.105 of this
part.

Sec. 1530.104  Application for a license.

    (a) A person seeking a license shall apply in writing to the
Licensing Authority and shall submit the following information:
    (1) The name and address of the applicant;
    (2) The address at which the applicant will maintain the records
required under Sec. 1530.110;
    (3) The address(es) of the applicant's processing plant(s),
including any wholly-owned subsidiary(s) and plant(s) in the case of a
consolidated license, and including those of any co-packer(s);
    (4) In the case of a refined sugar product, the polarity of the
product and the formula proposed by the refiner for calculating the
refined sugar in the product;
    (5) In the case of a sugar containing product, the percentage of
refined sugar (100 degree polarity), on a dry weight basis, contained
in such product(s);
    (6) In the case of polyhydric alcohol, the quantity of refined
sugar used producing certain polyhydric alcohols; and
    (7) A certification explaining that the applicant is not affiliated
with any other licensee, or explaining any affiliations, should they
exist.
    (b) A documentation agreement must be concluded with the Licensing
Authority.
    (c) If any of the information required by paragraph (a) of this
section changes, the licensee shall promptly apply to the Licensing
Authority to amend the application to include such changes.

Sec. 1530.105  Terms and conditions.

    (a) A licensed refiner (refiner) shall, not later than 90 days
after entering a quantity of raw cane sugar under subheading 1701.11.20
of the HTS, export or transfer an equivalent quantity of refined sugar
if the entry results in a positive license balance.
    (b) A licensed sugar containing products manufacturer
(manufacturer) or a licensed polyhydric alcohol producer (producer)
shall, not later than 18 months from the date of transfer of a quantity
of refined sugar from a refiner, export an equivalent quantity of
refined sugar as an ingredient in a sugar containing product if the
transfer results in a positive license balance, or use an equivalent
quantity of refined sugar in the production of certain polyhydric
alcohols if the transfer results in a positive license balance,
respectively.
    (c) Notwithstanding paragraphs (a) and (b) of this section,
licensees may receive credit for the exportation or transfer of refined
sugar, the exportation of a sugar containing product, or the production
of certain polyhydric alcohols prior to the corresponding date of entry
of raw cane sugar or the date of transfer of refined sugar.
    (d) Licensees are encouraged to submit monthly program transaction
reports, but shall report no later than 90 days from the date of entry,
transfer, export, or use.
    (e) A refiner may enter raw sugar, or a manufacturer or producer
may receive a transfer of refined sugar, in anticipation of the
transfer or export of refined sugar (refiner), the export of sugar in
sugar containing products (manufacturer) or the production of a
polyhydric alcohol (producer) not to exceed the value of a bond or
letter of credit, which must be established pursuant to Sec. 1530.107
of this part. The value of a bond or letter of credit shall not exceed
the license limits established in this section.
    (f) A refiner shall not exceed a license balance of 50,000 metric
tons, raw value for the sum of all charges and credits.
    (g) A refiner may enter raw sugar from Mexico and re-export, within
30 days of entry, refined sugar to Mexico without a charge against the
refiner's license balance. If the refined sugar is not re-exported to
Mexico within 30 days of entry, the license shall be charged the
quantity that has not been re-exported.
    (h) A manufacturer or a producer shall not exceed a license balance
of 10,000 short tons, refined value for the sum of all charges and
credits.
    (i) A manufacturer's or a producer's consolidated license balance,
or the sum of a parent company and wholly-owned subsidiary license
balances if held separately, shall not exceed a license balance of
25,000 short tons, refined value for the sum of all charges and
credits.
    (j) For the purposes of the programs governed by this part, sugar
is fully substitutable. The refined sugar transferred, exported, or
used does not

[[Page 7064]]

need to be the same sugar produced by refining raw sugar entered under
subheading 1701.11.20 of the HTS.
    (k) A licensee may use an agent to carry out the requirements of
participation in the program. The licensee must retain ownership of and
responsibility for the product until exported from the U.S. Customs
Territory, to a restricted foreign trade zone, or used in the
production of certain polyhydric alcohols, and must establish and
maintain sufficient documentation, as agreed in the documentation
agreement pursuant to Sec. 1530.110, to substantiate export of the
product or the production of certain polyhydric alcohols.
    (l) A license may be assigned only with the written permission of
the Licensing Authority and subject to such terms and conditions as the
Licensing Authority may impose.
    (m) The Licensing Authority may impose such conditions, limitations
or restrictions in connection with the use of a license at such time
and in such manner as the Licensing Authority, at his or her
discretion, determines to be necessary or appropriate to achieve the
purposes of the relevant program.

Sec. 1530.106  License charges and credits.

    (a) A license shall be charged or credited for the quantity of
sugar entered, transferred, exported, or used, adjusted to a dry weight
basis. Refiner quantities shall be adjusted to raw value, using the
formulas set forth in paragraphs (a) (1), (2), and (3) of this section.
Manufacturer and producer quantities shall be adjusted to 100 degrees
polarity on a dry weight basis.
    (1) To adjust the raw value for sugar with a polarization of less
than 92 degrees, divide the total sugar content by 0.972 (polarization
x  outturn weight/.972).
    (2) To adjust the raw value for sugar with polarization of 92
degrees or above, multiply the polarization times 0.0175, subtract
0.68, and multiply the difference by the outturn weight (((polarization
 x  0.0175)-0.68)  x  outturn weight).
    (3) To determine the quantity of refined sugar that must be
transferred or exported to equal a corresponding quantity of entered
raw sugar charged to a license, divide the quantity of entered raw
sugar by 1.07 (raw quantity/1.07).

Sec. 1530.107  Bond or letter of credit requirements

    (a) The licensee may charge program sugar in anticipation of the
transfer or export of refined sugar, the export of sugar in sugar
containing products, or the production of certain polyhydric alcohols,
if the licensee establishes a performance bond or a letter of credit
with the U.S. Department of Agriculture, which meets the criteria set
forth in this section.
    (b) The bond or letter of credit may cover entries made either
during the period of time specified in the bond (a term bond) or for a
specified entry (a single entry bond).
    (c) Only the licensee who will refine the sugar, manufacture the
sugar containing product, or produce certain polyhydric alcohols may be
the principal on the bond or letter of credit covering such sugar to be
re-exported or used in the production of certain polyhydric alcohols.
The surety or sureties shall be among those listed by the Secretary of
the Treasury as acceptable on Federal bonds.
    (d) The obligation under the bond or letter of credit shall be made
effective no later than the date of entry of the sugar for refiners or
the date of transfer of the corresponding sugar for manufacture into a
sugar containing product or certain polyhydric alcohols.
    (e) The amount of the bond or letter of credit shall be equal to 20
cents per pound of sugar to be entered under the license.
    (f) If a licensee fails to qualify for credit to a license within
the specified time period of the date of export or use of corresponding
sugar in an amount sufficient to offset the charge to the license for
that corresponding sugar, payment shall be made to the U.S. Treasury.
The payment shall be equal to the difference between the Number 11
contract price and the Number 14 contract price (New York Coffee, Sugar
and Cocoa Exchange) in effect on the last market day before the date of
entry of the sugar or the last market day before the end of the period
during which export or use was required, whichever difference is
greater. The difference shall be multiplied by the quantity of refined
sugar, converted to raw value, that should have been exported in
compliance with this part. If there was not a Number 11, or a Number 14
contract price for the relevant market day, the Licensing Authority may
estimate such price as he or she deems appropriate.

Sec. 1530.108  Revocation or surrender of licenses.

    (a) A license may be revoked upon written notice by the Licensing
Authority.
    (b) A licensee may surrender a license when the sum of all credits
is equal to or greater than the sum of all charges.

Sec. 1530.109  Reporting.

    (a) A licensee may submit as often as monthly for charges and
credits against a license balance, but must submit at least a quarterly
report to the Licensing Authority not later than 90 days after the
earliest transaction in the report for which credits or charges are
being submitted. The licensee need not report when there have not been
transactions during the reporting period.
    (b) Reports may be submitted by e-mail, U.S. mail, private courier,
or in person, but must be in an integrated database format acceptable
to the Licensing Authority. A copy of this format may be obtained from
the Licensing Authority. Applicants unable to submit a report in the
specified electronic format may seek a temporary waiver to permit them
to submit the report on paper.
    (c) The reports must include the following for all program
transactions:
    (1) A unique number associated with the transaction;
    (2) The date of the entry, transfer (only a refiner shall report
transfers to the Licensing Authority), export, or use;
    (3) The quantity of program sugar entered, transferred, exported as
refined sugar, or used in the production of certain polyhydric
alcohols;
    (4) The licensee's license number, or if a transfer is being
reported, the licensee's license number as well as the transfer
recipient's license number;
    (5) The country of origin (entry of raw sugar) or final destination
(refined exports), using the exact country code designated in the HTS;
and
    (6) The initial and final polarization, and final weight (when
available) for entries of raw sugar.
    (d) Licensees have an affirmative and continuing duty to maintain
the accuracy of the information contained in previously submitted
reports.
    (1) The licensee shall immediately notify the Licensing Authority
and promptly request that previously claimed credits be charged back
upon discovery that previously claimed exports of refined sugar,
refined sugar in sugar containing products, or refined sugar used in
the production of polyhydric alcohol were re-entered into the U.S.
Customs Territory without substantial transformation, not used in the
production of certain polyhydric alcohols, made under a false
underlying proof of export, or made but previously submitted exports do
not otherwise satisfy the requirements of regulations or the
documentation agreement.
    (2) Charge backs shall be as of the date of the erroneously claimed
credit.

[[Page 7065]]

Sec. 1530.110  Records, certification, and documentation.

    (a) A licensee shall establish a documentation agreement with the
Licensing Authority before submitting for credit against a license. The
licensee shall propose to the Licensing Authority a list of documents
to substantiate entries, transfers, exports, or use as appropriate. The
Licensing Authority shall consider the licensee's proposal to assure
that it provides that a program transaction is fully substantiated, and
shall then respond in writing to the licensee in a timely fashion
outlining any deficiencies. Once agreed, the licensee shall submit a
notarized letter specifying the documents to be maintained on file and
certifying that the charges and credits made pursuant to Sec. 1530.106
will be kept on file, identifiable by a unique number, and available
for inspection pursuant to Sec. 1530.110.
    (b) For all transactions, the documentation shall:
    (1) Substantiate the information required in Sec. 1530.109 (c), and
the completion of the reported transaction;
    (2) Establish the buyer and seller specifications for a
transaction;
    (3) Include all U.S. Customs forms submitted in the entry or export
process;
    (4) Provide the correct telephone numbers and addresses of any
agents, consignees, foreign purchasers, and non-vessel operating common
carriers used in completing the transaction;
    (5) Indicate the port of entry or export for the program
transaction;
    (6) Provide the percentage of sugar in a sugar containing product
or certain polyhydric alcohols; and
    (7) Provide the name of export carrier, vessel name, and container
number.
    (c) The licensee shall maintain the documentation established in
the documentation agreement for 5 years from the date of such program
transaction.
    (d) Upon request, the licensee shall make the records, outlined by
the documentation agreement and identified (associated) by the unique
number assigned by the licensee to the program transaction as reported
to the Licensing Authority for posting against a license balance,
available for inspection and copying by the Licensing Authority, the
Compliance Review Staff of the Foreign Agricultural Service, and/or the
Office of the Inspector General, USDA, the U.S. Department of Justice,
or any U.S. Government regulatory or investigative office.

Sec. 1530.111  Enforcement and penalties.

    (a) The Licensing Authority may revoke credits granted on a license
if the credits granted do not meet the requirements set forth in the
regulations of this part, or if the licensee does not voluntarily
charge back credits erroneously claimed in accordance with these
regulations. The Licensing Authority may also recommend revocation of a
license, if the licensee has been in violation of Sec. 1530.109 (c) of
this part.
    (b) The Administrator of the Foreign Agricultural Service, USDA,
may suspend or revoke a license upon recommendation of the Licensing
Authority. Suspension of a license will be governed by 7 CFR part 3017,
subpart D and debarment will be governed by 7 CFR part 3017, subpart C.

Sec. 1530.112  Administrative appeals.

    (a) The licensee may appeal the Licensing Authority's determination
by filing a written notice of appeal, signed by the licensee or the
licensee's agent, with the Director, Import Policies and Programs
Division, Foreign Agricultural Service (Director), or his or her
designee. The decision on such an appeal shall be made by the Director,
and will be governed by Sec. 3017.515 of this title. The appeal must be
filed not later than 30 days after the date of the Licensing
Authority's determination, and shall contain the licensee's written
argument.
    (b) The licensee may request an informal hearing. The Director
shall arrange a place and time for the hearing, except that it shall be
held within 30 days of the filing date of the notice of appeal if the
licensee so requests.
    (c) The licensee may be represented by counsel, and shall have full
opportunity to present any relevant evidence, documentary or
testimonial. The Director may permit other individuals to present
evidence at the hearing and the licensee shall have an opportunity to
question those witnesses.
    (d) The licensee may request a verbatim transcript of the hearing,
and shall be responsible for arranging for a professional reporter and
shall pay all attendant expenses.
    (e) The Director shall make the determination on appeal, and may
affirm, reverse, modify or remand the Licensing Authority's
determination. The Director shall notify the licensee in writing of the
determination on appeal and of the basis thereof. The determination on
appeal exhausts the licensee's administrative remedies.

Sec. 1530.113  Waivers.

    Upon written application of the licensee or at the discretion of
the Licensing Authority, and for good cause, the Licensing Authority
may extend the period for transfer, export, or production, and/or may
temporarily increase a maximum license limit, may extend the period for
submitting regularly scheduled reports, or may temporarily waive or
modify any other requirement imposed by this part if the Licensing
Authority determines that such a waiver will not undermine the purpose
of the relevant program or adversely affect domestic sugar policy
objectives. The Licensing Authority may specify additional requirements
or procedures in place of the requirements or procedures waived or
modified.

Sec. 1530.114  Implementation.

    Current program participants may qualify under this rule upon
concluding a documentation agreement with the Licensing Authority, but
must conclude a documentation agreement within 24 months of the
effective date of this rule. Participant license balances, as of the
effective date of this rule, shall continue under this rule.

Sec. 1530.115  Paperwork Reduction Act assigned number.

    Licensees are not required to respond to requests for information
unless the form for collecting information displays a currently valid
Office of Management and Budget (OMB) control number. OMB has approved
the information collection requirements contained in this part in
accordance with 44 U.S.C. chapter 35. OMB number 0551-0015 has been
assigned and will expire November 30, 1999.

    Signed at Washington, DC on February 5, 1999.
Timothy J. Galvin,
Acting Administrator, Foreign Agricultural Service.
[FR Doc. 99-3500 Filed 2-11-99; 8:45 am]
BILLING CODE 3410-10-P