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.

Proposed Rules Federal Register

15859 

Vol. 76, No. 55 

Tuesday, March 22, 2011 

GENERAL SERVICES 

ADMINISTRATION 

5 CFR Chapter VII 

41 CFR Chapters 101, 102, and 105, 

and Subtitle F 

48 CFR Chapters 5 and 61 

[EO 013563–OGP–1; Docket 2011–0010; 

Sequence 1] 

Reducing Regulatory Burden; 

Retrospective Review under E.O. 

13563 

AGENCY: Office of Governmentwide 

Policy, General Services Administration 

(GSA). 

ACTION: Request for information. 

SUMMARY: The General Services 

Administration (GSA) is requesting 

public input on how it can best 

implement the goals of Executive Order 

(EO) 13563, ‘‘Improving Regulation and 

Regulatory Review.’’ E.O. 132563 was 

signed by President Obama on January 

18, 2011, calls for an improvement in 

the creation and review of regulations 

and the better opportunities for the 

public to be part of this process. GSA 

will solicit public input through April 

15, 2011, via comments received on a 

blog located at http://www.gsa.gov/ 

improvingregulations. Later this year, 

GSA expects to release its retrospective 

review plan. 

DATES: Comments will be accepted 

through April 15, 2011. 

FOR FURTHER INFORMATION CONTACT: For 

clarification of content, contact General 

Services Administration, Office of 

Governmentwide Policy, Office of 

Travel, Transportation and Asset 

Management, at (202) 501–1777. 

SUPPLEMENTARY INFORMATION: 

A. Background 

Executive Order 13563 directs each 

federal agency to consider ‘‘how best to 

promote retrospective analysis of rules 

that may be outmoded, ineffective, 

insufficient, or excessively 

burdensome.’’ The EO calls on every 

agency to develop ‘‘a preliminary plan, 

consistent with law and its resources 

and regulatory priorities, under which 

the agency will periodically review its 

existing significant regulations to 

determine whether such regulations 

should be modified, streamlined, 

expanded or repealed to make the 

agency’s regulatory program more 

effective and or less burdensome in 

achieving its regulatory objectives.’’ 

B. Procedures 

Comments on Executive Order 13563 

can be posted on a blog located on the 

Internet at http://www.gsa.gov/ 

improvingregulations. To view 

Executive Order 13563 got to http:// 

www.gpo.gov/fdsys and enter ‘‘executive 

order 13563’’ in the search box. 

Dated: March 17, 2011. 

Janet Dobbs, 

Director, Office of Travel, Transportation and 

Asset Management. 

[FR Doc. 2011–6657 Filed 3–21–11; 8:45 am] 

BILLING CODE 6820–14–P 

DEPARTMENT OF AGRICULTURE 

Commodity Credit Corporation 

7 CFR Part 1463 

RIN 0560–AI12 

Tobacco Transition Payment Program; 

Cigar and Cigarette Per Unit 

Assessments 

AGENCY: Commodity Credit Corporation 

and Farm Service Agency, USDA. 

ACTION: Request for comments. 

SUMMARY: The Commodity Credit 

Corporation (CCC) is requesting 

comments about the calculation of 

assessments to fund the Tobacco 

Transition Payment Program (TTPP). 

Currently the cigar portion of the 

assessment uses a per unit calculation 

that treats all cigars, large and small, the 

same. That policy is under review as the 

result of a court decision. This review 

could also affect cigarettes, which are 

subject to similar provisions. 

DATES: We will consider comments that 

we receive by May 23, 2011. 

ADDRESSES: We invite you to submit 

comments on this notice. In your 

comment, please specify RIN 0560–AI12 

and include the volume, date, and page 

number of this issue of the Federal 

Register. You may submit comments by 

either of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: Jane Reed, Economic and 

Policy Analysis Staff, Farm Service 

Agency, USDA, 1400 Independence 

Ave., SW., Mail Stop 0515, Washington, 

DC 20250–0514. 

Comments may be inspected at the 

above address, in room 3722, between 

8 a.m. and 4:30 p.m. Monday through 

Friday, except holidays. 

FOR FURTHER INFORMATION CONTACT: Jane 

Reed; phone: (202) 720–6782. Persons 

with disabilities or who require 

alternative means for communication 

(Braille, large print, audio tape, etc.) 

should contact the USDA Target Center 

at (202) 720–2600 (voice and TDD). 

SUPPLEMENTARY INFORMATION: 

Background—TTPP Authority and 

Existing Regulations 

TTPP was enacted in the Fair and 

Equitable Tobacco Reform Act of 2004 

(FETRA) (7 U.S.C. 518–519a). FETRA 

was enacted as Title VI of Public Law 

108–357. FETRA ended the former 

tobacco quota program and price 

supports, and created the 10-year (2005 

through 2014) roughly $10 billion total 

TTPP. TTPP provides transition 

payments to certain tobacco producers 

and farm owners. TTPP is funded by 

assessments on manufacturers and 

importers of tobacco products. TTPP is 

sometimes called the ‘‘tobacco buyout’’ 

program. It is run by the Farm Service 

Agency (FSA) of the U.S. Department of 

Agriculture (USDA) on behalf of CCC. 

TTPP regulations are in 7 CFR part 

1463. 

Scope of This Request for Comments 

This notice involves the collection of 

TTPP assessments, which are 

authorized in section 625 of FETRA (see 

7 U.S.C. 518d). This notice focuses on 

the ‘‘Step B’’ cigar assessment, explained 

in greater detail below and addressed in 

§ 1463.7 of the regulations. More 

specifically, this notice focuses on how 

those assessments are calculated for 

cigars, given that cigars vary widely in 

size, weight, and value but are assessed 

using a method based on the number of 

cigars handled. 


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1Throughout this document, we refer to ‘‘snuff, 

roll-your-own, pipe, and chewing tobacco’’ as the 

‘‘other’’ four categories of tobacco. 

The relevant FETRA provisions are 

the same for cigarettes as for cigars. 

Cigarettes are, therefore, in theory 

subject to the same issue of 

interpretation that led to this notice, 

however, as a practical matter may not 

be substantially affected by its 

resolution because cigarettes, unlike 

cigars, are taxed at a constant rate and 

are generally uniform in size, or more 

uniform in size than cigars. 

Each year, FETRA assessments 

amount to about $1 billion for all 

tobacco product categories together. The 

assessments are collected quarterly. 

Current TTPP Assessment Methodology 

Calculation by USDA of the amount 

due from an individual manufacturer or 

importer currently involves two steps. 

‘‘Step A’’ allots a percentage of the total 

program assessment to six product 

categories specifically identified in 

FETRA (subsection 518d(c)) by 

Congress. Those six categories are 

cigarettes, cigars, snuff, roll-your-own, 

pipe, and chewing tobacco.1 The initial 

‘‘Step A’’ percentage allotments have 

been over time adjusted for changes in 

relative volume in the categories, as 

required by subsection 518d(c). The 

cigar and cigarette categories combined 

generate about 98% of the total TTPP 

assessments, and have since FETRA was 

enacted. The cigar ‘‘Step A’’ allotment 

started at about 3 percent of the total 

allotments in fiscal year 2004, was up to 

4 percent in 2009, and is now 7 percent. 

Cigarettes started at 96 percent and are 

now at 91 percent. Recent changes in 

volume may be in response to 2009 tax 

changes noted below. 

Step B divides the category’s 

assessment liability among the 

manufacturers and importers in that 

category. Currently, this is done by unit 

(‘‘sticks’’) for cigars under the USDA 

regulations. That unit method of 

calculating assessments is the heart of 

the controversy (the subject of a recent 

court case). All ‘‘sticks’’ are treated as 

equal. A very small cigar generates the 

same FETRA assessment as a very large 

cigar, irrespective of the difference in 

weight, size, and value. USDA specified 

the calculation that way in the 

regulations because of the provisions of 

subsection 518d(g). At issue in this 

request for comments is whether the 

‘‘unit’’ provisions of subsection 518d(g) 

are required to be considered to 

interpret FETRA, which as interpreted 

by USDA calls for ‘‘unit’’ volume 

calculations for cigarettes and cigars and 

weight volume calculations for the other 

four categories of tobacco. This follows, 

generally, the way the products are 

taxed. 

Tobacco Taxing Rates and Methods 

USDA does not have the authority to 

set tobacco product excise taxes. Excise 

tax rates and methods are outside the 

scope of this notice, however, taxing 

rates and methods are relevant to how 

TTPP assessments are calculated, or 

could be calculated, so some 

background on tobacco taxes is 

provided in this section to provide 

context. 

‘‘Small cigars’’ (for taxing purposes 

under other statutory, non-FETRA 

provisions) are those that weigh less 

than three pounds per 1,000 units. They 

are taxed, by agencies other than USDA, 

per unit (a certain dollar amount per 

1,000 units). ‘‘Large cigars’’ (literally 

those that are not ‘‘small cigars’’) are 

taxed at a percentage of their value up 

to a certain maximum amount per 1,000 

units. Thus the maximum tax rate for 

large cigars is a unit tax, but not all large 

cigars are taxed at a unit rate, if the 

value generates a unit amount that is 

below the maximum. The tax rates 

changed in 2009. Cigarettes are taxed by 

unit—a certain amount per 1,000 units. 

There are two tax categories for 

cigarettes, large and small, but there are 

no actual marketings in the ‘‘large’’ 

category. The other four categories of 

tobacco are taxed by weight. 

Step A Percentage Allotment 

Calculation Method 

Step A percentage allotments to the 

tobacco product categories were initially 

set in FETRA. USDA adjusts those 

periodically for changes in volume 

under subsection 518d(c). 

USDA analyzed the Congressional 

Step A allotments and determined that 

the initial percentages were calculated 

by taking historical data for the six 

categories and then multiplying the 

weights or units in each category by the 

maximum tax rate (units for cigars and 

cigarettes—computed separately for 

large and small cigars—and weight for 

the others). This puts all product 

categories on a dollar basis. 

Although the calculation was done 

separately for small and large cigars, 

Congress assigned one Step A 

percentage to cigars as a single category. 

As a result, there are only six categories 

in subsection 518d(c), not seven. There 

is one cigar category. There is not a 

separate ‘‘small cigar’’ category and a 

separate ‘‘large cigar’’ category. 

Each year USDA uses data from the 

U.S. Department of the Treasury 

(Treasury) and the U.S. Department of 

Homeland Security Bureau of Customs 

and Border Security (Customs)—the 

new volume figures (units for cigars and 

cigarettes)—and multiplies them by the 

2004 tax rates to adjust the Step A 

allotments using the calculation 

Congress was determined to have used 

for the initial Step A allotments. Those 

former tax rates (not the 2009 revised 

rates) are used so that the adjustments 

to the Step A category allotments are for 

changes in volume (units and weights) 

only, not changes in tax rates. 

USDA issued a technical amendment 

in the Federal Register published 

December 10, 2010 (75 FR 76921– 

76923), explaining this policy regarding 

Step A and clarifying the rules. The 

Step A calculation is being challenged 

in a lawsuit different than the one that 

resulted in this notice. There it is argued 

against the USDA position that the new 

2009 tax rates should be used for the 

computation. 

Step B Calculation 

This immediate controversy, however, 

involves, as noted, Step B. Step B is 

where a category’s percentage allotment 

is divided among the manufacturers and 

importers in that category. As indicated, 

subsection 518d(g) has been 

implemented by USDA to divide the 

single cigar Step A category allotment 

among all cigars by unit. Subsection 

518d(e) provides that no manufacturer 

or importer should have to pay more 

than the ‘‘pro rata’’ share of the volume 

in their category. 

Small cigar manufacturers and 

importers have argued that calculating 

Step B by units makes them pay more 

than their ‘‘pro rata’’ share. They argue 

that ‘‘volume’’ under subsection 518d(e) 

cannot be measured by units in the 

manner currently undertaken by USDA 

despite subsection 518d(g). 

USDA’s method treats all cigar units, 

large and small, the same for purposes 

of dividing up the single Step A cigar 

percentage allotment. USDA does not 

break out the cigar category first into 

small and large cigars and then apply 

the unit division of subsection 518d(g). 

United States Code and Code of Federal 

Regulations (CFR) References 

The discussion of cigar assessments in 

this notice references both FETRA (as it 

appears in the United States Code) and 

the current regulations (as they appear 

in the CFR). To help commenters 

understand the context of this notice, 

the full text of section 518d is available 

at: http://uscode.house.gov/uscode-cgi/

fastweb.exe?getdoc+uscview+

t05t08+2465+11++%28%29%20%20. 

FETRA was enacted October 22, 2004. 

The final rule implementing TTPP was 

published on February 10, 2005 (70 FR 


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7007–7014). There is a rulemaking 

exception in section 519a and the final 

rule was published without prior 

comment. The regulation was amended 

by a final rule published in the Federal 

Register on April 4, 2005 (70 FR 17150– 

17166). The regulation specifies a stickbased Step B cigar calculation and treats 

cigars as one category not two. The 

relevant regulation (for Step B 

calculations) is in 7 CFR 1463.7. 

Step B as Specified in FETRA 

The Step B controversy arises out of 

Prime Time International, Inc., v. 

Vilsack (599 F.3d 678). There were 

several issues raised in the lawsuit. (The 

others will be addressed separately once 

the rulemaking issue is resolved.) The 

district court ruled for USDA on the 

Step B issue. The case then went to the 

Court of Appeals (the Court). The Court 

described the Step B unit disagreement 

this way: 

Prime Time contends that USDA’s 

interpretation of the Fair and Equitable 

Tobacco Reform Act is contrary to ordinary 

construction and plain meaning of the word 

‘‘volume’’ in the phrase ‘‘gross domestic 

volume,’’ which is defined in section 

518d(a)(2) as the ‘‘volume of tobacco 

products-removed (as defined by section 

5702 of Title 26)’’ and ‘‘not exempt from tax’’ 

pursuant to provisions not relevant to this 

appeal, supra note 1. It observes that where 

statutory terms, such as ‘‘volume’’ here, are 

not defined in a statute, courts give them 

their ordinary meaning, citing Asgrow Seed 

Co. v. Winterboer, 513 U.S. 179, 187, 115 

S.Ct. 788, 130 L.Ed.2d 682 (1995). USDA 

responds that ‘‘volume’’ is ‘‘clearly explained’’ 

in FETRA to mean the number of cigars 

because section 518d(g)(3) provides that the 

number of cigars determines the ‘‘volume of 

domestic sales’’ and thus ‘‘market share’’ 

under section 518d(f). 

The Court described the suggested 

alternative to USDA’s Step B calculation 

as dividing the Step A percentage into 

small and large cigar subclasses and 

then applying the unit division to each 

category separately. The Court said: 

Prime Time maintains, because FETRA 

requires that the allocation within a tobacco 

class be ‘‘on a pro rata basis’’ with ‘‘[n]o 

manufacturer or importer * * * required to 

pay an assessment that is based on a share 

that is in excess of the manufacturer’s or 

importer’s share of domestic volume.’’ 7 

U.S.C. 518d(e). Therefore, it argues, after 

allocating the assessment by class of tobacco 

products, USDA should divide the cigar class 

assessment into sub-classes of large and 

small cigars, with the relative allocation 

determined by total weight, and then divide 

the assessments among individual large and 

small cigar manufacturers and importers on 

a per-stick basis from the subdivided 

assessments, satisfying subsection (g)(3)(A). 

Prime Time contends such a method is 

required by the plain text of subsection (e) as 

well as subsection (i)(4)(B), which, upon 

administrative appeal, requires the Secretary 

to ‘‘make any revisions necessary to ensure 

that each manufacturer and importer pays 

only its correct pro rata share of total gross 

domestic volume from all sources.’’ 

As to the government’s position that 

subsection 518d(g)(3) unambiguously 

required that all cigars be divided by 

unit (without a breakout of cigars into 

subclasses before the division by units), 

the Court said it did not see FETRA as 

being unambiguous: 

The plain text of FETRA does not selfevidently vindicate USDA’s two step 

assessment method. Under FETRA, the 

‘‘volume of domestic sales’’ and ‘‘market 

share’’ are not synonymous with ‘‘gross 

domestic volume.’’ FETRA provides, for 

example, that ‘‘[t]he volume of domestic sales 

shall be calculated based on gross domestic 

volume,’’ 7 U.S.C. 518d(g)(2) (emphasis 

added), indicating two different meanings for 

the terms. And section 518d(g)(3)(A) does 

not, on its face, require that a compound 

number of large and small cigars serve as the 

denominator when calculating a 

manufacturer’s or importer’s volume of 

domestic sales on a per-stick basis. Most 

critically, USDA’s interpretation appears to 

ignore the pro-rata-basis limitation Congress 

imposed on assessments within a tobacco 

class in subsection (e). As interpreted by 

USDA, it is irrelevant that one large cigar 

consumes far more tobacco than a small 

cigar, and so accounts for a far larger segment 

of the market than its per-stick contribution 

would indicate. Yet the text and structure of 

the statute titled the Fair and Equitable 

Tobacco Reform Act suggests an easy 

counting metric for cigarettes and cigars may 

not override a statutory mandate that 

assessments be ‘‘allocated on a pro rata basis’’ 

within each class of tobacco product, id. 

§ 518d(e)(1). Prime Time’s interpretation 

suggests that there is at least one way to 

interpret FETRA’s provisions consistently 

and in harmony, with none made 

superfluous or insignificant. See Corley v. 

United States, ___ U.S. ___, 129 S.Ct. 1558, 

1566, 173 L.Ed.2d 443 (2009); City of 

Anaheim, Cal. v. FERC, 558 F.3d 521, 522 

(D.C.Cir.2009). 

For the purpose of this appeal, the court 

need only observe that USDA’s present 

interpretation is not mandated by the plain 

text of FETRA. USDA does not maintain that 

its interpretation of FETRA is a permissible 

view of an ambiguous statute entitled to 

deference under Chevron step 2, 467 U.S. at 

843, 104 S.Ct. 2778. Given that FETRA does 

not appear to be susceptible of only a single 

interpretation, we reverse and remand to the 

district court with instructions to remand 

Prime Time’s FETRA claims to the USDA for 

further proceedings. See PDK Labs. Inc. v. 

U.S. DEA, 362 F.3d 786, 797–98 

(D.C.Cir.2004). 

Alternative Step B Methods 

As a result, the Court remanded the 

claims to USDA to reconsider and this 

request for comment is part of the 

process of reconsidering. Several points 

should be noted. First, the Court refers 

to weights for dividing cigars into two 

Step A subcategories. USDA does not 

have weight data for domestically 

manufactured small and large cigars. 

Cigars are not taxed based on weight. 

Weight information is not available on 

the Treasury reports and may not be 

known or reported by any part of the 

Federal government for domestically 

manufactured cigars. (There has been no 

reason for the Federal government to 

collect weights for cigars because they 

are not taxed on that basis). The same 

is true of cigarette weight data. USDA 

could ask the companies for the data, 

but subsection 518d(h) of FETRA 

requires tax reports to be used for these 

calculations. Those reports do not 

include the weight data either. Also, 

each manufacturer would be dependent 

on the accuracy of all other 

manufacturer’s weight data reports to 

receive a correct assessment. The title of 

subsection (h), the subsection 

mentioned in (g), seems telling in this 

regard—‘‘Measurement of Volume of 

Domestic Sales.’’ The only metric on the 

reports for cigars is units. 

There is another problem with this 

alternate approach. Ultimately, the 

alternative requires that large cigars be 

divided by unit. There are presumably 

variations in weight among small cigars 

but, in any event, there are wide weight 

and size variations among large cigars 

and if to pay more than the share 

represented by the respective weight 

violates subsection 518d(e), then it 

would appear that for the makers of 

smaller large cigars the alternative 

would violate subsection 518d(e). 

Therefore, it seems, the alternative 

would be self-contradictory. 

To, however, do the Step B division 

strictly on weight (or on some other 

measure like taxes paid) would appear 

to disregard subsection 518d(g). If the 

point of the interpretation is to give 

meaning to all part of the statute, then 

dismissing subsection 518d(g) does not 

work. In the reply brief submitted in 

support of an alternative approach in 

the litigation, it was suggested that taxes 

paid would be used in lieu of weight: 

If FETRA is read plainly, wholly and 

harmoniously, then the cigar assessment 

process is clean, simple, and direct: (A) 

Allocate the amount of the total assessment 

among the six classes based on the federal 

excise taxes paid by each class, with separate 

figures for large and small cigars as USDA 

currently does. (B) Divide the class 

assessment for cigars into large and small 

cigar segments. This will divide the market 

share of cigars along the lines of the overall 

size and weight (and coincidently market 

value) of the products removed. (C) For large 

cigars, divide the amount of the total cigar 

assessment attributable to large cigars by the 

number or stick count of the large cigars 


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removed by each company to establish a 

company assessment. For small cigars, divide 

the amount of the total cigar assessment 

attributable to small cigars by the number of 

small cigars each company removes to 

establish the company assessment. This 

procedure respects all of FETRA’s sections, 

calculating market share based on number of 

cigars while also ensuring assessments do not 

exceed respective shares of total gross 

domestic volume from all sources, as 

required by FETRA. 

That approach still leaves dividing up 

large cigars by units. (That is also a 

problem for small cigars if small cigars 

are not standard in size.) Therefore, it 

has the same internal contradiction 

problem as the strict weight based 

alternative. Plus, as noted below, 

weights and taxes for cigars do not vary 

proportionately. To the contrary, taxes 

actually in some cases, at least since 

2009, vary inversely to the size of the 

cigar in those instances where smallish 

large cigars are big enough to be taxed 

on a value basis rather than a unit basis. 

The Court referred to common uses of 

the term ‘‘volume.’’ It could be argued 

that volume might suggest weight in the 

proper instance. It does not, it would 

seem, suggest taxes paid. As for the use 

of units, there is no reason why volume 

cannot be a number and as to FETRA, 

as we note below, the word ‘‘volume’’ is 

strictly defined in subsection 518d(g) as 

a number and that makes particular 

sense it would seem since the 

government does not have weights for 

domestically manufactured cigars and it 

was based on units that the Step A 

calculation was made. Thus, and for the 

other reasons given here, the only 

definition for ‘‘volume’’ that makes sense 

is the actual one given in the statute— 

that which is in (g). This does not seem 

at all unusual for the reasons given. For 

example, if the issue were the volume 

of pedestrian traffic on a bridge, volume 

could well be measured as a number 

rather than the weight of the person 

who crossed the bridge or the taxes they 

paid. 

Also, in the alternative suggested in 

the litigation, the Step A allotment 

would effectively be a seven category 

calculation. Yet, FETRA specifically 

only provides for six. There does not 

appear to be any rational reason why 

Congress would have put six in FETRA 

if seven were meant. 

And, there is legislative history to 

suggest the use of six categories not 

seven was no accident. FETRA was 

enacted in October of 2004. The Senate 

Bill passed that summer had two 

assessments. One was to be a FDA 

assessment (ultimately jettisoned). The 

Bill’s FDA assessment followed the 

same structure as section 518d. There 

was in the FDA assessment a Step A 

division among categories but that Step 

A division had seven categories, not six, 

as ‘‘large’’ and ‘‘little’’ cigars were made 

separate categories (150 C.R. 16047 (July 

16, 2004), also 150 C.R. S8389). (‘‘Little’’ 

was defined the same as ‘‘small’’ is now.) 

The TTPP assessment in the Senate Bill 

did not cover cigars at all (150 C.R. 

16056 (July 16, 2004), also 150 C.R. 

S8397). There were only five categories. 

But in the end, the FDA provisions were 

taken out of the legislation that enacted 

FETRA and cigars were added to the 

TTPP without the cigar subcategories of 

the FDA assessment. That is, in the 

TTPP provisions that are now law, 

Congress went from five to six 

categories, specifically rejecting the 

seven-category (two-cigar category), 

FDA assessment model of the Bill that 

was at one time under consideration 

and which is what is actually suggested 

here. That is, Congress seems to have 

intentionally made cigars one category, 

not two, after considering the 

alternative. In addition, recent events 

noted below in which manufacturers 

have been fleeing the small cigar 

category for the cheaper taxes of the 

large cigar category indicates that there 

is not much difference between cigars 

on either side of the margin of the two 

categories, making it seemingly 

burdensome and market-affecting to 

separate the categories, which may have 

been a motivation for Congress as well. 

That would seem to be important in 

this instance since the alternative 

suggested in the litigation was a twocigar category alternative. Seemingly, 

Congress considered, but rejected, the 

breakout. The Senate Bill TTPP 

assessment provisions as they stood 

before cigars were added as a category 

was basically the same as they are now. 

Cigars were simply added. 

Before cigars were added, size 

differential was not really a potential 

issue in theory because the other four 

categories of tobacco were weight 

categories and cigarettes may not have 

the weight variations of cigars. Congress 

added cigars purposely as a single 

category and did nothing to add 

provisions dealing with separating 

cigars by size. 

To add a size element now or 

subcategories would seem to be to 

legislate rather than to interpret the 

legislation. FETRA has been in 

existence for 6 years without change. 

The definition of volume that seems to 

apply and be intended is that of 

subsection 518d(g)(3). That is why, for 

now, USDA, pending comment, 

maintains the current regulation and 

Step B procedure. 

Fairness of Assessment, Congressional 

Intent 

With regard to the alternative, there is 

in its favor, to the extent relevant, the 

potential equitable concern of small 

cigars generating the same liability as 

large ones. We address that more below. 

The Step A calculations are done 

separately for small and large cigars 

even though the end result is one Step 

A category. In support, on the other 

hand, of the current method, reading 

subsection 518d(g) as requiring a unit 

method can be seen as actually giving 

meaning to the other provisions of 

FETRA rather than being contrary to 

them. 

FETRA as it was finally enacted does 

bounce among several concepts. Among 

them are (1) ‘‘market share’’ and (2) 

‘‘volume of domestic sales’’ and (3) 

‘‘gross domestic volume.’’ Also there is 

the ‘‘pro rata’’ language. Under 

subsection 518d(e), USDA is to allocate 

Step B on a ‘‘pro rata’’ basis and 

subsection 518d(i)(4) specifies that each 

manufacturer and importer only pay 

their ‘‘correct share of total gross 

domestic volume from all sources.’’ 

Specifically in subsection 518d(e) 

FETRA provides that the assessment be 

‘‘allocated on a pro rata basis’’ based on 

the manufacturer’s or importer’s ‘‘share 

of gross domestic volume.’’ 

In the alternative view suggested in 

the litigation, it is suggested that a 

maker of small cigars is paying more 

than its ‘‘pro rata’’ share of the ‘‘gross 

domestic volume’’ if it pays the 

assessment as currently calculated 

because ‘‘gross domestic volume’’ 

cannot, it is suggested there, be based 

just on units. However, in subsection 

518d(f) FETRA requires that the 

manufacturers and importers be 

assessed based on ‘‘market share’’ and 

‘‘market share’’ is defined in subsection 

518d(a) to mean ‘‘volume of domestic 

sales.’’ 

There appears to be a logical 

progression towards subsection 518d(g), 

which is entitled ‘‘Determination of 

volume of domestic sales.’’ That is also 

the expression in the title of subsection 

518d(h). Subsection 518d(g)(2) specifies 

that ‘‘the volume of domestic sales’’ be 

calculated based on ‘‘gross domestic 

volume’’ therefore tying the two 

concepts together, or seeming to, and 

then subsection 518d(g)(3) specifies that 

‘‘volume of domestic sales’’ will be 

measured by units for cigars. Therefore, 

considering all of the sections together 

and weighing them all together with all 

of the potential for controversy that they 

may produce, it seems on balance at this 

time and subject to comment and 

further consideration that all FETRA 


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subsections seem to be tied together and 

given precise meaning in subsection 

518d(g)(3) by tying the measure to units. 

This interpretation of all the parts of the 

statute to resolve any ambiguities 

produced by the various subsections 

seems particularly strong when all the 

suggested alternatives suggested so far 

result in contradictory interpretation for 

separate subsections of FETRA or 

involve data that no Federal 

Government agency has and cannot be 

verified if supplied by manufacturers, 

and would involve calculations that 

Congress presumably would have laid 

out in the statute. This view is not one 

of convenience on the part of the agency 

but reflects the actual provision of the 

statute both as to what Congress did 

express and what it did not. 

Congress in subsection 518d(h) 

specifically called for the use of official 

government reports that do not include 

weight data for domestically 

manufactured cigars, and that section is 

specifically entitled ‘‘Measurement of 

Volume of Domestic Sales’’ and has only 

a unit metric for cigars. It was Congress 

that recognized the need for a ready 

method to collect the assessment. It was 

an add-on to the taxes paid elsewhere. 

The reports show taxes paid, but taxes 

paid is not a volume measure—a view 

that may be at issue in the Step A 

litigation referred to earlier—and, in any 

event, (h) is referenced in (g) which 

specifies that the ‘‘volume’’ method to be 

used is a unit method. 

If Congress wanted to calculate Step 

B some other way, presumably Congress 

would have told USDA what to do and 

not left parts of the calculation to 

speculation, particularly given how 

detailed the specifications otherwise are 

in FETRA. Congress could have omitted 

the unit provision and specified that 

payments would be made on the basis 

of taxes paid. They did not do that. It 

may be that a particular party can show 

that the unit figures used by USDA are 

inaccurate. But that is a different issue 

than the method of the assessment. 

It seems to follow, pending comment, 

that a manufacturer’s or importer’s ‘‘pro 

rata’’ share of the cigar volume would 

under FETRA and these provisions be 

their share of the total number of units 

together of all cigars thus resolving any 

ambiguities that might otherwise be left 

to debate by the more general provisions 

elsewhere in FETRA. The word ‘‘based’’ 

in subsection 518d(g)(2) would not seem 

to mean merely ‘‘derived from’’ allowing 

other elements to intercede in the 

volume determination since subsection 

518d(f) (in conjunction with subsection 

518d(a)) provides that the ‘‘volume of 

domestic sales’’ is determinative and 

subsection 518d(g)(3) specifies that that 

volume is a unit-based matter solely. It 

is not derived from that number—it is 

that number, or so FETRA seems to say. 

The current approach therefore does 

seem to give meaning to all parts of 

FETRA. The current approach handles 

the matter in a coherent and logically 

consistent way. Companies, 

accordingly, do seem under the current 

regime to pay their pro rata share of the 

correct volume. Subsection 518d(g) 

defines ‘‘volume’’ (and is the only 

provision to do so) and therefore gives 

meaning to other parts of FETRA. Plus, 

as noted, the calculation method in 

FETRA is detailed and specific and 

Congress only enacted six categories not 

seven and seemed to do so 

intentionally. Congress has never 

changed FETRA even though it changed 

other taxes among the tobacco product 

categories in 2009. 

The alternatives discussed in this 

notice are largely based on 

interpretations of 7 U.S.C. 518d(e) and 

whether the current method provides a 

fair assessment so that no company is 

paying more than its share of gross 

domestic volume. The current method 

that USDA uses could arguably be seen 

as ‘‘unfair’’ because tiny cigars generate 

as much assessment as very large, and 

expensive, cigars. However, USDA 

cannot change its obligations on the 

basis of what it believes to be fair not 

fair—that would be to legislate and it is 

not clear that Congress was unaware of 

these issues or regarded the current 

method as unfair. There is nothing in 

the statute to suggest that the 

calculation method is a policy call and, 

in any event on further consideration, 

there is no reason to necessarily 

consider the assessments ‘‘unfair’’ as 

enacted—or now. 

Rather, the Step B assessments have 

only been about one-third of one cent 

per unit for small cigars, or about $3 per 

1,000 units. This does not seem to have 

impeded the marketing of small cigars, 

judging from the numbers that have 

been reported to USDA from the tax 

reports. Presumably, this very small 

assessment was passed on to consumers. 

It was common to all parties in the same 

category so there was no competitive 

advantage. 

Further, we understand that small 

cigars can be packaged like cigarettes, 

can be about the same size, and can 

compete with cigarettes. In 2004 the 

difference in general tax rates between 

small cigars and cigarettes was about 

$18 per 1,000 units (‘‘small cigars’’ were 

taxed at about $2 per 1,000 units). The 

FETRA assessment of $3 per 1,000 units 

was much less than that difference and 

also cigarettes themselves generate a 

FETRA assessment. ‘‘Small cigars’’ thus 

would still have had an overall tax 

advantage. That may have figured in 

Congress’s thinking in enacting FETRA. 

There have been some changes in the 

tax situation since as noted above, the 

2009 tax changes equalized ‘‘small cigar’’ 

and cigarette tax rates at about $50 per 

1,000 units, but made no changes to 

FETRA. However, the tax changes 

apparently motivated small cigar makers 

to increase the size of their cigars so that 

they could be taxed at a value rate 

(about 50 percent of value) as ‘‘large 

cigars’’ (which results in an amount well 

below the maximum unit rate for large 

cigars) and not at a unit rate as small 

cigars. 

At current rates, taxes for smaller 

large cigars (those are just heavy enough 

to be in the ‘‘large’’ category) are small 

enough (because their value is low 

enough) that they are taxed more 

cheaply (converted to a per unit basis) 

than those in the ‘‘small cigar’’ category. 

That is, these now slightly bigger cigars 

are now taxed, per unit, at a rate that is 

well below the roughly $50 per 1,000 

units rate for ‘‘small cigars’’ and 

cigarettes. In fact, the difference 

between these smaller large cigars 

(which still may be marketed like the 

small cigars of old in packages of 20) 

and cigarettes may even be greater than 

the old difference between ‘‘small 

cigars’’ and cigarettes prior to the 2009 

tax changes. That difference, it appears, 

can be even greater than the $18 

difference under the former rates. 

Smaller large cigars still have a tax 

advantage over cigarettes. 

We add in the way of perspective on 

these issues that there has been a 

reported shift in market volume from 

the ‘‘small’’ cigar category into the large 

category and cigar numbers have 

increased steeply as reflected in the 

change in the FETRA cigar Step A 

allotment. This means that that those 

that would benefit from a breakout of 

‘‘small cigars’’ may now no longer so 

benefit from the alternate method of 

making the Step B calculation, thus 

suggesting a certain volatility in result 

which of itself may have been 

something that Congress would have 

wanted to avoid. Some companies that 

formerly exclusively sold small cigars 

appear to be primarily selling ‘‘large’’ 

cigars to maintain their tax advantages 

over cigarettes. ‘‘Large cigar’’ market 

volume numbers have increased 

substantially since the 2009 tax change. 

As for the future, if all small cigars are 

reformulated to meet the weight per 

1,000 units requirements of the large 

cigar category and its cheaper tax rates, 

it could be that there are no marketings 

at all in the small cigar category, in 

which case the result of using the 


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alternate method would be exactly the 

same as the method currently used by 

USDA. 

But assuming a situation in which 

there are substantial small cigar 

marketings in the actual ‘‘small cigar’’ 

tax category, changing the Step B 

method would substantially change 

assessment levels. Even applied to 

assessment data from the first quarter of 

2010, it appears that the alternative 

method of using cigar subcategories 

would have increased the large cigar 

unit assessment as much as 12 times. 

That difference might actually have 

been greater before then because in 

2010, the shift in market volume from 

small to large cigars had already begun. 

We request comments on all aspects 

of the Step B assessment. Commenters 

can address whether they believe the 

Court’s decision absolutely requires a 

change or merely requires a change if 

agency reconsideration of the current 

method of Step B division suggests that 

a change is appropriate. Comments in 

support of a change should suggest 

where USDA would obtain the data to 

implement the alternative and how that 

information would be verified. 

Comments should address the question 

of whether a change would be 

retroactive for all, or prospective only, 

for those other than the company in 

connection with the current litigation. 

Commenters may want to indicate 

whether ‘‘small cigars’’ are standard in 

size or provide other marketing 

information that may be germane to the 

consideration of this issue. 

Commenters may want to address 

whether cigarettes should be impacted 

by any potential resulting changes. 

Because the statutory provisions at issue 

are also used for the assessment of 

cigarettes, particularly with respect to 

the use of units, cigarette manufacturers 

and importers may wish to comment on 

whether the cigarette Step B method 

currently in use should be changed or 

remain the same. For example, if our 

assumption that all cigarettes weigh the 

same is inaccurate, a change to the Step 

B calculation to take weight into 

account could impact cigarette 

manufacturers or importers. 

Conclusion and Guidance for 

Comments 

CCC is requesting comments from the 

public on the method used to calculate 

TTPP assessments for cigar 

manufacturers and importers, and any 

related issues. Any change would be 

reflected in the regulations in 7 CFR 

part 1463. Specific comments 

addressing the issues raised above are 

preferred, but all comments are 

welcome. Proposals for alternatives 

should address data sources and costs 

and the provisions of FETRA that 

support the alternative. This notice does 

not change the regulations; any change 

would be published in a subsequent 

rulemaking document. Because FETRA 

exempts TTPP from notice and 

comment rulemaking, any future action 

would likely be a final rule. 

The following suggestions may be 

helpful for preparing your comments: 

• Explain your views as clearly as 

possible. 

• Describe any assumptions that you 

used. 

• Provide any technical information 

and data on which you based your 

views. 

• Provide specific examples to 

illustrate your points. 

• Offer specific alternatives to the 

current regulations or policies and 

indicate the source of necessary data, 

the estimated cost of obtaining the data, 

and how the data can be verified. 

• Submit your comments to be 

received by FSA by the comment period 

deadline. 

Executive Order 12866 

The Office of Management and Budget 

(OMB) designated this notice as not 

significant under Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ and therefore has not reviewed 

this notice. 

Signed in Washington, DC, on March 15, 

2011. 

Val Dolcini, 

Acting Executive Vice President, Commodity 

Credit Corporation. 

[FR Doc. 2011–6668 Filed 3–21–11; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2011–0254; Directorate 

Identifier 2010–NM–180–AD] 

RIN 2120–AA64 

Airworthiness Directives; The Boeing 

Company Model 737–600, –700, –700C, 

–800, –900, and –900ER Series 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above. For certain 

airplanes, this proposed AD would 

require a one-time inspection for 

damage of the hydraulic actuator rod 

ends and actuator attach fittings on the 

thrust reversers, and repair or 

replacement if necessary. For all 

airplanes, this proposed AD also would 

require repetitive inspections for 

damage of the hydraulic actuator rod 

ends, attach bolts, and nuts; repetitive 

inspections for damage of fitting 

assemblies, wear spacers, and actuator 

attach fittings on the thrust reverser; 

repetitive measurements of the wear 

spacer; and corrective actions if 

necessary. This proposed AD was 

prompted by in-service damage of the 

attachment fittings for the thrust 

reverser actuator. We are proposing this 

AD to detect and correct such damage, 

which could result in actuator attach 

fitting failure, loss of the thrust reverser 

auto restow function, and consequent 

loss of control of the airplane. 

DATES: We must receive comments on 

this proposed AD by May 6, 2011. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, 

M–30, West Building Ground Floor, 

Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact Boeing 

Commercial Airplanes, Attention: Data 

& Services Management, P.O. Box 3707, 

MC 2H–65, Seattle, Washington 98124– 

2207; phone: 206–544–5000, extension 

1; fax: 206–766–5680; e-mail: 

me.boecom@boeing.com; Internet: 

https://www.myboeingfleet.com. You 

may review copies of the referenced 

service information at the FAA, 

Transport Airplane Directorate, 1601 

Lind Avenue, SW., Renton, Washington. 

For information on the availability of 

this material at the FAA, call 425–227– 

1221. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Management Facility between 

9 a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. The AD 

docket contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Office 


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