SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The proposed rule has been determined to be non-significant under E.O. 12866 and has been reviewed by the Office of Management and Budget.

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 proposed rule will not have a significant economic impact on small businesses participating in the program.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988. The provisions of this proposed rule would not have preemptive effect with respect to any State or local laws, regulations, or policies which conflict with such provision or which otherwise impede their full
implementation. The proposed rule would not have a retroactive effect. Before any judicial action may be brought forward regarding this proposed rule, all administrative remedies must be exhausted.

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 proposed rule.

Unfunded Mandates Reform Act (Pub. L. 104-4)

    Public Law 104-4 requires consultation with State and local officials and Indian tribal governments. This proposed rule does not impose an unfunded mandate or any other requirement on State, local, or tribal governments. Accordingly, these programs are not subject to the
provisions of the Unfunded Mandates Reform Act.

Executive Order 12630

    This Order requires careful evaluation of governmental actions that interfere with constitutionally protected property rights. This proposed rule would 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.

Government Paperwork Elimination Act

    FAS is committed to compliance with the Government Paperwork Elimination Act, which requires Government agencies, in general, to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

Background

    The proposed rule at 7 CFR part 6 would revise the Dairy Tariff-Rate Import Quota Licensing regulation in effect since October 9, 1996, by suspending the provisions with respect to the reduction of historical licenses based on surrenders of unused amounts.
    Import licensing is one of the tools the U.S. Department of Agriculture (USDA) uses to administer the tariff-rate quota (TRA) system for U.S. imports of dairy products. TRQs replaced strictly quantitative import quotas for dairy products on January 1, 1995, as a result of the Uruguay Round Agreement on Agriculture and the Uruguay Round Agreements Act.
    Under these TRQs, a low tariff rate, called the in-quota rate, applies to imports up to a specified quantity. A higher tariff rate called the over-quota rate, applies to any imports in excess of that
amount. TRQ rates and quantities vary by product.
    For dairy products subject to TRQs, a license issued by the Foreign Agricultural Service (FAS) is generally required to import products at the in-quota rate. No license is required to import products at the over-quota rate.
    Under the historical license reductions provisions, the amount of the license issued by FAS is reduced if the importer surrenders more than 50 percent of the license during either three consecutive years or at least three out of five consecutive years. Specifically, section
6.25(b)(1)(i) provides that beginning with the 1999 quota year, if a licensee has surrendered more than 50 percent of a historical license in each of the three prior years, that license will be permanently reduced to the average amount entered during those three years. Section 6.25(b)(1)(ii) provides that beginning with the quota year 2001, if a licensee surrenders more than 50 percent of a historical license in at least three out of the five prior years, that license will be
permanently reduced to the average amount entered during those five years. These provisions are intended to provide a strong incentive for companies with historical licenses to utilize their licenses.
    The current regulation permitted the Secretary of Agriculture to suspend the historical license reduction provisions applicable prior to 1999. In 1998, the Secretary published a notice in the Federal Register suspending these provisions for five years, thereby delaying their implementation until 2004. The provisions were suspended in order to "provide adequate time for historical licensees of European Union (EU) cheeses to adjust to changing market conditions; to find alternative suppliers of cheese in the EU; and to develop new markets to enable importers to fully utilize their historical licenses for EU cheese.'' FAS also noted: "The suspension is consistent with the intent of the U.S.-EU Uruguay Round bilateral agreement on maximizing utilization of U.S. licenses for EU cheese.''
    However, current market conditions have again prompted the need for a temporary suspension of the historical license reduction provisions. The production of certain cheeses in the EU, particularly Swiss cheese, has declined primarily due to a reduction in subsidies. Other cheeses,
particularly processed Gruyere cheese, have declined in production primarily due to a change in consumer preferences and market demand. And finally, production of industrial grade low-fat cheeses has declined precipitously due to a switch to more profitable, consumer-oriented cheeses. Additionally, the expansion of the EU from 15 to 27 countries has diminished the availability of milk for cheese production and reduced availability of cheese for export.
    This temporary suspension is intended to improve program administration and reflect changes in the markets for cheese and other dairy products subject to import licensing requirements. The historical licenses provide for orderly importation of a wide variety of cheeses and permit companies to invest in market development with some assurance of future ability to provide specific types of cheese.

List of Subjects in 7 CFR Part 6

    Agricultural commodities, Cheese, Dairy products, Imports, Reporting and recordkeeping requirements.

    For the reasons described in the preamble, the Department of Agriculture proposes to amend 7 CFR part 6 as follows:

PART 6--IMPORT QUOTAS AND FEES

    1. The authority citation for part 6 continues to read as follows:

    Authority: Sec. 8, 65 Stat. 75; 19 U.S.C. 1365.

    2. Section 6.25 is amended by revising paragraphs (b)(1)(i) and
(ii) to read as follows:


Sec.  6.25  Allocation of Licenses

* * * * *
    (b) * * *
    (1) * * *
    (i) Beginning with the 2012 quota year, a person who has surrendered more than 50 percent of such historical license in each of the prior three quota years will thereafter be issued a license in an amount equal to the average annual quantity entered during those three quota years; and
    (ii) Beginning with the 2014 quota year, a person who has surrendered more than 50 percent of such historical license in at least three of the prior five quota years will thereafter be issued a license in an amount equal to the average annual quantity entered during those five quota years.
 

Dated: September 14, 2007.
Michael W. Yost,
Administrator, Foreign Agricultural Service