Details on AMS Proposed Rule for New Dairy Product Import Tax, Etc.

The following are highlights of the details of the proposed rule (See ITT's Online Archives or 05/21/09 news, 09052110, for BP summary which announced its issuance.)

Comments on the proposed rule are due by June 18, 2009.

AMS is Proposing an Import Tax of 7.5 Cents per Hundredweight

The 2008 Farm Bill mandates and AMS is proposing the collection of an assessment, to be set at a rate of 7.5 cents per hundredweight of milk, or equivalent thereof, on dairy products imported into the U.S. producers would also be subject to an assessment of 15 cents per hundredweight for all milk produced and marketed. (Note that the 2002 Farm Bill mandate for an assessment on dairy products imported into the U.S was never implemented due to controversy over the term "United States" (which the 2008 Farm bill resolved).)

Importer, Imported Dairy Product Would be Defined

The term "importer" would be defined under new 7 CFR 1150.121. According to the proposed regulations, importer means a person that imports imported dairy products into the U.S. as a principal or as an agent, broker, or consignee of any person who produces or handles dairy products outside of the U.S. for sale in the U.S., and who is listed as the importer of record for such dairy products.

1. CFR 1150.120 would be added to define an "imported dairy product" as any product that is imported into the U.S. under any of the HTS classification numbers listed in proposed new 7 CFR 1150.152(b)(1)(ii) (table of imported dairy products subject to an assessment)¹.

"United States" Would be Redefined to Include Alaska, Hawaii, DC, Puerto Rico

According to the proposed rule, the term United States (defined in 7 CFR 1150.106) would be redefined to include all of the States, the District of Columbia, and the Commonwealth of Puerto Rico. (This amendment would require that the States of Alaska, Hawaii, DC, and Puerto Rico be added to the existing regions of the National Dairy Promotion and Research Board (Dairy Board).)

Two Methods Proposed for Importers to Calculate Assessments

With respect to importers, this rule proposes two methods to calculate assessments due:

1. If the importer has sufficient documentation to determine the milk solids content of the imported dairy product, the importer would use an assessment rate of $0.01327 per kilogram (kg) of milk solids¹ to calculate and pay the assessment.
2. If the importer does not have adequate documentation concerning the milk solids content of the product to be imported, the importer would pay a rate per kilogram of product volume, as listed in the assessment rate table contained in the proposed rule.

AMS notes that for most products, the default assessment rate for each HTS code would be based upon maximum milk solids content. In some cases, the maximum milk solids content is stated in the HTS; in other cases, various sources other than the HTS would be used to estimate the maximum milk solids content for the particular HTS number.

Importer Assessment Would be Due When Entry Summary Documents Filed

The assessment on imported dairy products would be required to be paid by the importer to U.S. Customs and Border Protection at the time of entry summary for subject products. The assessments collected by CBP would be transferred to the Dairy Board.

The Dairy Board, at its discretion, would verify the information reported by importers to CBP to determine if additional money is due to the Dairy Board or an amount is due to an importer.

Late-Payment Charges for Importers

1. CFR 1150.156 would be modified to cover late-payment charges for importers. Any unpaid assessments to the Dairy Board would be increased 1.5% each month beginning with the day following the date such assessments were due. Any remaining amount due, which would include any unpaid charges previously made, would be increased at the same rate on the corresponding day of each month thereafter until paid.

(Any assessment paid to CBP subsequent to the time entry summary documents were filed by the importer would be considered to be past due.)

Exemption for Importers Who Import 100% Organic Products

1. CFR 1150.157 would be amended to state that an importer who imports only products that are eligible to be labeled as 100% organic under the National Organic Program (7 CFR Part 205) and who is not a split operation would be exempt from the payment of assessments.

That importer would submit documentation to the Dairy Board and request an exemption from assessment on 100% organic dairy products - on a form provided by the Dairy Board - at any time initially and annually thereafter as long as the importer continues to be eligible for the exemption. If the importer complies with the requirements, the Dairy Board would grant the exemption and issue a Certificate of Exemption to the importer.

The Board would also issue the importer a 9-digit alphanumeric HTS classification valid for one year from the date of issue. This HTS classification would be entered by the importer on the Customs entry documentation. Any line item entry of 100% organic dairy products bearing this HTS classification assigned by the Dairy Board would not be subject to assessments.

Importer Reporting, Books and Records Proposed Requirements

1. CFR 1150.171 would be revised to require reports from importers as necessary to verify that importer assessments have been carried out correctly, including verification that correct amounts were paid based upon milk solids content of the imported dairy products.
2. CFR 1150.172 would be modified to add importer books and records requirements. Each importer of dairy products would be required maintain and make available for inspection such books and records to verify that importer assessments have been carried out correctly, including verification that correct amounts were paid based upon milk solids content of the imported dairy products. Such records would be retained for at least two years beyond the calendar period of their applicability. Such information could include but would not be limited to invoices, packing slips, bills of lading, and letters from the manufacturer on the manufacturer's letterhead stating the milk solids content of imported dairy products.

Dairy Board Would be Expanded to Include Milk Product Importers

AMS is also proposing to expand, initially, the Dairy Board to include two importer representatives.

Modifications to the Dairy Board, which currently consists of 36 producer members, would also be made to the established Board regions to add Alaska, Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico to the region of closest geographic proximity.

The importers, like domestic dairy farmers who are appointed to the Dairy Board, would serve for terms of three years and would be eligible to serve two consecutive three-year terms with the exception that the two importer members initially appointed to the Board would serve until October 31, 2010, and October 31, 2011.

Comments Due by June 18th

AMS is seeking comments on its proposed rule by June 18, 2009. Comments may address any proposed provision of the regulation, but specifically, interested parties are asked to submit comments on the proposed designation of imported dairy products to be assessed under the Dairy Promotion and Research Order and the proposed methods used to calculate assessments on such products

¹The proposed rule designates a comprehensive list of products containing milk solids, including: dairy products made from cow's milk included in HTS Chapter 4, headings 0401 through 0406; other dairy items whose HTS description specifies that the product contains cow's milk, butterfat, and/or milk solids; and certain items known to usually contain dairy ingredients.

The following types of dairy-related items are specifically excluded from the list: items subject to by HTS General Note 15, which includes products imported by or for the account of any U.S. government agency and products imported for the personal use of the importer-products that will not enter the commerce of the U.S.; items that categorically do not contain cow's milk; items categorically used as animal feed; and items which may or may not contain milk solids and parameters for milk solids are not stated in the HTS, such as pizza, quiche, and pudding.

AMS contact: Whitney Rick (202) 720-6909

AMS proposed rule (FR Pub 05/19/09) available at http://edocket.access.gpo.gov/2009/pdf/E9-11492.pdf