AMS Proposes to Triple Cotton Import Tax HTS Nos, Raise Rate 16%
The Agricultural Marketing Service is issuing a proposed rule that would amend the Cotton Board Rules and Regulations to increase the supplemental assessment rate, revise the textile trade conversion factors, and greatly expand the number of Harmonized Tariff Schedule (HTS) numbers subject to assessments under the upland Cotton Research and Promotion Order.
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AMS states that these changes are necessary to ensure that assessments collected on imported raw cotton and the cotton content of imported products are the same as assessments collected on domestically produced cotton.
Comments are due by July 5, 2011.
Would Increase Supplemental Cotton Assessment 16%
AMS is proposing to increase the value assigned to imported cotton for the purpose of calculating the supplemental portion of the assessment1 by 16% (from $0.01088 to $0.012665 per kilogram of imported cotton). According to AMS, this increase reflects the increase in the weighted average price of upland cotton received by U.S. farmers during the period January-December 2010.
(Should the volume of cotton products imported into the U.S. in 2011 remain at the same level as in 2009, AMS expects the revised assessment rate to generate an additional $6.67 million in revenue.)
Would Revise Conversion Factors to be more Accurate
AMS is also proposing, at the request of the Cotton Board, to revise the textile trade conversion factors used to determine the raw fiber equivalents of imported cotton-containing products2 to reflect updated textile technologies and to more accurately estimate the amount of cotton contained in cotton-containing imports. AMS states that this will assure a more fair and accurate assessment of imported cotton-containing products.
(According to AMS, an analysis of these cotton trade conversion factors for a subset of cotton textile imports on which cotton import assessments are collected revealed that the differences between the current conversion factors and proposed conversion factors represent an approximate 4.7% reduction in cotton or $1.93 million less in assessments.)
Would Triple Affected HTS Nos to Cover Remaining 11% of Unassessed Products
Also in response to a request from the Cotton Board, AMS is proposing to expand the HTS tariff numbers affected by the assessment from the current 706 to 2,371 in order to assess all imported cotton and cotton-containing products, instead of just 89% of such products. (See notice for proposed list of HTS numbers.)
(According to a study, if AMS had expanded to include the 2,371 HTS numbers in 2009, the cotton program could have collected approximately $4.81 million more that year. In addition to increasing funds, AMS states that increasing the number of HTS numbers to 2,371 would better equalize importer and domestic producer assessments.
AMS Says Existing Exemptions Would Still Apply
AMS reminds the trade that under the Cotton Research and Promotion Regulations, importers meeting certain criteria are exempt from assessments and these exemptions would still apply. For example, importers with line-items appearing on U.S. Customs and Border Protection (CBP) documentation with value of the cotton contained therein results of an assessment of two dollars ($2.00) or less are not subject to assessments. In addition, imported cotton and cotton-containing products may be exempt from assessment if the cotton content is U.S. produced, cotton other than Upland, or 100% organic (if certain requirements are met). (See 7 CFR 1205.519.)
(CBP sources note that for articles which do not contain any cotton but are properly classified under an HTS number that is subject to a cotton assessment, the exemption number “999999999” should be reported in column 34 to indicate that no fee is required. See CSMS #92-000182 for instructions on the cotton assessment, including those on the other exemptions described above. (here)
1The total value of assessments is the sum of a flat rate levied on the weight of cotton imported and a supplemental assessment levied at a rate of five-tenths of one percent of the value of imported raw cotton or the cotton content of imported cotton-containing products.
2In the Import Assessment Table that appears in 7 CFR 1205.510(b)(3)(ii).
(See ITT’s Online Archives or 07/09/09 news, 09070935, for BP summary of AMS increasing the supplemental portion of the tax on imported cotton in August 2009 by 10.2%.)
AMS contact -- Shethir Riva (540) 361-2726
(FR Pub 06/03/11, D/N AMS-CN-11-0026)