USDA Issues Proposed Rule to Lower the Cotton Tax on Imported Cotton Products (Except for Raw Cotton, it Would be Raised )

(The price adjustment is based on the average price received by producers for upland cotton for the most recent period, which is currently 2003. In addition, the cotton assessment (fee) is the sum of two components - the "bale" portion (which is not proposed to be changed) and the "supplemental" portion (which is proposed to be changed).)

The proposed rule would also create a new adjustment for imported cotton products (except raw cotton), in order to account for the estimated quantity of U.S. cotton contained in these products. AMS states that this new adjustment is being proposed in order to ensure that the U.S. cotton content of imported products is not subject to the cotton assessment more than once, as the majority of U.S. (upland) cotton is now exported.

Imported raw cotton (classified in nine tariff numbers) would be unaffected by this proposed new adjustment for U.S. cotton content.

Imported Cotton Products (Except Raw Cotton)

AMS states that using the most current data, the proposed new adjustment for U.S. cotton would decrease the total amount paid by importers of cotton products by approximately 22.2% from what the amount would be from the price adjustment alone.

When the proposed new adjustment and the proposed price adjustment are applied together, the proposed rule would decrease the assessment ratefor imported cotton products to $0.008147 per kilogram (from the current $0.008267 per kilogram). This change would result in a 1.5%decrease in the assessment rate for such products.

Imported Raw Cotton

AMS states that using current procedures, the proposed price adjustment would result in a 26.7% increase in raw cotton import assessments.

As a result, the proposed rule would increase the assessment rate on imported raw cotton to $0.010472 per kilogram (from the current $0.008267 per kilogram). This change would result in a 26.7% increase in the assessment rate for such products.

Exemptions and Refunds Would Continue to be Available

AMS states that under this proposed rule, exemptions and refunds would continue to be provided for importers wishing to document the U.S. cotton content of specific goods.

Proposed Revised Cotton Assessment Table for Imports

AMS' proposed rule also contains a proposed revised assessment table, listing the 10-digit HTS numbers subject to the cotton assessment; the conversion factor for each such HTS number, which is determined by AMS and varies according to the tariff number; and the resulting converted proposed assessment rate for each such HTS number, expressed in cents per kilogram.

(See ITT's Online Archives or 05/27/03 news, 03052710, for BP summary of the final rule which imposed the current cotton assessment rates.)

-written comments must be received on or before March 14, 2005

AMS Contact - Whitney Rick (202) 720-2259

AMS Proposed Rule (D/N CN-04-001, FR Pub 01/12/05) available athttp://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-475.pdf

BP Notes

The 26.7% increase in the assessment rate for imported raw cotton is due to the higher average price received by producers for upland cotton in 2003, $1.2125 per kg. (up from $.7716 per kg. in 2002).

Without the proposed adjustment for U.S. cotton, the cotton assessment rate for imported cotton products would also increase 26.7%.

The cotton "assessment" is also termed a "fee," or sometimes a "tax."