Department of Agriculture, Commodity Credit Corporation: Tobacco Transition Assessments

GAO-05-384R: Mar 8, 2005

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GAO reviewed the Department of Agriculture, Commodity Credit Corporation's (CCC) new rule on tobacco transition assessments. GAO found that (1) the final rule provides the manner in which assessments are to be made on various domestic manufacturers of importers of tobacco products to fun the tobacco transition payment program required by Title VI of the American Jobs Creation Act of 2004; and (2) CCC complied with the applicable requirements in promulgating the rule.

Department of Agriculture, Commodity Credit Corporation: Tobacco Transition Assessments, GAO-05-384R, March 8, 2005

B-295960

March 8, 2005

The Honorable Saxby Chambliss
Chairman
The Honorable Tom Harkin
Ranking Minority Member
Committee on Agriculture, Nutrition, and Forestry
United States Senate

The Honorable Bob Goodlatte
Chairman
The Honorable Collin C. Peterson
Ranking Minority Member
Committee on Agriculture
House of Representatives

Subject: Department of Agriculture, Commodity Credit Corporation: Tobacco Transition Assessments

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Agriculture, Commodity Credit Corporation (CCC), entitled "Tobacco Transition Assessments" (RIN: 0560-AH31). We received the rule on February 22, 2005. It was published in the Federal Register as a final rule on February 10, 2005. 70 Fed. Reg. 7007.

The final rule provides the manner in which assessments are to be made on various domestic manufacturers or importers of tobacco products to fund the tobacco transition payment program required by Title VI of the America Jobs Creation Act of 2004 (the 2004 Act) (Pub. L. 108-357).

Enclosed is our assessment of the CCC's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Our review indicates that CCC complied with the applicable requirements.

If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210. The official responsible for GAO evaluation work relating to the subject matter of the rule is Robert Robinson, Managing Director, Natural Resources and Environment. Mr. Robinson can be reached at (202) 512-3841.

signed

Kathleen E. Wannisky
Managing Associate General Counsel

Enclosure

cc: Thomas J. Witzig
Director, Regulatory Review Group
Department of Agriculture

ENCLOSURE

ANALYSIS UNDER 5 U.S.C. 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF AGRICULTURE,
COMMODITY CREDIT CORPORATION
ENTITLED
"TOBACCO TRANSITION ASSESSMENTS"
(RIN: 0560-AH31)

Cost-benefit analysis

The final rule is expected to result in the procurement of approximately10.14 billion in assessments from tobacco manufacturers and importers over a 10-year period or approximately $1.014 billion annually. Manufacturers and importers are expected to ultimately pass the majority of these costs on to consumers of tobacco products through small increases in the sale price.

The 2004 Act specifies each category of tobacco products share of the assessment based on prior share of the market over a specified period. The cigarettes' portion of the fiscal year 2005 assessment is 96.331 percent or975 million. The assessment is about 4.8 cents per pack. The cigars' proportion of the FY 2005 assessment is 2.783 percent or $28.2 million and 0.4 cents per cigar.

Other products' shares of the assessment are (the implied increase in product prices in cents per pound are in parenthesis): snuff--$5.5 million (7.3), chewing tobacco--$1.1 million (2.4), pipe tobacco--$.7 million (13.8), and roll-your-own--$1.7 million (13.8).

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. 603-605, 607, and 609

Since the final rule was not preceded by a notice of proposed rulemaking, the requirements of the Regulatory Flexibility Act do not apply.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532-1535

Since the final rule was not preceded by a notice of proposed rulemaking, the requirements of the Unfunded Mandates Reform Act of 1995 do not apply.

et seq .