SUPPLEMENTARY INFORMATION:

A. Background

Amendments to the Cotton Research and Promotion Act (7 U.S.C. 2101-2118) (Act) were enacted by Congress under subtitle G of title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-624, 104 Stat. 3909, November 28, 1990). These amendments contained two provisions that authorized changes in the funding procedures for the Cotton Research and Promotion Program. These provisions provided for: (1) the assessment of imported cotton and cotton products; and (2) termination of refunds to cotton producers. (Prior to the 1990 amendments to the Act, producers could request assessment refunds.)

As amended, the Cotton Research and Promotion Order (7 CFR part 1205) (Order) was approved by producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in the Federal Register on December 10, 1991 (56 FR 64470). A proposed rule implementing the amended Order was published in the Federal Register on December 17, 1991 (56 FR 65450). Implementing rules were published on July 1 and 2, 1992 (57 FR 29181) and (57 FR 29431), respectively.

This proposed rule amends the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)) (Regulations) that is used to determine the Cotton Research and Promotion assessment on imported cotton and cotton in cotton-containing products. The total rate of assessment levied on cotton imports is the sum of two parts. The first part of the assessment is based on the weight of cotton imported, levied at a rate of $1 per bale of cotton, which is subsequently converted to a fixed amount per kilogram to facilitate the U.S. Customs Service. For the purposes herein, a bale of cotton is equivalent to 500 pounds, or 226.8 kilograms. The second part of the import assessment (referred to as the supplemental assessment) is levied at a rate of five-tenths of one percent of the historical value of domestically produced cotton.

Section 1205.510(b)(2) of the Regulations provides for assigning the 12-month average of monthly weighted average prices received by U.S. farmers for Upland cotton to represent the value of imported cotton. The source for the weighted average price statistic is Cotton and Cottonseed Market Year Average Prices Received, Agricultural Prices (September 2025), a publication of the National Agricultural Statistics Service (NASS) of the U.S. Department of Agriculture. Use of the NASS weighted average price figure in the calculation of supplemental assessments on imported cotton and cotton in cotton-containing products yields an assessment that is the same as the assessment that is paid on domestically produced cotton.

The marketing year for cotton is defined by NASS as the period August 1 to July 31. As such, the NASS 2024 marketing year for cotton pricing began August 1, 2024, and ended July 31, 2025. Further, in computing the weighted average, NASS uses monthly prices and marketings that are expressed in a statistical bale weight of 480-pound net weight; therefore, a factor of 1.04167 (500/480) is utilized to convert the figure to a 500-pound net weight bale.

To determine the revised total rate of assessment, as proposed herein, the formula employed is as follows: ^[1]

One bale equals 500 pounds.

One kilogram (kg) equals 2.2046 pounds.

One pound equals 0.453592 kg.

One Dollar per Bale Assessment Converted to Kilograms

A 500-pound bale equals 226.8 kg. (500 × 0.453592).

The $1 per bale assessment equals $0.002 per pound (0.2 cents per pound) ($1/500) or $0.004409 per kg (0.4409 cents per kg) ($1/226.8).

Supplemental Assessment of 5/10 of One Percent of the Value of the Cotton Converted to Kilograms

As calculated by NASS, the 2024 marketing year weighted average price received by United States producers for Upland cotton was $0.632 per pound. ( printed page 37350)

That amount, converted to account for 500-pound bales, equals $0.658 ($0.632 × 1.04167).

That value, converted to kilograms, equals $1.4506 per kg ($0.658 × 2.2046).

Five tenths of one percent of that amount equals a $0.007253 per kg (0.7253 cents per kg) (1.4506 × 0.005) supplemental assessment.

Total Rate of Assessment

Therefore, the total rate of assessment per kilogram of raw cotton is the sum of the $1 per bale equivalent assessment ($0.004409 per kg) and the supplemental assessment ($0.007253 per kg), which equals $0.011662 per kg (1.1662 cents per kg).

The current total rate of assessment is 1.3247 cents per kg for imported cotton or cotton in cotton-containing products. The revised total rate of assessment, as proposed in this rule, would be 1.1662 cents per kg, a decrease of 0.1585 cents per kg. This reflects the decrease in the average of monthly weighted average prices of Upland cotton received by U.S. farmers during the NASS marketing year August 1, 2024, to July 31, 2025, which represents the 12-month period.

The Import Assessment Table in § 1205.510(b)(3) of the Order indicates the total rate of assessment in cents per kilogram due for each Harmonized Tariff Schedule of the United States (HTS) number that is subject to assessment. The United States International Trade Commission modifies the HTS, which is published at https://hts.usitc.gov. In this rule, AMS is proposing to amend the Import Assessment Table to revise the total rate of assessment to account for the change in the supplemental assessment rate. This table must be revised each year to reflect the change to the supplemental assessment rate and any changes to the HTS numbers and respective conversion factors.

The conversion factors are provided by the Economic Research Service (ERS) to reflect estimates of the cotton raw-fiber content by HTS number. The factors are derived from information obtained from textile industry contacts to estimate the amount of raw fiber required, including losses during the manufacturing process, to make each finished textile product (raw-fiber-equivalent quantity). ERS publishes the resulting raw-fiber-equivalent data in the Cotton and Wool Outlook and in the Cotton and Wool Yearbook.

AMS believes that these amendments are necessary to ensure that assessments collected on imported cotton and the cotton in cotton-containing products are the same as those paid on domestically produced cotton. Accordingly, changes reflected in the rule should be adopted and implemented as soon as possible, since it is required by regulation.

B. Rulemaking Analyses

Executive Order 12866

This action is exempt from the Office of Management and Budget (OMB) review process required by Executive Order 12866. This rule amends an existing research and promotion program and is necessary for the continued operation of the Cotton Research and Promotion Order. Additionally, this action is exempt from the requirements of Executive Order 14192, “Unleashing Prosperity Through Deregulation,” pursuant to section 5(c).

Executive Order 13175

This proposed rule has been reviewed under Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments,” which requires Federal agencies to consider whether their rulemaking actions would have Tribal implications. AMS has determined that this rule is unlikely to have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988, “Civil Justice Reform.” This proposed rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 12 of the Act, any person subject to an order may file with the Secretary of Agriculture (Secretary) a petition stating that the order, any provision of the plan, or any obligation imposed in connection with the order is not in accordance with law and requesting a modification of the order or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. After the hearing, the Secretary would rule on the petition. The Act provides that the District Court of the United States in any district in which the person is an inhabitant, or has his principal place of business, has jurisdiction to review the Secretary's ruling, provided a complaint is filed within 20 days from the date of the entry of the Secretary's ruling.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this proposed rule on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. The Small Business Administration (SBA) defines, in 13 CFR 121.201, a small cotton farming business as those having annual receipts of no more than $3.25 million (North American Industry Classification System (NAICS) Code 111920) and small “Other Farm Product Raw Material Merchant Wholesalers” (cotton merchants/importers) (NAICS Code 424590) as having no more than 175 employees.

According to the NASS 2022 Agriculture Census, the number of cotton farms is 14,283. NASS also reports that the total U.S. production value for Upland production was $4,244,576,000 for the 2024 marketing year. Dividing the crop value by the number of cotton farms, the average crop value is approximately $297,177. Since $297,177 is well below $3.25 million and assuming a normal distribution, the majority of cotton producers are small according to the SBA standards.

The Cotton Board estimates approximately 36,000 importers are subject to the Cotton Research and Promotion Order. According to the United States Census Bureau's “2022 Survey of SUSB Annual Data Tables by Establishment Industry,” most importers are considered small entities as defined by the SBA (13 CFR 121.201).

This rule would only affect importers of cotton and cotton in cotton-containing products and would decrease the total rate of assessments paid by the importers under the Cotton Research and Promotion Order. The current assessment on imported cotton is 1.3247 cents per kg of imported cotton. The proposed amended total rate of assessment would be 1.1662 cents per kg, which was calculated based on the 12-month weighted average of prices received by U.S. cotton Upland farmers in the 2024 marketing year (August 1, 2024-July 31, 2025). The proposed supplemental rate of assessment follows § 1205.510 of the Order, which provides that “[t]he rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” Further, § 1205.510 provides that the 12-month average of monthly weighted average prices received by U.S. farmers is to be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported ( printed page 37351) cotton and will be expressed in kilograms.

Under the Cotton Research and Promotion Program, assessments are used by the Cotton Board to finance research and promotion activities designed to increase consumer demand for Upland cotton in the United States and international markets. According to the Cotton Board Independent Auditor's Report for December 31, 2024, producer assessments totaled $35.4 million and importer assessments totaled $47.6 million. Based upon this report, should the volume of cotton products imported into the U.S. remain at the same level in 2025, one could expect a decrease of assessments, at the assessment rate proposed herein, by approximately $5,693,178.

No negative or disproportionate impacts on large or small entities are anticipated in connection with this proposed rule. The positive impacts, which are expected to accrue to all industry members, both large and small, are improved for the benefit of all commodity producers, handlers, importers, and consumers, regardless of size.

This proposed rule would decrease the supplemental assessment part of the total rate of assessment imposed on cotton importers. The supplemental assessment is a formula-based calculation that is calculated annually in accordance with the Order. There are no significant alternatives that would allow the importer assessment to remain at the same rate as that levied on cotton produced within the United States. Assessments are applied uniformly to all producers and importers, based upon their volume handled.

Imported organic cotton and cotton products may be exempt from assessment, if eligible under § 1205.519. Additionally, any importer can request a reimbursement for their part of their assessment that was collected on cotton produced in the United States, or on cotton that is not Upland cotton, by following the procedures in § 1205.520.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. chapter 35), the information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0093, National Research, Promotion, and Consumer Information Programs. No changes in those requirements would be necessary as a result of this proposed rule. Should any changes become necessary, they would be submitted to OMB for approval.

This proposed rule would not impose any additional reporting or recordkeeping requirements on either small or large cotton handlers or importers. Reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide decreased opportunities for citizen access to Government information and services, and for other purposes.

AMS has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.

After consideration of all relevant material and information presented, USDA has determined that this proposed rule is consistent with, and will effectuate the purposes of, the Act.

A 30-day comment period is provided to allow interested persons to respond to this proposed rule. All written comments timely received will be considered before a final determination is made on this rule.

For the reasons set forth in the preamble, AMS proposes to amend 7 CFR part 1205 as follows:

1. The authority citation for part 1205 continues to read as follows:

Authority: 7 U.S.C. 2101-2118; 7 U.S.C 7401.

2. In § 1205.510, paragraph (b)(2) and the table in paragraph (b)(3) are revised to read as follows: