Fact File: the sugar-containing products re-export program

Question: What do catsup, hard candy, baking mixes, caramel toppings and cigarettes have in common?

Answer: They all contain sugar. Manufacturers of sugar-containing products who export or who are interested in entering the export market may find that participating in a program operated by the U.S. Department of Agriculture (USDA) will give their product a competitive edge in the overseas market.

The Sugar-Containing Products Re-Export Program is one of three quota-exempt programs operated by the USDA. Quota-exempt programs are separate and distinct from sugar entering the United States under the tariff rate quota. The other quota-exempt programs are the Program for Sugar To Be Re-Exported in Refined Form and the Program for Sugar for Production of Polyhydric Alcohol.

The Sugar-Containing Products Re-Export Program was initiated by regulations issued by the Secretary of Agriculture on Jan. 25, 1984. The program permits domestic manufacturers access to world price sugar strictly for the purpose of manufacturing sugar-containing products for the export market. Its purpose is to ensure the competitiveness of U.S. sugar-containing products in the world market. U.S. exports are generally not competitive because the U.S. price support program for sugar keeps the domestic price at more than double the world price.

Where do the licensees get the sugar? From refiners participating in the Re-Export Program for Refiners. Refiners may either re-export the refined sugar or transfer it to manufacturers licensed under the Sugar-Containing Products Re-Export Program. Prior to October 1990, companies were permitted to import their own sugar requirements directly. Under the new regulations, direct importation is no longer permitted.

Who is eligible for a license? The Sugar-Containing Products Re-Export Program is open to all manufacturers who agree to abide by the program's requirements and are approved manufacturers. Letters of application should contain the following information: the company's name and subsidiaries, if any; the name and address of the applicant; and the amount of the license in short tons. The maximum license amount is 10,000 short tons or 20 million pounds.

The letter of application should also state the kind and polarity (a measure of purity or refinement) of the sugar, the name of the bonding agency that will provide a bond or standby letter of credit in favor of the USDA, and a description of the products to be exported, their estimated sugar content and likely markets.

Finally, applicants must certify that they will export an amount of sugar equal to that transferred within the prescribed time limits and that the company will not request duty drawback from Customs for the sugar contained in the products exported under the auspices of the program.

What destinations are eligible for the program? Only the District of Columbia and Puerto Rico are ineligible for credit under the Re-export Program. Exports destined for overseas U.S. military installations are eligible, as are exports to Guam and the U.S. Virgin Islands.

How large should the license be? The license amount should be based on a reasonable estimate of the company's anticipated volume of business. Unless the license is subject to restrictions, the amount of the license does not refer to the annual maximum of transfers/exports. The license amount is similar to a checking account with revolving withdrawals (exports) and entries (transfer of sugar), not to exceed a maximum amount.

What is the purpose of a performance bond and how large should it be? A performance bond protects the government against the company possibly not fulfilling its obligation to export. Coverage should be $0.20 per pound. Many insurance companies are familiar with the performance bond; for those licensees dealing with companies that are not, it is suggested that the agent contact the office listed below.

There are two types of bonds. One covers the entry of a specific shipment and is called a single entry bond. The second, and most common, is the term bond, which is for a specified period, usually 12 to 18 months. Some companies use "rollover" bonds, which continue in force until canceled.

Program applicants may request to waive the bond requirement. If a company goes the waiver route, it must first export a product containing domestically produced sugar. The manufacturer is then eligible to receive a transfer of an amount of sugar equal to the amount initially exported.

There are two benefits to obtaining a bond. It gives the company immediate access to world sugar and it allows the manufacturer to take advantage of the fluctuations in the world sugar price. If the company elects to go the bonding route, the licensing authority (an official of the USDA) must receive the bond within 10 days of the license issuance. A standby letter of credit in favor of the USDA also is an acceptable substitute for a bond.

What types of documentation are used to substantiate export claims? Participating manufacturers must provide, or have available for inspection by officials of the USDA, certified U.S. Customs Forms 7512, original bills of lading, shippers export declarations or manifests. Companies licensed under the program must retain export documentation for a minimum of five years. 7 CFR 1530 permits companies to maintain the documentation on site and have it available for audit during periodic company inspections.

In order for a company to obtain credit for the export, the licensing authority (an official of the USDA) must receive certification and documentation of export within 95 days following the date of export. Information on the Customs forms or other export documentation is put on two forms supplied to licensees by the FAS Import Policy and Trade Analysis Division. These forms are the Bill of Lading Summary Sheet and the Certification of Exports, which gives the total exports shipped and which is certified by an officer of the company or his/her designee. In circumstances where the exporter encounters problems obtaining export documentation, he/she may be granted an extension.

What are the time requirements for transfer, manufacture and export of products and document submission under the Re-Export Program? Various time requirements are in effect. The process may begin with the transfer of sugar from a refiner. Whenever a participating company secures a transfer of re-export sugar from a refiner, the licensing authority must receive a notice of transfer within 10 business days of the transaction. The notice of transfer gives the date and amount of the sugar transferred along with the sugar's polarization or purity.

The manufacturer has up to 18 months from the date on which the sugar was transferred from the refiner to export the product. Manufacturers are required to apply for credit to their license within 95 days following the product's export.

Do re-export licenses expire? Yes. A license may expire upon written request by the company or automatically if there have been no charges or credits on the license with 12 months of the license's issuance or following 18 months of inactivity in a subsequent period. Listed below are various time requirements in effect for participants of the Sugar-Containing Products Re-Export Program.

- Performance bond within 10 days of issuance of the license. - Notice of transfer within 10 business days of transfer of the sugar from the refiner. - Transfer of sugar from refiner to manufacturer within 90 days of entry into the United States. - Application for license credit within 95 days after the export date. - Maximum limit for re-export of sugar in the form of sugar-containing products within 18 months of transfer from a refiner.

For more information: Companies interested in participating in the program should contact (in writing): Licensing Authority, Import Policy & Trade Analysis Division, Foreign Agricultural Service, U.S. Department of Agriculture, Room 5531-South, Washington, DC 20250-1000. To receive a copy of the program's regulations, 7 CFR 1530, contact Brenda Freeman at (202) 720-2916.

COPYRIGHT 1992 U.S. Department of Agriculture
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