§ 609. — Processing tax; methods of computation; rate; what constitutes processing; publicity as to tax to avoid profiteering.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC609]
TITLE 7--AGRICULTURE
CHAPTER 26--AGRICULTURAL ADJUSTMENT
SUBCHAPTER III--COMMODITY BENEFITS
Sec. 609. Processing tax; methods of computation; rate; what
constitutes processing; publicity as to tax to avoid
profiteering
(a) To obtain revenue for extraordinary expenses incurred by reason
of the national economic emergency, there shall be levied processing
taxes as hereinafter provided. When the Secretary of Agriculture
determines that any one or more payments authorized to be made under
section 608 of this title are to be made with respect to any basic
agricultural commodity, he shall proclaim such determination, and a
processing tax shall be in effect with respect to such commodity from
the beginning of the marketing year therefor next following the date of
such proclamation; except that (1) in the case of sugar beets and
sugarcane, the Secretary of Agriculture shall, on or before the
thirtieth day after May 9, 1934, proclaim that rental or benefit
payments with respect to said commodities are to be made, and the
processing tax shall be in effect on and after the thirtieth day after
May 9, 1934, and (2) in the case of rice, the Secretary of Agriculture
shall, before April 1, 1935, proclaim that rental or benefit payments
are to be made with respect thereto, and the processing tax shall be in
effect on and after April 1, 1935. In the case of sugar beets and
sugarcane, the calendar year shall be considered to be the marketing
year and for the year 1934 the marketing year shall begin January 1,
1934. In the case of rice, the period from August 1 to July 31, both
inclusive, shall be considered to be the marketing year. The processing
tax shall be levied, assessed, and collected upon the first domestic
processing of the commodity, whether of domestic production or imported,
and shall be paid by the processor. The rate of tax shall conform to the
requirements of subsection (b) of this section. Such rate shall be
determined by the Secretary of Agriculture as of the date the tax first
takes effect, and the rate so determined shall, at such intervals as the
Secretary finds necessary to effectuate the declared policy, be adjusted
by him to conform to such requirements. The processing tax shall
terminate at the end of the marketing year current at the time the
Secretary proclaims that all payments authorized under section 608 of
this title which are in effect are to be discontinued with respect to
such commodity. The marketing year for each commodity shall be
ascertained and prescribed by regulations of the Secretary of
Agriculture: Provided, That upon any article upon which a manufacturers'
sales tax is levied under the authority of the Revenue Act of 1932, act
June 6, 1932, ch. 209, 47 Stat. 169-289, and which manufacturers' sales
tax is computed on the basis of weight, such manufacturers' sales tax
shall be computed on the basis of the weight of said finished article
less the weight of the processed cotton contained therein on which a
processing tax has been paid.
(b)(1) The processing tax shall be at such rate as equals the
difference between the current average farm price for the commodity and
the fair exchange value of the commodity, plus such percentage of such
difference, not to exceed 20 per centum, as the Secretary of Agriculture
may determine will result in the collection, in any marketing year with
respect to which such rate of tax may be in effect pursuant to the
provisions of this chapter, of an amount of tax equal to (A) the amount
of credits or refunds which he estimates will be allowed or made during
such period pursuant to section 615(c) of this title with respect to the
commodity and (B) the amount of tax which he estimates would have been
collected during such period upon all processings of such commodity,
which are exempt from tax by reason of the fact that such processings
are done by or for a State, or a political subdivision or an institution
thereof, had such processings been subject to tax. If, prior to the time
the tax takes effect, or at any time thereafter, the Secretary has
reason to believe that the tax at such rate, or at the then existing
rate, on the processing of the commodity generally or for any designated
use or uses, or on the processing of the commodity in the production of
any designated product or products thereof for any designated use or
uses, will cause or is causing such reduction in the quantity of the
commodity or products thereof domestically consumed as to result in the
accumulation of surplus stocks of the commodity or products thereof or
in the depression of the farm price of the commodity, then the Secretary
shall cause an appropriate investigation to be made, and afford due
notice and opportunity for hearing to interested parties. If thereupon
the Secretary determines and proclaims that any such result will occur
or is occurring, then the processing tax on the processing of the
commodity generally or for any designated use or uses, or on the
processing of the commodity in the production of any designated product
or products thereof for any designated use or uses, shall be at such
lower rate or rates as he determines and proclaims will prevent such
accumulation of surplus stocks and depression of the farm price of the
commodity, and the tax shall remain during its effective period at such
lower rate until the Secretary, after due notice and opportunity for
hearing to interested parties, determines and proclaims that an increase
in the rate of such tax will not cause such accumulation of surplus
stocks or depression of the farm price of the commodity. Thereafter the
processing tax shall be at the highest rate which the Secretary
determines will not cause such accumulation of surplus stocks or
depression of the farm price of the commodity, but it shall not be
higher than the rate provided in the first sentence of this paragraph.
(2) In the case of wheat, cotton, field corn, hogs, peanuts,
tobacco, paper, and jute, and (except as provided in paragraph (8) of
this subsection) in the case of sugarcane and sugar beets, the tax on
the first domestic processing of the commodity generally or for any
particular use, or in the production of any designated product for any
designated use, shall be levied, assessed, collected, and paid at the
rate prescribed by the regulations of the Secretary of Agriculture in
effect on August 24, 1935, during the period from such date to December
31, 1937, both dates inclusive.
(3) For the period from April 1, 1935, to July 31, 1936, both
inclusive, the processing tax with respect to rice shall be levied,
assessed, collected, and paid at the rate of 1 cent per pound of rough
rice.
(4) For the period from September 1, 1935, to December 31, 1937,
both inclusive, the processing tax with respect to rye shall be levied,
assessed, collected, and paid at the rate of 30 cents per bushel of
fifty-six pounds. In the case of rye, the first marketing year shall be
considered to be the period commencing September 1, 1935, and ending
June 30, 1936. Subsequent marketing years shall commence on July 1 and
end on June 30 of the succeeding year. The provisions of section 616 of
this title shall not apply in the case of rye.
(5) If at any time prior to December 31, 1937, a tax with respect to
barley becomes effective pursuant to proclamation as provided in
subsection (a) of this section, such tax shall be levied, assessed,
collected, and paid during the period from the date upon which such tax
becomes effective to December 31, 1937, both inclusive, at the rate of
25 cents per bushel of forty-eight pounds. The provisions of section 616
of this title shall not apply in the case of barley.
(6)(A) Any rate of tax which is prescribed in paragraphs (2) to (4),
or (5) of this subsection or which is established pursuant to this
paragraph on the processing of any commodity generally or for any
designated use or uses, or on the processing of the commodity in the
production of any designated product or products thereof for any
designated use or uses, shall be decreased (including a decrease to
zero) in accordance with the formulae, standards, and requirements of
paragraph (1) of this subsection, in order to prevent such reduction in
the quantity of such commodity or the products thereof domestically
consumed as will result in the accumulation of surplus stocks of such
commodity or the products thereof or in the depression of the farm price
of the commodity, and shall thereafter be increased in accordance with
the provisions of paragraph (1) of this subsection but subject to the
provisions of subdivision (B) of this paragraph.
(B) If the average farm price of any commodity, the rate of tax on
the processing of which is prescribed in paragraphs (2) to (4), or (5)
of this subsection or is established pursuant to this paragraph, during
any period of twelve successive months ending after July 1, 1935,
consisting of the first ten months of any marketing year and the last
two months of the preceding marketing year--
(i) is equal to, or exceeds by 10 per centum or less, the fair
exchange value thereof, or, in the case of tobacco, is less than the
fair exchange value by not more than 10 per centum, the rate of such
tax shall (subject to the provisions of subdivision (A) of this
paragraph) be adjusted, at the beginning of the next succeeding
marketing year, to such rate as equals 20 per centum of the fair
exchange value thereof.
(ii) exceeds by more than 10 per centum, but not more than 20
per centum, the fair exchange value thereof, the rate of such tax
shall (subject to the provisions of subdivision (A) of this
paragraph) be adjusted, at the beginning of the next succeeding
marketing year, to such rate as equals 15 per centum of the fair
exchange value thereof.
(iii) exceeds by more than 20 per centum the fair exchange value
thereof, the rate of such tax shall (subject to the provisions of
subdivision (A) of this paragraph) be adjusted, at the beginning of
the next succeeding marketing year, to such rate as equals 10 per
centum of the fair exchange value thereof.
(C) Any rate of tax which has been adjusted pursuant to this
paragraph shall remain at such adjusted rate unless further adjusted or
terminated pursuant to this paragraph, until December 31, 1937, or until
July 31, 1936, in the case of rice.
(D) In accordance with the formulae, standards, and requirements
prescribed in this chapter, any rate of tax prescribed in paragraphs (2)
to (4) or (5) of this subsection or which is established pursuant to
this paragraph shall be increased.
(E) Any tax, the rate of which is prescribed in paragraphs (2) to
(4), or (5) of this subsection or which is established pursuant to this
paragraph, shall terminate pursuant to proclamation as provided in
subsection (a) of this section or pursuant to section 613 of this title.
Any such tax with respect to any basic commodity which terminates
pursuant to proclamation as provided in subsection (a) of this section
shall again become effective at the rate prescribed in paragraphs (2) to
(4), or (5) of this subsection, subject however to the provisions of
subdivisions (A) and (B) of this paragraph, from the beginning of the
marketing year for such commodity next following the date of a new
proclamation by the Secretary as provided in subsection (a) of this
section, if such marketing year begins prior to December 31, 1937, or
prior to July 31, 1936, in the case of rice, and shall remain at such
rate until altered or terminated pursuant to this section or terminated
pursuant to section 613 of this title.
(F) After December 31, 1937 (in the case of the commodities
specified in paragraphs (2), (4), and (5) of this subsection), and after
July 31, 1936 (in the case of rice), rates of tax shall be determined by
the Secretary of Agriculture in accordance with the formulae, standards,
and requirements prescribed in this chapter but not in this paragraph,
and shall, subject to such formulae, standards, and requirements,
thereafter be effective.
(G) If the applicability to any person or circumstances of any tax,
the rate of which is fixed in pursuance of this paragraph, is finally
held invalid by reason of any provision of the Constitution, or is
finally held invalid by reason of the Secretary of Agriculture's
exercise or failure to exercise any power conferred on him under this
chapter, there shall be levied, assessed, collected, and paid (in lieu
of all rates of tax fixed in pursuance of this paragraph with respect to
all tax liabilities incurred under this chapter on or after the
effective date of each of the rates of tax fixed in pursuance of this
paragraph), rates of tax fixed under paragraphs (2) to (4), or (5) of
this subsection, and such rates shall be in effect (unless the
particular tax is terminated pursuant to proclamation, as provided in
subsection (a) of this section or pursuant to section 613 of this title)
until altered by Act of Congress; except that, for any period prior to
the effective date of such holding of invalidity, the amount of tax
which represents the difference between the tax at the rate fixed in
pursuance of this paragraph (6) and the tax at the rate fixed under
paragraphs (2) to (4), and (5) shall not be levied, assessed, collected
or paid.
(7) In the case of rice, the weight to which the rate of tax shall
be applied shall be the weight of rough rice when delivered to a
processor, except that, where the producer processes his own rice, the
weight to which the rate of tax shall be applied shall be the weight of
rough rice when delivered to the place of processing.
(8) In the case of sugar beets or sugarcane the rate of tax shall be
applied to the direct-consumption sugar, resulting from the first
domestic processing, translated into terms of pounds of raw value
according to regulations to be issued by the Secretary of Agriculture,
and in the event that the Secretary increases or decreases the rate of
tax fixed by paragraph (2) of this subsection, pursuant to the
provisions of paragraph (6) of this subsection, then the rate of tax to
be so applied shall be the higher of the two following quotients: The
difference between the current average farm price and the fair exchange
value (A) of a ton of sugar beets and (B) of a ton of sugarcane, divided
in the case of each commodity by the average extraction therefrom of
sugar in terms of pounds of raw value (which average extraction shall be
determined from available statistics of the Department of Agriculture);
the rate of tax fixed by paragraph (2) of this subsection or adjusted
pursuant to the provisions of paragraph (6) of this subsection shall in
no event exceed the amount of the reduction by the President on a pound
of sugar raw value of the rate of duty in effect on January 1, 1934,
under paragraph 501 of section 1001 \1\ of title 19, as adjusted to the
treaty of commercial reciprocity concluded between the United States and
the Republic of Cuba on December 11, 1902, and/or the provisions of
sections 124 and 125 of title 19.
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\1\ See References in Text note below.
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(9) In computing the current average farm price in the case of
wheat, premiums paid producers for protein content shall not be taken
into account.
(c) For the purposes of this chapter, the fair exchange value of a
commodity shall be the price therefor that will give the commodity the
same purchasing power, with respect to articles farmers buy, as such
commodity had during the base period specified in section 602 of this
title; and, in the case of all commodities where the base period is the
prewar period, August 1909 to July 1914, will also reflect interest
payments per acre on farm indebtedness secured by real estate and tax
payments per acre on farm real estate, as contrasted with such interest
payments and tax payments during said base period; and the current
average farm price and the fair exchange value shall be ascertained by
the Secretary of Agriculture from available statistics of the Department
of Agriculture. The rate of tax upon the processing of any commodity in
effect on August 24, 1935, shall not be affected by the adoption of this
amendment and shall not be required to be adjusted or altered, unless
the Secretary of Agriculture finds that it is necessary to adjust or
alter any such rate pursuant to subsection (a) of this section.
(d) As used in this chapter--
(1) In case of wheat, rye, barley and corn, the term ``processing''
means the milling or other processing (except cleaning and drying) of
wheat, rye, barley or corn for market, including custom milling for toll
as well as commercial milling, but shall not include the grinding or
cracking thereof not in the form of flour for feed purposes only.
(2) In case of cotton, the term ``processing'' means the spinning,
manufacturing, or other processing (except ginning) of cotton; and the
term ``cotton'' shall not include cotton linters.
(3) In case of tobacco, the term ``processing'' means the
manufacturing or other processing (except drying or converting into
insecticides and fertilizers) of tobacco.
(4) Repealed. June 26, 1934, ch. 759, Sec. 2(a), 48 Stat. 1242.
(5) Repealed. Aug. 24, 1935, ch. 641, Sec. 14(b), 49 Stat. 767.
(6) In the case of sugar beets and sugarcane--
(A) The term ``first domestic processing'' means each domestic
processing, including each processing of successive domestic
processings, of sugar beets, sugarcane, or raw sugar, which directly
results in direct-consumption sugar.
(B) The term ``sugar'' means sugar in any form whatsoever,
derived from sugar beets or sugarcane, whether raw sugar or direct-
consumption sugar, including also edible molasses, sirups, and any
mixture containing sugar (except blackstrap molasses and beet
molasses).
(C) The term ``blackstrap molasses'' means the commercially so-
designated ``byproduct'' of the cane-sugar industry, not used for
human consumption or for the extraction of sugar.
(D) The term ``beet molasses'' means the commercially so-
designated ``byproduct'' of the beet-sugar industry, not used for
human consumption or for the extraction of sugar.
(E) The term ``raw sugar'' means any sugar, as defined above,
manufactured or marketed in, or brought into, the United States, in
any form whatsoever, for the purpose of being, or which shall be,
further refined (or improved in quality, or further prepared for
distribution or use).
(F) The term ``direct-consumption sugar'' means any sugar, as
defined above, manufactured or marketed in, or brought into, the
United States in any form whatsoever, for any purpose other than to
be further refined (or improved in quality, or further prepared for
distribution or use).
(G) The term ``raw value'' means a standard unit of sugar
testing ninety-six sugar degrees by the polariscope. All taxes shall
be imposed and all quotas shall be established in terms of ``raw
value'' and for purposes of quota and tax measurements all sugar
shall be translated into terms of ``raw value'' according to
regulations to be issued by the Secretary, except that in the case
of direct-consumption sugar produced in continental United States
from sugar beets the raw value of such sugar shall be one and seven
one-hundredths times the weight thereof.
(7) In the case of rice--
(A) The term ``rough rice'' means rice in that condition which
is usual and customary when delivered by the producer to a
processor.
(B) The term ``processing'' means the cleaning shelling, milling
(including custom milling for toll as well as commercial milling),
grinding, rolling, or other processing (except grinding or cracking
by or for the producer thereof for feed for his own livestock,
cleaning by or directly for a producer for seed purposes, and
drying) of rough rice; and in the case of rough rice with respect to
which a tax-payment warrant has been previously issued or applied
for by application then pending, the term ``processing'' means any
one of the above mentioned processings or any preparation or
handling in connection with the sale or other disposition thereof.
(C) The term ``cooperating producer'' means any person
(including any share-tenant or share-cropper) whom the Secretary of
Agriculture finds to be willing to participate in the 1935
production-adjustment program for rice.
(D) The term ``processor'', as used in subsection (b-1) of
section 615 of this title, means any person (including a cooperative
association of producers) engaged in the processing of rice on a
commercial basis (including custom milling for toll as well as
commercial milling).
(8) In the case of any other commodity, the term ``processing''
means any manufacturing or other processing involving a change in the
form of the commodity or its preparation for distribution or use, as
defined by regulations of the Secretary of Agriculture; and in
prescribing such regulations the Secretary shall give due weight to the
customs of the industry.
(e) When any processing tax, or increase or decrease therein, takes
effect in respect of a commodity the Secretary of Agriculture, in order
to prevent pyramiding of the processing tax and profiteering in the sale
of the products derived from the commodity, shall make public such
information as he deems necessary regarding (1) the relationship between
the processing tax and the price paid to producers of the commodity, (2)
the effect of the processing tax upon prices to consumers of products of
the commodity, (3) the relationship, in previous periods, between prices
paid to the producers of the commodity and prices to consumers of the
products thereof, and (4) the situation in foreign countries relating to
prices paid to producers of the commodity and prices to consumers of the
products thereof.
(f) For the purposes of this chapter, processing shall be held to
include manufacturing.
(g) Nothing contained in this chapter shall be construed to
authorize any tax upon the processing of any commodity which processing
results in the production of newsprint.
(May 12, 1933, ch. 25, title I, Sec. 9, 48 Stat. 35; Apr. 7, 1934, ch.
103, Sec. 3(a), 48 Stat. 528; May 9, 1934, ch. 263, Secs. 2, 3, 5, 6, 9,
48 Stat. 670, 671, 675, 676; June 26, 1934, ch. 759, Sec. 2, 48 Stat.
1242; Mar. 18, 1935, ch. 32, Secs. 1-6, 49 Stat. 45, 46; Aug. 24, 1935,
ch. 641, Secs. 11-15, 49 Stat. 762-767.)
References in Text
Section 1001 of title 19, referred to in subsec. (b)(8), was
repealed by Pub. L. 87-456, title I, Sec. 101(a), May 24, 1962, 76 Stat.
72. See Publication of Harmonized Tariff Schedule note set out under
section 1202 of Title 19, Customs Duties.
The treaty of commercial reciprocity concluded between the United
States and Cuba on December 11, 1902, referred to in subsec. (b)(8), was
terminated Aug. 21, 1963, pursuant to notice given by the United States
on Aug. 21, 1962. See, Bevans, Treaties and Other International
Agreements of the United States of America, 1776-1949, vol. VI, page
1106.
Sections 124 and 125 of title 19, referred to in subsec. (b)(8),
have been omitted from the Code.
Phrase ``this amendment'' in subsec. (c) refers to amendments by act
Aug. 24, 1935.
Amendments
1935--Subsec. (a). Act Aug. 24, 1935, Sec. 11, struck out second
sentence preceding semicolon and inserted in lieu thereof ``When the
Secretary of Agriculture determines that any one or more payments
authorized to be made under section 608 of this title are to be made
with respect to any basic agricultural commodity, he shall proclaim such
determination, and a processing tax shall be in effect with respect to
such commodity from the beginning of the marketing year therefor next
following the date of such proclamation.''
Act Mar. 18, 1935, Secs. 1, 2, struck out comma after ``except
that'' in second sentence and inserted in lieu thereof ``(i)'', and
inserted ``and (2) in the case of rice, the Secretary of Agriculture
shall, before April 1, 1935, proclaim that rental or benefit payments
are to be made with respect thereto, and the processing tax shall be in
effect on and after April 1, 1935''.
Subsec. (b). Act Aug. 24, 1935, Sec. 12, amended subsec. (b)
generally.
Act Mar. 18, 1935, Secs. 3, 4, among other changes inserted ``In the
case of rice, the weight to which the rate of tax shall be applied shall
be the weight of rough rice when delivered to a processor, except that
where the producer processes his own rice, the weight to which the rate
of tax shall be applied shall be the weight of rough rice when delivered
to the place of processing.''
Subsec. (c). Act Aug. 24, 1935, Sec. 13, among other changes
inserted ``The rate of tax upon the processing of any commodity, in
effect on August 24, 1935, shall not be affected by the adoption of this
amendment and shall not be required to be adjusted or altered, unless
the Secretary of Agriculture finds that it is necessary to adjust or
alter any such rate pursuant to subsection (a) of this section.''
Subsec. (d). Act Aug. 24, 1935, Sec. 14, inserted ``, rye, barley''
after ``wheat'' wherever appearing and struck out par. (5).
Act Mar. 18, 1935, Secs. 5, 6, struck out ``, rice,'' in two places
in par. (1), added par. (7), and renumbered former par. (7) as (8).
Subsec. (g). Act Aug. 24, 1935, Sec. 15, added subsec. (g).
1934--Subsec. (a). Act May 9, 1934, Sec. 9, struck out the period
after ``proclamation'' and inserted in lieu thereof ``; except that, in
the case of sugar beets and sugarcane, the Secretary of Agriculture
shall, on or before the thirtieth day after May 9, 1934, proclaim that
rental or benefit payments with respect to said commodities are to be
made, and the processing tax shall be in effect on and after the
thirtieth day after May 9, 1934. In the case of sugar beets and
sugarcane, the calendar year shall be considered to be the marketing
year and for the year 1934 the marketing year shall begin January 1,
1934.''
Subsec. (b). Act May 9, 1934, Sec. 3, among other changes amended
first two sentences and inserted ``In the case of sugar beets or
sugarcane the rate of tax shall be applied to the direct-consumption
sugar, resulting from the first domestic processing, translated into
terms of pounds of raw value according to regulations to be issued by
the Secretary of Agriculture, and the rate of tax to be so applied shall
be the higher of the two following quotients: The difference between the
current average farm price and the fair exchange value (1) of a ton of
sugar beets and (2) of a ton of sugarcane, divided in the case of each
commodity by the average extraction therefrom of sugar in terms of
pounds of raw value (which average extraction shall be determined from
available statistics of the Department of Agriculture); except that such
rate shall not exceed the amount of the reduction by the President on a
pound of sugar raw value of the rate of duty in effect on January 1,
1934, under paragraph 501 of section 1001 of Title 19, as adjusted to
the treaty of commercial reciprocity concluded between the United States
and the Republic of Cuba on December 11, 1902, and/or the provisions of
sections 124 and 125 of Title 19.''
Subsec. (d). Act June 26, 1934, Sec. 2(a), struck out par. (4).
Act June 26, 1934, Sec. 2(b), amended par. (7).
Act May 9, 1934, Secs. 2, 5, amended par. (6) generally and
renumbered former par. (6) as (7).
Act Apr. 7, 1934, added par. (5) and renumbered former par. (5) as
(6).
Subsec. (f). Act May 9, 1934, Sec. 6, added subsec. (f).
Unconstitutionality
This section may be obsolete in view of the Supreme Court's holding
that the processing and floor stock taxes provided for by the
Agricultural Adjustment Act of 1933 are unconstitutional. See U.S. v.
Butler, Mass. 1936, 56 S.Ct. 312, 297 U.S. 1, 80 L.Ed. 477, 102 A.L.R.
914.
Separability
Validity of remainder of this chapter as not affected should any of
those provisions be declared unconstitutional, see section 614 of this
title.
Section Referred to in Other Sections
This section is referred to in sections 619a, 673 of this title;
title 12 section 1150a.
